2001 Trinity Fund, LLC v. Carrizo Oil & Gas, Inc.

Motion for Rehearing Granted in Part and Denied in Part; Affirmed in Part
and Reversed and Remanded in Part; Opinion and Concurring Opinions filed
October 16, 2012 Withdrawn, and Substitute Opinion and Substitute
Concurring Opinions filed December 28, 2012.
In The
Fourteenth Court of Appeals
NO. 14-10-00604-CV
2001 TRINITY FUND, LLC, Appellant
V.
CARRIZO OIL & GAS, INC., Appellee
On Appeal from the 295th District Court
Harris County, Texas
Trial Court Cause No. 2008-05053
SUBSTITUTE CONCURRING OPINION
I join sections IV.B., IV.C., IV.D., and IV.E. of Justice Frost’s Substitute
Opinion (addressing issues pertaining to the quantum-meruit claim, the
promissory-estoppel claim, attorney’s fees, and the appropriate appellate
judgment). I write separately because I disagree with section IV.A. of Justice
Frost’s Substitute Opinion (the “plurality”) pertaining to appellant’s second issue.
Specifically, I would hold, as a matter of law, the parties did not intend to continue
the Barnett Shale Participation Agreement (“BSPA”) by using electronic
communications, as prescribed under the Texas Uniform Electronic Transactions
Act (“UETA”). Accordingly, the trial court should not have submitted Jury
Question No. 1 because the various contractual documents unambiguously
establish that the parties did not agree to continue the BSPA.
In what may simply be a semantically different approach, the plurality
suggests appellant’s second issue presents a legal-sufficiency-of-the-evidence
point. Appellant’s second issue is stated as follows: “The trial court should not
have submitted [appellee’s] breach of contract relating to the BSPA to the jury.”
In this dispute over contract formation, the court must first determine whether there
is ambiguity in the purported contract language, and if there is no ambiguity, an
analysis pertaining to legal sufficiency of the evidence to support the jury’s
affirmative answer to Question No. 1 is unnecessary because the trial court simply
should not have submitted the question. See XCO Prod. Co. v. Jamison, 194
S.W.3d 622, 627 n.2, 632 (Tex. App.—Houston [14th Dist.] 2006, pet. denied)
(determining appellant’s contention that trial court erred by submitting jury
question was not a legal-sufficiency issue and holding trial court did err by
submitting question because contract was unambiguous).
Appellant’s trial counsel objected to submission of Question No. 1 “in its
total on the fact that the evidence demonstrates that an agreement was not reached
post termination of the [BSPA].” Accordingly, appellant preserved for appeal
whether, as a matter of law, the parties agreed to continue with the BSPA. In
considering appellant’s contention that no enforceable contract was formed, our
first task must be to determine whether the transactional or contracting language
2
used by the parties is ambiguous. Lenape Res. Corp. v. Tenn. Gas Pipeline Co.,
925 S.W.2d 565, 574 (Tex. 1996).1
The plurality acknowledges that “the negotiations, alleged offers, and
alleged acceptances in the case under review are in writing and the language of
these writings is unambiguous.” I agree. The plurality concludes: “whether the
parties agreed to the Alleged Agreement is a question of law.” I agree. Because
the contract language in question is unambiguous, the focus should be on two
questions of law which were erroneously submitted to the jury2 as questions of
fact: (1) whether the parties agreed to amend terms and conditions of the BSPA
through electronic communications,3 and (2) if so, whether unambiguous language
in emails reflects mutual assent to continue the BSPA without a signed writing.
The plurality assumes that the parties agreed to amend terms and conditions
of the BSPA through email communications. In describing an email sent by
appellee’s representative, the plurality opines that “under the unambiguous
language of this proposal, the termination date in section 2.8(b) would not be
removed . . . .” The plurality avoids the pivotal question of law—did the parties
agree to be bound by their negotiations in electronic communications? I disagree
1
Appellate courts should be reticent to disturb jury verdicts unless required by law. See,
e.g., McWhorter v. Humphreys, 161 S.W.2d 304, 308 (Tex. Civ. App.—Texarkana 1941, writ
ref’d w.o.m.) (explaining court of appeals is “reluctant to disturb any jury verdict”); see also
Herbert v. Herbert, 754 S.W.2d 141, 143 (Tex. 1988) (recognizing “the sanctity to which a jury
verdict is entitled”).
2
The jury impliedly found that the parties agreed to continue and amend the BSPA by
electronic means. Additionally, relative to the UETA the jury impliedly found that the parties
executed or adopted a symbol associated with their respective emails with the intent to sign the
emails.
3
The plurality does not address appellant’s argument that the evidence is legally
insufficient to support the jury’s finding that the parties agreed to amend the BSPA by electronic
communications.
3
with this approach. For reasons outlined below, I would hold, as a matter of law,
that the parties did not agree to be bound by electronic communications.
