author: BROCK, Justice.

text:
    TENNESSEE DEPARTMENT OF HUMAN SERVICES, Assignee of Yvonne Coleman, Plaintiff-Appellee, v. J.B. BARBEE, Defendant-Appellant.
    Supreme Court of Tennessee, Western Section, at Jackson.
    May 6, 1985.

      Harvey M. Yaffe, Harry A. Simmons, Jr., Memphis, for defendant-appellant.
    Dianne Stamey, Asst. Atty. Gen., Nashville, Harold Horne, Memphis, for plaintiff-appellee.
   BROCK, Justice.

This is a paternity action. The focus of the litigation is Yvonne Coleman’s son, Cedric Jerome Coleman, who was born on February 19, 1970. On October 27, 1977, the Tennessee Department of Human Services, as an assignee of Yvonne Coleman, filed a petition to establish paternity against J.B. Barbee. This case was subsequently transferred to the Circuit Court for Shelby County, Tennessee.

On October 26, 1979, in open court the case was set for trial on January 23, 1980. At that time no answer had been filed on behalf of the defendant. There is no evidence in the record indicating that plaintiff’s counsel attempted to communicate the trial date to the defendant at that time. On November 26, 1979, an answer was filed on behalf of J.B. Barbee by Harvey Yaffe of the Memphis Bar which specifically denied that Mr. Barbee was the father of Cedric Jerome Coleman. On December 11, 1980, the plaintiff’s attorney, Harold Horne, wrote a letter to Mr. Yaffe informing him that he had set a motion for summary judgment for hearing on January 11, 1980. Horne wrote a second letter to Yaffe that same day which stated that the case was set for trial on January 23, 1980. With that letter Horne enclosed a set of interrogatories and a set of requests for admission which he had previously attempted to serve upon the defendant. On January 11, 1980, defense counsel failed to appear at the hearing on plaintiff’s motion for summary judgment. Mr. Horne rescheduled the hearing on the motion for the morning of trial, January 23, 1980. There is no evidence in the record indicating that Mr. Horne attempted to contact Mr. Yaffe’s office: (1) to ascertain why he failed to appear at the January 11, 1980, hearing, (2) to ascertain if Yaffe had received the December 11, 1979, letters and was aware of the dates set for the motion for summary judgment and for trial or (3) to inform him of the rescheduling of the hearing on the motion for summary judgment. On January 23, 1980, neither the defendant, J.B. Barbee, nor his attorney appeared for the trial and the court entered a default judgment decreeing that the defendant was the father of Cedric Jerome Coleman.

On May 2, 1980, a “Motion to Set Aside the Judgment” was filed on behalf of the defendant. The motion states that neither defense counsel nor the defendant received any notice from the clerk’s office that the case had been set for trial on January 23, 1980, and that defense counsel was out of the country on the date of trial. In support of this motion, the affidavit of the defendant, J.B. Barbee, was filed with the court which states that he was not the father of Cedric Jerome Coleman; that he had no notice of the January 23, 1980, trial and that his attorney was out of the country at the time the default judgment was taken. The plaintiff vehemently opposed the motion and in support of its opposition, filed the affidavit of Harold Horne, counsel for the plaintiff, with the trial court which explains how the case was set for trial, details the December 11, 1979, correspondence to Mr. Yaffe and the actions which were taken at the January 11 and January 23, 1980, hearings. At this time, the plaintiff did not claim that setting aside the default judgment would result in any prejudice to it.

On May 9, 1980, the trial court heard and granted the motion to set aside the default judgment. The order which sets aside the default judgment does not state the trial court’s rationale in so ruling. The plaintiff filed an “Application for an Extraordinary Appeal” in regard to the action taken by the trial court which was denied by the Court of Appeals on June 24, 1980. This Court denied the plaintiff’s “Application for an Extraordinary Appeal” on November 7, 1980.

On September 24, 1981, a jury trial was held which resulted in a verdict for the defendant. After the trial court overruled its motion for a new trial, the plaintiff appealed, assigning various errors on the part of the trial court in regard to the September 24, 1981, trial. The plaintiff also appealed the trial court’s action in setting aside the January 23, 1980, default judgment.

The Court of Appeals pretermitted the issues which pertain to the September 24, 1981, trial, holding that the trial court erred in setting aside the default judgment:

“Since the defendant failed to show any facts and circumstances to justify the extraordinary relief of setting aside a final judgment, it follows that the judgment of the trial court should be reversed. The jury verdict is to be vacated and the default judgment in favor of the plaintiff is to be reinstated.”

In support of his application for permission to appeal to this Court, the defendant filed the affidavit of defense counsel which indicates that he was unaware that his case was set for trial when he left this country in December, 1979, that he was out of the country on January 23, 1980, and that the first time he learned of the default judgment was on May 2, 1980, when J.B. Bar-bee informed him that he had received a bill of costs in this litigation. This caused Yaffe to check his files which contained the previously mentioned correspondence from Horne and to contact the Clerk’s office which verified that a default judgment had been entered. Unfortunately, Mr. Yaffe’s affidavit has not been made a part of the record under Rule 24(e) of the Tennessee Rules of Appellate Procedure. Although defense counsel contends that he communicated the information contained in his affidavit to the trial court at the May 9, 1980, hearing on the motion to set aside the default judgment, his affidavit was not filed with and made a part of the record by the trial court.

Did the trial court abuse its discretion when it set aside' the January 23, 1980, default judgment?

Rule 55.02 of the Tennessee Rules of Civil Procedure provides that “[f]or good cause shown the court may set aside a judgment by default in accordance with Rule 60.02.” Rule 60.02 provides, in pertinent part, that:

“On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons: (1) mistake, inadvertence, surprise or excusable neglect; (2) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party; (3) a judgment is void; (4) the judgment has been set aside, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that a judgment should have prospective application; or (5) any other reason justifying a relief from the operation of the judgment. A motion shall be made within a reasonable time, and for reasons (1) and (2) not more than one year after the judgment, order or proceeding was entered or taken.”

Under Rule 60 “the burden is on the mov-ant to set forth, in a motion or petition and supporting affidavits, facts explaining why the movant was justified in failing to avoid the mistake, inadvertence, surprise or neglect.” Tennessee State Bank v. Lay, Tenn.App., 609 S.W.2d 525 (1980). The setting aside of a default judgment lies within the sound discretion of the trial court. Keck v. Nationwide Systems, Inc., Tenn.App., 499 S.W.2d 266 (1973).

Federal courts have made a sharp distinction, in the application of Rule 60, between final judgments and default judgments.

“The cases calling for great liberality in granting Rule 60(b) motions, for the most part, have involved default judgments. There is much more reason for liberality in reopening a judgment when the merits of the case never have been considered than there is when the judgment comes after a full trial on the merits. On the other hand, the leading cases speaking of a requirement of exceptional or extraordinary circumstances have been cases of motions under Rule 60(b)(6). That subdivision of the rule does require a very special showing by the moving party and it does not assist sound analysis to repeat those phrases in cases brought pursuant to the other portions of Rule 60(b), under which a less demanding standard applies.” Wright & Miller, FEDERAL PRACTICE & PROCEDURE, § 2857, p. 160.

In applying Rule 60(b), Federal Rules of Civil Procedure, to default judgments, the courts have given it a liberal construction. “Since the interests of justice are best served by a trial on the merits, only after a careful study of all relevant considerations should courts refuse to open default judgments.” Securities and Exchange Commission v. Seaboard Corp., 666 F.2d 414 (9th Cir.1982).

“In applying Rule 60(b)(1) in the context of default judgments, courts have gone beyond the bare wording of the rule and established certain criteria which should be considered in deciding whether the designated standards have been satisfied. These criteria ... include (1) whether the default was willful; (2) whether defendant has a meritorious defense; and (3) the level of prejudice that may occur to the non-defaulting party if relief is granted.” Davis v. Musler, 713 F.2d 907 at 915 (2nd Cir.1983).

See also, Thorpe v. Thorpe, 364 F.2d 692 (D.C.Cir.1966); Wilson v. Moore and Associates, Inc., 564 F.2d 366 (9th Cir.1977); United States v. $55,518.05 in U.S. Currency, 728 F.2d 192 (3d Cir.1984).

In reversing the trial court and reinstating the default judgment in this cause, the Court of Appeals relied upon Hopkins v. Hopkins, Tenn., 572 S.W.2d 639 (1978). The order that was the subject of controversy in the Hopkins case was not entered by default. In Hopkins, Mary Hopkins sued her husband for an absolute divorce. A default judgment was entered against the husband. A hearing was held on March 9, 1976, which resulted in a final decree being entered which granted the plaintiff an absolute divorce and which awarded $350.00 in attorney fees to the plaintiff. More than thirty days after the final decree was entered, the plaintiff filed a petition to amend that decree, alleging that at the hearing the court had awarded to her as alimony the defendant’s interest in real property in Memphis, Tennessee, and a 1972 Ford station wagon. The trial court which entered the final decree declined to grant the plaintiff relief under Rule 60. This Court determined that the trial court, which was in the best position to determine if the final decree reflected its findings at the March 9, 1976, hearing, did not abuse its discretion in denying relief to the plaintiff. The plaintiff failed to offer any proof which justified “invocation of the extraordinary relief of setting aside a final judgment.” 572 S.W.2d at 640.

As has been noted above, courts often apply a different standard when faced with a Rule 60 motion in regard to a default judgment. Unlike the Hopkins case in which relief from a final judgment after a hearing was deemed to be extraordinary under Rule 60, Rule 60 is construed with liberality to afford relief from a default judgment. Another crucial distinction is that the trial court in Hopkins declined to afford the plaintiff relief under Rule 60. In the case at bar, the trial court exercised its discretion by determining that the default judgment should be vacated and that a hearing on the merits should be held. Obviously, the trial court is in the best position to assess the various factors that should be considered in determining whether a default judgment should be vacated and its finding is entitled to great weight. Moreover, unlike the Hopkins case, the record in this cause reflects why the defendant failed to appear at the January 23, 1980, trial. This case was set for trial in open court before defense counsel entered an appearance for the defendant. No order setting the case for trial was entered. After an answer was filed, the clerk’s office failed to notify defense counsel that this case has been set for trial.

