Court Opinion

ID: 2808161
Source: CourtListenerOpinion
Date Created: 2015-06-15 07:11:08.491622+00
Date Added: 2024-06-11T12:39:37.395656
License: Public Domain

IN THE SUPREME COURT OF TEXAS
                                         444444444444
                                            NO . 13-0597
                                         444444444444

           PLAINS EXPLORATION & PRODUCTION COMPANY, PETITIONER,
                                                  v.

               TORCH ENERGY ADVISORS INCORPORATED, RESPONDENT

           4444444444444444444444444444444444444444444444444444
                             ON PETITION FOR REVIEW FROM THE
                      COURT OF APPEALS FOR THE FIRST DISTRICT OF TEXAS
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       JUSTICE JOHNSON , dissenting.

       The Court holds that the 1996 purchase and sale agreement between Torch Energy Advisors

Incorporated and Plains Exploration & Production Company’s predecessor in interest divests Torch

of the right to any proceeds from the Amber judgment. ___ S.W.3d ___. See Amber Res. Co. v.

United States, 68 Fed. Cl. 535, 560 (2005) (Amber I), aff’d, 538 F.3d 1358 (Fed. Cir. 2008) (Amber

II). I disagree that the contract unambiguously transferred the claim underlying the judgment to

Plains. I would affirm the judgment of the court of appeals.

                                I. The Agreement is Ambiguous

       As the Court recognizes, our objective in construing contracts is to ascertain the true intent

of the parties, which we primarily do by looking to the language they used. ___ S.W.3d ___ (citing

Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 7 (Tex. 2014)). “A contract is not

ambiguous if [its] language can be given a certain or definite meaning” or interpretation. Id. (citing

El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 806 (Tex. 2012) (emphasis
added)). But a contract is ambiguous if the language is subject to two or more reasonable

interpretations, creating a fact issue with regard to the parties’ intent. Id. Whether a contract is

ambiguous is a legal question for the Court, even if the parties maintain that it is not ambiguous. See

Dynegy Midstream Servs., L.P. v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009).

        The parties in this case argue that the agreement unambiguously determines who owns the

disputed proceeds from the Amber judgment (proceeds)—they just differ on whom that is. The

dispute focuses on two sections of the agreement. Section 1.2(b) specifies that among the assets

classified as “Excluded Assets” are the following:

        [A]ll claims and causes of action of [Torch] (i) arising from acts, omissions or
        events, or damage to or destruction of property, occurring prior to the Effective Date,
        (ii) arising under or with respect to any of the Contracts that are attributable to
        periods of time prior to the Effective Date (including claims for adjustments or
        refunds) . . . .

Torch asserts ownership of the proceeds, at least in part, on the basis that Section 1.2(b) includes the

claims underlying the Amber judgment in “Excluded Assets” for two reasons. First, they arose from

acts or events occurring before the effective date of October, 1995, so they come within Section

1.2(b)(i). Second, they arose “under or with respect to” lease contracts “attributable to periods of

time prior to the Effective Date (including claims for adjustments or refunds).” In contrast, Plains

argues that the claims and rights arose from acts occurring long after the transfer so they were not

excluded assets. The Court agrees with Plains, concluding that the terms “arising from,” “arising

under or with respect to,” and “attributable to” “unambiguously require a pre-effective date causal

nexus that does not exist in the present case.” ___ S.W.3d at ___. I disagree.

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        As the court of appeals explained, the meaning of the word “claims” in the excluded assets

section reasonably could include both contingent and existing claims. Torch Energy Advisors Inc.

v. Plains Exploration & Prod. Co., 409 S.W.3d 46, 56 (Tex. App.—Houston [1st Dist.] 2013). I

agree. A claim is a claim, unless the parties intend the word to mean something different as reflected

by the word’s context or by the use of modifying language such as “existing” or “known.” Here

neither is demonstrated. To the contrary, in Section 1.2(b) “claims” is modified by the word “[a]ll,”

which both portrays the intent of the parties and gives context by including claims causally

connected to events and actions taking place before the effective date.

