Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd.
| Decision Date | 28 July 1994 |
| Docket Number | No. 01-92-01133-CV,01-92-01133-CV |
| Citation | 886 S.W.2d 294 |
| Parties | 129 Oil & Gas Rep. 525 COLUMBIA GAS TRANSMISSION CORPORATION, Appellant, v. NEW ULM GAS, LTD., Appellee. (1st Dist.) |
| Court | Texas Court of Appeals |
Thomas H. Lee, J. Eric Tohar, Houston, for appellant.
Tom Reavley, Ray Langenberg, Austin, Charley L. Smith, Bellville, for appellee.
Before HUTSON-DUNN, DUGGAN and ANDELL, JJ.
Columbia Gas Transmission Corporation (Columbia) appeals from a jury verdict in a lawsuit for breach of contract and fraud brought by New Ulm Gas, Ltd. (New Ulm), in connection with Columbia's purchase of gas from New Ulm. We reverse and remand.
In the 1960s and 70s, Fred Fox acquired oil and gas leases covering approximately 7,000 acres in the New Ulm Field in Austin County. In the mid to late 1970s, Fox assigned these leases to oil companies, reserving an overriding royalty to himself. The working interests under the original leases eventually became the property of various other oil companies.
In 1985, Fox purchased the working interest in the part of the New Ulm Field referred to as the Blezinger Unit, from which all of the gas in controversy in this case was produced. Fox then formed New Ulm to drill a Blezinger well. The general partner of New Ulm is the Fred Fox Corporation, of which Fox is president and sole owner.
In 1986, Fox assigned his interest in the Blezinger Unit to New Ulm, reserving an overriding royalty to himself. New Ulm drilled the Blezinger well and sold the gas to Columbia.
The gas sale was effected by five separate identical contracts (collectively, "the contract"). The contract contained two different pricing provisions, embodied in sections 3.1.1 and 3.1.3, respectively. Columbia and New Ulm disagree on how these two sections should be interpreted.
During the period in controversy, section 3.1.1 prices were as low as $7.31 per MMBtu (a unit of measurement used in gas sales) and as high as $8.61. Section 3.1.3 prices were as low as $1.36 and as high as $1.90. Section 3.1.1 was the exclusive pricing provision through December 31, 1984. Section 3.1.3 could be invoked by either party "[a]t any time after December 31, 1984, and from time to time thereafter," but not before. The contracts neither expressly allow nor expressly forbid pricing under section 3.1.1 after section 3.1.3 has been invoked.
Section 3.1.3 is a "market out" provision, although, in the view of both Columbia and New Ulm's respective experts, not a typical one. It is a mechanism by which price renegotiation may be effected, and the price reset according to current market levels. The section could be used by either the buyer, Columbia, or the seller, New Ulm. Columbia argues that section 3.1.3 became the exclusive pricing provision after its initial invocation; New Ulm contends that pricing under section 3.1.1 was still available to New Ulm even after Columbia invoked section 3.1.3.
During the period in controversy, Columbia had a gas sales contract with five other sellers besides New Ulm: Amerada, Kaiser Francis, Amoco Production, Unocal, and Superior (succeeded by Mobil). Of these five sales contracts, two were identical to Columbia's contract with New Ulm, and three differed only in the numbering of their sections.
All of the gas sold by New Ulm to Columbia before January 1, 1985, had been priced according to section 3.1.1. On January 1, 1985, Columbia invoked section 3.1.3 via a "market out" letter. All pricing after that date was done according to section 3.1.3.
Columbia filed for bankruptcy on July 31, 1991. At the time of filing, Columbia had not paid for the gas it had taken from New Ulm in June and July of 1991. In the trial court, Columbia stipulated to liability for the payment for that gas, and states on appeal that "New Ulm is entitled to a judgment for that amount regardless of the outcome ... in this appeal."
Both parties moved for summary judgment, each asserting that the two provisions at issue are unambiguous and that their own interpretation of the two provisions is the only reasonable interpretation that could be made. The trial court denied both motions and submitted the question to the trier of fact, the jury. 1
The jury agreed with New Ulm's contentions that Columbia's payment of section 3.1.3 prices instead of section 3.1.1 prices constituted breach of contract and fraud, and awarded damages to New Ulm. It also awarded New Ulm attorney's fees.
Columbia brings eight points of error. It argues the first three together.
In point of error one, Columbia asserts that the trial court erred "in failing to hold, as a matter of law, that, under the unambiguous terms of the contract," Columbia's invocation of section 3.1.3 precluded New Ulm from receiving a section 3.1.1 price for its gas. In point of error two, Columbia contends that the trial court erred in failing to grant its motion for judgment notwithstanding the jury's finding that Columbia breached its contract with New Ulm, "because, as a matter of law, under the unambiguous terms of the contract," Columbia's invocation of section 3.1.3 precluded New Ulm from receiving a section 3.1.1 price for its gas. In point of error three, Columbia argues that the trial court erred in failing to grant its motion for judgment notwithstanding the jury's finding that Columbia committed fraud, "because, as a matter of law, under the unambiguous terms of the contract," Columbia's invocation of section 3.1.3 precluded New Ulm from receiving a section 3.1.1 price for its gas.
