Powerhouse Services, Inc. v. Bechtel Corporation

• Court: Court of Appeals of Texas
• Decided: November 26, 2002
• Docket: 07-02-00033-CV
• Status: Published

Opinion

NO. 07-02-0033-CV

IN THE COURT OF APPEALS

FOR THE SEVENTH DISTRICT OF TEXAS

AT AMARILLO

PANEL E

NOVEMBER 26, 2002

______________________________

POW ERHOUSE SERVICES, INC., APPELLANT

V.

BECHTEL CORPORATION, APPELLEE

_________________________________

FROM THE 58TH DISTRICT COURT OF JEFFERSO N COUNTY;

NO. A-164,979; HONORABLE JAMES MEHAFFY, JUDGE

_______________________________

Before QUINN and REAVIS, JJ. and BOYD, S.J.*

Powerhouse Services, Inc. presents two issues challenging a summary judgment

that Bechtel Corporation recover $113,015.56 as damages and $37,671.85 as court costs

and reasonable attorney’s fees for breach of a written indemnity agreement. By its first

issue, Powerhouse contends the indemnity provision is invalid as a matter of law under the

express negligence test and by its second issue, contends that genuine issues of material

* John T. Boyd, Chief Ju stice (Re t.), Seve nth C ourt of Appea ls, sitting by assign men t. fact exist as to causation and Powerhouse’s alleged negligence which the trial court

apparently determined as a matter of law.1 Based upon the rationale expressed herein, we

affirm.

Bechtel, a general contractor, contracted with Mobil Chemical Company2 to construct

an expansion at Mobil’s Olefin’s Unit. Powerhouse, as subcontractor on the project, entered

into a written subcontract with Bechtel. As material here, paragraph GC-37 entitled

“Indemnity” provided:

SUBCONTRACTOR hereby releases and shall indem nify, defend and hold harmless CONTRACTOR, OW NER . . . from and against any and all suits, actions, legal or administrative proceedings, claims, demands, damages, liabilities, interest, attorney’s fees, costs, expenses, and losses of whatsoever kind or nature in connection with or incidental to the performance of this subcontract, whether arising before or after completion of the W ork hereunder and in any manner directly or indirectly caused, occasioned, or contributed to in whole or in part, or claimed to be caused, occasioned or contributed to in whole or in part, by reason of any act, om ission, fault or negligence whether active or passive of SUBCONTRACTOR, its lower-tier suppliers, subcontractors or of anyone under its direction or control or on its behalf.

* * *

SUBCONTRACTOR’S aforesaid release, indemnity and hold harmless obligations, or portions or applications thereof, shall apply even in the event of the fault or negligence, whether active or passive, or strict liability of the parties released, indem nified or held harmless to the fullest extent permitted by law, but in no event shall they apply to liability caused by the willful

1 Powerhouse does not present the broad form point which authorizes argument as to all possible grounds upon which summ ary judgment should have been denied. See Malooly Brothers, Inc. v. Napier, 461 S.W .2d 119, 121 (Tex. 1970). 2 Mobil is not a party to this proceeding.

2 misconduct or sole negligence of the party released, indemnified or held harmless.

Although Powerhouse contends that Bechtel is not entitled to indemnification because the

agreement does not satisfy the express negligence test, it did not plead nor assert in its

sum mary judgment response nor does it contend here that the paragraph was ambiguous.

During the course of the work under the contract, Evelyn Jones, a Powerhouse

employee, was injured when a valve broke off a fire hydrant when another Powerhouse

employee was attempting to tighten it. As a result, Jones was sprayed with a stream of high

pressure water and knocked backward. Claiming injuries to her neck, shoulder, and back,

Jones filed suit against Mobil and Bechtel accepted the defense of Mobil in accordance with

its contract with Mobil. Jones’s suit was settled by Bechtel for $75,000. Following its

settlement with Jones, Bechtel comm enced this action against Powerhouse seeking

indemnification for the settlem ent, its attorney’s fees expended in defense, and attorney’s

fees in prosecuting the action for declaratory judgment. In response to Bechtel’s

declaratory judgment action, in addition to a general denial, Powerhouse asserted that it

invoked the provisions of section 41.007 et seq. of the Texas Civil Practice and Remedies

Code and the punitive damages limitations contained therein and alleged its right to a

reduction of any dollar verdict which may be rendered in the underlying cause by credit for

payments made by other persons or entities. However, Powerhouse did not deny the

execution of the contract by verified plea per Rule 93 of the Texas Rules of Civil Procedure.

3 By its traditional motion for summary judgment, which was supported by 15 written

items, Bechtel asserted it was entitled to contractual indemnification from Powerhouse

under the contract because Jones was injured while another Powerhouse employee was

working on a valve. Among other exhibits, Bechtel’s evidence included (2) a copy of a

formal investigation of the incident conducted by Powerhouse; (5) a letter requesting that

Powerhouse assume defense pursuant to the contract; (11) a copy of the Memorandum of

Settlement in the Jones v. Mobil lawsuit; (12) a copy of a release signed by Jones; (14) a

copy of an invoice for attorney’s fees; and (15) an affidavit of Micha el T. Birdwell. In

response to Bechtel’s motion for summary judgment, Powerhouse filed its response to and

a cross-motion for summary judgment asserting (1) the indemnity agreement between

Powerhouse and Bechtel is invalid under the express negligence requirement of Texas law,

and (2) even if the indem nity agreement is enforceable, a fact question existed regarding

the negligence or causation question thereby precluding sum mary judgment.

