Duncan Development, Inc. v. Haney

• Decision Date: 26 May 1982
• Docket Number: No. C-685,C-685
• Citation: 634 S.W.2d 811
• Parties: DUNCAN DEVELOPMENT, INC. et al., Petitioners, v. John W. HANEY et al., Respondents.
• Court: Texas Supreme Court

Page 811

634 S.W.2d 811

DUNCAN DEVELOPMENT, INC. et al., Petitioners, v. John W. HANEY et al., Respondents.

No. C-685.

Supreme Court of Texas.

May 26, 1982.

Rehearing Denied July 14, 1982.

Zeleskey, Cornelius, Rogers, Hallmark & Hicks, Robert T. Cain, Jr. and Walter L. Borgfeld, Jr., Lufkin, for petitioners.

Crain, Caton, James & Womble, Frank E. Caton, Houston, for respondents.

POPE, Justice.

Duncan Development, Inc. and R. H. Duncan, hereinafter called Duncan, sued John Haney and Craig Canon, hereinafter called Haney, to recover damages for breach of a construction contract. The trial court rendered judgment in favor of Duncan, the builder, for $444,207.80. The court of civil appeals reversed the judgment and remanded the cause, holding that Duncan's proof of damages constituted inadmissible hearsay under the Texas Business Records Act, Tex.Rev.Civ.Stat.Ann. art. 3737e. 626 S.W.2d 61. The central question is whether Duncan properly proved a predicate for the admissibility of a summary representing work, services and materials furnished to Duncan by his many subcontractors on the construction project. We hold that Duncan properly qualified the summary for admission into evidence and, accordingly, reverse the judgment of the court of civil appeals.

Haney and Canon in 1974 bought land in Lufkin and pledged it as security for a loan they obtained from a local bank. The pair decided to construct five townhouse buildings on the property and entered into an agreement with Duncan for financing the initial bank loan. In a subsequent arrangement, the parties agreed that Duncan would construct building one on a fixed price basis. After completion of this structure, disputes arose regarding payment, building specifications, and Duncan's workmanship. Duncan and Haney resolved those problems and then agreed that Duncan would construct the other four buildings for the price of Duncan's construction costs, plus normal overhead, plus a fee of six percent of the construction costs, with payment due on completion of each building. Duncan finished two more buildings some nineteen months after the parties entered into this last agreement. Haney refused to pay Duncan for the construction, and Duncan refused to build the last two structures. Duncan then filed this action.

The rather narrow question of admissibility here presented is whether Duncan, the general contractor, adequately laid a foundation to prove by summary the amount of costs evidenced by invoices submitted by some three dozen subcontractors. Haney urges that records of the subcontractors' invoices from which Duncan made its summary did not qualify for admission under article 3737e because no Duncan employee or representative with personal knowledge either prepared or transmitted the underlying information included in the invoices submitted by the subcontractors. The subcontractors, who won their jobs through competitive bidding, had submitted invoices to Duncan for payment of their work. Approximately one-third of the alleged construction costs for the two buildings stemmed from the subcontractors' work.

Business records are admissible in evidence upon proof that (1) the business is a regular, organized activity whether conducted for profit or not, (2) the record or memorandum was made in the regular course of business, (3) an employee or representative of the business with personal knowledge of the act, event, or condition, acting in the regular course of that business, made a record or memorandum of the act, event or condition or transmitted the information to be included in a record or memorandum, and (4) the record was made at or near the time of the act, event or condition. Tex.Rev.Civ.Stat.Ann. art. 3737e; see University Savings & Loan Ass'n v. Security Lumber Co., 423 S.W.2d 287 (Tex.1967).

A summary of business records may be admitted into evidence upon proof of an additional predicate. This includes proof (1) that the records are voluminous, (2) they have been made available to the opponent for a reasonable period of time to afford inspection and an opportunity for cross-examination, and (3) the supporting documents are themselves admissible in evidence. Black Lake Pipeline Co. v. Union Construction Co., 538 S.W.2d 80, 93-94 (Tex.1976); Cooper v. La Gloria Oil and Gas Co., 436 S.W.2d 889, 891 (Tex.1969).

Duncan satisfied the requirements that it prove the records were voluminous and accessible to the opponent. There were six or seven boxes that contained many time cards, invoices, and computer print-outs that represented work done, materials furnished and expenditures paid on the two buildings. Duncan made the records available to Haney's attorneys who actually examined the records on four occasions before trial and made copies of some records.

R. H. Duncan, president of Duncan Development Inc., Ray Carswell, Duncan's chief accountant, and Leon Morris, Duncan's construction superintendent, testified about Duncan's system of accounting. Mr. Duncan testified that subcontractors would mail their invoices to his office and that he would send the invoices to the corporation's bookkeeping department. Bookkeeping coded the invoices in order to identify the account and project on which the subcontractors had worked and then forwarded the invoices to Duncan's job supervisors at its construction sites.

Carswell, the chief accountant, testified that Duncan personnel receiving an invoice were required to confirm that the work charged on the invoice by the subcontractor had been completed. As noted and relied upon by the court of civil appeals, he also testified on voir dire that he had no personal knowledge of the persons who prepared the...