Sonerra Resources Corporation v. Helmerich & Payne International Drilling Co.

Opinion issued August 30, 2012
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-11-00459-CV
———————————
SONERRA RESOURCES CORPORATION, Appellant
V.
HELMERICH & PAYNE INTERNATIONAL DRILLING CO., Appellee
On Appeal from the 61st District Court
Harris County, Texas
Trial Court Cause No. 2007-75537-A
MEMORANDUM OPINION
Appellant, Sonerra Resources Corporation (“Sonerra”), challenges the trial
court’s rendition of summary judgment in favor of appellee, Helmerich & Payne
International Drilling Co. (“H&P), in Sonerra’s suit against H&P for breach of
contract. In two issues, Sonerra contends that the trial court erred in granting
H&P’s summary-judgment motion, denying its summary-judgment motion, and
not awarding it attorney’s fees.
We affirm.
Background
Sonerra entered into an International Association of Drilling Contractors
Drilling Bid Proposal and Daywork Drilling Contract (the “drilling contract”) with
H&P. Sonerra, an oil-well operator, retained H&P, a drilling contractor, to drill
and work on an oil well in Nacogdoches County, Texas. During H&P’s work at
the well, H&P employee Billy Jack McDaniel was injured when hot gas was
released from the well after a stripper rubber inside a rotating-control device
(“RCD”) failed. McDaniel sued Sonerra, who had furnished the RCD and the
stripper rubber to H&P for use in drilling operations. Sonerra demanded that H&P,
pursuant to an indemnity provision in article 14.8 of the drilling contract, defend
and indemnify it from the claims made against it by McDaniel. H&P refused,
contending that an indemnity provision in article 14.7 of the drilling contract
required that Sonerra indemnify it and release it from any such liability.
The indemnity provisions relied upon by the parties are contained in Section
14 of the drilling contract, entitled “Responsibility for Loss or Damage, Indemnity,
2
Release of Liability and Allocation of Risk.” Section 14 provides, in pertinent
part,
14.7 Inspection of Materials Furnished by Operator: Contractor
agrees to visually inspect all materials furnished by Operator
before using same and to notify Operator of any apparent
defects therein. Contractor shall not be liable for any loss or
damage resulting from the use of materials furnished by
Operator, and Operator shall release Contractor from, and
shall protect, defend and indemnify Contractor from and
against, any such liability.
14.8 Contractor’s Indemnification of Operator: Contractor shall
release Operator of any liability for and shall protect, defend
and indemnify Operator from and against all claims, demands,
and causes of action of every kind and character, without limit
and without regard to the cause or causes thereof or the
negligence of any party or parties, arising in connection
herewith in favor of Contractor’s employees or Contractor’s
subcontractors of any tier (inclusive of any agent or consultant
engaged by Contractor) or their employees, or Contractor’s
invitees, on account of bodily injury, death, or damage to
property. Contractor’s indemnity under this Paragraph shall be
without regard to and without any right to contribution from
any insurance maintained by Operator pursuant to Paragraph
13. If it is judicially determined that the monetary limits of
insurance required hereunder or of the indemnities voluntarily
assumed under Subparagraph 14.8 (which Contractor and
Operator hereby agree will be supported either by available
liability insurance, under which the insurer has no right of
subrogation against the indemnities, or voluntarily self insured,
in part or whole) exceed the maximum limits permitted under
applicable law, it is agreed that said insurance requirements or
indemnities shall automatically be amended to conform to the
maximum monetary limits permitted under such law.
14.9 Operator’s Indemnification of Contractor: Operator shall
release contractor of any liability for, and shall protect, defend
and indemnify Contractor from and against all claims,
3
demands, and causes of action of every kind and character,
without limit and without regard to the cause or causes thereof
or the negligence of any party or parties, arising in connection
herewith in favor of Operator’s employees or Operator’s
contractors of any tier (inclusive of any agent, consultant or
subcontractor engaged by Operator) or their employees, or
Operator’s invitees, other than those parties identified in
Subparagraph 14.8 on account of bodily injury, death or
damage to property. Operator’s indemnity under this paragraph
shall be without regard to and without any right to contribution
from any insurance maintained by Contractor pursuant to
Paragraph 13. If it is judicially determined that the monetary
limits of insurance required hereunder or of the indemnities
voluntarily assumed under Subparagraph 14.9 (which
Contractor and Operator hereby agree will be supported either
by available liability insurance, under which the insurer has no
right of subrogation against the indemnities, or voluntarily self-
insured, in part or whole) exceed the maximum limits permitted
under applicable law, it is agreed that said insurance
requirements or indemnities shall automatically be amended to
conform to the maximum monetary limits permitted under such
law.
