Lively Exploration Co. v. Valero Transmission Co.

751 S.W.2d 649, 1988 WL 63114
CourtCourt of Appeals of Texas
DecidedJune 16, 1988
Docket04-87-00380-CV
StatusPublished
Cited by15 cases

This text of 751 S.W.2d 649 (Lively Exploration Co. v. Valero Transmission Co.) 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
Lively Exploration Co. v. Valero Transmission Co., 751 S.W.2d 649, 1988 WL 63114 (Tex. Ct. App. 1988).

Opinion

ON APPELLANT’S MOTION FOR REHEARING

CHAPA, Justice.

Appellant’s motion for rehearing is denied, however, the opinion of this Court dated March 31, 1988, is withdrawn, and the following opinion is substituted.

This is an appeal of part of a final judgment following a jury trial. The judgment arose from a suit filed by appellant Lively Exploration Company (Lively) against ap-pellee Valero Transmission Company (Vale-ro) for breach of a gas purchase contract. Lively alleged that Valero breached its obligations under the contract by failing to take delivery of and pay for the Daily Contract Quantity of natural gas during certain contract years or pay for such Daily Contract Quantity of natural gas, whether taken or not. In accordance with the findings of the jury, among other things, the judgment ordered that Lively take nothing on its claim for breach of the take-or-pay provisions of the contract. It is this part of the judgment which is sought to be reversed by this appeal. We affirm.

The issues before us are:

1) whether the court erred in admitting evidence of the Railroad Commission’s Gas Market Demand Rule;

2) whether the court erred in including an instruction on the Gas Market Demand Rule;

3) whether the court erred in its definition of the term “deliverability”;

4) whether the court’s instructions to Special Issue No. 2 were prejudicial comments on the weight of the evidence;

5) whether the court erred in conditionally submitting Special Issue No. 3;

6) whether there was no evidence to support the jury findings on the breach of contract;

7) whether there was insufficient evidence to support the jury findings on the breach of contract; and

8) whether the jury findings on the breach of contract were against the great weight and preponderance of the credible evidence.

In the first two points of error, Lively contends that the trial court erred in admitting evidence of the Texas Railroad Commission’s Gas Market Demand Rule and then including the said rule in the charge. Although Lively does not contend the evidence is irrelevant or immaterial, it argues that “the gas market demand rule does not affect the rights and obligations of the parties to the contract by relieving Valero of its obligation to pay for this minimum quantity of gas provided by the contract.”

Lively alleged that Valero breached that part of the contract which had a “take-or-pay” provision:

5.3 Subject to the other provisions hereof, Buyer agrees to purchase and pay for (or, if Buyer’s performance hereunder is not excused by other provisions of this agreement, pay for, if available, whether taken or not) during the days of each contract year of the term hereof a Daily Contract Quantity of gas from Seller’s Lands and Leases in the Contract Area equal to ninety percent (90%) of Seller’s daily Deliverability of gas hereunder....

*652 The obligations of Valero under the “take-or-pay” provision of the contract are clearly controlled by the “Daily Contract Quantity” and the “Deliverability” of the gas.

Under Article I of the contract and entitled “Definitions” we find the following:

(e) The term “Daily Contract Quantity” means the quantity of gas per day, averaged over each contract year, which Buyer is required to take from Seller hereunder at the point of delivery specified in this Agreement.
(j) The term “Deliverability” means that quantity of gas which Seller has available for delivery from the Lands and Leases to Buyer during each day, in conformity with the requirements of this Agreement, at a constant rate of flow, when Seller’s wells and facilities are not produced in excess of their maximum efficient rate of flow, but not exceeding the maximum (including overproduction) rate of flow permitted by the laws, rules and regulations of the Railroad Commission of Texas or other governmental regulatory agency having jurisdiction. Buyer agrees to make nominations, or to cooperate with Seller in the making of nominations, for well allow-ables (to be fixed or permitted by rules, regulations or orders of the Texas Railroad Commission) sufficient to cover the daily quantities which from time to time Buyer is entitled and elects to take hereunder up to the maximum quantity which in accordance with good engineering and gas production practice can be produced from Seller’s wells in the field. (Emphasis added)

Further, the contract includes a clause subjecting the agreement as follows:

AGREEMENT SUBJECT TO LAWS
13.1 This Agreement is made subject to all valid applicable federal and state laws or city ordinances, and to the orders, rules and regulations of any duly constituted federal or state regulatory body or authority having jurisdiction.

Evidence is admissible if it is “relevant and material; it must tend to prove or disprove some issue in the case.” Dallas Railway & Terminal Company v. Oehler, 156 Tex. 488, 296 S.W.2d 757, 759 (1956); Sims v. Dempsey-Tegler & Company, Inc., 487 S.W.2d 824, 827-28 (Tex.Civ.App.—San Antonio 1972, no writ). It is uncon-tradicted that the Texas Railroad Commission has regulatory jurisdiction over drilling, production, transportation, and use of natural gas in Texas. It is also uncontra-dicted that the Gas Market Demand Rule which was applicable to Lively and Valero, was promulgated by the Texas Railroad Commission as a tool to avoid “waste” by determining the overall quantity of natural gas which should be produced in Texas in a given month and to assure fairness in the proration between the different producers. Thus, the rule was relevant and material towards the issue of the quantity of gas which Lively had available for delivery, or in terms of the contract, Lively’s “daily Deliverability of gas.”

Since the application of the Gas Market Demand Rule tended to disprove that there was a breach of the “take-or-pay” provision, it was admissible. Dallas Railway & Terminal Company v. Oehler, 296 S.W.2d at 759.

Next, Lively does not contend that the application of the Gas Market Demand Rule to Lively and Valero in the charge was erroneous, but that the charge should not have included the rule because it did not relieve Valero of its contractual obligation. However, the real issue here is whether the rule was relevant and material to prove or disprove that there was a breach of the “take-or-pay” provision of the contract as alleged by Lively. Having concluded that the rule was relevant and material, we fail to see how its inclusion in the charge was harmful error. The first two points are overruled.

In the next two points of error, Lively complains of the court’s definition of “De-liverability.”

An appellant cannot complain that the court has adopted his definition in the charge. MacFadden Publications v. Wilson, 121 S.W.2d 430

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Bluebook (online)
751 S.W.2d 649, 1988 WL 63114, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lively-exploration-co-v-valero-transmission-co-texapp-1988.