Rodessa Operating Company, Inc. v. Leverich Liquidation Company, L.L.C., Assignee of Dissolution Supply Co., L.C., F/K/A Bourland & Leverich Supply Co. L.C. and IPSCO Koppel Tubulars, L.L.C. D/B/A TMK IPSCO Koppel

• Court: Court of Appeals of Texas
• Decided: January 16, 2014
• Docket: 09-13-00241-CV
• Status: Published

Opinion

In The

Court of Appeals Ninth District of Texas at Beaumont ________________

NO. 09-13-00241-CV ________________

RODESSA OPERATING COMPANY, INC., Appellant

V.

LEVERICH LIQUIDATION COMPANY, L.L.C., ASSIGNEE OF DISSOLUTION SUPPLY CO., L.C., F/K/A BOURLAND & LEVERICH SUPPLY CO. L.C., AND IPSCO KOPPEL TUBULARS, L.L.C. D/B/A TMK IPSCO KOPPEL, Appellees __________________________________________________________________

On Appeal from the 411th District Court Polk County, Texas Trial Cause No. CIV 27047 __________________________________________________________________

MEMORANDUM OPINION

Appellant Rodessa Operating Company, Inc. (“Rodessa”) appeals from the

trial court’s final summary judgment, in which the trial court ordered that Rodessa

take nothing from appellees Leverich Liquidation Company, L.L.C., assignee of

Dissolution Supply Co., L.C. and formerly known as Bourland & Leverich Supply

Co. L.C. (“Leverich”) and IPSCO Koppel Tubulars, L.L.C. d/b/a TMK IPSCO

Koppel (“IPSCO”). Rodessa raises one appellate issue for our consideration. We 1 affirm the trial court’s summary judgment in part and reverse the trial court’s

summary judgment in part, and remand the cause for further proceedings

consistent with this opinion.

BACKGROUND

In its original petition against Leverich and IPSCO, which was filed on

January 23, 2012, Rodessa contended that on September 21, 2006, Leverich

supplied Rodessa with “12,506.30 feet of 2 3/8” 4.70# L-80 8RD EUE T&C RG2

SMLS Koppel pipe” for a drilling project Rodessa was operating. According to

Rodessa, Leverich provided materials that did not conform to Rodessa’s order,

resulting in the failure of the well due to “crushing pressure” and Rodessa’s loss of

the “drilling project known as IP 39 #1 in Polk County, Texas” on May 6, 2008.

Rodessa asserted that Leverich and IPSCO provided pipe that was of J-55

hardness, “which was not fit for the intended purpose of the L-80 pipe ordered by

RODESSA.”

Rodessa alleged that while taking a deposition of a Leverich representative

in a similar case on December 14, 2010, Rodessa discovered IPSCO’s role in

delivering non-conforming pipe and tubular goods to Rodessa. Rodessa contended

that Leverich ordered the tubular goods to be delivered directly to Rodessa by

IPSCO, who also “manufactured, tempered, conditioned, and otherwise created the

2 tubular goods.” According to Rodessa, if the pipe had been the grade of hardness

represented, the well would not have failed. Rodessa alleged that it “pulled that

failed pipe from the hole and preserved it[,]” and later submitted it to an expert

metallurgist, who issued a report dated September 17, 2010, which confirmed that

the tubular goods supplied by Leverich and IPSCO did not conform to the proper

specifications. Rodessa alleged that the expert’s metallurgical examination of the

pipe constituted Rodessa’s first actual notice “that the failure was caused by the

lack of due care, manufacturing defects, and contractual violations of [Leverich]

and IPSCO.”

Rodessa asserted causes of action against Leverich and IPSCO for DTPA

violations, negligence, fraudulent inducement (Rodessa states in its original

petition that misrepresentations were made “for the purpose of inducing [Rodessa]

into a contract for the purchase of the material in question”), and breach of

contract. Both Leverich and IPSCO raised limitations as an affirmative defense in

their responsive pleadings. See Tex. R. Civ. P. 94.

Leverich and IPSCO jointly filed a traditional motion for summary judgment

against Rodessa based upon their affirmative defense of the statute of limitations.

