Court Opinion

ID: 9895175
Source: CourtListenerOpinion
Date Created: 2023-11-05 15:07:51.280989+00
Date Added: 2024-06-11T09:11:32.482292
License: Public Domain

Supreme Court of Texas
                            ══════════
                             No. 22-0901
                            ══════════

                           U.S. Polyco, Inc.,
                               Petitioner,

                                    v.

            Texas Central Business Lines Corporation,
                              Respondent

   ═══════════════════════════════════════
               On Petition for Review from the
       Court of Appeals for the Tenth District of Texas
   ═══════════════════════════════════════

                             PER CURIAM

      The parties in this case disagree about the meaning of a particular
provision in their land-improvement contract. The trial court interpreted
that provision as a matter of law and instructed the jury accordingly,
leaving the jury to resolve liability and damages. The court of appeals
also interpreted the provision and reached the same result as the trial
court by methodically applying well-established canons of construction.
What requires our review is what happened next. The court of appeals
determined that, despite its analysis of the contract’s language, the
provision was still insolubly ambiguous. It thus reversed the trial court’s
judgment, which had been based on the jury’s verdict, and ordered a new
trial so that a jury could determine the meaning of the contractual text.
The court of appeals provided this explanation:
      The record demonstrates that the parties strongly disagree
      about the intent of [the contractual provision] and its
      application. Given the disagreement about the intent
      behind and application of [that provision], and the multiple,
      reasonable interpretations of [it] outlined above, we
      conclude that [it] is ambiguous and cannot be construed as
      a matter of law.

__ S.W.3d __, 2022 WL 2977477, at *5 (Tex. App.—Waco 2022).
      This analysis is erroneous for two basic reasons. First, like all
other considerations beyond the contract’s language and structure,
parties’ “disagreement” about their intent is irrelevant to whether that
text is ambiguous. Parties who find themselves in a business dispute can
always claim an extratextual “intent” that would serve a current
litigation position. Second, the “multiple, reasonable interpretations”
that the court of appeals invoked are illusory. If there were multiple
interpretations and a court could not choose among them, then the text
would be genuinely ambiguous and there would be no choice but to leave
the question to a jury. But the multiple interpretations that the court
was referencing here were merely the competing theories that the parties
advanced about how to read the text—a dispute that both the trial and
appellate courts had ably addressed as a matter of law.
      The principles of contract interpretation at issue in this case are
well established and of fundamental importance. Without hearing oral
argument, we grant the petition for review, reverse the judgment below,
and remand for the court of appeals to address the parties’ remaining

                                   2
arguments.
                                *   *   *
      Petitioner U.S. Polyco, Inc. manufactures and sells asphalt
products throughout the United States. In early 2013, Polyco sought to
expand its business by building a new manufacturing plant that would
have direct railroad service. To that end, Polyco contacted respondent
Texas Central Business Lines Corporation, a short-line freight railroad
company. After several months of negotiation, the two companies agreed
that (1) Polyco would use an undeveloped parcel of land leased by Texas
Central for Polyco’s new asphalt manufacturing plant and (2) Polyco
would use Texas Central’s railroad service for its asphalt shipments.
      The parties memorialized these agreements in two contracts. The
“Transload Agreement” governed how Polyco would “transload” its asphalt
shipments—that is, how it would transfer them from railcar to truck. The
“Railroad Allowance Agreement” generally governed how the parties
would develop and improve the undeveloped parcel of land for Polyco’s
asphalt plant and transloading operations. Both contracts also addressed
how certain costs would be allocated once the project was underway.
      The primary issue before this Court concerns how the Railroad
Allowance Agreement allocated the costs of building infrastructure on the
undeveloped parcel between Polyco and Texas Central. Polyco agreed to
advance up to $1.2 million to make “TCB Infrastructure Improvements”
as defined in Section 1.1 of the Agreement. The parties dispute whether
Section 1.1(3)’s requirement of a further written agreement—italicized in
the following reproduction of the text—applies to everything listed in
Section 1.1(3) or only to the reference to “other items” that immediately

                                    3
precedes the “in writing” requirement:
      1.1 TCB Infrastructure Improvements. As used in this
      Agreement: “TCB Infrastructure Improvements” will mean
      the following improvements agreed to and shown generally
      in Exhibit X attached and incorporated into this Agreement
      by this reference (“Preliminary Layout”): . . . (3) various
      concrete and ground surface improvements, including
      without limitation slabs for truck scales and racks, tank and
      appurtenant structures to house personnel, oil heating and
      steam generation equipment, curbs and planters for parking
      areas, and other items in or adjacent to the Designated Areas
      as are agreed upon by TCB and [Polyco] in writing. All TCB
      Infrastructure Improvements constructed or provided for
      under this Agreement will be the sole property of TCB upon
      completion and are intended for the primary use of TCB in
      the conduct of its railroad operations.

