Court of Appeals of Texas,
ALCOA, Reynolds Metals Company, Ron Warpula, and Paul Stanley Danser, Jr., Appellants,
HYDROCHEM INDUSTRIAL SERVICES, INC., Appellee.
March 17, 2005.
Rehearing Overruled April 14, 2005.
On appeal from the 28th District Court of Nueces County, Texas, Nanette Hasette, Judge.
Attorneys & Firms
Randy G. Donato, Donato & Associates, Houston, for appellants.
Thomas R. Fox, Houston, for appellee.
Before Justices CASTILLO.
Memorandum Opinion by Justice HINOJOSA.
*1 This is an appeal from a summary judgment in a third-party action brought by appellants, ALCOA, Reynolds Metals Company, Ron Warpula, and Paul Stanley Danser, Jr. (collectively “ALCOA”), against appellee, Hydrochem Industrial Services, Inc. (“Hydrochem”), for indemnity. Noe Edward Recio, a Hydrochem employee, sued ALCOA for personal injuries he sustained on March 21, 2000, while performing his duties for Hydrochem on ALCOA’s premises. ALCOA filed this third-party action against Hydrochem, seeking indemnity for its alleged negligence. Both parties moved for summary judgment. The trial court granted Hydrochem’s motion and denied appellants’ motion.
In eight issues, appellants contend the trial court erred in granting Hydrochem’s motion for summary judgment and in denying their motion for partial summary judgment. We affirm the trial court’s order denying appellants’ motion for partial summary judgment. We reverse the trial court’s order granting appellee’s motion for summary judgment and remand the case to the trial court for further proceedings.
As this is a memorandum opinion and the parties are familiar with the facts, we will not recite them here except as necessary to advise the parties of our decision and the basic reasons for it. See TEX.R.APP. P. 47.4.
A. STANDARD OF REVIEW
We review the granting of a traditional motion for summary judgment de novo. Lorenz v. Janssen, 116 S.W.3d 421, 424 (Tex.App.-Corpus Christi 2003, no pet.).
B. APPLICABILITY OF PURCHASE ORDER 060972LQ
*2 In their seventh issue, appellants contend that Purchase Order 060972LQ controls the contractual relationship between the parties. They assert: (1) ALCOA issued PO 060972LQ to Hydrochem; and (2) Recio was injured while performing work that PO 060972LQ required Hydrochem to perform.
Hydrochem contends that PO 060972LQ had expired by its own terms, and that we should look to either the Statement of Clarifications, Modifications and Exceptions (“Statement”) executed between ALCOA and Halliburton Industrial Services Division of Brown & Root (“Halliburton”), or the Addendum for Offsite Transportation executed between ALCOA and Hydrochem in August 2000.
1. Expiration of PO 060972LQ
A contract provision for an exact date of performance can be waived by the parties. Double Diamond, Inc. v. Hilco Elec. Coop., Inc., 127 S.W.3d 260, 266 (Tex.App.-Waco 2003, no pet.).
In Sieber v. Calicutt, Sieber continued to perform maintenance services at a refinery owned by La Gloria well after the contract had expired by its own terms, and La Gloria continued to pay the invoices for those services. Id. at 347.
Sieber is highly analogous to the facts at hand. Even though the contract had expressly expired, both Hydrochem and ALCOA continued to operate under it. Hydrochem performed services that they billed to ALCOA under PO 060972LQ, and ALCOA continued to pay the invoices. In addition, the course of dealings between the parties showed that contracts had frequently been extended beyond their express expiration date. We conclude that the continued performance by both parties under PO 060972LQ impliedly extended the time for performance and all attending provisions.
2. Statement of Clarifications, Modifications and Exceptions
*3 In 1993, ALCOA and Halliburton executed a “Statement of Clarifications, Modifications and Exceptions” which was intended to supplement the general terms and conditions attached to all ALCOA Purchase Orders; where terms differed, the Statement was to control. In January 1995, Hydrochem purchased substantially all the assets of Halliburton. Hydrochem asserts that in the Bill of Sale, Halliburton assigned all of its rights under the designated contracts to Hydrochem, including the Statement. Hydrochem contends that the Statement controls its contractual relationship with ALCOA.
