Opinion

Opinion issued October 13, 2011.

In The

Court of

Appeals

For The

First District

of Texas

————————————

NO. 01-09-00138-CV

———————————

Advanced Micromagnetics, Inc. , Appellant

V.

Torch Energy

Advisors , Inc., Torch E&P Company, Rockport

Resources Capital Corporation, and NM Back Nine Exploration Partners, LLC ,

Appellees

On Appeal from the 113th District Court

Harris County, Texas

Trial Court Case No. 2007-34064

MEMORANDUM OPINION

Advanced

Micromagnetics, Inc. (“AMI”), appeals from a summary judgment in favor of Torch Energy Advisors, Inc., Torch

E&P Co., Rockport Resources Capital Corp., and NM Back Nine Exploration

Partners, LLC (collectively, “Torch” or the “Torch Defendants”) . We

reverse and remand for further proceedings consistent with this opinion.

Background

AMI is a consulting

company that uses proprietary geophysical technology to analyze and interpret

high frequency

elements of high resolution, low altitude micromagnetic data for its oil and

gas exploration clients. According to

AMI, its technology reduces

exploration costs and allows clients to focus upon prospects with increased success

rates and reduced exploration costs. The

Torch Defendants are affiliated companies that lease, drill for, complete,

produce and sell oil and natural gas in the southwestern region of the United

States, including New Mexico.

In early 2005, Torch’s

representative, John James

Lendrum III, [1] contacted AMI President David

Greenlee regarding potential oil and gas reserves in New Mexico. At the time, Greenlee was both owner and

officer of AMI, along with James Wolleben and Carl McCutcheon.

Greenlee met Lendrum, in early March 2005, to

discuss the New Mexico prospect and there after sent multiple communications on

AMI’s letterhead to Lendrum discussing and analyzing data

from an aeromagnetic

survey of the New Mexico prospect provided by Lendrum. Specifically,

Greenlee sent a letter noting that AMI “should be able to significantly add to

this exploration play by facilitating the ability to prioritize the magnetic

structural anomalies defined by [the other] study” and thanked Lendrum for

“remembering AMI.”

The record reflects

that, the following month, Greenlee submitted a proposal to L e ndrum, on his

personal letterhead, to process and analyze t he aeromagnetic data. Torch contends that when it asked about the

change, Greenlee responded that he had the right to provide the requested

analysis in his personal capacity. The

record reflects that Torch apparently agreed to hire Greenlee to provide his

data analysis services and Greenlee and Torch began to negotiate the terms of

an independent vendor/contractor’s agreement.

Although early drafts of the agreement named Greenlee as the vendor/contractor,

at Greenlee’s request, this was later changed to Telsus Exploration, Inc. The final agreement executed on May 26, 2005, between Torch and

Telsus is referred to as the “Torch Energy Contract,” [2]

pursuant to which, upon completion of the contract, Telsus received $50,000,

plus an overriding royalty of 0.5% on any prospect defined and located by

Telsus pursuant to the contract. AMI

claims that Torch’s use of AMI’s proprietary information and intellectual

property caused Torch to identify thirty-three defined micromagnecitc

prospects, from which Torch had profited already and would profit in the

future.

On September 13, 2006, AMI, Wolleben, Greenlee, and

McCutcheon executed a Mutual Settlement Agreement and Release Agreement (“Settlement

Agreement”), effective December 31, 2005, which, inter alia , provided for the transfer of Greenlee’s and Wolleben’s

AMI stock to McCutcheon and a mutual release of claims. It also included a number of representations

by Greenlee and Wolleben regarding AMI’s assets and liabilities, as well as

revenue and compensation that they received after May 2002 related to their AMI

employment. The Settlement Agreement

also transferred equity interest in various contracts to the individual

shareholders, and included a consulting agreement for Greenlee and Wolleben to

work for AMI on future projects. Before

the transfer, Greenlee and Wolleben owned slightly more than 50% of AMI.

AMI subsequently filed suit against Torch alleging various

causes of action, including trade secret misappropriation, conversion, quantum

meruit, unjust enrichment, breach of fiduciary duty and usurping corporate

opportunities, conspiracy, and aiding and abetting, arising from Torch’s

alleged misappropriation and conversion of AMI’s proprietary information and

intellectual property in concert with Greenlee, Wolleben, and Telsus. Notably, AMI did not assert a claim of

ownership with respect to the Torch Energy Contract. Torch answered with a

general denial and raised affirmative defenses of settlement, estoppel, third

party beneficiary, release, waiver, ratification, sanctions, ambiguity,

responsible third party, and agency.

