Mid Plains Reeves, Inc. v. Farmland Industries, Inc.

768 S.W.2d 318, 107 Oil & Gas Rep. 593, 1989 Tex. App. LEXIS 179, 1989 WL 7436
CourtCourt of Appeals of Texas
DecidedFebruary 1, 1989
Docket08-88-00230-CV
StatusPublished
Cited by15 cases

This text of 768 S.W.2d 318 (Mid Plains Reeves, Inc. v. Farmland Industries, Inc.) 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
Mid Plains Reeves, Inc. v. Farmland Industries, Inc., 768 S.W.2d 318, 107 Oil & Gas Rep. 593, 1989 Tex. App. LEXIS 179, 1989 WL 7436 (Tex. Ct. App. 1989).

Opinions

OPINION

OSBORN, Chief Justice.

This appeal is from a summary judgment denying recovery of damages in a suit involving a contract for the purchase of natural gas. We reverse and remand.

Farniland Industries, Inc., entered into a contract with Lone Star Gas Company in 1975, to provide up to fifty-five MMcf of natural gas per day. In 1986, it was providing only forty MMcf of gas and sought to obtain an additional fifteen MMcf of gas to sell under the 1975 contract. Farmland representatives contacted Mid Plains Reeves, Inc., to try to procure the additional gas which it could deliver to Lone Star at a gas processing plant in Sterling County.

Mid Plains procured the gas desired and the parties entered into a Gas Purchase Contract dated May 15, 1987. It provides in part:

Seller hereby commits and dedicates to the performance of this Contract the first 15 MMCF [sic] per day of gas production from casinghead gas made available from the Lands and Leases more fully shown on Exhibit “A” attached hereto, ....

By letter dated May 19, 1987, Farmland wrote to Mid Plains concerning the May 15 agreement to provide that:

Farmland’s performance under the captioned contract is dependent upon full and complete performance by Lone Star Gas Company under that certain residue contract dated August 29, 1975 between Farmland and Lone Star.
In the event that Lone Star does not perform in accordance with the terms and provisions of the August 29, 1975 contract, the rights and obligations under the captioned May 15, 1987 contract between the parties hereto, shall be suspended.

An officer of each of the companies signed their names at the bottom of the letter to indicate their approval.

By letter dated June 17, 1987, the president of Mid Plains wrote back to Farmland and said:

I have signed your letter dated May 19,1987 and Mid Plains understands that the above referenced contract is negated should Lone Star Gas Company refuse to accept any volume of gas from Farmland. However, should Lone Star accept fifteen MMcf per day or any lesser volume, then the rights of Mid Plains under the above referenced Gas Purchase Agreement will prevail.

An officer of Farmland signed to accept the terms of this letter on July 2, 1987.

When the additional fifteen MMcf of gas was supplied, Lone Star would not accept delivery. Mid Plains sued Farmland and Enerfin, Inc., who had purchased the Farmland operations and was selling gas to Lone Star. Mid Plains contends Farmland breached its gas purchase agreement and was guilty of fraud for misrepresentations it made about enforcing its agreement with Lone Star, and that Enerfin was liable for tortious interference with a business relationship in persuading Farmland to disregard its contractual obligation to purchase gas from Mid Plains. The summary judgment denied recovery to Mid Plains and it appeals.

In its first point of error, the Appellant urges the trial court erred in granting the motions for summary judgment because there were material fact issues as to the cause of action for breach of contract. All parties argue that the contract is unambiguous. They agree that the contract and supplemental letters must be read together and construed as one instrument. But, in doing so they arrive at totally different views as to their respective obligations.

First, Farmland says the letter of May 19, 1987, conditions its obligations to buy gas from Mid Plains “upon full and complete performance by Lone Star Gas Company” and that Lone Star did not agree to [321]*321full and complete performance, i.e., buying fifty-five MMcf of gas. Therefore, it claims it has no obligation to purchase gas from Mid Plains.

Second, Mid Plains says the letter of June 17, 1987, does let Farmland off the hook if Lone Star does not accept “any volume of gas from Farmland.” But, if Lone Star does accept any volume, the first fifteen MMcf per day must be gas supplied by Mid Plains to Farmland. Since Lone Star bought some gas, Mid Plains claims its contract should be enforced.

We must try to determine the attention of the parties from the language they used. Certainly, each contention finds support in the two letters signed in May and June. But, clearly their final writing in June does not condition the agreement upon Lone Star’s acceptance of “new gas” or “more than forty MMcf of gas” or “gas Farmland obtains from Mid Plains” but, it says the contract is negated if Lone Star should refuse to accept “any” gas from Farmland. Lone Star did not do that. The next sentence spells out a specific volume and says the agreement is enforceable if Lone Star takes all or part of fifteen MMcf per day.

Each of the letters states it is in reference to the May 15, 1987 contract. There is no question as to the meaning of the original contract. It provides for the sale by Mid Plains to Farmland of fifteen MMcf of gas per day. Undoubtedly, Farmland became concerned about buying gas that Lone Star might not take under its contract which provided for fifty-five MMcf of gas. Farmland then chose to modify the contract and make its performance subject to “full and complete performance by Lone Star....” Parties may modify a contract just as they originally make a contract. Rhoads Drilling Company v. Allred, 123 Tex. 229, 70 S.W.2d 576 (1934); Moser Company v. Awalt Industrial Properties, Inc., 584 S.W.2d 902 (Tex.Civ.App.— Amarillo 1979, no writ).

In this case, the May letter agreement was signed by both parties and no question is raised about consideration for the new agreement which limited Farmland’s obligation. But, that was not the end of the modifications. In the June letter to Farmland, the president of Mid Plains acknowledged signing the May 19 letter which he said would condition Farmland’s obligation if Lone Star refused to accept “any volume of gas....” The next sentence reflects another modification, this time of the “full and complete performance by Lone Star” to a new provision for performance of “15 MMcf per day or any lesser volume,.... ” Again, the parties were free to modify a prior modification and they did so when Farmland signed to accept the terms in the June letter. And again, no issue is raised as to consideration for this modification.

We conclude that the contract with the final modification is not ambiguous. The last modification supersedes and controls any prior conflicting provision and makes Farmland obligated to buy under its contract with Mid Plains if it sells any volume of gas to Lone Star. This result is consistent with the rule set forth in Willi-ston on Contracts, Third Edition, sec. 624 (1961), which says if the clauses in a contract present irreconcilable inconsistencies where the first clause is in general terms and the latter is particular, the latter clause controls. Here, the first letter spoke in general terms of full performance by Lone Star and the latter spoke of a specific fifteen MMcf of gas to be purchased by Lone Star. Point of Error No. One is sustained.

In its next point of error, Mid Plains asserts that there is also a fact issue as to its cause of action for fraud.

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Cite This Page — Counsel Stack

Bluebook (online)
768 S.W.2d 318, 107 Oil & Gas Rep. 593, 1989 Tex. App. LEXIS 179, 1989 WL 7436, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mid-plains-reeves-inc-v-farmland-industries-inc-texapp-1989.