Florentino Garza D/B/A Tino's Auto Mart v. Ford Motor Company

Citations: 423 S.W.3d 442; 2013 WL 5925849; 2013 Tex. App. LEXIS 13646Docket: 04-12-00734-CV

Court: Court of Appeals of Texas; November 5, 2013; Texas; State Appellate Court

Original Court Document: View Document

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In the case of Florentino Garza d/b/a Tino’s Auto Mart v. Ford Motor Company, the Fourth Court of Appeals affirmed the trial court's judgment. The case arose from the death of Luis Aguilar, leading to a lawsuit against both Ford and Garza. The trial court granted a directed verdict in favor of Garza and a jury returned a take-nothing verdict for Ford. Following the jury's decision, Garza filed a cross-claim against Ford for indemnity regarding defense expenses, while Ford counter-claimed for attorney’s fees, alleging Garza breached an Assumption of Defense Agreement.

Garza had initially requested Ford to defend and indemnify him, to which Ford responded with a conditional offer. Garza accepted this offer during the directed verdict hearing, signing the agreement shortly thereafter. Ford argued that the agreement limited its obligation to indemnify Garza for defense costs incurred only after it assumed his defense on September 29, 2011, and that Garza breached the agreement by demanding reimbursement for costs incurred prior to that date.

Garza contended that the agreement was not meant to be the sole source of his defense and indemnity rights, asserting it was intended only to establish the terms of Ford’s defense assumption. The court reviewed the summary judgment under a de novo standard, confirming that it should be granted only if no genuine issues of material fact exist and the movant is entitled to judgment as a matter of law. The court ultimately upheld the trial court's decision in favor of Ford, rejecting Garza’s claims.

The primary focus in interpreting a written contract is to determine the true intentions of the parties as reflected in the document, ensuring that all provisions are harmonized and meaningful. No single provision should dominate; instead, the entire contract must be considered contextually. In cases of disagreement over an unambiguous contract's meaning, the intent must be derived from the contract itself rather than the parties' current interpretations.

The agreement stipulates the following key points:

1. Ford is obligated to defend and indemnify Garza in relation to the Aguilar lawsuit, effective from the date signed by Ford’s counsel.
2. Ford will manage the defense, covering all attorney fees and costs incurred after the signature date, and is liable for any compensatory or general damages awarded or settled, regardless of whether they are against Ford, Garza, or both. However, Ford is not liable for punitive damages against Garza.
3. The defense and indemnification obligation remains in place until Ford learns of any indications of Garza's independent liability, at which point Ford may withdraw from the defense, allowing Garza to obtain new counsel.
4. Garza asserts no knowledge of any facts suggesting potential independent liability and agrees to promptly notify Ford if such knowledge arises in the future.
5. Garza consents to representation by the law firm Colvin, Chaney, Saenz, Rodriguez, L.L.P., selected by Ford, and waives any conflicts of interest that may arise, even if Ford later withdraws its defense.
6. Garza further waives any conflict of interest claims related to the law firm representing both parties in this and other cases, in accordance with Texas law and ethical guidelines.

This summary captures the essential details and obligations outlined in the agreement while ensuring clarity and completeness.

Garza is responsible for all defense costs up until Ford assumes his defense. If Ford re-tenders Garza’s defense due to undisclosed facts by Garza, he must reimburse Ford for any incurred fees and expenses. Garza argues that his initial responsibility for defense costs does not determine Ford's ultimate liability, which may be governed by common law, other agreements, and Texas indemnity statutes. 

Common law indemnity in Texas is limited to products liability and negligence actions, requiring either an adjudication or admission of the manufacturer's liability. In 1993, Texas enacted Civil Practice and Remedies Code section 82.002, allowing innocent sellers to seek indemnification from manufacturers for losses in products liability actions, unless caused by the seller’s own negligence or misconduct. This statutory duty includes coverage for court costs, reasonable expenses, attorney fees, and damages. The manufacturer’s indemnification obligation arises upon notification of a lawsuit against the seller.

Garza had a right to statutory indemnity under section 82.002, which was activated when he notified Ford of the lawsuit on September 15, 2010. Ford offered to assume the defense on November 2, 2010, under the agreement's terms. The agreement states Ford would cover attorney fees and costs incurred on Garza's behalf only after the signature date, emphasizing that Ford is not liable for costs incurred prior to assuming the defense. Thus, if the agreement was signed in November 2010, Ford would be responsible for costs post-signature, independent of the trial's outcome.