Torch subsequently filed a traditional motion for summary

judgment arguing that AMI had no claim as a matter of law because it knowingly

relinquished any rights or claims that it may have had with respect to the

Torch Energy Contract when it executed the Settlement Agreement. [3] According to Torch, the purpose of the

Settlement Agreement was to preserve AMI’s ownership of and use of its technology

with respect to future business and all existing business, excepting those

prospects specifically allocated to Greenlee and Wolleben in the Settlement

Agreement, such as the Torch Energy Contract.

Citing to section 2(C) of the Settlement Agreement which expressly

excluded the Torch Energy Contract from the definition of “AMI Prospects,”

Torch argues that by doing so, AMI agreed that the rights to the Torch Energy

Contract as well as the propriety information of AMI provided pursuant to the

contract did not belong to AMI, but instead were allocated to Greenlee and

Wolleben.

According to Torch, that the parties agreed to exclude the

Torch Energy Contract from AMI’s assets is further supported by Wolleben’s and

Greenlee’s representations and warranties

as set forth in sections 5.5 and 5.12 of the Settlement Agreement. Section 5.5 states that “[e]ach of Greenlee and

Wolleben represent and warrant that the assets listed in Exhibit ‘3,’. . .

lists all assets of AMI.” The Torch

Energy Contract is not included in Exhibit 3. The assets do include, however, AMI’s

confidential and propriety information. In section 5.12, Greenlee and

Wolleben state that they have identified the revenue and compensation received

since May 1, 2002, or are entitled to receive in the future “to the extent such

revenues and compensation arose from, or are related in any way to the

employment of AMI Micromagnetic Technology, AMI Geophysical Data, or AMI

Prospects” in an attached exhibit, and they further represent and warrant that:

there are (1) no undisclosed micromagnetic and/or aeromagnetic

prospects or projects that existed prior to May 1, 2002 that were sold by AMI

and/or transferred by AMI and which AMI is entitled in the future to any

compensation or value therefrom, and (2) there are no undisclosed micromagnetic

and/or aeromagnetic prospects or projects that were identified by Greenlee and

Wolleben and/or AMI between May 1, 2002 and the execution date and (3) none of

the AMI Prospects identified before or after May 1, 2002 and/or consulting

projects identified after May 1, 2002 using AMI Micromagnetic Technology have

been sold by either Greenlee or Wolleben or their affiliates since May 1, 2002. The

foregoing representation and warranty specifically excludes revenue and

compensation received relating to the one Torch Energy contract covering

1,800,000 acres in Chaves and Roosevelt Counties, New Mexico, dated June 20,

2005 .

Torch argues that these clauses evidence that the

Torch Energy Contract was not one of AMI’s assets and that AMI both knowingly

and willingly relinquished any rights or claims it may have had with respect to

the Contract and therefore, AMI has no claims arising therefrom as a matter of

law.

Torch further contends that AMI has

no claims against it for either “aiding

and abetting,” or usurpation of corporate opportunities because AMI

relinquished any interest it had in the Torch Energy Contract after services

were provided under the contract by Greenlee and Wolleben, and therefore, AMI

ratified Greenlee’s and Wolleben’s conduct.

Torch also claims that AMI’s secondary claims of conspiracy and aiding

and abetting require the existence of some wrongful conduct, and since AMI

authorized and ratified Greenlee’s and Wolleben’s conduct, there was no

wrongful conduct, and therefore, no basis for a conspiracy or aiding and

abetting claim. Torch also argues that it was entitled to

summary judgment because the Settlement Agreement establishes its affirmative

defenses of waiver and quasi-estoppel as a matter of law. [4]

In its response to Torch’s motion for summary judgment, AMI argues

that the Settlement Agreement did not transfer, convey, or assign AMI’s rights

to sue Torch or AMI’s rights to be compensated by Torch for the use of its

proprietary information to Greenlee, Wolleben, or Telsus. According to AMI, the two parties never

reached an agreement as to which owned the Torch prospect, the Torch Energy

Contract, or any claims related thereto.

