author: ODEN, Justice.

text:
    James D. SIMS, d/b/a Simtex Industries, Appellant, v. WILLIAM S. BAKER, INC. and Transamerica Insurance Company, Appellees.
    No. 8549.
    Court of Civil Appeals of Texas, Texarkana.
    July 5, 1978.
    Rehearing Denied Aug. 1, 1978.

      Mark T. Davenport, Anthony Atwell, At-well, Cain & Davenport, Dallas, for appellant.
    William C. Woodburn, Woodbum & Sullivan, Dallas, for appellees.
   ODEN, Justice.

The primary question to be resolved on appeal is whether or not the notice of claim served by James D. Sims, d/b/a Simtex Industries, appellant, on William S. Baker, Inc., and Transamerica Insurance Company, appellees, is sufficient to comply with the notice requirements of the McGregor Act. Tex.Rev.Civ.Stat.Ann. art. 5160. Appellant and appellees will be respectively referred to as Sims, Baker and Transamerica.

Sims is a sheet metal and duct subcontractor. Baker is a general contractor and on August 18, 1975, it entered into a contract with the City of Carrollton to remodel and make certain additions to the Carroll-ton Library and Recreational Center. The consideration to be paid under the construction contract was in excess of $25,000.00, and Baker was therefore required by the McGregor Act to execute performance and payment bonds. Transamerica was the surety on the statutory performance and payment bonds executed by Baker. On September 23, 1975, Baker subcontracted the plumbing, heating, ventilation and air conditioning portions of the construction contract to Dallas North Mechanical, Inc., who in turn entered into an agreement with Sims to perform the sheet metal and duct work required thereunder for $10,070.00. Sims substantially performed his obligations under the subcontract during the months of January, February, March and April of 1976; however, Dallas North Mechanical, Inc., though often requested, failed to remit payment, whereupon Sims served written notices of his claim by certified mail on Baker and Transamerica. The claim remained unpaid for at least 60 days at which time Sims instituted suit for the amount alleged due on the subcontract, plus reasonable attorney’s fees, against Baker and Transamerica on the payment bond and Dallas North Mechanical, Inc., on the subcontract. The case was tried before the court without a jury. Judgment was entered that Sims take nothing on his claims against Baker and Transamerica. Sims was awarded judgment against Dallas North Mechanical, Inc., for $9,209.26 plus interest, and reasonable attorney’s fees in the amount of $3,000.00. The parties to the appeal agree that the notice of claim was timely served for labor performed and materials furnished during the months of February, March and April, 1976. They likewise agree that the notice is not timely to perfect a claim for monies due during January, 1976. The primary disputed issue will be resolved by our determination of whether or not the notice of claim was sufficient to comply with the notice requirements contained in part B of the McGregor Act.

The provisions of the McGregor Act which are pertinent to the appeal are, with emphasis added:

“B. Every claimant who has furnished labor or material in the prosecution of the work provided for in such contract in which a Payment Bond is furnished as required hereinabove, and who has not been paid in full therefor, shall have the right, if his claim remains unpaid after the expiration of sixty (60) days after the filing of the claim as herein required, to sue the principal and the surety or sureties on the Payment Bond jointly or severally for the amount due on the balance thereof unpaid at the time of filing the claim or of the institution of the suit plus reasonable attorneys’ fees; provided:
“(a) Notices Required for Unpaid Bills, other than notices solely for Retainages as hereinafter described.
“Such claimant shall have given within ninety (90) days after the 10th day of the month next following each month in which the labor was done or performed, in whole or in part, or material was delivered, in whole or in part, for which such claim ⅛ made, written notices of the claim i)y certified or registered mail, addressed to the prime contractor at his last known business address, or at his residence, and to the surety or sureties. Such notices shall be accompanied by a sworn statement of account stating in substance that the amount claimed is just and correct and that all just and lawful offsets, payments, and credits known to the affiant have been allowed. Such statement of account shall include therein the amount of any retainage or retainag-es applicable to the account that have not become due by virtue of terms of the contract between the claimant and the prime contractor or between the claimant and a subcontractor. When the claim is based on a written agreement, the claimant shall have the option to enclose, with the sworn statement of account, as such notice a true copy of such agreement and advising completion or value of partial completion of same.
“(1) When no written contract or written agreement exists between the claimant and the prime contractor or between the claimant and a subcontractor, except as provided in subparagraph B(a)(2) hereof, such notices shall state the name of the party for whom the labor was done or performed or to whom the material was delivered, and the approximate dates of performance and delivery, and describing the labor or materials or both in such a manner so as to reasonably identify the said labor or materials or both and amount due therefor. The claimant shall generally itemize his claim and shall accompany same with true copies of documents, invoices or orders sufficient to reasonably identify the labor performed or material delivered for which claim is being made. Such documents and copies thereof shall have thereon a reasonable identification or description of the job and destination of delivery.
“(2) When the claim is for multiple items of labor or material or both to be paid for on a lump sum basis such notice shall state the name of the party for whom the labor was done or performed or to whom the material was delivered, the amount of the contract and whether written or oral, the amount claimed and the approximate date or dates of performance or delivery or both and describing the labor or materials or both in such a manner as to reasonably identify the said labor or materials.”

The parties to the appeal briefed the case on the assumption that the information to be contained in the notice to be served is that prescribed by subparagraph B(a)(l) of the McGregor Act. We do not agree. Subparagraph B(a)(l) relates specifically to content of the notices required of claimants where no written contract exists, and which does not involve a claim for multiple items to be paid for on a lump sum basis. United Benefit F. Ins. Co. v. Metropolitan Plumbing Co., 363 S.W.2d 843 (Tex.Civ.App. El Paso 1962, no writ). This Court disagrees with the statement contained in the United Benefit F. Ins. Co. v. Metropolitan Plumbing Co., supra, that, “Subpara-graph (2), subd. (a) of part B relates specifically to the content of notices required of claimants in direct contractual relation with the prime contractor . . .”. In our opinion subparagraph B(a)(2) of the McGre-gor Act prescribes the information to be contained in all notices given which involve a claim for multiple items of labor or material or both to be paid for on a lump sum basis irrespective of whether the claimant has a direct contractual relationship with the prime contractor. The claim in question is for multiple items of labor and material to be paid for on a lump sum basis, and we hold that the information to be contained in the notice to be served on the prime contractor and surety under the circumstances is that prescribed by subpara-graph B(a)(2) of the McGregor Act.

The notice of claim served on Baker and Transamerica by certified mail described the labor performed and material furnished as “labor and materials in the nature of sheet metal and duct work for the construction project,” and contained a statement that “the date on which claimant last furnished labor and materials on the construction project was on or after the week of April 12, 1976.” Baker and Transamerica contend that the notice of claim served on them by certified mail was insufficient to comply with the notice requirements of the McGregor Act because (1) it did not give the approximate date or dates of performance or delivery or both, (2) it did not describe the labor or materials or both in such a manner as to reasonably identify the said labor or materials, and (3) the asserted claim was not itemized nor was it accompanied with true copies of documents, invoices or orders sufficient to reasonably identify the labor performed or materials delivered for which such claim was made.

Subparagraph B(a)(2) of the McGregor Act does Pot require a claimant to itemize his claim and furnish true copies of documents, invoices or orders sufficient to reasonably identify the labor performed or material delivered for which the claim is being made. This requirement is found in the last two sentences of subparagraph B(a)(l). The information to be contained in the notice of claim in the case at bar is governed by the provisions of subparagraph B(a)(2) of the McGregor Act, and therefore the notice of claim under review is not insufficient by reason of Sims’ failure to itemize his claim and furnish true copies of documents, invoices or orders sufficient to reasonably identify the labor performed or material delivered for which the claim was made.

Sims, in compliance with subpara-graph B(b)(2) of the McGregor Act, notified Baker on April 12, 1976, that he had not been paid the January, February and March estimates. The notice was timely served to perfect a claim for labor performed and materials furnished during the months of February and March; however, all parties agree that it was not timely to perfect a claim for labor performed and materials furnished during the month of January inasmuch as it violated the “36 day notice” prescribed by subparagraph B(b)(2) of the McGregor Act. The notice of April 12, 1976, was accompanied by a copy of the statements sent to Dallas North Mechanical, Inc., for the months in question, which statements reflect the charges for labor performed and materials furnished during such months. A similar statement for the month of April was attached to the proof of claim under review. It indicated that it was the fourth “estimate.” The notices in question were sufficient to apprise Baker and Transamerica of the amount of the claim during the months for which notices had been timely served. The notices likewise apprised Baker and Transamerica that the notice of claim was not timely filed to perfect the claim for labor performed and materials furnished during the month of January, 1976. We hold that the notices were sufficient to advise Baker and Trans-america of the approximate date or dates that the labor was performed and the materials furnished.

