Texas = Judiciary Online

3D"Text

In = The

Court=20 of Appeals

For=20 The

First=20 District of Texas

NO.=20 01=9605-00468=96CV

MCALESTER = FUEL=20 COMPANY, Appellant

SMITH = INTERNATIONAL,=20 INC., Appellee

On Appeal = from the=20 11th District Court

Harris = County, Texas

Trial Court = Cause No.=20 2003=9664509

O P=20 I N I O N

=20 In two issues, appellant, McAlester Fuel Company = (=93McAlester=94),=20 challenges a final judgment rendered in favor of appellee, Smith=20 International, Inc. (=93Smith=94).

=20 We affirm.

&nbs= p; = ; = &= nbsp;=20 Factual=20 History

=20 McAlester, an oil and gas = company,=20 contacted Smith to determine whether Smith could provide = =93sidetrack=94=20 drilling services on an offshore oil and gas well. In response, Smith = e-mailed price=20 quotes for three different drilling methods to McAlester. These price quotes were = contained=20 in documents attached to the e-mail. =20 On each of these attached documents was the following = notation:=20 =93TERMS & CONDITIONS: The above quotation/proposal is made = subject to=20 our =91Terms and Conditions=92 applicable to the goods and/or = services=20 referred to herein (a copy of which is available upon request at=20 281-443-3370, attention Legal Department).=94

=20 Following a meeting between McAlester and Smith representatives, = McAlester orally=20 retained Smith to sidetrack through the double-string casing that = sheathed=20 the well at its deepest point. =20 No written contract was signed before the drilling=20 began.

=20 Smith made two attempts at sidetracking the well through = the=20 double-string casing without success. During each of these = attempts, the=20 milling tool used to drill through the double-string casing = broke. On its third attempt, = Smith=20 successfully sidetracked the well by drilling higher up through a = single=20 string of casing. = After the=20 sidetracking operation was completed, Smith presented job tickets = to Louis=20 Ebrom, McAlester=92s =93company = man,=94 who signed=20 them. =

=20 The front side of the job tickets detailed the tools and = services=20 provided by Smith for the sidetracking operation and estimated the = operation=92s cost. = Above the=20 signature line was the notation that the Smith=92s goods and = services =93are=20 provided subject to the terms and conditions on the reverse = side=94 of the=20 job ticket and in Smith=92s =93price list and/or price book.=94=20

=20 The terms and conditions on the back side of the job = tickets made=20 clear that McAlester, not Smith, bore the = risks of=20 the operation and would be responsible for any damages arising = from=20 it. Relatedly, the = terms and=20 conditions expressly limited Smith=92s liability, providing, in = part, that=20 =93SMITH SHALL IN NO = EVENT BE LIABLE=20 FOR SPECIAL, INDIRECT, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL = DAMAGES OR=20 CONTINGENT LIABILITIES ARISING OUT OF THIS AGREEMENT OR TO THE = FAILURE OF=20 ANY GOODS TO OPERATE PROPERLY . . . .=94 The backside of the job = ticket=20 also contained an indemnity clause providing that McAlester would = =93PROTECT, INDEMNIFY, HOLD = HARMLESS AND=20 DEFEND SMITH FROM AND AGAINST ANY CLAIMS, DEMANDS, LIENS, DAMAGES, = CAUSES=20 OF ACTION, JUDGMENTS, LOSSES AND LIABILITIES OF ANY NATURE = WHATSOEVER=94=20 arising from the operation.

=20 Smith invoiced McAlester for $298,415 relating = to the=20 sidetracking operation. =20 McAlester not only refused to pay but sent Smith a demand = letter=20 claiming that Smith owed it =93$539,511 to reimburse [McAlester] = for=20 additional expenses incurred by McAlester as the result of the = failures of=20 the Smith tools.=94

&nbs= p; = ; = =20 Procedural=20 History

=20 McAlester sued Smith for breach = of=20 contract, negligence, negligent misrepresentation, and violation = of the=20 Texas Deceptive Trade Practices Act (=93DTPA=94). McAlester alleged that Smith=92s failed = attempts to=20 sidetrack the well had caused McAlester to incur actual = damages of=20 $539,511. Smith=20 counterclaimed, alleging breach of contract and seeking $298,415 = for=20 performing the sidetracking operation. As part of its = counterclaim, Smith=20 also sought a declaratory judgment, requesting a declaration that=20 McAlester=92s claims were = limited or barred=20 by the terms and conditions of the parties=92 agreement.

