City of Alton v. Sharyland Water Supply Corp.

• Decision Date: 30 May 2013
• Docket Number: No. 13–06–00038–CV.,13–06–00038–CV.
• Citation: 402 S.W.3d 867
• Parties: CITY OF ALTON, Carter & Burgess, Inc., Turner, Collie & Braden, Inc., and Cris Equipment Company, Inc., Appellants, v. SHARYLAND WATER SUPPLY CORPORATION, Appellee.
• Court: Texas Court of Appeals

402 S.W.3d 867

CITY OF ALTON, Carter & Burgess, Inc., Turner, Collie & Braden, Inc., and Cris Equipment Company, Inc., Appellants,

v.SHARYLAND WATER SUPPLY CORPORATION, Appellee.

No. 13–06–00038–CV.

Court of Appeals of Texas, Corpus Christi–Edinburg.

May 30, 2013.

Stephen L. Tatum, Tolbert L. Greenwood, Cantley, Hanger, LLP, Fort Worth, Jeffrey D. Roerig, Rene O. Oliveira, Roerig Oliveira & Fisher, L.L.P., Brownsville, Rosemary Conrad–Sandoval, Roerig Oliveira & Fisher, L.L.P., McAllen, John B. Wallace, Hartline Dacus Barger Dreyer, Houston, Darrell L. Barger, Hartline Dacus Barger Dreyer, Corpus Christi, Marcus Montalvo, Montalvo & Ramirez, McAllen, Eileen M. Leeds, Guerra, Leeds, Sabo & Hernandez, PLLC, Brownsville, for Appellants.

J.W. Dyer, Dyer & Associates, McAllen, for Appellee.

Before Chief Justice VALDEZ and Justices RODRIGUEZ and GARZA.

OPINION ON REMAND

Opinion on Remand by Justice RODRIGUEZ.

This case involves an appeal from a judgment in a jury trial. It is before us on remand to address appellee Sharyland Water Supply Corporation's (Sharyland) negligence claim against appellants Carter & Burgess, Inc. (C & B), Turner, Collie & Braden, Inc. (TCB), and Cris Equipment Company, Inc. (Cris) (collectively, the contractors).¹See City of Alton, Carter & Burgess, Inc., Turner, Collie, & Braden, Inc. & Cris Equip. Co. v. Sharyland Water Supply Corp., 277 S.W.3d 132, 138–41 (Tex.App.-Corpus Christi, 2009), aff'd in part, rev'd and rendered in part, and rev'd and remanded in part,354 S.W.3d 407, 424 (Tex.2011).² On remand, the contractors contend that there was no evidence to establish that (1) C & B or Cris owed a duty to Sharyland; (2) C & B breached any duty owed; and (3) C & B, TCB, or Cris proximately caused Sharyland to suffer any damages. By a fourth issue, the contractors challenge the sufficiency of the evidence supporting the reasonableness of the jury's damages award. We affirm in part and reverse and render in part.

I. Background

In the early 1980s, Alton built a water distribution system and conveyed it to Sharyland in exchange for Sharyland's agreement to provide Alton residents with fresh water.³ In the 1990s, Alton received financing to construct a sanitary sewer system. Until the construction of the sewer system, Alton residents relied on a sewage disposal system that consisted of septic tanks and open ditches. Part of the septic system was built in the public right-of-way and another part connected the septic system from the public right-of-way to individual houses. For the public right-of-way phase, Alton retained the services of L.L. Rodriguez and Associates to design the system, TCB, an engineering company, to engineer and inspect the system, and C & B, an engineering company, to manage construction of the sewer system. Alton also hired Cris, a contractor, to build the system. Cris subcontracted with Grab Pipeline Services, Inc. to assist in the installation.⁴ The construction of the sewer system was completed in 1999.

To reach the houses on one side of the street, the sewer lines had to pass over or under the water main. Beginning in late 1999 or early 2000, Sharyland dug up some of the sites where the sewer lines crossed the water main. Sharyland expressed a concern that service lines crossing over the water main (rather than under the water main) did not have the required separation distance from the water main and that the crossings were not “centered” so that joints in the sewer service lines were as far from the water main as possible. When Sharyland and Alton could not work out an agreement over the service line crossings, Sharyland filed this lawsuit against Alton and the contractors. Sharyland asserted, among other things, that it was a third party beneficiary of the construction contracts because the sewer lines at issue were constructed in a manner which was not in conformance with regulatory standards or with the industry, engineering, and common law standard of care to be taken when constructing new sewer lines in the proximity of water lines. Sharyland also alleged that Alton and the contractors acted negligently in violating the duties created in contract or in not fulfilling their statutory and common law duties created under the law.

