Tellepsen Builders v. Kendall

• Decision Date: 15 April 2010
• Docket Number: No. 01-08-00295-CV.,01-08-00295-CV.
• Citation: 325 S.W.3d 692
• Parties: TELLEPSEN BUILDERS, L.P., Appellant, v. KENDALL/HEATON ASSOCIATES, INC. and CBM Engineers, Inc., Appellees.
• Court: Texas Court of Appeals

325 S.W.3d 692

TELLEPSEN BUILDERS, L.P., Appellant,

v.KENDALL/HEATON ASSOCIATES, INC. and CBM Engineers, Inc., Appellees.

No. 01-08-00295-CV.

Court of Appeals of Texas,Houston (1st Dist.).

April 15, 2010.

Jacqueline S. Cooper, Michelle E. Robberson, Raymond Douglas Rees, Cooper & Scully, P.C., Dallas, TX, John Wesley Raley, Cooper & Scully, P.C., Houston, TX, for Appellant.

Bryan Rutherford, Gregory N. Ziegler, MacDonald Devin, P.C., Dallas, TX, John P. Cahill, Jr., Hays, McConn, Rice & Pickering, P.C., Houston, TX, for Appellees.

Panel consists of Chief Justice RADACK and Justices BLAND and MASSENGALE.

OPINION

MICHAEL MASSENGALE, Justice.

Tellepsen Builders, L.P. appeals from summary judgments in favor of Kendall/Heaton Associates, Inc. and CBM Engineers, Inc. In its sole issue, Tellepsen asserts that the trial court erred by interpreting the term “property and equipment insurance” in a waiver-of-subrogation clause to include commercial general liability insurance. We reverse the summary judgments and remand for further proceedings.

Background

The contracts in dispute relate to a construction project known as the Phase One Expansion of the Camp Allen Retreat and Conference Center (the Retreat). The owner of the Retreat, the Protestant Episcopal Church Council for the Diocese of Texas (the Council), entered into a contract with Tellepsen, whereby Tellepsen agreed to act as the general contractor for additions and renovations to the Retreat. This contract was based upon a standard form agreement promulgated by the Associated General Contractors of America (AGC). ¹ The contract between Tellepsen and the Council reflected numerous substantive revisions to the standard form of agreement as promulgated by the AGC, including revisions to provisions relating to indemnity ² and insurance. ³ Tellepsen engaged several subcontractors to perform specific tasks for the Retreat project. Tellepsen entered into a subcontract with Kendall to perform architectural design work, and it entered into a separate subcontract with CBM to perform structural engineering and design work. Both the Kendall and CBM subcontracts were based upon standardized form agreements promulgated by the AGC. ⁴ In both subcontracts, references to “Contractor” refer to Tellepsen. In their respective subcontracts, Kendall and CBM are each individually referred to as “Architect/Engineer.”

Both subcontracts state that the “Contract Documents govern the relationship between the Contractor and the Architect/Engineer.” Each subcontract defines the “Contract Documents” to consist of the subcontract itself, including exhibits identified in the subcontract, plus written amendments to the subcontract as agreed to by the parties. The contract between Tellepsen and the Council is not listed as an exhibit to either of the subcontracts at issue, although both subcontracts expressly reference Tellepsen's agreement with the Council. The subcontracts both include a merger clause, stating that “[t]his Agreement represents the entire agreement between the Contractor and the Architect/Engineer and supersedes all prior negotiations, representations and agreements, either written or oral.”

Both subcontracts required the Architect/Engineer to carry a commercial general liability insurance (CGL) policy listing Tellepsen as an additional insured. Both subcontracts also contain the following waiver-of-subrogation clause, which is at the heart of the controversy before the Court:

WAIVER OF SUBROGATION The Contractor [Tellepsen] and Architect/Engineer [Kendall or CBM] waive all rights against each other and the Owner [the Council], Subcontractors and Subsubcontractors for loss or damage to the extent covered by property or equipment insurance, except such rights as they may have to the proceeds of such insurance.

The subcontracts do not expressly define the term “property or equipment insurance.”