For an agreement to be legally binding and enforceable, it must be “complete within itself in every material detail, and contain ... all of the essential elements of the agreement.” Stanley Boot, 847 S.W.2d at 222.
The Statement was intended to be incorporated, by reference, into contracts between Halliburton and ALCOA. At the time that Hydrochem purchased Halliburton’s assets, no contracts existed between Halliburton and ALCOA. The Bill of Sale reflects the Statement was assigned as a stand-alone contractual agreement. However, we note the Statement does not set out what services are to be rendered, what work is to be done, the time or location for performance, or the price to be paid. The Statement merely sets out incidental terms regarding indemnity, insurance, and liability. Accordingly, we conclude the Statement lacks sufficient definition of material terms to constitute an enforceable agreement and thus, fails for indefiniteness. Because the Statement does not constitute a legally binding agreement, we hold that no enforceable rights existed under it to be assigned to Hydrochem.
3. Addendum for Offsite Transportation
Hydrochem contends, in the alternative, that if PO 060972LQ is found to have been in effect on March 21, 2000, it should be interpreted as subject to the “Addendum for Offsite Transportation” (“Addendum”) executed between Hydrochem and ALCOA on August 4, 2000.
*4 Hydrochem argues that provisions may be binding even if agreed to after performance of the work. See Campbell v. Sonat Offshore Drilling, Inc., 979 F.2d 1115, 1120 (5th Cir.1992) (“where parties share a history of business dealings and standardized provisions have become part of those dealings, such familiar provisions within purchase orders issued after performance are binding where they are accepted without objection”).
We conclude that the cases cited by Hydrochem are inapposite to the facts at hand. Here, a purchase order was already in effect at the time the work was performed. Further, while Hydrochem and ALCOA had at other times issued purchase orders after work was completed, the Addendum is not a purchase order containing familiar, standardized provisions.
While parties can choose to apply a contract retroactively, Pegasus, 3 S.W.3d at 120.
The record reflects the Addendum was proposed by Hydrochem on May 1, 2000, and it was executed by ALCOA on August 4, 2000, more than four months after Recio’s accident. The terms of the Addendum are not ambiguous. The Addendum provides that it “shall be a part of any purchase order ...” between ALCOA and Hydrochem (emphasis added). We find nothing in the language of the Addendum, nor in the course of dealing between the parties, to indicate that the Addendum was intended to apply to past purchase orders. Accordingly, we conclude that on the date of Recio’s injury, PO 060972LQ was not subject to the Addendum. We hold that PO 060972LQ, with unaltered attending provisions, was the operative contractual document in effect on March 21, 2000. Appellants’ seventh issue is sustained.
C. STATUTORY BARS TO ENFORCEMENT
*5 In their third issue, appellants contend there are no statutory bars to enforcement of the indemnity and insurance agreements contained in PO 060972LQ. Hydrochem argues that enforcement of the indemnity provision is barred by, alternatively, the Statute of Frauds, the Worker’s Compensation Statute, or the Texas Oil-field Anti-Indemnity Act.
1. Statute of Frauds
While the Statute of Frauds prevents the enforcement of “a promise by one person to answer for the debt, default, or miscarriage of another” without a signed writing, Wingart v. Baxter, 30 S.W.2d 522, 527 (Tex.Civ.App.-Galveston 1930, writ ref’d). ALCOA fully performed by rendering full payment in accordance with the contract terms. Hydrochem accepted the benefit of ALCOA’s performance and partially performed by rendering the contracted for services. Under these circumstances, we hold the Statute of Frauds is unavailable as a bar against enforcement of the remaining terms.
