Kodiak 1981 Drilling Partnership v. Delhi Gas Pipeline Corp.
| Decision Date | 13 May 1987 |
| Docket Number | No. 04-84-00499-CV,04-84-00499-CV |
| Citation | 736 S.W.2d 715 |
| Parties | KODIAK 1981 DRILLING PARTNERSHIP, Appellant, v. DELHI GAS PIPELINE CORPORATION, Appellee. |
| Court | Texas Court of Appeals |
Eugene B. Labay, Barron W. Dowling, Cox & Smith, San Antonio, for appellant.
Thomas R. McDade, Jill Ann Duncan, Fulbright & Jaworski, Houston, for appellee.
Before ESQUIVEL and BUTTS, JJ., and FRED V. KLINGEMANN, * Appointed Justice.
This is a suit in a district court of Bexar County, Texas by Kodiak 1981 Drilling Partnership, a natural gas producer, against Delhi Gas Pipeline Corporation, an intrastate pipeline company, for deficiencies in payments allegedly owing under a gas purchase contract, for damages and other affirmative relief it asserts it is entitled to because of the breach of such gas purchase contract, and for damages for alleged discriminatory or non-ratable taking of gas in violation of the Texas Natural Resources Code. Trial was to the court, both sides having waived a jury trial. Extensive findings of fact and conclusions of law were made and filed by the trial court. The trial court rendered judgment that Kodiak take nothing by its suit against Delhi. Kodiak timely perfected its appeal.
In this opinion Kodiak 1981 Drilling Partnership will be referred to as either Kodiak, appellant, or plaintiff. Delhi Gas Pipeline Corporation will be referred to as either Delhi, appellee or defendant.
Delhi is an intrastate natural gas pipeline company engaged in the business of buying and reselling natural gas. Kodiak is a natural gas producer, producing the gas relevant to this lawsuit.
On December 3, 1981, after some negotiation and changes in the form and substance of the agreement, Kodiak and Delhi entered into a gas purchase agreement by which Kodiak agreed to sell, and Delhi agreed to purchase gas from certain oil and gas leases owned and operated by Kodiak, including land on which the Thomas Merritt well is located. The Merritt well produces "tight sands gas," the maximum lawful price of which is set under the Natural Gas Policy Act of 1978. Under such agreement Kodiak contracted all of the gas produced from the lands dedicated to the agreement and obligated itself to sell all of this gas to Delhi for a period of 10 years. Article IV of the agreement provides that Delhi must take 80% of the gas Kodiak had available for delivery each day. If at the end of the year, Delhi had not taken at the 80% level, Delhi had to pay Kodiak the difference between what it had already paid for gas taken and what it would have taken at the required level.
If Delhi takes less than the daily contract quantities during any contract year, Delhi must pay for the deficiency as if taken, after deducting: (a) any deficiencies existing due to "force majeure"; (b) any default by Kodiak in failing to deliver gas as and when requested by Delhi; (c) excess purchases by Delhi during the contract year; and (d) the total of any deficiency in Kodiak's allowable below daily contract quantity.
The yearly payment is referred to as a "deficiency payment," an "underpayment," or a "take or pay payment."
The Merrit Well No. 1 produces "tight sands gas," and is the particular well involved in this lawsuit.
The relevant force majeure provision in the gas purchase agreement provides:
Except for buyer's obligation to make payment for gas delivered hereunder, neither party hereto shall be liable for any failure to perform the terms of this Agreement, when such failure is due to 'force majeure,' as hereinafter defined. The term 'force majeure' as employed in this agreement shall mean ... partial or entire failure to gas supply or market or any other cause, whether of the kind herein enumerated or otherwise, not reasonably within the control of the party claiming 'force majeure,' the same shall so far as possible, be remedied with all reasonable dispatch.
We set forth the "force majeure" provision in some detail since it is evident from the record that the trial court's findings of fact, conclusions of law, and the final judgment of the court are primarily based on its holding that Delhi's failure to perform under the gas purchase contract has been solely due to "force majeure" conditions.
The findings of fact and conclusions of law of the trial court will hereinafter be summarized in this opinion.
In May of 1983 Delhi ceased taking any gas from Kodiak. On June 28, 1983, Kodiak filed suit against Delhi asserting a breach of "take or pay" provisions of the gas purchase contract, and discriminatory or non-ratable taking of gas in violation of the Texas Natural Gas Resources Code.
