Southwestern Bell Telephone Co. v. Delanney

• Decision Date: 18 October 1988
• Docket Number: No. 9614,9614
• Citation: 762 S.W.2d 772
• Parties: SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant, v. Eugene C. DELANNEY, Appellee. . Filed:
• Court: Texas Court of Appeals

Page 772

762 S.W.2d 772

SOUTHWESTERN BELL TELEPHONE COMPANY, Appellant, v. Eugene C. DELANNEY, Appellee.

No. 9614.

Court of Appeals of Texas Texarkana.

Filed: Oct. 18, 1988

John A. Buckley, Jr., Greer, Foutch, Herz & Adams, Galveston, for appellant.

Anthony P. Griffin, Anthony P. Griffin, Inc., Galveston, for appellee.

BLEIL, Justice.

In Southwestern Bell Telephone Company's appeal from a judgment on a verdict finding that it negligently damaged Eugene Delanney, Southwestern Bell raises issues concerning the questions asked of the jury, the denial of its motions for a directed verdict and a new trial, the enforceability of a contractual limitation and the sufficiency of the evidence. We find no error affecting the trial court's judgment and affirm.

Delanney operated Delanney & Associates, a real estate firm in Galveston, which had successfully advertised in Southwestern Bell's Yellow Pages. In April of 1980, Delanney and Southwestern Bell agreed to a Yellow Pages listing of Delanney's real estate business in the 1980-81 telephone directory. Also in 1980, Delanney decided to include a third line on his rotary system and to add another line to one of his two remaining inactive lines. This required the cancellation of one line and the transfer of this line to the rotary system. The cancelled line was the number to which the Yellow Pages listing was billed. Delanney requested the change before the Yellow Pages listings were sent to the printer. Because of Southwestern Bell's internal billing procedure, Delanney's request resulted in the deletion of his Yellow Pages advertisement from the 1980-81 directory.

Delanney sued Southwestern Bell for negligence. The jury found that Southwestern Bell's deletion of Delanney's Yellow Pages advertisement resulted from negligent acts which caused Delanney to suffer lost profits in the amount of $109,200.00 during the year his firm was not listed and $40,000.00 for loss of future profits. The trial court remitted the future damage award to $11,840.00.

Initially Southwestern Bell contends that the trial court erred in submitting a question to the jury asking if Southwestern Bell was negligent, claiming that in reality it had merely breached a contract with Delanney and that the underlying action sounded in contract alone. Southwestern Bell cites authorities which distinguish actions in contract from actions in tort, and argues that Delanney's action is based solely in contract because the duty imposed on Southwestern Bell arose purely by virtue of the contract. Southwestern Bell claims that an action in contract is for breach of a duty arising out of a contract, while an action for tort is for a breach of duty imposed by law, relying on International Printing Pressmen and Assistants' Union v. Smith, 145 Tex. 399, 198 S.W.2d 729, 735 (1946).

A party to a contract owes a common law duty to perform with care, skill, reasonable expedience and faithfulness the thing to be done, and a negligent failure in performing any of these conditions can be the basis for recovery in tort as well as a breach of contract. Coulson v. Lake L.B.J. Municipal Utility District, 734 S.W.2d 649 (Tex.1987); Montgomery Ward & Co. v. Scharrenbeck, 146 Tex. 153, 204 S.W.2d 508 (1947). Southwestern Bell relies on Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617 (Tex.1986), which provides some guidance as to when an action sounds in tort and when an action sounds in contract. In that case, the Reeds brought an action against the housing contractor who breached their construction contract by failing to build the house according to contract specifications. In addition to breach of contract, the Reeds claimed negligent supervision of construction by the contractor. In determining whether an action is based in tort or contract, the court noted that it is the substance of the cause of action and not necessarily the manner of pleading which controls, and that the nature of the injury most often determines the duties that are breached. Generally, when the injury is only the economic loss to the subject of a contract itself, the action sounds in contract alone. Jim Walter Homes, Inc. v. Reed, 711 S.W.2d at 618.

Delanney did not receive the advertisement he paid for and as a result suffered damages. When Southwestern Bell cancelled a listing and added a third rotary line, it was negligent in so doing and responsible for the damages proximately caused thereby. The specific findings of negligence on the part of Southwestern Bell were:

(1) failing to inform Delanney that the installation of a rotary system would cancel the Yellow Pages listing;

(2) failing to adequately train and inform its employees that an order to cancel one of the telephone numbers would cancel the Yellow Pages advertisement; and

(3) failing to recognize that the automatic cancellation of the Yellow Pages advertisement would occur when the billing procedure was changed.

