Harlandale Independent School District v. C2M Construction, Inc., Castillo Constructors and Management Construction, et al.--Appeal from 285th Judicial District Court of Bexar County

MEMORANDUM OPINION
No. 04-07-00304-CV
HARLANDALE INDEPENDENT SCHOOL DISTRICT,
Appellant
v.
C2M CONSTRUCTION, INC., Castillo Constructors and Management Construction,
Appellees
From the 285th Judicial District Court, Bexar County, Texas
Trial Court No. 2006-CI-08465
Honorable Andy Mireles, Judge Presiding

Opinion by: Alma L. L pez, Chief Justice

 

Sitting: Alma L. L pez, Chief Justice

Phylis J. Speedlin, Justice

Rebecca Simmons, Justice

 

Delivered and Filed: August 8, 2007

 

REVERSED AND RENDERED

Harlandale Independent School District ("HISD") brings this interlocutory appeal from the denial of its plea to the jurisdiction challenging the standing of C2M Construction, Inc., Castillo Constructors and Management Construction (collectively "C2M"). HISD asserts that C2M lacked standing to sue HISD because its breach of contract claim had been assigned to various sureties under an indemnity agreement between C2M and the sureties. We reverse the trial court's order and render judgment granting HISD's plea and dismissing C2M's claims against HISD.

Background

HISD and C2M entered into a contract for the construction of an elementary school. In accordance with the terms of the contract, C2M obtained a performance bond from Fidelity & Deposit Company of Maryland. In order to obtain the bond, C2M was required to enter into an Indemnity Agreement with Zurich American Insurance Company and its subsidiaries and affiliates including, but not limited to, Fidelity and Deposit Company of Maryland and Colonial American Casualty and Surety Company (the "Sureties"). On March 29, 2006, HISD terminated C2M. The Sureties undertook the completion of the project in accordance with their performance bond.

On June 1, 2006, C2M filed suit against HISD for breach of contract. On November 6, 2006, the Sureties demanded that C2M nonsuit its claims against HISD because those claims had been assigned to the Sureties pursuant to the terms of the Indemnity Agreement. On November 9, 2006, HISD filed a motion seeking dismissal of the lawsuit on the basis that C2M lacked standing because it had assigned its claim against HISD to the Sureties. On December 20, 2006, the Sureties filed a plea in intervention. C2M and the Sureties then filed cross motions for summary judgment on the issue of which party owned the claim against HISD. After a hearing on March 22, 2007, the trial court denied the plea to the jurisdiction and the cross motions for summary judgment. HISD brings this interlocutory appeal from the denial of the plea to the jurisdiction.

Jurisdiction to Consider Appeal

C2M contends that this court does not have jurisdiction to consider this appeal because HISD can only assert immunity from liability, not immunity from suit. A governmental unit like HISD, however, may appeal from an interlocutory order of a district court that denies a plea to the jurisdiction. Tex. Civ. Prac. & Rem. Code Ann. 51.014(8) (Vernon Supp. 2006). A governmental unit is not limited to the issue of sovereign immunity in a plea to the jurisdiction but may raise any ground on which it claims the court does not have subject-matter jurisdiction. In re H.C.S., 219 S.W.3d 33, 34 (Tex. App.--San Antonio 2006, no pet.); City of Austin v. L.S. Ranch, Ltd., 970 S.W.2d 750, 752 (Tex. App.--Austin 1998, no pet.). Standing is a prerequisite to subject-matter jurisdiction and is a proper ground to assert in a plea to the jurisdiction. See In re H.C.S., 219 S.W.3d at 34. Accordingly, we have jurisdiction to consider this appeal.

Discussion

We construe indemnity agreements under the normal rules of contract construction. Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 284 (Tex. 1998); Safeco Ins. Co. of America v. Gaubert, 829 S.W.2d 274, 281 (Tex. App.--Dallas 1992, writ denied). Our primary goal is to ascertain and give effect to the intentions of the parties as expressed in the instrument. Associated Indem. Corp., 964 S.W.2d at 284; Safeco Ins. Co. of America, 829 S.W.2d at 281. When the contract is unambiguous, we must determine the rights and liabilities of the parties by giving legal effect to the contract as written. Safeco Ins. Co. of America, 829 S.W.2d at 281. Whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered. See Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). If a written contract is worded so that it can be given a definite or certain legal meaning, then it is unambiguous. Nat'l Union Fire Ins. Co., 907 S.W.2d at 520. An instrument is not ambiguous simply because the parties disagree over its interpretation. See Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 727 (Tex. 1981); Taylor-Made Hose, Inc. v. Wilkerson, 21 S.W.3d 484, 494 (Tex. App.--San Antonio 2000, pet. denied).

The principal terms of the indemnity agreement at issue here are standard throughout the industry and have been widely upheld by courts. Associated Indem. Corp., 964 S.W.2d at 281; see generally Philip L. Bruner & Tracey L. Haley, Managing and Litigating the Complex Surety Case (2d ed. 2007) (discussing standard clauses). Having reviewed the agreement, we hold as a matter of law that the agreement is unambiguous. (1) Cf. Fidelity & Deposit Co. of Maryland v. Tri-Lam Co., No. SA-06-CA-207-XR, 2007 WL 1452632, at *2 (W.D. Tex. May 15, 2007) (concluding indemnity agreement was unambiguous).