AMI contends that

Torch has misinterpreted sections 2(C), 5.5, and 5.12 of the Settlement

Agreement. According to AMI, sections 2(C),

5.5, and 5.12 did not convey or transfer its rights to Greenlee or Wolleben

because there is nothing in the Settlement Agreement that expressly does so and

interpreting otherwise is against standard contract interpretation. AMI points out that section 5.5 and section

5.12 are representations of what Greenlee and Wolleben thought to be the assets

of AMI; the Settlement Agreement does not contain any such representations by

AMI. AMI also contends that because the

Settlement Agreement is silent as to which party owns the rights to the Torch

Energy Contract, the rights still belonged to AMI. AMI also cites to other provisions in the

contract which, it argues, support its view that AMI retains all rights and

claims associated with the Torch Energy Contract. [5]

Second, AMI argues that it did not ratify the wrongful

conduct of Greenlee, Wolleben, and Torch. AMI points out that the sole basis for the

argument of ratification by Torch was based on Torch’s interpretation of the

Settlement Agreement, an interpretation that AMI disagrees with, and therefore,

AMI maintains that there is no evidence for the ratification defense. AMI further claims that nothing in the

Settlement Agreement ratified the conduct of Greenlee, Wolleben, and Torch and

if AMI wanted to do so, it would have expressly stated its ratification in the

agreement. Lastly, AMI asserts that the

ratification defense is a genuine issue of fact for the jury, precluding

summary judgment.

In their final argument, AMI claims that Torch’s waiver and

quasi-estoppel defenses are not supported by summary judgment evidence. AMI asserts that these two defenses are

usually issues of fact for the jury to decide. AMI urges that there was no waiver in this

case because the Settlement Agreement does not express any intent of a waiver. AMI also contests Torch’s quasi-estoppel

defense on the grounds that it did not accept any benefit from the Torch Energy

Contract as necessary to invoke the defense.

In Torch’s reply to AMI’s response, it makes three more

arguments. First, Torch argues that AMI ignores section 2(C)’s exclusion of the

Torch Energy Contract as an AMI prospect, which it contends means that the parties

agreed that rights to that contract did not belong to AMI, but to Greenlee and

Wolleben. Second, Torch argues that AMI

interpreted section 5.10 incorrectly because that section only applies to AMI

assets and prospects, which the Torch Energy Contract is not. Lastly, Torch argues that its ratification,

waiver, and estoppel defenses are based on the Settlement Agreement. According to Torch, AMI’s knowledge about the

contract before the Settlement Agreement and its agreement that the Torch

Energy Contract was not an asset or a prospect of AMI in the agreement, amounted

to ratification and waiver and AMI is therefore estopped from making any claims

otherwise.

The trial court granted Torch’s motion for summary judgment,

but did not specify the ground or grounds upon which judgment was rendered. This appeal followed.

In four issues on appeal, AMI contends that the trial court

erred in granting Torch’s motion for summary judgment because (1) the Settlement Agreement did not transfer

or convey AMI’s interest in its proprietary information and intellectual

property or extinguish its right to be compensated for the use of these

valuable assets, (2) AMI did not ratify Greenlee’s or Wolleben’s conduct with

respect to AMI’s proprietary information and intellectual property, (3) Torch

failed to conclusively prove its affirmative defenses of waiver and

quasi-estoppel, and (4) questions

of material fact exist with respect to Torch’s misappropriation

of AMI’s proprietary

information and intellectual property.

Discussion

a.

Standard of review

We review a trial court’s grant or denial of a motion for

summary judgment de novo. See Tex. Mun. Power Agency v. Pub. Util.

Com’n of Tex. , 253 S.W.3d 184, 192, 199 (Tex. 2007). If the trial court’s order does not specify

the grounds upon which judgment was rendered, we must affirm the summary

judgment if any ground in the summary judgment motion is meritorious. FM

Props. Operating Co. v. City of Austin , 22 S.W.3d 868, 872 (Tex. 2000).

Under the traditional summary judgment standard, the movant

has the burden to show that no genuine issues of material fact exist and that

it is entitled to judgment as a matter of law. Tex. R.

Civ. P. 166a(c); Nixon v. Mr.

