Court Opinion

ID: 3112584
Source: CourtListenerOpinion
Date Created: 2015-10-16 07:05:35.44172+00
Date Added: 2024-06-11T12:27:01.588726
License: Public Domain

Fourth Court of Appeals
                                     San Antonio, Texas
                                             OPINION
                                        No. 04-12-00852-CV

                           Jerry L. HAMBLIN and Ricochet Energy, Inc.,
                                          Appellants

                                       v.
 Thomas A. LAMONT, L.O.G. Energy Development, Ltd., L.O.G. Energy Management, LLC,
                            RThomas A. LAMONT,
                                   Appellee

                     From the 111th Judicial District Court, Webb County, Texas
                               Trial Court No. 2008-CVF-000665-D2
                             The Honorable Joe Lopez, Judge Presiding

Opinion by: Patricia O. Alvarez, Justice
Dissenting Opinion by: Rebeca C. Martinez, Justice

Sitting:          Rebeca C. Martinez, Justice
                  Patricia O. Alvarez, Justice
                  Luz Elena D. Chapa, Justice

Delivered and Filed: December 11, 2013

REVERSED AND RENDERED

           Jerry L. Hamblin and Ricochet Energy, Inc. appeal a summary judgment, rendered in favor

of Thomas A. Lamont, enforcing a contractual indemnity provision. We reverse the judgment of

the trial court and render judgment in favor of Jerry L. Hamblin and Ricochet Energy, Inc.

                             FACTUAL AND PROCEDURAL BACKGROUND

           Because many of the historical facts in this case are set forth in our previous opinion,

Lamont v. Vaquillas Energy Lopeno Ltd., LLP, No. 04-12-00219-CV, 2013 WL 5228500 (Tex.

App.—San Antonio Sept. 18, 2013, no pet. h.), we need not repeat them here.
                                                                                  04-12-00852-CV

       This current cause of action stems from a series of agreements entered into between Jerry

L. Hamblin and Thomas A. Lamont. In 1996, Hamblin and Lamont formed Ricochet Energy, Inc.,

an oil and gas development company. Hamblin and Lamont each owned 50% of the shares and

were the only directors of the company. In August of 2006, Lamont notified Hamblin that he

wanted to separate from Ricochet.

A.     The Master Agreement

       The parties ultimately negotiated two separation agreements: (1) an agreement dividing

Ricochet’s oil and gas prospects (the Letter Agreement); and (2) a Master Agreement to Sell,

Transfer, Assign and/or Dissolve Certain Business Interests (the Master Agreement). The Letter

Agreement, attached and incorporated into the Master Agreement, identified the “Undeveloped

Prospects” to which Lamont had a right to participate in the subsequent wells. The Letter

Agreement also included notarized disclosure statements from Ray Gallaway, Ricochet’s general

counsel, and Hamblin warranting that the list of prospects was “a true, correct, complete and

accurate listing of all such ‘Undeveloped Prospects’ pursuant to the Master Agreement.” Under

the Master Agreement, Lamont sold and transferred his Ricochet shares to Hamblin while retaining

a 50% interest in certain ongoing Ricochet leases and Undeveloped Prospects. The Master

Agreement also permitted Lamont to compete against Ricochet in pursuing other interests not

specifically identified as an Undeveloped Prospect.

       The agreements were dated February 15, 2007, executed on February 16, 2007, and made

retroactive to December 31, 2006. Also on February 16, 2007, Lamont tendered his resignation

as director, officer, and chief operating officer retroactively to December 31, 2006. Hamblin and

Lamont initialed each page of the Master Agreement, which was drafted by Ricochet’s general

counsel, Ray Gallaway. During the separation negotiations, Gallaway served as both Ricochet’s

and Hamblin’s lawyer for purposes of reviewing and revising the Master Agreement.
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       The Master Agreement also contained a series of provisions indemnifying Lamont against

unknown liabilities. The indemnity provisions stipulate the parties’ intent “to provide as broad of

an indemnity as possible and all ambiguity as to whether Hamblin and Ricochet Energy, Inc. owe

the duty of indemnification shall be resolved in favor of providing the indemnity/indemnification.”

B.     The Vaquillas Lawsuit

       On March 4, 2008, Vaquillas Energy Lopeno Ltd., LLP and JOB Energy Partners II, Ltd.

sued Lamont, and others, alleging misappropriation of their trade secret, conversion, tortious

interference with existing contracts, unjust enrichment, and conspiracy. The trade secret in

question was a detailed seismic map of the Lopeno Prospect Gas Reservoir referred to as the

Treasure Map. Vaquillas and JOB asserted Lamont wrongfully utilized the Treasure Map to lease

the El Milagro property and develop the El Milagro wells, in direct competition with Ricochet.

