Champlin Oil & Refining Co. v. Chastain, 3884

• Decision Date: 29 May 1964
• Docket Number: No. 3884,3884
• Citation: 379 S.W.2d 938
• Parties: CHAMPLIN OIL & REFINING COMPANY et al., Appellants, v. M. B. CHASTAIN et al., Appellees.
• Court: Texas Court of Appeals

Page 938

379 S.W.2d 938

CHAMPLIN OIL & REFINING COMPANY et al., Appellants, v. M. B. CHASTAIN et al., Appellees.

No. 3884.

Court of Civil Appeals of Texas, Eastland.

May 29, 1964.

Rehearing Denied June 19, 1964.

Cantey, Hanger, Gooch, Cravens & Scarborough, Cecil E. Munn, Ft. Worth, for appellants.

Jackson, Walker, Winstead, Cantwell & Miller, Conan Cantwell and Jack Pew, Jr., Dallas, for appellees.

WALTER, Justice.

M. B. Chastain, Vincent A. Hughes, John P. Costello, and Grace C. Woolley, Bennett L. Woolley, Jr., James C. Woolley, Margaret W. Strong, and Grace Woolley Gowan, independent executors of the estate of Bennett L. Woolley, deceased, filed suit against Champlin Oil & Refining Co., a corporation, and others on a gas processing contract. The plaintiffs will be referred to as Chastain and the defendants as Champlin. Chastain owned four producing natural gas wells. Champlin owned and operated a natural gas processing plant in the Carthage field in Panola County, Texas. Natural gas is delivered into the plant from wells owned by Champlin, Humble, Pan American, Chastain and others. Approximately 50% of the gas that goes through the plant is owned by Champlin. Approximately 10% is owned by Chastain. Champlin extracts propane, motor fuel, fuel oil, kerosene, liquid petroleum gas and other products, hereinafter referred to as plant products, from this gas.

Chastain pleaded that Champlin breached its contract by allocating plant products contrary to the formula described in the contract. Champlin admitted in its answer that it had not used the contract allocation formula. It alleged that through a mutual mistake of fact Section 8 of the contract, the provision containing the allocation formula, was inserted in the contract. Champlin pleaded as defenses unjust enrichment, equitable estoppel and mutual mistake of fact. It also pleaded the four year statute of limitation.

A jury found that Chastain, prior to the time he met John McNamara, could have discovered by the use of ordinary care that the allocation method used by Champlin was different from the contract allocation formula; that Chastain by acts, conduct and silence led Champlin reasonably to believe that Chastain approved of the continuation of the allocation method used by Champlin; that Champlin relied upon such acts, conduct or silence; that, but for such acts, conduct or silence of Chastain, Champlin would have taken voluntary action or legal proceedings to protect itself against loss resulting from the use of more than one allocation method; that Chastain delayed in asserting a claim against Champlin for a length of time sufficient that Champlin would have good reason to believe that Chastain would not assert any claim because of the difference between the allocation method used in the production and disposition reports sent to Chastain and the allocation formula described in the contract; but that during such period of delay Champlin had not changed its position in a way which would make it unjust for Chastain to assert such a claim, and that Champlin's plant allocation method has distributed to the Chastain wells the amount of liquids produced by such wells.

The jury also found that Chastain did not know prior to the time he met John McNamara that the allocation method used by Champlin was different from the allocation formula described in the contract; that Champlin had equal knowledge or access to equal knowledge as did Chastain that the plant allocation method used was not the allocation method provided for in the contract; that with such equal knowledge or access to such equal knowledge Champlin failed to exercise ordinary care to protect itself from injury or detriment, and that Champlin failed to use ordinary care in failing to advise Chastain that the method of plant allocation that Champlin was using resulted in Chastain being allocated less plant products than was provided for in the contract.

The court rendered judgment for Chastain for $77,167.89, for Hughes $25,722.63, for Costello $25,722.63 and for Woolley $25,722.63.

