El Paso Field Servs., L.P. v. Mastec N. Am., Inc.

• Decision Date: 15 February 2013
• Docket Number: No. 10–0648.,10–0648.
• Citation: 389 S.W.3d 802,56 Tex. Sup. Ct. J. 174
• Parties: EL PASO FIELD SERVICES, L.P. and Gulfterra South Texas, L.P. f/k/a/ El Paso South Texas, L.P., Petitioners, v. MASTEC NORTH AMERICA, INC. and MasTec, Inc., Respondents.
• Court: Texas Supreme Court

389 S.W.3d 802

56 Tex. Sup. Ct. J. 174

EL PASO FIELD SERVICES, L.P. and Gulfterra South Texas, L.P. f/k/a/ El Paso South Texas, L.P., Petitioners,

v.MASTEC NORTH AMERICA, INC. and MasTec, Inc., Respondents.

No. 10–0648.

Supreme Court of Texas.

Argued Jan. 11, 2012.

Decided Dec. 21, 2012.

Rehearing Denied Feb. 15, 2013.

Chance Dean Weldon, Pacific Legal Foundation, Sacramento, CA, for Amicus Curiae.

David M. Gunn, John S. Adcock, Murray Fogler, Beck Redden & Secrest, L.L.P., Houston, TX, Harriet O'Neill, Law Office of Harriet O'Neill, PC, Austin, TX, for Petitioner El Paso Field Services, L.P.

Bruce E. Ramage, Levon G. Hovnatanian, Martin Disiere Jefferson & Wisdom LLP, Kevin H. Dubose, Alexander Dubose & Townsend LLP, Houston, TX, Norman C. Sullivan, Jr., Fowler Rodriguez Valdes–Fauli, New Orleans, TX, for Respondent MasTec North America, Inc.

Justice GREEN delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice HECHT, Justice JOHNSON, Justice WILLETT, and Justice BOYD joined.

In this case, we are asked to harmonize provisions in a pipeline construction contract to determine who bears the risk of obstacles in the pipeline's path. Specifically, we must examine the effect of the contract's risk-allocation provisions in light of due diligence specifications under which the pipeline owner was purportedly required, but failed, to provide accurate and complete information to the contractor regarding the location of “foreign crossings.” We conclude that the contract allocated all risk to the contractor for unknown obstacles discovered during the construction process. Accordingly, we reverse the court of appeals' judgment and reinstate the trial court's judgment.

I. Factual Background

El Paso Field Services, L.P. purchased an eight-inch propane pipeline from Coastal Corporation. The pipeline was approximately sixty-eight miles long, and was constructed in the 1940s as an emergency war pipeline to transport petroleum from Corpus Christi to inland U.S. Air Force bases. After determining that the pipeline was too shallow to be safe, El Paso made plans to remove the old pipeline and construct a new one that would carry butane, a byproduct of natural gas. El Paso invited MasTec, Inc., a company looking to expand its business to include energy pipelines, as well as other contractors to bid on a project to replace the section of the pipeline from Victoria to Nueces Bay. MasTec had never installed a pipeline, and its primary business usually entailed installing underground fiber-optic cables and telephone lines.

Before soliciting bids for the project, El Paso hired Gullett & Associates, Inc., a survey mapping company out of Houston, to survey the pipeline route. This survey was compiled in the form of “alignment sheets,” which showed the locations of 280 “foreign crossings” along the pipeline's right-of-way, including other pipelines, utilities, roads, rivers, canals, fences, wells, cables, and concrete structures. The alignment sheets were included in a bid package, which was distributed to the contractors at a pre-bid meeting to help them estimate the cost of constructing the pipeline.

To bid the project, MasTec hired as its general manager Bill White, who had forty-one years of experience in the pipeline construction business and had a team of construction personnel, including many who had worked with him for almost thirty years. White attended the pre-bid meeting on MasTec's behalf and received a copy of the alignment sheets, El Paso's contract, and other pertinent information for estimating the cost of the project. At the meeting, El Paso encouraged each potential bidder to perform an aerial inspection of the pipeline route. Subsequently, White and his son flew by helicopter over the route to assess its general topography, landing occasionally to assess the soil conditions. White testified that bidders were prohibited from entering certain private properties along the route, but El Paso later claimed that the contractors were able to enter those areas if they were escorted by an El Paso representative.

