jc-walter-iii-carole-walter-looke-jc-walter-jr-ltd-f-fox ( 2014 )

Appeal Dismissed, Petition for Writ of Mandamus Denied, and Opinion filed
January 30, 2014.
In The
Fourteenth Court of Appeals
NO. 14-12-00011-CV
J.C. WALTER, III, CAROLE WALTER LOOKE, J.C. WALTER, JR., LTD.,
F. FOX BENTON, III, MORENO ENERGY, INC., WILLIAM C. OEHMIG,
THE CAIN 1988 DESCENDANTS’ TRUST, MARY H. CAIN, MARY H.
CAIN MARITAL TRUST, ROBERT D. JOLLY, HOWARD CHAPMAN,
RUTH B. SMALLEY, ARTHUR L. SMALLEY, III, TOM E. SMALLEY,
BARBARA BETH FRANK SHARMAN TRUST, JANIS KAY FRANK
HENRY TRUST, AND MARGARET WEAVER, Appellants
V.
MARATHON OIL CORPORATION AND MARATHON E.G. LPG
LIMITED, Appellees
NO. 14-12-01123-CV
IN RE J.C. WALTER, III, CAROLE WALTER LOOKE, J.C. WALTER,
JR., LTD., F. FOX BENTON, III, MORENO ENERGY, INC., WILLIAM C.
OEHMIG, THE CAIN 1988 DESCENDANTS’ TRUST, MARY H. CAIN,
MARY H. CAIN MARITAL TRUST, ROBERT D. JOLLY, HOWARD
CHAPMAN, RUTH B. SMALLEY, ARTHUR L. SMALLEY, III, TOM E.
SMALLEY, BARBARA BETH FRANK SHARMAN TRUST, JANIS KAY
FRANK HENRY TRUST, AND MARGARET WEAVER, Relators
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Cause No. 2009-58805
OPINION
The central question presented by this case is: When one participant in a
business agrees to pay another using a formula, and some disputes about the
formula are resolved in an arbitration award confirmed by a court judgment, does
the court abuse its discretion by declining to interpret the award to resolve other
disputes about the formula that were not expressly addressed in the award? We
hold that the answer is no.
This original proceeding and appeal concern a dispute between the relators,
who are Limited Partners in the Alba Equatorial Guinea Partnership, L.P., and
Marathon E.G. LPG Limited (MEGLPG), the general partner of the Partnership.
The parties dispute the amounts due the Limited Partners as a result of the
Partnership’s investment in an oil and gas field off the coast of Equatorial Guinea.
The dispute was eventually arbitrated, and the trial court confirmed the arbitration
award in a final judgment.
More than a year later, believing MEGLPG was miscalculating the payments
due under the final judgment, the Limited Partners filed a motion asking the trial
court to enforce the judgment. The court denied the motion to enforce, and the
Limited Partners filed both an appeal and a petition for a writ of mandamus
challenging that denial. We conclude the trial court’s denial of the Limited
Partners’ motion to enforce is not an appealable final judgment or interlocutory
order, and we therefore dismiss the appeal. We further conclude the trial court did
not abuse its discretion when it denied the Limited Partners’ motion to enforce, and
2
we therefore deny their petition for writ of mandamus.
BACKGROUND
The Partnership was created in 1995 when the parties executed the
“Agreement of Limited Partnership of Alba Equatorial Guinea Partnership, L.P.”
(the AEGP Agreement). Through the Partnership, the Limited Partners possessed
an interest in the “Alba Project,” defined as “the gas processing plant proposed to
be constructed . . . to process the Gas Stream [produced from the Alba Field] to
separate propane and butane from such Gas Stream and to sell and export such
Products.”
The Alba Field operations evolved over time. An onshore gas processing
plant, referred to as Plant 3, was constructed to extract propane, butane, and
condensate from the Gas Stream. Over time, additional offshore wells were drilled
in the Alba Field and plans were made to construct an expanded gas processing
plant to handle the increased production. Marathon Oil Company eventually
acquired a controlling interest in the Alba Field operations, and its affiliate,
MEGLPG, became the general partner of the Partnership. The expanded gas
processing plant—known as Plant 4—was constructed adjacent to Plant 3, and
Plant 3 was taken out of service.
