Beneficial Personnel Services of Texas, Inc. v. Porras (927 S.W.2d 177, 1996)

OPINION

LARSEN, Justice.

This appeal stems from on-the-job injuries sustained by Noel Porras while working for Beneficial Personnel Services of Texas, Inc. (“BPS”). A jury found BPS had committed fraud, had breached its employment contract with Porras, and was negligent. It assessed $42,128 in actual and $150,000 in exemplary damages. After verdict, Porras filed a trial amendment adding Business Staffing, Inc. as an additional defendant. The trial court granted the trial amendment, and rendered judgment against both BPS and BSI. Defendants appeal.

FACTS

Noel Porras is an oil field worker in Ward County, Texas. Before 1991, he was employed by White Well Service as a well service floorhand. Mr. Porras is a high school graduate and, before his industrial accident, was a baseball pitcher of some talent. He is married to Carmen Porras and they have two small children.

In 1991, Beneficial Personnel Services of Texas, Inc., an employee leasing company, approached White Well Service’s owner, Johnny White. BPS proposed that White Well fire all its employees, who would be immediately hired by BPS and leased back to White Well to perform exactly the same work. As part of the agreement, BPS provided administrative services for personnel. These services were to include benefits for injuries compensable under the Texas Workers’ Compensation Act, but not through the state-sanctioned compensation system. That is, although BPS obligated itself to provide benefits, it would not purchase insurance from subscribers to the Texas Workers’ Compensation Act. White Well agreed to this arrangement and fired all its employees, including Noel Porras. The employees were immediately hired by BPS, and leased back to White Well to perform the same work.

When his employment was changed from White Well to BPS, Noel Porras signed an agreement which provided:

3. WORKER’S COMPENSATION BENEFITS. BPS has agreed in the PERSONNEL LEASE AGREEMENT with its Client Company to provide worker’s compensation benefits provided by a non-admitted insurance carrier to EMPLOYEE for injuries compensable under the Texas Worker’s Compensation Act and similar acts of other jurisdictions (collectively referred to as the ‘Act’) while EMPLOYEE is assigned to CLIENT COMPANY and to waive (give up) their common law defensed [sic] against the EMPLOYEE as set forth in the corresponding Act. In exchange, the EMPLOYEE agrees to limit his/her recovery against BPS and CLIENT COMPANY for such compensable injuries to benefits allowed by the corresponding Act. These benefits are provided by a non-admitted insurance carrier.

Because our worker’s comp, benefits are provided by a non-admitted carrier the New ‘Act’ requires that BPS provide you with the following statement:

“BPS DOES NOT have worker’s compensation insurance coverage to protect you from damages because of work-related illness or injury.”

On May 13, 1992, while servicing an oil rig, a stuffing box fell on Porras’s left hand. The blow severed the tip of his left index finger almost completely. He was taken to Ward Memorial Hospital, where he was seen in the emergency room by Dr. Adolfo Rama. After examining Porras and taking x-rays, Dr. Rama amputated the fingertip. On June 2, 1992, Dr. Rama released Porras to return to light duty in two weeks, as of June 15. Por-ras continued to have swelling and pain, however, and called BPS requesting to see an orthopedic specialist, Dr. O.T. Garza, who had successfully treated Porras’s father-in-law for a knee injury. BPS’s representative refused to authorize the treatment, telling Porras, “Well, if you don’t go to light duty, I’m sorry, but I’m not a doctor and you’re on your own....” After that date, BPS paid Porras nothing for medical treatment, nothing for temporary income benefits, and nothing for impairment income benefits. Although Dr. Rama’s release for light duty contemplated a return to work on June 15, BPS fired Porras as of June 10, allegedly for refusing to return for light duty. BPS never explained this anticipatory termination, nor did it tell Porras he was terminated. During his recuperation, BPS sent Porras $920 for four weeks wage replacement, approximately one-half of his average weekly wage of $460.

