Eagle Oil & Gas Co. v. Tro-X, L.P.

Opinion filed October 31, 2013
In The
Eleventh Court of Appeals
__________
No. 11-11-00290-CV
__________
EAGLE OIL & GAS CO., Appellant
V.
TRO-X, L.P., Appellee
AND
TRO-X, L.P., Cross-Appellant
V.
EAGLE OIL & GAS PARTNERS, LLC, Cross-Appellee
On Appeal from the 238th District Court
Midland County, Texas
Trial Court Cause No. CV-46,196
OPINION
Because TRO-X, L.P. believed that Eagle Oil & Gas Co. (Eagle Oil)
breached an agreement that it had with TRO-X regarding the acquisition and
disposition of oil and gas leases and other oil and gas interests, it brought a cause
of action against Eagle Oil for that breach. TRO-X also brought other causes of
action against Eagle Oil and, later, a third party, Eagle Oil & Gas Partners, LLC
(Eagle Partners). By way of a partial summary judgment in favor of Eagle Oil, the
trial court disposed of some of the causes of action that TRO-X brought against
Eagle Oil. In the partial summary judgment, except for a tortious interference
claim, the trial court also disposed of all of the causes of action that TRO-X
brought against Eagle Partners. Other issues, including damages and attorney fees,
were presented to the jury.
The jury found that Eagle Oil had breached the agreement; that TRO-X had
not breached the agreement; that Eagle’s breach was not excused; that TRO-X had
not waived its right to acquire an unpromoted working interest in the acreage
covered by the agreement; that TRO-X’s total damages amounted to $7,680,000;
and that TRO-X was entitled to total attorney fees of $571,000.
Additionally, as far as TRO-X’s claims against Eagle Partners were
concerned, the jury found that Eagle Partners intentionally interfered with the
agreement between TRO-X and Eagle Oil. The jury also found that Eagle Partners
did not act in the good faith belief that (1) it was acting in the bona fide exercise of
its own rights or (2) it had an equal or superior right in the subject matter of the
contract as opposed to that of TRO-X. However, the jury answered “$0” when
asked to assess damages to TRO-X that were proximately caused as a result of that
interference.
The jury verdict was not unanimous. The trial court instructed the jury that
it could not find that harm to TRO-X was maliciously caused by Eagle Partners
unless its answer was unanimous, and the jury did not answer the question
regarding malice. Because the question regarding the amount of exemplary
damages was conditioned upon an affirmative answer to the malice question, the
jury did not answer it.
Based upon the answers of the jury, and after the trial court denied Eagle
Oil’s motion for judgment notwithstanding the verdict and to disregard certain jury
2
findings, the trial court entered judgment in favor of TRO-X against Eagle Oil in
the amount of $7,680,000. It also entered judgment that TRO-X take nothing on
its claims against Eagle Partners. The trial court additionally awarded TRO-X a
total of $571,000 in attorney fees. Eagle Oil and TRO-X have each perfected an
appeal.
As a result of the discussion and analysis that follows, we reverse and render
judgment that TRO-X take nothing from Eagle Oil on its breach of contract claims,
but that TRO-X recover the sum of $379,788.80 from Eagle Oil, as shown by the
court-approved accounting. We reverse the award of attorney fees to TRO-X
related to the breach of contract claims and render judgment that TRO-X may not
recover those attorney fees in the absence of a successful breach of contract claim.
We also reverse the award of $35,000 in attorney fees that were conditioned upon
an affirmative answer to the question of whether Eagle Oil breached the agreement
by sending a letter to TRO-X. We render judgment that TRO-X cannot recover
those fees. We affirm the take-nothing judgment against TRO-X and in favor of
Eagle Partners.
Although the record in this case is quite voluminous, we will discuss only
those parts of the record that are directly germane to the resolution of this appeal.
The agreement that is the subject of this lawsuit is in writing and is
denominated: “ACREAGE ACQUISITION AGREEMENT: NEW PROSPECTS
AND AMENDMENT NO. 1 TO SOUTH HALEY PROSPECT AGREEMENT
PECOS COUNTY, TEXAS.” 1 The parties to the New Prospects Agreement are
TRO-X, L.P. and Eagle Oil & Gas Co.
1
The parties had previously bought and sold oil and gas leases and related interests under another
agreement (the South Haley Agreement). Except for references in the New Prospects Agreement to
certain definitions contained in the South Haley Agreement, this lawsuit does not involve any recovery
under the South Haley Agreement.
