Opinion by Justice RODRIGUEZ.
This is an appeal from a jury trial on disputes over an oil and gas drilling contract. By one issue, appellant Mohican Oil & Gas, LLC, plaintiff and counter-defendant in the trial court, challenges as legally and factually insufficient the evidence supporting the jury's award of damages and attorneys' fees to appellee Chapco, Inc., defendant and counter-plaintiff in the trial court. By one issue, cross-appellant Scorpion Exploration & Production, Inc., defendant and counter-plaintiff in the trial court, argues that the trial court erred in awarding attorneys' fees to cross-appellee Mohican and not Scorpion because Scorpion, not Mohican, was the prevailing party in the contract litigation. We affirm, in part, reverse and render, in part, and reverse and remand, in part.
Mohican is an oil and gas exploration and development company. Scorpion is a drilling contracting company, and Chapco is a well operating company; both are owned and run by Lauro Chapa. In the fall of 2006, Mohican and Scorpion entered into a turnkey contract
Drilling commenced on Olmitos No. 2 on November 21, 2006. Throughout December 2006, Scorpion encountered several difficulties in setting the intermediate casing and proceeding to production depths,
Mohican paid Scorpion the first half of the lump sum contract price up front and the second half when the well reached its total depth. In February 2007, Scorpion demanded approximately $836,000 from Mohican in addition to the lump sum contract price, claiming that the contract converted to daywork basis when the drilling complications began in early December 2006.
In March 2007, Mohican filed a petition for declaratory judgment against Scorpion and Chapco.
In May 2009, Mohican's claims and Scorpion and Chapco's counterclaims were tried to a jury. At trial, the following facts, relevant to this appeal, were in dispute: (1) whether the contract converted from turnkey to daywork when Scorpion encountered certain problems in the drilling process; (2) whether Mohican was obligated under the contract to provide Scorpion with a mudlogger
At the close of evidence, the trial court granted Scorpion's motion for directed verdict on all of Mohican's claims except its claim for declaratory relief.
In its judgment, the trial court found that: (1) Mohican had established its entitlement to declaratory relief
After the trial court issued its judgment, Scorpion filed a motion to modify, correct, or reform the judgment, arguing that the trial court erred in finding that Mohican was the prevailing party in the litigation. Mohican also filed a motion to disregard jury findings, for judgment notwithstanding the verdict, to reform the judgment, or in the alternative for a partial new trial or remittitur. In its motion, Mohican sought, in relevant part, to set aside the judgment in favor of Chapco or a new trial or remittitur on that claim because of insufficient evidence of damages.
By one issue, Mohican argues that there was legally and factually insufficient evidence that Chapco suffered $60,000 in damages for "time spent by Chapco as operator of the Olmitos No. 2 well." Specifically, Mohican argues that the evidence showed that Chapco performed none of the essential functions of an operator and Chapco therefore failed to prove it suffered damages.
In determining whether there is legally sufficient evidence to support the finding under review, we consider evidence favorable to the finding if a reasonable fact-finder could and disregard evidence contrary to the finding unless a reasonable fact-finder could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.2005). We may sustain a legal sufficiency challenge only when (1) the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of a vital fact. Id. at 810; King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex.2003). When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence. Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex.2004). More than a scintilla of evidence exists if the evidence furnishes some reasonable basis for differing conclusions by reasonable minds about the existence of a vital fact. Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co., 77 S.W.3d 253, 262 (Tex.2002).
In reviewing an appellant's factual sufficiency challenge to an adverse jury finding on which the other party had the burden of proof, as is the case here, we will consider, weigh, and examine all of the evidence in the record, both in support of and contrary to the finding. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001). We will set aside the trial court's finding only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).
At trial, John Newman, co-owner of and landman for Mohican, testified that Mohican was the operator on the drilling contract and Chapco was listed as operator with the TRC. Newman testified that Mohican asked Chapco to be listed as the operator with TRC for competitive reasons; Mohican wished to avoid being publicly associated with the well. According to Newman, however, Chapco performed none of the functions of an operator, which include "permitting," "receiv[ing] revenues," "pay[ing] royalties," running daily oil and gas charts and gauging the well, and "administer[ing] the contracts." Newman testified that Mohican hired a company "to do the Railroad Commission permitting." Newman admitted that, as TRC-listed operator, Chapco was liable for certain contingencies such as waste and contamination and that if "there's a problem, [the operator] gets a phone call." Finally, Newman testified that the "highest [Mohican has] received" for acting as operator is $650 a month.
