March Exploration Company v. Lone Star Gas Company, a Division of ENSERCH Corporation

• Court: Court of Appeals of Texas
• Decided: August 12, 1992
• Docket: 03-91-00238-CV
• Status: Published

Opinion

March v. Lone Star IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,

AT AUSTIN



NO. 3-91-238-CV

MARCH EXPLORATION COMPANY,

APPELLANT

vs.

LONE STAR GAS COMPANY, A DIVISION OF ENSERCH CORPORATION,

APPELLEE

FROM THE DISTRICT COURT OF TOM GREEN COUNTY, 51ST JUDICIAL DISTRICT

NO. CV89-0359-A, HONORABLE DICK ALCALA, JUDGE PRESIDING

PER CURIAM

Appellant March Exploration Company appeals from a summary judgment rendered against it and in favor of appellee Lone Star Gas Company, a division of Enserch Corporation. We will affirm.

BACKGROUND

March Exploration Company succeeded Deminex Oil Company as "seller" under a gas purchase contract covering gas produced from the Anne McGowan #1 well in Tom Green County. The contract included a take-or-pay provision obligating Lone Star Gas Company, as "buyer," to pay for a minimum amount of gas at a specified price whether or not it actually took that amount. If Lone Star failed to purchase the minimum quantity within any accounting period, March could enforce the take-or-pay provision by giving notice to Lone Star within four months after the end of that period. Lone Star then had sixty days to pay the deficiency, but, until the end of the contract, Lone Star retained the right to make up any amount paid for. March, however, had to refund payment for any amount that could not be made up because of its inability to deliver gas.

Lone Star also agreed to construct additional pipeline in order to receive gas under the contract. In exchange, March promised to pay a contribution toward construction costs. The construction-contribution provision of the contract provided:

Seller recognizes and agrees that Buyer's pipeline system does not extend to the reasonable vicinity of the premises herein, and that it will be necessary for Buyer to construct and install additional facilities consisting of approximately fourteen thousand four hundred (14,400) feet of pipeline and appurtenant equipment in order to receive the subject matter hereof. As part of the consideration to Buyer hereunder, Seller agrees to pay Buyer, subject to the provisions of the following paragraph, the sum of One Hundred Thirty Five Thousand One Hundred Ninety Dollars ($135,190) as Seller's contribution in aid of construction of such facilities.

Buyer and Seller agree that Buyer may deduct such sum from payments made to Seller for gas delivered hereunder at the rate of fifty cents ($0.50) per MMBTU of gas delivered hereunder commencing with initial deliveries and continuing until Seller has so paid said One Hundred Thirty Five Thousand One Hundred Ninety Dollars ($135,190) sum. In the event Seller sells and delivers less than two hundred seventy thousand three hundred eighty (270,380) MMBTU during the first five (5) accounting periods of the term hereof, Seller shall pay to Buyer said One Hundred Thirty Five Thousand One Hundred Ninety Dollars ($135,190) sum, provided that Seller's obligation to pay said One Hundred Thirty Five Thousand One Hundred Ninety Dollars ($135,190) sum shall be reduced by the same proportion that said deliveries during the first five (5) accounting periods bears to the two hundred seventy thousand three hundred eighty (270,380) MMBTU.

Under the contract, March assumed the risk and responsibilities for operation of the well. Article IX provided:

Seller shall regulate the flow of gas into Buyer's pipeline at the point of delivery to the quantity desired by Buyer, from time to time, to meet the fluctuating conditions of Buyer's market, it being understood that Buyer may, from time to time, find it necessary to shut off entirely the flow of gas hereunder and that in such event, Buyer shall not be liable to Seller for the resulting effect thereof. . . .

Seller retains full and continuing responsibility for the care and condition of all wells and delivery line located on the premises and connected to Buyer's pipeline under this contract. Buyer does not assume nor shall it have any responsibility or obligation with respect to the care or condition of such wells or delivery line. . . .

The McGowan well produced gas only from June 1985 to February 1986 and in April 1986. March delivered no gas from the McGowan well to Lone Star between May 1986 and January 1989, except for a small amount in September 1986. March contends that the McGowan well's ability to produce gas was ruined by December 1985, as a result of having been shut in for long periods of time. The McGowan lease expired on November 19, 1987.

March sued Lone Star for (1) breach of the "take-or-pay" provision of the gas purchase contract; (2) consequential damages to the McGowan #1 well and its producing formation, and termination of the lease, all caused by Lone Star's breach of the gas purchase contract; and (3) "transporting, marketing and selling gas by criminal means." The trial court granted Lone Star's motion for partial summary judgment on the latter two claims. March does not attack the granting of this partial summary judgment on appeal.

