

Appellees= Motion for Rehearing Denied; Reversed and Remanded;
Majority and Dissenting Opinions of March 31, 2009, Withdrawn; Substitute
Majority Opinion and Substitute Dissenting Opinion filed October 8, 2009.                                                                                                                                         
 
In The
 
Fourteenth Court of
Appeals
_______________
 
NO. 14-07-00465-CV
______________
 
ROWAN COMPANIES, INC., Appellant
 
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., NORTH SEA (CONNECTICUT) LP,
Appellees
                                                                                                                                             

On Appeal from the 215th District Court
Harris County, Texas
Trial Court Cause No. 2005-70675
                                                                                                                                             

 
S U B S T I T U T E   D I S S E N T I
N G  O P I N I O N




The construction of the relevant contractual provisions proffered by the
owner trustee is the only reasonable construction.  Under this construction,
the Aestimated residual value@ part of the definition of AStipulated Loss Value@ during the ARenewal Term@ of the charter is determined by an
appraisal procedure and is not set at $13.3 million at the beginning of the
transaction or at the beginning of the Renewal Term, as contended by the
charterer. The owner trustee followed this appraisal procedure, which resulted
in a determination that the  estimated residual value for the rig as of March
15, 2008, was in excess of $83 million. Though the charterer has asserted that,
under its construction of the charter, the appraisal procedure was not
available, the charterer has never challenged the manner in which this
appraisal procedure was conducted.  The independent appraisers= determination of the estimated
residual value through this procedure is final and binding upon the parties. 
Based on the unambiguous language of the contracts, this court should affirm
the trial court=s judgment in favor of the owner trustee.
                Overview of Operative Agreements and Key
Events
Participation Agreement and Charter




Effective as of December 1, 1984, appellant Rowan Companies, Inc.
(hereinafter ARowan@) as Charterer, appellee Textron Financial Corporation (hereinafter ATextron@) as Owner Participant,[1]
and appellee Wilmington Trust Company (hereinafter AWilmington Trust@) as Owner Trustee entered into the
Participation Agreement[2] regarding the
Rowan-Halifax 116-C Jack-up Rig (hereinafter ARowan Halifax@).  One of the conditions precedent
to the closing of the transaction in December 1984 was that the Owner
Participant receive two appraisals, each stating the appraiser=s estimate of the remaining useful
life of the Rowan Halifax and the residual value thereof at the end of the
Basic Term[3] of the
charter on September 15, 2000 (without taking into account the effects of
inflation or deflation and costs of removal to the Owner Participant or Owner
Trustee) in amounts not less than 22 years and $13.3 million, respectively.  In
the Participation Agreement, Rowan represented and warranted for the benefit of
the Owner Participant that the estimated fair market value of the Rowan Halifax
at the end of the Basic Term on September 15, 2000, was equal to at least $13.3
million.
Effective as of December 1, 1984, Rowan and Wilmington Trust also entered
into a Bareboat Charter of the Rowan Halifax (hereinafter ACharter@).  In the Charter, the parties
incorporated the definitions contained in Appendix A of the Participation
Agreement.  Consequently, the parties agreed in pertinent part  to the
following definitions:
AAppraisal 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. . .[detailing more procedures]. . .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. 
 
ARenewal Term@
shall mean each of the periods after the end of the Basic Term [on September
15, 2000] with respect to which [Rowan] shall exercise its option to renew the
Charter pursuant to Section 18 of the Charter.
 
AStipulated Loss Value@ as of any date during any Renewal Term shall mean the
amount determined pursuant to Section 18 of the Charter.  
 
