Helmerich & Payne Intern. v. Swift Energy

• Decision Date: 01 December 2005
• Docket Number: No. 14-04-00541-CV.,14-04-00541-CV.
• Citation: 180 S.W.3d 635
• Parties: HELMERICH & PAYNE INTERNATIONAL DRILLING CO., Appellant, v. SWIFT ENERGY COMPANY, Appellee.
• Court: Texas Supreme Court

180 S.W.3d 635

HELMERICH & PAYNE INTERNATIONAL DRILLING CO., Appellant, v. SWIFT ENERGY COMPANY, Appellee.

No. 14-04-00541-CV.

Court of Appeals of Texas, Houston (14th Dist.).

October 11, 2005.

Rehearing Overruled December 1, 2005.

David Ledyard Countiss, Fred Lee Butler, Houston, for appellant.

Marcus R. Tucker, Robert Hays Etnyre, Houston, for appellee.

Panel consists of Chief Justice HEDGES and Justices FOWLER and FROST.

OPINION

KEM THOMPSON FROST, Justice.

This is a contract construction case arising out of a dispute between parties to a drilling contract. The contractor argues that, under its unambiguous terms, the drilling contract allocates responsibility for the loss in question to the operator. The operator relies on a line of federal cases that seek to give effect to both indemnity provisions and covenants to name another party as an additional insured. Faced with cross-motions for summary judgment, the trial court ruled in favor of the operator and rendered summary judgment against the contractor on the operator's breach-of-contract claim. We conclude that, even if Texas were to adopt the line of cases upon which the operator relies, these cases do not apply to the drilling contract in this case. Because the unambiguous language of the drilling contract allocates responsibility for this loss to the operator, we reverse the trial court's judgment and render judgment granting the contractor the declaratory relief it sought in its petition and denying the operator recovery on its counterclaim. We also remand this case to the trial court for further proceedings regarding the contractor's attorney's fees request.

I. FACTUAL AND PROCEDURAL BACKGROUND

The contractor, appellant Helmerich & Payne International Drilling Co. ("H & P"), and the operator, appellee Swift Energy Company ("Swift"), are parties to a Daywork Drilling Contract, dated July 27, 2000 (the "Drilling Contract"). The Drilling Contract initially covered the Kana # 1-H well in Fayette County, Texas. In December 2000, the parties agreed by letter that the terms and conditions of the Drilling Contract (with the exception of certain rates) would apply when H & P drilled the Post # 1 well in Goliad County, Texas. During H & P's operations at the Post # 1 well, drilling fluids spilled into the surrounding field. Swift had this spill cleaned up, incurring $155,078.86 in total costs relating to the spill ("Costs"). The Drilling Contract requires H & P to maintain a Comprehensive General Liability ("CGL") insurance policy that includes Swift as an additional insured. H & P maintained a CGL policy issued by American Home Assurance Company (the "CGL Policy"). Swift made a claim for the Costs as an additional insured under the CGL Policy. American Home responded to the claim by agreeing that Swift had additional-insured status under the CGL Policy; however, American Home concluded it owed nothing because the claim fell within the $750,000 deductible per occurrence for pollution claims under the CGL Policy.

H & P refused to reimburse Swift for the Costs. Instead, H & P filed this suit as a declaratory-judgment action to determine its rights and obligations under the Drilling Contract. In its petition, H & P seeks a judgment declaring that the Drilling Contract allocates responsibility for all claims and damages resulting from the flow or spill of drilling fluids in the incident in question to Swift, that the Drilling Contract precludes Swift from recovering the Costs, and that Swift must defend and indemnify H & P in any action to recover the Costs. H & P also sought its reasonable and necessary attorney's fees under Chapters 37 and 38 of the Texas Civil Practice and Remedies Code.

Swift filed a counterclaim against H & P for breach of contract based on H & P's alleged failure to honor its purported obligation to reimburse Swift for the Costs. Swift also sought declaratory relief in this regard, as well as reasonable and necessary attorney's fees under Chapters 37 and 38 of the Texas Civil Practice and Remedies Code.

H & P and Swift filed cross-motions for summary judgment. The trial court granted Swift's motion and denied H & P's motion. The trial court rendered a final judgment awarding Swift actual damages of $154,193.86, plus attorney's fees, court costs, and prejudgment and postjudgment interest. H & P now challenges that judgment and asks this court to reverse and render judgment granting H & P's motion for summary judgment.