Our review of the record indicates that there was sufficient evidence before the trial court to support his decision to vacate the default judgment and to try this case on its merits. Accordingly, we find that the trial court did not abuse its discretion in vacating the default judgment and permitting this cause to be tried on its merits.

In Campbell v. Archer, Tenn., 555 S.W.2d 110 (1977), this Court, in dealing with a somewhat analogous fact situation, determined that a trial judge abused his discretion when he refused to set aside a judgment. While the Campbell case involved a motion for a new trial under Rule 59 of the Tennessee Rules of Civil Procedure, the analysis employed by the Court in that case is equally applicable to the facts involved in the case at bar. In Campbell, attorney Alfred Taylor was retained to represent the defendants and he filed an answer on their behalf. After the case had been continued on two occasions, in mid-February, 1975, the trial court reset the cases for trial on March 11, 1975. The clerk prepared a notice of the trial date and sent it to Taylor in mid-February, 1975. Although it was not denied that Taylor’s office received notice of the trial date, Taylor denied that he was personally aware of the trial date until he was informed that the trial had begun at mid-morning on March 11, 1975.

Four days prior to the March 11, 1975, trial date, Taylor and the defendants decided to go their separate ways. The defendants retained another attorney to represent them who promptly obtained the pertinent files from Taylor. The newly hired attorney was never advised by Taylor or anyone else that the case was set for trial on March 11, 1975.

On March 11, 1975, the defendants and their attorney failed to appear for trial. The court directed that Mr. Taylor be contacted. Mr. Taylor informed the court that he no longer represented the defendants and would not appear for trial on behalf of the defendants. The trial court determined that it should proceed with the trial. Taylor telephoned the defendants’ newly retained attorney and informed him of the ongoing trial. Shortly thereafter while the trial was in progress, the newly retained attorney and one of the defendants appeared in court. The court refused to grant the defense counsel permission to approach the bench during the proceedings. After the presentation of the plaintiff’s case, the court instructed the jury which returned judgments in the amounts of $6,000.00 in one case and $4,000.00 in the other case against the defendants. The defendants filed a motion for a new trial under Rule 59, asserting that they had a meritorious defense to the plaintiff’s claims, that they had no notice of the March 11, 1975, trial date and that their failure to appear was, at most, “excusable neglect.” The trial court refused to grant the defendant’s motion to award them a new trial.

We held that the trial court abused its discretion in denying the motion, holding that the defendants had shown “excusable neglect.” In so ruling, the court emphasized the facts that the defendants were not personally at fault and that no showing had been made that the plaintiffs would be prejudiced if the judgments were set aside and a new trial was awarded.

In the case at bar, despite the plaintiff’s protestations to the contrary, the plaintiff was not prejudiced by the trial court’s decision to vacate the default judgment and to try this case on its merits. The plaintiff claims that it was prejudiced because “it could no longer produce two witnesses and had lost letters from the defendant’s mother acknowledging the child was her grandson.” The first time that the plaintiff claimed that the trial court’s action in setting aside the default resulted in such prejudice was at the September 24, 1981, trial. When the defendant’s motion to set aside the judgment was heard on May 9, 1980, the plaintiff did not claim that it would suffer any prejudice if the default judgment was vacated. At that hearing plaintiff contended that the trial court had no jurisdiction to hear the motion and that the defendant had failed to show good cause to set aside the default judgment. After the trial court set aside the default judgment, the plaintiff, not the defendant, delayed progress in the litigation for over six months by attempting to appeal a non-final order to the Court of Appeals and this Court. There has been no showing that the plaintiff suffered any prejudice when the trial court set aside the default on May 9, 1980.

The record demonstrates that the defendant had a meritorious defense to the plaintiff’s claims. An answer had been filed in this litigation which specifically denied that J.B. Barbee was the. father of Cedric Jerome Coleman. Further, J.B. Bar-bee’s affidavit was filed with the Court in conjunction with the motion to set aside the default judgment which denied that he was the father of this child.

Moreover, there is no proof in the record that the defendant’s default was culpable or willful. Indeed, the record shows that this case was set for trial in open court before defense counsel entered an appearance, that no order was entered specifying the trial date, that after an answer was filed the clerk never notified defense counsel of the trial date and that the defendant was unaware of the January 23, 1980, trial date. As in the Campbell case, supra, the defendant, J.B. Barbee, was personally free of fault. If there is any fault in regard to the failure to appear for the January 23,1980, trial, that fault lies in the manner in which the case was set for trial, the clerk’s failure to notify defense counsel that the case was set and in defense counsel’s office which failed to notice that the trial was set when plaintiff’s counsel informed it of this fact in a letter dated December 11, 1979. Such lapses have been held to be excusable neglect by Tennessee courts. See, Campbell v. Archer, supra; Jerkins v. McKinney, Tenn., 533 S.W.2d 275 (1976); Tate v. County of Monroe, Tenn.App., 578 S.W.2d 642 (1979).

The judgment of the Court of Appeals is reversed and the trial court’s decision to vacate the default judgment and to try this case on its merits is affirmed. This cause is remanded to the Court of Appeals so that it can consider the pretermitted grounds which the plaintiff has asserted in this appeal regarding the September 24, 1981, jury trial. Costs are taxed against plaintiff-appellee and surety.

COOPER, C.J., and FONES, HARBISON and DROWOTA, JJ., concur.


source: Caselaw Access Project

author: PER CURIAM.

license: Public Domain

text:
    In re Petition of Arnold GOLDIN and Lee J. Bloomfield for an Advertising Rule Change.
    Supreme Court of Tennessee, at Nashville.
    May 22, 1985.
    Michael Richards, Heiskell, Donelson, Bearman, Adams, Williams & Kirsch, Memphis, for Goldin and Bloomfield.
    W.J. Michael Cody, Atty. Gen. & Reporter, John Knox Walkup, Chief Deputy Atty. Gen., Charles L. Lewis, Deputy Atty. Gen., C. Blair Scoville, Asst. Atty. Gen., Nashville, for the Atty. Gen.
    Lance B. Bracy, Chief Disciplinary Counsel, Nashville, for The Bd. of Professional Responsibility.
   OPINION

PER CURIAM.

A respectful and dignified petition supported by a scholarly brief has been filed with the Court on behalf of Arnold Goldin and Lee J. Bloomfield, attorneys engaged in the practice of law in Memphis, seeking deletion of the disclaimer required by Supreme Court Rule 8, DR 2-101(C).

Petitioners assert that the disclaimer, “is itself untrue, deceptive and potentially misleading to consumers of legal services.” Thus, they conclude that it is an overly broad restriction and therefore unconstitutional.

The State Attorney General and the Board of Professional Responsibility have filed excellent briefs insisting that the present disclaimer is constitutional and urging the Court to retain a disclaimer, either in its present or a modified form, as necessary to prevent misleading consumers of legal services in this State.

The parties have been heard in oral argument and we have carefully considered all of the legal and practical ramifications of the issue.

It is our conclusion that while the present disclaimer is constitutional, we think that a modified disclaimer will better serve the bar and the public.

This Court is convinced that many consumers and potential consumers of legal services in Tennessee believe that the mere listing, in advertisements, of specific areas of legal practice implies specialization, certification or expertise beyond that of the average lawyer. Thus, we are of the opinion that this State’s substantial interest in preventing advertising that will mislead the public requires that we retain a disclaimer.

In addition to modifying the form of the disclaimer, we have decided that the audible disclaimer in television commercials should be eliminated, but the visible disclaimer will be retained.

The result is that we modify Supreme Court Rule 8, DR 2-101(C) by striking the present rule and substituting in its place, the following:

(C) If a lawyer publishes or broadcasts a communication that contains any listing of legal services for specific areas of practice, the communication must include the following precise wording:
TENNESSEE DOES NOT CERTIFY SPECIALISTS IN THE LAW, AND WE DO NOT CLAIM CERTIFICATION IN ANY LISTED AREA.
(1) When the above disclaimer is required, it must be included in the communication in a prominent manner.
(2) Television commercials must include the disclaimer in the visible broadcast. In the visible broadcast of the disclaimer, the size of print, in contrast with other images on the screen at the same time, and the duration of the broadcast must be adequate to ensure that television viewers with average vision and education can read the disclaimer when viewing the broadcast on standard television receiving equipment.

Costs are assessed one-half against petitioners and one-half against the Board of Professional Responsibility.


text:
    In re ESTATE OF Susie Porter COOPER, Deceased. William H. FISHER, III, Administrator C.T.A. of the Estate of Susie Porter Cooper, Deceased, Complainant-Appellee, v. Mignon Dunn KLIPPSTATTER, Mary Grey Carlson, Sr., and Christina D. Benson, Defendants-Appellants.
    Court of Appeals of Tennessee, Western Section at Jackson.
    Jan. 29, 1985.
    Application for Permission to Appeal Denied by Supreme Court April 29, 1985.

      James E. Conley, Jr., Memphis, for defendants-appellants.
    Allan J. Wade, Memphis, for complainant-appellee.
   NEARN, Presiding Judge, Western Section.

This is an appeal from a judgment ordering appellant-beneficiaries under a will to reimburse other beneficiaries for the appellants’ pro rata share of estate tax and to pay 10% per annum prejudgment interest on the judgment pursuant to T.C.A. § 47-14-123 on the theory of unjust enrichment. Appellants do not appeal the amount of the judgment pertaining to their share of the estate tax, but raise as error the award of pre-judgment interest.