In order to comply with the notice requirements of subparagraph B(a)(2) of the McGregor Act, the notice of claim must describe the labor or materials or both in such a manner as to reasonably identify them. Sims alleges that he complied with this requirement by describing the labor and materials as “sheet metal and duct work for the construction project.” We agree. The test is not whether or not the description would reasonably identify the labor performed or materials furnished to a stranger but rather whether or not such description reasonably identifies the labor performed and materials furnished to the prime contractor and surety. The plans and specifications for the project were readily accessible to both Baker and Transamer-ica and on a visual inspection of the project they could ascertain if the sheet metal and duct work had been performed.

In construing the notice of claim under review, we have taken into account that the notice requirements of the McGre-gor Act are to be liberally construed and a substantial compliance with that statute is all that is required as to notice. United States Fidelity & Guaranty Co. v. Parker Bros. & Co., Inc., 437 S.W.2d 880 (Tex.Civ.App. Houston — 1st Dist. 1969, writ ref’d n. r. e.); Lesikar Construction Company v. Acoustex, Inc., 509 S.W.2d 877 (Tex.Civ.App. Fort Worth 1974, writ ref’d n. r. e.); and Citadel Construction Co. v. Smith, 483 S.W.2d 283 (Tex.Civ.App. Austin 1972, writ ref’d n. r. e.). We hold that the notice of claim Sims served on Baker and Transamer-ica was in substantial compliance with the notice requirements of the McGregor Act and that the trial court erred in denying Sims recovery against Baker and Trans-america.

Sims and Dallas North Mechanical, Inc. stipulated that the correct amount of the claim was $9,209.26 and that $3,000.00 would be a reasonable attorney’s fee for services rendered in the trial court. The stipulation as to reasonable attorney’s fee is not binding on Baker and Transamer-ica and for that reason the cause will have to be remanded to the trial court for a determination of the reasonable attorney’s fees rendered on Sims’ behalf in the trial court and this Court. On remand the trial court should further take into account Transamerica’s right to be indemnified by Baker and Baker’s right to be indemnified by Dallas North Mechanical, Inc.

It is not suggested that the stipulated sum owed is unreasonable nor is it suggested that Sims and Dallas North Mechanical, Inc. acted to defraud Baker and Transamerica by stipulating the amount owed. Furthermore, it is not suggested that there are several claimants among whom the bond proceeds should be apportioned. Under these circumstances we hold that the stipulation entered into between Sims and Dallas North Mechanical, Inc., as to the amount owed on the subcontract is binding on Baker and Transamerica. In effect, Baker and Transamerica were contingently liable for the debt at the time Dallas North Mechanical, Inc. and Sims entered into the subcontract and we see no distinction under the circumstances between the power of Dallas North Mechanical, Inc. to contingently bind Baker and Transamerica by contract prior to suit and by stipulation at time of trial. Baker and Transamerica should be given credit for $500.00 representing the value of the labor performed and materials furnished during the month of January because the notices for services rendered during the month were not timely served.

Interest on the $8,709.26 judgment to be awarded in favor of Sims against Baker and Transamerica shall be at the rate of 6% per annum from and after August 10,1976, the earliest date suit could be filed against Baker and Transamerica. Tex.Rev.Giv.Stat.Ann. art. 5069-1.08. Sims is not entitled to judgment against Baker and Transamerica for interest on the judgment amount between the dates the labor was performed and materials furnished and the date suit could be filed because the McGregor Act specifically provides that a suit cannot be filed until after the expiration of 60 days from the filing of the claim with the prime contractor and surety. In effect, this gives the prime contractor and surety 60 days in which to determine the legitimacy of a claim and in our opinion they should not be charged interest during this investigative period. Also, Sims was not damaged by Baker and Transamerica until the expiration of the 60-day period.

The cause will be reversed and remanded with instructions that the trial court award Sims judgment against Baker and Trans-america, jointly and severally, for the sum of $8,709.26 plus interest to be calculated in accordance herewith and reasonable attorney’s fees to be determined by the trial court.


source: Caselaw Access Project

author: HALL, Justice.

license: Public Domain

text:
    Nickoles Charles STANDISH, Appellant, v. Brenda J. Fuller STANDISH, Appellee.
    No. 5847.
    Court of Civil Appeals of Texas, Waco.
    July 6, 1978.
    Rehearing Denied Aug. 3, 1978.
    H. J. Bernard, Bernard & Bernard, Houston, for appellant.
    Lee Read, Houston, for appellee.
   HALL, Justice.

After trial was held before the court without a jury, judgment was rendered divorcing appellant Nickoles Charles Standish and appellee Brenda Fuller Standish and dividing their property.

Written findings of fact and conclusions of law were not requested by the parties nor filed by the court. However, the record shows without contradiction that the parties were never formally married. Necessarily, then, the judgment was based upon the conclusion that they were informally married.

V.T.C.A., Family Code § 1.91(a)(2) provides that an informal marriage may be proved by evidence that the parties “agreed to be married, and after the agreement they lived together in this State as husband and wife and there represented to others that they were married.”

Appellant comes forward with a single point of error reading, “The trial court erred in holding that a valid [informal] marriage existed between the parties.” Under this point he argues that there is no evidence to support the court’s implied findings of the elements of an informal marriage set forth in the statute. Particularly, he argues there is no evidence to support the findings that the parties agreed to be married or represented to others that they were married. We overrule those contentions and affirm the judgment.

Appellant initiated this suit by filing an “Original Petition For Divorce” on September 23, 1975. In the petition appellant pleaded that he and appellee were married on or about January 15, 1971; that they separated on or about July 4, 1975; that their marriage had become insupportable; that no children were born to or adopted by this marriage and none was expected; and that during the marriage certain community property was accumulated by the parties. He prayed for a divorce and an equitable division of the parties’ property. On December 2, 1975, appellee filed her original answer containing a general denial of the allegations in appellant’s petition for divorce. Thereafter appellant changed lawyers, and on March 3, 1976, he filed a motion for nonsuit in which he alleged that he and appellee were never married. The next day appellee filed a cross action for divorce containing virtually the same material allegations which were set forth in appellant’s petition, and praying for a divorce and a division of the community property. Appellant’s motion for nonsuit was granted by the court on March 8, 1976. The case went to trial on March 14, 1977, with appellee as movant for the divorce.

The original petition for divorce filed by appellant was introduced into evidence on the trial.

Appellee testified that she and appellant “were married” and began cohabiting and living together as husband and wife in Harris County in January, 1971; that she “did not want a church ceremony”; that they represented themselves to others as Mr. and Mrs. Standish; that they continuously lived together until their separation in July, 1975; that during that time appellant supported her and provided her needs, and she kept their house and cooked their meals and was faithful to him; that she used the name Brenda Fuller Standish; that when they attended public or private functions, including those held by his family and his employer, he always introduced her as his wife; that when she worked for awhile for appellant’s employer “they recognized me as Mrs. Standish”; that she deposited her earnings in appellant’s bank account; and that when they traveled for pleasure or business they registered in hotels as Mr. and Mrs. Standish. She identified a telegram sent to her by appellant in May, 1976, addressed to her as “Brenda Standish.”

The record shows that appellant and ap-pellee filed a single federal income tax return for 1974 as “married, filing joint return,” and a single return for 1975 as “married, filing separately.” Appellant testified he later filed amended returns for those years after talking with his lawyer and being told that he “was not married.”

Appellant admitted that he and appellee lived together in the same house from January, 1971, until July, 1975, but he stated that his work required him to be gone much of the time. He testified that he and appel-lee never agreed to be married and never represented to others that they were married, and that they were not known by others as husband and wife. It was his position on the trial, supported by the testimony of witnesses called by him, that ap-pellee “held the opinion that she was a free spirit, owing nothing to anyone,” and that she did not want to be married. He adduced evidence showing that appellee frequently went by the name “Brenda Fuller.”

It is provided in § 1.91(b) of our Family Code, supra, that, “In any proceeding in which a marriage is to be proved under Subsection (a)(2) of this section, the agreement of the parties to marry may be inferred if it is proved that they lived together as husband and wife and represented to others that they were married.”

It was the trial judge’s prerogative and duty as trier of the facts to weigh all of the evidence, pick out what she believed to be its most credible parts, and make her determinations accordingly. We hold the evidence is legally sufficient to support the findings in question.

The judgment is affirmed.


author: BRADBURY, Justice. RALEIGH BROWN, Justice,

text:
    RELIANCE INSURANCE COMPANY, Appellant, v. DAHLSTROM CORPORATION, Appellee.
    No. 5123.
    Court of Civil Appeals of Texas, Eastland.
    July 6, 1978.
    Rehearing Denied Aug. 3, 1978.