The focus of this appeal is the proper construction of Section 18(a) of
the Charter, which provides in its entirety as follows:




Fixed
Rental Renewal Option.  Unless [Rowan] shall have elected to purchase the [Rowan Halifax] under
Section 19, and unless a Charter Default shall have occurred and then be
continuing, [Rowan] may, by irrevocable written notice to [Wilmington Trust]
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 [Rowan Halifax] (measured from
the Closing Date [December 28, 1984]) 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 [Rowan Halifax] 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 [$13.3 million] and (B) the use of the [Rowan
Halifax] 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 [Wilmington Trust] to realize the residual value
described in the foregoing clause (A)) by some Person other than [Rowan] (or
any party related to [Rowan]) who could charter or purchase the [Rowan Halifax]
from [Wilmington Trust] 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.
Under the Charter, upon the occurrence of an Event of Loss with respect
to the Rowan Halifax, Rowan is required to give Wilmington Trust notice.  In
addition, as applicable to  the undisputed facts of this case, on the next Hire
Payment Date sixty days after the loss, Rowan is required to pay to Wilmington
Trust, among other things, the AStipulated Loss Value calculated as of such Hire Payment
Date.@ In the Charter, the parties agreed
to a schedule specifying the Stipulated Loss Value during the Basic Term. 
Under this schedule, Stipulated Loss Value begins at more than $73 million on
March 15, 1985, and decreases over time until it is $13.3 million at the end of
the Basic Term on September 15, 2000.  




Assumption and Assignment of
Participation Agreement
Rowan timely exercised its option to renew the Charter for a Renewal Term
that would last 7.5 years after the expiration of the Basic Term.  Effective as
of July 14, 2000, Rowan, Wilmington Trust, the Owner Participant, and Banc of
America Leasing & Capital, LLC, entered into an Assumption and Assignment
of Participation Agreement (hereinafter AAssumption Agreement@) in which the parties agreed in
pertinent part as follows:
!         Rowan has renewed the Charter for a Renewal
Term that will begin on September 15, 2000 and end on March 15, 2008.
  
!         The Charter is amended so that Stipulated
Loss Value payable during this Renewal Term Ashall
mean the amount determined by the procedure set forth for [sic] Section 18 of
the Charter.@
 
!         Except as modified in the Assumption Agreement, the
Participation Agreement and Charter are ratified and confirmed in all respects.

Loss of the Rig and the Appraisal Procedure
In late September 2005, the Rowan Halifax sank during Hurricane Rita. 
Rowan gave notice of the loss, and under Section 12 of the Charter, Rowan was
required to pay Wilmington Trust on March 15, 2006, the Stipulated Loss Value
calculated as of March 15, 2006.  Under Section 18(a),[4]
this Stipulated Loss Value  includes Athe present value as of such [Hire
Payment] Date [March 15, 2006,] of . . . the estimated residual value as of
[March 15, 2008,] (present value to be determined by using a discount rate of
10% compounded semiannually) as determined by the Appraisal Procedure.@




None of the agreements contains a definition of Aestimated residual value@ (hereinafter AERV@).  Rowan asserted that the ERV of
the Rowan Halifax as of March 15, 2008, was $13.3 million.  Wilmington Trust
disagreed.  Wilmington Trust gave written notice to Rowan that it was invoking
the Appraisal Procedure to determine this value.  In the entire history of the
contractual relationship, this was the only use of the Appraisal Procedure
involving the appointment of one or more marine surveyors.  Rowan took the
position that it was not proper under the contracts in question to use the
Appraisal Procedure to determine the ERV following an Event of Loss. 
Accordingly, Rowan did not participate in the Appraisal Procedure. 
Nonetheless, Rowan has not disputed  that the proper procedures were followed,
as detailed in the definition of AAppraisal Procedure@ in the Participation Agreement. 
Under this Appraisal Procedure, using three independent marine surveyors, the
ERV for the Rowan Halifax as of March 15, 2008, was determined to be $83,063,250. 
The trial court based its judgment on this amount being the ERV of the Rowan
Halifax as of that date.  Rowan asserts that it was inappropriate to use the
Appraisal Procedure and that, under the Charter, the ERV of the Rowan Halifax
as of March 15, 2008, was $13.3 million. The main issue in this appeal is which
of these constructions is correct.  
                                                                    Analysis
To ascertain the parties= true intentions, this court must examine the entire
agreement in an effort to harmonize and give effect to all provisions of the
contract so that none will be rendered meaningless.  MCI Telecomms. Corp. v.
Tex. Utils. Elec. Co., 995 S.W.2d 647, 652 (Tex. 1999).  Whether a contract
is ambiguous is a question of law for the court.  Heritage Res., Inc. v.
NationsBank,  939 S.W.2d 118, 121 (Tex. 1996).  A contract is ambiguous
when its meaning is uncertain and doubtful or is reasonably susceptible to more
than one interpretation.  Id.  However, when a written contract is
worded so that it can be given a certain or definite legal meaning or
interpretation, it is unambiguous, and the court construes it as a matter of
law.[5]





