Continental Motors, Inc. v. Danbury Aerospace, Inc.

Opinion

Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION

No. 04-19-00059-CV

CONTINENTAL MOTORS, INC., Appellant

v.

DANBURY AEROSPACE, INC., Airmotive Engineering Corporation, Engine Components International, Inc., EC Services, Inc., Precision Machined Airparts, Inc., Sterling Machinery & Process, Inc., and Aircooled Motors, Inc., Appellees

From the 73rd Judicial District Court, Bexar County, Texas Trial Court No. 2016CI18283 Honorable Norma Gonzales, Judge Presiding

Opinion by: Rebeca C. Martinez, Justice

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

Delivered and Filed: April 1, 2020

AFFIRMED IN PART; REVERSED AND REMANDED IN PART

BACKGROUND

Continental Motors, Inc. (“Continental”) is an aircraft engine manufacturer. Danbury

Aerospace, Inc. (“Danbury” 1) was its competitor. In March 2015, Danbury and Continental

entered into an Asset Purchase Agreement (“APA”) under which Continental would acquire

1 We use the term “Danbury” to refer to Danbury Aerospace, Inc. as well as its former subsidiaries Airmotive Engineering Corporation, Engine Components International, Inc., EC Services, Inc., Precision Machined Airparts, Inc., Sterling Machinery & Process, Inc., and Aircooled Motors, Inc. 04-19-00059-CV

substantially all of Danbury’s operating assets. Among other provisions, the APA required

Continental to deposit $2.4 million into an escrow account, the “Indemnity Escrow Fund.” Any

amount in the Indemnity Escrow Fund not subject to a valid claim by Continental two years after

closing would be paid to Danbury.

In May 2015, Danbury and Continental executed an addendum to the APA (the “May

Addendum”), and the transaction officially closed in July 2015. Following closing, a series of

disputes arose between Continental, Danbury, and various third parties. As a result, Continental

agreed that any future claim that it may have against the Indemnity Escrow Fund would be limited

to $571,129.66.

Danbury then filed the present suit against Continental seeking to enjoin Continental from

destroying certain business records belonging to Danbury that were in Continental’s possession.

Continental counterclaimed and asserted it was entitled to recover $571,129.66 from the Indemnity

Escrow Fund. According to Continental, the $571,129.66 was comprised of five categories of

funds: $57,339.08 for purchase order clearing balances; $187,400.23 for vacation and sick time

accrual; $70,731.40 for customer deposits; $182,380.06 for accounts payable invoices; and

$73,278.89 for warranty claims. Danbury moved for a partial summary judgment as to all

categories, except as to the warranty-claims category for $73,278.89. Danbury also sought to have

Continental’s “damages,” if any, limited by $80,000. According to Danbury, the APA authorized

recovery from the Indemnity Escrow Fund only after Continental’s “damages” exceeded $80,000

(the “threshold amount”). Continental opposed Danbury’s motion for partial summary judgment

on all grounds, except as to the category comprising the purchase order clearing balances for

$57,339.08. The trial granted partial summary judgment in favor of Danbury on four categories

of funds: $57,339.08 for purchase order clearing balances; $187,400.23 for vacation and sick time

accrual; $70,731.40 for customer deposits; and $182,380.06 for accounts payable invoices. The

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trial court also granted partial summary judgment in favor of Danbury as to the $80,000 threshold

amount. 2

At the bench trial that followed, the trial court ruled in Danbury’s favor on issues pertaining

to Danbury’s business-records claim and Danbury’s request for attorneys’ fees. The trial court

signed a final judgment and ordered all funds remaining in the Indemnity Escrow Fund, which

totaled $571,129.66, be released to Danbury. The trial court also awarded Danbury $157,799 in

attorneys’ fees, as well as conditional appellate attorneys’ fees.

On appeal, Continental contends the trial court erred in awarding to Danbury all of the

funds remaining in the Indemnity Escrow Fund. Continental also challenges the attorneys’ fees

award. We first review the trial court’s partial summary judgment ruling as to three categories of

funds: $187,400.23 for vacation and sick time accrual; $70,731.40 for customer deposits; and

$182,380.06 for accounts payable invoices. We then consider the warranty-claims category for

$73,278.89; this category was not directly addressed in the partial summary judgment order or

litigated at trial. 3 Last, we consider attorneys’ fees.

