Court Opinion

ID: 2980488
Source: CourtListenerOpinion
Date Created: 2015-09-22 19:11:10.236772+00
Date Added: 2024-06-11T15:02:14.473455
License: Public Domain

Reversed and Remanded and Majority and Dissenting Opinions filed March
19, 2015.

                                     In The

                    Fourteenth Court of Appeals

                             NO. 14-13-00644-CV

 GRANT PRIDECO, INC. AND AGGREGATE PLANT PRODUCTS CO.,
                         Appellants
                                       V.

 EMPEIRIA CONNER L.L.C., EMPEIRIA CONNER II L.L.C., AUBREY
   CONNER, LEGG MASON SBIC MEZZANINE FUND, L.P., AEA
 MEZZANINE FUND, L.P., AEA MEZZANINE (UNLEVERAGED) FUND,
   L.P., PAUL FRONTIER HOLDINGS, L.P., JOE FIAMINGO, WES
 DEHAVEN, ALEX SUAREZ, AND EMPEIRIA CONNER L.L.C., IN ITS
     CAPACITY AS THE SELLER REPRESENTATIVE, Appellees

                   On Appeal from the 281st District Court
                           Harris County, Texas
                     Trial Court Cause No. 2012-71176

                     MAJORITY OPINION
      The parties to this appeal dispute the meaning of a contractual indemnity
provision. The trial judge granted summary judgment agreeing with appellees’
interpretation. We agree with appellants’ interpretation and, therefore, reverse.
Concluding, however, that appellants have not established as a matter of law that
they are entitled to indemnification, we remand for further proceedings consistent
with this opinion.

                                           Background

      Empeiria Conner L.L.C., Empeiria Conner II L.L.C., Aubrey Conner, Legg
Mason SBIC Mezzanine Fund, L.P., AEA Mezzanine Fund, L.P., AEA Mezzanine
(Unleveraged) Fund, L.P., Paul Frontier Holdings, L.P., Joe Fiamingo, Wes
Dehaven, Alex Suarez, and Empeiria Conner L.L.C., in its capacity as the seller
representative (collectively, “Empeiria”) and others entered into a Stock Purchase
Agreement with Grant Prideco, Inc..1 Under the Stock Purchase Agreement, Grant
Prideco purchased all of the outstanding capital stock, warrants, and options of
Conner Steel Products Holdings, Co., a company that owned all of the issued and
outstanding capital stock of Conner Steel Products, Inc. The latter company owned
all of the issued and outstanding capital stock of appellant Aggregate Plant
Products Company (APPCO).

      APPCO manufactures heavy equipment, including multi-sanders used in oil
and gas operations. The Stock Purchase Agreement contains various indemnity
provisions, including an agreement by Empeiria to indemnify Grant Prideco and
others as to losses based upon, arising out of, or relating to certain products
liability claims.2 In March 2012, Jose Lara filed suit against APPCO and others in
Winkler County, Texas, asserting various products liability claims allegedly arising
out of severe injuries Lara suffered while working with a multi-sander allegedly
manufactured, designed, marketed, and distributed by APPCO and others.

      1
          For ease of reference, we refer to appellees in the singular.
      2
          The indemnity provision at issue is section 10.2(c). See infra pp. 5-6.

                                                  2
       Grant Prideco and APPCO (collectively, “Grant Prideco”) sent a timely
demand letter to Empeiria seeking indemnity from the claims, demands, and fees
and costs of defense or settlement “arising out of or related to Mr. Lara’s lawsuit.”3
Empeiria denied Grant Prideco’s demand for indemnity, asserting that Lara’s
claims do not fall within the scope of any indemnity provision in the Stock
Purchase Agreement. Grant Prideco filed suit against Empeiria, alleging that it
breached its indemnity obligations under the Stock Purchase Agreement, and
seeking “a declaration that [Grant Prideco is] entitled to recover all money held in
escrow,” contract damages, and attorney’s fees.4 Empeiria filed counterclaims
seeking declaratory relief and attorney’s fees.

