Petroleum Solutions, Inc. v. Head

• Decision Date: 29 April 2011
• Docket Number: No. 13–09–00204–CV.,13–09–00204–CV.
• Citation: 454 S.W.3d 518
• Parties: PETROLEUM SOLUTIONS, INC., Appellant, v. Bill HEAD d/b/a Bill Head Enterprises and Titeflex Corporation, Appellees.
• Court: Texas Court of Appeals

454 S.W.3d 518

PETROLEUM SOLUTIONS, INC., Appellant

v.Bill HEAD d/b/a Bill Head Enterprises and Titeflex Corporation, Appellees.

No. 13–09–00204–CV.

Court of Appeals of Texas, Corpus Christi–Edinburg.

April 29, 2011.

Jennifer Bruch Hogan, Richard P. Hogan, Jr., Hogan & Hogan, LLP, Matthew E. Coveler, Houston, Michael A. McGurk, Kittleman, Thomas, Ramirez & Gonzales, Victor A. Vicinaiz, Roerig, Oliveira & Fisher, Zuleida Lopez, McAllen, TX, for Appellant.

Donald Grissom, William W. Thompson, III, Grissom & Thompson, Austin, George P. Powell, McAllen, Craig S. Smith, Roberta Dohse, Hoblit Ferguson Darling, Corpus Christi, Benjamin C. Nichols, Thomas Anthony Cowen, Gonzales Hoblit Ferguson LLP, San Antonio, TX, for Appellee.

Before Chief Justice VALDEZ and Justices RODRIGUEZ and VELA.

MEMORANDUM OPINION

Memorandum Opinion by Chief Justice VALDEZ.

This appeal pertains to a substantial leak of diesel fuel from an underground storage system located at the Silver Spur Truck Stop in Pharr, Texas. By thirteen issues, appellant, Petroleum Solutions, Inc. (“PSI”), challenges the jury's verdict in favor of appellees, Bill Head d/b/a Bill Head Enterprises (“Head”) and Titeflex, Inc., and sanctions issued by the trial court, which included the assessment of costs against PSI, the striking of PSI's affirmative defenses, and a jury instruction that PSI destroyed, lost, or failed to produce material evidence, namely a flex connector that PSI asserted was the cause of the underlying leak. PSI further argues that: (1) it is entitled to judgment on Head's breach of fiduciary duty, fraud, breach of contract, breach of warranty, and negligence claims; (2) it is entitled to judgment on Titeflex's indemnity claims; (3) the trial court erred in failing to properly instruct the jury on overlapping damages; (4) Head is not entitled to attorney's fees or pre-judgment interest; (5) the judgment improperly disregarded the jury's proportionate responsibility finding; and (6) it is entitled to judgment on its claims against Head for payment to clean-up of the leak. We affirm, in part, and reverse and remand, in part.

I. BACKGROUND

Head began his career as a truck driver and eventually began acquiring trucks to establish a trucking business. At the same time, he worked part-time for a truck broker in Edinburg, Texas. Head desired to open his own trucking brokerage and truck stop. In 1991, Head purchased what was once known as The Tapadera, which is located in Pharr, Texas.¹ Head renamed the facility the Silver Spur Truck Stop. The facility included nineteen acres of land, a restaurant, an office, and three steel underground tanks and fuel dispensers. In 1996, Head added a motel to the truck stop. The facility was operated as a truck stop and as a brokerage center for trucks shipping products between Mexico and the United States.

A. PSI's Installation of a New Underground Storage Tank System

Shortly after purchasing the property, Head discovered that one of the steel underground tanks failed a required tightness test, which resulted in it being removed from service. Later, the Texas legislature passed a new law requiring that steel underground storage tanks be replaced or modified to protect against leaks. In response to the new law, in 1996, Head contracted with PSI to install a new fiberglass underground storage tank system. Head selected PSI to do the work because PSI was local and he had heard good things about the company. In fact, PSI is exclusively engaged in the business of installing, repairing, maintaining, and removing underground-storage-tank systems and compliance issues related to those systems, and as Mark Barron, the president of PSI and Environmental Risk Management (“ERM”), testified, PSI is a leader in this industry.

