Howell Pipeline Texas, Inc./appellant/cross-appellee v. ExxonMobil Pipeline Company/appellee/cross-appellant and Howell Corporation, Howell Pipeline USA, Inc., Howell Crude Oil Company

• Court: Court of Appeals of Texas
• Decided: August 28, 2003
• Docket: 14-02-00387-CV
• Status: Published

Opinion

Reversed and Remanded and Opinion filed _____, 2003

Reversed and Remanded and Opinion filed August 28, 2003.

In The

Fourteenth Court of Appeals

____________

NO. 14-02-00387-CV

HOWELL PIPELINE TEXAS, INC., Appellant/Cross-Appellee

V.

EXXONMOBIL PIPELINE COMPANY, Appellee/Cross-Appellant

HOWELL CORPORATION, HOWELL PIPELINE USA, INC., HOWELL CRUDE OIL COMPANY, Cross-Appellees

On Appeal from the 125th District Court

Harris County, Texas

Trial Court Cause No. 99-32526

O P I N I O N

            This suit concerns leftovers of a $63 million sale by Exxon[1] to Howell[2] of pipeline systems spread across four states.  As a part of the sale, Exxon leased back eight oil storage tanks in northwest Houston.  When Exxon terminated the lease a year later, it left behind substantial amounts of crude oil and “tank bottoms”—sediments that accumulate in the location indicated by their name. 

            Howell sued for rent, claiming Exxon was a holdover tenant because of the crude oil it left behind.  Both parties claimed the other should have paid the $1.6 million cost to clean out the tank bottoms left behind.  Based on a jury’s answers, the trial court awarded neither party anything, from which decision both appeal.  

Rent

            The jury found Exxon vacated the storage tanks in October 1996—more than six months after termination—but that Exxon did not breach the lease between the parties.  The jury also found (1) Exxon’s failure to pay rent after March 31, 1996 was excused by Howell’s repudiation or prior breach, (2) Exxon’s continued occupancy of the leased premises after March 31, 1996 was justified by circumstances beyond its control, and (3) Howell’s claim for rental payments fell within a release clause in the parties’ sales agreement.  At trial, Exxon tendered the release, as well as evidence that it left crude oil in the tanks because (1) without it “the roofs would land on the tanks,” (2) Howell refused to cooperate with Exxon’s efforts to remove it, and (3) Howell would need it to clean out the tank bottoms.  Although Howell disputed these claims at trial, on appeal it does not attack the legal or factual sufficiency supporting any of the jury’s findings.  

            Instead, Howell asserts Exxon was a holdover tenant, and thus had an absolute obligation to pay rent that could not be justified, excused, or released.  Generally, the duty to pay rent is independent of other covenants in a lease because a tenant in possession retains the primary right to which he is entitled—possession.[3]  But there was some evidence here that Exxon was not in possession of the premises, as it could not remove the crude oil without Howell’s cooperation.[4]  And there was also evidence the holdover was at Howell’s request and for its benefit, a matter which the parties were free to negotiate.[5]  Other than the general proposition making rent an independent covenant, Howell presents no authority supporting an absolute duty to pay rent under circumstances like those here. 

            Additionally, in the parties’ Purchase and Sale Agreement, Howell agreed to release Exxon for all claims asserted against it “by any person or entity arising . . . from incidents occurring after closing relating to the condition of the assets.”  Howell argues the release was intended to cover claims by third parties only (and not Howell), but this contradicts the express coverage of claims by any person or entity.  Howell argues the release could not have covered future events, an argument belied by the express coverage of claims arising after closing.  Finally, Howell again argues the release did not cover its claim for rent.  But as noted above, Exxon presented evidence that it could not or did not remove the crude oil due to the condition of the assets (here, the tanks).

            In the circumstances presented here, Howell was not entitled to rent regardless of its own breaches or agreements.  We hold the trial judge did not err in asking the jury whether Exxon’s duty to pay rent was justified, excused, or released, or in entering a take-nothing judgment based on their answers.

