Texas Judiciary Online - HTML Opinion

^{^[1]} The pistons of the = aircraft=20 engines at issue connect to rods that turn the crankshafts, and = the=20 crankshafts turn the propellers of the aircraft.

^{^[2]} Interstate Forging Industries, = Inc.=20 subsequently converted to a limited liability company known as = Citation=20 Wisconsin Forging, L.L.C. For the sake of clarity, we have = referred=20 to this single entity as IFI.

^{^[3]} The MSA originally provided that = either=20 party could terminate the agreement immediately upon certain = occurrences,=20 including:

[t]he sale or transfer of more than = fifty percent=20 (50%) of all or substantially all of the assets or stock or upon = the=20 occurrence of any other transaction that results in a change of = ownership=20 or control of a party unless the other party shall have expressly = agreed=20 thereto in writing . . . .

This provision was deleted in the First = Addendum=20 to the MSA on May 4, 1995.

^{^[4]} As previously noted, Lycoming = contends it=20 had no knowledge of IFI=3Ds Assignment Agreement with ISW and did = not know=20 that the crankshaft forgings were actually produced by ISW. = Thus,=20 Lycoming continued to direct its communications to IFI, and = neither IFI=20 nor ISW corrected Lycoming.

^{^[5]} Lycoming=3Ds correspondence of July 27, 1999 and = May 15, 2000=20 are both addressed to AInterstate Forging Industries[,] = Inc.@

^{^[6]} According to evidence offered by = ISW,=20 Lycoming had previously asked that its forgings be produced using = this=20 method, but until the settlement, the forging supplier had refused = because=20 the change would increase the cost of production. =

^{^[7]} AKsi@ is the abbreviation for Akilopounds per square inch@ and is a measurement of = tension.

^{^[8]} This letter is addressed to = AInterstate Forging = Southwest.@

^{^[9]} Textron, Inc. and Avco = Corporation are also=20 parties to the Release and Indemnity Agreement.

^{^[10]} Flying Frog, L.L.C. v. Cessna = Aircraft=20 Co., No. H-02-3817, filed on October 8, 2002 in the United = States=20 District Court for the Southern District of Texas, Houston = Division. =20

^{^[11]} IFI later intervened in the suit, = and=20 Lycoming objected on several grounds. The trial court struck = the=20 intervention, and none of the parties contend the trial court = erred in=20 doing so.

^{^[12]} Act of May 21, 2001, 77th Leg., = R.S., ch.=20 643, ' 3, 2001Tex. Gen. Laws 1208, 1209, = eff. Sept.=20 1, 2001, amended by Act of June 2, 2003, 78th Leg., R.S.,=20 ch. 204, ' 13.06, 2003 Tex. Gen. Laws 847, = 888B89, amended by Act of May 18, = 2007, 2007=20 Tex. Sess. Law Serv. ch. 593, ' 3.03 (H.B. 8) (West) (current version = at Tex. Civ. Prac. & Rem. = Code=20 Ann. ' 41.008(c)(11) (Vernon Supp.=20 2007)).

^{^[13]} The excluded evidence includes a = certified=20 copy of a report entitled ALycoming Special Certification Review = Team (SCRT)=20 Final Report@ (ASCRT Report@), which Lycoming describes as a report = by the=20 FAA. The trial court also excluded testimony about the SCRT = Report=20 or its conclusions.

^{^[14]} At the time this case was filed,=20 Amalice@ was defined as: (A) a specific intent = by the=20 defendant to cause substantial injury or harm to the claimant; or = (B) an=20 act or omission: (i) which when viewed objectively from the = standpoint of=20 the actor at the time of its occurrence involves an extreme degree = of=20 risk, considering the probability and magnitude of the potential = harm to=20 others; and (ii) of which the actor has actual, subjective = awareness of=20 the risk involved, but nevertheless proceeds with conscious = indifference=20 to the rights, safety, or welfare of others. Act of April = 20, 1995,=20 74th Leg., R.S., ch. 19, ' 1, 1995 Tex. Gen. Laws 108, 109, = amended=20 by Act of June 11, 2003, 78th Leg., R.S., ch. 204, = ' 13.02, 2003 Tex. Gen. Laws 847, 887 = (current=20 version at Tex. Civ. = Prac. &=20 Rem. Code Ann. ' 41.001(7) (Vernon Supp. 2007)). =

^{^[15]} See Tex. Civ. Prac. & Rem. = Code=20 Ann. ' 41.008(c)(11) (Vernon Supp. 2007) = (providing=20 an exception to statutory limitations on exemplary damages when = the=20 defendant knowingly or intentionally secures the execution of a = document=20 by deception).