PARTIAL SUMMARY JUDGMENT

A. STANDARD OF REVIEW & APPLICABLE LAW

We review a trial court’s order granting summary judgment de novo. Cmty. Health Sys.

Prof’l Servs. Corp. v. Hansen, 525 S.W.3d 671, 680 (Tex. 2017). Summary judgment is

appropriate when the movant has shown there is no genuine issue of material fact and that it is

entitled to judgment as a matter of law. Id. at 681. When reviewing a summary judgment, we take

2 In addition, the trial court granted Danbury’s motion for partial summary judgment as to the release of all funds in excess of $571,129.66 from the Indemnity Escrow Fund, which was approximately $1.6 million. Those funds have been released to Danbury and are not at issue in this appeal. 3 We do not address the fifth category of funds, $57,339.08 for purchase order clearing balances, because the trial court’s award of these funds to Danbury is not in dispute. Likewise, we do not address Danbury’s business-records claim because the parties do not appeal the trial court’s judgment as to that claim.

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evidence favorable to the nonmovant as true, and indulge every reasonable inference and resolve

any doubts in the nonmovant’s favor. Id. at 680. If the trial court’s order does not specify the

grounds relied upon for granting summary judgment, we must affirm the summary judgment if

any of the grounds advanced are meritorious. Id.

This appeal requires that we construe certain provisions of the parties’ written contract.

When interpreting a written contract, “the primary concern of the court is to ascertain the true

intentions of the parties as expressed in the instrument.” Coker v. Coker, 650 S.W.2d 391, 393

(Tex. 1983). To ascertain the true intentions of the parties, the court must “examine and consider

the entire writing in an effort to harmonize and give effect to all the provisions of the contract so

that none will be rendered meaningless.” Id. A contract’s plain language controls, and “we assign

terms their ordinary and generally accepted meaning unless the contract directs otherwise.” Great

Am. Ins. Co. v. Primo, 512 S.W.3d 890, 893 (Tex. 2017). If the contract is so worded that the

court may give it a certain or definite legal meaning or interpretation, then the contract is not

ambiguous, and the court may construe it as a matter of law. Coker, 650 S.W.2d at 393.

B. DISCUSSION

VACATION/SICK TIME ACCRUAL

All of Danbury’s employees were terminated by Danbury at the time the transaction closed.

Following closure, Continental, at its discretion, hired several of Danbury’s former employees.

These employees had accrued vacation and sick leave during their tenure with Danbury. When

Continental hired Danbury’s former employees, Continental voluntarily credited Danbury’s

former employees with any unused vacation and sick time they had accrued while employed at

Danbury. Continental sought to recover $187,400.23 from the Indemnity Escrow Fund for the

vacation and sick time it credited.

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In its motion for summary judgment and on appeal, Danbury argues that Continental cannot

recover this particular amount from the Indemnity Escrow Fund because the APA does not

authorize recovery of these purported liabilities from the Indemnity Escrow Fund. We agree.

Continental’s right to recover from the Indemnity Escrow Fund is governed by section

3.2(b) and article 10 of the APA. Neither party argues the relevant provisions are ambiguous, nor

do the parties offer differing interpretations. Section 3.2(b) of the APA states that Continental

“may recover from the Indemnity Escrow Fund amounts due to [Continental] under [a]rticle 10,

which amounts shall be [Continental’s] sole recourse for indemnity claims[.]” Thus, pursuant to

the plain language of section 3.2(b), we must look to article 10 to determine whether Continental

may recover from the Indemnity Escrow Fund for the vacation and sick time it credited.

Article 10 governs indemnification. Continental’s claim to recover the credited vacation

and sick time is not an indemnity claim as that term is generally understood. See, e.g., Claybar v.

Samson Expl., LLC, No. 09–16–00435–CV, 2018 WL 651258, at *3 (Tex. App.—Beaumont Feb.

1, 2018, pet. denied) (mem. op.) (noting an indemnity provision does not apply to a claim between

the parties to the agreement; instead, the appellant “had to show that a third party had filed a claim

against [the appellant] to prove that the indemnity provision applied”); MG Bldg. Materials, Ltd.

v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51, 63 (Tex. App.—San Antonio 2005 pet.

denied) (“An indemnity provision does not apply to claims between the parties to the agreement,

but obligates the indemnitor to protect the indemnitee against claims brought by third parties.”).