A. The parties submit their dispute to arbitration.
Under the AEGP Agreement, the Limited Partners are entitled to a portion of
the Available Alba Net Cash Flow after Payout is reached. Payout occurs when
the Discounted Alba Net Cash Flow (generated by selling the Products separated
from the Gas Stream) equals $800,000. MEGLPG asserted that the AEGP
Agreement did not include Plant 4. With Plant 3 out of service and Plant 4 outside
the scope of the AEGP Agreement, MEGP reasoned, Payout would never occur
3
and the Limited Partners would never receive any portion of the Available Alba
Net Cash Flow. The Limited Partners disagreed with MEGLPG’s analysis and
argued that Plant 4 was included within the scope of the AEGP Agreement and that
the Payout Date had occurred in the first quarter of 2008. This primary dispute led
to the arbitration at issue.1
As stated in the arbitration award, both sides sought declaratory judgments
from the arbitration panel. The Limited Partners sought a declaration (1) that the
Gas Stream, as used in the AEGP Agreement, included all gas from the Alba Field
processed at the Alba Project; (2) that the Alba Project included any gas processing
plant located in Equatorial Guinea owned or operated by the Partnership; (3) that
Products, as used in the AEGP Agreement, included condensate; and (4) if it did
not, the Limited Partners should not be burdened with the cost of separating
condensate from the Gas Stream because they did not receive any allocation of
revenue from that condensate. In response, MEGLPG sought a declaration (1) that
the Alba Project was limited to Plant 3; (2) that the Gas Stream was limited to a
specified volume of gas regardless of whether the Alba Project included only Plant
3 or encompassed both Plant 3 and Plant 4; and (3) that Products does not include
plant condensate but is instead limited to butane and propane.
In addition to resolving the primary dispute whether Plant 4 was within the
scope of the AEGP Agreement, the arbitration panel also was called upon to decide
subsidiary issues such as (1) the construction of defined terms in the AEGP
Agreement, including Alba Project, Gas Stream, and Products; (2) the
determination of when, if ever, the Payout Date under the AEGP Agreement would
1
In its arbitration award, the arbitration panel explained that “[t]he primary issue in this
case is whether the [AEGP Agreement] applies to all gas processed at the new LPG facility,
known as Plant 4, located at Punta Europa or whether the AEGP Agreement is limited only to the
old ‘Plant 3’ and/or limited to a specific volume of feedstock gas, i.e. 93.3 mmcf/d.”
4
occur; and (3) whether capital costs and certain specified categories of expenses
should be subtracted when calculating the Available Alba Net Cash Flow.2 In
addition, the Limited Partners argued during the arbitration that MEGLPG had
breached fiduciary duties it owed them, and that Marathon Oil was liable to them
under the theories of alter ego, agency, and single business enterprise.
The arbitration proceeding was lengthy, and much of the arbitration record
does not appear in our appellate record. During the arbitration, the panel asked the
Limited Partners’ expert, Dee Patterson, to prepare various Payout models that
included or excluded various items in the calculation formula. In its request, the
panel did not specifically mention condensate income taxes and whether they
should or should not be deducted in calculating the Payout date or Alba Net Cash
Flow after Payout. In response to the panel’s request, Patterson submitted ten
models, half of which excluded condensate from Products as MEGLPG argued,
while the other half included condensate within Products as the Limited Partners
argued. With respect to the five Payout models that excluded condensate from
Products, Patterson excluded condensate revenues and did not deduct condensate
income taxes.3 In the remaining five Payout models, Patterson included
condensate within the definition of Products, included condensate revenues, and
deducted condensate income taxes. MEGLPG’s expert agreed that Patterson’s
methodology was correct, but did not agree that particular items should be included
2
In addition to capital costs, the expense categories addressed by the arbitration panel
were: Upstream Costs, Compressor Costs, Utilities and Common Infrastructure Costs,
Dehydration Costs, and Condensate Processing Costs.
3
The Limited Partners contend that of Patterson’s five models or cases that excluded
condensate revenue, only one, the “Case 1 Model,” included those aspects ultimately embodied
in the panel’s arbitration award: (1) Plant 4 is included in the “Alba Project,” (2) “Products”
excludes condensate, (3) the disputed cost items, other than capitalized interest, may be charged
to the Limited Partners, and (4) the “Payout Date” occurred in the third quarter 2008. In its
award, however, the panel did not adopt—or even mention—Patterson’s Case 1 Model or state
that it relied on Patterson’s models generally in reaching its decision.
5
or excluded from the formula.
B. The panel issues its arbitration award and the Limited Partners
obtain a final judgment confirming the award.
