Harriet Lesikar v. EOG Resources, Inc. ( 2007 )

NO. 07-06-0285-CV

IN THE COURT OF APPEALS

FOR THE SEVENTH DISTRICT OF TEXAS

AT AMARILLO

PANEL B

SEPTEMBER 28, 2007 ______________________________

HARRIET LESIKAR,

Appellant

v.

EOG RESOURCES, INC.,

Appellee

_________________________________

FROM THE 188^TH DISTRICT COURT OF GREGG COUNTY;

NO. 2003-2305-A; HON. DAVID BRABHAM, PRESIDING _______________________________

Opinion _______________________________

Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.

Before us is an appeal involving a written Rule 11 settlement agreement. After the parties executed the document, the trial court attempted to enforce what it believed to be its terms, but in doing so exceeded the scope of the accord, said Harriet Lesikar. EOG Resources, Inc. disagreed. We reverse and remand the cause.

Background

The suit involved a mineral interest Lesikar inherited and her attempt to have EOG acknowledge its extent. Also sought were damages reflecting the deficiencies in money due her for gas taken under one or more leases encumbering the property. Upon joining issue, the litigants executed the aforementioned Rule 11 agreement purporting to settle the matter. It consisted of the following terms:

1) EOG Resources, Inc. . . . will pay $22,500.00 in full and final settlement

of any and all claims or allegations brought or which could have been brought by your client, Harriet Lesikar regarding the leases made the basis of her lawsuit;

2) EOG will transfer to Harriet Lesikar an additional 0.0063819 working interest and 0.00518475 net revenue interest on the Lee B Gas Unit;

3) Harriet Lesikar will immediately file a Motion to Dismiss With Prejudice the claims lawsuit filed against EOG; and

4) both parties will execute the necessary documentation, such as stipulation of interest, releases, etc., in order to finalize the dispute.

Though dated August 18, 2005, the letter agreement was file-marked by the trial court clerk on September 16, 2005. Thereafter, cross motions for summary judgment were filed. Each litigant sought to enforce the agreement as written, but neither could agree upon its scope. Lesikar thought it only settled claims that had matured at the time the document became effective and that the possibility of having to recoup future, and as yet unmatured, overcharges was omitted. EOG believed it resolved all claims of Lesikar, both those existing and those to accrue in the future.

Upon hearing the cross motions, the trial court granted that of EOG. Thus, it ordered that 1) "EOG . . . pay into the Registry of the Court . . . $22,500 in full and final settlement of any and all claims or allegations brought or which could have been brought by . . . Lesikar regarding the leases . . .," 2) EOG . . . effect a transfer to . . . Lesikar . . . of an additional 0.0063819 working interest and 0.00518475 net revenue interest on the Lee B Gas Unit . . .," and 3) the conveyance become effective upon Lesikar's execution of "a. [s]tipulation of interest; b. COPAS or other document indicating an agreed lease overhead charge; and c. [o]ther necessary documents finalizing the parties' dispute."

Issues

The scope of the Rule 11 agreement underlies the entire controversy before us. We construe such agreements by attempting to garner the parties' intention through the words used, the surrounding circumstances from which the agreement arose, the state of and allegations in the pleadings, and the attitude of the parties with respect to the issues. Sitaram v. Aetna U.S. Healthcare of North Texas, Inc., 152 S.W.3d 817, 824 (Tex. App.-Texarkana 2004, no pet.); Herschbach v. Corpus Christi, 883 S.W.2d 720, 734 (Tex. App.-Corpus Christi 1994, writ denied). With this said, we turn to the agreement and circumstances of record.

Per its terms, the $22,500 payment was to be made in full and final settlement of "any and all claims or allegations brought or which could have been brought by your client . . . regarding the leases made the basis of her lawsuit." The claims of Lesikar actually brought were not only of effort to have EOG recognize the extent of her interest in the property but also of effort to recoup "charges made . . . against the wells in question appear[ing] to be unreasonable and improperly charged against the wells." So too did she seek damages purportedly resulting from "overcharging for services." As can be seen, these particular allegations refer to past, as opposed to future, charges against the wells.

Moreover, we cannot ignore the obvious circumstance that the economic or business relationship between Lesikar and EOG was to be ongoing, so long as the mineral leases remained in existence. Not only was this circumstance existent when the agreement was executed, but also it differs from situations wherein a settlement arises from attempts to end a business relationship. The latter contemplates a sense of finality between the parties to the accord. The former does not. And, given that the relationship was to continue, our adopting EOG's interpretation of the Rule 11 document would effectively preclude Lesikar from complaining about any omissions, errors or the like committed by EOG down the road. In effect, EOG would have a license to act with impunity viz the charges it makes against Lesikar's interest.