=20 Smith also filed a motion for summary judgment, asserting = that=20 McAlester=92s claims were = barred as a=20 matter of law by the terms and conditions found in the job tickets = signed=20 by Ebrom and by the terms and conditions referenced in the = price-quotation=20 documents attached to Smith=92s e-mail proposal. The trial court granted = Smith=92s=20 motion for summary judgment, ordering that McAlester take nothing on its = breach of=20 contract, negligence, negligent misrepresentation, and DTPA = claims.

=20 Before the trial court granted Smith=92s motion for summary = judgment,=20 McAlester=20 amended its petition to include a claim for fraudulent = inducement. Smith in turn filed a = motion for=20 partial summary judgment regarding McAlester=92s fraudulent = inducement claim,=20 which the trial court denied. =20

=20 Smith=92s counterclaim for breach of contract, and = McAlester=92s=20 fraudulent inducement claim were tried to a jury. The jury found against = McAlester on its=20 fraudulent inducement claim and in favor of Smith on its breach of = contract counterclaim. = For=20 the breach, the jury determined that Smith was entitled to = $298,600 in=20 damages from McAlester. The jury was also asked, = =93Did=20 Smith fail to comply with its warranty that the tools used at the = Well=20 were free from defects in materials and workmanship?=94 The jury responded in = the=20 affirmative but in the next question found that McAlester was=20 entitled to zero dollars in damages for Smith=92s failure to = comply with the=20 warranty. =20

=20 The trial court signed a =93Final Judgment=94 which = provided, in=20 relevant part, as follows:

At the = conclusion of=20 the evidence, the Court submitted the questions of fact in the = case to the=20 jury. The charge of = the court=20 and the verdict of the jury are incorporated for all purposes by=20 reference. Because = it appears=20 to the Court that the verdict of the jury was in favor of Smith = and=20 against McAlester, judgment = should be=20 rendered on the verdict in favor of Smith and against McAlester.

=20 The Court, after taking judicial notice of its file = (including its=20 Order on Defendant=92s Motion for Summary Judgment [signed = November 29,=20 2004] and its Order [signed March 7, 2005]) and considering the = evidence,=20 stipulations, and jury answers, is of the opinion that McAlester = should=20 take nothing by this suit and that Smith should recover damages = from=20 McAlester.

=20 The Court finds and declares that, based upon the jury=92s = answers=20 and testimony and other evidence admitted at trial (including = =91Terms and=20 Conditions=92 stated in the price book, job tickets, and = invoices), that all=20 services rendered, equipment used, and tools run downhole by Smith = on the=20 North Hell Bayou Prospect, S.L. 16141 #2 Sidetrack Well were at=20 McAlester=92s sole risk and McAlester agreed to defend and hold = harmless=20 from all losses and liabilities, causes of action, and claims in = this case=20 relating to the sidetracking operations and to release Smith from = its=20 claims asserted in this case. . . .

=20 In the decretal portions of the judgment, the trial court = ordered=20 that McAlester take nothing from = Smith on its=20 claims and awarded Smith $298,600 in damages plus attorney=92s = fees. On appeal, McAlester challenges=20 the judgment by raising two issues.