In its arbitration award, the panel determined that the AEGP Agreement was
ambiguous.4 The panel agreed with the Limited Partners on the “central issue” and
determined that Plant 4 was part of the Alba Project. In the panel’s view,
accepting MEGLPG’s position that the Alba Project did not include Plant 4 would
render the “Limited Partners’ rights under the AEGP Agreement illusory,” a result
not permitted under Delaware law. The panel also agreed with the Limited
Partners that the Gas Stream, as defined in the AEGP Agreement, was not limited
in volume to the amount that was being produced at the time Plant 3 was
constructed. The panel agreed with MEGLPG, however, that Products did not
include condensate.5 The panel also found that Payout occurred in the third quarter
of 2008. The result of these determinations was that the Limited Partners had an
interest in the revenues from the propane and butane generated by Plant 4 but not
the condensate generated by Plant 4.
Having determined that Payout occurred in the third quarter of 2008, the
panel addressed the formula for calculating the Available Alba Net Cash Flow
after Payout. The AEGP Agreement defined this term to mean “all revenues from
the sale of Products . . . less all expenditures actually paid . . . for [certain specified
kinds of] Alba Project costs and expenses.” The dispute regarding this issue
4
The award observed that the AEGP Agreement “was not clearly written as to the rights
and obligations of the parties with respect to the scope of the Alba Project or payments due the
[Limited Partners] under the payout formula under the facts and circumstances as they developed
following the execution of the Agreement.”
5
In the arbitration award, the panel explained that the Limited Partners asked the panel
“to interpret the term ‘condensate’ and interpret the calculation of ‘payout’ under the Agreement
with respect to numerous field cost allocations.”
6
initially focused on condensate-related expenses. The Limited Partners argued that
if Products excluded condensate, they should not be charged for the portion of
Plant 4 operating expenses and capital costs allocated to separating condensate
from the Gas Stream. The panel rejected the Limited Partners’ argument, instead
deciding that “the operative provisions of the AEGP Agreement do not
contemplate an allocation of operating expenses and capital costs on the basis of
those costs and expenses that are attributable only to the separation of butane and
propane from the Gas Stream and those that are not.” As a result, the panel
decided that MEGLPG could deduct all of the Plant 4 operating expenses and
capital costs, with the exception of capitalized interest. The panel went on to
conclude that the Limited Partners’ share of the Available Alba Net Cash Flow
After Payout, beginning with the fourth quarter of 2008, would be “calculated
going forward using actual product proceeds realized under the terms of the AEGP
Agreement.”
The panel’s award stated that, as a result of the arbitration, the Agreement
“is at least somewhat clearer in the current factual context and the parties have
sufficient guidance to conduct their current operations.” The award also
recognized, however, that “disputes may occur in the future as the parties have an
interest in a significant natural resource and facilities that likely will warrant
operations for years to come.”
After the panel issued its award, the Limited Partners moved to confirm it in
the trial court. The trial court signed a Final Judgment Confirming Final Award on
November 9, 2009. The final judgment incorporated the arbitration award in its
entirety.
7
C. MEGLPG deducts condensate income taxes and other items when
calculating Available Alba Net Cash Flow after Payout.
In calculating the amount due the Limited Partners following the arbitration,
MEGLPG made two kinds of deductions that gave rise to the present case. First,
MEGLPG began charging the Limited Partners for condensate income taxes by
deducting them as part of the calculation of Available Alba Net Cash Flow. The
Limited Partners believed these deductions violated the final judgment because the
Payout calculation should not include any deduction for condensate income taxes.
Although both the Limited Partners and MEGLPG asserted that the final judgment
supported their respective positions, the final judgment did not expressly address
the treatment of income taxes on revenue generated from the sale of condensate.
In addition, the arbitration award confirmed by that judgment did not mention the
models prepared by Patterson, nor did it expressly address the treatment of income
taxes on the revenue from the sale of condensate either when calculating the
Payout date or in deciding the formula for calculating the Available Alba Net Cash
Flow after Payout.
Second, in its 2009 calculation of Available Alba Net Cash Flow after
Payout, MEGLPG charged the Limited Partners for certain non-condensate taxes,
royalties, and other obligations. The Limited Partners asserted that these
obligations had already been taken into account in determining the third quarter
2008 Payout date, which was calculated using the accrual method of accounting.
In response, MEGLPG argued that the final judgment required it to use the cash
method of accounting going forward to calculate the Available Alba Net Cash
Flow after Payout. Because the questioned charges had been paid in 2009,
MEGLPG maintained, they were properly included again in the 2009 calculation.
