Golsen v. ONG Western, Inc.

• Decision Date: 15 March 1988
• Docket Number: No. 65833,65833
• Citation: 756 P.2d 1209
• Parties: 5 UCC Rep.Serv.2d 605, 1988 OK 26 Sylvia H. GOLSEN and Zelda F. Brown, Plaintiffs-Appellants, v. ONG WESTERN, INC., Defendant-Appellee.
• Court: Oklahoma Supreme Court

Page 1209

756 P.2d 1209

5 UCC Rep.Serv.2d 605, 1988 OK 26

Sylvia H. GOLSEN and Zelda F. Brown, Plaintiffs-Appellants, v. ONG WESTERN, INC., Defendant-Appellee.

No. 65833.

Supreme Court of Oklahoma.

March 15, 1988.

As Corrected March 21, 1988.

Rehearing Denied June 1, 1988.

Appeal from the District Court of Oklahoma County, David M. Cook, judge.

In an action on a contract brought by a producer to enforce the take-or-pay provisions of a gas purchase contract the District Court of Oklahoma County held the defendant was excused from performing the obligation to pay for gas not taken by the force majeure clause of the contract. Additionally, the trial court held that, under the laws of the State and administrative regulations of the Corporation Commission, the plaintiffs-producers were prohibited from tendering more gas than was actually purchased. Accordingly, judgment was issued for the defendant on the issue of liability and this appeal ensues.

REVERSED AND REMANDED WITH DIRECTIONS.

Harvey L. Harmon, Sr., Julian P. Kornfeld, Kornfeld, Franklin & Phillips, Oklahoma City, for plaintiffs-appellants.

John L. Arrington, Jr., Thomas J. Kirby, David E. Crawford, Jonathan C. Neff, Huffman, Arrington, Kihle, Gaberino & Dunn, Tulsa, Burck Bailey, Harry H. Selph, II, Fellers, Snider, Blankenship, Bailey & Tippens, Oklahoma City, for defendant-appellee.

HARGRAVE, Vice Chief Justice.

Appealed here is a judgment in favor of the defendant, ONG Western, Inc., in an action on a contract brought in the District Court of Oklahoma County, Oklahoma by Sylvia H. Golsen and Zelda F. Brown, subnominees, and Constructivist Realty, Inc., plaintiffs.

Appellants-plaintiffs are working interest owners of the Taylor Fox No. I well located in the NE/4 of Sect. 10 T18N, R26W, Ellis County, Oklahoma. In September of 1981 Golsen entered into a gas purchase contract with ONG for a term of fifteen years, requiring the dedication of all the gas from the subject well to the defendant. This contract is referred to in the oil and gas industry as a take-or-pay contract, obligating ONG to take and pay for a minimum amount of gas per year. If that quantity of gas is not taken from the well the defendant covenanted nevertheless to pay for that minimum amount of gas per year (a deficiency payment). Amounts of gas not taken but paid for in any year may be taken from the well free of additional payment at any subsequent time within the fifteen year period. The contract further provides that plaintiffs must repay defendant for all gas paid for but not taken at the time the contact terminates or the gas reserves are depleted. The contract excuses performance under certain circumstances covered by a force majeure clause. This appeal is focused on a portion of that clause which excuses performance during circumstances in which there is a failure of gas supply or market.

In the years 1982, 1983 and 1984 ONG did not take the minimum annual quantities of gas specified by the contract, nor did it pay plaintiffs for the annual minimum quantities. This action was brought to recover the deficiency payments not made and for the diminution in value to the property resulting from the defendant's failure to perform under the contract. On the issue of liability only in the trial court, after waiver of a jury, a general judgment was rendered for the defendant. The trial court's findings of fact and conclusions of law reflect that performance was excused under the force majeure clause of the contract, and there was no tender of gas by the producer in excess of that taken by defendant, therefore the court held for the defendant on the issue of liability and this appeal ensues.

