Custom Transit, L.P. v. Flatrolled Steel, Inc.

375 S.W.3d 337

CUSTOM TRANSIT, L.P., Richway Cartage, Inc., and Custom Operations, LLC, Appellants

v.FLATROLLED STEEL, INC., Appellee.

No. 14–10–00936–CV.

Court of Appeals of Texas, Houston (14th Dist.).

June 14, 2012.

Rehearing Overruled Aug. 29, 2012.

Byron C. Keeling, Houston, for Appellants.

Phillip L. Sampson, Jr., Houston, for Appellee.

Panel consists of Justices BROWN, BOYCE, and McCALLY.

OPINION

WILLIAM J. BOYCE, Justice.

Custom Transit, L.P., Custom Operations, LLC, and Richway Cartage, Inc., appeal from a judgment in favor of Flatrolled Steel, Inc. following a jury trial.

We affirm the trial court's judgment as to contract damages and attorney's fees awarded against Custom Transit and Custom Operations. We reverse the trial court's judgment as to actual damages for negligence and exemplary damages awarded against Richway, and render judgment that Flatrolled take nothing from Richway.

Background

I. The Parties

Flatrolled is a Houston-based company that buys and sells carbon flatrolled steel, which is rolled into large coils weighing many tons. Flatrolled processes the coils at its facility in Houston using machinery that unrolls the coils and cuts the steel into sheets that can be packaged and shipped to its customers. These sheets are used to manufacture items such as computer cabinets, electrical boxes, ductwork, and roadway guardrails. Uses such as these require steel with a good surface that can be painted.

Flatrolled obtains some of the steel coils it buys from trading companies; these companies in turn buy coils from foreign manufacturers and then ship them into the Port of Houston. The coils are shipped in large sealed “cans” to protect them during transit.

Flatrolled entered into a direct discharge agreement with Custom Transit, under which Custom Transit agreed to provide direct discharge services in connection with at least eight vessels that delivered steel coils into the Port of Houston in 2006. As a direct discharge company, Custom Transit took possession of steel coil shipments at dockside immediately as stevedores unloaded them from the vessels and arranged for delivery of the coils to Flatrolled's Houston facility.

Custom Transit is a limited partnership. Its general partner is Custom Operations, which has no employees and conducts no business beyond serving as general partner for Custom Transit. Nolan Richardson is Custom Transit's president.

Custom Transit used equipment owned by Richway, including trucks and forklifts, in the course of performing direct discharge services for Flatrolled. Richway itself had no employees in 2006. Bills of lading sometimes were issued under Richway's name to Flatrolled. Members of the Richardson family served as Richway's officers, and also were officers of Custom Transit or bore responsibility for Custom Transit's operations. Flatrolled had no contract with Richway.

Some of the steel coils obtained by Custom Transit for Flatrolled were stored in warehouses before Custom Transit delivered them to Flatrolled. The evidence at trial conflicted with respect to the entity that held leases on the warehouses Custom Transit used to store Flatrolled's steel coils before delivery. Some testimony indicated that Richway held these leases and allowed Custom Transit to use the warehouses without payment. Other testimony indicated that the leases were held by a different entity called “R Enterprises” or “R Warehousing.”

II. The Dispute

The parties' dispute focuses primarily on 2,455 “weather-sensitive” steel coils. Flatrolled contends that Custom Transit breached the direct discharge agreement by storing these coils in non-climate-controlled warehouses for months before delivery instead of delivering them promptly to Flatrolled. According to Flatrolled, temperature fluctuations that occurred while these coils were stored in non-climate-controlled warehouses resulted in condensation forming externally on the storage cans and on the coils' steel surfaces inside the cans. In turn, this moisture caused rust and staining on the steel that diminished its value by making it unsuitable for use in finished products requiring painting. Flatrolled also contends that Custom Transit lost or failed to deliver another 37 coils.

Flatrolled filed suit in December 2006. In its live petition, Flatrolled asserted multiple claims against Custom Transit, Custom Operations,¹ Richway, and R Enterprises,² including breach of contract, negligence, gross negligence, and conversion in connection with the damaged and missing coils. Custom Transit filed a counterclaim for breach of contract predicated on unpaid or underpaid invoices for services provided to Flatrolled.