....
14.13 Indemnity Obligation: Except as otherwise expressly limited in
this Contract, it is the intent of parties hereto that all releases,
indemnity obligations and/or liabilities assumed by such parties
under terms of this Contract, including, without limitation,
Subparagraph 4.9 and 6.3(c), Paragraph 10 and 12, and
Subparagraph 14.1 through 14.12 hereof, be without limit and
without regard to the cause or causes thereof, including but not
limited to, pre-existing conditions, defect or ruin of premises or
equipment, strict liability, regulatory or statutory liability,
products liability, breach of representation or warranty (express
or implied), breach of duty (whether statutory, contractual or
otherwise) any theory of tort, breach of contract, fault,
negligence of any degree or character (regardless of whether
such negligence is sole, joint or concurrent, active, passive or
gross) of any party or parties, including the party seeking the
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benefit of the release, indemnity or assumption of liability, or
any other theory of legal liability. The Indemnities, and
releases and assumptions of liability extended by the parties
hereto under the provisions of Subparagraphs 4.9 and 6.3 and
Paragraphs 10, 12 and 14 shall inure to the benefit of such
parties, their coventurers, co-lessees, joint owners, their parent,
holding and affiliated companies and the officers, directors,
stockholders, partners, managers, representatives, employees,
consultants, agents, servants and insurers of each. Except as
otherwise provided herein, such indemnification and
assumptions of liability shall not be deemed to create any right
to indemnification in any person or entity not a party to this
Contract, either as a third beneficiary or by reason of any
agreement of indemnity between one of the parties hereto and
another person or entity not a party to this Contract.
Sonerra filed a third-party petition against H&P for breach of contract,
alleging that H&P had breached the drilling contract by refusing to defend and
indemnify it from the claims made against it by McDaniel. Sonerra sought to
recover its defense costs as well as the amounts for which it was ultimately held
liable.1 Sonerra also sought its attorney’s fees.2 H&P generally denied Sonerra’s
claims, asserted various affirmative defenses, and filed a counterclaim for breach
of the drilling contract. H&P also sought its attorney’s fees.
1
Sonerra’s third-party suit against H&P was severed into a separate action. After
the trial court granted summary judgment in favor of H&P and dismissed
Sonerra’s indemnity claims, Sonerra’s insurer settled the claims made by
McDaniel against Sonerra (the “McDaniel Settlement”). Sonerra, H&P, and their
respective insurers then entered into a funding agreement whereby H&P agreed to
pay one-half of the McDaniel Settlement. The parties also acknowledged that
Sonerra intended to appeal the trial court’s judgment, and the parties reserved their
rights to pursue reimbursement from each other for the amounts they respectively
paid in McDaniel Settlement.
2
See TEX. CIV. PRAC. & REM. CODE ANN. § 38.001 (Vernon Supp. 2011).
5
H&P then filed its summary-judgment motion, arguing that the drilling
contract, and specifically article 14.7, unambiguously required that Sonerra defend
and indemnify it for the claims made by McDaniel for his injuries that arose from
the use of the defective RCD, which was provided by Sonerra. Sonerra filed its
competing summary-judgment motion and response, arguing that the drilling
contract, and specifically article 14.8, unambiguously required that H&P defend
and indemnify it for the claims made by McDaniel for his injuries.
The trial court granted H&P’s summary-judgment motion, denied Sonerra’s
summary-judgment motion, and ordered that Sonerra take nothing on its claims
against H&P. The trial court subsequently entered final judgment in favor of H&P,
and it awarded H&P its attorney’s fees for its defense of the indemnity suit and for
appeal.
