Bailey C. Moseley, Justice.
In 2008, oil and gas companies descended on east Texas and Louisiana seeking to acquire leases to exploit the Haynesville Shale formation, which they viewed as having enormous potential. The atmosphere created by these companies was described as "unreal," "a land rush," and comparable to a gold rush. David Deffenbaugh, Petrohawk Properties, L.P.'s, vice president of land — midcontinent at the time, testified that in his thirty years in the industry, he had never seen bonus prices and activity accelerate as quickly as it did during the Haynesville Shale heyday.
To identify mineral interests that were available to lease, it was necessary to employ landmen to conduct title searches in the local county clerks' offices. In Harrison County, the clerk's office was overwhelmed with 80-100 landmen, causing the deputy clerks to limit the time each landman could use the office computers. This made it almost impossible to finish the title searches in a timely fashion.
During this time, Petrohawk
Negotiations began in June 2008 between the Family and RWT, acting on behalf of Petrohawk, for Petrohawk to lease the Family's available mineral interests. As negotiations progressed, Petrohawk's executive vice president, Steve Herod, became directly involved in finalizing the contract. The Family was willing to enter into a lease for an amount that was not the highest price per acre being paid by some other oil companies so long as the lessee would agree to lease every "open" mineral interest in the area (i.e., all of the minerals in which the Haynesville Shale depth stratum was not subject to a prior lease) held by the Family. Petrohawk and the Family entered into the "Agreement to Lease Oil and Gas Mineral Interests" (the Agreement) on July 11, 2008.
The Agreement provided that Petrohawk, within specified limitations, would lease all of the Family's unleased mineral interests situated east of Highway 59 in Harrison County, Texas (including, but not limited to, an extensive list of properties attached as Exhibit A to the contract), provided that the interests included rights in the Haynesville Shale stratum and, if unleased, the Bossier Shale stratum.
It also limited Petrohawk's obligation to lease to not more than 8,500 net mineral acres. In addition, the Agreement provided that Petrohawk would place $10,000,000.00 in escrow, which was to be applied to the purchase price at the closing. If the Family was unable to deliver oil and gas leases without title defects and having a net mineral acreage lease value that exceeded $10,000,000.00, or if Petrohawk and the Family did not agree to a lease form, then Petrohawk could terminate the Agreement without further liability, and the escrow would be returned to Petrohawk. On the other hand, if the Family delivered conforming leases with sufficient acreage and a lease value exceeding $10,000,000.00 and a lease form was agreed upon but Petrohawk refused to close the transaction, the escrow would be forfeited to the Family as liquidated damages.
Under the Agreement, the Family agreed to make their lease and title files, and any other information or documents they possessed, available to Petrohawk. Petrohawk agreed to keep the Family informed of the results of its title examination and give them the opportunity to cure any title defects in the tracts that were discovered in the search. Petrohawk agreed to notify the Family of any title defects not later than five days before closing. If the Family was unable to cure the title defects before closing, then it was given thirty days to cure any remaining title defects. At that time, the Family could execute additional leases covering those interests, and Petrohawk would pay the same $23,500.00 per acre lease bonus as with the other tracts.
At the time the Agreement was signed, Petrohawk did not know precisely the gross amount of the Family's mineral interests that were going to be available to be leased. However, it knew before the Agreement was signed that the Family had at least 4,800 mineral acres that may be available to lease. Petrohawk's Herod testified that his understanding was that Petrohawk would be leasing all of the net mineral acres that the Family owned east of Highway 59 in Harrison County that included the Haynesville Shale and that was unencumbered by a previous lease.
