Yucca Supply Company v. Continental Operating Company

• Court: Court of Appeals of Texas
• Decided: February 13, 2003
• Docket: 14-02-00085-CV
• Status: Published

Opinion

Affirmed and Opinion filed _____________, 2002

Affirmed and Memorandum Opinion filed February 13, 2003.                                                       

In The

Fourteenth Court of Appeals

____________

NO.  14-02-00085-CV

YUCCA SUPPLY COMPANY, Appellant

V.

CONTINENTAL OPERATING COMPANY, Appellee

On Appeal from the 157th District Court

Harris County, Texas

Trial Court Cause No.  98-32894

M E M O R A N D U M   O P I N I O N

Appellant Yucca Supply Company sued appellee Continental Operating Company for amounts due for drilling-mud supplies and services it provided.  Continental responded with a claim for damages allegedly caused by Yucca’s negligence in performing those services.  The jury found in favor of Continental, and judgment was entered awarding Continental approximately $60,000 in damages.  Because all dispositive issues are clearly settled in law, we issue this memorandum opinion.  See Tex. R. App. P. 47.1.  The facts of this appeal are known to the parties, so we do not repeat them here. 

Contract Claim

            In its first issue, Yucca alleges the trial court should have granted judgment n.o.v. in its favor on its breach of contract claim.  Judgment n.o.v. is proper only if no evidence supports the jury’s finding.  See Brown v. Bank of Galveston, N.A., 963 S.W.2d 511, 513 (Tex. 1998). 

            Continental presented testimony by participants and an expert that the standard practice in the oilfield service industry since the mid-1980s has been to submit bids with list prices, but discount those prices in a side letter that reflects current economic conditions.  Side letters from two of Yucca’s competitors for this job were admitted showing substantial discounts from their list prices.  Continental’s contracting representative testified he told Yucca representatives they would be hired only if their prices were competitive.  Yucca’s representative admitted he was aware of discounting in the industry, and was informed that his prices had to be competitive, but asserted he did not agree to discount list prices in this case.  Continental claimed it was not aware Yucca was using undiscounted list prices until after the well was completed.

There was conflicting evidence whether the parties agreed to Yucca’s list prices or to a discount on those prices.  Accordingly, the trial court properly submitted this issue to the jury.  We overrule Yucca’s objection.

Quantum Meruit

            Alternatively, Yucca asserts in its first issue the trial court should have rendered judgment in its favor on its quantum meruit claim.  On Continental’s motion, the trial court disregarded the jury’s quantum meruit finding in Yucca’s favor; this was proper only if the finding was either unsupported by the evidence or immaterial.  See Spencer v. Eagle Star Ins. Co. of America, 876 S.W.2d 154, 157 (Tex. 1994). 

            Continental argues the issue was immaterial because recovery in quantum meruit is unavailable if there is an express contract.  See Truly v. Austin, 744 S.W.2d 934, 936 (Tex. 1988).  When a valid agreement addresses a matter, recovery under an equitable theory (like quantum meruit) is unavailable.  Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000).  As was its duty, Continental requested an issue asking whether the parties had a valid agreement.  Id. at 685.  But at Yucca’s insistence (and over Continental’s objection), the following broad-form question was submitted to the jury:

Did Continental fail to comply with its agreement, if any, with Yucca?

An “agreement” means the bargain of the parties in fact, as found in their language or by implication from other circumstances, including course of dealing or usage of trade or course of performance.  An agreement may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such an agreement. 

If Yucca and Continental agreed to other essential terms but failed to agree on price, it is presumed a reasonable price was intended.  In considering whether the parties reached an agreement on price, you may consider what they said and did in light of the surrounding circumstances.  You may not consider the parties’ unexpressed thoughts or intentions.

Answer:    No  .

This question made quantum meruit immaterial: if the parties agreed to a price, that price would control; if they did not and a “reasonable price” was implied, recovery of the “reasonable value” through quantum meruit would be unnecessary and duplicative.

