Luig v. N. Bay Enters., Inc.

55 F.Supp.3d 942

Perry J. LUIG, Plaintiff

v.NORTH BAY ENTERPRISES, INC., Defendant.

Civil Action No. 7:13–cv–00094–O.

United States District Court, N.D. Texas, Wichita Falls Division.

Signed Oct. 27, 2014.

Matthew D. Anderson, Gibson Davenport Anderson, Wichita Falls, TX, Thad D. Spalding, Kelly, Durham & Pittard, LLP, Dallas, TX, for Plaintiff.

Kirk L. Pittard, Thad D. Spalding, Durham & Pittard LLP, Dallas, TX, Ron C. McCallum, Ted B. Lyon & Associates PC, Mesquite, TX, for Defendant.

MEMORANDUM OPINION AND ORDER

REED O'CONNOR, District Judge.

Before the Court are Defendant's Motion for Summary Judgment (ECF No. 27), filed September 12, 2014; Brief in Support of Defendant's Motion for Summary Judgment (ECF No. 28), filed September 12, 2014; Appendix in Support of Defendant's Brief in Support of its Motion for Summary Judgment (ECF No. 29), filed September 12, 2014; Supplement to Defendant's Motion for Summary Judgment and Brief in Support (ECF No. 30), filed September 15, 2014; Plaintiff's Response to Defendant's Motion for Summary Judgment (ECF No. 33), filed October 7, 2014; Plaintiff's Memorandum in Response to Defendant's Motion for Summary Judgment (ECF No. 34), filed October 7, 2014; and Reply to Plaintiff's Response to Defendant's Motion for Summary Judgment (ECF No. 39), filed October 16, 2014.

Having considered the motion, related briefing, record, and applicable law, the Court finds that Defendant's Motion for Summary Judgment should be and is hereby DENIED. For the reasons that follow, the Court further finds that Plaintiff's request for a declaration of the parties' rights and obligations under their contract is hereby GRANTED in part.¹

I. BACKGROUND

This dispute concerns the sale of a Bell helicopter by Plaintiff Perry J. Luig (“Luig”) to Defendant North Bay Enterprises, Inc. (“North Bay”) pursuant to an Aircraft Purchase Agreement. Luig seeks a declaratory judgment that he complied with the terms of the contract, and Defendant North Bay seeks damages for Luig's alleged breach of contract. The dispute centers on whether Luig failed to deliver the helicopter “with all systems in an airworthy condition and a current Certificate of Airworthiness” as provided in the parties' Aircraft Purchase Agreement. Def.'s App. Supp. Mot. Summ. J. Ex. 1A (Aircraft Purchase Agreement), App. 7, ECF No. 29.

On September 11, 2012, Luig entered into a signed, written contract to sell North Bay his Bell helicopter, tail number Bell NII59W, for $110,000. See id. ; Def.'s Br. Supp. Mot. Summ. J. 1, ECF No. 28; Pl.'s Br. Resp. Mot. Summ. J. 1, ECF No. 34. The NII59W helicopter was more than 50 years old and had undergone several changes, including the removal of the aircraft's turbo charger engine. Def.'s App. Supp. Mot. Summ. J. Ex. 5 (Russum Dep.) 15:16–24, App. 88, ECF No. 29. The airworthiness certificate accompanying the helicopter indicated that the aircraft was a type “47 G3B1.” Id. Ex. 2 (Luig Dep.) 77:16–22, at App. 30.

At the time of the contract, both parties understood that all aircraft flown in the United States are subject to Federal Aviation Administration (“FAA”) regulations and must comply with relevant airworthiness directives. See id. 61:17–21, at App. 26. It is undisputed that the NII59W helicopter is subject to FAA Airworthiness Directive 80–04–04 (“AD 80–04–04”), promulgated in 1980. See id. Russum Dep. 16:4–6, at App. 88. It is also undisputed that “no entries in the maintenance log specifically state that the AD [airworthiness directive] was complied with” and that “the FAA has determined that ‘there is insufficient evidence to prove that AD 80–04–04 R1 was or was not accomplished.’ ” See id. Ex. 6 (Pl.'s 1st Am. Pet.) ¶ 11, at App. 101.

The parties' Aircraft Purchase Agreement includes two material terms at issue in this dispute. The first is a “Pre-purchase Inspection” term which reads in full:

Purchaser will have Bill Clark perform the pre-purchase inspection at Seller's location. The Aircraft will be delivered with Fresh Annual Inspection with all systems in an airworthy condition and a current Certificate of Airworthiness. Seller will also take care of discrepancies list by Bill Clark on Attachment “A”. Purchaser will notify Seller of its acceptance of the Aircraft by signature of the Aircraft Acceptance, “Attachment C”.

