Turner, Collie & Braden, Inc. v. Brookhollow, Inc.

• Decision Date: 21 July 1982
• Docket Number: No. C-738,C-738
• Parties: TURNER, COLLIE & BRADEN, INC., Petitioner, v. BROOKHOLLOW, INC., et al., Respondents.
• Court: Texas Supreme Court

Page 160

642 S.W.2d 160

TURNER, COLLIE & BRADEN, INC., Petitioner, v. BROOKHOLLOW, INC., et al., Respondents.

No. C-738.

Supreme Court of Texas.

July 21, 1982.

Rehearing Denied Dec. 8, 1982.

Fulbright & Jaworski, Frank G. Jones and Roger Townsend, Houston, for petitioner.

Johnson, Swanson & Barbee, Charles R. Haworth and Charles W. Cunningham, Dallas, for respondents.

RAY, Justice.

This case concerns claims for breach of contract and negligent performance of a contract. It presents, primarily, questions involving the proper measure of damages and the admissibility of certain evidence. Brookhollow, Inc. contracted with Turner, Collie & Braden, Inc. (TCB) for TCB to design and supervise the construction of a sewer line. Brookhollow contracted with Whitelak, Inc. for the actual construction of the line. The completed sewer leaked and Brookhollow refused to pay Whitelak for its work. Whitelak sued Brookhollow who in turn brought in TCB as a third-party defendant. Among other things, the trial court's judgment awarded Brookhollow money damages against TCB on its cross-claim for negligent performance of the engineering services. The court of appeals affirmed a part of the judgment, but reversed and remanded to the trial court the part concerning TCB's liability on Brookhollow's cross-claim. 624 S.W.2d 203. We affirm the court of appeals' reversal of the trial court's judgment against TCB on Brookhollow's cross-claim for negligent performance; we reverse the remainder of the court of appeals' judgment and remand the entire cause to the trial court for a new trial.

I. The Facts

On January 3, 1972, Brookhollow of Houston, Inc. purchased 454 acres of land in Houston, Texas, for use as a housing development. The tract lay partly in the West Harris County Municipal Utility District No. 1 (MUD 1) and partly in the Harris County Municipal Utility District No. 25 (MUD 25). By agreement with Brookhollow, both MUDs were to own the sewage and sanitary facilities located in their respective districts. Brookhollow entered into a contract with the engineering firm of Turner, Collie & Braden, Inc. (TCB) for TCB to design the development's sewer and drainage facilities. MUD 1 and MUD 25 also contracted for TCB to design the proposed sewage facilities. In addition to designing the sewer line, TCB agreed to supervise its construction.

In December of 1972, TCB submitted to Brookhollow plans and specifications for a gravity flow sewer line, buried twenty to twenty-eight feet in depth, which is below the area water table. Brookhollow then contracted with Whitelak, Inc. for construction of the line in accordance with TCB's plans.

After Whitelak's completion of the sewer but before Brookhollow's final acceptance, numerous leaks and cracks were discovered. Whitelak undertook to repair the line, but its repairs were halted when an abutting landowner alleged the line encroached on his property. Whitelak could not resume repairs until several months later, when the boundary dispute was settled. Shortly thereafter, Whitelak abandoned its repair efforts and demanded that Brookhollow pay for the cost of the extra work. Because of the defects in the sewer line, Brookhollow refused to pay both the balance owing on the original construction and the cost of the extra work. Whitelak contended that it had substantially performed the contract and that the defects were caused by TCB's refusal to allow it to use a construction technique known as Special Section 5. Special Section 5 entails encasing the pipe in timber and then compacting shale and other material around it. This technique is often used when sewers are buried in sand below the water line. TCB denied liability for the cracks and attributed at least some of the defects to the fact that a portion of the line was left open to the elements during the protracted boundary dispute.

TCB took the position that the cracked pipe could be used if it were sliplined; this would involve lining the concrete pipe with plastic pipe of slightly less diameter. Brookhollow retained another engineering firm, Lockwood, Andrews and Newnam (LAN), to examine the line and make a recommendation as to the most desirable course of action. LAN presented Brookhollow with a written report in which it recommended abandonment of the defective line. Brookhollow followed LAN's advice and constructed a new pump-operated line at a shallower depth. Only thirty-five feet of the original line is now in use.

