Court Opinion

ID: 4910237
Source: CourtListenerOpinion
Date Created: 2021-09-10 18:00:24.371583+00
Date Added: 2024-06-11T08:13:23.354191
License: Public Domain

Case: 20-11274     Document: 00516009097          Page: 1    Date Filed: 09/10/2021

              United States Court of Appeals
                   for the Fifth Circuit                             United States Court of Appeals
                                                                              Fifth Circuit

                                                                            FILED
                                                                    September 10, 2021
                                   No. 20-11274
                                                                       Lyle W. Cayce
                                                                            Clerk

   Philadelphia Indemnity Insurance Company,

                                                             Plaintiff—Appellee,

                                       versus

   Reytech Services, L.L.C.,

                                                         Defendant—Appellant.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                            USDC No. 4:20-CV-211

   Before Stewart, Ho, and Engelhardt, Circuit Judges.
   Per Curiam:*
          This appeal arises out of the issuance of construction surety bonds.
   Plaintiff-Appellee alleges Defendant-Appellant breached the indemnity
   agreement. The district court granted summary judgment for plaintiff.
   We AFFIRM.

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-11274      Document: 00516009097           Page: 2   Date Filed: 09/10/2021

                                     No. 20-11274

                                          I.
          In 2011, Plaintiff-Appellee Philadelphia Indemnity Insurance
   Company (“Philadelphia”) entered into an indemnity agreement with
   defendants P.C. Contractors, L.L.C. (“PCC”) and John Douglas Chase
   Patterson (“Patterson”) (the “PCC Agreement”). The PCC Agreement
   named PCC as Principal and Philadelphia as Surety.
          In 2013, Defendant-Appellant Reytech Services, LLC (“Reytech”),
   PCC, and Patterson executed an additional general indemnity agreement on
   behalf of the named Surety, Philadelphia (the “Reytech Agreement”). The
   signature blocks on the Reytech Agreement reflect that all three
   defendants—Reytech,        PCC,      and     Patterson     (collectively,   the
   “Indemnitors”)—executed the agreement as “Principal/Indemnitor,” in
   favor of Philadelphia.     The Reytech Agreement specifically identifies
   Reytech as Principal in the definitions section. Under the terms of the
   Reytech Agreement, Reytech is responsible for indemnifying Philadelphia
   from losses related to bonds issued on behalf of any Principal.
          In 2015, Philadelphia issued performance bonds, payment bonds, and
   maintenance bonds on behalf of PCC (the “Bonds”). The Bonds name PCC
   as the Principal. After the Bonds were issued, PCC failed to pay bills or other
   indebtedness incurred in connection with the project for which the Bonds
   were issued. Specifically, Philadelphia received and/or is currently aware of
   claims in excess of $2,000,000.00 plus interest and attorneys’ fees on the
   Bonds. After reviewing and paying claims in the amount of $1,759,965.08 in
   accordance with the obligations under the Bonds and an internal
   investigation for an accounting on expenditures, Philadelphia incurred losses
   in the amount of $1,929,582.09.
          On December 26, 2018, Philadelphia sent a demand letter to the
   Indemnitors demanding that they, jointly or severally, deposit with

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                                    No. 20-11274

   Philadelphia the accounted incurred loss in cash or other property acceptable
   as collateral security to protect Philadelphia from all losses on the Bonds.
   Despite this demand, Reytech refused to indemnify Philadelphia, arguing
   that PCC was not a Principal under the Reytech Agreement.
          On March 5, 2020, Philadelphia brought its complaint against the
   Indemnitors seeking recovery for breach of the Reytech Agreement and
   common law indemnity. After PCC and Patterson failed to appear, an order
   of default judgment was entered against them on May 1, 2020. Reytech
   responded with a motion to dismiss under Rule 12(b)(6), which was denied
   on April 21, 2020. Reytech later filed a motion for summary judgment, which
   was also denied on August 13, 2020.
          On October 21, 2020, Philadelphia filed its motion for summary
   judgment against Reytech to recover for the Bonds. The district court
   granted the motion on November 30, 2020, and entered final judgment in
   favor of Philadelphia. Reytech timely appealed.
                                         II.
          We review the motion for summary judgment de novo, and we apply
   the same standard as the district court, viewing the evidence in the light most
   favorable to the nonmovant. First Am. Title Ins. Co. v. Cont’l Cas. Co., 709
   F.3d 1170, 1173 (5th Cir. 2013). The interpretation of a contract is also
   reviewed de novo. Nat’l Cas. Co. v. W. World Ins., 669 F.3d 608, 612 (5th
   Cir. 2012). Summary judgment is appropriate where “there is no genuine
   dispute as to any material fact and the movant is entitled to judgment as a
   matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); FED. R.
   CIV. P. 56(a). We apply Texas law to interpret the contract. Amerisure Ins.
   Co. v. Navigators Ins. Co., 611 F.3d 299, 309–310 (5th Cir. 2010).