In August 1992, Porras went to see Dr. Garza, who found he still had swelling at the amputation and prescribed physical therapy. Dr. Garza did not release Porras to return to work until October 1992. Porras contacted White Well, only to be told he had been fired in June.

Porras’s injury resulted in an 8 percent impairment to his whole body, according to the AMA guidelines used by the Texas Workers’ Compensation Commission to establish disability ratings. BPS paid him nothing for his disability, however, until after he had filed this lawsuit, and even then paid him only 50 percent of his average weekly wage, instead of the 70 percent he would have received under the Act.

Porras filed suit against a number of entities; all but BPS either settled or were severed from this suit before trial. The unanimous jury made the following findings:

1. The negligence of BPS’s employees other than Porras proximately caused his injury of May 13,1992.

2. Reasonable compensation for Porras’s injuries would include $5,000 for physical pain and mental anguish; $19,380 for loss of earnings and earning capacity; $8,832 for disfigurement; and $2,916 for medical care.

3. BPS agreed to provide Porras with the same amount and types of benefits he would have received under Texas workers’ compensation law, and BPS did not comply with that agreement.

4. Porras agreed to limit his ability to change doctors in non-emergency situations, and to limit his recovery to those benefits he could obtain under the Texas Workers’ Compensation Act.

5. BPS committed fraud against Porras concerning the existence and type of workers’ compensation benefits it would provide.

6. Porras’s fraud damages would include $1,500 for damage to credit reputation in the past; $1,500 for damage to credit reputation in the future; $1,500 for mental anguish in the past; and $1,500 for mental anguish in the future.

7. Exemplary damages for BPS’s fraud should be assessed at $150,000.

The trial court entered judgment on the tort causes of action, and made the following finding on the contract between BPS and Porras:

The Court further finds that Defendant Beneficial Personnel Services of Texas, Inc. was not a subscriber to the Workers Compensation Act of the state of Texas. The Court further finds that the contractual attempt of said Defendant to limit its liability resulting from an injury sustained by an employee in the course and scope of employment to those benefits provided by the Texas Workers Compensation Act is void under the laws and statutes of the state and further void as against public policy.

The trial court also granted a trial amendment finding that BPS had changed its name to “Business Staffing, Inc.” and finding that BPS and BSI were one and the same corporation,. and included that finding in the judgment. BPS and BSI appeal, urging twenty points of error. We affirm.

Name Change

In Point of Error One, appellants claim that the trial court erred in rendering judgment against BSI, a non-party. BSI was not named as a defendant prior to trial, but BPS’s corporate representative, Kenneth Cobb, called as an adverse witness by plaintiff, testified:

Q: And your occupation?

A: I’m Director of Risk Management.

Q: And is that for BPS of Texas, Inc.?

A: Yes, sir, BSI.

Q: Okay, and what’s BSI?

A: Business Staffing, Incorporated.

Q: Is that OMahoma?

A: No, sir, that’s our new — we’ve changed names. We got out of BPS of Texas. We’ve gone into BSI.

Q: Mr. Cobb, are you appearing here today as the corporate representative of Beneficial Personnel Services of Texas, Inc.?

A: Yes, sir.

Q: Is that still the name — have you changed the name of the business?

A: Yes, sir, we went to BSI because BPS of Texas limited us by the name itself to Texas.

Q: The same company?

A: Yes, sir.

Q: Just a different name?

A: Yes, sir.

Defense counsel made no objection to this evidence volunteered by his corporate representative, and indeed used the names “BPS” and “BSI” interchangeably throughout trial. Based on this testimony, Porras requested a trial amendment to include BSI as a defendant, urging that the two entities were one and the same. The trial court agreed, and entered judgment which included the following paragraph:

The Court further finds that Defendant has changed its name to Business Staffing, Inc. and that the said Business Staffing, Inc. is the same corporation as Defendant herein.

Defense counsel belatedly objected to the trial amendment and filed a motion to modify the judgment to delete Business Staffing, Inc.

