      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                       NO. 03-03-00740-CV



                             Tom Dyke and Sibyl Dyke, Appellants

                                                  v.

           Don Jackson and Velna Jackson d/b/a Prophet Investments, Appellees




     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
         NO. GN300334, HONORABLE C. W. DUNCAN, JR., JUDGE PRESIDING



                             MEMORANDUM OPINION


               Appellants Tom Dyke and Sibyl Dyke (“the Dykes”) leased a house from owners and

appellees Don Jackson and Velna Jackson d/b/a Prophet Investments (“the Jacksons”). Curtis

Gallaher, Sibyl Dyke’s brother, was injured at the house when a non-tempered glass panel shattered

and cut his wrist. Gallaher sued the Jacksons, alleging that their use of non-tempered glass was

negligent, that he was an invitee and thus owed a duty by the Jacksons, and that he was a third-party

beneficiary of the lease agreement between the Dykes and the Jacksons. The Jacksons filed a third-

party petition against the Dykes, alleging that the Dykes, as tenants in control of the property, were

liable for any injuries. The Jacksons alleged that the lease required the Dykes to obtain liability

insurance naming the Jacksons as additional insureds and that the Dykes failed to obtain such

insurance. The Jacksons further alleged that the lease agreement included an indemnification

provision under which the Dykes agreed to indemnify the Jacksons from all claims arising out of
loss, damage, or injury arising from the condition of the house or the Dykes’ use of the house during

the lease term. After Gallaher and the Jacksons reached a settlement agreement, Gallaher’s claims

against the Jacksons were severed from the Jacksons’ claims against the Dykes and dismissed.

               The Jacksons moved for summary judgment, arguing that the Dykes breached the

lease by failing to obtain the required insurance and by refusing to indemnify the Jacksons against

Gallaher’s claims. The Dykes moved for summary judgment against the Jacksons, arguing that the

indemnification clause was unenforceable because it did not satisfy the “fair notice” requirements,

the Dykes could not obtain insurance for the Jacksons, and the Dykes had no obligation to provide

insurance at the time Gallaher was injured. The trial court denied the Dykes’ motion and granted

the Jacksons’ motion and then signed a final judgment awarding the Jacksons $121,000 from the

Dykes, plus interest and appellate attorney’s fees. The Dykes appeal, arguing in six issues that the

indemnity clause was unenforceable, the Dykes did not have actual notice of the indemnity clause

so as to comply with fair notice requirements, there was a fact issue as to impossibility, the insurance

requirement was not yet in effect when Gallaher was injured, and the settlement with Gallaher was

not reasonable, prudent, and made in good faith. We affirm the trial court’s judgment.


                                        Standard of Review

               The standards used in reviewing the grant of summary judgment are well established.

When both parties move for summary judgment and the trial court grants one motion and denies the

other, we will review the evidence presented by both sides and determine all questions presented,

rendering the judgment that the trial court should have rendered. Cornyn v. Universe Life Ins. Co.,

988 S.W.2d 376, 378 (Tex. App.—Austin 1999, pet. denied). Summary judgment is proper if one

                                                   2
party establishes that there are no issues of material fact and that he or she is entitled to judgment

as a matter of law. Id. We take as true evidence favorable to the non-movant and indulge all

inferences and resolve any doubts in the non-movant’s favor. Id. If the trial court does not specify

the ground or grounds on which summary judgment is granted, we will consider all grounds

advanced by the parties and will sustain the summary judgment if any of the theories is meritorious.

Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 79 (Tex. 1989).


                                          Insurance Issues

               In two issues, the Dykes argue that the lease provision requiring them to obtain

insurance is unenforceable. They argue that they raised a fact question as to whether the provision

requiring them to procure insurance that would cover the Jacksons was impossible to satisfy. They

further argue that the provision was not in effect at the time of Gallaher’s injury because the Dykes

had not yet “moved in” to the house.