Section 10.1, which governs indemnity by Danbury, states Danbury agrees:

to indemnify and hold harmless [Continental] . . . from and against any loss, damage or expense . . . (collectively, “Damages”) suffered by . . . [Continental], resulting from:

(a) any inaccuracy or misrepresentation in or breach of any of the representations, warranties or covenants made by [Danbury] or any Shareholder herein or in any Schedule hereto;

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(b) any inaccuracy or misrepresentation in or breach of any certificate or other agreement referenced in Section 5.1 hereof delivered by [Danbury] . . . ; (c) any suit (other than one covered by Section 10.1(d)) in which [Continental] is involved alone or in conjunction with [Danbury] and/or any Shareholder, and resulting directly or indirectly from the actual or alleged failure of [Danbury] to pay any of the actual or alleged liabilities or obligations of [Danbury] or to fulfill any actual or alleged contractual obligation of [Danbury] not assumed by [Continental] pursuant to this Agreement; or (d) any claim, demand, administrative proceeding or suit against [Continental] arising out of the manufacturing or sale of products or the performance of services by [Danbury], including, without limitation, . . . (iii) warranty claims to the extent such claim or liability is determined to be based on fault or failure of parts manufactured or sold or services performed by [Danbury].

Section 10.4 states Continental’s recovery for “damages” is limited solely to the Indemnity Escrow

Fund. Thus, according to the plain language of article 10, Danbury must indemnify Continental

from and against any damages suffered by Continental resulting from the actions and omissions

identified in subsections (a), (b), (c), and (d). Continental’s claim to recover the credited vacation

and sick time does not fall within any of the subsections, and Continental does not argue that it

does. As such, Continental cannot recover the credited vacation and sick time from the Indemnity

Escrow Fund.

Continental argues, however, that sections 3.2(b) and 10.1 are inconsistent with schedule

3.3 of the May Addendum and, therefore, are implicitly superseded. We disagree. It is only when

the terms of one writing are so inconsistent with a later writing “that the two cannot subsist together

is there a presumption that the second super[s]eded the first.” IP Petroleum Co., Inc. v. Wevanco

Energy, L.L.C., 116 S.W.3d 888, 899 (Tex. App.—Houston [1st Dist.] 2003, pet. denied). Here,

there is no inconsistency between the provisions. Sections 3.2(b) and 10.1 govern when

Continental may recover from the Indemnity Escrow Fund, while schedule 3.3 provides that

Danbury is responsible for the payroll expense of its employees through the closing date.

Moreover, section 15.4 of the APA provides that the APA and its associated schedules, including

schedule 3.3, should be construed together to the same extent as if such schedules were fully set

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forth in the APA. See id. (“Instruments pertaining to the same transaction may be read together to

ascertain the parties’ intent, even if the parties executed the instruments at different times.”).

In effect, Continental argues that the accrued vacation and sick time is a “payroll expense”

that Danbury is responsible for under schedule 3.3, and, if Danbury is responsible, Continental

must have a right to reimbursement from the Indemnity Escrow Fund. However, the contract does

not provide that Continental may look to the Indemnity Escrow Fund for recovery of every

purported liability. Continental does not argue that any particular provision in the APA or

associated schedules entitle it to recover a purported payroll liability from the Indemnity Escrow

Fund, and, as discussed above, the relevant contract provisions do not allow for recovery from this

fund. See Helmerich & Payne Int’l Drilling Co. v. Swift Energy Co., 180 S.W.3d 635, 646 (Tex.

App.—Houston [14th Dist.] 2005, no pet.) (explaining that a court must enforce the contract as

written).

We conclude Continental’s claim to recover the credited vacation and sick time does not

fall within any of the subsections of section 10.1, and, thus, Continental cannot recover from the

Indemnity Escrow Fund. Accordingly, because Danbury established that it was entitled to

judgment as a matter of law, the trial court’s partial summary judgment ruling as to the category

of funds representing $187,400.23 for accrued vacation and sick time is affirmed. See Hansen,

525 S.W.3d at 681.

CUSTOMER DEPOSITS

Under section 3.3(a) of the APA, Continental assumed the obligation to provide to

Danbury’s customers any goods and services not yet delivered or performed by Danbury as of the

closing date. Continental fulfilled this obligation; however, some of these customers allegedly

paid Danbury for the completed work instead of Continental. Continental sought to recover these

customer payments from the Indemnity Escrow Fund in the amount of $70,731.40.