The facts, briefly, ?4re as follows. In 1979, Susie Porter Cooper died leaving certain realty and personalty to the appellants in her will. She also bequeathed personal property to others and left a residuary estate to her only surviving heirs, of whom the only one was a brother, Arthur R. Porter. Her administrator paid a total of $58,470.00 in Tennessee Inheritance Tax and $210,351.16 in United States Estate Tax. These amounts were paid out of the residuary estate and from the proceeds of the sale of certain specifically bequeathed stocks. The appellants failed to contribute to the payment of these taxes, even after demand. In 1981 after the death of the residuary legatee, Arthur R. Porter, his administrator filed a petition to establish apportionment of these estate and inheritance taxes and to require contribution by appellants. At the conclusion of the hearing on the petition, the Judge referred certain issues to a special master. Among those was a determination of whether interest should be charged appellants on their share of the taxes and, if so, a calculation of the amount. In his report, the special master ruled that the appellants should be required to pay their share of the taxes plus 10% annual interest. The appellants filed objections to the special master’s report, specifically to the interest award. However, the Trial Judge overruled their objections and confirmed the special master’s report.

Appellants contend that the award of prejudgment interest was error because T.C.A. § 47-14-123 is inapplicable to the case. That section provides in part that “Pre-judgment interest, ... as permitted by the statutory and common laws of the state as of April 1, 1979 may be awarded by courts or juries in accordance with the principles of equity at any rate not in excess of a maximum effective rate of ten percent (10%) per annum....” (Emphasis ours) Appellants contend that neither the statutory nor common laws of Tennessee as of April 1, 1979 provided for the award of prejudgment interest in cases of reimbursement of beneficiaries and that, therefore, the prejudgment interest statute does not apply to the instant case. Long prior to April 1, 1979 it has been the law of this state that prejudgment interest is allowable when based upon equitable principles. Chancellor Gibson observed that “where the debt is for property sold or services rendered or money loaned to the defendant, or a just debt paid for him, and the transaction reasonable, and there are no equities or meritorious defenses, interest is ordinarily allowable.” (Emphasis ours) Gibson’s Suits in Chancery § 226 (Inman 6th ed. 1982). In any event, 1929 is fifty years prior to 1979 and those principles continued and obtained April 1, 1979, just as well as today. For an example of the application of this Court created law prior to 1979, see Johnston v. Cincinnati, N.O. & T.P. Railway Co., (1922) 146 Tenn. 135, 240 S.W. 429. For a later application of that law, see Schoen v. J.C. Bradford & Co., (1984 Tenn.App.M.S.) 667 S.W.2d 97, 101-02, and Midland Insurance Co. v. Home Indemnity Co., (1981 Tenn.App.W.S. at Nashville) 619 S.W.2d 387.

The award of prejudgment interest is within the discretion of the Trial Court, B.F. Myers & Son of Goodlettsville v. Evans, (1980 Tenn.App.M.S.) 612 S.W. 912, 916, and “that discretion will not be disturbed by the appellate courts unless the record discloses a manifest and palpable abuse of discretion.” Schoen v. J.C. Bradford & Co., (1984 Tenn.M.S.) 667 S.W.2d 97, 101 (quoting Engert v. Peerless Insurance Co., (1964 E.S.) 53 Tenn.App. 310, 330, 382 S.W.2d 541, 550). In their brief, the appellants do not attack the Trial Court’s exercise of discretion and, from the record, we find that the Trial Judge did not abuse his discretion in ordering the appellants to pay prejudgment interest. The appellants clearly owed their proportional share of the estate tax and failed to pay it even after demand was made on them for payment. The Porter Estate was deprived of the use of the money which it expended to pay defendants’ debts and the defendants enjoyed the income and benefits from property bequeathed to them for over five years without first having paid the debt which could have been enforced by tax lien had it not been paid for them by others. Therefore, defendants clearly were unjustly enriched and the plaintiff is entitled to interest representing such enrichment.

The judgment is affirmed. Costs are assessed against the appellants.

Done at Jackson in the two hundred and ninth year of our Independence and in the one hundred and eighty-ninth year of our Statehood.

TOMLIN and HIGHERS, JJ., concur.

      . To this writer’s certain knowledge that quotation is found in all editions commencing at least with the 1929 3rd Edition of Gibson's Suits in Chancery through Inman’s 6th Edition. Not having in my possession the 1907 or 1916 editions, I cannot speak with absolute certainty as to them.


author: KILGARLIN, Justice. RAY, Justice, KILGARLIN, Justice.

text:
    LOWER COLORADO RIVER AUTHORITY et al., Petitioners, v. TEXAS DEPARTMENT OF WATER RESOURCES et al., Respondents.
    No. C-1620.
    Supreme Court of Texas.
    Nov. 14, 1984.
    Opinion on Motion for Rehearing May 22, 1985.

      L.C. Meyer, Small, Craig & Werkenthin, Fred B. Werkenthin, Lawrence S. Smith and David L. Guerra, George & George, Thomas W. George, Vinson & Elkins, Roger P. Nevóla, Austin, for petitioners.
    Jim Mattox, Atty. Gen., Timothy L. Brown and R. Lambeth Townsend, Asst. Attys. Gen., Frank R. Booth and Skip New-som, Austin, for respondents.
   KILGARLIN, Justice.

This appeal of an administrative order affecting water rights poses the question of what constitutes unappropriated water. The Texas Department of Water Resources, through its judicial division, the Texas Water Commission, issued a permit to the Colorado River Municipal Water District allowing it to impound water from the Colorado River to form a lake and to use annually 113,000 acre-feet of water from the river. The Lower Colorado River Authority, Garwood Irrigation Company and Lakeside Irrigation Company contested the proceeding and appealed to the District Court of Travis County. The trial court upheld the order.

Contestants appealed further to the Third Court of Appeals, which affirmed the judgment, one justice dissenting. 638 S.W.2d 557. The court of appeals held that the Department could find “unappropriated water” even though the existing appropriation permits showed insufficient water to supply the application. The court reasoned that historically usage statistics showed that the recorded appropriations were not being fully used and were unlikely to be fully used.

We reverse the judgments of the courts below because those courts have misconstrued and misapplied Tex. Water Code Ann. § 11.134. We hold that the term “unappropriated water” means the amount of water remaining after taking into account all existing uncancelled permits and filings valued at their recorded levels.

The Water District applied for a permit to impound over 500,000 acre-feet of water from the Colorado River at the Stacy Dam site southeast of Ballinger, Texas. The Stacy Dam and Reservoir have been proposed for that site at various times over the last twenty-five years. The Texas Water Commission therefore had before it a wealth of hydrologic information from past studies. In addition, the Department staff had prepared special studies for this particular application.

Colorado River water belongs to the State. Tex. Water Code Ann. § 11.021(a); In re Adjudication of the Water Rights of the Upper Guadalupe River Basin, 642 S.W.2d 438, 444 (Tex.1982); Motl v. Boyd, 116 Tex. 82, 111, 286 S.W. 458, 468 (1926). The right to impound water had to be obtained by the Water District, through a Department permit. Tex. Water Code Ann. § 11.121. To acquire a permit, the Water District had to satisfy the statutory grounds of Tex. Water Code Ann. § 11.-134(b)(2) & (3):

Action on Application
* * * * * *
(b) The commission shall grant the application only if:
* # # * * *
(2) unappropriated water is available in the source of supply; and
(3) the proposed appropriation:
* # * * * *
(B) does not impair existing water rights or vested riparian rights; and
(C) is not detrimental to the public welfare.

The Colorado River waters are presently charged with four types of outstanding water rights. There are vested riparian rights, certified filings, permits to appropriate water, and certificates of adjudication. The Colorado is an inconstant stream. There is insufficient water to satisfy the existing rights during drought, but the water supply is capable of supplying additional users during times of abundant rain.

The Department developed a sophisticated computerized model of the seasonally varying inflow to the Colorado at various points along the river. One goal of the computer model was to allow the staff to obtain a reasonably accurate scientific estimate whether there was “unappropriated water” at points along the river, at least during some seasons or months.

The computer model assumed that all existing recorded water rights in the Colorado River basin would be exercised in the maximum amounts authorized, or to the extent of water available from the inflows. The staff study concluded that “very little water would be available for appropriation at the proposed reservoir site_ The estimated firm yield of the reservoir for these quantities of appropriable water is 3,120 acre-feet per year_” The study also concluded that the proposed reservoir would adversely affect two existing downstream lakes — Lake Travis and Lake Buchanan — by reducing the firm yield of each by approximately fifteen percent.

The Water District rebutted the staff conclusion by expert studies and testimony. The studies used the hydrologic data from the staff report but discounted the recorded filings in a number of ways. As to certified filings, the experts presented historical use data to demonstrate that the maximum amount claimed under the filings had never in fact been used, and that some claims necessarily had not been “perfected.” As to riparian rights, many of the riparian claims were invalid because they were based on Spanish and Mexican land grants that did not include riparian rights. Finally, experts testified that demographic projections and historical use data indicated that the full amounts authorized under un-cancelled permits would not be used. By subtracting the estimated amounts that would not be used from the recorded filings, the Water District’s expert witnesses concluded there was sufficient water available for the proposed Stacy Reservoir. Similarly, they concluded that downstream rights would not be impaired if occasional flow-throughs were allowed.

The Commission made finding 15 that there was “unappropriated water” within the meaning of section 11.134(b)(2).

After recognizing downstream existing appropriations and claims below Stacy Dam, the Commission finds that there are unappropriated flows in the Colorado River at the dam site sufficient to permit the impoundment of 554,340 acre-feet of water at elevations 1151.5 feet above mean sea level and the diversion and consumptive use of not to exceed 113,000 acre-feet of water per annum without impairing existing water rights, provided releases of water from the reservoir are made from time to time in such quantities as may be necessary to provide water to which all superior and senior water rights are entitled.

