Koenning v. Manco Corp.

• Citation: 521 S.W.2d 691
• Decision Date: 03 April 1975
• Docket Number: No. 899,899
• Parties: Alton KOENNING, Appellant, v. MANCO CORPORATION et al., Appellees.
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 691

521 S.W.2d 691

Alton KOENNING, Appellant, v. MANCO CORPORATION et al., Appellees.

No. 899.

Court of Civil Appeals of Texas Corpus Christi.

April 3, 1975.

Rehearing Denied April 24, 1975.

E. B. Grimes, Robstown, Norman L. Utter, Utter & Chase, Corpus Christi, for appellant.

Allen Wood, Wood, Burney, Nesbitt & Ryan, Lev Hunt, Kleberg, Mobley, Lockett & Weil, Corpus Christi, for appellees.

OPINION

YOUNG, Justice.

This is an action brought on March 23, 1972, by Alton Koenning against Manco Corporation, John D. Manley, III (president of Manco) and South-Tex Corporation. In this action, Koenning seeks to recover the value of his royalty interest. (.03125) in natural gas removed from the Mounger-Koenning 80 acre lease by Manco Corporation, as operator-lessee of the leased premises, and processed by South-Tex Corporation. Koenning contends that he has a contract with both South-Tex and Manco whereby Manco was to allow South-Tex to remove and process natural gas. Under their contract Koenning contends that South-Tex was to sell all natural gas allowed to be sold by the Railroad Commission of Texas. The remaining unsold natural gas, after a deduction of 5% Of total volume for shrinkage and fuel usage by the South-Tex plant, was to be injected back into the Bertram Sand (part of which lay under Koenning's 80 acres). Koenning was not to be paid for the 5% Of volume attributed to fuel usage and shrinkage; nor was he to be paid the volume of gas injected back into the Bertram Sand.

Further, Koenning contends that the reports filed with the Railroad Commission by Manco and South-Tex and the 'Gas Statements' furnished to Koenning by Manco during the period between January 1, 1966, and June 30, 1969, were all false. Then he asserts that the purpose of these statements and various other communications between Manco and South-Tex was to conceal the fact that South-Tex was not actually injecting gas into the Bertram Sand. He argues that such conduct was a breach of his contract with Manco and South-Tex and was fraud.

In his pleadings, Koenning alleged that Manco and Manley were grossly negligent in several respects. Generally, this part of his pleadings deal with Manco's failures: to inspect the gas meters on the leased premises; to maintain a second set of meters on the leased premises; to certify the accuracy of South-Tex's statements regarding injection of gas. As a result of such gross negligence and fraud, Koenning requests actual and exemplary damages of each of the defendants. Additionally, he contends that the improper measuring of gas removed from his premises also constituted breach of contract by the defendants.

All defendants pleaded both the two year and four year statute of limitations. South-Tex contends that it has no contract with appellant. And all contend that there is no evidence to support any of the causes asserted by Koenning. In the alternative, Manco pleaded for a judgment over against South-Tex in the event that it should be held liable to Koenning for any damages.

Trial was commenced before a jury. After plaintiff presented his evidence, all defendants filed motions for instructed verdict. The trial court granted all these motions, but in the judgment the court stated no grounds upon which it relied. Koenning appeals.

In his eight points of error, the appellant complains that the trial court erred in its action of removing the case from the jury and entering an instructed verdict favoring all defendants because there was some evidence to prove all elements of his several causes of action.

In evaluating appellant's contentions, we will be guided by these rules:

1. An appeal from a directed verdict (or instructed verdict) presents a 'no evidence' point. Shubert v. Fidelity & Casualty Company of New York, 467 S.W.2d 662 (Tex.Civ.App.--Houston (1st Dist.) 1971, writ ref'd n.r.e.).

2. Therefore, evidence supporting appellant's position must be accepted as true and all conflicts and inconsistencies must be resolved in appellant's favor. Constant v. Howe, 436 S.W.2d 115 (Tex.Sup.1968); Walter E. Heller & Company v. Allen, 412 S.W.2d 712 (Tex.Civ.App.--Corpus Christi 1967, writ ref'd n.r.e.).

We will now discuss appellant's contentions that he has a contract with both South-Tex and Manco and whether both committed breaches causing damages to him.

In that regard, we consider South-Tex first. Besides his contention that he has established evidence upon each element in contract against South-Tex, the appellant argues that he is a third party beneficiary to those contracts pleaded and proved to which he is not a direct party. And as we have noted, South-Tex asserts that appellant has not pleaded a contract with South-Tex.

