Humble Nat. Bank v. DCV, Inc.

• Decision Date: 29 August 1996
• Docket Number: No. 14-94-00959-CV,14-94-00959-CV
• Citation: 933 S.W.2d 224
• Parties: HUMBLE NATIONAL BANK, Appellant, v. DCV, INC., Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 224

933 S.W.2d 224

HUMBLE NATIONAL BANK, Appellant, v. DCV, INC., Appellee.

No. 14-94-00959-CV.

Court of Appeals of Texas Houston (14th Dist.).

Aug. 29, 1996.

Rehearing Overruled Nov. 21, 1996.

Mariann Sears, John B. Thomas, Houston, Michael A. Hatchell, Molly H. Anderson, Tyler, for appellant.

Kenneth R. Wynne, Mark Maney, Gregory A. Pierce, Houston, for appellee.

Before YATES, AMIDEI and O'NEILL, JJ.

OPINION

O'NEILL, Justice.

DCV, Inc. ("DCV"), appellee, filed suit against Humble National Bank ("the Bank"), appellant, alleging breach of contract, conversion, negligence, and violations of the Texas Deceptive Trade Practices Act (DTPA). Following a jury trial, the trial court entered judgment for DCV based upon the jury's finding that the Bank breached an express warranty under the DTPA. The Bank brings thirteen points of error alleging that (1) DCV's claims under the DTPA are barred by the statute of limitations, (2) the trial court erred in entering judgment on the express warranty claim, (3) the trial court erred in awarding damages on the express warranty claim, and (4) the trial court improperly failed to condition its award of appellate attorney's fees. DCV brings a cross-point complaining about the trial court's award of prejudgment interest, and eleven conditional cross-points in the event it does not prevail on the express warranty issue. We reverse and remand to the trial court for further action in accordance with this opinion.

Background

DCV, Inc. is the assumed name of Antipode Valve Specialty Company, Inc., a small Houston company that sells specialty valves to the chemical industry. The company was originally formed by Clyde "Jon" Carr and was known as A-Line Company. The company was later taken over and operated by James Denson, who ultimately gave forty-nine percent of the company back to Jon Carr. The Bank had a banking relationship with DCV and the predecessor company.

DCV employed an outside bookkeeper, John Bingman. Bingman had originally been hired when the company was known as A-Line Company to set up and customize a computer accounting system for the company. Bingman's duties were later expanded to include all of the accounting, cutting checks, preparing income tax returns, paying payroll taxes, balancing the bank statements, making deposits, and taking checks to the Bank to pay taxes.

In 1988, Bingman began stealing from DCV. Bingman would prepare a DCV company check payable to "Humble National Bank," obtain an authorized signature on the check, usually Denson's, and take the check to the Bank. Instead of directing the Bank to pay taxes with the check as he was instructed to do, Bingman would discard DCV's written instructions and prepare a cashier's check request slip instructing the Bank to exchange the DCV check for a cashier's check payable to ABCA, Inc., a company created by Bingman. The Bank would exchange the company check for a cashier's check and deduct the money from DCV's account. Bingman would then endorse the cashier's check and deposit it in his ABCA, Inc. account at a different bank.

Denson first learned of Bingman's scheme when he began preparations for his retirement. Denson sent the Social Security Administration a questionnaire requesting information on the amount of his social security draw upon retirement. The Administration responded that for the preceding three and one-half years no social security payments had been made on his behalf and no IRS withholding taxes had been paid. Bingman was confronted with this information and ultimately confessed to embezzling the money.

Trial and Judgment

DCV filed suit against the Bank for its alleged part in Bingman's scheme. The case was tried to a jury, which answered "yes" to liability questions on breach of contract, negligence, breach of express warranty under the DTPA, and conversion. ¹ The jury also found that (1) Bingman had "apparent authority" from DCV to direct the Bank to issue the cashier's checks, and (2) DCV was fifty percent negligent. Regarding the Bank's statute of limitations defense, the jury found DCV first learned of the Bank's alleged wrongful conduct after April 26, 1990, which was within the applicable limitations period.

DCV moved for judgment on the verdict and requested the court to enter judgment on the breach of express warranty finding. DCV requested a monetary award of $405,815.80, together with attorney's fees and prejudgment interest at the rate of ten percent. The trial court determined that the findings on DCV's theories of recovery other than breach of express warranty were immaterial in light of the jury's finding of apparent authority, and granted the Bank's motion to disregard them. ² On June 9, 1994, the trial court entered judgment in favor of DCV based upon the express warranty claim, and awarded DCV its attorney's fees and prejudgment interest at the rate of six percent.

