Reuben H. Donnelley Corp. v. McKinnon

• Decision Date: 10 January 1985
• Docket Number: No. 13-84-117-CV,13-84-117-CV
• Citation: 688 S.W.2d 612
• Parties: The REUBEN H. DONNELLEY CORPORATION, a Delaware Corporation, Appellant, v. Thomas R. McKINNON d/b/a Busted 5 Ranch, Inc., Appellee.
• Court: Texas Court of Appeals

Page 612

688 S.W.2d 612

The REUBEN H. DONNELLEY CORPORATION, a Delaware Corporation, Appellant, v. Thomas R. McKINNON d/b/a Busted 5 Ranch, Inc., Appellee.

No. 13-84-117-CV.

Court of Appeals of Texas,

Corpus Christi.

Jan. 10, 1985.

Rehearing Denied Jan. 31, 1985.

Rehearing Overruled Feb. 21, 1985.

Wallace P. Finrock, Dallas, for appellant.

Craig H. Vittitoe, Harlingen, for appellee.

Before the court en banc.

OPINION

PER CURIAM.

On December 1, 1981, appellee, Thomas R. McKinnon, purchased from Albert A. Connell a franchise business known as Thrifty Rent-A-Car. In several discussions prior to the sale, McKinnon had inquired about and was assured by Connell that advertising had been secured in the upcoming year's Yellow Page Directory. Connell had exhibited an order form contract, signed September 28, 1981 by Thrifty Rent-A-Car's then general manager with Reuben H. Donnelley (hereinafter R.H.D.), for a triple half-column ad in the Rio Grande Valley Directory to be published in February 1982. No payment was due until the advertisement appeared. The ad failed to appear. McKinnon ultimately sued Albert Connell and R.H.D., alleging negligence and violations of the Texas Deceptive Trade Practices Act, Texas Business and Commerce Code, sec. 17.41 et seq. (Vernon Supp.1984). R.H.D. answered that it had cancelled the advertising upon the instruction of the party placing the ad and denied that it had any contractual or other obligation to McKinnon. Connell answered, denying cancellation. Before trial, Connell was dismissed as a party defendant. Evidence was then presented to a jury which answered twelve special issues. The jury found, inter alia, that Connell did not cancel the Yellow Page advertisement, that R.H.D.'s cancellation was negligent, and that R.H.D. breached its express warranty to McKinnon d/b/a Thrifty Rent-A-Car to provide advertising. The trial court entered judgment against R.H.D. for $212,000.00 plus attorney's fees.

R.H.D. brings forward thirteen points of error. Appellant's first, second and fourth points of error are all based on the premise that R.H.D. had no contractual relationship with McKinnon. We disagree.

As noted earlier, Thrifty Rent-A-Car's general manager entered into a contract for the advertisement on September 28, 1981, shortly before the directory's October 9 closing date. About two months after the advertising order was placed, and after the directory's closing date, but before the publication date, Connell and McKinnon contracted for the sale of the franchise business known as Thrifty Rent-A-Car. Appellant does not assert on appeal that the advertisement contract was not "transferred" by the contract for sale of the franchise; his argument is that the transfer was unauthorized, that appellant had no notice of it, and that, therefore, the transfer was ineffective to cause appellant any obligation to appellee. Appellant characterizes this transfer as an assignment, points to the following provision in its order form contract with Connell and asserts that the order was not assignable:

12. This agreement shall inure to and be binding upon the successors and assigns of the parties hereto; provided, however, that it shall not be assigned without the prior written consent of RHD. ¹

Appellee, for his part, characterizes the transfer as a succession and asserts that the above provision is inapplicable to this case. We find, for the following reasons, that the label descriptive of this transfer is not critical to the outcome of the case and that, under the circumstances of this case, RHD had a contractual obligation to provide yellow page advertising to the Thrifty Rent-A-Car franchise.

If appellee is classified as a "successor," the requirement of written consent to make the transfer effective would be inapplicable, and, therefore, the transfer would be valid. The result, however, is no different if appellee is classified as an "assignee," because the contract term only forbids assignment; it does not render an assignment ineffective. See Restatement, Second, Contracts § 322(2) which provides, in part:

A contract term prohibiting assignment of rights under the contract, unless a different intention is manifested,

(b) gives the obligor a right to damages for breach of the terms forbidding assignment but does not render the assignment ineffective.