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Relying on section 1.1(f) of the APA, Continental argues it purchased “all prepayments,

deposits and other consideration paid by customers in connection with purchase and work orders

to be assumed by” Continental. Thus, according to Continental, any customer payments made to

Danbury for work assumed, and subsequently performed, by Continental belongs to Continental.

Danbury again argues Continental’s right to recover from the Indemnity Escrow Fund is governed

by sections 3.2(b) and 10.1 and, even assuming a valid claim, such claim does not qualify for

recovery from the Indemnity Escrow Fund. We agree.

As with the accrued vacation and sick time, Continental similarly does not argue that

recovery for the customer payments falls within the plain language of section 10.1 or that any other

provision of the APA applies. We conclude Continental cannot recover these customer deposits

from the Indemnity Escrow Fund.

Accordingly, because Danbury established that it was entitled to judgment as a matter of

law, the trial court’s partial summary judgment ruling as to the category of funds representing

$70,731.40 for customer deposits is affirmed. See id.

ACCOUNTS PAYABLE INVOICES

Continental alleged it paid $1,182,380.06 in accounts payable invoices (“payables”) on

Danbury’s behalf, and it sought to recover $182,380.06 from the Indemnity Escrow Fund for

payables paid in excess of $1 million.

Under section 3.3(a) of the APA, Continental assumed “the trade payable obligations of

[Danbury] . . . listed on Schedule 3.3.” Schedule 3.3(d)(i) of the May Addendum states that the

maximum aggregate amount of payables assumed by Continental is $1 million. Schedule

3.3(d)(iv) provides that Danbury is responsible for payables in excess of the maximum aggregate

amount of $1 million (“excess payables”). Schedule 3.3(d)(iv) further states:

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To the extent determined by [Continental] in its sole discretion to be desirable to preserve business relationships, [Continental] may in its discretion pay for the account of [Danbury] any such [excess] payable that is not promptly paid by [Danbury] and is not disputed by [Danbury]. [Danbury] will promptly reimburse [Continental] upon request for any payment so made, and failing such reimbursement [Continental] may obtain such reimbursement from the Escrow Fund without application of any escrow deductible.

In its summary judgment motion and on appeal, Danbury does not dispute that Continental

may seek reimbursement from the Indemnity Escrow Fund for excess payables that were paid on

Danbury’s behalf. Rather, Danbury argues that Continental failed to comply with schedule

3.3(d)(iv). Danbury claims Continental first had to determine whether Danbury paid or disputed

the payable before Continental could exercise its discretion in paying an excess payable. Because

Continental failed to determine whether Danbury paid or disputed the payable before exercising

its discretionary authority, Danbury argues, Continental is not entitled to reimbursement from the

Indemnity Escrow Fund.

Section 3.3(a) and schedule 3.3(d)(i) provide, by their plain language, that Continental

would assume Danbury’s payables until the total aggregate amount paid by Continental reached

$1 million. Pursuant to schedule 3.3(d)(iv), Danbury was responsible for paying any payable in

excess of the $1 million total. Schedule 3.3(d)(iv) then states Continental has the discretion to pay

for any payable in excess of the $1 million total “that is not promptly paid by [Danbury] and is

not disputed by [Danbury].” (emphasis added). In other words, Continental has the discretion to

pay for any excess payable not promptly paid and not disputed by Danbury. Continental’s

discretionary authority was, therefore, contingent on whether the excess payable was (1) promptly

paid by Danbury and (2) disputed by Danbury. It follows then that Continental had to determine

whether the excess payable was (1) paid by Danbury and (2) disputed by Danbury before it could

exercise its discretion in paying the payable.