(Emphasis added.) The scope of the “in writing” provision determines
whether Polyco had to obtain Texas Central’s further written agreement
for work involving concrete slabs on the land.
      According to Texas Central, Polyco’s contract with a third party to
construct those slabs (and other contracts) led Polyco to incur expenses
far above its $1.2 million advance. Because Polyco did not obtain Texas
Central’s written agreement about such improvements, Texas Central
reasoned, the improvements did not qualify as “infrastructure” that
Texas Central was obligated to fund under Section 1.1(3).         Polyco
countered that no such written agreement was required. Only “other
items in or adjacent to” the property required separate written
agreements, Polyco argued, but concrete slabs were already specifically
listed as infrastructure in Section 1.1(3). The parties’ disagreement, in
other words, turned entirely on the syntactic issue of how far the “in
writing” requirement reached back into Section 1.1(3).

                                   4
       Polyco sued Texas Central for breach of contract and moved for
partial summary judgment on this interpretive issue. The trial court
granted the motion, specifically holding that:
       Under paragraph 1.1(3) of the Railroad Allowance
       Agreement . . . , the phrase “as are agreed upon by TCB
       and Customer in writing” modifies only the phrase “other
       items in or adjacent to the Designated Areas” and does not
       modify the phrase “various concrete and ground surface
       improvements, including without limitation slabs for truck
       scales and racks, tank and appurtenant structures to house
       personnel, oil heating and steam generation equipment,
       curbs and planters for parking areas.”

       The parties proceeded to a jury trial on their respective breach-of-
contract claims, and the trial court’s jury instructions were consistent
with its interpretation of Section 1.1(3). The jury found that Texas
Central had breached the Railroad Allowance Agreement. The court then
awarded Polyco almost $9 million in damages and approximately $2
million in prejudgment interest and attorney’s fees.
       Texas Central appealed, arguing (among other things) that the
trial court erred in its reading of Section 1.1(3). Reviewing the issue de
novo, the court of appeals applied two relevant canons of construction: the
series-qualifier canon and the last-antecedent canon. Under the series-
qualifier canon, the court reasoned, “the phrase ‘as are agreed upon by
[Texas Central] and [Polyco] in writing’ would modify all items in the
series listed in section 1.1(3) . . ., including ‘various concrete and ground
surface improvements.’” 2022 WL 2977477, at *4. But under the last-
antecedent canon, the court said, “the phrase ‘as are agreed upon by
[Texas Central] and [Polyco] in writing’ would only modify the last item
in the series, which is the phrase ‘other items in or adjacent to the

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[property].’” Id. Standing alone, either canon “might reasonably apply
to this text,” the court of appeals explained, but “ ‘[p]unctuation is a
permissible indicator of meaning,’ ” and “based on the absence of a comma”
before the “as are agreed in writing” phrase, that phrase “appears to only
apply to ‘other items in or adjacent to the [property],’ as suggested by the
last-antecedent doctrine.” Id. at *5 (quoting Sullivan v. Abraham, 488
S.W.3d 294, 297 (Tex. 2016)). This result is precisely what the trial court
had reached.
      The analytical approach undergirding that result is consistent
with our general principles of contract interpretation, and it would have
been unremarkable but for the fact that the court of appeals’ reasoning
did not stop there. In a subsequent section titled “Other Considerations,”
the court ventured beyond the contractual text. “Despite the foregoing,”
the court of appeals continued, “[t]he record demonstrates that the parties
strongly disagree about the intent of section 1.1(3) of the [Railroad
Allowance Agreement] and its application.”          Id.   And “[g]iven the
disagreement about the intent behind the application of section 1.1(3) of
the [Railroad Allowance Agreement], and the multiple, reasonable
interpretations of [it] outlined above, we conclude that section 1.1(3) . . .
is ambiguous and cannot be construed as a matter of law.” Id. The court
accordingly reversed the trial court’s judgment and remanded for a new
trial so that a jury could resolve the purported ambiguity. Id. at *7. Polyco
petitioned for review.
      Our “primary objective” when construing private legal instruments
like the parties’ Railroad Allowance Agreement here “is to ascertain and
give effect to the parties’ intent as expressed in the instrument.” URI,