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                                    No. 20-11274

                                        III.
          Reytech raises two issues on appeal. First, it argues that the district
   court erred in finding that PCC was a Principal under the Reytech
   Agreement. Second, it argues the district court erred by determining that
   the Reytech Agreement was not rescinded, superseded, or otherwise
   replaced by a subsequent indemnity agreement, in which PCC is not a party.
   Neither argument prevails.
          Principal under the Reytech Agreement
          Reytech argues that it is not obligated to indemnify the Bonds under
   the Reytech Agreement because it is not obligated to indemnify for unrelated
   bonds. Reytech argues that PCC is not a Principal because it signed under
   the boilerplate term “Principal/Indemnitor,” nor does PCC become a
   Principal under the definition’s section (b)(iii), and interpreting the Reytech
   Agreement to include PCC as a Principal would be an “absurd result.”
          It is undisputed that the signature lines of the Reytech Agreement
   show both PCC and Reytech executing the Reytech Agreement as
   “Principal/Indemnitor.” The Reytech Agreement defines Principal and
   Bonds as follows:
          b. Principal: (i) Reytech Services, LLC; (ii) any present or
          future, direct or indirect, subsidiary, successor, affiliate, or
          parent of any Indemnitor or Principal; and (iii) any other entity
          or person in response to a request from any Indemnitor or
          Principal named herein, and, as to all of the foregoing, whether
          they act alone or in joint venture with others, whether or not
          said others are named herein.
          ...
          e. Bond: All surety bonds, undertaking, recognizances,
          instruments of guarantee or other surety obligations … issued
          on behalf of any Principal by: (i) Surety. . .

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                                     No. 20-11274

          Philadelphia argues that PCC became a Principal under the Reytech
   Agreement after PCC requested the issuance of the Bonds from Philadelphia,
   and PCC was a defined Principal under the Reytech Agreement by way of its
   signature designation. Under the terms of the Reytech Agreement, the
   Indemnitors jointly and severally agreed to “indemnify the Surety from any
   and all loss incurred as a result of issuing the Bonds.”
          Under Texas law, we “must give [a contract’s] words their plain
   meaning, without inserting additional provisions into the contract.” Liberty
   Mut. Ins. Co. v. Hisaw v. Assocs. Gen. Contractors, Inc., 514 F.App’x 407, 411
   (5th Cir. 2013) (quoting Nat’l Union Fire Ins. Co. of Pittsburg, Pa. v. Crocker,
   246 S.W.3d 603, 606 (Tex. 2008)). We must also strive to “ascertain and
   give effect to the intent of the parties as that intent is expressed in the
   contract.” Id. (citing Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207
   S.W.3d 342, 345 (Tex. 2006)).
          Indemnity agreements are read as any other contract under Texas law.
   Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 284 (Tex.
   1998). The Reytech Agreement is to be interpreted in accordance with the
   general rules of contract construction, with the primary goal of construction
   to give effect to the parties’ intent as expressed in the terms of the contract.
   See Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000);
   Blanton v. Cont’l Ins. Co., 565 F. App’x 330 (5th Cir. 2014). Whether a
   contract is ambiguous is a question of law for the court to decide by looking
   at the contract as a whole in light of the circumstances present when the
   contract was entered. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). If
   the written instrument is so worded that it can be given a certain or definite
   legal meaning or interpretation, then it is not ambiguous, and we will construe
   the contract as a matter of law. Id. at 393.

