Summary
stating that Texas courts have “recognized ... a theory of liability” under section 324A
Summary of this case from Little v. Delta Steel, Inc.Opinion
No. 08-02-00090-CV.
August 12, 2003.
Appeal from the 142nd District Court of Midland County, Texas (TC# CV-42,652).
Attorney for Appellant: Hon. Andrew M. Greenwell, Harris Greenwell, L.L.P., 615 Upper North Broadway, Corpus Christi, TX 78477-0237.
Attorney for Appellee: Hon. Terry Rhoads, Cotton, Bledsoe, Tighe Dawson, 500 West Illinois, Suite 300, Midland, TX 79701.
Before Panel No. 2 Barajas, C.J., McClure, and Chew, JJ.
MEMORANDUM OPINION
This is an appeal from a summary judgment entered in favor of Appellees. On appeal, Mr. Olivas, individually and as next friend to his son, Adan Olivas, and his parents Bartolo and Maria Olivas (collectively "Appellants") raise eight issues, six of which challenge the trial court's findings that: (1) as a matter of law Southwest Royalties did not have a duty of care to Appellants; (2) there was no evidence of a relationship between Sierra Well Service and Southwest Royalties that would give rise to a duty of care to Appellants; (3) as a matter of law Southwest Royalties did not breach its duty of care to Appellants; (4) there was no evidence that Southwest Royalties breached its duty of care to Appellants; (5) as a matter of law the acts and/or omissions of Southwest Royalties constituting breach of its duty were not a proximate cause of injury to Appellants; and (6) there was no evidence that the acts and/or omissions of Southwest Royalties constituting breach of its duty were a proximate cause of injury to Appellants. In Issue Seven, Appellants argue that there is some evidence of gross negligence on the part of Southwest Royalties, precluding summary judgment. In their remaining issue, Appellants contend that the trial court erred in sustaining Southwest Royalties' special exceptions on the basis that Abelardo Olivas' parents do not have a cause of action for loss of companionship and society for injury to their adult son. We affirm.
BACKGROUND
On January 9, 1999, Abelardo Olivas, an employee of Sierra Well Service, Inc. ("Sierra"), was seriously injured at Rig 801, a workover rig owned by Sierra at an oil well site on the Nimrod Lease in Howard County, Texas. Mr. Olivas was working as a floor hand with the rig crew when a wire cable, the tubing line, broke during operations and hit Mr. Olivas in the head, knocking him off the rig floor. Mr. Olivas struck the catwalk as he fell to the ground. Mr. Olivas suffered injuries to his head, neck, and back and was left unable to use his legs. According to Chester Lyndon Wigington, Sierra's area manager, prior to 1999, Sierra's operating procedures did not include any written standards related to how to assess cables, rather Sierra employed a system of visual inspection. In late 1998, Presi Gonzalez, the derrick man, informed Steve Lopez, the rig operator, who then twice informed James Grimsley, the field supervisor of Rig 801, that the wire cable was starting to show wear and that it needed to be replaced. Mr. Grimsley told Mr. Lopez that the company would order a replacement. About two or three months later the cable broke and Mr. Olivas was injured.
Appellants brought a personal injury suit against Southwest Royalties Holdings, Inc., Southwest Royalties, Inc., Southwest Partners II, L.P., Southwest Partners, L.P., Southwest Partners III, L.P. ("Southwest Defendants"), Star Tool Co., and Nimrod Petroleum, Co. Southwest Defendants filed special exceptions against Intervenors, Bartolo and Maria Olivas, asserting that they had no cause of action for the loss of companion of their adult son. The trial court sustained the exceptions and gave Intervenors the opportunity to replead, which they did. Defendants then filed a No-Evidence and Summary Judgment Motion, which the trial court granted on February 7, 2002. In their motion, Southwest Defendants argued inter alia that their stock ownership in Sierra did not impose liability for Sierra's torts and that they had no duty to protect Sierra's employees from harm nor did they assume such a duty. Appellants now appeal the trial court's summary judgment order and the trial court's ruling on Appellees' special exceptions.
