NuStar Energy, L.P., and Kaneb Management Company, L.L.C. v. Diamond Offshore Company , 2013 Tex. App. LEXIS 7033 ( 2013 )

Reversed and Remanded and Opinion filed June 11, 2013.
In The
Fourteenth Court of Appeals
NO. 14-12-00657-CV
NUSTAR ENERGY, L.P., AND KANEB MANAGEMENT COMPANY,
L.L.C., Appellants
V.
DIAMOND OFFSHORE COMPANY, Appellee
On Appeal from the 190th District Court
Harris County, Texas
Trial Court Cause No. 2011-55475
OPINION
This is an appeal of the trial court’s rulings on cross-motions for summary
judgment by the successors of the parties to an asset and stock purchase agreement.
The parties to this suit asked the trial court to render declaratory judgment
interpreting the contract. The seller’s successor contends that the trial court erred
in granting summary judgment in favor of the purchaser’s successor and in
denying its own summary-judgment motion. Because we conclude that the
agreement is ambiguous, we reverse the judgment and remand the case to the trial
court.
I. FACTUAL AND PROCEDURAL HISTORY
This appeal arises from a contract dispute between Diamond Offshore
Company (“Diamond” or “Buyer”) and Kaneb Management Company, L.L.C.
(“Kaneb” or “Seller”) concerning an asset and stock purchase agreement (“the
Agreement”) between their respective predecessors; to avoid confusion, we will
refer to Diamond and Kaneb as though they were the original parties to the
contract.1 Kaneb provided contract drilling services to the oil-and-gas industry.
Directly or through subsidiaries, it owned a number of offshore drilling rigs, barge
rigs, some yard facilities, personal property, and equity in other companies.
On June 30, 1989 (defined in the Agreement as “the Closing Date”),
Diamond bought Kaneb’s assets. Some of Kaneb’s workers continued to work for
Diamond after the sale; in the Agreement, these individuals are called “Hired
Employees.” Individuals who had been employed by Kaneb before the sale but did
not work for Diamond after the sale are identified in the Agreement by the defined
term, “Employees.” Some Employees later sued Diamond for personal injuries
they allegedly sustained as a result of their exposure to asbestos while employed by
Kaneb.
Diamond sued Kaneb and its parent company NuStar Energy L.P., seeking
1
The assets and stock at issue were owned by Diamond M Company or by its direct or
indirect subsidiaries, Diamond M Drilling Company, Diamond M Exploration Company,
Diamond M General Company, and Diamond M International Company. Diamond M
Company’s successor, appellant Kaneb, is a wholly owned subsidiary of appellant NuStar
Energy L.P. In 1989, LTR Texas Corp. bought the assets and stock at issue, together with the
right to use the “Diamond M” name. Diamond Offshore Company is the successor to LTR
Texas Corp.
2
declaratory judgment that under the terms of the Agreement, Diamond did not
assume liability for claims by “Employees” that were “[b]ased upon injuries
identifiably sustained prior to the Closing Date” and that resulted from Kaneb’s
“ownership or operation of the assets prior to the Closing Date.” Diamond also
asked for a declaration that Kaneb assumed liability for these claims. Kaneb
counterclaimed, asking for a declaration that Diamond assumed liability for claims
that allegedly arose from asbestos exposure before the Closing Date, but that
accrued after the Closing Date.
The parties filed cross-motions for traditional summary judgment. As
summary-judgment evidence, both sides relied on a copy of the Agreement.
Diamond’s summary-judgment evidence additionally included a claims-
administration agreement that was attached to and incorporated in the Agreement;
securities filings from 2010 of the limited partnership of which Kaneb is a
subsidiary; a non-party’s discovery responses made in a Louisiana case; and the
affidavits of two attorneys who participated in negotiating and drafting the
Agreement. In response to Kaneb’s summary-judgment motion,2 Diamond
additionally relied on excerpts from the deposition of an attorney; insurance
policies that expired more than a decade before the Agreement; and a recent email
exchange between attorneys seeking evidence of insurance coverage. Kaneb
objected to the attorneys’ affidavits on numerous grounds, and in the alternative,
moved for a continuance.
