Horwood v. Wagner & Brown

• Decision Date: 09 December 1999
• Docket Number: No. 08-98-00234-CV,08-98-00234-CV
• Citation: 61 S.W.3d 1
• Parties: (Tex.App.-El Paso 2001) LONNIE HORWOOD AND DAVID LAWRENCE GLASS, APPELLANTS, v. WAGNER & BROWN, LTD. AND CANYON ENERGY, INC. D/B/A CANYON PIPELINE CORP., APPELLEES
• Court: Texas Court of Appeals

Page 1

61 S.W.3d 1 (Tex.App.-El Paso 2001)

LONNIE HORWOOD AND DAVID LAWRENCE GLASS, APPELLANTS, v. WAGNER & BROWN, LTD. AND CANYON ENERGY, INC. D/B/A CANYON PIPELINE CORP., APPELLEES.

No. 08-98-00234-CV

Court of Appeals of Texas, El Paso

December 9, 1999

Appeal from the 238th Judicial District Court of Midland County, Texas. (TC# CV42,213). [Copyrighted Material Omitted] Levon G. Hovnatanian, Feldman & Rogers, L.L.P, Houston, for appellants.

Steven C. Kiser, Lynch Chapple & Alsup A Professional Corp., Midland, for appellees.

Panel No. 3, Barajas, C.J., Larsen, and Chew, JJ.

OPINION

Richard Barajas.

This is an appeal from an order granting summary judgment based on the statute of limitations. For the reasons stated below, we reverse and remand.

I. SUMMARY OF THE EVIDENCE

This dispute emerged out of gas purchase and gas gathering contracts that were executed on February 15, 1975. The gas purchase contracts involved Wagner & Brown, Ltd.'s predecessor, who was the lessee of oil and gas estates in which Appellants' predecessors owned royalty interests, and several gas purchasers. Under the contracts, the purchasers were obligated to buy gas produced at the well. The gas gathering contracts involved Canyon Pipe Line Corporation ("Canyon") and the purchasers in the gas purchase contracts. Under the gas gathering contracts, Canyon compressed and delivered the gas to a central facility where it was subsequently delivered to the purchasers.

In 1978, the gas purchase contracts were amended. The new provisions in the contracts provided that the base compression fee charged by Canyon was to be deducted from the purchase price of the gas. Because the lease agreement that Wagner & Brown, Ltd.'s predecessor had with the original lessors provided that royalties were to be based on the amount realized from the sale of the gas, the effect of subtracting compression fees from the purchase price was to decrease the amount of royalties paid to the lessors. The provisions adopted in 1978 were incorporated into new purchase and gathering contracts, which were executed in 1984. The 1984 contracts expired sometime in 1995.

Prior to 1985, Appellants received statements from Wagner & Brown, Ltd.'s predecessor indicating that a compression fee of approximately twenty-five cents per one thousand cubic foot ("Mcf") had been charged. This prompted Appellant Glass to hire an independent firm to investigate whether the fees were excessive. Then, in 1985, Appellants' royalty statements indicated that the compression charge had been reduced to approximately twelve cents per Mcf. Larry Glass called Wagner & Brown, Ltd.'s predecessor regarding the new compression charge, and he was told that the charges were in fact only twelve cents per Mcf. In spite of being told that the compression fees were set at a relatively low amount, Appellants argue that from 1985 until sometime in 1995 the actual amount subtracted from the purchase price of the gas was approximately fifty cents per Mcf. Appellants argue that to the extent that these fees were excessive and unreasonable, they should have been included in the purchase price of the gas, the figure used to calculate their royalties.

Appellants brought suit for breach of the express and implied terms of the oil and gas lease, unjust enrichment, an accounting, fraud, and a request for a permanent injunction. In response to these claims, Appellees filed a motion for summary judgment on several grounds, including the statute of limitations. The trial court granted partial summary judgment based on the four-year statute of limitations, disposing of all claims which accrued prior to April 9, 1992. Those claims were then severed from the original cause of action and a final judgment was entered. This appeal follows.

II. DISCUSSION

In Point of Error No. One, Appellants argue that the trial court erred in granting summary judgment based on the statute of limitations because either the discovery rule or the fraudulent concealment rule should have been applied to preserve their claims which dated as far back as 1985. We begin with a discussion of the appropriate standard of review.

A. Standard of review

In a summary judgment context, the standard of review on appeal is whether the successful movant at the trial level carried its burden of showing that there is no genuine issue of material fact and that a judgment should be granted as a matter of law. See Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991); Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548 (Tex. 1985); Cortez v. Liberty Mut. Fire Ins. Co., 885 S.W.2d 466, 469 (Tex. App.--El Paso 1994, writ denied). Thus, the question on appeal is not whether the summary judgment proof raises fact issues as to the required elements of the movant's cause or claim, but whether the summary judgment proof establishes, as a matter of law, that there is no genuine issue of material fact as to one or more elements of the movant's cause or claim. See Gibbs v. General Motors, 450 S.W.2d 827, 828 (Tex. 1970).