^{^[16]} See Tex. Civ. Prac. & Rem. = Code=20 Ann. ' 37.009 (Vernon 1997) (A[I]n any proceeding under this chapter, = the court=20 may award costs and reasonable and necessary attorney=3Ds fees as are equitable and = just.@).

^{^[17]} Issues are discussed in the order = reached;=20 issues we do not reach are enumerated in the attached=20 Appendix.

^{^[18]} Lycoming=3Ds issues were independently numbered = under several=20 headings; for clarity, however, we refer to the issues as if they = were=20 numbered in a single continuous list.

^{^[19]} Specifically, Lycoming asks, = ADoes Texas law bar ISW=3Ds >defensive=3D declaratory judgment claim on the = indemnity issue=20 in this case because ISW asserted that claim on behalf of IFI only = after Lycoming had filed its suit against IFI seeking = indemnity and=20 raising the same issues in Pennsylvania?@

^{^[20]} ISW also alleged business = disparagement=20 regarding ISW=3Ds Aperformance of the forging = process,@ and claimed that Lycoming disparaged = Athe general character of its business . = . .=20 .@ These claims were subsequently = abandoned,=20 and the question of ISW=3Ds standing to assert such a claim is not = before=20 us. See Westgate, Ltd. v. State, 843 S.W.2d 448 (Tex. = 1992)=20 (sub. op.) (AIt is a party=3Ds request for jury issues and = instructions, not=20 its pleadings, that determine whether a cause of action is=20 preserved.@).

^{^[21]} We express no opinion on this=20 issue.

^{^[22]} We further note that if=20 Lycoming=3Ds argument were correct, then this court = would=20 have been obliged to dismiss ISW=3Ds declaratory judgment claims based on = the absence=20 of standing when the case was previously before us on = appeal. =20 Instead, we expressly stated that the Texas suit could = continue. =20 AVCO, 145 S.W.3d at 266.

^{^[23]} See also Phillips v. = Wertz, 546=20 S.W.2d 902, (Tex. Civ. App.CDallas 1977, writ ref=3Dd n.r.e.) (stating that Athe attempted unilateral >stipulation=3D by defendants=3D counsel that defendants would not = violate the=20 court=3Ds order [does not] constitute proof that = defendants would discontinue their attempts to use the = land@ and holding that plaintiff was entitled = to a=20 permanent injunction restraining defendants from using the = disputed=20 property).

^{^[24]} See Nootsie, 925 S.W.2d at = 661=20 (stating that the legal authority to act is a question of=20 capacity).

^{^[25]} Because Lycoming waived its = challenge to=20 ISW=3Ds capacity, we need not determine, = before reaching=20 the merits of the appeal, whether the scope of ISW=3Ds authority actually encompasses the = claims it=20 asserts on IFI=3Ds behalf.

^{^[26]} This issue is not resolved by our = conclusion that ISW has standing as IFI=3Ds attorney-in-fact to assert = IFI=3Ds tort claims, because we determine a=20 party=3Ds standing to pursue claims on its own = behalf=20 separately from its standing to pursue claims as a = representative. =20 See Elizondo v. Tex. Natural Res. Conservation = Comm=3Dn, 974=20 S.W.2d 928, 931B32 (Tex. App.CAustin 1998, no pet.) (holding that = plaintiff=20 lacked standing to sue in her individual capacity); cf. El T. = Mexican=20 Rests., Inc. v. Bacon, 921 S.W.2d 247, 251B52 (Tex. App.CHouston [1st Dist.] 1995, writ denied) = (capacity=20 but not standing to sue devolves upon shareholders of = incapacitated=20 corporation; thus, shareholders must sue as representatives of the = corporation).

^{^[27]} On appeal, ISW adds that it was = injured=20 because it was named as a defendant in the Flying Frog=20 litigation. But the plaintiffs in that suit named IFI, not = ISW, as a=20 co-defendant with Lycoming. In support of its statement that = ISW was=20 a defendant in Flying Frog, ISW cites correspondence in = which its=20 attorney asked Lycoming=3Ds attorney to substitute ISW for IFI in = a=20 settlement and release agreement. This correspondence is = dated June=20 9, 2003Ctwo years after the Second Addendum was = executed,=20 over a month after this suit was filed, and more than two weeks = after=20 Lycoming filed suit against IFI in Pennsylvania. Moreover, = ISW=3Ds attorney represented to the trial = court that=20 AInterstate@ did not settle with the Flying Frog=20 plaintiffs. And regardless of whether IFI or ISW was = named as a=20 defendant in Flying Frog, we see no basis on which to = consider this=20 an injury caused, directly or indirectly, by fraud or a=20 fraudulently-induced execution of the Second Addendum on behalf of = IFI or=20 ISW. Cf. Butler v. Morgan, 590 S.W.2d 543, 545 (Tex. = Civ.=20 App.CHouston [1st Dist.] 1979, writ = ref=3Dd n.r.e.) (holding that a plaintiff = claiming=20 malicious prosecution fails to allege damage Aconforming to legal = standards@ because the damage Aflowed, directly or indirectly, from the = fact that=20 suit was filed@).