Defendants Star Tool Co. and Southwest Partners L.P. were non-suited by Appellants in the trial court and Defendant Nimrod Petroleum Inc. was severed from this cause.
DISCUSSION Standards of Review
Southwest Royalties filed a traditional and no-evidence motion for summary judgment in this cause, which the trial court granted without specifying the grounds upon which the trial court relied. When a trial court's order granting summary judgment does not specify the ground or grounds relied upon for its ruling, summary judgment will be affirmed on appeal if any of the summary judgment grounds advanced by the movant are meritorious. Dow Chemical Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001); Carr v. Brasher, 776 S.W.2d 567, 569 (Tex. 1989).
A no-evidence summary judgment is properly granted if the non-movant fails to bring forth more than a scintilla of probative evidence to raise a genuine issue of material facts as to an essential element of the non-movant's claim on which the non-movant would have the burden of proof at trial. See Tex.R.Civ.P. 166a(i); Merrell Dow Pharmaceuticals, Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997), cert. denied, 523 U.S. 1119, 118 S.Ct. 1799, 140 L.Ed.2d 939 (1998). If the evidence supporting a finding rises to a level that would enable reasonable, fair-minded persons to differ in their conclusions, then more than a scintilla of evidence exists. Havner, 953 S.W.2d at 711. Less than a scintilla of evidence exists when the evidence is "so weak as to do no more than create a mere surmise or suspicion" of a fact, and the legal effect is that there is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983). A no-evidence summary judgment is essentially a pretrial directed verdict, therefore we apply the same legal sufficiency standard of review as we apply in reviewing a directed verdict. Jackson v. Fiesta Mart, Inc., 979 S.W.2d 68, 70 (Tex.App.-Austin 1998, no pet.).
A movant for traditional summary judgment rule must establish that there is no genuine issue as to any material fact and that the movant is entitled to summary judgment as a matter of law. See Tex.R.Civ.P. 166a(c); Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548 (Tex. 1985). In deciding whether there is a disputed material fact issue precluding summary judgment, all admissible evidence favorable to the non-movant will be taken as true; every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in the non-movant's favor. Nixon, 690 S.W.2d at 548-49; Collins v. County of El Paso, 954 S.W.2d 137, 145 (Tex.App.-El Paso 1997, pet. denied).
Assumption of Duty
On appeal, Appellants assert that the trial court erred in granting summary judgment because there was some evidence that Southwest Royalties had a duty to Mr. Olivas under Section 324A of the Restatement (Second) of Torts to use reasonable care in obtaining and supplying safety information and equipment maintenance standards to Sierra that related to wire rope. Appellants argue that Southwest Royalties assumed this duty under a contractual agreement with Sierra to provide certain services to Sierra upon its request.
We note that on appeal, Appellants limit their theory of duty to the contractual relationship between Southwest Royalties and Sierra at the time of Mr. Olivas' injury. We also observe that Appellants do not assert any liability claim which is based on Southwest Royalties' direct or indirect stock ownership of Sierra nor do they assert any alter ego theory.
A legal duty must exist before a defendant can be liable for negligence. Reeder v. Daniel, 61 S.W.3d 359, 364 (Tex. 2001). Whether a duty exists under a given set of laws is a question of law. See Fort Bend County Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 395 (Tex. 1991). Appellants base their claim on Section 324A of the Restatement (Second) of Torts, which Texas courts have recognized as a theory of liability. See Torrington Co. v. Stutzman, 46 S.W.3d 829, 837-38 (Tex. 2000); Sbrusch, 818 S.W.2d at 396 (Tex. 1991). Section 324A provides:
One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if
(a) his failure to exercise reasonable care increases the risk of such harm, or
(b) he has undertaken to perform a duty owed by the other to the third person, or
(c) the harm is suffered because of reliance of the other or the third person upon the undertaking.See Restatement (Second) of Torts § 324A (1965); Sbrusch, 818 S.W.2d at 396; Seay v. Travelers Indem. Co., 730 S.W.2d 774, 775-76 (Tex.App.-Dallas 1987, no writ).
