Court Opinion

ID: 3122285
Source: CourtListenerOpinion
Date Created: 2015-10-16 14:21:35.481003+00
Date Added: 2024-06-11T09:33:10.994040
License: Public Domain

NUMBER 13-09-186-CV

                              COURT OF APPEALS

                   THIRTEENTH DISTRICT OF TEXAS

                      CORPUS CHRISTI - EDINBURG

DOMINION OKLAHOMA TEXAS EXPLORATION
AND PRODUCTION, INC.,                                                            Appellant,

                                              v.

FAULCONER ENERGY CORPORATION, ET AL.,                                            Appellees.

                    On appeal from the 389th District Court
                          of Hidalgo County, Texas.

                           MEMORANDUM OPINION

      Before Chief Justice Valdez and Justices Benavides and Vela
                 Memorandum Opinion by Justice Vela

       This is an appeal from a trial court judgment awarding appellees, Faulconer Energy

Joint Venture 1988 (“FEJV88"), Faulconer Energy Corporation (“FEC”) and Vernon E.

Faulconer, Inc. (“VFI”) (collectively, appellees will be referred to as, “Faulconer,” unless the

specific argument or issue requires us to further delineate the specific party),
$2,167,342.33 from appellant, Dominion Oklahoma Texas Exploration and Production, Inc.

(“Dominion”). By three issues, Dominion argues that: (1) the trial court erred in awarding

Faulconer amounts that were paid by Bituminous Insurance Company, Faulconer’s insurer,

because Bituminous was not a party in the underlying case; (2) the trial court erred in

holding that Dominion agreed to indemnify Faulconer from the consequences of its own

negligence because the indemnity provisions at issue fail to satisfy the fair notice

requirements under Texas law; and (3) the trial court erred in holding that there was no

agreement between Faulconer and Dominion to settle the Ayala litigation because the

parties came to an agreement on all of the essential terms of the joint settlement. By one

cross-issue, Faulconer urges that the trial court erred in miscalculating the amount of

prejudgment interest because the trial court used the filing of this lawsuit as the accrual

date, rather than a notice of claim that was filed in a previous case that had been settled.

We affirm.

                                             I. BACKGROUND

        This suit arises from an assignment of mineral interests and related indemnity

agreements.        Dominion alleged that Faulconer breached an agreement related to

settlement of litigation brought by third parties (referred to in the opinion as the “Ayala

litigation”) that related to the interest assigned.1 Dominion is engaged in the business of

exploring and producing oil, gas and other minerals. It is the successor in interest to Louis

Dreyfus Natural Gas Corporation and American Exploration Company (“American”).

        1
          The Ayala litigation was brought by a group of plaintiffs who claim ed that their property was dam aged
by pollution caused by leaking natural gas pipe lines. One of the Faulconer entities operated the pipeline from
1989 to 1993. Dom inion was the previous owner of the sam e pipeline for two years. The Ayala case was
styled in the trial court as cause no. C-4597-92-C; Eva Reyna Ayala, et al v. Phillips Properties, Inc., et al.

                                                       2
Faulconer is also engaged in the same business.

        In transactions occurring between 1987 and 1989, Faulconer bought from Fina and

another company called Fair Operating Company, a system of five gas well and gathering

lines and connecting pipes. In September 1993, FEJV88 (the Faulconer joint venture) and

American entered into a purchase and sale agreement and an assignment and bill of sale

to sell what had previously been acquired from Fina and Fair.2 There were indemnity

agreements that were part of both documents, and the enforceability of those agreements

is at issue in this appeal.

        Two years after the sale to Dominion, various lawsuits, including the Ayala litigation,

were filed by plaintiffs claiming damages pertaining to leaking pipelines.                            In 1998,

Faulconer filed suit against Dominion asking for indemnity and a defense in the litigation.

Faulconer urged that indemnity and a defense were owed based upon the 1993 purchase

and sale agreement and the assignment and bill of sale. In 1999, the lawsuit between

Faulconer and American (Dominion’s predecessor) settled. American reserved the right

to deny indemnity and agreed to provide a defense to all of the Faulconer entities.3

        In 2000, a case similar to the Ayala case went to trial in Hidalgo County that resulted

in a $100 million verdict for the plaintiffs in that case against another oil company. In

October 2002, Fina sued Faulconer for in excess of the $1.8 million it had incurred in

defending and settling in the Ayala litigation. Tom Markel, a vice president for Faulconer,

        2
        Am erican eventually m erged with Louis Dreyfus Natural Gas and Am erican ceased to exist. There
was another m erger and the resulting entity is Dom inion, the appellant herein.

