Texas Central Business Lines Corporation v. U.S. Polyco, Inc.

Citation: Not availableDocket: 10-19-00004-CV

Court: Court of Appeals of Texas; July 27, 2022; Texas; State Appellate Court

Original Court Document: View Document

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Texas Central Business Lines Corporation (TCB) appeals various trial court rulings in favor of U.S. Polyco, Inc. (USP) regarding two agreements: a Transload Agreement (TA) and a Railroad Allowance Agreement (RAA). TCB, a railroad operating in Midlothian, Texas, and USP, a producer of proprietary asphalt products, entered these agreements to facilitate the construction of a plant and necessary infrastructure for USP’s business expansion. 

The RAA stipulates that USP is liable for up to $1.2 million in customer payments for infrastructure, while TCB is responsible for any construction costs exceeding this amount. Following cost overruns, USP claimed to have paid nearly $9 million for the plant and improvements but was unable to operate the facility due to incomplete utilities and parking lot construction, which prevented the issuance of a certificate of occupancy.

Both parties accuse each other of breaching the agreements concerning costs related to concrete construction, utilities, and the parking lot. USP initiated the lawsuit against TCB for breach and anticipatory breach of contract. In response, TCB denied the allegations and counterclaimed for reimbursement of utility construction costs and the $1.2 million limit for infrastructure improvements. TCB later filed motions for summary judgment on its counterclaims, asserting it did not breach any contracts. USP amended its petition to detail claims and damages, claiming actual damages of $12,699,989 and asserting that its liability under the RAA was capped at $1.2 million, with TCB responsible for additional utility construction costs. The court ultimately reversed and remanded the case.

Responses and objections were filed by both parties regarding pending motions for summary judgment. On November 14, 2016, the trial court granted USP's motion for partial summary judgment concerning the interpretation of section 1.1(3) of the Railroad Allowance Agreement (RAA) between USP and TCB, while denying TCB's motions and other parts of USP's motion. The court determined that the phrase "as are agreed upon by TCB and Customer in writing" modifies only the phrase "other items in or adjacent" within section 1.1(3) of the RAA. This section defines "TCB Infrastructure Improvements" and lists various improvements, including rail tracks, driveways, and concrete structures intended for TCB's railroad operations. TCB argues that the phrase should apply to all listed items, citing the series-qualifier and last-antecedent canons of construction. The series-qualifier canon suggests that modifiers in a series apply to all items, while the last-antecedent canon indicates that modifiers apply only to the words immediately preceding them. According to USP, the last-antecedent canon supports its position that the modifier applies solely to "other items in or adjacent to the Designated Areas."

The Texas Supreme Court has indicated that the last-antecedent doctrine is not absolute and can conflict with other interpretative canons, such as the series-qualifier canon, which may lead to differing interpretations of a contract provision. In the case at hand, USP argues that punctuation in section 1.1(3) of the RAA supports its interpretation. Punctuation can clarify whether a modifying phrase applies to all preceding elements or only to part of them. The absence of a comma in this section suggests that the phrase "as are agreed upon by TCB and Customer in writing" modifies only "other items in or adjacent to the Designated Areas," according to the last-antecedent doctrine. The primary goal in contract interpretation is to ascertain and uphold the parties' intent, considering the business context. In cases of competing interpretations, only reasonable readings should be accepted, while those leading to absurd outcomes should be rejected. Given the evident disagreement on the intent and application of section 1.1(3) and the existence of multiple reasonable interpretations, the court finds the section ambiguous and rules that it cannot be interpreted as a matter of law. Consequently, the trial court's grant of partial summary judgment based on its interpretation of this section is deemed erroneous due to the existence of a factual dispute regarding the parties' intent. 

Regarding jury instructions, TCB contends that the trial court erred by providing an incorrect instruction based on its interpretation of section 1.1(3). The court agrees, noting that jury instructions must assist the jury, accurately reflect the law, and be supported by pleadings and evidence. The trial court has discretion in determining the necessity of jury instructions, and errors are only reversible if harmful. TCB's objection highlights that the instruction was an inaccurate legal statement regarding the RAA. Furthermore, a jury question may be deemed immaterial if its answer is found elsewhere in the verdict or does not affect the verdict's outcome. Typically, if the trial court interprets a contract provision, that interpretation should be included when submitting questions about compliance or performance.

The trial court incorrectly granted USP's motion for partial summary judgment based on its interpretation of the ambiguous section 1.1(3) of the RAA, which resulted in a material fact issue that should have precluded the court from instructing the jury on this interpretation. The jury's findings regarding TCB's compliance with the RAA were likely influenced by the erroneous instruction, leading to harmful charge error. Consequently, TCB's fifth issue is sustained, necessitating a remand for a new trial. The court also acknowledges that TCB raised additional issues related to the trial court's denial of its judgment notwithstanding the verdict concerning USP's breach-of-contract claims, all of which are intertwined with the interpretation of section 1.1(3). Given the ambiguity of this section, further proceedings are required. The judgment of the trial court is reversed, and the case is remanded for additional actions consistent with this opinion.