Freight Terminals, Inc. v. Ryder System, Inc.

• Decision Date: 07 June 1972
• Docket Number: No. 71-3056.,71-3056.
• Citation: 461 F.2d 1046
• Parties: FREIGHT TERMINALS, INC., Plaintiff-Appellee, v. RYDER SYSTEM, INC., Defendant-Appellant-Cross Appellee. RYDER TRUCK LINES, INC., Defendant-Appellant, v. MERCURY FREIGHT LINES, INC., Third Party Defendant-Appellee-Cross Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

461 F.2d 1046 (1972)

FREIGHT TERMINALS, INC., Plaintiff-Appellee, v. RYDER SYSTEM, INC., Defendant-Appellant-Cross Appellee.

RYDER TRUCK LINES, INC., Defendant-Appellant, v. MERCURY FREIGHT LINES, INC., Third Party Defendant-Appellee-Cross Appellant.

No. 71-3056.

United States Court of Appeals, Fifth Circuit.

June 7, 1972.

COPYRIGHT MATERIAL OMITTED

Robert J. King, W. Robert Brown, Houston, Tex., for Ryder System, Inc.; Liddell, Sapp, Zivley & Brown, Houston, Tex., of counsel.

Charles R. Gregg, Thomas N. Crowell, Hutcheson, Taliaferro & Grundy, Houston, Tex., for Ryder Truck Lines, Inc.

Royce R. Till, Arno W. Krebs, Jr., Russel H. McMains, Fulbright, Crooker & Jaworski, Houston, Tex., for Mercury Freight Lines, Inc.

William M. Schultz, Albert S. Weycer, Schultz & De Ybarrondo, and Ladin & Weycer, Houston, Tex., for Freight Terminals, Inc.

Before GOLDBERG, DYER and SIMPSON, Circuit Judges.

DYER, Circuit Judge:

In this Texas diversity case Freight Terminals, Inc., as lessor, brought an action for physical damage to its truck terminal facilities against Ryder System Inc. and Ryder Truck Lines, Inc., as lessee, who in turn joined Mercury Freight Lines, Inc. as a third party defendant. A jury found the defendants liable for allowing the property to deteriorate in breach of their obligations under the lease and sublease. We affirm.

In 1950 Freight Terminals, Inc., as lessor, entered into a fifteen year lease agreement with T.S.C. Motor Freight Lines, Inc., as lessee. Freight Terminals had constructed a freight terminal building and yard in contemplation of the lease. With respect to the upkeep of the premises the pertinent parts of the lease provided:

VI.

The Lessor covenants and agrees at its own cost and expense to keep in good condition and repair during the demised term, the roof of the demised premises, exterior walls, and to make such repairs as may be required by inherent structural defects, except those necessitated by the acts of the Lessee.

* * * * * *

VIII.

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Lessee further agrees to suffer no waste upon said premises and shall, at its own expense and costs, keep them in as good repair and condition as when received, including all plumbing, air-conditioning and heating equipment, and shall, at the expiration of this lease, and in whatever manner its termination may be brought about, deliver said premises to Lessor in as good order and condition as they were immediately upon the erection and construction of said building, ordinary wear and tear, and damage by fire, Acts of God and windstorm, alone excepted. . . .

* * * * * *

XIV.

Lessee shall pay and discharge all costs and expenses, including reasonable attorneys\' fees, that shall arise from or in connection with enforcing the covenants and agreements of this lease by Lessor, and all of the covenants and agreements herein described shall extend to and be obligatory upon the successors, assigns or heirs of either and all the parties hereto, it being understood and agreed that the Lessor may at any time assign this lease and all its rights hereunder.

* * * * * *

In 1959 Ryder System, Inc. (System) acquired all of the capital stock of T.S.C., changed the name of T.S.C. to Ryder Truck Lines, Inc. (Truck) and guaranteed the performance of all the lease obligations. Truck continued to utilize the facilities in the operation of its motor freight business until July, 1962.

Prior to Truck's vacating the premises, Freight Terminals became concerned about the condition of the freight yard and the air conditioning system. In early 1961 Freight Terminals learned that bulldozers were scraping and removing the yard's asphalt surface. Later when Freight Terminals became aware of Truck's abandonment of the facilities their concern for the maintenance of the premises increased. The property was located in an area of Houston where vandalism was rampant and unoccupied buildings were more susceptible to ravishment by vandals.

Ladin, president of Freight Terminals, made a physical inspection of the premises in November, 1962. He found the facilities in a deplorable condition. There were broken windows, holes and cracks in the building, loading docks were damaged, most of the electrical system was ripped out or not working, commodes were torn out and the air conditioning system was not operating properly.