Champlin has appealed and contends the court erred in refusing to render judgment for defendants upon the jury's findings on the issues relating to equitable estoppel, and in granting plaintiffs' motion to disregard the jury's findings on said issues; in refusing to find that a mutual mistake was conclusively shown by the evidence or, alternatively, in refusing to submit to the jury defendants' affirmative defense of mutual mistake; in excluding from consideration by the jury the testimony and exhibits of the witnesses Frank L. Jones, Berry Holmes, Garman Kimmell, and Harlan Echols; and in granting judgment to plaintiffs for money allegedly due under the written contract prior to four years next preceding the commencement of this suit.

The appellees present a cross point that the court erred in failing to award them attorney's fees of $25,000.00, because they proved a valid claim for material furnished.

Chastain telephoned Charles B. Johnson, vice-president of Champlin in 1956, and informed him that he had some gas that was available for processing. Chastain told Johnson 'This is pretty rich gas, and it will take--ah--you will have to cut your process fee down pretty low to get it.' Johnson told him, 'Well, we will take a look at it and see if we can do it.' On September 17, 1956, Champlin mailed Chastain a natural gas processing agreement and in its letter of transmittal said: 'These contracts are somewhat flexible and may be altered to a specific condition and processing consideration.' Johnson referred to this contract as 'a form of contract that we had used before.'

On September 18, 1956, Champlin wrote another letter to Chastain correcting an error made in its September 17, 1956 letter and said: 'Will you please be advised that the second paragraph of the cited letter should read '60% Propane' instead of '65% Propane."

Champlin wrote Chastain on September 25th, 1956, enclosing the test data which it had accumulated on one of Chastain's wells and said: 'We are in hopes that this data will be of assistance to you in evaluating your gas in this area and that we may continue our discussion of the Processing Agreement as submitted by our letter of September 18, 1956. We want to discuss this Processing Agreement with you and invite your inquiries or questions concerning it.'

On October 9th, 1956, Champlin wrote Chastain and informed him of five changes they had made in the original agreement. One of these changes was with reference to Section 8. Section 8 is the provision in the contract that Champlin contends was inserted by mutual mistake. In said letter Champlin said: '4. Section 8, page 9--'Determination of the Quantity of Plant Products Derived from Producers Gas and the Volume of Residue Gas to be Delivered Back'.' 'This section has been changed to read in barrels per million cubic feet instead of GPM (gallons per thousand cubic feet). This change was made in order to bring our Processing Agreement in line with Accounting Procedures. Also under Section 8, paragraph (a) sub-paragraph 1, a third paragraph has been added which stipulates who shall bear the cost of retests which may be requested by either party.'

The final draft of the contract was prepared by Champlin and signed by all the parties on October 25th, 1956. The allocation formula as set forth in Section 8 of the contract was not followed by Champlin. It followed what it describes as its 'improved plant allocation method.' The parties stipulated that: 'The difference in the sale value of plant products derived from gas produced from the M. B. Chastain wells as the amounts of such products were determined by said plant allocation method and the sales value of such plant products if the amounts thereof had been determined by the allocation method described in said natural gas processing agreement may be calculated with mathematical certainty. * * * the parties hereto have agreed that the difference in the principal amount of such sales value for each month from June 1, 1957, through July 31, 1961, is as shown in Column 5 on said Stipulation Exhibit A. It is agreed and stipulated that if defendants had accounted to the plaintiffs for each of such months for plant products derived from gas produced from the M. B. Chastain wells determined by means of the allocation method described in said natural gas processing agreement rather than by means of said plant allocation method, the amount of additional payments which would have been made by the defendants to the plaintiffs is as shown in Column 5 of said Stipulation Exhibit A. * * *

'It is the purpose and intention of this stipulation to agree upon the principal amounts in dispute for each of the calendar months covered hereby and without waiving the contentions of either party with respect to whether additional amounts of principal or interest are due by the defendants to the plaintiffs for any or all of said calendar months.' Column 5 of said stipulation A reveals that if the sales value of plant products had been determined by the allocation method described in the contract Chastain would be entitled to an additional $118,076.25.

Humble and Pan American audited Champlin's books in 1958 and discovered that the method used by Champlin in distributing plant products was different from the allocation provision provided for in the contract. On September 12, 1958, Champlin wrote Chastain the following letter:

'Humble Oil & Refining Company and Pan...