Polaris Guidance Systems, LLC v. EOG Resources, Inc. ( 2019 )

Affirmed and Majority and Concurring Opinions filed April 16, 2019.
In The
Fourteenth Court of Appeals
NO. 14-17-00717-CV
POLARIS GUIDANCE SYSTEMS, LLC, Appellant
V.
EOG RESOURCES, INC., Appellee
On Appeal from the 189th District Court
Harris County, Texas
Trial Court Cause No. 2016-29381
MAJORITY OPINION
This is a summary judgment case involving the construction of an
unambiguous contract contained in multiple writings. Appellant, Polaris Guidance
Systems, LLC, sued appellee, EOG Resources, Inc., alleging breach of contract
and promissory estoppel causes of action. EOG Resources moved for summary
judgment, which the trial court granted. Finding no error, we affirm.
BACKGROUND
EOG Resources is in the business of “exploring for and producing oil, gas
and other hydrocarbons in the onshore and offshore areas of the Continental United
States.” Polaris develops software, which it sells to companies such as EOG
Resources. Polaris also provides maintenance and other services related to its
software sales.
In early 2014, Polaris and EOG Resources began negotiations regarding the
possible licensing of Polaris software, the purchase of related goods, and the
provision by Polaris of certain updating and maintenance services in connection
with the software. EOG Resources was interested in the Polaris software to
monitor its oil and gas wells. Polaris and EOG Resources initially signed a Master
Service Agreement (MSA) on February 11, 2014. The MSA provided that it
shall control and govern all Services performed by [Polaris] for [EOG
Resources] under subsequent oral or written work orders, purchase
orders or other similar documents issued by or accepted by [EOG
Resources] (‘Work Order’).” Any agreements or stipulations in any
such Work Order or other instrument used by [Polaris] not in
conformity with the terms and provisions of this Agreement, or that
purport to add to the rights of [Polaris] or to restrict the rights of
[EOG Resources], shall be null and void. No waiver, modification or
amendment of any of the terms, provisions or conditions herein shall
be effective unless said waiver, modification or amendment shall be in
writing and signed by authorized representatives of [EOG Resources]
and [Polaris]. . . . No representative of [EOG Resources] has
authority to waive any of the terms, conditions or provisions hereof
other than an officer with the rank of Vice President or higher, acting
with express authority from the Board of Directors.
The MSA defined “Services” as “software development and product sales of
same and any ancillary functions related thereto.” The MSA also provided that it
does not obligate [EOG Resources] to order Services from [Polaris],
nor does it obligate [Polaris] to accept orders for Services from [EOG
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Resources], but it, together with the commercial specifications and
technical parameters in any applicable Work Order, shall define the
rights and obligations of [EOG Resources] and [Polaris] during the
term thereof and will continue to govern such Services until they have
been completed by [Polaris] and accepted by [EOG Resources].
Notwithstanding the foregoing, [EOG Resources] may terminate any
Work Order at any time upon written notice, with or without cause,
and no amount shall be owed except for Services properly performed
prior to termination.
Subsequently, EOG Resources and Polaris signed two additional documents.
They initially signed the Polaris/EOG License Agreement, dated March 20, 2014,
wherein Polaris granted EOG Resources a perpetual, non-transferable, license to
certain specified Polaris software. That same day, Polaris signed a Polaris Quote,
which EOG Resources signed on March 24, 2014. The Polaris Quote provided that
“this transaction shall be governed by the Polaris License Agreement and the
Master Service Agreement by and between Polaris Guidance Systems, LLC and
EOG Resources, Inc.” Pursuant to these agreements, at the costs specified therein,
EOG Resources received a perpetual license to the specified Polaris software;
purchased related equipment; retained Polaris’s maintenance services on an annual
basis; and agreed to pay an extra fee each year for the use of a backup copy of the
software. EOG Resources paid Polaris more than $350,000, including a lump sum
payment of $150,000 for the software license and the right to use the software in
perpetuity.
EOG Resources paid each Polaris invoice until 2016. In 2016, EOG
Resources decided to change the system it employed to monitor its oil and gas
wells. As a result, EOG Resources notified Polaris that it intended to reduce the
services it obtained from Polaris. Polaris responded that EOG Resources was
locked into a perpetual service arrangement and could never terminate the services
and related annual payment obligations to Polaris.
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On May 5, 2016, Polaris’s counsel wrote EOG Resources, again contending
that EOG Resources was obligated to pay for Polaris’s maintenance and update
services forever. Polaris demanded accelerated payment in an amount purportedly
based on performance of the contract for a period of ten years. On November 1,
2016, EOG Resources sent a letter notifying Polaris a second time that it was
terminating Polaris’s services. EOG Resources included with the letter a final
payment for “services performed prior to termination,” along with all equipment it
had obtained from Polaris as part of their deal.
