Rowan Companies, Inc. v. Wilmington Trust Co. (Tex.App.- Houston [14th Dist.] Oct. 8, 2009)
(Guzman) (federal maritime contract, offshore drilling, construct construction, appraisal procedure)
REVERSED AND REMANDED: Opinion by
Justice Guzman      
Before Justices Frost, Seymore and Guzman  
14-07-00465-CV        Rowan Companies, Inc. v. Wilmington Trust Company, Not in Its Individual Capacity but
Solely as Owner Trustee of the Rowan-Halifax Jack-Up Rig, TEXTRON FINANCIAL CORPORATION, NORTH SEA
INVESTMENTS, INC., and NORTH SEA (CONNECTICUT   LP    
Appeal from 215th District Court of Harris County
Trial Court Judge:
LEVI JAMES BENTON
Dissenting Opinion by Justice Frost in Rowan Companies, Inc. v. Wilmington Trust Company  

S U B S T I T U T E    M A J O R I T Y   O P I N I O N

We deny the appellees' motion for rehearing, but to clarify the scope of remand, our majority and dissenting
opinions of March 31, 2009 are withdrawn and these substitute majority and substitute dissenting opinions
issued in their respective places.

In this summary-judgment appeal, bareboat charterer Rowan Companies, Inc. challenges the trial court's
judgment in favor of the Wilmington Trust Company, the Owner Trustee of the oil rig Rowan-Halifax.  Rowan
argues that the Owners improperly invoked an appraisal provision in their contract with Rowan after the oil rig
was destroyed by a hurricane, thereby impermissibly increasing the rig's estimated residual value, and hence,
the amount Rowan was contractually required to pay for loss of the rig.  

We agree, and therefore, reverse and remand.

I.  Factual and Procedural Background

Rowan Companies, Inc. (“Rowan") is an international offshore and land drilling contractor.  In 1984, Rowan
entered into a sale/leaseback transaction involving the Rowan-Halifax 166-C jack-up drilling rig (the “Halifax").  
The transaction was accomplished through a Participation Agreement and a bareboat charter (the “Charter"),
both dated December 1, 1984 (collectively, the “Operative Documents").  The parties to the Participation
Agreement included Rowan as Charterer, Textron Financial Corporation (“Textron") as Owner Participant, and
Wilmington Trust Company (“Wilmington") as Owner Trustee.[1]  The Charter provided that “so long as the
Charterer's Stockholders' Equity is at least $400,000,000, the Charterer may self-insure up to the excess of the
SLV [i.e., Stipulated Loss Value] Amount over $55,000,000 . . . ."

A.     Initial Appraisal

The Participation Agreement required, as a condition precedent, that Textron receive appraisals of the Halifax by
Rush Johnson Associates and Lowell Johnston & Associates, Inc.  Both appraisals were to be dated as of the
Closing Date of the contract, contractually defined to mean December 28, 1984.  Each appraisal was required to
contain the appraiser's estimates that, as of that date, (1) the Halifax's fair market value was $66.5 million, (2)
the remaining useful life of the vessel at the end of the Basic Term was at least 22 years, and (3) the Halifax's
residual value at the end of the Basic Term was not less than twenty percent of the owner's cost for the Vessel,
defined to be $66.5 million.[2]  In section 18 of the Charter, the parties also provided for a Renewal Option, the
terms of which are discussed further infra and set forth in full in the appendix to this opinion.

On December 26, 1984, Larry Hasty of Rush Johnson Associates appraised the Halifax and opined that:

*       The expected useful life of the rig in December 1984 was “at least" twenty years.

*       The Estimated Residual Value at the end of a sixteen-year lease period was “estimated to be twenty (20)
percent of the current fair market value, determined without including in such value any increase or decrease for
inflation or deflation during the lease and after subtracting any costs to the rig's owner for redelivery of the rig."
[[3]]

*       A remaining useful life of five years was Aa reasonable estimate of what the remaining useful life of the rig"
would be at the end of the original sixteen-year lease term.

*       It was “reasonable to assume" that it would be commercially feasible that the rig would be usable by
someone other than the lessee or an affiliate of the lessee at the end of the original sixteen-year lease term, and
it could be expected that the twenty percent residual value would be realized at that time.

*       The current fair market value of the rig was $66.5 million.

There is no evidence in the record that Textron obtained an appraisal from Lowell Johnston & Associates, Inc.,
and the parties do not state if this condition was performed or whether any party objected to its non-performance.

B.        Contract Performance

The Basic Term of the Charter passed uneventfully and expired in September 2000.  Rowan exercised its option
to renew the Charter, and the parties agreed to a Renewal Term of seven-and-one-half years.  On August 15,
2005, Jane M. Lavoie, Textron's vice president of operations, wrote to Bill Wells, Rowan's treasurer and vice
president of finance, questioning the adequacy of Rowan's insurance coverage of the Halifax:

The insurance certificates provided to us for the current year indicate that the hull insurance . . . on the Halifax is
for $43.35 million.  While we do not claim to be experts on the current market value of these assets, we note that
a recent Jefferies & Company report estimates the fair market value of 116C rigs to be $75 million and the
replacement cost to be $125 million.  We understand that the Jefferies reports include information provided by
Rowan.  If this information is correct, it appears that the hull insurance on these rigs needs to be substantially
increased.

In late September 2005, Hurricane Rita struck the Gulf Coast, leaving no trace of the Halifax.  The vessel was
presumed sunk, and Rowan gave notice to Wilmington on October 5, 2005 that the rig had been destroyed.  
Rowan's hull insurer paid policy limits exceeding $43.35 million on the claim, and in February 2006, the parties
agreed to place the insurance proceeds in an escrow account until their dispute over ownership of the proceeds
could be resolved.

C.        The Declaratory Judgment Action

On November 3, 2005, Rowan filed a petition for declaratory relief against Textron and Wilmington, in
Wilmington's  capacity as Owner Trustee of the Halifax.[4]  On November 29, 2005, Wilmington notified Rowan
that it was invoking the Appraisal Procedure as that term is defined in the Operative Documents.  Textron and
Wilmington (collectively, the "Owners") asserted counterclaims for breach of contract, declaratory judgment, and
attorneys' fees.

On or about March 13, 2006, Rowan informed Wilmington that it calculated the Stipulated Loss Value of the
Halifax to be $22,840,898.93, plus accrued interest.  Rowan eventually paid Wilmington this amount, which
included the Basic Hire of $2,617,489.13 payable on March 15, 2006.

On March 15, 2006, Wilmington wrote to advise Rowan that it had not received payment of the Stipulated Loss
Value, which, according to its calculations, was  $80,235,317.37; this amount was based on the post-loss
appraisal which Wilmington organized.  In addition, Wilmington stated that the Basic Hire payment of
$2,617,489.13 due on March 15, 2006 had not been paid,[5] and notified Rowan pursuant to Section 15(a) of
the Charter that if the full Stipulated Loss Value was not paid by close of business on March 17, 2006, a
contractual AEvent of Default" would occur.[6]

D.        Cross-Motions for Summary Judgment

The Owners moved for traditional summary judgment, asserting that Rowan owed Wilmington $59,882,522.06
plus interest under the terms of the Charter.[7]  In addition, they asked the trial court to declare their rights under
the insurance provisions of their contracts with Rowan[8] and award attorneys' fees incurred in prosecuting their
contract claim.  According to the Owners, Rowan failed to make payments that were due on March 15, 2006
resulting from the loss and failed to maintain adequate insurance.  In its cross-motion for traditional summary
judgment, Rowan asked the trial court to declare that it had paid all amounts due under the Charter provision
governing payments due in the event of a loss.  In addition, Rowan asked the trial court to direct the escrow
agent to pay Rowan all remaining hull insurance proceeds.[9]

On March 7, 2007, the trial court denied Rowan's motion for summary judgment and granted in part the Owners'
motion for summary judgment.  Although the trial court did not state the grounds for its judgment, it ruled that the
Owners' motion was "granted as set out [in the trial court's final judgment] and otherwise denied."  Specifically,
the court ordered Rowan to pay Wilmington (1) $59,882,522.06; (2) interest on that sum in the amount of
$3,467,364.37 through October 31, 2006; (3) interest from and including November 1, 2006 through and
including March 6, 2007 at the rate of $15,386.48 per day; (4) $500,000 for reasonable and necessary
attorneys' fees; and (5) post-judgment interest on the sum of all of these amounts.  In addition, the trial court
declared that Wilmington "is entitled to recover all proceeds paid from any hull and machinery policies on the
Halifax which were in effect at the time of its loss, including specifically those proceeds deposited in the escrow
account which the parties jointly established . . . ."  Finally, the trial court explained that all proceeds previously
paid to Wilmington had been credited in calculating the judgment.  Rowan's motion for new trial was overruled by
operation of law, and this appeal timely ensued.

II.  Issues Presented

In a single issue, Rowan contends the trial court erred in denying its motion for summary judgment and granting
summary judgment in favor of the Owners.

III.  Standard of Review

We review summary judgments de novo, Valence Operating Co. v. Dorsett,[10] and if the trial court grants the
judgment without specifying the grounds, we must affirm if any of the grounds presented are meritorious.  FM
Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872-73 (Tex. 2000).  We consider all grounds preserved
for review that are necessary for final disposition of the appeal.  See Cincinnati Life Ins. Co. v. Cates, 927 S.W.
2d 623, 626 (Tex. 1996).  In a traditional motion for summary judgment, the movant has the burden of showing
that there is no genuine issue of material fact and it is entitled to judgment as a matter of law.  Tex. R. Civ. P.
166a(c); Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997).  To be entitled to a final traditional
summary judgment, a defendant must conclusively negate at least one essential element of each of the plaintiff's
causes of action or conclusively establish each element of an affirmative defense.  Sci. Spectrum, Inc. v.
Martinez, 941 S.W.2d 910, 911 (Tex. 1997).  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).  Once the defendant establishes its
right to summary judgment as a matter of law, the burden shifts to the plaintiff to present evidence raising a
genuine issue of material fact.   City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678B79 (Tex.
1979).

When, as here, both sides move for summary judgment, each bears the burden of establishing that it is entitled
to judgment as a matter of law; neither side can prevail because of the other's failure to discharge its burden.
City of Garland v. Dallas Morning News, 969 S.W.2d 548, 552 (Tex. App.- Dallas 1998) (en banc), aff'd, 22 S.W.
3d 351 (Tex. 2000).  On appeal, we review all summary-judgment evidence, determine all questions presented,
and render the judgment the trial court should have rendered.  Valence Operating Co., 164 S.W.3d at 661.  We
may affirm the judgment, reverse and render a judgment for the other side if appropriate, or reverse and remand
if neither party has met its summary-judgment burden.  Hackberry Creek Country Club, Inc. v. Hackberry Creek
Home Owners Ass'n, 205 S.W.3d 46, 50 (Tex. App.- Dallas 2006, pet. denied).

IV.  Choice of Law

The resolution of this dispute is determined by the meaning of the contract term "estimated residual value."  
Before we can analyze this phrase under the correct rules of contract construction, we must determine which law
applies to the various documents governing the transactions between the parties.