Reasonableness of the Owners= Construction of Section 18
Rowan and the Owners[6] filed
competing declaratory-judgment claims and cross- motions for summary judgment
on these claims.  The trial court denied Rowan=s motion and granted the Owners= motion.  By doing so, the trial
court impliedly concluded that the Owners= proffered construction of Section 18
is the only reasonable construction.  See Heritage Res., Inc.,  939
S.W.2d at 121.  Under
the Owners= construction, while the parties agreed to predetermined, fixed amounts
for Stipulated Loss Value on the dates on which hire was due throughout the
Basic Term, during the Renewal Term, one of the amounts used to calculate
Stipulated Loss Value[7] is determined
by the Appraisal Procedure.  That element is the present value as of March 15,
2006, of the ERV of the Rowan Halifax as of the end of the Renewal Term, March
15, 2008, with the present value determined by using a discount rate of ten
percent compounded semiannually.  Terms in a contract are given their plain,
ordinary and generally accepted meanings unless the contract itself shows the
terms to be used in a technical or different sense.  Heritage Res., Inc., 
939 S.W.2d at 121.  Rowan
and Wilmington Trust could not agree on this value.  Following the Appraisal
Procedure and based on the determinations of three independent marine
surveyors, this value was determined to be $83,063,250.  




Rowan argues that the Owners= construction makes it impossible for
Rowan to buy the hull insurance required by Section 9(a).  Rowan asserts this
insurance must be in an amount at least equal to Stipulated Loss Value as of
the last Hire Payment Date; however, under the Owners= construction, Stipulated Loss Value
would include one component consisting of ERV as of March 15, 2008, as
determined by the Appraisal Procedure.  Rowan asserts it would be impossible to
know how much insurance it should buy under Section 9(a).       Section 9(a) of
the Charter required Rowan to maintain all-risk insurance in the greater amount
of (i) the Stipulated Loss Value as of the last preceding Hire Payment Date,
and (ii) Asuch amount as shall be sufficient to prevent the [Owners] from being a
coinsurer of any loss under the applicable insurance policies.@  Because one becomes a coinsurer
when the property is underinsured relative to its actual value, Rowan was
required to maintain hull insurance at least in the amount of the fair market
value of the Rowan Halifax, even during the Basic Term.  See Risdal v.
Universal Ins. Co., 232 F.Supp. 472, 474 (D. Mass. 1964) (stating that,
when hull policy insures less than the full value of the vessel, the insured
becomes a co-insured with the insurance company).  Therefore, under the
language of Section 9(a), Rowan always had a duty to obtain hull insurance for
at least the full value of the Rowan Halifax, which is an amount that is not
stipulated in advance and that is subject to disagreement.  Rowan=s corporate representative testified
that Rowan=s Chief Executive Officer knows the fair market value of any particular
Rowan rig based on survey information and knowledge of Rowan=s equipment.  In addition, because,
as part of the Appraisal Procedure, Rowan and Wilmington Trust could agree to
the ERV as of March 15, 2008, performance would not be impossible.