In order to establish a negligence duty based on Section 324A, Appellants must show evidence that Southwest Royalties undertook to render services to Sierra, which it should have recognized as necessary for the protection of Mr. Olivas, a Sierra employee. Second, Appellants must also show that Southwest Royalties failed to exercise reasonable care in undertaking these services and: (1) that the risk of physical harm to Mr. Olivas increased due to Southwest Royalties' failure; or (2) that Southwest undertook to perform a duty owed by Sierra to Mr. Olivas; or (3) that the harm suffered by Mr. Olivas was the result of his reliance or Sierra's reliance upon Southwest Royalties undertaking the rendered services. See Seay, 730 S.W.2d at 775-76.
The first inquiry under Section 324A is whether Southwest Royalties undertook a duty to protect Sierra's employees. See Sbrusch, 818 S.W.2d at 396; Seay, 730 S.W.2d at 776. Specifically, Appellants assert that Southwest Royalties assumed this duty by undertaking to obtain and supply safety information and equipment maintenance standards to Sierra relating to wire rope under a service agreement entered by the parties in 1997.
Summary judgment evidence in the record provides the following facts with respect to the contractual relationship between Southwest Royalties and Sierra. Bill Coggan was a vice president of Southwest Royalties and an active officer and director of Sierra until 1998. Mr. Coggan testified in his deposition that Sierra was formed in 1992 and was initially a wholly-owned subsidiary of Southwest Royalties, which is an oil and gas company that operates and develops properties. Southwest Royalties had a need for well servicing in the Permian Basin and started Sierra with the idea that it would become its own entity and provide these services to Southwest Royalties and other companies. At the time of Mr. Olivas' injury, Sierra was no longer a subsidiary of Southwest Royalties, however, Southwest Royalties remains a related company.
Between its formation in 1992 and 1995, Sierra developed an independent field management infrastructure. In 1993, Joey Fields became president of Sierra, and in 1995, Dub Harrison was hired to take over the role of safety and equipment manager and to build the field management infrastructure. Mr. Fields and Mr. Harrison ran the company and their expertise was mostly on the operational side. At that time, Mr. Coggan was in charge of accounting operations at Southwest Royalties. Since Sierra was a wholly-owned subsidiary, Mr. Coggan and Southwest Royalties employees were involved in setting up the initial bookkeeping and financial reporting procedures, and insurance policies. Southwest Royalties owned the source code for its software and made some modifications to fit a well servicing company. Southwest Royalties personnel performed the clerical duties of accounts payable, accounts receivable, cash receipts, and journal entries, and Southwest Royalties assigned an accountant to do the reconciliation functions and journal entry preparations. As Sierra became its own entity and developed its infrastructure, these administrative functions were either passed to Sierra personnel or Sierra hired persons from the outside to do these functions.
By 1997, if not earlier, Sierra had its administrative infrastructure almost in place. Mr. Coggan, however, still provided assistance in his capacity as a Southwest Royalties vice president under a management agreement between Southwest Royalties and Sierra, which was later superceded by a general service agreement in September 1997, the contract which is now at issue. The 1997 Service Agreement provides the following with respect to services to be rendered by Southwest Royalties:
1. Services. SWR [Southwest Royalties] will endeavor to perform (or appoint an agent or agents to perform) or provide for the Company [Sierra] such advisory, administrative, technical and other services as may be reasonably requested by the Company in the conduct of its business activities, including without limitation, the performance or provision of:
(a) accounting, bookkeeping, invoicing, computing, tax and other management information services; provided the Company agrees to set up and maintain its books and records in such manner that Southwest Royalties Holdings, Inc., of which SWR is a wholly owned subsidiary and the Company is an affiliate can use and integrate the information contained therein in its consolidated financial and tax accounting records to the extent applicable;
(b) advisory services for legal, contract, real estate, claims and insurance matters;
(c) advice in the purchase of any goods, materials, or services which the Company may require and assistance in expediting delivery of same;
(d) assistance in preparing budgets, plans, and programs, related to the Company's business activities;
(e) assistance in preparing the programs, specifications, analyses, and evaluations, for the design, development, construction and maintenance of equipment, facilities, and other undertakings associated with the Company's business activities;
