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`NO. 11-0288
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`JERRY MCGINTY AND VILLAS BY DESIGN, INC., PETITIONERS,
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`v.
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`THOMAS J. HENNEN, RESPONDENT
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`4444444444444444444444444444444444444444444444444444
`ON PETITION FOR REVIEW FROM THE
`COURT OF APPEALS FOR THE FOURTEENTH DISTRICT OF TEXAS
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`PER CURIAM
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`Villas By Design built Thomas Hennen’s home. Shortly after moving in, Hennen noticed
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`water leaks and, a few months later, mold. On his lawyer’s advice, the home was inspected and PE
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`Services found significant contamination throughout the house. A Corpus Christi contractor
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`estimated remedial costs to be in excess of $651,000.00, which included both the cost to rid the
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`house of mold and the cost to rebuild areas of the house affected by that remediation. Hennen sued
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`Villas for negligence, breach of express and implied warranties, breach of contract, and DTPA
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`violations, among other claims. We must decide whether the evidence supports the jury’s damage
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`finding.
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`For each claim, the jury was asked to find two damage awards: (1) the difference, as of the
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`date of closing, in the value of the home as it was received and the value it would have had if it had
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`been as represented, and (2) the reasonable and necessary cost to repair the home. The jury found
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`the difference in value to be $262,885.83 and the reasonable and necessary cost of repair to be
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`$651,230.72. The jury also awarded $750,000 in exemplary damages and $200,000 in attorney’s
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`fees. The trial court granted Villas’ motion to disregard the jury finding regarding the date Hennen
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`should have discovered the wrongful acts and found the DTPA and negligence claims barred by
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`limitations, leaving only the breach-of-contract damages. The trial court denied Villas’ motion for
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`judgment notwithstanding the verdict in which it argued that no evidence supported that damage
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`award.
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`Hennen appealed the trial court’s finding regarding limitations, and Villas cross-appealed.
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`Villas argued for reversal of Hennen’s breach-of-contract award because (1) the cost of repair
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`exceeded the value of the house, (2) Hennen failed to establish that his repair costs were reasonable
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`and necessary, and (3) Hennen failed to submit evidence of the cost of repair at the time of the injury.
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`A divided court of appeals affirmed. 335 S.W.3d 642, 655.
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`Villas petitioned this Court for review, advancing two arguments: (1) Hennen presented no
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`evidence that the estimated repair cost was reasonable and necessary, and (2) because remedial
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`damages would result in economic waste, the only recoverable measure of damages is the difference
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`in market value, on which Hennen failed to produce evidence. We agree that the evidence is legally
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`insufficient to support the jury’s finding that $651,230.72 was a reasonable and necessary cost to
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`repair Hennen’s house. And we agree that Hennen did not produce evidence of the difference in
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` Hennen did not petition this Court for review and instead raises “cross points of error” regarding the court of
`appeals’ limitations holding for the first time in his brief on the merits. Because he did not file a petition for review,
`Hennen has waived these arguments. See TEX. R. APP. P. 53.1 (“A party who seeks to alter the court of appeals’
`judgment must file a petition for review.”); Ctr. for Health Care Servs. v. Quintanilla, 121 S.W.3d 733, 735 (Tex. 2003)
`(per curiam).
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`market value, as of the date of closing, between the house received and a house built according to
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`the contract. We reverse the court of appeals’ judgment and render judgment that Hennen take
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`nothing on his breach-of-contract claim.
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`There are two measures of damages for the breach of a construction contract: (1) remedial
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`damages, which is the cost to complete or repair less the unpaid balance on the contract price, and
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`(2) difference-in-value damages, which is the difference between the value of the building as
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`constructed and its value had it been constructed according to the contract. Turner, Collie & Braden,
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`Inc. v. Brookhollow, Inc., 642 S.W.2d 160, 164 (Tex. 1982). A party seeking to recover remedial
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`damages must prove that the damages sought are reasonable and necessary. Mustang Pipeline Co.
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`v. Driver Pipeline Co., 134 S.W.3d 195, 200 (Tex. 2004) (per curiam). To establish that, the
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`plaintiff must show more than simply “the nature of the injuries, the character of and need for the
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`services rendered, and the amounts charged therefor.” Dall. Ry. & Terminal Co. v. Gossett, 294
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`S.W.2d 377, 383 (Tex. 1956). Instead, some other “evidence showing that the charges are
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`reasonable” is required. Id.
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`Mustang Pipeline illustrates this principle. There, Driver agreed to build Mustang a pipeline.
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`Mustang Pipeline Co., 134 S.W.3d at 196. Unexpected weather prevented Driver from completing
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`the task on time, and Driver sought an extension. Id. Mustang then contracted with another
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`company to finish Driver’s portion of the pipeline and sued Driver for breach of contract. Id. at 197.
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`The jury found that Driver had breached the agreement and awarded Mustang $2 million. Id. The
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`trial court and court of appeals, however, set that award aside because Mustang did not establish that
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`the $2 million it paid the new company was a reasonable cost for the completion of the pipeline. Id.