So too do we recognize that when obligations are ongoing (such as the duty to make periodic payments of money), claims for their breach normally do not accrue until default occurs. See Slusser v. Union Bankers Ins. Co., 72 S.W.3d 713, 717 (Tex. App.-Eastland 2002, no pet.) (stating that when a duty exists to make periodic payments, a separate cause of action arises for each missed payment). And, without default, there is no claim. This is of import when considered against the framework of the Rule 11 agreement at bar. Again, the $22,500 was payment to resolve "allegations brought or which could have been

brought." (Emphasis added). Claims that have yet to accrue when the settlement was reached because default had yet to occur could not have been brought in the lawsuit. Logic and rules of jurisdiction dictate that one cannot sue for damages arising from conduct that has never occurred. And while parties can release unknown claims and damages that arise in the future, Keck, Mahin & Cate v. National Fire Union Ins. Co., 20 S.W.3d 692, 698 (Tex. 2000), we hesitate to read such an expansive intent into a document lacking words expressly indicative of such an intent and contemplating an ongoing business relationship.

In short, that Lesikar was attempting to recover for overcharges that had been assessed, that the business relationship between her and EOG was ongoing, and that claims normally cannot be prosecuted until default occurs lead us to hold that EOG was not insulated from suits regarding overcharges or misconduct occurring after the Rule 11 agreement at issue was executed. To the extent that the trial court held otherwise, it erred. So too did it err if by requiring Lesikar to sign a "COPAS or other document indicating an agreed lease overhead charge," it sought to effectuate such a release. Yet, therein lies another problem for neither the "COPAS or other document" mentioned are part of the record before us. ⁽¹⁾ Given that, we know nothing of their terms or effect. Nor do we know whether their execution was "necessary . . . in order to finalize the dispute" given the absence of evidence on the subject. Again, both EOG and Lesikar agreed to execute only those documents deemed "necessary" to end the existing controversy. So, without knowing the terms of the "COPAS or other document" and their impact on the dispute, we can hardly say that EOG satisfied its summary judgment burden of proving, as a matter of law, that their execution was necessary. Nor can we say that their execution was unnecessary. Simply put, the issue remains an open question.

Accordingly, we reverse the final judgment of the trial court and remand the cause for further proceedings.

. Brian Quinn

Chief Justice

1. A COPAS does appear in the clerk's record, but it does not appear to be the document that EOG is requesting Lesikar execute. A COPAS is also included in the appendix to EOG's brief. However, documents attached to a brief which are not a part of the official appellate record may not be considered by the court. Randle v. Wilson, 26 S.W.3d 513, 515 n.1 (Tex. App.-Amarillo 2000, no pet.).

cable to each subsequent debt.

Indeed, to adopt the proposition of S & J would be to run afoul of Reagan and Hockley County. This is so because both Reagan and Hockley County can be read as holding that usury is determined by testing the interest charged or levied against the maximum allowed by statute at the time the debt was created. And, to the extent that the debts upon which American sued at bar were created long after the operating agreement was executed, the maximum interest rate allowed by statute when they were created (as opposed to the time when the operating agreement was executed) would control, according to Reagan and Hockley County. Finally, since the maximum rate, see Tex. Rev. Civ. Stat. Ann. 5069-1.04(b)(1) (Vernon 1987), repealed by Act of May 24, 1997, 75th Leg., R.S., ch. 1008, § 6(a), 1997 Tex. Gen. Laws 3091, 3602 (now found at Tex. Fin. Code Ann. §303.305 (Vernon Supp. 2001)) (designating 18% as the maximum legal interest rate) exceeded the 12% charged by American, the latter did not engage in usury.

Nor can it be said that American committed usury when it effectively compounded the 12% per annum mentioned in the operating agreement by charging interest on a monthly basis. This is so because the parties agreed that interest was to be assessed on a monthly basis. And, since the parties so agreed, American was entitled to compound the interest due, according to Texon Energy Corp. v. Dow Chemical Co., 733 S.W.2d 328, 331 (Tex. App.--Houston [14th Dist.] 1987, writ ref'd n.r.e.). In Texon, the court was asked to decide whether a contractual provision identical to that at bar permitted the compounding of interest on a monthly basis. The court held that it did. Id. at 331. So, given the holding in Texon, we conclude that the compound interest levied at bar was not usurious.

4. Award of Allegedly Uncontroverted Charges

Next, S & J asserts that the trial court erred in entering an interlocutory summary judgment awarding American $34,241.31. ⁽¹⁾ The latter, as urged by American in its motion for summary judgment, was allegedly composed of the uncontested lease operating expenses due by S & J. According to American, the sum was derived by deducting the expenses which S & J disputed from the entire amount of expenses American believed were due it.