It is true that generally, judgment shall not be rendered against one who is neither named nor served as a party defendant. Tex.R.Civ.P. 124; Werner v. Colwell, 909 S.W.2d 866, 869 (Tex.1995). One exception to this rule is when a party waives service by making a general appearance before the court. Id. at 869-70. We believe that this case presents another exception: where there is clear, uncontroverted, unequivocal and unsolicited testimony by a corporate representative that the two entities are one and the same, where defense counsel makes no objection to that testimony, and even refers to the defendant by both names interchangeably throughout trial. We also find it significant that the corporate representative volunteered the name change information, without prompting by either side. A trial court has broad discretion to allow a party to amend its pleadings to conform to evidence adduced at trial. TexR.Civ.P. 66, 67; Texas Employers’ Insurance Assoc. v. Gutierrez, 795 S.W.2d 5, 7 (Tex.App.-El Paso 1990, writ denied). Absent a showing of surprise or prejudice, it is an abuse of discretion for the trial judge to refuse a trial amendment. Greenhalgh v. Service Lloyds Ins. Co., 787 S.W.2d 938, 939 (Tex.1990); Zavala v. Trujillo, 883 S.W.2d 242, 245 (Tex.App.-El Paso 1994, writ denied). We believe that here it was established as a matter of law, by BPS’s own corporate representative, that the two entities (if there are two entities) were interchangeable. Under these facts, it would have been an abuse of discretion for the trial court to deny a trial amendment including Business Staffing in the judgment. Point of Error One is overruled.

The Contract

In Points of Error Two and Three, appellants urge that the trial court erred in holding the employment contract between Porras and BPS was void, as: 1) Porras did not plead illegality; 2) the statute relied upon by the court does not apply; 3) Texas law and policy support such a contract; and 4) the trial court’s conclusion conflicts with the jury findings. We find that enforceability of the contract was sufficiently pleaded, and that Texas public policy precludes the employer from indemnifying itself from its own negligence in the manner it has attempted here.

a. pleading

First, we reject the contention that enforceability was not properly an issue before the court. We believe that Porras did raise the issue sufficiently to put defendant on notice of his contention. We note that plaintiffs’ fifth amended petition included the following assertion:

[Tjhe employment contract provisions limiting damages sought to be enforced ... is unconscionable and should be held void as against public policy....

We believe that Porras’s petition sufficiently demonstrated his intention to challenge the enforceability of the contract between himself and BPS.

b. public policy

Secondly, BPS urges that its contract is permitted by Texas law and is not contrary to public policy. In support of this argument, it cites a number of cases which have upheld an employee’s efforts to enforce these contracts. Texas Health Enterprises, Inc. v. Gentry, 787 S.W.2d 604 (Tex.App.-El Paso 1990, no writ); Tigrett v. Heritage Building Co., 533 S.W.2d 65, 70 (Tex.Civ.App.-Texarkana 1976, writ ref'd n.r.e.); Employers Mutual Casualty Co. v. Boorman, 428 S.W.2d 698 (Tex.Civ.App.-San Antonio 1968, writ ref'd n.r.e.); United States Fidelity & Guaranty Co. v. Valdez, 390 S.W.2d 485 (Tex.Civ.App.—Houston 1965, writ ref'd n.r.e.). BPS points out that only one case has found such a contract unenforceable, and that was because the agreement failed to waive the employer’s common law defenses. Hazelwood v. Mandrell Industries Co., Ltd., 596 S.W.2d 204 (Tex.Civ.App.-Houston [1st Dist.] 1980, writ refd n.r.e.). Because BPS’s contract with Porras waived common law defenses, it thus concludes that the contract is enforceable.

We think public policy is contrary, however, because this employee agreement violates the fair notice doctrine. Thus, although an employee can elect to enforce such a contract (thus explaining the line of cases relied upon by BPS) we hold that an employer, desiring to engage in this extraordinary shift of common-law liability outside the auspices of the state-sanctioned workers’ compensation system, does not enjoy the same ability.