3
Under the terms of the New Prospects Agreement, Eagle Oil was to use
reasonable efforts to acquire “Interests” in the New Prospects area. In the New
Prospects Agreement, the parties refer to the definition of “Interests” as set out in
the South Haley Agreement. There, the term “Interests” is defined to be “oil and
gas leasehold interests, rights to acquire such interests such as by way of farmout
and, if available, mineral and royalty interests.” The agreement also contained an
AMI (Area of Mutual Interest) provision. All Interests acquired under the
agreement were to be taken solely in Eagle Oil’s name.
If the Interests in the New Prospects were acquired within one year from the
effective date of the New Prospects Agreement, Eagle Oil was to bear “all costs of
acquisition for leasehold bonus, purchase consideration, third party landman title
review and acquisition costs, out-of-pocket expenses incurred by those landmen,
and other like or similar charges incurred in the acquisition of up to 25,000 net
acres of Interests, not to exceed total maximum expenditures of $3,000,000.” The
parties denominated those expenses “Eagle New Prospect Expenses.” No charges
were to be assessed by either party or its affiliates for its own efforts in the
acquisition of Interests. However, either party was allowed to recover its “out-of-
pocket third party expenditures under Section II” of the New Prospects Agreement.
Those allowable expenses included “supplies and printing costs of prospect sales
brochures and out-of-pocket travel expenses for mileage, meals and
accommodations incurred in the prospect sale process.” Any such expenses
incurred by TRO-X were denominated “TRO-X New Prospect Expenses.” Those
types of expenses that were incurred by Eagle Oil were to be added to the “Eagle
New Prospect Expenses” that we have described earlier.
Thus far in this opinion, we have set out the nature of the parties’ agreement
regarding the acquisition of Interests. The real subject of the dispute in this lawsuit
lies not in the acquisition of Interests but, rather, in the exercise of rights to retain a
4
portion of those Interests once acquired. The dispute also involves the distribution
of proceeds from the subsequent sale of some of the Interests.
Section II of the New Prospects Agreement is entitled “DISPOSITION OF
INTERESTS AND DISTRIBUTION OF PROCEEDS.” 2 The heading assigned by
the parties to Section II.A. is: “Retention of Unpromoted Working Interests.” In
that section, Eagle Oil and TRO-X provided as follows:
Subject to the terms of Article IV below, TRO-X may retain an
unpromoted working interest of up to 40% (“TRO-X New Prospect
Interest”), and Eagle may retain an unpromoted working interest of up
to 60% (“Eagle New Prospect Interest”) in the New Prospects and
Interests acquired therein under the terms of any exploration
agreement and operating agreement negotiated with the working
interest owners prior to initial drilling (“Prospect Agreements”).
“Unpromoted” is defined in the South Haley Agreement. 3
Unpromoted working interests shall be chosen by the Parties prior to
the sale of all working interests to third parties on a promoted basis.
The working interest chosen by TRO-X is the “TRO-X New Prospect
Participation Percentage”, and the working interest chosen by Eagle is
the “Eagle New Prospect Participation Percentage”. On the day of
TRO-X’s selection of the TRO-X New Prospect Participation
Percentage, it shall reimburse Eagle for Eagle New Prospect Expenses
attributable to the TRO-X New Prospect Participation Percentage,
plus pay Eagle an annualized rate of return, calculated from one year
subsequent to the Effective Date of the South Haley Agreement, of
eight percent (8%), and the Eagle New Prospect Expenses to be
recovered under Section II.C. shall be reduced proportionately. On
the day of Eagle’s selection of the Eagle New Prospect Participation
Percentage, it shall reimburse TRO-X for the share of TRO-X New
Prospect Expenses attributable to the selected interest, plus pay TRO-
X an annualized rate of return, calculated from one (1) year
2
The divisions in the New Prospects Agreement are variously referred to in the Agreement as
“Sections” as well as “Articles.” We will refer to them as “Sections.”
3
In the South Haley Agreement, the parties defined “unpromoted” to mean “that the chosen
working interest shall bear all third party out-of-pocket costs (i) in the acquisition of Interests, (ii) for
geological and geophysical data and analysis, (iii) for running and curing title and title opinions, and
(iv) for costs incurred in preparing to drill, drilling, completing, equipping and pipeline costs under the
terms of the Prospect Agreements, including operating and overhead charges provided for therein.”
5
subsequent to the Effective Date of the South Haley Agreement, of
eight percent (8%), and the TRO-X New Prospect Expenses to be
recovered under Section II.C. shall be reduced proportionately.
(footnote added).
In accordance with other provisions in the New Prospects Agreement, the
“Eagle New Prospect Interest” was amended to read “up to 65%” and the “TRO-X
New Prospect Interest” was amended to read “up to 35%.”