        3
         In 2001, several hundred additional plaintiffs intervened in the lawsuits involving the pipelines. Fina
and Faulconer had previously entered into an indem nity agreem ent in 1989. In 2002, Fina was sued and
settled with sixty-five plaintiffs for $250,000. Fina was later brought back in to the litigation. This indem nity
obligation becom es im portant with respect to the later negotiations between Faulconer and Dom inion.

                                                        3
testified that this was a significant lawsuit to Faulconer. Prior to November 2005, counsel

for Faulconer became concerned and wrote a letter to Larkin Eakin, counsel for Dominion,

urging that Dominion should contribute to the settlement of the Ayala litigation because the

venue was bad and a large judgment could be predicted if the Ayala case went to trial.

       In November 2005, Dominion and Faulconer had a meeting regarding a possible

joint settlement of the Ayala litigation. The evidence at trial was conflicting with respect to

whether Faulconer’s concern about including Fina in any proposed settlement was

discussed. Several witnesses testified on behalf of Dominion suggesting that Faulconer

had never mentioned that it needed to be indemnified against any claim by Fina before

agreeing to settle. Conversely, witnesses for Faulconer testified that it was not willing to

settle the Ayala litigation if Fina was not included and that Dominion knew that it was

important to Faulconer. The parties unsuccessfully mediated the Ayala litigation in

December 2005. The parties also learned in December that there would be no release

from Fina.

       In January 2006, Joe Luce, an attorney, began negotiating with the Ayala plaintiffs

on behalf of Dominion. In late January 2006, Luce determined that he could settle the

Ayala litigation for $12 million. Before the settlement occurred, emails were exchanged

between Luce and counsel for Faulconer. In one email, sent on January 12, 2006, counsel

for Faulconer outlined the amount and percentages of the settlement that Faulconer would

agree to pay toward settling the Ayala litigation. Again, Dominion and Faulconer dispute

whether the claims of Fina were included at this time. Because Faulconer would not agree

to settle without a release from Fina, Dominion settled with the Ayala plaintiffs without

Faulconer’s participation.    At that time, Dominion also stopped funding Faulconer’s

                                              4
defense. Thereafter, the plaintiffs settled with Fina, and Faulconer settled with the Ayalas

for $1.5 million.

        On May 19, 2006, Dominion sued Faulconer seeking declaratory relief that it had

no duty to provide a defense to Faulconer after March 2, 2006, or to indemnify Faulconer

for any judgment in the Ayala lawsuit. Dominion also sought damages against Faulconer,

alleging that they had beached the agreement to settle the Ayala lawsuit. Faulconer

counterclaimed, alleging that Dominion breached its obligation to indemnify Faulconer from

the costs of defending and settling the Ayala litigation.

        Trial was to the court. Judgment was entered on January 13, 2009, in favor of

Faulconer awarding the sum of $2,167,342.33, which consisted of litigation costs in the

amount of $661,601.41 in connection with the filing of the Ayala litigation, and litigation

costs of $5,740.92 in connection with defending the Fina case.4 The trial court also

awarded Faulconer $1.5 million, representing the cost of settling the Ayala litigation and

prejudgment interest on the total amount of the judgment at five percent per annum from

May 19, 2006, until the date of judgment. This appeal ensued.

                                     II. Standard of Review

        In an appeal from a bench trial, the trial court's findings of fact “have the same force

and dignity as the jury's verdict upon questions.” Anderson v. City of Seven Points, 806
S.W.2d 791, 794 (Tex. 1991); see Ashcraft v. Lookadoo, 952 S.W.2d 907, 910 (Tex.

App.–Dallas 1997, writ denied) (en banc). The trial court's findings of fact are reviewed for

legal and factual sufficiency of the evidence to support them by the same standards that

      4
        The Fina litigation was styled trial court cause no. C-2000-02-F; TotalFinaElf E&P USA, Inc. and
ATOFINA Petrochemicals, Inc. v. Vernon E. Faulconer, Inc.

                                                   5
are applied in reviewing evidence supporting a jury's answers. Ortiz v. Jones, 917 S.W.2d
770, 772 (Tex. 1996); Anderson, 806 S.W.2d at 794. Fact findings, however, are not

conclusive when, as in this case, a complete reporter's record appears in the record. City

of Corpus Christi v. Taylor, 126 S.W.3d 712, 717 (Tex. App.–Corpus Christi 2004, pet.

dism'd) (citing Tucker v. Tucker, 908 S.W.2d 530, 532 (Tex. App.–San Antonio 1995, writ

denied)); see Middleton v. Kawasaki Steel Corp., 687 S.W.2d 42, 44 (Tex. App.–Houston

[14th Dist.] 1985, writ ref'd n.r.e.). Unchallenged findings of fact are binding on an

appellate court unless the contrary is established as a “matter of law” or there is “no

evidence” to support the finding. McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex.

1986). Generally, attacks on the sufficiency of the evidence supporting findings of fact

“must be directed at specific findings of fact, rather than at the judgment as a whole.”

