ARTHUR'S GARAGE, INC. A/K/A ARTHUR'S MERCEDES BENZ, Appellant v. RACAL-CHUBB
SECURITY SYSTEMS, INC., RACAL CORPORATION, and CHUBB SECURITY SYSTEMS, INC.,
Appellees
COURT OF APPEALS OF TEXAS, FIFTH DISTRICT, DALLAS-997 S.W.2d 803; 1999 Tex.
App. LEXIS 5205- July 15, 1999, Opinion Filed
PRIOR HISTORY: [**1] On Appeal from the 14th Judicial District Court.
Dallas County, Texas. Trial Court Cause No. 93-3835-A.
DISPOSITION: REVERSED & REMANDED in part, AFFIRMED as Modified in part.
CASE SUMMARY
PROCEDURAL POSTURE: Appellant garage sought review of an order of the 14th
Judicial District Court, Dallas County (Texas), granting summary judgment in
favor of appellee security company in appellant's action for damages for
breach of contract and violation of the Texas Deceptive Trade
Practices-Consumer Protection Act (DTPA), Tex. Bus. & Com. Code Ann. §
17.44.
OVERVIEW: Appellant garage contracted with appellee security for the
monitoring of an alarm system. When the smoke detector failed, appellant
sued appellee for breach of contract and violation of the Texas Deceptive
Trade Practices-Consumer Protection Act (DTPA), Tex. Bus. & Com. Code Ann. §
17.44. The court granted appellee's motion for summary judgment, concluding
that the contract limited appellee's liability to a liquidated damages
amount and also limited liability under the DPTA, and awarded expenses to
appellee. On appeal, the court affirmed the judgment upon the liquidated
damages provision because it acted as a limitation of liability, not as a
penalty, and it did not violate public policy. The court reversed the grant
of summary judgment upon the DTPA misrepresentation and unconscionable
action claims and remanded as the liability limitation did not prevent such
recovery. The court, however, affirmed the summary judgment for appellee
regarding alleged breaches of warranty under the DTPA. The court affirmed
the enforcement of the indemnity provisions in the contracts as they did not
violate fair notice. The court reversed the allowed recovery of expenses.
OUTCOME: The court reversed and remanded the summary judgment in appellee's
favor upon the misrepresentation and unconscionable action claims because
the contract's limitation of liability did not preclude the claims; the
court affirmed the summary judgment of the breach of contract claim, as the
liquidated damages provision was an enforceable limitation of liability, and
affirmed the summary judgment upon the breach of warranty claim.
COUNSEL: FOR APPELLANT: Kenneth J. Lambert, Middleberg Riddle & Gianna,
Dallas, TX.
FOR APPELLEE: Sharis L. Hauder, Fanning Harper & Martinson, P.C., Dallas,
TX. Alan P. Moore, Fanning Harper & Martinson, P.C., Dallas, TX. Don
Martinson, Fanning & Harper, Dallas, TX.
JUDGES: Before Justices Ovard, Whittington, and Moseley. Opinion By Justice
Moseley.
OPINIONBY: JIM MOSELEY
OPINION:
[*807] OPINION
Opinion By Justice Moseley
Arthur's Garage, Inc. a/k/a Arthur's Mercedes Benz (Arthur's Garage) sued
Racal-Chubb Security Systems, Inc., Racal Corporation, and Chubb Security
Systems, Inc., (Racal-Chubb) for damages it sustained when a smoke detector
failed to operate during a fire on the garage premises. The trial court
granted summary judgment in favor of Racal-Chubb on the ground that
Racal-Chubb's liability was contractually limited to $ 350. The trial court
also granted summary judgment in favor of Racal-Chubb on its claim for
indemnity from Arthur's Garage against third-party claims. The trial court
held a bench trial on the amount of damages arising from the failure to
indemnify. On appeal, Arthur's Garage contends the trial court erred in
granting Racal-Chubb's motions for summary judgment and in awarding
"expenses" beyond the award of attorney's fees and court costs. We affirm
the trial [**2] court's judgment in part and reverse and remand in part.
BACKGROUND
In August 1983, Arthur's Garage, a Mercedes-Benz repair business, contracted
with Andrews Alarm Systems, Inc., to transfer and reinstall existing burglar
alarm equipment from its old location to a new location. On August 25, 1983,
Arthur's Garage amended the contract to include installation of a fire alarm
system, which included smoke detectors. Arthur's Garage also contracted with
Andrews for monitoring and servicing the entire alarm system. Arthur's
Garage continued its contract with Andrews to service and maintain the alarm
system until Andrews was acquired by Racal-Chubb in 1989 in a stock-purchase
acquisition. After the acquisition, Racal-Chubb continued servicing existing
Andrews contracts, including the contracts with Arthur's Garage. According
to the summary judgment evidence, Arthur's Garage paid Racal-Chubb fifty-one
dollars per month to monitor the alarm system.