^{^[28]} The policy at issue is not in the = record,=20 and there is no evidence of the carrier=3Ds coverage position.

^{^[29]} Most of the failures occurred in = engines=20 using crankshafts made from earlier forgings produced pursuant to = the=20 original MSA.

^{^[30]} Buker testified that Rancho = Cucamonga made=20 no claims, and that the various Citation companies followed an = internal=20 accounting practice that charged the premiums to ISW and Rancho=20 Cucamonga. There is no evidence that Lycoming made a demand = for=20 indemnity from either of these companies.

^{^[31]} In the body of the Whirley = opinion,=20 the appellees=3D names are spelled = Segal.

^{^[32]} As Buker testified, AI=3Dm seeking relief that shows that = it=3Ds not my fault so I don=3Dt have any reason to have any liability, = Counsel.@

^{^[33]} 31 U.S.C.A. '' 3729-3730 (2003).

^{^[34]} 945 S.W.2d 812, 816 (AConsequential damages, on the other = hand, result=20 naturally, but not necessarily, from the defendant=3Ds wrongful acts. Under the common = law,=20 consequential damages need not be the usual result of the wrong, = but must=20 be foreseeable, and must be directly traceable to the wrongful act = and=20 result from it.@) (citations omitted); see also = Stuart v.=20 Bayless, 964 S.W.2d 920, 921 (Tex. 1998) (per curiam) (stating = that=20 consequential damages in a contract action Aare not recoverable unless the parties=20 contemplated at the time they made the contract that such damages = would be=20 a probable result of the breach@).

^{^[35]} ISW additionally cites = Guaranty Service=20 Corp. v. American Employers=3D Insurance Co. 898 F.2d 453 (5th Cir. 1990) (per = curiam)=20 (applying Mississippi law and holding that the plaintiff can = recover=20 Ainvestigation expenses incurred prior = to the=20 litigation . . . if it can prove that [plaintiff] would not = have=20 incurred the expenses but for [defendant]=3Ds misrepresentations and = concealments@) (emphasis added)). Neither of the = cases on which=20 Guaranty Service Corp. relied concerned the recovery of = expert=20 witness fees as actual damages for fraud. See Miss. Power = &=20 Light Co. v. Pitts, 181 Miss. 344, 179 So. 363, 366 (1938) = (addressing=20 sufficiency of evidence to recover lost profits for breach of = contract);=20 Shell Petroleum Corp. v. Yandell, 172 Miss. 55, 158 So. = 787, 790=20 (1935) (same).

^{^[36]} This is an inaccurate legal=20 conclusion. A person may petition the court for an order = authorizing=20 the taking of a deposition on oral examination or on written = questions to=20 investigate a potential claim or suit. Tex. R. Civ. P. = 202.1(b); see=20 also Tex. R. Civ. P. = 201.1 (governing depositions in foreign jurisdictions for = use in=20 Texas proceedings); 203.4 (governing exhibits to = depositions). The=20 scope of discovery in such a pre-suit deposition Ais the same as if the anticipated suit = or=20 potential claim had been filed.@ Tex. R. App. P.=20 202.5.

^{^[37]} This expert is also referred to = as=20 AJames Ervin.@

^{^[38]} This suit was filed on April 23,=20 2003. Irvin testified that he visited a source for Lycoming = engines=20 on March 26, 2003, but began receiving the engines in May = 2003. He=20 then sent various samples and data to companies identified as SIMI = and=20 Matco, and there is no evidence that either company=3Ds work was performed before suit or = outside this=20 litigation. Dr. Anthony J. DeArdo was hired fifteen or = eighteen=20 months before he testified in January 2005; thus, he appears to = have been=20 hired by June 2003. Dr. DeArdo worked with metals cut by = Matco from=20 material received from Irvin. Thermotemp performed work for = ISW on=20 April 6, 2004, nearly a year after suit was filed. Packer=20 Engineering and its affiliated experts, Dr. John Meyer and Dr. = Roch=20 Shipley, were retained in June 2004. Dr. John Naumann was = retained=20 in September 2004. Chuck van Karsen performed some of the=20 calculations for Drs. DeArdo and Meyer, both of whom were hired = during the=20 course of this litigation. As Dr. John Meyer for Packer = Engineering=20 testified, AIt was actually pretty frustrating, = initially,=20 because there seemed to beCdespite the maturity of the case, we = were brought=20 in to work on the case relatively recently.@

^{^[39]} Lycoming stated this issue as=20 follows:

[8.] = Did ISW=20 fail to introduce legally sufficient evidence that any alleged = fraud=20 proximately caused ISW or IFI to suffer damages, because (a) = increased=20 insurance premiums and expert witness fees incurred during = litigation are=20 not recoverable as damages in Texas, and (b) in any event, there = is no=20 evidence of proximate cause because the alleged act of=20 relianceCentering into the Second = AddendumCis not related to the alleged increase = in=20 insurance premiums or expert witness costs?