8
D. The Limited Partners file a motion to enforce the final judgment.
Following unsuccessful efforts to negotiate a resolution of these two
disputes, the Limited Partners filed a Motion to Enforce the Final Judgment in the
trial court. In their motion, the Limited Partners asked the trial court to compel
MEGLPG to change its payout calculation by removing the charge for condensate
income taxes. The Limited Partners asserted that the panel had adopted Patterson’s
Case 1 Model, which they argued did not include condensate revenue or deduct
condensate income taxes from the Payout calculation. In support of this
contention, the Limited Partners submitted an affidavit prepared by Patterson. In
his affidavit, which post-dated the arbitration, Patterson opined that his Case 1
Model was the only model submitted to the panel that encompassed the panel’s
decision that Products did not include condensate and did not deduct condensate
income taxes from revenues when calculating the Available Alba Net Cash Flow
after Payout.
The Limited Partners’ motion to enforce also asked the trial court to compel
MEGLPG to remove the charges for non-condensate taxes, royalties, and other
obligations that the Limited Partners believed had been double-charged. The trial
court denied the Motion to Enforce, and the Limited Partners filed both an appeal
and a petition for writ of mandamus challenging that denial.
JURISDICTION
Before reaching the merits of the Limited Partners’ arguments, we must
address MEGLPG’s contention that we lack jurisdiction to consider the Limited
Partners’ appeal because the trial court’s order denying their Motion to Enforce is
not an appealable final judgment. MEGLPG argues the appropriate vehicle for the
Limited Partners’ complaints is a petition for writ of mandamus. We agree with
MEGLPG.
9
Generally, an appeal may be taken only from a final judgment. Bally Total
Fitness Corp. v. Jackson, 53 S.W.3d 352, 352 (Tex. 2001); Royal Indep. Sch. Dist.
v. Ragsdale, 273 S.W.3d 759, 763 (Tex. App.—Houston [14th Dist.] 2008, no pet.)
(citing Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195 (Tex. 2001)). Various
statutes do authorize interlocutory appeals from limited categories of trial court
orders, e.g., Tex. Civ. Prac. & Rem. Code Ann. § 51.014 (West 2008), but Texas
courts construe these statutes strictly. Jackson, 53 S.W.3d at 355. The trial court’s
order denying the Limited Partners’ motion to enforce does not fall within any of
the statutory categories of appealable interlocutory orders.
Post-judgment orders made for the purpose of enforcing or carrying into
effect a prior judgment are not subject to appeal because they are not final
judgments. Wagner v. Warnasch, 295 S.W.2d 890, 893 (Tex. 1956); In re Doe,
397 S.W.3d 847, 849 (Tex. App.—Fort Worth 2013, orig. proceeding); Wall St.
Deli, Inc. v. Boston Old Colony Ins. Co., 110 S.W.3d 67, 69 (Tex. App.—Eastland
2003, no pet.); Katz v. Inglehart, No. B14-91-1376-CV, 1992 WL 56862, at *1
(Tex. App.—Houston [14th Dist.] March 26, 1992, writ denied) (not designated for
publication). Although some courts have recognized that certain limited classes of
post-judgment orders are appealable, the trial court’s order does not fall within any
of those classes.6 Because the trial court’s order denying the Limited Partners’
motion to enforce is not a final judgment or an interlocutory order made appealable
6
The Limited Partners cite several cases for the proposition that we have jurisdiction
over their appeal of the trial court’s order denying their motion to enforce. Because the cited
cases do not address facts similar to those before us, we conclude they do not control. See Cook
v. Stallcup, 170 S.W.3d 916, 919 (Tex. App.—Dallas 2005, no pet.) (appeal from post-judgment
order releasing funds from the registry of the court); Matz v. Bennion, 961 S.W.2d 445, 451–52
(Tex. App.—Houston [1st Dist.] 1997, writ denied) (appeal addressing classification of a post-
judgment order styled Judgment Nunc Pro Tunc); Greiner v. Jameson, 865 S.W.2d 493, 499–501
(Tex. App.—Dallas 1991, writ denied) (appeal from a sanctions order); Reynolds v. Harrison,
635 S.W2d 845, 846–47 (Tex. App.—Tyler 1982, writ ref’d n.r.e.) (appeal from post-judgment
contempt order).
10
by statute, we hold it is not appealable. Id. We therefore lack jurisdiction over the
Limited Partners’ appeal, which must be dismissed.