Most of the cases relied on by Southwestern Bell focus on the award of exemplary damages. The plaintiff in those cases was required to have proven--in addition to a breach of contract and damages--a distinct tortious injury with actual damages to support an additional award of exemplary damages. Exemplary damages are not involved in this case. The only damages awarded to Delanney were for lost profits, which are actual damages.

Turning to other issues, Southwestern Bell claims that the trial court erred in overruling its motions for directed verdict and for new trial because the evidence adduced at trial failed to establish a negligence cause of action. Delanney's negligence action is based on Southwestern Bell's handling of Delanney's request for an additional rotary line. Delanney claimed that Southwestern Bell failed to inform him that the addition of an extra rotary line would cancel his Yellow Pages listing, that Southwestern Bell negligently failed to recognize that automatic cancellation would take place, and that Southwestern Bell failed to inform and properly train its employees.

Lorraine Miller, a Southwestern Bell employee, testified that she received training to become a service representative. She stated that Delanney's wife called to request that one of the Delanney listings be cancelled and added as a third number to the rotary line, so Miller pulled the equipment listing, got the information and told Delanney she would get back with her. Miller wrote the order, disconnected the listing and put the requested number as a third number at the end of Delanney's rotary line. Miller testified that she did not inform Delanney that the Yellow Pages advertising would be cancelled. The line that Delanney asked to have cancelled was the listing for D. and D. Enterprises and was not the listing for Delanney. Miller testified that at the time she filled out the order she did not know the Yellow Pages advertisement for Delanney would be cancelled. Miller also testified that she had indicated on a report she had made that the omission of Delanney's listing was due to an error in production. The jury could reasonably infer from these facts that Southwestern Bell did not perform its agreement with Delanney with care; thus, the evidence supports a finding of Southwestern Bell's negligent performance of a duty it owed to Delanney. Montgomery Ward & Co. v. Scharrenbeck, supra.

Southwestern Bell additionally complains that the trial court erroneously submitted the limitation of liability question to the jury because public policy issues are not proper for jury consideration and the limitation of liability clause is enforceable as a matter of law. Also, Southwestern Bell claims that the trial court erroneously held that the limitation of liability clause is unenforceable.

The trial court submitted a question to the jury, as follows:

Do you find from a preponderance of the evidence that there was a disparity of bargaining power between the plaintiff and the defendant in negotiating the contract for Yellow Page advertising.

INSTRUCTION: A disparity of bargaining power exists when one party has no real choice in accepting an agreement limiting the liability of the other party.

Apparently, the trial court submitted this question because Delanney claimed in his petition that the limitation of liability clause is void and unenforceable. The limitation of liability clause reads as follows: "The applicant agrees that the Telephone Company shall not be liable for errors in or omissions of the directory advertising beyond the amount paid for the directory advertising omitted, or in which errors occur, for the issue life of the directory involved." A similar limitation of liability clause was upheld in a breach of contract suit. Wade v. Southwestern Bell Telephone Company, 352 S.W.2d 460 (Tex.Civ.App.--Austin 1961, no writ); see also Helms v. Southwestern Bell Telephone Co., 794 F.2d 188 (5th Cir.1986); Calarco v. Southwestern Bell Telephone Co., 725 S.W.2d 304 (Tex.App.--Houston [1st Dist.] 1986, writ ref'd n.r.e.). However, in Helms the court followed the case of Reuben H. Donnelley Corp. v. McKinnon, 688 S.W.2d 612 (Tex.App.--Corpus Christi 1985, writ ref'd n.r.e.), which held a similar limitation of liability clause in a Yellow Pages advertisement contract unenforceable because the plaintiff's action was based on negligence and the defendant could not limit its liability for negligence. 688 S.W.2d at 616.

The trial court's refusal to enforce the limitation of liability clause was proper, and the existence or nonexistence of a disparity in bargaining power was irrelevant because this is a negligence action. While courts may refuse to enforce limitation of liability clauses where there is such a disparity of bargaining power that the contract is one of adhesion, Allright, Inc. v. Elledge, 515 S.W.2d 266 (Tex.1974), this contractual provision would not serve to limit Southwestern Bell's damages for its negligent conduct. Helms v. Southwestern Bell Telephone Co., 794 F.2d at...