There is no patent or latent ambiguity4 in section 9.11 of the BSPA: “This
Agreement may not be modified or changed except by a written amendment signed
by all Parties.” There is no patent or latent ambiguity in section 9.12 of the BSPA:
“No right hereunder shall be waived (and the express waiver of any right hereunder
in one instance shall not be deemed a waiver of the same right in any other
instance or of any similar or dissimilar right) except by an instrument in writing
that is signed by the Party to be charged with such waiver and delivered to the
Party claiming the benefit of such waiver.”5 Here, the plain language in the BSPA
has a certain or definite legal meaning. When contracting parties engage in written
communications that have a certain or definite legal meaning, there is no fact issue
for determination by a jury. See Coker v. Coker, 650 S.W.2d 391, 393–94 (Tex.
1983).
After determining there is no patent or latent ambiguity in relevant
provisions of the BSPA, this court should focus on whether there is patent or latent
ambiguity in relevant email communications. Appellee argues that the question of
whether the parties agreed to conduct a transaction by electronic means is a fact
issue which was properly submitted to the jury with appropriate instructions
regarding application of the UETA, and appellant did not object to those
4
The plurality does not explain the difference between patent and latent ambiguity.
DeClaris Assocs. v. McCoy Workplace Solutions, L.P., 331 S.W.3d 556, 562 (Tex. App.—
Houston [14th Dist.] 2011, no pet.) (“An ambiguity in a contract may be said to be patent or
latent. Patent ambiguity in a contract is ambiguity that is apparent on the face of the contract;
latent ambiguity is ambiguity that only becomes apparent when a facially unambiguous contract
is applied under particular circumstances.”).
5
Additionally, the parties seem to acknowledge that the BSPA involves conveyance of
mineral interest, and all such agreements must be in writing. See Vela v. Pennzoil Producing
Co., 723 S.W.2d 199, 206 (Tex. App.—San Antonio 1986, writ ref'd n.r.e.).
4
instructions. Appellee also contends the jury’s affirmative answer to Question No.
1 must be upheld because appellant waived any objection to that portion of the
charge. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). However, appellee
presumes the parties’ mere use of electronic communications to negotiate an
amendment to the BSPA creates a fact issue on whether they intended to enter into
a binding agreement through email communications. To determine whether there
is a fact issue regarding intent of the parties to be bound, we consider the plain
meaning of words and phrases used in those emails. See Lesikar v. Moon, 237
S.W.3d 361, 367 (Tex. App.—Houston [14th Dist.] 2007, pet. denied).
Whether the parties agree to conduct a transaction by electronic means is
determined from the context and surrounding circumstances, including the parties’
conduct. See Tex. Bus. & Com. Code Ann. § 322.005(b) (West 2009). Because
the parties signed an agreement reflecting their mutual intent not to be bound by an
amendment to the BSPA unless the amendment is in writing and signed by both
parties,6 we determine whether there is latent ambiguity relative to intent of the
parties to amend the BSPA through subsequent electronic communications.
Appellee argues that the parties mutually agreed to amend the BSPA through
electronic communications because the established rules of contract formation
have been expanded by the UETA. See id. § 322.001 et seq. (West 2009 & Supp.
2012). However, the UETA does not supplant common law principles that govern
6
I acknowledge that under the UETA a record may not be denied its legal effect solely
because it is in electronic form, and, if a law requires a record to be in writing, an electronic
record satisfies the law. See Tex. Bus. & Com. Code Ann. § 322.007(a)–(d). However, the
essential inquiry is whether parties agreed to amend the BSPA through electronic
communications. See id. § 322.005(b); see also id. § 322.007, comment 2.a. (West 2009) (“The
requirements of [the general Texas statute of frauds] may now be met electronically where the
parties have agreed to conduct the transaction by electronic means.” (emphasis added)).
5
formation of contracts.7 In determining whether the parties had a meeting of the
minds concerning modification of a contract, the focus is on what the parties did
and said, not their subjective states of mind. Komet v. Graves, 40 S.W.3d 596, 601
(Tex. App.—San Antonio 2001, no pet.). Moreover, before email communications
are binding and enforceable, the parties must agree to conduct a transaction by
electronic means. See Tex. Bus. & Com. Code Ann. § 322.005(b).