In essence, Columbia contends that, because it had a right under the contract to pay section 3.1.3 prices rather than section 3.1.1 prices, it could not have committed breach of contract or fraud in paying section 3.1.3 prices. Were Columbia to prevail on these points, it would be entitled to a reversal and a rendering of judgment in its favor, because if Columbia's invocation of section 3.1.3 precluded New Ulm from receiving a section 3.1.1 price for its gas, then indeed there could be no breach of contract or fraud in Columbia's not paying a section 3.1.1 price.
The parties agree that, for Columbia to prevail on any of its first three points, it must show that the contract was unambiguous, and that its interpretation is the correct interpretation.
As noted above, the question of whether a contract is ambiguous is a question of law. Radx Corp., 658 S.W.2d at 301. "The primary concern is to ascertain and give effect to the intentions of the parties as expressed in the instrument." Id.
If the contract is worded such that a court may properly give it a certain or definite legal meaning or interpretation, it is not ambiguous. Radx Corp., 658 S.W.2d at 301. A contract is ambiguous, however, where there is genuine uncertainty about which of two meanings is proper. Id.
The contract provisions at issue here are as follows:
SECTION 3. PRICE
The price to be paid by Buyer to Seller for all gas delivered hereunder, or made available and not taken as herein provided, shall be as follows:
3.1.1 For gas produced, sold and delivered hereunder, or any portion thereof, which the United States Congress, the Federal Energy Regulatory Commission, or any governmental authority having jurisdiction in the premises, ceases or has already ceased to have jurisdiction or exercise control over rates that may be lawfully charged and collected (hereinafter referred to as "deregulated gas"):
(i) Subject to Section 3.1.1(ii) hereof, the initial price shall be Five Dollars and Thirty-Five Cents ($5.35) per MMBtu effective June 1, 1980, and shall be adjusted on the first day of each month thereafter in the manner provided below based on the Consumer Price Index for all Urban Consumers and published by the U.S. Department of Labor, Bureau of Labor Statistics. The adjustment shall be determined by multiplying the price in effect during the immediately preceding month by a ratio, the numerator of which is said Index for the third preceding month, and the denominator of which is said Index for the fourth preceding month. The price per MMBtu applicable to any month shall be computed to the nearest one-thousandth of a dollar.
(ii) Seller may request a determination of an alternate price to be paid by Buyer hereunder to be effective on the first day of each calendar quarter and shall remain in effect thereafter until Seller requests a different alternate price. Such request for determination of an alternate price shall be made to Buyer in writing within fifteen (15) days prior to the beginning of the calendar quarter for which such alternate price will be effective and shall designate Seller's election of the alternate price; provided, however, Seller may request a determination of an alternate price within fifteen (15) days following execution of this contract, said alternate price to be effective from execution hereof until Seller requests a different alternate price. The alternate price shall be selected by Seller from the following alternatives:
(1) the price per MMBtu determined in accordance with the provisions of Section 3.1.1(i) above, said price to escalate monthly as provided therein; or
(2) the price per MMBtu equivalent to one hundred and ten percent (110%) of the price per MMBtu of Fuel Oil No. 2 computed to the nearest one-thousandth of a dollar which price shall be effective for a calendar quarter and determined in the manner provided below:
The price per gallon for Fuel Oil No. 2 shall be the arithmetic average for the last month of the calendar quarter preceding the calendar quarter for which the price is to be determined, of the daily average of the high price and low price of Fuel Oil No. 2 published by Platt's Oilgram--New York edition under the heading "South and East Terminals New York Harbor" for such month. For use in converting the...
To continue reading
Request your trial
-
Ganz v. Lyons Partnership, L.P.
...the parties' intention is relevant, and the question as to what was intended is for the jury. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 886 S.W.2d 294, 301 (Tex.App.1994); Phillips v. Parrish, 814 S.W.2d 501, 503 (Tex.App. 1991) (writ denied). In light of this, and the evidence ......
-
Enserch Corp. v. Rebich
...but the contract is ambiguous if there is genuine uncertainty about which of two meanings is appropriate. Columbia Gas Transmission v. New Ulm Gas, 886 S.W.2d 294, 296 (Tex.App.--Houston [1st Dist.] 1994, no writ); Radx Corp. v. Demy, 658 S.W.2d 298, 301 (Tex.App.--Houston [1st Dist.] 1983,......
-
New Bremen Corp. v. Columbia Gas Transmission Corp.
...in which a market-out procedure is successfully concluded. Moreover, the state court in Columbia Gas Transmission Corp. v. New Ulm Gas, 886 S.W.2d 294, 298 (Tex.App. — Houston (1st Dist.) 1994), recognized that the interpretation New Bremen has adopted is also inconsistent with the literal ......
-
Cano v. North Texas Nephrology Assoc., P.A., 2-01-276-CV.
...are irrelevant and violate the rule that res inter alios2 are incompetent evidence. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 886 S.W.2d 294, 299 (Tex.App.-Houston [1st Dist.] 1994), rev'd on other grounds, 940 S.W.2d 587 (Tex.1996). Only when the intent with which an act is don......