National Oilwell Varco, L.P. v. Flowserve Corporation, Flowserve U.S., Inc., and Flowserve S. De R.L. De C v. ( 2015 )

Opinion issued April 30, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-13-00388-CV
———————————
NATIONAL OILWELL VARCO, L.P., Appellant
V.
FLOWSERVE CORPORATION, FLOWSERVE US INC., AND
FLOWSERVE S. DE R.L. DE C.V., Appellees
On Appeal from the 270th District Court
Harris County, Texas
Trial Court Case No. 2010-76473
MEMORANDUM OPINION
Flowserve Corporation, Flowserve US Inc., and Flowserve S. de R.L. de
C.V. (collectively “Flowserve”) sued National Oilwell Varco, L.P. (“NOV”) for
breach of contract and fraud after two motors that NOV sold to Flowserve for use
in a client’s water treatment plant leaked oil. Flowserve sought to recover from
NOV the money that it spent to acquire replacement motors. NOV contended that
Flowserve rejected its motors not because they leaked oil, but because they were
not designed to start on a lower voltage, which was a requirement that Flowserve’s
client initially failed to disclose to Flowserve or NOV. The jury returned a verdict
in favor of Flowserve on both theories, and the trial court entered judgment on the
jury’s verdict for breach of contract. NOV appeals, arguing that the trial court
erred in (1) refusing to submit instructions regarding NOV’s defenses and
(2) denying NOV’s motions for new trial and judgment notwithstanding the
verdict. We affirm.
Background
A. The Corbalis Water Treatment Plant expansion project
In 2002, the Fairfax County Water Authority in Herndon, Virginia,
commenced an expansion project at its Corbalis Water Treatment Plant. The
project was significant; the value of Fairfax’s contract with its general contractor,
Pizzagalli Construction Company, exceeded $160 million.
Among other things, the Corbalis project required the installation of two
large pumps. Pizzagalli contracted with Flowserve to supply the pumps.
Flowserve, in turn, contracted to purchase from NOV two vertical synchronous
motors to drive the pumps. Fairfax provided the motor specifications, which
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detailed the required design and provided that the bearing housing of the motors
“shall be designed to prevent leakage of oil and excessive aeration of the oil.”
B. Oil leakage and repairs
NOV concedes that the motors had “significant” oil leaks, shortly after they
were delivered in the spring of 2009. Soon after the oil leaks were discovered,
Fairfax issued a defective-work notice to Pizzagalli, indicating that the motors
must be repaired to eliminate the leaks, and NOV was informed of the problem.
The next month, Flowserve told NOV that it was concerned that its emails about
the leaks were being “dramatically ignored,” and requested “immediate input”
regarding repairs. NOV responded, stating that it had not ignored the emails and
had tried various unsuccessful remedies on site.
NOV engineers traveled to Virginia in June and July 2009 and attempted
various fixes, but could not repair the leaks. They concluded that the motors
would need to be removed for repair, but Fairfax could not release the motors
during the peak-demand summer months, even though they continued to leak oil.
In December 2009, NOV informed Flowserve that it had decided to send the
motors to Texas for repair, and that it would send a detailed repair schedule in a
week. Flowserve responded that a week was too long when a schedule had been
expected earlier. Flowserve also told NOV that Pizzagalli was refusing to pay a
“tremendous amount of money” that it owed to Flowserve because the motor issue
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had not yet been corrected. Flowserve noted that Pizzagalli thought that NOV was
“unresponsive” and had supplied motors of “terrible quality,” and was holding
Flowserve accountable for NOV’s deficiencies.
NOV prepared a schedule: the motors were to be removed one at a time,
beginning in January 2010, and the repairs were to be completed by early April
2010. The repair proposal included the addition of a lip seal to keep oil inside the
lower bearing housings.
The first motor was removed and arrived at NOV’s facility in January 2010.
As the repairs progressed, NOV decided not to install the proposed lip seal, telling
Flowserve and Pizzagalli that it was unnecessary and would cause further delays.
Pizzagalli asked Fairfax for approval to ship the motor back to Virginia, and
Fairfax agreed, noting that it was “very disappointed and concerned” that the
originally proposed repair procedures were not followed. Pizzagalli then
authorized Flowserve to ship the motor, but reminded Flowserve that it bore all
risks if the repairs were unsuccessful.
