Opinion ID: 2165636
Heading Depth: 1
Heading Rank: 14

Heading: preferential-right-to-purchase exception

Text: Coral and KJJ contend that Central's sale of its oil and gas assets did not fall within the exception to the preferential right to purchase because the plain language of the exception shows a sale of a party's assets or stock to a non-affiliated third party does not include a sale to more than one nonaffiliated third party. Central, EXCO, and Zecchi contend that Coral and KJJ's interpretation of the exception clause conflicts with the rule of construction in article I of the JOA, which provides: Unless the context otherwise clearly indicates, words used in the singular include the plural, the plural includes the singular, and the neuter gender includes the masculine and the feminine. Coral and KJJ counter that this court should decline to apply the rule of construction to the typewritten interlineation in the exception clause because (1) the rule of construction was only intended to apply to the definitions that were listed in article I; (2) interpreting a non-affiliated third party to include the plural would create an ambiguity; (3) other sections of the JOA show that the parties used the term party in the singular, plural, or in combination, to indicate their intent; and (4) interpreting the phrase to include the plural of party would render the preferential-right-to-purchase provision meaningless. The construction of an unambiguous contract presents a question of law for an appellate court. [17] A court's primary concern in interpreting a contract is ascertaining the true intent of the parties. [18] If a written instrument can be given a certain or definite legal meaning or interpretation, then it is not ambiguous, and the court will construe it as a matter of law. [19] An appellate court must examine and consider the writing as a whole in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. [20] A court presumes the parties to a contract intend every clause to have some effect. [21] No single provision taken alone will be given controlling effect; rather, all provisions must be considered with reference to the whole instrument. [22] Applying Texas' rules of construction, we disagree with Coral and KJJ's arguments. First, Coral and KJJ argue that under the rule of ejusdem generis, because the definitions of terms in article I precede the rule of construction, the rule was intended to apply only to those definitions. Coral and KJJ misapply this canon of construction. `[T]he rule of ejusdem generis . . . provides that when words of a general nature are used in connection with the designation of particular objects or classes of persons or things, the meaning of the general words will be restricted to the particular designation.' [23] In other words, general terms must be construed consistent with specific terms when they are used in a sequence. [24] That rule has no application here because the rule of construction is not an undefined term and the terms defined in article I are unrelated to the rule. There are no other sections of the JOA providing rules of construction, so article I was the logical place to insert a rule directed at interpreting terms in the instrument. Moreover, the reference to neuter gender could have no application to the definitions listed in article I, supporting a conclusion that the rule of construction was intended to be global rather than limited to the listed definitions. Second, we reject Coral and KJJ's contention that interpreting the exception clause to include the plural form of party renders the JOA ambiguous. The cases relied on by Coral and KJJ are distinguishable. For example, in a Texas case, the owners of adjacent commercial lots recorded an agreement to allow reciprocal parking on either lot, which would be binding on them and future owners unless rescinded by the then owner's of said property. [25] The court determined that the word owner's in this phrase created an ambiguity as to whether the parties had intended to allow one owner to unilaterally terminate the agreement or to require mutual consent. In a Maryland case cited by Coral, the court reversed a defendant's conviction for threatening a prosecutor because, although a threat against a State official could include `a State's Attorney under the statute, the singular reference unambiguously precluded its application to a state attorney's appointed assistants. [26] The reasoning in these cases is not applicable. First, Maryland courts, like most courts, strictly construe penal statutes. [27] Further, when a statutory scheme does include a rule of construction that allows a term's meaning to include its plural form, or vice versa, the opposite result has been reached. [28] As in the statutory construction cases, no ambiguity results from applying the parties' rule of construction to the terms in the JOA. A contract is not ambiguous if it can be given a certain or definite meaning as a matter of law. [29] The rule of construction simply shows that the parties unambiguously intended the term a non-affiliated third party to have both a singular and plural meaning. It is true that to the extent a conflict exists between typewritten and printed provisions, the typewritten matter in a contract must be given effect over the printed matter. [30] But [b]oth a printed provision that is clearly a part of the body of a contract and a handwritten or typewritten provision that has been inserted into a contract are subject to the same rules of interpretation as are other provisions of a contract. [31] In order to harmonize provisions that appear to be in conflict, Texas courts will apply printed provisions to typewritten provisions unless specific language in the typewritten provision precludes that result. [32] For example, a proportionate reduction clause in an oil and gas lease allows the lessee to reduce royalties or other moneys owed the lessor under specified circumstances. [33] In Texas, whether a printed proportionate reduction clause applies to a typewritten rider or addendum reserving an overriding royalty interest depends upon whether the typewritten provision includes specific language showing that the parties did not intend for the overriding royalty interest to be reduced. [34] Here, the interlineation in the exception clause shows the parties intended to narrow the preferential right to purchase and did not want the right to be triggered if one of them decided to exit the oil and gas business and sell its assets to a nonaffiliated third party. Nothing in the interlineation would preclude interpreting the phrase a non-affiliated third party to include its plural form. For instance, the parties did not state that the preferential right to purchase would not apply to a sale of a party's assets to a single third party. [35] Texas courts will not rewrite agreements to insert provisions parties could have included or to imply restraints for which they have not bargained. [36] Coral and KJJ counter that construing the exception as allowing a party to sell its assets to more than one outside party would permit a JOA party to sell a portion of its assets to an outside party and avoid the preferential right to purchase if the selling party intended to completely dissolve at some later point in time. There is no merit to this contention. Traditional contract principles would ensure that the owner of property subject to a preferential right to purchase remains master of the conditions under which he will relinquish his interest, as long as those conditions are commercially reasonable, imposed in good faith, and not specifically designed to defeat the preemptive rights. [37] However, we need not decide that issue here because Central clearly intended to exit the oil and gas business when it placed all of its assets for sale at the same time. Although it sold the assets in packages, the property sale memorandum specifically provided that it would give preference to offers for the entire company and/or multiple package offers. As one commentator has noted: [R]arely will any party, particularly a corporation of substantial size and with diverse assets, be able to sell all of .. . its assets to a single purchaser, and .. . therefore, the parties may very well not have intended to use the phrase sale of all assets in the singular sense of a sale to one purchaser but rather in the plural sense indicating a mode or means by which titles are passed. [38] Interpreting the JOA as a whole and giving effect to every provision, we conclude that the parties unambiguously intended that the preferential right to purchase would not be triggered by a party's sale of all or substantially all of its assets to one or more nonaffiliated third parties. The evidence shows that Central offered all of its oil and gas assets in one sale and that it had no remaining oil and gas assets after two sales agreements that resulted from that offer. Thus, the district court did not err in determining that Central had not breached the JOA. Because we conclude that Central did not breach the JOA, we need not consider Coral and KJJ's claim that EXCO tortiously interfered with their contract rights by procuring Central's breach. Further, because the parties do not dispute that Central had no remaining assets covered by the JOA after these two sales, we need not consider whether Central's single sale to EXCO constituted a sale of all or substantially all of its oil and gas assets.