Calpetco 1981 v. Marshall Exploration, Inc.

Decision Date26 April 1993
Docket NumberNo. 92-4274,92-4274
Citation989 F.2d 1408
PartiesCALPETCO 1981, a Limited Partnership, et al., Plaintiffs-Appellants, v. MARSHALL EXPLORATION, INC., et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

James Michael, pro se.

Carl D. Rosenblum, Tracy R. Bishop, Judith V. Windhorst, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, LA, for plaintiffs-appellants.

David C. Godbey, Willis E. Gresham, Theodore Stevenson, III, Hughes & Luce, Dallas, TX, for defendants-appellees.

Appeal from the United States District Court for the Eastern District of Texas.

Before WILLIAMS, HIGGINBOTHAM, and BARKSDALE, Circuit Judges.

BARKSDALE, Circuit Judge:

The instant dispute between the non-operator and operator in a series of oil and gas drilling ventures turns for the most part on the burdens of proof and standard for summary judgment. Also in issue are bench trial findings of fact. We AFFIRM.

I.

James Michael began oil and gas investments for himself and his law partners in 1967. He developed a structure for the investments, whereby he would form a business entity to serve as the general partner in a series of limited partnerships, with the investors as the limited partners. Those partnerships, some bearing the name "Calpetco" (the prior Calpetco entities), invested with numerous oil and gas operators.

In 1979, Michael met Quinton Carlile, President and CEO of Marshall Exploration, Inc.; and, after some discussion, the prior Calpetco entities began investing with Marshall. These investments were quite successful, and continued until 1981. That year, Michael incorporated Calpetco Enterprises, which was wholly owned by him. Calpetco Enterprises and Michael became the general partners in a series of limited partnerships (the Calpetco partnerships) formed to invest in the drilling, development, and operation of oil and gas wells. It was Michael's intention that a major portion of the partnership funds would be invested with Marshall, and he again engaged in discussions with Carlile regarding Marshall's drilling program and billing practices.

In June 1981, Marshall and Calpetco 1981 (one of five Calpetco partnerships in this litigation) entered into an operating agreement, which was to be read in conjunction with investment-specific letter agreements to govern the drilling, completion, and production of each well or group of wells. Exhibit "C" to the Operating Agreement is standard accounting procedures, 1 which provide that Calpetco may pay charges from Marshall without prejudice to its right to later contest their validity. However, all bills and statements issued in the course of a calendar year are "conclusively ... presumed to be true and correct" 24 months after the end of the calendar year in which they were rendered unless, within those 24 months, the non-operator (Calpetco) "takes written exception thereto and makes claim on Operator [Marshall] for adjustment".

The accounting procedures also allowed Calpetco to audit Marshall's accounts and records within the 24-month adjustment period. Audits were to be conducted at Calpetco's expense, and did not extend the time for filing written exceptions and demands for adjustment. In case of conflict between the terms of any of these documents, the Operating Agreement controlled the accounting procedures, and both were controlled by the applicable letter agreement.

The Calpetco partnerships entered into 73 letter agreements with Marshall, representing investment in 55 wells. Some of these wells enjoyed less success than Michael's earlier investments with Marshall; and in September 1982, Michael began to express his concerns to Carlile. Michael (also a party to this litigation, see note 2 infra ) contends that, by early 1985, he began to seriously question representations Marshall had made to him between 1981 and 1984, which he contends induced his participation in the various ventures. That April, he began to review certain charges and request documentation from Marshall. Extensive communication continued for almost two years, with Calpetco asserting overcharges by Marshall, and Marshall asserting that some of the Calpetco partnerships had not paid amounts due. Marshall did conduct at least a partial review of the Calpetco accounts and some adjustments were made.

After unsuccessful attempts at settlement, Marshall filed this action in April 1987 against five Calpetco partnerships, 2 seeking, inter alia, a declaration that charges questioned by Calpetco were conclusively presumed correct. Calpetco responded with 16 counterclaims 3 against Marshall and five additional third party defendants, 4 based primarily on alleged misrepresentations and overcharges.

