IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 94-20618
(Summary Calendar)
TRANSAMERICA INS. CO.,
Plaintiff-Appellee,
versus
PAUL R. AVENELL and GAYLE AVENELL,
Defendants-Appellants.
Appeal from the United States District Court
For the Southern District of Texas
(CA-H-93-2789)
August 17, 1995
Before DUHÉ, WIENER, and STEWART, Circuit Judges:
PER CURIAM*:
This appeal arises from an indemnity dispute between
Defendants-Appellants Gayle and Paul R. Avenell and Plaintiff-
Appellee Transamerica Insurance Company (Transamerica).
Transamerica filed suit and moved for summary judgment, contending
that the Avenells had breached their obligations under an indemnity
*
Local Rule 47.5 provides: "The publication of opinions that
have no precedential value and merely decide particular cases on
the basis of well-settled principles of law imposes needless
expense on the public and burdens on the legal profession."
Pursuant to that Rule, the Court has determined that this opinion
should not be published.
contract. The Avenells responded that (1) all conditions precedent
to the contract had not been met, (2) the indemnity contract was
unconscionable, and (3) the indemnity contract was void as against
public policy. We find the Avenells contentions devoid of merit
and affirm the district court.
I.
FACTS AND PROCEEDINGS
The following facts are not in dispute. Mr. Avenell is the
President and owner of Tacon Mechanical Contractors, Inc. (Tacon).
Transamerica, acting as surety, provides payment and performance
bonds to contractors and subcontractors in connection with
construction projects. Tacon subcontracted to perform the heating,
ventilating, and air conditioning work for Cahaba Construction
Company (Cahaba) in the construction of New Caney High School (NCHS
job). In turn, Tacon sub-subcontracted with Grant Sheet Metal,
Inc. (Grant) for the fabrication and installation of the duct work
on the NCHS job. Transamerica issued a performance bond and a
labor and material payment bond to secure Tacon's obligations under
its subcontract with Cahaba. As part of Transamerica's
consideration for issuing these bonds on behalf of Tacon, Mr.
Avenell executed an agreement (Indemnity Agreement) obligating both
Tacon and the Avenells, personally, to indemnify Transamerica
against any loss Transamerica might incur under the NCHS bond.
A dispute arose between Tacon and Grant over payment and
performance at the NCHS job. Tacon dismissed Grant from the NCHS
job and secured other contractors to complete the work. Grant
2
filed suit (Grant litigation) against Tacon and Cahaba's surety,
Seaboard Surety Company (Seaboard). In January 1993, the 55th
Judicial District Court of Harris County, Texas entered final
judgment on the jury verdict in favor of Grant, casting Tacon and
Seaboard in judgment. In March 1993, Cahaba made demand on Tacon
to pay the judgments. Tacon, however, had filed for bankruptcy and
could not pay the judgment. Cahaba notified Transamerica that, as
Tacon's surety, it was responsible for the judgment.
Tacon and Seaboard appealed from the judgment in the Grant
litigation. In September 1993, however, Cahaba and Seaboard
decided to settle with Grant and secured dismissal of Seaboard from
the appeal.1 Not interested in settlement, Tacon elected to
continue the appeal alone and wrote to Transamerica demanding that
it make no payments on any claims arising from the Grant
litigation. But as Tacon neither requested Transamerica to conduct
the appeal nor posted a security bond to obtain Transamerica's
assistance in the appeal, Transamerica proceeded to settle with
Cahaba and Seaboard, paying them $79,000.00 and $241,000.00,
respectively.
Having paid on the bonds, Transamerica looked to the Avenells
for indemnification, but they refused to indemnify Transamerica.
In September 1993, Transamerica filed this lawsuit against the
Avenells in federal district court, basing jurisdiction on
diversity and alleging breach of the Indemnity Agreement. In March
1
Tacon Mechanical Contractors, Inc. v. Grant Sheet Metal,
1993 WL 331790 (Tex.App.--Houston [14th Dist.] 1993).
3
1994, Transamerica filed a motion for summary judgment on all
claims, supporting its motion with proper affidavits and exhibits.
