Wells Fargo Bank Northwest, N.A. v. RPK Capital XVI, L.L.C., 05–10–00565–CV.

• Decision Date: 19 March 2012
• Docket Number: No. 05–10–00565–CV.,05–10–00565–CV.
• Parties: WELLS FARGO BANK NORTHWEST, N.A., not in its individual capacity but solely in its corporate capacity as owner trustee, Appellant, v. RPK CAPITAL XVI, L.L.C. and RPK Capital Management, L.L.C., Appellees.
• Court: Texas Court of Appeals

360 S.W.3d 691

WELLS FARGO BANK NORTHWEST, N.A., not in its individual capacity but solely in its corporate capacity as owner trustee, Appellant,

v.RPK CAPITAL XVI, L.L.C. and RPK Capital Management, L.L.C., Appellees.

No. 05–10–00565–CV.

Court of Appeals of Texas, Dallas.

Feb. 16, 2012.Rehearing Overruled March 19, 2012.

Scott T. Williams, Roderick L. Wilson, Akin Gump Strauss Hauer & Feld LLP, Dallas, for Appellant.

Christopher D. Kratovil, Dykema Gossett PLLC, David Weitman, James H. Billingsley, K & L Gates LLP, Christopher A. Brown, Winstead PC, Kevin B. Wiggins, White & Wiggins, L.L.P., Carlos Morales, Adorno Yoss White & Wiggins, LLP, Dallas, Jamie Ellen Lavergne Bryan, Winstead PC, Fort Worth, for Appellees.

Before Justices BRIDGES, O'NEILL, and FILLMORE.

OPINION

Opinion By Justice FILLMORE.

RPK Capital XVI, L.L.C. and RPK Capital Management, L.L.C. (collectively RPK) sued Wells Fargo Bank Northwest, N.A., in its corporate capacity as owner trustee of an aircraft (Wells Fargo), for conversion and for a declaratory judgment that RPK owns and is entitled to possession of an aircraft thrust reverser. Following a bench trial based partially on stipulated facts, the trial court awarded RPK possession of the thrust reverser, $848,480 in damages, and $624,743.90 in attorneys' fees for trial and contingent attorneys' fees on appeal. In seven issues, Wells Fargo argues (1) RPK's conversion claim is barred by the statute of limitations, (2) RPK was not entitled to possession of the thrust reverser because the thrust reverser is an accession to an aircraft that Wells Fargo acquired in the ordinary course of business, (3) the trial court erred by awarding RPK damages for a defect in the thrust reverser that was discovered, but not caused, by Wells Fargo, (4) RPK's damages model was based solely on the unreliable testimony of an expert witness, (5) even if the expert testimony was reliable, the evidence was insufficient to support the amount of past and future lost profits awarded by the trial court, and (6) the trial court erred by awarding RPK attorneys' fees. We affirm in part, reverse and render in part, and reverse and remand in part.

Stipulated Facts

The case was presented to the trial court partially on stipulated facts and partially on evidence offered at trial. As relevant to the issues on appeal, the parties' stipulations established that, on December 29, 1998, Provident Commercial Group, Inc. (Provident) entered into a lease agreement with American Trans Air, Inc. for an aircraft engine, a thrust reverser, and related equipment.¹ The lease identified the thrust reverser by two generic part numbers, LJ76612 for the left-hand thrust reverser and LJ76610 for the right-hand thrust reverser, rather than by serial numbers.² Although the engine lease was recorded with the Federal Aviation Administration in January 1999, there is no public registry for thrust reversers.

In 2003, Provident changed its name to Information Leasing Corporation (IFC), and American Trans Air, Inc. changed its named to ATA Airlines, Inc. (ATA). On December 29, 2003, IFC assigned the lease to Provident Bank. In 2004, ATA filed for bankruptcy. One of ATA's assets in the bankruptcy was an aircraft it leased from FINOVA Capital Corporation (FINOVA). In the 2004 bankruptcy, ATA rejected the lease with FINOVA. ATA surrendered the aircraft to FINOVA in December 2004. In the 2004 bankruptcy, ATA assumed the lease with Provident for the aircraft engine and the thrust reverser. The lease was subsequently assigned by Provident Bank to LINC Capital, Inc. (LINC). In 2005, LINC assigned the lease to RPK Capital V, L.L.C. and, in 2008, RPK Capital V assigned the lease to RPK Capital XVI, L.L.C.

