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Nationwide Property & Casualty Insurance Co. v. Revive Mfg., LLC

Court of Appeals of Texas, Second District, Fort Worth

May 17, 2018






         I. Introduction

         Appellant Nationwide Property & Casualty Insurance Company appeals the trial court's summary-judgment order in favor of Appellees Revive Mfg., LLC and Paul Taff in this subrogation action stemming from a fire that caused damage to a property owned by Nationwide's insured. In four issues, Nationwide argues that the trial court erred by granting Appellees' no-evidence motion for summary judgment and by denying Nationwide's motions for summary judgment and for new trial. We will affirm in part and reverse and remand in part.

         II. Background

         Richard Fuller d/b/a Fuller Leasing owns several properties in Everman, including one that he leased to "Revive Manufacturing ‒ Paul Taff" pursuant to a commercial lease agreement that began in April 2012.[2] The property is improved with a single story, metal construction building and is insured through Nationwide.

         Owned by Taff and his wife, Revive is in the business of reclaiming and remanufacturing wooden shipping pallets. One of Revive's employees was Robert Valdez. Jay Suggs, an acquaintance of Taff's but not an employee of Revive's, owned a nearby business and used Revive's equipment on occasion.

         At some point during the remanufacturing process, Revive utilized a machine called a "notcher." The record does not reveal the precise manner in which the machine operated, but suffice it to say that sawdust collects in its exhaust chute when wooden boards are notched. Revive admitted that in the past, it had "experienced smoldering fires caused when nails in the wood became hot during the notching and settled among the sawdust resulting from the notching process." Taff therefore had a standing rule that the notcher had to be cleaned out after every use. He also preferred to use the machine only during the morning.

         On May 7, 2013, Taff left work around noon, leaving Valdez in charge. According to Suggs, beginning sometime after 4:00 p.m., Valdez and Suggs used the notcher for about an hour and a half. After finishing, Suggs left, and Valdez used a forklift to take the notched runners over to Suggs's shop. Suggs last saw Valdez driving the forklift back to Revive, but he never saw Valdez clean out the notcher, nor did he do so himself.

         Taff returned to work early the next morning to find Revive's leased building on fire and damaged. Fuller Leasing made a claim under its insurance policy, which Nationwide paid in the amount of $281, 638.68. Nationwide then initiated this subrogation action against Appellees, alleging negligence for failing to clean the notcher and breach of contract for failing to carry insurance and seeking damages in the same amount that it paid Fuller Leasing. Appellees denied Nationwide's claims and filed a third-party petition against Suggs for negligence and statutory theft, averring that Suggs had entered onto Revive's property after hours and convinced Valdez to use the notcher but failed to clean it.

         All sides ultimately moved for summary judgment. Nationwide filed two traditional motions on its negligence and contract claims-one on liability and one on damages. Appellees filed a no-evidence motion challenging each element of Nationwide's negligence and contract claims. And Suggs filed a no-evidence motion challenging Appellees' negligence and theft claims.

         Nationwide relied on the same evidence in support of both its motion for summary judgment on liability and its response to Appellees' no-evidence motion. The evidence included Taff's deposition testimony, in which Taff confirmed that Valdez had admitted using the notcher with Suggs the night before the fire. When asked what he thought had caused the fire, Taff assumed that Valdez and Suggs had used the notcher and "that that started the fire."[3] The evidence also included the affidavit and report of Phillip Grona, a forensic fire investigator who opined that the "cause of the fire was attributed to improper cleaning and disposal of notching machine debris."

         To prove damages, both in its traditional motion on damages and in response to Appellees' no-evidence motion, Nationwide submitted the affidavit of Rich Gallion, who affirmed that Nationwide had sustained damages in the amount of $281, 638.68.

         In response to Nationwide's motion for summary judgment on negligence, Appellees acknowledged that Valdez was Revive's employee but argued that he was acting outside the scope of his employment when he and Suggs used the notcher the day before the fire. Appellees also lodged objections to Grona's affidavit and report.

          The trial court denied Nationwide's motions, granted Appellees' motion and several of its objections to Grona's affidavit and report, and granted Suggs's motion. Nationwide timely filed a motion for reconsideration and for new trial, which was overruled by operation of law. Only Nationwide appeals.