Arrellano v. State Farm Fire & Cas. Co., 191 S.W.3d 852, 855 (Tex. App.–Houston [14th

Dist.] 2006, no pet.) (citing Zagorski v. Zagorski, 116 S.W.3d 309, 319 (Tex. App.–Houston

[14th Dist.] 2003, pet. denied)).

       A finding is legally 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). A legal sufficiency challenge may only be sustained when: (1) the record discloses

a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of

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 a vital fact. Uniroyal Goodrich Tire Co. v. Martinez,

977 S.W.2d 328, 334 (Tex. 1998). In evaluating the evidence's legal sufficiency, “we credit

                                              6
evidence that supports the verdict if reasonable jurors could, and disregard contrary

evidence unless reasonable jurors could not.” Kroger Tex. Ltd. P'ship v. Suberu, 216
S.W.3d 788, 793 (Tex. 2006) (citing City of Keller, 168 S.W.3d at 827); see Am. Interstate

Ins. Co. v. Hinson, 172 S.W.3d 108, 114 (Tex. App.–Beaumont 2005, pet. denied). The

trial court, as fact-finder, determines the credibility of the witnesses and the weight to be

given their testimony. See City of Keller, 168 S.W.3d at 819; McGalliard, 722 S.W.2d at

697. Furthermore, in reviewing the sufficiency of the evidence, we may not substitute our

own judgment for that of the trier of fact, even if we would reach a different conclusion on

the evidence. Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998).

       In conducting a factual sufficiency review, we consider and weigh all of the evidence

and set aside the verdict and remand the cause for a new trial, if we conclude that the

verdict is so against the great weight and preponderance of the evidence as to be

manifestly unjust, regardless of whether the record contains some “evidence of probative

force” in support of the verdict. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757,

761-62 (Tex. 2003). The evidence supporting the verdict is to be weighed along with the

other evidence in the case, including that which is contrary to the verdict. Id.

       A party may not challenge conclusions of law for factual sufficiency, but we may

review conclusions of law to determine their correctness based upon the facts. Citizens

Nat'l Bank v. City of Rhome, 201 S.W.3d 254, 256 (Tex. App.–Fort Worth 2006, no pet.).

We will uphold a conclusion of law if the judgment can be supported on any legal theory

supported by the evidence. Tex. Dep't of Pub. Safety v. Stockton, 53 S.W.3d 421, 423

(Tex. App.–San Antonio 2001, pet. denied). We review conclusions of law de novo, see

                                             7
State v. Heal, 917 S.W.2d 6, 9 (Tex. 1996), and we will not reverse them unless they are

erroneous as a matter of law. Stockton, 53 S.W.3d at 423.

                                  III. Subrogation Issue

A. Background

        By its first issue, Dominion urges that the trial court erred in awarding Faulconer

damages that were paid by Bituminous, its insured, and were not incurred by Faulconer.

The trial court found that Faulconer incurred costs of $1,500,000 to settle the Ayala

litigation.   The trial court also filed additional findings of fact that Bituminous paid

$389,239.89 of the $661,601.41 of the costs of defending Faulconer in the underlying

lawsuit and it paid $500,000 of the $1,500,000 of the costs of settling the claims against

Faulconer in the underlying suit. Dominion argues that the only way Faulconer would be

entitled to recover that amount would be if Bituminous had assigned its subrogation rights

to Faulconer. Conversely, Faulconer argues that an insured may bring a subrogated claim

of the insurer in its own name, and the insurer is not required to be a party to the suit.

B. Analysis

        Dominion argues that the case must be reversed because Bituminous was a

necessary party to this litigation. It relies on Thoreson v. Thompson as authority for its

position that Bituminous was a necessary party. 431 S.W.2d 341, 347 (Tex. 1968). In

Thompson, the supreme court held that the trial court improperly overruled a plea in

abatement because the plaintiff’s insurer had not been joined. Thompson, the defendant,

filed a plea in abatement for failure to join the insurance company as a party. Id. at 346.

The Thompson court reasoned that the insurer was a necessary party and became a pro

                                             8
tanto owner of the cause of action. Id. at 347. Nothing in the record in Thompson showed

the insurance company had notice of the suit nor did the judgment provide for any recovery

by the insurance company. Id.