Mandamus provides a vehicle for appellate review in these circumstances,
however. Trial courts have an affirmative duty to enforce their judgments. In re
Crow-Billingsley Air Park, Ltd., 98 S.W.3d 178, 179 (Tex. 2003). Mandamus is an
extraordinary remedy available in limited circumstances to correct a clear abuse of
discretion or the violation of a duty imposed by law, provided the relator does not
have an adequate remedy by appeal. Id. A party is entitled to mandamus relief to
vacate an order that wrongly denies a prevailing party’s attempt to enforce an
unsuperseded judgment. Id. Because the Limited Partners allege the trial court
abused its discretion when it denied their motion to enforce the final judgment, we
hold we have jurisdiction to consider the Limited Partners’ petition for writ of
mandamus.
ANALYSIS
In their petition for writ of mandamus, the Limited Partners contend the trial
court abused its discretion when it denied their motion to enforce. Their arguments
begin with the above-cited principle that a trial court has an affirmative duty to
enforce its judgments. From that initial premise, the Limited Partners assert the
trial court abused its discretion by denying their motion to enforce because
MEGLPG violated the trial court’s final judgment in two ways: (1) by charging the
Limited Partners for condensate income taxes when calculating the Available Alba
Net Cash Flow after Payout; and (2) by allegedly double-charging the Limited
Partners for non-condensate taxes, royalties, and other costs. We address the
Limited Partners’ contentions in turn.
11
I. Standard of review
Mandamus relief is proper when the trial court abuses its discretion by
committing a clear error of law for which appeal is an inadequate remedy. In re
Ford Motor Co., 211 S.W.3d 295, 297–98 (Tex. 2006). Having already
determined that an appeal is not available to the Limited Partners, we focus only on
whether the trial court abused its discretion when it denied the Limited Partners’
motion to enforce the final judgment.
With respect to the resolution of factual issues committed to the trial court’s
discretion, the reviewing court may not substitute its judgment for that of the trial
court. In re Xeller, 6 S.W.3d 618, 623 (Tex. App.—Houston [14th Dist.] 1999,
orig. proceeding). Instead, the party seeking mandamus relief must establish that
the trial court could reasonably have reached only one decision yet did not do so.
In re USA Waste Management Resources, L.L.C., 387 S.W.3d 92, 95–96 (Tex.
App.—Houston [14th Dist.] 2012, orig. proceeding) (citing Johnson v. Fourth
Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985)).
A trial court has no discretion in determining what the law is or applying the
law to the facts. In re D. Wilson Constr. Co., 196 S.W.3d 774, 781 (Tex. 2006)
(orig. proceeding). A trial court abuses its discretion if it reaches a decision so
arbitrary and unreasonable as to constitute a clear and prejudicial error of law, or if
it clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt.,
L.P., 164 S.W.3d 379, 382 (Tex. 2005).
Whether a judgment is ambiguous is a question of law. Shanks v. Treadway,
110 S.W.3d 444, 447 (Tex. 2003). A judgment should be construed as a whole to
harmonize and give effect to the entire instrument. Id. If the judgment is
unambiguous, the court must give effect to the literal language used. Id. An
unambiguous judgment must be enforced without considering extrinsic evidence—
12
including the record—to determine its meaning. Gulf Ins. Co. v. Burns Motor,
Inc., 22 S.W.3d 417, 422 (Tex. 2000); Garza v. Phelps Dodge Refining Corp., 262
S.W.3d 514, 519 (Tex. App.—El Paso 2008, no pet.); Freightliner Corp. v. Motor
Vehicle Bd., 255 S.W.3d 356, 363 (Tex. App.—Austin 2008, pet. denied).
II. The Limited Partners have not established that the trial court abused its
discretion when it denied their motion to enforce the final judgment.
This original proceeding presents an unusual situation. The arbitration
award confirmed by the final judgment does not mention condensate income taxes
at all, yet all parties contend that it unambiguously answers the question whether
condensate income taxes should be deducted from revenues in calculating the
Available Alba Net Cash Flow after Payout. The parties do not agree, however, on
how the arbitration panel answered this question. As explained below, we
conclude that the arbitration panel did not answer the question.
In their first issue, the Limited Partners contend the trial court abused its
discretion by denying their motion to enforce the final judgment because the panel
expressly found that condensate was not a Product, and it impliedly found that
MEGLPG could not charge them for condensate income taxes. The Limited
Partners make a multi-tiered argument to support this contention. First, they point
out that the panel was asked to determine when, or if, Payout would occur under
the terms of the AEGP Agreement. The panel found Payout occurred in the third
quarter of 2008. According to the Limited Partners, the record shows that the only
way the panel could have reached this result is by impliedly adopting the Case 1
Model of their expert Patterson, which they allege excluded condensate income
taxes in calculating the Payout Date. Thus, the Limited Partners conclude the
panel impliedly found that MEGLPG could not deduct condensate income taxes
when calculating the Available Alba Net Cash Flow after Payout, and the principle
13
of collateral estoppel precludes re-litigating this issue. Because it is undisputed
that MEGLPG did deduct condensate income taxes when calculating the Available
Alba Net Cash Flow after Payout, the Limited Partners assert that it violated the
judgment in doing so, and the trial court therefore abused its discretion by denying
their motion to enforce.