As previously noted, the indemnity agreement contains provisions entitled indemnity, assignment, settlement, and attorney in fact that are standard in the industry. See generally Philip L. Bruner & Tracey L. Haley, Managing and Litigating the Complex Surety Case (2d ed. 2007). Based on alleged breaches by C2M, HISD terminated the construction contract, and the Sureties paid claims and completed the construction in accordance with their payment and performance bonds. As a result, all of C2M's rights "growing in any manner out of" the construction contract were assigned to the Sureties. (2) A claim for breach of contract is a chose in action or right to damages that grows out of the construction contract. See Browne v. King, 196 S.W. 884, 887 (Tex. Civ. App.--San Antonio 1917), aff'd, 111 Tex. 330, 235 S.W. 522 (1921) (noting that a chose in action is a right to damages arising from the breach of a contract); see also PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd. P'ship, 146 S.W.3d 79, 87 (Tex. 2004) (noting most claims are assignable). Although the agreement provided that C2M could request the Sureties to litigate its wrongful termination claim against HISD, the Sureties were obligated to litigate such a claim only if: (1) C2M made a request; and (2) C2M deposited cash or collateral satisfactory to the Sureties to be used in paying any judgment or judgments rendered, with interest, costs, expenses and attorneys' fees, including those of the Sureties. (3) The record does not contain any evidence that either the request or the deposit was made by C2M. Accordingly, because C2M's claims against HISD were assigned to the Sureties under the unambiguous terms of the indemnity agreement, C2M lacks standing in the underlying lawsuit. See Hutton Const. Co. v. County of Rockland, 52 F.3d 1191, 1192 (2nd Cir. 1995) (indemnity agreement unambiguously providing that contractor's rights "growing in any manner out of" the insured contracts were assigned to sureties and included authority to settle all claims on behalf of contractor, including contractor's affirmative claims growing out of its insured contracts); North Am. Specialty Ins. Co. v. Montco Const. Co., No. 01CV0246E(SR), 2003 WL 21383231, at *7 (W.D.N.Y. May 9, 2003) (indemnity agreement assigned right to settle contractor's pending claim against project owner that project owner materially altered the construction contract).

C2M argues that the indemnity agreement contains a specific provision assigning causes of action which the Contractor may have or acquire against any subcontractor in addition to a provision assigning all the rights of the Contractor in and to all subcontracts. (4) Similarly, C2M asserts that if the causes of action arising out of the construction contract were to be assigned, the indemnity agreement would contain a separate specific provision assigning those causes of action in addition to the general provision assigning the rights of the Contractor in the construction contract. The language in the indemnity agreement assigning the rights in and to all subcontracts; however, is not as broad as the language assigning all rights "in, and growing in any manner out of" the construction contract. Because the breach of contract claim grows or arises out of the construction contract, the assignment to the Sureties included that claim. See Hutton Const. Co., 52 F.3d at 1192; North Am. Specialty Ins. Co. 2003 WL 21383231, at *7.

Conclusion

The trial court's order is reversed, and the claims by C2M against HISD are dismissed.

 

Alma L. L pez, Chief Justice

1. Although the trial court determined that the indemnity agreement was ambiguous, the basis for this conclusion was that the parties had "two reasonable interpretations of the same contract, which is the definition of it being ambiguous." As previously noted, however, an instrument is not ambiguous simply because the parties disagree over its interpretation. See Sun Oil Co. (Delaware), 626 S.W.2d at 727; Taylor-Made Hose, Inc., 21 S.W.3d at 494.

2. The Indemnity Agreement provides, in pertinent part:

ASSIGNMENT

THIRD: The Contractor, the Indemnitors hereby consenting, will assign, transfer and set over, and does hereby assign, transfer and set over to the Surety, as collateral, to secure the obligations in any and all of the paragraphs of this Agreement . . . (a) All the rights of the Contractor in, and growing in any manner out of, all contracts referred to in the Bonds, or in, or growing in any manner out of the Bonds . . . .

3. The indemnity agreement provides, in pertinent part:

SETTLEMENTS

THIRTEENTH: The Surety shall have the right to adjust, settle or compromise any claim, demand, suit or judgment upon the Bonds, unless the Contractor and the Indemnitors shall request the Surety to litigate such claim or demand, or to defend such suit, or to appeal from such judgment, and shall deposit with the Surety, at the time of such request, cash or collateral satisfactory to the Surety in kind and amount, to be used in paying any judgment or judgments rendered or that may be rendered, with interest, costs, expenses and attorneys' fees, including those of the Surety.

4. The indemnity agreement first assigns, "(c) All the rights, title and interest of the Contractor in and to all subcontracts let or to be let in connection with any and all contracts referred to in the Bonds, and in and to all surety bonds supporting such subcontracts." The agreement next assigns, "(d) All actions, causes of actions, claims and demands whatsoever which the Contractor may have or acquire against any subcontractor, laborer or materialman, or any person furnishing or agreeing to furnish or supply labor, material, supplies, machinery, tools or other equipment in connection with or on account of any and all contracts referred to in the Bonds; and against any surety or sureties of any subcontractor, laborer, or materialman."