Section II.B. of the agreement is entitled “Sale of Working Interests to Third
Parties.” In Section II.B., Eagle Oil and TRO-X provided as follows:
All working interests in the New Prospects not acquired by
TRO-X and Eagle under Section 2.A. [sic] above shall be sold to one
or more third party working interest owners through joint sales efforts
of the Parties on a promoted basis under terms acceptable to Eagle
after consultation with TRO-X. TRO-X and some of its Affiliates,
including Greg McCabe, Ed McCabe, Rich Masterson and Greg Hair,
with Eagle’s assistance, shall prepare a detailed sales brochure
including land maps, geological maps and cross-sections covering all
prospective horizons and shall lead the sale process, all at no expense
to Eagle other than for cost recovery as otherwise provided for herein.
The Parties shall use their best efforts to ensure that the sale proceeds
of the New Prospects will (i) recover the unrecovered TRO-X New
Prospect Expenses and the unrecovered Eagle New Prospect
Expenses, (ii) if possible, provide for a cash profit, and (iii) provide
non-cash sale proceeds comprised of one or more of back-in working
interests, carried working interests or overriding royalties.
After the agreement was executed, interests were acquired in the New
Prospects area in accordance with the agreement. There is evidence in the record
that, after the New Prospects acreage was acquired, sales of the Interests in the
wildcat New Prospects area were slow. However, at some point in time, Eagle Oil
entered into negotiations with EnCap Investments for the sale of a portion of the
New Prospects. Ultimately, Eagle Oil and EnCap struck a deal for some of the
New Prospects area. Eagle Oil and EnCap structured their deal in this way: they
6
formed a new entity, Eagle Oil & Gas Partners, LLC. As a part of the transaction,
Eagle Oil was to manage Eagle Partners and was to receive a fee of $150,000 per
month for that.
On April 2, 2007, the same day that it was formed, the new entity, Eagle
Partners, bought a 50% working interest in a part of the New Prospects area. Eagle
Oil continued to try to sell what was left of the New Prospects acreage.
Meanwhile, the evidence shows that the relationship between TRO-X and
Eagle Oil began to go downhill. On October 15, 2007, Eagle Oil sent a letter to
TRO-X in which Eagle Oil, among other things, complained of TRO-X’s
performance under the agreement and outlined ways of going forward. TRO-X did
not reply to that letter but, ultimately, filed this lawsuit against Eagle Oil and later
added Eagle Partners as a defendant. Eagle Oil also filed a breach of contract
counterclaim against TRO-X. We have already set forth the ultimate result of the
suit.
While this lawsuit was pending in the trial court, negotiations were
completed for the sale of 100% of a portion of the New Prospects—the Collier
Prospect—to Chesapeake Exploration, L.L.C. Not long thereafter, Chesapeake
also purchased from Eagle Oil and Eagle Partners an 85% interest in that portion of
the New Prospects area known as the Balmorhea Ranch Prospect. In each sale,
Chesapeake paid $325 per acre, and Eagle Oil argues that Eagle Oil retained, for it
and TRO-X, an overriding royalty interest and a back-in working interest. These
proceeds were to be divided in accordance with the New Prospects Agreement.
TRO-X never designated a New Prospect Participation Percentage. There
was never any production on properties covered by the New Prospects Agreement,
and the leases were not otherwise kept alive and, ultimately, expired.
Neither party claims that the New Prospects Agreement is ambiguous.
However, each party to the contract has its own, quite different interpretation. But
7
a mere difference in interpretation is not tantamount to an ambiguity. Providence
Land Servs., LLC v. Jones, 353 S.W.3d 538, 541 (Tex. App.—Eastland 2011, no
pet.). It is only when the meaning of the agreement is uncertain and doubtful or
when it is reasonably susceptible to more than one meaning that it is ambiguous.
Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983).
TRO-X is correct when it states that it is entitled to retain an unpromoted
working interest of up to 35% in the New Prospects and in “Interests acquired” in
the New Prospects “under the terms of any exploration agreement and operating
agreement negotiated with the working interest owners prior to initial drilling
(‘Prospect Agreements’).” The maximum 35% figure was known as the New
Prospect Interest. The specific unpromoted interest that was actually chosen by
each party up to the maximum amount was defined by Eagle and TRO-X as “TRO-
X New Prospect Participation Percentage” as to TRO-X’s 35% maximum; Eagle
Oil’s like interest of 65% maximum was designated as “Eagle New Prospect
Participation Percentage.”
TRO-X maintains that, although it was required to specifically designate its
New Prospect Participation Percentage, it could exercise that right of designation
prior to each sale of any working interest to third parties and, even then, only after
Eagle had “consulted” with it first. TRO-X takes the position that the prior
consultation requirement as contained in Section II.B. applies to its obligation to
designate its New Prospect Participation Percentage in Section II.A. TRO-X also
takes the position that the “consultation” requirement means that Eagle is required
to advise TRO-X of the terms of each sale so that TRO-X can “make an informed
election between accepting its percentage of the profit, retaining a working interest,
or some combination of the two.”