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Continental argues it had the sole discretion to pay excess payables because its discretion

is twice mentioned by schedule 3.3(d)(iv): “To the extent determined by [Continental] in its sole

discretion to be desirable to preserve business relationships, [Continental] may in its discretion

pay for the account of [Danbury] any such [excess] payable that is not promptly paid by [Danbury]

and is not disputed by [Danbury].” However, Continental’s interpretation negates the second half

of the sentence. If we were to conclude that Continental could exercise its discretion over any and

all excess payables, without first considering whether the payable was paid or disputed by

Danbury, it would render the second half of the provision meaningless. See Coker, 650 S.W.2d at

394 (“Courts must favor an interpretation that affords some consequence to each part of the

instrument so that none of the provisions will be rendered meaningless.”). It is only when the

excess payable was not paid by Danbury and not disputed by Danbury, that Continental could

exercise its discretion and pay for the payable.

However, our contract interpretation does not resolve the issue. There is some evidence

indicating that Continental may have exercised its discretionary authority in accordance with

schedule 3.3(d)(iv). Danbury and Continental presented deposition excerpts on the matter.

In support of its summary judgment motion, Danbury provided the testimony of Brenda

Steward, a plant controller with Continental. Steward oversaw various accounting functions for

various Continental entities. Steward was aware that Continental was responsible for paying $1

million in payables and that anything over the $1 million total was Danbury’s responsibility.

Steward was instructed to continue paying even when the total aggregate amount paid by

Continental exceeded $1 million. When asked whether there was a procedure that needed to be

followed before paying an excess payable, Steward stated there was not a clear procedure. Steward

testified she occasionally sent an email to Danbury’s president, notifying him when an excess

payable had been paid by Continental. Steward stated she was not instructed to send invoices of

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excess payables to Danbury before payment. Steward further stated there were a few times she

did send Danbury’s president an invoice for an excess payable prior to paying it and Danbury’s

president responded by instructing Continental to pay the payable, but, most of the time, approval

by Danbury was not sought prior to payment.

Danbury provided the testimony of Carmen Woodham, a controller with Continental.

Woodham managed Continental’s accounting department. Woodham instructed Steward to

continue paying Danbury’s payables even when the total aggregate amount paid by Continental

exceeded $1 million. Woodham agreed that after the $1 million total was met, there was a

requirement to consult with Danbury in order to (1) give Danbury the opportunity to pay the excess

payable and (2) to find out if it was disputed by Danbury. According to Woodham, this was

“consistently done” through regular emails sent to Danbury’s president. Woodham stated she

requested payment from Danbury for excess payables and that Danbury’s president instructed her

to “just add it to the escrow account.” Woodham did not know if any specific invoice was

presented to Danbury before payment by Continental.

Viewing this evidence in the light most favorable to Continental and indulging every

reasonable inference in its favor, there is some evidence indicating that, prior to paying an excess

payable, Continental may have determined, based on communications with Danbury, that Danbury

would not pay or dispute the payable. Whether this was done each time Continental paid an excess

payable or just on occasion is not conclusively established by the summary judgment evidence.

There is also some evidence indicating that Danbury may have chosen to not pay or dispute an

excess payable when it was presented prior to payment, and instead, instructed Continental to pay

the payable on its behalf or to add the payable amount to the escrow account. Because there is

some evidence indicating that Continental may have exercised its discretionary authority in

accordance with schedule 3.3(d)(iv), Danbury has failed to conclusively establish that Continental

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is not entitled to reimbursement from the Indemnity Escrow Fund for the excess payables that were

paid on Danbury’s behalf.

Accordingly, because Danbury did not establish that it is entitled to judgment as a matter

of law, the trial court erred in granting partial summary judgment as to the category of funds

representing $182,380.06 for accounts payable invoices. See Hansen, 525 S.W.3d at 681.

FINAL JUDGMENT ORDER

Danbury’s motion for partial summary judgment and the trial court’s order granting partial

summary judgment did not address the category of funds representing $73,278.89 for warranty

claims (the “warranty-claims category”), nor was the warranty-claims category litigated at the

subsequent bench trial. Because this category of funds remained outstanding until entry of the

final judgment, we consider whether the trial court erred in awarding these funds to Danbury

pursuant to its final judgment, which ordered that all remaining funds in the Indemnity Escrow

Fund be released to Danbury.