The Avenells responded, contending that (1) all conditions
precedent to the Indemnity Agreement had not been met, (2) the
Indemnity Agreement was unconscionable, and (3) the Indemnity
Agreement was void as against public policy. In support of their
contentions, the Avenells presented the district court with (1) an
affidavit by Paul Avenell, (2) a copy of their brief to the Texas
Court of Appeals in the Grant litigation, and (3) a photocopy of
the letter to Transamerica, demanding that it not pay any claims
arising out of the Grant litigation.
In May 1994, the district court granted summary judgment in
favor of Transamerica, concluding that the Avenells had failed to
produce evidence that would allow a reasonable juror to find in
favor of the Avenells. The Avenells timely appealed.
In December 1994, during the pendency of this appeal, the
Texas Court of Appeals for the Fourteenth District affirmed the
judgment in the Grant litigation, but declined Grant's request to
assess the Avenells a frivolous appeal penalty.2 Tacon then filed
an application for writ of error with the Texas Supreme Court.
That court has ordered Grant to respond. As of this writing, the
Texas Supreme Court has yet to act on this writ.
2
See Tacon Mechanical Contractors, Inc. v. Grant Sheet Metal,
Inc., 889 S.W.2d 666 (Civ.App.--Houston [14th Dist.] 1994, writ
requested).
4
II.
ANALYSIS
A. STANDARD OF REVIEW
We review the district court's grant of a motion for summary
judgment de novo, applying the same standard as the district court
applied.3 Questions of law are decided just as they are outside of
the summary judgment context: de novo.4
B. BURDENS OF PROOF
When seeking summary judgment, the movant bears the initial
responsibility of demonstrating the absence of a genuine issue of
material fact with respect to those issues on which the movant
bears the burden of proof at trial.5 For any matter on which the
non-movant would bear the burden of proof at trial, however, the
movant may merely point to the absence of evidence and thereby
shift to the non-movant the burden of demonstrating by competent
summary judgment proof that there is an issue of material fact
warranting trial.6 Only when "there is sufficient evidence
favoring the nonmoving party for a jury to return a verdict for
3
Berry v. Armstrong Rubber Co., 989 F.2d 1408, 1412 (5th Cir.
1993); Fraire v. City of Arlington, 957 F.2d 1268, 1273 (5th
Cir.)(citations omitted), cert. denied, -- U.S. --, 113 S.Ct. 462,
121 L.Ed.2d 391 (1992).
4
Walker v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir.
1988.
5
Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548,
2558, 91 L.Ed.2d 265 (1986)
6
Id. at 322, 106 S.Ct. at 2553-54; see also, Moody v.
Jefferson Parish School Board, 2 F.3d 604, 606 (5th Cir. 1993);
Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 190 (5th Cir.
1991).
5
that party" is a full trial on the merits warranted.7
C. BREACH OF CONTRACT
Despite its complex factual and procedural history, this case
presents a straight-forward breach of contract claim. To prevail
at the summary judgment stage, Transamerica's evidence must
establish every element of its claim. Under the Texas law of
indemnification, Transamerica must establish five elements: (1) a
contractual indemnity agreement existed between the Avenells and
Transamerica, (2) the agreement obligated the Avenells to indemnify
Transamerica in the event claims were made on the bonds issued to
Tacon, (3) claims were made on the bonds issued to Tacon, (4) all
conditions precedent for recovery had occurred, been performed,
waived, or excused; an (5) Transamerica has been damaged.8
The Avenells contest only the fourth element, arguing that all
conditions precedent have not occurred. In particular, the
Avenells contend that a final judgmentSQno longer appealable and
currently executorySQin the Grant litigation is a condition
precedent to Transamerica's recovery for breach of contract.
According to the Avenells, until the Grant litigation is thus final
and executory, Transamerica is premature in seeking to recover on
the Indemnity Agreement. In addition to this basic premise, the
7
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106
S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).
8
See generally, Ford v. Aetna Ins. Co., 394 S.W.2d 693 (Civ.
App.--Corpus Christi 1965, writ ref'd n.r.e.)(discussing the
enforceability of indemnity agreements under Texas law).