Prop. Mgmt. Co., Inc. , 690 S.W.2d 546, 548 (Tex. 1985). In deciding whether there is a disputed

material fact issue precluding summary judgment, evidence favorable to the

non-movant will be taken as true, and every reasonable inference must be

indulged in favor of the non-movant and any doubts resolved in its favor. Nixon ,

690 S.W.2d at 548–49. A defendant moving

for a traditional summary judgment 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).

When a contract contains an

ambiguity, its interpretation becomes a fact issue. Coker

v. Coker , 650 S.W.2d 391, 394 (Tex. 1983); Hackberry Creek Country Club, Inc. v. Hackberry Creek Home Owners Ass’n ,

205 S.W.3d 46, 56 (Tex. App.—Dallas 2006, pet. denied). When construing a written contract, the

primary concern of the court is to ascertain the parties’ intent as expressed

in the contract’s terms. Chrysler Ins. Co. v. Greenspoint Dodge of

Houston, Inc. , 297 S.W.3d 248, 252 (Tex. 2009); Coker , 650 S.W.2d at 393 .

Contract language that can be given

a certain or definite meaning is not ambiguous and is construed as a matter of

law. Chrysler ,

297 S.W.3d at 252 ; Coker , 650 S.W.2d

at 393 . A contract is ambiguous when its

meaning is uncertain and doubtful or it is reasonably susceptible to more than

one meaning. Coker , 650 S.W.2d at 393 ; United

Protective Servs., Inc. v. W. Vill. Ltd. P’ship , 180 S.W.3d 430, 432 (Tex. App.—Dallas

2005, no pet.). A court may conclude

that a contract is ambiguous even in the absence of such a pleading by either

party. Sage St. Associates v. Northdale Constr. Co. , 863 S.W.2d 438, 445

(Tex. 1993); see Coker , 650 S.W.2d at

392–94 (although both parties asserted property settlement agreement was

unambiguous and moved for summary judgment, supreme court concluded ambiguity

existed).

b.

Analysis

All of Torch’s summary judgment arguments are based upon its

interpretation of the Settlement Agreement.

Thus, in order to determine whether summary judgment was appropriate, we

must first determine whether the Settlement Agreement was ambiguous. See Coker , 650 S.W.2d at 394 .

Having reviewed the contract and

the parties’ arguments, we conclude that the Settlement Agreement is ambiguous .

Although the parties agreed to exclude the Torch Energy Contract from

the definition of AMI Prospects, the parties also agreed in section 9.1 that “AMI shall solely and exclusively own

any and all AMI Micromagnetic Technology and all related intellectual property.

. . .” Greenlee and Wolleben further represented and warranted that none of

their family members had any rights or claims with respect to “AMI Micromagnetic

Technology, AMI Prospects, or AMI Geophysical Data” and that, to the extent

Greenlee and Wolleben had such a claim, they assigned it to AMI.

While one might reasonably

interpret the Settlement Agreement to transfer, convey, or assign all of AMI’s rights and claims

associated with the Torch Energy Contract, including its right to sue Torch or its

rights to be compensated by Torch for the use of its proprietary information,

to Greenlee or Wolleben , the agreement

does not expressly say that, and it would be just as reasonable to interpret

the Settlement Agreement to reserve the Torch Energy Contract and all rights

and claims associated with it to AMI. In

addition to the absence

of any language of conveyance with respect to the Torch

Energy Contract, the Settlement

A greement contains other provisions that convey and assign

equity interests in certain contracts to Greenlee and Wolleben. The parties chose not

to use this conveyance language for the Torch Energy Contract.

Additionally, the Settlement

A greement does not release or relinquish any claims that AMI

might have against third parties who were provided with AMI’s confidential

information by Greenlee or Wolleben. [6]

It does not release

Torch, nor does it convey any claims that AMI might have against

T o rch to Greenlee and Wolleben. W e agree with Greenlee

and Wolleben that the summary judgment record demonstrates that the Torch

Energy Contract was disclosed to AMI, that AMI knew its contents and purposes , and that it

precludes any claims by AMI against Greenlee and Wolleben. We do not, however, agree that it

bar s

such claims against Torch.