      James A. Ellis, Jr., Carrington, Coleman, Sloman, Johnson & Blumenthal, Dallas, for appellant.
    Richard L. Jackson, Shuford, Jackson & Miller, Dallas, for appellee.
   BRADBURY, Justice.

This is a suit by Dahlstrom Corporation against Reliance Insurance Company to recover on a performance bond. The trial court, based on the jury’s answers to special issues, entered judgment for Dahlstrom. Reliance appeals and we affirm.

Dahlstrom was the prime contractor on the United States Corps of Engineers project at Waurika Lake, Oklahoma. Har-peth Steel, Inc., a subcontractor, agreed to furnish Dahlstrom trashracks, guides and structural steel for a service bridge. Har-peth furnished Dahlstrom a performance bond with Reliance as surety. Harpeth defaulted and went into bankruptcy. Dahlst-rom demanded from Reliance the sum necessary to complete Harpeth’s contract.

In answer to special issues, the jury found that the date of November 20, 1972, reflected in the bond, was a result of mutual mistake between Dahlstrom and Reliance; that Reliance had ratified liability on the bond; that it had waived any right to complain of any irregularities, as to dates, on the bond; Dahlstrom did not change the specifications for the materials listed in the subcontract after November 30, 1972; Dahlstrom did change the date of delivery for the materials to be supplied by Harpeth; and, on or about November 30, 1972, Dahlstrom’s officers and agents knew or should have known that the bond referred to a written agreement dated November 20, 1972.

Reliance did not file a motion for new trial but did file a motion for judgment non obstante veredicto and, in the alternative, for judgment on the verdict. Reliance by reference incorporates its motion for instructed verdict in its motion for judgment. The statement of facts reflects that Reliance dictated to the court reporter objections and exceptions to the charge of the court. The court never ruled on the objections; therefore, they are waived. Rules 272 and 274, T.R.C.P.; Big Three Welding Equipment Company v. Roberts, 399 S.W.2d 912 (Tex.Civ.App. — Corpus Christi 1966, writ ref. n.r.e.). Reliance’s failure to file a motion for new trial limits our consideration to matters in Reliance’s motion for judgment and motion for judgment non obstante veredicto. Sanders v. Harder, 148 Tex. 593, 227 S.W.2d 206 (1950); Rule 324, T.R.C.P.; Rule 301, T.R.C.P.

We must determine if there is some evidence to sustain the jury’s findings that there was a valid bond with Reliance as surety; financial loss, if any, suffered by Dahlstrom as a result of Harpeth’s failure to furnish materials; and, if Reliance ratified liability on the bond.

There is no dispute that Harpeth had filed its petition in bankruptcy; that Dahlstrom had filed its claim under the bond; and, that such claim was denied. Reliance furnished Dahlstrom information as to where to obtain an alternative supply of materials to complete the contract it had with Harpeth, including the cost of such materials. Dahlstrom and Reliance worked together in an effort to secure from a supplier the necessary materials at the lowest attainable cost. Dahlstrom contacted some suppliers but Reliance was able to find materials at a more reasonable cost and Dahlstrom followed Reliance’s suggestion in obtaining these materials. Checks drawn on Dahlstrom were admitted without objection evidencing the sums paid for the materials needed to complete the contract.

Reliance argues there was no valid bond because it reflected that Harpeth had entered into contracts with Dahlstrom November 20, 1972, which was an incorrect date. The date line just above the signature for an officer of Dahlstrom bears the date of November 30, 1972. Near the top of the agreement, it bears date of November 14, 1972. Dahlstrom’s witness, Jerry Ford, testified that Harpeth executed the contract on November 14, 1972, and sent it to his company, but they could not accept it because it was not accompanied by a performance bond and notified Harpeth to that effect. Harpeth then furnished the bond in question dated November 20, 1972, and after it was furnished Dahlstrom executed the contract with Harpeth and the date of its execution was November 30, 1972. He further testified there was no other bond encompassing the same subject matter between the same parties. The record reflects that the contracts between Harpeth and Dahlstrom gave the same project number, and described the same project as is set out on the bond in question. The jury found there was a mutual mistake of fact, ratification by Reliance, and waiver.

Reliance says that since the bond, the agreement between Dahlstrom and Har-peth and some other documents were inadmissible, there was no evidence to sustain the findings of the jury.

The bond was admissible as an operative fact and the basis of Dahlstrom’s cause of action. Cunningham v. R. W. McPherson and Associates, Inc., 392 S.W.2d 145 (Tex.Civ.App. — Waco 1965, writ ref. n.r. e.). It was a basic document included in Dahlstrom’s pleadings and not denied under oath; and admissible without other proof. Rule 93(h), T.R.C.P.; Ship Ahoy, Inc. v. Whalen, 347 S.W.2d 662 (Tex.Civ.App.— Houston 1961, no writ). The contracts between Harpeth and Dahlstrom were admissible by the provisions of Article 3737e, V.A.T.S. University Savings and Loan Association v. Security Lumber Company, 423 S.W.2d 287 (Tex.1967) wherein the court said:

“. . .A sufficient answer to University’s contention that business records should not be admissible against a litigant who was not a party to the business transaction is that the statute does not limit their admissibility to suits between the original parties to the business transaction. We would be reluctant to write the limitation into the statute when the Legislature could easily have done so if it had regarded it as wise . . . ”

These documents when considered with the letters and other instruments admitted into evidence without objection, together with the matters stipulated, all constitute evidence to sustain the jury’s answers which support the judgment. Martinez v. Delta Brands, Inc., 515 S.W.2d 263 (Tex.1974).

Reliance in its motion for judgment and motion for judgment non obstante ve-redicto argues that Issues 8 and 9 should be disregarded because there was no allegation, competent evidence, or jury finding as to the “reasonable cost” of completing performance of the subcontracts as the bond provided. Reliance argues that Issues 8 and 9 are immaterial issues because they submit an improper measure of damages. Dahlstrom’s cause of action sought damages not only for reasonable cost of completing performance of the subcontracts, but other damages as well. There was sufficient evidence from Dahlstrom’s witness, Jerry Ford, and there was correspondence in evidence sufficient to support the jury’s findings on the damage issues. Issue 9 was too broad; however, the issue as drawn was sufficient to include the reasonable cost of completing performance of the subcontracts. Before the charge was given to the jury, Reliance objected to the submission of Issues 8 and 9 but did not obtain a ruling from the court on such objection and not having filed a motion for new trial, the defect in the manner in which the issues were submitted was waived. Rule 274, T.R. C.P.; Howell v. Bowden, 868 S.W.2d 842 (Tex.Civ.App. — Dallas 1963, writ ref. n.r.e.); McCreless Properties, Ltd. v. F. W. Woolworth Co., 533 S.W.2d 863 (Tex.Civ.App.— San Antonio 1976, writ ref. n.r.e.).

Reliance argues it is not liable under the bond because the date of delivery of the service bridge and trashracks was changed without its consent.

Release of a surety’s liability on an altered contract is an affirmative defense which must be proved by the surety asserting the defense. General Bonding & Casualty Ins. Co. v. Beckville Independent School Disk, 156 S.W. 1161 (Tex.Civ.App.— Texarkana 1913, writ ref'd). The jury found in answer to Special Issue 6 that the delivery date specified in the contract was changed. Reliance did not request an issue on whether the change of delivery date enhanced its risk of injury or whether it was in fact injured. Unless either of these facts are conclusively established by the evidence, Reliance’s defense fails.

In Old Colony Insurance Company v. City of Quitman, 163 Tex. 144, 352 S.W.2d 452 (1961), the court found the contract alterations prejudiced the rights of the surety as a matter of law. The court stated:

“. . . Respondent, by its acts, in not requiring compliance with the contract, prevented the happening of either of these possibilities and thereby prejudiced a right of petitioner as surety going to the whole contract. The situation is therefore not one where the contract deviations failed to prejudice or damage the surety but is one where there is injury to the surety as a matter of law going to the whole contract obligation.”

In the instant case, the contract obligated Harpeth to furnish certain trashracks, guides and structural steel for a service bridge. The contract additionally provided:

“The Seller shall be excused for delays in the performance in whole or in part of any contract made on the basis of this proposal resulting in whole or in part from any cause beyond the control of the Seller . . . Estimated delivery is made as closely as possible and we endeavor ■ especially to make shipments within time promised.”

We cannot hold under these facts that the change of delivery date affected the whole contract obligation so as to prejudice the surety as a matter of law. Reliance failed to discharge its burden of proving all elements necessary for its defense.