       Here, no party filed a plea in abatement to join Bituminous. And, there is no

complaint or pleading filed by Dominion urging that Bituminous was a necessary party and

was required to be joined. Also, it is clear in this record, unlike in Thompson, that

Bituminous understood that its interests were being managed in the lawsuit. In December

2007, Faulconer filed a document in the trial court titled “Statement Regarding Bituminous

Insurance Companies.” Attached was a letter from counsel for Bituminous to counsel for

Faulconer, stating that the “interests of Bituminous Insurance Companies are being

protected in the pending litigation referenced above by the Faulconer entities. . . . Thus,

Bituminous is not going to file a separate action against Dominion Oklahoma Texas

Exploration & Production, Inc. to recover attorney’s fees or indemnity benefits paid under

its insurance contract with Faulconer entities.” The record also reflects that Dominion had

previously received a copy of the $500,000 settlement check issued by Bituminous and

payable to counsel for the Ayala plaintiffs. Thus, unlike the Thompson case, all parties

were aware that Bituminous was the insurer and of Bituminous’s position that it was

protected by the lawsuit. Dominion was aware in advance of the trial in this case that

Bituminous had paid a portion of the funds to settle the Ayala claims.

       Here, it appears that both Bituminous and its insured, Faulconer, believed that its

interest was being protected by Faulconer and that Bituminous had notice that the suit was

proceeding in its absence. Therefore, Thompson is factually distinguishable.

                                            9
       Dominion also relies on Trans-State Pavers, Inc. v. Haynes, for the proposition that

an insured cannot assert the subrogation rights of its insurer without placing the opposing

party on notice of the subrogation claims and making the insurance company a party. 808
S.W.2d 727, 736 (Tex. App.–Beaumont 1991, writ denied). In Haynes, the trial court

allowed the insureds, who were the plaintiffs, to file a post-judgment trial amendment

adding the insurer as a party plaintiff. Id. at 729. The defendants objected, contending

that at no time did it receive notice before judgment that the court had granted leave to file

the trial amendments. Id. The court pointed out that appellant in that case was facing a

judgment in favor of a party who was added to the case after verdict and judgment and had

never been served with citation. Id. at 734. Here, there is no similar argument. The crux

of Dominion’s argument is that Faulconer will receive a double recovery in this case

because part of its damages have already been paid by Bituminous. There is no argument

or suggestion, however, that Bituminous will look to Dominion for any sort of redress. In

fact, it appears to be the opposite. Haynes is also distinguishable because there was no

showing in that case that the insurer knew about the suit. Here, there was evidence that

Bituminous knew about the lawsuit.

       Dominion further argues that we should not consider Faulconer’s notice regarding

the Bituminous entities because it was not formally introduced at trial. We note that it was

filed in the trial court during trial and is included as part of the clerk’s record in this Court.

The letter was also presented to the trial court during the course of the trial. Regardless,

the trial court may take judicial notice of its own file documents even though no request is

made to do so and no formal announcement is made. Alford v. Johnston, 224 S.W.3d
10
291, 300 (Tex. App.–El Paso 2005, pet. denied). The trial court did not err in considering

the letter.

       In analyzing the issue before us, we look to the possible prejudice that could result

from this case proceeding to trial in the posture that it did. See Fort Worth & Denver Ry.

Co. v. Ferguson, 261 S.W.2d 874, 879 (Tex. App.–Fort Worth 1953, writ dism’d). Here,

Dominion had notice well in advance of the trial that Bituminous had paid a portion of the

settlement. In a situation where a party is on actual notice that a third party owns all or a

portion of a cause of action, a defendant is under a duty to either protect the interest of the

third party in the manner the case is pleaded or the defendant “is under the duty to protect

himself from such party by properly raising the issue as to plaintiff’s right to sue in the

capacity in which he does sue . . . .” Id. at 879. “If he does neither, then he could not

complain of any exposure to further litigation from the third party subrogee-assignee. “ Id.

There was proof before the trial court that Bituminous will not file a claim against Dominion,

as well as proof that Bituminous’s interests were protected by the lawsuit.

       To reverse this case in the face of Bituminous’s agreement that it is protected by

Faulconer’s participation in this lawsuit would not make sense. Even Dominion’s prayer

for relief with respect to this issue is nebulous with regard to how this Court would proceed

if it determined that reversal was the correct disposition of this issue. Dominion prays that

we “reverse the trial court’s judgment awarding Faulconer over $2.1 million, over $839,000

of that amount belonged to Bituminous, not Faulconer.” But, Dominion does not suggest

whether rendition, remittitur of the amount paid by Bituminous, or remand to require the

joinder of Bituminous would be proper. Under the record here, both Dominion and

Bituminous are protected. And, because of the specific facts presented, the appearance

                                              11
of Bituminous as a party was not necessary. We overrule issue one.

                                    IV. Indemnification Claim

A. Background Facts

        Dominion contends by its second issue that the trial court erred in finding that

Dominion agreed to indemnify Faulconer from the consequences of its own negligence

because the indemnity provision at issue fails to satisfy the fair notice requirements under

Texas law. Faulconer claims that Dominion’s indemnity obligation extended to damages

caused by Faulconer’s negligence. Faulconer also argues that the express negligence

rule, and the fair notice doctrine do not apply to this case. In other words, Faulconer claims

that actual knowledge of the indemnity provision eliminated any need for “conspicuous”

language.