       Empeiria filed a traditional summary-judgment motion on the bases that “the
underlying cause of action for negligence accrued after the sale of [APPCO]” and
“[Empeiria is] not liable to indemnify [Grant Prideco] for claims arising after the
sale.”5 Grant Prideco filed a motion for partial summary judgment, seeking a
declaratory judgment that it is entitled to indemnity from Empeiria as to Lara’s
claims and for attorney’s fees. The trial court granted in part and denied in part
Empeiria’s summary-judgment motion and denied Grant Prideco’s motion for
partial summary judgment. In its summary-judgment order, the trial court declared
that “the facts, events, and circumstances with respect to [Lara’s claims] did not
arise prior to the Closing Date” and thus Empeiria is not required to indemnify

       3
           As with appellees, we refer to appellants in the singular.
       4
         In conjunction with the stock purchase, the parties entered into an Escrow Agreement.
Pursuant to section 4 of the Escrow Agreement, an Escrow Fund of $9.5 million was established
for the purpose of paying claims for indemnification. Empeiria claimed Grant Prideco breached
the Escrow Agreement by failing to release funds.
       5
          Grant Prideco brought only a breach of contract claim, but in its prayer sought the
above-referenced declaration in addition to monetary damages. Empeiria moved for summary
judgment as to Grant Prideco’s breach claim but did not otherwise object to Grant Prideco’s
request for declaratory relief.

                                                   3
Grant Prideco under the Stock Purchase Agreement. The trial court denied
Empeiria’s request for attorney’s fees.

                                          Discussion

      In a single issue, Grant Prideco asserts that the trial court erred in granting
Empeiria’s summary-judgment motion and in denying its motion for partial
summary judgment. Grant Prideco did not seek a final judgment. However,
because Grant Prideco and Empeiria moved for summary judgment on the same
issue (both seeking a declaration regarding whether Empeiria was required to
indemnify Grant Prideco), we may review the trial court’s denial of Grant
Prideco’s summary-judgment motion. See FDIC v. Lenk, 361 S.W.3d. 602, 611–12
(Tex. 2012); Frontier Logistics, L.P. v. Nat’l Prop. Holdings, L.P., 417 S.W.3d
656, 659, 664 (Tex. App.—Houston [14th Dist.] 2013, pet. denied).

      In a traditional motion for summary judgment, if the movant’s motion and
summary-judgment evidence facially establish the movant’s right to judgment as a
matter of law, the burden shifts to the nonmovant to raise a genuine, material fact
issue sufficient to defeat summary judgment. M.D. Anderson Hosp. & Tumor Inst.
v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). In our de novo review of a trial court’s
summary judgment, we consider all the evidence in the light most favorable to the
nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors
could, and disregarding contrary evidence unless reasonable jurors could not. Mack
Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a
genuine issue of fact if reasonable and fair-minded jurors could differ in their
conclusions in light of all of the summary-judgment evidence. Goodyear Tire &
Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007).

      When, as in this case, the parties file competing motions for summary
judgment, and the trial court grants one motion and denies the other, we may
                                           4
consider the propriety of the denial as well as the grant. See Lidawi v. Progressive
County Mut. Ins. Co., 112 S.W.3d 725, 729 (Tex. App.—Houston [14th Dist.]
2003, no pet.). If the issue raised is based on undisputed and unambiguous facts,
we may determine the question presented as a matter of law. See id. We may then
either affirm the judgment or reverse and render the judgment the trial court should
have rendered. See id. If, however, resolution of the issues rests on disputed facts,
summary judgment is inappropriate, and we should reverse and remand for further
proceedings. See id. at 729-30.

      Grant Prideco argues that Lara’s claims fall within the scope of the
indemnity provision so that, as a matter of law, Empeiria must indemnify Grant
Prideco as to these claims. Conversely, Empeiria argues that Lara’s claims do not
fall within the scope of that provision so that, as a matter of law, Empeiria has no
obligation to indemnify Grant Prideco as to these claims. We construe indemnity
agreements strictly under the usual principles of contract interpretation to give
effect to the parties’ intent as expressed in the agreement. See Gulf Ins. Co. v.
Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000); E.I. Du Pont De Nemours &
Co. v. Shell Oil Co., 259 S.W.3d 800, 805 (Tex. App.—Houston [1st Dist.] 2007,
pet. denied). We must give terms in an indemnity agreement their plain, ordinary,
and generally accepted meaning unless the agreement indicates otherwise.
Lehmann v. Har-Con Corp., 76 S.W.3d 555, 562 (Tex. App.—Houston [14th
Dist.] 2002, no pet.). An indemnity agreement is unambiguous if it can be given a
definite or certain legal meaning, and we will construe an unambiguous indemnity
agreement as a matter of law. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229
(Tex. 2003); E.I. Du Pont De Nemours & Co., 259 S.W.3d at 805.