       The jury found that Lamont misappropriated Vaquillas and JOB’s trade secret and

intentionally interfered with the Prospect Generation Agreements between Ricochet, Vaquillas,

and JOB. The jury assessed compensatory damages against Lamont and his co-defendants. The

trial court rendered judgment on the jury’s verdict.

C.     The Indemnity Lawsuit and Summary Judgment Proceedings

       Three weeks after being sued in the Vaquillas Lawsuit, Lamont made a demand on

Hamblin and Ricochet to honor the Master Agreement’s indemnity provisions and indemnify him

from any liability imposed on him as a result of the Vaquillas Lawsuit. Hamblin and Ricochet

refused to indemnify Lamont for his liabilities. Lamont subsequently filed the present action

against Hamblin and Ricochet, alleging Hamblin and Ricochet failed to honor their indemnity

obligations under the Master Agreement. Lamont sought a declaration that Hamblin and Ricochet

were required to indemnify him as a matter of law. Both sides moved for partial summary

judgment on the indemnity issue.
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       The trial judge presiding over the summary judgment proceedings also presided over the

jury trial in the Vaquillas Lawsuit. The trial judge granted partial summary judgment in favor of

Lamont and ordered Hamblin and Ricochet to indemnify Lamont for (1) “any amount of the

judgment in the [Vaquillas Lawsuit] . . . for which Lamont is liable after appeals of that judgment

are exhausted,” (2) Lamont’s attorney’s fees and expenses incurred in defending and appealing the

judgment in the Vaquillas Lawsuit, and (3) Lamont’s attorney’s fees incurred in enforcing

Hamblin and Ricochet’s duties of indemnity in the present case.

       Hamblin and Ricochet’s interlocutory appeal followed.

                                     INDEMNITY AGREEMENTS

       “An indemnity agreement is a promise to safeguard or hold the indemnitee harmless against

either existing and/or future loss liability.” Dresser Indus., Inc. v. Page Petroleum, Inc., 853
S.W.2d 505, 508 (Tex. 1993); accord Van Voris v. Team Chop Shop, LLC, 402 S.W.3d 915, 918

(Tex. App.—Dallas 2013, no pet.). It is a “risk-shifting provision[ ] that, in the context of relieving

a party of responsibility for its own negligence, [is] considered ‘extraordinary.’” Van Voris, 402
S.W.3d at 918 (quoting Dresser, 853 S.W.2d at 508).

       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). Principles of contract law require

courts to ascertain and give effect to the intentions of the parties as expressed within the four

corners of the agreement. See El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802,

805 (Tex. 2012); Ideal Lease Serv., Inc. v. Amoco Prod. Co., Inc., 662 S.W.2d 951, 953 (Tex.

1983). It is the objective, not subjective, intent of the parties that controls, and the instrument

alone is considered to express that intent. Sun Oil Co. v. Madeley, 626 S.W.2d 726, 731 (Tex.

1981); see MasTec, 389 S.W.3d at 805.

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                                                                                     04-12-00852-CV

A.     Lamont’s Indemnity Agreement

       The Indemnity Provisions in this case are found in the Master Agreement and provide as

follows:

       In addition to the indemnification set forth in Sections in 3.03, 3.09 and elsewhere
       herein, Hamblin and Ricochet Energy, Inc. agree to INDEMNIFY Lamont against
       any and all liabilities, obligations or claims arising from any act, occurrence,
       omission or otherwise which occurs after the Effective Date of this Agreement and
       which in any way pertains to Ricochet Energy, Inc. and/or its operations, actions
       and inactions. It is the intention of the Parties and Ricochet Energy, Inc. to provide
       as broad of an indemnity as possible and all ambiguity as to whether Hamblin and
       Ricochet Energy, Inc. owe the duty of indemnification shall be resolved in favor of
       providing the indemnity/indemnification.

                Additionally, Hamblin and Ricochet Energy, Inc. specifically, as of the
       Effective Date, retain and assume any and all obligations or liabilities arising
       pursuant to any contracts, vendor agreements, contractor agreements, loans or other
       agreements executed by, on behalf of or for the benefit of Ricochet Energy, Inc.,
       except those obligations and/or liabilities created by Lamont as a result of Lamont
       acting outside the normal course and scope of his employment with the corporation
       or normal course and scope of his duties as an officer of the corporation. Hamblin
       and Ricochet Energy, Inc. agree to INDEMNIFY Lamont against any and all
       liabilities, obligations or claims which in any way relate to the assumed and retained
       obligations and liabilities specified herein. It is the intention of the Parties and
       Ricochet Energy, Inc. to provide as broad of an indemnity as possible and all
       ambiguity as to whether Hamblin and Ricochet Energy, Inc. owe the duty of
       indemnification shall be resolved in favor of providing the
       indemnity/indemnification.