               The Jacksons’ motion for summary judgment asserted that the Dykes breached the

lease contract by failing to obtain insurance. In support of this argument, the Jacksons pointed to

the language of the lease and Mr. Jackson’s affidavit. The lease provided that the Jacksons “agree[d]

to secure a tenants [sic] liability policy with minimum limits of $300,000 and $20,000 for liability

and property damage respectively. [The Jacksons] shall be named as an additional insured on this

policy. This policy shall be effective and sent to the [Jacksons] before any move in can occur.” In

his affidavit, Mr. Jackson averred that the two earlier tenants had obtained the required insurance and

never informed the Jacksons that they had any difficulty in obtaining that insurance. He further

averred that he had no reason to believe that the Dykes had not obtained insurance and would not

                                                  3
have leased to them if he had known that they had not obtained or would not obtain the insurance.

The Jacksons also attached an affidavit by Jerry Tolar, who assists the Jacksons with the leasing and

management of their real estate, in which Tolar averred that two earlier tenants had obtained the

required insurance through Nationwide Insurance Company. He also averred that on April 15, 2000,

he met with the Dykes to discuss the lease and that Mr. Dyke “assured me that he had . . . already

contacted his insurance agent and had already added [the Jacksons] as an additional insured on their

tenant’s liability insurance policy.”

               By showing that the Dykes contracted to obtain the insurance but failed to do so, the

Jacksons established their breach of contract claim as a matter of law. The Jacksons further showed

that prior tenants had procured the required insurance. To defeat summary judgment, the Dykes had

to raise a fact issue regarding their affirmative defense of impossibility.1 See Walden v. Affiliated

Computer Servs., Inc., 97 S.W.3d 303, 324-25 (Tex. App.—Houston [14th Dist.] 2003, pet. denied).

               Impossibility occurs if performance becomes impracticable or if the agreement’s

performance is frustrated by an event the non-occurrence of which was a basic assumption under

which the contract was made. Restatement (Second) of Contracts §§ 261-266 (1981); see Tractebel




       1
          The doctrine of impossibility is sometimes referred to as “impracticability.” Tractebel
Energy Marketing, Inc. v. E.I. Du Pont De Nemours & Co., 118 S.W.3d 60, 64-65 & n.6 (Tex.
App.—Houston [14th Dist.] 2003, pet. denied). Impossibility is defined as “[t]hat which, in the
constitution and course of nature or the law, no person can do or perform.” Black’s Law Dictionary
755 (6th ed. 1990). “Impossibility of performance of contract” is defined as a “doctrine under which
a party to a contract is relieved of his or her duty to perform when performance has become
impossible or totally impracticable (through no fault of the party).” Id. The definition goes on to
note that an action may be legally impossible if it is impracticable, meaning “when it can only be
done at an excessive and unreasonable cost.” Id.; see also Restatement (Second) of Contracts § 261,
cmt. d (1981) (‘“impracticability’ means more than ‘impracticality’”).

                                                 4
Energy Marketing, Inc. v. E.I. Du Pont De Nemours & Co., 118 S.W.3d 60, 64 (Tex. App.—Houston

[14th Dist.] 2003, pet. denied). Impossibility can be present at the time an agreement is made or can

occur after an agreement has been made. See Centex Corp. v. Dalton, 840 S.W.2d 952, 954 (Tex.

1992); Restatement (Second) of Contracts §§ 265-266. A governmental regulation may make

performance impracticable or impossible. Restatement (Second) of Contracts § 264 (1981). A party

claiming impossibility must show it used reasonable efforts to attempt to avoid the obstacle to

performance. Tractebel Energy, 118 S.W.3d at 69 (citing Restatement (Second) of Contracts § 261,

cmt. d). A contractual obligation is not impossible simply because performance is more expensive

or difficult than anticipated. Huffines v. Swor Sand & Gravel Co., 750 S.W.2d 38, 40 (Tex.

App.—Fort Worth 1988, no writ); Restatement (Second) of Contracts § 261, cmt. d (“mere change

in the degree of difficulty or expense . . ., unless well beyond the normal range, does not amount to

impracticability”); see Tractebel, 118 S.W.3d at 64-65.