A.        The Charter

The parties agreed that the "Charter shall in all respects be governed by, and construed in accordance with, the
general maritime laws of the United States of America and otherwise by the laws of the State of New York."  
When a dispute is not inherently local, federal law controls the interpretation of a maritime contract.  Norfolk S.
Ry. Co. v. Kirby, 543 U.S. 14, 22-23 (2004) (citing Kossick v. United Fruit Co., 365 U.S. 731, 735 (1961)).  The
determination of whether an agreement constitutes a maritime contract subject to federal maritime law depends
upon "the nature and character of the contract" and whether it has "reference to maritime service or maritime
transactions."  Id. at 23-24 (quoting N. Pac. S.S. Co. v. Hall Bros. Marine Ry. & Shipbuilding Co., 249 U.S. 119,
125 (1919)).  Because "a charter party is a classic example of a maritime contract," federal law governs its
interpretation.  See Fontenot v. Mesa Petroleum Co., 791 F.2d 1207, 1214 (5th Cir. 1986); Novoship (UK) Ltd. v.
Ruperti, 545 F. Supp.2d 328, 332 (S.D.N.Y. 2008) ("There can be no dispute that the contracts at issue here -
charter party contracts - should be considered maritime contracts.").

Federal maritime law "is an amalgam of traditional common-law rules, modifications of those rules, and newly
created rules."  E. River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 865 (1986).  When interpreting
a maritime contract, the general rules of contract construction and interpretation apply.  See Marine Overseas
Servs., Inc. v. Crossocean Shipping Co., Inc., 791 F.2d 1227, 1234 (5th Cir. 1986).

B.        The Participation Agreement

Although the Halifax Charter and the Participation Agreement are part of the same transaction and therefore are
interpreted together,[11] the rules of construction applicable to each are not necessarily the same.[12]  The
Participation Agreement is the contract by which Rowan committed to sell the Halifax to the Owners; unlike a
charter party, contracts for the sale of a vessel are not maritime in nature.  See, e.g., Herman Family Revocable
Trust v. Teddy Bear, 254 F.3d 802, 804 (9th Cir. 2001) (stating that contracts for the sale of a vessel are not
maritime in nature); Vrita Marine Co. Ltd. v. Seagulf Trading LLC, 572 F. Supp. 2d 411, 411 (S.D.N.Y. 2008)
(same).  The parties agreed that the Participation Agreement Ashall in all respects be governed by, and
construed in accordance with, the laws of the State of New York applicable to agreements made and to be
performed entirely within such State, including all matters of construction, validity and performance."  Although
the Owners cite New York law as well as the law of other jurisdictions in their motion for summary judgment, the
extent to which the parties urge the application of New York law rather than federal maritime law to various
contract provisions is unclear.[13]  Thus,  we apply the rules of contract construction set forth in federal maritime
law to the Charter's provisions, and we interpret provisions of the Participation Agreement in accordance with
Texas contract law except to the extent that the parties have provided sufficient briefing of New York law to allow
us to apply the substantive law of that state.  See Coca-Cola Co. v. Harmar Bottling Co., 218 S.W.3d 671, 685
(Tex. 2006) (noting that, absent proof or argument to the contrary, Texas courts generally may presume that the
determinative law of another state is the same as Texas law).

V.  Analysis

A.        "Estimated Residual Value"

It is uncontroverted that the Halifax disappeared when Hurricane Rita struck the Gulf Coast during the Renewal
Term of the Charter.  Under Section 12 of the Charter, the loss triggered Rowan's obligation to pay the Owners
as follows:

SECTION 12.  Loss, Destruction, Condemnation or Damage.  (a) Payment of Stipulated Loss Value.  Upon the
occurrence of an Event of Loss with respect to the Vessel, the Charterer shall forthwith . . . give the Owner
Trustee and the Indenture Trustee notice of such Event of Loss and, on the next succeeding Hire Payment Date
60 days after such occurrence (or, if earlier, the final scheduled Hire Payment Date) pay to the . . . Owner
Trustee an amount equal to the sum of (i) Stipulated Loss Value calculated as of such Hire Payment Date, (ii) . .
. Basic Hire due and payable on such Hire Payment Date and (iii) any other Hire then due and payable.

(emphasis added).  The next succeeding Hire Payment Date sixty days after the loss fell on March 15, 2006,
and, with the exception of the Hire Payment regularly scheduled for that date and the Stipulated Loss Value
payable as a result of the loss, the parties do not contend that "any other Hire [was] then due and payable."  
Thus, on March 15, 2006, Rowan was required to pay (1) the Stipulated Loss Value calculated as of that date;
and (2) the Basic Hire due on March 15, 2006.  Rowan does not dispute that the Basic Hire due on that date was
$2,617,489.13.  The parties' disagreement arises from their differing interpretations of one of the components of
"Stipulated Loss Value."

The Participation Agreement provides that, "'Stipulated Loss Value' as of any date during any Renewal Term
shall mean the amount determined pursuant to Section 18 of the Charter."  Under section 18 of the Charter,
Stipulated Loss Value on a given Hire Payment Date is defined to equal the sum of (1) the Basic Hire due on that
date, (2) the present value on the Hire Payment Date of all remaining payments, and (3) the present value on
the Hire Payment Date of the "estimated residual value."[14]  The central dispute in this appeal concerns the
meaning of the phrase "estimated residual value" as used in section 18(a)(B)(ii)(b) of the Halifax Charter.

Section 18(a) provides in pertinent part:

SECTION 18(a) Fixed Rental Renewal Option.

Such Renewal Term shall be for a period that, when added to the Interim Term and the Basic Term, shall not
exceed 80% of the total estimated remaining economic useful life of the Vessel (measured from the Closing
Date) as determined by the Appraisal Procedure . . .; provided, however, that

(A)      at the end of such Renewal Term the Vessel will have an estimated residual value . . . as determined in
such Appraisal Procedure of not less than 20% of the Owner's Cost for the Vessel and

(B)      the use of the Vessel will, as of the beginning of such Renewal Term and as determined in such Appraisal
Procedure, be reasonably expected to be commercially feasible (in a manner that would permit the Owner
Trustee to realize the residual value described in the foregoing clause (A)) by some Person other than the
Charterer who could charter or purchase the Vessel from the Owner Trustee at the end of such Renewal Term.  
In addition to the limitation set forth in the next preceding sentence, no Renewal Term pursuant to this paragraph
(a) shall be entered into if it would end before one year after the commencement thereof.  During such Renewal
Term, all of the provisions of this Charter shall continue in full force and effect, except that

(ii)       Stipulated Loss Value on each Hire Payment Date during such Renewal Term shall be equal to the sum of
Basic Hire payable on such Date and the present value as of such Date of (a) Basic Hire that would have been
payable over the balance of such Renewal Term and (b) the estimated residual value as of the end of such
Renewal Term (present value to be determined by using a discount rate of 10% compounded semiannually) as
determined by the Appraisal Procedure.

(emphasis added).

Rowan contends that the phrase "estimated residual value" is a term of art with a recognized usage in the tax,
accounting, and financial fields and is the estimate made at the beginning of the lease of the value of the vessel
at the end of the lease.  The Owners contend that "estimated residual value" is equal to the fair market value
that the vessel would have commanded at the end of the Renewal Term if the loss had not occurred.  After
analyzing the agreements under the applicable rules of contract interpretation, we conclude that the
interpretation advanced by Rowan is reasonable, and the interpretation described by the Owners is not.  We
therefore hold that the Halifax Charter is unambiguous and must be interpreted in the manner described by
Rowan.

1.         Intent of the Parties

Charter party agreements are a species of contract, and as such, they are subject to the general rules of
contract law.  Marine Overseas Servs., Inc., 791 F.2d at 1234.  Like other contracts, maritime contracts must be
interpreted to give effect to each of the contract's provisions.  Am. Roll-On Roll-Off Carrier, LLC v. P&O Ports
Baltimore, Inc., 479 F.3d 288, 293 (4th Cir. 2007); see also Restatement (Second) of Contracts: Rules in Aid of
Interpretation ' 202(2) (1979) (AA writing is interpreted as a whole, and all writings that are part of the same
transaction are interpreted together.").  Our primary purpose in interpreting a maritime contract is to ascertain
the intent of the parties.  F.W.F., Inc. v. Detroit Diesel Corp., 494 F. Supp. 2d 1342, 1357 (S.D. Fla. 2007).  
Thus, we construe a charter "according to the intent of the parties as manifested by the whole instrument rather
than by the literal meaning of any particular clause taken by itself."  The Rice Co. (Suisse), S.A. v. Precious
Flowers Ltd., 523 F.3d 528, 534 (5th Cir. 2008) (quoting  The Framlington Court, 69 F.2d 300, 303 (5th Cir.
1934)); see also F.W.F., Inc., 494 F. Supp. 2d at 1357 ("The elementary canon of interpretation is, not that
particular words may be isolatedly considered, but that the whole contract must be brought into view and
interpreted with reference to the nature of the obligations between the parties, and the intention which they have
manifested in forming them." (quoting O'Brien v. Miller, 168 U.S. 287, 297-300 (1897))); Restatement (Second)
of Contracts: Rules in Aid of Interpretation ' 202(1) (1979)  ("Words and other conduct are interpreted in the light
of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight.").  
Contractual provisions are read in a manner that effectuates the contract's spirit and purpose, considered as a
whole and interpreted so as to harmonize and give meaning to all of its provisions.  Arizona v. United States, 575
F.2d 855, 863 (Ct. Cl. 1978).  An interpretation that affords "a reasonable meaning to all parts will be preferred
to one which leaves a portion of it useless, inexplicable, inoperative, void, insignificant, meaningless,
superfluous, or achieves a weird and whimsical result."  Id.

2.         Plain Language

Whenever possible, we consider the plain language of the contract first.  Flores v. Am. Seafoods Co., 335 F.3d
904, 910 (9th Cir. 2003).  Unless a different intention is manifested, we interpret language according to its
generally prevailing meaning.  Restatement (Second) of Contracts: Rules in Aid of Interpretation '  202(3)(a)
(1979).

In the phrase, "estimated residual value," to "estimate" means "[t]o set a value on or appraise," "[t]o form an
approximate judgment or opinion regarding the value,'" or to "'[c]alculate approximately.'" United States v. Foster,
131 F.2d 3, 7 (8th Cir. 1942).  "Value," as used in the context presented here, refers to monetary worth.  See
Webster's Third New Int'l Dictionary, 2530 (Philip Babcock Gove, ed., 3d ed., 1993).  More specifically, "residual
value" is defined as the "[a]mount expected to be obtained when a fixed asset is disposed of at the end of its
useful life (also called scrap or salvage value)."   Black's Law Dictionary 1552 (6th ed. 1990).[15]  Thus, the
generally prevailing meaning of the words comprising the phrase "estimated residual value" as used in the
Operative Documents suggests an approximate calculation of the monetary value of the vessel at the end of the
lease term under discussion.  This meaning is consistent with Rowan's argument that "estimated residual value"
was required to be calculated before the loss, because after the vessel vanished, its approximate value at the
end of the lease term would be nothing.