Chapa testified that he was seeking $65,000 for acting as operator. He testified that although he did not do any of the permitting with the TRC or perform any other operator functions, such as
Finally, Chapco called Robert Dougherty to testify as its expert witness on operations. Dougherty testified as follows regarding the responsibilities of the operator:
Dougherty testified as follows about compensation for an operator, in general, and for Chapco, in this case:
Dougherty then agreed that "approximately 64 to $65,000" would be "a reasonable charge by Chapco."
Mohican argues that Chapa conceded in his testimony that he performed none of the essential functions of an operator, as those functions were defined and
Under the jury charge, Chapco was awarded $60,000 for "time spent . . . as operator of the Olmitos No. 2 well." Because Mohican did not object to the charge and does not challenge it on appeal, we conclude that is the relevant measure of damages for this issue. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex.2000) (citing TEX.R. CIV. P. 272, 274, 278, 279; Larson v. Cook Consultants, Inc., 690 S.W.2d 567, 568 (Tex. 1985); Allen v. Am. Nat'l Ins. Co., 380 S.W.2d 604, 609 (Tex.1964)) ("[I]t is the court's charge, not some other unidentified law, that measures the sufficiency of the evidence when the opposing party fails to object to the charge."). And even presuming that Chapco performed only the one function to which Chapa testified,
In his testimony, Newman admitted that, because it was listed as operator with the TRC, Chapco was liable for potential problems such as waste and contamination. Chapa also testified that he would be liable for problems such as blowouts and dry holes. Dougherty testified that, when there are problems with a well, "the [TRC-listed] operator is the one they come to first and has the ultimate responsibility." Additionally, when questioned by Mohican's counsel regarding the "actual work" Chapco performed as operator, Dougherty responded, "First of all, it's the exposure. [Chapco] was exposed." Dougherty stated that, even if all Chapco did was put its "name on a piece of paper," "[i]t's a pretty big job."
With regard to the amount of compensation, we acknowledge that Chapa's statement that $65,000 was "fair" compensation for being the TRC-listed operator is, alone, not likely sufficient to support the jury's award. But the other evidence was more specific. Dougherty testified that he charged $1,000 a day while a well was being drilled and $1,000 a month after the well is completed and producing.
In sum, the testimony at trial established that Chapco assumed significant liability and responsibility by being listed as the operator of Olmitos No. 2 with the TRC. The compensation Mohican owed Chapco for assuming that responsibility was a matter within the jury's sound discretion, and there was evidence presented at trial that supported the jury's $60,000 award. Thus, viewing the evidence in the light most favorable to the jury's finding, we conclude that there was legally sufficient evidence that supported the jury's $60,000 award to Chapco for "time spent" as operator of Olmitos No. 2. Contrary to Mohican's assertions on appeal, the evidence did not conclusively establish that Chapco performed no essential functions of an operator; rather, there was more than a scintilla of evidence—or evidence from which reasonable jurors could differ in their conclusions—supporting the amount awarded to Chapco. See id. at 810, 827; Rocor Int'l, Inc., 77 S.W.3d at 262. Moreover, considering both the evidence in support of and contrary to the finding, we cannot conclude that the amount of the
By one issue on cross-appeal, Scorpion challenges the trial court's award of attorneys' fees to Mohican, arguing that Scorpion, not Mohican, was the prevailing party in the dispute over the drilling contract because the jury found that Mohican breached the drilling contract and awarded Scorpion damages.
The trial court's judgment provides as follows regarding the prevailing party and attorneys' fees:
The drilling contract provided as follows regarding attorneys' fees:
"Parties are free to contract for a fee-recovery standard either looser or stricter" than the fee-recovery standards provided by statute, and courts are bound by the parties' choice. Intercont'l Group P'ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 653 (Tex.2009); Wayne v. A.V.A. Vending, Inc., 52 S.W.3d 412, 417 (Tex.App.-Corpus Christi 2001, pet. denied) (citing One Call Sys., Inc. v. Houston Lighting & Power Co., 936 S.W.2d 673, 676 (Tex.App.-Houston [14th Dist.] 1996, writ denied)). Because the contract at issue here provides for attorneys' fees, the terms of the contract, not statute, control the outcome of this issue. See KB Home Lone Star L.P., 295 S.W.3d at 653; Wayne, 52 S.W.3d at 412.