WARRANTY CLAIMS

Continental alleged it provided credits and services to Danbury’s customers in satisfaction

of customer warranties. In connection with these warranty claims, Continental sought to recover

$73,278.89 from the Indemnity Escrow Fund.

Shortly after the trial court granted Danbury’s motion for partial summary judgment, the

case proceeded to a bench trial, after which the trial court ruled in favor of Danbury on Danbury’s

business-records claim and Danbury’s request for attorneys’ fees. The trial court signed an order

of final judgment, incorporating the prior summary judgment orders, and ordering that Danbury

recover all remaining funds in the Indemnity Escrow Fund and that Continental take nothing on

its counterclaims. The order of final judgment states: “[A]ll relief requested by any party and not

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expressly granted herein is hereby DENIED. This a final, appealable judgment which disposes of

all claims and parties.”

This capstone language in the final judgment unequivocally demonstrates that the trial

court intended to render a final and appealable judgment that disposed of all claims before it. See

Lehmann v. Har-Con Corp., 39 S.W.3d 191, 206 (Tex. 2001). However, Danbury’s motion for

partial summary judgment and the trial court’s order granting partial summary judgment did not

specifically address the warranty-claims category for $73,278.89, nor was the warranty-claims

category litigated at the subsequent bench trial. Thus, the trial court, through its final judgment

order, either impliedly ruled on Continental’s claim to recover the warranty-claims category or

failed to adjudicate it.

Danbury argues that the trial court did not fail to adjudicate Continental’s claim to recover

the warranty-claims category because Continental had abandoned this claim prior to the rendition

of final judgment. We agree.

Whether a claim has been abandoned is a question of law that we review de novo. In re

J.M., 352 S.W.3d 824, 826 (Tex. App.—San Antonio 2011, no pet.). “A party who abandons any

part of his claim or defense, as contained in the pleadings, may have that fact entered of record, so

as to show that the matters therein were not tried.” TEX. R. CIV. P. 165. A stipulation may

demonstrate abandonment of a claim, and formal amendment of a party’s pleadings is not required.

In re J.M., 352 S.W.3d at 826. “A stipulation is an agreement, admission, or concession made in

a judicial proceeding by the parties or their attorneys respecting some matter incident thereto.” Id.

at 826–27.

In any case, the issues to be tried may be limited or excluded by stipulation. Where a stipulation limits the issues to be tried or considered by the [trial court], those issues are excluded from consideration. If the stipulation is ambiguous or unclear, it should be disregarded by the trial court. In construing a stipulation, a court must determine the intent of the parties from the language used in the entire agreement,

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examining the surrounding circumstances, including the state of the pleadings, the allegations made therein, and the attitude of the parties with respect to the issue.

Laredo Med. Grp. v. Jaimes, 227 S.W.3d 170, 174 (Tex. App.—San Antonio 2007, pet. denied)

(internal citations omitted).

Here, the record reflects Continental limited the issues to be tried or considered by the trial

court by stipulation, and thereby abandoned its claim to the warranty-claims category and excluded

the issue from the trial court’s consideration. See id. Shortly after the trial court granted Danbury’s

motion for partial summary judgment, Danbury and Continental entered into a rule 11 agreement,

in which the “parties acknowledge[d] that all issues, except Danbury’s claim to preserve and

recover records and Danbury’s claim to recover attorney’s fees, have been resolved by summary

judgment in favor of Danbury[.]” Neither party contests the validity of the rule 11 agreement, and

it is undisputed that the agreement was in writing, signed by both parties, and filed with the court

as part of the record. See TEX. R. CIV. P. 11 (listing the requirements for an enforceable rule 11

agreement). The case then proceeded to a bench trial, where counsel for Continental explained to

the trial court in its opening statement what issues were before the court: “So what are the issues

at trial? Disposition of the records, and Danbury’s request for attorney’s fees.” See Rosenboom

Mach. & Tool, Inc. v. Machala, 995 S.W.2d 817, 822–23 (Tex. App.—Houston [1st Dist.] 1999,

pet. denied) (determining a strict liability claim was abandoned when trial counsel advised the trial

court that the only remaining issues were claims for gross negligence and damages). Additionally,

the testimony and evidence offered by Continental at the bench trial focused exclusively on

Danbury’s business-records claim and Danbury’s request for attorneys’ fees. Cf. In re C.C.J., 244

S.W.3d 911, 921–22 (Tex. App.—Dallas 2008, no pet.) (finding a claim was not abandoned by a

party when the testimony at trial largely pertained to the allegedly abandoned claim).