Points of Error Four, Five and Seven

(Breach of Express Warranty)

In points of error four, five, and seven, the Bank claims the trial court should have disregarded the jury's answer to the breach of express warranty question because the evidence was legally and factually insufficient to support it. Under these points, the Bank argues: (1) the phrases "tradition of excellence" and "know your customer" did not rise to the level of a warranty; (2) there was no express warranty to provide reasonably proficient and safe and sound banking practices; and (3) there was no actionable warranty to abide by the terms of the contract. We will address these contentions individually.

In its Fifth Amended Petition, the live pleading at the time of trial, DCV generally pled that the Bank's conduct violated the bank's implied and express warranties to provide reasonably proficient and safe and sound banking services. At trial, DCV relied upon the following purported express warranties: (1) the statement "a tradition of excellence" which appeared on the cover of the Bank's brochure; (2) the Bank's unwritten but highly promoted policy that it "knows its customer;" (3) that the Bank would provide reasonably proficient and safe and sound banking practices; and (4) that the Bank would abide by the contract terms.

The Bank claims these first two purported warranties are not actionable because they are merely opinion or puffing. Neither opinion nor puffing is specifically listed as a defense under the DTPA. Autohaus, Inc. v. Aguilar, 794 S.W.2d 459, 461 (Tex.App.--Dallas 1990), writ denied per curiam, 800 S.W.2d 853 (Tex.1991). Compare TEX. BUS. & COM.CODE ANN. § 2.313 (Vernon 1968) (statement of seller's opinion or commendation specifically listed as defense in Texas Uniform Commercial Code to the creation of an express warranty). While the DTPA does not specifically mention opinion or puffing as a defense, the Texas Supreme Court has held that "misrepresentations, so long as they are of a material fact and not merely 'puffing' or opinion, are nevertheless actionable [under section 17.46(b)(5) and (7) of the DTPA]." Pennington v. Singleton, 606 S.W.2d 682, 687 (Tex.1980). Numerous courts of appeals and federal courts have followed Pennington and indicated that a "puffing" or "opinion" defense will defeat a misrepresentation claim brought under section 17.46(b)(5) and (7). ³ See, e.g., Presidio Enter., Inc. v. Warner Bros. Distrib. Corp., 784 F.2d 674, 686 (5th Cir.1986); Sergeant Oil & Gas Co., Inc. v. Nat'l Maintenance & Repair, Inc., 861 F.Supp. 1351, 1362 (S.D.Tex.1994); Hedley Feedlot, Inc. v. Weatherly Trust, 855 S.W.2d 826, 838-39 (Tex.App.--Amarillo 1993, writ denied); RRTM Restaurant Corp. v. Keeping, 766 S.W.2d 804, 807 (Tex.App.--Dallas 1988, writ denied); Parks v. U.S. Home Corp., 652 S.W.2d 479, 484 (Tex.App.--Houston [1st Dist.] 1983, writ dism'd w.o.j.).

Courts have generally considered three factors in determining whether a statement is actionable or mere puffing or opinion. Hedley Feedlot, 855 S.W.2d at 826. First, the court must examine the specificity of the alleged misrepresentation. Id. (citing Autohaus, 794 S.W.2d at 462). An imprecise or vague representation constitutes a mere opinion. Id. Although general or indefinite statements may support recovery under the DTPA, they must be examined in light of the particular facts of the case. Id. (citing Autohaus, 794 S.W.2d at 464). But see Royal Business Machines, Inc. v. Lorraine Corp., 633 F.2d 34, 42 (7th Cir.1980) (holding general statements are generally regarded as expressions of seller's opinion or puffing and do not create an express warranty).

Second, courts compare the knowledge of the buyer and the seller. Id. (citing Autohaus, 794 S.W.2d at 463). As the Seventh Circuit stated in Royal Business Machines, whether a representation is a warranty or merely an expression of opinion depends in part upon whether the seller asserts a fact of which the buyer is ignorant, or merely states an opinion or judgment on a matter on which the seller has no special knowledge and on which the buyer may be expected to have an opinion and exercise his judgment. 633 F.2d at 41. While the Seventh Circuit describes this as a "decisive" test, Texas courts merely consider the parties' comparative knowledge along with the specificity of the representation:

Another circumstance which is treated as indicating whether a statement is a mere expression of opinion is whether or not its correctness is a matter of which either of the parties can judge as well as the other, upon which the buyer can, and may, reasonably be expected, in the exercise of ordinary diligence, to have formed his own opinion....

Superior knowledge of seller, in conjunction with the buyer's relative ignorance, operates to make the slightest divergence from mere praise into representations of fact effective as a warranty.

United States Pipe & Foundry Co. v. City of Waco, 130 Tex. 126, 108 S.W.2d 432, 436-37 (1937).

Finally, the courts look at whether the representation pertains to a past or...