In urging that the trial court erred in granting the summary judgment , S & J posited various contentions. Only one need be addressed here. It concerns the failure of American to attach to the affidavit of Carroll Beaman, president and sole-shareholder of American, documents to which he alluded in his affidavit and on which he relied in calculating the supposedly uncontested sum. Furthermore, these documents consisted of excerpts from the deposition of Richard Stowers, a principal of S & J, and joint interest billings. The former contain the "operating charges specifically identified [in the deposition of S & J's representative] . . . as being contested . . .," alleged Beaman. And, because they were not attached to the affidavit, the trial court was "unable to determine the basis for Beaman's conclusions," concluded S & J. We agree.

Rule 166a(f) of the Texas Rules of Civil Procedure requires, among other things, that an affiant attach to his affidavit "sworn or certified copies of all papers or parts thereof referred to in [the] affidavit . . . ." Rodriquez v. Texas Farmers Ins. Co., 903 S.W.2d 499, 506 (Tex. App.--Amarillo 1995, writ denied). The failure to do so constitutes "a fatal defect in the substance of the affidavit . . . ." Id. This is so because, at the very least, without the documents the court or the opposing party may not be able to assess the accuracy of the facts or opinions offered by the affiant. And, that the defect was not made known to the trial court matters not for it may be raised on appeal for the first time. Id.

Here, the Stowers' deposition excerpts which Beaman mentioned in his affidavit formed the basis of his opinion regarding the uncontested charges allegedly due. Yet, neither the excerpts nor the deposition itself were attached to the motion. ⁽²⁾ See E.B. Smith Co. v. U.S. Fidelity and Guar. Co., 850 S.W.2d 621, 624 (Tex. App. - Corpus Christi 1993, writ denied) (holding that the deposition or deposition excerpts must be provided to the trial court for consideration at time summary judgment motion is presented). Nor does the appellate record before us reveal that the deposition was ever filed of record. Similarly omitted from the affidavit were express references to where in the deposition these supposedly disputed charges appeared. ⁽³⁾ Under these circumstances, American failed to comply with Rule 166a(f) by omitting to attach a verified copy of the deposition excerpts to its affidavit. Without them, "there [is] no way to determine which portion of the document[] the [interested witness] relied upon in expressing his opinion." Natural Gas Clearinghouse v. Midgard Energy Co., 23 S.W.3d 372, 379 (Tex. App.--Amarillo 1999, pet. denied). Consequently, the affidavit is fatally defective, and the testimony regarding the undisputed sums allegedly due from S & J fails to establish, as a matter of law, that American was entitled to $32,241.31 from S & J. ⁽⁴⁾

Directed Verdict

Fraud

S & J alleged that American defrauded it because it charged S & J for expenses on wells which were not operating between 1990 and 1998. The trial court directed a verdict against S & J on the claim. S & J contended that this was error because there existed some evidence creating a question of fact upon each element of the claim. We disagree.

Assuming arguendo that the bills sent by American were false, S & J never paid them. Having failed to pay them, it can hardly be said that it suffered damage or injury. And, presence of damage or injury is elemental to a claim of fraud. Eagle Properties .Ltd. v. Scharbauer, 807 S.W.2d 714, 723 (Tex. 1990).

Moreover, if presentation of those allegedly false bills constituted the supposed material misrepresentations, as S & J posited, then its failure to pay same also illustrates that it did not rely on the misrepresentations to its detriment. See id. (holding that reliance upon the misrepresentation is also an element of fraud). Simply put, it cannot be said that one relied on a misrepresentation when he has not responded to or acted upon it. Consequently, the trial court did not err in granting American a directed verdict on the claim.

Intentional Misconduct and Gross Negligence

Next, S & J contends that the trial court erred in directing a verdict on its claims of intentional misconduct and gross negligence. Both theories were invoked by the complainant pursuant to a provision in the operating agreement insulating American from claims involving actions other than those considered intentional misconduct or grossly negligent. According to S & J, American engaged in such misconduct and negligence by failing to close or shut-in wells that were not operating and by charging investors expenses related to those very same wells.

In granting American an instructed verdict upon the allegations, the court recited several grounds for its decision. That is, it concluded that American was entitled to the verdict because S & J presented no evidence of gross negligence or of damage arising from the purported intentional misconduct and gross negligence. Given that the court's decision was based on several grounds, logic dictates that to secure reversal, S & J was obligated to attack each ground and illustrate why none were a legitimate basis for an instructed verdict. This it failed to do in its brief.

