Rupe v. Triton Oil & Gas Corp.

• Decision Date: 12 November 1992
• Docket Number: Civ. A. No. 90-1159-B.
• Citation: 806 F. Supp. 1495
• Parties: G.N. RUPE and William P. Higgins, Plaintiffs, v. TRITON OIL & GAS CORPORATION, Defendant.
• Court: U.S. District Court — District of Kansas

806 F. Supp. 1495

G.N. RUPE and William P. Higgins, Plaintiffs, v. TRITON OIL & GAS CORPORATION, Defendant.

Civ. A. No. 90-1159-B.

United States District Court, D. Kansas.

November 12, 1992.

David W. Nickel, Depew, Gillen & Rathbun, Wichita, Kan., for plaintiffs.

Donald W. Bostwick, Adams, Jones, Robinson & Malone, Wichita, Kan., Jim L. Flegle, Harold A. Rose, Michael L. Dinnin, Bracewell & Patterson, Dallas, Tex., for defendant.

MEMORANDUM AND ORDER

BELOT, District Judge.

This matter is before the court on defendant's motion for summary judgment (Doc. 72), and defendant's motion to strike (Doc. 89). This diversity action for breach of contract was filed in state court before removal to this court.

The dispute concerns several gas purchase contracts under which plaintiffs agreed to sell gas produced from their wells to defendant. The parties entered into the subject contracts between 1976 and 1979, and the contracts have been amended from time to time. All contracts but one have an initial term of 20 years.

Although the specific claims vary somewhat with respect to the particular wells and contracts, the following appear to be among the breaches alleged by plaintiffs: (1) defendant unilaterally changed the contract price agreed upon and has failed to pay plaintiffs the correct contract price; (2) defendant failed to make an upward adjustment in the purchase price for gas that has a heating content higher than 1000 Btu; (3) defendant failed to reimburse plaintiffs for 75% of the Kansas severance tax paid by plaintiffs on several wells; (4) defendant wrongfully deducted from its purchase price a dehydration charge to which plaintiff did not agree; and (5) defendant failed to take and pay for quantities of gas specified in certain of the gas purchase contracts.

I. Defendant's Summary Judgment Motion

Defendant raises several grounds in support of its motion for summary judgment.

Rule 56(c) of the Federal Rules of Civil Procedure directs the entry of summary judgment in favor of the party who "shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." A principal purpose "of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses...." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). The court's inquiry is to determine "whether there is the need for a trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Summary judgment is inappropriate if there is sufficient evidence on which a trier of fact could reasonably find for the non-moving party. Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 684 (10th Cir.1991).

A. Material Facts

Plaintiffs allege that defendant breached the several contracts by implementing certain unilateral changes in their terms. Defendant announced the first of these changes on or about January 25, 1985 in a "letter amendment" sent to plaintiffs ("the 1985 Amendment"). The letter represents that the price paid for gas under the gas purchase contracts had been deregulated under the Natural Gas Policy Act of 1978 ("NGPA"). The letter "offers to continue to purchase gas from plaintiffs' wells under ... terms." (Defendant's Exh. 9 to Affidavit of Charles Winchester; Plaintiffs' Exh. 15).¹ These terms include a change in the price paid for gas from plaintiffs' wells, and an increase in the amount of a "dehydration fee" that defendant charges plaintiffs to dehydrate gas produced from their wells. The letter further proposes that both changes be effective January 1, 1985. The letter concludes: "If the aforementioned redetermination and processing fee increase is agreeable, please indicate your acceptance by signing in the space provided below and returning one (1) signed copy of this letter to the undersigned." Id. Plaintiffs did not sign and return a copy of the letter in the manner indicated. There is also evidence that plaintiffs promptly notified defendant that the terms of the offer were unacceptable to plaintiffs, and that plaintiffs continued to protest these terms before filing suit. (Plaintiffs' Exh. 17, Spicer Depo. at pp. 254-57; Exh. 9, Spicer Affidavit, at ¶¶ 9-13). Plaintiffs have continued, however, to accept payments by defendant in the amount, less the dehydration fee, proposed by defendant in the 1985 Amendment.

The second set of changes were announced by defendant in a "letter amendment" sent to plaintiffs on or about February 26, 1986 ("the 1986 Amendment"). Among other matters, this Amendment announced that effective January 1, 1986, defendant would no longer adjust its purchase price upward for gas having a heating value in excess of 1000 Btu, and that defendant would no longer reimburse plaintiffs for their payment of severance taxes.