The parties characterize these indemnity provisions respectively as the Prospective Indemnity and

the Retrospective Indemnity. Assuming, without deciding, Lamont’s liability from the Vaquillas

Lawsuit pertains to Ricochet, public policy precludes any indemnity in this case because Lamont’s

liability arises from his own intentional torts.

B.     History of the Fair Notice Requirements in Texas

       Because Lamont is seeking to be excused and protected from his own intentional acts, we

look to the history of the Express Negligence Test and whether the parties intended to protect

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Lamont from his own actions. 1 We note these were contractual indemnity provisions. To be

enforceable, an indemnity contract must satisfy the fair notice requirements: (1) the express

negligence doctrine and (2) the conspicuousness requirement. Enserch Corp. v. Parker, 794
S.W.2d 2, 8 (Tex. 1990). Because this case does not raise the question of conspicuousness, or

whether the language would “attract the attention of a reasonable person when he looks at it,” we

need only address the express negligence doctrine. See Dresser, 853 S.W.2d at 508.

         1.       Ethyl Corp. v. Daniel Construction Co.

         Texas courts place great restrictions on a party’s ability to exculpate itself, in advance, of

responsibility for its own negligence. See Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708

(Tex. 1987). In Ethyl, an employee of Daniel Construction was working on the premises of Ethyl

Corporation constructing tie-in lines to connect an existing facility with a new facility. Id. at 706.

The tie-in lines were to carry “aluminum alkyls, a highly volatile and inflammable substance.” Id.

The employee was seriously burned when alkyls escaped from the lines at the existing facility and

ignited. Id. at 707. The evidence established that Ethyl was contractually obligated to “purge the

existing lines of alkyls prior to the tie-in,” while Daniel Construction was obligated to remove the

valve handles from the existing lines to prevent them from being accidentally opened. Id. The

alkyls escaped because neither party complied with its respective contractual obligation. Id. The

jury found Ethyl and Daniel Construction negligent, and “apportioned the negligence 90% to Ethyl

1
  We note that Appellants specifically stated they waived the Express Negligence Test because their claim does not
lie in negligence. That being said, Appellants’ pleadings and briefing do contend Lamont should not be indemnified
for his own intentional torts. Specifically, Appellants entitle their argument “Public Policy Should Prohibit Lamont’s
Claim For Indemnity For His Intentional Torts” and contend “that persons engaged in clearly improper conduct are
not protected by corporate funds from the consequences of their wrongdoing.” The jury found no negligence as to
Lamont, but did find Lamont liable for intentional torts. Therefore, Appellants did not waive the application of the
Express Negligence Test as to intentional torts. See State Bar of Tex. v. Heard, 603 S.W.2d 829, 833 (Tex.1980) (“We
look to the substance of a plea for relief to determine the nature of the pleading, not merely at the form of title given
to it.”); accord TEX. R. CIV. P. 71; In re Estate of Blankenship, 04-08-00043-CV, 2009 WL 1232325, at *3 (Tex.
App.—San Antonio May 6, 2009, pet. denied) (mem. op.).

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and 10% to Daniel” Construction. Id. Ethyl then sued Daniel Construction for indemnity based

on the following clause in the parties’ contract:

       Contractor [Daniel] shall indemnify and hold Owner [Ethyl] harmless against any
       loss or damage to persons or property as a result of operations growing out of the
       performance of this contract and caused by the negligence or carelessness of
       Contractor, Contractor’s employees, Subcontractors, and agents or licensees.

Id.

       The Ethyl court rejected Ethyl’s argument that the inclusion of language indemnifying

against “any loss” and “as a result of operations growing out of the performance of this contract”

expressed the parties’ intent for Daniel Construction to indemnity Ethyl for the consequences of

Ethyl’s own negligence. Id. at 708. The court examined the trend toward a more strict construction

of indemnity contracts and adopted the express negligence doctrine. Id. at 707–08; cf. Atl.

Richfield Co. v. Petrol. Pers., Inc., 768 S.W.2d 724, 726 (Tex. 1989) (holding that language

indemnifying for “any negligent act” sufficiently defined the parties’ intentions and met the

requirements of the express negligence rule); B-F-W Constr. Co. v. Garza, 748 S.W.2d 611, 613

(Tex. App.—Fort Worth 1988, no writ) (concluding that “‘and regardless of any cause or of any

fault or negligence of contractor’ meets the express negligence test”).