The trial court denied Kaneb’s motion for continuance, but held that “the
contract is not ambiguous on the issue presented” and struck the attorneys’
2
In Kaneb’s motion for summary judgment, NuStar Energy, L.P. also was identified as a
counter-plaintiff and a movant. Because the record shows that Kaneb is a successor to one of the
sellers under the Agreement, but does not show NuStar’s connection, we refer to the motion as
though it were filed solely by Kaneb. Diamond did not object in the trial court that NuStar had
asserted no counter-claims against it.
3
affidavits as “inadmissible extrinsic evidence on the issue of intent and contract
interpretation.” The trial court granted summary judgment in Diamond’s favor,
and in its amended order on the motions, the trial court made the following
declarations:
(1) Plaintiff [Diamond]—the liability successor of Buyer—did not
assume liability for claims:
a. Filed by the Sellers’ Employees who did not become
Hired Employees after the Closing;
b. Based upon injuries identifiably sustained prior to the
Closing; or
c. Resulting from the Sellers’ ownership or operation of the
Assets prior to the Closing.
and
(2) Defendant Kaneb Management Co., LLC—the liability
successor of Sellers—assumed liability for claims:
a. Filed by the Sellers’ Employees who did not become
Hired Employees after the Closing;
b. Based upon injuries identifiably sustained prior to the
Closing; or
c. Resulting from the Sellers’ ownership or operation of the
Assets prior to the Closing. 3
The trial court denied all requests for attorneys’ fees.
II. ISSUES PRESENTED
In its first issue, Kaneb argues that its interpretation of the Agreement is the
3
The trial court further stated, “This Order makes no finding as to liability, if any, of
Nustar Energy LP as a liability successor to Sellers.” Nustar and Kaneb filed a notice of appeal
of this order. We abated the appeal because in its pleadings, Diamond also requested judgment
against Nustar, and the trial court’s order did not address any claims against that defendant, and
thus, the order was not a final judgment. Diamond’s claims against Nustar were severed, and we
reinstated the appeal. See TEX. R. APP. P. 27.2. (“The appellate court may treat actions taken
before an appealable order is signed as relating to an appeal of that order and give them effect as
if they had been taken after the order was signed.”).
4
only reasonable one, and thus, the trial court erred in denying its summary-
judgment motion and granting Diamond’s cross-motion. As an alternative, Kaneb
argues in its second issue that its interpretation of the Agreement is at least a
reasonable one, and thus, the trial court erred in granting summary judgment to
Diamond. As a further alternative, Kaneb asserts in its third issue that we must
reverse the ruling and remand the case because the particular declarations recited in
the judgment do not resolve the parties’ dispute.
III. STANDARD OF REVIEW
We review de novo the trial court’s grant of a summary judgment. Ferguson
v. Bldg. Materials Corp. of Am., 295 S.W.3d 642, 644 (Tex. 2009) (per curiam)
(citing Tex. Mun. Power Agency v. Pub. Util. Comm’n of Tex., 253 S.W.3d 184,
192 (Tex. 2007)). We must affirm the summary judgment if any of the movant’s
theories presented to the trial court and preserved for appellate review are
meritorious. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216
(Tex. 2003).
The movant for traditional summary judgment has the burden of showing
that there is no genuine issue of material fact and that it is entitled to judgment as a
matter of law. TEX. R. CIV. P. 166a(c); Mann Frankfort Stein & Lipp Advisors,
Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). Evidence is conclusive only if
reasonable people could not differ in their conclusions. City of Keller v. Wilson,
168 S.W.3d 802, 816 (Tex. 2005).
When we review the rulings on cross-motions for summary judgment, we
consider the evidence presented by each party, determine de novo all questions
presented, and render the judgment the trial court should have rendered. Gilbert
Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex.
2010) (sub. op.); Tex. Mun. Power Agency, 253 S.W.3d at 192.
5
IV. GOVERNING LAW
When interpreting a contract, our primary concern is to ascertain and give
effect to the written expression of the parties’ intent. Italian Cowboy Partners,
Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011); Seagull
Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006). By
this approach, we “strive to honor the parties’ agreement and not remake their
contract by reading additional provisions into it.” Gilbert Tex. Constr., L.P., 327
S.W.3d at 126. The parties’ intent is governed by what is written in the contract,
not by what one side contends they intended but failed to say. See id. at 127.
Thus, “it is objective, not subjective, intent that controls.” Matagorda Cnty. Hosp.