Standard of Review
To prevail on a summary-judgment motion, a movant has the burden of
proving that it is entitled to judgment as a matter of law and there is no genuine
issue of material fact. TEX. R. CIV. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339,
341 (Tex. 1995). When deciding whether there is a disputed, material fact issue
precluding summary judgment, evidence favorable to the non-movant will be taken
as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985).
6
Every reasonable inference must be indulged in favor of the non-movant and any
doubts must be resolved in its favor. Id. at 549.
When both parties move for summary judgment and the trial court grants
one motion and denies the other, the reviewing court should review the summary-
judgment evidence presented by both sides, determine all questions presented, and
render the judgment that the trial court should have rendered. Tex. Workers’
Comp. Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643, 648 (Tex. 2004).
Indemnity
In its first issue, Sonerra argues that the trial court erred in granting H&P’s
summary-judgment motion and denying its summary-judgment motion because the
RCD and the component stripper rubbers are “clearly equipment” rather than
“materials,” as referred to in the indemnity provision in article 14.7. Sonerra
asserts that article 14.7 “requires indemnity [only] for property damage and
economic loss” rather than for claims for bodily injury like those brought against it
by McDaniel. Sonerra further asserts that the “more specific” article 14.8, which
requires H&P to indemnify it for McDaniel’s bodily injury claims, “should control
over general” article 14.7 and, when harmonized, articles 14.7 through 14.9
establish its entitlement to indemnity from H&P as a matter of law. In response,
H&P asserts that the term “materials” as used in article 14.7 includes the defective
stripper rubbers in the RCD, the phrase “any loss or damage” used in article 14.7
7
includes the damages that Sonerra sought to recover after being sued by McDaniel
for bodily injury, and the “specific release” in article 14.7 “controls over the
general indemnity provision” in article 14.8.
Indemnity agreements are construed under normal rules of contract
construction. Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000).
In construing a contract, a court must ascertain and give effect to the true intentions
of the parties as expressed in the writing itself. Italian Cowboy Partners, Ltd. v.
Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011); J.M. Davidson, Inc.
v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). We 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. Italian Cowboy Partners, Ltd.,
341 S.W.3d at 333. We begin our analysis with the contract’s express language.
See id. And we analyze the provisions of a contract “with reference to the whole
agreement.” Frost Nat’l Bank v. L & F Dists., Ltd., 165 S.W.3d 310, 312 (Tex.
2005); see also Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342,
345 (Tex. 2006) (“No single provision taken alone will be given controlling effect;
rather, all the provisions must be considered with reference to the whole
instrument.”). Contract terms will be given their plain, ordinary, and generally
accepted meanings unless the contract itself shows them to be used in a technical
or different sense. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex.
8
2005). If the contract can be given a certain or definite legal meaning or
interpretation after applying the pertinent contract construction rules, then it is not
ambiguous, and we will construe the contract as a matter of law. Frost Nat’l Bank,
165 S.W.3d at 312. “We construe contracts ‘from a utilitarian standpoint bearing in
mind the particular business activity sought to be served’ and ‘will avoid when
possible and proper a construction which is unreasonable, inequitable, and
oppressive.’” Frost Nat’l Bank, 165 S.W.3d at 312 (quoting Reilly v. Rangers
Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)).
If a contract “is subject to two or more reasonable interpretations after
applying the pertinent rules of construction, the contract is ambiguous, creating a
fact issue on the parties’ intent.” J.M. Davidson, 128 S.W.3d at 229. However, a
contract is not ambiguous merely because the parties disagree on its meaning.
Seagull Energy E & P, Inc., 207 S.W.3d at 345. Only where a contract is
ambiguous may we consider the parties’ interpretation and admit extraneous
evidence to determine the true meaning of the contract. Italian Cowboy Partners,
Ltd., 341 S.W.3d at 333–34; see also Fiess v. State Farm Lloyds, 202 S.W.3d 744,
747 (Tex. 2006) (stating that court may not consider extrinsic evidence to create
ambiguity).
