Rowan Companies, Inc. v. Wilmington Trust
| Citation | 305 SW 3d 698 |
| Decision Date | 04 February 2010 |
| Docket Number | No. 14-07-00465-CV.,14-07-00465-CV. |
| Parties | ROWAN COMPANIES, INC., Appellant, v. WILMINGTON TRUST COMPANY, Not in Its Individual Capacity but Solely as Owner Trustee of the Rowan-Halifax Jack-Up Rig, Textron Financial Corporation, North Sea Investments, Inc., and North Sea (Connecticut) LP, Appellees. |
| Court | Court of Appeals of Texas |
Jim Taylor, David M. Gunn, David J. Beck, Houston, for appellant.
John Ellis O'Neill, Reagan Douglas Pratt, Stephen G. Tipps, Houston, Joseph R. Knight, Austin, for appellees.
Panel consists of Justices FROST, SEYMORE, and GUZMAN.
SUBSTITUTE MAJORITY OPINION
We deny the appellees' motion for rehearing, but to clarify the scope of remand, our majority and dissenting opinions of March 31, 2009 are withdrawn and these substitute majority and substitute dissenting opinions issued in their respective places.
In this summary-judgment appeal, bareboat charterer Rowan Companies, Inc. challenges the trial court's judgment in favor of the Wilmington Trust Company, the Owner Trustee of the oil rig Rowan-Halifax. Rowan argues that the Owners improperly invoked an appraisal provision in their contract with Rowan after the oil rig was destroyed by a hurricane, thereby impermissibly increasing the rig's estimated residual value, and hence, the amount Rowan was contractually required to pay for loss of the rig. We agree, and therefore, reverse and remand.
Rowan Companies, Inc. ("Rowan") is an international offshore and land drilling contractor. In 1984, Rowan entered into a sale/leaseback transaction involving the Rowan-Halifax 166-C jack-up drilling rig (the "Halifax"). The transaction was accomplished through a Participation Agreement and a bareboat charter (the "Charter"), both dated December 1, 1984 (collectively, the "Operative Documents"). The parties to the Participation Agreement included Rowan as Charterer, Textron Financial Corporation ("Textron") as Owner Participant, and Wilmington Trust Company ("Wilmington") as Owner Trustee.1 The Charter provided that "so long as the Charterer's Stockholders' Equity is at least $400,000,000, the Charterer may self-insure up to the excess of the SLV i.e., Stipulated Loss Value Amount over $55,000,000. ..."
The Participation Agreement required, as a condition precedent, that Textron receive appraisals of the Halifax by Rush Johnson Associates and Lowell Johnston & Associates, Inc. Both appraisals were to be dated as of the Closing Date of the contract, contractually defined to mean December 28, 1984. Each appraisal was required to contain the appraiser's estimates that, as of that date, (1) the Halifax's fair market value was $66.5 million, (2) the remaining useful life of the vessel at the end of the Basic Term was at least 22 years, and (3) the Halifax's residual value at the end of the Basic Term was not less than twenty percent of the owner's cost for the Vessel, defined to be $66.5 million.2 In section 18 of the Charter, the parties also provided for a Renewal Option, the terms of which are discussed further infra and set forth in full in the appendix to this opinion.
On December 26, 1984, Larry Hasty of Rush Johnson Associates appraised the Halifax and opined that:
There is no evidence in the record that Textron obtained an appraisal from Lowell Johnston & Associates, Inc., and the parties do not state if this condition was performed or whether any party objected to its non-performance.
The Basic Term of the Charter passed uneventfully and expired in September 2000. Rowan exercised its option to renew the Charter, and the parties agreed to a Renewal Term of seven-and-one-half years. On August 15, 2005, Jane M. Lavoie, Textron's vice president of operations, wrote to Bill Wells, Rowan's treasurer and vice president of finance, questioning the adequacy of Rowan's insurance coverage of the Halifax:
The insurance certificates provided to us for the current year indicate that the hull insurance ... on the Halifax is for $43.35 million. While we do not claim to be experts on the current market value of these assets, we note that a recent Jefferies & Company report estimates the fair market value of 116C rigs to be $75 million and the replacement cost to be $125 million. We understand that the Jefferies reports include information provided by Rowan. If this information is correct, it appears that the hull insurance on these rigs needs to be substantially increased.