II. STANDARD OF REVIEW

A summary-judgment movant must establish its right to summary judgment by conclusively proving all elements of the movant's claim or defense as a matter of law. See TEX.R. CIV. P. 166a(c); Havlen v. McDougall, 22 S.W.3d 343, 345 (Tex.2000). When both parties move for summary judgment, each party must carry its own burden, and neither can prevail because of the failure of the other to discharge its burden.¹ INAC Corp. v. Underwriters at Lloyd's, 56 S.W.3d 242, 247 (Tex.App.-Houston [14th Dist.] 2001, no pet.). Because each party was a movant, the burden for each was the same: to establish entitlement to a summary judgment by conclusively proving all the elements of the claim or defense as a matter of law. Id. When both sides move for summary judgment and the trial court grants one motion and denies the other, the appellate court must review all summary-judgment evidence, determine all issues presented, and render the judgment that the trial court should have rendered. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex.2000). This court reviews the summary-judgment evidence using familiar standards of review. See Dolcefino v. Randolph, 19 S.W.3d 906, 916 (Tex.App.-Houston [14th Dist.] 2000, pet. denied).

III. ISSUE PRESENTED

In a single issue on appeal, H & P asserts the trial court erred in granting Swift's motion for summary judgment and in denying H & P's motion for summary judgment. H & P asserts, among other things, that under the unambiguous language of paragraph 14 of the Drilling Contract, Swift assumed all responsibility for the Costs, agreed to release and indemnify H & P for the Costs, and agreed that the provisions of paragraph 14.11 would take precedence over the provisions of paragraph 13 to the extent of any conflict.

IV. ANALYSIS

The parties' arguments implicate several provisions of the Drilling Contract. The top of the first page of the Drilling Contract states, "THIS AGREEMENT CONTAINS PROVISIONS RELATING TO INDEMNITY, RELEASE OF LIABILITY, AND ALLOCATION OF RISK." (emphasis in original). Paragraph 14 of the Drilling Contract contains the following relevant provisions:

RESPONSIBILITY FOR LOSS OR DAMAGE, INDEMNITY, RELEASE OF LIABILITY AND ALLOCATION OF RISK:

...

14.11 Pollution and Contamination: Notwithstanding anything to the contrary contained herein, except the provisions of Paragraphs 10 and 12, it is understood and agreed by and between [H & P] and [Swift] that the responsibility for pollution and contamination shall be as follows:

(a) Unless otherwise provided herein, [H & P] shall assume all responsibility for, including control and removal of, and shall protect, defend and indemnify [Swift] from and against all claims, demands and causes of action of every kind and character arising from pollution or contamination, which originates above the surface of the land or water from spills of fuels, lubricants, motor oils, pipe dope, paints, solvents, ballast, bilge and garbage, except unavoidable pollution from reserve pits, wholly in [H & P's] possession and control and directly associated with [H & P's] equipment and facilities.

(b) [Swift] shall assume all responsibility for, including control and removal of, and shall protect, defend and indemnify [H & P] from and against all claims, demands, and causes of action of every kind and character arising directly or indirectly from all other pollution or contamination which may occur during the conduct of operations hereunder, including, but not limited to, that which may result from fire, blowout, cratering, seepage or any other uncontrolled flow of oil, gas, water or other substance, as well as the use or disposition of all drilling fluids, including, but not limited to, oil emulsion, oil base or chemically treated drilling fluids, contaminated cuttings or cavings, lost circulation and fish recovery materials and fluids. [Swift] shall release [H & P] of any liability for the foregoing.

...

14.13 Indemnity Obligation: Except as otherwise expressly limited herein, it is the intent of parties hereto that all releases, indemnity obligations and/or liabilities assumed by such parties under terms of this Contract, including, without limitation, Subparagraph 14.1 through 14.12 hereof, be without limit and without regard to the cause or causes thereof (including preexisting conditions), strict liability, regulatory or statutory liability, breach of warranty (express or implied), any theory of tort, breach of contract or the negligence of any party or parties, whether such negligence be sole, joint or concurrent, active or passive.²

(italics added).

Swift does not argue that the Costs arise from the pollution or contamination described in Paragraph 14.11(a), and the summary-judgment evidence shows that the Costs arise directly or indirectly from the pollution or contamination described in paragraph 14.11(b). Swift asserts, among other things, that its counterclaim against H & P does not implicate paragraph 14 of the Drilling Contract because this counterclaim is a separate and independent claim under paragraph 13 of the Drilling Contract, which reads in pertinent part:

13. Insurance:

At all times during the life of this Contract, and in addition to, and independent of, the insurance procurement obligations set forth in paragraphs 14.8 and 14.9, [H & P] shall procure and maintain insurance coverages of the types and in the amounts set forth on the attached and incorporated Exhibit C. All such...