Moreover , section

2(C) addresses

AMI’s prospects; it does not address the use of proprietary and confidential

information. The phrase “ AMI Prospects ” concerns listings of companies and

leads. It is distinct from “ AMI Micromagnetic Technology ” and “ AMI Geophysical Data, ” both of which concern

AMI’s confidential

and propriety intellectual property . This

language could reasonably be read to suggest that the companies and contacts

are defined as “prospects,” but the intellectual property related to such work

is not covered by that definition. Additionally , section 5 .5

does not contain an agreement by AMI that the assets listed on exhibit 3 constitute

all of AMI’s assets . On the contrary,

section 5.10 makes it clear that AMI does not agree that its assets are limited

to items listed on exhibit 3 and AMI reserves its rights for assets not listed

in that paragraph . Section 5.12 likewise

is a representation by Greenlee and Wolleben; it does not reflect an agreement of the

parties with respect to

this issue. Sections

9.1 and 9.2 expressly

state that AMI owns all of the technology in question and all related intellectual

property . Finally, section 25 is

contrary to the assertion that the Settlement A greement constitutes a conveyance

to Greenlee and Wolleben

of all rights under the Torch Energy Contract.

Having reviewed the entire

agreement, we are uncertain about the parties’ intentions when they entered

into the Settlement Agreement. We,

therefore, conclude that, at a minimum, a contract ambiguity exists regarding

whether AMI transferred

or conveyed any rights it had with respect to the Torch Energy Contract to

Greenlee and Wolleben under the terms

of the Settlement Agreement and whether that transfer also extinguished AMI’s

right to be compensated for the use of any AMI Micromagnetic Technology and all

related intellectual property.

Because all of Torch’s summary

arguments were premised upon their interpretation of an agreement that we have

determined to be ambiguous, the trial court erred in rendering summary judgment

on any ground argued by Torch. See Coker , 650 S.W.2d at 394 (“When a

contract contains an ambiguity, the granting of a motion for summary judgment

is improper because the interpretation of the instrument becomes a fact

issue.”). Therefore, we reverse the

summary judgment and remand this matter to the trial court for further

proceedings consistent with this opinion.

Conclusion

We reverse the judgment of the

trial court and remand for further proceedings.

Jim

Sharp

Justice

Panel

consists of Chief Justice Radack and Justices Sharp and Brown.

[1] At

the time, Lendrum was the President and Chief Operating Officer of Torch

Energy Advisors, Inc. and the President of Torch E&P Co.

[2] Greenlee

signed the document on behalf of Telsus.

[3] Torch’s motion for summary judgment

also argues that Rockport had no interest in the Torch Energy Contract and that

AMI had improperly joined Rockport as a defendant. According to Torch, Rockport was simply a

corporation that Lendrum conducted business through prior to becoming President

and Chief Operating Officer of Torch Energy Advisors, Inc. AMI nonsuited

Rockport when it filed its response to Torch’s motion for summary judgment.

[4]

Specifically, Torch contends that waiver was established as a matter of

law when AMI acknowledged the Torch Energy Contract and gave up any interest in

it via the Settlement Agreement. Torch

also claims that AMI is estopped as a matter of law from claiming that the

Torch Energy Contract did not go to Greenlee and Wolleben in the Settlement

Agreement because AMI knowingly chose to exclude the Torch Energy Contract from

AMI’s assets under the terms of the Settlement Agreement and AMI benefited from

the Settlement Agreement.

[5] Specifically,

AMI cites to section 5.10 of the Settlement Agreement w hich states that in the event Greenlee, Wolleben, and/or their spouses

“have directly or indirectly retained any asset of AMI or the benefit of any

AMI Prospects or consulting projects sold to third party clients of AMI which

is not disclosed in Exhibit ‘3’ such asset and all of the financial benefits

related thereto shall be the sole property of AMI.” AMI also

cites to section 25 which provides in relevant part: “The Parties acknowledge

and agree that no

statements, promises, or representations have been made

by any Party to the other or are to be relied upon by any third person or entity. No third party beneficiary or

other rights are created by or arise from

this Agreement. This Agreement shall not affect any

contractual rights the parties to this Agreement may have with third

parties. . . .” AMI argues that section 25 makes two things

clear: (1) there is no language in the Settlement Agreement that confers the

rights of the Torch Energy Contract to Greenlee or Wolleben, and (2) the

Settlement Agreement does not confer third party beneficiary rights to Torch,

evidenced by the clear and unambiguous language in this section.

[6] In fact, section 25 of the Settlement

Agreement expressly states that “ [t]his Agreement shall not affect any contractual

rights the parties to this Agreement may have with third

parties. . . .”