Swanson v. Schlumberger Technology Corp.

• Decision Date: 30 November 1994
• Docket Number: No. 06-93-00084-CV,06-93-00084-CV
• Citation: 895 S.W.2d 719
• Parties: John SWANSON, George Swanson, and George C. Swanson Enterprises (PTY.), Ltd., Appellants, v. SCHLUMBERGER TECHNOLOGY CORP., Schlumberger Ltd., Appellees.
• Court: Texas Court of Appeals

Page 719

895 S.W.2d 719

John SWANSON, George Swanson, and George C. Swanson Enterprises (PTY.), Ltd., Appellants, v. SCHLUMBERGER TECHNOLOGY CORP., Schlumberger Ltd., Appellees.

No. 06-93-00084-CV.

Court of Appeals of Texas Texarkana.

Nov. 30, 1994.

Opinion Overruling Motion for

Rehearing Feb. 22, 1995.

E. Eric Fryar, Susman Godfrey, L.L.P., John M. O'Quinn, O'Quinn, Kerensky, McAninch, Houston, Franklin Jones, Jr., Jones, Jones & Curry, Inc., Marshall, for appellants.

Ben Taylor, Roger Townsend, Fulbright & Jaworski, Houston, John R. Mercy, Atchley, Russell, Waldrop, Texarkana, for appellees.

Before CORNELIUS, C.J., and BLEIL and GRANT, JJ.

OPINION

GRANT, Justice.

John Swanson, George Swanson, and George E. Swanson Enterprises (Pty.), Ltd. (the Swansons) appeal from a judgment notwithstanding the verdict entered in their suit against Schlumberger Technology Corporation and Schlumberger Ltd. (Schlumberger). The Swansons filed suit alleging that Schlumberger committed common-law and statutory fraud and that Schlumberger breached fiduciary duties owed to the Swansons under a partnership or confidential relationship.

ISSUES

In three points of error, the Swansons contend generally that the district court erred in entering a j.n.o.v. in favor of the defendants and in failing to enter judgment on the verdict in favor of the plaintiffs. In twenty-three reply and cross-points, Schlumberger contends that the trial court did not err in rendering j.n.o.v., that the evidence is legally and factually insufficient to support numerous jury findings, and that the trial court erred in submitting several questions to the jury over Schlumberger's objections.

FACTS

According to the evidence, George Swanson believed that a vast field of high quality diamonds had been washed from the continent of South Africa into the ocean by millions of years of erosion. In 1978, he advanced an idea for mining the diamonds in this offshore field. George discussed this idea with his brother John, a minerals consultant and sought his aid in finding someone with the know-how and equipment to mine the diamonds. Later in 1978, John negotiated with Sedco, Inc. and convinced Sedco to join with the Swansons in attempting to develop an offshore diamond mine. Sedco was experienced in offshore drilling. Through a series of letters, Sedco agreed to join the Swansons in pursuit of the offshore diamonds.

The sea-diamond project had three phases: In Phase I, Sedco was to study the feasibility of offshore diamond mining off the coast of Africa, and the Swansons were to conduct preliminary work necessary to acquiring exclusive operating rights in the area; in Phase II, the parties were to acquire a diamond lease and begin prospecting for diamonds; and in Phase III, Sedco was to undertake commercial mining of the diamonds, with John Swanson and the Swanson Corporation each receiving 2.5% of the net proceeds and an option to purchase up to 5% of the shares of the newly founded mining company. The letter agreements gave Sedco an exclusive option as to whether to proceed with each successive phase of the mining operation. The Swansons were also to receive a consultation fee from Sedco during the first two phases of the operation.

Sedco finished the Phase I feasibility study in January 1979, having determined that the sea-diamond project was both technologically and commercially feasible. In May of 1979, a second letter agreement extended the time period for Phase II because no diamond lease was then available for offshore diamond mining. For the next two years, the Swansons lobbied the South African government for a diamond lease and, in 1981, the government redrew the lease lines in order to create new deep sea leases. The Swansons and Sedco received Lease 3C in July 1983, with Sedco, Inc. and George E. Swanson Enterprises named as co-lessees.

At around the same time, British Petroleum Company was awarded Lease 2C immediately to the north of the Sedco/Swanson lease, and DeBeers was awarded Leases 4C and 5C immediately to the south. In 1984, Sedco, British Petroleum, and DeBeers conducted negotiations aimed at forming a consortium to pool the four leases and jointly develop the mines. According to the testimony of John Swanson, Sedco's general counsel promised that the Swansons would be allowed access to the consortium's prospecting information, the Swansons would be given a seat on the operating committee of the consortium, and Sedco would stay in the project if diamonds were found in commercial quantities. In a third letter agreement, the Swansons gave express consent to the consortium but retained all of the rights granted in the previous letter agreements. Under the terms of the consortium agreement executed in February 1985, the parties, DeBeers, British Petroleum, and Sedco, agreed to stay in the consortium until 21 million rand (approximately $8.6 million) was expended.

