Southern Chemical Corp. v. Celanese, Ltd.
(Tex.App.- Houston [14th Dist] Sep. 10, 2009)(Sullivan)
(
contract interpretation, contract ambiguous, ambiguity creates fact issue which is not proper for
resolution by summary judgment; summary judgment reversed and case remanded for further
proceedings)
REVERSED AND REMANDED: Opinion by
Justice Sullivan   
Before Justices Seymore, Brown and Sullivan  
14-08-00348-CV  Southern Chemical Corporation v. Celanese, LTD   
Appeal from 190th District Court of Harris County
Trial Court Judge:
Patricia J Kerrigan

M E M O R A N D U M  O P I N I O N

The parties to this appeal, which arises from dueling summary-judgment motions, dispute the
proper interpretation of a methanol-supply contract's term and termination provisions.  Although the
contract specifies an initial ten-year term that does not expire until the year 2015, the appellant,
Southern Chemical Corporation, contends another clause permits early termination of the contract
upon the giving of commercially reasonable notice.  By contrast, Celanese, Ltd., the appellee,
argues that neither party may terminate the contract during the initial ten-year term except for
specific reasons not applicable here.

Because the parties are well-versed in the facts and the legal issues are settled, we issue this
memorandum opinion.  See Tex. R. App. P. 47.4.  We conclude that the contract is susceptible to
more than one reasonable interpretation and is therefore ambiguous.  Accordingly, we reverse the
trial court's judgment and remand this dispute to resolve the ambiguity.
                                                                        
I.
                                                          
Background

The facts germane to this appeal are not in dispute.  In 2003, the parties signed a confidential[1]
“Methanol Sale and Purchase Agreement" under which Celanese was required to purchase all of its
methanol needs exclusively from Southern Chemical for a period of ten years beginning July 1,
2005.  That initial ten-year term will automatically renew for an additional five years “unless
terminated as provided herein."

A dispute arose when Southern Chemical attempted to terminate the contract before the end of the
initial term.  In April 2007, Southern Chemical filed a declaratory-judgment action seeking a judicial
determination that the contract permits early termination during the initial term upon commercially
reasonable notice.  In response, Celanese contended the contract does not provide for early
termination during the initial ten-year period.

Both parties filed competing motions for summary judgment advocating their respective
interpretations of the contract.  The trial court denied Southern Chemical's motion and granted
Celanese's, ruling that:

1.         The term and termination provisions are unambiguous;

2.         The initial term is mandatory and cannot be terminated; and

3.         The contract allows the parties to give notice of termination within three years of the end of
the initial term, but that provision does not affect the language mandating completion of the initial
ten-year term.

The summary judgment became final after the trial court resolved the last disputed issue by
denying Celanese's request for attorneys' fees.  On appeal, Southern Chemical contends that the
contract unambiguously permits early termination and that the trial court erred by reaching the
opposite conclusion.
                                                                       
II.
                                                 
Standard of Review

When both sides request summary judgment and the trial court grants one motion while denying
the other, the appellate court must review the summary-judgment evidence and decide all of the
questions presented.  See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex.
2000).  Stated differently, we are to render the judgment the trial court should have rendered.  See
id.  In considering the evidence presented by both sides, we will apply the familiar summary-
judgment standards, which we need not recite here.  See Dolcefino v. Randolph, 19 S.W.3d 906,
916 (Tex. App.-Houston [14th Dist.] 2000, pet. denied).

Naturally, our primary concern when interpreting a contract is to ascertain and give effect to the
parties' intent.  Perry Homes v. Cull, 258 S.W.3d 580, 606 (Tex. 2008).  We focus on the language
used in the contract because that is the best indication of the parties' intent.  See id.  We must
examine the entire contract in an effort to harmonize and effectuate all of its provisions so that none
are rendered meaningless.  Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345
(Tex. 2006).  Therefore, we will not give controlling effect to any single provision; instead, we read
all of the provisions in light of the entire agreement.  See id. (citing Coker v. Coker, 650 S.W.2d
391, 393 (Tex. 1983)).  We may not rewrite the parties' contract or add to its language under the
guise of interpretation.  Ramco Oil & Gas Ltd. v. Anglo-Dutch (Tenge) L.L.C., 207 S.W.3d 801, 815
(Tex. App.-Houston [14th Dist.] 2006, pet. denied).  Instead, we must enforce an agreement as
written.  See id.

A court may determine that a contract is ambiguous even though neither party makes that claim.  In
re Sterling Chems., Inc., 261 S.W.3d 805, 809 (Tex. App.-Houston [14th Dist.] 2008, orig.
proceeding) (citing Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex. 1993)).  
However, the parties' mere disagreement about interpretation does not render a contract
ambiguous.  See id. at 808.  Instead, a contract is ambiguous if it is susceptible to more than one
reasonable interpretation.  J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).  By
contrast, a contract that may be given a definite or certain meaning is not ambiguous and will be
construed as a matter of law.  See id.  Determining whether an ambiguity exists is a question of law
for the court.  See id.
                                                                      
III.
                                                               
Analysis

The pertinent portions of the methanol-supply contract are as follows:

4.         Term of Agreement.  This Agreement will begin on July 1, 2005 and will continue for a
period of ten (10) years.  Thereafter this Agreement will continue for an additional five (5) year
period unless terminated as provided herein.