Polaris eventually filed suit against EOG Resources alleging causes of action
for breach of contract and promissory estoppel. Polaris also sought a temporary
injunction. Polaris alleged that EOG Resources breached the license agreement
when it chose to terminate. EOG Resources filed an answer and a counterclaim
seeking a declaratory judgment that EOG Resources had the contractual right
under the MSA to terminate Polaris’s services. EOG Resources eventually filed a
motion for summary judgment seeking a declaration regarding its right to terminate
the license agreement pursuant to the MSA, as well as a ruling against Polaris on
all of its claims against EOG Resources. The trial court granted EOG Resources’
motion in its entirety. In addition to denying all of Polaris’s claims against EOG
Resources, the trial court declared “that EOG [Resources] has the right to terminate
its agreement with Polaris and that EOG [Resources] exercised such authority and
terminated the agreement and paid all sums due and owing to Polaris.” Polaris
filed a motion for new trial, which the trial court denied with a written order. This
appeal followed.
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ANALYSIS
Polaris challenges the trial court’s summary judgment in three issues.1
While all three of Polaris’s issues contend the trial court erred in its construction of
the three writings underlying the software transaction between Polaris and EOG
Resources, we need only reach the first two.
I. Standard of review and contract interpretation
A declaratory judgment granted on a traditional motion for summary
judgment is reviewed de novo. Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445,
449 (Tex. 2015). A motion for summary judgment is properly granted if the
movant establishes that there is no genuine issue of material fact and that he or she
is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Gastar
Exploration Ltd. v. U.S. Specialty Ins. Co., 412 S.W.3d 577, 582 (Tex. App.—
Houston [14th Dist.] 2013, pet. denied).
A contract is unambiguous if it can be given one certain or definite legal
interpretation. Lane-Valente Indus. (Nat’l), Inc. v. J.P. Morgan Chase Bank, N.A.,
468 S.W.3d 200, 205 (Tex. App.—Houston [14th Dist.] 2015, no pet.). The
construction of an unambiguous contract is a question of law, which we review de
novo. Kachina Pipeline Co., 471 S.W.3d at 449. In construing an unambiguous
contract, an appellate court’s primary goal is to ascertain the true intentions of the
parties as expressed in the instrument. J. M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 229 (Tex. 2003). Ordinarily, the writing alone is sufficient to express
1
Although Polaris references the trial court’s denial of its motion for new trial in its
Statement of the Case and Summary of the Argument, it did not include an issue or arguments
challenging the trial court’s denial of its motion for new trial. It is therefore not at issue in this
appeal. See Tex. R. App. P. 38.1(i); Birnbaum v. Law Offices of David G. Westfall, 120 S.W.3d
470, 477 (Tex. App.—Dallas 2003, pet. denied) (concluding appellant’s brief presented nothing
for the appellate court to review because his issue did not contain argument supported by
citations to record and legal authority).
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the parties’ intentions, because it is the objective, not subjective, intent that
controls. See Matagorda Cty. Hosp. Dist. v. Burwell, 189 S.W.3d 738, 740 (Tex.
2006). When construing a contract, we give contract terms their plain, ordinary,
and generally accepted meanings unless the contract itself shows them to be used
in a technical or different sense. Valence Operating Co. v. Dorsett, 164 S.W.3d
656, 662 (Tex. 2005). We construe contracts from a utilitarian standpoint, bearing
in mind the particular business activity sought to be served, and we avoid, when
possible and proper, a construction that is unreasonable, inequitable, or oppressive.
Frost Nat’l Bank v. L & F Distrib., Ltd., 165 S.W.3d 310, 312 (Tex. 2005). We
examine and consider the entire writing in an effort to harmonize and give effect to
all provisions of the contract so that none will be rendered meaningless. J. M.
Davidson, Inc., 128 S.W.3d at 229. This is true even when, like here, there are
multiple writings at issue. It is well established that all instruments pertaining to
the same transaction may be read together to ascertain the parties’ intent as
expressed in the instruments, even if the instruments were executed at different
times and they do not refer to each other. Fort Worth Indep. Sch. Dist. v. City of
Fort Worth, 22 S.W.3d 831, 840 (Tex. 2000).
Whether a contract is ambiguous is a question of law for the court to decide
by examining the agreement as a whole in light of the circumstances present when
the contract was entered. Lane-Valente Indus. (Nat’l), Inc., 468 S.W.3d at 205. A
contract is ambiguous if it is susceptible of more than one reasonable
interpretation. Id. The fact that the parties disagree about a contract’s meaning
does not necessarily show that it is ambiguous. Id. In addition, parol evidence is
not admissible for the purpose of creating an ambiguity. Material P’ships, Inc. v.
