A. F. Conner & Sons, Inc. v. Tri-County Water Supply Corp.

• Decision Date: 18 January 1978
• Docket Number: TRI-COUNTY,No. B-6343,B-6343
• Citation: 561 S.W.2d 466
• Parties: A. F. CONNER AND SONS, INC., et al., Petitioners, v. WATER SUPPLY CORPORATION, Respondent.
• Court: Texas Supreme Court

Page 466

561 S.W.2d 466

A. F. CONNER AND SONS, INC., et al., Petitioners,

v. TRI-COUNTY WATER SUPPLY CORPORATION, Respondent.

No. B-6343.

Supreme Court of Texas.

Jan. 18, 1978.

Rehearing Denied March 1, 1978.

Haley, Fulbright, Winniford, Bice & Davis, John W. Fulbright, Wilson, Olson, Stem & Farr, Lyndon L. Olson, Waco, for petitioner.

Clark, Fisher, Gorin, McDonald & Ragland, Leonard L. Gorin, Waco, Robert G. Carter, Marlin, for respondent.

ON MOTION FOR REHEARING

STEAKLEY, Justice.

Our prior opinion delivered under date of September 27, 1977, is withdrawn and the following opinion is substituted therefor.

Tri-County Water Supply Corporation sued A. F. Conner and Sons, Inc., and Fidelity & Deposit Company of Maryland, the surety on Conner's performance bond, for damages resulting from Conner's alleged breach of a contract to construct a water distribution system. After a jury trial, and upon the basis of findings later noted, the trial court rendered judgment in favor of Tri-County for $389,815.85 plus prejudgment interest at the rate of six per cent per annum from December 13, 1970 in the sum of $75,282.25, and that Fidelity & Deposit recover over and against Conner. The Court of Civil Appeals ordered a remittitur of $119,542.33 and otherwise affirmed the trial court's judgment. 541 S.W.2d 856. We reverse these judgments and remand the cause for a new trial.

Tri-County Water Supply Corporation is a non-profit corporation authorized to own and operate a water supply system in the rural area of eastern Falls County, Texas. In February of 1968, Tri-County contracted with Duff Engineers to make an engineering study of the feasibility of constructing a water supply system. Upon a favorable recommendation, Tri-County authorized Duff Engineers to solicit bids for the construction of the system. In October of 1968, Tri-County accepted the bid of A. F. Conner & Sons, Inc., and entered into a contract under which Conner was to construct the water supply system consisting of five pump stations and approximately 178 miles of plastic pipeline. The contract provided that all workmanship and materials would be of good quality and that upon completion of the work Tri-County would pay Conner the sum of $522,480.13, of which $389,815.53 was in payment for the pipeline. The contract also obligated Conner to replace or repair any defective material or equipment discovered within one year of completion. Duff Engineers was designated as the inspecting engineering firm. The certificate of completion was executed June 4, 1970, and thereafter numerous leaks and other defects were discovered. It appears that Conner ceased repairing the leaks and other defects on December 13, 1970.

Tri-County sued Conner in April of 1971, and alleged that the defects in the system rendered it "not reasonably fit for the purpose of the water distribution system" and that Conner had failed to discharge the contractual duty to repair the system and remedy the defects. Tri-County sought damages of $389,815.85, the value of the pipeline. There have been two trials. Upon the first trial in December, 1972, the jury found that the materials and workmanship used by Conner were not of good quality; but that Conner had substantially performed the contract, and that the reasonable cost of repairing and replacing the defective pipe and adapters was $4,853.77. The trial court rendered judgment on the verdict for Tri-County in the amount of $4,853.77; but upon the subsequent motion of Tri-County the trial court set aside this judgment and ordered a new trial on grounds not herein material.

One of the witnesses at the first trial was Mr. William Garner who had been an employee of Duff Engineers for some time and was an experienced inspector. He was directly responsible for supervising and inspecting the construction of the system. At the first trial, Garner testified that he had visited the job site on at least thirty-seven separate occasions and had personally inspected the construction. He testified that numerous leaks were discovered throughout the system after the June 4, 1970 completion date. He further testified that he believed the leaks would not stop and that, in his opinion, the workmanship and materials used by Conner were bad. Garner also said he believed that the only way to put the pipeline in "A-1" shape would be to lay a replacement line and completely abandon the Conner pipeline. Garner also stated that, in his opinion, the line as constructed had no value.