Summary Judgment Standard of Review

For a party to prevail on a traditional motion for summary judgment, he must

conclusively establish the absence of any genuine question of material fact and that he is

entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c). This requirement dictates

that when the defendant is the movant, he must conclusively negate at least one of the

essential elements of the plaintiff's cause of action. Likewise, a defendant who conclusively

establishes each element of an affirmative defense is entitled to summ ary judgment.

4 Randall's Food Markets, Inc. v. Johnson, 891 S.W .2d 640, 644 (Tex. 1995). In Nixon v. Mr.

Property Management Co., 690 S.W .2d 546, 548-49 (Tex. 1985), the Court set out the

standard by which we are to review a summary judgment:

1. The movant for summ ary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. 2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true. 3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.

Once the movant has established a right to summary judgment, the non-m ovant has the

burden to respond to the motion and present to the trial court any issues that would

preclude sum mary judgment. City of Houston v. Clear Creek Basin Authority, 589 S.W .2d

671, 678 (Tex. 1979); Barbouti v. Hearst Corp., 927 S.W .2d 37, 64 (Tex.App.--Houston [1st

Dist.] 1996, writ denied). Issues which the non-movant contends preclude the granting of

a summ ary judgment must be expressly presented to the trial court by written answer or

other written response to the m otion and not by mere reference to summary judgment

evidence. McConnell v. Southside School Dist., 858 S.W .2d 337, 341 (Tex. 1993). Issues

not expressly presented to the trial court in writing shall not be considered on appeal as

grounds for reversal. Tex. R. Civ. P. 166a(c). Further, all theories in support of or in

opposition to a motion for summ ary judgment must be presented in writing to the trial court.

Casso v. Brand, 776 S.W .2d 551, 553 (Tex. 1989).

5 W here, as here, both sides move for summ ary judgment and the trial court grants one

motion and denies the other, on appeal, we review the summ ary judgment evidence of both

sides and determine all questions presented, and render judgment the trial court should have

rendered. Bradley v. State ex rel. White, 990 S.W .2d 245, 247 (Tex. 1999). Greg Lair, Inc.

v. Spring, 23 S.W .3d 443, 446 (Tex.App.--Amarillo 2000, pet. denied). Moreover, because

neither party presented any objections to the summary judgment evidence in the trial court

and none are presented here, we m ay consider all of the summary judgm ent evidence in the

record. Grand Prairie Independent School District v. Vaughan, 792 S.W .2d 944, 945 (Tex.

1990); Calp v. Tau Kappa Epsilon Fraternity, 75 S.W .3d 641, 645-46 (Tex.App.--Amarillo

2002, pet. denied).

Express Negligence Test

By its first issue, Powerhouse contends the trial court erred in finding that the

indem nity provision in Bechtel’s contract did not violate the express negligence test set forth

in Ethyl Corp. v. Daniel Const. Co., 725 S.W .2d 705, 708 (Tex. 1987). W e disagree. The

express negligence requirement is a rule of contract interpretation to be determined as a

matter of law. Fisk Elec. v. Constructors & Associates, 888 S.W .2d 813, 814 (Tex. 1994).

Thus, we commence our analysis of the matter of law question by reviewing three rules of

contract law. First, we note that an express contract arises when the terms are stated by the

parties while a contract implied in fact arises from the acts and conduct of the parties, it

being implied from the facts and circumstances. See Haws & Garrett G. Con., Inc. v.

6 Gorbett Bros. W eld. Co., 480 S.W .2d 607, 610 (Tex. 1972) (holding that whether a contract

for indem nity existed should have been submitted to the jury). Second, in construing a

contract “the thing of first importance is the language of the contract itself.” See Gallup v. St.

Paul Insurance Company, 515 S.W .2d 249, 250 (Tex. 1974). Finally, the language

contained in the contract is to be accorded its plain gramm atical meaning unless to do so

would defeat the parties’ intent. See DeW itt County Elec. Co-Op. v. Parks, 1 S.W .3d 96, 101

(Tex. 1999). As material to our analysis, the indemnity section as restated below provides:

[Powerhouse] shall indem nify . . . [Bechtel] . . . from and against any and all suits . . . claims, demands, damages . . . attorney’s fees . . . and losses of whatsoever kind or nature in connection with or incidental to the performance of this subcontract . . . in any m anner directly or indirectly caused, occasioned, or contributed to . . . by reason of any act, omission, fault or negligence whether active or passive of [Powerhouse] . . . or of anyone acting under its direction or control of on its behalf.

