### I N THE UNI TED STATES COURT OF APPEALS FOR THE FI F TH CI RCUI T

No. 11-11012

LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant Cross-Appellee.

versus HISAW & ASSOCIATES GENERAL CONTRACTORS, INCORPORATED, Defendant-Appellee, RICHARD L. HISAW; KATHRYN REHM-HISAW, Defendants-Appellees Cross-Appellants.

Appeals from the United States District Court f or the Northern District of Texas

(09-CV-867)

Before HIGGINBOTHAM, SMITH, and ELROD, Circuit Judges. JERRY E. SMITH, Circuit Judge: * U n i t e d S t a te s C o u rt o f A p p e al s F i f t h C i rc u i t 

### F I L E D February20, 2013 Ly l e W . Cay ce Clerk

* Purs uant to 5 T H C I R

. R. 47. 5, the court has determ ined that this op inion s hould not be p ublis hed and is not p reced ent excep t und er the lim ited circum s tances s et forth in 5 T H C I R

. ( continued

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Richard and Kathryn Hisaw o w n H i s a w & A s s o c i at e s G e n e r al C o ntr a c t o r s , I n c o rp o r ated (“HAGC”). T he Hisaws and HAGC entered into a s ure ty a gr e e m e nt with Liberty Mutual Insurance Company (“Liberty Mutual”) u nder which they indemnified Liberty Mutual and agreed not to mak e c e rtain types of transfers of a ssets. After HAGC defaulted on its c ontracts, Liberty Mutual had t o pay the bondholders and sought recovery from HAGC and the Hisaws, challenging several transfers a n d payments made by HAGC as i nvalid under the agreement. The district c ourt granted s u m mary j udgment partially in favor of Liberty Mutual a nd p artially i n favor of the Hisaws and awarded attorney’s fees to Liberty Mutual. We affirm in part, reverse in part, and vacate the fee award.

I. As part of the surety agreement, HAGC and the Hisaws indemnified Liberty M utual for p ayment of bonds: HAGC and the Hisaws would be jointly and severally liable for “losses, fees, costs a nd expenses” i ncurred by Liberty Mutual

as a result of the enforcement of a payment and performance bond. The agreement provided that [i]n the event of any p ayment b y the Surety, the Principals and Indemnitors f

u rther agree that in any accounting between the Surety and [HAGC], or between the Surety and the [ Hisaws], or e ither or b o t h o f t hem, the Surety shall be entitled to charge for any and all disbursements m ade by it in good faith in and about the matters herein contemplated by this Agreement.
The parties amended the agreement to protect Liberty M u tual further in

case of enforcement of the b onds and to limit the Hisaw s ’ individual exposure. The amendment stated that

* (

. . . continued ) R. 47. 5. 4. 2 Case: 11-11012 Document: 00512148472 Page: 2 Date Filed: 02/20/2013No. 11-11012

[t]he joint and several liability of the [Hisaws] to the Surety under the General Agreement of Indemnity, shall be s pecifically l imited to the full extent of any funds o r assets of [HAGC] received b y th e [Hisaws] a s a result of distributions, payments or dividends or bonuses, redemption of stock, loans, or sale of assets which r educe th e TANGIBLE NET W ORTH of [HAGC] below Three Million Dollars ($3,000,000); or which occur while [HAGC’s] Tangible Net Worth is below Three Million Dollars ($3,000,000).
The corollary provision forbade HAGC from m aking distributions, payments, and the like when its assets fall below $3 million or w hen doing so would cause its assets to follow below that threshold. After execution of the agreement and a mendm e n t , o w ners of bonds enforced their righ ts a gainst Liberty Mutual, w hich c l aimed losses of $ 1 6 , 2 7 8 ,896. The H isaws and HAGC then took several actions that Liber t y Mutual argues violated the amendment. First, HAGC repaid a $585,000 loan that the H isaws had given to HAGC. Second, HAGC paid down a $501,222.22 line of credit for which Richard Hisaw

was a personal guarantor. Third, HAGC paid $131, 2 1 4 i n r e nt to i ts landlord, T w o C hilies Holding (“Two Chilies”), a corporation owned by the Hisaws. Fourth , HAGC paid $10,675 t o wind u p a 401(k) retirement a ccount. Fifth, HAGC paid a retainer of $321,865.80 to counsel who subsequently represented HAGC and the Hisaws in this matter. Sixth, the Hisaws paid $532,134 t o HAGC for operating expenses. S e v e nth, HAGC paid $18,519 in operating e xpenses. Finally, HAG C p aid $152,300 to ADP Payroll to p ay employee salaries, including $45,00 0 to the Hisaws. Liberty M utual c o n t e nded that these p ayments occurred after HAGC’s assets were under the $3 million threshold and were therefore prohibited under the amended agreement. In the district court, Liberty Mutual argued that each of the payments was either a distribution, payment, or the “result of” a loan and was “received by” the Hisaws, and therefore, under the amend m ent, the Hisaws were liable for the