After the Agreement was signed, RWT began conducting due diligence regarding titles on behalf of Petrohawk, locating mineral interests owned by the Family covered by the Agreement, determining the interest owned by each member of the Family, reporting its results to Petrohawk, and preparing property descriptions (Exhibit A's) for each lease. As the title search work progressed, RWT's Chadwick kept the Family informed of the results of the title examination made by it on behalf of Petrohawk. Walsh testified that Petrohawk did not expect the Family to — nor was the Family obligated to — conduct its own title examination. If the Family had presented leases at the closing covering
As the August 15 closing date approached, it became apparent that RWT and Petrohawk would not have the title work finished on all of the properties. In view of this obstacle, Petrohawk requested an extension of the closing to August 27 to allow more time to complete title work (at least on some of the mineral interests), with a second "clean up" closing on September 17. The Family agreed to that extension. David Elkouri, Petrohawk's general counsel, sent an email on August 13 to other Petrohawk executives and RWT confirming this agreement. On or about August 27, leases covering thirty tracts and containing approximately 2,200 mineral acres were executed by the Family and Petrohawk, and Petrohawk paid the Family over $51,000,000.00, including some $31,000,000.00 going to Appellees. At the August 27 closing, Petrohawk and the Family agreed to release the $10,000,000.00 escrow deposit and include it in the amount paid by Petrohawk.
Before and after the August 27 closing, Petrohawk instructed RWT to continue its work identifying and verifying other mineral interests of the Family within the area set out in the Agreement in preparation for the September closing. Chadwick communicated the results of RWT's title search to Petrohawk and identified the interests proposed to be carried over to the September closing without any objection from Petrohawk. Members of the Family and Ned Hartline (one of the attorneys representing them in the transaction) testified that Petrohawk and Chadwick told them any properties not included in the closing of August 27 would be carried over to the September closing for closing at that time. As with the first closing, difficulty in verifying title caused the second closing to be postponed until October 9, with a third, final closing to be conducted on November 6. Herod stayed in contact with RWT to keep abreast of the number of additional mineral acres to be closed on October 9 and on November 6 and to make sure that the Family agreed on the "acreage splits" among them. In late September, Petrohawk asked that the October 9 closing be moved up to October 8. As late as October 6, internal emails indicate that Petrohawk expected to close on the leases of the additional acreage. RWT prepared a list of properties for the October 8 closing showing those interests in which the Family had defensible title, totaling about 1,211 net mineral acres. RWT also prepared and forwarded to the Family Exhibit A property descriptions to be attached to the leases to be delivered at the October 8 closing. Then, on October 7, Petrohawk sent an email to the Family's attorney that stated, in part,
The Family sought clarification from Petrohawk regarding when it would be able to close, but without success. By the end of October, Petrohawk took the position that the Agreement was closed on August 29 as to all acreage that had defensible title and that the Family had thirty days from that date to cure any title defects, which they did not do. Therefore, according to Petrohawk's communication, it believed that it had no further obligations to the Family under the Agreement. The undisputed testimony was that Petrohawk never notified the Family of any purported title defects.
The Family filed suit alleging Petrohawk had breached the Agreement and seeking either damages or specific performance. During the course of litigation, twelve family members settled with Petrohawk, and Appellees proceeded to trial. At trial, the jury found, inter alia, that Petrohawk breached the Agreement and awarded damages and attorney fees to the Appellees. Appellees elected to accept the damages award, reserving their right to specific performance should the damages be overturned, and a judgment was entered on the jury verdict for damages totaling $12,389,089.05, attorney fees totaling $4,220,000.00, and post-judgment interest. Subsequently, Appellees volunteered to remit $912,767.98, which was then ordered by the court.
On appeal, Petrohawk asserts error based on (1) its allegation that the statute of frauds bars recovery under the changed agreement, (2) its claim of the legal insufficiency of evidence to support the jury findings, including its findings of liability and damages, (3) its position that the jury charge was in error, and (4) its claim that the award of attorney fees was in error. Since we find that (1) the statute of frauds does not bar enforcement of the parties' modification to the Agreement, (2) there is sufficient evidence to support the jury's liability and damages findings, and (3) there was no harmful error in the jury instructions, we affirm those portions of the trial court's judgment. Because we are unable to perform a factual sufficiency analysis concerning the attorney fees award, we reverse and remand the issue of attorney fees for a new trial.
"Whether an agreement falls within the statute of frauds is a question of law." Sterrett v. Jacobs, 118 S.W.3d 877, 879 (Tex.App.-Texarkana 2003, pet. denied); Frost Nat'l Bank v. Burge, 29 S.W.3d 580, 594 (Tex.App.-Houston [14th Dist.] 2000, no pet.). "A question of law is subject to a de novo review." Dixon v. Amoco Prod. Co., 150 S.W.3d 191, 194 (Tex.App.-Tyler 2004, pet. denied).