Several years after the Retreat was completed, the Retreat began showing signs of structural and water damage. The Council demanded that Tellepsen repair the defects. Tellepsen performed the repairs and sought reimbursement from its CGL insurance carrier, Zurich American Insurance Company. Zurich honored the claim under the CGL policy and reimbursed Tellepsen $841,042 for the repairs. ⁵

Tellepsen, as subrogor of Zurich, claimed that Kendall and CBM, among others, were responsible for design and construction defects that caused the damages suffered by the Council. Tellepsen filed suit against its subcontractors, alleging negligence, breach of contract, and breach of warranty. Tellepsen additionally named as defendants First American Group Construction f/k/a National Framing Contractors and Advanced Concrete Surfaces, Ltd. f/k/a Gypsum Floors of Texas, Inc. After the trial court granted summary judgment in favor of Kendall and CBM, the trial court severed the claims against Kendall and CBM into this separate action so that Tellepsen could appeal the summary judgment rulings. Accordingly, these other defendants are not parties to this appeal.

Both Kendall and CBM filed Rule 166a(c) motions for summary judgment, asserting that the waiver-of-subrogation clauses in their subcontracts, which apply to “loss or damage to the extent covered by property or equipment insurance,” precluded Tellepsen from seeking recovery from them for property damage covered by Tellepsen's CGL insurance policy. Tellepsen responded that the waiver-of-subrogation clauses did not apply because Tellepsen's CGL policy was not “property or equipment insurance” as required for the application of those clauses, but Tellepsen did not file its own motion for summary judgment confirming its proposed interpretation.

The trial court granted summary judgments in favor of both Kendall and CBM, in each case ordering that Tellepsen take nothing. This appeal ensued.

Analysis

On appeal, Tellepsen argues that the trial court erred in granting the summary judgments in favor of Kendall and CBM. Tellepsen contends that the waiver-of-subrogation clauses applied only to claims covered by property or equipment insurance, and not to claims covered by CGL insurance. In support of this contention, Tellepsen argues that both industry custom and the law recognize that “property insurance” is distinct from “liability insurance.” Tellepsen contends that its interpretation is also supported by language in its separate contract with the Council, and by separate provisions in the subcontracts with Kendall and CBM which provided for mutual indemnity as between Tellepsen and its subcontractors, and which required those subcontractors to maintain professional liability insurance.

I. Standard of Review

We review a trial court's summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.2005); Provident Life Accid. Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex.2003). Under the traditional standard for summary judgment, the movant has the burden to show that no genuine issue of material fact exists and that the trial court should grant a judgment as a matter of law. Tex.R. Civ. P. 166a(c); KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex.1999). When reviewing a summary judgment motion, we take as true all evidence favorable to the nonmovant and indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Dorsett, 164 S.W.3d at 661; Knott, 128 S.W.3d at 215; Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.1997).

II. Rules of Contract Construction

When construing a written contract, our primary concern is to ascertain the true intent of the parties as expressed in the instrument. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003); Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). We must examine and consider the entire contract in an effort to harmonize and give effect to all provisions so that none are rendered meaningless. J.M. Davidson, 128 S.W.3d at 229; Coker, 650 S.W.2d at 393. All contractual provisions should be considered with reference to the entire instrument, and no single provision taken alone should be controlling. J.M. Davidson, 128 S.W.3d at 229. Terms are given their plain, ordinary, and generally accepted meaning unless the instrument shows that the parties used them in a technical or different sense. Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex.1996).

If the written instrument is so worded that it can be given a definite or certain legal meaning, then the contract may be construed as a matter of law. Coker, 650 S.W.2d at 393. An unambiguous contract will be enforced as written, and parol evidence will not be received for the purpose of creating an ambiguity or to give the contract a meaning different from that which its language imports. David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex.2008); see also Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995) (per curiam).

When a contract contains an ambiguity, summary judgment is precluded because interpretation of the contract becomes a fact issue. Coker, 650 S.W.2d at 394 (citing Harris v. Rowe, 593 S.W.2d 303, 306 (Tex.1980)); Simpson v. GEICO Gen. Ins. Co., 907 S.W.2d 942, 945 (Tex.App.-Houston [1st Dist.] 1995, no pet.). A simple lack of clarity or disagreement between parties does not render a term ambiguous. See DeWitt County Elec. Coop., Inc. v. Parks, 1 S.W.3d 96, 100 (Tex.1999). Rather, an ambiguity arises only after the application of established rules of construction leaves an agreement susceptible to more than one meaning. Id. For an ambiguity to exist, both potential meanings must be reasonable. Id. Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered. Coker, 650 S.W.2d at 394.

III. Summary Judgment on Interpretation of Subcontracts

We now turn to the interpretation of the...