Rt Realty, L.P. v. Texas Utilities Elec., 05-04-00302-CV.

• Decision Date: 13 January 2006
• Docket Number: No. 05-04-00302-CV.,05-04-00302-CV.
• Citation: 181 S.W.3d 905
• Parties: RT REALTY, L.P.; Aetna Casualty and Surety Company n/k/a Travelers Casualty and Surety Company; Lexington Insurance Company; Allstate Insurance Company; Dr. Karl A. Kuchenbacker, P.C.; Wilson, White & Copeland, L.L.P.; and Bailey Vaught Robertson & Company, Appellants, v. TEXAS UTILITIES ELECTRIC COMPANY, Appellee.
• Court: Texas Supreme Court

181 S.W.3d 905

RT REALTY, L.P.; Aetna Casualty and Surety Company n/k/a Travelers Casualty and Surety Company; Lexington Insurance Company; Allstate Insurance Company; Dr. Karl A. Kuchenbacker, P.C.; Wilson, White & Copeland, L.L.P.; and Bailey Vaught Robertson & Company, Appellants, v. TEXAS UTILITIES ELECTRIC COMPANY, Appellee.

No. 05-04-00302-CV.

Court of Appeals of Texas, Dallas.

January 13, 2006.

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E. Stratton Horres, Jr., Rebecca M. Alcantar, Jeffery O. Marshall, Wilson Elser Moskowitz Edelman & Dicker, LLP; William E. Bailey, Law Offices of William E. Bailey; Lawrence T. Bowman, Cozen & O'Connor, P.C.; James Robert Krause, Lawrence J. Friedman, Friedman & Feiger, L.L.P.; Del W. Mecham, Jr.; Claude R. Wilson, Jr., Vial Hamilton, Koch & Knox, Dallas, for Appellants.

Travis E. Vanderpool, Worsham, Forsythe, Sampels & Wooldridge; Melanie Irene Kemp, Dallas, for Appellee.

Before Justices WHITTINGTON, MOSELEY, and LANG-MIERS.

OPINION

Opinion by Justice LANG-MIERS.

We deny Wilson, White & Copeland, L.L.P.'s motion for rehearing. On our own motion, we withdraw our opinion of November 21, 2005 and vacate our judgment of that date. This is now the opinion of the Court. This is an appeal of the order granting summary judgment dismissing claims against Texas Utilities Electric Company (TU Electric) and granting a motion for sanctions dismissing claims against TU Electric because of RT Realty's spoliation of evidence. For the reasons that follow, we affirm.

BACKGROUND

Republic Tower II is a fifty-story office tower in downtown Dallas that was built in the 1960s. TU Electric provided electric service for Tower II through the underground network that supplies electrical power to all of the Dallas central business district. During construction, TU Electric representatives and representatives of the builder, architect, and owner (collectively, the customer) worked together to design the electrical vault that would house the equipment needed to supply the 480-volt service requested by the customer. TU Electric specified the weight and size of the transformers to be placed in the vault and the airflow required. The customer then built the vault, which was located in the first level basement (1B) of the parking garage under the Bryan Street sidewalk. It was covered by ventilation grates at the sidewalk level and contained four drains in the bottom. The vault was built primarily of concrete, but one wall was brick.

During initial construction, TU Electric installed current-limiting fuses (CL fuses) in the vault on its side of the point of delivery to protect its equipment from problems on the customer's side of the point of delivery. In the late 1960s or early 1970s, TU Electric discovered that CL fuses did not always prevent arcs¹ in the 480-volt systems and began to test alternative fire protection systems. As a result of these tests, TU Electric determined that a fenwal system provided better protection than the CL fuses. TU Electric retrofitted all of its 480-volt systems with the fenwal system, including its system for Tower II.

On May 5, 1995, a heavy rainstorm struck the Dallas area, causing extensive flash floods, hail, loss of life, and property damage throughout the area. At that time, RT Realty owned Tower II; and Dr. Karl Kuchenbacker, P.C.; Wilson, White & Copeland, L.L.P.; and Bailey Vaught Robertson & Company (collectively, Appellants) were tenants. Downtown Dallas received over five inches of rainfall per hour that evening. A massive amount of water surged down Bryan Street. Rain water flooded the first floor of Tower II, entering the elevator shaft and causing electrical arcing. Dense smoke filled the entire building. Witnesses testified that drains in the parking garage were unable to remove the amount of water flowing in from the street and accumulating in the garage.

