Tx. C.C., Inc. v. Wilson/Barnes General

• Decision Date: 28 August 2007
• Docket Number: No. 05-06-00155-CV.,05-06-00155-CV.
• Parties: TX. C.C., INC., Appellant, v. WILSON/BARNES GENERAL CONTRACTORS, INC. and Colorado Stone, Incorporated a/k/a Colorado Stone and Stucco, Appellees.
• Court: Texas Court of Appeals

233 S.W.3d 562

TX. C.C., INC., Appellant, v. WILSON/BARNES GENERAL CONTRACTORS, INC. and Colorado Stone, Incorporated a/k/a Colorado Stone and Stucco, Appellees.

No. 05-06-00155-CV.

Court of Appeals of Texas, Dallas.

August 28, 2007.

Thomas J. Stutz, Martin, Mason, Stutz, LLP, Dallas, for appellant.

Michelle E. Robberson, R. Brent Cooper, Nathan P. Pekar, Cooper & Scully, P.C., R. Wayne Gordon, Rodney Geer, Touchstone, Bernays, Sidney H. Davis, Jr., Touchstone Bernays Johnston Beall & Smith, Dallas, for

Before Justices WRIGHT, RICHTER, and LANG.

OPINION

Opinion by Justice RICHTER.

This is an appeal from a traditional summary judgment in a subrogation claim arising out of a 1996 restaurant construction contract between TX. C.C. and Wilson/Barnes General Contractors. The restaurant was completed in January 1997, but destroyed in a December 2000 fire resulting from a faulty fireplace installed by Colorado Stone, Inc. a/k/a Colorado Stone and Stucco, a subcontractor. TX. C.C. was compensated for its loss by Safeco Lloyds Insurance Company under a property insurance policy acquired in 1999. TX. C.C., as Safeco's insured, subsequently sued Wilson/Barnes and Colorado Stone for reimbursement for the proceeds paid under the policy. Wilson/Barnes and Colorado Stone both successfully moved for summary judgment asserting two "standard" waiver of subrogation clauses in the contract shifted the risk of loss resulting from fire to any property insurance maintained by TX. C.C. and thus barred recovery as a matter of law. We must now determine, as an issue of first impression in this Court, whether waiver of subrogation clauses, one of which we have specifically held enforceable in subrogation claims during construction,¹ extend beyond the construction period to preclude recovery for proceeds paid for post-construction loss under a policy voluntarily obtained after the construction period.² Concluding they do, we affirm the trial court's judgment.

Background

The contract at issue here consists of two standard documents commonly used in the construction industry — the American Institute of Architects (AIA) A101-1987 "Standard Form of Agreement Between Owner and Contractor" and the A201-1987 "General Conditions of the Contract for Construction." The "General Conditions" consists of fourteen articles concerning the various duties and responsibilities of the "Owner," TX. C.C., and the "Contractor," Wilson/Barnes, as well as the allocation of risks between the two. Of particular relevance to the appeal is Paragraph 11.3, entitled "Property Insurance." This paragraph provides in relevant part as follows:

11.3.1 Unless otherwise provided, the Owner shall purchase and maintain ... [an all-risk] property insurance ... for the entire Work ... until final payment has been made....

11.3.2 Boiler and Machinery Insurance. The Owner shall purchase and maintain boiler and machinery insurance required by the Contract Documents³ or by law, which shall specifically cover such insured objects during installation and until final acceptance by the Owner ...

11.3.3 Loss of Use Insurance. The Owner, at the Owner's option, may purchase and maintain such insurance as will insure the Owner against loss of use of the Owner's property due to fire or other hazards, however caused ...

11.3.5 If . . . after final payment⁴ property insurance is to be provided on the completed Project through a policy or policies other than those insuring the Project during the construction period, the Owner shall waive all rights in accordance with the terms of Subparagraph 11.3.7 for damages caused by fire or other perils covered by this separate property insurance. All separate policies shall provide this waiver of subrogation by endorsement or otherwise.

11.3.7 Waiver of Subrogation. The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other ... for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 11.3 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by the Owner as fiduciary ... The policies shall provide such waivers of subrogation by endorsement or otherwise.

(Emphasis added.) The contract defines "Work" in relevant part as the "construction and services required by the Contract Documents, whether completed or partially completed, and ... may constitute the whole or a part of the Project." "Project" is defined as the restaurant.