Rowan also notes that, under Section 12(a), payment of Stipulated Loss
Value may be due between sixty days and approximately eight months after an
Event of Loss, and that, under Section 16(b), Wilmington Trust may require
Rowan to pay Stipulated Loss Value within ten to thirty days after receipt of a
notice.  Rowan notes that, under the Participation Agreement, an Appraisal
Procedure could take as long as eighty-five days to complete.  Again, these
provisions are not impossible to satisfy because the parties can agree or the
Appraisal Procedure can take less than the full eighty-five days to conclude. 
In addition, the contracts do not state that time is of the essence, so strict
compliance with these deadlines may not be required, especially in fact
patterns in which the parties act diligently to obtain a prompt result from the
Appraisal Procedure but are delayed by circumstances beyond their control.[8]
In sum, the Owners= construction is consistent with the language of the
Participation Agreement, the Charter, and the Assumption Agreement, and it
gives effect to all provisions of these contracts. The Owners= construction of Section 18 is
reasonable.[9]
Unreasonableness of Rowan=s Constructions of Section 18    
1.  ERV in Question as Equivalent to
ERV as of September 2000 in 1984 Dollars
Rowan asserts that, the Auniversal understanding,@ Agenerally prevailing meaning,@ and Aplain meaning@ of the term Aestimated residual value@ or ERV requires that this term be
measured and fixed at the beginning of the lease or charter transaction to
serve its tax purposes, rather than later on, after a loss has occurred. 
Therefore, Rowan points to the December 1984 appraisal concluding that the ERV
of the Rowan Halifax as of September 15, 2000, was $13.3 million in 1984
dollars, and Rowan argues that this ERV must be the ERV referred to in Section
18(a) as an element of Stipulated Loss Value during the Renewal Term.[10] 
Likewise, Rowan argues that this Aplain meaning@ of ERV precludes parties from
agreeing to determine a leased or chartered asset=s ERV after the beginning of the
lease or charter or after the loss of that asset.  The language of Section
18(a) directly at issue is the following:




the present
value as of such [Hire Payment] Date [March 15, 2006] of  . . . the
estimated residual value as of the end of such Renewal Term [March 15, 2008]
(present value to be determined by using a discount rate of 10% compounded
semiannually) as determined by the Appraisal Procedure.
Under Rowan=s construction, the plain meaning of
ERV requires that it always be calculated at the beginning of the transaction,
which, in this case, was in December 1984.  Therefore, according to Rowan, the
plain meaning of ERV requires that the ERV mentioned in the above-quoted
provision must have been equivalent to the ERV as of September 15, 2000, that was
determined before the December 1984 closing to be $13.3 million in 1984
dollars.  There are several problems with this construction.
Under the unambiguous language of the Participation Agreement, the 1984
pre-closing appraisal was (1) a condition precedent to closing that confirmed
the accuracy of  Rowan=s representation and warranty, and (2) specifically required
to be performed and delivered to the Owner Participant by December 28, 1984. 
The December 1984 appraisal does not purport to be made as part of an Appraisal
Procedure under the Participation Agreement,[11]
and it would be inconsistent with the language of the Participation Agreement 
to conclude that the ERV in this appraisal was determined by the Appraisal
Procedure.[12]  The
unambiguous language of the contracts and the undisputed summary-judgment
evidence prove that the ERV of the Rowan Halifax as of September 15, 2000, in
1984 dollars, was not determined by the Appraisal Procedure.  Therefore,
acceptance of Rowan=s argument would render meaningless the phrase Aas determined by the Appraisal
Procedure@ in the above-quoted provision.




Under the unambiguous language of the above-quoted provision, the ERV of
the Rowan Halifax is to be determined as of the end of the Renewal Term C March 15, 2008.  On the other hand,
under the unambiguous language of Section 3.01(j) of the Participation
Agreement, the ERV of the Rowan Halifax is to be determined as of the end of
the Basic Term C September 15, 2000.  Although it is conceivable that the ERV
of the Rowan Halifax might be determined by appraisers to be the same amount on
both September 15, 2000 and March 15, 2008, one appraiser=s determination of ERV as of the
former date does not constitute an appraisal as to ERV as of the latter date. 
Under the Charter, the ERV of the Rowan Halifax must be determined as of March
15, 2008.  Acceptance of Rowan=s argument would render meaningless the phrase Aas of the end of such Renewal Term@ in the above-quoted provision.
Furthermore, the 1984 appraisal was required to be made in 1984 dollars. 
But the language in the above-quoted provision states that the ERV as of March
15, 2008, should be discounted at a specified rate to obtain the present value
as of the Hire Payment Date in question during the Renewal Term, which, under
the facts of this case, was March 15, 2006.  As a result, the ERV in the
above-quoted provision would not be calculated in 1984 dollars; rather, as
applied to the facts of this case, it would be calculated in 2006 dollars.[13] 
By equating 1984 dollars with 2006 dollars, Rowan does not give meaning to the
phrase Apresent value as of such [Hire
Payment] Date.@