(f) credit services including (1) research and advice as to the credit worthiness of potential customers, contractors and suppliers and (2) assistance in the collection of outstanding receivables;
(g) banking, cashiering, and disbursement services including (1) establishment, operation, and reconciliation of bank accounts; (2) vouchering and banking of cash receipts; (3) establishment of letters of credit, performance bonds, and bank guarantees; and (4) processing and funding of cash disbursements including invoices, payments and call for fund payments;
(h) investment services and cash management including placement of surplus cash in short term investment securities;
(i) financing services including assistance in the arrangement of funding from (1) third party lenders or (2) affiliated companies as permitted;
(j) administrative, accounting and record keeping services associated with real estate and personal property leases, and lease operations, including, but not limited to the payment of rents, fees and maintenance changes due under leases;
(k) administrative and human resources services;
(l) assistance in the negotiation of contracts in the Company's business;
(m) assistance in negotiating or bidding for personal and or real business properties;
(n) securing operational, management and administrative personnel needed in the conduct of the Company's business;
(o) assistance with travel and transportation planning and services; provided that SWR shall have no authority hereunder to conclude or accept contracts or orders in the name of the Company or otherwise enter into obligations on behalf of The Company except for the purchase of goods and services as hereinabove mentioned.
Mr. Coggan testified that during 1997, he worked with Mr. Fields, Mr. Harrison, and Debbie Brock, a Southwest Royalties accounting administration employee, on financial matters and on evaluating acquisitions from a financial standpoint. Mr. Coggan assisted in working through budgetary information in so far as what to budget for, maintenance, and capital expenditures. According to Mr. Coggan, this work fell off in 1998, and by 1999, he was no longer involved.
Ms. Brock also testified in her deposition about the services Southwest Royalties performed for Sierra. Ms. Brock recalled that until January 1998, Southwest Royalties performed all the accounting and administrative duties because Sierra did not have any in-house staff for accounting administration. These services included accounting, payroll, financial negotiations with lenders, investment bankers, setting up Sierra's accounting system, and due diligence on the accounting side of acquisitions. It was her understanding that Sierra handled the operations side and was responsible for safety and that Southwest Royalties had no role with respect to implementing personnel safety policies. Her department was involved in analyzing different expense items, including repairs and maintenance, and fund availability, but Sierra made the decisions on the operations side regarding equipment acquisition.
During his deposition, Mr. Coggan was asked to explain the types of services Southwest Royalties provided to Sierra under paragraph (e) of the 1997 Service Agreement. Mr. Coggan stated that with respect to assistance in preparing program, specifications, and analyses of equipment, Southwest Royalties provided assistance on the administrative and financial side. For example, Southwest Royalties obtained inventory and equipment information for possible acquisitions. Mr. Fields would hire someone or his field personnel would go out and do an actual inventory of the prospective acquisition, except for one occasion in which Southwest Royalties personnel counted pipe inventory for a transaction. According to Mr. Coggan, Southwest Royalties did not assist in preparing any kind of programs that related to maintenance or safety of drilling or rig equipment nor was such assistance requested because it was out of their area of expertise.
Mr. Coggan was also asked whether Southwest Royalties had anything to do with preparing any kind of employee safety manuals. Mr. Coggan stated that the only time that Southwest Royalties was involved in this would have been in the early days when Sierra was a wholly-owned subsidiary. Mr. Coggan recalled that the person prior to Mr. Fields who was running Sierra's first rig, and then Mr. Fields, informally asked that Southwest Royalties find industry standard information, a drilling industry guide. Mr. Coggan stated that Southwest Royalties did help find and obtain a well hand industry standard handbook. This request occurred in 1993 and/or 1994, and he responded by ordering handbooks out of a Penwell Catalog. Mr. Coggan also stated that in 1995 and/or 1996 or earlier, Southwest Royalties helped Mr. Fields complete a personnel handbook. When asked whether he remembered if any of the information that Southwest Royalties supplied or any help he gave involved the safety standards that governed wire cables, Mr. Coggan replied, "I am sure they had that in there, yes, sir." Mr. Coggan testified that this was the extent of any services related to safety and equipment maintenance in the field service area.