3.         Terms Used Elsewhere in the Operative Documents

It is the Owners' position, however, that "estimated residual value" is calculated after an event of loss and is
equal to the fair market value that the vessel would have had if the loss had not occurred.  But every provision of
a maritime contract must be read in light of the others so as to give each the meaning reflected by the contract
as a whole.  Am. River Transp. Co. v. Morton Int'l, Inc., No. 06-6103, 2008 WL 2436176, at *1 (E.D. La. June 13,
2008).  We therefore cannot ignore the fact that the parties have actually used the terms "fair market value" and
"residual value" elsewhere in the contract to refer to non-equivalent valuations.[16]  For example, section 3.01(j)
of the Participation Agreement describes the following conditions precedent:

The Owner Participant shall have received . . . appraisals by Rush Johnson Associates and [L]owell [J]ohnston &
[A]ssociates, [I]nc., in form and substance satisfactory to the Owner Participant . . . and dated the Closing Date,
stating in each case:

(i)        such appraiser's estimate of the fair market value of the Vessel on the Closing Date, which fair market
value shall be equal to $66,500,000;

(ii)       such appraiser's estimate as of the Closing Date of the remaining useful life of the Vessel and the
residual value thereof at the end of the Basic Term (without taking into account the effects of inflation or
deflation and costs of removal to the Owner Participant or the Owner Trustee), which estimates shall be not less
than 22 years and not less than 20% of Owner's Cost for the Vessel, respectively . . . .

(emphasis added).  Thus, the Participation Agreement required an initial appraisal of two different values.  The
first figure represented the vessel's then-current fair market value.  The second figure was a prediction, made
before the lease term began, of the vessel's residual value when the lease term ended sixteen years later.  This
section of the Participation Agreement is noteworthy in that it illustrates that the parties did not use the terms
"estimated residual value" and "fair market value" to refer to the same thing.  Rowan's interpretation of
"estimated residual value" is consistent with the parties' use of these words elsewhere in the contract to require
an approximate calculation of the vessel's residual value in the future.  In contrast, the Owners' interpretation of
"estimated residual value" requires speculation regarding the fair market value the vessel would have had if it
had survived.

Further, the Owners' interpretation requires the terms "residual value" and "fair market value" to be used in ways
that not only are inconsistent with the use of these terms elsewhere in the contract, but  which also render some
contract provisions meaningless.  For example, in section 16(b) of the Halifax Charter, the parties agreed that in
the event of default,

[T]he Owner Trustee may, within 30 days after the Charterer shall make the full payment of Basic Hire and
Stipulated Loss Value as aforesaid, give the Charterer written notice requesting that the Fair Market Sales Value
of the Vessel as of the date as of which Stipulated Loss Value was determined pursuant to clause (ii) of this
Section 16(b) be determined.  If the Fair Market Sales Value of the Vessel as of such date shall be determined to
exceed the Stipulated Loss Value paid pursuant to the first sentence of this Section 16(b), the Charterer shall,
within 60 days after such determination, pay the amount of such excess to the Owner Trustee.

If, as the Owners imply, estimated residual value is the same as fair market value, then this provision is
meaningless.  As previously discussed, Stipulated Loss Value is the sum of  estimated residual value plus the
present value of remaining Basic Hire payments.  If estimated residual value and fair market value are the same,
then Stipulated Loss Value is the sum of fair market value plus the present value of remaining Basic Hire
payments.  Under this interpretation, it is mathematically impossible for fair market value ever to exceed
Stipulated Loss Value, and this provision of the Charter is superfluous.

The Owners' interpretation also uses the word "estimate" in a manner inconsistent with its usage elsewhere in
the contract.  Although "estimate" is used in other provisions to refer to an approximate calculation based on
known information, the Owners' use of the word "estimated" in its interpretation of the phrase "estimated residual
value" requires an appraiser to calculate the fair market value of the vessel at the end of the lease term based
on an assumption -the continued existence of the vessel - that is known to be false.

4.         Rule of the Last Antecedent

Under the grammatical "rule of the last antecedent," "qualifying words, phrases, and clauses" are to be applied
only to the immediately preceding words or phrase[17] and "are not to be construed as extending to and
including others more remote."  Elliot Coal Mining Co., Inc. v. Dir., Office of Workers' Comp. Programs,  17 F.3d
616, 629-30 (3d Cir. 1994) (quoting Azure v. Morton, 514 F.2d 897, 900 (9th Cir.1975)).  Pursuant to section 18
(a)(B)(ii)(b) of the Charter, one component of Stipulated Loss Value is "the estimated residual value as of the
end of such Renewal Term (present value to be determined by using a discount rate of 10% compounded
semiannually) as determined by the Appraisal Procedure."  Applying the rule of the last antecedent to this
language, the phrase "as determined by the Appraisal Procedure" does not modify "estimated residual value" as
the Owners contend, but instead modifies "such Renewal Term."[18]

5.         Absurd Result

The unreasonableness of the Owners' interpretation is further illustrated by the  inconsistent ways in which it
deals with the effect of the hurricane on supply, demand, and value.  The destruction of the Halifax and similar
rigs decreased the supply of such vessels.  Consequently - and as stated by the Owners' own appraisers -
demand for such vessels after the hurricane exceeded supply.[19]  Because demand exceeded supply, the
market price for such vessels increased.  See United States v. Cors, 337 U.S. 325, 333-34 (1949) (discussing
analogous situation in which government demand for vessels in a time of national emergency outstrips supply,
resulting in inflated prices for vessels and causing the market to be an unfair indication of value).  Thus, when
estimating the fair market value that a vessel such as the Halifax would have had at the end of the Renewal Term
had it survived, the appraisers used market prices that were based in part on the destruction of the Halifax,
among others.  In effect, the Owners urge an interpretation that accounts for the effect of the hurricane on the
market but ignores its effect on the rig.  Instead of acknowledging the destruction of the vessel as a cause of
decreased supply, the Owners treat the Halifax as the beneficiary of increased demand.  This interpretation
reaches an absurd result in which the destruction of the Halifax increased its value.  In addition, it highlights
another barrier to this interpretation: the absence of shared assumptions.

6.         No Shared Assumptions for a Post-Loss Appraisal

The Operative Documents provide no set of shared assumptions on which a post-loss appraisal could be
based.  For example, Section 7(a)(ii) of the Charter requires the Charterer to "keep the Vessel in such condition
as will entitle her to the highest classification and rating by the American Bureau of Shipping for vessels of the
same age, type and use . . . ."  This obligation does not apply "during such period as . . . an Event of Loss shall
have occurred and be continuing . . . ."  Charter, ' 7(a)(y).  Thus, there is no agreement concerning the
hypothetical condition of the vessel at the time of a post-loss appraisal.  Nevertheless, the appraisers retained
by the Owners used the assumption that the vessel was in the highest classification rating, despite the explicit
contract provision that this assumption does not apply to an Event of Loss.  As a result, their opinions concern a
hypothetical rig that not only survived the hurricane, but did so without significant damage.  The absurdity of this
result further illustrates that if the parties intended to permit the Appraisal Procedure to be invoked after a loss,
they would have eliminated the exception in section 7(a)(y) of the Charter or otherwise agreed upon the
assumptions they would apply regarding the vessel's hypothetical condition after its loss.[20]

B.        Timing of Appraisal Procedure

As the foregoing discussion demonstrates, the Operative Documents  do not support an interpretation that the
parties intended estimated residual value to be based on a post-loss appraisal.  A close reading of these
documents also demonstrates that the parties did not intend for the Appraisal Procedure to be invoked after the
Renewal Term began.

1.         Plain Language

As previously indicated, the parties agreed that the length of the Renewal Term would be determined by the
Appraisal Procedure.  In section 18(a)(A) and 18(a)(B) of the Charter, the parties agreed that "at the end of
such Renewal Term the Vessel will have an estimated residual value . . . as determined in such Appraisal
Procedure of not less than 20% of the Owner's Cost for the Vessel and . . .  the use of the Vessel will, as of the
beginning of such Renewal Term and as determined in such Appraisal Procedure, be reasonably expected to be
commercially feasible . . . ." (emphasis added).  The use of the word "such" indicates that the length of the
Renewal Term and the minimum estimated residual value are determined from the same Appraisal Procedure.
[21]  Similarly, in section 18(a)(B)(ii)(b), the Stipulated Loss Value on each Payment Hire Date during the
Renewal Term includes "the estimated residual value as of the end of such Renewal Term . . . as determined by
the Appraisal Procedure." (emphasis added).  This is the same Appraisal Procedure referred to earlier in section
18, i.e., the Appraisal Procedure utilized to determine both the length of the Renewal Term and to ascertain
whether the  minimum estimated residual value is at least twenty percent of the Owners' Cost.

As expressed in the language of section 18(a), the parties contemplated the use of a single Appraisal
Procedure, which would determine (1) the vessel's remaining useful life measured from the Closing Date (i.e.,
the period used to determine the length of the Renewal Term), and (2) whether the estimated residual value was
at least twenty percent of the Owners' Cost of $66.5 millionCi.e., $13.3 million.  Specifically, the Appraisal
Procedure was to be used to calculate the Renewal Term within a range of one to seven-and-one-half years.  
The parties intended that the Renewal Term be determined before it began, and there is no indication in the
Operative Documents that the length of the Renewal Term could be varied during the term as initially agreed
upon by the parties.  Thus, unless "Appraisal Procedure" means different things in different sentences of the
same contract provision, then the Appraisal Procedure was intended to be used before the start of the Renewal
Term to determine its length.  Moreover, section 18(a) requires an appraiser to certify that the estimated residual
value at the end of the Renewal Term will be at least $13.3 million.  Significantly, this section  contains no
language requiring or permitting the adjustment of the estimated residual value.

The Owners' interpretation, however, requires us to ignore the word "such" and disconnect the determination of
the Vessel's remaining useful life from the determination that the minimum estimated residual value is at least
$13.3 million.  Because this interpretation would render the word "such" meaningless, we cannot adopt this view.

2.         "Appraisal Procedure" Defined

The contractual definition of "Appraisal Procedure" also supports Rowan's interpretation.  In Appendix A of the
Participation Agreement, "Appraisal Procedure" is defined as follows:

"Appraisal Procedure" shall mean the procedure specified in the succeeding sentences for determining an
amount, value or period.  If the Owner Trustee and the Charterer shall have been unable to agree on such
amount, value or period, and if either the Owner Trustee or the Charterer shall give written notice to the other
requesting determination of such amount, value or period by appraisal, the Owner Trustee and the Charterer
shall consult for the purpose of appointing a mutually acceptable qualified independent appraiser, who shall be a
marine surveyor.  If such parties shall be unable to agree on an appraiser within 20 days of the giving of such
notice, such amount or value shall be determined by a panel of three independent appraisers, each of whom
shall be a marine surveyor. (emphasis added).