        The indemnity provisions at issue were included in a purchase and sale agreement

and assignment and bill of sale entered into by Faulconer and American.5 In 1993,

Faulconer entered into an agreement with American under which Faulconer conveyed

property to American. The agreement included a purchase and sale agreement and an

assignment and bill of sale that was included as an attachment to the purchase and sale

agreement and was also a separately executed contract.                     Both documents contain

indemnity agreements—it is the sufficiency of those agreements that is at issue here.

        The purchase and sale agreement provides, in pertinent part:

             7. Assumption and Indemnity. At the closing date, Buyer agrees to
        assume and will pay, perform and discharge all obligations of Seller to the

        5
        As noted in the factual background in this opinion, Am erican Exploration Com pany was Dom inion’s
predecessor in interest.

                                                   12
      extent such obligations are attributable to Seller’s interests in the property
      and are attributable to periods from and after the Effective Date. Buyer
      assumes the obligations set forth in the Assignment and Bill of Sale as
      attached hereto as exhibit “B”, . . . and Buyer agrees to indemnify, defend
      and hold Seller, its successors and assigns, and their respective affiliates,
      directors, officers, employees, stockholders, partners and agents harmless
      from and against any and all loss, liability, liens, demands, judgments, suits
      and claims of any kind or character resulting from such assumed obligations
      or relating thereto. Buyer agrees to defend any suits brought against Seller
      on account for any such claims and to pay any judgment against Seller
      resulting from any such suits, along with all costs and expenses relative to
      such claims, including attorney’s fees.

            Except as assumed by Buyer in the foregoing paragraph and in the
      Assignment and Bill of Sale attached hereto as exhibit “B”, Seller shall
      indemnify and hold harmless buyer, its successors and assigns, and their
      respective affiliates, directors, officers, employees, stockholders, partners
      and agents, from and against any and all loss, liability, liens, demands,
      judgments, suits and claims of any kind or character arising out of, in
      connection with, or resulting from Seller’s operation of the Property, for
      periods prior to the Effective Date. Seller agreed to defend any suits brought
      against Buyer on account of any such claims and to pay any judgments
      against Buyer resulting from any such suits, along with all costs and
      expenses relative to such claims, including attorney’s fees.

The assignment and bill of sale provided, with respect to indemnity:

             (b) Assignee shall defend, indemnify and hold Assignor harmless from
      any and all claims in favor of any person, business or governmental entity for
      personal injury, death or damage to property or to the environment, or for
      any other relief arising directly or indirectly from, or incident to, the use,
      occupation, operation, maintenance or abandonment of any of the Interests,
      or condition of the property or premises, whether latent or patent, and
      (INCLUDING WITHOUT LIMITATION THOSE ARISING FROM OR
      CONTRIBUTED TO BY THE NEGLIGENCE IN ANY FORM OF ASSIGNOR,
      ITS AGENTS, EMPLOYEES OR CONTRACTORS, INCLUDING SOLE
      NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE,
      ACTIVE NEGLIGENCE, PASSIVE NEGLIGENCE, GROSS NEGLIGENCE,
      STRICT LIABILITY OR WILLFULL CONDUCT OF SUCH PERSONS AND
      ASSERTED AGAINST ASSIGNEE AND/OR ASSIGNOR AFTER THE
      EFFECTIVE DATE,) provided that as to any claims made prior to the
      Effective Date, this paragraph shall not apply.

                                           13
      The trial court made the following findings applicable to the indemnity issue:

              13. The intent of DOTEPI’s[6] predecessor to indemnify the Faulconer
      entities for the consequences of their own negligence is specifically stated
      in the Purchase and Sale Agreement and the Assignment and Bill of Sale
      between Faulconer Energy Joint Venture 1988 and DOTEPI’s predecessor.

             14. The indemnity provisions contained in the Purchase and Sale
      Agreement and the Assignment and Bill of Sale between Faulconer Energy
      Joint Venture 1988 and DOTEPI’s predecessor are written so as to attract
      the attention of a reasonable person to them.

            15. Faulconer Energy Corporation, Vernon E. Faulconer, Inc. and
      Faulconer Energy Joint Venture, 1988 are all affiliates of each other.

            17. Both parties to the Purchase and Sale Agreement and
      Assignment and Bill of Sale had actual knowledge of the provisions of such
      contracts, including the indemnity provisions and provisions requiring
      DOTEPI’s predecessor to indemnify the Faulconer Entities from the
      consequences of the negligence of the Faulconer Entities.