On April 13, 1991, a fire occurred at Arthur's Garage. The fire did not set
off the smoke detector; however, as the fire grew, it set off the burglar
alarm. Arthur's Garage sustained damages of $ 458,057.28 to inventory,
furniture, fixtures, [**3] equipment, and miscellaneous items.
Investigators later discovered that the smoke detector was improperly wired.
Arthur's Garage sued Racal-Chubb alleging breach of contract, negligence,
breach of implied and express warranties, and violations of the Texas
Deceptive Trade Practices-Consumer Protection Act (DTPA). Under its DTPA
claims, Arthur's Garage alleged Racal-Chubb made material
misrepresentations, breached express and implied warranties, and engaged in
an unconscionable course of conduct. Frank LaBarba, the landlord of the
burned premises, also joined in the suit against Racal-Chubb. (Arthur's
Garage and LaBarba also sued Andrews but later dropped it from the suit.)
Racal-Chubb counterclaimed against Arthur's Garage asserting it was
contractually obligated to indemnify Racal-Chubb against LaBarba's claims.
After LaBarba voluntarily nonsuited his claims, Racal-Chubb amended its
counterclaim and alleged, based on the indemnity provision in the contract,
that Arthur's Garage was liable for Racal-Chubb's attorney's fees in
defending the LaBarba lawsuit and prosecuting its counterclaim for
indemnity.
Racal-Chubb moved for summary judgment against Arthur's Garage on all
asserted [**4] causes of action contending that: [*808] (1) Arthur's
Garage's damages were contractually limited to $ 350 by a clause in the
installation contracts n1 entitled "Liquidated Damages and Indemnification,"
and (2) Arthur's Garage's claims were barred by the doctrine of successor
liability. Racal-Chubb alternatively moved for partial summary judgment on
two specific DTPA claims, asserting: (1) Texas law does not recognize an
implied warranty to install and/or maintain a fire alarm system in a good
and workmanlike manner; (2) Racal-Chubb could not have breached an implied
warranty that repairs or modifications of existing tangible goods be
performed in a good and workmanlike manner because it never performed any
repairs or inspection of the smoke detector; and (3) Arthur's Garage was not
aware of any misrepresentations made by Racal-Chubb.
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n1 Both installation contracts contain identical provisions.
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The trial court granted Racal-Chubb's motion for summary judgment on
Arthur's Garage's liability claims and awarded Arthur's [**5] Garage $ 350
in satisfaction of all claims against Racal-Chubb. In its order, the trial
court specified it was granting summary judgment on the limitation of
liability clause in the contract and held that the clause was not a penalty
and was therefore enforceable against Arthur's Garage.
Subsequently, Racal-Chubb moved for summary judgment on its remaining
counterclaim seeking indemnity for its attorney's fees and expenses incurred
in defending against LaBarba's claim. The trial court granted Racal-Chubb's
summary judgment motion on liability only and held a bench trial on the
amount of attorney's fees incurred. Following trial, the court awarded
Racal-Chubb $ 8,470 in attorney's fees and $ 952.57 in expenses. This appeal
followed.
CONTENTIONS ON APPEAL
Arthur's Garage contends the trial court erred in granting Racal-Chubb's
first motion for summary judgment because: (1) the liquidated damages clause
is unenforceable against Arthur's Garage's DTPA claims; (2) Racal-Chubb
failed to prove all the elements of its liquidated damages affirmative
defense; and (3) the liquidated damages clause is an unenforceable penalty.
Arthur's Garage also contends the trial court erred in granting [**6]
Racal-Chubb's second motion for summary judgment because the indemnity
provision does not meet the "express negligence" test or the
"conspicuousness" test. Finally, Arthur's Garage contends the trial court
erred in awarding "expenses" of $ 952.57 because expenses are not
recoverable as a matter of law.
Racal-Chubb raises two cross-points on appeal. First, Racal-Chubb asserts
the trial court erred in denying its motion for summary judgment on the DTPA
implied warranty claim because Texas law does not recognize an implied
warranty to install and/or maintain a fire alarm system in a good and
workmanlike manner. Racal-Chubb also asserts the undisputed summary judgment
evidence shows it never performed any repairs or modifications on the alarm
system; therefore, it could not have breached any existing implied
warranties as a matter of law. Second, Racal-Chubb argues the trial court
erred in denying its motion for summary judgment on Arthur's Garage's DTPA
laundry list claims because Arthur's Garage did not establish a causal link
between the alleged misrepresentations and its damages.
STANDARD OF REVIEW
In reviewing a summary judgment record, this Court applies the following
[**7] standards:
1. The movant for summary judgment has the burden of showing that there is
no genuine issue of material fact and that it is entitled to judgment as a
matter of law.
2. In deciding whether there is a disputed material fact issue precluding
summary judgment, evidence favorable to the nonmovant will be taken as true.
