Signal Oil and Gas Co. v. Universal Oil Products

• Decision Date: 12 July 1978
• Docket Number: No. B-6629,B-6629
• Citation: 572 S.W.2d 320
• Parties: 24 UCC Rep.Serv. 555 SIGNAL OIL AND GAS COMPANY, Petitioner, v. UNIVERSAL OIL PRODUCTS et al., Respondents.
• Court: Texas Supreme Court

Page 320

572 S.W.2d 320

24 UCC Rep.Serv. 555

SIGNAL OIL AND GAS COMPANY, Petitioner, v.UNIVERSAL OIL PRODUCTS et al., Respondents.

No. B-6629.

Supreme Court of Texas.

July 12, 1978.

Rehearing Denied Oct. 4, 1978.

Kronzer, Abraham & Watkins, W. James Kronzer, Royston, Rayzor, Vickery & Williams, D. J. Holcombe and Ted C. Litton, Houston, for petitioner.

Baker & Botts, Joseph D. Cheavens and Douglas S. Sandage, Fulbright & Jaworski, David J. Beck and Arnold Anderson Vickery, Hicks, Hirsch, Glover & Cochran, Les Cochran, Houston, for respondents.

JOHNSON, Justice.

Signal Oil & Gas Company(hereinafter referred to as Signal)¹ sued Universal Oil Products (UOP), Procon, Inc.(Procon), and Alcorn Combustion Company(Alcorn) for property damage and economic loss resulting from an explosion and fire at Signal's Houston refinery.Signal sued UOP, Procon, and Alcorn in strict liability and negligence for defects in the manufacture, design, and/or installation of an isomax reactor charge heater.Signal further sued UOP and Procon for breach of the implied warranty arising from the isomax unit's design, construction, and installation which failed to meet acceptable engineering standards.Alcorn was also sued for breach of the implied warranty arising from the manufacture and sale of the unit which was unfit or unsuitable for its intended use.Procon filed a cross claim against Alcorn for indemnity.Based on jury findings to special issues, the trial court denied Signal any relief as to all three defendants.The court of civil appeals affirmed.545 S.W.2d 907.We affirm the judgments of the courts below as to the strict liability cause of action.We reverse the judgments of the courts below and remand the case for a new trial on the merits as to the implied warranty cause of action against Alcorn and Procon.²

On April 6, 1962, Signal entered into an Isomax Process License Agreement with UOP, which agreement was subsequently amended on March 24, 1966.In such agreement UOP, as owner of the patent rights to the isomax process, granted Signal a license to use the isomax process in Signal's plants.On June 22, 1966, Signal contracted with Procon, a subsidiary of UOP, wherein Procon agreed to obtain the necessary materials and equipment and to construct an isomax unit and hydrogen plant at the Signal plant in Houston.Prior to this contract, on March 24, 1966, Procon and UOP had entered into an engineering agreement whereby UOP agreed to provide Procon with the necessary engineering design specifications for the isomax unit construction at the Signal plant.UOP provided the specifications for the isomax reactor charge heater, a component part of the plant, to Procon on April 18, 1966.Thereafter, on July 21, 1966, Procon contracted by purchase order with Alcorn for the purchase of the reactor charge heater; Alcorn accepted such order on October 24, 1966.Thereafter, Alcorn furnished the heater, and Procon erected and installed the unit at the Houston plant site.The isomax process unit began operation in February 1968.Less than three months later, on April 26, 1968, the unit ruptured causing a fire which resulted in the damages for which this suit was brought.

The design of the reactor charge heater consisted of gas burners surrounded by steel tubes through which oil flowed.The tubes were braced at their midpoints with guides.The specifications called for the tube guides to be anchored by 25-12 bolts, a stainless steel bolt.About the first of March, 1968, it was discovered that some of the middle tube guides had fallen to the floor of the heater and that the tubes had begun to bow inward.At that time, one of the bolts was retrieved; it was determined that B-7 bolts had been used, rather than the 25-12 bolts.These B-7 bolts were not designed to withstand the high temperatures generated by the heater.