The trial court also filed the following relevant conclusions of law:

              1. The Purchase and Sale Agreement and the Assignment and Bill
      of Sale between Faulconer Energy Joint Venture 1988 and DOTEPI’s
      predecessor require DOTEPI to indemnify the Faulconer entities from the
      cost of defending and settling the claims against the Faulconer Entities in the
      Ayala Litigation and Cause No. C-4570-905-F; First National Bank et. al. v.
      Phillips Properties, Inc., et. al., and Cause No. C-04568-95-D; Timely
      Adventures, Inc. v. Difco, Inc, et. al., and Cause No. C-04566-95-B; Ernesto
      Garza et. al. v. Phillips Properties, Inc. et. al., which were subsequently
      consolidated into the Ayala litigation and Fina litigation.

            2. The Purchase and Sale Agreement and the Assignment and Bill
      of Sale between Faulconer Energy Joint Venture 1988 and DOTEPI’s
      predecessor satisfy the fair notice requirements of express negligence and
      conspicuousness.

            3. Even if the fair notice requirements of express negligence and
      conspicuousness had not been satisfied by the Purchase and Sale
      Agreement and Assignment and Bill of Sale, the indemnity provisions are
      nevertheless enforceable because all contracting parties had knowledge of

      6
          The parties often refer to Dom inion as DOTEPI.

                                                    14
       such terms.

       Dominion argues that the indemnity provision must comply with the express

negligence, conspicuousness and fair notice requirements. Faulconer claims that: (1) the

express negligence rule and related requirements do not apply to the agreements at issue;

(2) actual knowledge negates fair notice requirements; (3) the fair notice test does not

apply because the indemnity agreements do not relate to future negligence by Faulconer;

and (4) the indemnity portion of the agreement is conspicuous.

B. Analysis

       A contract that fails to satisfy either of the fair notice requirements when imposed

is unenforceable as a matter of law. Storage & Processors, Inc. v. Reyes, 134 S.W.3d
190, 192 (Tex. 2003). One fair notice requirement, the express negligence doctrine,

requires that the intent of the parties be specifically stated within the four corners of the

document. Id. The other requirement, conspicuousness, requires that something appear

on the face of the contract to attract the attention of the person looking at it. Id. Language

may satisfy the conspicuousness requirement by appearing in larger type, contrasting

colors, or otherwise calling attention to itself. Id. If both contracting parties have actual

knowledge of the terms, an agreement may be enforced even if the fair notice

requirements are not satisfied. Id. Actual knowledge is treated as an affirmative defense

to a claim of lack of fair notice. U.S. Rentals, Inc. v. Mundy Serv. Corp., 901 S.W.2d 789,

793 (Tex. App.–Houston [14th Dist.] 1995, writ denied) (op. on reh’g). The burden of

establishing actual knowledge is on the party seeking indemnification. Mo. Pac. R.R. Co.

v. Lely Dev. Corp., 86 S.W.3d 787, 791 (Tex. App.–Austin 2002, pet. dism'd).

                                             15
       Whether an agreement meets the conspicuousness requirement is a question of

law for the trial court. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 509

(Tex. 1993). Indemnity agreements are construed under the normal rules of contract

construction. Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000). The

primary goal is to determine the parties’ intent. Id.

C. Underlying Facts

       Here, the headings in the Purchase and Sale agreement were underlined. The

indemnity agreement was in a separately numbered paragraph that was titled “Assumption

and Indemnity.” It was underlined. The Purchase and Sale agreement made reference

to the Assignment and Bill of Sale and it was attached to the purchase and sale agreement

as “Exhibit B”. In the Assignment and Bill of Sale, paragraph B includes language

discussing indemnity set off in all capital letters. The assignment and bill of sale was

specifically referenced in the purchase and sale agreement and was also a separately

executed document. The trial court did not err in finding that the indemnity provisions were

written to attract the attention of a reasonable person and, thus, satisfy the requirements

of express negligence and conspicuousness.

       Regardless, there was additional evidence that indemnity provisions like the ones

at issue here are common in the oil and gas industry. Malcolm Johns, former counsel for

Dominion, testified that it is very common to have indemnity provisions in such contracts.

Jean Crawley, vice-president for Faulconer stated that indemnity provisions, such as the

one at issue here, were standard. Johns also said that it would be general practice in the

industry to read and understand the contracts before executing them. Here, both parties

                                             16
initialed various parts of the agreements, showing that they were reviewed and considered.

       The trial court could have considered that the evidence showed knowledge of the

indemnity agreements. The parties here were sophisticated business people who were

accustomed to indemnity agreements, such as the one at issue here. The trial court could

have reasonably concluded from the evidence before it that the parties had actual

knowledge. Its findings of fact and conclusions of law are supported by sufficient evidence.

       Dominion also argues that indemnity is not owed to any Faulconer entity except

FEJV88.7        Tom Markel, the vice president and chief financial officer for Vernon E.