[*809] 3. Every reasonable inference must be indulged in favor of the
nonmovant and any doubts resolved in its favor. n2
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n2 Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985).
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For the defendant, as movant, to prevail on a summary judgment, it must
either disprove at least one element of the plaintiff's theory of recovery
or plead and conclusively establish each essential element of an affirmative
defense, thereby rebutting the plaintiff's cause of action. n3 We do not
consider evidence that favors the movant's position unless it is
uncontroverted. n4
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n3 See International Union UAW Local 119 v. Johnson Controls, Inc., 813
S.W.2d 558, 563 (Tex. App.--Dallas 1991, writ denied). [**8]
n4 Great Am. Reserve Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41,
47 (Tex. 1965).
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LIABILITY ISSUES
A. Limitation of Liability
In its first point of error, Arthur's Garage contends the trial court erred
in granting summary judgment limiting Racal-Chubb's liability to $ 350 on
all asserted causes of action. Arthur's Garage specifically contends that:
(1) the "liquidated damages" clause is not enforceable against its DTPA
claims; (2) Racal-Chubb failed to prove as a matter of law all of the
elements of its "liquidated damages" affirmative defense; and (3) the
liquidated damages clause constitutes an unenforceable penalty. Racal-Chubb
argues that, despite its name, the "liquidated damages" clause is really a
limitation of liability and therefore a penalty analysis does not apply.
Racal-Chubb also asserts the limitation of liability clause is enforceable
against the DTPA claims.
The alarm installation contracts between Arthur's Garage and Andrews
(assumed by Racal-Chubb) contain the following provision under the title
"Liquidated Damages and Indemnification": [**9]
It is expressly understood and agreed that seller is not an insurer and that
insurance, if any, covering personal injury and property loss or damage on
purchaser's premises shall be obtained by the purchaser; that the payments
provided for herein are based solely on the value of the system and/or
service as set forth herein, and are unrelated to the value of the
purchaser's property or the property of others located on purchaser's
premises; that seller makes no guarantee or warranty including any implied
warranty of merchantability or fitness that the system or service supplied
will avert or prevent occurrences or the consequences therefrom which the
system or service is intended to detect or avert.
Purchaser acknowledges that it is impractical and extremely difficult to fix
the actual damages, if any, which may proximately result from a failure to
perform any of the obligations herein or a failure of the service and/or
system to operate because of, among other things: the uncertain amount or
value of purchaser's property or the property of others which may be lost or
damaged; the uncertainty of the response time of the police or fire
department or other appropriate agency; [**10] the inability to ascertain
what portion, if any, of any loss would be proximately caused by seller's
failure to perform any of its obligations or failure of its equipment to
operate; the nature of the services to be performed by seller.
If there shall, notwithstanding the above provisions, at any time be or
arise any liability on the part of seller by virtue of this agreement or due
to the negligence of seller or otherwise, such liability is and shall be
limited to the sum of three hundred fifty and no/100 dollars ($ 350.00),
which sum shall be paid and received as liquidated damages, such liability
as herein set forth is fixed as liquidated damages and not a penalty and
this liability shall be complete and exclusive.
[*810] In the event purchaser desires seller to assume greater liability
for the performance of its services hereunder, a choice is hereby given of
obtaining full or limited liability by paying an additional amount,
proportioned to the responsibility, and an additional rider shall be
attached to this agreement setting forth the additional liability of the
seller and additional charge. The rider and additional obligation shall in
no way be interpreted to hold seller [**11] as an insurer.
The monitoring contracts between Arthur's Garage and Racal-Chubb also
contain a substantially similar provision. As a preliminary matter, we must
decide whether the provision at issue is a liquidated damages provision or a
limitation of liability provision.
Generally, contractual provisions fixing liability at a specific amount or
at a specified percentage of the service charge are categorized as
liquidated damages provisions. n5 To enforce a liquidated damages clause,
the court must find that: (1) the harm caused by the breach is incapable of
being estimated or is difficult to estimate at the time of entry into the
agreement, and (2) the amount of liquidated damages called for is a
reasonable forecast of just compensation. n6 The failure of a court to find
either of these elements renders a liquidated damages clause an
unenforceable penalty for the breach of the contract. n7 On the other hand,
a contractual provision setting an upper limit to the amount recoverable is
considered a limitation of liability provision. n8 Limitation of liability
provisions are not subject to a penalty analysis because, by their nature,
they cannot be used to penalize a party for a [**12] breach of contract.
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- -
n5 See Vallance & Co. v. D'Anda, 595 S.W.2d 587, 589 (Tex. Civ. App.--San
Antonio 1980, no writ).
n6 See Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991).
n7 See id.
n8 See Fox Elec. Co. v. Tone Guard Sec. Inc., 861 S.W.2d 79, 83 (Tex.