In response, MEGLPG contends the trial court did not abuse its discretion
when it denied the Limited Partners’ motion to enforce because the panel impliedly
found that condensate income taxes should be deducted when calculating the
Available Alba Net Cash Flow after Payout. According to MEGLPG, the panel
made this implied finding when it repeatedly rejected the Limited Partners’
position that they did not receive the benefit of condensate revenue, so they should
not be burdened with any costs associated with separating condensate from the Gas
Stream. MEGLPG concludes that if the trial court had granted the motion to
enforce, it would have abused its discretion because revisiting this issue would
materially change the final judgment and grant the Limited Partners relief denied
by the Mother Hubbard language in the judgment. In MEGLPG’s view, res
judicata bars the Limited Partners from obtaining any relief with respect to any
other issues relating to the construction of the provisions of the AEGP Agreement
at issue in the arbitration.
A. The award and judgment are not ambiguous.
We begin by noting that we agree with the parties that the final judgment—
which incorporates the arbitration award—is unambiguous. Because the judgment
is unambiguous, we may not consult the underlying arbitration record to determine
whether the trial court abused its discretion in denying the Limited Partners’
14
motion to enforce.7 Instead, we must give effect to the judgment’s literal language,
which we discuss next. Gulf Ins. Co., 22 S.W.3d at 422. Accordingly, we do not
consider the excerpts from the arbitration record or the post-arbitration affidavit of
the Limited Partners’ expert. Id.
B. The award and judgment do not address the issue of MEGLPG
charging the Limited Partners for condensate income taxes.
Considering the language of the judgment and award, we hold the trial court
did not abuse its discretion when it denied the Limited Partners’ motion to enforce.
The award does not even mention—much less resolve—the question whether
condensate income taxes should be subtracted from revenues in calculating the
Available Alba Net Cash Flow after Payout.
The award explicitly states the issues in dispute and before the panel for
resolution in the arbitration. The parties disagreed about many things, including:
whether Plant 4 was part of the Alba Project; whether Payout would ever occur
and, if so, when; and whether certain specific costs and expenses should be
subtracted under subsections (w) and (x) of the definition of Available Alba Net
Cash Flow after Payout. The award identifies the contested costs as upstream
costs, capitalized interest, compressor costs, utilities and common infrastructure
costs, dehydration costs, and condensate processing costs. The panel did not
include condensate income taxes—which fall under subsection (u) of the
definition—in this list of contested items. This omission is not surprising for two
reasons: (1) as the arbitration award makes clear, MEGLPG’s position in the
arbitration was that Payout would never occur; and (2) as a result of that position,
7
Even if we could consult the record, because it is incomplete, it does not support the
Limited Partners’ contention that the trial court clearly abused its discretion when it denied their
motion to enforce. See London v. London, 94 S.W.3d 139, 143 (Tex. App.—Houston [14th
Dist.] 2002, no pet.) (Absent “a complete reporter’s record on appeal, the court of appeals must
presume the omitted portions are relevant and support the trial court’s judgment.”).
15
MEGLPG offered no calculations of the Available Alba Net Cash Flow after
Payout until after the arbitration.8
After laying out the disputed issues, the panel addressed each of the
challenged costs and decided that, with the exception of capitalized interest, each
cost should be deducted from revenues when calculating the Available Alba Net
Cash Flow after Payout. Having decided that the Alba Project included Plant 4 and
that all of the contested costs except capitalized interest should be deducted from
revenues when calculating the Available Alba Net Cash Flow after Payout, the
panel found that Payout occurred in the third quarter of 2008.9 In reaching these
decisions, the panel said nothing about the treatment of condensate income taxes.
Instead, the panel understood that its award was not intended to settle the meaning
of the AEGP Agreement once and for all. The panel observed that its
interpretation of certain key terms had made the ambiguous AEGP Agreement “at
least somewhat clearer in the current factual context,” but it recognized that
“[d]isputes may occur in the future as the parties have an interest in a significant
natural resource that likely will warrant operations for years to come.”