        The Court focuses on the phrases “arising from,” “arising under or with respect to,” and

“attributable to,” which it says are dispositive. ___ S.W.3d at ___. Without explaining how it

determines what the parties intended the terms to mean in this contract, it says such language

requires a substantial-factor relationship between the Amber judgment and the acts or events that

produced it, and only post-effective date acts and events have such a relationship. Id. at ___.

        Torch asserts, however, that “arising from” and “arising under” require simply some causal

relationship and the claim underlying the Amber recovery “arose from” the original bonus payments

and the Coastal Zone Management Act amendments that were before the effective date.

        The Court cites three cases in which this Court has interpreted “arising out of” broadly to

require only a causal connection, consistent with Torch’s interpretation. ___ S.W.3d at ___. The

Court does not consider these cases as making Torch’s reading of “arising from” reasonable because

there were policy considerations in those cases (such as reading a contract in favor of arbitration) that

tipped the scales toward a liberal construction. Id. But even taking policy considerations and

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“liberal construction” into account, the interpretation of the phrases in those cases still had to be

reasonable. See, e.g., Utica Nat’l Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 202 (Tex.

2004) (“The court must adopt the construction of an exclusionary clause urged by the insured as long

as that construction is not unreasonable . . . .”). Although I agree with the Court that Plains’s

interpretation of “arising from” is reasonable, reading Section 1.2(b) consistently with Torch’s view

of the language is also reasonable. The fact that there are two reasonable interpretations renders the

section ambiguous. See El Paso Field Servs., 389 S.W.3d at 806 (providing that a contract is

ambiguous if it is subject to two or more reasonable interpretations).

       The Court also concludes that Torch’s reading of the language to include a broad causation

standard is unreasonable when viewed in context. The Court points to section 1.2(g), which provides

that the agreement excludes transfer to Plains of “all proceeds, income or revenues . . . attributable

to . . . the Properties for any period prior to the Effective Date.” ___ S.W.3d at ___. “Attributable

to,” in this context, the Court says, cannot mean “but for” causation because every pre-conveyance

event, in some way, would be attributable to post-conveyance proceeds. Id. at ___. I do not

necessarily agree with that statement, but regardless of what either the Court or I think, the parties

chose the language of the contract and nothing in the contract indicates they intended “attributable

to” in section 1.2(g) to mean the same thing as “arising from” and “arising under” in section 1.2(b).

       Moreover, setting out an “effective date” to clarify the division of assets and claims the

transferring party retained from those it transferred is an accepted method—if not the accepted

method—for doing that. And reading the language of Section 1.2(b) as a whole and in context,

Torch’s position that the agreement did just that is reasonable. Nevertheless, when both parties

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advance reasonable interpretations of the language, the language is ambiguous despite their obvious

attempt to make it clear, and what the parties intended it to mean must be decided by a factfinder.

See Grohman v. Kahlig, 318 S.W.3d 882, 887 (Tex. 2010) (“If the contract is ambiguous, the parties’

intent is a question of fact for the jury.”). And while Torch argues that Section 1.2(g) also reserved

to it the rights underlying the Amber judgment payments, even construing “attributable to” to mean

that Section 1.2(g) did not reserve those rights, the contract remains ambiguous regarding whether

the rights were an excluded asset under Section 1.2(b).

        To repeat, the question before us is what the parties intended the words to mean when they

entered the agreement. See Lane Bank Equip. Co. v. Smith S. Equip., Inc., 10 S.W.3d 308, 321 (Tex.

2000) (“When we construe a contract or deed, we say what the parties intended by the language they

agreed to.”). I agree with the court of appeals that the agreement is subject to being interpreted either

of two reasonable ways. Therefore, it is ambiguous as to whether the rights underlying the Amber

judgment were excluded from the assets transferred by the agreement, and the case should be

remanded for a factfinder to determine the parties’ intent.

                                           II. Conclusion

        The agreement is ambiguous regarding ownership of the disputed proceeds. Thus, I would

affirm the judgment of the court of appeals remanding the case to the trial court. Because the Court

does not do so, I respectfully dissent.

                                                ________________________________________
                                                Phil Johnson
                                                Justice

OPINION DELIVERED: June 12, 2015

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