6
Avenells advance two corollaries.9 In the first, they contend
that, as the finality of the Grant litigation was a condition
precedent, Transamerica acted in bad faith by settling the Grant
litigation. In the second, they reason that, as the Grant
litigation precludes the instant action, the district court erred
in not granting the Avenells' plea in abatement. We disagree with
both the general premise and the corollaries derived therefrom.
1. Condition Precedent
Among its summary judgment exhibits, Transamerica submitted an
authenticated copy of the Indemnity Agreement. Provision 13 of the
Indemnity Agreement, entitled "Settlements," provides:
[Transamerica] shall have the right to adjust, settle or
comprise any claim, demand, suit or judgment upon the
Bonds, unless [Tacon] and the [Avenells] shall request
[Transamerica] to litigate such a claim or demand, or
defend such suit, or to appeal from such judgment, and
shall deposit with [Transamerica], at the time of such
request, cash or collateral satisfactory to
[Transamerica] in kind and amount, to be used in paying
any judgment or judgments rendered or that may be
rendered, with interest, costs, expenses and attorneys'
fees, including those of [Transamerica].
Under Provision 13, Transamerica had no duty to seek Tacon's or the
Avenells' approval before paying claims on the bonds.10 To the
contrary, that provision imposes a two-prong condition precedent on
9
We deliberately use the procedurally ambiguous term
"corollaries," rather than more precise procedural language such as
"affirmative defense", "counter-claim", or "motion to dismiss", as
it is unclear to us how the Avenells regard these arguments. In
their answer and response to motion for summary judgment, these
corollaries are labelled affirmative defenses. In their brief to
us, the Avenells refer to these same corollaries as counter-claims.
10
See Ford, 394 S.W.2d at 697-98; English v. Century Indemnity
Co., 342 S.W.2d 366, 369 (Civ.App.--San Antonio 1961, no writ).
7
the Avenells: If they wanted to preclude any such action by
Transamerica, the Avenells had to (1) request litigation or
defense, and (2) post security. They did neither.
The Avenells admit in their brief that they neither asked
Transamerica to oppose the claims nor posted security to cover
Transamerica's exposure. Although the Avenells demanded that
Transamerica not settle the case, absent compliance with their own
conditions precedentSQan affirmative request for defense and
adequate securitySQthat demand was legally ineffectual. The
Indemnity Agreement does not obligate Transamerica to hear, much
less honor, such a demand unless it is accompanied by security.
Neither does it proscribe payment or settlement of claims if such
claims are being litigated. Consequently, we hold that under the
terms of the Indemnity Agreement, the finality of the Grant
litigation was not a condition precedent to Transamerica's right to
settle and, to the contrary, that a request for defense and the
posting of security by Tacon were conditions precedent to its right
to prevent Transamerica from settling. Thus Tacon's unaccompanied
demand that Transamerica make no payments in settlement could notSQ
and did notSQdefeat Transamerica's claim or preclude summary
judgment in this case.
2. Other Conditions Precedent
The Avenells have identified no other conditions precedent
that would prevent summary judgment. Transamerica presented the
affidavit of Rona Endicott, detailing Transamerica's action
preceding settlement and averring that all conditions precedent to
8
the contract have been met. The Avenells have failed to identify
in their answer to the complaint, their response to Transamerica's
motion for summary judgment, or their brief to us, any putative
condition precedent (other than the Grant litigation) that might
prevent summary judgment. Neither have the Avenells offered any
summary judgment evidence to support their conclusionary
declaration that all conditions precedent have not been performed
or occurred, or have been waived. Therefore, we hold that
Transamerica has established that no conditions precedent remain
unfulfilled to preclude the grant of summary judgment in this case.
Moreover, as the Avenells dispute no other element of
Transamerica's indemnity claim, Transamerica has discharged its
initial burden as the party moving for summary judgment. We find
no genuine issue of material fact with respect to those issues on
which Transamerica bears the burden of proof. Only if the Avenells
can raise an issue of fact on one of their corollaries can summary
judgment be averted.