Reliance’s defense fails for the additional reason that it did not establish in fact or by law its lack of consent to the change of delivery date. In Hester v. Ross, Banks, May, Cron & Cavin, 492 S.W.2d 378 (Tex.Civ.App. — Waco 1973, no writ), the court stated:

“The rule is that a surety or guarantor is discharged by a material alteration or modification of the contract between the debtor and creditor, without such surety or guarantor’s consent. Straus-Frank Co. v. Hughes, 138 Tex. 50, 156 S.W.2d 519.
But the burden is on the surety or guarantor to plead and prove modification or alteration without his consent, in order to be entitled to discharge from liability. The burden is not on the creditor to plead and prove that the surety consented to the modification, but on the surety to plead and prove that he did not consent thereto. General Bonding & Casualty Ins. Co. v. Beckville Independent School Disk, Tex.Civ.App., er. ref., 156 S.W. 1161; Southland Life Ins. Co. v. Stewart, Tex.Civ.App. n.w.h., 211 S.W. 460; Reed v. Roark, 14 Tex. 329; 53 Tex.Jur.2d 658.”

After judgment was entered, Reliance filed a motion to correct the judgment contending Dahlstrom was not entitled to prejudgment interest; the judgment erroneously provided for interest prior to any transaction at issue; and, the judgment erroneously awarded postjudgment interest upon interest and postjudgment interest upon costs.' The court reduced the amount of interest before the judgment became final. Reliance did not file a motion for new trial or make any further complaint in the trial court regarding the judgment. Reliance has waived any errors concerning judgment interest. Rule 324, T.R.C.P.

We have considered all of Reliance’s points of error. They are overruled.

Judgment of the trial court is affirmed.

RALEIGH BROWN, Justice,

dissenting.

I dissent. The performance bond expressly provided the measure of damages to be “the reasonable cost of completing performance.” Appellee requested, and the court submitted, an inquiry as to “financial loss”, an improper measure of damages not merely an improperly worded damage issue. Appellant in his motion for judgment non obstante veredicto clearly challenged the materiality of the issues. There are numerous cases in Texas that hold by failing to object to an improper measure of damages appellant may not later complain of such submission. Employment Advisors, Inc. v. Sparks, 368 S.W.2d 199 (Tex.1963); Whitson Company v. Bluff Creek Oil Company, 293 S.W.2d 488 (Tex.1956). Such cases reveal the damage issue was merely improperly worded and failure to object waived the defect or the materiality of the issues was not challenged.

In McCreless Properties, Ltd. v. F. W. Woolworth Company, 533 S.W.2d 863 (Tex.Civ.App. — San Antonio 1976, writ ref. n.r. e.), relied upon by the majority, no objection was made that the issues submitted were an improper measure of damages. In the case at bar, objection to the submission of the improper measure of damages as being immaterial was made but such complaint was not included in a motion for new trial. Appellant, however, filed a motion for judgment non obstante veredicto based on the immateriality of the issues.

Special Issues 8 and 9 in the case at bar are immaterial issues. The court erred in failing to disregard the issues as requested by appellant. Grubb v. Grubb, 525 S.W.2d 38 (Tex.Civ.App. — El Paso 1975, writ ref. n.r.e.). Appellee waived its right to recover damages as provided in the contract. Sharp v. Stacy, 535 S.W.2d 345 (Tex.1976).

I would reverse and render the cause.

      . “SPECIAL ISSUE NO. 8: Do you find from a preponderance of the evidence that Dahlstrom Corporation has sustained any financial loss as a result of the failure of Harpeth Steel Corporation to furnish the materials listed in its agreements (Plaintiffs Exhibits 1 and 3)?
      Answer ‘Yes’ or ‘No’.
      ANSWER: Yes
      If you have answered the preceding issue ‘Yes’ then answer the following issue; otherwise, do not answer it.
      SPECIAL ISSUE NO. 9: Find from a preponderance of the evidence the financial loss, if any, sustained by Dahlstrom Corporation as a result of the failure of Harpeth Steel, Incorporated to furnish to Dahlstrom Corporation the materials in question (Plaintiffs Exhibits 1 and 3)?
      Answer in dollars, if any, and cents, if any, or more.
      ANSWER: $23.078.30


author: PHILLIPS, Chief Justice.

text:
    Honorable John L. HILL, Attorney General of Texas, et al., Appellants, v. TEXAS WATER QUALITY BOARD, Appellee.
    No. 12752.
    Court of Civil Appeals of Texas, Austin.
    July 12, 1978.
    Rehearing Denied July 26, 1978.
    John L. Hill, Atty. Gen., David M. Kendall, Jr. and Troy C. Webb, Asst. Attys. Gen., Austin, for appellants.
    James W. Wilson, Stubbeman, McRae, Sealy, Laughlin & Browder, Austin, Special Counsel, for appellee.
   PHILLIPS, Chief Justice.

The Texas Water Quality Board adopted certain rules and regulations designed to protect the water of the Edwards Underground Reservoir; however, the Attorney General of Texas disagreed with these rules and brought suit in the district court of Travis County to set them aside. The trial court sustained the Board’s contention that the Attorney General lacked standing to bring the suit and it was dismissed.

We affirm this judgment.

The suit was brought under the authority of the Texas Administrative Procedure Act, Article 6252-13a § 12, to set aside the Board’s orders as invalid.

The Attorney General conceives his role to be the lawfully constituted guardian of the public interest, which authorizes him, under the common law adopted by this state in its early history, to seek redress against a state agency when he believes its action to be wrong or inimical to the public interest.

The Board, on the other hand, contends that what authority the Attorney General has is derived from the Texas Constitution and from the statutes of this state and that under the law the Attorney General is the Board’s lawyer, is committed to defend the Board’s orders, and that there is nothing in the Constitution or statutes which expressly or impliedly authorizes him to bring this suit against the State.

It should be stated at the outset that the Attorney General’s claim that he is seeking to set aside an “illegal” action of the Board refers to the manner in which the Board has exercised discretionary powers delegated to it by the Legislature and he seeks a declaration that the Board’s orders were arbitrary and unreasonable. This is not a suit in which the Attorney General seeks to enjoin a state official from acting outside the scope of his lawful authority.

Although the Attorney General, in his brief, refers to the “unconstitutional” action of the Board, the only way that the Board’s action could be remotely suspect under the Constitution of either the State or the Federal government would be a violation of equal protection due, as alleged by the Attorney General, to its arbitrary, capricious, and unreasonable action. This contention must fail as equal protection is a constitutional guaranty afforded only to “persons” and the State does not have standing to raise the claim. South Carolina v. Katzenbach, 383 U.S. 301, 86 S.Ct. 803,15 L.Ed.2d 769 (1966).

A suit against a state agency which is exercising governmental functions only is a suit against the State. Department of Public Safety v. Great Southwest Warehouses, 352 S.W.2d 493 (Tex.Civ.App.1962, writ ref’d n. r. e.).

The facts before us are these: the orders in question concern the Edwards Underground Reservoir, a hydrologically independent water-bearing limestone formation found in Kinney, Uvalde, Medina, Bexar, Kendall, Comal and Hays Counties, respectively. Substantially all of the water which enters the reservoir enters where the limestone formation appears exposed at the ground surface and this surface is generally referred to as the “recharge zone.” Certain activities on the “recharge zone” provide a source of pollution for the reservoir. In recognition of the pollution problems created by activity over the recharge zone, the Board entered its order No. 75-0128-20 regulating activities where the recharge zone appears in the seven counties referred to above. Later, the Board replaced this order with seven separate orders, one applying to each separate county where the recharge zone is found. The Attorney General seeks to set aside these orders on grounds that the orders significantly lessen the degree of control of pollution causing activity over the recharge zone, thus posing a threat of contamination of the reservoir which would be a hazard to those people dependent upon it for drinking purposes; that the orders are arbitrary, capricious, and unreasonable; and that by treating citizens similarly situated in a different manner, the order constitutes a denial of equal protection of the laws guaranteed by the Constitution of the United States and of the State of Texas.

The Attorney General seeks to justify his position, in part, by pointing out that he authorized the Board to employ outside counsel to represent it in this cause of action.

Bexar County intervened as a plaintiff seeking to set aside the actions of the Board as did the City of San Antonio. The counties of Medina, Uvalde, and Kinney intervened on behalf of the Board. The Board filed pleas in abatement questioning, in effect, the standing of the Attorney General to bring this suit, and, as stated above, the trial court sustained the Board’s plea, dismissed the cause of action brought by the Attorney General, and severed and consolidated into a single cause the suits brought by the City of San Antonio and Bexar County.

The Attorney General is before us on five points of error, briefed together, which, in effect, complain of the action of the court in holding that his suit is contrary to the constitutional and statutory provisions fixing the duties of that office.

In defense of his suit against the State, the Attorney General maintains that he is the chief legal officer of the State of Texas, an office originating in England where that office was under the duty of representing the Crown in all legal matters in which it might be concerned. He then cites authority for the proposition that it is generally held that, in addition to the powers conferred and duties imposed upon him by statute, he is clothed and charged with all the common law powers and duties pertaining to his office as well, except insofar as they have been expressly restricted and modified by statute or the State Constitution. These powers would include authority as the public interest may, from time to time, require, to institute, conduct, and maintain all such suits and proceedings as he deems necessary for the enforcement of the laws of the state, the preservation of order and the protection of public rights. He then cites authority which he contends establishes his common law powers in Texas.