       Under the express negligence doctrine, “parties seeking to indemnify the indemnitee from

the consequences of its own negligence must express that intent in specific terms. Under the

doctrine of express negligence, the intent of the parties must be specifically stated within the four

corners of the contract.” Ethyl Corp. 725 S.W.2d at 708 (emphasis added); see Van Voris, 402
S.W.3d at 919 (requiring explicit clarity for any party expressing an intent to protect a party for

that party’s negligence); see also Enserch Corp., 794 S.W.2d at 8 (reinforcing requirement that

words expressly state an indemnitee will be reimbursed even for its own negligence). Simply

stated, absent language stating a clear intent to indemnify, there is no obligation to do so. Ethyl,

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725 S.W.2d at 708. The court noted that the express negligence doctrine would preclude

“scriveners of indemnity agreements [from devising] novel ways of writing provisions which fail

to expressly state the true intent of those provisions.” Id. at 707. Finally, the court held that

because the indemnity provision did not expressly provide for indemnification of Ethyl’s

negligence or comparative indemnity in question, Ethyl was not entitled to recover anything under

the contractual indemnity provision. Id. at 707–08.

       2.      Dresser Industries, Inc. v. Page Petroleum, Inc.

       In Dresser Industries, Inc. v. Page Petroleum, Inc., the Texas Supreme Court further

explained the policy reasons behind its adoption of the express negligence doctrine. 853 S.W.2d
505, 507–09 (Tex. 1993). Although the court recognized that indemnity agreements operate to

transfer risk against existing or future loss liability, the court reasoned that using indemnity

agreements to “exculpate a party from the consequences of its own negligence” goes further and

involves “an extraordinary shifting of risk.” See id. at 508. Under those circumstances, the express

negligence doctrine mandates that the party use express language within the four corners of the

contract specifically stating that the party will be indemnified for liability arising from the party’s

own negligence. Id. References to liabilities or claims in general will not suffice; instead, the

language must specifically refer to liability pertaining to the party’s own negligence. See id.; cf.

Atl. Richfield Co., 768 S.W.2d at 726 (identifying language in the indemnity provision which met

requirements of the express negligence rule).

C.     Application to Intentional Torts

       The same public policy concerns associated with extraordinary risk-shifting set forth in

Ethyl and Dresser should apply with equal or greater force to intentional torts. See Green Int’l

Inc. v. Solis, 951 S.W.2d 384, 387 (Tex. 1997) (distinguishing provisions that shift economic

damages resulting from breach of contract with extraordinary shift from consequence of a person’s
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own future acts); cf. Dresser, 853 S.W.2d at 508; Ethyl, 725 S.W.2d at 708. As such, only an

indemnity provision specifically stating an intent to indemnify the indemnitee for the indemnitee’s

intentional torts should be enforceable against the indemnitor for the indemnitee’s intentional acts.

See Ethyl, 725 S.W.2d at 708; Dresser, 853 S.W.2d at 508; see also Ott v. Sonic Land Corp., No.

09-94-209CV, 1996 WL 185347, at *7 (“If a release must expressly state it will release future

negligence, then surely it must expressly state it will release future intentional tortious conduct.”)

We cannot conclude that a strict construction of the indemnity provisions in question expressly

states the Appellants’ intentions to indemnify Lamont for his own intentional torts. Cf. Atl.

Richfield Co., 768 S.W.2d at 726.

         Moreover, we question whether public policy would prevent Lamont from “prospectively

contractually exculpat[ing himself] with respect to intentional torts” even if the indemnity

provisions contained the specific language. 2 Solis v. Evins, 951 S.W.2d 44, 50 (Tex. App.—

Corpus Christi 1997, no writ); accord Oxy USA, Inc. Sw. Energy Prod. Co., 161 S.W.3d 277, 283

(Tex. App.—Corpus Christi 2005, pet. denied); Budner v. Wellness Int’l Network, Ltd., No. 3:06-

CV-0329-K, 2007 WL 806642, at *8 (N.D. Tex. 2007). Accordingly, because the indemnity

provisions in question do not specifically state an intent to indemnify Lamont for liability arising

from his own intentional torts, Appellants Jerry L. Hamblin and Ricochet Energy, Inc. have no

obligation to indemnify Lamont for any liability arising out of the Vaquillas Lawsuit.

                                                           Patricia O. Alvarez, Justice

2
 We note the Texas Supreme Court has not specifically addressed “whether indemnity for one’s own gross negligence
or intentional injury may be contracted for or awarded by Texas courts.” Atl. Richfield Co. v. Petrol. Pers., Inc., 768
S.W.2d 724, 726 n.2 (Tex. 1989).

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