Cap Rock Elec. Co-op., Inc. v. Texas Utilities Elec. Co., 08-93-00061-CV

• Decision Date: 02 February 1994
• Docket Number: No. 08-93-00061-CV,08-93-00061-CV
• Citation: 874 S.W.2d 92
• Parties: Util. L. Rep. P 26,407 CAP ROCK ELECTRIC COOPERATIVE, INC., Appellant, v. TEXAS UTILITIES ELECTRIC COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 92

874 S.W.2d 92

Util. L. Rep. P 26,407

CAP ROCK ELECTRIC COOPERATIVE, INC., Appellant, v. TEXAS UTILITIES ELECTRIC COMPANY, Appellee.

No. 08-93-00061-CV.

Court of Appeals of Texas El Paso.

Feb. 2, 1994.

Opinion Overruling Motion for

Rehearing April 7, 1994.

James P. Boldrick, Boldrick, Clifton, Nelson & Holland, Midland, for appellant.

Rick D. Davis, Jr., Charles Tighe, Cotton, Bledsoe, Tighe & Dawson, Midland, M.D. Sampels, Worsham, Forsythe, Sampels & Wooldridge, L.L.P., Dallas, for appellee.

Before BARAJAS, C.J., and KOEHLER and LARSEN, JJ.

OPINION

BARAJAS, Chief Justice.

This is an appeal from a final judgment in a declaratory judgment action granting summary judgment in favor of Appellee, Texas Utilities Electric Co., denying summary judgment for Appellant, Cap Rock Electric Cooperative, Inc., and imposing sanctions on Appellant. In ten points of error, Appellant attacks the entry of summary judgment, as well as the imposition of sanctions. We affirm the judgment of the trial court.

I. SUMMARY OF THE PROCEEDINGS

Texas Utilities Electric Company, Appellee, is an electric utility company which provides electric service to a large portion of the State of Texas. Cap Rock Electric Cooperative, Inc., Appellant, is a rural electric distribution cooperative which services customers in West Texas. Appellant owns no facilities for the generation of electric power and has long purchased all of its customers' power and energy requirements from TU Electric.

In 1990, TU Electric and Appellant negotiated and executed a new contract, the 1990 Power Supply Agreement (1990 PSA), for the purchase of power by Appellant from TU Electric. The 1990 PSA expressly provided that it would not become effective until Appellant terminated the prior contract governing such purchases. The enforceability of the 1990 PSA is the central issue in this case.

The dispute in the instant case centers around the quantity of power Appellant is required to purchase from TU Electric under the terms of their 1990 PSA. Appellant, believing that the 1990 PSA gave it the right, but not the obligation, to purchase all of its power requirements from TU Electric, advised TU Electric that it was terminating the prior agreement and would begin to purchase a significant percentage of its power from other providers. The termination of the prior agreement is not an issue in this appeal. TU Electric responded that, in its opinion, the 1990 PSA was a full-requirements contract and Appellant could not purchase power elsewhere without following the procedures detailed in that agreement.

Appellant subsequently filed an action seeking a declaration that the 1990 PSA is not a binding and enforceable contract, or in the alternative, that the contract is not a full-requirements contract. Appellant additionally sought injunctive relief preventing TU Electric from taking any action to interfere with or prevent Appellant from receiving electricity from any other source. TU Electric answered and filed a counterclaim seeking a declaration that the 1990 PSA is an enforceable full-requirements contract, and also seeking specific performance of that agreement. A hearing was held on Appellant's request for injunction, with the trial court denying the requested injunctive relief.

Subsequent to the injunction hearing, both parties filed motions for sanctions against the other for alleged misconduct during the hearing. Both parties also filed motions for summary judgment on the contract interpretation issue and stipulated that all testimony, documents, exhibits, or other evidence admitted into evidence at the hearing on Appellant's application for injunction be before the trial court in support of or opposition to summary judgment as if such evidence were contained in an affidavit filed in accordance with TEX.R.CIV.P. 166a.

After yet another hearing, the trial court granted TU Electric's motion for summary judgment, ruling that the 1990 PSA is an unambiguous, fully enforceable, full-requirements contract and denied Appellant's motion for summary judgment. The trial court additionally imposed sanctions on Appellant for its misconduct during the injunction hearing and awarded attorney's fees to TU Electric. Finally, the trial court granted TU Electric's Motion for Severance, severing TU Electric's cause of action for specific performance of the 1990 PSA, and assigning that cause of action a separate docket number. The judgment signed by the trial court thus disposed of all issues and parties and, as such, is a final appealable judgment. See Teer v. Duddlesten, 664 S.W.2d 702, 703 (Tex.1984); Jackson v. Coldspring Terrace Property Owners Ass'n, 838 S.W.2d 320, 322 (Tex.App.--El Paso 1992, no writ).