                                     6
Inc. v. Kleberg County, 543 S.W.3d 755, 763 (Tex. 2018). “In the usual
case, the instrument alone will be deemed to express the intention of the
parties for it is objective, not subjective, intent that controls.” City of
Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex.
1968). Thus, when a contract is unambiguous, it will “be enforced as
written without considering extrinsic evidence bearing on the parties’
subjective intent.” Devon Energy Prod. Co. v. Sheppard, 668 S.W.3d 332,
343 (Tex. 2023). Our cases reiterating these points are legion.
       The court of appeals, quite correctly, began its analysis by applying
two relevant canons of construction and observing that they might
reasonably point in different directions.      Canons often do; the last-
antecedent and series-qualifier canons generally will. The task of the
court is to assess the language, structure, and context of a written
instrument to determine which principle carries more weight and
relevance. That is why the court of appeals—again, correctly—determined
that, in this context, the punctuation of Section 1.1(3) favored the last-
antecedent canon’s application. Had the court of appeals affirmed the
trial court’s reading, its decision would have squarely aligned with our
decision in Sullivan, in which we applied the last-antecedent canon based
largely on the Legislature’s inclusion of an Oxford comma in a provision
of the Texas Citizens Participation Act. See 488 S.W.3d at 297-99.
       As we emphasized in Sullivan, “use of the Oxford comma,” while
instructive, “is not definitive.” Id. at 299. This case illustrates the point.
The omission of an Oxford comma here only reveals the lack of anything
else in the text or context that supports the notion that the parties
intended the “in writing” requirement at the end of Section 1.1(3) to

                                      7
govern everything in that section.     Had they so intended, they had
multiple structural and syntactical tools—not merely the use of a
comma—to achieve that result.
      By choosing instead to itemize distinct improvements in Section
1.1(3) and include the writing requirement only at the end, the comma’s
absence is instructive because it conveys that the “in writing” provision
is simply part of the final item in the list. The point is that something
is needed to link that phrase to what goes before—perhaps a comma,
perhaps distinct placement of the requirement, perhaps making it a
separate sentence.
      Instead, Section 1.1’s structure and syntax—together with its
incorporated exhibit—indicate the opposite. The introductory portion of
Section 1.1 explains that “‘TCB Infrastructure Improvements’ will mean
the following improvements agreed to and shown generally in Exhibit X
attached and incorporated into this Agreement.” (Emphases added.)
Among the “following” improvements are “(3) various concrete and
ground surface improvements, including without limitation slabs for
truck scales and racks, tank and appurtenant structures to house
personnel, oil heating and steam generation equipment, curbs and
planters for parking areas.” And Exhibit X shows such improvements.
      In signing the written Railroad Allowance Agreement, the parties
specified that they “agreed to” these expressly identified improvements,
including slabs. This contract is the one that provides agreement for
those items, and no further agreement is needed. They also added as
the last phrase of Section 1.1(3) “and other items in or adjacent to the
Designated Areas as are agreed upon by [Texas Central] and [Polyco] in

                                   8
writing.”   The word “are” in this context signals that this phrase
encompasses additional improvements that the parties may agree to in
writing in the future.
      It is not reasonable to interpret this final phrase as imposing a
future writing requirement on the improvements listed earlier in Section
1.1(3) and shown on Exhibit X. That reading is inconsistent with the
written statement at the beginning of Section 1.1 that the parties “agreed
to” the listed and shown improvements. The final phrase of Section
1.1(3) plays a different role. It first acknowledges that unanticipated
infrastructure improvements may be needed—it eliminates any doubt
regarding whether the specified projects will be sufficient.      It then
eliminates any doubt about how to proceed when such a need arises by
creating the mutual obligation of a written agreement about them.
      We thus cannot adopt, or deem as a reasonable competitor, Texas
Central’s more unnatural reading of the agreement. That reading would
require us to conclude that the parties intended to mandate an agreement
“in writing” to items already listed in Section 1.1(3), thus necessitating
not one but two written agreements regarding the same thing—without
any textual basis for adopting such a reading.
      The court of appeals accordingly erred by concluding that there
were “multiple, reasonable interpretations” of Section 1.1(3). 2022 WL
2977477, at *5. By “multiple,” it simply meant two—the two we have
already examined, only one of which we can embrace.              And by
“reasonable,” it simply meant plausible, but lawyers in litigation can
often generate plausible arguments to advance their clients’ position. As
we have observed before, a “contract is not ambiguous merely because the