The parties' rights to request appraisal is subject to the condition precedent that the parties "shall have been"
unable to agree.  In determining the meaning of this phrase, we apply normal grammatical rules.  "Shall have
been" is the future perfect continuous tense, "used to express a continuous, ongoing action which will be
completed by a certain time in the future."[22]  Here, it cannot be said that there was a continuous, ongoing
failure to agree.  To the contrary, the parties entered the contract and performed for 21 years - throughout the
remaining existence of the rig - without any expression of disagreement regarding the variables required to be
determined pursuant to section 18(a).  Although the Owners essentially contend that they may require a formal
appraisal if the parties become unable to agree, this is not what is stated in the definition provided by the
Operative Documents.[23]

3.         Adjustment of Stipulated Loss Value

The Operative Documents also provide that Stipulated Loss Value "shall be adjusted as required in Article IX of
the Participation Agreement." Article IX of the Participation Agreement sets forth conditions under which Basic
Hire, Stipulated Loss Value, and Termination Value are to be recalculated.  These conditions consist of (i) a
change in the Closing Date, (ii) an increase in the Owner's transaction costs, and (iii) changes in the tax law.  
Notably, the occurrence of an "Event of Loss" or changes in the market are not listed among those conditions
that necessitate or permit a mid-term adjustment to Stipulated Loss Value.

4.         Generally Accepted Accounting Principles

It has been said that, under general maritime law, a court may not look beyond the written language of the
document to determine the intent of the parties unless the disputed contract provision is ambiguous.  Corbitt v.
Diamond M. Drilling Co., 654 F.2d 329, 332-33 (5th Cir. 1981).[24]  Although this is essentially a statement
regarding the parol evidence rule, it excludes "only evidence of prior understandings and negotiations which
contradicts the unambiguous meaning of a writing which completely and accurately integrates the agreement of
the parties."  Battery S. S. Corp. v. Refineria Panama, S. A., 513 F.2d 735, 739-40 (2d Cir. 1975).  

Conversely, when extrinsic evidence is considered for the purpose of interpretation, the parol evidence rule is
inoperative.  Garza v. Marine Transp. Lines, Inc., 861 F.2d 23, 27 (2d Cir. 1988).  Having concluded that the
unambiguous language of the Operative Documents demonstrates the intent of the parties to use the Appraisal
Procedure not later than the start of the Renewal Term - and only if they have been unable to agree on an
amount, value, or period - we further note that this conclusion is consistent with, but not dictated by, generally
accepted accounting principles ("GAAP").

GAAP "'encompass[] the conventions, rules, and procedures that define accepted accounting practice at a
particular point in time.'" Shalala v. Guernsey Mem'l Hosp., 514 U.S. 87, 101 (1995).  Foremost among the
sources informing GAAP is the Financial Accounting Standards Board ("FASB"), a private organization founded
at the recommendation of the American Institute of Certified Public Accountants to establish accounting
principles.  Statement of Policy on the Establishment and Improvement of Accounting Principles, SEC Release
No. AS-150, 1973 WL 149263, at *1 (Dec. 20, 1973).  The "principles, standards and practices promulgated by
the FASB in its Statements and Interpretations" are considered by the Securities & Exchange Commission "as
having substantial authoritative support, and those contrary to such FASB promulgations [are] considered to
have no such support."  Id.

FASB Statement No. 13 addresses the accounting treatment of estimated residual value in leasing transactions
and provides that estimated residual value is determined at the inception of the lease (or in some instances, at
the renewal of the lease).  Fin. Accounting Standards Bd., Statement of Fin. Accounting Standards No. 13
("FASB 13"), & 17 (2008).  This accounting standard further provides that A[a]n upward adjustment of the
estimated residual value shall not be made."  Id.

The Owners argue that the provisions of FASB 13 are applicable only to accounting.  For example, paragraph
43 of FASB 13 describes generally accepted accounting principles concerning the method by which a lessor in a
leveraged lease accounts for that investment.  The calculation of the lessor's investment includes the estimated
residual value of the leased asset.  FASB 13 & 43(c).  Except in circumstances not presented here, however, A[t]
he estimated residual value shall not exceed the amount estimated at the inception of the lease."  Id.  The same
restriction applies to the accounting of a lessor's investment in a "sales-type lease" and a "direct financing
lease."  See FASB 13 && 17(a), (d); 18(a), (d).  According to the Owners, these restrictions imply that the
estimated residual value can increase, but simply prevent the lessor from recognizing a gain on the investment
before it actually receives the money.

This argument ignores the distinction between estimated residual value and actual residual value.  Significantly,
the parties entered the Participation Agreement with the express understanding that estimated residual value
and actual residual value are not the same.  Moreover, the parties agreed in section 8.03(b) of the Participation
Agreement that Rowan did not guarantee the actual residual value of the Vessel.[25]  Thus, Rowan correctly
asserts that the A$13,300,000 figure remains the number that should be used in the formula for calculating what
Rowan owes."

By setting a time limit for invoking the Appraisal Procedure, the parties have allocated the risk of market
fluctuations.  If the Owners believed that the estimated residual value of the vessel would increase over time,
they could have invoked the Appraisal Procedure at the outset of the contract.  By failing to do so, they bore the
risk that they would lose value if the estimated residual value rose.  This is consistent with economic reality: if the
vessel remained in existence at the end of the lease so that its actual residual value could be realized, then the
Owners would bear the loss if its actual value was less than estimated and would reap the gain if its value
increased.  Conversely, if Rowan believed that the rig's estimated residual value would be less than $13.3
million, it could have invoked the Appraisal Procedure.  By failing to do so, it bore the risk that it might pay more
than the rig's residual value in the event of a loss, but it obtained the benefit of a locking in a "ceiling" for the
vessel's stipulated loss value.[26]

We conclude that the previously agreed-upon estimated residual value of $13.3 million was not changed by the
Owners' invalid invocation of the Appraisal Procedure after the loss.  Even if the 2000 amendment to the
Operative Documents contemplated a second "Appraisal Procedure," the intention of the parties as expressed in
section 18(a) does not encompass a post-casualty appraisal.  At most, the parties indicated that the appraisal be
performed at the start of the Renewal Term as part of the process of determining the length of the Renewal
Term.  Nothing in the Operative Documents allows backdating of estimated residual value as the Owners
suggest.  Although the Owners further argue that they agreed to use the Appraisal Procedure to calculate
estimated residual value "if and when there was a need to calculate SLV during the Renewal Term," the need to
calculate Stipulated Loss Value was not a mere contingency; rather, it was necessary to calculate Stipulated
Loss Value from the start of each term in order for Rowan to ascertain its insurance obligations.  Moreover,
under the Owners' model, it cannot be determined if or when Rowan breached the contract by under-insuring.

C.        Calculation of Amount Owed by Rowan

The amount Rowan owed in the Event of Loss is set forth in Section 12(a) of the Charter: on the next succeeding
Hire Payment Date 60 days after the Loss, Rowan was required to pay to Wilmington, as the Owner Trustee, an
amount equal to the sum of the Basic Hire due on that date and Stipulated Loss Value.  Stipulated Loss Value on
a given payment date is defined to equal the Basic Hire due on that date plus the present value of all remaining
payments, plus the present value of the estimated residual value.

On appeal, Rowan challenged only substitution of the estimated residual value of over $80 million as calculated
by the Owners rather than the previously agreed-upon estimated residual value of $13.3. million.  We agree that
the trial court erred in substituting the post-loss figure suggested by the Owners rather than the previously
agreed-upon figure; however, we are unable to simply render judgment.  See Tex. R. App. P. 43.3(a) ("When
reversing a trial court's judgment, the court must render the judgment that the trial court should have rendered,
except when . . . a remand is necessary for further proceedings . . . .").  Because the trial court concluded that
the insurance proceeds that Rowan deposited in an escrow account were insufficient to meet Rowan's
obligations to the Owners, it did not reach the question of the proper disposition of excess insurance funds.

D.        Excess Insurance Proceeds

Insurance proceeds in excess of the amount that Rowan is required to pay pursuant to Section 12(b)(i) of the
contract are to be divided between parties "as their interests may appear," but the Operative Documents provide
no description of the means by which the parties' interests are to be determined.  We therefore remand the
question of the method intended by the parties to be used in making this determination, for calculation of the
total amount Rowan is required to pay to Wilmington, and for determination of the parties' respective rights to
excess insurance proceeds.[27]

Although the Owners argue on appeal that "Rowan had no evidence of any insurable interest of its own in the
Halifax hull and equipment," the Owners did not pursue a no-evidence summary judgment or argue that there
was no such evidence.  In their traditional motion for summary judgment, the Owners merely asserted that
"Rowan has refused to identify any insurable interest of its own in the Halifax hull and equipment."  The Owners
do not contend that Rowan lacked an insurable interest, or even lacked evidence of an insurable interest, and
the foregoing is not properly characterized as an express ground for traditional or no-evidence summary
judgment

E.        Attorneys' Fees

Attorneys' fees were awarded pursuant to the parties' stipulation that appellees' reasonable and necessary
attorney fees for the breach-of-contract action total $500,000.  Rowan did not challenge this award in its
appellate brief, or assert error regarding the amount of fees at any time prior to its reply brief.  Although Rowan
reserved the right to challenge appellees' entitlement to attorneys' fees, it did not reserve the right to challenge
the amount.

On appeal, Rowan cites Barker v. Eckman as authority for reversing and remanding the attorneys' fee award.  
213 S.W.3d 306, 312-15 (Tex. 2006).  In Barker, the Texas Supreme Court concluded that the appellate court
could not conduct a proper factual sufficiency review because the jury's award of attorneys' fee was tied to an
inflated damage finding.  Id. at 314-15.  Here, however, the parties have stipulated to the proper amount of the  
Owners' attorneys' fees.  Under these circumstances, we are reasonably certain that the trial court's award of
attorneys' fees was not significantly influenced by the erroneous amount of damages it considered, but was
instead a result of the parties' stipulation.  Because we conclude that the Owners correctly asserted that Rowan
owed additional funds, albeit in a much lesser amount, we affirm the trial court's award of attorneys' fees.

V.  Conclusion

Pursuant to the unambiguous terms of the Operative Documents, the Owners were not entitled to recalculation
of  the estimated residual value  based on a post-loss appraisal.  We therefore reverse the trial court's judgment
and remand for determination of (1) the amount owed by Rowan based upon the Halifax's estimated residual
value of $13.3 million, (2) the disposition of excess insurance funds, and (3) applicable pre-judgment and post-
judgment interest based upon the corrected amounts.  Because the amount of attorneys' fees to be awarded
was based upon the parties' stipulation, we affirm the award of attorneys' fees.

/s/        Eva M. Guzman

Justice

Panel consists of Justices Frost, Seymore, and Guzman. (Frost, J. dissenting)

APPENDIX

The key provisions of the Participation Agreement are as follows:

Article III      CONDITIONS PRECEDENT

SECTION 3.01.  Conditions Precedent to Participations in Owner's Cost.  The obligation of each Participant on
the Closing Date to participate in the payment of Owner's Cost shall be subject to the fulfillment to the
satisfaction of, or waiver by, each Participant prior to or on the Closing Date, of the following conditions
precedent . . . :
. . .