2. Texas Worker’s Compensation Statute
The Texas Worker’s Compensation Act provides that a subscribing employer may not be held liable to a third party for a judgment or settlement resulting from the injury or death of an employee “unless the employer executed, before the injury or death occurred, a written agreement with the third party to assume liability.” TEX. LAB.CODE ANN. § 417.004 (Vernon 2004). Hydrochem argues that under the Worker’s Compensation Act, the indemnity provision is unenforceable because ALCOA has not produced a signed indemnity agreement. Hydrochem would have us apply a stricter standard than is required by the statute.
“The execution of a contract includes the performance of all acts necessary to render it complete as an instrument.” Velasquez v. Schuehle, 562 S.W.2d 1, 3 (Tex.Civ.App.-San Antonio 1977, no writ). Further,
[t]he absence of a signature on a contract does not necessarily destroy its validity.... As long as the parties give their consent to the terms of the contract, and there is no evidence of an intent to require both signatures as condition precedent to it becoming effective as a contract, signatures are not a required factor in the making of a valid contract.
*6 Simmons & Simmons Constr. Co., Inc. v. Rea, 155 Tex. 353, 286 S.W.2d 415, 418 (Tex.1955)).
PO 060972LQ is a written agreement between the parties. The mere lack of a signature does not destroy its validity. Because the agreement satisfies the statutory requirement, we hold the Texas Worker’s Compensation Act does not bar enforcement of the indemnity agreement.
3. Texas Oil-Field Anti-Indemnity Act
The Texas Oil-Field Anti-Indemnity Act voids indemnity agreements that purport to indemnify a person for his own negligence if they are “contained in, collateral to, or affecting an agreement pertaining to a well for oil, gas, or water or to a mine for a mineral.” 30 U.S.C. § 801 et. seq. (2004). Although both statutes deal with mining generally, they define their areas of coverage quite differently. Regulation by the MSHA does not automatically make a facility subject to the Texas Anti-Indemnity Act.
The Federal Mine Safety and Health Act provides “a sweeping definition for a mine, encompassing much more than the usual meaning attributed to it.” 30 U.S.C. § 802(h)(1). The Sherwin Alumina Plant falls under the MSHA because it is a “milling” operation,1 not a “mining” facility. It is this portion of the MSHA definition which differs significantly from the Texas Anti-Indemnity Act.
The Texas Anti-Indemnity Act defines an agreement pertaining to a well or mine as “(i) a written or oral agreement or understanding concerning the rendering of well or mine services; or (ii) an agreement to perform a part of those services or an act collateral to those services, including furnishing or renting equipment, incidental transportation, or other goods and services furnished in connection with the services.” TEX. CIV. PRAC. & REM.CODE ANN. § 127.001(4)(A)(ii) (Vernon 1997).
The Texas statute does not include milling operations in its defined area of coverage. While mineral milling is peripherally related to mining, it constitutes a separate and distinct category of facilities. Because application of the Texas Oil-Field Anti-Indemnity Act to these facilities would extend the Act beyond its intended coverage, we hold the Act does not bar enforcement of the indemnity provision. Appellants’ third issue is sustained.
D. ENFORCEABILITY OF INDEMNITY PROVISION
*7 In their fourth issue, appellants contend the indemnity provision in PO 060972LQ complies with all the requirements of fair notice and is enforceable as a matter of law.
Indemnity agreements are construed under the normal rules of contract construction, with the primary goal of determining the intent of the parties. Dresser Indus., Inc. v. Page Petroleum, 853 S.W.2d 505, 508 (Tex.1993). Fair notice demands that for an indemnity clause to be valid, it must satisfy both the express negligence test and the conspicuousness requirement. Id. Whether an indemnity clause complies with these fair notice requirements is a question of law for the court. Id. at 509.
1. Express Negligence
The express negligence doctrine provides that a party “seeking to indemnify the indemnitee from the consequences of its own negligence must express that intent in specific terms.... [T]he intent of the parties must be specifically stated within the four corners of the contract.” Atlantic Richfield Co. v. Petroleum Pers., Inc., 768 S.W.2d 724, 726 (Tex.1989).
