AEROSPATIALE HELICOPTER CORP.,FROM A DISTRICT COURT APPELLANT, v. UNIVERSAL HEALTH SERVICES, INC., APPELLEE

 
COURT OF APPEALS
FIFTH DISTRICT OF TEXAS
AT DALLAS
 
NO. 05-88-00730-CV
 
AEROSPATIALE HELICOPTER CORP.,FROM A DISTRICT COURT
 
        APPELLANT,
 
v.
 
UNIVERSAL HEALTH SERVICES, INC.,
 
        APPELLEE.OF DALLAS COUNTY, TEXAS
 
 
 
BEFORE JUSTICES McCLUNG, BAKER, AND KINKEADE
DISSENTING OPINION BY JUSTICE BAKER
AUGUST 25, 1989
        I respectfully dissent.
        I would affirm the trial court's judgment regarding indemnity because Aerospatiale's claim for indemnity was not within the scope of the indemnity clause of the lease agreement. The indemnity clause provided:
                V.        INDEMNITY: The LESSEE will indemnify and hold harmless the LESSOR, its agents, servants, and assigns from and against any and all losses, damages, injuries, claims, demands and expenses including legal expenses of whatsoever kind and nature arising on account of (i) the use or operation of the helicopter or any part thereof, by whomsoever used or operated other than the LESSOR, its agents, servants, or employees and (ii) the installation or removal of any unit of equipment pursuant to any provisions of this lease; provided, however, that in no event shall LESSEE be liable for any loss, damage, injury or claim resulting from any latent defect which is not discovered or discoverable by LESSEE's inspection prior to taking of possession by LESSEE. LESSEE shall not be liable for loss, damage, injury or claim which is the proximate result of the sole negligence of the LESSOR or LESSOR's agents, servants, or assigns.
(Emphasis added.)
        General rules relating to interpretation and construction of contracts are applicable to indemnity contracts. Sun Oil Co. v. Renshaw Well Service, Inc., 571 S.W.2d 64, 68 (Tex. Civ. App.--Tyler 1978, writ ref'd n.r.e.); see Ideal Lease Service, Inc. v. Amoco Prod. Co., 662 S.W.2d 951, 952-53 (Tex. 1983). Under those general rules, the question of whether a contract is ambiguous is a question of law for the court. In interpreting a contract, the primary concern of the court is to ascertain and give effect to the intentions of the parties as expressed in the instrument. To achieve this object, the court will examine and consider the entire contract, seeking to harmonize and give effect to all of its provisions so that none will be rendered meaningless.
        In determining whether a contract is ambiguous, the court applies established rules of interpretation. See R & P Enterprises v. La Guarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518-19 (Tex. 1980); Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 157 (1951). Rules of construction (as opposed to rules of interpretation) are not applied unless the contract is determined to be uncertain or ambiguous. See General Am. Indem. Co. v. Pepper, 161 Tex. 263, 339 S.W.2d 660, 661 (1960); Universal C.I.T., 243 S.W.2d at 157. However, after the intent of the parties has been determined, the cardinal rule that the indemnitor is entitled to have its undertaking strictly construed in its favor may then be applied, thereby preventing liability under the indemnity contract from being extended beyond the terms of the agreement. See Ohio Oil Co. v. Smith, 365 S.W.2d 621, 627 (Tex. 1963), overruled on other grounds, Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 708 (Tex. 1987); Hudson v. Hinton, 435 S.W.2d 211, 214 (Tex. Civ. App.--Dallas 1968, no writ); Sun Oil, 571 S.W.2d at 68.
        If a contract is so worded that a court may properly give it a certain or definite legal meaning or interpretation, it is not ambiguous. On the other hand, a contact is ambiguous when application of proper rules of interpretation leave the court genuinely uncertain about the contract's proper meaning. See R & P Enterprises, 596 S.W.2d at 519; Universal C.I.T., 243 S.W.2d at 157. The language used by the parties in a contract should be accorded its plain grammatical meaning unless it definitely appears that the intention of the parties would thereby be defeated. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex. 1985); Fox v. Thoreson, 398 S.W.2d 88, 92 (Tex. 1966).