According to Leverich and IPSCO, Rodessa’s causes of action for DTPA

violations, misrepresentation, negligence, and breach of contract all accrued on

3 September 21, 2006, when materials of an allegedly improper grade were supplied

to Rodessa. Leverich and IPSCO contended that two-year statutes of limitations

barred Rodessa’s causes of action for DTPA violations, negligence, and

misrepresentation, and a four-year statute of limitations barred Rodessa’s cause of

action for breach of contract. Leverich and IPSCO characterized Rodessa’s

misrepresentation claim as one for negligent misrepresentation rather than

fraudulent inducement; however, based upon the language used by Rodessa in its

pleading, we conclude that Rodessa’s claim is most properly characterized as one

for fraudulent inducement. Leverich and IPSCO’s summary judgment evidence

merely consisted of a copy of Rodessa’s original petition, the September 21, 2006,

invoice for the pipe Rodessa ordered, a copy of IPSCO’s original answer, and a

copy of Leverich’s answer.

In response, Rodessa asserted that the cause of action did not accrue until the

pipe was tested by a metallurgist “in connection with a similar case,” and that a

fact issue exists with respect to whether Rodessa, “in the exercise of reasonable

diligence, should have submitted the pipe for metallurgical examination when it

was initially pulled from the hole.” Rodessa argued that its causes of action were

inherently undiscoverable because determining the grade of the pipe by visual

inspection was impossible. Rodessa provided an affidavit by its owner, Ken Talley,

4 who averred that the metallurgist’s report was the “first knowledge” he had, “either

individually or as president of Rodessa Operating, that the pipe in question was not

the same pipe grade represented by the sellers . . . .” After conducting a hearing,

the trial court granted summary judgment in favor of Leverich and IPSCO and

ordered that Rodessa take nothing.

ANALYSIS

In its sole appellate issue, Rodessa contends the trial court erred by granting

summary judgment in favor of Leverich and IPSCO because “the statute of

limitations ran only with the discovery of the pipe defect in 2012;” previous filings

in a related case put Leverich and IPSCO on notice of a potential claim; and the

discovery rule applied, placing the burden on Leverich and IPSCO, as the movants

for summary judgment, to negate “all issues concerning the invocation of the

discovery rule by Rodessa[.]” 1 We review a summary judgment de novo. See

Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848

1 On appeal, Rodessa asserts for the first time that IPSCO is “equitably estopped” from asserting a limitations defense due to its “prior dealings” with Rodessa, and that IPSCO and Leverich had actual notice of the claim due to the filing of a counterclaim in litigation related to the same issue at another well. Because these issues were not presented to the trial court, they are not preserved for review. See Tex. R. App. P. 33.1(a); see also City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979) (“The written answer or response to the motion must fairly apprise the movant and the court of the issues the non- movant contends should defeat the motion.”). 5 (Tex. 2009). A party filing a traditional motion for summary judgment must show

that no genuine issue of material fact exists, and that the movant is entitled to

judgment as a matter of law. Tex. R. Civ. P. 166a(c); Sw. Elec. Power Co. v.

Grant, 73 S.W.3d 211, 215 (Tex. 2002). “A defendant moving for summary

judgment on the affirmative defense of limitations has the burden to conclusively

establish that defense.” Velsicol Chem. Corp. v. Winograd, 956 S.W.2d 529, 530

(Tex. 1997). Therefore, a defendant asserting a limitations defense in a motion for

summary judgment

must (1) conclusively prove when the cause of action accrued, and (2) negate the discovery rule, if it applies and has been pleaded or otherwise raised, by proving as a matter of law that there is no genuine issue of material fact about when the plaintiff discovered, or in the exercise of reasonable diligence should have discovered the nature of its injury.

KPMG Peat Marwick v. Harrison Cnty. Housing Fin. Corp., 988 S.W.2d 746, 748

(Tex. 1999). “If the movant establishes that the statute of limitations bars the

action, the nonmovant must then adduce summary judgment proof raising a fact

issue in avoidance of the statute of limitations.” Id. In determining whether the

movant met its summary judgment burden, we take all evidence favorable to the

non-movant as true and resolve every reasonable inference in favor of the non-

movant. Nixon v. Mr. Prop. Mgmt. Co., Inc., 690 S.W.2d 546, 548-49 (Tex. 1985).