3. The Corollary Arguments
As mentioned above, the Avenells derive two corollaries from
their basic argument that the Grant litigation is a condition
precedent. Although the Avenells affix many different and
incorrect procedural labels to each of these subsidiary arguments,
both the general premise and the corollaries have the same theme:
the Grant litigation somehow precludes Transamerica's breach of
contract claim. As we disagree with the premise, it follows, as
the night the day, that we disagree with the corollaries derived
9
therefrom. In the interest of completeness, however, we shall
briefly address the corollaries.
a. Plea in Abatement: Same Song, Second Verse
The Avenells contend that the district court erred by failing
to grant their "plea in abatement." We disagree. The plea in
abatement is an archaic common law pleading which, "without
disputing the merits of the plaintiff's claim, objects to place,
mode, or time of asserting it."11 With the adoption of the Federal
Rules of Civil Procedure in 1938, and pursuant to the Rules
Enabling Act,12 the Supreme Court abolished the plea in abatement13
and replaced it with motions to dismiss under Federal Rules of
Civil Procedure 12(b) or 41.14 We therefore assume that the
Avenells' plea is an attempt to have this case dismissed until the
Grant litigation achieves finality. As we stated above, however,
absent a Provision 13 request and security from the Avenells, the
Grant litigation presents no bar, procedural or substantive, to
this litigation. We affirm the district court's denial of the
Avenells' plea in abatement.
b. Bad Faith: Last Verse, Same as The First
In their second corollary, the Avenells argue that
Transamerica, by settling prior to the finality of the Grant
litigation, acted in bad faith. We again disagree. As discussed
11
Black's Law Dictionary 1151-52 (6th ed. 1990).
12
28 U.S.C. § 2072 (West 1994).
13
See Fed.R.Civ.P. 7(c).
14
See Fed.R.Civ.P. 12(b) & 41.
10
above, the Indemnity Agreement unambiguously and unequivocally
spelled out for the Avenells the necessary steps to take if they
wanted to prevent Transamerica's settling with the bond obligees.
The Avenells did not take these steps. Neither have the Avenells
offered any summary judgment evidence supporting their
conclusionary allegations of bad faith. According to
Transamerica's uncontroverted summary judgment evidence, it
exercised its rights under the Indemnity Agreement in good faith
and settled with Grant on behalf of its bond beneficiaries,
Seaboard and Cahaba.15 We find no factual support for the Avenells'
allegations of bad faith, the burden of proof for which they bear.
In an effort to excuse the absence of such evidence, the
Avenells contend that the district court should have granted a
continuance for additional discovery. The standard by which we
review the district court's denial of a continuance for additional
discovery is abuse of discretion, and we will affirm that denial
unless it is arbitrary or clearly unreasonable.16 The district
15
See Firemen's Fund Ins. Co. v. Commercial Standard Ins. Co.,
490 S.W.2d 818, 824 (Tex. 1972)(settling indemnitee can recover
upon proof of his "potential liability" as well as the
reasonableness of the settlement between himself and the third
party); H.M. Ford v. Aetna Ins. Co., 394 S.W.2d 693 (Tex.Civ.App.--
Corpus Christi 1965)(purpose of indemnity contract is to protect
surety; surety was not precluded from recovering on indemnity
contract on ground that it had not acted in good faith in paying
various sums under the performance and payment bonds insured by
it).
16
Krim v. BancTexas Group, Inc. 989 F.2d 1435, 1441-42 (5th
Cir. 1993)(citations omitted); Mayo v. Tri-Bell Indus., Inc., 787
F.2d 1007, 1012 (5th Cir. 1986).
11
court did not abuse its discretion. The only unreasonable conduct
that we discern here is the neglect and inattention exhibited by
the Avenells. Summary judgment was rendered nine months after this
suit was filed and two months after the motion for summary judgment
was filed; yet, during this entire time the Avenells made no
attempt to conduct discovery. Our review of the district court
docket reveals that, despite having notice of all discovery
deadlines since the suit was filed, the Avenells failed to comply
with the district court's discovery plan in any respect. The
Avenells failed to depose -- indeed, they failed even to request to
depose -- a single Transamerica agent or employee. The Avenells
had more than sufficient time in which to develop evidence of
Transamerica's alleged bad faith, but failed to exercise their
rights in a timely manner. As the only barrier to discovery was
the Avenells' lack of diligence, we see no abuse of discretion by
the district court and affirm its denial of the continuance.