                                    9
parties disagree about its meaning.” Kleberg County, 543 S.W.3d at 763.
When there is a plausible basis for dispute, lawyers should disagree by
making the strongest available arguments for their clients; counsel in this
case have discharged that duty well and honorably.                         But such
disagreement is not a basis for a court to abandon the interpretive task—
it is what makes that task needed. Whenever possible, courts must assess
adverse arguments and resolve a text’s meaning as a matter of law.1 And,
like discounting the mere existence of disagreement, we have cautioned
courts against considering parties’ subjective intent when resolving a
contract’s meaning. See, e.g., Perthuis v. Baylor Miraca Genetics Labs.,
LLC, 645 S.W.3d 228, 240 n.17 (Tex. 2022).2 Accordingly, in litigation, it

       1 We reaffirm, of course, that genuine ambiguity leaves courts with no

recourse but to turn the matter over to a jury. “Courts should endeavor to give
meaning to the text without too hastily finding ambiguity, but there may be
times in which no other choice remains.” Van Dyke v. Navigator Grp., 668
S.W.3d 353, 365 (Tex. 2023). Concluding that a legal instrument is insolubly
ambiguous must always come after a court has exhausted all the traditional
tools of interpretation and still cannot reach a definitive conclusion about the
meaning conveyed by the text.
       2 That contract interpretation is an “objective” endeavor is a proposition

we have stated in countless opinions. See, e.g., Kleberg County, 543 S.W.3d at
764 (“Objective manifestations of intent control . . . .”); Reed v. Wylie, 554 S.W.2d
169, 182 (Tex. 1977) (Daniel, J., dissenting) (“[O]ur decisions in the past have
not been concerned with [the parties’] subjective intent . . . .”); In re Dillard Dep’t
Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006) (“The objective intent as expressed
in the agreement controls the construction of an unambiguous contract . . . .”);
Luckel v. White, 819 S.W.2d 459, 462 (Tex. 1991) (“[I]t is not the actual intent of
the parties that governs, but the actual intent of the parties as expressed in the
instrument as a whole . . . .”); Matagorda Cnty. Hosp. Dist. v. Burwell, 189
S.W.3d 738, 740 (Tex. 2006) (“[T]he instrument alone will be deemed to express
the intention of the parties for it is objective, not subjective, intent that controls.”
(quoting City of Pinehurst, 432 S.W.2d at 518)); American-Amicable Life Ins. Co.
v. Lawson, 419 S.W.2d 823, 826 (Tex. 1967) (same); Republic Nat’l Life Ins. Co.
v. Spillars, 368 S.W.2d 92, 94 (Tex. 1963) (same).

                                          10
is not noteworthy—or at least not material—that the “record demonstrates
that the parties strongly disagree about the intent of” a contract. 2022
WL 2977477, at *5. If lawyerly disagreement about text meant that a
legal instrument’s disputed meaning must be resolved as a matter of fact,
it would be a poor advocate who could not obtain a jury trial to interpret
the text.
      To its credit, Texas Central defends at least the result of the
decision below with arguments that are more text-centered.            Texas
Central specifically urges us to consider the Railroad Allowance
Agreement more holistically and contends that various pieces of context
surrounding Section 1.1(3) favor its series-qualifier interpretation.
Context is certainly a permissible indicator of meaning, see, e.g., Brown
v. City of Houston, 660 S.W.3d 749, 754 (Tex. 2023), and courts must
strive to “harmonize and give effect to all the provisions of the contract by
analyzing the provisions with reference to the whole agreement.” Frost
Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005).
      The major premise of Texas Central’s argument (that context
matters) is sound, but its minor premise (that there is any contextual
basis for reading this text differently) is not. Texas Central first argues
that other provisions in the Railroad Allowance Agreement reveal the
parties’ larger intent to give Texas Central control over the infrastructure
process. An introductory paragraph of the Railroad Allowance Agreement
provides that one of the agreement’s purposes is to “facilitate” Texas
Central’s infrastructure improvements, Section 1.3.2 gives Texas Central
control over which contractors are chosen for construction, and the second
sentence of Section 1.1 provides that the improvements will ultimately be

                                     11
Texas Central’s “sole property” and “are intended for [its] primary use . . .
in the conduct of its railroad operations.” Only by reading Section 1.1(3)
to require Texas Central’s written consent for all items listed, Texas
Central submits, will Section 1.1(3) be consistent with these provisions
and the general “theme” of its control over infrastructure.
       We disagree. The task of harmonizing contracts entails reconciling
otherwise conflicting contractual provisions.             That task does not
authorize courts to ensure that every provision comports with some
grander theme or purpose, particularly when the parties have not said in
the contract which purpose matters most or that everything else in the
contract should be read subject to that purpose.3 To hold otherwise would
implicitly assume that contracting parties pursue a purpose (at whatever
generality) at all costs. That proposition is as foreign to the contractual
process as it is to the legislative one, see, e.g., BankDirect Cap. Fin., LLC
v. Plasma Fab, LLC, 519 S.W.3d 76, 86-87 (Tex. 2017), especially where,
as here, two sophisticated parties negotiate a business deal.