A contrary position is taken by Eagle Oil. It maintains that TRO-X was
required to select its New Prospect Participation Percentage at some time prior to
8
the time that all working interests were sold to third parties but not as to each sale.
And Eagle Oil argues that it was not required to reveal the terms of each sale to
third parties to TRO-X so that TRO-X could, prior to each sale, “make an
informed election between accepting its percentage of the profit, retaining a
working interest, or some combination of the two” as argued by TRO-X.
It is Eagle Oil’s position that the consultation provision in Section II.B. has
nothing to do with TRO-X’s selection of its New Prospect Participation Percentage
as provided for by the parties in Section II.A. Section II.A. deals with the selection
and cost of retaining unpromoted working interests by each party. Section II.B.
deals with the process and details of selling promoted working interests that remain
to third parties. And, Eagle Oil maintains, it may sell those promoted working
interests to third parties on terms satisfactory to it after consultation with TRO-X.
Eagle Oil’s first issue contains five parts.4 In each part, Eagle Oil claims
that the trial court erred when it “render[ed] judgment for TRO-X on its claim that
Eagle breached the New Prospects Agreement by ‘depriving TRO-X of its right to
retain an unpromoted working interest by selling to Eagle Partners on a promoted
basis without consultation with TRO-X.”
In Issue 1(a), Eagle Oil claims that the trial court erred when it entered the
judgment because, “as a matter of law, Eagle could not have ‘deprive[d]’ TRO-X
of its right to retain a working interest of up to 35% because TRO-X unilaterally
controlled its mature right or option to retain an unpromoted working interest at
any time before the sale of all working interests to third parties” (alteration in
original).
Issue 1(b) contains Eagle Oil’s complaint that there was no evidence to
support “the jury’s finding that Eagle ‘deprive[d]’ TRO-X of its right to retain up
4
In its statement of the issues, Eagle Oil lists its issues on appeal. When it later discusses those
issues, Eagle Oil uses a different numbering system for the issues. We will use the system used by Eagle
Oil in the argument portion of the brief.
9
to a 35% interest because Eagle sold only an undivided 50% working interest to
Eagle Partners, and thus a 50% working interest remained available for TRO-X to
retain even after that sale” (alteration in original).
In Issue 1(c), Eagle Oil takes the position that the “consultation” provision
of Section II.B. “has nothing to do with TRO-X’s right to retain an unpromoted
working interest under section II.A of the agreement.”
We will resolve these three arguments before going on to the other
arguments made by Eagle Oil in its appeal.
Before we can address those arguments, we must first decide what the
parties intended as evidenced in the written agreement. In construing a written
contract, our primary objective is to determine the true intentions of the parties as
expressed in the writing. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of
Am., 341 S.W.3d 323, 333 (Tex. 2011); Coker, 650 S.W.2d at 393. We are to
consider the entire writing “in an effort to harmonize and give effect to all the
provisions of the contract so that none will be rendered meaningless.” Coker, 650
S.W.2d at 393. If the written agreement is so worded that it can be assigned a
certain or definite legal meaning or interpretation, it is not ambiguous, and a court
will construe the agreement as a matter of law. Id. A written agreement is,
however, ambiguous “when its meaning is uncertain and doubtful or it is
reasonably susceptible to more than one meaning.” Id. Whether an agreement is
ambiguous is a question for the court to decide as a matter of law. Id. at 394. In
making that legal decision, a court examines the agreement as a whole in light of
the circumstances attendant when the parties made the contract. Id.
TRO-X and Eagle Oil have agreed that the New Prospects Agreement is not
ambiguous. Although a court can decide that an agreement is ambiguous in spite
of what the parties argue to the contrary, we agree that the New Prospects
Agreement can be given only one reasonable meaning and that it is not, therefore,
10
ambiguous. See id. at 393. Because the New Prospects Agreement is not
ambiguous, we will construe it as a matter of law as it is written. Italian Cowboy,
341 S.W.3d at 333; R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d
517, 518 (Tex. 1980); Martin v. Saga Petroleum Corp., 332 S.W.3d 646, 650 (Tex.
App.—Eastland 2010, no pet.).
Against this backdrop, we will consider Eagle Oil’s complaint that, under
the written agreement, as a matter of law, it could not deprive TRO-X of its right to
a retained unpromoted working interest of up to 35%.