In the Ethyl case, Ethyl argued that the language “any loss ... as a result of operations growing out of the performance of this contract and caused by the negligence or carelessness of the Contractor” in the indemnity provision was intended to include the negligence of the indemnitee. Ethyl Corp., 725 S.W.2d at 708 (emphasis added). The supreme court held that the language did not clearly indicate such an intention and the demands of express negligence would not allow such an attenuated interpretation. Id.
Conversely, the supreme court upheld the indemnity clause in the Atlantic Richfield case. That clause provided that the indemnitor would indemnify the indemnitee for “any negligent act or omission of [the indemnitee], its officers, agents, or employees....” Atlantic Richfield, 768 S.W.2d at 724 (emphasis added). The court considered this language to be sufficiently direct to define the parties’ intent and satisfy the express negligence requirement. Id.
The indemnity clause in this case provides:
(a) The presence at the jobsite of Seller [Hydrochem] ... is at Seller’s risk. Seller shall protect, defend and indemnify Buyer [ALCOA] ... from and against any and all claims, losses, damages, costs, actions, judgments, expenses and liabilities of every kind and nature whatsoever ... in any way connected with ... the performance of the Work, including, but not limited to, actual or alleged bodily injury ... resulting from any act or omission, negligent or other-wise, on the part of Seller....
*8 (b) The provisions of section 4(a) shall apply whether or not the damage, injury or loss was caused or contributed to ... by the active, passive, affirmative, sole or concurrent negligence ... on the part of Buyer....
Express negligence does not mandate that in order for an indemnity clause to be enforceable it must be the best or the briefest possible statement of the parties’ intentions, only that it specifically define the parties’ intent. See Enserch, 794 S.W.2d at 8. The indemnity agreement in Enserch provided that “Christie would indemnify Enserch for any claims ‘regardless of whether such claims are founded in whole or in part upon alleged negligence of Enserch.’ “ Id. The agreement further provided: “Christie ‘further agrees to indemnify and hold harmless Enserch ... in respect to any such matters....’ “ Id. The true intent of the clause was not concealed because the references to indemnification and negligence were made in separate sentences. See id.
While the express negligence rule prevents scriveners from obscuring the meaning of an indemnity clause via lengthy and ambiguous language, division into two paragraphs which respectively state that (1) the indemnitor indemnifies the indemnitee from the indemnitor’s negligence, and (2) the indemnitor also indemnifies the indemnitee from the indemnitee’s own negligence, does not make the clause so unwieldy as to conflict with the express negligence requirement. See id.
We conclude that sections 4(a) and 4(b) are two parts of a whole section regarding the liability of the parties, that taken together clearly define the parties’ intent that Hydrochem indemnify ALCOA for any consequences of ALCOA’s own negligence. Accordingly, we hold that the ALCOA-Hydrochem indemnity clause satisfies the express negligence requirement.
In Dresser Indus., the Texas Supreme Court adopted the Uniform Commercial Code (UCC) standard for conspicuousness. Dresser Indus., 853 S.W.2d at 511. The UCC standard provides:
A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is “conspicuous” if it is in larger or other contrasting type or color. But in a telegram, any term is “conspicuous.”
Id. at 510 (citing TEX. BUS. & COM.CODE ANN. § 1.201(10) (Vernon Supp.2004-05)).
The ALCOA-Hydrochem contract consists of the purchase order and six additional contract documents which are incorporated by reference. The type on the face of the purchase order is in all capital letters. The indemnity clause is located on Supplemental Terms and Conditions Form R-380-1. Form R-380-1 consists of two pages of small type-written text divided into sixteen numbered sections. Each section heading is printed in bold capital letters. The indemnity provision is found in Section 4, entitled “LIABILITY.”
*9 Texas courts have applied the conspicuousness requirement to indemnity clauses not found on the front page of a contract. In K & S Oil, the bottom of the second page of a purchase order contained a statement in “ordinary, but slightly smaller type” which said “subject to the terms and conditions on the reverse side .” Id. at 738.