We first address the parties’ dispute over the term “materials,” as used in
article 14.7. Sonerra contends that the stripper rubber cannot qualify as a
9
“material” and that, for this reason, the indemnity provision in article 14.7 does not
apply in favor of H&P to defeat Sonerra’s breach-of-contract claim. We begin our
analysis3 by consulting the express language of the disputed provisions in the
drilling contract and consider those in light of the entire contract. Italian Cowboy
Partners, Ltd., 341 S.W.3d at 333.
Article 14.7 expressly provides that H&P is not liable “for any loss or
damage resulting from the use of materials furnished” by Sonerra. The article
further provides that Sonerra releases and must indemnify H&P from and against
“any such liability.” Although the term “materials” is not expressly defined in the
drilling contract, it is a term that is used throughout the contract in conjunction
with other similar terms, including “equipment.” For example, in article 4.9 of the
contract, Sonerra agreed to reimburse H&P for certain costs of “material” and
“equipment.” In article 14.12, the parties set forth indemnity obligations for
consequential damages related to “equipment” and “materials.”
3
In their briefing, the parties discuss case law from other jurisdictions that have
construed the meaning of the word “materials” as used in unrelated contracts. The
parties also ask us to consider provisions from the Texas Business and Commerce
Code that discuss the terms “equipment,” “materials,” and “inventory.” See TEX.
BUS. & COM. CODE ANN. § 9.102 (Vernon Supp. 2011). However, we decline the
parties’ invitation to seek guidance from either case law addressing the meaning of
words “material” or “materials” as used in distinguishable contracts or statutory
provisions that have no direct application to the construction of the contract in the
instant case.
10
Moreover, in section 4 of Exhibit A to the drilling contract, which is entitled
“Equipment, Materials and Services to be Furnished by Contractor,” the parties set
forth the “machinery, equipment, tools, materials, supplies, instruments, services,
and labor” to be provided by H&P at the well. The parties identified multiple
items, including a drilling rig, rigging material, storage for mud and chemicals, and
drill pipe. They also attached a document to Exhibit A that further described these
items. The parties made no effort to indicate whether each of the items constituted
“machinery,” “equipment,” “tools,” “materials,” or “supplies.” Similarly, in
section 5 of Exhibit A, which is entitled “Equipment, Materials and Services to be
Furnished by Operator,” the parties set forth the “machinery, equipment, tools,
materials, supplies, instruments, services, and labor” to be provided by Sonerra at
the well. Under this section, the parties identified multiple items, including mud
storage tanks, drilling bits, special tools, and casing and tubing. As with section 4
of Exhibit A, the parties made no effort to identify whether each of the items
constitutes “machinery,” “equipment,” “tools,” “materials,” or “supplies.” Finally,
in section 6 of Exhibit A, which is entitled “Equipment, Materials and Services to
be Furnished by Designated Party,” the parties set forth another extensive list of
“machinery, equipment, tools, materials, supplies, instruments, services, and
labor.” The parties identified in a chart whether Sonerra or H&P was responsible
for furnishing the listed items. Included among these items are the “Rotating
11
Head” and “Rotating Head Rubbers.” In this section, like the others before it, the
parties made no distinction between the items that were considered “materials,”
“equipment,” “supplies,” and the like. There is simply no indication in section 6
that any of the items listed, including the RCD and stripper rubbers, were only to
be considered “materials,” “equipment,” or “tools” and that such items could only
be considered as falling within the scope of one of these particular terms. Rather,
the parties identified the RCD and stripper rubbers after generally referring to
“machinery, equipment, tools, materials, supplies, [and] instruments.” In sum,
there is simply no indication in the written contract that these terms, as used
throughout the contract, are mutually exclusive and refer to a distinct set of items.
Sonerra’s efforts to restrict the construction of the term “materials” to
exclude the stripper rubbers inside the RCD conflicts with the plain, ordinary, and
generally accepted meanings of the words used in the drilling contract. See
Valence Operating Co., 164 S.W.3d at 662. The terms “material” or “materials”
are defined as “the matter from which a thing is or can be made” or “things needed
for an activity,”4 “the substance or substances of which a thing is made or
composed” or “any constituent element,”5 “the equipment necessary for a
4
THE NEW OXFORD AMERICAN DICTIONARY 1054 (2001).