None of the three contracts in question states that the determination of
ERV in 1984 dollars as of September 15, 2000, should be used as the ERV in
Section 18(a) that constitutes one part of the calculation of Stipulated Loss
Value during the Renewal Term.  Rowan has not cited any case in which a court
has held that, under the plain meaning of ERV, this term must be calculated at
the beginning of the transaction, and parties may not agree to have ERV
determined after the transaction begins or after a loss.[14]




Rowan also argues that the same construction is required based on the
contracting parties= purported use of the term ERV in a technical sense.  Rowan
asserts that ERV is a term of art in the equipment-leasing industry.  However,
this argument fails because the Charter and the Participation Agreement
themselves do not show that ERV is used in a technical sense.  See Heritage
Res., Inc.,  939 S.W.2d at 121 (stating that terms in a contract are given
their plain, ordinary, and generally accepted meanings unless the contract
itself shows the terms to be used in a technical or different sense); Western
Reserve Life Ins. Co. v. Meadows, 261 S.W.2d 554, 557B60 (Tex. 1953) (holding contract term
would be construed according to its plain, ordinary, and generally accepted
meaning because contract itself did not show that term was used in a technical
sense).  In addition, even if these contracts showed that ERV was being used in
a technical sense, there is no summary-judgment evidence of this alleged
technical meaning.  See CDI Eng=g Group, Inc. v. Admin. Exch., Inc., 222 S.W.3d 544, 551 (Tex. App.CHouston [14th Dist.] 2007, pet.
denied) (rejecting contention that terms were terms of art in a particular
industry because there was no evidence to support this contention).  In its
appellate briefing, Rowan cites at least six publications in support of its
arguments; however, these publications were not presented to the trial court
and are not in our appellate record.[15]
Rowan construes the ERV in question as being equivalent to the 1984
appraisal of  ERV as of September 15, 2000, in 1984 dollars.[16] 
For the reasons stated above, this construction is unreasonable.[17]
2.  Significance of Parties= Agreement to Items in Section 18(a)=s Second Sentence
In an alternative argument, Rowan notes that the Owners have asserted
that there was an implied agreement at the beginning of the Renewal Term as to
the items stated in the second sentence of Section 18(a).  Rowan agrees and
asserts that, because such an agreement is an Appraisal Procedure, the agreed
items in the second sentence determine that the ERV to be used in the fourth
sentence to calculate Stipulated Loss Value is $13.3 million.     




It is undisputed that there was no determination of the items in the
second sentence of Section 18(a) by any marine surveyor appointed in an
Appraisal Procedure.  However, presuming that the parties impliedly agreed to
these items by proceeding with a Renewal Term and that such an agreement was an
Appraisal Procedure at the beginning of the Renewal Term, the following items
would be determined in this Appraisal Procedure:
(1)       The 7.5 year
Renewal Term is Afor a period that, when added to the Interim Term and
the Basic Term, [does] not exceed 80% of the total estimated remaining economic
useful life of the [Rowan Halifax] (measured from the Closing Date [December
28, 1984])@
 
(2)       A[A]t the end of such Renewal Term [March 15, 2008] the
[Rowan Halifax] will have an estimated residual value (in 1984 dollars without
giving effect to inflation or deflation from the beginning of the Charter Term)
. . . of not less than [$13.3 million].@
 
(3)       A[T]he use of the [Rowan Halifax] will, as of the
beginning of such Renewal Term[,] be reasonably expected to be commercially
feasible (in a manner that would permit [Wilmington Trust] to realize the
residual value described in the foregoing clause (A)) by some Person other than
[Rowan] (or any party related to [Rowan]) who could charter or purchase the
[Rowan Halifax] from [Wilmington Trust] at the end of such Renewal Term.@
 
Rowan argues that an agreement as to the second item above would be a
determination in an Appraisal Procedure that the ERV of the Rowan Halifax as of
March 15, 2008, is $13.3 million.  This construction conflicts with the
language of Section 18(a).  
First, the second item above does not say that the value must equal $13.3
million; rather, it says that it must not be less than this amount.  Therefore,
the implied agreement in question would be that the ERV as of March 15, 2008,
is not less than $13.3 million in 1984 dollars.  This does not yield an ERV for
use in calculating Stipulated Loss Value in the fourth sentence.  Rowan=s construction would render the
phrase Anot less than@ meaningless.