Whitelak sued Brookhollow, MUD 1 and MUD 25 (hereinafter collectively referred to as "Brookhollow") for breach of contract, asking recovery for the balance owing on the original construction contract ($78,764.99), the cost of the extra work it performed in repairing the line ($184,595.27), interest on those amounts and reasonable attorney's fees. Brookhollow counterclaimed against Whitelak alleging breach of contract, breach of implied warranty and negligence in the construction of the line. Brookhollow sought indemnity from TCB for any amounts it might be found to owe Whitelak. In addition to this claim for indemnity, Brookhollow brought a cross-claim against TCB, alleging breach of contract, breach of implied warranty and negligence in supervising the construction of the line. TCB counterclaimed against Brookhollow for the balance owing on its engineering contract.

At trial, after all parties rested, Whitelak moved for a directed verdict. The trial court granted the motion and rendered an interlocutory judgment awarding Whitelak $36,115.86 (the undisputed amount of unpaid retainage) against Brookhollow. The remainder of the case was submitted to the jury, which found, among other things, that TCB's conduct was the sole cause of the trunk sewer's failure. On the basis of the jury findings, the trial court awarded Whitelak an additional $227,244.40 against Brookhollow. Brookhollow was awarded indemnity of $184,595.27 against TCB, the amount of Brookhollow's liability to Whitelak, less $78,764.99, the amount owed by Brookhollow for the original construction. The trial court awarded Brookhollow an additional $298,472.67 on its cross-claim against TCB.

The court of appeals found harmful error in the trial court's admission of the LAN report into evidence and in the amount of damages the trial court awarded against TCB. Accordingly, it reversed that part of the trial court's judgment which awarded Brookhollow damages on its cross-claim against TCB and remanded that part of the cause to the trial court for a new trial; it affirmed the remaining parts of the judgment. We granted applications for writ of error from both Brookhollow and TCB.

II. Damages

The trial court submitted the following Special Issue No. 6:

What amount of money, if any, do you

find from a preponderance of the

evidence would fairly and reasonably

compensate the owners (Brookhollow)

for the damages, if any, which they

have suffered and probably will suffer

in the future as a result of the failure

of the trunk sewer to be in operating

condition?

                a) The reasonable and necessary expenses       $34,265.72
                   incurred in investigating the causes of     __________
                   the failure of the trunk sewer
                b) The reasonable and necessary expenses       $ 7,892.10
                   incurred in securing temporary sewage-      __________
                   removal services by the use of
                   sewage pumping trucks
                c) The reasonable and necessary expenses       $ 85,060.45
                   incurred in designing and constructing      __________
                   a temporary lift station and force
                   main
                d) The reasonable and necessary                $11,376.06
                   engineering expenses incurred in designing  __________
                   a permanent force main
                e) The present value of the reasonable         $80,000.00
                   and necessary expenses that probably        __________
                   will be incurred in the future in
                   constructing a permanent force main
                f) The present value of the reasonable         $17,650.80*
                   and necessary expenses that will be         __________
                   incurred in the future in paying for
                   the additional energy costs, if any,
                   attributable to the operation of (a) the
                   temporary force main and lift station
                   that was built as a temporary replacement
                   for the trunk sewer, and (b) the
                   permanent force main & lift station
                   that probably will be built as a permanent
                   replacement for the trunk sewer?
                *This figure is ten percent of the
                 amount in question.  That amount
                 being $176,508.00.  (Notation made by
                 the jury.)
                

These figures total $236,245.13. Disregarding these findings, the trial court rendered judgment in favor of Brookhollow and against TCB for $298,472.67. The court of appeals held that the trial court erred in entering judgment for this amount because it was not conclusively proved and the jury findings do not support such an award. The court of appeals also held that it could not render judgment based on the jury verdict because Special Issue No. 6 inquired into an improper measure of damages.

In Graves v. Allert & Fuess, 104 Tex. 614, 142 S.W. 869 (1912), this Court set down the rule that for breach of a construction contract, if the contractor has substantially performed, the owner can recover the cost of completion less the unpaid balance on the contract price. We will refer to this as the remedial measure of damages.

A different measure of damages was applied in Hutson v. Chambless, 157 Tex. 193, 300 S.W.2d 943 (1957), which concerned an action for defective performance of a construction contract. In Hutson, the contractor had deviated from the plans and it was alleged that these deviations could be corrected only by tearing down and reconstructing a large part of the house. The Court quoted with approval the following language from White v. Mitchell, 123 Wash. 630, 213 P. 10 (1923):

Where it is necessary, in order to make the building comply with the contract, that the structure, in whole or in material part, must be changed, or there will be damage to parts of the building, or the...