(j)        Appraisers' Certificates. The Owner Participant shall have received . . . appraisals by Rush Johnson
Associates and [L]owell [J]ohnston & [A]ssociates, [I]nc., in form and substance satisfactory to the Owner
Participant . . . and dated the Closing Date, stating in each case:

(i)        such appraiser's estimate of the fair market value of the Vessel on the Closing Date, which fair market
value shall be equal to $66,500,000;

(ii)       such appraiser's estimate as of the Closing Date of the remaining useful life of the Vessel and the
residual value thereof at the end of the Basic Term (without taking into account the effects of inflation or
deflation and costs of removal to the Owner Participant or the Owner Trustee), which estimates shall be not less
than 22 years and not less than 20% of Owner's Cost for the Vessel, respectively; and

(iii)     that the Vessel does not constitute "limited use property" as that term is used in Rev. Proc. 76-30.

SECTION 3.02.  Conditions Precedent to Obligations of Charterer.  The obligations of the Charterer to sell the
Vessel to the Owner Trustee, and to charter the Vessel from the Owner Trustee on the Closing Date and to
carry out its other obligations under the Operative Documents . . . shall be subject to the performance by each of
the other parties hereto of their respective obligations hereunder . . . and the fulfillment to the satisfaction of, or
waiver by, the Charterer on or prior to the Closing Date, of the following additional conditions precedent:
. . .
(c)       Other Documents.  The Owner Participant shall have received the appraisals referred to in Section 3.01
(j) . . .

SECTION 8.03.  Representations, Warranties and Covenants of the Charterer.  The Charterer represents to,
and warrants and covenants for the benefit of, the Owner Participant that:
. . .
(b)       Useful Life, etc.  (i) The period consisting of the Interim Term and the Basic Term is not greater than 80%
of the estimated remaining useful life of the Vessel (measured from the Closing Date), (ii) the estimated fair
market value of the Vessel at the expiration of the Basic Term is equal to at least 20% of Owner's Cost, without
including in such value any increase or decrease for inflation or deflation and after subtracting from such value
any estimated cost to the Owner Trustee or the Owner Participant for removal and delivery of possession of the
Vessel to the Owner Participant at the end of such period, (iii) it is reasonable to expect that the Vessel will be
useful and usable by a party other than the Charterer or any person related to the Charterer at the end of the
Basic Term and any Renewal Term and capable of continued leasing or transfer to another party at that time
and that it will be commercially feasible to do so such that the Vessel is not and will not be "limited use property"
within the meaning of Revenue Procedure 76-30 as modified to the Closing Date, (iv) Owner's Cost is equal to
the fair market value of the Vessel on the Closing Date and (v) the estimated remaining useful life of the Vessel
(measured from the Closing Date) is 22 years; provided, however, that nothing contained in this Section 8.03(b)
shall constitute a guarantee of the actual useful life or residual value of the Vessel.[[28]]

Article IX      RECOMPUTATION OF BASIC RENT, STIPULATED LOSS VALUE AND TERMINATION VALUE

SECTION 9.02.  Stipulated Loss Value; Termination Value.  At the time any adjustment of Basic Hire percentages
shall be required under this Article IX or under Section 8.09, the Stipulated Loss Value and Termination Value
percentages specified in Schedules A and B annexed to the Charter shall be adjusted by the Owner Participant,
effective as of the first Hire Payment Date thereafter; provided, however, that Stipulated Loss Value and
Termination Value percentages shall not be reduced below those percentages that will produce Stipulated Loss
Value or Termination Value as of any Hire Payment Date until expiration of the Basic Term (taken together with
any Interim Hire or Basic Hire payable on such Hire Payment Date) at least equal to the principal amount of, and
interest on the Bonds outstanding on the Hire Payment Date to which such payment of Stipulated Loss Value or
Termination Value, as the case may be, relates.

SECTION 9.03.  Computation of Adjustments.  Upon the occurrence of an event requiring an adjustment to any
Basic Hire, Stipulated Loss Value or Termination Value percentages pursuant to this Article IX or under Section
8.08,[[29]] the Owner Participant shall make the necessary computations and, within 90 days of the Owner
Participant's knowledge of such event, furnish to the Charterer (with a copy to the Indenture Trustee) a
certificate of the Owner Participant setting forth the amount of any increase or decrease in such percentages
and the computation of such amounts.  If the Charterer shall disagree with any such amounts, they shall be
reviewed and determined by an independent accounting firm jointly chosen by the Owner Participant and the
Charterer or, in the absence of agreement as to such firm, by a third independent accounting firm jointly chosen
by two independent accounting firms, one chosen by the Owner Participant and one chosen by the Charterer.  
The costs of such verification shall be borne by the Charterer.

Appendix A   DEFINITIONS RELATING TO THE PARTICIPATION AGREEMENT, CHARTER, INDENTURE AND
TRUST AGREEMENT REFERRED TO BELOW           

"Appraisal Procedure" shall mean the procedure specified in the succeeding sentences for determining an
amount, value or period.  If the Owner Trustee and the Charterer shall have been unable to agree on such
amount, value or period, and if either the Owner Trustee or the Charterer shall give written notice to the other
requesting determination of such amount, value or period by appraisal, the Owner Trustee and the Charterer
shall consult for the purpose of appointing a mutually acceptable qualified independent appraiser, who shall be a
marine surveyor.  If such parties shall be unable to agree on an appraiser within 20 days of the giving of such
notice, such amount or value shall be determined by a panel of three independent appraisers, each of whom
shall be a marine surveyor.  One of such appraisers shall be selected by the Charterer and another shall be
selected by the Owner Trustee; provided, however, that if either the Charterer or the Owner Trustee shall fail to
select an appraiser within 30 days after the giving of such notice, such appraiser shall be selected by the other
party.  The two appraisers selected as aforesaid shall select the third appraiser or, if they shall be unable to
agree on a third appraiser within 10 days after each of such two appraisers shall have been selected, such third
appraiser shall be selected by the American Arbitration Association (or its successors).  The appraiser or
appraisers appointed pursuant to the foregoing procedure shall be instructed to determine such amount, value
or period within 45 days after such appointment and such determination shall be final and binding upon the
parties.  If three appraisers shall be appointed, the determination of the appraiser that shall differ most from the
second highest determination of all three appraisers shall be excluded, the remaining two determinations shall
be averaged and such average shall constitute the determination of the appraisers.  The fees and expenses of
the appraiser appointed by the Charterer shall be paid by the Charterer, the fees and expenses of the appraiser
appointed by the Owner Trustee shall be paid by the Owner Trustee and the fees and expenses of the third
appraiser shall be divided equally between the Charterer and the Owner Trustee, except that all fees and
expenses of all the appraisers shall be paid by the Charterer in the case of an appraisal or determination under
Section 16 of the Charter.

"Event of Loss shall mean any of the following events:
. . .
(d) the loss or disappearance of the Vessel, whether or not covered by insurance . . . .

"Fair Market Sales Value" shall mean, as to the Vessel or any other property, the fair market sales value thereof
that would be obtained in an arm's-length transaction between an informed and willing buyer and an informed
and willing seller, under no compulsion, respectively, to buy or sell.

"Hire Payment Dates" (a) for the Interim Term shall mean the first day of the Basic term, (b) for the Basic Term
shall mean the six-month anniversaries of the commencement of the Basic Term occurring in March and
September of each year after commencement of the Basic Term and (c) for any Renewal Term shall mean the
sixth-month anniversary of the first day of such Renewal Term, each sixth-month anniversary thereafter during
such Renewal Term and, if not such an anniversary, the last day of such Renewal Term.

"Interim Hire" shall mean the charter hire payable pursuant to Section 4(b) of the Charter.

"Interim Term" shall mean the period commencing on the Closing Date and ending on March 14, 1985, or such
shorter period as may result from earlier termination of the Charter as provided herein.

Owner Participant" shall mean Textron Financial Corporation, a Delaware corporation, and shall also include any
Person to which such corporation (or any successor) shall transfer its right, title and interest in and to the Vessel
and the Operative Documents in accordance with Section 11.01 of the Participation Agreement.

"Owner's Cost" shall mean $66,500,000.

"Renewal Term" shall mean each of the periods after the end of the Basic Term with respect to which the
Charterer shall exercise its option to renew the Charter pursuant to Section 18 of the Charter, or such shorter
period as may result from the termination of the Charter as provided herein.

"Stipulated Loss Value" as of any date during the Interim Term or the Basic Term shall mean an amount equal to
the product of [the] Owner's Cost multiplied by the percentage set forth in Schedule A to the Charter opposite
the applicable Hire Payment Date specified therein.  "Stipulated Loss Value" as of any date during any Renewal
Term shall mean the amount determined pursuant to Section 18 of the Charter.  Stipulated Loss Value shall be
adjusted as required in Article IX of the Participation Agreement.  Notwithstanding anything in the Charter
(including Schedule A thereto) or in any other Operative Document to the contrary, Stipulated Loss Value as of
any Hire Payment Date shall be, under any circumstances and in any event, in a sum at least sufficient, together
with the Interim Hire or Basic Hire payable on such Hire Payment Date, to pay an amount equal to the principal of
and interest on all Bonds then outstanding.           

"Supplemental Hire" shall mean any and all amounts, liabilities and obligations other than Interim Hire or Basic
Hire that the Charterer assumes or agrees to pay under any Operative Document, including, without limitation,
payments of Stipulated Loss Value, Fair Market Sales Value and Termination Value and any damages for
breach of any covenants, representations, warranties or agreements therein, to any Participant, the Owner
Trustee or the Indenture Trustee.   

B.        The Bareboat Charter

As an Owner Participant under the Participation Agreement, Textron executed a Trust Agreement with
Wilmington.  Rowan transferred title to the rig to Wilmington using a written bill of sale, then chartered the rig
from Wilmington pursuant to a Bareboat Charter dated December 1, 1984.  The key provisions of the Bareboat
Charter are as follows:

SECTION 6.  Amended by Assumption & Assignment of Participation Agreement, July 14, 2000.

SECTION 7.  Operations and Maintenance; Compliance with Law; Alterations, Modifications and Additions.  (a)  
Operation and Maintenance.  The Charterer shall have full  responsibility for possession, use, operation,
maintenance and repair of the Vessel throughout the Charter Term and until redelivery thereof.  Except during
such period as (y)[sic] an Event of Loss shall have occurred and be continuing, or (z) [sic] there has been any
other loss or damage with respect to the Vessel and the Charterer shall not have had a reasonable time to
repair the same (the Charterer hereby agreeing to diligently repair the same), the Charterer shall, at its own cost
and expense (whether or not any applicable insurance proceeds are adequate for the purpose); (i) maintain and
preserve the Vessel and her drilling and other equipment in good running order and repair, so that the Vessel
shall be, insofar as due diligence can make her so, tight, staunch, strong and well and sufficiently tackled,
separated, furnished, equipped and in every respect seaworthy and in as good operating condition as when
delivered hereunder, ordinary wear and tear excepted, and in any event in the condition, running order and
repair which equals or exceeds industry standards and the condition, running order and repair of other vessels
and rigs and their equipment owned or leased by the Charterer of like kind and age, (ii) keep the Vessel in such
condition as will entitle her to the highest classification and rating by the American Bureau of Shipping for
vessels of the same age, type and use, (iii) cause the Vessel to meet all requirements of Applicable Laws . . . (iv)
cause the Vessel to be overhauled when necessary or appropriate and to be dry-docked, cleaned and bottom-
painted when necessary . . . , and (v) maintain the Vessel as required by manufacturers' warranties and
outstanding insurance policies.