         III. Summary Judgment Rulings

         Nationwide's first three issues challenge the trial court's summary-judgment rulings. Its first issue, Nationwide argues that the trial court erred by granting Appellees' no-evidence motion on Nationwide's negligence claim. In its second issue, Nationwide argues that the trial court erred by granting summary judgment in favor of Appellees on Nationwide's breach-of-contract claim. And in its third issue, Nationwide argues that the trial court erred by denying its traditional motions for summary judgment on liability and damages on its negligence claim.

         A. Standard of Review

         We review a no-evidence motion for summary judgment under the same legal sufficiency standard as a directed verdict. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013). The nonmovant has the burden to produce more than a scintilla of evidence to support each challenged element of its claims. Id. In a traditional motion for summary judgment, the movant has the burden to show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c). A plaintiff is entitled to summary judgment on a cause of action if it conclusively proves all essential elements of the claim. See id.; MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986). In reviewing either type of summary-judgment motion, we view the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could and disregarding evidence contrary to the nonmovant unless reasonable jurors could not. Merriman, 407 S.W.3d at 248; Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).

         B. Negligence

         The elements of Nationwide's negligence claim are the existence of a legal duty, a breach of that duty, and damages proximately caused by the breach. See Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 477 (Tex. 1995).

         1. Duty

         Appellees do not appear to dispute that Nationwide met its summary-judgment burden to show that a duty existed, but insofar as they do, Nationwide met its burden. Notwithstanding that the 2012 lease obligated the lessee to "maintain the premises in good and safe condition" and to "surrender the same at termination hereof, in as good condition as received, " as Nationwide observes, the common law "imposes upon all persons the duty to exercise ordinary care to avoid injury or damage to the property of others." Elliff v. Texon Drilling Co., 146 Tex. 575, 584, 210 S.W.2d 558, 563 (1948).

          2. Breach

         Turning to the breach element, Nationwide sought to impose liability upon Appellees for Valdez's negligence in failing to clean the notcher after he and Suggs used it on May 7, 2013. Nationwide thus invoked the common-law doctrine of respondeat superior.

         The supreme court recently clarified the general framework for addressing the common-law doctrine of respondeat superior, or vicarious liability. See Painter v. Amerimex Drilling I, Ltd., No. 16-0120, 2017 WL 8794796, at *3 (Tex. Dec. 6, 2017). In the employer-employee context, to prove an employer's vicarious liability for a worker's negligence, the plaintiff must show that at the time of the negligent conduct, the worker (1) was an employee and (2) was acting in the course and scope of his employment. Id. Appellees do not dispute that Valdez was Revive's employee. Under the course-and-scope requirement, vicarious liability arises only if the complained-of act was (1) within the scope of the employee's general authority, (2) in furtherance of the employer's business, and (3) for the accomplishment of the object for which the employee was hired. Id. at *4; Green v. Ransor, Inc., 175 S.W.3d 513, 516 (Tex. App.-Fort Worth 2005, no pet.). Further, the act "'must be of the same general nature as the conduct authorized or incidental to the conduct authorized. Accordingly, if an employee deviates from the performance of his duties for his own purposes, the employer is not responsible for what occurs during that deviation.'" Painter, 2017 WL 8794796, at *4 (quoting Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 757 (Tex. 2007)); see Arbelaez v. Just Brakes Corp., 149 S.W.3d 717, 720 (Tex. App.-Austin 2004, no pet.) (observing that course and scope of employment is generally a fact issue).

         a. Admissions and "Judicial Admissions"

         In both its response to Appellees' no-evidence motion and its motion for summary judgment on liability, Nationwide relied in part on five of Appellees' responses to requests for admissions and several "judicial admissions" contained in Appellees' third-party petition to establish Appellees' negligence for Valdez's failure to clean the notcher after using it with Suggs on May 7, 2013. The requests for admissions were as follows:

Admission No. 1:
This defendant was a tenant of plaintiff's insured, Rick Fuller dba Fuller Leasing under a lease for his properties located at 304, 306 & 308 [Thomas Place, ] Everman, Texas 76140.
Admit as to Defendant Revive Mfg. Deny as to Defendant Taff.
Admission No. 2:
This defendant operated a wood product manufacturing business out ...

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