Judy Rylie v. Rylie Transports, Inc. ( 2014 )

Reversed and Rendered and Memorandum Opinion filed August 28, 2014.
In The
Fourteenth Court of Appeals
NO. 14-13-00282-CV
JUDY RYLIE, Appellant
V.
RYLIE TRANSPORTS, INC., Appellee
On Appeal from the 13th District Court
Navarro County, Texas 1
Trial Court Cause No. 09-18048-CV
MEMORANDUM OPINION
The Texas Workforce Commission (TWC) awarded appellant Judy Rylie
unemployment benefits and authorized charging back those benefits to Rylie’s
former employer, appellee Rylie Transports, Inc. Rylie Transports then sued
Rylie, alleging she was required to reimburse it for the charges under an indemnity
agreement contained in the final divorce decree ending her marriage to the
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This case was transferred to this Court from the Tenth Court of Appeals.
president of Rylie Transports. Both parties filed cross-motions for summary
judgment, and the trial court granted Rylie Transports’ motion and denied Rylie’s.
In this appeal, Rylie contends the trial court erred when it granted Rylie
Transports’ motion and denied her own because she established as a matter of law
that the indemnity agreement did not cover Rylie Transports’ claim for
reimbursement. Because the undisputed facts establish that Rylie’s claim for
unemployment benefits is not covered by the plain language of the indemnity
agreement, we reverse and render judgment that Rylie Transports take nothing.
BACKGROUND
Rylie was married to Ernest Rylie, the president of Rylie Transports. Ernest
filed for a divorce from Rylie, and a Final Decree of Divorce ending their marriage
was signed on December 5, 2008. In addition to a negotiated property settlement,
the Divorce Decree contained an indemnification agreement.
During her marriage to Ernest, Rylie worked for Rylie Transports. After
Ernest had filed for divorce, a restraining order was signed barring Rylie from
entering the premises of Rylie Transports and preventing her from performing her
work duties. Despite barring her from entering the premises, Rylie Transports
continued to pay Rylie her regular salary. Rylie Transports paid Rylie until
September 26, 2008, when the wages were stopped in anticipation of a settlement
in the divorce action. Ultimately, the Divorce Decree ordered Rylie to resign from
her positions with Rylie Transports.
After Rylie Transports stopped paying her salary, Rylie filed a claim for
unemployment benefits with the TWC on October 19, 2008. The TWC approved
Rylie’s claim and authorized charging back Rylie’s unemployment benefits to
Rylie Transports’ account on November 17, 2008. One result of the TWC’s
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decision was an increase in Rylie Transports’ unemployment insurance tax rate.
The TWC Appeal Tribunal confirmed the decision awarding Rylie unemployment
benefits as well as the charge to Rylie Transports’ account on March 9, 2009.
Rylie Transports sought judicial review of the TWC’s decision in district
court. In the same suit, Rylie Transports sued Rylie to recover the damages it
claimed it had incurred as a result of charging back Rylie’s unemployment benefits
to Rylie Transports’ account. Rylie Transports based its claim against Rylie on an
indemnity agreement in the Divorce Decree and also alleged fraud.
Rylie Transports filed a motion for partial summary judgment, arguing it had
established as a matter of law that Rylie was liable to it under the indemnity
agreement. Riley filed a combined response and cross-motion for summary
judgment asserting, among other arguments, that her claim for unemployment
benefits was not covered by the plain language of the indemnity agreement.
Before the court ruled on these motions, Rylie Transports non-suited its cause of
action seeking review of the TWC’s decision.
The trial court granted Rylie Transports’ motion and denied Rylie’s. It then
conducted a bench trial on the damages Rylie Transports alleged it had incurred as
a result of Rylie filing for unemployment benefits. 2 At the conclusion of the
evidence, the trial court signed a final judgment awarding Rylie Transports
$13,089.33 in damages and $9,220 in attorneys’ fees. This appeal followed.
