Court Opinion

ID: 2735849
Source: CourtListenerOpinion
Date Created: 2014-09-23 05:00:56.909628+00
Date Added: 2024-06-11T10:03:33.937522
License: Public Domain

Case: 13-20635             Document: 00512776688   Page: 1   Date Filed: 09/22/2014

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                              United States Court of Appeals
                                                       Fifth Circuit

                                                                                 FILED
                                                                           September 22, 2014
                                          No. 13-20635                        Lyle W. Cayce
                                                                                   Clerk

In the Matter of: WEST HILLS PARK JOINT VENTURE, doing business as
WLP Properties, L.C.; J.A. DEVELOPMENT, L.C.,

                                                   Debtors

------------------------------

RANDY W. WILLIAMS, Trustee of the West Hills Park Joint Venture
Bankruptcy Estate,

                                                   Appellant,
v.

HOME DEPOT USA, INCORPORATED,

                                                   Appellee.

                      Appeal from the United States District Court
                           for the Southern District of Texas
                                USDC No. 4:10-CV-2493
     Case: 13-20635      Document: 00512776688         Page: 2    Date Filed: 09/22/2014

                                      No. 13-20635
Before DAVIS, DENNIS, and COSTA, Circuit Judges.
PER CURIAM:*
        Home Depot USA, Inc. and West Hills Park Joint Venture owned
adjacent land where construction activity caused the loss of lateral support to
land owned by yet another entity. A state court awarded over $2 million in
damages against West Hills Park based on jury findings of strict liability and
negligence.      The bankruptcy trustee for West Hills Park then filed a federal
lawsuit against Home Depot seeking contractual indemnification to cover the
state court judgment on the ground that Home Depot was responsible for the
conduct that caused the lack of lateral support. The district court rejected that
claim after a bench trial, and the trustee now appeals.
                                             I.
        As part of a plan to jointly develop a shopping center, West Hills Park
sold land to Home Depot, retaining a contiguous tract of land for itself. Both
tracts abutted property owned by Boxcars Properties, which operated an
apartment complex on its parcel. The parties began construction by clearing,
grading, and excavating their tracts; Home Depot and its subcontractors were
directly responsible for excavating ten to fifteen feet of earth along the property
line that separated the Home Depot and West Hills Park tracts from Boxcars’
land.       Boxcars soon noticed damage to its apartment complex—the brick
facades and walls cracked, the floors buckled, the sheet rock between walls and
ceilings separated, the balconies and roofs began leaking, and the foundation

        *Pursuant to 5TH CIR. R. 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
CIR. R. 47.5.4.

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was damaged.        Eventually, the property became uninhabitable and was
condemned, requiring all of the tenants to vacate the building.
      Boxcars sued Home Depot and West Hills Park, among others, in state
court for damages to its apartment complex resulting from the development.
Home Depot settled with Boxcars without admitting fault. After trial, a jury
in Walker County, Texas found against West Hills Park on both strict liability
and negligence claims and awarded $2,389,009. 1
      Shortly after entry of judgment in the state court action, West Hills Park
filed a Chapter 11 bankruptcy petition. Randy Williams, as trustee of West
Hills Park’s bankruptcy estate, then sued Home Depot for contractual
indemnity in the United States Bankruptcy Court for the Southern District of
Texas.    The case was later transferred to the district court following a
withdrawal of the reference. The trustee argued that in spite of the state court
verdict finding West Hills Park liable, it was actually Home Depot—the party
performing the excavation—that was responsible for the conduct that gave rise
to the state court judgment.
      After a bench trial, the district court found that Home Depot was not
contractually required to indemnify West Hills Park for two reasons. First, the
district court found that the state court judgment finding West Hills Park
liable was entitled to preclusive effect, barring West Hills Park from
relitigating its fault in the indemnity suit. Second, even absent preclusion, the
district court’s independent review of the evidence led it to conclude that West
Hills Park proximately caused damage to Boxcars because it failed to conduct
or obtain studies on the effect of the developmental work on the adjacent land