The undisputed evidence in this record is that existing uncancelled permits and filings, valued at their recorded levels, leave an insufficient supply of “unappropriated water for Stacy Dam.” Sections 11.-134(b)(2) & (3) are unambiguous in their statements that the Commission shall grant applications for new water rights only if there is available unappropriated water and the new appropriation does not impair existing water rights or vested riparian rights. Additionally, granting additional permits cannot be detrimental to public welfare. Basically, our decision is that the article prohibits “double permitting” or the stacking of appropriated waters on appropriated waters.

The Water District relies upon its construction of two water code provisions for its contention that unbeneficially used water may be counted as unappropriated waters. They are sections 11.025 and 11.-146(e), (f):

§ 11.025 Scope of Appropriative Right
A right to use state water under a permit or a certified filing is limited not only to the amount specifically appropriated but also to the amount which is being or can be beneficially used for the purposes specified in the appropriation, and all water not so used is considered not appropriated.
§ 11.146 Forfeitures and Cancellation of Permit for Inaction
(e) If a permit has been issued for the use of water, the water is not subject to a new appropriation until the permit has been cancelled in whole or part as provided by this section.
(f) Except as provided by Subchapter E of this chapter, none of the provisions of this code may be construed as intended to impair, cause, or authorize or may impair, cause, or authorize the forfeiture of any rights acquired by any declaration of appropriation or by any permit if the appropriator has begun or begins the work and development contemplated by his declaration of appropriation or permit within the time provided by the law under which the declaration of appropriation was made or the permit was granted and has prosecuted or continues to prosecute it with all reasonable diligence toward completion.

Based on this statutory language, the Water District concludes that water which cannot be beneficially used “is considered not appropriated” under section 11.025, and therefore must be “unappropriated water” within the meaning of section 11.134(b)(2). It distinguishes the prohibition against “double permitting” in section 11.146(e) as applying only to specific construction projects.

The Lower Colorado River Authority contends, on the other hand, that section 11.-146(e) prohibits granting of a new appropriation for unused water until water rights from the existing permit are cancelled in whole or in part. Yet, in the case at bar, there has been no claim that existing water rights have been cancelled.

We hold that second grants that overlay uncancelled water permits are not authorized, and except as provided by Sub-chapter E of the Water Code, existing rights may not be impaired or forfeited until cancelled in whole or in part. We arrive at this conclusion based on the water code’s legislative history, the court decisions construing these provisions, views of commentators about the law of appropriations and cancellations, and the administrative history of the water code or its predecessor statutes.

Legislative History

The court of appeals construed the term “unappropriated water” contrary to the legislative history of these statutes. The term, as used in section 11.134(b)(2), is not expressly defined in the water code. Prior to 1913, Texas had no system of permits allowing the appropriation of state water. Rather, Texas used the “filing” system in which a person claiming a right to use the water recorded his claim in the county in which he made it. The filing method provided no guarantee that the water claimed was actually available and left to the court system the resolution of competing priority claims. This was based on the established “first in time, first in right” rule. The system actually magnified Texas’ water law problems. In re Adjudication of the Water Rights of the Upper Guadalupe River Basin, 642 S.W.2d 438, 440 (Tex.1982).

The filing method caused insecurity for investors. Those who sought to build a dam had no reasonable way of knowing whether there would be water available when they completed their project, particularly if they contemplated a downstream construction. The instability and uncertainty discouraged development necessary to allow proper water use. The Irrigation Act of 1913 sought to correct such problems.

Section 11.134(b)(2) finds its source in section 19 of the 1913 Act and its reenactment in section 24 of the 1917 Act. Representative D.W. Glasscock, a principal author of the 1913 Act, stated that the purpose of the 1913 Act was to prevent overappropriation of rivers and thus to insure the stability necessary to attract development capital. An initial purpose of the permit system has been to insure as much as possible that the water granted in a permit would be available when the project was completed. Section 11.146(e), by providing that water granted under any permit is not again subject to a new permit to appropriate until the permit has been cancelled in whole or in part, is consistent with the overall legislative purpose.

The court of appeals limited the application of section 11.146(e) by concluding that it applies only when cancellation is sought on the narrow ground that a permit holder had failed timely to commence and pursue construction of specific works necessary to divert the water. Based on our review of the legislative history of section 11.146(e), we do not agree that this limitation, if it exists, is significant. We furthermore hold the legislature meant the prohibition of “double permitting” water in subsection (e) to be applied to define the term “unappropriated water.”

It is true that subsection (e) is located in a section of the code in which the first three subsections deal exclusively with cancellation for failure to commence and pursue construction of specific works. But subsections (c), (d) and (f) contain references to cancellation under other provisions of the code. The Water Code was the second codification by the Texas Legislative Council pursuant to a directive from the legislature “for formal revisions on a topical or code basis ... [of] the statutory law of Texas.” In 1963, the legislature directed that “[i]n carrying out the revision program, the sense, meaning or effect of any legislative act shall not be altered.” Tex. Rev.Civ.Stat.Ann. art. 5429b-1, § 1. The Foreword to the then proposed water code was written by the Executive Director of the Texas Legislative Council. The Foreword describes the codification as “a non-substantive revision of the general and permanent water law.” I Vernon’s Texas Water Code Annotated v (1972) (emphasis added). There is no indication that a change in meaning for subsection e was intended by its current placement in the Water Code. Thus, we look to the prior enactments and codifications for guidance.

The provisions appeared in the 1925 Revised Civil Statutes as part of article 7474 with the clear indication that water under permit was not subject to a new permit to appropriate. The 1917 Act prohibited granting water to a new applicant if the water was covered by an existing permit, whether the permit was granted under the 1913 Act or the 1917 Act. At the time the provision was enacted, the only purpose for obtaining a permit was to begin such a water-use project. Whether the work “contemplated” by the permit was digging a diversion ditch or erecting a dam, water granted under the permit was not subject to a new appropriation. The reference in the final clause, that water under a permit from the 1917 Act or from the prior 1913 Act “shall not be subject to new appropriation until the permit is cancelled by the Board [of Water Engineers] in whole, or in part, ...” represented the greatest possible restraint upon the grant of permits for water already subject to a permit to appropriate.

The Water District may take little comfort that this predecessor to section 11.-146(e) was included in a provision relating it to a “work” project. The Water District’s position, accepted by the court of appeals, is that the last clause of section 11.025 of the present code controls over section 11.146(e). The predecessor to section 11.025, as codified in the 1925 Revised Civil Statutes and as it appeared in the 1917 Act, was also limited to “works.” It provided that the use of water was limited to what would “be necessarily required when beneficially used ... irrespective of the capacity of the ditch or other works, and all the water not so applied shall not be considered as appropriated.” Irrigation Act of 1917, ch. 88, § 45, 1917 Tex.Gen. Laws 211, 222 (emphasis added).

The legislature, in amending the statutory water laws, has explicitly shown its purpose to interdict “double permitting” of water, expressed in what are now subsections 11.146(e) and (f), applies broadly. That purpose was to prohibit a permit for water already covered under an existing permit or certified filing. The original 1913 Act and the 1917 Act provided only for cancellation of a permit for failure to begin the work on a project or for failure to develop the project diligently. There was no provision for cancellation of permits for nonuse, if they had originally been developed (other than cancellation for wilful abandonment, which required proof of actual intent to abandon). In 1953, the legislature amended the existing water laws to allow cancellation of any permit for which no part of the water authorized to be withdrawn and appropriated had been put to use for a period of ten consecutive years next preceding the effective date of the act. Act of 1953, ch. 352, § 1, 1953 Tex.Gen. Laws 867. The act’s emergency clause stated that the cancellation provisions were necessary to make available for new appropriation, waters which were already allocated in outstanding permits but which were not being put to beneficial use by existing permit holders. Act of 1953, ch. 352, § 5, 1953 Tex.Gen. Laws 867, 868. The act also directed the existing water agency, then the Board of Water Engineers, to examine its records to determine what permit holders had never reported actual use of any part of their permitted amount during the relevant period, and to give notice that under the act their rights were cancelled.

The court of appeals rationalized that the statement in Motl v. Boyd, 116 Tex. 82, 286 S.W. 458 (1926), that the Board of Water Engineers would merely consult their records to determine the amount of existing appropriations, was not contrary to its holding in this case. “Records,” to the court of appeals, included the required annual reports which showed how much water the permittee actually used. The court of appeals reasoned that in consulting its records, to determine whether there existed “unappropriated water,” the Board would consider how much of the recorded appropriation was going unused. That rationalization is directly contrary to the legislature’s purpose. According to the 1953 Act, even if the records under the existing permit indicated the appropriator had not used any water at all for the last 10 years, it was still necessary to cancel the unused permit before the water covered by it would again be subject to a new appropriation.

Legislative awareness that “unappropriated water” for purposes of section 11.-134(b)(2) means water not covered by the face amount granted under existing outstanding permits and certified filings, has been demonstrated two additional times. In 1957 the legislature added provisions for the cancellation of a permit for which no part of the amount of water authorized had been put to beneficial use for ten years. It also provided for partial cancellation of any portion of water granted under a permit when the portion had not been used at any time during a ten-year period and for which the permittee’s nonuse was not justified. Act of 1957, ch. 39, §§ 1, 2, 1953 Tex.Gen. Laws 82, 83-84. That act’s emergency clause also stated it was necessary because “a public need exist[ed] to make such water available for appropriation and beneficial use_” Act of 1957, ch. 39, § 3, 1957 Tex.Gen. Laws 82, 85.

The legislature added the Water Rights Adjudication Act of 1967 to provide for Department of Water Resources rec-ordation of then unrecorded water rights claims, to limit the exercise of such claims to actual use, and to provide for adjudicating these rights. Tex. Water Code Ann. §§ 11.301, 11.302. The act required mandatory judicial review, after which the amounts were added to the Commission’s recorded filings as “certificates of adjudication.” Tex. Water Code Ann. § 11.303; In re Adjudication of the Water Rights of the Upper Guadalupe River Basin, 642 S.W.2d 438 (Tex.1982). The original 1967 act provided for recording these “certificates of adjudication,” but failed to provide for cancellation if they fell into nonuse, as analogous provisions for permits or certified filings allowed for nonuse cancellation.