               Mr. Dyke testified in a deposition that he asked his insurance company to add the

Jacksons to his homeowner’s insurance on April 15. He assumed the insurance was in place until

he was informed in June that he could not add the Jacksons to that particular policy. He was told,

“You can do this on a commercial lease, but you can’t do it on a residential lease” and that “the State

didn’t allow it.” Mr. Dyke’s insurance company gave him the names of two people at the Texas

Department of Insurance, and he contacted them about the issue in August 2000. The Dykes

produced a letter, dated August 15, 2000, from the Texas Department of Insurance, stating that a

homeowner’s insurance policy “is not intended to assume any liability for a landlord” and that the

landlord should instead arrange for coverage from their own homeowner’s or by a separate liability



                                                  5
policy on the rental property. The letter states that while coverage for a landlord “is not eligible for

HO-301,[2] and not in accordance with the [Texas Personal Lines] Manual,[3] any company having

issued a policy as such would have to abide by the policy contract.” Although Mr. Dyke was aware

that earlier tenants were able to get the required insurance, he did not ask whether he could add the

Jacksons as additional insureds on a “tenants policy,” did not inquire into “surplus lines coverage,”

and did not recall explaining that he was using the house as an office.

               Assuming that the Dykes properly pleaded and presented the affirmative defense of

impossibility, and assuming that the letter from the Department of Insurance established that the

Dykes could not add the Jacksons to their existing homeowner’s policy, the Dykes still did not raise

a fact question as to whether performance of the insurance requirement was in fact impossible.

               The Jacksons established both the existence of the insurance requirement and that

other tenants had obtained insurance in the past. The Dykes raised a fact issue only as to one

possible means to obtain the required insurance. The Dykes did not show that they made any effort

to obtain the required insurance beyond their own homeowner’s policy. They did not establish that

they could not obtain insurance, for instance, through a commercial policy or a general liability

policy. The Dykes did not show that they inquired as to coverage with any other insurance company,

such as the one used by the Jacksons’ past tenants. The letter from the Department of Insurance did



        2
          HO-301 is an endorsement adding additional insureds to a Texas homeowner’s policy. The
letter describes the Dykes’ inquiry as asking whether the HO-301 may be used to “provid[e] liability
coverage to a landlord” and says that such coverage “is not an eligible exposure for the additional
insured endorsement.”
       3
         The manual “outlines the writing rules for residential property policies in Texas” and
“includes the eligibility rules for various situations in which the HO-301 may be used.”

                                                   6
not establish that the Dykes were unable to obtain coverage on behalf of the Jacksons, only at most

that they could not obtain coverage under one specific kind of policy. Thus, the Dykes did not raise

a question of fact on the impossibility of obtaining insurance and avoiding a breach of the lease

contract. The trial court did not err in granting summary judgment on the issue of impossibility.

               The Dykes also asserted that their duty to provide insurance coverage for the Jacksons

had not been triggered at the time of Gallaher’s injury because they had not yet “moved in” to the

house. They argue that because they had not moved their belongings into the house or begun

residing in the house, they had not “moved in” under the lease and were not yet obligated to provide

insurance coverage for the Jacksons. We disagree.

               The lease was signed by the parties in mid-April 2000, and the Dykes paid rent for

the period of April 15 through May 15. The lease requires the Dykes to obtain insurance covering

the Jacksons before “move in” may occur. On May 6, the day Gallaher was injured, Gallaher was

at the house helping his brother-in-law install a new gas cooktop. In exchange, Mr. Dyke paid

Gallaher $100. The Dykes and Gallaher had removed an old electrical cooktop and installed the new

one, hiring a plumber to prepare a gas connection, and Gallaher was going to turn the power back

on when he walked into one of the glass panels and was injured. The Dykes replaced the electrical

cooktop, which worked, because the old one was dirty and Mrs. Dyke preferred a gas unit. Mr. Dyke

testified that in late April he told Tolar what he wanted to do, and Tolar said he should go ahead,

but he never made a written request for the change to Tolar or the Jacksons.4




       4
          Tolar stated in his affidavit that the Dykes never asked and he never gave permission for
the replacement of the cooktop.