Following more than three years of extensive discovery, Marshall moved for partial summary judgment in January 1991, on the grounds that many of Calpetco's claims were barred by either the contractual 24-month adjustment period or the Texas four-year statute of limitations for breach of contract claims. In response, Calpetco contended that (1) the contractual and statutory limitation periods should be tolled because Marshall had fraudulently concealed its overcharges, preventing Calpetco from discovering its claims in a timely manner; (2) there were genuine issues of material fact on whether Marshall waived, or was estopped from asserting, the 24-month limitation; and (3) in any event, the accounting procedures did not apply to costs incurred before a well reached contract depth. A conclusory affidavit by Michael was filed with the response. 5 After a hearing at the end of February, 6 the district court granted the motion in mid-March 1991, concluding that the accounting procedures were "clear and unambiguous" and governed "the procedures for charges and credits for the entire project", and that Calpetco failed to produce sufficient evidence to show a genuine issue of material fact on its claims of fraudulent concealment, waiver and estoppel.

In April 1991, Calpetco moved for reconsideration or clarification, or in the alternative, certification for interlocutory appeal. In support, it submitted a second affidavit by Michael, with 37 attachments, chronicling the 1982 through 1987 correspondence between Marshall and Calpetco. Shortly thereafter, Marshall filed a fourth motion for partial summary judgment, 7 seeking rulings (1) that Calpetco did not timely object to any of the challenged charges (alleged overcharges), and (2) that therefore, all are "conclusively presumed true and correct", and at trial, Calpetco could not challenge those charges for any purpose. Because the court considered both motions "really ... one in the same", they were heard together. Marshall's was granted; Calpetco's, denied.

All remaining claims (including negligence, gross negligence, and over 30 alleged misrepresentations 8) were heard in a four-day bench trial in December 1991. In accordance with the partial summary judgment on the fourth motion, the court excluded all evidence of overcharges. At the close of Calpetco's (the plaintiff's) case, 9 and on motion by Marshall, the court, pursuant to newly-amended Fed.R.Civ.P. 52(c), made a series of findings and ruled against Calpetco on several of its claims. 10 Following trial, and pursuant to findings of fact and conclusions of law, the court ruled against Calpetco on all remaining claims. 11

II.

Calpetco raises numerous points of error, including the partial summary judgments, denial of its motion for reconsideration, and rulings on several of its Texas DTPA and Securities Act claims.

A.

In challenging the first partial summary judgment, Calpetco asserts, inter alia, error in the district court's interpretation of the contractual language, and its refusal to toll the 24-month adjustment period and statute of limitations on the basis of fraudulent concealment, or bar reliance on the accounting procedures under the doctrines of waiver or estoppel. 12 Of course, we review a summary judgment de novo, applying the same standard used by the district court. E.g., Skotak v. Tenneco Resins, Inc., 953 F.2d 909 (5th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 98, 121 L.Ed.2d 59 (1992).

1.

The agreement between Calpetco and Marshall consists of two documents: the letter agreement for each investment and the Operating Agreement (with its accounting procedures), adopted by each letter agreement. As with any set of documents executed at the same time, with the same purpose and in the course of the same transaction, we construe the agreements together. Jim Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 327 (Tex.1984). In doing so, we find no ambiguity, and agree with the district court's ruling that the accounting procedures "govern the procedures for charges and credits for the entire project".

Calpetco contends that, under the controlling letter agreement, the Operating Agreement applies only after each well is drilled to contract depth, and therefore, any invoices submitted for costs incurred in the drilling phase are not governed by the accounting procedures. This interpretation is reasonable, Calpetco says, because in most cases the drilling costs were turnkeyed 13 and, in others, the letter agreements explain the costs to contract depth. Thus, there is no need for an accounting procedure at the drilling stage.

The letter agreement language on which Calpetco relies states, however, that the Operating Agreement "shall govern operations on the Subject Leases after the test well has been drilled to contract depth". (Emphasis added.) This is distinctly different from stating that it does not even take effect until that time. To the contrary, it is clear that the Operating Agreement is applicable from the time each letter agreement is signed. The Operating Agreement states that it "shall be retroactive to date of first operations, including drilling and first production". The accounting procedures specifically address billing for overhead...

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