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`3
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`at 198. We agreed. Id. at 201. Mustang’s expert estimated the cost for the new company to
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`complete the contract but did not opine about “whether that contracted amount was a reasonable cost
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`to build a pipeline.” Id. We noted that evidence of out-of-pocket costs alone “did not establish that
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`the damages were reasonable and necessary.” Id. Instead, we found it “well settled that proof of the
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`amounts charged or paid does not raise an issue of reasonableness, and recovery of such expenses
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`will be denied in the absence of evidence showing that the charges are reasonable.” Id. (quoting
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`Gossett, 294 S.W.2d at 383). Because Mustang failed to produce evidence on the reasonableness
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`of its damages, we held that the trial court correctly set aside the damage award. Id.
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`Here, the jury awarded both remedial and difference-in-value damages, and the trial court
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`rendered judgment on the amount of remedial damages. Hennen’s expert’s testimony was the only
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`evidence offered on reasonable remedial damages. He derived his estimated costs of repair from an
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`“Exactimate” program “that’s used widely in the insurance industry.” The program had a Houston
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`price guide, which he compared with Corpus Christi and found to be “within a percent or two
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`difference.” He further testified that because not every price issued by the program is right, “we have
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`to cross-reference and double check all our pricing.” And finally, he testified that “some of the other
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`costs came from subcontractors or historical data or jobs.”
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`The court of appeals found this evidence legally sufficient to support the jury’s finding that
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`the repair costs were reasonable. 335 S.W.3d at 654. But Hennen’s evidence on reasonableness is
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`quite similar to what we concluded was insufficient in Mustang Pipeline. Estimated out-of-pocket
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`expenses, like paid out-of-pocket expenses, do not establish that the cost of repair was reasonable.
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`Some other evidence is necessary. Neither Hennen’s damage expert nor any other witness testified
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`to the reasonableness of the estimated cost.
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`Hennen argues, however, that his expert testified extensively about how he derived his
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`pricing estimate, which is the same as reasonableness. That explanation may explain how the figure
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`was derived, but it does not in itself make the figure reasonable. In some cases, the process will
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`reveal factors that were considered to ensure the reasonableness of the ultimate price. But that did
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`not happen here. Hennen’s expert established only that some of the pricing came from a widely used
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`software program and some from “subcontractors or historical data or jobs.” We agree with the
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`dissenting opinion below that this evidence does not support the jury’s finding that the estimated cost
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`of repair was reasonable.
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`We next address the remaining damage award. The jury awarded $262,885.83 as the
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`difference in value between the house as received and a house built according to the contract. Villas
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`argues that no evidence supports this award because Hennen did not offer any evidence on the value
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`of his house during the relevant time period.
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`The jury was instructed that “[t]he difference in value, if any, shall be determined as of the
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`date of the closing,” and we measure the evidence by the charge as given. See Akin, Gump, Strauss,
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`Hauer & Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d 106, 112 (Tex. 2009). Hennen,
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`however, testified to the value of his house at the time of trial, which was six years after the closing
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`date. In response to a question asking if he knew what his property was worth, Hennen stated, “In
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`my layman’s ability to do so, I have an idea of what I think it’s worth today.” He then proceeded to
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`testify that his house was worth $450,000 to $475,000 and that “without all these problems” it would
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`be worth $875,000. This testimony is no evidence of the difference in value at the time of closing.
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`Hennen argues that the jury could have reasonably inferred that the difference-in-value
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`damages at the time of closing were close to the cost of repair, $651,230.72. Thus, it was within the
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`jury’s discretion to award the lesser amount. But remedial damages and difference-in-value damages
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`are not the same. Otherwise, there would be no need to submit separate questions for the different
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`measures. The jury was required to determine an award based on the value of the house at the time
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`of closing, and Hennen offered no evidence of the house’s value at that time.
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`Hennen also argues that Villas waived this argument by not raising it in its brief to the court
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`of appeals. But at the court of appeals, Villas argued that Hennen failed to prove any measure of
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`legally recoverable damages and specifically argued that no evidence supported the difference in
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`value damages:
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`There is also no evidence upon which the jury could have based its answer of
`$262,885.83 as the difference in value of the house as represented and as received.
`There was no evidence of the value of the house when Hennen received it in
`September 2002, when he closed into his permanent financing and began occupying
`it. While Hennen did testify as to his opinion of the value of his home at the time of
`trial, he offered no evidence of its value when he closed.
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`Villas also urged this argument in the trial court and objected to the difference-in-value submission
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`on that basis. Villas preserved its challenge to the difference-in-value damages.
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`No evidence supports the reasonableness of the remedial damages awarded by the jury. As
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`a result, the court of appeals erred in affirming the trial court’s judgment awarding Hennen
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`$651,230.72. Hennen cannot opt for the difference-in-value damages awarded by the jury because
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`he offered no evidence of the value of his house at the time of closing. Accordingly, without hearing
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`oral argument, we grant Villas’ petition for review, reverse the court of appeals’ judgment, and
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`render judgment that Hennen take nothing. TEX. R. APP. P. 59.1, 60.2(c).
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`OPINION DELIVERED: June 29, 2012
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