The fair notice doctrine in Texas has evolved in eases where one party to a contract seeks to transfer the risk of liability for its own negligence to the other party. It includes two requirements: the express negligence doctrine and conspieuousness. Enserch Corp. v. Parker, 794 S.W.2d 2, 8 (Tex.1990). The express negligence doctrine provides that a party seeking release or indemnity from the consequences of its own negligence must express that intent in specific terms. Under this test, the intent of the parties must be specifically stated within the four corners of the contract in order for such provision to be enforceable. Dresser Industries, Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 509 (Tex.1993); Atlantic Richfield Co. v. Petroleum Personnel, Inc., 768 S.W.2d 724, 725 (Tex.1989); Ethyl Corp. v. Daniel Construction Co., 725 S.W.2d 705, 707-08 (Tex.1987). The conspicuousness requirement mandates that the intent to transfer liability must appear on the face of the contract in such a way as to attract the attention of a reasonable person looking at it; that is, it must be conspicuous. Dresser Industries, 853 S.W.2d at 508.

In its brief before this Court, BPS/ BSI argues that a voluntary employment contract such as the one it entered with Porras serves to promote public policy goals because it “(1) provide[s] workers’ compensation benefits for the lost earning capacity and medical expenses due to an injury, but not for pain, suffering, or the injury itself; and (2) avoidls] litigation of fault in return for limited, but easily ascertainable damages.” Porras’s employment agreement “guaranteed Porras the workers’ compensation benefits for lost earning capacity and medical expense, and it relieved him of the burden of proving fault.” “If voluntary contracts are no longer enforceable, then the employer either gratuitously continues paying benefits ... or it can simply withdraw its offer. In the latter case injured employees will lose their right to medical payments and temporary disability payments, but must file negligence actions (for which they carry the burden of proof) against their employer.” Thus, BPS’s own argument acknowledges that the employment agreement is, at bottom, a release of liability for BPS’s own negligence. That the jury did indeed find BPS negligent in causing Porras’s injury supports this conclusion. That BPS agreed to make certain limited payments in return for the release from negligence liability does not, in our view, relieve it of its obligation to comply with the fair notice doctrine. For BPS to enforce the agreement, therefore, it must show that the contract complies with the fair notice doctrine, a question of law. Dresser Industries, 853 S.W.2d at 509. It clearly does not.

The employment agreement makes no mention of negligence, waiver of common law rights, or any other specific statement that the parties intended to waive liability for BPS’s acts of negligence committed in the future. The only reference to Porras’s waiver of his common law rights is the statement “the EMPLOYEE agrees to limit his/her recovery against BPS and CLIENT COMPANY for such compensable injuries to benefits allowed by the [workers’ compensation] Act.” In contrast, clauses which have been held enforceable under the express negligence doctrine must contain unambiguous language such as: “Diamond Shamrock agree[s] to indemnify Moran against all bodily injury, death and property claims by its employees or the employees of its contractors ‘without limit and without regard to the cause or causes thereof or the negligence of any party or parties,_’ ” Maxus Exploration, Co. v. Moran Brothers, Inc., 817 S.W.2d 50, 56 (Tex.1991); “PPI agrees to ... indemnify ... ARCO ... in any matter arising from the work performed hereunder, including but not limited to any negligent act or omission of ARCO,.... ” Atlantic Richfield Company v. Petroleum Personnel, Inc., 768 S.W.2d 724, 726 (Tex.1989); “Contractor hereby indemnifies and agrees to protect, hold and save Union Texas ... harmless from and against all claims, ... including but not limited to injuries to employees of Contractor, ... on account of, arising from or resulting, directly or indirectly, from the work and/or services performed by Contractor ... and whether the same is caused or contributed to by the negligence of Union Texas, its agent or employees,_” Permian Corp. v. Union Texas Petroleum Corp., 770 S.W.2d 928, 929 (Tex.App.—El Paso 1989, no writ). From these examples, it is clear that the express negligence doctrine means exactly what the name implies: an enforceable release of liability from negligent acts must expressly state that is what the parties intend. The employment agreement here wholly fails to meet the requirements of the express negligence doctrine, and we therefore hold that BPS may not enforce it where its employee sought to assert his common law rights against the company. We overrule Points of Error Two and Three.