        The strict meaning of the words "and" and "or" are more readily departed from than the meanings of other words, and one may be read in place of the other in deference to the meaning of the context. Young v. Rudd, 226 S.W.2d 469, 474 (Tex. Civ. App.--Texarkana 1950, writ ref'd n.r.e.). However, the word "and" will not be construed to mean "or" except for strong reasons, and the words should never be so construed unless the context favors the conversion. Examples of such exceptional circumstances are when the substitution is necessary to effectuate the manifest intention of the user, or when the failure to substitute renders the meaning ambiguous or the result absurd, or when the failure to substitute amounts to a refusal to correct a mistake. See Board of Ins. Comm'rs v. Guardian Life Ins. Co., 142 Tex. 630, 180 S.W.2d 906, 908 (1944). The words "and" and "or" are not generally treated as interchangeable unless their accurate reading renders the sense of the instrument dubious. See Young v. Rudd, 226 S.W.2d at 474. Ordinarily, the words "and" and "or" are in no sense interchangeable terms but are used in the structure of language for purposes entirely different, "and" being strictly of a conjunctive nature, whereas "or" is of a disjunctive nature. Board of Ins. Comm'rs, 180 S.W.2d at 908; American Nat'l Ins. Co. v. Wilson State Bank, 480 S.W.2d 296, 300 (Tex. Civ. App.--Amarillo 1972, no writ).
        Applying established rules of interpretation to determine the parties' intent as expressed in the indemnity clause, the word "and" should be accorded its plain grammatical meaning. In other words, "and" means "and"; it does not mean "or." Neither Aerospatiale nor the majority provide support for their conclusory determination that "and" should be read to mean "or." On the contrary, there are no strong reasons for departing from the general rule that "and" and "or" are not interchangeable. Reading "and" to mean "or" is not required by context or by the manifest intent of the parties. Moreover, reading "and" as "and" does not render the meaning ambiguous or the result absurd, nor does it constitute a refusal to correct a mistake. In short, there is nothing inherently unreasonable in attaching to the word "and" its normal conjunctive meaning. Had the parties intended a disjunctive meaning, they could have easily used the word "or" instead of "and." See American Nat'l Ins., 480 S.W.2d at 300.
        When the word "and" is given its ordinary and reasonable meaning, the indemnity clause is unambiguous. Under the plain terms of the clause, Universal is required to indemnify Aerospatiale only in cases involving both use or operation of the helicopter by anyone other than Aerospatiale and the installation or removal of any unit of equipment pursuant to provisions of the lease. The record contains no evidence of installation or removal of any unit of equipment. Therefore, Aerospatiale's claim for indemnity fails because it is not within the scope of the indemnity clause. Having determined the parties' intent from the unambiguous terms expressed in their contract, the conclusion reached is then strengthened by the rule that the indemnitor (Universal) is entitled to have its undertaking strictly construed in its favor, thereby preventing liability from being extended beyond the terms of the agreement. See Ohio Oil, 365 S.W.2d at 627; Hudson v. Hinton, 435 S.W.2d at 214; Sun Oil, 571 S.W.2d at 68.
        When an indemnity contract is unambiguous, the rights and liabilities of the parties must be determined by giving legal effect to the contract as written. Intent is determined from the contract itself, and the scope of coverage stated in an indemnity contract cannot be expanded based solely upon what a court may perceive to be the improperly expressed intentions of the parties. Ideal Lease Service, 662 S.W.2d at 953. The result-driven conclusion reached by the majority is lacking in proper legal foundation. I would affirm the trial court's take nothing judgment on the claim for indemnity. This determination effectively disposes of all of Aerospatiale's points of error concerning the cause of the crash and enforcement of the indemnity clause. I would overrule points one through twenty-seven.
        I would also affirm the trial court's judgment regarding the provision of insurance. The relevant provisions in the lease stated:
        IV.        INSURANCE:
 