Dist. v. Burwell, 189 S.W.3d 738, 740 (Tex. 2006) (per curiam) (citing City of
Pinehust v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968)). We
therefore give terms their plain and ordinary meaning unless the contract indicates
that the parties intended a different meaning. Dynegy Midstream Servs., Ltd.
P’ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009). We do not consider
only those parts of a contract that favor one party, City of Keller, 168 S.W.3d at
811, but examine the writing as a whole to harmonize and give effect to all of the
contract’s provisions. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). We also
bear in mind the particular business activity to be served, and when possible and
proper to do so, we avoid a construction that is unreasonable, inequitable, and
oppressive. Frost Nat’l Bank v. L & F. Distribs., Ltd., 165 S.W.3d 310, 312 (Tex.
2005) (per curiam); Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex.
1987).
If a contract is not ambiguous, courts must enforce it as written without
considering parol evidence for the purpose of creating an ambiguity or giving the
contract “a meaning different from that which its language imports.” David J.
6
Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex 2008) (per curiam). We
determine whether a contract is ambiguous by looking to the contract as a whole in
light of the circumstances present when the parties executed it. Sun Oil Co. (Del.)
v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981). The contract is unambiguous if it
can be given a certain or definite meaning as a matter of law. El Paso Field Servs.,
L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 806 (Tex. 2012); Universal Health
Servs., Inc. v. Renaissance Women’s Group, P.A., 121 S.W.3d 742, 746 (Tex.
2003). A contract is not ambiguous simply because the parties advance conflicting
interpretations. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940
S.W.2d 587, 589 (Tex. 1996). If the contract is subject to more than one
reasonable interpretation after applying the pertinent rules of contract construction,
then the contract is ambiguous and there is a fact issue regarding the parties’ intent.
El Paso Field Servs., 389 S.W.3d at 806; J.M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 229 (Tex. 2003).
A contract is not necessarily ambiguous simply because some sections
arguably conflict. This is because the parties may choose to set out a general rule
in one provision and exceptions to that rule in other provisions. Thus, “[t]o the
extent of any conflict, specific provisions control over more general ones.”
Grynberg v. Grey Wolf Drilling Co., L.P., 296 S.W.3d 132, 137 (Tex. App.—
Houston [14th Dist.] 2009, no pet.) (citing Forbau v. Aetna Life Ins. Co., 876
S.W.2d 132, 133–34 (Tex. 1994)).
V. ANALYSIS
In arguing that its interpretation of the Agreement is the only reasonable one,
Kaneb and Diamond rely on different provisions. In its summary-judgment
motion, Diamond asserted that liability for the Employee claims at issue is
governed by Section 10.13 of the Agreement, which provides as follows:
7
10.13 Employee Injury Claims. Sellers will bear the entire cost
and expense of all Claims arising out of injuries identifiably sustained
by Employees on or before the Closing Date. Buyer will bear the
entire cost and expense of all Claims arising out of injuries
identifiably sustained by Hired Employees or other employees of
Buyer after the Closing Date.
In its summary-judgment motion, Kaneb asserted that under Section 2.1 of the
Agreement, liability for the asbestos-related claims at issue was assigned to
Diamond:
2.1 Liabilities Assumed by Buyer. . . . Buyer agrees . . . to
assume, at the Closing, and thereafter to pay, perform and
discharge . . . the following liabilities and obligations of Sellers (but
only such liabilities and obligations):
(a) All liabilities and obligations relating to the ownership or
operation of the Assets which accrue or arise after the Closing,
including such liabilities and obligations based upon a condition or
condition that existed with respect to the Rigs . . . prior to
Closing . . . .
As can be seen by comparing the two provisions, Section 10.13 addresses
the specific allocation of liability for claims of injured workers, and Section 2.1
concerns allocations of liability generally. Diamond relies on a specific provision,
while Kaneb relies on a general provision.
Because specific provisions control over conflicting general provisions, see
Grynberg, 296 S.W.3d at 137, either party could prevail by establishing that
(a) liability for the claims at issue is unambiguously allocated to the other party in
Section 10.13; or (b) Section 10.13 does not apply at all, and liability for the claims
at issue was unambiguously allocated to the other party in Section 2.1. Diamond
took the former position, and Kaneb took the latter.
Kaneb contends that Section 10.13 does not apply because it has expired,
and if this is correct, then it is unnecessary for us to expend much time on its
8
interpretation. We therefore consider this argument first. We conclude, however,
that Section 10.13 has not expired, but it is ambiguous.
