Great American Ins. Co. v. North Austin Mun. Utility Dist. No. 1
| Decision Date | 31 March 1993 |
| Docket Number | No. 3-92-182-CV,3-92-182-CV |
| Parties | GREAT AMERICAN INSURANCE COMPANY, Appellant, v. NORTH AUSTIN MUNICIPAL UTILITY DISTRICT NO. 1, Appellee. |
| Court | Texas Court of Appeals |
Arthur F. Selander, Quilling, Selander, Cummiskey, Clutts & Lownds, P.C., Dallas, for appellant.
Charles D. Olson, Olson, Stem & Buenger, Waco, Scott R. Kidd, Brown McCarroll & Oaks Hartline, Austin, Albert A. Carrion, Jr., Hilgers & Watkins, P.C., Austin, William Knolle, Hearne, Knolle, LeWallen, Livingston & Holcomb, Austin, for appellee.
Before CARROLL, C.J., and JONES and KIDD, JJ.
The North Austin Municipal Utility District No. 1 ("MUD"), appellee, filed suit against Great American Insurance Company ("Great American"), appellant, Underground Utilities Company ("Underground Utilities"), Dippel Ulmann & Associates, Inc. ("Dippel Ulmann"), and Smith Pump Company, Inc. ("Smith Pump"), alleging that the defendants had used a defective component in the construction of a waste-water system for MUD. Following a jury trial, the trial court rendered judgment in favor of MUD and against all four defendants.
Great American is the only defendant that perfected an appeal from the trial court's judgment. On appeal, Great American attacks the judgment on the basis of (1) the determination of Underground Utilities' underlying liability, from which Great American's liability derives; (2) the charge submitted to the jury; (3) the applicability of article 21.21 of the Insurance Code, Tex.Ins.Code Ann. art. 21.21 (West 1981 & Supp.1993); (4) the sufficiency of the evidence to support the jury's findings for violations of article 21.21 and the exclusion of evidence pertinent to Great American's defense to MUD's claims under article 21.21; (5) the award of attorney's fees; and (6) the inclusion of prejudgment interest as part of MUD's actual damages for purposes of trebling such damages. We will affirm the judgment of the trial court.
This suit involves a project for the construction of the Rattan Creek Lift Station, a waste-water lift station. Underground Utilities was the general contractor for the project; Dippel Ulmann was the engineer; Smith Pump was a subcontractor; and Great American was the construction surety, furnishing both performance and maintenance bonds on behalf of Underground Utilities, its principal, and in favor of MUD, its obligee.
The lift station at issue in the present case consisted of a wet well/dry well configuration. Under this system, both the wet well and dry well are buried in the ground. The wet well is fabricated out of poured concrete and serves as a collection tank for waste water delivered by local gravity pipe lines. The dry well consists of a prefabricated metal container and houses the pumping equipment used to pump the water from the wet well into a force main pipe system.
Before advertising for bids on the project, MUD requested Dippel Ulmann (then known as Carlson & Dippel, Inc.), which was under contract to provide engineering services for MUD, to assess the feasibility of refurbishing and relocating an existing dry well owned by MUD that was scheduled to be taken out of service. After receipt of Dippel Ulmann's initial research, MUD authorized Dippel Ulmann to proceed. Dippel Ulmann then drafted plans and specifications for the construction project. The plans did not indicate any specific requirement for the thickness of the sides for the dry well. In addition, the specifications merely required that the thickness of the sides be sufficient "for the depth of burial."
MUD advertised for bids and requested that bidders provide alternative bids: one for a newly constructed dry well and the other for the refurbishment and relocation of the existing dry well. The bid package included the plans and specifications prepared by Dippel Ulmann. There was no indication in the bid package that the plans and specifications would be varied if the bid were awarded based on the refurbishment alternative. In August 1987, Underground Utilities was awarded the contract on the basis of its bid of approximately $360,000 for the refurbishment and relocation of the existing lift station. Great American then issued a performance bond on behalf of Underground Utilities and in favor of MUD.