Ventura, 102 S.W.3d 252, 258 (Tex. App.—Houston [14th Dist.] 2003, pet.
denied). A court may, however, conclude that a contract is ambiguous even
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though the parties did not plead ambiguity or argue on appeal that it is ambiguous.
See Lane-Valente Indus. (Nat’l), Inc., 468 S.W.3d at 205; see also Phil Watkins,
P.C. v. The Krist Law Firm, No. 14-02-00291-CV, 2003 WL 21786173, at *3
(Tex. App.—Houston [14th Dist.] Aug. 5, 2003, pet. dism’d) (mem. op.) (stating
that agreement between parties that contract at issue was not ambiguous does not
prevent appellate court from concluding that it is ambiguous). Contract ambiguity
can be divided into two categories: patent or latent. URI, Inc. v. Kleberg Cty., 543
S.W.3d 755, 765 (Tex. 2018). A patent ambiguity is evident on the face of the
contract while a latent ambiguity occurs when a contract, unambiguous on its face,
is applied to the subject matter, and the ambiguity appears by reason of a collateral
matter. Id. Parol evidence is not admissible to reveal a latent ambiguity, it must
instead be revealed when the contract is read in context of the surrounding
circumstances.2 Id. When an agreement is ambiguous, the parties’ intent becomes
a fact issue. Kachina Pipeline Co., 471 S.W.3d at 449. Summary judgment is
inappropriate when a contract is ambiguous. Lane-Valente Indus. (Nat’l), Inc., 468
S.W.3d at 205.
II. We do not consider Polaris’s exhibit attached to its motion for new trial
in resolving its complaints regarding the trial court’s summary
judgment.
Throughout its arguments challenging the trial court’s summary judgment,
Polaris references an exhibit it attached only to its motion for new trial. This
exhibit, consisting of excerpts from depositions taken after the summary judgment
hearing, was not part of the summary judgment record. We therefore do not
consider it in resolving Polaris’s appellate issues. See Horie v. Law Offices of Art
2
The classic example of a latent ambiguity is when a contract requires a delivery to the
green house on Pecan Street, but surrounding circumstances reveal there are two green houses on
Pecan Street. URI, Inc., 543 S.W.3d at 765.
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Dula, 560 S.W.3d 425, 432 (Tex. App.—Houston [14th Dist.] 2018, no pet.)
(excluding from appellate consideration evidence that was “not part of the
summary-judgment record presented to the trial court”).
III. The agreements at issue here are not ambiguous.
While Polaris cites ambiguity cases in the legal standard section of its
opening brief, and then attempts to rely on parol evidence in its various arguments,
it does not affirmatively argue in its first two issues that the documents underlying
the software transaction at issue here are ambiguous. Indeed, Polaris argues that
they should be enforced as written. For example, Polaris states, in the conclusion
to its first issue, that, “because the language of the “Termination” section [of the
Polaris/EOG License Agreement] is certain or definite in its meaning, and [EOG
Resources] failed to obtain [Polaris’s] written consent to terminate the contract, in
whole or in part, there exists a genuine issue of material fact in which [EOG
Resources’] Motion for Final Summary Judgment should have been denied as a
matter of law.” Similarly, Polaris concludes its second issue with the following
argument: “Because the language of the merger clause is certain or definite in its
meaning, and the MSA provides for written waiver, modification, or amendment of
its terms, there exists a genuine issue of material fact in which [EOG Resources’]
Motion for Final Summary Judgment should have been denied as a matter of law.”
While Polaris does assert in its third issue that a latent ambiguity exists in the
agreement, it does not identify the alleged latent ambiguity, nor does it establish
the collateral matter making the alleged latent ambiguity apparent. See URI, Inc.,
543 S.W.3d at 765 (describing latent ambiguity). Polaris instead relies on its
proffered parol evidence. Parol evidence, however, cannot be used to create a
latent ambiguity. Id. Because the documents at issue in this dispute can be given a
certain or definite meaning, we conclude they are not ambiguous. Chrysler, Ins.
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Co. v. Greenspoint Dodge of Houston, Inc., 297 S.W.3d 248, 252 (Tex. 2009).
IV. The trial court did not err when it granted EOG Resources’ motion for
summary judgment.
Polaris contends in its second issue on appeal that the Polaris/EOG License
Agreement superseded the MSA as a result of a merger clause found in the
Polaris/EOG License Agreement.3 Polaris then goes on to make two separate
arguments. First, Polaris argues that the MSA is simply inapplicable to the
software transaction because it does not reference the Polaris/EOG License
Agreement. Second, Polaris argues that construing the documents together would
render the merger clause found in the Polaris/EOG License Agreement
meaningless. We disagree with both arguments.
