Firm Newsletter - January 2016

Photo by mihalec/iStock / Getty Images

Photo by mihalec/iStock / Getty Images

Statutory Cap on Exemplary Damages is not Avoidance or an Affirmative Defense

 

Recently, in Zorrilla v. Aypco Construction II, LLC the Texas Supreme Court held the statutory cap on exemplary damages is not waived if it is not pleaded as an affirmative defense or avoidance. Mirta Zorilla (Petitioner) contacted Aypco Construction II, LLC and its owner, Jose Luis Munoz (both as Respondent), to modify the master bedroom and bathroom in a partially finished residence. Petitioner was satisfied with the work done to the master bedroom, and entered into an agreement to complete the rest of the residence. After failing to pay Respondent for some of the completed work the Respondent sued the Petitioner.

The Petitioner stated that she had an oral agreement with Munoz as the owner, but that she did not have an agreement with the construction company. Additionally, Petitioner alleged that she specified to Respondent that she would not pay for work after April 2007 unless it was agreed upon in writing. Moreover, Petitioner testified she told the Respondent to discontinue work at the end of April 2007. Respondent argued that the Petitioner knew she was contracting with the construction company as well as him and thus a written agreement between the parties did exist. Respondent worked until the residence was approximately 80% complete, which went into May 2007, and Respondent denied ever being told to cease operations. Because Petitioner failed to pay, Respondent ceased work and sued Petitioner under multiple causes of action. The Petitioner did not plead the statutory cap but asserted the cap in her motion for new trial.

At the trial court level the jury found in favor of the Respondent. The Jury awarded $56,654.15 in economic damages and $250,000 in exemplary damages. Additionally, the jury awarded the Respondent $150,000 in attorney’s fees through trial and additional attorney’s fees if the case was appealed. The court of appeals affirmed the jury verdict with the exception of the attorney’s fees award.

The Texas Supreme Court decided multiple issues in this case. One of the issues evaluated by the court was whether the statutory cap on exemplary damages is waived if it is not pleaded as an affirmative defense or avoidance. The court held that the exemplary dam-ages awarded did exceed the statutory cap. As a result, the court reduced the exemplary damage award by $50,000. To reach this decision, the court analyzed whether the damages cap fell into the residual category of Texas Rules of Civil Procedure Rule 94 governing affirmative defenses. It held that the exemplary damages cap did not have the characteristics of an affirmative defense or avoidance, and therefore applied automatically. Specifically, it does not require proof of any additional fact to establish its applicability which means the cap does not constitute as avoidance. Moreover, there is no defense to a statutory cap on exemplary damages, ruling out the cap constituting as an affirmative defense. Certain claims are excluded from the statute’s application. However, the statutory cap applies automatically to claims not expressly omitted. Accordingly, the Court stated that the statutory cap is the rule, which meant it did not need to be specifically plead and it still applied. Thus, the Court reversed the exemplary damages and rendered them to be $200,000 and affirmed all other points of error.

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