The statute of frauds applies to oil and gas leases and contracts to acquire the same. Noxon v. Cockburn, 147 S.W.2d 872 (Tex.Civ.App.-Galveston 1941, writ ref'd). When an agreement is subject to the statute of frauds, it is not enforceable unless the "agreement, or a memorandum of it, is (1) in writing; and (2) signed by the person to be charged with the promise or agreement or by someone lawfully authorized to sign for him." TEX. BUS. & COM.CODE ANN. § 26.01(a) (West 2009). Further, the "statute of frauds requires that a memorandum of an agreement ... must be complete within itself in every material detail and contain all of the essential elements of the agreement so that the contract can be ascertained from the writings without resorting to oral testimony."
Generally, any modification to an agreement subject to the statute of frauds must also be in writing. See Dracopoulas v. Rachal, 411 S.W.2d 719, 721 (Tex.1967). However, when there is an alleged modification to the original agreement, to satisfy the statute of frauds, the "modification ... need not restate all the essential terms of the original agreement." BACM 2001-1 San Felipe Rd. Ltd. P'ship v. Trafalgar Holdings I, Ltd., 218 S.W.3d 137, 145-46 (Tex.App.-Houston [14th Dist.] 2007, pet. denied). Since a modification only alters those terms of the original agreement to which it refers, it leaves intact those unmentioned portions of the original agreement that are not inconsistent with the modification. Id. at 146; see also Boudreaux Civic Ass'n v. Cox, 882 S.W.2d 543, 547-48 (Tex.App.-Houston [1st Dist.] 1994, no writ). Further, "`[o]ne writing may be connected with another either expressly or by necessary inference because of internal evidence of the subject matter and occasion, that is, that they relate to the same transaction.'" Preston Exploration Co., L.P. v. GSF, L.L.C., 669 F.3d 518, 524 (5th Cir.2012) (quoting Oliver v. Corzelius, 215 S.W.2d 231, 237 (Tex.Civ.App.-El Paso 1948), rev'd on other grounds, 148 Tex. 76, 220 S.W.2d 632 (Tex.1949)).
There are exceptions to the rule that any modification must be in writing to be enforceable. If the modification to the agreement is not a material one, then an oral modification may be enforceable. Under certain circumstances, an oral agreement to extend the time of performance of a contract required to be in writing is enforceable, if the oral agreement is made before the written contract expires. Dracopoulas, 411 S.W.2d at 722. "Moreover, such an extension of time for performance may be implied as well as express...." Triton Commercial Props., Ltd. v. Norwest Bank Tex., N.A., 1 S.W.3d 814, 818 (Tex.App.-Corpus Christi 1999, pet. denied). However, an oral extension of time to perform is enforceable only if it does not materially alter the underlying written contract. Vendig v. Traylor, 604 S.W.2d 424, 427 (Tex.Civ.App.-Dallas 1980, writ ref'd n.r.e.). When the extension of time changes other contractual rights and duties, it materially affects the written contract and must itself be in writing. Id.; see Dracopoulas, 411 S.W.2d at 722. In other words, "where the terms of the extension differ so much as to make the modification an entirely new contract, the oral modification is unenforceable under the Statute of Frauds." Vendig, 604 S.W.2d at 427. But, when the extension of time to perform "has no such collateral effects on other rights under the underlying written contract, the exception applies to allow oral modification." Triton Commercial Props., Ltd., 1 S.W.3d at 818. In considering whether there was an oral agreement to extend the time for performance, the parties' behavior may be considered as evidence of the agreement. Joiner v. Elrod, 716 S.W.2d 606, 610 (Tex.App.-Corpus Christi 1986, no writ).
In order to determine whether a modification is material, we must determine the intent of the parties as expressed in the underlying contract. See Dracopoulas, 411 S.W.2d at 722 (oral extension of real estate listing contract for indefinite period materially affected other rights and duties); Triton Commercial Props., Ltd., 1 S.W.3d at 818-19 (oral extension of time to execute option in real estate contract had no collateral effect on other contractual rights). In construing a written contract,
In this case, Appellees argued below and secured jury findings to the effect that Appellees and Petrohawk had, before the original closing date, agreed to extend the closing to August 27, 2008, and then, prior to August 27, agreed to conduct two closings, the second to be held on September 17, 2008.