Section I of the New Prospects Agreement contained the parties’ agreement
with respect to the acquisition of “Interests” in the New Prospects. Section II.A. of
the New Prospects Agreement is entitled “Retention of Unpromoted Working
Interests.” In it, Eagle Oil and TRO-X provided the procedure whereby Eagle Oil
and TRO-X could retain applicable percentages of unpromoted working interests
in the New Prospects. As we have said, for TRO-X, the maximum allowable
percentage was called “TRO-X New Prospect Interest.” Any percentage that was
actually chosen by TRO-X was to be designated the “TRO-X New Prospect
Participation Percentage,” and the percentage actually chosen by Eagle Oil was to
be designated as the “Eagle New Prospect Participation Percentage.”
In Section II.A., the parties provided that the “[u]npromoted working
interests” were to be “chosen by the Parties prior to the sale of all working interests
to third parties on a promoted basis” (emphasis added). In the remainder of
Section II.A., the parties detailed the method by which they were to compute the
price that each had to pay for its respective “New Prospect Participation
Percentage.” Section II.A. contains no provisions pertaining to the sale of any
“Interests” in the New Prospects, only the retention of interests by Eagle Oil and
by TRO-X and the method of payment by each for the interests that each
designated for retention.
11
Section II.B. contains the parties’ agreement pertaining to the sale of
promoted working interests to third parties. The parties agreed that “[a]ll working
interests in the New Prospects not acquired by TRO-X and Eagle under Section
2.A. [sic] above shall be sold to one or more third party working interest owners”
(emphasis added). The parties set forth which party was to do what in connection
with the sales effort. The sales were to be made upon “terms acceptable to Eagle
after consultation with TRO-X.” Additionally in Section II.B., the parties agreed
that they would use their “best efforts to ensure that the sale proceeds of the New
Prospects will (i) recover the unrecovered TRO-X New Prospect Expenses and the
unrecovered Eagle New Prospect Expenses” (those expenses pertaining to the
acquisition of interest as set out in Section I), “(ii) if possible, provide for a cash
profit, and (iii) provide non-cash sale proceeds comprised of one or more of back-
in working interests, carried working interests or overriding royalties.”
In Section II.B., the part of the agreement that contains the “consultation”
provision, the parties mentioned neither acquisitions that they addressed in
Section I nor retentions that they described in Section II.A.; the only process that
the parties detailed in Section II.B. was that related to sales of promoted working
interests.
Section II.C. of the New Prospects Agreement contains a formula to be used
to compute the distribution of cash proceeds attributable to the sale of “Interests”
in the New Prospects. The function of the formula was to arrive at “New Prospect
Distribution Shares” for Eagle Oil and for TRO-X. Eagle Oil and TRO-X agreed
that, after each party recovered certain expenses, plus a certain rate of return on
each party’s New Prospect Expenses, remaining cash sale proceeds were to be
shared according to each party’s “New Prospect Promotion Share.” “New
Prospect Promotion Share” is defined in Section II.C. of the New Prospects
Agreement.
12
Section II.D. of the New Prospects Agreement provides for the distribution
of non-cash sale proceeds, such as back-in working interests, carried working in-
terests, or overriding royalties. These interests were to be distributed to Eagle Oil
and to TRO-X “according to their respective New Prospect Promotion Shares.”
Neither Section II.C. nor Section II.D. contains any provisions relating to the
retention of an unpromoted working interest either by Eagle Oil or TRO-X. In
fact, none of the distributions referred to in Section II.C. or in Section II.D. utilize
the designation “New Prospect Participation Percentage” in relation to those
distributions; that term is peculiar to Section II.A.
That the parties knew how to provide for the type of procedure TRO-X
argues for here is apparent from Section III of the New Prospects Agreement, the
AMI provision. There, within certain time constraints, if either Eagle Oil or TRO-
X wanted to separately purchase an interest within the New Prospect AMI, then
that party was required to notify the other party of the proposed acquisition and
“provide all of the pertinent information concerning the acquisition to the other
Party.” The other party would then have a period of time within which it was to
notify the acquiring party of its intent to acquire its share of the interest being
purchased “under the same terms under which the acquiring Party is bound.”
“Failure to timely respond with full payment and properly executed documentation
shall be deemed to be an election not to acquire.”
The retention provisions of Section II.A. do not provide for that type of
disclosure or privilege. As Eagle Oil argues, to say otherwise would be to require
us to rewrite the New Prospects Agreement to provide: “Unpromoted working
interests shall be chosen by the Parties prior to the sale of each or any working
interests.” We cannot rewrite the agreement to transform it into one that the parties
did not make. Neece v. A.A.A. Realty Co., 322 S.W.2d 597, 600 n.3 (Tex. 1959);
13
Healthcare Cable Sys., Inc. v. Good Shepherd Hosp., Inc., 180 S.W.3d 787, 791
(Tex. App.—Tyler 2005, no pet.).