2
At the beginning of the bench trial, the trial court agreed to reconsider its summary
judgment in response to a legal argument re-urged by Rylie. The court also proceeded to hear
evidence regarding damages and attorneys’ fees. In its final judgment, the court again granted
Rylie Transports’ summary judgment motion. Nothing in the bench trial record affects our
interpretation of the indemnity agreement, which presents a legal issue.
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ANALYSIS
Rylie brings four issues on appeal challenging the trial court’s final
judgment. Because it is dispositive, we need only address her second issue. In that
issue, Rylie contends the trial court erred when it granted Rylie Transports’ motion
for partial summary judgment and denied her own because Rylie Transports’ claim
for indemnification is not covered by the Divorce Decree’s indemnity agreement.
We agree with Rylie.
I. Standard of review and applicable law
We review a trial court’s order granting a traditional summary judgment de
novo. Mid-Century Ins. Co. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007). When a
plaintiff moves for summary judgment on its cause of action, it must conclusively
prove all essential elements of its claim as a matter of law. Cullins v. Foster, 171
S.W.3d 521, 530 (Tex. App.—Houston [14th Dist.] 2005, pet. denied). When a
defendant moves for summary judgment, it must disprove at least one essential
element of the plaintiff’s cause of action in order to prevail. Doggett v. Robinson,
345 S.W.3d 94, 98 (Tex. App.—Houston [14th Dist.] 2011, no pet.). When both
parties move for summary judgment, each party bears the burden of establishing
that it is entitled to judgment as a matter of law. City of Garland v. Dallas
Morning News, 22 S.W.3d 351, 356 (Tex. 2000). When the trial court grants one
motion and denies the other, the appellate court reviews both motions and
determines all questions presented. Id. The reviewing court should then render the
judgment that the trial court should have rendered, or reverse and remand if neither
party has met its summary judgment burden. Id.
“An indemnity agreement is a promise to safeguard or hold the indemnitee
harmless against either existing [or] future loss liability.” Dresser Indus., Inc. v.
Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993). Indemnity agreements
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are construed under the normal rules of contract construction. Ayres Welding Co.
v. Conoco, Inc., 243 S.W.3d 177, 180 (Tex. App.—Houston [14th Dist.] 2007, pet.
denied). Indemnity agreements must be strictly construed to give effect to the
parties’ intent as expressed in the agreement. Crowder v. Scheirman, 186 S.W.3d
116, 119 (Tex. App.—Houston [1st Dist.] 2005, no pet.). To determine that intent,
we must examine the entire agreement in an effort to harmonize and give effect to
all provisions so that none will be rendered meaningless. Ayres Welding Co., 243
S.W.3d at 181. In an effort to discern that intent, we may not expand the parties’
rights or responsibilities beyond the limits agreed upon by the parties in the
indemnity agreement. See Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d
951, 953 (Tex. 1983); Lehmann v. Har-Con Corp., 76 S.W.3d 555, 561 (Tex.
App.—Houston [14th Dist.] 2002, no pet.). In addition, we must read the
indemnity provision in light of common sense and give its terms their plain,
ordinary, and generally accepted meanings unless the agreement provides
otherwise. Lehmann, 76 S.W.3d at 561. The interpretation of an unambiguous
indemnity agreement, like any unambiguous contract, is a question of law which is
reviewed de novo. Crowder, 186 S.W.3d at 119.
II. Rylie established as a matter of law that the plain language of the
indemnity agreement does not cover her claim for unemployment
benefits.
Rylie Transports moved for partial summary judgment on its indemnity
cause of action, asserting that: (1) it was a party covered by the Divorce Decree’s
indemnity agreement; and (2) Rylie breached the indemnity agreement when she
received unemployment benefits after the Divorce Decree was signed and then
failed to reimburse Rylie Transports for the amount charged back to Rylie
Transports’ unemployment insurance account.
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The indemnity agreement executed on December 5, 2008 provides in
pertinent part:
[1] Each party represents and warrants that he or she has not incurred
any outstanding debt, obligation, or other liability on which the other
party is or may be liable, other than those described in this decree.
