to April 5, 1996". The second provision defines the term as expiring "prior to five years from the Closing Date". The parties agree that the term Closing Date refers to April 5, 1991, and that the words "five years from the Closing Date" refer to April 5, 1996. Cmplt. para. 24; Pl. Resp. at 7; Def. Memo. at 4-5. Thus, I find that "prior to April 5, 1996" has the same meaning as "prior to five years from the Closing Date". The parties in this case do not dispute the significant facts, however they disagree over their legal relevance. Plaintiffs argue that "prior to April 5" means that the Stock Warrant expired prior to the end of the day on April 5, 1996. Pls. Resp. at 6. Defendant, on the other hand, argues that this provision means the warrant expired before April 5, 1996. Def. Memo. at 4-5.
"Although the parties disagree as to the proper interpretation of the contract, their disagreement does not create an ambiguity." Northwestern Nat'l Ins. Co., 672 A.2d at 43. Thus, the mere fact that the parties now dispute the proper interpretation of the O'Connor Warrant does not require finding that the agreement is ambiguous.
There do not appear to be any Delaware cases dealing with the construction of the phrase "prior to" within a contract. However, the United States Supreme Court decided a case wherein a similar issue arose regarding a deadline defined by the words "prior to". In United States v. Locke, 471 U.S. 84, 85 L. Ed. 2d 64, 105 S. Ct. 1785 (1985), the Court found that a provision in the Federal Land Policy and Management Act requiring mining claimants to file with government officials "prior to December 31", meant that filings had to be made "on or before December 30". Locke, 471 U.S. at 96. Accordingly, the Court found that mining claimants who had filed on December 31 had missed the deadline by filing one day too late. 105 S. Ct. at 1789. The Court's interpretation of "prior to" also accords with the ordinary usage of this phrase. "Prior to" is normally understood to mean "before". See Webster's II, (New Riverside University Dictionary ed., 1984).
The Supreme Court's interpretation of the words "prior to" applies in this case. Just as the Court in Locke found that "prior to December 31" meant "on or before December 30", this court finds that "prior to April 5" in the O'Connor Warrant means "on or before April 4". The literal meaning of the language in the O'Connor Warrant provides a reasonable answer as to the contract's expiration date. The contract was valid on April 4, 1996 and void on April 5, 1996. Thus, I conclude that this contract is not ambiguous.
Still, plaintiffs point to other language in the contract to support their argument that "prior to April 5" means by the end of April 5". Specifically, plaintiffs refer to a descriptive heading on the first page of the warrant that states, "Void After Five Years From Date of Original Issuance. " Pls. Resp. at 5.
I recognize that this descriptive heading read in conjunction with the text discussed above could tend to render the O'Connor Warrant susceptible to multiple interpretations. However, the heading is not legally determinative for several reasons. First, the contract itself provides a mechanism for properly interpreting this inconsistent language. Part 10 of the O'Connor Warrant labeled "Descriptive Headings: Governing Law" states that "the descriptive headings of the several parts and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant." Cmplt. Exh. D at 6. Therefore, the descriptive heading, though clumsily drafted, is not part of the contract and its meaning is not controlling.
Second, the decision to disregard the descriptive heading in the O'Connor Warrant is also consistent with accepted methods of contract and statute construction. In United States v. Leslie Salt Co., 350 U.S. 383, 389, 100 L. Ed. 441, 76 S. Ct. 416 (1956), the United States Supreme Court construed a commercial instrument for tax purposes. There, the Court found that the "essential characteristics" of the instruments controlled "regardless of their descriptive caption." Id. In addition, although Delaware appears to lack case law on point, the Delaware Code has addressed the legal weight of descriptive headings in the context of statute interpretation. The Code states that "the descriptive headings ... immediately preceding or within the texts of the individual sections of this Code ... do not constitute part of the law." 1 Del. Code Ann. § 306 (1995).
Third, this construction of the O'Connor Warrant also accords with general rules of contract construction. It is well established that a specific clause should prevail over a more general one in a contract. Mutual Life Ins. Co. of N.Y. v. Hill, 193 U.S. 551, 558, 48 L. Ed. 788, 24 S. Ct. 538 (1904); 3 A. L. Corbin, Corbin on Contracts § 547 at 176 (1960 ed.) ("If the apparent inconsistency is between a clause that is general ... and one that is more ... specific in its coverage, the latter should generally be held to operate as a modification and pro tanto nullification of the former."). Applying this rule of construction to the language at issue leads to a finding that the more specific text -- i.e. "prior to April 5" -- modifies and nullifies the general language of the descriptive heading -- i.e. "Void After Five Years From Date of Issuance".
Finally, plaintiffs argue that a prospectus released by Dresser in April 1994 in compliance with federal securities regulations provides additional proof that the contract's expiration date was April 5, 1996. However, in light of my decision that the O'Connor Warrant is not ambiguous, I will not consider parole or extrinsic evidence. Moreover, because the prospectus was published in April 1994, three years after the contract at issue was formed, I find it is irrelevant on the matter of the parties' intent at the time of contract formation.
For the foregoing reasons, the court concludes that this contract is not ambiguous. The O'Connor Warrant had to be exercised on or before April 4, 1996. Even if SBC had been ready, willing, and able to exercise its contractual rights on April 5, 1996, SBC would have acted one day too late. Consequently, Dresser's refusal to sell its stock to SBC on April 8, 1996 did not amount to a breach of contract because the O'Connor Warrant was no longer in effect. Accordingly, Count I of the complaint is dismissed.
For the reasons stated above, defendant's motion to dismiss is GRANTED with respect to Count I of the complaint.
Defendant's request to dismiss the complaint in its entirety is denied because the motion to dismiss failed to address Count II of the complaint regarding reformation of the contract.
James B. Zagel
United States District Judge
Date: 03 Oct 1996