6 Pleadings do not constitute summary judgment evidence. Laidlaw Waste Sys.

(Dallas), Inc. v. City of Wilmer, 904 S.W.2d 656, 660-61 (Tex. 1995).

Fraudulent inducement claims are governed by a four-year statute of

limitations. Tex. Civ. Prac. & Rem. Code Ann. § 16.004(a)(4) (West 2002);

Canada v. Canada, No. 02-11-00483-CV, 2013 WL 1759894, at *3 (Tex. App.—

Fort Worth Apr. 25, 2013, no pet.) (mem. op.). Claims for breach of a contract for

the sale of goods are also governed by a four-year statute of limitations. Tex. Bus.

& Com. Code Ann. § 2.725(a) (West 2009). Claims for negligence and DTPA

violations are governed by a two-year statute of limitations. Tex. Bus. & Com.

Code Ann. § 17.565 (West 2011) (two-year statute of limitations for DTPA

claims); Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a) (West Supp. 2013)2

(general two-year statute of limitations); see Dunmore v. Chicago Title Ins. Co.,

400 S.W.3d 635, 640 (Tex. App.—Dallas 2013, no pet.) (applying two-year statute

of limitations from section 16.003(a) to negligence claim).

The date that a cause of action accrues is a question of law. Moreno v.

Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex. 1990); Willis v. Maverick, 760

S.W.2d 642, 644 (Tex. 1988). “A cause of action generally accrues, and the statute

of limitations begins to run, when facts come into existence that authorize a

2 Because the changes to section 16.003(a) are immaterial to this appeal, we cite to the current version of the statute. 7 claimant to seek a judicial remedy.” Johnson & Higgins of Tex., Inc. v. Kenneco

Energy, Inc., 962 S.W.2d 507, 514 (Tex. 1998). A cause of action for negligence

accrues on the date when the negligent act that produces the injury is committed.

Dunmore, 400 S.W.3d at 641. A cause of action for breach of contract involving a

sale of goods accrues “when the breach occurs, regardless of the aggrieved party’s

lack of knowledge of the breach[,]” and a cause of action for a DTPA violation

accrues when the consumer discovered or should have discovered the occurrence

of the allegedly false, misleading, or deceptive act or practice. Tex. Bus. & Com.

Code Ann. §§ 2.725(b), 17.565. Finally, a cause of action for fraudulent

inducement accrues on the date the allegedly false representations were made.

Seureau v. ExxonMobil Corp., 274 S.W.3d 206, 227 (Tex. App.—Houston [14th

Dist.] 2008, no pet.).

The discovery rule defers the accrual of a cause of action until the plaintiff

knows, or by exercising reasonable diligence should know, of the facts giving rise

to its claim. Barker v. Eckman, 213 S.W.3d 306, 311-12 (Tex. 2006); Schneider

Nat’l Carriers, Inc. v. Bates, 147 S.W.3d 264, 279 (Tex. 2004); HECI Exploration

Co. v. Neel, 982 S.W.2d 881, 886 (Tex. 1998). The discovery rule is a very limited

exception to statutes of limitations, and its application is generally restricted “to

exceptional cases to avoid defeating the purposes behind the limitations statutes.”

8 Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006). Because the discovery

rule is a plea in confession and avoidance, a party seeking to avail itself of the

discovery rule must plead the discovery rule as a matter in avoidance. Woods v.

William M. Mercer, Inc., 769 S.W.2d 515, 517-18 (Tex. 1988). The discovery rule

delays accrual only if the injury was both inherently undiscoverable and

objectively verifiable. Computer Assocs. Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453,

456 (Tex. 1996). “An injury is not inherently undiscoverable when it is the type of

injury that could be discovered through the exercise of reasonable diligence.” BP

Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 66 (Tex. 2011).