                                                 7
                  Generally when two parties enter into a lease contract and a lease term begins, the

“lessor relinquishes possession or occupancy of the premises to the lessee.” Johnson County

Sheriff’s Posse, Inc. v. Endsley, 926 S.W.2d 284, 285 (Tex. 1996); see also Prestwood v. Taylor, 728

S.W.2d 455, 460 (Tex. App.—Austin 1987, writ ref’d n.r.e.) (landlord, “by her lease to the tenant,

transferred to him the right of possession and he entered into actual occupation of the land, for an

extended period, with an intent to exercise the right of control given him in the lease contract”). In

this case, the Jacksons relinquished control to the Dykes as of April 15. The Dykes pulled up carpet,

had a plumber install a gas line for the new cooktop, removed the electrical cooktop, and installed

the gas cooktop. Although the Dykes may not have moved all of their possessions into the house

and may not yet have been residing in the house, they clearly exercised control and possession over

the house. Under the Dykes’ strained interpretation, a tenant could exercise control over the

property, making changes, inviting friends over, and otherwise using the house, but as long as he did

not move his furniture into the house or sleep in the house regularly, he could escape the requirement

to provide insurance coverage under the lease. Further, the Dykes seem to have understood the lease

to require insurance from the beginning of their control over the premises, as evidenced by Mr.

Dyke’s April 15 phone call to his insurance agent requesting insurance coverage for the Jacksons.

By buying and installing the new appliance, the Dykes had indeed begun moving their belongings

into the house.

                  The Jacksons showed as a matter of law that the Dykes were contractually obligated

to obtain insurance and breached that obligation. The Dykes did not raise a fact question as to

whether it was impossible to obtain the required insurance or as to whether the insurance provision



                                                   8
was in effect at the time of Gallaher’s injury. Therefore, the trial court did not err in granting

summary judgment in favor of the Jacksons.


                                Was the Settlement Reasonable?

               Under the settlement, the Jacksons agreed to pay Gallaher $45,000 to settle the claims

for which he originally sought $300,000 in damages. In defending and eventually settling Gallaher’s

suit, as well as prosecuting their suit against the Dykes through summary judgment, the Jacksons

incurred $76,000 in attorney’s fees. The Jacksons sought and were awarded $121,000 from the

Dykes. The Dykes argue that the Jacksons did not prove that their settlement with Gallaher was

reasonable, prudent, and made in good faith. They argue primarily from an indemnification

standpoint. See H.S.M. Acquisitions, Inc. v. West, 917 S.W.2d 872, 879 (Tex. App.—Corpus Christi

1996, writ denied) (“For a settling indemnitee to recover an amount of the settlement from its

indemnitor, the indemnitee must show its potential liability to a claimant and that the settlement was

reasonable, prudent, and made in good faith under the circumstances.”). The Jacksons, however,

argue that they were not required to satisfy the reasonableness element of indemnification damages

and instead were entitled to breach-of-contract damages.5

               If a party voluntarily agrees to provide insurance coverage for another’s property, he

undertakes a duty similar to that of an insurance agent. Colonial Sav. Ass’n v. Taylor, 544 S.W.2d




       5
          Prevailing plaintiffs in a breach-of-contract action may recover actual damages for losses
that are “the natural, probable, and foreseeable consequence of the defendant’s conduct.” Mead v.
Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981).

                                                  9
116, 119-20 (Tex. 1976). An insurance agent who agrees to procure insurance for another has a legal

duty to use reasonable diligence to obtain the insurance and if he cannot, to notify the principal of

his inability to do so. May v. United Servs. Ass’n of Am., 844 S.W.2d 666, 669 (Tex. 1992); see

Stinson v. Cravens, Dargan & Co., 579 S.W.2d 298, 299-300 (Tex. Civ. App.—Dallas 1979, no

writ); Burroughs v. Bunch, 210 S.W.2d 211 (Tex. Civ. App.—El Paso 1948, writ ref’d). The proper

measure of damages for a failure to obtain insurance is the amount that would have been paid under

the insurance policy if it had been obtained. Diamond v. Duncan, 177 S.W. 955, 956 (Tex. 1915);

Taylor v. Republic Grocery, 483 S.W.2d 293, 296 (Tex. Civ. App.—El Paso 1972, no writ); Wallis

v. Liberty Mut. Ins. Co., 465 S.W.2d 422, 425 (Tex. Civ. App.—Dallas 1971, writ ref’d n.r.e.).