Rain water also fell through the sidewalk ventilation grates into the electrical vault and the vault flooded. The pressure from the accumulating water caused the brick wall of the vault to collapse and spill water into the parking garage. By evening's end, over sixty inches of water collected on level 5B, the lowest below ground level of the parking garage.

Earlier in the evening, Gene Strawn, who worked in the operator room on level 5B, saw water dripping from the access panels in the level 5B ceiling onto one of the pumps responsible for removing water from the drainage systems. He called to have a maintenance man help him cover the pumps. Before help arrived, Strawn observed that another pump was straining to pump the water out of level 5B and that the water level was within one foot of the top of this pump. Strawn also saw water flowing onto the main electrical equipment on level 5B. He did not attempt to determine the source of this water. When the maintenance man arrived, he saw shorting and sparks coming from this equipment. He did not do anything to protect the pumps or the main electrical equipment.

A couple of minutes later, Strawn left. He walked up to level 4B where he saw Dalton Page, Tower II's security officer. Page suggested they move their cars from the underground parking garage because of all the water entering the building, so they drove their cars to the top of the exit ramp. Strawn saw water "coming down real fast" from the entrance ramp as he moved his car. They went to the security console on the main floor to wait out the storm. At one point, Strawn attempted to return to level 5B to check on the equipment, but could not get past the main floor because something, he guessed fumes, burned his eyes and nose. While at the security console, Page heard a loud "explosion" that was later determined to be the brick wall of the vault collapsing from the pressure of the accumulated water. At some point, Tower II lost all power. The building was evacuated and repairs took several months.

RT Realty sued TU Electric² for (1) negligence and gross negligence in failing to maintain the vault and in failing to protect RT Realty's electrical equipment, (2) breach of the implied warranties of merchantability and fitness for a particular purpose, (3) breach of contract, and (4) strict products liability. RT Realty sought recovery in excess of $40 million for property damage. The tenants intervened in the lawsuit and sought recovery in excess of $1.5 million for property damage and loss of business. Aetna and Lexington, who insured RT Realty, and Allstate, who insured Dr. Kuchenbacker, also intervened seeking the recovery of over $17 million they paid to their insureds.³

During the discovery phase of litigation, all of the parties' experts agreed the electrical problem on May 5 began with arcs in the customer's main electrical equipment on level 5B caused by water entering the equipment. But the parties disagreed about the source of that water. Appellants initially argued the water came from the vault when the brick wall collapsed. Later, they alleged that as the water level rose in the vault, the water entered the customer's electrical system in the vault because of a faulty seal at the connection between TU Electric's equipment and RT Realty's equipment and then traveled through conduits from level 1B to the main electrical equipment on level 5B. In the opinion of TU Electric's experts, it was not physically possible for this to occur because the equipment that carried the electrical system from the vault to the main electrical equipment on level 5B was ventilated with holes in the conduits and made two ninety degree turns, and the water would have fallen through the ventilation holes before it could have reached the equipment on level 5B.

This ventilated equipment, which had been removed from the building after the flooding, was destroyed while litigation was pending. TU Electric argued it would be impossible to determine whether water traveled through this equipment without physically examining it. Appellants' expert also agreed he would have to examine the equipment to determine that the water actually entered the equipment in the vault and traveled through the system to the main electrical equipment on level 5B.

TU Electric filed a motion for summary judgment on traditional and no evidence grounds, arguing, among other things, that all of Appellants' claimed damages are economic damages for which TU Electric has limited liability under the terms of its tariff, and that it had no duty to protect RT Realty's equipment. TU Electric also filed a motion for sanctions against Appellants, seeking dismissal of their claims because of spoliation of the electrical equipment.

The trial court granted TU Electric's motion for summary judgment "in its entirety," dismissing all claims against TU Electric. The trial court also granted TU Electric's motion for sanctions and struck Appellants' pleadings. Appellants appeal the trial court's rulings.

SUMMARY JUDGMENT

Appellants argue the trial court erred (1) by granting TU Electric's motion for sanctions and dismissing Appellants' claims and (2) by granting summary judgment in favor of TU Electric. We address the summary judgment issue first. TU Electric filed one motion in which it argued both traditional and no-evidence grounds for summary judgment on all of Appellants' claims.

Standard of Review

We review a grant of summary judgment de novo. Dickey v. Club Corp. of Am., 12 S.W.3d 172, 175 (Tex.App.-Dallas 2000, pet. denied). The standard of review in traditional summary judgment cases is well established. The issue on appeal is whether the movant met its summary judgment burden by establishing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. TEX.R. CIV. P. 166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex.2002). The movant bears the burden of proof and all doubts about the existence of a genuine issue of material fact are...