Contract Construction

In Points of Error Four and Five, appellants urge that the trial court erred in ruling that the employment contract between Porras and BPS was ambiguous, and therefore also erred in submitting a question to the jury to ascertain the meaning of that contract. For the reasons set out in our discussion of Porras’s right to recover in fraud, we believe the trial court correctly found that the contract was ambiguous as to whether workers’ compensation insurance, or benefits, would be provided by BPS, and what exactly those terms meant. Moreover, as we have held that BPS could not enforce the contract against Porras in light of its failure to comply with the fair notice doctrine, any error in holding the contract ambiguous is harmless. Points of Error Four and Five are overruled.

Recovery on Tort Claims

In Points of Error Six and Seven, appellants urge that the trial court erred in entering judgment on Porras’s negligence and fraud claims, as Porras was contractually limited to recovery for breach of contract, and because entering such judgment was inconsistent with the jury’s finding that Porras had contractually agreed to limit his recovery to the benefits available under the Texas Workers’ Compensation Act. Because we have found the contract to be insufficient under the express negligence doctrine, and therefore unenforceable by BPS, we find these arguments without merit. Points of Error Six and Seven are overruled.

Fraud Recovery

In Points of Error Eight and Ten, appellant contends that the record does not support the jury’s finding that BPS committed fraud, nor any conclusion that BPS did more than breach the employment contract, and further claims there was no evidence or insufficient evidence to support a fraud recovery. Specifically, BPS asserts that the trial court erred in entering judgment based on fraud, as any failure to provide benefits as promised constitutes only a breach of the employment contract between BPS and Porras; thus Porras’s complaint that BPS misrepresented the existence and type of workers’ compensation benefits is really only a complaint for breach of contract. Nevertheless, in answer to question number six, the jury responded “yes” to this inquiry:

Did Beneficial Personnel Services of Texas, Inc. commit fraud against Noel Por-ras with regard to representations concerning the existence and type of workers compensation benefits which would be provided to him?

The trial court properly charged the jury on the elements of common law fraud, that: (1) the party makes a material misrepresentation; (2) with knowledge of falsity or made recklessly without any knowledge of its truth and as a positive assertion; (3) made with intent that it be relied upon by the other party; (4) that the party actually relied upon it; and (5) that the party suffer injury. Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex.1983); Stone v. Lawyers Title Insurance Corp., 554 S.W.2d 183 (Tex.1977); State National Bank of El Paso v. Farah Manufacturing Co., 678 S.W.2d 661 (Tex.App.-El Paso 1984, writ dism’d by agr.). The trial court likewise properly instructed the jury that a misrepresentation means: (1) a false statement of fact, or (2) a promise of future performance made with intent not to perform, or (3) a statement of opinion based on a false statement of fact, or (4) an expression of opinion that is false, made by one claiming or implying to have special knowledge of the subject matter of the opinion. Trenholm, 646 S.W.2d at 930; Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434-35 (Tex.1986); Eagle Properties, Ltd. v. Scharbauer, 807 S.W.2d 714, 723 (Tex.1990). We must determine whether this case was properly submitted as fraud, or whether it sounds in contract only. We conclude that the trial court was correct in determining that the facts here supported a jury question on fraud.

In arguing that this case sounds only in contract, BPS relies upon several statements made by our Supreme Court that, although the contractual relationship between parties may create duties under both contract and tort law, the nature of an injury most often determines whether contract or tort duties have been breached.