      The provision in question is section 10.2 of the Stock Purchase Agreement,
which provides in pertinent part as follows:

                                         5
              Section 10.2 Indemnification by the Sellers. Subject to the
       limitations set forth in this Article X, including without limitation
       Section 10.7, each Seller hereby (on a joint and several basis with the
       other Sellers except as set forth below) agrees to and shall defend,
       indemnify and hold harmless the Buyer and each of the Buyer’s
       subsidiaries, Affiliates and parents, successors and permitted assigns,
       and each of their respective partners, officers, directors, employees
       and their respective heirs and legal and personal representatives
       (collectively, the “Buyer’s Indemnified Persons”) from and against,
       and shall reimburse the Buyer’s Indemnified Persons for, any and all
       Losses to the extent such Losses are based upon, arise out of, or are
       related to: . . .

             (c) any Claims of Product Liability for which the facts, events
       and circumstances with respect to such Products Liability Claim first
       arose prior to the Closing Date (“Product Liability Claim”)[.]

       The closing date for the Stock Purchase Agreement was May 25, 2011, and
Lara alleges that he sustained his injuries on or about September 1, 2011. The
parties do not dispute that at least some of Lara’s claims are “Claims of Product
Liability.”6

       The main issue is whether Lara’s claims are claims “for which the facts,
events and circumstances with respect to such [claim] first arose prior to the
Closing Date.” Grant Prideco contends that this indemnity applies to “any Claims
of Product Liability” in which the allegedly actionable conduct occurred before the
Closing Date. Empeiria contends that this indemnity applies to “any Claims of
Product Liability” that accrued before the Closing Date.

       The everyday words “facts,” “events,” “circumstances” and “arose” are not
defined in the Stock Purchase Agreement. Nothing in the Stock Purchase
Agreement suggests that these ordinary words are used in a technical sense or in

       6
       The term “Product Liability” is defined in section 4.27(b) of the Stock Purchase
Agreement, and the term “Claims” is defined in section 1.1 of the Stock Purchase Agreement.

                                            6
any way other than to convey their ordinary and generally accepted meaning, so
we give these words that meaning. See Valence Operating Co. v. Dorsett, 164
S.W.3d 656, 662 (Tex. 2005). The phrase “the facts, events and circumstances with
respect to such . . . Claim” has a broad scope that would encompass the allegedly
actionable conduct that is the basis of Lara’s claims, the harm or injury allegedly
sustained as a result of that conduct, and other facts, events, and circumstances
with respect to such a claim.

       We do not agree with the interpretation of the contract put forward by
Empeiria and apparently found by the trial judge: that the disputed paragraph
applies only to claims that “accrued” before the closing date. If the parties had
intended to permit indemnification only for legal causes of action that had
“accrued” prior to the closing date, they easily could have used that term, which
has a specific legal meaning, in the Stock Purchase Agreement. Appellees argue
that one of the synonyms for “accrue” is “arise” which is the present tense of
“arose.” We find this argument unpersuasive.7
       The words “arising out of” have been interpreted by courts as “broad,
general, and comprehensive terms effecting broad coverage” in that the words are
“understood to mean originating from, having its origin in, growing out of, or
flowing from.”8 Am. States Ins. Co. v. Bailey, 133 F.3d 363, 370 (5th Cir. 1998);