In 1975, the legislature corrected the omission by adding provisions that a certificate of adjudication could be cancelled in whole or in part for nonuse. Act of 1975, ch. 27, § 1, 1975 Tex.Gen. Laws 49. The emergency clause of that act again stated the provision was necessary because a public need existed to make the water available for appropriation and beneficial use. Act of 1975, ch. 27, § 3, 1975 Tex.Gen. Laws 49, 51.

In both the 1975 and 1957 acts, the legislature provided that the Water Commission, or its predecessor agency, should examine its records on actual use under existing permits or filings and initiate proceedings to cancel those permits or certificates of adjudication that had gone unused for ten years. If nonuse alone, without formal cancellation, made the water again available for a permit to appropriate, the directive would have been unnecessary. Construing nonuse alone to free the water for a new appropriation also contradicts the emergency clauses of both acts.

Prior Court Decisions

The construction of “unappropriated water” approved by the court of appeals is also contrary to prior writings by this court. In Motl v. Boyd, 116 Tex. 82, 286 S.W. 458, 475 (1926), the court stated in reference to the construction of the predecessor to section 11.134(b)(2):

It is the duty of the board [of Water Engineers] to reject applications where there is no unappropriated water in the source of supply. The facts as to that question can be determined by the board by the mere matter of adding up the amount of water previously appropriated and shown on their records, and subtracting it from the amount of state water they had previously determined the stream furnished.

Similarly, in upholding the constitutionality of the 1957 cancellation provisions, this court wrote:

Once water is appropriated, its availability to another user is reduced or defeated, and if the permittee does not use a substantial portion of it the water will run unused into the sea.

Texas Water Rights Commission v. Wright, 464 S.W.2d 642, 647 (Tex.1971). We consider it implicit in these opinions that appropriated water is not subject to a new permit until the existing permit has been cancelled, forfeited or otherwise invalidated.

Administrative History and Commentators’ Views

The construction given “unappropriated water” by the Commission in this case and by the court of appeals is also contrary to evidence of agency practice in applying the state’s water laws. A.P. Rollins, a member of the Board of Water Engineers, stated it was the Board’s practice to value existing recorded permits at full face value to determine whether “unappropriated water” existed in order to grant a new application. Rollins, The Need for a Water Inventory in Texas, Proceedings of the 1952 & 1954 Water Law Conferences, University of Texas School of Law 67, 68 (1954); Rollins, Policies of the Board of Water Engineers in Passing Upon Applications for Appropriative Rights, Proceedings of the 1952 & 1954 Water Law Conferences, University of Texas School of Law 221, 222-3 (1954). The very first report of the Board of Water Engineers reflected the Board’s understanding that under the 1913 Act water granted under a permit was not subject to a new appropriation until the existing permit had been cancelled in whole or in part. The report states:

Under the present status, a permit issued by the Board is essentially the concession of a perpetual monopoly. If the population should remain stationary, or human ingenuity should never be able to discover enlarged or more economic uses for water, there would be nothing objectionable in it. But since we do not know that what appears to be economic today will not be viciously wasteful tomorrow under these existing conditions, we believe it should be the policy of the State to grant these concessions for fixed periods only, renewable at the end of the stated periods under such reasonable regulations as experience and the common weal may suggest and demand, and as will not result in the confiscation of created wealth.

Booth, Applications for Permits to Appropriate Water, Proceedings of the Water Law Conference, University of Texas School of Law 96, 106 (1959), citing First Report of the Board of Water Engineers 39 (1914). The Commission that issued the present order itself indicated its approval of the use of the full recorded amounts in its new computerized model. Thirty-third Report of the Texas Water Rights Commission 14-15 (1977).

Commentators also state that the construction of “unappropriated water” should be that water granted under an uncancelled permit was not subject to a new permit. Bouldin, The Law of Surface Water Rights in Texas, Proceedings of the 1952 & 1954 Water Law Conferences, University of Texas School of Law 97, 102 (1954). Perhaps nowhere is there a clearer statement of what “unappropriated water” is, than in a panel discussion that ultimately led to the 1957 amendment allowing the partial cancellation of permits and certified filings for nonuse:

Since it is apparent on the face of many of those [old certified filings] that it was beyond fulfillment or hope of fulfillment as far as total use was concerned, it would seem reasonable and desirable that some limitation be fixed or a procedure established by which the unused portion can be returned to the public domain for appropriation to others who will put it to beneficial use.

Remarks of R. Richard Roberts, in Panel Discussion on Legislative Problems in the Field of Riparian and Appropriative Rights, Proceedings of the 1952 & 1954 Water Law Conferences, University of Texas School of Law 239, 240 (1954).

The language of section 11.025 suggests that its definition of “not appropriated water” does not apply to section 11.134(b)(2). Section 11.025 refers to the amount granted under a permit or certified filing as “the amount specifically appropriated” (emphasis added). It states that the amount of an appropriation that cannot be used beneficially “is considered not appropriated,” not that it is “again subject to appropriation.” In intending to make the water available to applicants for a new permit, the legislature, in section 11.030, expressly stated the water is “again subject to appropriation.”

The majority of the court of appeals reasoned, through a series of rhetorical questions, that the term, “unappropriated water,” included unused waters that were subject to existing permits. The court reasoned that any other construction would mean the Commission and its predecessor agencies had shirked their statutory duty by allowing Texas rivers to become overap-propriated. There can be no doubt that the prevention of overappropriation was a principal goal of the legislative scheme. Nineteenth Biennial Report of the Board of Water Engineers 8 (1948-50); Cox, The Texas Board of Water Engineers, 7 Texas L.Rev. 86, 96 (1928). The fact that some rivers are overappropriated does not mean the state’s water agencies have failed in their duty. Because of changing circumstances, the vagaries of nature or the possibility of erroneous assumptions about the inflow amounts to the rivers, overappropri-ation may exist. These circumstances may make any river overappropriated, particularly during a drought period, and thus there can be no substitute for enforcement. The Texas statutes protect senior water rights from actual impairment. No matter how many permits the Commission issues, the action is purely administrative, and it cannot divest or impair prior rights.

Conclusion

Under the law, the Department may not grant permits when its own records show that the supply must come from an existing downstream permittee’s water that the Department speculates he will not actually need. Section 11.025 places a limit on the amount of water that can be used benefically or the amount the senior holders can claim, even though the face amount of their permits may be more. Among other things, that limitation serves to distribute the water appropriately when there is a drought. It does not mean the Department may intentionally overappropriate. A contrary decision would return water rights to the state of chaos that the act is designed to avoid. For example, upstréam junior permit holders whose grants depended upon an overappropriation of the stream would suffer the most from deprivation of water in times of drought. The water source they had come to rely upon would be denied them.

The legislature also recognized the important principle of beneficial use. No person is granted the right to waste water by not using it. In re Adjudication of the Water Rights of the Upper Guadalupe River Basin, 642 S.W.2d 438 (Tex.1982); Texas Water Rights Commission v. Wright, 464 S.W.2d 642 (Tex.1971). It is for that reason that unbeneficial use can be corrected by cancellation. To order partial cancellation of a permit for nonuse, the Commission must find, among other facts, that the permittee was not justified in his nonuse or does not have a bona fide intention of putting the unused water to an authorized beneficial use within a reasonable time. Tex. Water Code Ann. § 11.-182(a)(3). The legislature directed the Commission to consider the financial investment made and the amount of time usually necessary for development in making its determination. Tex. Water Code Ann. § 11.182(b)(1), (4).

The Water District and the Department have a remedy expressly granted by the legislature. If there exist recorded permits, filings and certificates of adjudication that will not reasonably be used in the future, the Department or another interested party must seek total or partial cancellation of those rights. Only after sufficient cancellations have freed that water from its commitment, may the Department again grant a permit to appropriate it.

We reverse the judgments of the courts below and set aside the permit granted by the Texas Department of Water Resources to the Colorado River Municipal Water District.

RAY, J., files a concurring opinion.

RAY, Justice,

concurring.

I agree with the court’s conclusion that “unappropriated water” must not include water already granted under an existing, uncancelled permit. I do not agree with the court’s disposition of setting aside the Commission’s order. I would remand the case to the Commission for further proceedings in accordance with the opinion.

Under section 19(e)(4) of the Administrative Procedure and Texas Register Act, Tex.Rev.Civ.Stat.Ann. art. 6252-13a, § 19-(e)(4)(Supp.1984), the court has authority to remand the case to the administrative agency if the findings of the agency are affected by an error of law. Railroad Commission of Texas v. Home Transportation Co. Inc., 654 S.W.2d 432, 434 (Tex.1983). The Commission’s error was applying the wrong definition of “unappropriated water.” This court had not previously expressly addressed the question. Had the water district presented its application under the proper standard, it could have simultaneously sought partial or total cancellations of unused water rights under existing certified filings and permits. Although the district can now file a new application using the proper definition, that action would not be a complete remedy. Both the priority of an appropriation and the claimant’s right to use the water date from the filing of the application with the Department. Tex. Water Code Ann. § 11.-141 (Supp.1984). Since the misconception of the law caused the Commission to commit error, I believe it is appropriate to preserve the district's priority by remanding to the Commission for proper proceedings under the correct legal standard. Cf. Lewis v. Metropolitan Savings and Loan Ass’n, 550 S.W.2d 11, 16 (Tex.1977); Lewis v. Gonzales County Savings and Loan Ass’n, 474 S.W.2d 453, 458-59 (Tex.1971).

OPINION ON MOTION FOR REHEARING

KILGARLIN, Justice.