We do not deem it necessary for the purposes of this opinion to further elaborate on the Texas cases cited by the Attorney General which allegedly suggest certain common law powers inherent in that office. Suffice to say that none of them concern the question before us. Nor will we discuss the out-of-state authority cited as the factors controlling these cases and other writings, whether because of the facts involved or the statutes or constitutional provisions relative thereto, they are dissimilar to those controlling here and are readily distinguishable.

Both parties hereto agree that should the Attorney General have the common law powers, such powers can be circumscribed by the Constitution and the statutes of this state. Consequently, we need pass no judgment on the common law powers question and base our opinion solely on the duty of the Attorney General to represent the ap-pellee herein under the Constitution and the laws of this state.

In Garcia v. Laughlin, 155 Tex. 261, 285 S.W.2d 191 (1956), the question before the Court was whether the Attorney General had the authority to bring an action for the removal of a county commissioner from office. In contending that he did, the then Attorney General relies strongly on the common law powers doctrine. In denying the Attorney General the authority he asserted, the Court stated:

. . Article 4, § 22, defines the duties and powers of the Attorney General to represent the State ‘ * * * in all suits and pleas in the Supreme Court of the State in which the State may be a party * * * and perform such other duties as may be required by law. * * ’ This article was also amended November 2, 1954, but the quoted language is substantially that existing prior to the amendment. The powers conferred by the Constitution upon the state officials are generally held to be exclusive, and except in the manner authorized by the Constitution, these powers cannot be enlarged or restricted.” (Emphasis added) (285 S.W.2d at 194)

Brady v. Brooks, 99 Tex. 366, 89 S.W. 1052 (1905), construed the Texas Constitution as allowing the Legislature to expand the powers of the Attorney General to include representation of the State in the trial courts.

The Court in Garcia then specifically approved the decision of the Court of Civil Appeals in State v. Harney, 164 S.W.2d 55 (Tex.Civ.App.1942, writ ref’d w. o. m.), also denying the Attorney General authority to bring suit to remove a local official from office. The Supreme Court stated that Harney “very ably and thoroughly discussed the rights and powers of the Attorney General in his representation of the State in its litigation,” and quoted with approval the following statement from Har-ney:

“it is our considered judgment that, since there is no constitutional or statutory provision which vests in the Attorney General the power, or makes it his duty, to institute actions for the removal of county officers under the provisions of Art. 5, § 24, of the Constitution, and Art. 5970 of the Statutes, [Title 100 — Officers —Removal of, Vernon’s Annotated Civil Statutes] the Attorney General cannot assert or exercise such power and duty in this action.” (285 S.W.2d at 194-95)

Under the authority of both Garcia and Harney, we hold that the Attorney General’s exclusive right and power under the Constitution and statutes to represent state agencies preclude the Attorney General from bringing suit against appellee.

Another leading case on the subject is Maud v. Terrell, 109 Tex. 97, 200 S.W. 375 (1918). Here the exclusive nature of the State’s representation was explicitly recognized:

“. . . The powers thus conferred on these officials [the Attorney General and county and district attorneys] are exclusive. The Legislature cannot devolve them upon others. Nor can it interfere with the right to exercise them. . It may provide assistance for the proper discharge by these officials of their duties, but since in the matter of prosecuting the pleas of the State in the courts the powers reposed in them are exclusive in their nature, it cannot, for the performance of that function, obtrude other persons upon them and compel the acceptance of their services. Wherever provision is made for the services of other persons for this express purpose, it is the constitutional right of the Attorney-General and the county and district attorneys to decline them or not at their discretion and, if availed of, the services are to be rendered in subordination to their authority.” (Emphasis added) (200 S.W. at 376)

Thus, either the Attorney General or a county or district attorney may represent the State in a particular situation, but these are the only choices, whichever official represents the State exercises exclusive authority and if services of other lawyers are utilized, they must be “in subordination” to his authority. To uphold the Attorney General’s position would give rise to an intolerable situation which, as was aptly observed by the trial court, would put him on both sides of the lawsuit.

The judgment of the trial court is affirmed.

Affirmed.

      . Now the Texas Department of Water Resources, S.B.No.1139, 65th Leg., 1977.

      . 2 Gammel’s Laws 177 (1840).

      . Tex.Laws 1975, Ch. 743, Art. V, § 41 at 2864 (Appropriation Act).

      . 7 Am.Jur.2d Attorney General, § 6, pp. 6-7, Ruling Case Law, Vol. 11 at p. 916.

      . Common Law Powers of State Attorneys General — National Association of Attorneys General, May, 1977, pp. 22-23; Common Law Powers and Duties of the Attorney General, 7 Baylor L.Rev. 1 (1955); Kerns B. Taylor, Modernizing the Powers of the Attorney General of Texas, 36 Tex.Bar Jr. 51 (1973); State v. Delesdenier, 7 Tex. 76 (1851); State v. Farmers Loan and Trust Co., 81 Tex. 530, 17 S.W. 60 (1891); Yett v. Cook, 115 Tex. 205, 221 S.W. 837 (1926); Agey v. American Liberty Pipe Line Co., 141 Tex. 379, 172 S.W.2d 972 (1943); among others.


author: O’QUINN, Justice.

text:
    F. P. PICKENS, Appellants, v. J. C. ALSUP, Trustee, et al., Appellees.
    No. 12771.
    Court of Civil Appeals of Texas, Austin.
    July 26, 1978.
    Rehearing Denied Aug. 2, 1978.
    Brantly Harris, Prappas, Moncure, Harris & Termini, Houston, for appellants.
    Phil Mockford, Austin, for appellees.
   O’QUINN, Justice.

F. P. Pickens brought this lawsuit in September of 1975 for sums claimed due additionally from a profit sharing plan in force under former employment and for prejudgment interest and reasonable attorney’s fees. The trial court awarded Pickens recovery of part of the additional money claimed due from the profit sharing plan, but denied recovery of interest and attorney’s fees.

Pickens was employed by Southwest Auto-Chlor System, Inc., from 1948 until May of 1973 when he resigned. During employment with Southwest, Pickens became a participant in the Southwest-Chlor, Inc., Profit Sharing Plan, of which J. C. Alsup was trustee, later joined by American National Bank, also a party defendant in this suit. Pickens alleged that when he left employment of Southwest in 1973 he was underpaid for vested interest in the plan because real estate belonging to the plan was undervalued by the trustees.

The trial court, sitting without a jury, entered judgment in favor of Pickens for $17,399.06, but refused to award recovery of interest prior to judgment or for attorney’s fees. Pickens has appealed only from that part of the judgment denying recovery of interest and attorney’s fees. We will affirm the judgment of the trial court.

At the time Pickens left employment with Southwest, and was shortly thereafter paid his part of the benefits from the company plan, Pickens questioned the valuation placed on the real estate owned by the trust, which the trustees had valued at $1,000 per acre, but which Pickens insisted had a value of $2,000 an acre. Later, after an appraisal obtained by the trustees, valuation of the land was placed at $1,500 per acre.

Before additional disbursement could be made to Pickens, based on the higher appraisal, the trustees learned that Pickens was engaged in competition with Southwest and that this activity had commenced before expiration of one year after termination of employment with Southwest, affording basis for forfeiture of Pickens’ remaining interest in the plan under the trust agreement. The trustees refused to make further payment to Pickens, who instituted suit in which he demanded payment of $34,-798.12, based upon a valuation of $2,000 per acre for the land.

The trial court found the valuation to be $1,500 per acre and found that Pickens had engaged in competition with Southwest within one year after termination of employment, in violation of the trust agreement. The trial court concluded, nevertheless, that Pickens’ violation was not of sufficient magnitude to work a forfeiture and awarded Pickens recovery of his interest in the amount of $17,399.06, but denied all other relief.

Pickens left the employ of Southwest in May of 1973, and thereafter, on June 20 and on August 30 of 1973, Pickens received payments, which taken together represented the total amount the trustees contended was due, based on a valuation of $1,000 per acre. At that time, and continuing through the trial, Pickens insisted he was entitled to payment on a valuation of $2,000 per acre. On appeal Pickens argues that if the trustees had properly valued Pickens’ interest as of August 30, 1973, he would have received at that time the additional $17,399.06 awarded subsequently by the court. On this premise, Pickens insists he is entitled to interest on that amount from August 30, 1973, until date of judgment.

