Medical City Dallas, Ltd. v. Carlisle Corp.

• Decision Date: 11 April 2008
• Docket Number: No. 06-0660.,06-0660.
• Citation: Medical City Dallas, Ltd. v. Carlisle Corp., 251 S.W.3d 55 (Tex. 2008)
• Parties: MEDICAL CITY DALLAS, LTD., Petitioner, v. CARLISLE CORPORATION d/b/a Carlisle Syntec Systems, Respondent.
• Court: Texas Supreme Court

251 S.W.3d 55

MEDICAL CITY DALLAS, LTD., Petitioner, v.CARLISLE CORPORATION d/b/a Carlisle Syntec Systems, Respondent.

No. 06-0660.

Supreme Court of Texas.

Argued October 17, 2007.

Decided April 11, 2008.

Robert B. Gilbreath, Hawkins, Parnell & Thackston, LLP, Dallas, Melissa M. Davis, Brandy M. Wingate, Attorney At Law, Vernon Childs Howerton, Jr., Jenkens & Gilchrist, Houston, TX, for Petitioner.

Michael L. Knapek, William David Ellerman, Jackson Walker, L.L.P., Dallas, TX, for Respondent.

Chief Justice JEFFERSONdelivered the opinion of the Court.

Texas law permits recovery of attorney's fees for a claim based on an oral or written contract.SeeTEX. CIV. PRAC. & REM.CODE § 38.001(8).We must determine whether an action for breach of express warranty is such a claim.Because we conclude that it is, we reverse in part the court of appeals' judgment.

IFacts and Procedural History

In 1991, Medical City Dallas contracted with Charley Company of Texas to re-roof one of completed, Carlisle issued express warranties to Medical City, one of which— a Twenty Year Membrane Material Warranty—promised that the roof membrane would not deteriorate prematurely.Each express warranty identified Medical City as the building's owner.

Within months of the installation, Medical City encountered a leak in the building's roof and Charley Co. repaired it.By 1995, leaks became more frequent, and Charley Co. made more repairs.By 1999, the leaks were "continuous," and complaints from Medical City's tenants prompted a meeting in October 2000 with representatives from Charley Co., Medical City, and Carlisle.In November 2000, Medical City retained LRW Consultants, Inc. to evaluate the roof.LRW found "[o]pen lap seams,""pinholes,""material defects in the roof membrane," and "premature aging of the material."LRW concluded that the roof was "in extremely poor condition" and recommended that Medical City contact the manufacturer to discuss warranty issues.After failed attempts to resolve the dispute, Medical City sued Charley Co. and Carlisle, alleging breach of the express warranties, breach of implied warranties, and negligence.It sought direct costs incurred in replacing the roof in October 2002, attorney's fees, and costs.The trial court granted Carlisle summary judgment on the negligence claim.

A jury returned a verdict in favor of Medical City, finding that Carlisle breached its Twenty Year Membrane Warranty, and awarded Medical City $110,449.59 in damages and $121,277.04 in attorney's fees.¹Carlisle moved for judgment notwithstanding the verdict, but the trial court denied the motion and signed a judgment for Medical City.Carlisle appealed.

On the attorney's fees issue, the court of appeals held that Texas Civil Practice and Remedies Code section 38.001(8), which allows fees for claims based on oral or written contracts, did not encompass breach of warranty claims.196 S.W.3d 855, 868-72.It noted that Medical City did not plead or try a breach of contract cause of action and did not recover on that theory.Id. at 870.As a result, the court of appeals rendered a take-nothing judgment for Carlisle on the attorney's fees claim and affirmed Medical City's judgment in all other respects.Id. at 872.Medical City petitioned this court for review on the sole issue of attorney's fees.We granted the petition to decide whether a party who prevails in a breach of express warranty action is entitled to attorney's fees.50 Tex. Sup.Ct. J. 712(May 4, 2007).

IIDiscussion

A party who prevails in a lawsuit is entitled to recover attorney's fees only if permitted by statute or by contract.Tony Gullo Motors I, L.P. v. Chapa,212 S.W.3d 299, 310(Tex.2006).Here, while there was no separate contract between Medical City and Carlisle, Carlisle issued Medical City several express warranties.Medical City contends that an express warranty is like a contract, and that attorney's fees are therefore authorized by section 38.001 of the Civil Practice and Remedies Code.We must determine if a claim based on an express warranty is, in essence, a contract action.Because we conclude that it is, Medical City was entitled to attorney's fees when it prevailed.