The motor was reinstalled at Corbalis in March 2010, but it showed signs of
leaking the next day. Internally, NOV continued to attempt to find a way to
resolve the oil leaks. But one engineer noted in an internal email that NOV was
“looking very stupid in front of this customer!!” The NOV engineer responsible
for the design of the motors’ lower bearing housing reported internally that he
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“suspect[ed] that if we do not get this [oil leak issue] turned around really fast . . .
they might end up using our[] [motors] until they get someone else to build some[,]
then tell us they don’t want them . . . .”
On March 19, 2010, Fairfax inspected the repaired motor and was displeased
to see that it was running hotter than it had previously and that there was a
“remarkable amount of oil residue.” Fairfax sent a letter to Pizzagalli, requesting
an immediate plan of action, telling it that “[w]ith this ongoing oil leakage problem
and new high bearing temperature problem we still consider this equipment
defective,” and stating that it was “very concerned” that the motors could not be
repaired. Pizzagalli responded by notifying Flowserve: “due to the repeated and
continuing problems . . . we will formally and finally reject the motors and require
that Flowserve act immediately to provide new motors” unless certain repair
conditions were met. In response, Flowserve and NOV prepared a written repair
plan. Based on NOV’s analysis, Flowserve informed Pizzagalli that the oil on the
repaired motor was merely residual and proposed that the second motor be repaired
as the first one had.
After the second motor was repaired, it was returned to Corbalis on Friday,
May 21, 2010. Before it was started, a Fairfax inspector put his hand inside the
motor and found that it came away “covered in oil.” Pizzagalli immediately
contacted NOV and Flowserve and requested that a representative from Flowserve
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inspect the second motor. NOV responded that it had tested the motor for 36 hours
with no leak and that it believed that the oil was merely residual. But it also
admitted that the motors had been steam-cleaned and baked to remove any residual
oil before they were shipped back to Corbalis.
On June 2, 2010, Pizzagalli formally rejected the two motors due to the
“persistent and substantial oil leaks,” which it noted had been ongoing since April
2009. Pizzagalli noted that “[t]he opportunity for Flowserve and NOV to cure the
oil leak defect by repair of these motors is now long past,” and it demanded that
Flowserve agree in writing by June 11, 2010 to provide contractually-compliant
motors manufactured by someone other than NOV.
On June 9, 2010, Flowserve demanded that NOV “provide Flowserve with a
detailed proposal outlining the steps NOV will take to immediately and finally
resolve the motor issues” by June 16, 2010. On June 10, 2010, Flowserve notified
Pizzagalli that it had demanded that NOV provide a proposal for final resolution of
the leaks, and that Flowserve was also evaluating alternative motor vendors. On
June 11, 2010, NOV wrote Flowserve to propose several additional repairs, and
concluded that, though they were “unsure of [the] origin” of the oil on the motors,
the “tiny amounts” “if . . . indeed residual” should taper off to zero after four to six
weeks.
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On June 25, 2010, Flowserve told NOV that NOV’s “inability to resolve the
oil leak problem after several attempts over many months” left Flowserve with
“little choice but to attempt to mitigate the damages caused by the . . . motors” by
“sourcing replacement motors from a different motor supplier,” and that NOV “is
welcome to participate in this effort.” Five days later, Flowserve notified NOV
that Pizzagalli would not accept further repair attempts and that the motors would
be replaced.
After Flowserve sued NOV, a June 2011 inspection of the motors revealed
leaking oil. At trial, NOV engineers admitted that the oil was not residual and had
leaked from the lower bearing housing.
C. The 65% requirement
Dominion Power, the utility company that supplied power to Corbalis,
limited the voltage dip during startup of the pumps’ motors to a maximum of 3% in
order to avoid interruption of service to other customers. As part of the Corbalis
expansion, Fairfax installed a reduced voltage starter set on a 65% tap, with the
intention that the motors start on 65% power and transition to 100% power over
time to avoid an impermissible voltage dip. But this design feature had not been
included in the design specifications that NOV used to design the motors.
Accordingly, through no fault of NOV, the motors it supplied were not designed to
start on a 65% tap.