App.--Fort Worth 1993, no writ).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -Here,
although the provision at issue is entitled "liquidated damages," the
provision limits Racal-Chubb's potential liability to $ 350. Because the
provision sets an upper limit, it is a limitation of liability provision,
and a penalty analysis is not applicable. n9 Therefore, to obtain summary
judgment, Racal-Chubb was not required to prove the $ 350 damages limitation
provided in the contract was a "reasonable forecast of just compensation."
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n9 See id.
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Arthur's Garage [**13] also asserts that the limitation of liability is
unenforceable as a matter of law on public policy grounds. Specifically,
Arthur's Garage contends (1) it is against public policy to enforce such
provisions in the face of its allegations of gross negligence and (2)
enforcement of the provision "effectively works a recision of the contract"
by freeing Racal-Chubb from performance under the contract. We disagree.
An agreement to limit liability for future negligence is enforceable if the
agreement does not violate public policy. n10 Generally, an agreement to
limit liability will not violate public policy if there is no disparity of
bargaining power between the parties. n11 Arthur's Garage has not asserted
any disparity in the bargaining power between the parties. Moreover, the
alarm contract provides Arthur's Garage could have obtained greater
protection against losses by paying an additional amount commensurate with
the level of protection desired. Thus, there appears to be no disparity of
bargaining power between the parties.
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n10 861 S.W.2d at 82-83.
n11 Id. at 83.
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Policy reasons also favor enforcement of terms limiting the liability of
protective services companies such as Racal-Chubb. Under monitoring
contracts such as the [*811] one at issue in this case, the customer pays
only a nominal fee for equipment and monitoring services. n12 Prohibiting an
alarm company from contracting to limit its liability exposure would subject
the alarm company to significant and uncertain risks that could vary widely
depending on the contents of the building being monitored. Requiring alarm
companies to take such risks would likely result in significant increases in
the cost of providing monitoring services, which in turn would marginally
reduce the number of persons who can afford such services.
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n12 See Vallance, 595 S.W.2d at 590.
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Additionally, prohibiting limitation of liability clauses in monitoring
contracts would engender additional litigation and higher administrative
costs for providing monitoring services. Even without limitation of
liability provisions, monitoring [**15] companies are liable only for the
damages proximately caused by their breach -- -- they are not insurers.
Unless the monitoring company somehow caused the fire, each loss would
result in a dispute as to the amount of fire, smoke, or water damage that
resulted inevitably from the fire, as opposed to those that would not have
resulted but for the monitoring company's alleged breach. Monitoring
companies would likely pass these additional administrative costs to their
customers, resulting in increased prices and fewer customers.
Permitting alarm companies to limit their liability does not necessarily
leave consumers unprotected. They may, and often do, purchase insurance to
protect themselves and their property from fire and other hazards. Thus, we
conclude the limitation of liability provision in Racal-Chubb's monitoring
contract does not violate public policy prohibiting such limitations.
B. DTPA Claims
Arthur's Garage next argues that because the DTPA specifically provides any
waiver of its provisions is unenforceable, the limitation of liability
clause is not effective against its DTPA claims. n13 In its petition,
Arthur's Garage asserted Racal-Chubb violated the [**16] DTPA by: (1)
making material misrepresentations; (2) engaging in unconscionable conduct
or an unconscionable course of conduct; and (3) breaching express or implied
warranties.
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n13 See TEX. BUS. & COM. CODE ANN. § 17.42(a) (Vernon Pamph. 1999).
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Non-Warranty Claims
The DTPA was enacted to protect consumers against "false, misleading, and
deceptive business practices [and] unconscionable actions." n14 A consumer's
waiver of any of the DTPA provisions is contrary to public policy and
therefore void and unenforceable unless such waiver is in writing and
complies with the requirements provided in section 17.42. n15 This "no
waiver" provision applies to rights created by the DTPA. n16 Therefore, a
limitation of liability clause is invalid insofar as it purports to waive
liability for an act defined as "deceptive" under the laundry list of DTPA
violations contained in section 17.46, which includes material
misrepresentations. n17 Likewise, a limitation of liability [**17] clause
does not limit recovery for an "unconscionable action or course of action"
by Racal-Chubb. n18 Accordingly, we conclude the trial court erred in
limiting Racal-Chubb's liability to $ 350 on Arthur's Garage's DTPA claims
alleging Racal-Chubb made material misrepresentations [*812] or engaged in
an unconscionable course of conduct.
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n14 Id. § 17.44.
n15 See id. § 17.42.
n16 See Southwestern Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 576 (Tex.
1991).
n17 See First Title Co. v. Garrett, 860 S.W.2d 74, 77-78 (Tex. 1993); Hycel
v. Wittstruck, 690 S.W.2d 914, 924 (Tex. App.--Waco 1985, writ dism'd).
n18 See Ciba-Geigy Corp. v. Stephens, 871 S.W.2d 317, 322-23 (Tex.