Tank Bottoms

            The jury found Howell breached the lease by refusing to pay for clean-up of the tank bottoms, but also found Exxon suffered no damages from Howell’s breach.  Howell appeals the former finding, Exxon the latter. 

            The parties presented conflicting expert testimony on whether the clean-up costs should be borne by the owner of the tanks (Howell) or the owner of the contents (Exxon).  Although nothing in the parties’ agreements answers this question directly, Exxon points to several provisions that support its interpretation:

·        The Purchase and Sale Agreement provided that Exxon sold the tanks to Howell “ON AN AS-IS, WHERE-IS AND WITH ALL FAULTS BASIS” (capitalization in original).  This does not suggest the parties intended for Exxon to clean out the tanks after the sale.

·        The Purchase and Sale Agreement excluded from the sale all crude oil in the various pipeline assets belonging to shippers (including Exxon affiliates).  An attachment provided an elaborate calculation for this crude oil inventory that excluded tank bottoms.  By excluding crude oil from the sale, but also excluding tank bottoms from the calculation of crude oil, this provision suggests the tank bottoms were sold with the tanks.

·        The Lease Agreement for the tanks specifically provided Exxon would return them at termination “in the same condition as when received,” presumably including tank bottoms.[6] 

            At the least, these contractual provisions do not unambiguously place the duty of clean-up on Exxon.  We need not decide whether they unambiguously place the duty on Howell; even assuming they are ambiguous, they provide some evidence to support the jury’s verdict that Howell had that duty, and breached it by failing to pay the full cost.

             In its appeal, Exxon challenges the jury’s finding that it suffered no damages from Howell’s breach.  Damages were defined as costs incurred in cleaning up the tank bottoms.  Based on the undisputed evidence presented at trial, the jury’s finding cannot possibly be true—there is simply no evidence that clean-up was free.  Howell and Exxon each paid $799,236.09 in clean-up costs, and each sued the other for the same reimbursement amount.  Accordingly, neither party challenged the reasonableness or necessity of that amount.  While it is generally within the province of jurors to set damages, they cannot ignore the undisputed facts and arbitrarily deny any recovery.[7]

            Howell’s only argument in support of the jury verdict is that Exxon paid voluntarily, and thus waived any right to reimbursement.[8]  But the clean-up only began when, after an initial impasse, Exxon and Howell signed an agreement to split the clean-up costs that contained the following proviso:

This agreement to share costs and perform the tank cleaning is being done to minimize the impact on the surrounding community and is not to be taken or used by either party as an admission by the other party of any responsibility for the tank bottoms or a waiver of any legal rights.  Howell and [Exxon] will each reserve its legal rights to claim or counterclaim for the amounts expended in the cleanup and any other amounts rightfully owed by one party to the other.

This language is not ambiguous—Exxon waived nothing by agreeing to split the clean-up costs until the parties’ rights were settled in court.[9]  Thus, the evidence establishes as a matter of law that Exxon incurred $799,236.09 in actual damages.[10]

            Exxon also asserts that it conclusively proved it was entitled to $303,506 in attorney’s fees for Howell’s breach.  Exxon’s expert testified regarding the billing rate and attorneys involved, the nature of the services rendered, and the reasonableness of the fees charged.  Howell did not controvert Exxon’s evidence, and its only response on appeal is the jury’s zero-damage award.  Because the evidence was clear, direct and positive, and not contradicted by any other witness or attendant circumstances, we hold Exxon is entitled to attorney’s fees in the amount of $303,506.[11]

Jury Argument

            In its final issue, Howell asserts the trial court erred by denying its motion for new trial based on jury argument by Exxon’s counsel.  The record reflects several occasions during closing arguments when both of Exxon’s attorneys inserted their personal beliefs regarding the credibility of the witnesses.  Even if these statements were improper, Howell objected only once, never got a ruling on that objection, and never asked for an instruction to disregard the argument. 

