Oasis Oil Corp v. Koch Refining Co.

• Decision Date: 23 August 2001
• Docket Number: No. 13-00-243-CV,13-00-243-CV
• Citation: 60 S.W.3d 248
• Parties: (Tex.App.-Corpus Christi 2001) OASIS OIL CORPORATION AND OASIS TRANSPORTATION AND MARKETING CORPORATION v. KOCH REFINING COMPANY L.P., Appellee
• Court: Texas Court of Appeals

Page 248

60 S.W.3d 248 (Tex.App.-Corpus Christi 2001)

OASIS OIL CORPORATION AND OASIS TRANSPORTATION AND MARKETING CORPORATION v. KOCH REFINING COMPANY L.P., Appellee.

No. 13-00-243-CV

COURT OF APPEALS OF TEXAS, CORPUS CHRISTI

August 23, 2001

Rehearing Overruled November 8, 2001

On appeal from the 347th District Court of Nueces County, Texas. [Copyrighted Material Omitted] Before Chief Justice Valdez and Justices Yanez and Rodriguez

OPINION

Opinion by Chief Justice Rogelio Valdez

Appellants, Oasis Oil Corporation and Oasis Transportation and Marketing Corporation ("Oasis"), sold a product manufactured by appellee Chemical Process & Production, Inc. ("CP&P"), to Koch Refining Company ("Koch"). The product allegedly damaged Koch's refinery. Koch brought suit against Oasis, which sought indemnity from CP&P under chapter 82 of the Texas Civil Practice and Remedies Code. See Tex. Civ. Prac. & Rem. Code Ann. §§ 82.001 - 82.006 (Vernon 1997). CP&P filed both traditional and no-evidence motions for summary judgment, and the trial court granted summary judgment in favor of CP&P. The dispositive question in this appeal is whether Oasis, the seller of the product, was entitled to indemnity from CP&P, the manufacturer, against loss arising from the product liability action instituted by Koch. Because we find that the summary judgment cannot stand on any ground asserted by CP&P, we reverse and remand.

Factual and Procedural Background

In reviewing the summary judgment record, the appellate court must resolve all factual disputes and indulge all inferences in favor of the non-movant. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). Accordingly, although there are numerous factual disputes in this case, the following statement of facts resolves those conflicts in favor of Oasis.

The main parties in the underlying litigation were Whytecliff, CP&P, Oasis, and Koch. Whytecliff owned a large quantity of a naphtha product, which is a hydrocarbon, and Whytecliff contracted with CP&P to process that naphtha product for sale. Whytecliff's naphtha product was unusually high in organic chlorides, which can damage processing facilities by forming hydrochloric acid during high-temperature processing. Accordingly, Whytecliff had the levels of organic chlorides tested, and provided that testing data to CP&P. Despite the high organic chloride levels, CP&P nevertheless agreed to accept a fee in exchange for distilling Whytecliff's naphtha product. One of the distillates from CP&P's processing was a substance called "overheads," also referred to as crude naphtha. CP&P's distillation process increased the concentration of the harmful organic chlorides in the crude naphtha overheads by four fold.

CP&P then contacted Oasis and asked if Oasis was interested in buying Whytecliff's crude naphtha overheads. Oasis is an oil gatherer that sells hydrocarbons to Koch, which then further refines the petrochemicals. When CP&P contacted Oasis about buying the crude naphtha, CP&P provided Oasis with a certified chemical analysis that identified the product as crude naphtha with certain additional distillates and by-products. This certified chemical analysis CP&P provided to Oasis did not reveal the presence of organic chlorides in the crude naphtha, and CP&P did not provide Oasis with the chemical analysis of the organic chloride levels that Whytecliff had provided to CP&P. Oasis purchased the crude naptha overheads, then sold them to Koch.

Oasis delivered the crude naphtha with high organic chloride levels into Koch's pipeline system. Subsequently, Koch claimed that the high organic chloride levels damaged Koch's plant, and Koch consequently sued Oasis. No party disputes that Koch's claims against Oasis fell within the definition of a product liability action under chapter 82 of the Texas Civil Practice and Remedies Code. See Tex. Civ. Prac. & Rem. Code Ann. §§ 82.001 - 82.006 (Vernon 1997). Ultimately, Oasis settled with Koch for $700,000 and brought a claim for indemnity against CP&P under chapter 82. See id. at §82.002 (manufacturer's duty to indemnify).

CP&P filed a conventional motion for summary judgment, which was denied. CP&P later filed a no-evidence motion for summary judgment that also reasserted its conventional motion for summary judgment, and the trial court granted the motion for summary judgment without specifying the basis for its ruling. This summary judgment was then appealed to this Court.