App.--Eastland 1994, writ denied); Hycel, 690 S.W.2d at 923-24.
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We next address Racal-Chubb's second cross-point of error, which is
conditioned on our finding the trial court erred in limiting liability on
the DTPA misrepresentation claim. [**18] By this cross-point, Racal-Chubb
asserts summary judgment is proper on this claim because there is no
evidence of a causal link between any alleged misrepresentations and the
damages sustained by Arthur's Garage. We recognize that, in the interest of
judicial economy, we may consider additional grounds for summary judgment
that were not specifically ruled on by the trial court if they are properly
preserved for our review. n19
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n19 See Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 626 (Tex. 1996)
(stating that in interest of judicial economy, appellate courts may consider
additional grounds for summary judgment that were properly preserved for
review and not specifically ruled on by trial court).
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Our review of the summary judgment motion shows Racal-Chubb did not raise a
ground asserting the lack of a causal link between the alleged
misrepresentations and the damages sustained. (Rather, Racal-Chubb sought
summary judgment on the ground that Arthur's Garage was not aware of any
misrepresentations [**19] by Racal-Chubb.) A motion for summary judgment
must specifically state the grounds upon which judgment is sought. n20
Because Racal-Chubb did not assert lack of causation in its motion for
summary judgment, it cannot now challenge the trial court's failure to grant
summary judgment on this basis. Thus, Racal-Chubb has not properly preserved
this ground for our review. We overrule Racal-Chubb's second cross-point of
error.
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n20 See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339 (Tex.
1993).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -2. Warranty
Claims
Arthur's Garage also argues the trial court erred in limiting Racal-Chubb's
liability to $ 350 on its express and implied warranty DTPA claims. As
discussed above, the general rule is that the provisions of the DTPA cannot
be waived or disclaimed; however, an exception to this "no-waiver" provision
exists when a DTPA cause of action is predicated on breach of an express or
implied warranty. In Southwestern Bell Telephone Co. v. FDP Corp., the Texas
Supreme [**20] Court concluded that limitation of liability clauses are
enforceable if the DTPA has as its basis breach of an express warranty
because the warranty becomes part of the basis of the bargain between the
parties. n21 If the DTPA claim is based on an implied warranty deriving from
common law or statutory sources, we must consider the source of the warranty
to determine its nature and extent. n22 If the warranty is one that can be
disclaimed under the law creating it, a limitation of liability clause does
not offend the DTPA "no waiver" provision. n23
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n21 See FDP Corp., 811 S.W.2d at 577.
n22 811 S.W.2d at 576-77.
n23 See 811 S.W.2d at 577.
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Arthur's Garage predicated a DTPA claim on an alleged breach of an express
warranty that Racal-Chubb's work or services would be performed in a good
and workmanlike manner. Under FDP Corp., any express warranties became part
of the basis of the bargain between the parties; therefore, the limitation
of liability clause is effective [**21] to limit Racal-Chubb's liability to
$ 350 on this claim. n24
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n24 See id.
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Arthur's Garage also predicated a DTPA claim on Racal-Chubb's alleged breach
of the implied warranty that its work or services would be performed in a
good and workmanlike manner. While some implied warranties can be
disclaimed, n25 the supreme court has expressly held that the implied
warranty to repair or [*813] modify existing tangible goods or property in
a good and workmanlike manner may not be waived or disclaimed. n26
Therefore, we conclude the limitation of liability clause is not effective
against Arthur's Garage's implied warranty DTPA claim.
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n25 See id.
n26 Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 355 (Tex. 1987).
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However, this conclusion does not end our inquiry. Racal-Chubb has asserted
in a cross-point of error that the [**22] trial court erred in failing to
grant summary judgment on Arthur's Garage's breach of implied warranty
claims because no implied warranty to "install and/or maintain" an alarm
system exists in Texas and because no implied warranty arose because it
never performed any work on the alarm system. Racal-Chubb raised these
grounds for summary judgment in its motion; therefore, the issue has been
preserved for our review. n27 Citing Melody Home Manufacturing Co. v.
Barnes, Arthur's Garage responds that Texas does recognize an implied
warranty to perform work in a good and workmanlike manner. n28
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n27 See Cates, 927 S.W.2d at 626.
n28 Melody Home, 741 S.W.2d at 354.
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We first address Racal-Chubb's argument that no implied warranty exists. We
agree that Texas does not recognize an implied warranty to "install and/or
maintain" an alarm system in a good and workmanlike manner as such. However,
in Melody Home, the Texas Supreme Court recognized an implied warranty to
repair or [**23] modify existing tangible goods or property in a good and w
orkmanlike manner. n29 Although the warranty does not require workers to
guarantee the results of their work, it does require any repair or
modification be performed in a good and workmanlike manner. n30 While this
implied warranty extends to a broad range of repair and modification
services, n31 it is not a warranty to perform all services in a good and
workmanlike manner. The supreme court has recognized the implied warranty
only when the service performed relates to the repair or modification of
existing tangible goods or property. n32 The implied warranty recognized in
Melody Home is available to consumers suing under the DTPA. n33 Accordingly,
we reject Racal-Chubb's argument that no implied warranty exists as a matter
of law.
