Texas Central Business Lines Corporation v. U.S. Polyco, Inc.

Court of Appeals of Texas·Decided July 27, 2022·No. 10-19-00004-CV·Published

Opinion

IN THE

TENTH COURT OF APPEALS

No. 10-19-00004-CV

TEXAS CENTRAL BUSINESS LINES CORPORATION, Appellant

v.

U.S. POLYCO, INC., Appellee

From the 40th District Court Ellis County, Texas

Trial Court No. 92159

MEMORANDUM OPINION

In six issues, appellant, Texas Central Business Lines Corporation (“TCB”), challenges various rulings by the trial court in favor of appellee, U.S. Polyco, Inc. (“USP”). We reverse and remand.

Background

TCB is a terminal and switching railroad that operates in Midlothian, Texas. TCB also provides transloading operations, which is the transfer of commodities from rail cars to trucks to reach their final destination. USP produces various blends of proprietary asphalt products that it sells to customers throughout the United States.

Seeking to use TCB’s transloading operations to increase capacity to bring in larger quantities of asphalt by rail to service customers, USP entered into two agreements with TCB—a “Transload Agreement” (“TA”) and a “Railroad Allowance Agreement” (“RAA”). These agreements addressed the construction of a plant for USP, as well as infrastructure to support USP’s business expansion.

The agreements also provided that TCB would pay certain costs, that USP would pay other costs, and for reimbursement of costs from one party to the other under specific circumstances. In particular, the RAA requires USP to be responsible for paying up to $1.2 million as a maximum customer payment for infrastructure. The RAA also provides that: “All costs of construction of the TCB Infrastructure Improvements which cumulatively exceed the Maximum Customer Payment amount will be paid in a timely manner by TCB.”

The construction process resulted in cost overruns. USP alleged that it paid more than $1.2 million toward the infrastructure improvements to get the project moving. At trial, USP asserted that it paid close to $9 million for the plant and infrastructure improvements combined.

The facility was substantially completed in February 2016. However, because there was no electricity at the plant, and because a parking lot was not completed, the fire

Tex. Cent. Bus. Lines Corp. v. U.S. Polyco, Inc. Page 2 marshal would not issue a certificate of occupancy. Therefore, USP was unable to operate the plant.

This dispute centers on which party was responsible for the costs associated with concrete construction, utilities construction, and the construction of a parking lot. Claiming that the other party is responsible for paying these costs under the RAA and the TA, TCB and USP each assert that the other party breached the RAA and TA and relieved them of responsibility to perform under the RAA and the TA.

USP was the first to file suit in this matter, alleging breach-of-contract and/or anticipatory breach of contract claims against TCB. TCB filed an answer denying the allegations contained in USP’s original petition and later filed a counterclaim against USP for breach of contract for failing to reimburse TCB for the costs associated with the construction of the utilities at the USP plant and for costs up to $1.2 million for the construction of TCB Infrastructure Improvements. USP filed an answer denying the claims made by TCB.

Thereafter, TCB filed traditional and no-evidence motions for summary judgment, arguing, among other things, that it is entitled to summary judgment on its counterclaims and that TCB did not breach or anticipatorily breach any contract it had with USP. USP responded by amending its original petition and filing a motion for partial summary judgment. In its amended petition, USP included more detail regarding its claims and damages, including an allegation that its actual damages are $12,699,989. In its motion

Tex. Cent. Bus. Lines Corp. v. U.S. Polyco, Inc. Page 3 for partial summary judgment, USP contended, among other things, that it was limited to pay the maximum amount of $1.2 million towards infrastructure construction under the RAA and that sections 1.1, 2.1, and 2.2 of the RAA required TCB to pay the rest of the costs for the utilities as actual costs of construction for the TCB Infrastructure Improvements.

Subsequently, the parties filed responses and objections to the pending motions for summary judgment. On November 14, 2016, the trial court signed an order granting USP’s motion for partial summary judgment only as to USP’s contract interpretation of section 1.1(3) of the RAA and denying the remainder of the motion for partial summary judgment, as well as TCB’s motions for summary judgment.1 In the order, the trial court specifically concluded, as a matter of law, that:

Under § 1.1(3) of the Railroad Allowance Agreement entered into as of July 14, 2014 between USP and TCB, the phrase “as are agreed upon by TCB and Customer in writing” modifies only the phrase “other items in or adjacent

1 Section 1.1 of the RAA provides the following:

1.1 TCB Infrastructure Improvements. As used in this Agreement, “TCB Infrastructure Improvements” will mean the following improvements agreed to and shown generally in Exhibit X attached and incorporated into this Agreement by this reference (“Preliminary Layout”): (1) approximately 3000 feet of rail track, including two rail transload tracks shown in the TCB Rail Transfer Area from which Commodities may be transferred to and from the Designated Area-Storage; (2) approximately 6000 feet of a two-lane improved (stabilized but unpaved) driveway suitable for trucks carrying Commodities between Midlothian Parkway and the Designated Area-Truck Transfer, shown in the Truck Transit Area; and (3) various concrete and ground surface improvements, including without limitation slabs for truck scales and racks, tank and appurtenant structures to house personnel, oil heating and steam generation equipment, curbs and planters for parking areas, and other items in or adjacent to the Designated Areas as are agreed upon by TCB and Customer in writing. All TCB Infrastructure Improvements constructed or provided for under this Agreement will be the sole property of TCB upon completion and are intended for the primary use of TCB in the conduct of its railroad operations.

Tex. Cent. Bus. Lines Corp. v. U.S. Polyco, Inc. Page 4 to the Designated Areas” and does not modify the phrase “various concrete and ground surface improvements, including without limitation slabs for truck scales and racks, tank and appurtenant structures to house personnel, oil heating, and steam generation equipment, curbs and planters for parking areas.

In light of the trial court’s ruling on its motion for partial summary judgment and a ruling allowing the testimony of USP’s expert witness, USP amended their petition once again to increase the allegation of actual damages to $13,339,479. TCB amended their counterclaim to argue that USP breached the TA. TCB also amended its original answer to USP’s suit.

The case was ultimately tried to a jury. In the jury charge, the trial court instructed the jury as to the trial court’s interpretation of section 1.1(3) of the RAA, as stated in its order on USP’s motion for partial summary judgment. The jury determined that TCB committed a material breach of the RAA and awarded USP $8,699,989 in damages. The jury also found that neither party breached the TA. The trial court denied several post- trial motions filed by TCB and signed a final judgment in favor of USP, awarding $8,699,989 in damages, $1,138,149.25 in pre-judgment interest, $347,000 in attorney’s fees, and attorney’s fees for appeals to this Court and the Texas Supreme Court. TCB then filed a motion for new trial, which was overruled by operation of law. This appeal followed.

Tex. Cent. Bus. Lines Corp. v. U.S. Polyco, Inc. Page 5

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