When interpreting a contractual attorneys' fee provision in which the "prevailing party" term is left undefined, as is the case here, we are guided by the Texas Supreme Court's opinion in Intercontinental Group Partnership v. KB Home Lone Star L.P. See 295 S.W.3d at 653-57. To begin, "we presume the parties intended the term's ordinary meaning." Id. at 653. In that regard,
Id. at 654 (quoting Farrar v. Hobby, 506 U.S. 103, 111-12, 113 S.Ct. 566, 121 L.Ed.2d 494 (1992)) (other quotations omitted). In short, "[w]hether a party prevails turns on whether the party prevails upon the court to award it something, either monetary or equitable," and the court then makes such an award. Id. at 655.
Here, in its original petition, Mohican prevailed upon the trial court to award it the equitable, declaratory relief related to the drilling contract it eventually obtained in the judgment. A complication arises, however, in that the judgment also concludes that Mohican committed a breach of the same contract against Scorpion. In light of these seemingly competing conclusions in the judgment, the question remains: which party prevailed in the suit on the contract, Mohican or Scorpion? Our conclusion is that this is a case in which there were two prevailing parties at trial.
In drawing this conclusion, we are mindful of the supreme court's reasoning in KB Home with regard to declarations of rights that
Id. at 656-57 (internal citations and quotations omitted). However, the supreme court's reasoning was predicated on the notion that the plaintiff in such a case sought only actual damages for breach of contract. Id. at 656 (stating that "to prevail in a suit that seeks only actual damages... there must be a showing that the plaintiff was actually harmed, not merely wronged"). In other words, the lawsuit in the supreme court's scenario was never one to "declare rights"; rather, this suit "always" sought only "money damages." Id. at 660-61.
Here, Mohican filed suit specifically to have its rights declared under the drilling contract. It sought equitable, declaratory relief separate and apart from its breach of contract claim—a claim that was not only disposed of on directed verdict but was not even related to the notice and turnkey versus daywork issues in the requested declaratory relief. By obtaining that declaratory relief in the trial court's judgment, Mohican therefore succeeded on the merits of its claim and affected the relationship between it and Scorpion. In other words, the declarations established that Scorpion could not recover from Mohican for any work performed on a daywork basis, and we conclude that Scorpion thus prevailed in the controversy over the notice and turnkey versus daywork issue. The fact that Scorpion was also awarded damages on its counterclaim does not demote Mohican's declaratory relief to a mere "nominal," "technical[,] or de minimis" victory. To conclude otherwise would exalt monetary damages for a potentially unrelated counterclaim
Because we believe that Scorpion's counterclaim was also a suit on the drilling contract that was governed by the attorneys' fees provision therein, we further conclude that Scorpion was a prevailing party because it obtained a favorable answer to its breach of contract jury question and was awarded damages related to that breach. For the same reasons discussed above, we will not weigh the distinguishable successes achieved by both parties in order to determine that one is prevailing and one is not. Although tried before the same jury in the same proceeding, we believe there were essentially two suits brought on the drilling contract under different provisions of the contract and based on different actions by the parties during the drilling. Mohican prevailed in the controversy over the turnkey versus daywork issue. And even though the jury sided with Mohican on that issue, Scorpion nonetheless proved a breach of contract on its other pleaded theory for recovery. To interpret the jury's verdict in any other way ignores the voluminous evidence and argument at trial regarding the mudlogger issue. As such, Scorpion was also a prevailing party in this litigation.
In drawing the foregoing conclusions, we feel compelled to address the parties' various arguments in support of their positions that they alone were the prevailing party. Scorpion argues that its breach of contract counterclaim rendered Mohican's "non-liability" declaratory judgment action moot and that Mohican cannot become a prevailing party by using its declaratory action to avoid the matured breach of contract claim. See Shank, Irwin, Conant & Williamson v. Durant, Mankoff, Davis, Wolens & Francis, 748 S.W.2d 494, 500 n. 4 (Tex.App.-Dallas 1988, no writ).