Id. Aircraft Purchase Agreement, at App. 7. The second is the “Acceptance of Condition of Aircraft” term which reads in full: “At the time of delivery Purchaser agrees to accept the Aircraft in an ‘as is where is' condition. (NO WARRANTY).” Id. at App. 8 (emphasis in original). The parties do not contest the existence of a valid contract that includes both of these terms. Def.'s Br. Supp. Mot. Summ. J. 1, ECF No. 28; Pl.'s Br. Resp. Mot. Summ. J. 1, ECF No. 34. After North Bay conducted a pre-purchase inspection and indicated several items to be repaired, Luig delivered the aircraft to North Bay with the requested repairs completed. Luig Dep. 39:11–13, at App. 23; Id. 66:1–17, at App. 27.

Plaintiff Luig brought a declaratory judgment action pursuant to Chapter 37 of the Texas Civil Practice and Remedies Code in the 97th Judicial District Court of Archer County, Texas. See Notice Removal, ECF No. 1. Defendant North Bay removed the action to federal court and asserted a counterclaim for breach of contract. Id. Defendant now moves for Summary Judgment on its breach of contract counterclaim and associated claim for attorney's fees. Def.'s Mot. Summ. J., ECF No. 27. The issues have been briefed, and the motion is ripe for determination.

II. LEGAL STANDARD

Summary judgment is proper when the pleadings and evidence on file show “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[T]he substantive law will identify which facts are material.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue of material fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. The movant makes a showing that there is no genuine issue of material fact by informing the court of the basis of its motion and by identifying the portions of the record which reveal there are no genuine material fact issues. See Fed.R.Civ.P. 56(c) ; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

When reviewing the evidence on a motion for summary judgment, the court must decide all reasonable doubts and inferences in the light most favorable to the non-movant.See Walker v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir.1988). The court cannot make a credibility determination in light of conflicting evidence or competing inferences. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. As long as there appears to be some support for the disputed allegations such that “reasonable minds could differ as to the import of the evidence,” the motion for summary judgment must be denied. Id. at 250, 106 S.Ct. 2505.

III. ANALYSIS

A. Applicable State Law

To determine the applicable state law for an action invoking diversity jurisdiction, the Court must apply choice of law rules of the forum state of Texas. See Mayo v. Hartford Life Ins. Co., 354 F.3d 400, 403 (5th Cir.2004). Generally, under Texas law, “the parties' contractual choice of law will be given effect if the contract bears a reasonable relationship to the chosen state and no countervailing public policy of the forum demands otherwise.” Johnson v. Structured Asset Servs., LLC, 148 S.W.3d 711, 720 (Tex.App.-Dallas 2004, no pet.) ; accord Tex. Bus. & Com.Code Ann. § 1.301 (Vernon 2009). Here, the parties contracted for Oklahoma law to govern actions concerning their Aircraft Purchase Agreement. Aircraft Purchase Agreement, at App. 8. However, because both parties bring claims under Texas law and neither invokes Oklahoma law, Texas law governs this action. See Johnson, 148 S.W.3d at 720 (“Absent a motion by a party, the law of Texas may be applied to a dispute.”).

B. Defendant's Breach of Contract Claim

The Aircraft Purchase Agreement at issue concerns the sale of goods, and thus is governed by Article Two of the Uniform Commercial Code (“UCC”), adopted in Texas's Business and Commerce Code. See Emerson Elec. Co. v. Am. Permanent Ware Co., 201 S.W.3d 301, 310 (Tex.App.-Dallas 2006, no pet.) ; Tex. Bus. & Com.Code Ann. § 2.102 (Vernon 2009).

Under the UCC in Texas, breach of contract and breach of warranty are separate and distinct causes of action, each with different available remedies. Sw. Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 576 (Tex.1991). “Texas law forbids conflating breach of warranty and breach of contract.” A.O. Smith Corp. v. Elbi S.p.A., 123 Fed.Appx. 617, 619 (5th Cir.2005) (citing Ellis v. Precision Engine Rebuilders, Inc., 68 S.W.3d 894, 897 (Tex.App.-Houston [1st Dist.] 2002, no pet.) ). “[T]he critical factor in whether the buyer has a breach of contract or breach of warranty claim is whether the buyer has finally accepted the goods.” Emerson, 201 S.W.3d at 310 (citing Tex. Bus. & Com.Code Ann. §§ 2.711, 2.714 (Vernon 1994) ); see also Trident Steel Corp. v. Wiser Oil Co., 223 S.W.3d 520, 526 (Tex.App.-Amarillo 2006, pet. denied) (“[I]t is the buyer's acceptance or rejection of goods which determines the remedies available to the buyer, not the seller's mere delivery of something.”). Damages for delivery of non-conforming goods are permitted under a breach of warranty cause of action; whereas, damages are only permitted under a breach of contract cause of action when the seller has failed to deliver the goods, the buyer has rejected the goods, or the buyer has revoked his acceptance. See A.O. Smith, 123 Fed.Appx. at 619 ; Sw. Bell, 811 S.W.2d at 576 ; Emerson, 201 S.W.3d at 310. “Failure of the buyer to reject even non-conforming goods within a reasonable time and to seasonably notify the seller of rejection automatically results in acceptance of the...