A. Section 10.13 Has Not Expired . . .
Kaneb argues that Section 10.13 should have no bearing on the analysis of
the contract because it was in effect only during the “gap” period between the
Agreement’s execution on June 16, 1989 and the Closing Date on June 30, 1989.
According to Kaneb, Section 10.13 contains covenants that did not survive the
Closing because they deal with a short, narrowly defined period of time, and after
the Closing, the need for such interim measures passed and the covenants had no
further force or effect. But the second sentence of Section 10.13 specifically
allocates liability for claims “identifiably sustained by [Diamond’s employees]
after the Closing Date.” (emphasis added). If Section 10.13 did not survive the
Closing, then this language never could have been given effect. Under the rules of
contract construction, we cannot infer an expiration date that would render half of
the provision meaningless. See El Paso Field Servs., 389 S.W.3d at 805 (“In
discerning the parties’ intent, ‘we must examine and consider the entire writing in
an effort to harmonize and give effect to all the provisions of the contract so that
none will be rendered meaningless.’” (quoting Italian Cowboy Partners, Ltd., 341
S.W.3d at 333)).
Kaneb further contends that Section 10.13 applied only to claims “that the
parties could identify at or near the time of closing as having been sustained before
closing, and whose financial impact could be addressed under [Section 3.3 which]
required adjustments to the cash portion of the purchase price in the 90 days after
closing.” Nothing in the Agreement indicates that this is so. Section 3.3 provides
that within 90 days after the Closing Date, the parties could adjust the cash portion
9
of the purchase price upward or downward to the extent that the “Current
Liabilities” assumed by Diamond on the Closing Date and identified in the
“Closing Balance Sheet” varied from a stated amount. If the liability did not exist
on the Closing Date, or if the liability existed but the parties were unaware of it,
then the cash portion of the purchase price was not adjusted. In Section 10.13,
however, the parties allocated liability for “the entire cost and expense of all
[c]laims arising out of injuries identifiably sustained” at a certain time,4 and not
merely those claims that were identified as “Current Liabilities” or those that
resulted in an adjustment to the cash portion of the purchase price.
We conclude that Section 10.13 has not expired. Because it is the most
specific unexpired provision addressing the allocation of liability for employee
injuries, the case turns on the meaning of this section.
B. . . . But Section 10.13 Is Ambiguous . . .
The trial court’s judgment addressed the allocation of liability for asbestos-
related claims by “Employees”—that is, persons who were employed by Kaneb but
never employed by Diamond—but did not address the allocation of liability for
asbestos-related claims by “Hired Employees”—that is, persons who were
employed by Diamond. Only the first sentence of Section 10.13 allocates liability
for claims arising from injuries to “Employees.” It provides that Kaneb is liable
for the “cost and expense of all Claims arising out of injuries identifiably sustained
by Employees on or before the Closing Date.” The question is, when are asbestos-
related injuries “identifiably sustained”? The Agreement itself provides no
answer.5
4
Emphasis added.
5
Neither party argues that the reference in Section 10.13 to “injuries identifiably
sustained” employs a specialized term with a commonly understood meaning in the industry. Cf.
10
The parties might reasonably have intended the phrase to refer to the date on
which injuries are manifested. The reference to the “cost and expense of all
Claims arising out of injuries” suggests that the parties may have intended the
word “injuries” to mean injuries capable of supporting a claim for damages. As
Kaneb has pointed out, asbestos exposure does not inevitably lead to disease. See
Borg-Warner Corp. v. Flores, 232 S.W.3d 765, 770–71 (Tex. 2007); Temple–
Inland Forest Prods. Corp. v. Carter, 993 S.W.2d 88, 95 (Tex. 1999). Thus, the
parties did not necessarily intend their use of the word “injuries” to encompass
asbestos exposure before any compensable damage occurred. The parties
reasonably may have intended to treat latent occupational illnesses as injuries that
are “identifiably sustained” on the date on which it can be identified that such an
injury has been sustained.
On the other hand, because this section deals exclusively with claims arising
from injuries to the parties’ employees, the parties may have intended the
construction of this provision to be informed by Texas workers’-compensation law.