Paragraphs 11.3.5 and 11.3.7 form the basis of the summary judgment motions. Under these provisions, subrogation rights are waived for damages resulting from fire or other perils in three situations: (1) under paragraph 11.3.5 if after final payment property insurance is "to be" provided through a policy or policies other than those insuring the project during the construction period; and under paragraph 11.3.7 to the extent covered by (2) property insurance obtained pursuant to paragraph 11.3 or (3) "other property insurance applicable to the Work." In all three situations, the Contract Documents require that the policies provide such waivers of subrogation by endorsement or otherwise.

Wilson/Barnes and Colorado Stone argued in their motions that, although TX. C.C.'s obligation to maintain property insurance on the restaurant terminated upon final payment, because TX. C.C. opted to obtain a policy after final payment and the damage to the restaurant was covered by that policy, TX. C.C. waived its rights against them for damages caused by the fire either under the first situation or the third. And because Safeco, as TX. C.C.'s insurer, has no rights by way of subrogation beyond TX. C.C.'s, Wilson/Barnes and Colorado Stone argued further, recovery in the lawsuit is precluded as a matter of law. See Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. John Zink, Co., 972 S.W.2d 839, 843 (Tex.App.-Corpus Christi 1998, pet. denied) (insurer acquires right to be subrogated to any cause of action insured may have against offending party upon payment for loss; insurer's right to subrogation derives from insured's rights and is limited to those rights). In a single order, the trial court summarily agreed.

On appeal, TX. C.C. asserts enforcing the waiver of subrogation clauses after completion of the restaurant and final payment does not reflect the intent of the parties as construed by the rules of contract construction and does not advance the public policy underlying such clauses. Given the parties' intent and the underlying public policy, the scope of the waiver of subrogation clauses, TX. C.C. argues, is limited to that of the insurance requirement which under paragraph 11.3.1 is the period of construction. As such, TX. C.C. maintains, the third situation — providing for waiver of subrogation claims under paragraph 11.3.7 if "other property insurance applicable to the Work" covers damages resulting from fire or other perils — applies only during the construction period if the owner opts to rely on existing property insurance in place at the time of construction instead of the insurance required by paragraph 11.3.1. TX. C.C. maintains the first situation — providing for waiver of subrogation claims under paragraph 11.3.5 if after final payment insurance is to be provided through a policy other than that insuring the project during construction — applies only if the contract requires the owner to maintain insurance post-construction. Because the fire did not occur during construction and because it was not required to maintain property insurance once the restaurant was completed, TX. C.C asserts, recovery is not barred as a matter of law and thus the waiver of subrogation clauses cannot support summary judgment. In the alternative, TX. C.C. asserts, the waiver of subrogation clauses cannot support summary judgment because they are ambiguous.

Standard of Review

We review de novo both the granting of a summary judgment motion and a trial court's interpretation of a contract. AIG Life, Ins. Co. v. Federated Mut. Ins. Co., 200 S.W.3d 280, 284 (Tex. App.-Dallas 2006, pet. denied) (summary judgment); First Trust Corp. TTEE FBO v. Edwards, 172 S.W.3d 230, 233-34 (Tex. App.-Dallas 2005, pet. denied) (contract). When reviewing a traditional summary judgment, we determine whether the movant met its burden of establishing that no material fact issue exists and that it is entitled to judgment as a matter of law. TEX.R. Civ. PROC. 166a; AIG Life, 200 S.W.3d at 284. We take the non-movant's evidence as true, indulge every reasonable inference in favor of the non-movant, and resolve all doubts in the non-movant's favor. TEX.R. Civ PROC. 166a; AIG Life, 200 S.W.3d at 284. When, as here, the trial court does not specify the basis for granting the motion, we will affirm if any ground supports the ruling. AIG Life, 200 S.W.3d at 284.

When reviewing the court's interpretation of a contract, we give words in the contract their plain meaning and examine the entire contract in an effort to harmonize and give effect to all the provisions so that none will be rendered meaningless. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157-59 (Tex.2003); Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). We determine the parties' intent from the instrument as a whole, considering each provision not in isolation but with reference to the entire contract. Stine v. Stewart, 80 S.W.3d 586, 589 (Tex.2002); Coker, 650 S.W.2d at 393. We will find the contract to be unambiguous and will construe it as a matter of law if we can give it a certain or definite legal meaning or interpretation. Coker, 650 S.W.2d at 393; Ludwig v. Encore Med., L.P., 191 S.W.3d 285, 290 (Tex.App.-Austin 2006, pet. denied). On the other hand, if the contract's meaning is uncertain or reasonably susceptible to more than one meaning, we will find it ambiguous...