In June, 1963, System employed Evans to repair the facilities. Evans found the property in great disrepair when he commenced his renovations. The air conditioning system was repaired, the electrical system restored, doors were fixed and holes in the yard were filled — all for a total cost of approximately $10,000. Evans had estimated that a new asphalt yard surface would cost $9,500: however, System instructed him to simply fill the holes. Evans could have made further necessary repairs to the facilities but in fact did not. During the work Evans had to keep a man physically on the scene at all times because of the continuous threat of vandalism.

After the repairs were made in June the premises again remained vacant until November, 1963 when Mercury Fregiht Lines sub-leased the facilities from System at a reduced rent.¹ Mercury's operation was much smaller than Truck's. Only a portion of the yard and building were utilized. Mercury occupied the terminal facilities until the lease expired in December, 1965.

In February 1965 System and International Utilities Corporation entered into a stock purchase agreement under which International acquired all of System's stock in Truck. In the agreement System represented to International that Truck had complied with the provisions of all outstanding leases² and warranted that there was no litigation, proceeding or investigation pending or threatened which could result in any material or adverse change in the business prospects of Truck.³ System agreed to indemnify International for any inaccuracy or breach of the representations made in the stock purchase agreement.⁴

At the expiration of the lease Freight Terminals again inspected the property and found the doors damaged, windows broken and holes in the building. The interior of the building was not inspected at that time. In March, 1966 pictures were taken which reflected that the condition of the premises was the same as it had been in December, 1965.

Freight Terminals hired Thompson in the spring of 1966 to provide it with a cost estimate of the reparations necessary to restore the facilities to a usable condition. Thompson enumerated all of the damage he found and estimated the cost would be $36,000 to repair and refurbish the building and $36,000 to restore the surface of the yard.

Suit was filed by Freight Terminals in state court in June, 1966 against System and Truck to recover damages as a result of their breach of the lease. System, a Florida corporation with no place of business or agent in the state, was served with process by service upon the Secretary of State pursuant to the Texas long arm statute.⁵ Immediately upon removal System moved to dismiss on the ground that the allegations in the complaint were insufficient to support proper service under art. 2031b.

Truck brought Mercury in as a third party defendant. The district court granted Freight Terminals leave to amend its complaint to correct the pleading error complained of by System in its motion to dismiss. The motion to dismiss was then denied.

In answers to special interrogatories at the conclusion of the trial the jury found that both Truck and Mercury breached the condition in the lease in that the premises were damaged beyond ordinary wear and tear and the excepted obligations of the lessor.⁶ They apportioned the amount of damages between Truck and Mercury⁷ and awarded attorneys' fees to Freight Terminals.

System and Truck were held jointly and severally liable for all damages and attorneys' fees. Truck was granted indemnity against System for all amounts owing to Freight Terminals, together with reimbursement to Truck for its attorneys' fees. Mercury was required to indemnify System for the damages which occurred during its occupancy and for a proportionate share of Freight Terminals' attorneys' fees.

The following specifications of error are raised on this appeal: (1) System contends that the court erred in denying its motion to dismiss on jurisdictional grounds; (2) System, Truck and Mercury argue that the evidence is insufficient as a matter of law to support special interrogatories 4 and 6; (3) System, Truck and Mercury assert that the jury's verdict with respect to apportioning the amounts of damages between Truck and Mercury amounted to a compromise or quotient verdict; (4) System and Truck claim that the court erred in finding the sub-lease with Mercury ambiguous and insufficient to impose liability on Mercury for all damages under the sub-lease agreement; (5) System argues that the court erred in determining that under the stock purchase agreement it was required to indemnify Truck for all damages found in favor of Freight Terminals and further that System was liable for Truck's attorneys' fees; and (6) Mercury contends that it was not liable contractually or otherwise to Freight Terminals for attorneys' fees.

Motion to Dismiss

Immediately upon removal of the case to the district court System filed a motion to dismiss on the grounds that Freight Terminals' allegations failed to allege that System "does not maintain a place of regular business in this State or a designated agent upon whom service may be made." Tex.Civ. Stat.Ann. art. 2031b (1964). Texas strictly construes its long arm statute. Jurisdiction is not conferred unless the complaint alleges all of the jurisdictional facts set out in the statute. McKanna v. Edgar, Tex.1965, 388 S.W.2d 927; Woodcock, Cummings, Taylor & French, Inc. v. Crosswell, 468 S.W.2d 864, 866 (Tex.Civ.App.—Houston, 1st Dist.1971, no writ); compare, Eyerly Aircraft Co. v. Killian, 5 Cir.1969, 414 F.2d 591, 602-604. Subsequently on...