=20 Declaration = Renders Any=20 Summary Judgment Error Harmless

=20 McAlester first assails = the portion=20 of the judgment incorporating the summary judgment on McAlester=92s breach=20 of contract, negligence, negligent misrepresentation, and DTPA=20 claims. Raising a = number of=20 sub-points, McAlester asserts = that =93genuine=20 issues of disputed material fact=94 existed regarding whether = McAlester had agreed=20 to the exculpatory =93terms and conditions,=94 which relieved = Smith from=20 liability. In its = second=20 issue, McAlester challenges the = remainder=20 of the judgment by contending that the summary-judgment ruling = =93precluded=20 McAlester=92s claims and = defenses from=20 being heard by the jury and resulted in a damages and attorney=92s = fee award=20 that must be reversed because Smith will not be the prevailing = party after=20 reversal.=94

=20 In response, Smith contends that the declaration in the = trial=20 court=92s judgment that the sidetracking operation was performed = at=20 =93McAlester=92s sole risk and McAlester agreed to defend and hold = harmless=20 from all losses and liabilities, causes of action, and claims in = this case=20 relating to the sidetracking operations and to release Smith from = its=20 claims=94 rendered harmless any error committed by the trial court = in=20 granting Smith=92s motion for summary judgment. We agree. The Supreme Court of = Texas has=20 twice held, under diverse circumstances, that a trial court=92s = erroneous=20 decision to grant summary judgment can be rendered harmless by = subsequent=20 events in the trial court. = See Progressive County = Mut. Ins. Co. v. Boyd, = 177=20 S.W.3d 919, 921 (Tex. 2005) (concluding that any error committed = by=20 granting summary judgment on insurance bad-faith and = extra-contractual=20 claims was harmless because jury=92s finding in subsequent = proceeding=20 negated coverage, which was prerequisite for asserting bad-faith = and=20 extra-contractual claims); Martin=20 v. Martin, Martin & Richards, Inc., 989 S.W.2d 357, 359 = (Tex.=20 1998) (holding that trial court rendered any error arising from = its=20 failure to give notice of submission date for motion for summary = judgment=20 harmless when it considered nonmovant=92s response and reconfirmed = its prior=20 ruling on the motion).[1]=20

=20 To merit reversal of the judgment, McAlester must show that the = trial=20 court=92s grant of the motion for partial summary judgment on its = breach of=20 contract, negligence, negligent misrepresentation, and DTPA claims = was=20 harmful. See Tex. R. App. P. = 44.1(a). This it has not = done. The declaratory language = in the=20 trial court=92s judgment indicates that the issue of whether Smith = was=20 shielded from liability, under the =93terms and conditions=94 = language relied=20 on by Smith, was fully litigated in the trial court independently = of the=20 grant of the motion for partial summary judgment. On appeal, McAlester does not=20 successfully show the contrary. =20

=20 McAlester focuses its opening = brief=20 primarily on establishing that the trial court erred in granting = the=20 motion for partial summary judgment on its breach of contract, = negligence,=20 negligent misrepresentation, and DTPA claims. Though its second issue = globally=20 asserts that the remainder of the judgment must also be reversed,=20 McAlester=20 directed no argument specifically at the declaratory judgment = portion of=20 the judgment in its opening brief. =20 Rather, the lion=92s share of McAlester=92s contentions to = defeat the=20 declaratory judgment were raised in its reply brief and go beyond = merely=20 responding to the assertions of Smith made in its appellee=92s = brief. See Tex. R. App. P. = 38.3. An issue raised for the = first time=20 in a reply brief is ordinarily waived and need not be considered = by this=20 Court. See N.P. v. Methodist = Hosp., 190 S.W.3d 217, 225 = (Tex.=20 App.=97Houston [1st Dist.] 2006, pet. denied); Zamarron v. Shinko Wire = Co., 125=20 S.W.3d 132, 139 (Tex. App.=97Houston [1st Dist.] 2003, pet. = denied); Lopez v. Montemayor, 131 = S.W.3d=20 54, 61 (Tex. App.=97San Antonio 2003, pet. denied); cf. Hutchison v. = Pharris, 158=20 S.W.3d 554, 564 (Tex. App.=97Fort Worth 2005, no pet.) = (considering issue=20 raised for first time in reply brief because appellee =93fully = argued=94 the=20 issue in its response brief and appellants merely replied). Accordingly, we address = only those=20 contentions asserted in the reply brief that can be construed to = expound=20 on McAlester=92s second issue = presented in its=20 opening brief or that reply to issues fully briefed by Smith.[2]