Eagle Oil argues that TRO-X unilaterally controlled its right to retain an
unpromoted working interest of up to 35% at any time prior to the sale of all
working interests to third parties. Therefore, Eagle Oil maintains, as a matter of
law, it could not have deprived TRO-X of its right to retain an unpromoted
working interest of up to 35%; the right of retention was controlled strictly by
TRO-X.
Under the plain meaning of the New Prospects Agreement, in Section II.A.,
the parties agreed that either party could choose the unpromoted working interest
that it wanted to retain prior to the sale of all working interests on a promoted
basis. We are to give words their plain meaning unless some different or technical
meaning is designated in the agreement. Healthcare Cable, 180 S.W.3d at 791.
The primary definition of “all” in the Merriam-Webster’s Collegiate
Dictionary is “the whole amount, quantity, or extent of.” MERRIAM-WEBSTER’S
COLLEGIATE DICTIONARY 31 (11th ed. 2004). In Enterprise Leasing, the court was
concerned with the language in a vehicle rental agreement that provided that the
renter was responsible to pay Enterprise Leasing “the retail value of replacing
and/or repairing all losses and damages to the rented car.” Enter. Leasing Co. of
Houston v. Barrios, 156 S.W.3d 547, 548 (Tex. 2004) (emphasis added). The
vehicle was stolen while in the possession of the renter. Id. The renter claimed
that he was not responsible for the theft. Id. The Supreme Court disagreed. Id. at
549. In reversing the court of appeals’s decision in favor of the renter, the court
wrote: “As one of the dissenting justices [in the court of appeals] succinctly stated,
“‘All losses’ means all losses.” Id.
As Eagle Oil points out, the sale to Eagle Partners did not involve a sale of
all working interests. After the sale, a 50% interest remained, and as Eagle Oil
14
argues, the choice remained exclusively with TRO-X to choose and to select a
retained unpromoted working interest of up to 35% upon payment of the amounts
set out in Section II.A. The sale was not of “the whole amount, quantity, or extent
of” the working interest.
TRO-X presents several scenarios in which it describes how TRO-X might
have decided its course of action differently under those different scenarios if
presented with the full details of each sale. We understand the difference that
could make in its decision-making process. However, although that might have
been a more advantageous way to draft the agreement, that is not the agreement
that the parties made as is apparent from the writing itself. Contrarily, Eagle Oil
argues that, under TRO-X’s suggested procedure, it would be impossible to market
the interests because Eagle Oil would have no way of telling a prospective
customer what it had for sale.
A plain reading of Section II.B. limits the application of the “consultation”
provision to that to which it refers and to which it is most closely located in the
agreement, namely, sales “under terms acceptable to Eagle [Oil].” In no other part
of the New Prospects Agreement did Eagle Oil and TRO-X use that term.
Because Eagle Oil could not, as a matter of law, deprive TRO-X of its right
to retain an unpromoted working interest by selling to Eagle Partners on a
promoted basis without consultation with TRO-X, we sustain Eagle Oil’s Issue
1(a) and 1(c).
Eagle Oil argues that there is another reason that the judgment against it
should be reversed. It maintains that there is no evidence to support the jury’s
answer to Question No. 1(b)—that Eagle Oil deprived TRO-X of its right to retain
up to a 35% interest—when there remained a 50% interest after the sale to Eagle
Partners against which TRO-X could exercise its right to retain up to a 35%
unpromoted working interest.
15
When we review a legal sufficiency challenge to the evidence, we credit
evidence that supports the verdict if reasonable jurors could have done so and
disregard contrary evidence unless reasonable jurors could not have done so. Akin,
Gump, Strauss, Hauer & Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d
106, 115 (Tex. 2009); City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).
We will sustain a legal sufficiency challenge when (a) there is a complete absence
of evidence of a vital fact, (b) the court is barred by rules of law or of evidence
from giving weight to the only evidence offered to prove a vital fact, (c) the
evidence offered to prove a vital fact is no more than a mere scintilla, or (d) the
evidence conclusively establishes the opposite of the vital fact. Merrell Dow
Pharm., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). “Evidence does not
exceed a scintilla if it is ‘so weak as to do no more than create a mere surmise or
suspicion’ that the fact exists.” Kroger Tex. Ltd. P’ship v. Suberu, 216 S.W.3d
788, 793 (Tex. 2006) (quoting Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601
(Tex. 2004)).