At some point, FINOVA and related entities filed for bankruptcy. On August 10, 2001, the bankruptcy court confirmed FINOVA's plan of reorganization. FINOVA's 2001 Securities and Exchange Commission Form 10K indicated that as part of its business, FINOVA treated as assets and regularly sold aircraft to third parties at the end of lease terms and that FINOVA had historically “earned total proceeds from the sale of assets upon lease termination in excess of carrying amounts.” The 2001 Form10K also stated, “[T]he main objective of the Debtors' post-confirmation business plan is to maximize the value of their portfolio through the orderly liquidation of the portfolio over time” and that “[T]he Debtors' largest line of business is Transportation Finance, which primarily consists of various forms of financing of used aircraft.” FINOVA's Securities and Exchange Commission Form 10–Q for the quarter ending June 30, 2008 stated:

Since emergence from chapter 11 bankruptcy proceedings in August 2001, our business activities have been limited to maximizing the value of our portfolio through the orderly collection of our assets.... We have substantially completed the liquidation of our portfolio and our focus has shifted to the continued wind down of our operations and future dissolution of our entities.

On September 19, 2005, Talos Aviation Limited (Talos) entered into a letter of intent with FINOVA to purchase the aircraft formerly leased by ATA. On October 7, 2005, FINOVA sold the aircraft to Talos. Talos then conveyed the aircraft to Wells Fargo as owner-trustee.

In April 2008, ATA again initiated a bankruptcy proceeding. Prior to filing the 2008 bankruptcy, ATA made its annual lease payment to RPK and provided proof of insurance and financial records as required by the lease. In ATA's 2008 bankruptcy, RPK sought adequate protection of the equipment subject to the lease, including the thrust reverser and related records. On April 25, 2008, RPK made demand on Wells Fargo for “removal and return of a thrust reverser.”

In early May 2008, RPK began an investigation to determine the serial numbers of the thrust reverser that was the subject of the lease. In May 2008, the serial numbers on the thrust reverser attached to the aircraft Wells Fargo purchased from FINOVA were 1267003 for equipment on the left side of the aircraft and 1267002 for equipment on the right side of the aircraft. In May 2008, RPK made a more specific demand that Wells Fargo return the thrust reverser bearing those two serial numbers.

On May 27, 2008, NORDAM, a company specializing in the detailed inspection of thrust reversers, conducted an inspection of the thrust reverser at Wells Fargo's request. The May 2008 inspection was not required by the lease. During the inspection, NORDAM found delamination on sections of the thrust reverser.³ Because of the delamination, the thrust reverser was tagged as unserviceable. Thrust reversers are interchangeable parts that can be removed from one aircraft and installed on another. In December 2008, the thrust reverser was removed from the aircraft owned by Wells Fargo. Removal of the thrust reverser caused no damage to the aircraft.

The parties introduced additional evidence at trial on several disputed issues. We will discuss the disputed evidence later in this opinion as necessary to address Wells Fargo's complaints on appeal. Of note, a significant contested issue at trial was whether the thrust reverser on the aircraft owned by Wells Fargo was the thrust reverser that was the subject of the lease between Provident and American Trans Air. Wells Fargo has not challenged on appeal the trial court's finding the thrust reverser on the aircraft purchased from FINOVA was the thrust reverser that was the subject of the lease and, accordingly, we need not address the evidence introduced at trial relating to this issue.

The trial court found Wells Fargo converted the thrust reverser and awarded RPK possession of the thrust reverser, $848,480 in damages, and $624,743.90 in attorneys' fees for trial and contingent attorneys' fees on appeal. The trial court entered findings of fact and conclusions of law based on both the stipulated and contested facts.

Standard of Review

Stipulations of fact are binding on the parties, the trial court, and the reviewing court. Panther Creek Ventures, Ltd. v. Collin Cent. Appraisal Dist., 234 S.W.3d 809, 811 (Tex.App.-Dallas 2007, pet. denied). We do not review the legal or factual sufficiency of the evidence in a case tried on stipulated facts. Id. Rather, we review de novo whether the trial court correctly applied the law to the stipulated facts. Id.

As to the issues that were disputed, in an appeal from a bench trial, the trial court's findings of fact have the same force and effect as jury findings. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.1991); Walker v. Anderson, 232 S.W.3d 899, 907 (Tex.App.-Dallas 2007, no pet.). Unchallenged findings of fact are binding on the appellate court, unless the contrary is established as a matter of law or there is no evidence to support the finding. McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex.1986); Walker, 232 S.W.3d at 907. When the appellate record contains a reporter's record, as it does in this case, findings of fact on the disputed issues are not conclusive and may be challenged for sufficiency of the evidence. Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 52 (Tex.2003); Las Colinas Obstetrics–Gynecology–Infertility Ass'n, P.A. v. Villalba, 324 S.W.3d 634, 638 (Tex.App.-Dallas 2010, no pet.). We review a trial court's findings of fact under the same legal and factual sufficiency of the evidence standards used when determining if sufficient evidence exists to support an answer to a jury question. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994); Darocy v. Abildtrup, 345 S.W.3d 129, 136 (Tex.App.-Dallas 2011, no pet.).

We review a trial court's conclusions of law de novo. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex.2002); Darocy, 345 S.W.3d at 136. We independently evaluate the trial court's conclusions of law to determine whether the trial court correctly drew the legal conclusions from the facts. Walker, 232 S.W.3d at 908; ...