^{^[40]} Lycoming argues in its fifteenth = issue that=20 the findings of the jury and the trial court Afail to provide a basis for the = declaratory=20 judgment and other equitable relief, as well as = attorneys=3D fees, awarded by the trial = court[.]@ In its seventeenth issue, = Lycoming asserts=20 that the trial court erred when it purported to rescind the = indemnity=20 provision of the MSA that required IFI to indemnify Lycoming = Aas a result of the jury=3Ds finding of fraud . . . .@

^{^[41]} Lycoming also challenged the = declaratory=20 judgments as defensive pleadings, and we have addressed that = argument in=20 our discussion of standing.

^{^[42]} The Texas Supreme Court has also=20 Aprohibited assignments that may skew the = trial=20 process [and] confuse or mislead the=20 jury . . . .@ PPG Indus., Inc. v. JMB/Houston = Ctrs. Partners=20 L.P., 146 S.W.3d 79, 90 (Tex. 2004).

^{^[43]} When reversing a declaratory = judgment, an=20 appellate court generally renders the judgment the trial court = should have=20 rendered. Here, however, ISW did not ask the trial court to=20 interpret the contract, but instead asked only that the trial = court make=20 certain specific findings. We therefore do not go beyond the = requested relief, but restrict our rulings to reversing the trial=20 court=3Ds conclusions that are not supported by = evidence=20 or authority.

^{^[44]} We discern no challenge to = Declaratory=20 Judgment 2.

^{^[45]} See Humble Sand & Gravel, = Inc. v.=20 Gomez, 146 S.W.3d 170, 181 n.17 (Tex. 2004):

The care taken by the supplier of a = product in its=20 preparation, manufacture or sale, is not a consideration in strict = liability; this is, however, the ultimate question in a negligence = action. Strict liability looks at the product itself and = determines=20 if it is defective. Negligence looks at the acts of the = manufacturer=20 and determines if it exercised ordinary care in design and = production.=20

(quotation omitted); see also = Armstrong Rubber=20 Co. v. Urquidez, 570 S.W.2d 374, 375B76 (Tex. 1978) (holding that the = doctrine of=20 strict liability Aapplies even though the seller has = exercised care=20 in the preparation and sale of the=20 product . . . .@).

^{^[46]} Lycoming proposed the jury = question:=20 ADo you find that all of = Lycoming=3Ds losses related to the crankshaft = forgings=20 provided under the MSA were directly caused by the negligence, if = any, of=20 Lycoming?@ ISW objected and argued that it = was=20 entitled to the Afactual determination@ of whether a design defect was the sole = cause of=20 the failures.

^{^[47]} Such indirect causation could be = found, for=20 example, in cases of vicarious liability.

^{^[48]} As previously noted, Lycoming has = asserted=20 its claims for indemnification in Pennsylvania, rather than in = this=20 action.

^{^[49]} We further note that this = determination is=20 an independent reason to conclude that neither IFI nor ISW were=20 fraudulently induced to enter a contract extending its indemnity=20 obligations for another five years. See Haase v. = Glazner, 62=20 S.W.3d 795, 800 (Tex. 2001) (stating that a party cannot be = fraudulently=20 induced to enter an unenforceable contract).

^{^[50]} There is no evidence that = Citation, ISW, or=20 IFI produced crankshafts under a reservation of rights or = otherwise=20 performed under protest. Moreover, in one of the = Pennsylvania=20 proceedings, Citation and IFI agreed to the entry of an Agreed = Order for=20 Preliminary Injunction requiring them to produce the = crankshaft=20 forgings. This order was entered on June 12, 2003, less than = two=20 months after this lawsuit was filed.

^{^[51]} This is the crankshaft model that = experienced the failures at issue in this suit.

^{^[52]} Objection and ruling=20 omitted.

^{^[53]} In light of our disposition, we = do not=20 reach ISW=3Ds second cross-issue or the remaining = issues=20 presented by Lycoming, which are enumerated in the attached=20 Appendix.

^* Senior Justice J. Harvey Hudson = sitting by=20 = assignment.