Faulconer, testified regarding the three Faulconer entities. He said that FEJV88 is a Texas

partnership.        Faulconer Energy Corporation was an eighty-percent owner of the

partnership. It was the entity that owned the working interest in the pipeline system at

issue in the Ayala litigation. The operating company was Vernon E. Faulconer, Inc., with

Vernon Faulconer as the sole stockholder. Under the Assignment and Bill of Sale,

Dominion’s predecessor agreed to indemnify for those claims “arising from or contributed

to by the negligence in any form of assignor, its agents, employees or contractors,

including sole negligence, simple negligence, concurrent negligence, active negligence,

passive negligence, gross negligence, strict liability or willful conduct of such persons and

asserted against assignee and/or assignor after the effective date . . . .”               Further,

Dominions’s predecessor agreed to “indemnify, defend and hold Seller, its successors and

assigns and their respective affiliates, directors, officers, employees, stockholders, partners

and agents harmless from and against any and all loss, liability, liens, demands,

       7
           This entity was the joint venture that actually entered into the agreem ent.

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judgments, suits and claims of any kind or character arising from such assumed obligations

or relating thereto.”

       The trial court found that Faulconer Energy Corporation, Vernon E. Faulconer, Inc.

and Faulconer Energy Joint Venture, 1988 are all affiliates of each other. Dominion has

not challenged this finding on appeal. An unchallenged fact finding is binding on an

appellate court unless the contrary is established as a matter of law or there is no evidence

to support the finding. McGalliard v. Kuhlmann, 722 S.W.2d at 696. Here, there was

evidence to support the trial court’s finding and the contrary was not established by

Dominion as a matter of law. The trial court did not err in determining that the indemnity

agreement included negligence on the part of any of the Faulconer entities. We overrule

Dominion’s second issue.

                 V. Was there an Enforceable Settlement Agreement?

       By Dominion’s third issue, it asserts that the trial court erred in holding there was no

agreement between it and Faulconer to settle the Ayala litigation because the parties came

to an agreement on all the essential terms of the joint settlement of the Ayala litigation.

Faulconer claims that it made Dominion aware, that in order to settle the Ayala litigation,

the indemnity issues of Fina had to be resolved. Dominion argues that Faulconer’s

authority to settle was verbally conferred by Charles Murray, Faulconer’s counsel. On

January 12, 2006, Murray sent an email to Joe Luce, who was handling the settlement

negotiations for Dominion in the Ayala litigation. The email stated: “Joe, the authority we

gave when the $15 million mediator’s proposal was being considered was 13% of the first

$8 mil, 10% of the next $3 mil, and 3% thereafter up to $15 mil. You still have that

authority. Good luck.” On the same day, Luce responded to the email as follows: “Thank

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you for the confirmation. I will let you know what we decide.” Counsel for Faulconer sent

additional email correspondence to Luce on January 17, 2006, affirming that the settlement

had to include Fina. Dominion claims that the foregoing initial email correspondence of

January 12, 2006, was a valid contractual agreement to settle. The trial court made a

finding that Faulconer offered to contribute to Dominion’s proposed settlement fund for the

Ayala litigation contingent upon receiving a release from Fina.

       There was conflicting evidence before the trial court. Luce testified that during

negotiations in December of 2005, no one mentioned contractual indemnities owed to Fina.

According to Luce, as of January 30, 2006, he had not heard anything with respect to

indemnity owed to Fina. He claimed that he first learned that Faulconer had agreed to

indemnify Fina on February 2, 2006. Luce stated that Fina was not discussed at a

November 2005 meeting when the defendants in the Ayala litigation met to discuss

settlement of the Ayala litigation. Gilbert Hinojosa, Dominion’s expert, testified that Fina

was only mentioned at the end.

       James Dyer, counsel for Faulconer, testified that he recommended to his client that

it not settle unless the agreement included Fina. He stated that during the November 2005

meeting with the defendants in the Ayala litigation, he discussed the necessity of Fina

being settled at the same time as everything else. Markel, Faulconer’s, vice-president,

testified that at the November 2005 meeting, two of Faulconer’s attorneys urged that it

should not settle without Fina. He also said that “we laid out the formula and details about

Fina to them (Dominion) at that time.”       Jean Crawley, vice-president of land and

administration for Faulconer also testified that at least after November 22, 2005, Fina had

to be included in any settlement. She said that at that meeting it was made clear to

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Dominion that Faulconer agreed to pay a portion of the settlement in the event that

Faulconer could settle its claims with Fina.

B. Relevant Law

         Texas Rule of Civil Procedure 11 prohibits enforcement of any agreement unless

it is in writing. TEX . R. CIV. P. 11. In order to satisfy rule 11, the writing must contain all of

the essential elements of the agreement. Padilla v. LaFrance, 907 S.W.2d 454, 460 (Tex.

