Opinion
No. 05-07-01230-CV
Opinion issued August 5, 2008.
On Appeal from the 192nd Judicial District Court Dallas County, Texas, Trial Court Cause No. 07-00552-K.
Before Chief Justice THOMAS and Justices BRIDGES and MAZZANT.
MEMORANDUM OPINION
Appellant Walter L. Irving appeals a summary judgment granted in favor of appellee Guarantee Company of North America. In two issues, appellant claims that the trial court erred in granting appellee's motion for summary judgment. We affirm the trial court's judgment.
Background and procedural history
On August 11, 2001, Armetia R. Pinkston died in Dallas County, Texas. As part of the probate of her estate, attorney Carla Marie Jenkins was appointed administrator of the estate. On October 24, 2001, Jenkins applied for a probate bond.
In his role as the attorney for the Pinkston estate, appellant submitted an application to CPI Bonding Company (CPI) requesting a bond in the amount of $250,000. On the other side of the application, underneath an itemized list of the assets of the Pinkston estate, there was a section entitled "Indemnity." At the bottom of the page there were signature lines for the applicant and a guarantor/indemnitor. Jenkins signed as the applicant and appellant signed as the guarantor/indemnitor. The indemnity portion of the application stated that, "[i]n consideration of the extension of such bond, and compliance with a promise of the undersigned made prior thereto, the undersigned hereby agree . . . as follows." Paragraph five required them to:
To indemnify and keep indemnified the surety and save it harmless from and against any and all liability, damage, loss, cost and expense of whatsoever kind or nature, including counsel and attorney's fees, which the surety may at any time sustain or incur by reason or in consequence of having executed or procured the execution of the bond or enforcing this agreement against any of the undersigned or in procuring or in attempting to procure its release from liability under the bond.
Paragraph nine provided:
The surety in its sole discretion and without notice to the undersigned, is hereby authorized but not required, (a) from time to time to make or consent to any change in said bond or to issue any substitutes for any renewal thereof, and this instrument shall apply to such substituted or changed bond or renewal. . . .
Paragraph eleven stated that if there was a dispute concerning the probate bond for Pinkston's estate, a lawsuit could be brought against either appellant or Jenkins separately: "Separate suits may be brought hereunder as causes of action accrue, and suit may be brought against any and all of the undersigned."
Based on the application submitted by appellant, on November 15, 2001, a bond in the amount of $250,000 was issued on behalf of the Pinkston estate. Jenkins was the principal and Atlantic Alliance Fidelity and Surety Company (Atlantic) acted as the surety on the bond. During the probate proceedings, however, it became necessary for the bond amount to be increased when the court ordered a new bond in the amount of $875,000. On May 31, 2002, appellant, as the attorney for the Pinkston estate, wrote a letter to CPI. The letter reads in part as follows:
This is to follow up on our telephone conversation regarding my request for CPI to secure me an increase in the present bond from $250,000 to $850,000.
I will secure safekeeping agreements from all banks that I ultimately use but I will concentrate on securing the agreements with banks on the Court's approved list. I have prepared a Motion for a Bond Reduction, but the Court is not going to consider it until we post the new bond. Based on my conversations with the Court's auditors, I do not anticipate a problem with a reduction if we [sic] safekeeping agreements.
On June 4, 2002, a bond with Jenkins as principal was issued in the amount of $875,000. Guarantee Company of North America USA (Guarantee) was the surety on this bond.
In February of 2003, the probate court admitted a will of the decedent to probate. As a result, Jenkins was removed as dependent administrator. The successor to Jenkins, Archie Greer, the independent executor of Pinkston's estate, subsequently filed suit against Jenkins for failure to account for estate funds and for breach of fiduciary duties. As a result of this lawsuit, judgment was entered against Jenkins for $59,536.11. When Jenkins failed to pay the judgment, Guarantee satisfied the judgment.
After paying the judgment, Guarantee brought suit against appellant on the basis that he failed to indemnify it in accordance with the terms of the indemnity agreement. Guarantee then moved for summary judgment, asserting that the issuance of a second bond did not negate the indemnity agreement and that appellant was obligated to reimburse it under the terms of the indemnity agreement for the sum of $59,536.11. On June 1, 2007, the trial court granted Guarantee's motion for summary judgment and awarded it $59,536.11 in damages. On August 2, 2007, the court denied appellant's motion for new trial. This appeal followed.
Discussion
Indemnity Agreement
In his first issue, appellant claims the trial court erred in granting Guarantee's motion for summary judgment and denying his motion for new trial because there was no enforceable indemnity agreement between appellant and Guarantee — only between appellant and Atlantic — or there is a genuine issue of material fact as to whether such an agreement existed.