Furthermore, Rowan=s construction would conflate the Appraisal Procedure mentioned
in the second sentence of Section 18(a) with the Appraisal Procedure mentioned
in the fourth sentence.  The parties agreed that the first item in the second
sentence would be Adetermined by the Appraisal Procedure.@  The parties agreed that both the
second and third items would be Adetermined in such Appraisal
Procedure,@[18] indicating that all three items
would be determined in the same Appraisal Procedure.  However, in the fourth
sentence, the parties agreed that the ERV of the Rowan Halifax as of March 15,
2008, would be Adetermined by the Appraisal Procedure,@ indicating that this Appraisal
Procedure would not be the same as that mentioned in the second sentence. 
Therefore, Rowan=s construction is contrary to the use of the phrase Ain such Appraisal Procedure@ in the second sentence.
Likewise, the unambiguous language of the second sentence speaks in terms
of 1984 dollars, indicating that it is not the same calculation as the
calculation in the fourth sentence, which is done in 2008 dollars that are
discounted back to dollars for the appropriate year in the Renewal Term, in
this case 2006 dollars.[19]  
           Presuming
that the agreed items in the second sentence were determined by an Appraisal
Procedure, this result would not determine the ERV of the Rowan Halifax as of
March 15, 2008, for the calculation of Stipulated Loss Value in the fourth
sentence of Section 18(a).  For all of these reasons, Rowan=s contrary construction is
unreasonable.[20] 
                                                                Conclusion




Under the unambiguous language of the Charter, the ERV part of the
definition of Stipulated Loss Value during the Renewal Term is determined by
the Appraisal Procedure and is not set at $13.3 million at the beginning of the
transaction or at the beginning of the Renewal Term.[21] 
See New Ulm Gas, Ltd., 940 S.W.2d at 589B92.  The Charter thus provides only
one way for the ERV to be Adetermined@ during the Renewal Term, and that is Aby the Appraisal Procedure.@  The plain meaning of the language
of the Stipulated Loss Value definition leads to no absurd results.  There is
no justification for striking the requirement of the Charter that the Rowan
Halifax=s ERV as of March 15, 2008, be
determined by the Appraisal Procedure.  The record reflects that Wilmington
Trust followed the Appraisal Procedure, which resulted in a determination that
the ERV for the Rowan Halifax as of March 15, 2008, was $83,063,250.  While
Rowan has asserted that, under its construction of the Charter, the Appraisal
Procedure was not available, Rowan has never challenged the Appraisal 
Procedure itself or the qualifications of the three independent marine
surveyors.  Nor has Rowan contended that there were any procedural defects in
the Appraisal Procedure, or that the appraisals resulted from bias, fraud, or
bad faith.  Under the Participation Agreement and the Charter, these
independent appraisers= determination of the ERV for the Rowan Halifax as of March
15, 2008, is Afinal and binding upon the parties.@
Based on the plain language of the contracts, this court should affirm
the trial court=s judgment awarding Wilmington Trust $59,882,522.06, plus
attorney=s fees, prejudgment interest, and
postjudgment interest.  Because it does not, I respectfully dissent.
 
 
 
/s/        Kem Thompson Frost
Justice
 
Panel
consists of Justices Frost, Seymore, and Guzman. (Guzman, J., majority).




[1]  At the time of the December 1, 1984 transaction,
Textron Financial Corporation was the Owner Participant under the Participation
Agreement.  Textron later assigned its interest to North Sea Investments, Inc. 
Because the entity serving as Owner Participant is not relevant to the issues
in this appeal, in this opinion reference will be made generically to the AOwner Participant.@


[2]  There were other parties to the Participation
Agreement who are not material to the issues at hand.


[3]  Under the Participation Agreement, the Interim Term
of the Charter began on December 28, 1984, and ended on March 14, 1985.  The
Basic Term of the Charter began on March 15, 1985, and ended on September 15,
2000. 


[4]  Unless otherwise stated, all references to a ASection@
are to the respective section of the Charter.