***

[Powerhouse’s] . . . indemnity . . . shall apply even in the event of the fault or negligence . . . of [Bechtel] . . . to the fullest extent permitted by law, but in no event shall they apply to liability caused by the willful m isconduct or sole negligence of [Bechtel] . . . .

(Em phasis added). Focusing on the language “indem nity. . . shall apply even in the event

of the fault or negligence” of Bechtel “to the fullest extent permitted by law,” and applying the

referenced rules of contract law, we must determine whether this language satisfies the

express negligence test.

7 In Fisk Elec. v. Constructors & Associates, Inc., 888 S.W .2d 813 (Tex. 1994), 3 Ethyl

Corp. v. Daniel Const. Co., 725 S.W .2d 705 (Tex. 1987), 4 and Gulf Coast Masonry v. Owens-

Illinois, 739 S.W .2d 239 (1987), 5 the Court held the indemnity provisions unenforceable

because they did not clearly provide for indemnification for the indemnitee’s own negligence.

However, the indemnity provisions in Fisk Elec., Ethyl, and Gulf Coast Masonry did not

contain language similar to the language here that the duty to indemnify “shall apply even

in the event of the fault or negligence of [Bechtel].”

In Ethyl, the Court held that the contractual provision did not expressly provide for

indemnity for the negligence of the indemnitee, comparative or otherwise. 725 S.W.2d at

708-09. Unlike the provisions in Fisk Elec., Ethyl, Gulf Coast Masonry, the indem nity

obligation under this contract applies “even in the event of the fault or negligence” of Bechtel.

Otherwise stated, Powerhouse had the duty to indemnify Bechtel “notwithstanding” Bechtel’s

fault or negligence, willful misconduct, or sole negligence excepted. Moreover, the

indem nity provision is readily apparent, appearing in larger type than the preceding

paragraphs and the title “Indemnity” is capitalized in bold print. Accordingly, we conclude that

the indem nity provision does satisfy the express negligence test. Giving the “plain

grammatical meaning” to the language “even in the event of the fault or negligence” of

3 See indemnity provision, Constructors & Associates v. Fisk Elec., 880 S.W .2d 424, 425 (Tex.App.–Houston [14th Dist.] 1993), rev’d, 888 S.W .2d 813 (Tex. 1994). 4 See indemnity provision, 725 S.W .2d at 707. 5 See indem nity provision, 739 S.W .2d at 239.

8 Bechtel, we conclude the provision satisfied the express negligence test. Powerhouse’s first

issue is overruled.

By its second issue submitted in the alternative, Powerhouse contends a material fact

question existed as to causation and its alleged negligence, which the trial court apparently

determined as a matter of law. W e disagree. As part of its sum mary judgment evidence,

Bechtel submitted the written report entitled ”Accident Investigation” conducted and prepared

by an employee of Powerhouse, which included unchallenged fact findings, including:

• Powerhouse foreman noticed that the gate valve on M-63 was leaking on January 11 and he placed a yellow caution tag on the valve stating “Bad Valve.” • Powerhouse instructed its fire watches not to use this valve. • On January 12, between 8:00 and 9:00 a.m., Mobil shut down the Powerhouse fire watch duties on M-63 due to the leaking gate valve. • On the morning of January 13, the bad valve tag has been removed from M-63. W hen the injured Powerhouse employee arrived at M-63 to set up for the day’s fire watch duties as Ms. Jones was having difficulty in removing the gated-Y, she sought assistance from another Powerhouse employee. As he was attempting to tighten the gate valve with his foot, it broke off. • Ms. Jones was standing about two feet from the fire monitor as a water stream struck her in the upper body and knocked her down.

After interviewing the injured employee, foreman, and witnesses, the accident investigator

for Powerhouse concluded in part that removal of the tag by an unauthorized/unknown

person was the root cause of the accident. Also, according to his report, the decision of fire

watch personnel to use the monitor valve “while it was leaking at the nipple” was a

9 contributing factor. Powerhouse did not object to the submission of the report as sum mary

judgm ent evidence or present any summary judgment evidence to the contrary.

Although recognizing that the subcontract requires that Powerhouse’s fault or

negligence be the triggering event before the duty to indemnify arises, it then proceeds to

argue that the elem ents of negligence including proximate cause were not established by the

summ ary judgment evidence. However, under the applicable clause:

in any manner directly or indirectly caused, occasioned, or contributed to in whole or in part, or claimed to be caused, occasioned or contributed to in whole or in part, by reason of any act, omission, fault, or negligence whether active or passive of SUBCONTRACTO R, its lower-tier suppliers, subcontractors, or anyone under its direction or control or on its behalf

sum mary judgm ent proof of negligence is not essential but, instead, evidence of cause in

fact is sufficient to trigger the duty to indem nify. The inspector’s unchallenged findings of

fact are sufficient to establish “cause in fact” by employees of Powerhouse thereby giving

rise to the duty of Powerhouse to indemnify Bechtel. Accordingly, Powerhouse’s second

Accordingly, the judgment of the trial court is affirmed.

Don H. Reavis Justice

Publish.