Even though there might be consequences to Eagle Oil as a result of Eagle
Oil’s failure to comply with the consultation provision in connection with the
sales of the interest, and there is evidence that it did fail, 5 as opposed to the
retention of an unpromoted working interest, Eagle Oil reminds us that we are to
measure the sufficiency of the evidence against the court’s charge as actually
given. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000) (the court’s charge
measures the sufficiency of the evidence when the opposing party does not object
to the charge). We note that the trial court generally instructed the jury that, “other
than the obligation of consultation contained in II.B. of the New Prospects
Agreement, the Agreement does not require either party to disclose specific
5
We do, however, agree with TRO-X that “consult” means more than “notify.” To consult means
“to have regard to; consider; to ask the advice or opinion of; to refer to.” MERRIAM-WEBSTER’S
COLLEGIATE DICTIONARY 268 (11th ed. 2004).
16
information to the other.” Specifically, in connection with Question No. 1, the trial
court instructed the jury that “Eagle [Oil] did not owe a duty to offer TRO-X an
opportunity to retain an unpromoted working interest for itself.”
There was no objection to the general instruction. TRO-X objected to
Question No. 1 in its entirety because it was not a broad-form submission. TRO-X
also objected to the instruction contained in Question No. 1 regarding Eagle Oil’s
lack of duty to offer TRO-X an opportunity to retain an unpromoted working
interest for itself because the instruction constituted a comment on the weight of
the evidence. The trial court overruled the objections. Although there were other
objections, there were none that are relevant to this appeal.
We hold that, under the charge as given, the evidence conclusively
establishes that, because there remained enough working interest after the sale for
TRO-X to exercise its right of retention to an unpromoted working interest up to
35%, Eagle Oil did not deprive TRO-X of its right to retain an unpromoted
working interest by selling to Eagle Partners on a promoted basis without
consulting TRO-X. Therefore, we sustain Eagle Oil’s no-evidence point contained
in Issue 1(b).
In Question No. 1(a), the jury was asked whether Eagle Oil failed to comply
with the agreement when it sent a certain letter to TRO-X. The letter has been
called a “washout” letter. Eagle Oil maintains that the letter does not constitute a
breach of the agreement as a matter of law. We have considered the letter and
agree. Other than various complaints that Eagle Oil set out regarding TRO-X’s
performance under the New Prospects and South Haley Agreements, a demand for
questioned expenses, and suggested ways to go forward, Eagle Oil does little more
than rehash the terms of the agreement as we have construed it. We sustain Eagle
Oil’s Issue 5(a).
17
Although there was some discussion in the briefs about certain cash
proceeds in the Chesapeake transaction, in Question No. 1(c), the trial court only
asked the jury whether Eagle Oil failed to comply with the agreement by
preventing TRO-X from acquiring its proportionate share of the overriding royalty
interest and back-in working interest acquired in the sale to Chesapeake. The jury
answered that Eagle Oil did.
Eagle Oil asserts in Issue 2(a) that there is no evidence to support a finding
that Eagle Oil prevented TRO-X from acquiring its interest in the overriding roy-
alty interest and in the back-in working interest because TRO-X had always held
the equitable title to the interest, which was retained, not acquired, in the
Chesapeake sale. Further, Eagle Oil maintains that, if TRO-X’s complaint is that
Eagle Oil did not assign the interest to TRO-X after the Chesapeake sale, the
evidence shows that TRO-X told Eagle Oil that TRO-X would not accept an
assignment. This is the question that the trial court asked the jury: “Did Eagle
[Oil] fail to comply with the Agreement . . . by preventing TRO-X from acquiring
its proportionate share of the overriding royalty interest and working interest back-
in acquired in the sale to Chesapeake?” The question was not whether Eagle Oil
failed to make an assignment of the interest to TRO-X. Because TRO-X always
held equitable title to those interests, Eagle Oil could not, as a matter of law,
deprive TRO-X of them. Further, for the same reason, the evidence conclusively
establishes that Eagle Oil did not deprive TRO-X of the interests. We sustain
Eagle Oil’s Issue 2(a).
In view of our rulings on the above issues, we need not consider any of
Eagle Oil’s other issues regarding breach of contract, waiver, or damages in
connection with TRO-X’s suit against Eagle Oil. We will discuss the issue of
attorney fees later in this opinion.
18
We now consider TRO-X’s appeal of the trial court’s judgment against
TRO-X and in favor of Eagle Partners.
After the trial court entered partial summary judgment in favor of Eagle
Partners, the only cause of action that remained against Eagle Partners was one for
tortious interference of the agreement between Eagle Oil and TRO-X. Before a
claimant can recover on a tortious interference claim, “it must produce some
evidence that the defendant knowingly induced one of the contracting parties to
breach its obligations under a contract.” All Am. Tel., Inc. v. USLD Commc’ns,
Inc., 291 S.W.3d 518, 532 (Tex. App.—Fort Worth 2009, pet. denied). The
claimant must present evidence that there has been a breach of the agreement. N.Y.
