Wells Fargo Bank Northwest, N.A. v. RPK Capital XVI, L.L.C.
360 S.W.3d 691
Tex. App.2012Background
- RPK Capital XVI, L.L.C. and RPK Capital Management, L.L.C. leased a thrust reverser and related equipment to ATA Airlines (successively Provident/IFC) under a long-term lease; Wells Fargo, as owner-trustee, acquired the aircraft containing the thrust reverser from FINOVA in a post-bankruptcy liquidation.
- ATA in bankruptcy rejected/terminated leases and transferred the thrust reverser to FINOVA, then to Talos and ultimately to Wells Fargo; RPK sued Wells Fargo for conversion and sought declaratory relief of ownership and possession.
- ATA continued to perform lease obligations after transfer of the thrust reverser, until the 2008 bankruptcy revealed Wells Fargo possessed the thrust reverser no longer under ATA’s possession.
- May 2008 NORDAM inspection found delamination, rendering the reverser unserviceable; the delamination was not caused by Wells Fargo’s possession.
- Trial court in bench trial awarded RPK possession, damages, and attorneys’ fees; Wells Fargo challenged limitations, title/ownership status, damages, and fees.
- Appellate court affirmed in part, reversed and rendered in part, and reversed and remanded in part, ultimately taking RPK’s damages claim to be without basis and upholding possession award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Accrual of RPK’s conversion claim (limitations) | RPK’s claim accrued in 2005 when ATA transferred to FINOVA/Talos and Wells Fargo obtained the reverser. | Accrual occurred in 2005 upon unlawful initial possession by Wells Fargo; suit filed after two-year period. | RPK’s conversion claim not barred by statute of limitations. |
| Buyer in ordinary course vs. accession governing title | RPK retained superior rights; Wells Fargo failed to prove ordinary-course-buyer status under 2A.310-2A.305. | Thrust reverser was an accession; Wells Fargo asserted title through ordinary-course purchase. | Wells Fargo failed to prove buyer in ordinary course; no need to resolve accession issue further. |
| Damages for defect (delamination) and causal link to conversion | RPK entitled to repair costs to return reverser to serviceable condition under lease; NORDAM inspection caused/advanced condition. | No evidence Wells Fargo caused delamination; lease does not bind Wells Fargo to contractual repair terms. | Trial court’s repair-damages award reversed; RPK cannot recover repair costs from Wells Fargo. |
| Lost profits as damages for conversion; reliability of expert | De Jaeger’s testimony shows substantial lost profits due to loss of use; admissible under Texas law. | Expert relied on unreliable, unverified data; insufficient to prove lost profits with reasonable certainty. | Lost profits evidence insufficient; award for past and future lost profits reversed. |
| Attorney’s fees basis (declaratory judgment) | Fees awarded for both conversion and declaratory-judgment claims. | Feeshould be limited to proper bases; UDJA connection unclear. | Attorney’s fees reversed and remanded for reconsideration consistent with opinion. |
Key Cases Cited
- Waisath v. Lack's Stores, Inc., 474 S.W.2d 444 (Tex. 1971) (elements of conversion established; injury required)
- Tex. Integrated Conveyor Sys., Inc. v. Innovative Conveyor Concepts, Inc., 300 S.W.3d 348 (Tex.App.-Dallas 2009) (accrual and limitations in conversion cases; discovery rule)
- Hofland v. Elgin-Butler Brick Co., 834 S.W.2d 409 (Tex.App.-Corpus Christi 1992) (accrual upon demand and refusal or discovery in special cases; lessee in lawful possession)
- Varel Mfg. Co. v. Acetylene Oxygen Co., 990 S.W.2d 486 (Tex.App.-Corpus Christi 1999) (illustrates accrual when possession is continued under lease terms)
- Pierson v. GFH Fin. Servs. Corp., 829 S.W.2d 311 (Tex.App.-Austin 1992) (accrual in subordination scenarios; notice of repudiation governs)
- Sindone v. Farber, 432 N.Y.S.2d 778 (N.Y. Misc. 1980) (good to show ordinary-course sale considerations in liquidation)
- In re Winn's Stores, Inc., 177 B.R. 253 (Bankr.W.D.Tex. 1995) (bankruptcy liquidation affects ordinary-course status)