An examination of appellant's pleadings, first amended original petition, complicates the issue at hand. It is elementary that there must be an allegation of a contractual relationship. It is necessary that the petition aver every material part of the contract and so much of it as essential to the cause of action should be specially set out. Since no recovery can be had for a breach of contract that is not pleaded, the petition must show a breach of the contract by the defendant, and is defective if it fails to do so. See 13 Tex.Jur.2d Contracts §§ 374, 378. Appellant's petition regarding a contract cause of action against South-Tex reveals the following:

1. The only allegation of a contractual relationship between appellant and South-Tex is contained in paragraph 5. This paragraph merely alleges that a special relationship of trust and confidence and dependency 'existed between Plaintiff and Defendants because of their written contract (Exhibit B) . . ..'

a. 'Exhibit B' is a division order executed by appellant in favor of Manco Corporation. Appellant's petition notes in paragraph 3 thereof that the parties to the division order agree to be bound by the terms, amendments, extensions and renewals of 'an agreement dated April 23, 1953, between James Kennedy and John A. Koch, Trustees, Horsting Oil Company, as owner and South-Tex Corporation, as processor, . . .'

b. Neither the 1953 agreement nor any of the terms or amendments are attached to or plead in appellant's petition.

2. Appellant pleaded in paragraph 6 that he was not paid for 928,485 MCF (MCF meaning 1000 cubic feet) of gas which was removed from his lease between January 1, 1966 and June 30, 1969.

3. Appellant pleaded that Manco filed reports with the Railroad Commission of Texas which represented that 928,485 MCF of gas had been injected according to the division order entered into between Manco and appellant. Appellant further pleaded that Manco and Manley furnished appellant a monthly 'Gas Statement' and check attached thereto which purported to pay appellant for all gas sold off appellant's premises; that such statements were untrue because no injection credits were taken; that South-Tex knew of and ratified such monthly practice and concealed the fact that Manco was not reporting the true value of gas being produced and sold off appellant's premises.

4. Appellant alleged that after his discovery of 'Defendants untrue representation' he demanded payment from Manley, Manco, and South-Tex.

There can be no doubt that appellant's pleadings in regard to a contract cause of action against South-Tex are defective because there are no allegations of any terms or contractual duties upon which appellant seeks to hold South-Tex liable. Nor are there allegations that appellant is the intended beneficiary of any contract to which South-Tex is a party. Appellant's agreement to be bound by the terms of the 1953 agreement was between appellant and Manco. This does not mean, however, that South-Tex agreed to be bound by any agreement between Manco and appellant.

No special exceptions were directed by South-Tex to appellant's 'First Amended Original Petition'. We are thus confronted with the issue of trial by consent. At the trial, the following documents upon which appellant bases his allegation of a cause of action in contract were introduced:

1. An Oil, Gas, and Mineral Lease, executed August 9, 1940 covering the Mounger-Koenning 80 acres. Appellant is a successor in title to the Lessor (Mounger) therein. This document was attached to and incorporated into appellant's pleadings.

2. A 1945 processing agreement between C. P. Burton (who acquired the oil and gas lease conveyed in the 1940 lease) and the Agua Dulce company.

3. An agreement dated April 23, 1953, replaced and superseded the 1945 agreement. The parties to the 1953 agreement were Mr. Kennedy and Mr. Koch, Trustees for Horsting Oil Company (Operator), and South-Tex Corporation (Processor). The agreement covers the Mounger-Koenning 80 acres, but it did not provide that it would modify or become a part of the 1940 lease. This 1953 agreement provided: that residue gas would be returned to the sand from which it was produced through operator's injection well; that the gas removed and returned was to be measured by orifice meters 'operated by processor and checked periodically for accuracy'; the compensation to South-Tex for returning the gas to the Bertram Sand; that processor be operator's agent for the sale of operator's gas and the collection of the funds received; that processor was obligated to furnish operator a 'statement' showing the amount of gas delivered to processor hereunder during the preceeding calendar month, the amount of plant products extracted therefrom, the amount of such products and residue gas actually marketed And the amount of residue gas returned to the Bertram Sand; that processor pay, from operator's share, all royalties due and payable under oil and gas leases; that the 'statement' would be considered correct after the passage of 90 days. The 1940 lease was described in an exhibit attached to the 1953 agreement, but the lease itself was not specifically incorporated into the agreement.

4. An amendment of the 1953 agreement by letter...