                A.        LESSEE agrees to furnish LESSOR certificates of insurance evidencing that LESSEE has at LESSEE's expense:
                
                . . . .
 
                4.    insured the helicopter against total loss in an amount not less than EIGHT HUNDRED SEVENTY EIGHT THOUSAND DOLLARS---------($878,000.00) U.S. Dollars.
        
                5.    obtained all risk hull insurance in the amount of not less than EIGHT HUNDRED SEVENTY EIGHT THOUSAND DOLLARS---------($878,000.00) U.S. Dollars, specifying LESSOR as loss payee as its interest may appear and LESSEE as co-insured.
 
            B.        In the event of total loss, LESSEE          shall immediately pay to LESSOR such monies due, together with interest at the rate of ten percent (10%) per annum on all such monies not received by LESSOR within sixty (60) days of such total loss.
The lease also contained a provision on default that stated in pertinent part:
                XIV.         DEFAULT:         In the event LESSOR deems any undertaking of LESSEE herein to be in default, LESSOR shall notify LESSEE in writing of such default and it shall be corrected by LESSEE within five (5) days from the receipt of such notice.
(Emphasis added.)
        Universal notified Aerospatiale that it had obtained hull insurance for the helicopter in the amount of $878,000 with a $25,000 "in motion" deductible. If such insurance was regarded by Aerospatiale as not in compliance with the lease provisions, Aerospatiale was required by the default provisions of the lease to notify Universal of the default. There is no evidence that Aerospatiale did so. There was testimony by John McPhilimy, a former Aerospatiale employee, that the existence of the deductible meant to Aerospatiale that Universal was self-insuring for the deductible amount. This testimony regarding Aerospatiale's unilateral view of the situation is irrelevant. One party's self-interested and unilateral interpretation of a situation simply cannot be the basis for a claim of breach of contract. It is elementary that a contract is by definition a mutual agreement, and any breach of that agreement is determined by its express terms, not by one party's unilateral interpretation that was never communicated to the other party. See Finley v. Hundley, 252 S.W.2d 958, 962 (Tex. Civ. App.--Dallas 1952, no writ); Sweeney v. Cross, 476 S.W.2d 464, 465 (Tex. Civ. App.--El Paso 1972, no writ).
        Estoppel may arise as effectually from silence as from words spoken when there is a duty to speak. Smith v. National Resort Communities, Inc., 585 S.W.2d 655, 658 (Tex. 1979); see Echols v. Yeates Dev. Co., 565 S.W.2d 277, 280 (Tex. Civ. App.--Fort Worth 1978, writ ref'd n.r.e.). Estoppel by silence arises when a person is under a duty to another to speak but refrains from doing so and thereby leads the other to act in reliance upon a mistaken understanding of the facts. Williams v. Stansbury, 649 S.W.2d 293, 296 (Tex. 1983); Page Airways, Inc. v. Associated Radio Serv. Co., 545 S.W.2d 184, 193 (Tex. Civ. App.--San Antonio 1976, writ ref'd n.r.e.). According to these principles, Aerospatiale is estopped from asserting that Universal breached the lease provisions on obtaining insurance. The lease clearly required Aerospatiale to notify Universal of any breach of those provisions. Despite this duty, Aerospatiale did not notify Universal that the policy deductible was unacceptable. Aerospatiale's unilateral assumption that Universal had chosen self-insurance in the amount of $25,000 is irrelevant and provides no basis for a claim of breach of contract. On the other hand, not having been informed otherwise, Universal was entitled to rely on its apparent compliance with the insurance provisions. This reliance was clearly justified and authorized by the express terms of paragraph XIV of the lease on default. I would overrule Aerospatiale's points of error twenty-eight through thirty.
        The reliance by Aerospatiale and the majority upon Dillingham Tug & Barge Corp. v. Collier Carbon & Chemical Corp., 707 F.2d 1086 (9th Cir. 1983), cert. denied, 465 U.S. 1025 (1984), is misplaced. The majority ignores a number of important distinctions between Dillingham and this case. In Dillingham, a towing contract required the defendant/owner to maintain insurance on a barge to its full value. The contract also provided that the defendant/owner would look only to the insurance for recovery for any loss or damage. The defendant obtained insurance with a $1,000,000 deductible, which effectively left the barge insured for about half of its value. Dillingham, 707 F.2d at 1088-89, 1091. All of these facts distinguish Dillingham from this case. Moreover, the Dillingham court acknowledged that "some deductible might have been reasonably anticipated under the contract." What the court specifically disapproved was the insuring of the barge for half of its value. Dillingham, 707 F.2d at 1091. In my view, Dillingham does not support the majority's conclusion.
        In point of error thirty-one, Aerospatiale contends that the trial court erred in refusing to award damages in the form of agreed contractual interest because of Universal's failure to make timely payment of the insurance proceeds. The pertinent lease provision is found in paragraph IV, quoted above. It provided that in the event of total loss, Universal shall pay to Aerospatiale such monies due along with interest of 10 percent per annum on all such monies not received by Aerospatiale within sixty days of the total loss. The helicopter crash occurred on December 7, 1983. Universal released an insurance check for $853,000 to Aerospatiale on August 16, 1984. Under the lease, Universal was clearly obligated to pay interest on the $853,000 from sixty days after the crash to the date of release of the check. I would sustain point of error thirty-one. Because I am unable to substantiate Aerospatiale's determination of the exact amount of interest due and owing, I would overrule point of error thirty-two.
        In point number thirty-three, Aerospatiale argues that the trial court erred in failing to award attorneys' fees to Aerospatiale. Because point of error thirty-one should be sustained, I would also sustain point number thirty-three. In letters dated August 27, 1984, and February 7, 1985, Aerospatiale demanded to be afforded all rights to which it was entitled under the insurance provisions of the lease. Since Aerospatiale was entitled to judgment for contractual interest on the insurance proceeds, it was also entitled to an award of attorneys' fees. TEX. CIV. PRAC. & REM. CODE ANN. §§ 38.001(8), 38.002 (Vernon 1986); see Findlay v. Cave, 597 S.W.2d 37, 40-41 (Tex. Civ. App.--Fort Worth 1980), aff'd, 611 S.W.2d 57 (Tex. 1981).
        In summary, points of error one through thirty and thirty-two should be overruled. Points thirty-one and thirty-three should be sustained. This cause should be remanded for determination of the amount of contractual interest owed to Aerospatiale on the insurance proceeds and for an award of attorneys' fees to Aerospatiale.                                                                                                                   __________________________
                                                          JAMES A. BAKER
                                                          JUSTICE
 
PUBLISH
TEX. R. APP. P. 90
 
880730.DF
 
 
File Date[09-07-89]
File Name[880730DF]