The motion for rehearing of Lake Travis Improvement Association is granted in part. Our opinion of January 9, 1985 is withdrawn and this opinion is substituted therefor.

We grant in part the motion for rehearing filed by the Colorado River Municipal Water District and withdraw our previous judgment of November 14, 1984. The application for a water permit was filed by the district on February 21, 1978, at which time the priority date of the permit attached. From that time, Colorado River Municipal Water District proceeded through the administrative and judicial channels to obtain the permit. Because an examination of authorities on the issue demonstrates that a remand is more appropriate than a reversal and rendition, we reverse the judgments of the courts below and remand the cause to the Texas Department of Water Resources pursuant to our power under the Administrative Procedure and Texas Register Act, Tex.Rev.Civ.Stat. Ann. art. 6252-13a, § 19(e)(4) (Vernon Supp.1984). See also, e.g., Railroad Commission of Texas v. Home Transportation Co., 654 S.W.2d 432, 434 (Tex.1983); Lewis v. Metropolitan S & L Ass’n, 550 S.W.2d 11 (Tex.1977). The order dismissing the application of Lake Travis Improvement Association for want of jurisdiction is withdrawn and the application is granted and disposed of by the judgment in this cause. In all other respects, the motion by the district and the other motions for rehearing are overruled.

      . Authority for the Commission to act in the name of and for the Department is contained in Tex. Water Code Ann. § 5.016(b), and acts of the Commission are to be considered as acts of the Department.

      . The City of Austin, also a contestant in the Texas Water Commission hearing, likewise appealed the Commission decision to the district court, but after the adverse ruling there, did not seek further relief.

      . Lake Travis Improvement Association was also an appellant in the court of appeals and sought writ of error in this court, which we dismiss for want of jurisdiction because of the failure of its application to contain a statement of jurisdiction. Tex.R.Civ.P. 469(d).

      . Texas adopted the filing system of appropriative water rights in the Irrigation Act of 1889, 1889 Tex.Gen. Laws, ch. 88, at 100, 9 H. Gammel, Laws of Texas 1128 (1898), later amended in the Irrigation Act of 1895, 1895 Tex.Gen. Laws, ch. 21, at 21, 10 H. Gammel, Laws of Texas 751 (1898).

      . Irrigation Act of 1913, ch. 171, 1913 Tex.Gen. Laws 358.

      . Id. § 19 at 364.

      . Irrigation Act of 1917, ch. 88, § 24, 1917 Tex. Gen. Laws 211, 217.

      . Representative Glasscock’s recorded remarks include:
      Under our present statutes the appropriator who, in good faith, complies with all the requirements thereof does not know whether he has obtained anything thereby, nor can he offer any assurance of that fact to those from whom he would obtain capital to develop his enterprise. Who will advance funds for costly improvements, dependent for their value solely upon a water supply that may exist today and tomorrow be numbered among the things that were? How many individuals and communities in this state ... have sought to interest capital and been met upon the threshold by the legitimate and unanswerable objection: "You have no adequate protection under the law to assure the water supply upon which your proposition depends"? When the provisions of this bill are complied with and a permit obtained, a reasonable assurance of title and of legal protection of the rights involved can be shown.
      HJ. of TEX., 33rd Leg., Reg.Sess. 949, 954 (1913).

      . Tex.Rev.Civ.Stat.Ann. art. 7474 (repealed 1972), read as follows, in relevant part:
      [B]ut if any appropriator under this chapter, or other law of this state, has failed or fails to begin the work and development contemplated by his declaration of appropriation within the time provided in the law under which the same was or is made, or has failed or fails, to prosecute the same with all reasonable diligence toward completion, his right to so much water as has not been applied, or is not applied to beneficial use, as defined in this chapter, shall be considered as, and shall be, forfeited, and such water shall be subject to new appropriation under this chapter; provided, that no such rights shall be declared forfeited until the person or persons who are the owners of the land and whose rights are claimed to have been forfeited, shall first be given due notice and hearing, as required in Article 7519 of this chapter; and, provided further, that if a permit for the use of such water has been issued, or is issued, under this Act, or under the Act approved April the 9th, 1913, such water shall not be subject to new appropriation until the permit is cancelled by the Board in whole, or in part, in accordance with the provisions of Article 7519 of this chapter.

      . Irrigation Act of 1917, ch. 88, § 7, 1917 Tex. Gen. Laws 211, 212-13.

      . Tex. Water Code Ann. § 11.030; State Board of Water Engineers v. Slaughter, 382 S.W.2d 111 (Tex.Civ.App.—San Antonio 1964), writ ref'd n.r.e. per curiam, 407 S.W.2d 467 (Tex.1966); Lower Nueces River Water Supply District v. Cartwright, 274 S.W.2d 199 (Tex.Civ.App.—San Antonio 1954, writ ref'd n.r.e.).

      . Also, the original 1913 and 1917 acts had provided for the preliminary examination of applications and for the Board of Water Engineers summarily to reject an application and return the application fee if there were no unappropriated water in the proposed source of supply. Irrigation Act of 1917, ch. 88, § 22, 1917 Tex.Gen. Laws 211, 217; Irrigation Act of 1913, ch. 171, § 17, 1913 Tex.Gen. Laws 358, 363. If the amounts of recorded appropriations could be reduced by a subjective “likely nonuse” factor based on reported actual use, it seems unlikely the legislature would have provided for summary rejection on this ground.

      . The language "again subject to appropriation," or its equivalent, is not new to the 1972 codification. For example, the 1917 act provided that after notice and hearing the Board of Water Engineers might declare a permit for water forfeited for nondevelopment, "and such water shall be subject to new appropriation under this Act." Irrigation Act of 1917, ch. 88, § 7, 1917 Tex.Gen. Laws 211, 213. The 1913 Act provided that if a permit holder wilfully abandoned water use for three consecutive years, his rights to the water were forfeited and "the water formerly so used or appropriated shall be again subject to appropriation for the purposes stated in this Act." Irrigation Act of 1913, ch. 171, § 49, 1913 Tex.Gen. Laws 358, 370.


author: McGEE, Justice. ROBERTSON, Justice, RAY, Justice,

text:
    TRINITY RIVER AUTHORITY et al., Petitioners, v. Carla Leigh WILLIAMS et al., Respondents.
    No. C-2530.
    Supreme Court of Texas.
    Feb. 27, 1985.
    Rehearing Denied June 5, 1985.

      Mayor, Day & Caldwell, Roger Rider and Mark R. Zeidman, F.J. Coleman, Jr., City Atty., David Lee Crawford, Asst. City Atty., Houston, for petitioners.
    W. James Kronzer, Maurice A. Lehmann, Houston, Bill Jones, Livingston, Coy U. Spawn, Jr., Houston, for respondents.
   McGEE, Justice.

This is a wrongful death action involving issues of governmental immunity, maritime law and contributory negligence. Plaintiffs, as legal survivors of Richard Michael Williams and Mark Phillips Magaziner, sued the Trinity River Authority (TRA) and the City of Houston (City). Based on the jury’s verdict, the trial court rendered judgment for the plaintiffs, although reducing damages by the percentage of contributory negligence attributed to the decedents. The trial court also limited TRA’s liability to $100,000 per decedent pursuant to the Texas Tort Claims Act. The court of appeals modified and affirmed the trial court’s judgment so as to eliminate the damage reduction for contributory negligence. 659 S.W.2d 714. The judgment of the court of appeals is affirmed in part and reversed in part.

Williams and Magaziner drowned in 1977 while fishing in the Trinity River below the Livingston dam and spillway. They put their boat into the water below the “restricted area” of the dam, but the back currents of the water caught the boat and drew it up into the restricted area near the dam. Williams and Magaziner drowned when the boat was pulled into a turbulent main current and capsized.

The jury found that TRA and the City were joint operators of the Livingston Dam project; the City was found to be an owner-occupier of the premises. In addition, the jury found that TRA and the City each failed to give adequate warning of the dangerous back currents existing in the waters below the restricted area of the dam and such failure was negligence, proximately causing the deaths. The jury also found that TRA and the City each negligently failed to maintain a floating warning cable across the surface of the Trinity River below the Livingston Dam, proximately causing the deaths.

The jury found that Williams and Maga-ziner were contributorily negligent and that such contributory negligence proximately caused their deaths. Negligence was apportioned as follows:

TRA.45%
City_25%
Williams...15%
Magaziner_15%

The jury found total damages to be $750,000 for Williams’ survivors and $50,-000 for Mazaginer’s survivors. The trial court rendered judgment on the jury verdict, reducing each survivor’s award by the fifteen percent contributory negligence of the decedents. TRA and the City were held jointly and severally liable, subject to TRA’s statutory liability limitation.

Governmental Immunity

The court of appeals overruled one group of TRA’s points of error that claimed it had governmental immunity based on the so-called “floodgate” provision of the Texas Tort Claims Act. The court of appeals held that the floodgate exception to liability did not apply since plaintiffs did not allege the operation of the floodgates was negligently performed but rather relied upon allegations of failure to warn of and protect against the dangerous back currents.

Section 3 of the Texas Tort Claims Act provides, in part:

Each unit of government in the state shall be liable for money damages for ... personal injuries or death when proximately caused by the negligence or wrongful act or omission of any officer or employee ... arising from the operation or use of a motor-driven vehicle and motor-driven equipment, other than motor-driven equipment used in connection with the operation of floodgates or water release equipment by river authorities created under the laws of this state, ...or death or personal injuries so caused from some condition or some use of tangible property, real or personal. ...

Tex.Rev.Civ.Stat.Ann. art. 6252-19, § 3(b) (Vernon Supp.1984) (emphasis added).

