GT & MC, Inc. v. Texas City Refining, Inc.

• Decision Date: 19 December 1991
• Docket Number: No. 01-90-01096-CV,01-90-01096-CV
• Citation: 822 S.W.2d 252
• Court: Texas Court of Appeals
• Parties: GT & MC, INC., f/k/a Graver Tank and Manufacturing Company, Inc., a Subsidiary of Aerojet-General Corporation, Appellant, v. TEXAS CITY REFINING, INC., Appellee. (1st Dist.)

Page 252

822 S.W.2d 252

GT & MC, INC., f/k/a Graver Tank and Manufacturing Company Inc., a Subsidiary of Aerojet-General Corporation, Appellant, v. TEXAS CITY REFINING, INC., Appellee.

No. 01-90-01096-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Dec. 19, 1991.

Rehearing Denied Feb. 13, 1992.

Otto D. Hewitt, James R. Ansell, James Galbraith, Galveston, for appellant.

R. Lawrence Purdy, Minneapolis, George D. Martin, Galveston, John C. Hart, Dallas, for appellee.

Before SAM BASS, HUGHES and DUNN, JJ.

OPINION

DUNN, Justice.

The issue in this case is whether a trial court may award consequential damages arising from breach of an express warranty for design requirements, when the contract in question limits the aggrieved party's damages to repair or replacement only for workmanship and materials defects. We hold that the trial court correctly interpreted and enforced the parties' agreement and, therefore, affirm.

This is an appeal from a lawsuit for damages arising out of the failure of an oil tank designed, manufactured, and installed by appellant, GT & MC, Inc. at the Texas City, Texas, facility of appellee, Texas City Refining, Inc. ("TCR"). The tank, designated Tank 089, is 340 feet in diameter and 48 feet high, with a capacity of 750,000 barrels of oil. The critical feature of the tank, for purposes of this appeal, is the roof, a patented design called an "Everfloat" roof, designed to float on the surface of the oil in the tank. Floatation is provided by a circular segmented ring pontoon that forms the circumferential outer edge of the roof and by multiple pontoons of various sizes spread over the remaining area of the roof. When oil is added, the roof rises, and as oil is withdrawn, the roof lowers.

The cause of action was based on breach of warranty. Appellant expressly warranted the tank and roof to withstand a wind velocity of 125 miles per hour, and to further withstand 10 inches of rainfall in a 24 hour period, even when the roof drains were blocked.

On August 17 and 18, 1983, Hurricane Alicia struck the Texas coast. Testimony at trial established that winds during the storm did not exceed 125 miles per hour at the TCR facility and that the rainfall did not exceed the 10 inch per 24 hour period design limit. Nevertheless, during the hurricane, the Everfloat roof sank, resulting in a loss of approximately 38,754 barrels of crude oil. TCR established that it incurred expenses in repairing the tank and roof, renting substitute tank space during the repair period, and transferring the oil from Tank 089 to substitute tanks.

TCR brought suit against appellant, seeking recovery for these damages. The jury awarded TCR $380,000 for loss of use of the tank and $570,000 for the value of crude oil lost, and the trial court entered judgment for the combined amount, plus interest.

Appellant does not contest any of the facts relating to its breach of express warranty, but asks this Court to reverse and render judgment that TCR take nothing by way of its suit. In six points of error, appellant claims that the trial court erred and abused its discretion in refusing to enforce the provision of the contract pertaining to damages. Appellant maintains that it was entitled to judgment notwithstanding the verdict as a matter of law or alternatively, a new trial, where lost use and lost product damages were not recoverable under the contract.

In order for a trial court to disregard a jury's findings and to grant a motion for judgment notwithstanding the verdict, it must determine that there is no evidence upon which the jury could have relied for its findings. Exxon Corp. v. Quinn, 726 S.W.2d 17, 19 (Tex.1987); Navarette v. Temple Indep. School Dist., 706 S.W.2d 308, 309 (Tex.1986). A trial court may refuse to grant a motion for judgment notwithstanding the verdict only if there is more than a scintilla of competent evidence to support the jury's finding. Navarette, 706 S.W.2d at 309. The standard of review for a trial court's refusal to grant a motion for new trial is that of abuse of discretion. Jackson v. Van Winkle, 660 S.W.2d 807, 809 (Tex.1983).

Our consideration of point of error one is dispositive of appellant's points of error one and two. Appellant states that the trial court erred and abused its discretion in entering judgment for plaintiff and denying defendant's motion for judgment or alternatively judgment notwithstanding the verdict and motion for new trial, because the contract expressly limited breach of warranty damages exclusively to repair or replace defective material or workmanship.