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n29 Id. at 354.
n30 Id. at 355.
n31 See Archibald v. Act III Arabians, 755 S.W.2d 84, 85 (Tex. 1988).
n32 See, e.g., Rocky Mountain Helicopters, Inc. v. Lubbock County Hosp.
Dist., 987 S.W.2d 50, 52-53 (Tex. 1998); Melody Home, 741 S.W.2d at 354.
[**24]
n33 See Melody Home, 741 S.W.2d at 354.
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By this cross-point, Racal-Chubb also asserts it was entitled to summary
judgment because the summary judgment evidence conclusively established it
never performed any repairs or "service" on the alarm system. The summary
judgment evidence shows Andrews originally installed the alarm system
located in Arthur's Garage and contracted with Arthur's Garage to monitor
and service the system. The monitoring contract, entitled "Alarm Signal
Response Agreement," contains the following provision:
It is the Subscriber's sole responsibility to carefully and properly set the
alarm system and carefully test the alarm system periodically. . . . In the
event any defect in the operation of the alarm system develops, Subscriber
shall notify SYSTEMS [Andrews] and SYSTEMS [Andrews] will repair such
defective condition in the normal course of business after the receipt of
notice from the Subscriber. A preventative maintenance inspection will be
made if requested by the Subscriber.
After acquiring Andrews, Racal-Chubb continued to service the [**25]
existing contracts.
Trey West, manager of technical services for Racal-Chubb, stated in his
affidavit that Racal-Chubb did not repair or modify the smoke detector
located in Arthur's Garage. West's assertion is not [*814] disputed. Thus,
because Racal-Chubb never repaired or modified existing tangible goods or
property, Racal-Chubb could not have breached an implied warranty to perform
such repairs or modifications in a good and workmanlike manner. n34 We
conclude Racal-Chubb established its right to summary judgment in its favor
on Arthur's Garage's common law and DTPA claims for breach of the implied
warranty to perform repair services in a good and workmanlike manner. We
sustain Racal-Chubb's first cross-point of error.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n34 See Dallas Power & Light Co. v. Westinghouse Elec. Corp., 855 F.2d 203,
208 (5th Cir. 1988).
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In so concluding, we do not address whether the implied warranty recognized
in Melody Home requires that inspection services be performed in a good and
workmanlike manner when a party [**26] contracts to "inspect and repair"
existing tangible goods or property. Under the monitoring contract at issue
in this case, Andrews (later Racal-Chubb) agreed to perform maintenance
inspections only if requested by Arthur's Garage. Barbara Van der Vlies, an
officer of Arthur's Garage, stated in her deposition that she never
requested any repairs or maintenance on the smoke detector.
C. Conclusion
In conclusion, we hold the trial court correctly granted summary judgment
limiting Racal-Chubb's liability to $ 350 on Arthur's Garage's breach of
contract, negligence, and common-law and DTPA breach of express warranty
claims. We also conclude that Racal-Chubb proved as a matter of law that no
implied warranty that repairs be performed in a good and workmanlike manner
arose under the facts of this case and, therefore, summary judgment is also
proper as to the common law and DTPA implied warranty claims. However,
because the DTPA specifically provides that any waiver of its provisions is
unenforceable, the limitation of liability is ineffective against Arthur's
Garage's DTPA claims based on misrepresentation and an unconscionable course
of action. Accordingly, we sustain [**27] Arthur's Garage's first point of
error in part and reverse the trial court's judgment with respect to
Arthur's Garage's claims under the DTPA for misrepresentation and an
unconscionable course of action.
INDEMNITY PROVISION
In its second point of error, Arthur's Garage contends the trial court erred
in granting Racal-Chubb's second motion for summary judgment because the
indemnity provisions in the contracts do not meet the fair notice
requirements of Texas law. Specifically, Arthur's Garage contends that the
indemnity provisions do not meet either the "express negligence" test or the
"conspicuousness" test.
Under Texas law, indemnity provisions are valid and enforceable if they
satisfy two fair notice requirements. n35 First, under the express
negligence doctrine, a party's intent to be released from all liability
caused by its own future negligence must be expressed in unambiguous terms
within the four corners of the contract. n36 Second, the clause must be
"conspicuous" under the objective standard defined in the Uniform Commercial
Code. n37 Section 1.201(10) of the Uniform Commercial Code provides:
A term or clause is conspicuous when it is so written that a reasonable
[**28] person against whom it is to operate ought to have noticed it. A
printed heading in capitals (as: Non-Negotiable Bill of Lading) is
conspicuous. Language in the body of a form is "conspicuous" if it is in
larger or other contrasting type or color. n38
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n35 Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex.
