C & C Partners v. Sun Exploration and Production Co.

• Decision Date: 29 December 1989
• Docket Number: No. 05-89-00185-CV,05-89-00185-CV
• Citation: 783 S.W.2d 707
• Parties: C & C PARTNERS, Eugene E. Caldwell, William E. Campbell, Campbell Company, Ltd., C & C Partners 1983 Drilling Fund, C & C Partners--1983A, C & C Partners--1983B, C & C Partners--1983C, C & C Partners--1983D, and C & C Partners--1983E, Appellants, v. SUN EXPLORATION AND PRODUCTION COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 707

783 S.W.2d 707

C & C PARTNERS, Eugene E. Caldwell, William E. Campbell Campbell Company, Ltd., C & C Partners 1983 Drilling Fund, C & C Partners--1983A, C & C Partners--1983B, C & C Partners--1983C, C & C Partners--1983D, and C & C Partners--1983E, Appellants, v. SUN EXPLORATION AND PRODUCTION COMPANY, Appellee.

No. 05-89-00185-CV.

Court of Appeals of Texas Dallas.

Dec. 29, 1989.

Rehearing Denied Feb. 6, 1990.

Jerome J. Schiefelbein, La Jolla, Cal., G. Leroy Street, John T. Palter, Gregg A. Cooke, Dallas, for appellants.

Cynthia Hollingsworth, Joe B. Harrison, David Gibson, Dallas, for appellee.

Before STEWART, ROWE and BURNETT, JJ.

OPINION

ROWE, Justice.

C & C Partners, Eugene E. Caldwell, and others (hereinafter referred to as C & C or Caldwell) appeal from an adverse judgment rendered in a suit filed by Sun Exploration and Production Company. Sun had asserted claims of breach of contract and fraudulent misrepresentation. C & C, by means of a counterclaim, alleged that Sun had violated the Texas Deceptive Trade Practices Act (DTPA). On appeal, C & C raises a number of points of error regarding the DTPA counterclaim, contractual consent, legal and factual sufficiency of evidence, the grant of a partial summary judgment, the fraudulent misrepresentation claim, prejudgment interest, and the proper parties to the lawsuit. With respect to the judgment for fraud, we reverse and render a take nothing judgment; as to prejudgment interest, we reverse and remand for further proceedings; in all other respects, we affirm the judgment of the trial court.

FACTS

Caldwell, on behalf of C & C Partners, entered into three exploration and joint operating agreements with Sun. According to the exploration agreements, C & C Partners and Sun agreed to jointly participate in oil and gas operations in three drilling prospects, the "East Wilson Creek," the "South Alamo," and the "Atlee." The terms of the agreements provided that Sun would drill a test well on each prospect. C & C agreed to pay 66.67 percent of all costs of drilling a test well to casing point. ¹ After casing point, all costs, other than plugging, abandonment, and surface restoration costs, were to be borne 50 percent by Sun and 50 percent by C & C, "subject to the right of any party to elect to go non-consent pursuant to the terms and provisions of [the] Operating Agreement." If no completion attempt of a test well was made, costs of plugging, abandoning, and surface restoration were to be borne 66.67 percent by C & C and 33.33 percent by Sun. If attempts to complete a test well were unsuccessfully made, resulting in a dry hole, C & C and Sun would each bear 50 percent of the costs after casing point. If a test well could not reach contract depth, the parties could mutually agree to drill a substitute well. The operating agreement covering the South Alamo prospect had a provision allowing the drilling of additional wells in order to earn acreage.

The initial test wells drilled on the South Alamo and Atlee prospects were named Booth No. 1 and Dietert No. 1 respectively. The test well on the East Wilson Creek prospect was originally proposed to be located on a certain lease but was later moved to another lease and renamed Union Carbide No. 1. The Union Carbide No. 1 sustained a partial blowout, and a substitute well called Union Carbide No. 1-A was drilled on the East Wilson Creek Prospect. Two additional wells were drilled on the South Alamo prospect in order to earn more acreage. They were named Whitley No. 1 and Dooley No. 1.

Sun sued C & C to recover C & C's unpaid share of the drilling and plugging costs for the Union Carbide No. 1, the completion costs for the Booth No. 1 and the Dietert No. 1, and the drilling and completion costs for the Union Carbide No. 1-A, the Whitley No. 1, and the Dooley No. 1. C & C denied liability and counterclaimed for damages under the Texas Deceptive Trade Practices Act. See TEX.BUS & COM.CODE ANN. §§ 17.41-17.63 (Vernon 1987). The trial court granted a partial summary judgment in Sun's favor with respect to the costs attributable to the completion and first fracture stimulation of the Booth well. After the presentation of all the evidence, the trial court granted an instructed verdict in Sun's favor on C & C's DTPA counterclaim on the ground that C & C and the other defendants were not consumers as defined by the DTPA. Based on the jury's findings, the trial court rendered judgment in favor of Sun for breach of contract and fraudulent misrepresentation and awarded actual damages, punitive damages, prejudgment interest, and attorneys' fees. C & C's motion for new trial was overruled.

