Delhi Gas Pipeline Corp. v. Lamb

724 S.W.2d 97
CourtCourt of Appeals of Texas
DecidedFebruary 4, 1987
Docket08-86-00007-CV
StatusPublished
Cited by8 cases

This text of 724 S.W.2d 97 (Delhi Gas Pipeline Corp. v. Lamb) 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
Delhi Gas Pipeline Corp. v. Lamb, 724 S.W.2d 97 (Tex. Ct. App. 1987).

Opinions

OPINION

OSBORN, Chief Justice.

This suit was filed by working interest owners of mineral leaseholds in the Howard Draw Field in Crockett County to recover damages under four different contracts because of alleged failures of the gas purchaser to redetermine the price of gas every other year and to pay for gas under a take-or-pay provision. The trial court in a bench tried case awarded the plaintiffs $1,046,093.40 and prejudgment interest of $409,408.21, plus attorney’s fees of $120,000.00 for both the trial and appeals. Plaintiffs filed a voluntary remit-titur of $37,511.58 to correct a miscalculation.

By two points of error, the Appellant contends the trial court erred in granting judgment for deficiencies in the quantities of gas purchased and in granting judgment based upon a price redetermination. By two additional points, the Appellant complains of the award of attorney’s fees. By two cross-points of error, the Appellees assert the trial court erred in calculating the proper redetermined prices for gas and in calculating prejudgment interest. We affirm in part and reverse and remand in part.

James L. Lamb, Jr. is the operator of the field in behalf of all plaintiffs. By three gas purchase agreements executed in 1973 and one in 1975, these working interest owners agreed to sell gas to Delhi Gas Pipeline Corporation. The first three contracts required Delhi to purchase 80% of each well’s delivery capacity and under the fourth contract, 75% of delivery capacity. The contracts required that Delhi conduct tests four times a year to determine the Delivery Capacity of each well. By a letter agreement in April, 1976, Delhi agreed to redetermine the price of gas commencing March 1, 1976, to $1,425 per MCF under the three contracts executed in 1973, and the sellers in those contracts waived all claim for deficiencies in the purchase of gas, if any had occurred up to that date. From March 1, 1976, to February 28, 1982, Delhi purchased 3,051,148 MCF of gas from the field. No delivery tests were conducted in 1976 or 1977. Based upon production figures in 1978 and 1979, Lamb decided that Delhi had failed to either take or pay for the quantities of gas required under its contracts and this suit was filed in June, 1979.

Mr. Lamb testified initially that for the six years from 1976 to 1982, the total deficiencies for the field were 1,003,533 MCF of gas. He testified extensively as to problems with Delhi’s gas lines, gas pressures in their intake line, and compressor operations, which he said resulted in either Delhi being unable to take gas from the field or resulted in the wells being unable to produce at their normal flow pressures. He said that by permitting pressure to build up in the intake lines and by having a compressor which was not operating, Delhi was [99]*99able to control gas production. He also indicated that at times Delhi had no market for all the gas it was required to take and that it took steps to delay or reduce production.

After all testimony was concluded in July, 1982, the trial court made certain rulings which required recalculations and adjustments under the force majeure clauses. At a subsequent hearing in September, 1985, Mr. Lamb presented his revised calculations based upon Delhi’s deliverability test, the values of gas actually purchased as stipulated by the parties, a comparison of volumes produced, and line pressure according to daily volume and pressure reports prepared solely by Delhi. With that information, he determined the total deficiency was 640,158 MCF of gas. He also calculated certain volumes of gas that Delhi was to receive as a credit under the force majeure clauses based upon gas charts which reflected downtime in Delhi operations. These calculations resulted in a credit for eighty-four days of nonproduction whereby Delhi was relieved of its obligation to take gas under its contracts.

Delhi produced evidence contrary to that presented by Mr. Lamb. It calculated its total deficiencies at 68,136 MCF of gas. It further concluded that after giving effect to the force majeure provisions in its gas contracts, there were no deficiencies. Under a no evidence point of error “the appellate court must consider only the evidence and the inferences tending to support the finding and disregard all evidence and inferences to the contrary.” Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965). And where findings of fact and conclusions of law are not requested, all questions of fact are presumed found in support of the judgment and the judgment will be affirmed if it can be upheld upon any legal theory that finds support in the evidence. Lassiter v. Bliss, 559 S.W.2d 353 (Tex.1977). We conclude that the testimony and exhibits which reflect the revised figures certainly support the trial court’s judgment. Those calculations were arrived at by using reports prepared by Delhi. Point of Error No. One is overruled.

We now turn to the issue of price redetermination. With the rapid fluctuations in the price of gas since 1973, it has become a rather standard procedure to provide clauses in oil and gas purchase agreements which peg the price of a produce to other similar sales in the area. Delhi’s contracts gave the sellers a right or option to cause the price to be paid for gas under the contracts to be redetermined every other year. A written request for a price redetermination had to be made sixty days prior to the beginning of every other contract year.

The record contains copies of the correspondence whereby written demand was timely made prior to the appropriate contract years for a price redetermination after the first two years. The letter agreement which the parties signed in April, 1976, did redetermine the price of gas for the two-year period commencing March 1, 1976. It also contained a waiver of any claim under the take-or-pay provision.

Following the timely request for redeter-mination commencing on March 1, 1978, Delhi wrote to Mr. Lamb agreeing to a price of $1.527 per MCF. The letter agreement contained a provision for waiving any claim under the take-or-pay provision for the prior two years. The proposal was not acceptable to Mr. Lamb. Following another request for redetermination two years later, Delhi agreed to a price of $1.796 per MCF commencing March 1,1980. This proposal also contained a provision waiving any claim under the take-or-pay clause for the prior two years. Mr. Lamb did not accept the proposal. The request for rede-termination beginning on March 1, 1982, received no reply. Similar requests and responses were made under the fourth contract, but on different dates because of the difference in the beginning of a contract year. Delhi had no contractual right to require a waiver of the take-or-pay provision as a condition to a price redetermination. Since no agreement was reached after 1976, Delhi paid the sellers under three contracts $1.425 per MCF throughout the period in dispute and paid the sellers under [100]*100the fourth contract $1,527 per MCF during the period in dispute.

At trial the parties stipulated that based upon the formula in the gas contracts the price per MCF was $2.0454 as of March 1, 1978; $2.1515 per MMBTU (Million British Thermal Units) as of July 1, 1979; $2.3622 per MMBTU as of March 1,1980; $2.84 per MMBTU as of July 1, 1981; and $3,063 per MMBTU as of March 1, 1982, all subject to deductions for treating, compression and cleaning costs, if applicable.

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