The summary judgment evidence also contains testimony from former Sierra safety directors. K.R. "Butch" Brents was safety director for Sierra from April 1998 to April 1999. In affidavit testimony, Mr. Brents stated that Southwest Royalties did not control or direct Sierra's safety programs or operations during his tenure. Mr. Brents also stated that Southwest Royalties did not furnish Sierra's safety manual and did not direct or control the creation, development, implementation, or dissemination of Sierra's safety manual or handbooks. Mr. Brent's successor, Gary Crook worked as safety director from April 1999 to October 2000. Mr. Crook prepared a safety manual for Sierra in May 1999. In deposition testimony, he recalled seeing the prior manual in Mr. Brent's office, but he did not know its contents. Mr. Crook stated that he did not look at or use the Brent manual at all in producing the May 1999 safety manual. Mr. Crook did not know if Sierra had any wire rope standards for inspection, safety, or replacement, in force or published prior to the May 1999 manual. Mr. Crook also testified that he had no conversations with Southwest Royalties in preparing the safety materials nor any knowledge of what role, if any, Southwest Royalties had played in producing prior manuals or safety handbooks.
In Issue Two, Appellants contend that the trial court erred in granting summary judgment on the basis that there was no evidence of a relationship between Sierra and Southwest Royalties that would give rise to a duty of care to Appellants by Southwest Royalties. Appellants assert that Southwest Royalties assumed a legal duty to Mr. Olivas under the 1997 Service Agreement because "Southwest Royalties agreed for consideration to provide services to Sierra Well Service, which included providing safety information to be incorporated in the latter's safety policies and procedures manual." We disagree.
It is clear from the context and circumstances in this case that the 1997 Service Agreement between Southwest Royalties and Sierra was primarily for the purpose of securing financial and accounting services for Sierra during its transition from a wholly-owned subsidiary to a separate entity. While the terms of this Agreement are quite general, the overwhelming majority of the Service Agreement provisions are related to financial and administrative services that Southwest Royalties would provide to Sierra upon Sierra's request. The Service Agreement contains no express language to suggest that in entering the Service Agreement Southwest Royalties was undertaking a duty to provide safety information for Sierra's safety policies and procedures manual or that Southwest Royalties would be responsible for researching industry standards related to wire cable repair or maintenance. Further, there is no evidence that the services rendered by Southwest Royalties under the Service Agreement included providing safety information or researching industry standards. Rather, K.R. "Butch" Brents, Sierra's safety director at the time of Mr. Olivas' injury, stated in affidavit testimony that Southwest Royalties did not control or direct Sierra's safety programs or operations during his tenure nor did Southwest Royalties direct or control the creation, development, implementation, or dissemination of Sierra's safety manual or handbooks.
Appellants' argument for showing some evidence of a liability claim under Section 324A rests on certain statements made by Mr. Coggan during his deposition testimony. Mr. Coggan testified as to two instances in which Southwest Royalties ordered safety standard handbooks upon request and assisted in preparing a personnel handbook. At that time, Sierra was a wholly-owned subsidiary of Southwest Royalties and the 1997 Service Agreement was not in effect. In their brief, Appellants argue that Southwest Royalties assumed the obligation of providing industry safety standards to Sierra, which it would have recognized as necessary for the protection of Sierra's employees. They further argue that Southwest Royalties failed to exercise reasonable care because they failed to provide information regarding wire cable replacement. Even assuming that the pre-1997 instances in which Southwest Royalties provided requested materials to Sierra are relevant to an alleged duty assumed later on, Appellants produced no evidence to show that Southwest Royalties failed to provide wire cable standards to Sierra. Based on the summary judgment evidence in the record, we conclude that Appellants failed to produce probative evidence that Southwest Royalties assumed a duty to Appellants when Southwest Royalties undertook to render certain services to Sierra under the 1997 Service Agreement. Therefore, Appellants failed to produce evidence as to an essential element of the liability claim they asserted. Issue Two is overruled.
Given our disposition of Issue Two, it is not necessary to address Appellants' remaining issues. We affirm the trial court's judgment.