5
RANDOM HOUSE WEBSTER’S UNABRIDGED DICTIONARY 1185 (2d. ed. 2003).
12
particular activity,”6 and “the elements, constituents,[7] or substances of which
something is composed or can be made” or an “apparatus necessary for doing or
making something.”8
Sonerra admits in its briefing that it furnished the stripper rubber and the
stripper rubber is a “component” of the RCD. The plain language of article 14.7,
when considered in the context of the drilling contract, indicates that the parties
used the term “materials” to generally refer to the physical items that were to be
provided by Sonerra at the well. Sonerra’s argument that article 14.7 is
inapplicable because the defective stripper rubber and the RCD can only be
considered a piece of “equipment” and not “materials” necessarily fails.9
6
COLLINS ENGLISH DICTIONARY - COMPLETE & UNABRIDGED (10th ed. 2009).
7
Sonerra even cites in its briefing the definition of “material” that refers to an
“element” or “constituent.” The term “element” is defined to be a “constituent
part” and a “distinct part of a composite device.” MERRIAM WEBSTER’S
COLLEGIATE DICTIONARY 402 (11th ed. 2003). And constituent is defined to be
“an essential part” and a “component element,” WEBSTER’S DICTIONARY 248
(10th ed. 1999); “a constituent element, material, etc.; component,” RANDOM
HOUSE WEBSTER’S UNABRIDGED DICTIONARY 436 (2d. ed. 2003); and a
“component part of something.” THE NEW OXFORD AMERICAN DICTIONARY 368
(2001).
8
MERRIAM WEBSTER’S COLLEGIATE DICTIONARY 765 (11th ed. 2003).
9
Sonerra also argues that the parties’ use of the term “equipment” in other
indemnity provisions in the drilling contract reveals that the parties’ used the terms
“equipment” and “materials” to mean different things. For example, in article
14.1 H&P assumed liability for damage to its surface equipment, in article 14.2
Sonerra assumed liability for H&P’s in-hole equipment, in article 14.3 Sonerra
assumed liability for damage to H&P’s equipment resulting from hydrogen sulfide
13
We next address the parties’ dispute concerning the phrase “any loss or
damage” as used in article 14.7. Sonerra asserts that, by the use of this phrase, the
parties only required indemnity for property damage and economic loss, but not
bodily injury claims. In support of its interpretation, Sonerra cites other
provisions in the drilling contract where the terms “damage” or “loss” were used
by the parties to refer to property damage and economic loss, rather than bodily
injury. For example, in articles 14.1, 14.2, 14.3, and 14.4, all of which concern
indemnity obligations for damage to “equipment,” the terms “damage[s]” or
“loss[es]” refer to property damage to the parties’ equipment. However, the fact
that the terms “damage[s]” or “loss[es]” were used in a more limited nature in
these provisions is unremarkable given the subject matter of the provisions. The
use of “damage” or “loss” to refer to property damage in these contractual
provisions does not require that the terms be construed throughout the drilling
contract to refer only to such losses. The terms “damage” and “loss” are not
similarly limited by the subject matter of article 14.7. Rather, article 14.7 provides
or other corrosive elements, and in article 14.4 Sonerra assumed liability for its
own equipment. We need not address whether the parties’ use of the term
equipment in these other indemnity provisions pertains to a subset of items
described in the drilling contract, including items described in Exhibit A. Rather,
we confine our analysis to determining the meaning of the term “materials” as that
term was used by the parties in article 14.7 and in light of the entire drilling
contract.
Sonerra also asserts that H&P waived certain arguments concerning the proper
construction of the term “materials,” but the parties squarely presented this
definitional dispute to the trial court in their summary-judgment briefing.
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indemnity for “any loss or damage resulting from the use of materials” furnished
by Sonerra.10
Damage is generally defined as “[l]oss or injury to a person or property.”