Similarly, in Dresser Indus., the indemnity provision was “located on the back of a work order in a series of numbered paragraphs without heading or contrasting type.” Id. at 511.
The front of each page of the purchase order in Goodyear Tire and Rubber Co. v. Jefferson Constr. Co., 565 S.W.2d 916 (Tex.1978), contained the following language printed in large red type:
Important Notice to Seller. This purchase order is expressly made subject to, and your acceptance is strictly limited to, the terms and conditions stated herein, including the terms and conditions stated on the reverse side hereof.
Id. at 920. The contract language also specifically referred to the “hold harmless” provision on the reverse side. Id. The supreme court found this constituted “some evidence that the indemnity provision was conspicuous enough to give ... fair notice of its existence.” Id.2
After considering all of the above, we conclude the indemnity provision is not sufficiently conspicuous to satisfy the fair notice requirement. In order to meet the conspicuous requirement, something indicating the intent to transfer liability must appear on the face of the contract sufficient to attract the attention of a reasonable person. UPS Truck Leasing, Inc. v. Leaseway Transfer Pool, Inc., 27 S.W.3d 174, 176 (Tex.App.-San Antonio 2000, no pet.). Of the six additional contract documents incorporated by reference on the face of Purchase Order 060972LQ, five are labeled to indicate their contents: (1) “AFFIDAVIT, RELEASE AND WAIVER OF LIENS FORM R-379-5,” (2) “SAFETY POLICY PROCEDURE # 151,” (3) “RMCO. FORM R-379-8 POLICY ON SUBSTANCE ABUSE,” (4) “RMC SPEC. WS-LQ-192 R/11 ‘CONTRACTORS’ GENERAL WORK CONDITIONS,’ “ and (5) “RATE SHEETS.” However, the reference to the document containing the indemnity clause is generically labeled “SUPPL. TERMS & CONDITIONS FORM R-380-1.” Had Form R-380-1 been the only document incorporated by reference, its singularity may have called sufficient attention to itself. However, as one document in a list of several, we conclude the generic title does not attract the attention of a reasonable person to afford fair notice of the presence of a risk-shifting indemnity clause contained therein. Whether the heading “LIABILITY” is conspicuous enough to attract the attention of a reasonable person looking at Form R-380-1 is inconsequential if nothing on the face of the purchase order indicates that a reasonable person should look at Form R-380-1. The intent of the fair notice requirements is defeated if parties are allowed to remove risk-shifting clauses to secondary documents that are only inconspicuously referenced on the face of the contract.
3. Actual Knowledge
*10 ALCOA argues that the indemnity clause may still be given effect because Hydrochem had actual knowledge of the clause. Because the purpose of the conspicuousness requirement is to protect a contracting party from surprise and an unknowing waiver of rights, whether language is inconspicuous becomes immaterial if the indemnitee can establish that the indemnitor had actual knowledge of the indemnity clause. Mo. Pac. R.R. Co. v. Lely Dev. Corp., 86 S.W.3d 787, 791 (Tex.App.-Austin 2002, pet. dism’d).
Actual knowledge can result from prior dealings of the parties, or if the indemnitee specifically brings the inconspicuous waiver to the indemnitor’s attention. Id. at 919-20.
To succeed on their own motion for summary judgment on the basis of actual knowledge, ALCOA had to conclusively show that Hydrochem had actual knowledge of the indemnity provision as a matter of law. Montgomery, 699 S.W.2d at 311. However, to succeed in obtaining the denial of Hydrochem’s motion for summary judgment, ALCOA, as the non-movant, only had to show that there was a genuine issue of fact regarding Hydrochem’s actual knowledge of the indemnity clause. U.S. Rentals, 901 S.W.2d at 793.