Shortly thereafter, White submitted, on MasTec's behalf, a completed contract and a bid on the project for $3,690,960, which was substantially lower than the other bids. The average bid for the project was $8.1 million. ¹ El Paso narrowed its choices to two contractors, then met with White to ensure that MasTec would be able to complete the project according to El Paso's time frame. El Paso asserts that, at that meeting, its representatives discussed MasTec's low bid with White, and then offered White the opportunity to withdraw the bid. White disputes being told that the bid was low and denies being offered the chance to withdraw the bid. Nevertheless, El Paso subsequently awarded MasTec the contract, which the parties entered into on June 10, 2003.

MasTec's work on the project commenced later that month. Although the alignment sheets showed 280 foreign crossings, MasTec discovered far more foreign crossings by the end of the project.² Many of the undiscovered foreign crossings required a special weld, called a “tie-in” weld, and about ten hours of labor, which substantially increased the cost of the work. In a letter to El Paso dated September 8, 2003, White raised the issue of extra costs associated with foreign crossings, though he did not make a demand for payment. El Paso responded by letter on September 26, 2003, reciting contractualprovisions and asserting that the undiscovered foreign crossings were within MasTec's scope of work.

II. Procedural Background

In 2004, MasTec filed suit against El Paso for breach of contract and fraud, based on El Paso's failure to locate 794 unknown foreign crossings and its subsequent refusal to compensate MasTec for its additional expenses resulting from the crossings. In the alternative, MasTec sought to recover under the theories of quantum meruit and quantum valebant. At trial, the jury was asked whether El Paso failed to comply with the contract.³ To answer that question, the jury was instructed to consider “whether El Paso exercised due diligence in locating foreign pipelines and/or utility line crossings.” The jury answered that El Paso failed to comply with the contract and awarded MasTec $4,763,890 in damages. Additionally, the jury found that MasTec failed to comply with the contract by not completing the work required in the contract and awarded El Paso $104,687.09 in damages.

El Paso moved to disregard the jury's findings and for judgment notwithstanding the verdict. El Paso urged that the “due diligence” provisions in the contract “did not involve any future performance but at best constituted a warranty.” El Paso further asserted that, regardless of the due diligence provisions in the contract, MasTec disclaimed reliance on any warranty by El Paso regarding foreign pipeline and utility crossings. The trial court granted the motion and entered a take-nothing judgment in favor of El Paso, finding that the contract was clear and unambiguous and “allocates the risk of any additional cost incurred because of foreign pipeline crossings to MasTec.” In response, MasTec filed a motion to vacate the judgment, which the trial court denied.

MasTec appealed, and the court of appeals reversed the trial court's judgment. 317 S.W.3d 431, 434 (Tex.App.-Houston [1st Dist.] 2010). On rehearing, the court of appeals issued a new opinion, though it did not change its disposition or judgment. Id. The court of appeals held that MasTec's commitments and representations under the contract did not preclude its recovery based on the jury's finding that El Paso failed to exercise due diligence in locating the foreign crossings. Id. at 456. The court of appeals denied El Paso's motion for rehearing en banc. Id. at 431. We granted El Paso's petition for review. 55 Tex.Sup.Ct.J. 29 (Oct. 21, 2011).

III. Standard of Review

In construing a contract, we must ascertain and give effect to the parties' intentions as expressed in the writing itself. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex.2011). In discerning the parties' intent, “we must examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.” Id. (quoting J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003)) (internal quotation marks omitted). We begin our analysis with the contract's express language. Id. If we determine that the contract's language can be given a certain or definite legal meaning or interpretation, then the contract is not ambiguous and we will construe it as a matter of law. Id. But, “if the contract is subject to two or more reasonable interpretations after applying the pertinent rules of construction, the contract is ambiguous, creating a fact issue on the parties' intent.” J.M. Davidson, 128 S.W.3d at 229.

IV. Contract Interpretation

El Paso relies on the following risk-allocation provisions in the lump-sum contract:

7.1 REPRESENTATIONS AND WARRANTIES

[MasTec] represents and warrants to [El Paso]:

(e) That its duly authorized representative has visited the site of the Work, is familiar with the local and special conditions under which the Work is to be performed and has correlated the on site observations with the requirements of the Contract and has fully acquainted itself with the site, including without limitation, the general topography, accessibility, soil structure, subsurface conditions, obstructions and all other conditions pertaining to the Work and has made all investigations essential to a full understanding of the difficulties which may be encountered in performing the Work, and that anything in this Contract or in any representations, statements or information made or furnished by [El Paso] or any of its representatives notwithstanding, [MasTec] assumes full and complete responsibility for any such conditions pertaining to...