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In August 2009, after NOV had concluded that the motors would need to be
removed to repair the oil leaks, Flowserve learned for the first time that Fairfax
wanted the motors to start on a 65% tap. Fairfax’s engineering firm concluded that
the motors supplied were not capable of starting on a 65% tap and would need to
be modified or replaced in order to do so. Fairfax notified Pizzagali that the
motors were defective because they were unable to start on a 65% tap.
Pizzagalli, in turn, notified Flowserve. Flowserve responded that it and
NOV “were never contracted by Pizzagalli . . . to start at 65% rated voltage.”
Accordingly, Flowserve told Pizzagalli, “based on the fact that the 65% voltage
start requirement is not a part of the contract between [Flowserve] and Pizzagalli,
Flowserve and NOV will work . . . to meet this requirement, however, any changes
to the pump or motor must be to the expenses of Pizzagalli.” Pizzagalli disputed
this, acknowledging that the requirement had not been included in the design
specifications, but arguing that because it had been mentioned on associated
drawings, the expenses should be covered by Flowserve.
Flowserve and Pizzagalli entered into a settlement agreement in July 2010.
Pizzagalli agreed to pay Flowserve money that it was withholding on the Corbalis
project and an unrelated project in exchange for Flowserve’s replacement of the
motors, which, according to the agreement, had been rejected due to oil leaks. The
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replacement motors Flowserve purchased were designed to comply with the 65%
requirement.
D. Trial and post-trial motions
After a three week trial, the jury found that NOV breached its contract with
Flowserve and committed fraud against Flowserve. The jury assessed $999,000 in
damages for the amount paid by Flowserve for replacement motors attributable to
NOV’s breach, and $190,000 in incidental damages.
NOV moved for judgment notwithstanding the verdict, arguing that the
evidence conclusively established that Flowserve rejected the motors because they
did not meet the 65% requirement, not because they leaked, and that there was no
evidence to support the jury’s fraud finding. The trial court denied the motion and
entered judgment on the jury’s verdict for breach of contract and the parties’
stipulation regarding attorney’s fees.
NOV moved for a new trial, arguing, among other things, that the evidence
showed as a matter of law that the oil leaks were not the cause of Flowserve’s
rejection of the motors, that the evidence was factually insufficient to support the
jury’s fraud finding, and that the trial court erred in denying its requested
instructions regarding its defenses. The trial court denied the motion and NOV
appealed.
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Charge Issues
In its first and second issues, NOV argues that the trial court erred in
refusing to submit its requested jury instructions on NOV’s affirmative defense of
excuse. NOV argues that it was entitled to two such instructions: (1) a prior
material breach instruction based on Flowserve’s alleged bad faith refusal to
provide NOV a reasonable opportunity to cure the oil leaks and (2) a waiver
instruction based on Flowserve’s alleged waiver of the right to sue NOV for
NOV’s delivery of non-conforming motors.
A. Standard of Review
We review a trial court’s refusal to include an instruction in the jury charge
for an abuse of discretion. See Tex. Dep’t of Hum. Servs. v. E.B., 802 S.W.2d 647,
649 (Tex. 1990); Powell Elec. Sys. v. Hewlett Packard Co., 356 S.W.3d 113, 122
(Tex. App.—Houston [1st Dist.] 2011, no pet.). A trial court has wide discretion
in submitting instructions and jury questions. Powell Elec. Sys., 356 S.W.3d at
122. A trial court abuses its discretion when it acts in an arbitrary or unreasonable
manner, or if it acts without reference to any guiding rules or principles. Tex.
Dep’t of Hum. Servs., 802 S.W.2d at 649; Powell Elec. Sys., 356 S.W.3d at 122.
A trial court must submit to the jury all questions, instructions, and
definitions raised by the pleadings and evidence. TEX. R. CIV. P. 278 (“The court
shall submit the questions, instructions and definitions in the form provided by
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Rule 277, which are raised by the written pleadings and the evidence.”); Hyundai
Motor Co. v. Rodriguez, 995 S.W.2d 661, 664 (Tex. 1999). “When a trial court
refuses to submit a requested instruction on an issue raised by the pleadings and
evidence, the question on appeal is whether the request was reasonably necessary
to enable a jury to render a proper verdict.” Shupe v. Lingafelter, 192 S.W.3d 577,
579 (Tex. 2006) (per curiam).
B. Did the trial court err in refusing to submit NOV’s requested
instruction regarding Flowserve’s prior material breach?