In late September 2005, Hurricane Rita struck the Gulf Coast, leaving no trace of the Halifax. The vessel was presumed sunk, and Rowan gave notice to Wilmington on October 5, 2005 that the rig had been destroyed. Rowan's hull insurer paid policy limits exceeding $43.35 million on the claim, and in February 2006, the parties agreed to place the insurance proceeds in an escrow account until their dispute over ownership of the proceeds could be resolved.
On November 3, 2005, Rowan filed a petition for declaratory relief against Textron and Wilmington, in Wilmington's capacity as Owner Trustee of the Halifax.4 On November 29, 2005, Wilmington notified Rowan that it was invoking the Appraisal Procedure as that term is defined in the Operative Documents. Textron and Wilmington (collectively, the "Owners") asserted counterclaims for breach of contract, declaratory judgment, and attorneys' fees.
On or about March 13, 2006, Rowan informed Wilmington that it calculated the Stipulated Loss Value of the Halifax to be $22,840,898.93, plus accrued interest. Rowan eventually paid Wilmington this amount, which included the Basic Hire of $2,617,489.13 payable on March 15, 2006.
On March 15, 2006, Wilmington wrote to advise Rowan that it had not received payment of the Stipulated Loss Value, which, according to its calculations, was $80,235,317.37; this amount was based on the post-loss appraisal which Wilmington organized. In addition, Wilmington stated that the Basic Hire payment of $2,617,489.13 due on March 15, 2006 had not been paid,5 and notified Rowan pursuant to Section 15(a) of the Charter that if the full Stipulated Loss Value was not paid by close of business on March 17, 2006, a contractual "Event of Default" would occur.6
The Owners moved for traditional summary judgment, asserting that Rowan owed Wilmington $59,882,522.06 plus interest under the terms of the Charter.7 In addition, they asked the trial court to declare their rights under the insurance provisions of their contracts with Rowan8 and award attorneys' fees incurred in prosecuting their contract claim. According to the Owners, Rowan failed to make payments that were due on March 15, 2006 resulting from the loss and failed to maintain adequate insurance. In its cross-motion for traditional summary judgment, Rowan asked the trial court to declare that it had paid all amounts due under the Charter provision governing payments due in the event of a loss. In addition, Rowan asked the trial court to direct the escrow agent to pay Rowan all remaining hull insurance proceeds.9
On March 7, 2007, the trial court denied Rowan's motion for summary judgment and granted in part the Owners' motion for summary judgment. Although the trial court did not state the grounds for its judgment, it ruled that the Owners' motion was "granted as set out in the trial court's final judgment and otherwise denied." Specifically, the court ordered Rowan to pay Wilmington (1) $59,882,522.06; (2) interest on that sum in the amount of $3,467,364.37 through October 31, 2006; (3) interest from and including November 1, 2006 through and including March 6, 2007 at the rate of $15,386.48 per day; (4) $500,000 for reasonable and necessary attorneys' fees; and (5) post-judgment interest on the sum of all of these amounts. In addition, the trial court declared that Wilmington "is entitled to recover all proceeds paid from any hull and machinery policies on the Halifax which were in effect at the time of its loss, including specifically those proceeds deposited in the escrow account which the parties jointly established. ..." Finally, the trial court explained that all proceeds previously paid to Wilmington had been credited in calculating the judgment. Rowan's motion for new trial was overruled by operation of law, and this appeal timely ensued.
In a single issue, Rowan contends the trial court erred in denying its motion for summary judgment and granting summary judgment in favor of the Owners.
We review summary judgments de novo, Valence Operating Co. v. Dorsett,10 and if the trial court grants the judgment without specifying the grounds, we must affirm if any of the grounds presented are meritorious. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872-73 (Tex. 2000). We consider all...
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