It is the area of motor-driven equipment, wherein the legislature responded to various river authorities and provided a specific exemption for waiver of sovereign immunity for floodgate operations. Greenhill & Murto, Governmental Immunity, 49 Tex. L.Rev. 462, 468 (1971). The Act, however, further provides that its provisions will be given a liberal construction in order to effect the legislative intent. Tex.Rev.Civ. Stat.Ann. art. 6252-19, § 13 (Vernon Supp. 1984). The other part of section 3 providing for waiver of governmental immunity, for injuries caused by “some condition or some use of tangible property,” is a category especially subject to a broad interpretation, Salcedo v. El Paso Hospital District, 659 S.W.2d 30, 32 (Tex.1983), and we agree with the court of appeals that this provision is applicable.

In this case, the plaintiffs maintained that TRA, as owner-occupier of the Livingston Dam project, negligently failed to warn about dangerous back currents and negligently failed to maintain a barrier cable across the river. These failures are independent of the “operation of floodgates or water release equipment” provision. Accordingly, we hold that the “floodgates” exception does not apply and affirm the judgment of the court of appeals in this respect.

Admiralty Jurisdiction and Sovereign Immunity

The court of appeals opinion concluded that federal maritime law did not apply because decedents’ accident did not involve “traditional commercial maritime activity.” 659 S.W.2d at 725 (emphasis added). The court of appeals incorrectly required a commercial element; the Supreme Court expressly disapproved the “commercial” requirement in Foremost Insurance Co. v. Richardson, 457 U.S. 668, 675-76, 102 S.Ct. 2654, 2659, 73 L.Ed.2d 300 (1982).

Respondents claim that the maritime law issue is material because if such law applies, the judgment of the trial court should be reformed so as to afford complete relief against both TRA and the City. We disagree. Even if maritime law should apply, this fact situation is within the terms of the Texas Tort Claims Act.. Sovereign immunity has been waived; however, in waiving sovereign immunity, the state is free to limit the terms of the consent to be sued. Great Northern Life Insurance Co. v. Read, 322 U.S. 47, 53-54, 64 S.Ct. 873, 876, 88 L.Ed. 1121 (1944); Lyons v. Texas A & M University, 545 S.W.2d 56, 58 (Tex.Civ.App.—Houston [14th Dist.] 1977, writ ref’d n.r.e.). The fifth circuit, in addressing the Texas Tort Claims Act, found the notice of death requirement “obviously ... a limitation which the state clearly intended to apply to tort claims under the Act whether or not they are under state or maritime law.” Kamani v. Port of Houston Authority, 702 F.2d 612, 615 (5th Cir.1983). Likewise, the dollar limitation represents the state’s intent to limit the waiver of sovereign immunity. Therefore, the $100,000 limitation on TRA’s liability remains whether state or federal law is applied.

Contributory Negligence

The jury found that Williams and Magaziner were negligent “[i]n entering the Trinity River, under the circumstances in question, in the boat, and with the motor in question” and that such negligence proximately caused their deaths. The jury, however, in another issue refused to find that Williams and Magaziner knew or should have known of the dangerous back currents. The court of appeals held that no causal connection existed between the harm and the negligent acts because, without knowledge of the back currents, Williams and Magaziner had no basis to anticipate danger. We disagree.

It is not necessary that the exact path leading to injury be anticipated as long as the general danger surrounding the event is appreciated. Clark v. Waggoner, 452 S.W.2d 437, 440 (Tex.1970). The issue involved “is not what the wrongdoer believed would occur; it is whether he ought reasonably to have foreseen that the event in question, or some similar event, would occur.” Id. at 440. There is evidence that Williams and Magaziner, at the very least, should have reasonably foreseen the dangerous events of capsizing and drowning when they entered the Trinity River “in the boat, and with the motor in question.” Accordingly, we believe there was a basis to support the jury’s findings of a causal connection between the harm and the contributory negligence. The judgment of the court of appeals is reversed in part and the damage reduction based on the contributory negligence findings is reinstated.

The judgment of the court of appeals is affirmed in part; the judgment of the court of appeals, modifying the trial court’s judgment as to contributory negligence, is reversed and the trial court’s judgment in that respect is also affirmed.

ROBERTSON, J., files a concurring and dissenting opinion in which SPEARS, J., joins.

RAY, J., files a dissenting opinion.

ROBERTSON, Justice,

concurring and dissenting.

I concur in part and dissent in part. The court of appeals was correct in its holding that there was no causal connection between the alleged contributory negligence and the accident. 659 S.W.2d at 725. Accordingly, I disagree with the majority’s opinion to the extent that it reinstates the damage reduction for contributory negligence.

Special Issue No. 14 inquired whether the two men knew or should have known of the dangerous back currents. The jury answered “no.” Thus, the jury refused to find that Williams and Magaziner knew of the danger that ultimately caused their deaths.

It was not the mere turbulence of the waters that killed the two men. Indeed, they fished for some time on those waters before being caught up in the back currents. The danger of the river was the back currents; and it was the back currents which caused the deaths of Williams and Magaziner. By its answer to Special Issue No. 14, the jury refused to find that the men appreciated the general danger of the river or that they could have reasonably foreseen the risk involved. Therefore, as a matter of law, they should not be held contributorily negligent. See Clark v. Waggoner, 452 S.W.2d 437, 440 (Tex.1970). In all other respects, I concur with the result reached by this Court.

SPEARS, J., joins in this concurring and dissenting opinion.

RAY, Justice,

dissenting.

I respectfully dissent. First, I disagree with the majority’s holding that Trinity River Authority’s (TRA) liability is limited to $100,000. Also, I oppose the majority’s employment of contributory negligence to reduce the damage award payable to Williams and Magaziner.

The majority rejects Williams' and Maga-ziner’s argument that maritime law controls this cause. The applicability of maritime law is significant because under maritime law, TRA’s liability is not limited to $100,000. The entire reasoning of the majority in this regard is: “[tjhis fact situation is within the terms of the Texas Tort Claims Act.” The question I am compelled to ask the majority is: why?

As the majority correctly notes, the court of appeals erroneously required a “traditional commercial maritime activity” for the application of maritime jurisdiction. Rather, maritime jurisdiction attaches when the activity involved occurs on a navigable waterway and has a “sufficient nexus to traditional maritime activity.” Foremost Insurance Co. v. Richardson, 457 U.S. 668, 674, 102 S.Ct. 2654, 2658, 73 L.Ed.2d 300 (1982). Here, there is no question that the Trinity River is a navigable waterway. Also, fishing and boating are the most traditional maritime activities. Thus, maritime law should apply. See Kohl v. United States, 712 F.2d 286 (7th Cir.1983) (maritime law governs the drowning of three fishermen near a lock and dam on the Mississippi River); Estate of Callas v. United States, 682 F.2d 613 (7th Cir.1982) (maritime law governs the drowning of two fishermen due to the dangerous back currents caused by the release of water at a dam); McCormick v. United States, 680 F.2d 345 (5th Cir.1982) (maritime law governs the collision of a pleasure boat with an unmarked piling in a navigable waterway).

Even though the majority concludes that the Texas Tort Claims Act controls this cause, they continue to analyze the effects of maritime law. The majority seems to hold that maritime law might apply; but even if it does, the Texas Tort Claims Act still would limit the amount of damages recoverable against TRA to $100,000. In my opinion, maritime law governs this cause entirely and it is not appropriate to apply a state law damage limitation to a properly pleaded and litigated federal cause of action.

The majority also reduces Williams’ and Magaziner’s damages based on a jury finding that they were negligent in entering the Trinity River under the circumstances. In so doing, the majority refuses to give effect to another jury finding that Williams and Magaziner did not know or should not have known of the dangerous back currents. I agree with the court of appeals analysis that one must either anticipate or have knowledge of the danger “before one can be held guilty of contributory negligence.” 659 S.W.2d at 725. Since the deaths were caused by the back currents resulting from the discharge of the water at the dam and TRA’s negligence in failing to maintain a floating cable across the surface of the river, I believe the fact that Williams and Magaziner neither knew, nor should have known of the danger precludes the application of contributory negligence to lower the damages award. In other words, how can someone be held responsible for failing to appreciate a risk that a jury found no reason for that person to realize or anticipate in the first place?

In conclusion, the court of appeals made but one error, that being its misapplication of maritime law to require a traditional commercial maritime activity to invoke maritime jurisdiction. The majority, however, dismisses that error and, without any reasoning, baldly asserts that the Texas Tort Claims Act applies to limit TRA’s liability. The majority further errs in reducing the damages awards of two people who did not know or should not have known of the invisible peril that would lead to their tragic deaths. This is a classic maritime lawsuit. Here, the TRA, while discharging water at a dam on a navigable waterway, negligently failed to perform its proprietary function of maintaining a cable across the river with warning signs to alert unsuspecting people of the hazardous back currents. Consequently, maritime law should govern this cause and Williams’ and Maga-ziner’s awards should not be reduced.


author: WALLACE, Justice.

text:
    Joyce S. HALLETT, et vir., Petitioners, v. HOUSTON NORTHWEST MEDICAL CENTER, Respondent.
    No. C-3304.
    Supreme Court of Texas.
    April 17, 1985.
    Rehearing Denied June 5, 1985.

      Lorance and Thompson, Larry D. Thompson, Houston, for petitioners.
    Fulbright and Jaworski, Robert J. Swift, Doreen Z. Bartlett, Houston, for respondent.
   WALLACE, Justice.

This is a medical malpractice suit. Pursuant to a jury verdict, the trial court rendered judgment for the defendant hospital. In an unpublished opinion, the court of appeals affirmed the judgment of the trial court. We affirm the judgment of the court of appeals.

While a patient in Houston Northwest Medical Center, Joyce Hallett, suffered an injury to her hand. Mrs. Hallett sued the hospital alleging that the negligence of the hospital staff caused the injury. During jury voir dire Mrs. Hallett challenged four jurors for cause. The trial court refused all four challenges.