1995).

         Dominion urges that as a matter of law the email correspondence between Luce and

Murray on January 12, 2006, constitutes a binding agreement which set forth the essential

terms of the agreement. It argues that it was only after the plaintiffs accepted the

settlement offer that Faulconer decided that Fina had to be part of the settlement. There

was evidence that the inclusion of Fina as part of the settlement offer was discussed in

November 2005. The email sent by Luce refers to an agreement by Faulconer to

participate. It does not state what Faulconer was getting in return by way of release. It

does not specify whether it is only a release from the Ayala claims or from both the Ayala

and Fina claims.

         There was evidence before the trial court that a release from Fina had been

previously discussed. The trial court could have chosen to believe that testimony. The

email correspondence between Luce and Murray does not mention releases at all. The

trial court could correctly have determined that all of the essential terms had not been

reduced to writing and the rule 11 agreement was not an enforceable contract. See

Padilla, 907 S.W.2d at 460. We overrule issue three.

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                                     VI. Cross Appeal

A. Background

       Faulconer contends by cross-appeal that the trial court incorrectly determined that

prejudgment interest began to run in May 2006. It claims that prejudgment interest should

have begun to accrue 180 days after it gave notice of its indemnity claim on April 15, 1996.

Dominion asserts that Faulconer has completely ignored the fact that the 1996 notice of

claim was made prior to and resulted in a 1998 lawsuit, filed in federal court, that was later

settled and dismissed.

       The trial court awarded Faulconer $2,167,342.33 in this case. With respect to

prejudgment interest, the trial court found “in March of 2006 DOTEPI and Faulconer

exchanged letters concerning the continuation of DOTEPI providing a defense for

Faulconer in the lawsuit. Notice that DOTEPI failed to continue defending was given

March of 2006.” The trial court concluded that Faulconer was entitled to prejudgment

interest beginning May 19, 2006, the day the lawsuit was filed.

B. Standard of Review and Applicable Law

       The trial court's prejudgment interest award is reviewed under an abuse of discretion

standard. See Wilmer-Hutchins Indep. Sch. Dist. v. Smiley, 97 S.W.3d 702, 706 (Tex.

App.–Dallas 2003, pet. denied). To determine if a trial court abused its discretion, we must

decide if the trial court acted without reference to any guiding rules or principles. See

Downer v. Aquamarine Operators, Inc. 701 S.W.2d 238, 241-42 (Tex. 1985). A claim for

prejudgment interest may be based upon general principles of equity or an enabling

statute. Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549, 552 (Tex. 1985). Under

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both the common law and the Texas Finance Code, prejudgment interest begins to accrue

on the earlier of: (1) 180 days after the date a defendant received written notice of a claim,

or (2) the date suit is filed. TEX . FIN . CODE ANN . § 304.104 (Vernon 2006). Prejudgment

interest is awarded to fully compensate the injured party, not to punish the defendant. See

Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex.

1998); see also Trujillo v. Burrows, No. 13-08-291-CV, 2009 WL 866827, *2 (Tex.

App.–Corpus Christi, Apr. 2, 2009, no pet.) (mem. op.). It is considered compensation

allowed by law as additional damages for lost use of the money due between the accrual

of the claim and the date of judgment. Kenneco Energy, Inc., 962 S.W.2d at 528.

C. Analysis

       The trial court awarded prejudgment interest in this case based upon what it

believed the correct statutory interpretation. The trial court’s fact findings confirmed that

the award was calculated based upon the date this suit was filed, May 19, 2006. Faulconer

argues that it is entitled to prejudgment interest based upon litigation that ensued in 1998

between it and American, Dominion’s predecessor. American agreed to provide a defense

to Faulconer and that case settled in 1999. As part of the settlement agreement, American

agreed to delay further litigation on its indemnity obligation and reserved certain rights.

There does not seem to be a dispute that there was a notice of Faulconer’s claim in 1996.

Dominion argues that the notice in 1996 may not be used to calculate the accrual of

prejudgment interest because the case at issue here is a different case. We agree.

       There was evidence that Faulconer had incurred $80,502.74 in costs in defending

the Ayala litigation to the point where the original case settled. Faulconer reserved its right

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to seek payment in future litigation that it had incurred up to that time. Faulconer had the

right to file suit against Dominion to recover those fees. However, to do so, it had to file

a new cause of action because its previous case had settled. We agree with the trial

court’s decision to grant prejudgment interest based on the filing of the second lawsuit. It

was a new claim, even though it was based on rights that had been previously reserved.

We overrule Faulconer’s cross issue.

                                     VII. Conclusion

       The judgment of the trial court is affirmed.

                                                      ROSE VELA
                                                      Justice

Delivered and filed the
31st day of August, 2010.

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