the Coastal Corporation v. Daniel Torres, William Bourland, and David Natividad

NUMBER 13-00-732-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

___________________________________________________________________

THE COASTAL CORPORATION, Appellant,

v.

DANIEL TORRES, WILLIAM BOURLAND,

AND DAVID NATIVIDAD, Appellees.

___________________________________________________________________

On appeal from the 319th District Court

of Nueces County, Texas.

__________________________________________________________________

O P I N I O N

Before Chief Justice Valdez and Justices Hinojosa and Rodriguez

Opinion by Justice Rodriguez

This is a personal injury case that involves a refinery explosion caused by a

defect in a pressure vessel. Appellees, Daniel Torres, William Bourland, and David

Natividad, asserted a negligence claim against appellant, The Coastal Corporation

(Coastal). Following a jury trial, the trial court entered judgment against Coastal. By

five issues, Coastal contends appellees’ theory of recovery is not recognized in Texas;

the evidence is legally and factually insufficient to support such theory, if recognized;

the trial court erred in admitting expert testimony; the award of actual damages is

excessive; and prejudgment interest on future damages should not have been awarded.

We reverse and render.

I. BACKGROUND

An explosion occurred in May 1999 at a Corpus Christi refinery owned and

operated by Coastal Refining & Marketing, Inc. (Coastal Refining).

A pressure vessel

ruptured, releasing a large amount of naphtha that found an ignition source and

exploded. Appellees, who were Coastal Refining employees, received serious injuries

in the accident. The rupture occurred as a result of the vessel’s walls thinning from

internal corrosion.

Appellees sued appellant for negligence and gross negligence alleging that

“through central budgetary authority exercised by Coastal’s corporate officers in

Houston, Texas, Coastal . . . assumed control over maintenance, turnaround, and

inspection matters at the plant.” In response to a broad-form negligence question, the

jury found Coastal’s negligence proximately caused appellees’ injuries.

The court’s

charge defined the terms “negligence,“ ”ordinary care,” and “proximate cause.”

Moreover, the detailed instructions accompanying the question provided, in relevant

part:

In order to find negligence on the part of The Coastal Corporation,

you must find all of the following: (1) The Coastal Corporation had the

right to control the budget and/or expenditures of Coastal Refining &

Marketing, Inc.; (2) The Coastal Corporation exercised that right of

control through a person who was acting as a director, officer, employee

or agent of The Coastal Corporation; and (3) The Coastal Corporation’s

exercise of that control amounted to negligence.

The jury answered, “Yes,” as to each appellee and awarded actual damages totaling

$122.5 million.

By its first issue, Coastal challenges appellees’ theory of liability in this case.

It contends Texas does not recognize a cause of action against a parent company for

negligent control of the budget of its subsidiary. Because appellees have waived any

premises liability, Coastal argues that appellees are left with theories of recovery that

have no support in Texas law.

II. ANALYSIS

Appellees assert that Coastal’s duty arises from traditional and mainstream

principals of tort law. Coastal, however, contends Texas courts have not accepted

any theory of recovery urged by appellees.

A. Negligent Control of Subsidiary’s Budget

Appellees complain of Coastal’s actions in allegedly taking control of the safety

budget and expenditures for the refinery and imposing policies that created strict

procedures over its subsidiary’s access to funds. Because Coastal was allegedly

negligent through its own conduct in creating that management scheme and in

withholding funds for inspectors and safety maintenance, appellees contend Coastal

is liable.

Appellees assert Texas case law provides the mainstream duty that Coastal

owed appellees, that being a duty arising from its alleged negligent control over

budgets and expenditures. Relying on Redinger v. Living, Inc ., 689 S.W.2d 415, 417-18 (Tex. 1985), and cases following Redinger , to support their control-based liability

theory, appellees contend Coastal, by limiting expenditures, controlled and influenced

its subsidiary in a way that directly resulted in appellees’ injuries. The facts, however,

underlying the Redinger line of cases are distinguishable from the present facts.

In Redinger , the court reviewed supervisory control over construction work that

caused the injury, an activity conducted on the premises. See id . Redinger adopted

section 414 of the Restatement (Second) of Torts, which imposes liability based on

control of another’s work activities. Section 414 provides:

One who entrusts work to an independent contractor, but who retains

control of any part of the work, is subject to liability for physical harm to

others for whose safety the employer owes a duty to exercise reasonable

care, which is caused by his failure to exercise his control with

reasonable care.

Id . at 418 (quoting Restatement(Second) of Torts § 414 (1977)). Appellees also rely

on: (1) Read v. Scott Fetzer Co ., 990 S.W.2d 732, 736 (Tex. 1998) (control over

specific details of the work); (2) Exxon Corp. v. Tidwell , 867 S.W.2d 19, 22-23 (Tex.

