Sunline Commercial Carriers, Inc. v. Citgo Petroleum Corporation
206 A.3d 836
Del.2019Background
- CITGO (shipper) and Sunline (carrier) entered a Master Agreement (Jan 9, 2013) and a Term Agreement (Mar 18, 2013) with identical formal titles; the Term Agreement incorporated the Master and supplied commercial terms (price, monthly minimums).
- Term Agreement specified a “1 Year agreement with a start date of April 1, 2013” but also stated its terms “shall remain in effect until the Master Agreement is expired or terminated,” and both contracts allowed 60 days’ termination notice.
- CITGO repeatedly failed to meet monthly minimums, creating cumulative shortfalls; parties agreed shortfalls would be made up “at the end of the contract.”
- On March 31, 2014 CITGO sent a 60‑day cancellation email stating services would continue through May 31, 2014; CITGO continued shipping in April and May and paid per the Term Agreement pricing.
- Superior Court held the Term Agreement expired March 31, 2014 (one‑year term), treated April–May shipments as satisfying earlier shortfalls, and entered judgment for CITGO; Sunline appealed.
- Delaware Supreme Court reversed: the Term Agreement is ambiguous (conflicting clauses), parol evidence is admissible, and summary judgment was improper; case remanded for trial on intent and shortfall liability.
Issues
| Issue | Plaintiff's Argument (Sunline) | Defendant's Argument (CITGO) | Held |
|---|---|---|---|
| Whether the Term Agreement expired on Mar 31, 2014 or remained until May 31, 2014 | Term Agreement’s clause tying its duration to the Master Agreement + parties’ conduct show it remained until Master’s termination (May 31) | One‑year clause is definitive; Term Agreement expired Mar 31, 2014 | Ambiguous — court reverses Superior Court; parol evidence required to resolve (trial needed) |
| Whether April–May shipments satisfied prior shortfalls | Shortfalls were to be made up at end of the contract if Term remained in effect through May, so April–May shipments did not resolve new shortfalls | If Term expired Mar 31, then April–May shipments (under Master) satisfied earlier shortfalls | Dependent on contract termination timing; summary judgment improper because parol evidence creates fact disputes |
| Whether the termination notice unambiguously ended one or both agreements | The March 31 notice (terminating “Motor Transportation Services Agreement” and stating services continue through May 31) is reasonably read as terminating the entire relationship on May 31 | Notice meant only to cancel the Term Agreement effective Mar 31 (one‑year end) | Notice is ambiguous; its language and parties’ course of performance permit multiple reasonable inferences |
| Whether parol evidence may be considered | Parol evidence (internal emails, communications, conduct, termination email) supports Sunline’s reading and should be considered | Court below found the contract unambiguous, so parol evidence was unnecessary | Parol evidence is admissible because the contract is reasonably susceptible to multiple meanings; remand for factfinding |
Key Cases Cited
- Kuhn Constr., Inc. v. Diamond State Port Corp., 990 A.2d 393 (Del. 2010) (contracts must be read to give effect to all terms)
- Rhone-Poulenc Basic Chems. Co. v. Am. Motorist Ins. Co., 616 A.2d 1192 (Del. 1992) (ambiguity exists only when provisions are reasonably susceptible to different meanings)
- GMG Capital Invs., LLC v. Athenian Venture Partners I, L.P., 36 A.3d 776 (Del. 2012) (if contract is ambiguous, extrinsic evidence is for the factfinder)
- Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (interpretation begins with the contract text and objective meaning)
- DCV Holdings, Inc. v. ConAgra, Inc., 889 A.2d 954 (Del. 2005) (specific contract language controls over general language)
- Salamone v. Gorman, 106 A.3d 354 (Del. 2014) (where contract is ambiguous, courts consider admissible extrinsic evidence)
- Continental Oil Co. v. Pauley Petroleum, Inc., 251 A.2d 824 (Del. 1969) (trial courts must not weigh evidence on summary judgment)