Underground Utilities hired Smith Pump as a subcontractor to refurbish the existing dry well. Smith Pump submitted shop drawings to Dippel Ulmann, the engineer, indicating the manner in which it proposed to refurbish the existing lift station. The shop drawings did not indicate that Smith Pump would thicken the sides of the dry well. Dippel Ulmann approved the drawings and Smith Pump performed the work in conformity with the drawings. The refurbished dry well was then delivered to Underground Utilities. The project was completed, and the lift station was activated in April 1988. MUD accepted the project as substantially complete in December 1988.
The contract between MUD and Underground Utilities provided for a one-year correction period after MUD's acceptance of the project. This provision required Underground Utilities to correct or replace any defective work. In connection with Underground Utilities' obligation under this provision, Great American as surety issued a one-year maintenance bond in favor of MUD.
On March 10, 1989, MUD discovered a structural deformity in the "shell" of the dry well: one of the sides was beginning to collapse. Based on an investigation by a structural engineer, MUD concluded that the collapse was occurring because the sides of the dry well were not of sufficient thickness for the depth of burial. MUD requested Underground Utilities to make repairs pursuant to the correction-period provision of the contract. Underground Utilities refused to make any repairs, claiming that (1) it had performed all work in accordance with the plans and specifications; (2) Dippel Ulmann had approved the work; (3) MUD had accepted the work; and (4) Smith Pump was liable under its manufacturer's warranty for the deformity.
MUD then informed Great American that the dry well was suffering from a structural deformity and that Underground Utilities had refused to make repairs. MUD demanded that Great American perform under the terms of its maintenance bond. Great American responded that the structural defect was the result of a design defect for which Underground Utilities was not liable under the terms of the contract. On that basis, Great American asserted that it was not liable under the terms of the bond. Great American did not take any action to effect repairs or make any payments to MUD to cover the cost of repairs.
MUD filed suit, asserting various claims against Underground Utilities, Dippel Ulmann, Smith Pump, and Great American. The jury found that all four defendants were liable; that Great American had knowingly engaged in "unfair or deceptive act[s] or practice[s]"; that MUD's actual damages were $411,400; and that reasonable attorney's fees were one-third of the amount of MUD's recovery. After adding prejudgment interest, the trial court trebled the combined damage sum, awarding MUD a total of $1,558,804.80 in damages and $779,402.40 in attorney's fees against Great American. Great American, as sole appellant, asserts twenty-four points of error complaining of the trial court's judgment. We will group the points of error and address each in the following order: (1) Excused Liability; (2) Jury Charge; (3) Applicability of Article 21.21; (4) Evidence of Article 21.21 Violations; (5) Attorney's Fees; and (6) Prejudgment Interest.
In points of error fifteen and sixteen, Great American complains that Underground Utilities was relieved from any liability to MUD and, as a result, the trial court erred in rendering judgment against Great American as surety for Underground Utilities. Although Underground Utilities has not appealed the judgment of the trial court, Great American asserts that any liability it has to MUD as surety for Underground Utilities is strictly derivative of Underground Utilities' liability to MUD. Accordingly, if Underground Utilities was relieved from liability, Great American argues that it, too, is relieved from liability. 1
Great American asserts two bases for the argument that Underground Utilities was relieved from liability. The initial basis is that, in answer to question seven, the jury found that Dippel Ulmann's negligence proximately caused the occurrence, i.e., the structural deformity. Great American contends that, on the basis of this finding, Underground Utilities is relieved from any liability to MUD. We disagree, for two reasons.
First, there may be more than one proximate cause of an occurrence. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex.1991). The trial court specifically recited this rule in its jury-charge definition of proximate cause. Questions one and two were based on MUD's breach-of-contract claims. In question one, the jury found that Underground Utilities failed to furnish and install a lift station with sides of sufficient thickness for the depth of burial. Further, in question two, the jury found that Underground Utilities failed to correct defective work. The trial court rendered judgment based on the jury's findings. Although the jury was not asked in questions one and two whether Underground Utilities' actions proximately caused MUD's damages, a finding of proximate cause is deemed found by the trial court in such a manner as to support the judgment. See Tex.R.Civ.P. 279.
Second, there is an independent ground on which Underground Utilities may be held liable. Question three was based on MUD's breach-of-warranty claim under the Deceptive Trade Practices Act (DTPA), Tex.Bus. & Com.Code Ann. § 17.46 (West 1987). In answer to this question, the jury found that Underground Utilities' breach of warranty was a...
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