After the granting of the partial summary judgment, March amended its pleading, abandoning the claims decided against it and seeking only take-or-pay damages. Lone Star counterclaimed to recover from March the balance due on the construction contribution. March answered Lone Star's counterclaim by general denial and asserted the affirmative defenses of lack of consideration and estoppel, both premised on Lone Star's own alleged breach of contract in failing to request and take substantial amounts of gas.

The trial court again granted a summary judgment, ordering that March take nothing on its take-or-pay claim and that Lone Star recover $13,784.73 on its counterclaim. March appeals from this second summary judgment, raising three points of error.

STANDARD OF REVIEW

In reviewing a summary judgment, this Court must determine whether the movant has shown that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. Ann. 166a(c) (Supp. 1992); Nixon v. Mr. Property Mgt. Co., Inc., 690 S.W.2d 546, 548 (Tex. 1985). In doing so, we take as true all evidence favoring the non-movants and indulge every inference and resolve every doubt in their favor. Id. at 548-49. When, as in this case, the summary-judgment order does not state the specific ground upon which it is granted, the appellant must show that each of the independent arguments in the motion is insufficient to support the order. Tilotta v. Goodall, 752 S.W.2d 160, 161 (Tex. App. 1988, writ denied); McCrea v. Cubilla Condominium Corp., 685 S.W.2d 755, 757 (Tex. App. 1985, writ ref'd n.r.e.).

MARCH'S TAKE-OR-PAY CLAIM

In addition to the take-or-pay clause, the gas purchase contract contains a proportionate reduction clause which provides:

Seller warrants that it owns the entire interest in the gas reserves underlying the premises covered hereby . . . and that Seller has the right to sell the same. Should Seller not own such interest, then in addition to any other remedies to which Buyer may be entitled, Buyer shall have no obligation to take or pay for any minimum volume of gas under this Contract.

March owned no interest in the McGowan lease and thus no interest in the gas reserves. Lone Star moved for summary judgment on March's take-or-pay claim on two grounds: (1) Lone Star had no take-or-pay obligation under the contract by virtue of the proportionate reduction clause because March owned no interest in the gas reserves, and (2) Lone Star owed no take-or-pay deficiency because March's inability to deliver gas constituted a breach of contract and obligated March to repay any deficiency payment.

In its second point of error, March complains only that the trial court erred in granting summary judgment for Lone Star on this claim on the first ground, that March is not an "owner." The trial court did not, however, specify in its order that this was the ground on which it granted summary judgment. Because the trial court could have granted Lone Star's motion for summary judgment on the second ground, which March does not specifically challenge, March's point of error presents nothing for review. See Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970); Thomson v. Norton, 604 S.W.2d 473, 476-77 (Tex. Civ. App. 1980, no writ); Rodriguez v. Morgan, 584 S.W.2d 558, 559 (Tex. Civ. App. 1979, writ ref'd n.r.e.).

We overrule March's second point of error.

LONE STAR'S COUNTERCLAIM

In its first and third points of error, March complains that the trial court erred in granting summary judgment for Lone Star on its counterclaim. In point of error one, March complains generally that genuine issues of material fact exist. In point of error three, March complains specifically that material fact issues exist regarding whether Lone Star's conduct caused March's inability to produce from the McGowan well.

The summary-judgment record supports Lone Star's allegations in its counterclaim that March owes the construction-contribution debt. Lone Star alleges that March contracted to contribute $135,190 toward the cost of constructing and installing a pipeline to the McGowan #1 well. The parties agreed that Lone Star would apply fifty cents per MMBTU of gas purchased under the contract toward the contribution amount. If March sold Lone Star less than 270,380 MMBTU's in the first five accounting periods, March agreed to pay the $135,190, less reduction for any recoupment. By letter agreement, Lone Star extended the recoupment period through May 1988. Lone Star attached copies of the gas purchase contract and the letter agreement as summary-judgment evidence.

Lone Star constructed the pipeline. The McGowan well last produced gas in September of 1986. Up to that time, Lone Star had purchased only 36,055.411 MMBTU's of gas under the contract. From these purchases, Lone Star applied $17,385.65 to March's construction obligation, leaving a balance of $117,162.30 outstanding. Lone Star offered the affidavit of Steve Cantrell, an Enserch accountant in Lone Star's Gas Purchase Department, to support these allegations.