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amount of those transfers. Based o n the plain meaning of “loan” a nd the text of the indemnity agreement taken as a whol e , the court concluded that “loans” meant l o ans from HAGC to the Hisaws. T he court therefore held that the repayment by HAGC of the loan from the Hisaws was not a distribution as a result of

a loan as contemplated by the indemnity agreement. It denied Liberty Mutual’s motion for summary judgment and granted the Hisaws’ m o t i o n f or summary judgment as to the loan repayment. The court a lso determined that p ayments under the indemnity agreement and amendment did not i nclude transfers to third p arties from which the Hisaws

o r HAG C “ m e r ely derive[d] [indirect] p ersonal benefit.” T he court con c l u d e d th at the repayment of the line of credit, the rental p ayments, the 401(k) payments, and t h e p a y m e n ts to attorneys were not “received b y” the Hisaws. The court therefore denied Liberty M utual’s motion for summary j udgment a nd grant e d the H isaws’ motion on these c laims as w ell. The court similarly denied Liberty Mutual’s motion for summary judgment and granted the Hisaws’ as to the operating expense payments and s alaries, except that it held that the salary paid by HAGC to the Hisaws was a distribution, and so it granted summary judgment in that amount to Liberty Mutual. A subset of these s ummary-judgment rulings forms the basis of this appeal. 1 Finally, the court a warded Liberty Mutual attorney’s fees of $354,349 to be paid by HAGC and the H isaws. The H isaws objected to that award as unreasonable; because Liberty Mutual had recovered o nly $45,000, a fraction of what it sought, such high fees were exce s s i v e . T he court agreed that the fee was unreasonable and reduced it by 50%.

I I.

1 The court als o granted s um m a r y jud g m ent agains t H AG C f or los ses s us tained by Liberty Mutual andd is m is s ed a num ber of contract claim s . N one of thos e is ap p ealed

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Summary j u dgments are reviewed de novo . See M editrust Fin. Servs. Corp. v . Sterling Chems., Inc. , 168 F.3d 211, 2 13 ( 5th Cir. 1999). Summary judgment is appropriate where, t aking the evidence in the light most f avorable to the nonmoving party, there is no genuine issue of material f act and the moving party is entitled to judgment as a m atter of law. Celotex Corp. v. Catrett , 477 U .S. 317, 322 (1986). See also F E D
. R. C I V
. P. 56(a). We apply Texas l aw to interpret the disputed contract. Amerisure Ins. Co. v. Navigators Ins. C o. , 6 1 1 F

. 3d 299, 309–310 (5th Cir. 2010). Awards of attorney’s fees are reviewed for abuse of discretion. Mathis v. Exxon Corp. , 302 F.3d 448, 461 (5th C i r . 2 002). A court “‘abuses its discretion when its ruling is based on an erroneous view o f the l aw or a clearly erroneous assessment of the evidence.’” United S tates v . Ebron , 683 F.3d 1 05, 125 (5th Cir. 2 0 1 2 ) (quoting United S tates v. Yanez Sosa , 513 F.3d 194, 200 (5th Cir. 2 0 0 8 )

. “State law controls both the award of and the r easonabl e n e s s o f fees awarded where state law supplies the rule of decision.” Mathis , 302 F.3d at 461.

III. Under Texas law, we “must give [a contract’s] words their p lain meaning, without inserting additional provisions into the contract.” Nat’l U nion Fire Ins. Co. of Pittsburgh, Pa. v. Crocker , 246 S.W.3d 603, 606 (Tex. 2008) (citations omitted). We must also strive to “ascertain and give effect to the intent o f the parties

as that intent is expressed in the contract.” Seagull Energy E&P, I nc. v . Eland Energy, Inc. , 207 S.W.3d 342, 345 (Tex. 2006) (citations o mitted)

. The intent inquiry, however, is an objective one, and it is s ubject to the plain meaning of the words i n the contract. “In the usual case, the instrument alone will be deemed to express the intention of the parties fo r i t is objective, n ot subjective, intent

