Hartman Income REIT Management v. Summer Energy, LLC

CourtCourt of Appeals of Texas
DecidedNovember 30, 2023
Docket14-22-00469-CV
StatusPublished

This text of Hartman Income REIT Management v. Summer Energy, LLC (Hartman Income REIT Management v. Summer Energy, LLC) 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
Hartman Income REIT Management v. Summer Energy, LLC, (Tex. Ct. App. 2023).

Opinion

Affirmed and Opinion filed November 30, 2023.

In the

Fourteenth Court of Appeals

NO. 14-22-00469-CV

HARTMAN INCOME REIT MANAGEMENT, Appellant

V. SUMMER ENERGY, LLC, Appellee

On Appeal from the 295th District Court Harris County, Texas Trial Court Cause No. 2021-31657

OPINION

In February 2021, Winter Storm Uri caused blackouts across the state as low temperatures drove electricity demand up while simultaneously impairing the ability of power generators and transmitters to produce and deliver. From February 15th until mid-morning on the 19th, ERCOT,1 the entity that operates Texas’s electric-

1 ERCOT is the acronym for the Electric Reliability Council of Texas. power grid,2 set the wholesale price of electricity at $9,000/MWh—the maximum then allowable.3 Pursuant to its multiple “Real Time Index Full Pass Through” contracts with commercial-property owner Hartman Income REIT Management, retail electric provider Summer Energy, LLC, included these charges in Hartman’s electric bills. Hartman refused to pay the full amount billed, arguing that ERCOT should have stopped imposing the high price thirty-three hours earlier than it did.

Summer sued Hartman for breach of contract, and Hartman countersued for breach of contract, breach of the duty of good faith, and declaratory relief. After a non-jury trial, the trial court denied Hartman’s claims and held that the parties’ unambiguous contracts required Hartman to pay a price for electricity that included the rate set by ERCOT. Hartman appealed, but we conclude that the trial court correctly construed the contracts and denied Hartman relief. Thus, we affirm the trial court’s judgment.

I. BACKGROUND

Appellant Hartman Income REIT Management owns and operates over fifty buildings, more than thirty of which are in Houston. Hartman obtains electricity for its properties through retail electric provider (REP) Summer Energy, LLC. REPs do not themselves generate energy;4 rather, REPs like Summer “arrange for purchase and delivery of electricity” on a retail customer’s behalf. This service is

2 See CPS Energy v. Elec. Reliability Council of Tex., 671 S.W.3d 605, 612 (Tex. 2023) (structure of Texas’s electric-utility industry requires ERCOT “to operate the wholesale electric market”). 3 The Public Utility Commission of Texas later lowered that cap to $5,000. See 16 TEX. ADMIN. CODE § 25.509(b)(6). 4 See Act of May 27, 1999, 76th Leg., R.S., ch. 405, § 11, sec. 31.002(17), 1999 TEX. GEN. LAWS 2543, 2549 (amended 2021 & 2023).

2 administratively defined as an “electricity product,” which is just a “specific type of retail electricity service developed and identified by a REP.”5

In May 2020, Hartman entered into five contracts with Summer covering a total of forty-three properties; the contracts differ only in the addresses served. In each, Hartman purchased Summer’s “Real Time Index Full Pass Through + $0.003660/kwh Retail Adder.” Hartman agreed that one component of the Product’s price would be the “Real Time Index Price.”

The contracts do not define “Real Time Index Price.” Hartman maintains that the term is ambiguous; Summer disagrees. Each side presented witnesses who testified that this term refers to the real-time energy rate that ERCOT reports at 15- minute intervals; neither side presented controverting evidence. Hartman stipulated that this component of its electricity bills accurately reflects the real-time prices published by ERCOT. Moreover, Hartman does not contest the parts of Summer’s bills that include the $9,000/MWh imposed by ERCOT from February 15th through nearly all of February 17, 2021, but Hartman maintains that ERCOT should have stopped imposing the market cap at 11:55 p.m. on February 17th rather than at approximately 9:00 a.m. on February 19th. Hartman contends that the “Real Time Index Price” referred to in its contracts with Summer must be an index that sets prices according to a pre-defined formula, and because ERCOT did not follow a pre- defined formula during those hours, Summer was not permitted to pass through those charges. Hartman additionally pleaded that Summer breached a duty of good faith by billing Hartman for those charges.

5 16 TEX. ADMIN. CODE § 25.5(39).

3 After a nonjury trial, the trial court concluded that the contracts’ pricing provisions were unambiguous. The trial court ruled in Summer’s favor and against Hartman.

II. ISSUES PRESENTED

In three issues, Hartman argues that the trial court erred in (a) its construction of the parties’ contracts, (b) considering extrinsic evidence at trial even though the trial ultimately concluded that the contracts are unambiguous, and (c) failing to find that Summer breached a duty of good faith.

III. CONSTRUING THE CONTRACTS

When construing a contract, we apply the de novo standard of review. Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 479 (Tex. 2019). Our primary objective is to effectuate the written expression of the parties’ intent. Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 889 (Tex. 2019). To do so, we “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 Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)). We do not consider a provision in isolation and give it controlling effect; rather, we consider each provision in the context of the contract as a whole. Plains Expl. & Prod. Co. v. Torch Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex. 2015). We give the contract’s words their plain, common, or generally accepted meaning unless the contract shows that the parties used words in a technical or different sense. Id. Ordinarily, the writing alone is sufficient to express the parties’ intentions, “for it is objective, not subjective, intent that controls.” Matagorda Cty. Hosp. Dist. v. Burwell, 189 S.W.3d 738, 740 (Tex. 2006) (per curiam) (quoting City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968)).

4 Whether a contract is ambiguous is a question of law. Nettye Engler Energy, LP v. BlueStone Nat. Res. II, LLC, 639 S.W.3d 682, 690 (Tex. 2022). We will conclude that a contract is ambiguous only if, after applying the pertinent rules of construction, it is subject to more than one reasonable interpretation. Finley Res., Inc. v. Headington Royalty, Inc., 672 S.W.3d 332, 340, 344 (Tex. 2023). If the contract can be given a definite legal meaning or interpretation when considered as a whole, and in light of the objective circumstances surrounding its execution, then the contract is not ambiguous, and we will construe it as matter of law. See id. Evidence of the objectively determinable facts and circumstances surrounding the contract’s formation—including commercial setting, trade custom, and trade usage—may inform the meaning of the language chosen even in an unambiguous contract. See id. We also may consider the parties’ sophistication and the participation of legal counsel, “which carry an expectation that the parties were aware of what to bargain for and understood the terms of their written agreement.” Id.

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Hartman Income REIT Management v. Summer Energy, LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hartman-income-reit-management-v-summer-energy-llc-texapp-2023.