After the first trial concluded, Tri-County expanded the water supply system. This new addition began from the same well as the old system and was some 110 to 120 miles long. It ran in a different direction from the old system and shared only the well in common with the old system. The new system was also designed by Duff Engineers and was supervised and inspected by Duff's employee, Garner. Construction was by Brazos Construction Company. The new system differed from the old in that an aerator was designed and installed to cool the water before it went into the plastic pipeline. It was also shown that the temperature of the water affects the strength of the pipe, the amount it contracts and expands, and the pressure at which the system is operated.

The second trial was set for Monday, January 28, 1974. On the preceding Friday, January 25, counsel for Tri-County advised Conner and Fidelity that Garner was in a Waco hospital and would be unable to testify; and that arrangements had been made to have his testimony at the first trial transcribed for introduction at the forthcoming trial. On the same date Tri-County, by written motion, requested the trial court to direct the court reporter to transcribe Garner's testimony at the first trial. In its motion Tri-County alleged that Garner "would be unable to appear as a witness in this cause scheduled for trial for the week of January 28, 1974, and that he was physically unable to have his deposition taken and that his testimony is essential to plaintiff's case and that his testimony was developed in the prior trial which commenced in December, 1973, (sic) and that defendant's counsel had full right to cross examination and therefore his testimony at the former trial is admissible during the trial commencing January 28th." The trial judge granted the motion and issued the order.

When the cause was called for trial on January 28, counsel for Fidelity made an objection to the proposed introduction of Garner's prior testimony and moved for a continuance until such time as Garner's deposition could be taken, or he could appear at trial. Counsel for Fidelity represented to the court that Garner was no longer in the employ of Duff Engineers and contended that the affidavit and testimony of counsel for Conner would further support his motions. The trial court then heard evidence of the following facts and circumstances:

1) On Sunday, January 20, counsel for Tri-County visited Garner at his home and reviewed his testimony. At that time Garner seemed well and fully able to testify. Counsel reviewed the entire testimony with Garner and specifically stressed the question of the system's value. Garner's answers were the same as those he had given at the first trial;

2) On Thursday, January 24, counsel for Tri-County learned that Garner was in the hospital and went immediately to see him. Garner informed counsel that he was scheduled to have a myelogram on Monday the 28th and surgery on the 29th to correct a low back condition. Garner further said that he was unable to be deposed because he was sedated, "full of shots," and suffering from diabetes;

3) On Friday, January 25, counsel for Tri-County verified Garner's continued hospitalization with his wife and then called counsel for Conner and Fidelity separately and informed them of Garner's unavailability and the motion to transcribe his prior testimony;

4) Upon receiving this call, counsel for Conner called Garner, whom he knew personally, at the hospital. Garner confirmed the fact that he was scheduled for surgery on the 29th. Garner also said that he would not give the same testimony at the second trial as he had at the first. Garner said that his opinion as to the value of the system would differ and that he would now testify that the pipeline had some value;

5) On January 26, the Saturday preceding the trial, another of the attorneys for Tri-County visited Garner, who again confirmed his unavailability for trial and inability to be deposed. No mention of a change of testimony was made.

On this evidence the trial judge overruled Fidelity's motion and objection, in which Conner had joined. The court indicated that when the prior testimony was offered with a proper predicate, it would consider a recess for the purpose of obtaining Garner's deposition. The parties then selected a jury and trial commenced.

Tri-County called James Duff as the first witness and he was questioned at length both on direct and cross examination. Throughout his testimony Duff made reference to Garner by name in connection with both the original system constructed by Conner and the expansion constructed after the first trial. Shortly after Duff completed his testimony, Tri-County offered the former testimony of Garner into evidence. In support of its offer and in addition to the evidence theretofore adduced at the hearing on Fidelity's motion, Tri-County offered the following sworn statement, dated January 29, 1974:

AFFIDAVIT

My name is William Garner. I am now confined as a bed patient at Hillcrest Hospital, Waco, Texas, and will be so confined until February 1, 1974, at which time I will undergo surgery of a lumbar disk and after such surgery will be further confined for an undetermined period of time. On January 28, 1974 I underwent a myelogram and I am unable to appear and testify in the above cause and I am unable to give my testimony by oral deposition. If I were able to appear in the above trial, the facts...