Life Ins. Co. v. Miller, 114 S.W.3d 114, 125 (Tex. App.—Austin 2003, no pet.).
As we have held, as a matter of law, Eagle Oil did not breach the agreement when
it sent the letter, did not deprive TRO-X of its right of retention by selling to Eagle
Partners on a promoted basis without first consulting with TRO-X, and did not
prevent TRO-X from acquiring its proportionate share of the overriding royalty
interest and back-in working interest acquired in the sale to Chesapeake. We have
also sustained Eagle Oil’s no-evidence issue and have found that, because a 50%
interest remained after the sale to Eagle Partners, the evidence conclusively
established that Eagle Oil did not deprive TRO-X of its right of retention in the
Eagle Partners transaction. Without a finding that Eagle breached the New
Prospects Agreement, TRO-X cannot recover against Eagle Partners in TRO-X’s
tortious interference claim.
In TRO-X’s appeal of the judgment against TRO-X and in favor of Eagle
Partners, TRO-X argues, in its first issue, that the trial court erred when it granted
partial summary judgment in favor of Eagle Oil on several of TRO-X’s claims
against Eagle Oil for breach of contract. The erroneous partial summary judgment,
TRO-X maintains, affected TRO-X’s ability to recover against Eagle Partners on
19
the tortious interference claim because the trial court limited the duties owed by
Eagle Oil in connection with the consultation provision of the agreement, such as
the duty to disclose specific information about third-party sales. However, as
Eagle Partners points out in a cross-point, TRO-X asserts no issue on appeal
challenging the summary judgment against TRO-X and in favor of Eagle Oil.
Because there is no sustainable finding of breach of the New Prospects
Agreement, TRO-X cannot recover on its tortious interference claim against Eagle
Partners. Further, the jury found that any alleged interference did not proximately
cause any damage to TRO-X. The cross-point is sustained, and TRO-X’s first
issue is overruled.
We have held that there was no sustainable finding of breach of the New
Prospects Agreement against Eagle Oil. We have also held that, in the absence of
such a finding, TRO-X cannot recover from Eagle Partners on TRO-X’s claim of
tortious interference. Therefore, we need not address Issues II, III, and IV raised
by TRO-X in its appeal from the take-nothing judgment in favor of Eagle Partners.
We now address the award of attorney fees. In Question No. 7, the jury was
asked to assess the amount of attorney fees to be awarded as damages up to
December 5, 2007. The jury found those fees to be $35,000. The trial court
instructed the jury not to answer the question unless it had found that Eagle Oil
breached the agreement when it mailed the letter of October 15, 2007. We have
held that Eagle Oil did not, as a matter of law, breach the agreement by sending the
letter. Further, there is no evidence that Eagle Oil damaged TRO-X when it sent
the letter. Nor was inquiry made of the jury of any such damages except for
attorney fees. In the absence of either a breach or damages caused by that breach,
the award of attorney fees of $35,000 cannot stand as this case was submitted to
the jury. We sustain Eagle Oil’s fifth issue.
20
In Question No. 10, the trial court asked the jury to find the “reasonable fee
for the necessary services of TRO-X’s attorneys for pursuing the breach of contract
claims” against Eagle Oil in connection with the Eagle Partners transaction and the
Chesapeake transaction. Because we have held that, as a matter of law, Eagle Oil
did not breach the agreement as submitted to the jury and that there was no evi-
dence to support a finding that Eagle Oil breached the agreement by selling a 50%
promoted working interest to Eagle Partners without consulting with TRO-X, the
part of the judgment awarding these attorney fees must be reversed. We sustain
Eagle Oil’s fourth issue.
We have considered all issues necessary to the disposition of this appeal.
We reverse that portion of the trial court’s judgment wherein it held that Eagle Oil
had breached the New Prospects Agreement as found by the jury in Question
Nos. 1(a), 1(b), and 1(c). We render judgment that TRO-X take nothing in that
regard from Eagle Oil. We affirm the judgment that TRO-X take nothing from
Eagle Partners because there could be no interference without a breach of the
agreement by Eagle Oil. The trial court approved the findings in the court-ordered
accounting. We render judgment that TRO-X recover the sum of $379,788.80
($1,064,789.45 due to TRO-X less $685,000.65 in expenses due to Eagle Oil) as
shown by the accounting. We reverse the award of attorney fees and render
judgment that TRO-X take nothing in this appeal for attorney fees.
October 31, 2013 TERRY McCALL
Panel consists of: Wright, C.J., JUSTICE
McCall, J., and Hill. 6
Willson, J., not participating.
6
John G. Hill, Former Chief Justice, Court of Appeals, 2nd District of Texas at Fort Worth, sitting
by assignment.
21