[5]  Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124
S.W.3d 154, 157 (Tex. 2003).  The parties to the Participation Agreement chose
New York law to govern that agreement.  The parties to the Charter chose
general maritime law and, to the extent necessary, New York law to govern the
Charter.  No party has asserted or established that New York law or general
maritime law differs from Texas law regarding any issue in this case. 
Therefore, this court should presume that in all material respects New York law
and general maritime law are the same as Texas law.  See Excess Underwriters
at Lloyd=s, London v. Frank=s Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 53 (Tex. 2008).   


[6]  At the time of the December 1, 1984 transaction,
Textron was the Owner Participant under the Participation Agreement.  Textron
later assigned its interest to North Sea Investments, Inc., who intervened in
this case along with North Sea (Connecticut) LP.  Since December 1, 1984,
Wilmington Trust Company has held title to the Rowan Halifax as Owner Trustee. 
All of these parties are appellees.  Because the distinctions among these
parties are not relevant to the issues in this appeal, for simplicity, all of
these appellees are collectively referred to in this opinion as AOwners.@       



[7]  The first two elements are not in issue in this
appeal.


[8]  See Argos Res., Inc. v. May Petrol., Inc.,
693 S.W.2d 663, 665 (Tex. App.CDallas 1985,
writ ref=d n.r.e.). In addition, Rowan=s argument based on potential adjustments to
Stipulated Loss Value under Article IX of the Participation Agreement lacks
merit because, under the unambiguous language of that article, these
adjustments would be made only in the Basic Term and not in the Renewal Term.


[9]  See Columbia Gas Transmission Corp. v. New Ulm
Gas, Ltd., 940 S.W.2d 587, 589B92
(Tex. 1996).


[10]  Under the Participation Agreement, the acquisition
of two appraisals concluding that the ERV of the Rowan Halifax as of September
15, 2000, was not less than $13.3 million was a condition precedent to the
closing of the transaction in December 1984.  The summary-judgment evidence
contains one appraisal from December 1984 that concludes the ERV of the Rowan
Halifax as of September 15, 2000, was equal to $13.3 million.  The record
contains no evidence of any other December 1984 appraisal or any explanation
whether the other appraisal was performed or whether the parties waived the
requirement of a second appraisal.  


[11]  Indeed, uncontroverted testimony from Rowan=s former Chief Financial Officer, Edward Thiele,
showed that, from 1969 through April 30, 2005, there was never an Appraisal
Procedure involving the appointment of one or more marine surveyors regarding
the Rowan Halifax.  On May 1, 2005, Thiele retired from his position as Rowan=s Chief Financial Officer, Treasurer, and Senior Vice
President of Finance and Administration.


[12]  For example, the Participation Agreement was
executed as of December 1, 1984, and the appraisal was required by December 28,
1984; however, under the Appraisal Procedure, the appraiser or appraisers have
45 days after appointment to make the determination submitted to them.  In
addition, under the Appraisal Procedure, the fees and expenses of the
appraisers are paid by Rowan and Wilmington Trust; however, under Section 10.01
of the Participation Agreement and the definition of ATransaction Costs,@
the fees and expenses for the 1984 appraisal were paid by the Owner
Participant, who, at the time, was Textron.  


[13]  Earlier in Section 18(a), the parties to the Charter
required, among other things, a determination under the Appraisal Procedure
that the ERV of the Rowan Halifax in 1984 dollars will be Anot less than@
$13.3 million at the end of the Renewal Term on September 15, 2008.  This
determination, unlike the determination in the above-quoted provision, is also
required to be in 1984 dollars.  