BLACK’S LAW DICTIONARY 445 (9th ed. 2009). Damages include “physical harm
caused to something in such a way as to impair its value, usefulness, or normal
function” and “a sum of money claimed or awarded in compensation for a loss or
an injury.” THE NEW OXFORD AMERICAN DICTIONARY 429 (2001). Article 14.7,
by its express terms, applies to any “loss” or “damage” resulting from materials
furnished by Sonerra, and there is no indication that article 14.7 applies only to
economic losses or property damage. In other places in the drilling contract, the
parties necessarily used the terms “loss” or “damage” with specific reference to a
type of loss or damage. But because the parties themselves failed to express in
their written contract that the release and indemnity provided for in article 14.7
applied only to economic or property losses, we will not impose such a limitation.
Thus, Sonerra’s argument that article 14.7 is inapplicable because it applies only to
economic losses and property damages necessarily fails.
10
In its briefing, H&P argues that because Sonerra, in response to requests for
admission, admitted that the “damages” it sought to recover incurred as the result
of the use of the RCD. However, the responses to the requests for admission do
not resolve the case. The requests themselves did not address or ask Sonerra to
admit or deny a particular construction of the drilling contract.
15
We next consider whether, when construing the drilling contract as a whole
and when seeking to harmonize all of the contractual provisions, Sonerra is
entitled, pursuant to article 14.8, to be indemnified for the bodily injury claims
brought against it by McDaniel, an employee of H&P, and the McDaniel
Settlement. Article 14.8 provides that H&P shall release Sonerra from “any
liability” for and shall indemnify Sonerra “from and against all claims . . . without
limit and without regard to the cause or causes thereof or the negligence of any
party or parties, arising in connection herewith in favor of [H&P’s] employees”
and other prescribed parties “on account of bodily injury, death or damage to
property.” Article 14.9 provides a reciprocal obligation by Sonerra to indemnify
H&P “from and against all claims . . . without limit and without regard to the cause
or causes thereof or the negligence of any party or parties, arising in connection
herewith in favor of [Sonerra’s] employees” and other prescribed parties “on
account of bodily injury, death or damage to property.” Under these indemnity
provisions H&P and Sonerra agreed to indemnify the other for claims brought by
their respective employees and other prescribed parties, including their respective
contractor’s and subcontractor’s employees and invitees.
These reciprocal indemnity obligations must be considered with reference to
the other provisions of the drilling contract, including article 14.7. As noted above,
article 14.7 granted H&P indemnity for “any loss or damage” resulting from
16
Sonerra’s materials, not simply economic or property damage. Also, as noted
above, article 14.7 is not limited, in the manner suggested by Sonerra, by the use of
the term “materials.” Rather, by the express terms of article 14.7, Sonerra agreed
to indemnify H&P for any loss or damage resulting from the use of the materials
furnished by Sonerra. When all of the articles of the drilling contract are
harmonized, it is evident that the indemnity obligation and release in article 14.7
carve out a set of claims that might otherwise be covered by the indemnity
provision in article 14.8. See Clark v. Cotten Schmidt, L.L.P., 327 S.W.3d 765,
773 (Tex. App.—Fort Worth 2010, no pet.); (“A specific contractual provision
controls over a general provision”); Ayres Welding Co., Inc. v. Conoco, Inc., 243
S.W.3d 177, 181 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (providing
that more specific provisions of contract will control over general).
Sonerra’s contention that article 14.8 is the more specific provision is
premised upon its implied argument that article 14.8 is narrowly limited to
employee bodily injury claims. But article 14.8, by its plain terms, is not so
limited. Article 14.8 requires the contractor, H&P, to indemnify the operator,
Sonerra, for all claims of every kind and character, without regard to cause, that are
“in favor” of H&P’s employees, subcontractors (of any tier), agents, consultants,
their employees, and invitees for bodily injury, death, and property damage. Thus,
article 14.8 applies to a broad class of persons and a broad class of losses and, as
17
such, is the more general indemnity obligation when compared to article 14.7.
Article 14.9 provides a similar, general reciprocal indemnity obligation flowing
from Sonerra to H&P. In contrast to article 14.8, article 14.7 addresses a particular
kind of claim—loss or damage resulting from the use of Sonerra’s materials. The
only reasonable interpretation of the drilling contract is that article 14.7 grants a
more specific indemnity that controls in the circumstances before us.