Leverich and IPSCO contend that Rodessa did not plead the discovery rule,

but instead raised the discovery rule for the first time in its response to the motion

for summary judgment. Although Rodessa did not explicitly use the term

“discovery rule” in its original petition, Rodessa did allege that the expert’s

metallurgical examination of the pipe constituted Rodessa’s “first actual notice . . .

that the failure was caused by the lack of due care, manufacturing defects, and

contractual violations of [Leverich] and IPSCO.” We hold that this allegation by

Rodessa in its first amended petition was sufficient to provide Leverich and IPSCO

with fair notice that Rodessa intended to rely upon the discovery rule. See Galindo

v. Snoddy, No. 06-13-00072-CV, ___ S.W.3d ___, 2013 WL 6136771, at *3 n.8

9 (Tex. App.—Texarkana Nov. 22, 2013, no pet. h.) (not yet released for

publication) (concluding that when petition alleged when the falsity of

representations was discovered, an attorney of reasonable competence would

understand such an allegation as invoking the discovery rule); see generally Tex.

R. Civ. P. 45 (“All pleadings shall be construed so as to do substantial justice.”).

We now turn to the question of whether the discovery rule applies to

Rodessa’s claims. With respect to Rodessa’s claim for breach of contract, the

discovery rule does not apply because the Legislature has explicitly rejected its

application in breach of contract claims involving the sale of goods. Tex. Bus. &

Com. Code Ann. § 2.725(b); Via Net, 211 S.W.3d at 313. Therefore, Rodessa’s

breach of contract action accrued on September 21, 2006, when the non-

conforming pipe was delivered, and Rodessa’s filing of its original petition on

January 23, 2012, was not timely. See Tex. Bus. & Com. Code Ann. § 2.725(b).

Accordingly, the trial court did not err in granting summary judgment as to

Rodessa’s breach of contract claim. See id.; see also Via Net, 211 S.W.3d at 313.

We next address the question of whether Leverich and IPSCO demonstrated

that the discovery rule does not apply. As previously discussed, the movant for

summary judgment on limitations must (1) prove when the cause of action accrued

and (2) negate the discovery rule, if the discovery rule applies, by proving that

10 there is no genuine issue of material fact about when the plaintiff discovered, or in

the exercise of reasonable diligence should have discovered the nature of its injury.

KPMG Peat Marwick, 988 S.W.2d at 748.

Leverich and IPSCO provided as summary judgment evidence the invoice

for the pipe, which demonstrated that the pipe was delivered to Rodessa on

September 21, 2006, and that absent application of the discovery rule, Rodessa’s

causes of action accrued on that date. However, the trial court had no evidence

before it concerning whether the non-conforming pipe was inherently

undiscoverable by Rodessa upon delivery, e.g., whether the pipe was unmarked or

mismarked, or whether the industry standard required that pipes be marked to show

their strength and grade. The trial court also had no evidence before it regarding

whether, if the non-conforming pipe was inherently undiscoverable upon delivery,

when Rodessa should have discovered its injury in the exercise of reasonable

diligence. See id. In addition, Leverich and IPSCO’s motion for summary

judgment failed to negate the discovery rule’s application to Rodessa’s claims,

despite the fact that Rodessa had pleaded the discovery rule, and instead simply

orally argued at the hearing on the motion for summary judgment that Rodessa had

failed to properly plead the discovery rule. Therefore, Leverich and IPSCO failed

to meet their burden of proving that, as a matter of law, there was no genuine issue

11 of material fact about when Rodessa should, in the exercise of reasonable

diligence, have discovered the nature of the injury. See id. Accordingly, we affirm

the trial court’s summary judgment with respect to the breach of contract claim, to

which the discovery rule does not apply, and we reverse the trial court’s summary

judgment as to Rodessa’s causes of action for negligence, DTPA violations, and

fraudulent inducement and remand the cause for further proceedings consistent

with this opinion.3

AFFIRMED IN PART; REVERSED AND REMANDED IN PART.

________________________________ STEVE McKEITHEN Chief Justice

Submitted on December 13, 2013 Opinion Delivered January 16, 2014

Before McKeithen, C.J., Kreger and Horton, JJ.

3 We do not rule on the ultimate issue of whether the statute of limitations has run on Rodessa’s claims for negligence, DTPA violations, and fraudulent inducement. Rather, our ruling as to those claims is confined to determining that, in the context of the summary judgment proceeding, Leverich and IPSCO failed to meet their burden of showing that no genuine issues of material fact exist and they are entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c); KPMG Peat Marwick v. Harrison Cnty. Housing Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). 12