In its first issue, NOV contends that the trial court erred in refusing to submit
its requested jury question on the affirmative defense of excuse based upon
Flowserve’s prior material breach of rejecting the motors in bad faith, without
providing NOV a reasonable opportunity to cure the oil leaks.
1. Applicable Law
A party is excused from performing a contract if the other party committed a
prior material breach of the contract. See Mustang Pipeline Co. v. Driver Pipeline
Co., 134 S.W.3d 195, 196 (Tex. 2004) (“It is a fundamental principle of contract
law that when one party to a contract commits a material breach of that contract,
the other party is discharged or excused from further performance.”); Compass
Bank v. MFP Fin. Servs., Inc., 152 S.W.3d 844, 852 (Tex. App.—Dallas 2005, pet.
denied) (excuse based upon prior material breach is an affirmative defense). The
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party asserting excuse bears the burden of proving it. See Am. Petrofina, Inc. v.
Allen, 887 S.W.2d 829, 830 (Tex. 1994).
Under the Uniform Commercial Code (UCC), which the parties agree is
applicable here, each party to a contract has a duty to act in good faith in the
performance or enforcement of the contract. TEX. BUS. & COM. CODE ANN.
§ 1.304 (West 2009); El Paso Natural Gas Co. v. Minco Oil & Gas, 8 S.W.3d 309(Tex. 1999). “Good faith” means honesty in fact and the observance of reasonable
commercial standards of fair dealing. TEX. BUS. & COM. CODE ANN. § 1.201(20)
(West 2009). When a buyer rejects non-conforming goods and the time for
performance has not yet expired, “the seller may seasonably notify the buyer of his
intention to cure and may then within the contract time make a conforming
delivery.” TEX. BUS. & COM. CODE ANN. § 2.508 (West 2009).
2. Analysis
NOV argues that both the UCC and the parties’ contract required Flowserve
to provide NOV an opportunity to cure any nonconformity before Flowserve
would be justified in replacing the motors. NOV further contends that Flowserve’s
failure to provide NOV a good faith, reasonable opportunity to cure amounts to a
contractual breach that preceded any material breach by NOV. Accordingly, NOV
maintains that the trial court should have submitted NOV’s excuse defense based
on prior material breach to the jury.
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In its opening brief, NOV did not identify a provision of the contract that
gave NOV the right to cure. It relied instead on the general UCC requirement that
each party to a contract must reject goods in good faith. Later, in its reply brief,
NOV asserted that the contract contained a cure and limitation of remedies
provision:
In the event any goods manufactured by [NOV] and furnished
hereunder are found to be defective or otherwise fail to conform to the
conditions of this contract, Buyer’s sole and exclusive remedy shall be
to notify [NOV] and [NOV] will at its option (1) replace the goods at
the delivery point specified herein (2) repair the goods or (3) refund
the purchase price. Buyer’s remedies are limited as aforesaid
regardless of the basis of the claim. Claims must be made promptly
after discovery but not later than one year from date of delivery.
[NOV] must be given an opportunity to investigate.
After oral argument, Flowserve filed a letter with this Court, asserting that the
record contains competing purchase orders, and because of this “battle of the
forms,” the parties agreed that they would look solely to the UCC and not to the
competing forms to supply the terms governing available remedies. We conclude
that we need not decide the battle of the forms issue, or whether the parties agreed
to look only to the provisions of the UCC, because neither of those questions
impacts our analysis.
NOV tendered a proposed question on excuse with instructions regarding
prior material breach and four other affirmative defenses. NOV’s tender read:
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Affirmative defenses to breach of contract liability question and instructions—
Was NOV’s failure to comply excused?
You are instructed as follows:
Failure to comply by NOV is excused by Flowserve’s
previous failure to comply with a material obligation of the
same agreement. In addition to the language of the agreement,
the law imposes on a party to a contract a duty to enforce the
contract in good faith. In that connection, good faith means
honesty in fact and the observance of reasonable commercial
standards of fair dealing. The duty of good faith applies to the
buyer’s decision to reject the goods.
Failure to comply by NOV is excused if compliance is
waived by Flowserve.
Waiver is an intentional surrender of a known right
or intentional conduct inconsistent with claiming the
right.
A party’s conduct includes conduct of others that the
party has ratified. Ratification may be express or implied.