      1 This figure represents the net jury award after a settlement credit of $867,500 but
does not include interest that was awarded.
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and failed to notify Boxcars of that work.
                                          II.
        West Hills Park and Home Depot’s 2001 “Reciprocal Easement and
Operation Agreement” is the basis for West Hills Park’s indemnity claim.
Paragraph 4.1, “Liability: Indemnification,” states:
             Each Owner shall indemnify, defend, save and hold
             every other Owner, tenant, and occupant of the Center
             harmless (except for loss or damage resulting from the
             tortious acts of such other parties) from and against
             any damages, liabilities, actions, claims, and expenses
             (including attorneys’ fees in a reasonable amount) in
             connection with the loss of life, bodily injury, personal
             injury and/or damage to property arising from or out
             of any occurrence in or upon such Owner’s Parcel, or
             occasioned wholly or in part by any act or omission of
             said Owner, its tenants, agents, contractors,
             employees, or licensee.

The trustee acknowledges that this language does not impose an indemnity
obligation on Home Depot for the “the tortious acts of . . . other parties” like
West Hills Park. He nonetheless seeks to hold Home Depot liable for the state
court judgment against West Hills Park by arguing that it was Home Depot’s
conduct that gave rise to that verdict.
        The express negligence doctrine alone may be sufficient to deny West
Hills    Park’s   indemnity   claim.          Under    that     doctrine,   contractual
indemnification for a party’s own negligence or strict liability must be clearly
and expressly stated within the four corners of the contract. Ethyl Corp. v.
Daniel Const. Co, 725 S.W.2d 705, 708 (Tex. 1987); Hous. Lighting & Power
Co. v. Atchison, Topeka, & Santa Fe Ry. Co., 890 S.W.2d 455, 458–59 (Tex.
1994) (extending the express negligence doctrine to cases involving indemnity
for strict liability). Not only does the indemnity agreement between Home

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Depot and West Hills Park fail to meet that high standard, it expressly
disavows indemnification for the tortious conduct of another party to the
agreement.
      At least some caselaw indicates that this should be the end of the
matter—because the trustee is seeking indemnification for a state court
judgment that found West Hills Park liable, the express negligence doctrine
bars that claim as a matter of law. For example, a Texas Court of Appeals
refused to allow a party that settled a personal injury case to avoid the express
negligence doctrine by proving in a separate case that it was actually the
conduct of the indemnitor that gave rise to its liability in the underlying case.
See Gilbane Bldg. Co. v. Keystone Structural Concrete, Ltd., 263 S.W.3d 291,
298 (Tex. App.—Hous. 2007, no pet.). Gilbane reasoned that allowing the
indemnitee to relitigate its liability in a separate suit “retards rather than
advances the policy of preventing satellite litigation regarding interpretation
of indemnity contracts.” Id. (quoting Fisk Elec. Co. v. Constructors & Assocs.,
888 S.W.2d 813, 815 n.2 (Tex. 1994)).
      In any event, even if the express negligence doctrine did not
automatically bar the trustee’s separate case seeking indemnification, we see
no reason to disturb the district court’s thorough and well-reasoned ruling
rejecting the trustee’s claim.
      The district court first determined that the issue of West Hill Park’s
tortious conduct was fully resolved in the state court case and entitled to
preclusive effect. Under Texas law, issue preclusion applies if “(1) the facts
sought to be litigated in the first action were fully and fairly litigated in the
prior action; (2) those facts were essential to the judgment in the first action;
and (3) the parties were cast as adversaries in the first action.” Eagle Props.,
Ltd. v. Scharbauer, 807 S.W.2d 714, 721 (Tex. 1990). The second element is
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often not established when alternate holdings support a judgment. 2 Caprock
Inv. Corp. v. Montgomery, 321 S.W.3d 91, 97 (Tex. App.—Eastland 2010, pet.
denied) (“The general rule is that there cannot be estoppel by alternative
holdings.”). The trustee relies on that principle to avoid application of issue
preclusion, citing the jury’s finding that West Hills Park was liable under both
strict liability and negligence theories.
       The district court correctly held, however, that the negligence finding
was essential to the judgment because only that finding allowed for the
damages for improvements to land included in the state court verdict. It has
long been held that damages for improvements to land require a finding of
negligence. See Simon v. Nance, 100 S.W. 1038, 1040 (Tex. Civ. App.—Austin
1907, no writ) (“[The] absolute right [of lateral support] is limited to the soil
itself, and does not apply to buildings or other structures which have been
placed upon the land. When it is sought to recover damages to improvements
which have been placed upon the land, then, as a general rule, the question of
negligence becomes an important factor.”); see also Comanche Duke Oil Co. v.
Tex. Pac. Coal & Oil Co., 298 S.W. 554, 559–60 (Tex. Comm’n App. 1927) (“[I]f
the ‘adjoining owner’ had an improvement on or in his land (say, a cased well)
and as a proximate result the improvement were injured through destruction
of ‘lateral support,’ liability would attach if an ordinarily prudent man, thus
circumstanced, would not have sunk a well so near the boundary as that
supposed.”). West Hills Park argues that B.A. Mortgage Co. v. McCullough,
590 S.W.2d 955 (Tex. Civ. App.—Fort Worth 1979, no writ), creates an
exception to this rule. But the exception noted in McCullough refers to the