The Texas Supreme Court has held that “agreements executed at the same
time, with the same purpose, and as part of the same transaction, are construed
together.” In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004). A
court may determine, as a matter of law, that multiple documents comprise a
written contract. Fort Worth Indep. Sch. Dist., 22 S.W.3d at 840. As explained
below, we conclude that is appropriate here.
Initially, the parties executed the MSA. The MSA defined “Services” as
“software development and product sales of same and any ancillary functions
related thereto.” The MSA then provides that it “shall control and govern all
3
The merger clause provides as follows:
Each party hereto acknowledges that there are no agreements or understandings,
written or oral, between them with respect to the subject matter hereof, except as
set forth herein, that this Agreement supersedes and replaces any and all such
prior agreements or understandings to the extent in conflict herewith, and that this
Agreement contains the entire agreement between them with respect to the subject
matter hereof.
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Services performed by [Polaris] for [EOG Resources], under subsequent oral or
written work orders, purchase orders or other similar documents issued by or
accepted by [EOG Resources].” The MSA thus envisioned the issuance of
additional documents, such as work orders or purchase orders, which would set out
specific details of the contemplated software transaction. Within a short time, the
parties executed the Polaris/EOG License Agreement and the Polaris Quote. The
Polaris Quote expressly states that “this transaction shall be governed by the
Polaris License Agreement and the Master Service Agreement by and between
Polaris Guidance Systems, LLC and EOG Resources, Inc.” We conclude that
these documents demonstrate a clear intent by the parties that their software
transaction was to be governed by the MSA, the Polaris/EOG License Agreement,
and the Polaris Quote. We therefore must construe them together. Castillo Info.
Tech. Servs., LLC v. Dyonyx, L.P., 554 S.W.3d 41, 49 (Tex. App.—Houston [1st
Dist.] 2017, no pet.). Because the documents must be construed together, the
Polaris/EOG License Agreement does not supersede the MSA. Reaching this
conclusion does not render the Polaris/EOG License Agreement’s merger clause
meaningless because it specifically states that there are no other agreements
dealing with the “subject matter hereof,” the licensing of Polaris software, and that
it supersedes and replaces only prior agreements that conflict with it. We conclude
that there is no conflict with the MSA because the Polaris/EOG License
Agreement provides additional methods to terminate the relationship that were not
contained in the MSA. See id. (rejecting argument that multiple documents should
not be construed together because doing so would render various terms in one of
the documents meaningless). We overrule Polaris’s second issue.
Polaris argues in its first issue that the trial court erred when it granted EOG
Resources’ motion for summary judgment based on the thirty-day written notice
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termination provision in the MSA. In Polaris’s view, the termination provisions in
the Polaris/EOG License Agreement totally supplanted the MSA’s termination
provision. Having already decided that the Polaris/EOG License Agreement did
not supersede the MSA, we conclude that the thirty-day written notice termination
provision found in the MSA remained in effect. Because it is undisputed that EOG
Resources gave Polaris thirty days’ written notice of termination, we conclude that
the trial court did not err when it granted EOG Resources’ motion for summary
judgment. See Benavides v. Benavides, No. 04-11-00252-CV, 2011 WL 5407493,
at *1 (Tex. App.—San Antonio Nov. 9, 2011, pet. denied) (mem. op.) (“When the
facts surrounding performance of an unambiguous contract are undisputed, the
determination of whether a party has breached the contract is a question of law for
the court and not a question of fact for the jury.”). We overrule Polaris’s first
issue.4
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Polaris’s third issue challenges an alternative ground for summary judgment EOG
Resources included in its motion. Because we have already determined that the trial court did
not err when it granted EOG Resources’ motion for summary judgment on the ground that the
MSA granted EOG Resources the ability to cancel the agreement with Polaris upon giving thirty-
days written notice, we need not address Polaris’s third issue challenging the alternative ground.
See Tex. R. App. P. 47.1; Ammerman v. Ranches of Clear Creek Cmty. Ass’n, 562 S.W.3d 622,
640, n.5 (Tex. App.—Houston [1st Dist.] 2018, no pet.) (“Because we affirm the trial court’s
grant of summary judgment on limitations grounds, we need not address the alternative grounds
asserted by the Wilsons and the Association in their motions for summary judgment on these
claims.”).
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CONCLUSION
Having overruled each of Polaris’s issues necessary for final disposition of
the appeal, we affirm the trial court’s judgment. See Tex. R. App. P. 47.1.
/s/ Jerry Zimmerer
Justice
Panel consists of Justices Jewell, Zimmerer, and Spain (Spain, J., concurring).
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