1993) (in case alleging negligence in maintaining safe workplace, focus must be on

specific control over safety and security of premises, rather than more general right of

control over operations); and (3) Humble Oil & Ref. Co. v. Martin , 148 Tex. 175, 178 ,

222 S.W.2d 995, 998 (1949) (control over details of station operations including strict

system of financial control and supervision).

From the Redinger line of cases, it is

apparent that liability is imposed when there is specific control over the activity that

caused the accident. See Coastal Marine Serv., Inc. v. Lawrence , 988 S.W.2d 223,

226 (Tex. 1999) (per curiam) (control over injury-producing event); Hoechst-Celanese

Corp. v. Mendez , 967 S.W.2d 354, 356-58 (Tex. 1993) (control over details of work);

Koch Ref. Co. v. Chapa , 11 S.W.3d 153, 155-56 (Tex. 1999) (employer must have

some degree of control over manner in which work done); Elliott-Williams Co. v. Diaz ,

9 S.W.3d 801, 804 (Tex. 1999) (for general contractor to be liable for independent

contractor’s acts, it must have right to control means, methods, or details of

independent contractor’s work); see also Dow Chemical Co. v. Bright , 89 S.W.3d 602,

611 (Tex. 2002) (mere promulgation of safety policies does not establish actual

control over independent contractor).

In the present case, appellees assert negligent control of the budget, not

negligent control over details of specific operational activities. We cannot conclude

the cited authority provides support for appellees’ argument. Because appellees have

provided us with no authority, and we find none, where a Texas court has imposed

liability against a parent company, under mainstream principles of tort law, for

negligent control of such remote conduct as budgeting activities, we conclude

appellees’ control-based negligence theory of recovery fails.

B. Affirmative Conduct/Undertaking Liability

Coastal also challenges the viability of any affirmative conduct theory of

recovery appellees now argue on appeal.

Appellees assert Coastal’s tort duty flows from the mainstream duty rule that

a party must use reasonable care in its affirmative conduct. Appellees construe the

affirmative conduct about which they complain as Coastal’s choice of a business

management plan that allegedly gave Coastal control over expenditures and budgets.

They describe this theory as one closely akin to an “undertaking liability.”

The Texas Supreme Court discussed the undertaking theory of liability in

Torrington Co. v. Stutzman , 46 S.W.3d 829, 837 (Tex. 2000). The Torrington court

concluded undertaking liability requires the submission of the following specific duty

predicates:

(1) [the defendant] undertook to perform services that it knew or should

have known were necessary for the plaintiffs’ protection, (2) [the

defendant] failed to exercise reasonable care in performing those

services, and either (3) [a third party charged with protecting the

plaintiffs] relied upon [the defendant’s] performance, or (4) [the

defendant’s] performance increased the plaintiffs’ risk of harm.

Id . at 838.

While the trial court’s charge in Torrington included the usual definitions

of “negligence,” “ordinary care,” and “proximate cause,” it gave the jury no further

instructions or definitions applicable to the negligence question. Id . Because the

charge did not submit the necessary duty predicates for a voluntary undertaking claim,

and because neither plaintiff nor the court of appeals had the guidance of Torrington

at the time the case was tried, the supreme court remanded the undertaking claim to

the trial court. Id . at 841.

In the present case, the above duty predicates were not submitted in the trial

court’s charge. Unlike Torrington , however, the court’s charge did include the

following predicates which appellees assert gave rise to a legal duty: (1) Coastal had

the right to control the budget and/or expenditures of Coastal Refining & Marketing,

Inc.; and (2) Coastal exercised that right of control through a person who was acting

as a director, officer, employee or agent of Coastal. Appellees assert these elements

were submitted in an effort to prove that, by refusing to budget necessary funds,

Coastal chose to control the “safety duty” that the refinery owed its employees.

However, the actions about which appellees complain are not affirmative actions of

control undertaken to provide services to protect another. Appellees are complaining

of refusals or failures to budget. This is the antithesis of an affirmative course of

action. See Peterson v. Mut. Sav. Inst. , 646 S.W.2d 327, 329 (Tex. App.–Austin

1983, no writ) (plaintiff must show an “affirmative undertaking . . . for the benefit of

the injured person ”) (emphasis in original); see also Fort Bend County Drainage Dist.

v. Sbrusch , 818 S.W.2d 392, 396-96 (Tex. 1991) (mere promise to repair bridge with

neither performance nor reliance imposes no tort obligation on promissor); Colonial