Similar provisions, although limited in scope, are contained in the Texas Business and Commerce Code. See §§ 2.210; 9.104(6) and 9.318(d). See also Gips v. Red Robin Corporation, 366 S.W.2d 853 (Tex.Civ.App.--Houston 1963, writ ref'd n.r.e.). Accordingly, we disagree with appellant that it had no contractual duty to provide advertising to McKinnon's Thrifty Rent-A-Car. Appellant's first, second, and fourth points of error are overruled.

In his third point of error, appellant argues that, even if a contract did exist between appellant and appellee, the trial court awarded excessive damages as the order form contract provided that in the event of "any error or omission in the publication of or failure to publish any item ... the liability of RHD ... shall be limited to the charges for the publication in such directory of the item of the advertising involved...." Appellant cites Wade v. Southwestern Bell Telephone Co., 352 S.W.2d 460 (Tex.Civ.App.--Austin 1961, no writ) for the proposition that these limiting clauses for errors and omissions are valid and enforceable. Wade, however, was an action for breach of contract rather than negligence or deceptive trade practices. There are several Texas cases where contractual provisions limiting damages have not been enforced. For example, in DeKalb Hybrid Seed Company v. Agee, 293 S.W.2d 64 (Tex.Civ.App.--Beaumont 1956, writ ref'd n.r.e.), an order form for baby chicks contained a clause limiting the seller's liability to the price of the chicks. The Court of Civil Appeals held that the buyer's measure of damages was not limited to the purchase price where his cause of action was for fraud (an intentional tort) rather than for the rescission of the contract. See also F.H. Woodruff & Sons v. Brown, 256 F.2d 391 (5th Cir.1958); Andrews v. Powell, 242 S.W.2d 656 (Tex.Civ.App.--Texarkana 1951, no writ). Recently, this Court was presented with the same issue, but, because of the disposition, was not required to address whether recovery for lost profits is foreclosed by a contractual limitation of liability. See Goldson v. Southwestern Bell Telephone Co., 659 S.W.2d 902 (Tex.App.--Corpus Christi 1983, writ ref'd n.r.e.). In addition, the Texas Supreme Court was not required to decide that issue in White v. Southwestern Bell Telephone Company, Inc., 651 S.W.2d 260 (Tex.1983).

We now address that issue. Appellant contends that similar provisions have been upheld in sixteen states and should be upheld in Texas. See McClure Engineering Associates, Inc. v. Reuben H. Donnelley Corp., 95 Ill.2d 68, 69 Ill.Dec. 183, 447 N.E.2d 400 (1983), where the Illinois Supreme Court lists those jurisdictions upholding the validity of such provisions. More recently, however, the Wisconsin Supreme Court, in a negligence case, held unenforceable a limiting provision similar to the one in this case. Discount Fabric House v. Wisconsin Telephone Company, 117 Wis.2d 587, 345 N.W.2d 417 (1984). See also Thomas v. General Telephone Directory, 127 Mich.App. 788, 339 N.W.2d 257 (1983). For reasons stated in these cases, we hold that appellant may not limit its liability for negligence. Appellant's third point of error is overruled.

In his fifth point of error, appellant argues that the trial court erred in submitting special issues based on negligence, because the appellee's rights, if any, were based on contract. Cases similar to this one have been brought on negligence theory. See Discount Fabric House v. Wisconsin Telephone Company, 117 Wis.2d 587, 345 N.W.2d 417 (1984); Southwestern Bell Telephone Company v. Reeves, 578 S.W.2d 795 (Tex.Civ.App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.); Thomas v. General Tel. Directory Co., 339 N.W.2d 257. Appellant's fifth point of error is overruled.

In his sixth point of error, appellant contends that McKinnon was not a consumer under the Deceptive Trade Practices Act. In Bancroft v. Southwestern Bell Telephone Company, 616 S.W.2d 335 (Tex.Civ.App.--Houston [14th Dist.] 1981, no writ), the Houston Court of Appeals held that Bancroft was not a consumer because he did not pay for and was not charged for the advertisements which were omitted from the Yellow Page directory. We choose not to follow Bancroft, finding it in conflict with our holding in McCrann v. Klaneckey, 667 S.W.2d 924 (Tex.App.--Corpus Christi 1984, no writ). Appellant's sixth point of error is overruled.

In his seventh point of error, appellant complains...