Great American Ins. Co. v. North Austin Mun. Utility Dist. No. 1

• Court: Texas Supreme Court
• Writing for the Court: PER CURIAM
• Citation: Great American Ins. Co. v. North Austin Mun. Utility Dist. No. 1, 950 S.W.2d 371 (Tex. 1997)
• Decision Date: 31 July 1997
• Docket Number: No. 97-0081,97-0081
• Parties: 40 Tex. Sup. Ct. J. 943 GREAT AMERICAN INSURANCE COMPANY, Petitioner, v. NORTH AUSTIN MUNICIPAL UTILITY DISTRICT NO. 1, Respondent.

Page 371

950 S.W.2d 371

40 Tex. Sup. Ct. J. 943

GREAT AMERICAN INSURANCE COMPANY, Petitioner, v. NORTH AUSTIN MUNICIPAL UTILITY DISTRICT NO. 1, Respondent.

No. 97-0081.

Supreme Court of Texas.

July 31, 1997.

Arthur F. Selander, Dallas, for Petitioner.

Scott R. Kidd, Austin, for Respondent.

OPINION

PER CURIAM.

This suit arises out of a construction project for a municipal wastewater lift station in which Great American Insurance Company ("Great American") issued payment, performance, and maintenance bonds in favor of the North Austin Municipal Utility District No. 1 ("MUD"). MUD contracted with Underground Utilities Company ("Underground") to refurbish and relocate an existing dry well. When Underground refused to correct allegedly defective work performed on the well, MUD sued Underground, Great American, an engineering firm, and a subcontractor.

MUD alleged violations of the Deceptive Trade Practices Act, Insurance Code, and breach of contract against Great American, as the surety on the performance bond. Following a jury trial, the trial court rendered judgment for MUD based on liability findings against all the defendants. Regarding Great American, the jury found that it had knowingly committed deceptive acts in violation of article 21.21 of the Insurance Code and had breached a common law duty of good faith and fair dealing. The trial court rendered judgment against Great American for $2,338,207.20, including attorney's fees and prejudgment interest. Great American alone appealed the trial court's judgment, and the court of appeals affirmed. 850 S.W.2d 285, 902 S.W.2d 488. On the first appeal to this Court, we affirmed the court of appeals judgment in part and reversed in part, holding that Great American was liable to MUD only for breach of contract in the amount of $397,503.20, plus attorney's fees and prejudgment interest. Great Am. Ins. Co. v. North Austin Mun. Util. Dist. No. 1, 908 S.W.2d 415 (Tex.1995). We then remanded the case to the trial court for a calculation of prejudgment interest due to MUD. Id. at 428-29.

On remand, Great American asserted that MUD was entitled to only six percent per annum prejudgment interest, pursuant to Texas Revised Civil Statutes article 5069--1.03. The trial court, instead, awarded equitable prejudgment interest of ten percent per annum, the rate provided in article 5069--1.05. The court of appeals affirmed. 933 S.W.2d 737.

In this appeal, Great American contends that the court of appeals erred in holding that article 5069--1.03 does not apply when extrinsic evidence is needed to ascertain the damages arising out of the contract. More specifically, Great American claims that the performance bond and the construction contract between MUD and Underground, read together, meet the requirements of article 5069--1.03, which mandates prejudgment interest at six percent per annum.

Article 5069--1.03 provides:

When no specified rate of interest is agreed upon by the parties, interest at the rate of six percent per annum shall be allowed on all accounts and contracts ascertaining the sum payable, commencing on the thirtieth (30th) day from and after the time when the sum is due and payable.

TEX.REV.CIV. STAT. ANN. art. 5069--1.03 (Vernon 1987) (emphasis added). A contract is one "ascertaining the sum payable" when it (1) "provides the conditions upon which liability depends," and (2) "fixes a measure by which the sum payable can be ascertained with reasonable certainty, in the light of the attending circumstances." Federal Life Ins. Co. v. Kriton, 112 Tex. 532, 249 S.W. 193, 195 (1923); see also Perry Roofing Co. v. Olcott, 744 S.W.2d 929, 930 (Tex.1988); La Sara Grain Co. v. First Nat'l Bank, 673 S.W.2d 558, 567 (Tex.1984). The statute is to be given a liberal interpretation. See Kriton, 249 S.W. at 195; La Sara Grain, 673 S.W.2d at 567.

Relying on three recent decisions from this Court, the court of appeals opined that we have "significantly narrowed" those instances in which article 5069--1.03 applies. 933 S.W.2d at 738 (citing Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549 (Tex.1985); Perry Roofing, 744 S.W.2d 929; Rio Grande Land & Cattle Co. v. Light, 758 S.W.2d 747 (Tex.1988) (per curiam)). For example, the court of appeals cited Light for the rule that when the amount of damages for breach of the contract at issue "could not be ascertained by reference to the face of the contract," article 5069--1.03 did not govern prejudgment interest. See Light, 758 S.W.2d at 748. Concluding that the damages for breach in this case "were not ascertainable from the face of the contract" because the parties had to resort to extrinsic evidence to determine the actual amount of damages, the court held that article 5069--1.03 does not apply. 933 S.W.2d 737, 739.

Other courts of appeals have also interpreted Light similarly. In concluding that article 5069--1.03 was inapplicable, these decisions relied on the fact that the damages in each case could only be determined by resorting to extrinsic evidence. See, e.g., Graco Robotics, Inc. v. Oaklawn Bank, 914 S.W.2d 633, 646 (Tex.App.--Texarkana 1995, no writ); International Piping Sys., Ltd. v. M.M. White & Assocs., Inc., 831 S.W.2d 444, 453 (Tex.App.--Houston [14th Dist.] 1992, writ denied); Sage Street Assocs. v. Northdale Constr. Co., 809 S.W.2d 775, 778 (Tex.App.--Houston [14th Dist.] 1991), aff'd in part & rev'd in part, 863 S.W.2d 438 (Tex.1993); Phillips v. Phillips, 792 S.W.2d 269, 272-73 (Tex.App.--Tyler 1990), aff'd, 820 S.W.2d 785 (Tex.1991); Winograd v. Willis, 789 S.W.2d 307, 312 (Tex.App.--Houston [14th Dist.] 1990, writ denied); General Life & Acc. Ins. Co. v. Handy, 766 S.W.2d 370, 374 (Tex.App.--El Paso 1989, no writ).

We are not persuaded. Neither Perry Roofing nor Light actually hold that article 5069--1.03 is inapplicable when extrinsic evidence is required to calculate damages under the contract. The contract in Perry Roofing did not prescribe any method or means for calculating damages in the event of breach. See Perry Roofing, 744 S.W.2d at 930 ("The contract ... contains no measure by which a sum payable could be ascertained for damages resulting from Perry Roofing's failure to properly install the roof."). And we noted in Light that "[w]hile the relationship between Light and Rio Grande arose under a contract, the damages suffered by Light could not be ascertained by reference to that contract.... The contract did not contain provisions to determine damages from overcharging for costs expended" for the services Rio Grande performed. Light, 758 S.W.2d at 748. Thus, the reason that article 5069--1.03 did not apply in either case was not because extrinsic evidence was needed to...