SECTION 8.  DELETED BY ASSUMPTION & ASSIGNMENT OF PARTICIPATION AGREEMENT, July 14, 2000

SECTION 9.  Insurance.  (a) Insurance Against Loss or Damage to the Vessel.  The Charterer shall maintain in
effect, at its own expense, "all-risk" hull insurance covering the Vessel, in an aggregate amount of not less than
the greater of (i) the Stipulated Loss Value as of the last preceding Basic Hire Payment Date (or during the
period from and including the Closing Date[[30]] to and including the first Basic Hire Date, as of the first Basic
Hire Payment Date) (the ASLV Amount") and (ii) such amount as shall be sufficient to prevent the Charterer, the
Owner Trustee, the Indenture Trustee,[[31]] any Participant or any Holder from being a coinsurer of any loss
under the applicable insurance policies,[[32]] with deductibles not in excess of $500,000.  Such insurance shall
cover marine perils (but need not cover war risk except as set forth in Section 9(j)) on hull and machinery, and
the policy or policies of insurance shall be placed through independent brokers of good standing and shall be
issued by responsible underwriters reasonably acceptable to the Owner Participant, shall be maintained in the
broadest forms available in either the American or British insurance markets, shall otherwise contain conditions,
terms; stipulations and insurance covenants reasonably satisfactory to the Owner Participant, and shall be kept
in full force and effect by the Charterer at all times during the Charter Term; provided that, so long as the
Charterer's Stockholders' Equity is at least $400,000,000, the Charterer may self-insure up to the excess of the
SLV Amount over $55,000,000; and provided further, however, that unless and until an Event of Loss shall occur
with respect to the Vessel, the Charterer shall promptly and fully repair all damage to the Vessel and shall pay all
salvage and other charges with respect to such damage, whether or not any insurance is maintained by the
Charterer with respect to the loss resulting from such damage.  The Charterer shall not put into effect or
materially change any such self-insurance arrangement unless it shall have notified the Owner Trustee, the
Indenture Trustee and each Participant of the details of such arrangement or change and the Charterer shall
have furnished to the Owner Participant and the Indenture Trustee such evidence as shall be reasonably
satisfactory to the Owner Participant and the Indenture Trustee that such arrangement or change shall not result
in any coinsurance penalty.
. . .
(k)       Additional Insurance.  The Owner Trustee, the Owner Participant or the Indenture Trustee may, at its
expense, obtain any additional insurance covering the Vessel or covering any interests of the Owner Trustee,
the Indenture Trustee or any Participant, as the case may be, with respect to the Vessel as it may in its
discretion deem appropriate; provided that no such Person shall purchase any such insurance that would void,
impair or reduce the coverages of the insurance required to be maintained by the Charterer pursuant to this
Section 9.  Any such insurance shall not be governed by any other provision of this Charter, the Indenture or the
Mortgage, including without limitation as to policy provisions and payment of proceeds.

SECTION 12.  Loss, Destruction, Condemnation or Damage.  (a) Payment of Stipulated Loss Value.  Upon the
occurrence of an Event of Loss with respect to the Vessel, the Charterer shall forthwith (and, in any event, within
five Business Days of such occurrence) give the Owner Trustee and the Indenture Trustee notice of such Event
of Loss and, on the next succeeding Hire Payment Date 60 days after such occurrence (or, if earlier, the final
scheduled Hire Payment Date) pay to the Indenture Trustee so long as the Indenture is in effect and thereafter
to the Owner Trustee an amount equal to the sum of (i) Stipulated Loss Value calculated as of such Hire
Payment Date, (ii) Interim Hire or Basic Hire due and payable on such Hire Payment Date and (iii) any other Hire
then due and payable.  Nothing in this Section 12 shall relieve the Charterer from its obligation to pay Interim
Hire or Basic Hire on any Hire Payment Date occurring prior to or on the date on which Stipulated Loss Value
shall be payable.

Upon payment in full of all amounts due pursuant to the preceding paragraph and provided no Charter Default
shall have occurred and be continuing, the Owner Trustee shall transfer (without any representation, warranty or
recourse whatsoever except the absence of Owner's Liens) the Vessel to the Charterer by instruments
reasonably satisfactory in form and substance to the Charterer, the obligation of the Charterer to pay Interim
Hire and Basic Hire shall terminate, the Vessel shall no longer be subject to this Charter and the Charter Term
shall end.

(b) Application of Payments upon an Event of Loss.  Subject to the provisions of Section 12(d), any payments
received at any time by the Owner Trustee or by the Charterer with respect to the Vessel (including insurance
proceeds from insurance carried by the Charterer) from any governmental authority or other Person as a result
of the occurrence of an Event of Loss shall be applied as follows:

(i) so much of such payments as shall not exceed all amounts required to be paid by the Charterer pursuant to
Section 12(a)(i) or (ii) shall, for so long as the Indenture shall be in effect, be paid to the Indenture Trustee (or, if
the Indenture shall not be in effect, to the Owner Trustee) and, to the extent so paid, shall be a credit against
(or, if the Indenture shall not be in effect, be applied in reduction of) the Charterer's obligation to pay such
amounts if not already paid by the Charterer, or if already paid by the Charterer, shall be applied to reimburse
the Charterer for its payment of such amounts, and

(ii) the balance, if any, of such payments remaining thereafter, shall be divided between the Owner Trustee and
the Charterer as their interests may appear.

Upon payment in full of all amounts due pursuant to Section 12(a) and provided no Charter Default shall have
occurred and be continuing, the Charterer shall, to the extent of its payment pursuant to Section 12(a)(i), be
subrogated to any rights of the Owner Trustee arising solely out of such Event of Loss.

SECTION 15.  Charter Events of Default.  The following events shall constitute Charter Events of Default
(whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body:

(a)       the Charterer shall fail to make any payment of Interim Hire, Basic Hire, Termination Value or Stipulated
Loss Value within the earlier of (i)five days after the same shall have become due or

(ii)       two days after written notice by personal delivery, telex or other written communication  . . . ; or

(b)       the Charterer shall fail to make any other payment of Supplemental Hire . . . .

(c)       the Charterer shall fail to carry and maintain insurance on or with respect to the Vessel in compliance with
the provisions of Section 9 hereof, or shall otherwise fail to comply with its obligations set forth in Section 9(i)
hereof . . . .

SECTION 16.  Remedies.  Upon the occurrence of any Event of Default and at any time thereafter so long as the
same shall be continuing, the Owner Trustee may, at its option, by notice to the Charterer . . . , declare this
Charter to be in default, and at any time thereafter the Owner Trustee may do one or more of the following as
the Owner Trustee in its sole discretion shall elect, to the extent permitted by, and subject to compliance with the
mandatory requirements of, all Applicable Laws then in effect:
. . .
(b)       the Owner Trustee, by notice to the Charterer specifying a payment date not earlier than ten days nor
more than 30 days from the date of such notice, may require the Charterer to pay to the Owner Trustee, and the
Charterer hereby agrees that it will pay to the Owner Trustee, on the payment date specified in such notice, as
liquidated damages for loss of a bargain, and not as a penalty, and in lieu of any further payments of Basic Hire
hereunder, an amount (reduced by any amounts previously paid by the Charterer pursuant to Section 16(d))
equal to the sum of (i) all unpaid Basic Hire payable or that would have been payable on or before the Hire
Payment Date next succeeding the date of payment specified in such notice, plus (ii) an amount equal to
Stipulated Loss Value calculated as of such Hire Payment Date, unless such payment date shall occur on a Hire
Payment Date, in which case Stipulated Loss Value and unpaid Basic Hire shall be computed as of such Hire
Payment Date, together with interest, if any, at the Overdue Rate on the amount of such Stipulated Loss Value
and Basic Hire from the Hire Payment Date as of which Stipulated Loss Value is computed until the date of actual
payment; and upon such payment of liquidated damages and all other Hire then due and payable by the
Charterer the Owner Trustee shall transfer (without any representation, recourse or warranty whatsoever other
than the absence of Owner's Liens) the Vessel to the Charterer and the Owner Trustee shall execute and deliver
such documents evidencing such transfer and take such further action as the Charterer shall reasonably
request.  In addition, the Owner Trustee may, within 30 days after the Charterer shall make the full payment of
Basic Hire and Stipulated Loss Value as aforesaid, give the Charterer written notice requesting that the Fair
Market Sales Value of the Vessel as of the date as of which Stipulated Loss Value was determined pursuant to
clause (ii) of this Section 16(b) be determined.  If the Fair Market Sales Value of the Vessel as of such date shall
be determined to exceed the Stipulated Loss Value paid pursuant to the first sentence of 16(b), the Charterer
shall, within 60 days after such determination, pay the amount of such excess to the Owner Trustee.
. . .
(d)       Whether or not the Owner Trustee shall have exercised, or shall thereafter at any time exercise, any of its
rights under Section 16(c) (other than a sale under Section 16(c)), the Owner Trustee may, at any time prior to
the time that the Vessel shall have been transferred to the Charterer pursuant to Section 16(b) or sold by the
Owner Trustee pursuant to Section 16(c), by written notice to the Charterer requesting that the Fair Market
Sales Value or Fair Market Rental Value of the Vessel be determined, demand that the Charterer shall pay to
the Owner Trustee, and the Charterer shall pay to the Owner Trustee on the first Hire Payment Date occurring at
least ten days after the determination of such Fair Market Sales Value or Fair Market Rental Value, as the case
may be, as liquidated damages for loss of a bargain and not as a penalty (in lieu of all payments of Basic Hire
becoming due after the payment date), an amount equal to the sum of (i) all unpaid Basic Hire due on or before
such Hire Payment Date and (ii) whichever of the following amounts the Owner Trustee, in its sole discretion,
shall specify in such notice (together with interest on such amount at the Overdue Rate from the scheduled
payment date to the date of actual payment): (x) [sic] an amount equal to the excess, if any, of the Stipulated
Loss Value, computed as of such Hire Payment Date, over the Fair Market Rental Value of the Vessel for the
remainder of the Basic Term or the then[-]current Renewal Term, as the case may be, after discounting such
Fair Market Rental Value semi-annually (effective on the Hire Payment Dates) to present worth as of the
scheduled payment date at the rate of interest borne by the Bonds at the time outstanding or if none shall be
outstanding, the Prime Rate, or (y) [sic] an amount equal to the excess, if any, of the Stipulated Loss Value for
the Vessel as of such Hire Payment Date over the Fair Market Sales Value of the Vessel.