Both the Limited Partners and MEGLPG contend that the panel nevertheless
made an implied finding about how condensate income taxes should be treated, so
principles of preclusion dictated how the trial court should rule on the motion to
enforce. We disagree.
8
The arbitration award establishes that during the arbitration, MEGLPG did recognize
that if the panel decided that the Alba Project included Plant 4, Payout would occur sometime in
2008. Thus, once the panel decided Plant 4 was part of the Alba Project, the issue became when
in 2008 the Payout date occurred.
9
One of the three arbitrators dissented from this finding, explaining that he would have
excluded compressor costs and found that payout occurred in the first quarter of 2008.
16
The Limited Partners argue the arbitration record shows that condensate
income taxes must have been excluded in calculating the Payout date, and
collateral estoppel precluded the re-litigation of this issue. As explained above,
however, we may not consider the arbitration record because the award and
judgment are unambiguous. For its part, MEGLPG relies on the arbitrators’
findings that condensate-related costs should be deducted under subsection (w) of
the definition, contending this means condensate income taxes should likewise be
deducted. But condensate income taxes are addressed in subsection (u) of the
definition, and the arbitrators never mentioned that subsection. MEGLPG also
argues that the Limited Partners’ claim for exclusion of condensate income taxes
was denied by the Mother Hubbard language in the arbitration award, so res
judicata barred them from obtaining any relief. The arbitration award does not
indicate, however, that a claim regarding the treatment of condensate income taxes
was before the panel.10 Because the treatment of condensate income taxes was not
disputed in or resolved by the arbitration, we reject the parties’ arguments that res
judicata or collateral estoppel dictated the outcome of the motion to enforce.11
10
The arbitration provision of the AEGP Agreement applies to disputes “relating to the
computation of the Alba Net Cash Flow Before Payout or the Alba Net Cash Flow After Payout
for any Calendar Quarter” that have gone through an audit, objection, and negotiation procedure.
The challenged computations for the quarters that are the subject of the Limited Partners’ motion
to enforce were provided after the panel issued its award.
11
See Zea v. Valley Feed & Supply, Inc., 354 S.W.3d 873, 877 (Tex. App.—El Paso
2011, pet. dism’d) (“If an issue was not actually decided in a prior arbitration proceeding or if its
resolution was not necessary to the arbitration award, its litigation in a subsequent proceeding is
not barred by collateral estoppel.”); Acker v. City of Huntsville, 787 S.W.2d 79, 81 (Tex. App.—
Houston [14th Dist.] 1990, no writ) (“The appropriate question [in addressing collateral estoppel]
is whether the issue was actually recognized by the parties as important and by the trier of fact in
the first action as necessary to the first judgment.” (citing Restatement (Second) of Judgments
§ 27 cmt. j (1980)); see also Welch v. Hrabar, 110 S.W.3d 601, 606–07 (Tex. App.—Houston
[14th Dist.] 2003, pet. denied) (stating the elements of res judicata and collateral estoppel);
Samedan Oil Corp. v. Louis Dreyfus Natural Gas Corp., 52 S.W.3d 788, 794 (Tex. App.—
Eastland 2001, pet. denied) (“Res judicata does not apply to future disputes between the parties
involving different questions.”).
17
In sum, the unambiguous arbitration award confirmed in the final judgment
did not expressly address the question whether MEGLPG should deduct
condensate income taxes from revenues when calculating the Available Alba Net
Cash Flow after Payout. Accordingly, we hold that the trial court did not clearly
abuse its discretion when it denied the Limited Partners’ motion to enforce seeking
to stop such deductions. For the same reasons, we reject MEGLPG’s contention
that the award and judgment decided that condensate income taxes should be
deducted when calculating the Available Alba Net Cash Flow after Payout. We
overrule the Limited Partners’ first issue.
C. The award and judgment do not address the alleged double-
counting of certain expenses because that dispute had not arisen
at the time of the arbitration.
The Limited Partners begin their second issue with two undisputed facts: (1)
the Partnership used the accrual method of accounting prior to the third quarter
2008 Payout date; and (2) the arbitration award ordered that the Available Alba
Net Cash Flow after Payout be calculated quarterly on a cash basis, using proceeds
actually realized and expenditures actually paid. The Limited Partners assert that
MEGLPG violated the award and judgment by double-counting expenditures: in
calculating the second quarter 2009 Available Alba Net Cash Flow, MEGLPG
charged them for taxes and other costs that had been accrued previously in 2008.12
Given this asserted violation, the Limited Partners contend that the trial court
abused its discretion when it denied their motion to enforce.