III. The Verdict

The case was tried to a jury in March and April 2009. The jury returned a verdict in which it

• found that Flatrolled and Custom Transit entered into a direct discharge agreement regarding transport of steel coils from the Port of Houston; found that Custom Transit failed to comply with the agreement; and made separate breach-of-contract damage awards for lost and undelivered coils, and for damaged coils;

• answered “no” to a question asking whether Flatrolled failed to comply with its payment obligation to Custom Transit under the direct discharge agreement;

• found that Custom Transit converted Flatrolled's steel coils; found by clear and convincing evidence that Custom Transit acted with malice; and awarded actual damages;

• found that negligence on the part of Custom Transit and Richway proximately caused the loss of Flatrolled's steel coils; found that negligence on the part of Custom Transit and Richway proximately caused damage to Flatrolled's steel coils; and made separate awards for lost and undelivered coils, and for damaged coils;

• attributed 50 percent of the injury-causing negligence to Custom Transit, and 50 percent to Richway;

• found by clear and convincing evidence that the harm to Flatrolled's steel coils resulted from gross negligence on the part of Custom Transit and Richway; and

• awarded punitive damages against Custom Transit and Richway.

Attorney's fees were tried to the court. The trial court subsequently signed an orderawarding attorney's fees and court costs to Flatrolled in connection with its breach of contract claim.

IV. The Final Judgment

The trial court signed a final judgment in Flatrolled's favor on July 9, 2010. Flatrolled elected to recover on its contract claim against Custom Transit. The final judgment recites that “Flatrolled's only theory of recovery against Richway is for negligence.”

The final judgment ordered that Flatrolled recover actual damages of $959,316.88 from Custom Transit, along with attorney's fees, costs of court, and pre- and post-judgment interest. The final judgment also ordered that Flatrolled recover actual damages of $479,658.44 against Richway, along with pre- and post-judgment interest. The final judgment contains this statement: “However, Flatrolled is entitled to only one satisfaction of actual damages for its total injury of $959,316.88, and to only one satisfaction of pre-judgment and post-judgment interest on actual damages, from any combination of Custom Transit, Custom Operations, and Richway up to the amounts for which each is liable.” In addition, the final judgment ordered that Flatrolled recover $959,316.88 in exemplary damages from Richway along with post-judgment interest on that amount.

V. Issues on Appeal

Custom Transit and Richway present seven issues on appeal. They contend that the trial court's judgment must be reversed because (1) the jury charge erroneously included an accord and satisfaction instruction in connection with Custom Transit's breach-of-contract counterclaim against Flatrolled; (2) the economic loss rule forecloses Flatrolled's recovery against Custom Transit and Richway on its negligence and conversion claims; (3) Richway owed no duty in tort to Custom Transit; (4) the evidence is legally and factually insufficient to support the jury's awards for damaged coils; (5) the trial court's judgment violates the one satisfaction rule by awarding both contract and tort damages for a single, indivisible injury; (6) the award of exemplary damages against Richway is improper; and (7) the attorney's fees award against Custom Transit is improper.

Standards of Review

Legal and Factual Sufficiency of the Evidence. Legal insufficiency challenges may be sustained only when the record discloses one of the following situations: (a) a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence establishes conclusively the opposite of the vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex.2005) (citing Robert W. Calvert, “No Evidence” and “Insufficient Evidence” Points of Error, 38 Tex. L.Rev. 361, 362–63 (1960)); see also Niche Oilfield Servs., LLC v. Carter, 331 S.W.3d 563, 569 (Tex.App.-Houston [14th Dist.] 2011, no pet.).

We must consider evidence in the light most favorable to the verdict and indulge every reasonable inference that would support it. City of Keller, 168 S.W.3d at 822. If the evidence allows only one inference, neither jurors nor the reviewing court may disregard that evidence. Id. “The traditional scope of review does not disregard contrary evidence in every no evidence review if there is no favorable evidence (situation (a) above), or if contrary evidence renders supporting evidenceincompetent (situation (b) above) or conclusively establishes the opposite (situation (d) above).” Id. at 810–11. If the evidence at trial would enable reasonable and fair-minded people to differ in their conclusions, then jurors must be allowed to do so. Id. at 822. Accordingly, the ultimate test for legal sufficiency always must focus on whether the evidence would enable reasonable and fair-minded jurors...