Texas West Oil and Gas Corp. v. Fitzgerald

Decision Date21 October 1986
Docket Number86-10,Nos. 86-9,s. 86-9
Citation726 P.2d 1056
PartiesTEXAS WEST OIL AND GAS CORPORATION and Bob Johnson, Appellants (Plaintiffs), v. D.N. FITZGERALD, Appellee (Intervenor), Oil Patch Sales and Rentals of Wyoming, Inc., a Wyoming corporation, Appellee (Defendant). D.N. FITZGERALD, Appellant (Intervenor), v. TEXAS WEST OIL AND GAS CORPORATION and Bob Johnson, Appellees (Plaintiffs), Oil Patch Sales and Rentals of Wyoming, Inc., a Wyoming corporation, (Defendant).
CourtWyoming Supreme Court

Jeffrey C. Gosman, Casper, for Texas West Oil and Gas Corp. and Bob johnson.

Harold E. Meier of Schwartz, Bon, McCrary & Walker, Casper, for D.N. Fitzgerald.

Susan Maher Overeem, Casper, for Oil Patch Sales and Rentals of wyoming, inc.

Before THOMAS, C.J., and BROWN, CARDINE, URBIGKIT and MACY, JJ.

MACY, Justice.

These two cases have their origins in the same contract. We will first consider the facts relating to the dispute between plaintiffs Texas West Oil and Gas Corporation (Texas West) and Bob Johnson and defendant Oil Patch Sales and Rentals of Wyoming, Inc. (Oil Patch).

Texas West is in the business of exploring for, developing, and producing oil and gas. On June 1, 1981, Texas West agreed to purchase a drilling rig from Oil Patch. The contract provided for a $500,000 payment on the day of execution and four monthly payments of $750,000. The contract also stated that the price to be paid for the drilling rig was approximately $5.1 million with "exact figures to be made definite and certain by agreement of the parties, or if unable to be agreed upon, by arbitration, and is to be based upon actual costs of Seller as well as time involved in construction." Finally, the contract provided that it was anticipated that the rig would be completed in October 1981.

Although Texas West paid the $3.5 million required by the contract, Oil Patch could not deliver the rig as the parties had anticipated because of problems with the delivery of the rig's drawworks to Oil Patch. After the parties had discussed the problems with the drawworks, Oil Patch sent Texas West a letter on February 19, 1982, in which Oil Patch requested that Texas West select substitute drawworks, pay the additional cost for these substitute drawworks, and advance the balance of the contract. At the same time, Oil Patch offered the alternative of delivering the rig without the drawworks in exchange for the balance of the contract price less the cost of the drawworks. Texas West responded by stating that the delivery date of " 'during the first two weeks of October, 1981' " was crucial and that Oil Patch had failed to fulfill the contract. In addition, Texas West stated that the $5.1 million figure was only an approximation; that Oil Patch had not shown expenditures of nearly that amount; and that the contract price could be less than $5.1 million.

Texas West filed a complaint against Oil Patch in October 1982 asserting that Oil Patch had breached the contract by failing to complete and deliver the rig. The complaint sought possession of the rig as well as damages allegedly caused by the breach. Oil Patch answered and asserted that it was impossible to complete the rig with the drawworks originally set out in the contract and that Texas West had refused to specify substitute drawworks which it would accept and had repudiated the contract. Oil Patch counterclaimed for the balance of the purchase price--i.e., $5.1 million--less any setoffs and sought incidental damages it claimed to have suffered from Texas West's repudiation.

After Oil Patch requested that the issue of the purchase price be submitted to arbitration, the parties entered into a stipulation in which they agreed to submit all legal and factual issues in the dispute to an arbitration panel. After a hearing in April 1984, the arbitration panel concluded that the contract price was $5.1 million with a provision in case of any overrun of costs beyond that amount. Because the rig was not completed, the panel awarded Oil Patch the contract price of $5.1 million minus the cost of completing the rig, which the panel found to be $1,133,000, and the down payment of $3.5 million. 1 The panel also found that Texas West should pay interest on the balance of the contract price from March 1, 1982.