MEGLPG does not dispute that it charged the Limited Partners in the second
quarter of 2009 for taxes and other costs that had already been accrued in 2008.
Instead, MEGLPG argues that the award required it to include all taxes and
12
All parties admit this situation is a one-time event due to the transition from the accrual
method to the cash method of accounting.
18
expenses actually paid during the relevant quarter in calculating Available Alba
Net Cash Flow after Payout, and the award made no allowance for expenses that
were previously accrued. MEGLPG concludes that any departure from the
mandated cash method of accounting would violate the award and judgment, so the
trial court correctly denied the Limited Partners’ motion to enforce.
We agree with MEGLPG that the trial court did not abuse its discretion
when it denied the Limited Partners’ motion to enforce on the issue of double-
counting, but we do so for a reason different from that suggested by MEGLPG.
The final arbitration award was issued on June 1, 2009. The alleged double-
counting problem did not arise until July 2009, when MEGLPG provided the
second quarter 2009 Available Alba Net Cash Flow calculations to the Limited
Partners. Because MEGLPG had not made the second quarter 2009 Available
Alba Net Cash Flow calculations at the time of the arbitration, no dispute could
have arisen over MEGLPG’s handling of the transition period accounting. Thus,
the arbitration could not have addressed or resolved the issue.
Because the arbitration did not address the double-counting allegation, the
trial court did not clearly abuse its discretion when it denied the Limited Partners’
motion to enforce based on the alleged double-counting.13 We overrule the
Limited Partners’ second issue.14
13
See Zea, 354 S.W.3d at 877 (stating that an arbitration award is conclusive on the
parties only on those matters of fact and law submitted to the arbitrators); see also Peacock v.
Wave Tec Pools, Inc., 107 S.W.3d 631, 637 (Tex. App.—Waco 2003, no pet.) (observing that the
res judicata effect of a judgment confirming an arbitration award that contemplates future acts
would not reach those future acts); Samedan Oil Corp., 52 S.W.3d at 794 (“Res judicata does not
apply to future disputes between the parties involving different questions.”).
14
MEGLPG also argues that the Limited Partners accepted benefits under the award and
failed to seek clarification from the arbitrators, so they may not challenge the award’s treatment
of condensate income taxes or its choice of cash accounting. These arguments fail because the
arbitration award confirmed by the final judgment did not decide how condensate income taxes
should be treated or how double-counting should be handled in transitioning to cash accounting.
19
III. MEGLPG has not established that it is entitled to sanctions.
In its brief, MEGLPG urges this Court to sanction the Limited Partners
under Texas Rule of Appellate Procedure 52.11 for two reasons. First, MEGLPG
contends the Limited Partners’ petition for writ of mandamus is groundless
because the Limited Partners were attempting to re-litigate matters MEGLPG
believes were previously decided in the arbitration and confirmed in the final
judgment. Second, MEGLPG asserts the Limited Partners flagrantly ignored the
proper standard of review by allegedly asking this Court to conduct a de novo
review of the arbitration award itself.
Rule 52.11 provides that a court may impose just sanctions on a party or
attorney who is not acting in good faith as indicated by, among other things: (1)
filing a petition that is clearly groundless; (2) grossly misstating or omitting
obviously important and material facts in the petition; or (3) filing an appendix that
is clearly misleading due to the omission of important and material evidence or
documents. Tex. R. App. P. 52.11. When deciding a motion for sanctions, we
exercise the discretion afforded by Rule 52.11 with prudence and caution and only
after careful deliberation. In re Lerma, 144 S.W.3d 21, 26 (Tex. App.—El Paso
2004, orig. proceeding).
We have already determined that the issues raised by the Limited Partners in
their petition for writ of mandamus were not decided in the arbitration. In
addition, the Limited Partners have not asked this Court to conduct an improper de
novo review of the underlying arbitration proceeding and award. Rather, the
Limited Partners’ brief refers to de novo review in the context of challenging the
trial court’s resolution of legal questions. Therefore, we conclude MEGLPG has
not established any basis for sanctions under Rule 52.11.
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CONCLUSION
Because the trial court’s order denying the Limited Partners’ motion to
enforce is not an appealable final judgment or interlocutory order, we dismiss the
Limited Partners’ appeal. In addition, the trial court did not abuse its discretion
when it denied the Limited Partners’ motion to enforce, so we deny their petition
for writ of mandamus. Finally, we deny MEGLPG’s motion for sanctions.
/s/ J. Brett Busby
Justice
Panel consists of Justices Boyce, Jamison, and Busby.
21