The Texas Supreme Court recently concluded that warranty law applies to both service transactions, as well as to sales of goods. Southwestern Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 574-75 (Tex.1991). Thus, we need not reach the issue of whether this transaction was for services or for goods, as urged by appellee. We do, however, utilize case law that has evolved from the law of contracts, as well as from interpretation of the Uniform Commercial Code, for guidance.

Our analysis begins with the language of the contract. In construing a written contract, the primary concern of the court is to ascertain the parties' true intentions as expressed in the instrument itself. Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529 (Tex.1987). If the written instrument is worded so that it can be given a certain definite meaning or interpretation, then it is not ambiguous, and the court will construe the contract as a matter of law. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983); City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex.1968); Community Dev. Serv., Inc. v. Replacement Parts Mfg., 679 S.W.2d 721, 724 (Tex.App.--Houston [1st Dist.] 1984, no writ).

Section 2.316 of the Uniform Commercial Code, TEX.BUS. & COM.CODE ANN. § 2.316 (Vernon 1968), specifies that "words or conduct relevant to the creation of an express warranty and words of conduct tending to negate or limit warranty shall be construed whenever reasonable as consistent with each other...." (Emphasis added.) Thus, we must examine whether the express warranty pertaining to design was limited under the contract.

The contract between TCR and appellant consisted of TCR's bid request (Request for Quotation), appellant's bid proposal, drawings, specifications, contractor list of bid documents, contractor clarification of exceptions, contractor rules and regulations, and detailed drawings and instructions consistent with the drawings and specifications necessary for proper execution of the work, and representations made in advertising materials. The Request for Quotation contains language in section 15.3, titled "Protection of Work and Property," that excludes liability for consequential damages with respect to appellant's construction obligations; however, this section also references workmanship guarantees in section 4.0 that limit damages to repair or replacement of defective materials or workmanship. The scope of "workmanship" is discussed in section 10.0, as follows:

WORKMANSHIP

All of the work shall be executed by none but experienced mechanics and shall be of the highest quality and complete in all respects and appearance, whether finally concealed or exposed.

The Request for Quotation was dated April 22, 1980, and was referenced in the contract, dated May 12, 1980, as follows:

Thank you for your inquiry dated April 22, 1980.

In accordance with the terms, conditions and specifications set forth in your inquiry, except as may be hereinafter amplified or amended, we propose to furnish, fabricate, deliver and erect on your foundations at Texas City, Texas, One (1) 340' diameter X 48' high Floating Roof Tank as shown on our design sketch 80-76 dated April 29, 1980 for the price shown on the attached price schedule.

The section titled "Guarantee " specifies:

Any workmanship or material that may prove defective within one year from the date of completion of erection, ordinary wear and tear excepted, will be repaired or replaced without expense to you. We do not, however, accept responsibility for other costs, for loss of time or contents, or for other damages that may be attributed to such defects.

(Emphasis added.) Our review of the documents and of the record failed to produce any other evidence offered by the parties to clarify the term "workmanship."

Language used by parties in a contract should be accorded its plain, grammatical meaning unless it definitely appears that the parties' intention would thereby be defeated. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex.1985). An unambiguous writing will be deemed to express the intention of the parties, and the objective, not subjective, intent will control. Pfeffer v. Southern Tex. Laborers' Pension Trust Fund, 679 S.W.2d 691, 695 (Tex.App.--Houston [1st Dist.] 1984, writ ref'd n.r.e.). Parties to a contract may agree on remedies for breach and that the agreed remedy is exclusive. O'Neal v. Bush & Tillar, 108 Tex. 246, 173 S.W. 869, 870 (Tex.1915). If the parties agree in writing on limitation of the warranty, the seller is not bound by the warranty beyond the terms of the agreed limitation. John Deere Co. v. Tenberg, 445 S.W.2d 40, 43 (Tex.Civ.App.--Beaumont 1969, no writ).

At trial, appellee demonstrated that appellant breached its express warranty that the storage tank would withstand wind loads of 125 miles per hour and rainfall of 10 inches per 24 hour period. Appellant does not contest either the fact of the design warranty or breach of that warranty. Once appellee established the warranty and breach of the warranty, it was entitled to pursue any and all remedies for damages, unless the warranty was disclaimed or liability for breach was limited. See, e.g., TEX.BUS. & COM.CODE ANN. §§ 2.316, 2.719 (Vernon 1968). Appellant did neither.

We hold that the language in the contract of May 12, 1980, expressly limited TCR's recovery only for defects in materials...