[14]  Indeed, Rowan cites no cases in which courts
construe the meaning of ERV in a contract, and only one case that mentions ERV.
 See M&M Leasing Corp. v. Seattle First Nat=l Bank, 563
F.2d 1377, 1381 (9th Cir. 1977) (mentioning generally ERV in automobile
leases).  Rowan cites several cases involving contracts defining Astipulated loss value@; however, all of the contracts in these cases fix Astipulated loss value@ at a specified payment, schedule, or formula, rather than having
language comparable to that in Section 18(a).  See Mt. Mansfield Television,
Inc. v. United States, 239 F.Supp. 539, 544 (D. Vt. 1964); In re Delta
Air Lines, Inc., 370 B.R. 552, 554B55
(Bankr. S.D. N.Y.  2007); In re Lykes Bros. Steamship Co., 196 B.R. 574,
578 (Bankr. M.D. Fla. 1996); In re UAL Corp., No. 06C4243, 2007 WL
256323, at *3 (N.D. Ill. Jan. 22, 2007); Marathon Ashland Petrol. v. Equili
Co., No. 00Civ2935, 2002 WL 662900 (S.D. N.Y. Apr. 23, 2002).  While
Wilmington Trust and Rowan could have agreed to a schedule of fixed values or a
fixed value or formula for determining the ERV element of Stipulated Loss Value
during the Renewal Term, they instead elected to have this element determined
by the Appraisal Procedure. In one of Rowan=s
cases, the court, in discussing leveraged lease transactions generally notes
that Ait is perhaps unnecessary to state, but important to
make clear, that each leveraged lease transaction is the product of, and must
be construed in accordance with, the specific contracting documents which
govern the parties.@  In re Delta Air Lines, Inc., 370 B.R. at
554.  Accordingly, the court emphasizes that Aeach set of contractual documents comprising a transaction may contain
different provisions which may dictate different outcomes of similar
controversies.@ Id.
 


[15]  During parts of its opening appellate brief, Rowan
seems to argue that there is a trade usage or custom as to the meaning of ERV. 
However, in its reply brief, Rowan clarifies that it is not asserting this
argument.  Even if Rowan were making this trade-usage argument, it would lack
merit because there is no summary-judgment evidence regarding the alleged
existence of any trade usage.  See XTO Energy, Inc. v. Smith Prod., Inc.,
282 S.W.3d 672, 682 (Tex. App.CHouston [14th
Dist.] 2009, pet. filed).


[16]  On appeal, Rowan also relies on Statement of
Financial Accounting Standards No. 13, which is not a legal authority but
rather a statement of standards for financial accounting and reporting for
leases.  Rowan cited this document in its summary-judgment response, but it did
not make it part of the summary-judgment evidence. Although Rowan provides a
copy on appeal, the document is outside of the appellate record.  With limited
exceptions not relevant here, this court may not consider matters outside the appellate
record.  See Bencon Mgmt. & Gen. Contracting, Inc. v. Boyer, Inc., 
178 S.W.3d 198, 210B11 (Tex. App.C
Houston [14th Dist.] 2005, no pet.). In any event, Rowan has cited no cases for
the proposition that parties cannot agree to contractual terms and duties that
differ from the Statements of Financial Accounting Standards.  Rowan cites  Ramco
Oil & Gas, Ltd. v. Anglo Dutch (Tenge) L.L.C., for the court=s  adoption of the definition of Anet worth@
under generally accepted accounting principles.  See 171 S.W.3d 905, 913B14 (Tex. App.CHouston
[14th Dist.] 2005, order).  However, Ramco is not on point because in
that case this court was construing an undefined term in statutes relating to
determining the bond amount needed to supersede a judgment.  See id. at 
911B14.  Ramco did not involve the interpretation
of a contract with language providing for the determination of values in a way
that might be different from accounting rules.  See id.


[17]  See New Ulm Gas, Ltd., 940 S.W.2d at 589B92.


[18]  (emphasis added)


[19]  Rowan asserts that the Apresent value@
calculation under the fourth sentence can be used to convert the alleged
determination of $13.3 million in 1984 dollars in the second item into 2006
dollars.  This conversion would seem contrary to the meaning of Adiscount.@ 
In addition, if this conversion were made using a Adiscount@
rate of ten percent compounded semiannually, the amount of the ERV would exceed
$29 million in 2006 dollars.  This is not how Rowan calculated the ERV.  Rowan
used $13.3 million as the ERV component in determining Stipulated Loss Value.  


[20]  See New Ulm Gas, Ltd., 940 S.W.2d at 589B92.


[21]  Because the contracts in question are unambiguous,
this court may not consider parol evidence.  Accordingly, the parol evidence
cited by both Rowan and the Owners is not relevant.  See Nat=l Union Fire Ins. Co. of Pittsburgh, PA v. CBI Indus., 907 S.W.2d 517, 520 (Tex. 1995).