B. Statute of Limitations

Plaintiffs filed this action on February 20, 1990. All parties are in agreement that the five-year limitations period of K.S.A. § 60-511(1) applies to plaintiffs' claimed breaches of a written contract. Brubaker v. Branine, 237 Kan. 488, 493, 701 P.2d 929, 932 (1985); Miller v. William A. Smith Constructing Co., 226 Kan. 172, 174, 603 P.2d 602, 604 (1979). The dispute concerns the time at which plaintiffs' cause, or causes, of action accrued.

In Kansas, a cause of action for breach of contract accrues at the time of the breach. Voth v. Chrysler Motor Corp., 218 Kan. 644, 651, 545 P.2d 371 (1976); Wolf v. Brungardt, 215 Kan. 272, 279, 524 P.2d 726 (1974). The plaintiff's knowledge of the breach or any injury caused thereby is irrelevant. Pizel v. Zuspann, 247 Kan. 54, 74, 795 P.2d 42, modified on other grounds, 247 Kan. 699, 803 P.2d 205 (1990); Freeto Constr. Co. v. American Hoist & Derrick Co., 203 Kan. 741, 746, 457 P.2d 1, 4 (1969); Ware v. Christenberry, 7 Kan.App.2d 1, 4, 637 P.2d 452 (1981).

Defendant argues that any breach arising from the 1985 Amendment² occurred on January 1, 1985 — when the first set of changes would become effective; or at the latest on January 25, 1985 when it sent notice to plaintiffs of the change in terms. On the other hand, plaintiffs claim that they had a cause of action only at the time that defendant was obligated to pay for the gas. Plaintiffs further contend that a separate breach occurred on a month to month basis, and that they have a separate cause of action for each monthly breach committed by defendant.

The parties herein have entered into a continuing contractual relationship. For all gas received by the buyer in a given fiscal month, the buyer is obligated to pay the seller on approximately the 25th day of the following calendar month. (Plaintiffs' Exts. 1-6, section 2). Under Kansas law, a cause of action for breach of an obligation to make payments under a continuing contract generally accrues at the time each payment becomes due, thus giving rise to a separate cause of action for each failure to make payment when due. See Head v. Knopp, 225 Kan. 45, 47, 587 P.2d 867 (1978) (where contract of employment fixes time for payment, action accrues at the end of each period of payment); Leonard v. Kleitz, 155 Kan. 626, 627, 127 P.2d 421 (1942) (alimony); see also FDIC v. Galloway, 856 F.2d 112, 116 (10th Cir.1988) (new action on continuing guaranty accrues as each underlying debt becomes due); Rock Milling & Elevator Co. v. Atchison, Topeka & Santa Fe Ry. Co., 98 Kan. 478, 483, 158 P. 859 (1916) (statute ran separately as to each separate shipment of cars); Bailey v. Fredonia Gas Co., 82 Kan. 746, 109 P. 411 (1910) (single contract for drilling wells was severable as to each well, and payment was due whenever paying well had been drilled). If this rule is to apply, then plaintiffs have a separate cause of action accruing monthly, beginning February 25, 1985, for defendant's alleged breaches announced in the 1985 Amendment.

Breach of duties arising under a continuing contract may give rise, however, to a single action having a single date of accrual if the breach amounts to an anticipatory repudiation of the contract. Trustees for Alaska Laborers-Constr. v. Ferrell, 812 F.2d 512, 517 (9th Cir.1987) (citing 4 A. Corbin, Corbin on Contracts §§ 956, 951, 989 (1951)). In such a situation, the repudiation constitutes a total rather than partial breach, see Restatement (Second) of Contracts §§ 250, 253 (1981), giving the injured party one of several options:

If an injured party wishes to treat a renunciation or repudiation of a contract as an anticipatory breach, he must either (1) bring an immediate suit for damages; or (2) treat the contract as still binding and bring an action only after the time for performance by the promisor has passed; or (3) rescind the contract and sue for money paid or the value of services or property furnished.

Stauth v. Brown, 241 Kan. 1, 734 P.2d 1063, syl. ¶ 8 (1987). Assuming, without deciding, that defendant's conduct constituted a repudiation of the continuing contract,³ the issue becomes when a cause of action for an anticipatory breach of contract accrues.

There is authority for the proposition that a cause of action for an anticipatory breach accrues on the earliest date on which plaintiff is permitted to sue, i.e., immediately upon the announcement of the breach by the repudiating party. See American Cyanamid Co. v. Mississippi Chem. Corp., 817 F.2d 91, 93 (11th Cir. 1987) (New Jersey law). The general rule, however, is that "where an action is brought after the time fixed by an executory contract for the beginning of performance by a party who has committed an anticipatory breach, the period of limitations runs, not from the time of such breach, but from the time fixed by the contract for performance by the defaulting party...