ALCOA presented summary judgment evidence on its course of dealing with Hydrochem. The evidence showed that between 1995 and 2000, Hydrochem performed work for ALCOA under at least thirteen separate purchase orders, the material terms of which were essentially identical to those in PO 060972LQ. All thirteen purchase orders referenced “Supp. Terms and Conditions Form R-380-1 .” Multiple copies of Form R-380-1 were found in Hydrochem’s files, including a file on Reynolds Metals, labeled “Terms and Conditions” which contained a complete copy of Purchase Order 040138LQ, with a Form R-380-1 attached.
ALCOA also presented evidence that in September 1996, a contracts administrator for Hydrochem had reviewed Purchase Order 060611LQ, including Form R-380-1. During this review, Hydrochem objected and issued a letter proposing revisions to several terms contained in the contract, including the indemnity and additional-insured clauses. An addendum was issued altering the specific terms contested here, effective only regarding PO 060611LQ.
ALCOA’s summary judgment evidence does not conclusively establish that Hydrochem had actual knowledge of the indemnity provision. However, we conclude the evidence raises a fact question regarding actual knowledge.
E. “ADDITIONAL-INSURED” PROVISION
*11 In their fifth issue, appellants assert the contract contained an additional-insured requirement, separate and distinct from the indemnity provision. Therefore, they argue, Hydrochem was required to name ALCOA as an additional insured regardless of the applicability of the indemnity clause.
Liability insurance provisions are often included as part of indemnity agreements to guard against insolvency of the indemnitor. Getty Oil Co. v. Ins. Co. of N. America, 845 S.W.2d 794, 804-05 (Tex.1992).
In Getty Oil, the Texas Supreme Court identified two factors it considered important in determining when an additional-insured provision is a separate and distinct obligation from an indemnity agreement: (1) whether the indemnity clause contains an internal provision stating that insurance is required to cover the extent of indemnity, and (2) whether the general additional-insured provision specifies that it applies “whether or not required by the other provisions of the contract.” Id; see Emery Air Freight Corp. v. Gen. Transp. Sys., Inc., 933 S.W.2d 312, 315 (Tex.App.-Houston [14th Dist.] 1996, no writ).
The additional-insurance provision in this case provides:
(a) Seller [Hydrochem] shall not commence performance of the Work until it has furnished Buyer [ALCOA] with certificates of insurance.... Such policies shall provide for (i) Workers’ Compensation ... (ii) Employer’s Liability ... (iii) Comprehensive General Liability ... and (iv) Comprehensive Automobile Liability....
(b) Except for the Workers’ Compensation insurance, Buyer [ALCOA] ... shall be named as additional insureds in all of the foregoing insurance policies....
(c) The aforesaid insurance coverage is intended to protect Buyer [ALCOA] ... against any and all claims, losses, damages, costs, actions, judgments, expenses and liabilities which ... result from the performance of the Work.
This provision does not specify that it applies “whether or not required” by other clauses in the contract. Further, the indemnity agreement does not contain a separate, internal additional-insured provision. We conclude the absence of these elements shows the ALCOA-Hydrochem additional-insured provision was not intended to stand alone as a distinct obligation, but was intended only to assure the performance of the indemnification agreement. Appellants’ fifth issue is overruled.
*12 In light of our disposition of these issues, it is unnecessary to address appellants’ remaining issues. TEX.R.APP. P. 47.1.
We affirm the trial court’s order denying appellants’ motion for partial summary judgment. We reverse the trial court’s order granting appellee’s motion for summary judgment and remand the case to the trial court for further proceedings.
A mill is “any facility for reducing ores by means other than smelting, ... [including] a facility where metal ore is cleaned, concentrated or otherwise processed before it is shipped to the customer.” In re Kaiser Aluminum and Chem. Co., 214 F.3d 586, 592 (5th Cir.2000) (citing AMERICAN GEOLOGICAL INST., DICTIONARY OF MINING, MINERAL, AND RELATED TERMS 344 (2nd ed.1996)).
Prior to Dresser Indus., Inc. v. Page Petroleum, 853 S.W.2d 505 (Tex.1993), conspicuousness was treated as a question of fact. In Dresser Indus., the supreme court held that conspicuousness was a question of law. Id. at 509.