[2] Each party agrees and IT IS ORDERED that if any claim, action,
or proceeding is hereafter initiated seeking to hold the party not
assuming a debt, an obligation, a liability, an act, or an omission of
the other party liable for such debt, obligation, liability, act or
omission . . . , that other party will . . . defend the party not assuming
the debt, obligation, liability, act or omission of the other party against
any such claim or demand . . . and will indemnify the party not
assuming the debt, obligation, liability, act or omission . . . and hold
him or her harmless from all damages resulting from the claim or the
demand.
(Emphasis added). In Rylie Transports’ view, Rylie’s claim for unemployment
benefits invoked the duty to indemnify Rylie Transports because the charge led to
an increase in its unemployment insurance tax rate. In her combined summary
judgment response and cross-motion for final summary judgment, Rylie argued her
filing for unemployment benefits and any impact that may have had on Rylie
Transports’ unemployment insurance tax rate was not covered by the plain
language of the indemnity agreement.
For purposes of our analysis, we assume without deciding that Rylie
Transports was a party to the indemnity agreement.3 Nevertheless, we conclude
that the unambiguous language of the indemnity agreement quoted above does not
cover Rylie’s claim of unemployment benefits or the TWC proceeding seeking to
3
In her motion for summary judgment and in her first issue on appeal, Rylie also argues
that section 207.071 of the Texas Labor Code declares invalid any agreement requiring a former
employee to reimburse his or her former employer for any amounts the former employer is
required to pay the TWC because the former employee received unemployment benefits.
Because of our disposition, we need not reach this issue.
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charge Rylie Transports’ account for those benefits.
Rylie Transports alleged in the trial court that Rylie breached the first
sentence of the agreement quoted above and committed fraud by failing to disclose
her unemployment claim. But the first sentence only required Rylie to disclose
whether “she ha[d] . . . incurred an[] outstanding debt, obligation, or other
liability.” The parties have not cited, and we have not discovered, any basis for
concluding that Rylie incurred a liability when she filed a claim for unemployment
benefits. Accordingly, we hold that her claim is not covered by the first sentence
of the indemnity agreement.
Nor does the second sentence of the agreement apply here. Even if a claim
for unemployment benefits could qualify as an “act” of Rylie, the TWC proceeding
seeking to hold Rylie Transports liable for that act was initiated before the
indemnity agreement took effect. It is undisputed that (1) Rylie Transports ceased
paying Rylie on September 26, 2008; (2) Rylie filed for unemployment benefits on
October 19; (3) the TWC approved her claim for benefits and ordered the benefits
charged back to Rylie Transport’s account on November 17; and (4) the Divorce
Decree containing the indemnity was not signed until December 5. These dates
demonstrate that the TWC had approved Rylie’s application for unemployment
benefits and charged back those benefits to Rylie Transports’ account well before
the Divorce Decree was signed.
Under the plain language of the second sentence of the indemnity
agreement, Rylie’s duty to indemnify only arose for claims, actions, or proceedings
initiated after the Divorce Decree was signed and seeking to hold Rylie Transports
liable for a debt, obligation, liability, act, or omission of Rylie. Because Rylie’s
unemployment claim was initiated before the Divorce Decree was signed, we hold
Rylie did not have a duty to indemnify Rylie Transports for the cost of the charge
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and did not breach the Divorce Decree’s indemnity agreement by failing to do so.
See Ideal Lease Serv., Inc., 662 S.W.2d at 953 (holding, based on evidence in trial
record and language of the indemnity agreement, that injury underlying indemnity
lawsuit was not covered by indemnity agreement).
Given that the plain language of the indemnity agreement does not require
Rylie to pay Rylie Transports for any damages it allegedly incurred as a result of
her unemployment claim, we sustain her second issue on appeal and hold that the
trial court erred in denying her motion for summary judgment and granting Rylie
Transports’ motion.
CONCLUSION
Having sustained Rylie’s second issue on appeal, we reverse the trial court’s
judgment and render judgment that Rylie Transports take nothing.
/s/ J. Brett Busby
Justice
Panel consists of Justices McCally, Busby, and Donovan.
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