Burlington Northern & Santa Fe Railway Co. v. South Plains Switching, Ltd.

174 S.W.3d 348, 2005 WL 2044800
CourtCourt of Appeals of Texas
DecidedSeptember 15, 2005
Docket2-04-364-CV
StatusPublished
Cited by24 cases

This text of 174 S.W.3d 348 (Burlington Northern & Santa Fe Railway Co. v. South Plains Switching, Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Burlington Northern & Santa Fe Railway Co. v. South Plains Switching, Ltd., 174 S.W.3d 348, 2005 WL 2044800 (Tex. Ct. App. 2005).

Opinion

OPINION

DIXON W. HOLMAN, Justice.

This case arises from a dispute over the meaning of certain provisions in an Asset Sales Agreement (the Agreement) between Appellant Burlington Northern and Santa Fe Railway Company (BNSF) and Appel-lee South Plains Switching, Ltd. Co. (South Plains). After careful consideration of Appellant’s issues, we affirm in part and reverse and render in part.

BACKGROUND AND PROCEDURAL HISTORY

BNSF and South Plains executed the Agreement in May 1999. Under this Agreement, BNSF conveyed to South Plains certain “rail line” properties (tracks) in Lubbock, Texas, and certain rail freight transportation business conducted on those tracks. The tracks conveyed were known as the “Lower Yard.” Under the Agreement, BNSF retained its “through route” business, conveying to South Plains only the “switching services” provided to BNSF’s “through route” customers.

“Through route” business consists of shipments that originate with BNSF at one location and, although some of the shipping takes place on rail lines owned by other carriers, continue to be billed by BNSF for the entire trip. South Plains’ switching services for these shipments includes interchanging cars and moving them to and from the industry track destinations on the rail lines conveyed to South Plains by the Agreement. For these switching services, South Plains receives a “division of revenue.” South Plains began operations under the Agreement on July 5, 1999.

During negotiations surrounding the creation of the Agreement, South Plains expressed an interest in acquiring additional properties known as the North Yard. No official arrangements were made with regard to the North Yard property before execution of the Agreement. From execution of the Agreement in 1999 through mid-2001 there were conversations between BNSF and South Plains regarding the sale of the North Yard.

Sometime in June or July 2001, BNSF informed South Plains that the property and switching operations for the North Yard were not for sale, ending any negotiations regarding the conveyance of that property. On January 17, 2002 and February 4, 2002 South Plains wrote letters to BNSF requesting BNSF’s consent to impose surcharges on all cars interchanged (or “switched”) by South Plains. South Plains explained the need for a surcharge by stating that it had underbid the “divi *352 sion of revenue” deal under the Agreement because it relied on oral promises that the North Yard would be conveyed, thereby providing South Plains with another source of revenue.

On February 22, 2002, exercising its rights under the Agreement, BNSF denied consent to the surcharge request, stating its belief that the additional surcharge would adversely affect its volume of business because shippers might resort to using trucks instead of paying the extra rail line fee. BNSF initiated an action for declaratory judgment on the surcharge issue on April 16, 2002. South Plains asserted several counterclaims that were either disposed of through summary judgment or nonsuited prior to trial.

The case proceeded on four declaratory judgment claims brought by BNSF. The jury answered adversely to BNSF on all four jury questions regarding the parties’ rights under the Agreement. The court denied BNSF’s motions for directed verdict, judgment notwithstanding the verdict, and a new trial. On August 23, 2004, the trial court rendered judgment on the verdict. In three issues, BNSF appeals the trial court’s judgment.

SURCHARGE ISSUE

In its first issue, BNSF contends that the jury’s finding that BNSF unreasonably withheld consent to South Plains’ surcharge request is not supported by the judgment for two reasons. First, the trial court erred by refusing to instruct the jury on the proper legal meaning of the term “unreasonably.” Second, the evidence is legally and factually insufficient to support the jury’s finding.

Was a deftnition required?

The phrase in question used in the Agreement is as follows: “[South Plains] shall not impose a surcharge upon [rail] traffic without the prior written consent of [BNSF], which consent shall not be unreasonably withheld.”

BNSF asserts that without an instruction from the trial court defining the term “unreasonable,” the jury incorrectly applied its own subjective definition of the term, rather than the proper legal meaning, which resulted in an improper verdict. In support of its contention, BNSF relies upon Mitchell’s Inc. v. Nelms, 454 S.W.2d 809, 813 (Tex.Civ.App.-Dallas 1970, writ ref'd n.r.e.).

Texas courts have not settled on a legal definition of “unreasonable.” “What constitutes the elements of unreasonableness in the act of withholding consent presents a question not simple in resolution.” Id. In Mitchell’s, the court held that a landlord did not unreasonably withhold consent to a sublease as mandated by the terms of the lease. Id. at 814. In reaching this decision, the court examined the specific terms of the lease to determine the intention of the parties. Id. After considering the lessor’s reason for denying consent, the court examined the original intention of the parties as evidenced in the lease and decided that the lessor did not act unreasonably or arbitrarily. Id. at 815.

In examining the elements of unreasonableness in the act of withholding consent, the Mitchell’s court noted that unreasonable conduct compares to arbitrary action. Id. at 813-14. The court also mentioned the definition of arbitrary — “without fair, solid and substantial cause or reason.” Id. However, the word “arbitrary” is only used as a “yardstick” in Mitchell’s to show that for something to be reasonable it must be something more than arbitrary. Id. The Mitchell’s court did not hold that overcoming arbitrariness equates to reasonableness. See id.

Mitchell’s, in fact, proposes several meanings for the term “unreasonable,” in- *353 eluding a definition of the word from Webster’s dictionary and definitions applied by other courts. Id. The Mitchell’s court did not rely on any particular definition of unreasonable but instead “made reference to various definitions of ‘reasonable’ and ‘unreasonable,’ including the definition supplied by Webster’s Dictionary, but did not approve any specific language that would necessarily be suitable for a jury instruction.” Terry I. Cross, The Ties That Bind: Preemptive Rights and Restraints On Alienation That Commonly Burden Oil and Gas Properties, 5 Tex. Wesleyan L.Rev. 198, 224 n. 182 (1999).

Furthermore, “[ajlthough the court in Mitchell’s discussed various definitions of unreasonableness in the abstract, it relied on the specific terms of the contract to hold that the landlord had acted reasonably in withholding his consent.” B.M.B. Corp. v. McMahan’s Valley Stores,

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Cite This Page — Counsel Stack

Bluebook (online)
174 S.W.3d 348, 2005 WL 2044800, Counsel Stack Legal Research, https://law.counselstack.com/opinion/burlington-northern-santa-fe-railway-co-v-south-plains-switching-ltd-texapp-2005.