The force majeure clause comprises Article XVII of the contract here considered. This article, in its entirety, reads as follows:

17.1 If either Buyer or Seller is rendered unable, wholly or in part, by force majeure or any other cause of any kind not reasonably within its control, to perform or comply with any obligations or conditions of this contract, such obligations or conditions shall be suspended during the continuance of the inability so caused and such party so rendered unable shall be relieved of liability and shall suffer no prejudice for failure to perform the same during such period, it being understood that Buyer's minimum annual obligation to take or pay for gas hereunder shall be reduced by the volume which Buyer, under normal circumstances, would have taken from the well during the period of time the inability exists; provided, obligations to make payments then due for gas delivered hereunder shall not be suspended, and in other cases, the cause of suspension (other than strikes, lockouts, or labor disputes) shall be remedied insofar as possible with reasonable dispatch. Settlement of strikes, lockouts, and labor disputes shall be wholly within the discretion of the party having the difficulty. The term "force majeure" shall include, without limitation by the following enumeration, acts of God and of the public enemy, unseasonal weather, freezing of wells of lines of pipe, repairing or altering machinery or lines of pipe, fires, accidents, breakdowns, strikes, labor disputes, and any other industrial, civil or public disturbance, inability to obtain materials, supplies, rights-of-way on customary terms, permits, or labor, any act or omission by parties not controlled by the party having the difficulty, any act or omission (including failure to take gas) of a purchaser of gas from Buyer which is excused by any event or occurrence of the character herein defined as constituting force majeure, failure of gas supply or markets, and any laws, orders, rules, regulations, acts, or restraints of any governmental body or authority, civil or military, or any other causes beyond the control of the parties hereto.

Plaintiffs' initial proposition of error urges this Court to ameliorate the presumption of correctness afforded the trial court's findings of fact in instances where the findings are prepared by counsel and adopted by the trial court with minimal changes. In support thereof plaintiffs refer us to Phillips Petroleum Co. v. United States Fidelity & Guaranty Co., 442 P.2d 303 (Okl.1968), stating this Court essentially adopted a lesser standard of review for these instances found in Kelson v. U.S., 503 F.2d 1291 (10th Cir.1974).

Phillips Petroleum Co. v. United States Fidelity & Guaranty Co., supra, does not stand as authority for the referred error or the lesser standard of review requested. In Phillips, supra, plaintiff contended United States Fidelity & Guaranty had made a contingent promise to pay plaintiff's claim thereby waiving the defense of the statute of limitations. The trial court found no such promise was made and foreclosed the whole issue. As a result of that ruling there was no need to decide whether plaintiff placed reliance upon the promise. On appeal it was held the facts of the cause supported an adjudication of implied waiver. The Court remanded the cause for new trial stating that reliance upon the promise of the defendant has not yet been ascertained or considered by the trial court and that question was potentially a determinative issue in the action.

Appellants recognize the case of Tiger v. Lozier, 124 Okl. 260, 256 P. 727 (1927) is contrary to this position they now assert. There the Court's syllabus states where the court adopts the findings of fact and conclusions of law submitted by counsel and those findings are reasonably supported by the evidence and the conclusions of law therein are correctly stated the fact that the findings were tendered by counsel prior to their adoption by the court does not constitute error. We have considered appellants' objection to this practice but refuse to label the questioned practice reversible error. It is the duty of the trial court to make findings of fact and conclusions of law upon request. That duty requires the court to examine proposed findings using its independent judgment of the facts and applicable law with a view to adopting only those findings and conclusions justified in the cause being considered. Once approved and adopted they became the findings and conclusions of the court.

In the trial court's findings of fact and conclusions of law, the basis of the trial court's judgment for the defendant is set out. There the court determined a decline in demand triggered the force majeure clause. Additionally the court found that amounts of gas in excess of that actually taken were not tendered under the contract provisions in the light of the conservation law of Oklahoma.

The trial court found that beginning in 1982 ONG experienced a loss of market so severe it constituted a failure of market condition. This finding states defendant's gas sales decreased from 363 billion cubic feet in 1981 to 267 billion cubic feet in 1983. This is a 26.4% reduction in two years or a 13.2% reduction per year. (The delivery quantities are expressed per accounting year in the gas purchase contract.) Plaintiffs' exhibit 24 also reflected over the same period gas sales revenue decreased from $965,889,000 to $919,298,000. In the conclusions of law the trial court held that this decrease in demand, now termed failure of market was a force majeure event. The court also concluded that this event excused and suspended ONG's obligation under the contract to either take or pay for the gas from the Fox well.

The trial court also concluded that production from the well, which is taken here to mean gas produced from the Fox well and purchased from plaintiffs, in excess of the volume that was actually taken would have been in excess of market demand, would have been legally prohibited waste under 52 O.S.1981 § 86.3 and § 239. The court concluded that under the provisions of the contract there was no tender of gas over that in fact taken and therefore no obligation to pay for the gas not taken under the take-or-pay provisions of...