II. DISCUSSION

A. Sanctions

In Point of Error No. Six, Appellant asserts that the trial court erred in assessing sanctions against it. Specifically, Appellant contends that there was legally or factually insufficient evidence to support the trial court's finding that it or its representatives intentionally mislead the court or acted in bad faith during an injunction hearing. Appellant further asserts that the sanctions are improper in that TU Electric was not harmed or prejudiced in any way by any such conduct by Appellant.

The trial court's extensive findings of fact and conclusions of law set forth the facts which formed the basis of the sanction order. Due to the seriousness of the violation and the innovative sanction which was imposed, a summary of these findings is set out as follows:

Cap Rock's board of directors approved a bonus ("success fee") for certain management employees on November 26, 1991. Two such success fee contracts, providing for a bonus to be paid to Steven Collier, were executed by Cap Rock on that same day. Mr. Collier executed the two contracts on December 10-11, 1991.

An injunction hearing in this cause was held on March 26-27 and April 14-15, 1992. On April 9, 1992, an attorney for TU Electric informally requested copies of all documents relating to Mr. Collier's compensation arrangements with Cap Rock. When informed of this request, Mr. Collier turned over to Cap Rock's attorneys a file containing, among other things, copies of his employment contract and two signed copies of the success fee contracts. The attorneys brought the file to Midland on April 13 before the injunction hearing resumed.

On April 13, Cap Rock and Collier decided to "rescind" the two success fee contracts, so that they would not have to be produced. Rescission contracts, back-dated to April 3, were then prepared by the attorneys and signed by Cap Rock and Collier. Also on April 13, the file containing Mr. Collier's employment contract and the signed success fee contracts was returned by the attorneys to a representative of Cap Rock. The file remained with the representative in Midland until at least the evening of April 14.

Although Mr. Collier did not give the "rescission" documents back to Cap Rock after they were signed, he orally indicated to the Cap Rock representative on the morning of April 14 that he did in fact agree to rescind the success fee contracts. He also agreed to testify that no such success fee contracts existed if he was asked at the hearing.

Just prior to the resumption of the hearing on the morning of April 14, Cap Rock's attorney produced for TU Electric a copy of Mr. Collier's employment contract and stated that this contract was the only document he was aware of that concerned Mr Collier's employment. The success fee contracts and rescission contracts were not produced.

During the hearing on April 14, Mr. Collier denied the existence of any success fee arrangement but testified that he hoped to have such an arrangement at some point. Mr. Collier further testified, when asked if he had recently negotiated a success fee arrangement with Cap Rock, that he and Cap Rock had "considered" written language about a success fee arrangement. Attorneys for TU Electric then renewed their request for such documents, including any documents "evidencing those discussions."

The trial court then asked Mr. Collier if he had any such documents. Collier responded that he had in his files in Austin "written language that I have proposed and what we have discussed about what an acceptable arrangement might be." An attorney for Cap Rock informed the court that he did not have any such documents with him (in Midland), but he could get them later that day. The court then instructed him to do so and produce them for the court.

An attorney for Cap Rock then left the courtroom and called his office in San Angelo. He requested his secretary to generate copies of the success fee contracts from his office's word processor and fax them to Cap Rock's office in Stanton. The attorney then called Cap Rock's office and instructed them to stamp the copies as "DRAFT" and re-fax them to the Midland office of another of Cap Rock's attorneys. The two signed originals of the success fee contracts were, at this time, in Cap Rock's office in Stanton. The two signed copies that the attorney had brought to Midland were still in the possession of the Cap Rock representative in Midland.

At the end of the injunction hearing on April 14, Cap Rock produced to the court the copies of the unsigned success fee contracts generated in San Angelo earlier that day and stamped "DRAFT." None of the signed copies or the "rescission" contracts were produced.

During the evening of April 14, Mr. Collier destroyed the two "rescission" contracts that had been signed the day before and back-dated to April 3. Later that evening, the attorneys for Cap Rock, Mr. Collier, and another individual met in a hotel room in Midland and discussed the existence of the signed success fee contracts and the approach Cap Rock had taken and would take in the future regarding their production to the trial court. This discussion was loud enough to be heard, without the aid of any listening device, by a...