Implied ratification occurs if a party, though he
may have been unaware of unauthorized conduct taken
on his behalf at the time it occurred, retains the benefits
of the transaction involving the unauthorized conduct
after he acquired full knowledge of the unauthorized
conduct. Implied ratification results in the ratification of
the entire transaction.
NOV’s failure to comply is excused if you find that
Flowserve accepted the benefits of a transaction, and that
Flowserve subsequently took an inconsistent position to avoid
corresponding obligations or effects.
You are instructed that NOV’s failure to comply is
excused if you find that NOV’s performance was rendered
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impracticable or impossible by the occurrence of an event the
non-occurrence of which was a basic assumption on which the
contract was made.
Answer “Yes” or “No”: ____________
NOV’s tender commingled instructions regarding six different affirmative
defenses, but NOV argues in its first issue that the trial court erred in refusing the
prior material breach instruction.
There is no evidence supporting an instruction regarding a prior material
breach by Flowserve. It is undisputed that the motor specifications required that
the bearing housing of the motors “be designed to prevent leakage of oil and
excessive aeration of the oil.” NOV’s delivery of motors that leaked oil thus
constituted a breach of the contract. See Westech Eng’g, Inc. v. Clearwater
Constructors, Inc., 835 S.W.2d 190, 203–04 (Tex. App.—Austin 1992, no writ.)
(noting that failure of equipment to meet specifications warrants rejection and that
trial court did not err in concluding that seller breached contract by failing to
supply equipment meeting contract specifications). It is undisputed that Flowserve
did not reject the motors and cover by buying new motors until after the oil leaks
were discovered. NOV points to no evidence, and we have found none in the
record, that would support a finding that Flowserve breached the contract before
the leaks were discovered. Thus, there is no evidence that Flowserve’s alleged
breach occurred before NOV’s—which is required, by definition, for Flowserve to
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have committed a “prior material breach.” See Mustang Pipeline Co., 134 S.W.3d
at 196.
At oral argument and in its briefing, NOV relied upon Oil Country
Specialists, Ltd. v. Phillipp Brothers Inc., 762 S.W.2d 170 (Tex. App.—Houston
[1st Dist.] 1988, writ denied) and Printing Center of Texas, Inc. v. Supermind
Publishing Company, Inc., 669 S.W.2d 779 (Tex. App.—Houston [14th Dist.]
1984, no writ), to argue that the oil leaks could not constitute a breach of the
contract until after NOV was given a reasonable opportunity to cure. According to
NOV, this means that Flowserve breached first by refusing in bad faith to allow
NOV reasonable opportunity to cure. However, neither Oil Country Specialists
nor Printing Center of Texas supports NOV’s position because neither involved the
assertion of a prior material breach.
In Oil Country Specialists, the jury answered in the affirmative a special
issue asking whether the plaintiff rejected the goods in bad faith. See 762 S.W.2d
at 178–79. That is different from the theory asserted by NOV here, which is that
the alleged bad-faith refusal to allow NOV to cure by repairing the non-
conforming goods constituted the first breach. And while Printing Center of Texas
recognizes that a buyer may reject goods in bad faith, see 669 S.W.2d at 784, it
does not support the proposition that a bad-faith rejection of non-conforming goods
can constitute the first breach of a contract so as to support a prior material breach
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instruction, as NOV argues here. Thus, these cases do not support NOV’s
argument that the evidence here supports its requested prior material breach
instruction. Because it was unsupported by the evidence, NOV’s tendered
instruction on prior material breach was not proper. See Union Pac. R.R. v.
Williams, 85 S.W.3d 162, 166 (Tex. 2002).
In addition, the jury was instructed not to include in its damages award any
amount that Flowserve could have avoided by the exercise of reasonable care.
NOV argued that Flowserve did not act in a commercially reasonable manner
when it rejected NOV’s motors and chose to cover. Thus, the trial court’s charge
instructed the jury that Flowserve was not entitled to recover damages to the extent
that Flowserve acted unreasonably. We hold that NOV failed to demonstrate that
the trial court abused its discretion in rejecting its prior material breach instruction
or that the rejection resulted in an improper verdict. See Powell Elec. Sys., 356
S.W.3d at 122; Shupe, 192 S.W.3d at 579.