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                                    No. 20-11274

          The Bonds were issued a year-and-a-half after the Reytech Agreement
   was executed. The signature line of the Reytech agreement identifies PCC
   and Reytech executing as a “Principal/Indemnitor.” Philadelphia issued the
   Bonds based on Reytech’s agreement to indemnify it in the Reytech
   Agreement. Philadelphia’s Surety Bond Claim Manager, Jennifer Leuschner,
   submitted a sworn affidavit that Philadelphia relied upon Reytech’s promise
   of indemnification before issuing the Bonds. Under the terms of the Reytech
   Agreement, upon request of a named Indemnitor to Philadelphia for the
   issuance of a Bond, the named Principal on that requested Bond becomes a
   Principal under the Reytech Agreement—and the requested Bond is a Bond
   in which the Indemnitors are jointly and severally liable.
          The Reytech Agreement provides that Reytech agrees to indemnify
   and hold harmless Philadelphia from and against any loss sustained or
   incurred as a result of executing any bond or as a result of the failure of any
   principal or indemnitor to comply with the Reytech agreement or any other
   agreement. While Reytech argues this evidence is only a “self-serving
   Affidavit,” the record is void of rebuttal evidence to the contrary. Reytech
   did submit a sworn declaration by Patterson, as an authorized representative
   of PCC, after default judgment had been entered against him and PCC. But
   Reytech has not alleged or presented any evidence of fraud or lack of good
   faith on the part of Philadelphia. Accordingly, in view of the plain meaning,
   we conclude, as a matter of law, PCC is a Principal under the Reytech
   Agreement, and thus, affirm the summary judgment.
          Replacement Agreement
          Reytech additionally argues that it entered into a new general
   indemnity agreement with Philadelphia in 2016 that replaced the original
   Reytech Agreement. PCC is not a party under the replacement agreement.
   Reytech argues, based on language in the 2016 agreement, that the

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Case: 20-11274     Document: 00516009097          Page: 7   Date Filed: 09/10/2021

                                   No. 20-11274

   replacement agreement supersedes any prior agreement between the parties.
   The district court found the language of the 2016 agreement inadequate for
   terminating the 2013 Reytech Agreement because the terms of the Reytech
   Agreement required written notice by registered mail of an intent to
   terminate. No such notice occurred or has been alleged by the parties.
         Further, the alleged replacement indemnity agreement was entered
   into a year after the issuance of the Bonds at issue, and PCC was not a party
   to the agreement. The other named parties in the 2016 agreement are not the
   original Indemnitors/Principals named in the Reytech Agreement. Merger
   occurs when the same parties to a prior agreement subsequently enter into a
   written integrated agreement covering the same subject matter. Leon Ltd. v.
   Albuquerque Commons P’ship, 862 S.W.2d 693, 700 (Tex. App. 1993).
   “[B]efore one contract is merged into another, the last contract must be
   between the same parties as the first, must embrace the same subject matter,
   and must have been so intended by the parties.” Kelly v. Rio Grande
   Computerland Grp., 128 S.W.3d 759, 768–69 (Tex. App.—El Paso 2004, no
   pet.). But even then, a written agreement does not supersede a previous
   written agreement “relating to the same subject matter if the agreements
   [are] such that [they] might naturally be made as a separate agreement[s].”
   Fish v. Tandy Corp., 948 S.W.2d 886, 899 (Tex. App.—Fort Worth 1997, writ
   denied).
          Reytech has not shown that the parties intended the Reytech
   Agreement to be merged into the replacement agreement such that it would
   no longer have any obligation to indemnify Philadelphia on the Bonds. See
   Kona Tech. Corp. v. s. Pac. Transp. Co., 225 F.3d 595, 612 (5th Cir. 2000).
   Accordingly, we affirm the finding by the district court that the Reytech
   Agreement was not rescinded, superseded, or otherwise replaced by a
   subsequent indemnity agreement.

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                                No. 20-11274

                                    IV.
         For the foregoing reasons, the judgment of the district court is
   AFFIRMED.

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