       7
          Empeiria also argues that no manufacturing company could ever be sold if Grant
Prideco’s interpretation of the indemnity language is upheld, citing Nustar Energy L.P. v.
Diamond Offshore Co., 402 S.W.3d 461, 466 (Tex. App.—Houston [14th Dist.] 2013, no writ).
That case, however, simply states that, in interpreting a contract, we bear in mind the particular
business activity to be served, and when possible and proper to do so, we avoid a construction
that is unreasonable, inequitable, and oppressive. Id. at 466. We do not interpret NuStar to
endorse setting aside well-established principles of contract interpretation. Contract
interpretation principles limit our analysis to the intent of the parties as expressed in the
agreement. See E.I. Du Pont De Nemours & Co., 259 S.W.3d at 805.
       8
         A claimant must commence a products liability action against a manufacturer or seller
of certain manufacturing equipment before the end of 15 years after the date of sale of the
                                                7
see also Lancer Ins. Co. v. Garcia Holiday Tours, 345 S.W.3d 50, 54 (Tex. 2011);
Acceptance Ins. Co. v. Lifecare Corp., 89 S.W.3d 773, 779 (Tex. App.—Corpus
Christi 2002, no pet.). Black’s Law Dictionary similarly defines “arise,” in relevant
part, as “[t]o originate[,] to stem (from)[,]” and “[t]o result (from).” Black’s Law
Dictionary 129 (10th ed. 2014). “Accrue,” although a related term, is more narrow.
In Texas jurisprudence, “accrue” means that “facts have come into existence that
authorize a claimant to seek a judicial remedy.” Apex Towing Co. v. Tolin, 41
S.W.3d 118, 120 (Tex. 2001). A judicial remedy is not available until facts, events,
and circumstances result in a cognizable injury. See Rice v. Louis A. Williams &
Assocs., Inc., 86 S.W.3d 329, 337 (Tex. App.—Texarkana 2002, pet. denied)
(discussing “legal injury rule” and noting that causes of action generally accrue
when plaintiff is injured); see also Reese v. Parker, 742 S.W.2d 793, 797 (Tex.
App.—Houston [14th Dist.] 1987, no writ) (“A cause of action will then accrue
only when the plaintiff’s legally protected interest has been invaded.”). Thus, when
“facts, events and circumstances arise” is a broader concept than when a claim
accrues.

       We conclude that Empeiria did not establish as a matter of law that the
phrase “first arose” in the indemnity clause means “accrued.” Empeiria did not
present conclusive evidence of when the facts, events, and circumstances with
respect to Lara’s claims first arose.9 Accordingly, the trial court erred in finding as
a matter of law that the facts, events, and circumstances made the basis of Lara’s
claims did not arise prior to the closing date, and Empeiria is not required to

equipment by the defendant. Tex. Civ. Prac. & Rem. Code § 16.012(b). Thus, a manufacturer
may be held responsible for long-ago activities.
       9
          Lara alleges, among other things, that he was injured when he was working with a
multi-sander manufactured, designed, marketed, and distributed by APPCO and others. Empeiria
presented no evidence of when the multi-sander was “manufactured, designed, marketed, and
distributed” or its condition at that time.

                                             8
indemnify Grant Prideco. Thus, the trial court erred in granting Empeiria’s
summary-judgment motion on those bases.

       Similarly, although Grant Prideco established as a matter of law that the
language “first arose” in the indemnity clause is broader than “accrued,” Grant
Prideco did not present conclusive evidence of when the facts, events, and
circumstances with respect to Lara’s claims first arose and accordingly did not
establish as a matter of law that it was entitled to indemnification from Empeiria.10
Thus, the trial court did not err in denying Grant Prideco’s summary-judgment
motion.

                                          Conclusion

       We conclude the trial court erred in granting Empeiria’s summary-judgment
motion, but did not err in denying Grant Prideco’s summary-judgment motion.
Because resolution of the issues rests on disputed facts, we reverse the trial court’s
judgment and remand this case to the trial court for proceedings consistent with
this opinion. See Lidawi, 112 S.W.3d at 729-30.

                                             /s/       Martha Hill Jamison
                                                       Justice

Panel consists of Chief Justice Frost and Justices Jamison and Wise (Frost, C.J.,
dissenting).

       10
           It is undisputed that the Lara lawsuit was filed after the closing date. The record does
not reveal whether the alleged “facts, events and circumstances” “first arose” prior to the closing
date, if Grant Prideco sustained a loss under the Stock Purchase Agreement, or if so, the amount
of the loss. Grant Prideco’s brief states, without record cite, that the equipment that allegedly
injured Lara was designed and manufactured prior to 2001. Grant Prideco’s summary judgment
motion cited Empeiria’s motion to support this argument. Empeiria’s motion cited Lara’s
petition, but no evidence was presented on this issue. Unsupported argument is not evidence.
Green v. Brantley, 11 S.W.3d 259, 264 (Tex. App.—Fort Worth 1999, pet. denied).

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