Basin Operating Co., Ltd. v. Valley Steel Products Co., No. 20504

• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas
• Writing for the Court: Before GUITTARD; GUITTARD
• Citation: 620 S.W.2d 773
• Parties: BASIN OPERATING CO., LTD., et al., Appellants, v. VALLEY STEEL PRODUCTS CO., Appellee.
• Decision Date: 20 July 1981
• Docket Number: No. 20504

Page 773

620 S.W.2d 773 BASIN OPERATING CO., LTD., et al., Appellants,
v.
VALLEY STEEL PRODUCTS CO., Appellee. No. 20504. Court of Civil Appeals of Texas, Dallas. July 20, 1981.
Rehearing Denied Sept. 10, 1981.

Page 774

Tom B. Ramey, Jr., Mike Hatchell, Ramey, Flock, Hutchins, Jeffus, McClendon & Crawford, Tyler, for appellants.

James A. Kilgore, Kilgore & Kilgore, Dallas, for appellee.

Before GUITTARD, C. J., and AKIN and STOREY, JJ.

GUITTARD, Chief Justice.

This litigation began as a suit by Valley Steel Products Company against Basin Operating Company, Ltd. for a debt arising from Basin's purchase of certain pipe used in drilling oil and gas wells. This claim is not disputed except with respect to Basin's liability for prejudgment interest. The principal question in the case arises from Basin's counterclaim for breach of warranty with respect to other pipe purchased by Basin from a third party, which, in turn, ordered it from Valley. Certain individuals designated "third-party plaintiffs" (although they are more nearly in the position of intervenors) joined with Basin in the counterclaim, apparently on the theory that as investors and owners along with Basin of the well in which the warranted pipe was used, they were the real parties in interest in purchasing the warranted pipe and in claiming damages for breach of the warranty. A jury trial on the issues raised by the counterclaim resulted in a verdict favorable to Basin and its investors. The court rendered judgment for Valley against Basin on the main claim, together with prejudgment interest, but disregarded certain jury findings and rendered judgment for Basin and its investors in an amount unsatisfactory to them. Valley has filed cross-points asserting that all recovery on the counterclaim should be denied. We conclude that the court erred in disregarding the jury findings. Consequently, we reverse the judgment and remand the cause with instructions to render judgment on the verdict.

Factual Background

The principal controversy is raised by disputed inferences and opinions based on facts established without dispute. Basin is a limited partnership which undertook the drilling of a well in the Douglas Field in Nacogdoches County. The "third-party plaintiffs" had invested in this enterprise, but were not members of the limited partnership. Because of the depth of the proposed well and certain techniques anticipated for fracturing the gas-bearing formation, Basin required pipe capable of withstanding high internal pressures. It ordered the pipe from Bell Supply Company, which, in turn, ordered it from Valley. On a direct inquiry by Basin's engineer, Valley's representative gave assurance that the pipe ordered was a grade of pipe capable of withstanding high internal pressures. Valley delivered the pipe directly to Basin. Each joint of pipe was stenciled "Test 7,000."

After the well was drilled to the prescribed depth, the pipe was cemented in the hole. When a preliminary pressure test was made, one joint of the pipe burst at approximately 4,400 pounds per square inch. At some expense the failed joint, which was above the cemented section, was cut out,

Page 775

and the pipe was reconnected. Another test was undertaken, with similar results. Basin then removed and replaced most of the pipe above the cement, but decided that since it could not remove the cemented pipe, the high-pressure fracturing operation could not be safely carried out. Accordingly, it undertook a diminished fracturing operation at a lower pressure. This operation was not successful in obtaining production in paying quantities. Consequently, Basin abandoned operations at that depth and completed a shallower well producing a relatively small volume of gas. The counterclaim asserts damages for the cost of repairing the damages caused by the failure of the pipe on the two tests and also for its loss of the income which it would have realized from the well if the fracturing operation had been accomplished as originally planned.

In response to special issues, the jury found that Valley failed to test the pipe at seven thousand pounds per square inch pressure before delivering it to Basin (issue seven), that the bursting of the pipe on the pressure tests was a proximate cause of Basin's inability to complete the well as a commercial gas well at the depth originally planned (issue eight), that $150,000 would reasonably compensate Basin for its inability to complete the well as a commercial gas well at that depth (issue nine), and that the reasonable and necessary cost to Basin of the remedial work done on the well as a proximate result of the bursting of the pipe was $61,000 (issue ten).

Valley filed a "motion for relief with respect to judgment," asserting that the jury's findings in answer to issues seven, eight, and nine should be disregarded for lack of evidence to support them and, accordingly, that Basin and its investors be denied recovery of the $150,000 damages found. The motion prays that any recovery of damages because of the remedial work be limited to approximately $56,000.

The trial court granted Valley's motion, denied recovery of the $150,000 damages found by the jury, but rendered judgment for Basin and its investors in proportion to their interests for $54,634.23 and for an attorney's fee in an amount found by the...