Signal alleged two basic theories for the cause of the tube rupture and ensuing fire.The first theory was that the B-7 bolts failed to hold the tube guides in place; therefore, without these braces the tubes carrying oil bowed inward toward the gas burners, resulting in a rupture and a fire.The second theory was that scaling or coke accumulation had collected inside the tubes, causing the rupture.Signal developed these theories in presenting its causes of action based upon negligence, strict liability, and breach of implied warranty.Special issues developing all three causes of action as to each of the three defendants were presented to the jury.³Signal has conceded in its brief before the court of civil appeals that the judgment as to UOP should be affirmed and has not alleged any error in this court concerning UOP; therefore, the liability of UOP will not be discussed herein.

NEGLIGENCE CAUSE OF ACTION

In Signal's negligence cause of action against Procon and Alcorn the jury found that Alcorn was negligent in not supplying 25-12 bolts and that Procon was negligent in using the B-7 bolts in erecting the heater.Both actions were found to be the proximate cause of the tube rupture.However, the jury additionally found that Signal was contributorily negligent in not shutting down the heater before the fire since it was warned of the hazard and failed to heed that warning.Accordingly, the trial court denied Signal recovery under its negligence cause of action.⁴In the court of civil appeals and in this court, judgment on the negligence cause of action is not challenged.Accordingly, the trial court determination and judgment is final as to the negligence cause of action.

STRICT LIABILITY CAUSE OF ACTION

Signal asserted a cause of action in strict liability against Alcorn and Procon, alleging that they were the furnishers, sellers, or manufacturers of a defective product which was unreasonably dangerous.⁵The jury found the reactor charge heater as shipped by Alcorn and as erected by Procon was defective.The jury further found that Signal incurred property damage in the amount of $378,000.But the jury failed to find that the defective condition constituted a producing cause of the tube rupture.Accordingly, the trial court held that Signal could not recover in strict liability against Alcorn or Procon; the court of civil appeals affirmed.

Signal contends that this case is first and foremost a strict liability cause of action for property damages resulting from a defective product.Signal argues that the jury findings taken as a whole, rather than in sequence, support recovery in strict liability.Signal points out that the jury found Proximate causation in the special issue series developing the negligence cause of action and urges that these proximate causation findings are operative in the strict liability issue series, even though the jury failed to find Producing cause under the strict liability theory.The thrust of Signal's argument is that proximate causation by definition includes the lesser causative element of producing cause which is the necessary causative element in strict liability; therefore, the findings in the negligence series should support the causation findings in strict liability.Continuing this reasoning, Signal urges that the special issue findings taken as a whole support a cause of action for strict liability to which contributory negligence is not a defense.Henderson v. Ford Motor Company, 519 S.W.2d 87(Tex.1974).Furthermore, Signal points out that those defenses which could bar or mitigate recovery in strict liability assumption of the risk and misuse of the product were not supported by the jury findings in the instant case.⁶Accordingly, Signal urges that it is entitled to recover $378,000 for property damages in its strict liability cause of action.

The court of civil appeals agreed with Signal that the special issues may be read as a whole, rather than taken in the sequence as presented to the jury, relying upon Pizza Inn, Inc. v. Tiffany, 454 S.W.2d 420(Tex.Civ.App. Waco 1970, no writ).However, the court of civil appeals determined that the alignment of issues was governed essentially by whether the issues were predicated upon the same set of facts.In the instant casethe court held that the causation findings in the strict liability issue series and in the negligence issue series were not essentially predicated upon the same facts.The intermediate court noted that Signal had asserted two causative theories for the explosion; although the negligence issues were limited to one of these theories (the use of the wrong bolts), the strict liability issues were not so limited and could have been interpreted by the jury as an inquiry on the other causation theory (coke accumulation in the tubes).Accordingly, the court of civil appeals held that the findings were not interchangeable and that the strict liability issue series did not support Signal's recovery of property damages.

This court affirms the court of civil appeals ruling on this issue.We agree with Signal in its contention that this suit may be considered as a strict liability cause of action.Under Section 402A of the Restatement (Second) of Torts a buyer is entitled to recover for property damages sustained as a result of an unreasonably dangerous product:

"One who sells any product in a defective condition unreasonably dangerous to the user or consumer or To his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or To his property . . . ."(Emphasis added.)

However, in Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77(Tex.1977), this court restricted the scope of strict liability causes of action by precluding recovery for economic loss and holding that such economic loss was recoverable only under the Texas Business and Commerce Code.In Mid Continent Aircraft Corporation v. Curry County Spraying Service, Inc., and Cravens, Dargan and Company, 572 S.W.2d 308(Tex.1978), decided this day, this court has further held that where only the...