The statutory definition of interest . .is the compensation allowed by law for the use or forbearance or detention of money . . . ” (Emphasis added) Article 5069-1.01, V.A.T.S. (1967). The general rule is that a court properly may allow prejudgment interest as damages for detention of money from the due date of the liability. Hayek v. Western Steel Company, 478 S.W.2d 786, 795-6 (Tex.1972); Texas Company v. State, 154 Tex. 494, 281 S.W.2d 83 (1955); Watkins v. Junker, 90 Tex. 584, 40 S.W. 11 (1897). The recognized test is whether the measure of the claim is fixed by conditions existing at the time the injury arose, and not necessarily the amount of damages. McDaniel v. Tucker, 520 S.W.2d 543, 549 (Tex.Civ.App. Corpus Christi 1975, no writ).

Pickens contends he is entitled to interest, on the amount awarded by the trial court ($17,399.06), from August 30, 1973, the date Pickens received the last payment from the trustees on the valuation of $1,000 per acre. But at that time Pick-ens was claiming a valuation of $2,000 per acre and payment of $34,798.12 for his part in the plan and not the amount awarded later by the trial court. Subsequent appraisal brought the valuation to $1,500 per acre, which is the value found by the trial court, although Pickens had sued for payment on a basis of $2,000 per acre.

Thus a bona fide dispute existed between Pickens and the trustees up to the time of the trial court’s final judgment, arrived at on a basis of $1,500 per acre. Pickens’ demand for payment on a valuation of $2,000 per acre therefore was an excessive demand upon the trustees, and he is not entitled to interest on the debt until the date of the trial court’s judgment. Ingham v. Harrison, 148 Tex. 380, 224 S.W.2d 1019, 1022 (1949); Warrior Constructors v. Small Business Investment Company, 536 S.W.2d 382, 386 (Tex.Civ.App. Houston (14th) 1976, no writ). The trial court, as trier of the facts, correctly denied Pickens interest from August 30, 1973.

Although the trial court declined to enforce the forfeiture against Pickens, the court did find that Pickens had violated the agreement by commencing direct competition with Southwest, his former employer, within a year after leaving Southwest’s employ. This violation was an added reason for the trustees to withhold payment of additional money, even after an appraisal arrived at a valuation of $1,500 per acre. The effect of the trial court’s finding was to find Pickens legally wrong and the trustees legally right in their position, even though the court decided that in equity Pickens should not suffer forfeiture because of his legal wrong.

Denial of prejudgment interest was proper, since under the facts and circumstances of the case there remained a serious and genuine dispute regarding ultimate liability, which was contested in good faith by the parties, and the amount of damages could not be ascertained until final judgment. Travelers Indemnity Co. v. Pollard Friendly Ford Co., 512 S.W.2d 375, 383 (Tex.Civ.App. Amarillo 1974, no writ), and cases there cited.

Pickens contends under his second point of error that the trial court erred in refusing to award him judgment for attorney’s fees. Recovery of attorney’s fees, Pickens argues, is predicated in this suit “. . . upon the plain language of Article 2226: ‘Any person having a valid claim against a person . . . for services rendered . . . may present the same to such person . . . and if . . .he should finally obtain judgment he may also recover ... a reasonable amount as attorney’s fees . . .’”

This lawsuit in its posture as tried on the merits was an action to recover from the trustees of Southwest Auto-Chlor System, Inc., Profit Sharing Plan the “sum of not less than $34,798.12 interest as provided by law, a reasonable attorney’s fee in the sum of not less than $12,500.00 . . . ” Pick-ens alleged that he was employed by Southwest Auto-Chlor System, Inc., from 1948 until 1973 “. . . and for services rendered by virtue of such employment became a Participant in the Southwest Auto-Chlor System, Inc., Profit Sharing Plan.” The profit sharing plan was established by a trust agreement in May of 1959 between the corporation and the trustees.

Suit originally was filed in Harris County against both the corporation and the trustees, and on appeal from an adverse ruling on plea of privilege, the court of civil appeals held “. . . that Pickens failed, as a matter of law, to establish a cause of action against Southwest . . .” and the cause was ordered transferred to Travis County, residence of the trustee. Alsup v. Pickens, 526 S.W.2d 266, 268 (Tex.Civ.App. Houston (1st) 1975, no writ).

In pleadings to establish his right to attorney’s fees, Pickens alleged that he “. . . earned his interest in the . Profit Sharing Plan for services rendered by Plaintiff as an employee of Southwest Auto-Chlor System, Inc.” By supplemental petition Pickens pleaded that when the trustees paid him “the amount of his vested interest” in the profit sharing plan shortly after he resigned, without awaiting the expiration of one year, the trustees “thereby waived the non-competition provision of the Plan. The only purpose of this suit,” Pick-ens continued, “is to correct the Trustees’ incorrect valuation of Plaintiff’s vested interest in the Plan.”

Although Pickens employs the term “services rendered” in his pleadings and contends that he is entitled to attorney’s fees by reason of his employment with Southwest, the claim asserted by his suit is based upon a special contract under which he was entitled to share in profits of the corporation. Any obligation of the trustees to pay Pickens exists by reason of the trust agreement, and, as pleaded by Pickens, “The only purpose of this suit is to correct the Trustees’ incorrect valuation of Plaintiff’s vested interest in the Plan.” (Emphasis added) From the record it appears clear that the suit was intended to be, and was tried on the basis of, a suit to recover a disputed amount in a vested right acquired in the profit sharing plan during the years he was employed by Southwest.

In similar cases an employee suing to share in gross earnings of a business, or to share in division of profits, the courts have held that attorney’s fees could not be recovered under Article 2226, Y.A.T.S. In Eisenbeck v. Buttgen, 450 S.W.2d 696, 702 (Tex.Civ.App. Dallas 1970, no writ), the court noted that it has been judicially determined that Article 2226 “has no application to a suit based on special contract between the parties,” and held that in an action brought “solely to recover for breach of contract concerning payment of a percentage of gross earnings of a business” attorney’s fees are not recoverable. In 1971, in a similar action, the Beaumont Court of Civil Appeals held attorney’s fees were not recoverable in a suit by an employee who under a contract was to receive a percentage of net profits of the business. G & W Marine, Inc. v. Morris, 471 S.W.2d 644, 650 (Tex.Civ.App. Beaumont 1971, no writ).

In the present case a former employee of Southwest, who during his employment became entitled to rights in a profit sharing plan, created and operated under terms of a contract, sued to recover his vested interest in the plan. The essential facts of this case differ in no significant aspect from the facts forming the basis of decision in Eisen-beck v. Buttgen, supra, and in G & W Marine, Inc. v. Morris, supra. We hold that the trial court properly refused to award attorney’s fees under Article 2226.

The judgment of the trial court is affirmed.

Affirmed.


author: HOGGE, Judge.

text:
    UNITED STATES of America, Appellant, v. COMMONWEALTH of Kentucky ex rel. Robert D. BELL, Secretary, Department for Natural Resources and Environmental Protection and Ike Marsee, Appellees.
    Court of Appeals of Kentucky.
    Dec. 16, 1977.
    Eldon L. Webb, U. S. Atty., Robert F. Trevey, Asst. U. S. Atty., Lexington, Myron C. Baum, Acting Asst. Atty. Gen., Gilbert E. Andrews, Crombie J. D. Garrett, William S. Estabrook, III, Attys., Tax Div., Dept, of Justice, Washington, D. C., for appellant.
    Scott Allen Wilson, Kentucky Dept, for Environmental Protection and Natural Resources, Frankfort, Mark Anderson, Mid-dlesboro, for appellees.
    Before HAYES, HOGGE and LESTER, JJ.
   HOGGE, Judge.

This is an appeal from an order determining that the appellee, Ike Marsee, had a superior right against the United States to the sum of $6,300.00 held by the Kentucky Department of Natural Resources and Environmental Protection as a cash bond for obtaining a strip mining permit, which had been deposited by Carbon Coal Company Inc., a debtor of both Marsee and the United States.

The claim of the United States against Carbon Coal grew out of unpaid taxes. The claim of Marsee against Carbon Coal grew out of a loan to that company by Marsee. There is no question that the claim of the United States predated Marsee’s claim. Nor is it questioned that the United States first took action to effectuate its lien. The issue before this court is whether the United States complied with the statutory requirements as to filing of notice of its lien.

A notice of federal tax liabilities was filed on January 3, 1972, and on June 29, 1972, in Claiborne County, Tennessee. Ike Marsee did not file suit against Carbon Coal until September 28, 1972. On October 3, 1972, Marsee obtained a pre-judgment attachment against Carbon Coal and, on October 6th, served the attachment upon the Kentucky Department for Natural Resources and Environmental Protection. On December 7, 1972, Marsee obtained judgment against Carbon Coal. The United States had not attempted to file notice of its lien in any place other than Claiborne County, Tennessee, although Carbon Coal had offices and connections in three states, Kentucky, Ohio and Tennessee.