In 1985, Sedco merged into a wholly owned Texas subsidiary of Schlumberger, designated as Schlumberger Technology Corporation. Sedco's drilling operations continued to exist under the name Sedco-Forex and a South African subsidiary, called Sedswan Diamonds (Pty.), Ltd., was formed to handle the development of the offshore diamond mines. Schlumberger, however, decided later in 1985 to pull out of the offshore diamond mining project. This decision was apparently in line with Schlumberger's corporate philosophy of investing only in core, established businesses and did not derive from the commercial feasibility of the diamond mine project. The Swansons were unaware of Schlumberger's intention to pull out of the project until almost two years later, by which time Lease 3C had been reissued in the name of Sedswan Diamonds, the newly created subsidiary of Schlumberger.

The Swansons contend that Schlumberger failed to keep Sedco's promise that it would keep the Swansons informed regarding the project and award the Swansons a seat on the consortium's operating committee. The Swansons further contend that they were dependent on Schlumberger for all their information on the project. Schlumberger contends that during this period the Swansons came to distrust Schlumberger and sought legal advice regarding their relationship.

In January 1987, Schlumberger offered to sell their interest in the consortium to DeBeers and British Petroleum, but both companies refused to buy out Schlumberger subject to the Swansons' rights. Over the next thirteen months, Schlumberger negotiated with the Swansons in an attempt to buy out their alleged interest in the consortium. During these negotiations, Schlumberger repeatedly downplayed the potential profitability of the sea-diamond project, suggesting that no technology existed that could efficiently mine the diamonds. Also during this period, the Swansons repeatedly threatened to sue Schlumberger and, at one point they even drafted a petition alleging conspiracy, breach of contract, and illegal dilution.

In February 1988, Schlumberger offered the Swansons two million rand (stipulated at trial to be the equivalent of $814,000.80) in exchange for the Swansons' relinquishing of all rights, claims, and interests in the sea-diamond project and Lease 3C and for releasing Schlumberger from all causes of action, known or unknown. The Swansons signed the release, which also warranted that the Swansons were not relying on any statement or representation made by any agent of Schlumberger or Sedco. Schlumberger then sold its interest in the consortium to British Petroleum and DeBeers for ten million rand. ¹

The Swansons sued Schlumberger in 1992 alleging, inter alia, common-law fraud, and a breach of fiduciary duty. A claim of statutory fraud was added in 1993. The jury charge made inquiries regarding five theories of liability, including breach of fiduciary duties arising from a partnership, breach of fiduciary duties arising from a special relationship, common-law fraud by misrepresentation, common-law fraud by nondisclosure, and statutory fraud under Section 27.01 of the Texas Business and Commerce Code. Additionally, five questions were submitted on limitations, sixteen questions were submitted on other affirmative defenses, and two questions were submitted on Schlumberger's counterclaim for breach of the release. The jury found in favor of the Swansons on all theories of liability and against Schlumberger on all affirmative defenses, as well as on the counterclaim. The jury found the value of the Swansons' interest in the sea-diamond project at the time of the release to be $15 million. The jury also awarded $35 million in exemplary damages on the statutory fraud claim, $10 million in exemplary damages on the breach of fiduciary duty and the common-law fraud claims, and an attorney's fee of twenty-five percent of the total recovery. The trial court granted Schlumberger's motion for j.n.o.v. and entered a take-nothing judgment in its favor. The judgment does not disclose the trial court's grounds for awarding the j.n.o.v.

STANDARDS OF REVIEW

In reviewing a judgment notwithstanding the verdict, the court must view the evidence admitted at trial in favor of the nonmovant and determine that there was no evidence upon which the jury could have found for the nonmovant. Exxon Corp. v. Quinn, 726 S.W.2d 17 (Tex.1987). When the trial court states no reason why a j.n.o.v. was granted, and the motion for j.n.o.v. presents multiple grounds upon which a j.n.o.v. could be granted, the appellant has the burden of showing that the judgment cannot be sustained on any of the grounds stated in the motion. Fort Bend County Drainage Dist. v. Sbrusch, 818 S.W.2d 392 (Tex.1991).

Schlumberger's motion for j.n.o.v. was based upon the Swansons' failure to obtain any liability findings, the Swansons' failure to obtain an actual damage finding, the defense of ratification and limitation, and numerous allegations on legally insufficient evidence. In addition, Schlumberger has...