In support of its argument that the second closing modification was material,
In order to weigh Petrohawk's assertions, we must examine the intent of the parties as expressed in the Agreement and in light of the surrounding circumstances to determine what affect, if any, a second closing would have on Petrohawk's obligations. See, e.g., Dracopoulas, 411 S.W.2d at 722; Triton Commercial Props., Ltd., 1 S.W.3d at 818-19. As previously noted, the Agreement contains specific limitations regarding the quality of the titles to the properties Petrohawk would be obligated to lease. Under the Agreement, Petrohawk agreed to accept only those leases covering mineral interests that (1) were owned by the Family, (2) were located east of Highway 59 in Harrison County, (3) included interests in the Haynesville Shale and, if unleased, the Bossier Shale, (4) possessed defensible title, and (5) in total, did not exceed a maximum of 8,500 net mineral acres. Further, the Agreement indicates that Petrohawk would be performing title examinations on the Family's mineral interests, providing the Family the results of the title examination, and notifying the Family, at least five days before closing, of any title defects which Petrohawk alleged existed on the property. At trial, Herod acknowledged that it is the custom in the industry for the oil and gas company to verify mineral ownership, identify title defects, and prepare the leases for execution, and that Petrohawk did so in this case. Petrohawk's Walsh testified that Petrohawk would not accept leases tendered by the Family covering mineral interests that RWT (as the representative of Petrohawk) had not determined had defensible title. Appellees neither made a claim at trial, nor do they claim on appeal, that the second
Regarding the $10,000,000.00 escrow deposit, the Agreement provides,
Petrohawk asks us to concentrate solely on the last half of the last sentence to find that a second closing would necessarily deprive it of its "walk-away option" and, thus, its limitation of damages. However, we must examine the entire Agreement and give effect to each provision so that none is rendered meaningless. See Craig Sessions, M.D., P.A., 412 S.W.3d at 745. When examining the Agreement, all of its provisions will be considered in light of the Agreement as a whole and no single provision will be given controlling effect. See id.
The Agreement expresses the parties' intent to lease all of the Family's mineral interests east of Highway 59 in Harrison County, subject to the restrictions previously noted. Petrohawk's Herod testified that this was his understanding from the beginning. It is undisputed that at the time the Agreement was signed, neither Petrohawk nor the Family knew exactly how many mineral acres the Family owned. Because of the substantial amount of lease bonus being invested and the intense competition from other companies to lease the Family's interests, the Agreement reflects several clauses designed to protect both Petrohawk and the Family. In addition to specific restrictions on what kind of mineral acres would qualify, the
By contrast, there are only two clauses that protected the Family and ensured it that Petrohawk would either honor its agreement to lease all of the Family's qualifying mineral interests or forfeit its $10,000,000.00 escrow deposit. The first clause gave the parties a specific date to approve a lease form, after which the Family, at its option, could terminate the Agreement. It is undisputed that Petrohawk and the Family approved a lease form and the Family did not exercise this option. The form of the lease was not a subject of controversy here.
The other clause is located in paragraph 6, which also contains Petrohawk's walk-away option and resulting limitation of damages. This clause contains a condition precedent that, if met, requires Petrohawk to choose whether to go through with the Agreement or forfeit the escrow. The clause states that if the Family is "able to comply with and satisfy all of the conditions set forth in the preceding sentence and Petrohawk refuses to close this transaction, the Escrow Deposit shall be forfeited to Lessors as liquidated damages...." Thus, this clause not only protected Petrohawk by limiting its damages if it decided to walk away, it compensated the Family for removing their mineral interests from the market at a time when bonus prices were skyrocketing.
In its reply brief and at oral argument, Petrohawk asserted that two cases originally cited in Appellees' brief supported their contention that the modification agreement caused the liquidated damages provision to become a nullity and, thus, amounted to a material modification of the written contract. See Logue v. Seven-Hot Springs Corp., 926 F.2d 722 (8th Cir.1991); Mott v. Graves, No. 02A01-9410-CH-00244, 1995 WL 755926 (Tenn.Ct.App. Dec. 20, 1995) (not designated for publication).