Sav. Ass’n v. Taylor , 544 S.W.2d 116, 119-20 (Tex. 1976) (jury found insurance

company had undertaken to provide fire insurance coverage for house that burned

down and, thus, had assumed duty to exercise reasonable care when purchasing

coverage); Johnson v. Abbe Eng’g Co ., 749 F.2d 1131, 1133 (5th Cir. 1984) (parent

corporation’s duty may be established by showing it undertook inspection of entire

plant). Accordingly, we conclude Coastal’s alleged actions do not comprise affirmative

conduct akin to an affirmative undertaking pursued for the benefit of the injured

person. Moreover, appellees have provided us with no authority, and we find none,

where a Texas court has, under mainstream principles of tort law, construed a parent

company’s refusal or failure to budget as an affirmative undertaking and imposed

liability against a parent company. Thus, appellees’ affirmative conduct theory also

fails.

C. Negligent Activity

More accurately, appellees’ theory of recovery is a “negligent activity” claim,

the term that the Texas Supreme Court uses to distinguish activity-based torts from

premises-liability claims. See, e.g., Keetch v. Kroger Co ., 845 S.W.2d 262, 264 (Tex.

1992); see also Alamo Lumber Co. v. Pena , 972 S.W.2d 800, 804 (Tex. App.–Corpus

Christi 1998, pet. denied) (citing Clayton W. Williams, Jr., Inc. v. Olivo , 952 S.W.2d

523, 527 (Tex. 1997)) (negligent activity and premises defect theories may coexist,

depending on facts of particular case).

Texas law, however, requires that a “negligent activity” be a contemporaneous

cause of the accident. See Timberwalk Apartments, Partners, Inc. v. Cain , 972

S.W.2d 749, 753 (Tex. 1998) (claim for inadequate security is premises defect claim,

not activity claim); Keetch , 845 S.W.2d at 264 (affirmative activity of spraying plants

with water which caused floor to become slippery is premises claim not negligent

activity); see also Dallas Mkt. Ctr. Dev. Co. v. Liedeker , 958 S.W.2d 382, 383-84

(Tex. 1997) (muffling elevator gate alarm resulted in premises claim, not general claim

for negligent activity); H.E. Butt Grocery Co. v. Warner , 845 S.W.2d 258, 259 (Tex.

1992) (“failure to pre-bag chicken theory” rejected by supreme court as an

impermissible negligent-activity claim when plaintiff fell in puddle of chicken blood,

water, and other fluids).

The accident made the basis of this suit did not occur as a contemporaneous

result of any of the conduct appellees allege: namely Coastal’s original purchase of the

refinery premises; Coastal’s transfer of the premises to its subsidiary, Coastal Refining;

or Coastal’s alleged budgeting activities. Thus, under the facts of this case, appellees

cannot recovery under a negligent activity theory.

D. Premises Defect

Coastal further argues this case is strictly a classic premises defect case arising

out of a failure of the walls of a pressure vessel that were too thin to be operated

safely.

See Cain , 972 S.W.2d at 753 ; Liedeker , 958 S.W.2d at 385 . Appellees

elected, however, not to seek recovery based on a premises defect. Therefore, relief,

if any, on this basis has been waived, and we need not address it on appeal.

Accordingly, we sustain Coastal’s first issue.

Because of our disposition of Coastal’s first issue, we need not address the

remaining issues. Tex. R. App. P. 47.1.

III. CONCLUSION

Appellees have masterfully presented their arguments in an attempt to obtain

relief under a negligence theory bounded by traditional and mainstream principles of

tort. We must conclude, however, that Texas law, as it exists today, imposes no

liability on a parent company to approve budgets for its subsidiaries in order to assure

that the subsidiaries repair defects on their premises.

Moreover, the Texas Supreme

Court has often demonstrated its unwillingness to expand tort duties in Texas. See

e.g., Mellon Mortgage Co. v. Holder , 5 S.W.3d 654, 658 (Tex. 1999) (declining to

create any “universal duty” on premises owners to prevent criminal activity on their

property); Van Horn v. Chambers , 970 S.W.2d 542, 546-47 (Tex. 1998) (declining

to impose a duty on physicians to protect third persons from acts committed by

patients); Smithkline Beecham Corp. v. Doe , 903 S.W.2d 347, 353 (Tex. 1995)

(declining to recognize a new common law duty after weighing the likelihood of injury

against the utility of the defendant’s conduct, the burden of preventing the injury, and

the effect of placing that burden on the defendant).

Accordingly, the judgment of the trial court is reversed and rendered that

appellees take nothing.

NELDA V. RODRIGUEZ

Justice

Opinion delivered and filed

this 25th day of March, 2004.