All determinations of Fair Market Sales Value and Fair Market Rental Value pursuant to this Section 16 shall be
determined in accordance with the Appraisal Procedure.  No termination of this Charter, in whole or in part, or
exercise of any remedy under this Section 16 shall, except as specifically provided herein, relieve the Charterer
of any of its liabilities and obligations hereunder, all of which shall survive such termination, repossession or
exercise or remedy.  In addition, the Charterer shall be liable for any and all unpaid Supplemental Hire due
hereunder (and all other amounts payable by Charterer under the Participation Agreement) before, after or
during the exercise of any of the foregoing remedies, including all reasonable legal fees and other costs and
expenses incurred by the Owner Trustee . . . by reason of the occurrence of any Charter Event of Default or the
exercise of the remedies of the Owner Trustee with respect thereto . . . .

To the extent permitted by, and subject to the mandatory requirements of all Applicable Laws, each and every
right, power and remedy herein specifically given to the Owner Trustee or otherwise in this Charter shall be
cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or
hereafter existing at law, in admiralty, in equity or by statute, and each and every right, power and remedy
whether specifically given herein or otherwise existing may be exercised from time to time and as often and in
such order as may be deemed expedient by the Owner Trustee, and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any other right, power or remedy.  No delay or omission by the Owner Trustee in the exercise of
any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be
construed to be a waiver of any default on the part of the Charterer or to be an acquiescence therein.  No
express or implied waiver by the Owner Trustee of any Event of Default shall in any way be, or be construed to
be, a waiver of any future or subsequent Charter Event of Default. . . .
. . .
SECTION 18 Renewal Options.  (a) Fixed Rental Renewal Option.  Unless the Charterer shall have elected to
purchase the Vessel under Section 19, and unless a Charter Default shall have occurred and then be
continuing, the Charterer may, by irrevocable written notice to the Owner Trustee given not less than twelve
months nor more than 18 months prior to the scheduled expiration of the Basic Term, renew this Charter at the
expiration of the Basic Term.  Such Renewal Term shall be for a period that, when added to the Interim Term and
the Basic Term, shall not exceed 80% of the total estimated remaining economic useful life of the Vessel
(measured from the Closing Date) as determined by the Appraisal Procedure and in no case shall exceed 7-1/2
years; provided, however, that (A) at the end of such Renewal Term the Vessel will have an estimated residual
value (in 1984 dollars without giving effect to inflation or deflation from the beginning of the Charter Term) as
determined in such Appraisal Procedure of not less than 20% of the Owner's Cost for the Vessel and (B) the use
of the Vessel will, as of the beginning of such Renewal Term and as determined in such Appraisal Procedure, be
reasonably expected to be commercially feasible (in a manner that would permit the Owner Trustee to realize the
residual value described in the foregoing clause (A)) by some Person other than the Charterer (or any party
related to the Charterer) who could charter or purchase the Vessel from the Owner Trustee at the end of such
Renewal Term.  In addition to the limitation set forth in the next preceding sentence, no Renewal Term pursuant
to this paragraph (a) shall be entered into if it would end before one year after the commencement thereof.  
During such Renewal Term, all of the provisions of this Charter shall continue in full force and effect, except that
(i) Basic Hire shall be payable semiannually in arrears in an amount equal to 50% of the weighted average
amount of the semiannual installments of Basic Hire payable during the Basic Term and (ii) Stipulated Loss
Value on each Hire Payment Date during such Renewal Term shall be equal to the sum of Basic Hire payable on
such Date and the present value as of such Date of (a) Basic Hire that would have been payable over the
balance of such Renewal Term and (b) the estimated residual value as of the end of such Renewal Term
(present value to be determined by using a discount rate of 10% compounded semiannually) as determined by
the Appraisal Procedure.

SECTION 27.  Miscellaneous.  (f) Governing Law.  This Charter shall in all respects be governed by, and
construed in accordance with, the general maritime laws of the United States of America and otherwise by the
laws of the State of New York.

[1]  Various bond purchasers and an indenture trustee were also parties to the Participation Agreement but are
not parties to the underlying suit or to this appeal.

[2]  This figure was to be calculated "without taking into account the effects of inflation or deflation and costs of
removal" to Textron or Wilmington.  In addition, the appraiser was to opine that the Halifax does not constitute
"limited use property" as that term is used in Rev. Proc. 76-30.

[3]  Note that this estimate does not say "at least twenty percent."

[4]  Textron subsequently assigned its beneficial interest in the Participation Agreement and the Charter to its
subsidiary, North Sea Investments Inc.  Rowan later agreed to North Sea Investments Inc.'s substitution as
Owner Participant through an Assumption and Assignment of Participation Agreement.  On July 31, 2006, North
Sea (Connecticut) LP intervened in the suit, alleging that it "owns a right to share in the economic benefits owed
to North Sea by Rowan . . . ."  We therefore include North Sea Investments and North Sea (Connecticut) LP in
our use of the name, "Textron."

[5]  Under the terms of the escrow agreement, this amount was to be paid by the escrow agent on March 15,
2006.  The record is not clear regarding the date on which this occurred.

[6]  Five days after the date of Wilmington's letter, Rowan filed a first amended original petition for damages and
declaratory relief, adding Textron subsidiary CP Offshore LLC as a defendant and adding claims concerning the
Cecil Provine rig.  Rowan alleged that, just as North Sea succeeded to Textron's interest in the Rowan-Halifax
rig, CP succeeded to Textron's interest in the Cecil Provine rig.  Rowan also added a claim in quantum meruit for
insurance premiums it incurred to insure the Cecil Provine for its full market value, rather than its Stipulated Loss
Value.

[7]  This figure represents the sum of the Basic Hire payment and its calculation of the Stipulated Loss Value,  
reduced by the amount that Rowan already had paid based on its own calculations.

[8]  In addition, Textron, North Sea, and Wilmington asked the trial court to dismiss Rowan's claim for increased
insurance premiums on a second rig, the Cecil Provine, which was subject to a similar sale and leaseback
agreement.  Claims regarding the Cecil Provine were severed from the case.

[9]  Before ruling on the cross-motions for summary judgment, the trial court signed two severance orders.  By
agreement of the parties, the trial court severed Rowan's quantum meruit claims against the Owners.  In
addition, the trial court granted the Owners' motion to sever their claims against Rowan for (1) breach of contract
for failure to pay expenses for the Halifax Appraisal Procedure; (2) breach of contract for failure to indemnify the
Owners for the loss of the Halifax; (3) relief sought pursuant to section 16(b) of the Halifax Charter; (4) a
declaration of the Owners' right to remedies under section 16(b) of the Halifax Charter; (5) a declaration of the
Owners' rights regarding Rowan's continuing obligation to insure the Cecil Provine rig, including the Owners'
rights under sections 9(a) and 12(b)(ii) of the Cecil Provine Charter; (6) a declaration of the Owners' continuing
right to have the Stipulated Loss Value for the Cecil Provine decided by the Appraisal Procedure; and (7) all
relief requested in the Owners' pleadings relating to such claims, including requests for damages, interest, and
attorneys' fees.  The latter order was "intended to sever and consolidate . . . all claims and issues not decided
with respect to the motions for summary judgment filed by the parties in this action."

[10]  164 S.W.3d 656, 661 (Tex. 2005).

[11]  Restatement (Second) of Contracts: Rules in Aid of Interpretation ' 202(2) (1979).

[12]  See, e.g., Tetra Applied Techs., LP v. Henry's Marine Serv., No. H-04-2576, 2007 WL 1239240, at *2 (S.D.
Tex. April 27, 2007).

[13]  We note, however, that if a party asks the court to take judicial notice of the laws of another state, the court
must do so if the party provides the court with "sufficient information to enable it properly to comply with the
request."  Tex. R. Evid. 202.  AA preliminary motion is necessary to assure the application of the law of another
jurisdiction, and absent a motion by a party, Texas law may be applied to a dispute."  Burlington N. & Santa Fe
Ry. Co. v. Gunderson, Inc., 235 S.W.3d 287, 290 (Tex. App.- Fort Worth 2007, pet. withdrawn) (citing Pittsburgh
Corning Corp. v. Walters, 1 S.W.3d 759, 769 (Tex. App.- Corpus Christi 1999, pet. denied)).

[14]  Although Rowan argued in the trial court that Basic Hire was not a component of Stipulated Loss Value, it
has abandoned that argument on appeal.

[15]  "Scrap value" is defined as A[t]he value of the constituent materials and components of a thing; not its
value for the purpose for which it was made."  Id.

[16]   See also Taracorp, Inc. v. NL Indus., Inc., 73 F.3d 738, 744 (7th Cir. 1996) (applying general principles of
contract law and inferring that parties did not intend for two different phrases to mean the same thing); Hubbell v.
United States, 4 Ct. Cl. 37, 1800 WL 608, at *3 (Cl. Ct. 1868) ("Neither Congresses nor men are apt to say
precisely the same thing over twice in different words . . . .").

[17]  Barnhart v. Thomas, 540 U.S. 20, 26 (2003).

[18]  In their motion for rehearing, the Owners argue that Rowan did not contend the rule of the last antecedent
applies.  As a grammatical rule, however, it applies to the contract regardless of whether the parties point it out.
Interpretation of a maritime contract is a matter of law, reviewable de novo on appeal.  Foreman v. Exxon Corp.
770 F.2d 490, 496 (5th Cir. 1985).  General federal maritime law has adopted the general rules of contract
construction, which include rules of grammar.  See F.T.C. v. Mandel Bros., Inc., 359 U.S. 385, 389-90, 79 S. Ct.
818, 822-23 (1959) (applying the rule of the last antecedent without suggesting that its application was urged by
any party); Sims' Lessee v. Irvine, 3 U.S. 425, 445 n.a, 1 L. Ed. 665 (1799) ("The rule is, that 'such' applies to
the last antecedent, unless the sense of the passage requires a different construction." (quoting Ellsworth, C.
I.)).  The rules of English grammar also apply under New York contract law.  See In re Enron Creditors Recovery
Corp.,  380 B.R. 307, 322 (S.D.N.Y. 2008) (AUnder ordinary contract construction rules, the rules of English
grammar apply.  The rule of the last antecedent is such a rule."); id. at 319 (A[I]n line with the maxim that
contract language is to be interpreted pursuant to the plain, ordinary and usual meaning of the words used, . . .
a court should apply settled rules of grammatical construction unless it clearly appears that the parties intended
otherwise.") (citation omitted).  The Owners also contend that if we apply the rule of the last antecedent as we
have done here, we must also apply it to the parenthetical in section 3.01(j)(ii).  This premise, however, is
incorrect.  See R.W. Burchfield, The New Fowler's Modern English Usage, 571 (rev. 3d ed., Oxford Univ. Press
2000) (describing a parenthesis as an "interruption" of a sentence and stating, "It is important to bear in mind
that a parenthesis may or may not have a grammatical relation to the sentence in which it is inserted.").