            Incurable argument (for which no request for an instruction is required) is rare, typically only involving inflammatory statements.[12]  The difference between the argument “witness A was not credible” and “I believe witness A was not credible” is a narrow one that cannot be described as inflammatory.  Accordingly, we overrule Howell’s third issue.

            In sum, we affirm the trial court’s take-nothing judgment against Howell.  We reverse the trial court’s take-nothing judgment against Exxon, and hold that Exxon is entitled to judgment against Howell Pipeline Texas, Inc. for $799,236.09 in actual damages, attorney’s fees of $303,506, costs, and interest.  The record in this case does not allow this Court to determine prejudgment interest as a matter of law; thus, we reverse the trial court’s judgment and remand this case to the trial court for rendition of judgment consistent with this opinion.[13]                                          

                                                                        /s/        Scott Brister

                                                                                    Chief Justice

Judgment rendered and Opinion filed August 28, 2003.

Panel consists of Chief Justice Brister and Justices Yates and Hudson.

---

[1]  The seller of the pipeline systems was Exxon Pipeline Company, whose successor after a corporate reorganization was ExxonMobil Pipeline Company. Because no issue turns on the reorganization, for ease of reference both are referred to herein as “Exxon.”

[2]  The buyer of the pipeline systems was Howell Crude Oil Company.  After an ownership transfer among its affiliates, the tanks were leased back to Exxon by Howell Pipeline Texas, Inc.  Because no issue turns on the transfer among the Howell entities, for ease of reference all are referred to herein as “Howell.”

[3]  See Davidow v. Inwood North Professional Group, 747 S.W.2d 373, 375 (Tex. 1988).

[4]  See Restatement (Second) of Property §10.01, cmt. e (providing tenant does not holdover if property left behind does not substantially interfere with landlord’s retaking possession).

[5]  Cf. Churchill Forge, Inc. v. Brown, 61 S.W.3d 368, 371 (Tex. 2001) (refusing to infer prohibition against parties’ agreement given State’s “strong commitment to the principle of contractual freedom”).

[6]  While Howell asserts that the tank bottoms increased during the term of the lease, the jury found Exxon did not breach the lease between the parties, and Howell has not challenged this jury finding on appeal.

[7]  See Schwartz v. Pinnacle Communications, 944 S.W.2d 427, 436 (Tex. App.—Houston [14th Dist.] 1997, no writ).

[8]  Howell also argues Exxon waived error by moving for entry of judgment on the jury’s verdict.  See Litton Indus. Prods., Inc. v. Gammage, 668 S.W.2d 319, 321–22 (Tex. 1984).  But before the hearing was held, Exxon filed a motion for judgment notwithstanding the verdict challenging the jury’s zero-damage finding.  Accordingly, Exxon did not waive error. See Baw v. Baw, 949 S.W.2d 764, 767 (Tex.App.—Dallas 1997, no pet.) (holding husband who signed decree stating “approved and consented to as to both form and substance” did not waive appeal because he later indicated during hearing that he did not consent to it).

[9]  See Spring Branch Bank v. Mengden, 628 S.W.2d 130, 136 (Tex. App.—Houston [14th Dist.] 1981, writ ref’d n.r.e.) (stating that a payment made with an express reservation of rights to bring suit is not a voluntary payment). 

[10]  See Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990) (affirming part of court of appeals judgment that awarded actual damages as a matter of law because evidence of these damages was uncontroverted).

[11] Id. at 881 (holding that, if the evidence is clear, direct and positive, and not contradicted by any other witness or attendant circumstances, an appellate court can render judgment as to the uncontroverted amount of attorney’s fees).

[12]  See Melendez v. Exxon Corp., 998 S.W.2d 266, 281 (Tex. App.—Houston [14th Dist.] 1999, no pet.).

[13]  See Buys v. Buys, 924 S.W.2d 369, 375 (Tex. 1996).