DTPA COUNTERCLAIM

In its first two points of error, C & C contends that the trial court erred in granting Sun's motion for instructed verdict with respect to C & C's DTPA counterclaim. C & C argues that fact issues existed as to its status as a consumer and that Sun failed to establish as a matter of law that C & C and the other appellants were not consumers.

One may not be subjected to a private suit for damages under the DTPA unless the allegedly aggrieved party is a consumer. One who maintains a private lawsuit under section 17.50 of the DTPA (providing a private right of action for consumers) must be a consumer as defined in section 17.45(4). Riverside Nat'l Bank v. Lewis, 603 S.W.2d 169, 173 (Tex.1980); see TEX.BUS. & COM.CODE ANN. § 17.50 (Vernon 1987). Under the DTPA, a consumer is defined, in pertinent part, as "an individual, partnership, [or] corporation ... who seeks or acquires by purchase or lease, any goods or services." TEX.BUS. & COM.CODE ANN. § 17.45(4) (Vernon 1987). A plaintiff establishes his standing as a consumer in terms of his relationship to a transaction, not by a contractual relationship with the defendant. Birchfield v. Texarkana Memorial Hosp., 747 S.W.2d 361, 368 (Tex.1987). In order to establish its status as a consumer under the DTPA, a plaintiff must show (1) that it sought or acquired goods or services by purchase or lease and (2) that the goods or services purchased or leased form the basis of the complaint under the DTPA. Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 351-52 (Tex.1987).

C & C contends that it purchased services and materials from Sun and that it was, therefore, a consumer. Based on this contention, C & C argues that the trial court erred in granting Sun's motion for instructed verdict regarding C & C's DTPA counterclaim.

In reviewing the propriety of an instructed verdict, we determine whether there is any evidence of probative force to raise fact issues on the material questions presented. We consider all of the evidence in the light most favorable to the party against whom the verdict was instructed, disregarding all contrary evidence and inferences. Henderson v. Travelers Ins. Co., 544 S.W.2d 649, 650 (Tex.1976). An instructed verdict is proper if the evidence proves conclusively the truth of fact propositions which, under the substantive law, establish the right of the movant, or negate the right of his opponent, to judgment. Fort Worth State School v. Jones, 756 S.W.2d 445, 446 (Tex.App.--Fort Worth 1988, no writ); Riley v. Powell, 665 S.W.2d 578, 580 (Tex.App.--Fort Worth 1984, writ ref'd n.r.e.). A directed verdict is warranted when the evidence is such that no other verdict can be rendered and the moving party is entitled, as a matter of law, to judgment. Wright v. General Motors Corp., 717 S.W.2d 153, 155 (Tex.App.--Houston [1st Dist.] 1986, no writ).

The evidence, viewed in the light most favorable to C & C, showed that C & C was billed for its share of administrative costs incurred by Sun, including the administrative costs associated with engineers, geologists, maintenance of buildings, and accounting. The joint operating agreements provided that the joint account of the operator (Sun) and the nonoperators (C & C) would be charged for items such as the labor costs of Sun's field employees, for the materials purchased or furnished for use on the prospect properties, and for the costs of services provided by contract personnel on the prospect properties.

Sun contends that Hamilton v. Texas Oil & Gas Corp., 648 S.W.2d 316 (Tex.App.--El Paso 1982, writ ref'd n.r.e.), controls this case and establishes that C & C was not a DTPA consumer as a matter of law. The Hamilton case involved a suit between an operator (TXO) and a nonoperator working interest owner who had entered into a joint operating agreement. TXO sued to collect the nonoperator's share of drilling costs. The nonoperator denied liability and counterclaimed for damages for alleged deceptive trade practices. These facts are virtually identical to the facts of the instant case, Sun being the operator and C & C being the nonoperator.

In the Hamilton case, the trial court disregarded the jury finding that the nonoperator was a consumer within the meaning of section 17.45(4) of the DTPA. Hamilton, 648 S.W.2d at 321-22. On appeal, the nonoperator argued that TXO had rendered operator's services to the nonoperator and had been paid for those services. Those services included directing and controlling all operations, paying costs, and providing management, bookkeeping, and supervision. Id. at 322. We conclude that the services rendered by TXO in the Hamilton case were of the same character as the services rendered by Sun in this case. Those services were basically administrative, managerial, and supervisory.

The Hamilton court determined that:

TXO was simply reimbursed for costs incurred on behalf of the operating and non-operating interest owners. [The nonoperator] did not employ TXO. Rather, there was merely a consolidation of interests. TXO was the "front man" incurring the debts for all, for which it was entitled to be reimbursed. That TXO did not intend to make a profit for what it did is a factor to be weighed.... The purpose of operating agreements, being to spread the risk of drilling operations...