When the Agreement was executed, “injury” was defined in the Workers’
Compensation Act as “damage or harm to the physical structure of the body and
such diseases or infections as naturally result therefrom.” 6 The Texas Supreme
Court explained that “[d]amage embraces direct physical injury to a cell, tissue,
organ or organ system; ‘harm’ to the physical structure of the body embraces also
impairment of use or control of physical structures, directly caused by the
accident.” Bailey v. Am. Gen. Ins. Co., 154 Tex. 430, 436–37, 279 S.W.2d 315,
XCO Prod. Co. v. Jamison, 194 S.W.3d 622, 627–28 (Tex. App.—Houston [14th Dist.] 2006,
pet. denied) (explaining that, in determining whether a contract is ambiguous, courts consider the
“the commonly understood meaning in the industry of a specialized term, which may be proven
by extrinsic evidence such as expert testimony or reference material”).
6
Act of May 28, 1971, 62nd Leg., R.S., ch. 834, § 1, 1971 TEX. GEN. LAWS 2539, 2539–
40 (current version at TEX. LAB. CODE ANN. § 401.011(26) (West 2006)).
11
319 (1955).7 The Workers’ Compensation Act further provided that “[w]here
compensation is payable for an occupational disease, the employer in whose
employ the employee was last injuriously exposed to the hazards of such disease
shall be deemed the employer within the meaning of the Act.”8 Considering
Section 10.13 in light of Texas workers’-compensation law, the parties reasonably
may have intended that the date on which “injuries [were] identifiably sustained”
meant the date identified as the time when the employee was last injuriously
exposed to asbestos fibers and presumably sustained damage—even if the damage
at that time was only on a cellular level—that gave rise to the occupational disease
and the claim.
1. . . . and the ambiguity is not resolved by other contract provisions . . .
Kaneb and Diamond have attempted to buttress their respective
interpretations of Section 10.13 by arguing that a particular reading is consistent
with other provisions in the Agreement that address the allocation of liabilities or
benefits in connection with other matters, or that address claims of which the
parties had notice at an earlier date. Some of the provisions they cite are more
consistent with Kaneb’s overarching interpretation of the Agreement, and some are
more consistent with Diamond’s interpretation. The problem, however, is that
Section 10.13 is the only unexpired provision specifically dealing with the
allocation of liability for claims arising from employee injuries, and because
specific provisions control over conflicting general provisions, see Forbau, 876
S.W.2d at 133–34, there is no way to know whether the parties intended that
section to be consistent with or an exception to any other allocation of liability.
7
The language construed by the court in Bailey differs from the language of the 1971
version of the Act in effect at the time of the Agreement only in that the 1971 Act used the plural
infections rather than the singular infection.
8
Act of Apr. 14, 1947, 50th Leg., R.S., ch. 113, § 6, 1947 TEX. GEN. LAWS 176, 178
(current version at TEX. LAB. CODE ANN. § 406.031(b) (West 2006)).
12
For example, the parties allocated responsibility in Section 2.1 for “liabilities
and obligations” that “accrue or arise after the Closing.” Kaneb has argued, and
we agree, that “accrue” can reasonably be construed to mean the date on which a
cause of action accrues.9 Because the symptoms of an asbestos-related disease
typically appear years after the exposure, if at all, the Texas Supreme Court has
held that the cause of action for latent occupational disease does not accrue until “a
plaintiff’s symptoms manifest themselves to a degree or for a duration that would
put a reasonable person on notice that he or she suffers from some injury and he or
she knows, or in the exercise of reasonable diligence should have known, that the
injury is likely work-related.” Childs v. Haussecker, 974 S.W.2d 31, 33 (Tex.
1998). Thus, a cause of action for an injury arising from asbestos exposure before
the Closing Date might not “accrue” until many years after the Closing Date.
But the word “accrue” does not appear in Section 10.13. There is no reason
to assume that the parties intended different language in the two sections to have
the same meaning. See DaimlerChrysler Motors Co., LLC v. Manuel, 362 S.W.3d
160, 185 (Tex. App.—Fort Worth 2012, no pet.) (“It is not reasonable to interpret
both terms . . . to have the same meaning as that would render one or the other term
meaningless or redundant.”); see also XCO Prod. Co. v. Jamison, 194 S.W.3d 622,
630 n.5 (Tex. App.—Houston [14th Dist.] 2006, pet. denied) (concluding that a
party’s construction of two terms to mean substantially the same thing was not
reasonable where, among other things, the party failed to account for the use of
different terms in different parts of the contract). Because none of the provisions
9
This is not the only reasonable construction of the term as used in Section 2.1. Given
that the parties also refer in Section 2.1 to the “Closing Balance Sheet,” their reference to
“liabilities” that “accrue” after the Closing Date may have been intended to refer to a debt that,
for accounting purposes, is chargeable at a particular time. See BLACK’S LAW DICTIONARY 21
(6th ed. 1990) (defining “accrued liability” as “[a]n obligation or debt which is properly
chargeable in a given accounting period but which is not yet paid or payable.”).
