Burke v. Union Pacific Resources Co.

• Decision Date: 16 April 2004
• Docket Number: No. 06-02-00183-CV.,06-02-00183-CV.
• Citation: 138 S.W.3d 46
• Parties: Russell BURKE and Wife, Lori Burke, and Bob Anderson, as Chapter 7 Bankruptcy Trustee, Appellants v. UNION PACIFIC RESOURCES COMPANY, N/K/A Anadarko E & P Company, Palestine Water Well Service, Inc. and Jere Pritchett, Appellees. Union Pacific Resources Company, N/K/A Anadarko E & P Company, Appellant v. Russell Burke and Wife, Lori Burke, and Bob Anderson, as Chapter 7 Bankruptcy Trustee, Palestine Water Well Service, Inc. and Jere Pritchett, Appellees.
• Court: Texas Court of Appeals

138 S.W.3d 46

Russell BURKE and Wife, Lori Burke, and Bob Anderson, as Chapter 7 Bankruptcy Trustee, Appellants v. UNION PACIFIC RESOURCES COMPANY, N/K/A Anadarko E & P Company, Palestine Water Well Service, Inc. and Jere Pritchett, Appellees.

Union Pacific Resources Company, N/K/A Anadarko E & P Company, Appellant v. Russell Burke and Wife, Lori Burke, and Bob Anderson, as Chapter 7 Bankruptcy Trustee, Palestine Water Well Service, Inc. and Jere Pritchett, Appellees.

No. 06-02-00183-CV.

Court of Appeals of Texas, Texarkana.

Submitted March 31, 2004.

Decided April 16, 2004.

Opinion Overruling Rehearing June 9, 2004.

Appeal from the 4th Judicial District Court, Rusk County, J. Clay Gossett, J Ron Adkison Wellborn, Houston, et al., Henderson, and John R. Mercy, Mercy, Carter & Tidwell, LLP, Texarkana, TX, for Russell Burke & wife Lori Burke.

David M. Gunn, Beck, Redden & Secrest, LLP, Houston, Michael G. Carroll, Michael G. Carroll, PC, Tyler, for Union Pacific Resources Company (n/k/a Anadarko E & P Company).

Daniel F. Dean, Dean Coe & Associates, PC, Palestine, for Palestine Water Well Service, Inc. and Jere Pritchett.

Before MORRISS, C.J., ROSS and CARTER, JJ.

OPINION

Opinion by Justice CARTER.

In the fall of 1997, Union Pacific Resources Company (UPRC) conducted a seismic survey consisting of most of Rusk County. After the survey had been conducted Russell and Lori Burke noticed their recently drilled water well was producing an excessive amount of sand. The sand caused decreased weight gain on their feedlot cattle and caused over 1,000 of the cattle to die. After they were forced into bankruptcy, Russell and Lori Burke and Bob Anderson, the bankruptcy trustee (herein collectively "the Burkes"), sued UPRC and Palestine Water Well Service, Inc. (PWW). After a jury trial, the trial court rendered judgment against UPRC, awarding the Burkes $1.5 million and awarding PWW $200,000.00. The Burkes appeal the judgment of the trial court, and UPRC cross-appeals. We render a take-nothing judgment concerning PWW's tortious interference claim and suggest a remittitur concerning the Burkes' breach of contract claim.

The Burkes raise the following three issues on appeal:

1) Where the evidence shows that the water well was eventually repaired and some water service restored, was it error for the jury to find that the injury to the Burkes was permanent?

2) Where the expert only discovered that the seismic blasting damaged the well in December 2001, was it error for the jury to find that the Burkes should have discovered it on January 1, 1998?

3) Where there was uncontroverted evidence concerning attorney's fees, was it error for the jury to find that the Burkes were not entitled to recover attorney's fees?

Union Pacific Resources Company, n/k/a Anadarko E & P Company, presents eleven issues on appeal. UPRC's issues are as follows:

1) Did the Burkes prove their right to recover from UPRC on a breach of contract theory based on the testing permit (PX-17)?

2) Did the Burkes prove their right to recover from UPRC as purported third-party beneficiaries of the indemnity contract (PX-99) between UPRC and Schlumberger?

3) Is there an adequate pleading by the Burkes to support recovery of consequential damages?

4) Is there sufficient evidence of the Burkes' direct damages?

5) Is there sufficient evidence to support a total damage award of $1.5 million?

6) Is UPRC entitled to a credit for the Schlumberger settlement?

7) Does the two-year statute of limitations bar PWW's claims for tortious interference?

8) Does the lack of a pleading prevent PWW from recovering for tortious interference with prospective relations?

9) Is there sufficient evidence to support either of PWW's claims for tortious interference?

10) May PWW recover attorney's fees or expert witness fees as tort damages?

11) Is there sufficient evidence of malice by UPRC toward PWW?

