Court Opinion

ID: 9681244
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:46:31.464988+00
Date Added: 2024-06-11T18:17:32.860433
License: Public Domain

SAM BASS, Justice,
dissenting.
I respectfully dissent. This appeal concerns the construction of an indemnity contract between appellant, Construction Investments and Consultants, Inc. (“CIC”), the contractor, and appellee Dresser, the owner. The question before this Court is whether the “express negligence test” applies to the entire indemnity provision, or whether CIC’s obligation to indemnify Dresser for attorneys’ fees and expenses is separate from its obligation to indemnify Dresser for its own negligence.
Dresser argues, and the majority agrees, that the duty to defend and the obligation to indemnify pursuant to the indemnity provision in the contract between Dresser and CIC are separate and distinct issues. Appellant asserts that the trial court erred in awarding Dresser indemnity for attorneys’ fees and expenses incurred in defending the suit, because the indemnity agreement fails to meet the “express negligence test.” I agree. The express negligence test is a rule of contract construction, not an affirmative defense. Monsanto Co. ¶. Owens-Corning Fiberglas Corp., 764 S.W.2d 293, 296 (Tex.App.—Houston [1st Dist.] 1988, no writ). The enforceability of the agreement is a question of law determined by the specific intent of the parties as expressed within the four comers of the contract. Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex.1987); Continental Steel Co. v. H.A. Lott, Inc., 772 S.W.2d 513 (Tex.App.—Dallas, 1989, n.w.h.) (Lagarde, J., dissenting).
A recent case from this Court holds that the “express negligence test” applies to the entire indemnity provision and not only that portion purporting to indemnify the owner for its own negligence. See Monsanto Co. v. Owens-Corning Fiberglas Corp., 764 S.W.2d 293. Such a holding seems more consistent than that of the majority, which requires the contractor to pay the owner’s attorneys’ fees and defense costs even though a jury has found the owner liable in the underlying suit for negligence. In Monsanto, this Court upheld a summary judgment holding unenforceable the indemnity provisions of a contract between a company and a subcontractor because it failed to meet the “express negligence test.” Monsanto argued that the summary judgment was improper because the indemnity language expressly required Owens to indemnify Monsanto for its defense costs in the event that a jury found that Monsanto was not negligent. This Court found the subsection of the indemnity provision regarding reimbursement for attorneys’ fees failed the express negligence test because the intent of Owens-Coming to indemnify Monsanto for attorneys’ fees was not specifically stated within the contract. Monsanto, 764 S.W.2d at 296.
The applicable indemnity provision of the contract in question between Monsanto and Owens-Corning reads in pertinent part:
Contractor agrees to indemnify and save Monsanto and its employees harmless against any and all liabilities, penalties, demands, claims, causes of action, suits, losses, damages, costs and expenses (including costs of defense, settlement and reasonable attorneys’ fees) which any or all of them may hereafter suffer, incur, be responsible for or pay out ... as a result of bodily injuries ... to any person or damage ... to any property occurring *795to or caused in whole or in part by, Contractor (or any of his employees), any of his Subcontractors (or any employee thereof), or any person, firm or corporation (or any employee thereof), or any person, firm or corporation (or any employee thereof) directly or indirectly employed or engaged by either Contractor or any of his Subcontractors.
Monsanto, 764 S.W.2d at 296.
Following Monsanto, we look to the section of the indemnity provision purporting to allow reimbursement for attorneys’ fees and determine whether the intent to do so is specifically stated such that there can be no mistake about what the parties intended. To be enforceable, three elements must exist: (1) the intent of the parties must be clear; (2) it must be set forth within the four comers of the agreement; and (3) the specific intent of the parties must be expressed. Adams Resources, 761 S.W.2d at 65. Here, the intent of the parties is unclear. It is not expressed in the agreement whether CIC will reimburse Dresser for its attorneys’ fees and costs only if Dresser is found “not negligent.” Moreover, if Dresser had been found negligent in the underlying suit, the “express negligence test” as set forth in Ethyl would come into play, and the trial court would have had to deny not only the damages assessed for Dresser’s negligence, but also the attorneys’ fees as “provided for” in the indemnity agreement. The. agreement did not intend to “take out of context” those portions of the indemnity provision that pertain solely to attorneys’ fees and costs. The effect of Dresser’s interpretation of the contract would circumvent Ethyl and create an unresolvable dilemma for parties faced with demands for indemnity.
Indemnity agreements are not favored in Texas and should be strictly construed. I am constrained to follow the rale in Monsanto, and the well-reasoned dissenting opinion by Justice Lagarde in Continental Steel. The test set out in Ethyl should be the foremost requirement in determining whether the agreement, on the whole, will be enforceable; regardless of whether negligence is eventually established on the party seeking indemnity.
Appellant’s point of error should be sustained. This Court should reverse the award of indemnity and render that appel-lee, Dresser Industries, Inc., take nothing.