Garza did not accept the indemnification agreement from Ford until September 29, 2011, which was when Ford assumed responsibility for Garza’s defense costs. Under Texas law, specifically section 82.002 of the Texas Civil Practice and Remedies Code, a manufacturer’s duty to indemnify is additional to any other legal or contractual obligations. The agreement explicitly stated that Ford would cover attorney fees incurred on behalf of Garza after the agreement was signed, while Garza was responsible for his defense costs up to that date. This execution of the agreement indicates Garza’s intent to waive his right to statutory indemnity.

Garza argued that the agreement could not be considered a release of his statutory indemnification claim due to the lack of explicit release language and the inclusion of conditions not stipulated in section 82.002. He claimed that Ford could not condition indemnification on his representations regarding potential liability or conflicts of interest. However, it was determined that section 82.002 does not require indemnification for losses resulting from the seller’s own negligence or misconduct. Thus, the agreement's provisions allowing Ford to reassess the defense based on potential independent liability and requiring Garza to affirm the absence of such liability were found to be consistent with section 82.002. Additionally, the requirement for a waiver of conflicts of interest was deemed permissible.

In reference to previous case law, specifically Victoria Bank, Trust Co. v. Brady, it was established that a release must explicitly mention the claims to be released. The court ruled that claims not clearly related to the subject matter of the release remain actionable. Therefore, if a claim is not explicitly addressed in the release, it is not discharged.

In *Keck, Mahin, Cate v. National Union Fire Ins. Co.*, 20 S.W.3d 692, 697 (Tex. 2000), the Texas Supreme Court evaluated whether an insured's release of attorney's fees extended to all malpractice claims related to legal services during a designated timeframe or was confined to unpaid fees. The Court determined that the release in question was more comprehensive than the one previously examined in *Brady*, stating it included "all demands, claims or causes of action of any kind whatsoever," and did not necessitate specific identification of every potential claim. While the release did not explicitly mention a statutory right to indemnification under section 82.002, it did not restrict itself to indemnification claims alone. The Court affirmed that neither common law nor section 82.002 prohibits parties from creating their own indemnification agreements, referencing *ASI Tech.*, which upheld the validity of waiving statutory indemnity rights through clear contractual language.

The agreement allowed Ford to withdraw its defense if it uncovered evidence of Garza's negligence or undisclosed facts, stipulating that Garza would reimburse Ford for incurred expenses during the period of assumed defense. Garza’s attorney acknowledged this risk and accepted the agreement after the plaintiffs had presented their evidence, thus precluding any argument for prior indemnification rights under section 82.002, which would undermine the agreement's clarity. The trial court's summary judgment favoring Ford was upheld.

Ford counterclaimed, asserting that Garza's demand for attorney's fees breached the agreement, and sought fees based on Texas Civil Practice and Remedies Code sections 38.001 and 37.009. The trial court awarded Ford attorney’s fees amounting to $20,375.41, though it did not specify the statutory basis for this award.

Garza contends that Ford is not entitled to attorney’s fees under the Declaratory Judgment Act. The Act allows individuals to seek a declaration regarding their rights under a written contract or statute, and permits the court to award costs and reasonable attorney’s fees deemed equitable. Declaratory judgments can be pursued even when a breach of contract claim exists, as prohibiting this would contradict the Act’s provisions. However, the Act cannot be misused to claim otherwise impermissible attorney’s fees, and a party cannot reclassify a standard breach of contract claim as a declaratory judgment claim just to secure fees. 

Garza's cross-claim sought indemnity for court costs and attorney’s fees under section 82.002, but he did not reference the relevant agreement. Ford countered that Garza breached their agreement by filing his cross-claim and sought a declaration that Garza's claim was discharged by the agreement, holding him accountable for attorney’s fees incurred before a specified date. The interpretation of the agreement was crucial for Ford's claims. Even if Ford did not win its breach of contract claim, it was entitled to a declaratory judgment regarding the parties' rights under the agreement. The court found that Ford did not improperly use the Declaratory Judgment Act to obtain fees, and thus upheld the trial court’s award of attorney’s fees to Ford without needing to address the breach of contract claim. The appellate court affirmed the trial court’s judgment.