First, we are not persuaded by the non-binding dicta holding in Shank, Irwin that Scorpion's contract counterclaim rendered Mohican's declaratory judgment action moot. In Shank, Irwin, the plaintiff filed a suit for declaratory judgment of non-liability on a contract for fees after the defendant had demanded payment for fees under that contract. 748 S.W.2d at 496. The defendant then filed a counterclaim seeking recovery of those fees it had demanded. Id. The trial court granted summary judgment in favor of the defendant on the counterclaim, but the court of appeals reversed holding that the plaintiff proved as a matter of law that it owed no fees under the contract. Id. at 497, 500. In a footnote, the court of appeals then declined to remand the case to the trial court for a determination of which party prevailed on the declaratory judgment action and was thus entitled to attorneys' fees, reasoning that once the defendant filed its counterclaim, the plaintiff's request for declaration of non-liability became moot. Id. at 500 n. 4.
Here, the parties' claims were tried to a jury, not disposed of in pre-trial motions. Even if we were to assume that Mohican's declaratory action was somehow subsumed into Scorpion's breach of contract counterclaim, that does not alter the fact that Mohican's declaratory judgment questions were submitted to the jury without objection
Citing MBM Financial Corp. v. The Woodlands Operating Co., Scorpion also argues that Mohican's declaratory judgment action was merely tacked onto Mohican's "matured contract and tort claims" and, as a result, could not be used as a vehicle to obtain attorneys' fees where Mohican failed to obtain damages and fees for its breach of contract action. See 292 S.W.3d 660, 670 (Tex.2009). We disagree that this is a case in which a breach of contract action was "replead[ed] ... as a declaratory judgment" and used as a "vehicle to obtain otherwise impermissible attorney's fees." See id. at 669. Mohican's original claim was one for declaratory relief. Although Mohican also alleged a breach of contract claim in that same petition, it was based on facts and actions unrelated to the subject-matter of its declaratory judgment action.
In support of Mohican's position that it, alone, was the prevailing party, Mohican argues that its declaratory judgment action was the main issue in the litigation and that, because it obtained favorable jury findings on its requests for declaratory relief, Mohican was the prevailing party at trial. In short, Mohican argues that its declaratory action was the "suit ... brought on" the contract and that it prevailed in that suit. We disagree.
First, the supreme court has implicitly rejected the sort of "main issue" analysis that Mohican advocates in cases where a contractual attorneys' fee provision controls. See KB Home, 295 S.W.3d at 661-62. Second, concluding that the turnkey versus daywork controversy was the main issue in the litigation would be ignoring the evidence that was actually presented and argued at trial. Having reviewed the entire trial record, we believe that whether Mohican was obligated to provide a mudlogger to Scorpion during drilling and whether the delays and complications in drilling during December 2006 were the result of the failure to provide a mudlogger were issues of equal importance. We are therefore unpersuaded by Mohican's contention that it was the sole prevailing party because the main issue in the case was its declaratory judgment.
In sum, we conclude that the trial court erred in determining that Mohican was the sole prevailing party at trial. Both Mohican and Scorpion benefited from the relief awarded to them by the trial court in the judgment and thus prevailed on the merits of their claims. See id. at 654-55. Because of the unique character of this disposition, we do not believe that the attorneys' fees affidavits submitted by and stipulated to by the parties after trial are sufficient for this Court to render awards on appeal. Therefore, we will remand the issue of attorneys' fees for determination by the trial court. Scorpion's issue is sustained in so far as it complains that the trial court erred in denying Scorpion prevailing party status but overruled in so far as it complains that the trial court erred in ruling Mohican the prevailing party.
We affirm the judgment of the trial court regarding: (1) the damages awarded to Chapco, and (2) the prevailing party status conferred upon Mohican. We reverse the judgment of the trial court in so far as it denied prevailing party status to Scorpion and render judgment that Scorpion is a prevailing party in the litigation on the drilling contract. We further reverse and remand the case for determination of Mohican and Scorpion's attorneys' fees in accordance with this opinion.
At trial, the parties disputed the exact benefit and function of a mudlogger. Mohican contended that mudloggers are mainly useful to company geologists when the composition of the formation under the drilling site is uncertain; Mohican posited that the area in which Olmitos No. 2 was drilled was well-documented and that its geologist therefore did not need a mudlogger. Scorpion contended that mudloggers are also useful to the drilling contractor because a mudlogger's analysis of the cuttings aids the contractor in determining whether they are drilling into a layer that requires certain additional precautions in its operations.
With regard to the damages associated with Chapco's contract action against Mohican, the jury was asked:
We are therefore unpersuaded by Mohican's argument that its and Scorpion's contractual liability bears on the remaining liability of Chapco established at trial.