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Continental argues it was effectively precluded from pursuing its claim on the warranty-

claims category at trial because the trial court’s partial summary judgment order imposed an

$80,000 threshold amount for “damages” and the warranty-claims category was for an amount

below that threshold. 4 However, section 10.5, which establishes the threshold amount, specifically

incorporates an exception in section 10.6. Section 10.6 provides, in part, that the threshold amount

will not apply to warranty claims. 5 Thus, although the trial court agreed that Continental’s

“damages,” if any, were limited to an amount in excess of $80,000, it had no effect on

Continental’s ability to recover from the Indemnity Escrow Fund for its warranty claims because

the threshold amount does not apply to “damages” resulting from warranty claims. Indeed,

Continental recognized in its summary judgment response that “regardless of how the court rules

on [Danbury’s] motion for partial summary judgment, the . . . [warranty-claims category] will still

be in dispute.”

In light of this record, we conclude Continental’s claim to the category of funds

representing $73,278.89 for warranty claims was abandoned by stipulation. See Laredo Med. Grp.,

227 S.W.3d at 174. The APA provides that any amounts in the Indemnity Escrow Fund not subject

to a claim by Continental be released to Danbury. Because Continental abandoned its claim to the

warranty-claims category through stipulation, the amount of $73,278.89 was no longer subject to

a claim by Continental, and the trial court did not err in awarding those funds to Danbury.

4 Section 10.5 provides: “Except as provided in [s]ection 10.6, [Danbury] . . . shall not be required to indemnify [Continental] for Damages until the aggregate amount of such Damages exceeds Eighty Thousand Dollars ($80,000.00), in which case [Danbury] . . . shall only be responsible for Damages exceeding the foregoing amount.” The “damages” referenced in section 10.5 are described in section 10.1, which we have reproduced in the text above. 5 Section 10.6 provides that section 10.5 “shall not apply to claims against [Danbury] . . . for Damages arising from (i) matters indemnified under [s]ection 10.1(d) . . . .” Section 10.1(d) concerns warranty claims.

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ATTORNEYS’ FEES

Last, we consider attorneys’ fees. In its conclusions of law, the trial court determined

Danbury was the prevailing party on all claims, that Danbury was entitled to all remaining funds

in the Indemnity Escrow Fund, and that Danbury recovered all relief sought. It awarded Danbury

the full amount it requested: $154,799 in attorneys’ fees and an additional $94,800 in conditional

appellate attorneys’ fees. As discussed, the trial court awarded Danbury recovery of $571,129.66

from the Indemnity Escrow Fund, and, in this opinion, we reverse and remand as to $182,380.06

in the Indemnity Escrow Fund, which represents the dispute that remains over accounts payable

invoices.

In awarding an amount in attorneys’ fees, the trial court should consider a number of

factors, including the amount involved and the amount awarded. See Arthur Andersen & Co. v.

Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). “[T]he issue of attorney’s fees should be

retried if the [amounts] awarded are reduced on appeal” unless the appellate court is “reasonably

certain that the [trial court] was not significantly influenced by the erroneous” merits award. See

Young v. Qualls, 223 S.W.3d 312, 314 (Tex. 2007) (quoting Barker v. Eckman, 213 S.W.3d 306,

314 (Tex. 2006)).

Here, we are not reasonably certain that the trial court’s attorneys’ fees award was not

significantly influenced by the erroneous award of $182,380.06. See id. Accordingly, we reverse

the judgment of the trial court as to the issue of attorneys’ fees and remand the matter for a

redetermination. See id. at 314–15.

CONCLUSION

We reverse the trial court’s final judgment insofar as it awards to Danbury $182,380.06

from the Indemnity Escrow Fund, which represents the dispute that remains over accounts payable

invoices, and insofar as it awards Danbury attorneys’ fees. We affirm the trial court’s final

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judgment in all other respects, which includes an award of $388,749.60 from the Indemnity Escrow

Fund to Danbury. We remand for further proceedings consistent with this opinion.

Rebeca C. Martinez, Justice

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