An appellate court reviews a summary judgment de novo to determine whether a party's right to prevail is established as a matter of law. See Tittizer v. Union Gas Corp., 171 S.W.3d 857, 860 (Tex. 2005); Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); First Union Nat'l Bank v. Richmont Capital Partners I, 168 S.W.3d 917, 923 (Tex.App.-Dallas 2005, no pet.). A party moving for traditional summary judgment carries the burden of establishing that no material fact issue exists and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005); W. Inv., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005); First Union, 168 S.W.3d at 923. A matter is conclusively established if ordinary minds could not differ as to the conclusion to be drawn from the evidence. Triton Oil Gas Corp. v. Marine Contractors Supply, Inc., 644 S.W.2d 443, 446 (Tex. 1982); First Union, 168 S.W.3d at 923. When reviewing a summary judgment, an appellate court takes the nonmovant's competent evidence as true, indulges every reasonable inference in favor of the nonmovant, and resolves all doubts in favor of the nonmovant. See Diversicare, 185 S.W.3d at 846; Urena, 162 S.W.3d at 550; Willrich, 28 S.W.3d at 23-4; First Union, 168 S.W.3d at 923. The appellate court also considers all grounds presented to the trial court and preserved on appeal in the interest of judicial economy. Diversicare, 185 S.W.3d at 846. However, an appellate court may not affirm a summary judgment on grounds that were not raised in the trial court. See Progressive County Mut. Ins. Co. v. Boyd, 177 S.W.3d 919, 921 (Tex. 2005) (per curiam).
Whether a contract is ambiguous is a question of law for the court. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). However, when a written contract is worded so that it can be given a certain or definite legal meaning or interpretation, it is unambiguous and the court construes it as a matter of law. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); Pratt-Shaw v. Pilgrim's Pride Corp., 122 S.W.3d 825, 829 (Tex.App.-Dallas 2003, no pet.). An ambiguity does not arise simply because the parties advance conflicting interpretations of the contract; rather, for an ambiguity to exist, both interpretations must be reasonable. Lopez v. Munoz, Hockema Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000).
"A contract for indemnity is read as any other contract." Safeco Ins. Co. of America v. Gaubert, 829 S.W.2d 274, 281 (Tex.App.-Dallas 1992, writ denied). When interpreting a contract, the entire instrument, taken by its four corners, must be read and considered to determine the true intention of the parties. Pratt-Shaw, 122 S.W.3d at 829; First Union Nat'l Bank, 168 S.W.3d at 924. We give terms their plain, ordinary, and generally accepted meaning unless the instrument shows the parties used them in a technical or different sense. Heritage Res., Inc., 939 S.W.2d at 121; Pratt-Shaw, 122 S.W.3d at 829. We must also examine the entire agreement in an effort to harmonize and give effect to all provisions of the contract so that none will be meaningless. Pratt-Shaw, 122 S.W.3d at 829. We presume the parties to a contract intend every clause to have some effect. Heritage Res., Inc., 939 S.W.2d at 121; Pratt-Shaw, 122 S.W.3d at 829. When interpreting an agreement, "[s]pecific and exact terms are given greater weight than general language." Pratt-Shaw, 122 S.W.3d at 829.
An indemnity agreement is a promise by the indemnitor to safeguard or hold the indemnitee harmless against existing or future loss or liability, or both. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993); see also 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. MG Bldg. Materials, 179 S.W.3d at 63. An indemnity agreement creates a potential cause of action in the indemnitee against the indemnitor. Dresser, 853 S.W.2d at 508; MG Bldg. Materials, 179 S.W.3d at 63.
The rule of strictissimi juris applies so that the indemnitor is entitled to have his agreement strictly construed. See First Union Nat'l Bank, 168 S.W.3d at 924-25; Hudson v. Hinton, 435 S.W.2d 211, 214 (Tex.Civ.App.-Dallas 1968, no writ). This rule prohibits the extension, by construction or implication, of the indemnitor's obligations beyond the precise terms of the agreement. See First Union Nat'l Bank, 168 S.W.3d at 924-25; Material Partnerships, Inc. v. Ventura, 102 S.W.3d 252, 258 (Tex.App.-Houston [14th Dist.] 2003, pet. denied); Hudson, 435 S.W.2d at 214. However, the rule of strictissimi juris is not a rule of construction but a rule of substantive law that applies only after the parties' intent has been ascertained through ordinary rules of construction. See First Nat'l Union Bank, 168 S.W.3d at 925; Safeco Ins. Co., 829 S.W.2d at 278; Aerospatiale Helicopter Corp. v. Universal Health Services, Inc., 778 S.W.2d 492, 502 (Tex.App.-Dallas 1989, writ denied); Hudson, 435 S.W.2d at 214.