We overrule NOV’s first issue.
C. Did the trial court err in refusing to submit NOV’s requested
instruction regarding excuse based on Flowserve’s waiver?
In its second issue, NOV contends that the trial court erred in refusing to
submit its requested jury question on excuse based upon Flowserve’s waiver of the
right to recover for the damages it sustained in connection with its cover.
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1. Applicable Law
Waiver may be asserted as an affirmative defense against a party who
“intentionally relinquishes a known right or engages in intentional conduct
inconsistent with claiming that right.” Tenneco, Inc. v. Enter. Prods. Co., 925
S.W.2d 640, 643 (Tex. 1996); see also Robinson v. Robinson, 961 S.W.2d 292,
300 (Tex. App.—Houston [1st Dist.] 1997, no writ) (“The doctrine of waiver
distinguishes between a showing of intent to waive by actual renunciation and a
showing of intent to waive based on inference.”). When a party relies on inferred
or implied waiver by conduct, it is that party’s burden “to produce conclusive
evidence that the opposite party manifested its intent to no longer assert its claim.”
Robinson, 961 S.W.2d at 300.
2. Analysis
NOV requested that the trial court submit the following instruction regarding
excuse based upon waiver:
Failure to comply by NOV is excused if compliance is waived by
Flowserve. Waiver is an intentional surrender of a known right or
intentional conduct inconsistent with claiming the right.
On appeal, NOV contends that Flowserve had the “right under the UCC to demand
from Pizzagalli a reasonable opportunity” for NOV to repair or replace the motors.
NOV contends that because Flowserve did not do so, and instead “chose to settle
its differences with Pizzagalli in return for receiving Flowserve’s withheld funds,”
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it “waived its rights to demand” that NOV “pay for the replacement motors.”
NOV relies upon Section 2.711 of the Business and Commerce Code, which
provides a buyer may “cover” at the seller’s expense if the buyer rightfully rejects
the goods. See TEX. BUS. & COM. CODE ANN. § 2.711 (West 2009). NOV argues
that, because Flowserve did not “rightfully” reject the motors, it may not recover
damages from NOV for the amount it spent “covering.”
Because NOV relies on inferred or implied waiver by conduct, it was NOV’s
burden to adduce evidence that Flowserve manifested its intent to waive its claim
against NOV for the cost of the cover. But NOV points to no evidence indicating
such a waiver. See Robinson, 961 S.W.2d at 300.
The sole case NOV relies upon in support of its waiver argument, Vera v.
North Star Dodge Sales, Inc., 989 S.W.2d 13 (Tex. App.—San Antonio 1998, no
pet.), illustrates the type of evidence required to support a claim of waiver. In
Vera, after a dispute arose regarding North Star’s sale of a car to Vera, North Star
sent a check to Vera that said: “Endorsement releases North Star Dodge from any
and all liability regarding the purchase of a 1993 Mazda Protg
JM1B62266PO585288.” Id. at 16. Vera endorsed and cashed the check, and
waived his DTPA claim by doing so. Id. at 18.
There are no comparable facts here. Waiver is the intentional
relinquishment of a known right or intentional conduct inconsistent with claiming a
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right, and NOV points to no statement or action by Flowserve suggesting that
Flowserve did not intend to assert its right to have NOV compensate Flowserve for
damages Flowserve sustained in connection with its cover. See Tenneco, Inc., 925
S.W.2d at 643.
We overrule NOV’s second issue.
Judgment Notwithstanding the Verdict
In its third issue, NOV challenges the trial court’s denial of its motion for
judgment notwithstanding the verdict, contending that the evidence conclusively
established that Flowserve rejected the motors because they did not meet the 65%
requirement, and not because they leaked.