Standard of Review

The function of a summary judgment is to eliminate patently unmeritorious claims and untenable defenses. Gulbenkian v. Penn, 252 S.W.2d 929, 931 (Tex. 1952); see also Chambers v. City of Lancaster, 843 S.W.2d 143, 146 (Tex. App.-Dallas 1992), aff'd in part, rev'd in part on other grounds, 853 S.W.2d 650 (Tex. 1994) (citing Gulbenkian, 252 S.W.2d at 931). The Texas Supreme Court has established the following standards for reviewing a motion for summary judgment:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true.

3. Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor.

Nixon, 690 S.W.2d at 548-49.

The summary judgment movant must establish its entitlement to summary judgment as a matter of law on each cause of action alleged. Clark v. First Nat'l Bank of Highlands, 794 S.W.2d 953, 955 (Tex. App.-Houston [1st Dist.] 1990, no writ);see also Tex. R. Civ. P. 166a(c). When the defendant is the movant, summary judgment is proper only if the plaintiff cannot succeed upon any theory pleaded as a matter of law. Chambers, 843 S.W.2d at 146 (citing Peirce v. Sheldon Petroleum Co., 589 S.W.2d 849, 852 (Tex. Civ. App.-Amarillo 1979, no writ)). The defendant must either conclusively negate an element from each of the plaintiff's causes of action or conclusively establish every element of an affirmative defense. Chambers, 843 S.W.2d at 147 (citing Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex. 1970); Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972)). In response, the plaintiff can bar summary judgment by presenting evidence that creates a fact question on the challenged elements of the plaintiff's case or by showing that the defendant's legal position is unsound. Chambers, 843 S.W.2d at 147 (citing Puga v. Donna Fruit Co., 634 S.W.2d 677, 680-81 (Tex. 1982); Torres v. Western Cas. & Sur. Co., 457 S.W.2d 50, 52 (Tex. 1970); Estate of Devitt, 758 S.W.2d 601, 602 (Tex. App.-Amarillo 1988, writ denied)).

When a motion for summary judgment is based on no-evidence grounds, the Texas Supreme Court has ordered that the courts must apply these rules in light of the following additional caveats:

1. the no-evidence motion can only be brought against "a claim or defense on which an adverse party would have the burden of proof at trial," Tex. R. Civ. P. 166a(i);

2. "the motion must state the elements as to which there is no evidence," Id.;

3. "the motion must be specific in challenging the evidentiary support for an element of a claim," Tex. R. Civ. P. 166a cmt.;

4. "paragraph (i) does not authorize conclusory motions or general no-evidence challenges to an opponent's case," Id.;

5. "its response need only point out evidence that raises a fact issue on the challenged elements," Id.; and

6. "the respondent is not required to marshal its proof." Id.

"The trial court may not grant a no-evidence summary judgment if the respondent brings forth more than a scintilla of probative evidence to raise a genuine issue of material fact." Zapata v. The Children's Clinic, 997 S.W.2d 745, 747 (Tex. App.-Corpus Christi 1999, no pet.).

Applicable Law

In product liability actions, Texas law clearly distinguishes between negligence claims based on conduct and strict liability claims based on products. In the American Tobacco Co. v. Grinnell case, for example, the Texas Supreme Court explained the distinction as follows:

negligent design and manufacturing claims are conceptually distinguishable from the strict liability claims. While strict liability focuses on the condition of the product, "[n]egligence looks at the acts of the manufacturer and determines if it exercised ordinary care in design and production." Negligent design and manufacturing claims are predicated on the existence of a safer alternative design for the product.

Amer. Tobacco Co., Inc. v. Grinnell, 951 S.W.2d 420, 437 (citing Caterpillar, Inc. v. Shears, 911 S.W.2d 379, 384-85 (Tex. 1995); Gonzales v. Caterpillar Tractor Co., 571 S.W.2d 867, 871-72 (Tex.1978)).

When a products liability action is submitted to the jury on a theory of negligent manufacture or negligent design, the defendant is held liable based on proof that its negligent conduct proximately caused the claimant's damages. See Torrington Co. v. Stutzman, 46 S.W.3d 829, 836-37 (Tex. 2000). In contrast, when a products liability action is submitted to the jury on a strict liability theory, the defendant is held liable based on proof that it placed the product into the stream of commerce and upon further proof that the defective product was a producing cause of the claimant's damages. See Firestone Steel Prods. Co. v. Barajas, 927 S.W.2d 608, 613 (Tex. 1996). This distinction is critical because strict liability claims are based on the product and, therefore, strict liability claims may be asserted against "innocent sellers" ¹ who have no culpable responsibility except for their role as an intermediary seller that merely received a defective product and unknowingly sold it down the stream of commerce. See generally id.

To balance the right of consumers to sue any party who places a product into the stream of commerce against the potential unfairness of subjecting significant...