1993).
n36 Id.; Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex. 1987).
n37 See TEX. BUS. & COM. CODE ANN. § 1.201(10) (Vernon 1994); Dresser, 853
S.W.2d at 510-11.
n38 TEX. BUS. & COM. CODE ANN. § 1.201(10) (Vernon 1994).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*815] The
purpose of the conspicuousness requirement is to protect the buyer from
surprise and an unknowing waiver of his or her rights. n39 The question of
compliance with both fair notice requirements is a question of law for the
court. n40
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n39 Littlefield v. Schaefer, 955 S.W.2d 272, 275 (Tex. 1997). [**29]
n40 Dresser, 853 S.W.2d at 509.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
The indemnity provision in the alarm installation contract stated:
When purchaser, in the ordinary course of business, has the property of
others in his custody, or the alarm system extends to protect the property
of others, purchaser agrees to and shall indemnify, defend, and hold
harmless seller, its employees and agents for and against all claims brought
by parties other than the parties to this agreement. This provision shall
apply to all claims, regardless of cause, including seller's performance or
failure to perform, and including defects in products, design, installation,
maintenance, operation or non-operation of the system, whether based upon
negligence, active or passive, warranty, or strict product liability on the
part of seller, its employees or agents, but this provision shall not apply
to claims for loss or damage solely and directly caused by an employee of
seller while on purchaser's premises. n41
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n41 The indemnity provision in the monitoring contracts is substantially
identical to the provision in the installation contracts. The only
difference is that, in the monitoring contracts, the word "subscriber" is
used instead of the word "purchaser."
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**30]
Contrary to Arthur's Garage's assertions, this provision clearly and
specifically provides that it covers any negligence, breach of warranty, and
strict product liability on the part of Racal-Chubb. We conclude the
provision meets the express negligence test. n42
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n42 See Ethyl Corp., 725 S.W.2d at 708.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
The provision also meets the conspicuousness test. The provision is entitled
"LIQUIDATED DAMAGES AND INDEMNITY," and the indemnity language is printed in
capital letters immediately following the limitation of liability language,
which also appears in capital letters. We conclude that a reasonable person
against whom it is to operate ought to have noticed it. n43
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n43 See TEX. BUS. & COM. CODE ANN. § 1.201(10) (Vernon 1994).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
Finally, Arthur's Garage contends the indemnity provision is [**31]
unconscionable and therefore unenforceable and fact issues exist on whether
Racal-Chubb took advantage of Arthur's Garage's lack of knowledge, ability,
experience, or capacity to a grossly unfair degree. Specifically, Arthur's
Garage contends that the indemnity provision is unconscionable because the
provision was contained in a standard form contract and the summary judgment
evidence shows Arthur's Garage received no value for the consideration it
paid for the alarm system.
Whether a contract is unconscionable is a question of law for the court to
decide. n44 "Unconscionability" has no precise legal definition because it
is not a concept but a determination to be made in light of a variety of
factors. n45 In general, the term "unconscionability" describes a contract
that is unfair because of its overall one-sidedness or the gross
one-sidedness of its terms. n46 Although no single test exists to determine
if a contract is unconscionable, we begin with two questions: (1) How did
the parties arrive at the terms in controversy; and (2) Are there legitimate
commercial reasons which justify [*816] the inclusion of those terms? n47
The first question, described as the procedural aspect of unconscionability,
[**32] is concerned with assent and focuses on the facts surrounding the
bargaining process. n48 The second question, described as the substantive
aspect of unconscionability, is concerned with the fairness of the resulting
agreement. n49
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n44 Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 820 (Tex.
App.--San Antonio 1996, no writ); Wade v. Austin, 524 S.W.2d 79, 85 (Tex.
Civ. App.--Texarkana 1975, no writ).
n45 Pony Express, 921 S.W.2d at 821.
n46 Id.
n47 Southwestern Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 498-99 (Tex.
1991) (Gonzalez, J., concurring); Pony Express, 921 S.W.2d at 821.
n48 DeLanney, 809 S.W.2d at 499 (Gonzalez, J., concurring); Pony Express,
921 S.W.2d at 821.
n49 DeLanney, 809 S.W.2d at 499 (Gonzalez, J., concurring); Pony Express,
921 S.W.2d at 821.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
We have reviewed the indemnity provision in light of the [**33] foregoing
considerations. Although the indemnity provision is contained in a standard
form contract, the contract provides that Arthur's Garage could have
obtained a higher limitation of liability for an increase in fees.