One of the jurors challenged for cause, Trenton L. Torregroso, actually served on the jury. Mrs. Hallett alleged that she was compelled to leave Mr. Torregroso on the jury list in order to strike a more objectionable person. After a judgment was rendered for the hospital, Mrs. Hallett’s attorney filed a motion for judgment n.o.v., to which he attached his affidavit. The affidavit stated that Mrs. Hallett had exhausted her peremptory challenges, that three of those challenges were used to strike three of the persons challenged for cause, and the remaining three challenges were used to strike other objectionable jurors. The issue before us is determination of the proper method for preserving error when a litigant is compelled to accept an objectionable juror who has been challenged for cause.

Rules 227, 228 and 229, TEX.R.CIV.P., define challenge for cause. The rules provide that the court should decide the challenge, and if sustained, discharge the juror. However, the rules do not provide the procedure to be used for preserving error when the challenge is not sustained and an objectionable juror is permitted to serve. To determine that procedure we must consult common law authority.

Mrs. Hallett contends that once a juror has been challenged for cause, the trial court is aware that the person is objectionable to the challenging party. Therefore, it is illogical and unnecessary to require that party to advise the court a second time that an objectionable juror will be permitted to serve. She further contends that all the complaining party must show is that one or more of the challenged jurors who was not discharged was disqualified as a matter of law. As authority for her contention, Mrs. Hallett cites San Antonio & A.P. Ry. Co. v. Lester, 99 Tex. 214, 89 S.W. 752 (1905). However, the Lester opinion states that the party challenging the jurors made his bill of objections to the court prior to making his peremptory strikes. Mrs. Hallett also cites Compton v. Henrie, 364 S.W.2d 179 (Tex.1963). This case is not dispositive of the matter before us. The only question in that case was the misconduct of a juror who was found to be disqualified. However, no challenge was made to this juror at any time before the return of the jury verdict. In addition, Mrs. Hallett cites Flowers v. Flowers, 397 S.W.2d 121 (Tex.Civ.App.—Amarillo 1965, no writ) and State of Texas v. Burke, 434 S.W.2d 240 (Tex.Civ.App.—Waco 1968, no writ). Those cases are not on point with the issue before us.

We hold that the correct rule for preserving error in this case was set forth in the cases of Hammon v. Texas New Orleans Ry. Co., 382 S.W.2d 155 (Tex.Civ.App.—Tyler 1964, writ ref’d n.r.e.) cert. denied, 382 U.S. 832, 86 S.Ct. 73, 15 L.Ed.2d 76 (1965); Yecker v. San Antonio Traction Co., 76 S.W. 780 (Tex.Civ.App.—San Antonio 1903, writ ref’d); and Texas General Indemnity Co. v. Moreno, 638 S.W.2d 908 (Tex.Civ.App.—Houston [1st Dist.] 1982, no writ).

Our system of jury selection is designed to provide a jury composed of persons who are not biased or prejudiced. The object is an impartial jury. The refusal of the trial court to excuse an unqualified juror does not necessarily constitute harmful error. The harm occurs only if the party uses all of his peremptory challenges and is thus prevented from striking other objectionable jurors from the list because he has no additional peremptory challenges. It is at this point that any harmful error occurs, i.e., when the court is made aware that objectionable jurors will be chosen. Thus, it is incumbent upon the complaining party to inform the trial court at that time of the error. Once informed, the court is able to determine if the party was in fact forced to take objectionable jurors.

For these reasons the complaining party waives any error by not timely bringing such error to the attention of the trial court prior to making his peremptory challenges. A party cannot wait until the trial is finished, then seek to reverse an unfavorable verdict by complaining of an error which the trial court could have corrected had it been timely informed of the error.

We hold that Mrs. Hallett waived any error committed by the trial court. It was incumbent upon her, prior to exercising her peremptory challenges, to advise the trial court of two things: (1) that she would exhaust her peremptory challenges; and, (2) that after exercising her peremptory challenges, specific objectionable jurors would remain on the jury list. Absent such notice to the trial court she waived any error committed by the court in its refusal to discharge those jurors who were challenged for cause.

The judgment of the court of appeals is affirmed.


author: ROBERTSON, Justice.

text:
    Francis KENNEDY, Petitioner, v. J. Woodford SALE, Respondent.
    No. C-3767.
    Supreme Court of Texas.
    April 24, 1985.
    Rehearing Denied June 5, 1985.

      Bancroft & Mouton, Drew Mouton, Big Spring, for petitioner.
    Freeman, Hyde & Martin, John G. Hude, Midland, for respondent.
   ROBERTSON, Justice.

This cause involves the definition of “consumer” under the Texas Deceptive Trade Practice-Consumer Protection Act (“DTPA”). Tex.Bus. & Comm.Code Ann. § 17.45(4) (Vernon Supp.1985). The question presented is whether an employee complaining of misrepresentations of the provisions of a group insurance policy is a “consumer,” though the employer alone purchased the policy. The court of appeals held that the employee was not a consumer. 679 S.W.2d 733. We reverse the judgment of the court of appeals and affirm that of the trial court.

Francis Kennedy was an employee of the Martin County Hospital District. The Board of Managers of the hospital district decided to change group insurance carriers, from Blue Cross/Blue Shield to Southwest Medical Corporation Trust. J. Woodford Sale was the insurance agent.

After the policy was accepted, but before it went into effect, Sale met with hospital employees to explain the new provisions and benefits, as well as to collect signed enrollment cards from each employee. Kennedy and other employees testified that at this meeting Sale misrepresented the preexisting condition coverage, claiming that the policy offered full coverage without qualification, when in fact the policy provided only $4000 maximum coverage during the first year. Kennedy also testified that had he been correctly informed, he would have enrolled under his wife’s group plan, which provided full coverage.

Shortly thereafter, Kennedy underwent surgery for a preexisting condition. The policy paid $4,000; Kennedy brought suit against Sale for the balance of $11,338.21, alleging a violation of the DTPA and common law fraud. The jury found that Sale had misrepresented preexisting condition coverage to Kennedy, but not to the Board of Managers. The trial court rendered judgment for Kennedy on his DTPA cause of action. The court of appeals, with one justice dissenting, reversed this judgment but remanded for a new trial on the common law fraud theory.

The court of appeals held that because Kennedy did not purchase the policy benefits directly from Sale, he was not a “consumer” as defined by the DTPA. In reaching this conclusion, the court of appeals placed substantial reliance on Delaney Realty, Inc. v. Ozuna, 593 S.W.2d 797 (Tex.Civ.App.—El Paso), writ ref'd n.r.e. per curiam, 600 S.W.2d 780 (Tex.1980). This court, while refusing writ, did not endorse the Delaney Realty court’s reasoning. 600 S.W.2d 780 (Tex.1980). Less than one year later, we expressly disapproved the result in Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539-40 (Tex.1981).

While Cameron v. Terrell & Garrett, Inc. is not conclusive on the question here presented, the decision is nonetheless highly instructive. The question presented in Cameron was whether a real estate agent could be held in violation of the DTPA where he was neither the buyer nor the seller of the property. In a unanimous opinion, we stated:

We find no indication in the definition of consumer in section 17.45(4), or any other provision of the Act, that the legislature intended to restrict its application only to deceptive trade practices committed by persons who furnish the goods or services on which the complaint is based. Nor do we find any indication that the legislature intended to restrict its application by any other similar privity requirement.”

618 S.W.2d at 540-41 (emphasis added). This court further stated:

“The Act is designed to protect consumers from any deceptive trade practice made in connection with the purchase or lease of any goods or services.... To this end, we must give the Act, under the rule of liberal construction, its most comprehensive application possible without doing any violence to its terms.”

Id. at 541.

Keeping these principles in mind, we turn to an examination of the instant cause. The DTPA defines “consumer” as “an individual ... who seeks or acquires by purchase or lease, any goods or services.” Tex.Bus. & Comm.Code Ann. § 17.-45(4) (Vernon Supp.1985) (emphasis added).

The court of appeals gave two reasons why Kennedy did not qualify as a consumer. First, it was suggested that Kennedy did not “seek or acquire” the policy benefits. 679 S.W.2d at 735. While Kennedy did not “seek” the benefits (since the new policy was negotiated by the hospital district’s Board of Managers without his input), he most assuredly did “acquire” those benefits when he was covered by the policy’s provisions.

The second rationale advanced by the court of appeals is that Kennedy did not “purchase” the policy from Sale, because he paid no consideration to Sale. While the Act’s definition of “consumer” includes one who “acquires by purchase or lease,” it does not necessarily follow from that language that the consumer must himself be the one who purchases or leases. For example, it could reasonably be said that Kennedy did “acquire” the policy benefits “by purchase,” albeit a purchase consummated for his benefit by the hospital district’s Board of Managers.

To accept the construction favored by Sale, that only direct purchasers can be consumers, would be to read additional or different language into the DTPA, in contravention of the Act’s mandate of liberal construction. The legislature could easily have drafted such a restriction into the definition of “consumer,” for example, by use of the words “purchaser or lessee,” but did not do so. As this court stated in Cameron:

“[W]e believe every word excluded from a statute must ... be presumed to have been excluded for a reason. Only when it is necessary to give effect to the clear legislative intent can we insert additional words or requirements into a statutory provision.”

618 S.W.2d at 540.

We therefore hold that, under the facts of this case, Francis Kennedy was a consumer and thus entitled to maintain a cause of action under the DTPA. As this court recently stated in Flenniken v. Longview Bank & Trust Co., 661 S.W.2d 705, 707 (Tex.1983):

“Privity between the plaintiff and defendant is not a consideration in deciding the plaintiff’s status as a consumer under the DTPA_ A plaintiff establishes his standing as a consumer in terms of his relationship to a transaction, not by a contractual relationship with the defendant. The only requirement is that the goods or services sought or acquired by the consumer form the basis of his complaint.”

For the foregoing reasons, we reverse the judgment of the court of appeals and affirm the judgment of the trial court.