13
cited by either party use the expression “injuries identifiably sustained” (or even
“identifiably sustained”), they do not provide guidance on the parties’ intentions in
using that language.10
2. . . . or by caselaw interpreting liability-insurance policies . . .
The parties also have looked outside the Agreement to case law that each
contends supports its reading or undermines the contrary interpretation. Diamond
contends that Kaneb’s construction is unreasonable in that it conflicts with cases in
which courts considered whether a claim for latent occupational disease was
covered under occurrence-based insurance policies. In particular, Diamond relies
on a line of cases that follows the holding of Insurance Co. of North America v.
Forty-Eight Insulations, Inc., 633 F.2d 1212, 1220 (6th Cir. 1980), decision
clarified on reh’g, 657 F.2d 814 (6th Cir. 1981). There, the court addressed the
question of whether coverage under an occurrence-based insurance policy that
potentially covered a latent occupational disease caused by asbestos exposure
should be considered triggered by the claimant’s exposure to the harmful substance
or by manifestation of the illness or injury. Each of the insurance policies at issue
provided coverage for “damages because of . . . bodily injury . . . caused by an
occurrence.” Id. at 1216. “Bodily injury” was defined to include “sickness or
disease sustained by any person which occurs during the policy period, including
10
We have not found another asset-purchase agreement containing this exact provision;
however, a provision nearly identical to Section 10.13 was included in a 1986 purchase
agreement and was construed by New York’s Workers’ Compensation Board in a trio of claims.
See Employer: MRC Bearings, No. 8902 1506, 2004 WL 3060139 (N.Y. Work. Comp. Bd. Dec.
31, 2004); Employer: MRC SKF, Inc, No. 8921 2379, 2004 WL 3060140 (N.Y. Work. Comp.
Bd. Dec. 31, 2004); Employer: MRC Bearings, No. 8932 0814, 2004 WL 3060141 (N.Y. Work.
Comp. Bd. Dec. 31, 2004). There, the parties agreed that “[Seller] will bear the entire expense
and cost of all workers’ compensation claims arising out of injuries identifiably sustained by
employees of the Business on or before the Closing Date.” Employer: MRC Bearings, 2004 WL
3060139, at *1. The reviewing board concluded that the provision was “ambiguous when
considered in the context of an occupational disease claim.” Id., 2004 WL 3060139, at *4.
14
death at any time resulting therefore.” Id. (emphasis added). “Occurrence” was
defined to include “injurious exposure to conditions which results, during the
policy period, in bodily injury . . . .” Id. The court noted that the date on which an
injury “occurs” has been interpreted differently in statute-of-limitations cases,
worker’s-compensation cases, and health-insurance cases, and evaluated each type
of case to determine whether the same rationale applied to liability-insurance
policies. The court reasoned that the “exposure theory” applied because terms
such as “‘bodily injury’ and ‘occurrence’ are inherently ambiguous as applied to
the progressive disease context,” id. at 1222, and the state law governing the
dispute provided that “‘[i]f there are ambiguities in the policy, or uncertainty over
its interpretation, the policy is to be construed against the insurer, and in favor of
the insured.’” Id. at 1219–20 (quoting Ins. Co. of N. Am. v. Forty-Eight
Insulations, Inc., 451 F. Supp. 1230, 1237–38 (E.D. Mich. 1978), aff’d, 633 F.2d
1212. The court therefore concluded that the exposure theory applied because it
would leave the manufacturer insured, whereas adopting the manifestation theory
would effectively leave the manufacturer uninsured. Id. at 1222.