PSI's proposal to Head included the removal of the three steel tanks and the installation of two twenty-thousand-gallon, double-walled fiberglass tanks to be used to store diesel fuel. Though State regulations did not require that the tanks be double-walled, Head agreed to PSI's proposal and work began. Acting on Head's behalf, PSI filed a construction application with the Texas Natural Resource Conservation Commission (the “TNRCC”), now known as the Texas Commission on Environmental Quality. After receiving approvals from the TNRCC, PSI removed the old steel tanks and installed the new fiberglass tanks in a different area from where the steel tanks were previously installed. Barron testified that:

First off, we installed the new underground storage tanks those two 20,000–gallon storage tanks. We then probably took their system out of service because we had to build new trenches to the existing dispensers to run new piping, which we did, and after we dug the tanks or installed the tanks, dug the trenches, installed the piping, modified the existing electrical to run to the new system, hook up the existing pumps that we moved from their old system to the new tanks, hooked all that up, backfilled, powered concrete, checked everything out, did testing on the tanks and the lines as it's required, started to open business, then we moved the old system. That's the whole project, basically.

PSI completed construction on the new system in 1997.

B. PSI's Installation of a New Release Detection System

According to Bill Morris, an inspector for PSI and a previous employee of the TNRCC, on December 22, 1998, the State enacted new regulations requiring improved release detection methods. Among the methods approved for usage by the State was an automatic tank gauging system (“ATG”), which reconciles fuel lost and added to the storage tanks to determine if a release has occurred.² At the time, Head was using the stick method, gauging fuel in the underground storage tanks using long, calibrated measuring sticks. In response to the new regulation, PSI recommended that Head install a new ATG system. PSI told Head that the ATG system “was supposed to do all the work and should—should alert us whenever we had a leak.” Further, based on the advice of PSI, Head agreed to the installation of the ATG system. PSI completed the installation of the ATG system in October 1999. Because of the ATG system, Head discontinued using the stick method to monitor inventory levels.

C. Problems With the Release Detection System

Shortly after PSI installed the underground storage tank and ATG systems, Head began to experience many problems. Between 1997 and 2001, Head requested that PSI maintain and/or repair the system numerous times.³ Head testified that PSI's systems caused him more problems than his old system and that PSI serviced the systems on a “[p]retty regular [basis].” Head recalled that the ATG system was usually the reason for the problems. Head authorized Robert Carpenter, the manager of the Silver Spur Truck Stop, to contact PSI whenever a problem arose with the systems. Carpenter recalled that PSI was the exclusive entity that maintained and repaired the systems.

In late October 2001, Carpenter went on vacation. When he returned in early November 2001, Carpenter discovered additional problems with the underground storage tanks. Gilbert Obregon, a clerk at the Silver Spur Truck Stop, testified that, when reconciled each month, the ATG system always revealed an overage or shortage with respect to the amount of diesel fuel purchased and the amount of fuel in the storage tanks. Oddly, at the end of October, Obregon noticed that the ATG system reconciled 100 percent. Nevertheless, while Carpenter was on vacation, the inventory numbers became more volatile. Carpenter described the volatility as such:

The numbers of the inventory didn't match up, but it was taken off the ATG. They were bouncing back and forth within the time I was gone. One day we would have a minus fuel, and the next day a plus fuel, which would balance out, but as time progressed on, these numbers —it became evident that there was a potential problem on hand.⁴

As a result of his observations, Carpenter notified PSI. Head allowed PSI to investigate the systems to determine the extent and source of the perceived problem.

D. The Leaking of Diesel Fuel

In the course of its investigation, PSI discovered that a major release of diesel fuel had occurred. Experts estimated that more than 20,000 gallons of diesel fuel was recovered from underground. Barron acknowledged that the fuel had leaked “quite aways [sic]” from the Silver Spur Truck Stop, including a drainage ditch that bordered the property and that he had “no idea how much [diesel fuel] they lost.”⁵ Carpenter denied seeing any diesel fuel on the asphalt surrounding the truck stop; however, one of Head's expert witnesses, Daniel Airey, an environmental consultant for Ranger Environmental Services (“Ranger”), stated that, based on a monitor well Ranger implemented on the northern side of the truck stop, diesel fuel leaked from 5.78 feet to 19.95 feet underground. Airey further noted that diesel fuel had leaked into the water table, which is located at 18.82 feet underground where the monitor well was placed. Upon discovering that a major leak had occurred, Barron traveled to the scene. Barron admitted that when he was told about the leak, he anticipated that PSI would be sued because PSI had installed the underground storage tank and ATG systems.

E. PSI's Determination of the Source of the Leak

Several PSI employees investigated the underground storage tank system to determine the cause of the leak.⁶ PSI examined the double-walled fiberglass tanks, the system's piping, and the dispensers. Barron testified that the tanks were subjected to two pressurized leak tests, both of which they passed. PSI then tried to test the system's piping, but PSI could not “establish pressure on the piping.” Based on the inability of the system's piping to establish pressure, PSI concluded that the leak must be located somewhere within the piping system.

Later, Barron approached Carpenter and informed him that the source of the leak was a faulty flex connector located...