Texas West moved in district court to vacate or modify the arbitration award, while Oil Patch asked for an order confirming the award. The district court determined that the award should not be set aside or modified (except for the $100,000 We are also presented with the dispute which, although connected with the contract between Oil Patch and Texas West, now involves as parties D.N. Fitzgerald and Texas West. Fitzgerald was not named in the original complaint filed by Texas West against Oil Patch, but he intervened because he claimed to hold a security interest in the inventory of Oil Patch, which included the rig Texas West sought to possess. After Fitzgerald intervened, Texas West amended its complaint joining Fitzgerald and others as defendants. In its amended complaint, Texas West alleged that Fitzgerald intentionally interfered with the contract between Oil Patch and itself, which caused Texas West to suffer damages.

arithmetic error) and accordingly entered an order confirming the award and dismissing the motion to vacate or modify. Texas West has appealed from this order.

Fitzgerald had been an original incorporator and vice president of Oil Patch. As such he agreed to guarantee the corporation's loans from First Interstate Bank of Casper, N.A. (Bank). Although he resigned as a director of Oil Patch in March 1981, the Bank did not release Fitzgerald from his guaranty of $500,000. In fact, in April 1982 Fitzgerald increased the guaranty to $1.1 million. This guaranty became important because Oil Patch borrowed approximately $1.1 million from the Bank as it worked on completing the rig for Texas West. In addition to Fitzgerald's guaranty, in March 1982, the Bank also acquired a security interest in all of Oil Patch's inventory and accounts receivable, which included the rig. By September 1982, the loans had become past due, and the Bank asked Fitzgerald to honor his guaranty. Fitzgerald did so and received the note and security interest previously held by the Bank.

Texas West asserts that Fitzgerald induced the Bank to take the lien on the rig. Then Fitzgerald assumed control over the disposition of the rig, requiring that additional money be paid under the contract between Oil Patch and Texas West in order to protect himself from liability on the guaranty. These actions induced Oil Patch to breach the contract by requiring more than the contract price before it would deliver the rig. These actions also form the basis for Texas West's claim against Fitzgerald.

Texas West's claim against Fitzgerald was tried before a jury which found that Fitzgerald had interfered with the contract between Oil Patch and Texas West. The jury also found that as a result Texas West suffered damages of $4 million. Fitzgerald moved for a judgment notwithstanding the verdict (JNOV) or alternatively for a new trial or remittitur. The trial court denied the motion for JNOV but granted the motion for a new trial unless Texas West consented to a remittitur of $3,431,675. Texas West has appealed from this order, and Fitzgerald has taken a cross-appeal from the portion of the order denying his motion for JNOV.

ARBITRATION AWARD

The order of the district court affirming the arbitration award is affirmed.

The motion of Texas West merely stated that the arbitration award should be vacated or modified for any and all reasons allowed or contemplated by law.

According to the brief of Texas West filed in the district court in support of its motion, Texas West contended that the award should be set aside because it is a manifest mistake of law to award full profit on a contract which the seller failed to perform. In the alternative, Texas West contended that the award should be modified (1) to reduce the award by $226,000, which it claims is the ratio of profit for the portion of the rig not completed; (2) to reduce the award to reflect the $100,000 arithmetic error; (3) to strike the requirement for the payment of interest and attorney's fees; and (4) to require Oil Patch to convey title to the incompleted oil rig to Texas West upon receiving payment of any unpaid balance owed by it.

In its brief in opposition to the motion of Texas West, Oil Patch contended that the "An application to the court for an order shall be by motion which, unless made during a hearing or trial, shall be made in writing, [and] shall state with particularity the grounds therefor * * *." (Emphasis added.)

motion was insufficient in that it did not state with particularity the grounds therefor as required by Rule 7(b)(1), W.R.C.P., which provides in part that:

Oil Patch further contends in its brief that Texas West has failed to show any clear and convincing reason why the award should be vacated on any of the grounds enumerated in § 1-36-114(a), W.S.1977, which provides that the court shall vacate an arbitration award where:

"(i) The award was procured by corruption, fraud or other undue means;

"(ii) There was evident partiality by an arbitrator appointed as a neutral, corruption of any of the arbitrators or misconduct prejudicing the rights of any party;

"(iii) The arbitrators exceeded their powers;

"(iv) The arbitrators refused to postpone the hearing upon sufficient cause being shown, refused to hear evidence material to the controversy or otherwise conducted the hearing as to prejudice substantially the rights of a party; or

"(v) There was no arbitration agreement, the issue was not adversely determined by a court as provided by law and the applicant did not participate in the arbitration hearing without raising the objection. The fact that the relief was such that it could not or would not be granted by a court...

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