       3 In its most relevant and legal sense, “context” is simply the surrounding

words and structure of the operative text. See Context, BLACK’S LAW
DICTIONARY (11th ed. 2019) (“The surrounding text of a word or passage, used
to determine the meaning of a word or passage.”); see also Brown, 660 S.W.3d at
754 (“Among the core contextual considerations that generate reliable
constructions are the surrounding provisions of a disputed text . . . .”). Texas
Central’s alternative and broader meaning of context would smuggle in the
many extratextual, extrinsic, and subjective considerations that we have long
rejected in contract interpretation. Cf. Rowland v. Cal. Men’s Colony, Unit II
Men’s Advisory Council, 506 U.S. 194, 199-200 (1993) (rejecting “the broader
sense” of context that includes “[a]ssociated surroundings” and “legislative
history”) (alteration in original); Antonin Scalia & Bryan A. Garner, READING
LAW: THE INTERPRETATION OF LEGAL TEXTS 168 (2012) (“It is not a proper use
of the [whole-text] canon to say that since the overall purpose of the statute is to
achieve x, any interpretation of the text that limits the achieving of x must be
disfavored.”).

                                        12
       Texas Central also argues that its reading of Section 1.1(3) is the
only reading that gives the “in writing” requirement any effect. The
“including without limitation” language does not place any limit on what
may constitute “various concrete and ground surface improvements,”
Texas Central reasons, so if the “in writing” requirement applied only to
the last component of the serial list (“other items”), it would not serve
any purpose. Again, we disagree. Texas Central is right that use of the
word “including” before a list presumptively indicates that the list is
nonexhaustive.     But nonexhaustive hardly means indefinite. Texas
Central’s stated concern—that Polyco would have a “blank check” to
build improvements of no use in Texas Central’s railroad operations
unless the “in writing” requirement applies to everything in Section
1.1(3)—is accounted for by the reading that we (and the lower courts)
have embraced. The items listed after “including” and shown generally
in the exhibit are those that both parties already “agreed to” with the
general provisions on which Texas Central relies, while unenumerated
items require further agreements: “and other items in or adjacent to the
Designated Areas as are agreed upon by [Texas Central] and [Polyco] in
writing.” It is not terribly surprising for parties to agree to a delegation
of authority for known and anticipated items while requiring further
consultation for “other items” that they have not yet imagined.4

       4 Relatedly, Texas Central contends that having the writing requirement

apply to everything listed in Section 1.1(3) makes good sense when considered
along with the fact that Exhibit X mentioned in Section 1.1 is a “Preliminary
Layout”—that is, the parties could have generally agreed to infrastructure items
but required a written agreement when it came down to specifics. This
argument, however, proves too much. The “Preliminary Layout” precedes not

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                                    *   *    *
       We therefore hold that the phrase “as are agreed upon by [Texas
Central] and [Polyco] in writing” in Section 1.1(3) of the Railroad
Allowance Agreement modifies only the phrase “other items in or
adjacent to the Designated Areas,” not everything else listed in that
subsection. The trial court correctly construed this provision, and the
court of appeals erred in holding that it was ambiguous. Because of the
latter court’s holding, however, it had no opportunity to address Texas
Central’s other arguments, including those it raised with respect to the
Transload Agreement. The court of appeals should address those issues
in the first instance on remand. See In re Troy S. Poe Tr., 646 S.W.3d
771, 780-81 (Tex. 2022). Without hearing oral argument, we grant the
petition for review, reverse the court of appeals’ judgment, and remand
the case to that court for further proceedings. See TEX. R. APP. P. 59.1.

OPINION DELIVERED: November 3, 2023

only Section 1.1(3) but Sections 1.1(1) and 1.1(2) as well, and Texas Central does
not (and could not) go as far as to say that the “in writing” requirement reaches
beyond Section 1.1(3).

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