[19]  One appraiser noted that Rowan Companies lost four offshore rigs as a result of Hurricanes Katrina and
Rita.  Another notes that "day rates at this time have increased dramatically over a short period of time."  
According to the appraiser, such rates were "approximately twice as high now compared to late 2002," which was
the last time prior to the loss that a comparable rig was sold, and "the [fair market value] derived from the Cost
Approach is not appropriate given the high day rates presently in the marketplace."  He further stated that "[t]
here are presently 43 jackups on order that will be delivered in the next three years" and "day rates will be
moderate in 3 to 4 years as supply catches up with demand."  The surveyor from ABS Consulting observed,
"Naturally, if equipment is in high demand, the dayrate or earning capacity of any such unit is increased and this
tends to have a proportionate increasing effect on value[,]" and, "among drillers, the tightest supply now is for
jackup rigs such as the [Halifax]."  "Jackup rig utilization has increased from 86% in April 2004 to effectively 100%
as of the date of this report [2/22/06].  Also, rig charter dayrates have doubled in some regions since the third
quarter of 2004 due to tight supply."  The third appraiser stated, "It is obvious that we are currently in an
extremely strong market, a seller's market."  The ABS surveyor further observed that as of February 2006, rig
demand exceeded supply.

[20]  Because Rowan was required to repair damage costing as much as half of the estimated residual value,
substituting a hypothetical fair market value for estimated residual value also skews Rowan's repair obligations:
as the fair market value increases, the relative cost of repair decreases.  Thus, if the Halifax survived with some
damage, and we followed the Owners' suggestion of substituting fair market value for estimated residual value,
then Rowan's maximum responsibility for repair costs would increase from approximately $6.65 million to more
than $40 million - based upon damage sustained by other vessels.

[21]  See Lechuga v. Tex. Employers' Ins. Ass'n, 791 S.W.2d 182, 185 (Tex. App.- Amarillo 1990, writ denied)
(explaining the ordinarily understood meaning of the word, "such"); Coker v. Tex. Alcoholic Beverage Comm'n,
524 S.W.2d 570, 574-75 (Tex. Civ. App.- Dallas 1975, writ ref'd n.r.e.) (holding that the word "such" refers back
to preceding language; thus, in a statute that initially identifies "dry" political subdivisions, a subsequent
reference to "such" political subdivisions refers to those same identified subdivisions); Warner Elevator Mfg. Co.
v. Houston, 28 S.W. 405, 408 (Tex. Civ. App. 1894) (A>Such' refers to what has been specified, and means 'the
same as has been mentioned.'"), rev'd on other grounds, 88 Tex. 489, 31 S.W. 353 (1895).

[22]  See Ch. 7.  The Future Tenses, WordPower, (2002-2009), http://www.wordpower.ws/grammar/gramch07.
html; H. Ramsey Fowler, The Little, Brown Handbook, 155 (Little, Brown & Co. eds. 1980) ("The perfect tenses
indicate that an action was or will be completed before another time or action."); see, e.g., In re Eagle-Picher
Indus., Inc., 190 B.R. 557, 562 (Bankr. S.D. Ohio 1995) (discussing lease provision agreeing that "Landlord shall
have the right, but not the obligation, to terminate this Lease . . . if by August 31, 1989 Landlord shall have been
unable to obtain a commitment for both a non-recourse construction loan and a non-recourse permanent loan");
Stabile v. McCarthy, 336 Mass. 399, 403, 145 N.E.2d 821, 823-24 (1957) (holding that contract that was "subject
to the right of the buyer in the event that he shall have been unable to obtain the approval of the Wilmington
Planning Board of his proposed subdivision of the . . . premises prior to the date . . . set for performance . . . at
his option to cancel this agreement" required the buyer to prepare a plan conforming to the planning board
regulations, and to try reasonably to obtain planning board approval prior to the date set for the conveyance,
before condition precedent for contract cancellation was satisfied); Wilmington United Neighborhoods v. U.S.
Dep't of Health, Educ.& Welfare, 458 F. Supp. 628, 645 (D.C. Del. 1978) (discussing contract providing that "[i]If
on July 1, 1978, litigation pending against Owner . . . shall remain pending or shall have been resolved adversely
to Owner, or if prior to such date Owner shall have been unable to obtain or obtain commitments for such
financing then from and after July 1, 1978, Owner shall have the right to terminate the Contract by the giving of
seven days prior written notice").

[23]  In addition, the rig arguably had already been appraised by "a mutually acceptable qualified independent
appraiser" in 1984 pursuant to section 3.01(j) of the Participation Agreement.  As a signatory to the contract,
Rowan accepted Rush Johnson Associates as the marine surveying company to provide the Appraiser's
Certificate.  Thus, the December 1, 1984 contract can itself be considered "written notice to the other requesting
determination of such amount, value or period by appraisal," and "the Owner Trustee and the Charterer" did
appoint "a mutually acceptable qualified independent appraiser, who shall be a marine surveyor."  This appraisal
is "final and binding." If the initial agreed use of Rush Johnson Associates is the first use of the Appraisal
Procedure, and the Owner is permitted to invoke the Appraisal Procedure again, then the contract language
requiring the result of the appraisal procedure to be "final and binding" is rendered meaningless.

[24]  Under New York law, "[a]n 'ambiguous' word or phrase is one capable of more than one meaning when
viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated
agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in
the particular trade or business."  Walk-In Med. Ctrs., Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir.
1987) (quoting Eskimo Pie Corp. v. Whitelawn Dairies, Inc., 284 F. Supp. 987, 994 (S.D.N.Y. 1968)).

[25]  We note also that, in a leveraged lease, the lessee does not guarantee the residual value of the property.  
FASB 13.  This is not simply a matter of accounting, but has a real effect on the terms of the agreement that are
consistent with its purpose of establishing a leveraged lease.

[26]  In their motion for rehearing, the Owners argue that "'[b]y delaying the implementation of the appraisal
procedure, both parties took the risk that the property would change in value by the time the appraisal finally
took place.'"  De Anza Enters. v. Johnson, 128 Cal. Rptr. 2d 749, 757 (Cal. Ct. App. 2002).  The Owners further
contend that "Texas public policy requires the De Anza approach here to effectuate the parties' agreement to
resolve their dispute via the Appraisal Procedure."  We note that the contract at issue here, however, is
governed by general federal maritime law, whereas De Anza is a California state law case using California
statutes governing contract interpretation.  Those statutes differ from the general federal maritime law that
govern this action.  Moreover, De Anza supports the position that by delaying implementation of the appraisal
procedure, the Owners took the risk that the rig would be valueless at the time of the appraisal.

[27]  Pursuant to Charter section 12, Rowan sought an award of excess insurance proceeds, but the Owners did
not seek judgment on this basis.  To the contrary, in their motion for summary judgment, they argued as follows:

With respect to the Halifax, of course, there are no Aexcess" insurance proceeds subject to Charter ' 12(b)(ii)
because Rowan's payment obligation under ' 12(a) far exceeded the amount of insurance proceeds received.  
The owners ask the Court to declare that the Owner Trustee is entitled to all of the Halifax insurance proceeds,
pursuant to Charter ' 12(b)(i).

The Owners argue that, on remand, it is appropriate to consider the Owners' claim that Rowan breached the
contract by failing to maintain adequate insurance.  We disagree.  In its motion for summary judgment, the
Owners asked that the trial court declare "that Rowan was obligated to maintain hull insurance on the Halifax . . .
in an amount sufficient to pay the full value of Defendants' ownership interest . . . ."  With regard to the Halifax,
the Owners did not move for damages on this basis.  As previously noted, however, the trial court severed a
number of claims regarding the Halifax from the case before us, including, inter alia, the Owners' claims for (1)
failure to indemnify the Owners for the Halifax's loss, (2) relief pursuant to pursuant to section 16(b) of the
Charter; (3) a declaration of the Owners' right to remedies under section 16(b) of the Charter; and (4) all relief
requested in the Owners' pleadings relating to such claims.  See ante, n.9 (emphasis added).  Section 16(b) of
the Charter sets forth the contractual remedies available should an "Event of Default" occur, and the Charter
specifically defines the failure to maintain insurance in compliance with the Charter as an Event of Default.  
Thus, the Owners' request for a declaration that they are entitled to the remedies under section 16(b) of the
Charter is, in effect, a request that the trial court declare whether an Event of Default occurred.  Because we
read this request for relief to be encompassed in the trial court's reference to  "relief requested in the Owners'
pleadings relating to" the severed claims described above, we consider the Owners' request for declaratory
judgment to be severed as well.  Thus, remand for litigation of the claim in the present cause number is
unnecessary.

[28]  In section 3.01(j) of the Participation Agreement, it is similarly stated that it is a condition precedent which
must be fulfilled or waived that, as of the Closing Date, the Owner Participant shall have received appraisals by
Rush Johnson Associates and Lowell Johnston & Associates, Inc., A(i) such appraiser's estimate of the fair
market value of the Vessel on the Closing Date, which . . . shall be equal to $66,500,000; (ii) such appraiser's
estimate as of the Closing date of the remaining useful life of the Vessel and the residual value thereof at the
end of the Basic Term . . . , which estimates shall be not less than 22 years and not less than 20% of Owner's
Cost for the Vessel, respectively . . . ."

[29]  Section 8.08 concerns changes in tax law.  Under Section 9.01, adjustments are also required if
Transaction Costs are greater or less than 0.75% of Owner's Costs or the Closing Date is other than December
28, 1984.  The occurrence of a loss is not included among the events requiring such adjustment.

[30]  The Closing Date is defined to mean December 28, 1984.

[31]  The Participation Agreement names "The Connecticut Bank and Trust Company, National Association" as
Indenture Trustee.  Rowan Companies, Inc. is named as Charterer, and the remaining originally-named parties
to the Participation Agreement are six Bond Purchasers.

[32]  At the summary judgment hearing, Rowan's attorney emphasized the word, "applicable":

Mr. Beck:          It doesn't say under any insurance.  It says "the applicable[.]" They knew what the applicable
insurance policy was.  They knew it was an agreed value policy.  They knew that it was not a co-insurance
situation.  And over 16 years of the basic term they never complained about any of this. . . . They didn't complain
about any of that and now they're coming in after the fact, we respectfully submit, and say, no, that's not really
the procedure you should have been following.

He later explained that this shows the dealings and course of conduct of the parties.  Rowan's attorney also
asserted that the Owner Trustee purchased "gap insurance" for the difference between the "agreed value"
coverage Rowan bought and the Owner Trustee's claimed interest.  The trial court pointed out that section 9(a)
requires Rowan to insure "the greater of" SLV or an amount necessary to prevent any party (the Charterer,
Owner Trustee, etc.) from being a coinsurer.  In response, Rowan's attorney insisted that "you cannot ignore the
language under the applicable insurance policies."  The trial court also pointed out that the charter does not say
that Rowan has an obligation to maintain agreed value insurance, and Rowan's counsel answered, "No, but it's
in the certificate that tells them the type of all risk hull insurance that we bought.  And it tells them specifically
what the amount is.  Our position was consistently throughout the 16-year term of the charter that that was the
amount of the policy 9(a) required us to get.  And nobody ever complained about that."  But Textron says that
Jane M. Lavoie's letter of August 15, 2005 to Rowan's treasurer and vice-president of finance is evidence that
they did question the adequacy of the insurance.