Our discussion in this opinion will be divided into three general areas: (1) findings of fact and conclusions of law of the trial court; (2) the portion of Kodiak's suit against Delhi to recover deficiencies in payment allegedly owing under the terms and provisions of the gas purchase contract, and other affirmative relief pertinent thereto; and (3) the portion of Kodiak's suit against Delhi for damages caused by Delhi's alleged unlawful discrimination and violation of the terms of the Texas Natural Resources Code (Common Purchaser Act).
The findings of fact and conclusions of law made by the trial court are quite extensive and set forth in some detail the factual background of the case and the basis of the court's holdings. We will not attempt to set forth all of such findings, but the court found, among other things that:
(a) The general resale gas market and the resale gas market for "tight sands gas" in particular, failed unforeseeably and uncontrollably, including Delhi's general resale gas market in its East Texas system.
(b) This gas market failure excused Delhi's performance under the gas purchase agreement by virtue of the "force majeure" provision of such agreement.
(c) As to any obligation undertaken and not excused, Delhi intended to and did perform in accordance with the agreement.
(d) Delhi did not discriminate against Kodiak by not taking gas from Kodiak during the existence of the "force majeure" condition.
(e) Delhi offered to take ratable volumes of gas from Kodiak, but Kodiak refused to accept the offer, thereby waiving any non-ratable take or descrimination claim it had under the Texas Natural Resources Code.
We deem it necessary to set forth some of the findings of fact of the trial court in more detail. Such findings are summarized as follows, using the court's actual numbered finding:
(18) Delhi's obligation to perform under the agreement and to make deficiency payments was and has been at all time material to the claims asserted by Kodiak, in fact, excused by the occurrence of a "force majeure" condition--partial or entire failure of the gas well.
(19) In May of 1982, the general resale gas market and in particular, the resale gas market for "tight sands gas" failed unforeseeably and uncontrollably, including Delhi's East Texas system, as well as its resale gas market for Kodiak's "tight sands gas."
(20) This gas market failure continues today. No deficiency exists, and Delhi has not breached the agreement, and Kodiak has not been damaged.
(21) Delhi's failure to perform has been due to "force majeure" conditions only.
(22) Delhi has not repudiated its duty to perform the agreement after the "force majeure" conditions cease, Delhi intends to perform the agreement.
(23) Delhi has made no fraudulent representation during the agreement negotiation.
(29) Delhi's obligation to take any gas from Kodiak was suspended by the occurrence of the "force majeure" conditions; therefore Delhi has not discriminated against Kodiak by not taking gas from Kodiak during this "force majeure" condition.
(30) The Common Purchaser Act's prohibitions against discrimination do not apply to claims of price discrimination. There was no evidence of any type of any discrimination, price or otherwise, or of failure to take gas ratably. Further, Delhi offered to take ratable volume from Kodiak, but Kodiak refused to accept this offer, and thereby it waived any non-ratable take or discrimination claim it had.
(35) Any damage which Kodiak might have sustained would have been calculable and therefore, Kodiak, had it proved its allegations, would have been entitled to damages only, not injunctive relief.
The trial court also made five supplementary findings of fact proposed by Kodiak, which in effect set forth the amounts of gas taken by Delhi from wells in the Oak Hill (Cotton Valley field), from July 1983, through July 1984, and also set forth the gas allowable for the Merritt well during such period.
The trial court also made and filed conclusions of law which are as follows:
(1) The occurrence of a "force majeure" condition suspends a party's obligation to perform one's obligations under a contract. Failure to perform one's obligation is not a breach where one's performance is suspended by a "force majeure" condition.
(2) Parties, negotiating at arms-length, may contractually define the meaning of "force majeure."
(3) A representation that is true at the time it was made does not constitute fraud.
(4) A promise to do a future act is not fraudulent if the promising party intended to perform the act when the promise was made.
(5) An opinion about the future is not fraudulent if it is made to someone with equal knowledge of the relevant facts and if it is not given with the intention of deceiving the other person.
(6) Evidence regarding representations contradicting explicit terms of a written contract are barred by the parol evidence rule and the doctrine of merger, absent evidence of fraud, accident or mistake.
(7) Tortious interference with contractual relations must be willful, intentional and unjustified.
(8) A pipeline's obligation to take gas from a producer without unreasonable...
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