Neither party to this dispute argues that the agreement is ambiguous but both parties offer radically different interpretations of the agreement. The issue here is whether the indemnity agreement applies to the second bond based on the language in paragraph nine of the agreement that "this instrument shall apply to such substituted or changed bond or renewal." Guarantee argues that the second bond was a "substituted or changed bond" because it insured the same corpus, i.e. the Pinkston estate, as the original bond, which it substituted for and caused to be discharged. In addition, Jenkins was the principal on both bonds. Appellant, on the other hand, argues that the second bond was not a "substituted or changed bond" because it was an entirely new bond issued by a different company.
We begin by concluding that the agreement is unambiguous. Despite the parties' conflicting interpretations, the provisions in question have certain and definite meanings and do not conflict. Because the agreement is not ambiguous, its interpretation is, therefore, a question of law.
Applying established rules of interpretation to determine the parties' intent as expressed in the indemnity agreement, we agree with Guarantee's interpretation of the agreement and conclude that it applies to all substituted, changed, or renewed bonds issued for the benefit of the Pinkston estate. We also conclude that the second bond was a "substituted or changed" bond under the indemnity agreement. Appellant suggests that the indemnity agreement applied only to the bond issued by Atlantic and perhaps to subsequent bonds issued by Atlantic, had there been any. The indemnity agreement, however, does not mention Atlantic or any other surety by name. Nor could it, since the indemnity agreement appears not in Atlantic's bond but in the bond application that Jenkins submitted to CPI to start the process of finding a surety. The bond application sought bonding specifically for the Pinkston estate; it does not specify any surety or even a potential surety. Although the probate bond on which Guarantee paid is certainly a different bond from the one Atlantic issued, both bonds were issued to Jenkins as principal and both were intended to secure the Pinkston estate against losses that occurred during probate. Given these circumstances, the Guarantee bond was a "substituted or changed bond" within the meaning of the indemnity agreement. We also note that the specified damages are well within the penal limits of the original bond — a bond on which appellant does not dispute that he could have been liable for indemnity. We therefore overrule this part of appellant's first issue.
As part of his first issue, appellant also claims that the trial court erred by overruling his motion for new trial. The motion addressed Guarantee's motion for summary judgment and the trial court's order granting summary judgment.
We review a trial judge's decision denying a motion for new trial under an abuse of discretion standard of review. Dir., State Employees Workers' Comp. Div. v. Evans, 889 S.W.2d 266, 268 (Tex. 1994); Novosad v. Cunningham, 38 S.W.3d 767, 770 (Tex.App.-Houston [14th Dist.] 2001, no pet.). Absent a showing of an abuse of discretion, we will not disturb a trial judge's ruling. Evans, 889 S.W.2d at 268; Comanche Nation v. Fox, 128 S.W.3d 745, 749 (Tex.App.-Austin 2004, no pet.). An abuse of discretion occurs when the trial judge fails to correctly analyze or apply the law. Comanche Nation, 128 S.W.3d at 749.
The issues presented by appellant in his motion for new trial are the same issues we have already considered and overruled in this appeal. We therefore conclude that the trial court did not abuse its discretion by overruling appellant's motion for new trial. We overrule appellant's first issue.
Section 17.001(a)
In his second issue, appellant argues that the trial court erred in granting summary judgment because Guarantee never sued, joined, or obtained a judgment against Jenkins, the principal on the bond. Appellant relies on section 17.001(a) of the civil practice and remedies code, which provides that "[a] judgment may not be rendered against a party not primarily liable unless judgment is also rendered against the principal obligor." Tex. Civ. Prac. Rem. Code Ann. § 17.001(a) (Vernon 1997).
As noted by Guarantee, however, appellant expressly agreed that should a lawsuit be necessary to recover losses suffered on the probate bond, separate suit could be brought "against any or all" of the parties to the agreement. Such waivers have been recognized as valid and enforceable. See Hernandez v. Bexar County Nat'l Bank, 710 S.W.2d 684, 689 (Tex.App.-Corpus Christi), writ ref'd n.r.e. per curiam, 716 S.W.2d 938 (Tex. 1986) (provision stating, "It shall not be necessary to institute suit on any indebtedness before proceeding against guarantor[s]," was a valid and enforceable waiver); see also Ford v. Darwin, 767 S.W.2d 851, 854 (Tex.App.-Dallas 1989, writ denied); Wilson v. Industrial Leasing Corp., 689 S.W.2d 496, 498 (Tex.App.-Houston [1st Dist.] 1985, no writ); Yandell v. Tarrant State Bank, 538 S.W.2d 684, 687-88 (Tex.Civ.App.-Fort Worth 1976, writ ref'd n.r.e.); cf. Hanks v. NCNB Texas Nat'l Bank, 815 S.W.2d 763, 764 (Tex.App.-Eastland 1991, no writ) (citing Hernandez). We overrule appellant's second issue.
We affirm the trial court's judgment.