Facts

In the fall of 1997, the Burkes decided to open their own feedlot cattle preconditioning operation. Russell Burke was familiar with the business, having worked with his father for many years in a similar operation. Dr. Christopher Grotegut testified that he was familiar with Russell Burke and his father and that they had been in the business a long time. The Burkes purchased ninety-four acres in Laneville, Texas, and began to develop a preconditioning feedlot operation.

Most cattle ranchers in this region of Texas have small operations. Due to their small size, it is not always profitable to precondition calves. A feedlot cattle preconditioning operation obtains calves from numerous operations and provides vaccinations and other care in a low stress environment until the calves' immune systems are strong enough to fight diseases and stress on their own. It is essential to a preconditioning operation that quality water be made available to nurture the calves. Poor hydration will cause the cattle to have decreased appetites and result in reduced weight gain. Proper hydration will decrease the frequency and effect of diseases. Poor hydration will, however, prevent drugs from treating diseases as well as they should. The Burkes' operation involved cattle that they owned outright, cattle that they partnered with others, and cattle that they fed for customers.

In order to obtain an adequate water supply, the Burkes contracted with PWW to drill a water irrigation well. PWW and the Burkes selected a location for the well based on PWW's knowledge of the Laneville area and its sand formations. PWW started drilling the well on November 17, 1997, and completed the well on November 21, 1997. While PWW was in the process of drilling the well, it noticed some seismic testing operations approaching the area.

On September 22, 1997, the Burkes gave permission for seismic testing of their ninety-four acres. Seismic testing is a method of exploring for hydrocarbons under the ground. Schlumberger Technology Corporation (Schlumberger) performed the seismic testing on behalf of UPRC, which involved thirty-six square miles and lasted several months. Seismic testing involves drilling a shot hole, placing charges in the hole, and collecting readings of the waves created by the detonation of the explosives.

Due to his previous oil field experience, Jere Pritchett, an employee of PWW, became concerned about the effect of the seismic testing on the well. Pritchett stopped the drilling of the well and informed the seismic crew about the well. Some of the seismic crew came to the well site and discussed the situation with Pritchett. The Burkes did not want to stop drilling the well because they had to get the feedlot operating in order to make payments on their obligations. Schlumberger agreed to move their explosive charges away from the well so as not to damage it.

Schlumberger obtained an agreement from UPRC to pay for any damage to the well caused by the seismic testing. Bennie Bates, the field project manager, signed the agreement on behalf of UPRC. John Gibson, the project manager, testified he authorized Bates to execute the agreement.

When PWW finished the well, it produced clean water without any sand. The Burkes did not install a pump until January 1998. After the well had been drilled, but before the pump was installed, Schlumberger performed the blasting. After the blasting, the Burkes and Pritchett noticed the well pad had been "uplifted" three to four inches above the ground. When the pump was activated, there was sand in the water. The well eventually began producing parts of the gravel pack intended to filter out the sand. This indicated that the gravel pack and screen had been broken. The sand production became so bad that the 900-gallon holding tank and automatic watering troughs would fill with sand. Sometimes the watering troughs needed to be cleaned out fifteen to twenty times a day. The Burkes installed two sand separators in an attempt to filter out the sand. Initially, Burke and PWW were unable to determine the cause of the problem.

Eventually, the parties discovered that the seismic crews had detonated charges closer to the well than discussed earlier and had increased the magnitude of the charges. Three of the charges had been detonated in violation of the safe distance guidelines that UPRC had developed for another project.

The cattle being raised by the Burkes had abnormally high rates of pneumonia and mortality. The cattle gained less weight than expected. Further, out of the first 500 cattle brought to the operation, approximately 125 died. The Burkes brought in an expert to evaluate the operation, who determined the only major problem with the operation was the sand in the water. The Burkes repaired the well by having Travis Russell place a patch on the gravel pack. However, the repaired well only produced approximately one half its original volume. On December 4, 2001, it was discovered that UPRC had moved the holes closer to the well rather than farther away from it.

Out of the 14,000 cattle which had been conditioned by the operation, approximately 1,300 died. On average, a feedlot will have two percent of the calves die from natural causes. Dr. Grotegut testified the Burkes' excessive losses were tied directly to the water problems. In an attempt to maintain good relations with their customers, the Burkes replaced 500 of the cattle with their own money. The Burkes sold their home and borrowed additional money for the replacements. Of the cattle that survived, the Burkes had higher medical expenses and feed costs. The cattle ended up with a weight gain of only 1.5 pounds per day, rather than the 2.5 pounds which the Burkes had expected. Because the income from the feedlot was based on weight gain, the Burkes lost approximately $25.00 per head on the surviving cattle.

Eventually, the Burkes declared bankruptcy. On December 29, 1999, the Burkes and the bankruptcy trustee sued PWW for negligence, violations of the Texas Deceptive Trade Practices...