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that controls.” 2 Liberty Mutual a ppeals the holdings regarding t h e r e nt payment, the repayment of the line o f credit, the l aw- f i r m retainer payment, and the l oan repayment. The Hisaws appeal the holding that their salary constituted a “distribution” and the attorney’s fees. Liberty Mutual argues that the rent payment made b y HAGC t o Two Chilies was a fund or asset o f HAGC “received by” the Hisaws as a result of a payment in direct contravention of the amended indemnity agreement. The Hisaws respond that they did not “receive” the payment; i t was instead received by Two Chilies. The district court concluded that a payment to a third party was not an asset or fund “received by” the Hisaws. The plain language of th e c o n t r act p rohibits the Hisaws from receiving funds or assets from HAGC a s a result of payments or distributions. The Hisaws did not receive any funds from HAGC; instead, Two Chilies, a corporate entity distinct from the Hisaws, received them. Liberty Mutual urges us to give the c ontract a “common sense” meaning t o i n c l u d e transfers to third parties that might benefit the Hisaws. I t argu e s that a transfer to a corporate entity o wned by the Hisaws is the same a s a transfer t o them. Finding otherwise, Liberty M utual a sserts, would lead to “absurd” results. We reject this argument. Liberty Mutual does not argue that the rental payment was a s ham transaction o r that the Hisaws in any way undermined the separate corporate identity of HAGC or T wo Chilies. Though Liberty Mutual i s correct that we avoid absu r d r e sults, this outcome is not that. If Liberty Mutual w anted to prevent transfers to third parties, owned by the Hisaws or n ot, it could have written such

2 M a ta gorda Cnty. H

osp . D i st. v . Burw el l , 189 S. W. 3d 738, 740 (Tex. 2006) ( “The Courts
w ill give ef

f ect to the intention of the parties as exp res s ed or as is a p p arent in the w riting. ” ( citation om itted) )

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a provision into the contract. Under Texas law, “ [a]n unambiguous contract will b e enforced as written.” David J. Sacks, P.C. v. H aden , 266 S .W.3d 447, 450 (Tex. 2008) (citation omitted). We may not write new restrictions into contracts. Because the rent payment w as not “received by” the Hisaws b ut rather by Two Chilies, it does not violate the amended indemnity agreement. Similar reasoning a pplies to the repayment by HAGC of a line of c redit for which R i c h ard Hisaw was a personal guarantor. Liberty Mutual argues that Richard Hisaw benefite d f rom HAGC’s repayment of the line of c redit as if he had been given the money directly. This indirect benefit, discharge of p otential liability, Liberty Mutual reasons, constitutes an a sset effectively “received by” the Hisaws. Liberty Mutual once again a sks u s i m permissibly to insert a provision into the contract. The money used to repay the line of credit did not go to the H isaws but t o HAGC’s creditors. The fact that Richard Hisaw was a guarantor is immaterial; he r eceived no funds or assets from HAGC as required under the agreement. 3 This transfer thus did not violate the contract. We again apply the same understanding of funds or assets “received by” the Hisaws to HAGC’s payment of a retainer to a law firm to represent it and the Hisaws. Liberty Mutual contends that the retainer was essentially the Hisaws’ using HAGC ’ s f

u n d s to purchase services for themselves, such that they were “receiving” those funds. We disagree. The retainer was a leg i t i m a t e t r a nsfer by HAGC t o a law firm. Though the Hisaws undoubtedly benefited from the firm’s dual representation of them and HAGC, they did not “receive” funds o r assets from HAGC via a “payment”

or “ d i s t r ibution.” The plain meaning of receiving funds or a ssets does not include receiving benefits form a third party as a result of a business decision by

3 This conclus ion is f

urther bols tered by analogy to f ed eral tax law

. A guarantor w ho is releas ed by the p rincip al’s rep aym ent has not realized cancellation of d ebt incom e f or tax p urp os es . See Whi tm er v . Com m ’r , 71 T. C. M

. (CCH ) 2213 (T

. C. 1996)

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H A G C

. Again, the contract could have been worded otherwise. The re t a i n e r payment did not violate the amended indemnity agreement. L ib e r ty Mutual a rgues that HAGC’s r epayment of loans th at had b e e n extended to it by the H isaws w ere funds o r assets received by the Hisaws “as a result of

. . . loans.” It s uggests that this is the exact type of receipt of funds contemplated by the agreement. It is irrelevant, it maintains, that the loan was given to HAGC rather than to the Hisaws. Liberty Mutual’s und e r s t a n di n g o f “ a s a r e s u l t o f , ” h owever, is implausible. We “must construe contracts as a whole.” City of Keller v. Wilson , 1 6 8 S.W.3d 802, 811 (Tex. 2005) (citation omitted). The language “as a result of” precedes

a list o f kinds of transfers, all of which necessarily flow to t h e H i s a w s rather than from them. For exam p l e , t h e Hisaws may not receive HAGC funds “as a result of” stocks, bonuses, and distributions. T hese three t y p e s of transfers would flow from HAGC to the Hisaws. The challenged loans, h owever, flowed from the Hisaws to HAGC, which