IRC § 6321 provides that a lien arises in favor of the United States upon the taxpayer’s failure to pay the taxes upon demand. IRC § 6323 provides that said lien is not effective against a judgment lien creditor until notice of same is properly filed. That section further provides that the proper place for filing of notice of lien against the personal property of a corporate taxpayer is the state where its “principal executive office” is located. Therefore, if the United States had properly filed its notice of federal tax liability at the time Marsee became a judgment creditor, the claim of the United States would be superior. However, if the notice had not been properly filed at the time Marsee become a judgment creditor, Marsee’s claim would be superior.

The location of the “principal executive office” of Carbon Coal is basic to any determination of whether the United States filed its notice in the proper place. Unfortunately, the record is completely void of any evidence on this critical point. As a result, the trial court was unable to make any findings of fact respecting the location of the principal executive office of Carbon Coal.

In the absence of any evidence on this issue, any judgment of the trial court may result in a gross miscarriage of justice.

Judgment reversed and remanded for further proceedings consistent with this opinion, including the taking of additional proof if necessary.

All concur.


author: HOWERTON, Judge.

text:
    HOBART MANUFACTURING COMPANY and Travelers, Appellants, v. James Robert JOHNSON, Workmen’s Compensation Board of Kentucky and James R. Yocum, Commissioner of Labor and Custodian of the Special Fund, Appellees.
    Court of Appeals of Kentucky.
    Dec. 16, 1977.
    Rehearing Denied March 17, 1978.
    Discretionary Review Denied June 27,1978.

      Lionel A. Hawse, Lexington, for appellants.
    Benjamin J. Hays, Winchester, Cyril E. Shadowen, Asst. Counsel, Dept, of Labor, Louisville, for appellees.
    Before HOWERTON, COOPER and HAYES, JJ.
   HOWERTON, Judge.

This is a workmen’s compensation case in which the claimant was awarded benefits for 30% permanent, partial disability, with the award being apportioned one-half to the employer and one-half to the Special Fund.

James Robert Johnson, the claimant, experienced low back and neck pain while moving a washing machine from a conveyor belt to his workbench on April 15, 1974.

On this appeal, the employer argued that there was not substantial evidence in the record to sustain the Board’s finding of permanent, partial disability, that the Board erred in fixing the amount of Johnson’s benefits, and that the board erred in not apportioning medical benefits between it and the Special Fund.

The record in this case is sketchy, at best. A short hearing was held before a hearing officer of the Workmen’s Compensation Board and the parties were given some time afterwards in which to file further proof. The employer argues on this appeal that no medical evidence was presented which would allow the Board to make a finding of permanent, partial disability. The Board appointed a physician, pursuant to its statutory authority, to examine the claimant. If that is the only competent evidence which the Board could consider, it is clear from Dr. Massie’s report that there was no permanent damage. Dr. Massie concluded:

It is my opinion that, prior to April 15, 1974, he had no permanent functional impairment, that following this, he probably did have an acute disabling condition which persisted for no more than 8 to 12 weeks, and that this has spontaneously regressed . . . . No obvious functional impairment either now, and hence, none resulting from any previous injury.

Hobart argues that this is the only evidence of record. The claimant counters that the Board correctly considered a letter summarizing the examination of the claimant by a Dr. Goodman. It appears from the record that the employer requested the claimant to see Dr. Goodman and that the claimant did so. Thereafter, the employer moved the Board to name the Special Fund as an additional defendant. In its motion, the employer stated:

There is now evidence that this employee was suffering from a pre-existing, dormant, non-disabling, degenerative disc disease condition prior to his action, in which dormant disease was probably exacerbated or brought into disabling reality as a result of his alleged injury.

Attached to this motion was a copy of the report of Dr. Goodman. In his report, Dr. Goodman determined that there was a 5% permanent, functional, anatomic impairment, 2V2% due to the pre-existing, degenerative disc, and 2½% as the result of the accident. Thus, if Dr. Goodman’s letter can be considered as competent evidence which the Board could consider, there was sufficient medical evidence for the Board, in light of other evidence, to determine that the claimant suffered a 30% functional disability.

At no time did the claimant formally adopt or present Dr. Goodman’s report to the Board, though it can be said in his favor that he did not object to the Special Fund being made a defendant.

Hobart argues that Dr. Goodman’s letter was not competent evidence for the Board’s consideration in determining the claimant’s disability. The record indicates that some time after the motion was granted to add the Special Fund, the claimant’s attorney sought an additional expansion of time for submitting proof, stating in a motion and affidavit for extension of time on February 24, 1976, that the appellant had “not taken any medical proof” as of that date. We think that a review of the record would clearly indicate that the Goodman letter attached to the motion was not competent evidence for a determination of a permanent, partial disability. We are impressed by appellant’s argument that to decide otherwise would place him in an untenable position — namely, he would be forced to make out the claimant’s case for him, or pushed into the position of being unable to show that if there is any disability, the Special Fund is at least partially responsible.

The Board must be guided by prevailing rules concerning the competency of evidence. Perry McGlone Construction Company v. Shaw, 283 Ky. 84, 140 S.W.2d 829 (1940). This letter was clearly hearsay evidence. In that regard, this letter is not unlike the letter incorrectly admitted into evidence in Standard Accident Insurance Co. v. Hinson, 251 Ky. 287, 64 S.W.2d 574 (1933). It was incompetent. We think its admission in this case was prejudicial in that there was insufficient legal, competent evidence to sustain the award if the Goodman letter is removed from the consideration. See Valentine v. Weaver, 191 Ky. 37, 228 S.W. 1036 (1921). We do not believe that the attachment of the letter to a motion for adding the Special Fund as a defendant amounts to a declaration against interest. While it was not stated in precise words, we can reach no other conclusion but that the employer, as he argues, was stating that the Special Fund was concurrently responsible with it if any party was liable.

In view of the foregoing conclusion, the only other issue we need decide is whether the Board and the circuit court, in its affirmation of the Board, were correct in not apportioning medical benefits between the employer and the Special Fund, rather than holding the employer totally responsible as it did. We believe that no error was committed in this matter, and refer to a recent case of this court in support thereof. See Yocom v. Reid, Ky.App. (Rendered June 17,1977).

We therefore affirm the circuit court’s determination on the allocation of medical benefits, and reverse the case to the circuit court so that it may allow the Board to make determinations consistent with this opinion.

All concur.


text:
    MALCO, INC., Appellant, v. COMMONWEALTH of Kentucky, DEPARTMENT OF REVENUE, Appellee.
    Court of Appeals of Kentucky.
    June 30, 1978.

      Robert S. Miller, Miller, Griffin & Marks, Lexington, for appellant.
    William S. Riley, Asst. Atty. Gen., Frankfort, John N. Hughes, Legal Staff, Dept, of Revenue, Frankfort, for appellee.
    Before GANT, HOGGE and WINTER-SHEIMER, JJ.
   HOGGE, Judge.

This appeal involves the interpretation of KRS 136.070, which imposes a license tax on corporations based on the amount of capital employed in the business. Section two of the statute defines capital as including monies “borrowed for purposes other than current operating expenses and used in lieu of or in addition to invested capital . . .” The appellee, the Department of Revenue, issued assessments against the appellant, Maleo, Inc., for additional corporation license tax for calendar years 1968 through 1970 and for the period in 1971 ending October 31, 1971. The basis for these additional assessments were funds borrowed in connection with Malco’s business of purchasing and leasing automobiles.

Appellee describes these loans as “money borrowed by the appellant for the purchases of automobiles,” and contends there is no exemption. Maleo describes the loans in its brief as “loans which are incurred to fund the depreciation of the leased automobiles.” It argues that depreciation is a current operating expense, and that it is not liable for taxes on that fifty percent of the assessment representing money borrowed for current operating expenses.

The Kentucky Board of Tax Appeals concluded “that the inclusion of the notes payable in the total capital employed in appellant’s business was proper under the provisions of KRS 136.070” for the reason that the purchase of automobiles (i.e. capital assets) is not a current operating expense and monies borrowed for that purpose should not be excluded from the license tax provisions. The Fayette Circuit Court affirmed the decision of the Kentucky Board of Tax Appeals and Maleo appeals.

The opinion of the Fayette Circuit Court in this case states that “the facts presented before the Board of Tax Appeals clearly indicated that the money was borrowed for the purposes of purchasing automobiles to be leased and these funds were used in lieu of or in addition to invested capital.” (Emphasis added). We find ample evidence in the record to support the finding of the Circuit Court. Not only did the appellant’s witness not correct counsel when referring to the loans as money borrowed for the purchase of vehicles, but he also described it in that manner in his own testimony.