Admittedly, the plain meaning of words in the email communications reflect
contract negotiations. However, as required under the BSPA, the parties also
attempted to amend the BSPA by drafting and forwarding written instruments to be
signed by both parties. The following chronology is instructive: (1) on December
14, 2007, appellant’s representative sent an email to appellee’s representative
stating that his attorney would have “the agreement” ready by December 18, 2007;
(2) on December 18, 2007, appellant’s representative sent appellee a draft
amendment to the BSPA, asking appellee’s representative to review and edit; (3)
appellee’s representative responded that appellant’s proposed agreement was under
consideration and noted that the compensation specified was different from the
amount previously specified by the parties; (4) sometime between December 19,
2007 and December 30, 2007, appellee sent appellant a draft amendment to the
BSPA; apparently, this document was lost or is not in the appellate record; (5) on
December 30, 2007, appellee sent appellant a different draft of a “First
Amendment to Barnett Shale Participation Agreement” and requested that
appellant disregard the previous draft; (6) subsequently, appellee’s representative
demanded that appellant’s representative sign the proposed amendment to the
BSPA by January 4, 2008; (7) thereafter, appellee forwarded a copy of the “First
7
Whether an electronic record or signature has legal consequences is determined by this
chapter and other substantive and applicable law. See Tex. Bus. & Com. Code Ann. §§
322.003(d) (West Supp. 2012); 322.005(e).
6
Amendment to Barnett Shale Participation Agreement,” signed by appellee’s
representative; (8) appellant’s representative never signed or returned the proposed
amendment.
In sum, the following undisputed evidence establishes, as a matter of law,
that the parties did not agree to amend the BSPA and continue business by waiving
automatic and mandatory termination provisions: (1) the parties entered into a
written agreement (BSPA) that involved exploration and production of mineral
interest; (2) under the BSPA, the parties agreed that no amendments would be
effective without a writing, signed by the parties; (3) subsequently, the parties
engaged in email negotiations regarding an amendment to the BSPA; (4) in their
email communications, the parties did not express any agreement to waive
provisions pertaining to amendments to the BSPA or agree that they would be
contractually bound by verbiage in electronic communications; (5) pursuant to
requirements expressed in the BSPA, the parties exchanged multiple drafts of
written amendments which they never jointly signed or executed.
This undisputed evidence, combined with the fact that the parties previously
agreed any modifications would be in writing, conclusively establishes appellant’s
assertion that the parties did not waive the requirement of a signed writing to
amend the BSPA. There is no language in any of the emails raising a fact issue
regarding whether the parties waived the requirement of a signed writing or agreed
that electronic communications were sufficient to bind the parties to a new contract
or amend the BSPA. The chosen verbiage and multiple efforts to obtain signatures
on a written or printed amendment negate any implication or inference that the
parties agreed to be bound by their emails.
Notwithstanding application of the UETA to these facts, the parties plainly
did not agree to amend and continue the BSPA without condition-precedent
7
language in section 2.8(b) terminating the contract for failure to timely remit sums
due on October 19, 2007. We are cognizant of the fact that most individuals send
and receive multiple emails every day. Consequently, courts should be hesitant to
imply or infer an agreement to transact business or negotiate contracts
electronically merely because emails were exchanged. See Cunningham v. Zurich
Am. Ins. Co., 352 S.W.3d 519, 529–30 (Tex. App.—Fort Worth 2011, pet. filed).8
In a sister jurisdiction where the parties’ conduct and email communications
reflected an understanding that a physical signature was required because of the
statute of frauds, the North Carolina Supreme Court concluded that the parties did
not agree to use electronic signatures in lieu of a physical signature to complete the
transaction. Powell v. City of Newton, 703 S.E.2d 723, 727–28 (N.C. 2010).
Under the unique facts of this case, there is no fact issue regarding intent of the
parties to be bound by electronic communications.9
I would hold, as a matter of law that there was no “meeting of the minds” to
use electronic communications to amend the BSPA and, thus, no agreement to
amend or continue to BSPA. Komet, 40 S.W.3d at 601. Therefore, the trial court
should not have submitted Question No. 1 to the jury, and there is no reason for
this court to determine whether the evidence is legally sufficient to support the
jury’s affirmative finding relative to Question No. 1. See Daewoo Shipbuilding &
Marine Eng’g, Co., v. Ikanco Inc., 376 S.W.3d 229, 233 (Tex. App.—Houston
[14th Dist.] 2012, pet. granted, judgm’t vacated w.r.m.) (“If, after the rules of
8
See also Tex. Bus. & Com. Code Ann. § 322.005 comment 2. (“While [UETA] removes
barriers to the use of electronic records and electronic signatures, it does not confer an automatic
right on one party to conduct a transaction by electronic means. In consensual transactions, e.g.,
agreements, both parties must agree to conduct the transaction by electronic means.”).
9
This holding is confined to the facts of this case. There may be other fact patterns in
which a jury issue arises regarding intent of the parties to be bound by emails, without specific
language reflecting mutual assent to be bound.
8
construction are applied, the contract can be given a definite or certain legal
meaning, it is unambiguous and we construe it as a matter of law.”); Jamison, 194
S.W.3d at 627 n.2, 632. Accordingly, I concur in the judgment only as to section
IV.A. of Justice Frost’s Substitute Opinion, and I do not join Judge Jamison’s
Substitute Concurring Opinion.
/s/ Charles W. Seymore
Justice
Panel consists of Justices Frost, Seymore, and Jamison. (Seymore, J., concurring)
(Jamison, J., concurring).
9