               The Dykes were contractually obligated to obtain insurance coverage to benefit the

Jacksons, but failed to do so and never notified the Jacksons of the failure. The Jacksons, then, were

entitled to damages and attorney’s fees incurred in defending and eventually settling Gallaher’s suit,

which otherwise presumably would have been covered by the required insurance. See Mead v.

Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex. 1981) (breach-of-contract damages compensate

for natural, probable, and foreseeable consequences of breach). The Jacksons diligently opposed

Gallaher’s suit for more than a year before settling the suit for about 15% of the damages Gallaher

originally sought. Unless the Dykes raised a question of fact as to whether the settlement or the

attorney’s fees were unreasonable or incurred in bad faith, the trial court did not err in its award.

               Gallaher sued the Jacksons for negligence, alleging he was a guest of their tenants,

and arguing that he was a third party beneficiary of the lease contract between the Jacksons and the




                                                 10
Dykes.6 Gallaher sought $300,000 in damages for physical and mental pain and suffering, mental

anguish, medical expenses, lost wages or earning capacity, and physical impairment. As summary

judgment evidence, Gallaher attached affidavits by Mr. and Mrs. Dyke, in which they said (1) the

Jacksons retained responsibility for maintaining and repairing the home, (2) the Dykes were unaware

that the glass panels were not safety glass, (3) they assumed the house was safe for themselves and

their visitors, and (4) Gallaher was in the house at their invitation. The Jacksons contested their

liability throughout, arguing that they owed Gallaher no duty because a landlord is not liable to

tenants or their guests for injury due to a dangerous condition in place when the tenants took

possession. See Restatement (Second) of Torts § 365 (1983). The Jacksons further argued that they

were not in possession of the property and did not know and had no reason to know of the danger.

               The Dykes argue that because the Jacksons contested liability and because Gallaher’s

claims would have failed had they not been settled, the settlement was unreasonable and not made

in good faith. However, the Jacksons had already filed one motion for summary judgment against

Gallaher’s claims, which was denied, and even assuming Gallaher could not succeed on any of his

claims, the Jacksons would still have incurred further attorney’s fees in their defense of the suit. At

the time of summary judgment against the Dykes, the Jacksons had already incurred attorney’s fees

in an amount almost double the amount of the settlement. The Dykes presented no evidence

showing that, had an insurance policy been in place, the claim would not have been covered, an

insurance company defending the Jacksons would not have settled Gallaher’s claims, or that the


       6
           The Dykes assert that Gallaher added his third-party beneficiary claim after his cause was
severed from the Jacksons’ claims against the Dykes. However, the record shows that he amended
his petition to add this claim in November 2002, several months before the severance and settlement.

                                                  11
settlement was unreasonable. Had the Jacksons been insured, the insurance company would have

been obligated to defend the suit, thus sparing the Jacksons from incurring $76,000 in attorney’s

fees, and would have paid the settlement or any damages awarded after a trial.

               The Jacksons showed that they incurred $121,000 in defending and settling the suit,

a sum which would presumably have been covered by the insurance policy, had the Dykes procured

it, and the Dykes did not raise a fact issue as to whether the $45,000 settlement was unreasonable

or entered into in bad faith. Therefore, the trial court did not err in awarding the Jacksons $121,000.


                                             Conclusion

               We have determined that the Jacksons established as a matter of law that they were

entitled to judgment as to the Dykes’ contractual obligation to obtain insurance. Therefore, the trial

court did not err in granting summary judgment in favor of the Jacksons. Further, the Dykes did not

raise a question of fact as to whether the settlement was unreasonable or made in bad faith.

Therefore, the trial court did not err in awarding the Jacksons $121,000. Due to our resolution of

the insurance issue, we need not address whether the Jacksons were entitled to indemnification by

the Dykes. We affirm the judgment of the trial court.



                                               __________________________________________

                                               David Puryear, Justice

Before Chief Justice Law, Justices Patterson and Puryear

Affirmed

Filed: August 10, 2005

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