       2 An exception exists when the alternate holdings are “rigorously considered.” Eagle
Props., 807 S.W.2d at 722. The district court found that this exception would apply even if it
erred in determining that the negligence finding was essential to the judgment.
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measure of damages for unimproved land. 590 S.W.2d at 957 (calculating the
proper measure of damages for loss of lateral support when adjacent land
suffered vertical drop in height). Neither McCullough nor any of the other
Texas cases West Hills Park cites allow strict liability to support an award for
damage to improvements. 3 Because the negligence finding was the only legally
permissible basis for the damages awarded to compensate for harm to the
apartment complex, the district court properly determined that the state court
finding was entitled to preclusive effect.
      In addition to its preclusion holding, the district court reviewed the
evidence as a matter of first impression and concluded that West Hills Park’s
omissions proximately caused damages to Boxcars.                     In reaching this
conclusion, the district court emphasized (1) West Hills Park’s failure to obtain
studies on the impact of clearcutting, excavating, and grading on the adjoining
property, and (2) its failure to notify Boxcars of the effects of the development,
which led to the lost opportunity to detect early signs of damage. Contrary to
West Hills Park’s arguments, these omissions constitute “activity on land” for

      3  The Second Restatement of Torts and some other states have adopted the so-
called “English Rule” which allows damages for improvements to be awarded for
strict liability upon a certain factual finding: “In England, and in some states in this
country, it appears to be settled that, if the land would have fallen away, even without
the building, as a result of the excavation of adjoining land, the owner may recover
for damage to the building as well as to the land.” 3 HERBERT T. TIFFANY & BASIL
JONES, THE LAW OF REAL PROPERTY § 753 (3d ed.) (citing cases); see, e.g., Catalano v.
Woodward, 617 A.2d 1363, 1369 (R.I. 1992); see also RESTATEMENT (SECOND) OF TORTS
§ 817 (“Illustration: . . . A and B are severally in possession of lands. There is a heavy
building on A’s land. B makes an excavation in his land for the purpose of building a
house on it. A’s land falls into this excavation. If A’s land would not have fallen if
there had been no building on it, B is not liable under the rule stated in this
Subsection. If A’s land would have fallen if there had been no building on it, B is liable
under the rule stated in this Subsection.”). But the English rule has not been applied
in Texas and the trustee did not try to prove that the land would have fallen if there
had been no building on it.
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the purpose of finding liability. See 3 TIFFANY & JONES, supra note 3, § 753
(“[T]he excavating landowner or the excavator is under a duty to give notice to
an adjoining property owner who has a building on his land. And it has been
regarded as evidence of negligence that he omitted, before making the
excavation, to notify the adjoining owner of his intention to make it.” (internal
citations omitted)). The district court engaged in a comprehensive analysis of
the evidence to support its findings, which easily survive our review for clear
error.
         For the above reasons and the others relied upon by the district court in
its detailed ruling, we AFFIRM.

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