D. VOID AS AGAINST PUBLIC POLICY
The Avenells assert that the Indemnity Agreement was against
public policy and therefore void, as it requires them to waive
their homestead rights in violation of the Texas Constitution.17
Transamerica counters that the following provision of the Indemnity
Agreement, an "invalidities clause," protects against nullity of
the entire contract:
[i]n case any of the parties mentioned in this agreement
fail to exercise the same, or in case the execution
hereof by any of the parties be defective or invalid for
17
See Tex. Const. art. XVI, §§ 50-52.
12
any reason [such as where a state's laws might cause the
Agreement to be otherwise invalid], such failure, defect
or invalidity shall not in any manner affect the validity
of this Agreement or the liability hereunder of any of
the parties executing the same, but each and every party
executing shall be and remain fully bound and liable
hereunder to the same extent as if such failure, defect
or invalidity had not existed.
Transamerica explains that this clause is so designed that, if any
provision of the contract violates a specific state law, the
offending provision is automatically stricken from the agreement as
though never written therein, and the rest of the contract remains
in full effect, albeit free of the offending provision. On the
other hand, the Avenells contend that the invalidities clause
applies only when execution by one of the parties is defective and
is thus inapplicable here.
Transamerica's reading of the invalidities clause is correctSQ
and the Avenells' incorrectSQfor two reasons: First, "where the
subject matter of the contract is legal, but the contract contains
an illegal provision . . . the illegal provision may be severed and
the valid portion of the contract enforced."18 This is especially
true when, as here, the contract itself expressly contemplates and
provides for the severance of an illegal provision. Second, a
basic tenet of contractual construction holds that, whenever
feasible, an agreement is to be interpreted in a manner that
renders performance possible rather than impossible.19 The
Avenells' construction would render the Indemnity Agreement
18
Panasonic Co. v. Zinn, 903 F.2d 1039, 1041 (5th Cir. 1990).
19
See, e.g., Temple-Eastex v. Addison Bank, 672 S.W.2d 793
(Tex. 1984).
13
nugatory. Such a result cannot be what the parties intended. We
conclude that the invalidities clause severs the homestead waiver
provision from the Indemnity Agreement: No lien is created against
the Avenells' homestead, but neither is the entire agreement
invalidated by its presence. Thus the Indemnity Agreement is not
void under Texas law. We affirm the district court's construction
of the invalidities clause.
E. ATTORNEY'S FEES
Finally, the Avenells assert that the attorney's fee affidavit
submitted by Transamerica is insufficient to justify an award of
$69,983.05. Rule 56(e) requires that, when a motion for summary
judgment is made and supported, an adverse party may not rest on
mere allegations and denials; rather the adverse party's response
must, by competent summary judgment evidence, set forth specific
facts showing that there is a genuine issue of fact for trial.
The Indemnity Agreement expressly provides for attorneys' fees
and costs. Counsel for Transamerica submitted a detailed affidavit
listing his activities in preparation for the case, including the
number of hours worked, the number of hours he anticipated working
on the appeal, and his hourly rate. In their only reference to
Transamerica's attorney's fees, the Avenells state in response to
the motion for summary judgment that "[d]efendant should certainly
not be required to pay any attorney fees to Transamerica as
requested." We belabor the obvious: This bald assertion does not
create a genuine issue of material fact. The Avenells neither
disputed nor produced evidence questioning the contents of Mr.
14
Ryman's affidavit. The Avenells' failure to contest any particular
aspect of Transamerica's attorney's fee award waives this issue on
appeal.20 Accordingly, we affirm the district court's award of
attorney's fees.
III.
CONCLUSION
For the foregoing reasons we find that each of the Avenells'
assertions of error is either devoid of merit or has been waived.
As a result, the judgment of the district court is, in all
respects,
AFFIRMED.
20
Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992)
(Court of Appeal's inquiry is limited to summary judgment record
before trial court; parties cannot add exhibits, depositions, or
affidavits to support their position on appeal, nor may parties
advance new theories or raise new issue to secure reversal);
McQueen Contracting v. Fidelity & Deposit Co., 863 F.2d 1216, 1219
(5th Cir. 1989)(party may not wait until trial or appeal to develop
claims or defenses in response to summary judgment motion).
15