In resolving the issue of whether the movant has carried this burden, all evidence favorable to the non-movant must be taken as true and all reasonable inferences, including any doubts, must be resolved in the non-movant's favor. See Nixon, 690 S.W.2d at 548-49; DeLuna v. Guynes Printing Co., 884 S.W.2d 206, 208 (Tex. App.--El Paso 1994, writ denied). Where the defendants are the movants and they submit summary evidence disproving at least one essential element of each of plaintiff's causes of action, then summary judgment should be granted. See Perez, 819 S.W.2d at 471; Bradley v. Quality Serv. Tank Lines, 659 S.W.2d 33, 34 (Tex. 1983); Cortez, 885 S.W.2d at 469. Furthermore, when a trial court's order granting summary judgment does not specify the ground or grounds relied on for the ruling, summary judgment will be affirmed on appeal if any of the theories advanced are meritorious. See State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993); Rogers v. Ricane Enter. Inc., 772 S.W.2d 76, 79 (Tex. 1989).

B. Applicable limitations period

Appellants' claims are governed by a four-year statute of limitations. See HECI Exploration Co. v. Neel, 982 S.W.2d 881, 885 (Tex. 1998) (applying four-year statute of limitations to breach of implied covenants claim); Houston Endowment, Inc. v. Atlantic Richfield Co., 972 S.W.2d 156 (Tex. App.--Houston [14th Dist.] 1998, no writ) (applying four-year statute of limitations to claim for breach of the express terms of an oil and gas lease); Williams v. Khalaf 802 S.W.2d 651, 658 (Tex. 1990) (applying a four-year limitations period to fraud claims); TEX. CIV. PRAC. REM. CODE ANN. §§ 16.051 (Vernon 1997) (four-year statute of limitations for actions for an accounting); and Amoco Prod Co. v. Smith, 946 S.W.2d 162, 164-65 (Tex. App.--El Paso 1997, no writ) (applying a four-year limitations period to claims for unjust enrichment and money had and received).¹ Because Appellants filed suit on April 9, 1996, the trial court granted summary judgment in favor of Appellees on all claims which accrued prior to April 9, 1992.

C. Application of the discovery rule

When applicable, the discovery rule alleviates the injustice of barring a claimant's cause of action before he learned or, exercising reasonable diligence, could have learned about the facts underlying his right of action. Clade v. Larsen, 838 S.W.2d 277, 282 (Tex. App.--Dallas 1992, writ denied) (citing Robinson v. Weaver, 550 S.W.2d 18, 23 (Tex. 1977) and Gaddis v. Smith, 417 S.W.2d 577, 578-79 (Tex. 1967)). Two conditions must exist prior to a proper application of the discovery rule: the nature of the injury must be inherently undiscoverable, and the injury must be objectively verifiable. See HECI Exploration Co. v. Neel, 982 S.W.2d 881, 886 (Tex. 1998). For an injury to be inherently undiscoverable,

[it] need not be absolutely impossible to discover, else suit would never be filed and the question whether to apply the discovery rule would never arise. Nor does 'inherently undiscoverable' mean merely that a particular plaintiff did not discover his injury within the prescribed period of limitations; discovery of a particular injury is dependent not solely on the nature of the injury but on the circumstances in which it occurred and plaintiff's diligence as well. An injury is inherently undiscoverable if it is by nature unlikely to be discovered within the prescribed limitations period despite due diligence. S.V. v. R.V., 933 S.W.2d 1, 7 (Tex. 1996) (citing Computer Associates International, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996)). For an injury to be objectively verifiable, the facts upon which liability is asserted must be capable of being demonstrated through direct physical evidence. See 933 S.W.2d at 7. The facts upon which liability is premised must not be based merely on expert testimony. See id at 7. Stated differently, "An injury is 'objectively verifiable' if the presence of injury and the producing wrongful act cannot be disputed." Howard v. Fiesta Texas Show Park, Inc., 980 S.W.2d 716, 720 (Tex. App.--San Antonio 1998, no writ).

1. Is the nature of Appellants' alleged injury inherently undiscoverable?

It is helpful to begin this inquiry by identifying the nature of Appellants' alleged injury. Essentially, Appellants argue that Appellee Wagner & Brown, Ltd. deducted an unreasonably high processing fee from the purchase price of the gas and then turned it over to their alter ego, Appellee Canyon. Appellants contend that although they received their 1/8 royalty based on what Appellees claim was the true amount realized, the amount realized should have been increased to the extent that the payments to Canyon constituted an unreasonably high processing fee. Thus, by not calculating royalties on what should have been a higher purchase price, Appellants contend that Appellees breached their lease agreement. We must...