5.         Termination.

a)         By either PARTY giving written notification of termination to the other PARTY not less than
three (3) years prior to the end of either the initial or additional term.

b)        If either party:  becomes insolvent; is unable to pay its debts as they mature; makes a
general assignment for the benefit of creditors; has a receiver appointed for the whole or any
substantial part of its property, or becomes bankrupt, then the other party may, in addition to all
other rights and remedies provided by law, immediately terminate this Agreement.

c)         At any time, either party may terminate this Agreement because of a material breach if it is
not corrected to the reasonable satisfaction of the non-breaching party within a thirty (30) day
period after receipt of written notice of the breach.

The parties agree that sections 5(b) and 5(c) provide for early termination “for cause," that is,
because of a party's insolvency or uncured breach of the contract.  However, they disagree about
the scope and effect of the sentence fragment that comprises section 5(a).

A.        Southern Chemical's Interpretation

Southern Chemical argues that section 5(a) confers the right to cancel the contract “for
convenience."  That is, the early-termination right created by section 5(a) is not tethered to the
occurrence of any conditions such as breach or insolvency, and can be invoked simply by giving
notice of termination to the other party within the first seven years of the initial term.  Under
Southern Chemical's interpretation, such notice would enable a party to exit the contract after a
commercially reasonable time.[2]

However, Southern Chemical's reading of section 5(a) cannot be harmonized with  the contract's
term provisions in the preceding paragraph 4.  That section expressly permits a party to cancel the
extended five-year term but not the initial term.  Southern Chemical's proposed interpretation would
require us to rewrite the first sentence of section 4 to read, “This Agreement will begin on July 1,
2005 and will continue for a period of ten (10) years unless terminated as provided herein."  
However, we may not rewrite, or add to the language of, the parties' contract.  See Ramco Oil &
Gas Ltd., 207 S.W.3d at 815.  Nor may we conclude that section 5(a) trumps, or controls over, the
apparently mandatory terms of section 4.  See Seagull Energy E & P, Inc., 207 S.W.3d at 345.

B.        Trial Court's Interpretation

The trial court construed the contract as mandating the completion of the initial ten-year term.  
However, that interpretation, while consistent with section 4, makes no allowances for sections 5(b)
and 5(c), which specifically authorize a party to exit the contract's initial term under specific
circumstances.  If section 4 imposes an initial period that may not be terminated for any reason,
sections 5(b) and 5(c) lose any meaning.  We cannot adopt a reading of a contract that renders
portions of it meaningless.  See J.M. Davidson, Inc., 128 S.W.3d at 229.

C.        Celanese's Interpretation

Celanese suggests a reading of the contract that differs from both Southern Chemical's and the
trial court's interpretations.  While conceding that sections 5(b) and 5(c) allow early termination for
breach or insolvency, Celanese contends that section 5(a) is not an “early termination" provision
but speaks only to the method a party must follow in order to prevent the contract from
automatically renewing at the end of the initial term.

However, to reach that interpretation, we must disregard part of section 5(a), which reads: “By
either PARTY giving written notification of termination to the other PARTY not less than three (3)
years prior to the end of either the initial or additional term."[3]  Under its own terms, the contract
automatically expires at the end of the additional term, if not before.  Thus, there is no purpose for
a clause that, under Celanese's interpretation, would simply explain how to terminate the additional
term that will expire of its own accord.  See id.
                                                                      
IV.
                                                           
Conclusion

In this case, section 5(a) is susceptible to at least two reasonable interpretations.  Read in isolation,
it seemingly authorizes either party to withdraw from the methanol-supply contract for any reason
during the first seven years.  But considered in context with the contract's term provisions, section 5
(a) may also be read as simply describing the method by which a party may prevent the contract
from automatically renewing at the end of the initial term.  

However, neither interpretation gives full effect to all of the term and termination provisions without
requiring a court to add to or disregard other portions of the contract.  Thus, the contract may not
be assigned a definite or certain meaning and is therefore ambiguous.  See id.  That contract
ambiguity creates a fact issue as to the parties' intent that must be decided by a fact-finder.  See
Progressive County Mut. Ins. Co. v. Kelley, 284 S.W.3d 805, 808-09 (Tex. 2009); Columbia Gas
Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996).  Therefore, the trial
court erred by granting summary judgment.  See Kelley, 284 S.W.3d at 809.

Accordingly, we reverse the judgment of the trial court and remand for further proceedings not
inconsistent with this opinion.

/s/      
Kent C. Sullivan

Justice

Panel consists of Justices Seymore, Brown, and Sullivan.
--------------------------------------------------------------------------------

      [1]  The parties agreed that the contract contains trade secrets, and the trial court placed it
under seal.  Therefore, we discuss the contract's terms only to the limited extent necessary to
explain our resolution of this appeal.

      [2]  Southern Chemical contends that “commercially reasonable notice" is sixteen months.  
However, because we hold that section 5(a) does not unambiguously confer a right of early
termination during the initial term, we need not reach the subsidiary question of the amount of
notice that would be necessary or sufficient to effect such an early termination.  See Tex. R. App. P.
47.1.

      [3]  Emphasis added.