Presumably, during the bargaining process, Arthur's Garage considered and
rejected this additional protection. We conclude the contract does not
overly favor one party in the transaction. Further, there are legitimate
commercial reasons for including an indemnity provision in this contract. As
previously discussed, Arthur's Garage paid fifty-one dollars per month for
monitoring services. Normally, alarm companies base monthly monitoring fees
on the price of the equipment and monitoring services and not on the value
of the property being protected. n50 Arthur's Garage was in a better
position to insure the property under its protection. After considering the
totality of the circumstances, we conclude the indemnity provision is not
unconscionable. We overrule Arthur's Garage's second point of error.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n50 See Leon's Bakery, Inc. v. Grinnell Corp., 990 F.2d 44, 49 (2d Cir.
1993).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**34]
AWARD OF EXPENSES
In its third point of error, Arthur's Garage contends that the trial court
erred in awarding Racal-Chubb $ 952.57 in expenses over and above its award
of attorney's fees. Racal-Chubb argues that Arthur's Garage waived any
complaint about the trial court's award of expenses because it failed to
object in the court below.
We first address Racal-Chubb's waiver argument. To preserve a complaint for
appellate review, a party must present to the trial court a timely request,
objection, or motion stating the specific grounds for the ruling sought. n51
To preserve a complaint of error in a judgment, a party must inform the
trial court of its objection by a motion to amend or correct the judgment, a
motion for new trial, or some other similar method. n52
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n51 See TEX. R. APP. P. 33.1.
n52 Willis v. Willis, 826 S.W.2d 700, 702 (Tex. App.--Houston [14th Dist.]
1992, no writ); see also Holland v. Hayden, 901 S.W.2d 763, 765 (Tex.
App.--Houston [14th Dist.] 1995, writ denied) (motion for new trial is
appropriate method for preserving error regarding alleged defect in final
judgment).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**35]
The trial court signed the final judgment on January 30, 1996. On February
29, 1996, Arthur's Garage filed its "Motion to Correct, Modify or Reform
Judgment, for Reconsideration and for New Trial." In this motion, Arthur's
Garage requested the trial court to modify its final judgment to delete the
award of $ 952.57 in expenses because such expenses were not recoverable as
a matter of law. We conclude that for appellate purposes, Arthur's Garage
preserved its complaint that the trial court erred in awarding expenses. n53
Accordingly, we now turn to the merits of Arthur's Garage's complaint.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n53 See Willis, 826 S.W.2d at 702.
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A party may recover attorney's fees only if permitted by contract or
statute. n54 However, ordinary expenses incurred by a party in prosecuting
or defending [*817] a lawsuit cannot be recovered either as damages or as
court costs in the absence of statutory provisions or usages of equity. n55
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n54 New Amsterdam Cas. Co. v. Texas Indus., Inc., 414 S.W.2d 914, 915 (Tex.
1967); First Nat'l Bank v. Anderson Ford-Lincoln-Mercury, Inc., 704 S.W.2d
83, 85 (Tex. App.--Dallas 1985, writ ref'd n.r.e.). [**36]
n55 Flint & Assoc. v. Intercontinental Pipe & Steel, Inc., 739 S.W.2d 622,
626 (Tex. App.--Dallas 1987, writ denied).
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The record shows the "expenses" included filing fees, courier fees, postage,
telephone expenses, long distance charges, and fax charges. This Court has
concluded that these expenses make up the overhead of a law practice, are
considered as a component in setting hourly billing rates and reasonable
fees, and may be recovered as a component of attorney's fees. n56
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n56 739 S.W.2d at 626-27.
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The trial court found Racal-Chubb was entitled to recover its attorney's
fees for defending the LaBarba lawsuit under the indemnity provision in the
alarm contract. The trial court further found Racal-Chubb was entitled to
its attorney's fees for prosecuting its counterclaim because Arthur's Garage
breached the indemnity contract. n57 Neither section 38.001 of the civil
practice and remedies [**37] code nor the indemnity provision in the alarm
contract specifically provides for recovery of such expenses. Accordingly,
we conclude the trial court erred in awarding Racal-Chubb expenses because
there is no legal basis for the award. We modify the trial court's judgment
on Racal-Chubb's indemnity claim to eliminate the $ 952.57 award of
expenses. n58
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n57 See TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8) (Vernon 1997).
n58 See TEX. R. APP. P. 43.2.
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CONCLUSION
For the foregoing reasons, we reverse that portion of the trial court's
judgment granting Racal-Chubb summary judgment on Arthur's Garage's claims
under the DTPA for (1) false, misleading, or deceptive acts under section
17.46 and (2) an unconscionable course of action under section 17.50(a)(3)
and remand only those causes of action to the trial court. n59 We also
modify the trial court's judgment to delete the trial court's award of $
952.57 in "expenses." In all other respects, we affirm the trial [**38]
court's judgment.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n59 See TEX. BUS. & COM. CODE ANN. §§ 17.46, 17.50(a)(3) (Vernon 1987 &
Pamph. 1999).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -JIM MOSELEY
JUSTICE