was not giving the m l o a n s a s it would give distributions o r bonuses. The l oan repayment is thus outside the scope of the other types of transfers. In the context of the agreement, loans meant loan tr a n s f e rs to the Hisaws rather than repayment o f l oans given by the Hisaws. Liberty Mutual’s overly broad i nterpretation of “as a result of . . . loans” just does not fit. Moreover, Liberty Mutual all but a dmitted that i t understood “as a result of” loans to mean that loans could not be given by HAGC to the Hisaws. During his deposition, the senior surety counse l a t L ib e rty Mutual testified that he int e rpreted loans u nder the indemnity agreement as “loans m ade by the principal to the individual indemnitors.” After that statement, counsel f or Liberty Mutual a sked for a break in the deposition, and, after consultation, the witness explained that he had been confused and was “senil e . ” He c hanged h is testim o n y s o m e what and said that loans could mean either loans t o or from the

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Hisaws. We find the original explanation persuasive and the retraction telling. Finally, Liberty M utual’s overly broad understanding of “as a result of” would lead to absurd results. For example, i f HAGC took out a loan t o pay the Hisaws’ salary, that payment would be “a result of” loans. Such an outcome is not contemplated by the agreement’s plain meaning. We therefore reject Liberty Mutual’s theory, and we agree with the district court that HAGC’s loan repayments to the Hisaws were not prohibited by the amended agreement. The final challenged transfer is the $ 45,000 salary to the Hisaws. The district court f

ound that the payment c onstituted a “distribution” received by them and thus violated the agreement. The H isaws, as cross-appellants, argue that this was not a “distribution.” They c ite to the technical definition o f distribution as a dividend, r edemption of shares or stock, o r a payment as a result of

a liquidation. See T E X
. B U S

. O R G S

. C O D E § 21.002(6)(a). They also point out that,

on numerous occasions, Liberty Mutual’s c o unsel asserted that salaries are not distributions and were not contemplated as such in the indemnity agreement. Reading the contract a s a whole, w e a gree with the Hisaws. The word distribution is a term o f art, defined as a “corporation’s direct or indirect transfer of money or other property, or incurring of indebtedness to or f or the benefit of its shareholders, such as a dividend payment o ut of c u r r e n t or past earnings.” B LA C K ’ S LAW D I C T I O N A RY 543 (9th ed. 2009). A s alary, as distinguished from a distribution, is “ [a]n agreed compensation for services

SS esp[ecially] professional

o r s e miprofessional services

SSusu[ally] paid at regular intervals on a yearly basis.” Id. at 1 454. The $ 45,000 payment w as not a t ransfer “to o r for the benefit of [ ] s hareholders” but instead was made as a part of a number of salary payments to employees of HAGC by HAGC’s payroll vendor, ADP Payroll. It constituted a salary, paid to the Hisaws for their work as employees of HAGC, which is distinct from a distribution. I f w e w e re to give “distribution” as broad a m eaning as did the district

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court, it would include essentially any type o f transfer to the Hisaws. Giving it that broad meaning would render the rest of the amendment s uperfluous. “Distribution” would swallow “payments o r d i v idends or bonuses, redemption of stock, loans, [and] sale[s] of assets.” Under Texas law, all of a contract’s provisions m ust be given ef f e c t “ s o t hat none are rendered meaningless.” Stine v. Stewart , 80 S.W.3d 586, 589 (Tex. 2 0 0 2) (citation omitted). W e thus interpret “distribution” narrowly in conjunction with its common legal meaning and reverse the district court’s contrary holding. The court awarded attorney’s f ees under Section 38.001 of the Texas Civil Practice and Remedies Code, which provides that “[a] person may recover reasonable attorney’s fees

. . . if the claim is for:

. . . an oral or written contract.” To recover fees, “a party must (1) prevail on a cause of action for which attorney’s fees are recoverable, a nd (2) recover damages.” 4 Where zero damages are awarded, the party is not entitled to f ees. Green, 9 5 1 S

. W .2d at 390. Because

we reverse on the issue of salary payments, Liberty Mutual h as not prevailed on any cause of action, s o i t c a n not recover attorney’s fees under Texas law. We vacate the award. In summary, the judgment is AFFIRMED as to the payment of rent, payment of the line o f credit, payment of a retainer, and repayment o f loans and is REVERSED as to the p ayment of salaries; the a ward o f attorney’s fees is VACATED. Judgment is RENDERED accordingly.

4 G reen Int’l, Inc. v . Sol i s , 951 S. W. 2d 384, 390 (Tex. 1997) ( citing Sta te Fa rm Lif e Ins. Co. v . Bea ston , 907 S. W. 2d 430, 437 (Tex. 1995) )

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