=20 McAlester argues that the = trial=20 court considered its grant of the partial summary judgment when it = declared that=20 Smith was protected from liability for McAlester=92s claims. McAlester points to the = language of the=20 judgment reciting that the trial court took judicial notice of its = file,=20 including the order granting the motion for summary judgment. Despite this recitation, = there is=20 no indication that the trial court relied on its grant of the = motion for=20 summary judgment when it determined the declaratory judgment = claim. To the contrary, the = judgment=20 provides that the trial court =20 determined the declaratory judgment claim =93based upon the = jury=92s=20 answers and testimony and other evidence admitted at trial = (including=20 =91Terms and Conditions=92 stated in the price book, job tickets, = and=20 invoices).=94 Cf. General Star Indem. = Co. v. Spring Creek Vill. Apartments Phase = V,=20 Inc., 152 S.W.3d = 733, 738=20 (Tex. App.=97Houston [14th Dist.] 2004, no = pet.)=20 (reversing and remanding entirety of trial court=92s judgment,=20 including breach of = contract=20 issue tried to jury, because =93jury trial on breach of contract = was=20 premised on the summary judgment that the appraisal award was = binding and=20 Spring Creek was entitled to recover more than $1=20 million=94).

=20 Acknowledging that the trial court relied on the jury=92s = answers, in=20 part, to determine the declaratory judgment claim, McAlester also=20 challenges the declaratory judgment by arguing that the jury was = presented=20 with a =93one-sided case.=94 =20 McAlester contends that = the case=20 presented to the jury presumed that McAlester had agreed to the = =93terms and=20 conditions=94 that limited Smith=92s liability. As support, McAlester cites the jury question on = Smith=92s breach=20 of contract counterclaim, which asked as follows: =93Did = [McAlester] fail to=20 comply with the agreement to pay [Smith] for the sidetracking = services to=20 be performed?=94 = While it shows=20 a presumption that an agreement existed between McAlester and = Smith=20 regarding payment of the sidetracking services, the jury question = does not=20 show that a presumption existed that =20 McAlester had agreed to the exculpatory =93terms and = conditions,=94=20 which shielded Smith from liability.

=20 McAlester correctly points out = that =93the=20 jury did not answer issues regarding waiver and release.=94 Nevertheless, McAlester=92s point is=20 irrelevant unless it shows that, after the evidence was presented = at=20 trial, issues of fact remained to be decided by the jury before = the trial=20 court could determine the declaratory judgment claim. McAlester makes no such = showing.=20

=20 In sum, McAlester has not shown that = the=20 declaratory judgment portion of the final judgment should be=20 reversed. Thus, it = may be=20 considered in determining harm from the trial court=92s grant of = the partial=20 summary judgment. = See Progressive County = Mut. Ins., 177 S.W.3d = at=20 921. Based on this=20 consideration, we conclude that there is no remaining issue of = material=20 fact because the declaratory judgment decided the same issue that = was in=20 dispute in the motion for summary judgment proceedings. That is, the declaratory = judgment=20 determined that McAlester had agreed to release = Smith=20 from the claims asserted in this case. For this reason, we hold = that,=20 even if the trial court improperly granted the motion for summary=20 judgment, the error was harmless. =20 See Tex. R. App. P.=20 44.1.

=20 We overrule McAlester=92s first and second=20 issues.

&nbs= p; = ; = &= nbsp; =20 Conclusion

=20 We affirm the judgment of the trial = court.

&nbs= p; =20 &nbs= p; = ; = =20 Laura Carter Higley

&nbs= p; = ; = &= nbsp; &n= bsp; =20 Justice

Panel = consists of=20 Justices Nuchia, Jennings, and=20 Higley.

Justice = Jennings,=20 dissenting.