To the extent that S & J addressed damages, it did so merely in relationship to gross negligence. Nowhere under the points of error in question did it mention the damages it supposedly suffered as a result of American's supposed intentional misconduct. Moreover, in discussing the subject of damages viz-a-viz gross negligence, it said nothing about what, if anything, it suffered. Rather, mention was made of American "los[ing] $800,000 on the lease" and that "investors" in general had lost or forfeited their interest in the field to American. Yet, nowhere did S & J argue or cite us to evidence illustrating that it was one of the investors which lost their interest. Nor did it mention that it lost any sum of money or that its property rights were somehow damaged.

Simply put, to survive a directed verdict, S & J had to present some evidence that it suffered injury because of American's conduct. Arguing that others may have is not enough. Hunt v. Bass, 664 S.W.2d 323, 324 (Tex. 1984) (holding that one lacks standing to pursue redress for injury suffered by another). Consequently, we overrule the contention that the trial court erred in directing a verdict in favor of American upon the claims of intentional misconduct and gross negligence.

Jury Award of Interest

Next, S & J contends that the jury's answer to question two of the charge was incorrect and against the great weight of the evidence. We disagree and overrule the point.

Through question two, the jury was asked to interpret the following provision of the operating agreement and to determine whether it allowed for the compounding of interest. The provision stated:

Each Non-operator shall pay its proportion of all bills within fifteen (15) days after receipt. If payment is not made within such time, the unpaid balance shall bear interest monthly at the rate of twelve percent per annum or the maximum contract rate permitted by the applicable usury laws in the state in which the Joint Property is located, whichever is the lesser . . . .

The jury answered the question in the affirmative, and S & J attacks that determination. ⁽⁵⁾ As discussed above, the provision permits the compounding of interest on a monthly basis. Texon Energy Corp. v. Dow Chemical Co., 733 S.W.2d at 331. Given Texon, the jury's answer to the issue was not wrong.   

Attorney's Fees

Lastly, S & J asserts that the award of attorneys fees must be reversed if we conclude that the trial court erred in granting summary judgment upon American's claim for payment of the $32,241.32 debt allegedly due it. We agree and sustain the contention.

The award of fees was dependant upon American succeeding upon its claim that S & J failed to pay its debt as agreed by contract. See Tex. Civ. Prac. & Rem Code Ann. §38.001 et. seq. (Vernon Supp. 2001) (permitting the recovery of reasonable attorney's fees should the claimant prevail upon a claim of breached written or oral contract). Our having concluded that the trial court erred in entering summary judgment in favor of American upon its claim of debt, we hold that American could not be awarded attorney's fees at this time.

Accordingly, we reverse that portion of the final judgment and interlocutory summary judgment which awards American $32,241.32, pre and post judgment interest on that sum

and attorney's fees, affirm the judgment in all other respects, and remand the cause for further proceedings.

Brian Quinn

Justice

Do not publish.

1. This sum represented the damages awarded American in the final judgment as well, exclusive of interest and attorney's fees.

2.

Also omitted were verified copies of the "joint interest billings" which Beaman also referred to in his affidavit and which supposedly form the basis of its entire claim.

3.

Discovery products not on file with the clerk may be used as summary judgment evidence if copies of the material, appendices containing the evidence, or a notice containing specific references to the discovery or specific references to other instruments are filed and served on all parties together with a statement of intent to use the specified discovery as summary judgment proof. Tex. R. Civ. Proc. 166a(d). The appellate record also fails to disclose that American complied with this rule when it purported to use deposition excerpts to calculate the uncontested expenses allegedly due.

4.

To the extent American suggests that Stowers confirmed at trial that the uncontested charges equaled the amount Beaman mentioned in his summary judgment affidavit, we find that this does not cure the defect. Whether summary judgment was properly issued depends upon the summary judgment evidence presented to the court at the time it was considering the summary judgment motion. See State Farm Fire & Cas. Co. v. Griffin, 888 S.W.2d 150, 153 (Tex. App. - Houston [1^st Dist.] 1994, no writ).

5.

The meaning of an unambiguous contract is a question of law. Texas Utilities Elec. Co. v. City of Waco, 919 S.W.2d 436, 439 (Tex. App. - Waco 1995, writ denied). Thus, the duty to interpret same lies with the court, not a jury. Furthermore, the provision submitted to the jury for determination was, and is, not ambiguous. Texon Energy Corp. v. Dow Chemical Co., 733 S.W.2d 328 (Tex. App.--Houston [14th Dist.] 1987, writ ref'd n.r.e.) (holding a like provision to be clear and unambiguous). So, it should not have been tendered to the jury for construction.