Moreover, that the indemnity and release provisions in article 14.7 apply in
these circumstances in favor of H&P makes sense when we consider the specific
purpose of article 14.7 and the general obligations in the entire drilling contract. In
the first sentence of article 14.7, H&P agreed to both “visually inspect” the
“materials” that Sonerra furnished and “notify” Sonerra of any “apparent defects.”
The plain purpose of this provision was to require H&P to alert Sonerra of any
patent defects in the materials so that Sonerra could replace them or repair any
defects discovered through the visual inspection. This provision afforded
substantial protections to Sonerra in that, if complied with, it operated to prevent
H&P’s use of patently defective materials in drilling operations. Such protection
was important to Sonerra since Sonerra bore significant indemnity obligations in
the rest of the drilling contract, and H&P’s use of patently defective materials
could potentially give rise to significant liability for Sonerra. For example, Sonerra
owed an indemnity obligation for H&P’s in-hole equipment in article 14.2,
18
underground damage in article 14.6, and loss or damage to the hole. The second
sentence of article 14.7, which released H&P from loss or damage resulting from
the use of materials furnished by Sonerra and which required Sonerra to indemnify
H&P for such loss or damage, immediately follows the language requiring H&P’s
inspection of materials and notification of defects. When read in its entirety,
article 14.7 protects H&P from loss or damage caused by Sonerra’s materials, but
it also requires H&P to fulfill its inspection and notification duties with regard to
apparent defects.11
If we were to interpret article 14.8 to grant Sonerra indemnity to apply to
any claims brought by H&P employees, like McDaniel, or any other covered
subcontractors, consultants, employees, or invitees, for bodily injury, death, or
property damage resulting from the use of materials furnished by Sonerra, we
would be defeating the obvious purpose of article 14.7. Sonerra’s interpretation of
the drilling contract would, in spite of the plain language of article 14.7, impose
liability upon H&P for a broad class of losses, including bodily injury, death, or
property damage, brought by a broad class of persons, including H&P’s
11
Sonerra also argues that article 14.13 supports its interpretation because it provides
that all releases and indemnity obligations in the drilling contract are “without
limit and without regard to the cause or causes thereof,” including “defect or ruin
of premises or equipment,” “strict liability,” “products liability,” breach of
warranty, breach of contract, and negligence of any degree. However, article
14.13 states that it applies “[e]xcept as otherwise expressly limited” in the drilling
contract, and the language in this article does not modify the language in article
14.7.
19
employees, subcontractors (of any tier), agents, consultants, and invitees, even
when such claims resulted from the use of materials furnished by Sonerra.
Accepting Sonerra’s arguments would remove at least some of the incentive for
H&P to fulfill its inspection and notification duties because the scope of indemnity
afforded to H&P under article 14.7 would be greatly diminished. Additionally,
accepting Sonerra’s interpretation would also remove at least some of the incentive
for Sonerra, once notified of apparent defects, to repair or replace such defective
materials because, despite the plain language of article 14.7, H&P would remain
liable for a broad class of claims (bodily injury, death, property) brought by a
broad class of parties, even when such losses result from the use of its materials.
In sum, to limit article 14.7 so as not to include within it an indemnity by
Sonerra in favor of H&P for any claims brought by H&P employees for bodily
injury caused by materials furnished by Sonerra, we would have to insert
additional language into the drilling contract. Article 14.8 does not modify the
indemnity and release language of article 14.7. If the parties had intended for the
indemnity provision in article 14.7 to be so limited, the parties could have included
language limiting the class of losses or damages to which it applied or excepting
employee claims for losses or damages that would otherwise fall within article
14.8. When properly harmonized, and when considered in light of the entire
agreement, article 14.7 of the drilling contract unambiguously precludes Sonerra’s
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indemnity claims against H&P. Accordingly, we hold that the trial court did not
err in granting H&P’s summary-judgment motion and denying Sonerra’s
summary-judgment motion.
We overrule Sonerra’s first issue.
Conclusion
Having overruled Sonerra’s first issue, we further hold that the trial court did
not err in not awarding Sonerra its attorney’s fees. Thus, we overrule Sonerra’s
second issue. We affirm the order of the trial court.
Terry Jennings
Justice
Panel consists of Justices Jennings, Massengale, and Huddle.
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