We agree with the position of the appellant that “depreciation”, as that term is generally used and understood in accounting concepts and practices, is a “current operating expense.” We cannot agree with the position of the appellant that the borrowings involved in this case were for the purpose of funding the depreciation of the leased automobiles. We do not believe that depreciation is funded, although this point is very forcefully urged by the appellant. The amount that an asset depreciates in the current year is deductible for income tax purposes, but we do not believe that amount has any relevancy to “capital” as used in this statute. Money borrowed for current operating expense is specifically exempt from this tax by statute. However, under any accounting concept of depreciation and its position on the balance sheet, depreciation is simply not funded. It does not represent any expense that is actually paid, as is true of the normal current operating expenses. It is an accounting charge only.

As above stated, it was admitted by the appellant’s expert witness that the borrowed money was actually used to purchase new automobiles. It therefore went into capital. What does the depreciable life of an asset have to do with it when the money borrowed, in its inception, went into capital? We find that the initial transaction, viz. borrowing money for the purchase of new automobiles, which makes all that borrowed money part of capital that is taxable under the statute involved, is the determining factor rather than the manner that this same money is subsequently treated by some accounting practice.

The judgment is affirmed.

All concur.


author: REYNOLDS, Judge.

text:
    James R. YOCOM, Commissioner of Labor and Custodian of the Special Fund, Appellant, v. HI-FLAME COALS, INCORPORATED, Charles Hyden and Workmen’s Compensation Board of Kentucky, Appellees.
    Court of Appeals of Kentucky.
    June 30, 1978.

      Cyril E. Shadowen, Asst. Counsel Dept, of Labor, Louisville, for appellant.
    Gayle G. Huff, Harlan, Neville Smith, Manchester, for appellees.
    Before MARTIN, C. J., and REYNOLDS, and WILHOIT, JJ.
   REYNOLDS, Judge.

The Workmen’s Compensation Board found appellee-employee, Charles Hyden, to be permanently and totally disabled as a result of an injury of July 24, 1972, and further found him to be totally and permanently disabled from November 28,1972, as a result of the occupational disease of pneu-moconiosis and/or silicosis, which arose out of and in the course of his employment as a coal miner. The Board, inter alia, ordered the Special Fund, appellant, and the appel-lee-employer to pay $60 per week for 425 weeks (less certain credits), and with the Special Fund also receiving credit for the overlap.

The appellee-employer filed a petition in Clay Circuit Court for review of the Board’s order and award, solely upon the issue of its liability, and named the Workmen’s Compensation Board and the employee as respondents. Thereafter, the Special Fund, which had not appealed nor been named as a respondent, moved to intervene and/or have the appeal to circuit court dismissed for failure to join it, the Special Fund, as an adverse and indispensable party. The order and judgment of Clay Circuit Court denied the Special Fund’s motions and held that the Board’s award was erroneous since there was no probative evidence to support the Board’s award against the employer for the July 24, 1972, injury.

The Special Fund appeals and maintains that it was an adverse and indispensable party to the circuit court appeal, pursuant to K.R.S. 342.285, and that it was error for the court to deny intervention.

The employer’s petition for review to circuit court designated the grounds upon which it sought review, which were limited to the Board’s finding and award pertaining to the July 24, 1972, injury. It is patent that the employer is solely responsible for the disability attributable to the accident and the Special Fund solely responsible for the disability attributable to the pneumoco-niosis and/or silicosis. Neither the employer nor the Special Fund was arrayed or occupied a position as being clearly adverse parties in the proceedings before the Workmen’s Compensation Board. We find, to that extent, that the Special Fund was not an adverse party nor had it challenged or appealed as to the propriety of the award imposed upon it. However, it is obvious that the net effect of the Board’s award imposed total or almost complete liability for the responsibility of payments upon the employer (so long as the disability is attributable to the injury). The Board’s award was not an apportioned one. See Estep Coal Company v. Ward, Ky., 421 S.W.2d 367 (1967). The trial court’s refusal to dismiss the petition for a review was not clearly erroneous, and the appellant’s authorities are clearly distinguishable. Boyd & Usher Transport v. Southern Tank Lines, Inc., Ky., 320 S.W.2d 120 (1959), and George v. Kentucky Alcoholic Beverage Control Bd., Ky., 403 S.W.2d 24 (1966).

The denial of appellant’s motion to intervene or appear in the appeal before the trial court did constitute prejudicial error.

K.R.S. 342.285(4) provides that the Board and each party may appear in such review proceedings, and with this statutory provision coupled with CR 24 we find under the facts of this case that the defense, sought to be raised by the intervenor (appellant), involved some common questions of fact with the main action, and that the appellant had a contingent pecuniary interest in the subject of the appeal litigation, all of which provided a basis for intervention. K.R.S. 342.285(1) clearly provides that both the Board and an adverse party are to be made respondents to an appeal to circuit court, while subsection (4) establishes a permissive basis for other parties to the action to appear in the review proceeding. We hold the definition of “appear” or “appearance” to mean, in this proceeding, as a coming into court as a party, not a mere corporal presence, by the giving of notice and the performance of some act and, as herein, the filing or tendering of an answer. Our courts, generally, construe CR 24 liberally in order to effect the purpose of intervention. 67 C.J.S. Parties § 53. Also, see Tatum v. Cardillo, 11 F.R.D. 585 (1951).

The order and judgment of Clay Circuit Court denying appellant’s motion to intervene is reversed and remanded to the circuit court for further proceedings consistent with this opinion.

All concur.


author: GANT, Judge.

text:
    COMMONWEALTH of Kentucky, DEPARTMENT OF TRANSPORTATION, BUREAU OF HIGHWAYS, Appellant, v. George M. CATLETT and Geraldine Catlett, Appellees. COMMONWEALTH of Kentucky, DEPARTMENT OF TRANSPORTATION, BUREAU OF HIGHWAYS, Appellant, v. Caroline M. BAILEY and J. Harrison Bailey, Appellees.
    Court of Appeals of Kentucky.
    June 30, 1978.
    Ed W. Hancock, Asst. Atty. Gen., Dept, of Transp., Frankfort, Ann E. Samani, Frankfort, for appellant.
    Joseph J. Leary, Frankfort, for appellees.
    Before GANT, HOGGE and WINTER-SHEIMER, JJ.
   GANT, Judge.

The appellants appeal from an order in each of these cases dismissing two condemnation proceedings for lack of jurisdiction. The lower court ruled that KRS 177.082 mandates that these actions and all like them should be filed in the county court and that the Franklin Circuit Court had no jurisdiction over the proceedings.

The history of condemnation proceedings in Kentucky discloses that in 1952 the Acts provided that all such proceedings should be commenced in the county court of the county in which the land was located. In 1970, an alternate method was provided, granting to the county court and circuit court concurrent jurisdiction over such proceedings. In 1976, pursuant to a research project, the legislature attempted to put all condemnation proceedings in the circuit court, seeking to simplify the procedure. However, the legislature failed to repeal KRS 177.082 in spite of enacting new statutes and in spite of enacting the Eminent Domain Act of Kentucky (KRS 416.540-416.670). At the special session in 1976, this oversight was cured but in the hiatus, and at the time these actions were brought, both KRS 177.-081 and KRS 177.082 were in effect.

KRS 177.081 read, in essential part, as follows:

(1) The commonwealth of Kentucky, bureau of highways, . . . may . condemn the lands . . . designated as necessary.
(2) The proceedings for condemnation shall be as provided in the Eminent Domain Act of Kentucky.
KRS 416.570 provided as follows:
Filing of Petition. ... a condemn- or seeking to condemn property or the use and occupation thereof, shall file a verified petition in the circuit court of the county in which all or the greater portion of the property sought to be condemned is located . . . (Emphasis added).
KRS 177.082 read as follows:
County attorney to represent bureau of highways in condemnation proceedings— Petition. — The commonwealth of Kentucky, bureau of highways, when seeking to condemn lands . . . shall direct the county attorney or any attorney authorized to represent the commonwealth to file a petition in the office of the county court clerk in the county in which all or the greater portion of the land . is located. (Emphasis added).

Thus we have two specific statutes, one directing that the verified petition be filed in the circuit court and the other directing that the petition be filed in the office of the county court clerk. This is not a question of a general statute against a specific statute but is, instead, two specific statutes.

Although the intent of the legislature is manifestly clear, we do not have to speculate on legislative intent in such a situation. The law is clearly set out in the case of Commonwealth ex rel. Martin v. Tom Moore Distillery Co., 287 Ky. 125, 152 S.W.2d 962 (1939), when the court said, “All statutes are presumed to be enacted for the furtherance of a purpose of the legislature and should be construed so as to accomplish such purpose rather than to render them nugatory.” At worst, these conflicting statutes granted concurrent jurisdiction and did not grant sole jurisdiction to the county court.

Accordingly, these cases are reversed and remanded to the lower court for further proceedings consistent herewith.

All concur.