A. Standard of Review
We review the denial of a motion for judgment notwithstanding the verdict
under a no-evidence standard. See NETCO, Inc. v. Montemayor, 352 S.W.3d 733,
738 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (citing Tanner v. Nationwide
Mut. Fire Ins. Co., 289 S.W.3d 828, 830 (Tex. 2009)). The evidence is sufficient
if it “would enable reasonable and fair-minded people to reach the verdict under
review.” City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). We view the
evidence “in the light most favorable to the verdict,” and we “credit evidence
favoring the jury verdict if reasonable jurors could, and disregard contrary
evidence unless reasonable jurors could not.” Zachry Constr. Corp. v. Port of
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Houston Auth. of Harris Cnty., 449 S.W.3d. 98, 101 n.3 (Tex. 2014); Tanner, 289
S.W.3d at 830 (quoting Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649,
651 (Tex. 2007)). Evidence is legally insufficient if: (1) there is a complete
absence of evidence of a vital fact; (2) the court is barred by rules of law or
evidence from giving weight to the only evidence offered to prove a vital fact;
(3) the evidence offered to prove a vital fact is no more than a mere scintilla; or
(4) the evidence establishes conclusively the opposite of the vital fact. City of
Keller, 168 S.W.3d at 810.
B. Applicable Law
To recover damages for breach of contract, a plaintiff must show that he
suffered a pecuniary loss as a result of the breach. S. Elec. Servs., Inc. v. City of
Houston, 355 S.W.3d 319, 323–24 (Tex. App.—Houston [1st Dist.] 2011, pet.
denied). “Such losses must be the natural, probable, and foreseeable consequence
of the defendant’s conduct.” Id. at 324 (citing Mead v. Johnson Grp, Inc., 615
S.W.2d 685, 687 (Tex. 1981)). “[T]he absence of a causal connection between the
alleged breach and the damages sought will preclude recovery.” Id.C. Analysis
The jury found that Flowserve was entitled to recover damages for NOV’s
breach of the contract. Viewing the evidence in the light most favorable to the
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verdict, we conclude that the evidence at trial was legally sufficient to support the
jury’s verdict.
Flowserve’s witnesses testified that Flowserve did not believe that either it
or NOV was required by their respective contracts to supply motors designed to
start on a 65% tap. They testified that irrespective of that requirement, the motors
were unacceptable because they continued to leak, even after NOV’s repeated
attempts to fix them. Flowserve’s General Manager testified that Flowserve’s
position was that it was not contractually required to supply motors that started on
a 65% tap because that specification was not a part of the contract, but that it did
have a contractual obligation to supply motors that did not leak oil, and that the
motors were rejected and replaced because of the oil leaks. Documentary evidence
showed that Flowserve informed Pizzagalli that neither it nor NOV was
responsible for the expense of resolving the 65% tap problem because that
requirement had not been included in the project specifications. This is some
evidence supporting the jury’s conclusion that Flowserve’s damages were caused
by the motors oil leaks as opposed to their failure to meet the 65% requirement.
NOV argues that the jury should not have believed Flowserve’s witnesses
because the evidence conclusively shows that the oil leaks were not the cause of
Flowserve’s damages. For example, NOV points to evidence that Flowserve’s
Post-Delivery Service Coordinator asked his manager whether they should have an
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independent consultant, Armando Tovar, attend NOV’s review of the motors when
NOV was given an opportunity to propose a final resolution after Pizzagalli
rejected the motors in June 2010. Flowserve’s manager responded that he didn’t
“believe [Tovar] would . . . be of much help. The problem is more political than
technical.” NOV also points to evidence that Flowserve supplied replacement
motors that could start on a 65% tap, arguing that this proves the 65% issue was
the real reason that the motors were rejected.
We disagree with NOV’s contention that this evidence conclusively showed
that the motor leaks did not cause Flowserve’s damages. The evidence on this
point sharply conflicted; it was the province of the jury to resolve conflicting
evidence, to determine the credibility of the witnesses, and to weigh their
testimony. City of Keller, 168 S.W.3d at 819. We are required to credit evidence
favoring the jury’s conclusion that NOV’s breach caused Flowserve’s damages “if
reasonable jurors could, and disregard contrary evidence unless reasonable jurors
could not.” Tanner, 289 S.W.3d at 830. We conclude that there was more than a
mere scintilla of evidence to enable reasonable and fair-minded people to conclude
that the motors were rejected and replaced due to the oil leaks. See City of Keller,
168 S.W.3d at 827.
We overrule NOV’s third issue.
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Because we have determined that the trial court properly rendered judgment
on the jury’s breach of contract finding, we do not reach NOV’s remaining issues,
which pertain to the alternate ground of recovery, fraud.
Conclusion
We affirm the judgment of the trial court.
Rebeca Huddle
Justice
Panel consists of Chief Justice Radack and Justices Bland and Huddle.
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