Here, the only dispute between the parties regarding their agreement concerned the contract price.  The instructions Yucca requested left the jury no choice but to find that a valid agreement existed—either at the price urged by one of the parties, or at “a reasonable price.”  Having requested an issue that required the jury (under the facts of this case) to find there was a contract, Yucca cannot now argue there was none.  We overrule the first issue.

Negligence

            In its sixth issue, Yucca challenges the legal and factual sufficiency to support the jury’s finding that it was negligent.  We apply the usual standards of review.  See Southwest Key Program, Inc. v. Gil-Perez, 81 S.W.3d 269, 274 (Tex. 2002) (legal sufficiency); Dow Chemical Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001) (factual sufficiency).

            The record shows Yucca assigned one mud engineer to the drill site, who accordingly was on the well all day every day, sleeping whenever feasible in a nearby trailer. The “near blow-out” that required the well to be shut in and Continental to incur repair costs occurred in the early morning hours when he was asleep.  For some reason, the mud monitors that should have warned of the impending danger failed to do so. 

There was conflicting testimony as to the cause of the accident, whether Yucca should have assigned more employees to the well, whether its engineer picked an inopportune time to rest, and whether he properly notified other workers that he was retiring and transferred his duties to them.  There was also factual and expert testimony that Yucca had primary responsibility for monitoring mud volume, and the failure to notice a dangerous increase in the level of mud in the surface pits caused the accident.  The jury found both parties negligent, assigning 45% of the fault to Continental and 55% to Yucca.  

We find this evidence was legally and factually sufficient to support the jury’s finding of negligence.  We overrule the sixth issue. 

Evidentiary Issues

            In its second issue, Yucca argues the trial court erred in admitting evidence of “customary discounts.”  Testimony regarding custom and usage in an industry is admissible when a contract’s terms are ambiguous.  Texas Gas Exploration Corp. v. Broughton Offshore Ltd. II, 790 S.W.2d 781, 785 (Tex. App.—Houston [14th Dist.]1990, no writ).  Here there was no signed contract between the parties.  Yucca argues that Continental accepted its list prices, but admitted it was told its prices had to be “competitive.”  Without extrinsic evidence or a standard industry reference, this term was ambiguous, and the trial court properly admitted evidence of what competitive prices were.  We overrule the second issue.

            In its third issue, Yucca argues the trial court erred in admitting evidence of its alleged profits.  In its alternative quantum meruit claim, Yucca was seeking the “reasonable value” of the work it performed.  Yucca does not explain why it is entitled to present evidence of a reasonable value but exclude any evidence of how much of that value represented profit.  We overrule the third issue.

            In its seventh issue, Yucca argues the trial court erred in failing to admit evidence that Continental “cooked up” its negligence counterclaim only after Yucca threatened to sue for breach.  The trial court admitted evidence that Continental asserted negligence only after the well was completed, and allowed Yucca to suggest during cross-examination that the idea of negligence was suggested to Continental’s expert by Continental’s lawyer.  Yucca points only to two letters the trial court excluded, both of which were sent by Continental’s lawyer in attempt to settle the case without litigation.  These were inadmissible.  See Tex. R. Evid. 408; Tatum v.  Progressive Polymers, Inc., 881 S.W.2d 835, 837 (Tex. App.—Tyler 1994, no writ).  We overrule the seventh issue.

Attorney’s Fees and Interest

            In its fourth and fifth issues, Yucca asserts the court erred in failing to award it attorney’s fees or interest.  But because Yucca recovered no damages, it was entitled to neither.  The fourth and fifth issues are overruled.

Cross-Issue

            Continental conditionally raises insufficiency of the evidence to support the jury finding as to the reasonable value of Yucca’s compensable work.  As we are affirming the judgment in favor of Continental, we need not reach this cross-issue and it is overruled.

            Appellant’s issues are overruled, and the judgment is affirmed.

                                                            /s/        Scott Brister

                                                                        Chief Justice

Judgment rendered and Memorandum Opinion filed February 13, 2003.

Panel consists of Chief Justice Brister and Justices Fowler and Edelman.