The contractors generally denied Sharyland's claims. As to Sharyland's contract claim, the contractors specifically pleaded that Sharyland was not a third party beneficiary of any contract or agreement with Alton or any other entity. As to Sharyland's negligence claims, the contractors denied that they owed any legal duty to Sharyland and, if there was a legal duty, that their breach, if any, did not proximately cause damages. They claimed that section 317.13 of title 30 of the Texas Administrative Code, which sets out the design criteria for sewerage systems, did not apply to the service connections at issue. See 30 Tex. Admin. Code § 317.13(1)(A)-(B), repealed by 33 Tex. Reg. 6938 (2008).⁵ They also asserted that any damages were economic and, thus, barred by the economic loss doctrine.

The case was tried to a jury, which found that the contractors failed to comply with their contracts with Alton and that Sharyland was a third party beneficiary to all of the contracts. It also found the contractors negligent, proximately causing damages to Sharyland (C & B was found 20% responsible, Cris 40%, and TCB 40%). The jury awarded Sharyland past damages of $14,000 and future damages of $1,125,000 as the reasonable cost of repairs necessary to restore the property to its condition immediately before the injury. The trial court entered judgment against the contractors.

On appeal, this Court reversed and rendered judgment that Sharyland take nothing on its breach of contract claims against the contractors because Sharyland was not a third party beneficiary to any construction contracts. City of Alton, 277 S.W.3d at 155. We also rendered judgment that Sharyland take nothing on its negligence claims against the contractors because Sharyland's water system had not been damaged, and with purely economic damages, the economic loss rule barred Sharyland's tort claims. Id. at 154.

Sharyland appealed to the Texas Supreme Court. See Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 411–12 (Tex.2011). Relevant to this appeal, the supreme court reversed our judgment on Sharyland's negligence claims against the contractors. Id. at 420. It concluded that “the economic loss rule[, which bars a party from recovering in negligence or strict liability for purely economic losses,] does not preclude Sharyland's negligence claim against [the contractors]” because Sharyland's water system was damaged. Id. In other words, the supreme court concluded that the economic loss rule did not apply because there were damages to Sharyland's water system. According to the supreme court, Sharyland's water system was damaged because,

Sharyland's system once complied with the law, and now it does not. Sharyland is contractually obligated to maintain the system in accordance with state law and must either relocate or encase its water lines. These expenses, imposed on Sharyland by the contractors' conduct, were the damages the jury awarded. Costs of repair necessarily imply that the system was damaged, and that was the case here.

Id. And regarding “whether [the economic loss rule] should apply at all in a situation like this,” the supreme court reasoned as follows:

Merely because the sewer was the subject of a contract does not mean that a contractual stranger is necessarily barred from suing a contracting party for breach of an independent duty. If that were the case, a party could avoid tort liability to the world simply by entering into a contract with one party.

Id. at 418–19.

In addition, Sharyland argued before the supreme court “that the contractors failed to maintain the required minimum distance between water lines and sewer lines, failed to center the sewer pipes, and negligently installed those pipes above the water lines in violation of section 317.13.” Id. at 422. In response, the contractors contended “that section 317.13 applied purely to sewer mains, and not the residential sewer lines[, the only portions of Alton's sewer system] at issue here.” Id. The contractors argued “that Sharyland's entire case hinged on the 317.13 violation, and without it, there is no basis for finding that the contractors were negligent.” Id. at 421. The supreme court disagreed with the contractors' argument. It determined that, as a matter of law, section 317.13 unambiguously applied to all sewer lines in this case, including the residential sewer lines.⁶Id. at 423. It provided the following explanation:

Nowhere in chapter 317 were residential service connections excluded from the general meaning of “sewers” or “sanitary sewers.” To the contrary, the breadth of the terms implies the definition that dictionaries give it: that is, underground pipes carrying domestic or industrial waste. We agree with the trial court that section 317.13 applied to the sewer lines in this case....

Id.

The supreme court remanded the case to this Court to address the negligence issues involving Sharyland and the contractors, issues we did not reach in our earlier opinion. See id. at 424.

II. Applicable Law and Standard of Review

A. Negligence

“Negligence arises when an actor breaches a legal duty in tort, and the breach proximately causes damages.” Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d 238, 246 (Tex.2008).

1. Duty

Because the threshold inquiry in a negligence case is duty, Sharyland must first establish that the contractors owed a legal duty to it. See Nabors Drilling, U.S.A., Inc. v. Escoto, 288 S.W.3d 401, 404 (Tex.2009); Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex.1995); Yeager v. Drillers, Inc., 930 S.W.2d 112, 115 (Tex.App.-Houston [1st Dist.] 1996, no writ) (holding that “duty is the threshold question in a negligence case”). A duty is a legal...