But the Agreement is not an insurance contract, and an ambiguous provision
in this context presents a question of fact as to the parties’ intent, which is a matter
to be resolved by the factfinder. See Grohman v. Kahlig, 318 S.W.3d 882, 887
(Tex. 2010) (per curiam). The parties also chose not to use the words “occur” or
“occurrence” in Section 10.13, and there is no reason to assume that they intended
the reference to the date on which an injury was “identifiably sustained” to be
interpreted to mean the date on which an injury “occurred.” Moreover, the parties
specified that the Agreement is governed by Texas law, and even in the context of
liability-insurance policies, the Texas Supreme Court had not adopted either the
manifestation or the exposure rule at the time the Agreement was executed. See
15
Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 853 n.20 (Tex. 1994)
(declining to identify the test that applies when determining which of several
insurance policies are triggered by a single continuing occurrence). See also
Clemtex, Inc. v. Se. Fid. Ins. Co., 807 F.2d 1271, 1278 (5th Cir. 1987) (“The
continuing judicial debate about the appropriate trigger of insurance coverage
refutes defendants’ contention that the exposure theory was the established rule at
the time . . . .”). Neither party has cited any authority that addresses the meaning
of “injuries identifiably sustained” (or even “identifiably sustained”), and the
authorities on which they rely do not shed light on the parties’ intent in choosing
this language in 1989.
3. . . . or by statute . . .
Diamond also relies in its summary-judgment motion on Section 10.254 of
the Texas Business Organizations Code, which provides in effect that a person who
acquires property through an asset-purchase agreement “may not be held
responsible or liable for a liability or obligation of the transferring domestic entity
that is not expressly assumed by the person.” TEX. BUS. ORGS. CODE ANN.
§ 10.254 (West 2012) (emphasis added). Although Diamond contends that this
statute also supports its position that it has not assumed liability for the asbestos-
related claims at issue, that statute does not apply. It post-dates the Agreement by
many years, and none of Kaneb’s predecessors were “domestic entities.”
Moreover, Diamond’s argument based on this statute begs the question of whether
Diamond “expressly assumed” liability for the asbestos-related claims at issue.
Diamond also argues that the Jones Act supports its interpretation of the
Agreement. Under the Jones Act, “[a] seaman injured in the course of employment
or, if the seaman dies from the injury, the personal representative of the seaman
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may elect to bring a civil action at law, with the right of trial by jury, against the
employer.” 46 U.S.C.A. § 30104 (2012) (emphasis added). Diamond contends
that Kaneb’s interpretation of the Agreement conflicts with federal law because
“Diamond is not a proper party to a suit filed by [Kaneb’s] Employees for
employment-related exposure to asbestos during [Kaneb’s] ownership of the rigs.”
There is no reason to assume, however, that the parties intended to allocate liability
in such a way that Diamond would not be a proper party to a suit by an injured
employee pursuant to the Jones Act.
4. . . . or by extrinsic evidence.
Finally, Diamond argues that the parties intended each party to be
responsible only for liabilities that arose during its “watch”—that is, during its
ownership and operation of the assets. In support of this position, Diamond relies
on (a) the affidavits of attorneys involved in drafting the agreement in 1989,
twenty-three years before these summary-judgment proceedings; (b) excerpts from
the deposition of one of these attorneys; (c) evidence of insurance in effect for the
twelve-month period beginning September 1, 1976, thirteen years before the
Agreement was drafted; and (d) an email string in which Diamond’s attorney
stated that a third party was looking for material concerning “potential insurance
coverage” that was provided during an unspecified period of time.
We cannot consider the affidavits Diamond cites. The trial court struck this
evidence, and that ruling has not been challenged. The trial court did not strike the
remaining extrinsic evidence, but that evidence does not affect our analysis. As
previously mentioned, the construction of an unambiguous contract is a matter of
law for the court, which must construe the contract according to the parties’
objective intent as manifested in the contract’s language. See Matagorda Cnty.
Hosp. Dist., 189 S.W.3d at 740. Extrinsic evidence about the parties’ intentions is
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relevant only if the contract is ambiguous, but if the contract is ambiguous, then its
interpretation is a question of fact. Neither party moved for summary judgment on
the ground that extrinsic evidence conclusively established the parties’ intentions.
We therefore overrule Kaneb’s first issue, sustain its second issue, and do
not reach its third issue.
VI. CONCLUSION
Because the Agreement is ambiguous, neither party was entitled to summary
judgment. We therefore reverse the trial court’s judgment and remand the case for
further proceedings consistent with this opinion.
/s/ Tracy Christopher
Justice
Panel consists of Justices Brown, Christopher, and McCally
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