Apache Corp. v. DYNEGY MIDSTREAM SERVICES

214 S.W.3d 554, 2006 Tex. App. LEXIS 10442, 2006 WL 3511858
CourtCourt of Appeals of Texas
DecidedDecember 7, 2006
Docket14-05-00010-CV
StatusPublished
Cited by24 cases

This text of 214 S.W.3d 554 (Apache Corp. v. DYNEGY MIDSTREAM SERVICES) 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
Apache Corp. v. DYNEGY MIDSTREAM SERVICES, 214 S.W.3d 554, 2006 Tex. App. LEXIS 10442, 2006 WL 3511858 (Tex. Ct. App. 2006).

Opinion

OPINION ON REHEARING

JOHN S. ANDERSON, Justice.

This is a commercial damages case involving natural gas contracts.

This appeal arises from disagreements as to the interpretation of several gas contracts between the predecessors of Apache Corporation and Versado Gas Processors. The disputes were submitted to a jury, and Apache received favorable answers to the most critical questions addressed by the jury. However, the trial court granted a judgment notwithstanding the verdict. In six issues, Apache contends the trial court erred in rendering judgment because legally sufficient evidence supported its breach of contract and unfair trade practice claims. Dynegy and Versado (collectively “Versado”) filed a cross-appeal in which they complain the trial court erred in awarding Apache a declaratory judgment for future field condensate payments. In both appeals, the parties argue they are entitled to recover attorney’s fees as the prevailing party. We modify the judgment, affirm as modified, and remand the issue of Versado’s attorney’s fees.

I. PROCEDURAL AND FACTUAL BACKGROUND

Apache is a producer of natural gas and owns several oil and gas wells in West Texas and New Mexico. Title to the gas Apache produces is transferred to Versado at the wellhead. Versado then transports the gas through its pipeline to a processing plant. At the plant, the liquid hydrocarbons are stripped out of the gas and are sold as fuel. The remaining dry residue gas is also sold by Versado. Although Versado is the party who contracted with *558 Apache to process the gas, it has no employees; therefore, Dynegy employees operate the gas processing plants. Versado agreed to pay Apache a percentage of the proceeds it realizes from the sale of the liquid hydrocarbons and the residue gas. The dispute between the parties arose after Apache audited Versado’s payments and discovered irregularities in the payments for gas and liquids to Apache.

Versado owns several processing plants at issue in this case. The Eunice North and South Plants were originally built by Texaco in 1936. The Eunice Middle Plant was built in 1948 by Gulf Oil, and the Monument Plant was built in 1936 by Am-erada Hess, which was later purchased by Warren Petroleum. Those companies are the original parties to the contracts at issue. Through a series of mergers and acquisitions, Apache and Versado are the current parties to the contracts.

Apache sued Versado for breach of contract and for violations of the New Mexico Unfair Practices Act. The jury found that Versado breached the contracts and engaged in unfair or deceptive trade practices. The jury further found that Apache neither wrongfully retained money from Versado, nor failed to comply with the contracts. Finally, the jury found that Ver-sado charged Apache excessive marketing fees. For the breach of contract and unfair practices violations, the jury awarded $1,508,674 in damages to Apache. For the claim of excessive marketing fees, the jury awarded $158,000 in damages.

Following the jury’s verdict, Versado filed a motion for judgment notwithstanding the verdict, which the trial court granted in part. In its judgment, the trial court ordered that Apache take nothing on its contract and unfair practices claims and that Versado take nothing on its counterclaims. The trial court further entered a declaratory judgment on eleven of the contracts declaring that Apache was entitled to payments for condensate from the North and South Eunice locations from the date of Versado’s last condensate payment to Apache through the date the contracts terminate. The trial court awarded Apache $75,000 in attorney’s fees for its declaratory judgment action, and affirmed a partial summary judgment in which it found Versado had not breached the contracts regarding interaffiliate transfers. Both parties appealed.

In six issues, Apache contends the trial court erred in entering judgment notwithstanding the verdict because the evidence supports both the trial court’s finding that the contracts were ambiguous and the jury’s verdict interpreting the contracts. Apache further seeks attorney’s fees of $775,000 through trial and $100,000 through appeal. In a cross-appeal, Versa-do contends the trial court erred in entering a declaratory judgment awarding Apache future condensate payments because neither the evidence, nor the jury’s verdict, supports the declaratory judgment. Versado also seeks remand to determine the amount of attorney’s fees it should recover.

II. STANDARD OF REVIEW FOR JUDGMENT Notwithstanding the VeRdict

In order to uphold a trial court’s judgment notwithstanding the verdict, an appellate court must determine that no evidence supports the jury’s findings. Mancorp v. Culpepper, 802 S.W.2d 226, 227 (Tex.1990). The final test for legal sufficiency must always be whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.2005). Under the properly applied scope of review, appellate courts must view the evidence in the light most favorable to the verdict, *559 crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not disregard such evidence. Id. at 807.

A judgment notwithstanding the verdict is proper in the following circumstances: (1) a defect in the opponent’s pleadings makes the pleadings insufficient to support a judgment, (2) the evidence conclusively proves a fact that establishes a party’s right to judgment as a matter of law, or (3) the evidence offered on a cause of action is insufficient to raise an issue of fact. Sherman v. Elkowitz, 130 S.W.3d 316, 319 (Tex.App.-Houston [14th Dist.] 2004, no pet.). If there is sufficient evidence to support the jury’s findings, the judgment notwithstanding the verdict should be reversed. Hester v. Friedkin Companies, Inc., 132 S.W.3d 100, 104 (Tex.App.-Houston [14th Dist.] 2004, pet. denied).

III. Breach of ContRact— Unaccounted-foR Gas

The plants now owned by Versado process natural gas supplied by Apache. When the gas enters Versado’s pipeline, it is under relatively low pressure. As the gas moves through the pipeline, the pressure is gradually increased so the gas can reach the plant. At the plant, the gas is compressed further to extract liquids. During this process, the quantity of gas received by Versado from Apache is reduced by the amounts of gas used for fuel, lost through leaks, and flared during processing.

The dispute between Apache and Versa-do arose after Apache conducted a routine audit and discovered that Versado included a category for “unaccounted-for gas” in its calculations of residue gas. Eight of the contracts define residue gas as “the quantity of Gas which remains after the Liquid Hydrocarbon Products are extracted ...

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214 S.W.3d 554, 2006 Tex. App. LEXIS 10442, 2006 WL 3511858, Counsel Stack Legal Research, https://law.counselstack.com/opinion/apache-corp-v-dynegy-midstream-services-texapp-2006.