AHistorical Background

Nearly 100 years ago, the Texas Legislature created a statutory right to attorney's fees for judgments in select claims.SeeAct ofMarch 13, 1909, 31st Leg., R.S., ch. 47, § 1, 1909 Tex. Gen. Laws 93, 94 (creating a right to a "reasonable amount" of attorney's fees, limited to twenty dollars, for persons obtaining judgment for the full amount of their claim in actions for "personal services rendered or for labor done, or for material furnished, or for overcharges on freight or express, or for any claim for lost or damaged freight, or for stock killed or injured").Over time, the statute has been modified to expand the types of claims eligible for an award of fees.It was amended in 1923 to allow fees for loss of or damage to express shipments.SeeAct ofMarch 26, 1923, 38th Leg., R. S., ch. 144, § 1, 1923 Tex. Gen. Laws 312, 312.In 1949, it was amended to allow attorney's fees upon a judgment "for any amount" recovered.SeeAct ofJune 29, 1949, 51st Leg., R.S., ch. 494, § 1, 1949 Tex. Gen. Laws 915, 915.Four years later, the Legislature extended article 2226 to "suits founded upon a sworn account or account."SeeAct of April21, 1953, 53d Leg., R.S., ch. 67, § 1, 1953 Tex. Gen. Laws 101, 101.As the statute evolved, so did Texas jurisprudence.

In 1958, we held that a contract for the drilling of an oil well was not an action on a sworn account and thus disallowed attorney's fees under article 2226.Meaders v. Biskamp,159 Tex. 79, 316 S.W.2d 75, 78(1958).A 1973court of appeals decision declared that attorney's fees were generally unavailable in contract actions at that time.M.C. Winters, Inc. v. Cope,498 S.W.2d 484, 491(Tex.Civ.App.-Texarkana 1973, no pet.).And we strictly construed those claims allowing fees.See, e.g., Tenneco Oil Co. v. Padre Drilling Co.,453 S.W.2d 814, 820-21(Tex.1970)(interpretingarticle 2226's "labor done" and "personal services" provisions);Van Zandt v. Fort Worth Press,359 S.W.2d 893, 896(Tex.1962)(construing"personal services" rendered under article 2226).

The modern era began in 1977, when the Legislature added "suits founded on oral or written contracts" to the claims for which recovery of attorney's fees was authorized.SeeAct ofApril 25, 1977, 65th Leg., R. S., ch. 76, § 1, 1977 Tex. Gen. Laws 153, 153-54.This modification brought the statute in line with the Legislature's decision, four years earlier, to make fees recoverable by consumers who successfully pursued similar actions under Texas' Deceptive Trade Practices Act ("DTPA").SeeAct of May21, 1973, 63d Leg., R.S., ch. 143, § 1, sec. 17.50, 1973 Tex. Gen. Laws 322, 326-27 (creating the remedy of attorney's fees for the first time for consumers prevailing in an action on an "express or implied warranty")(current version at TEX. BUS. & COM.CODE § 17.50(d)("Each consumer who prevails shall be awarded court costs and reasonable and necessary attorney's fees.")).Two years after authorizing attorney's fees for suits founded on contract, the Legislature instructed courts to construe the statute liberally "to promote its underlying purposes."SeeAct ofJune 6, 1979, 66th Leg., R.S., ch. 314, § 1, 1979 Tex. Gen. Laws 718, 718.

Finally and most recently, the statute was recodified in a "topic-by-topic revision of the state's general and permanent statute law without substantive change."SeeAct of 1985, 69th Leg., R.S., ch. 959, § 1,secs. 1.001, 38.001, 38.005, 1985 Tex. Gen. Laws 3242, 3244, 3278, 3279(current version at TEX. CIV. PRAC. & REM.CODE §§ 1.001,38.001, and38.005).²Thus, section 38.001 now provides:

A person may recover reasonable attorney's fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for:

(1) rendered services;

(2) performed labor;

(3) furnished material;

(4) freight or express overcharges;

(5) lost or damaged freight or express;

(6) killed or injured stock;

(7) a sworn account; or

(8) an oral or written contract.

TEX. CIV. PRAC. & REM.CODE § 38.001.

BBreach of Express Warranty Actions

The Uniform Commercial Code(UCC) governs Medical City's express warranty claim.³SeeTEX. BUS. & COM.CODE § 2.313.However, the UCC sections and comments dealing with remedies for breach of warranty, adopted verbatim in Texas, are silent on the issue of attorney's fees.See, e.g.,TEX. BUS. & COM.CODE §§ 2.714-.715 and cmt.(providing for consequential damages to a buyer in a breach of warranty action but failing to indicate in the comment whether attorney's fees are considered either consequential or incidental damages).At least one court has held that attorney's fees may be recovered under the UCC as consequential damages.SeeKelynack v. Yamaha Motor Corp.,152 Mich.App. 105, 394 N.W.2d 17, 21(1986)(allowing attorney's fees as consequential damages).But seeWebco Indus., Inc. v. Thermatool Corp.,278 F.3d 1120, 1132(10th Cir.2002)(rejectingKelynack in part by concluding that the Michigan Supreme Court would not agree with awarding attorney's fees as an element of consequential damages).Leading commentators conclude, however, that attorney's fees are "generally not recoverable as consequential damages" on the theory that if the UCC intended to authorize recovery of attorney's fees, it would have done so expressly.See, e.g., 24 RICHARD A. LORD, WILLISTON ON CONTRACTS § 66.67(4th ed.2001).Although attorney's fees may not qualify as UCC consequential damages, fees may nonetheless be recoverable if authorized by another statute.Thus, as one commentator has noted, if a state has a "special statute[ ] that allows recovery of attorney fees in an action based upon a contract relating to the sale of goods [i]t would be appropriate for a court to award...