Eagle Oil & Gas Co. v. Tro-X, L.P.

416 S.W.3d 137, 182 Oil & Gas Rep. 488, 2013 WL 5861496, 2013 Tex. App. LEXIS 13534
CourtCourt of Appeals of Texas
DecidedOctober 31, 2013
Docket11-11-00290-CV
StatusPublished
Cited by11 cases

This text of 416 S.W.3d 137 (Eagle Oil & Gas Co. v. Tro-X, L.P.) 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
Eagle Oil & Gas Co. v. Tro-X, L.P., 416 S.W.3d 137, 182 Oil & Gas Rep. 488, 2013 WL 5861496, 2013 Tex. App. LEXIS 13534 (Tex. Ct. App. 2013).

Opinions

OPINION

TERRY McCALL, Justice.

Because TRO-X, L.P. believed that Eagle Oil & Gas Co. (Eagle Oil) breached an agreement that it had with TRO-X regarding the acquisition and disposition of oil and gas leases and other oil and gas interests, it brought a cause of action against Eagle Oil for that breach. TRO-X also brought other causes of action against Eagle .Oil and, later, a third party, Eagle Oil & Gas Partners, LLC (Eagle Partners): By way of a partial summary judgment in favor of Eagle Oil, the trial court disposed of some of the causes of action that TRO-X brought against Eagle Oil. In the partial summary judgment, except for a tortious interference claim, the trial court also disposed of all of the causes of action that TRO-X brought against Eagle Partners. Other issues, including damages and attorney fees, were presented to the jury.

The jury found that Eagle Oil had breached the agreement; that TRO-X had not breached the agreement; that Eagle’s breach was not excused; that TRO-X had not waived its right to acquire an unpro-moted working interest in the acreage covered by the agreement; that TRO-X’s total damages amounted to $7,680,000; and that TRO-X was entitled to total attorney fees of $571,000.

Additionally, as far as TRO-X’s claims against Eagle Partners were concerned, the jury found that Eagle Partners intentionally interfered with the agreement between TRO-X and Eagle Oil. The jury also found that Eagle Partners did not act in the good faith belief that (1) it was acting in the bona fide exercise of its own rights or (2) it had an equal or superior right in the subject matter of the contract as opposed to that of TRO-X. However, the jury answered “$0” when asked to assess damages to TRO-X that were proximately caused as a result of that interference.

The jury verdict was not unanimous. The trial court instructed the jury that it could not find that harm to TRO-X was maliciously caused by Eagle Partners un[140]*140less its answer was unanimous, and the jury did not answer the question regarding malice. Because the question regarding the amount of exemplary damages was conditioned upon an affirmative answer to the malice question, the jury did not answer it.

Based upon the answers of the jury, and after the trial court denied Eagle Oil’s motion for judgment notwithstanding the verdict and to disregard certain jury findings, the trial court entered judgment in favor of TRO-X against Eagle Oil in the amount of $7,680,000. It also entered judgment that TRO-X take nothing on its claims against Eagle Partners. The trial court additionally awarded TRO-X a total of $571,000 in attorney fees. Eagle Oil and TRO-X have each perfected an appeal.

As a result of the discussion and analysis that follows, we reverse and render judgment that TRO-X take nothing from Eagle Oil on its breach of contract claims, but that TRO-X recover the sum of $379,788.80 from Eagle Oil, as shown by the court-approved accounting. We reverse the award of attorney fees to TRO-X related to the breach of contract claims and render judgment that TRO-X may not recover those attorney fees in the absence of a successful breach of contract claim. We also reverse the award of $35,000 in attorney fees that were conditioned upon an affirmative answer to the question of whether Eagle Oil breached the agreement by sending a letter to TRO-X. We render judgment that TRO-X cannot recover those fees. We affirm the take-nothing judgment against TRO-X and in favor of Eagle Partners.

Although the record in this case is quite voluminous, we will discuss only those parts of the record that are directly germane to the resolution of this appeal.

The agreement that is the subject of this lawsuit is in writing and is denominated: “ACREAGE ACQUISITION AGREEMENT: NEW PROSPECTS AND AMENDMENT NO. 1 TO SOUTH HALEY PROSPECT AGREEMENT PECOS COUNTY, TEXAS.”1 The parties to the New Prospects Agreement are TRO-X, L.P. and Eagle Oil & Gas Co.

Under the terms of the New Prospects Agreement, Eagle Oil was to use reasonable efforts to acquire “Interests” in the New Prospects area. In the New Prospects Agreement, the parties refer to the definition of “Interests” as set out in the South Haley Agreement. There, the term “Interests” is defined to be “oil and gas leasehold interests, rights to acquire such interests such as by way of farmout and, if available, mineral and royalty interests.” The agreement also contained an AMI (Area of Mutual Interest) provision. All Interests acquired under the agreement were to be taken solely in Eagle Oil’s name.

If the Interests in the New Prospects were acquired within one year from the effective date of the New Prospects Agreement, Eagle Oil was to bear “all costs of acquisition for leasehold bonus, purchase consideration, third party landman title review and acquisition costs, out-of-pocket expenses incurred by those landmen, and other like or similar charges incurred in the acquisition of up to 25,000 net acres of Interests, not to exceed total maximum expenditures of $3,000,000.” The parties denominated those expenses “Eagle New [141]*141Prospect Expenses.” No charges were to be assessed by either party or its affiliates for its own efforts in the acquisition of Interests. However, either party was allowed to recover its “out-of-pocket third party expenditures under Section II” of the New Prospects Agreement. Those allowable expenses included “supplies and printing costs of prospect sales brochures and out-of-pocket travel expenses for mileage, meals and accommodations incurred in the prospect sale process.” Any such expenses incurred by TRO-X were denominated “TRO-X New Prospect Expenses.” Those types of expenses that were incurred by Eagle Oil were to be added to the “Eagle New Prospect Expenses” that we have described earlier.

Thus far in this opinion, we have set out the nature of the parties’ agreement regarding the acquisition of Interests. The real subject of the dispute in this lawsuit lies not in the acquisition of Interests but, rather, in the exercise of rights to retain a portion of those Interests once acquired. The dispute also involves the distribution of proceeds from the subsequent sale of some of the Interests.

Section II of the New Prospects Agreement is entitled “DISPOSITION OF INTERESTS AND DISTRIBUTION OF PROCEEDS.”2 The heading assigned by the parties to Section II.A. is: “Retention of Unpromoted Working Interests.” In that section, Eagle Oil and TRO-X provided as follows:

Subject to the terms of Article IV below, TRO-X may retain an unpromot-ed working interest of up to 40% (“TRO-X New Prospect Interest”), and Eagle may retain an unpromoted working interest of up to 60% (“Eagle New Prospect Interest”) in the New Prospects and Interests acquired therein under the terms of any exploration agreement and operating agreement negotiated with the working interest owners prior to initial drilling (“Prospect Agreements”). “Unpromoted” is defined in the South Haley Agreement.3 Unpromoted working interests shall' be chosen by the Parties prior to the sale of all working interests to third parties on a promoted basis. The working interest chosen by TRO-X is the “TRO-X New Prospect Participation Percentage”, and the working interest chosen by Eagle is the “Eagle New Prospect Participation Percentage”.

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Bluebook (online)
416 S.W.3d 137, 182 Oil & Gas Rep. 488, 2013 WL 5861496, 2013 Tex. App. LEXIS 13534, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eagle-oil-gas-co-v-tro-x-lp-texapp-2013.