Lone Star made demand for payment of the outstanding construction contribution but March did not pay. March admits that if anyone is liable for payment of the construction contribution under the contract, it is. To support these allegations Lone Star attached to its motion for summary judgment March's answers to requests for admissions and the deposition of John March, president of March Exploration.

March does not dispute that Lone Star established its claim as a matter of law. March argues only that material fact issues remain with respect to March's affirmative defenses.

Once Lone Star establishes its right to summary judgment as a matter of law, to avoid summary judgment March must come forward with evidence raising a fact issue on each element of at least one of its affirmative defenses. Nicholson v. Memorial Hosp. Sys., 722 S.W.2d 746, 749 (Tex. 1986); Seale v. Nichols, 505 S.W.2d 251, 254 (Tex. 1974). The fact issue must be raised by evidence which would be admissible upon the trial of the case. Finkelstein v. Southampton Civic Club, 675 S.W.2d 271 (Tex. App. 1984, writ ref'd n.r.e.).

March argues that its summary-judgment evidence establishes that the parties intended to satisfy the construction contribution primarily from production and that Lone Star's failure to request and take substantial quantities of gas represents a failure of consideration with respect to the construction-contribution provisions of the contract; that Lone Star's failure to request gas for significant periods estops Lone Star from claiming the entire contribution; that the fact that for a period of time Lone Star had no right-of-way to use the pipeline influenced Lone Star's decision to take only small amounts of gas; and finally, that Lone Star shut in the well more frequently than "from time to time," as permitted by the Article IX, constituting a further failure of consideration, which relieves March from liability for the construction contribution.

Despite these arguments, the summary-judgment record contains no proof precluding summary judgment. The contract clearly requires March to pay for the construction, even though Lone Star agreed to look first to production to recoup the debt. The debt is not contingent upon Lone Star's securing a right-of-way or purchasing substantial volumes of gas. In fact, the contract did not require Lone Star to purchase substantial volumes of gas or even to purchase any minimum quantity, but only to pay for a minimum quantity if not taken. Furthermore, March is not relieved of liability even if Lone Star's failure to take substantial volumes of gas occasioned the cessation of production. Under the contract, March assumed the risk and responsibility for the care and condition of the wells.

All of March's summary-judgment evidence relates to arguments attempting to establish that the parties contracted for something other than that which the contract's written terms provide. March relies primarily on two affidavits of John March, stating that the parties intended to satisfy the construction contribution primarily from production, and that "from time to time," as used in the contract, meant not more than two or three days. However, parol evidence is generally inadmissible to vary the unambiguous terms of a contract. R & P Enter. v. LaGuarta, Gavrel & Kirk, 596 S.W.2d 517, 519 (Tex. 1980); Heffron v. Pollard, 11 S.W. 165, 166-67 (Tex. 1889); Clark v. Dedina, 658 S.W.2d 293, 297 (Tex. App. 1983, writ dism'd); Mason v. Mid-Continent Supply Co., 374 S.W.2d 922 ( Tex. Civ. App. 1964, writ ref'd n.r.e.); Absent allegations of fraud, accident or mistake, parol evidence is not admissible to show the parties' intent where, as here, the contract is unambiguous. Tenneco Oil Co. v. Alvord, 416 S.W.2d 385 (Tex. 1967); Murphy v. Dilworth, 151 S.W.2d 1004 (Tex. 1941).

Although one of March's affirmative defenses is couched in terms of failure of consideration, it does not come within the exception that permits a party to introduce parol evidence to vary or contradict a recital of consideration in a written contract. See, e.g., Lakeway Co. v. Leon Howard, Inc., 585 S.W.2d 660, 662 (Tex. 1979); Time Ins. Agency v. Grimes, 613 S.W.2d 40, 42 (Tex. Civ. App. 1981, no writ). Here, the consideration is contractual. A party cannot alter the terms of the contract under the guise of proving failed consideration when the consideration is contractual. Lakeway Co., 585 S.W.2d at 662; D. Sullivan & Co. v. Schreiner, 222 S.W.314 (Tex. Civ. App. 1920, writ ref'd); Humble Oil & Ref. Co. v. Strauss, 243 S.W. 528, 533-34 (Tex. Civ. App. 1922, no writ).

We overrule March's first and third points of error and affirm the trial court's judgment.

[Before Chief Justice Carroll, Justices Aboussie and B. A. Smith]

Affirmed

Filed: August 12, 1992

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