Petrohawk also argues that when a plaintiff asserts that the defendant's prior breach of an oral modification of an agreement subject to the statute of frauds excuses the plaintiff's performance under the agreement, then the modification is material and must be in writing, citing SP Terrace, L.P. v. Meritage Homes of Texas, LLC, 334 S.W.3d 275, 283 (Tex.App.-Houston [1st Dist.] 2010, no pet.); Walker v. Tafralian, 107 S.W.3d 665, 670 (Tex.App.-Fort Worth 2003, pet. denied); and King v. Texacally Joint Venture, 690 S.W.2d 618, 620 (Tex.App.-Austin 1985, writ ref'd n.r.e.). In examining these cases, we note that this proposition was first set forth in King by the Austin Court of Appeals, with no analysis or citation to any supporting authority. King, 690 S.W.2d at 620. In that case, the proposition appears to be dictum and a rebuke of the party refusing to honor its obligation, who was attempting to offensively use the doctrine of excuse for nonperformance against an innocent party. Id. The Fort Worth court then
We find that the oral modification to conduct multiple closings neither changed the obligations and rights of the parties under the Agreement nor substantially altered the Agreement itself. Therefore, the modification was not material, the modification was not required to be in writing, and enforcement of the modification is not barred by the statute of frauds. We overrule this point of error.
In determining legal sufficiency, the appellate court determines "whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review." City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.2005); Basley v. Adoni Holdings, LLC, 373 S.W.3d 577, 582 (Tex.App.-Texarkana 2012, no pet.). In looking at the evidence, we credit favorable evidence if a reasonable jury could and disregard contrary evidence unless a reasonable jury could not. City of Keller, 168 S.W.3d at 827. The evidence is legally insufficient if (1) there is a complete absence of evidence of a vital fact; (2) the rules of law or of evidence bar the court from giving weight to the only evidence offered to prove a vital fact; (3) there is no more than a mere scintilla of evidence offered to prove a vital fact; or (4) the opposite of the vital fact is conclusively established by the evidence. Jelinek v. Casas, 328 S.W.3d 526, 532 (Tex.2010). More than a scintilla of evidence exists when the evidence reaches a level enabling reasonable and fair-minded people to differ in their conclusions. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.1997). "Less than a scintilla of evidence exists when the evidence is `so weak as to do no more than create a mere surmise or suspicion' of a fact." King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex.2003) (quoting Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983)).
Petrohawk asserts that there was legally insufficient evidence to support the jury's finding in favor of Appellees in regard to Question 2. Question 2 asks, "Prior to August 27, 2008[,] did Petrohawk and Plaintiffs agree to conduct two closings, the second closing to be on September 17, 2008, for all of Plaintiffs' Properties not leased at the August 27, 2008[,] closing?" It also contains a definition of the term "Plaintiffs' Properties" as "Plaintiffs' unleased mineral interests east of Highway 59 in Harrison County, Texas, including but not limited to those certain properties listed on Exhibit `A' attached to the July
Petrohawk correctly asserts that in considering the sufficiency of the evidence to support the jury's answers, we are limited by what the charge actually says. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). Question 2 asks prior to August 27, 2008, (1) did the Plaintiffs and Petrohawk agree to conduct two closings, the second closing to be on September 17, 2009, (2) for all of Plaintiffs' Properties not leased at the August 27, 2008, closing. This question essentially inquires whether there has been an agreement between the parties to modify the Agreement. A modification only alters those terms of the original agreement to which it refers and leaves intact those other provisions of the original agreement that are not inconsistent with it. Trafalgar Holdings I, Ltd., 218 S.W.3d at 146. Terms not addressed in the modification may be supplied by the original agreement. Id. Further, in considering whether there has been an oral modification of the Agreement, the parties' behavior may be considered as evidence of the agreement. See Joiner, 716 S.W.2d at 610.
In Question 2, the trial court looked to the Agreement to supply the definition of the term "Plaintiffs' Properties." The Agreement also provides the obligation of Petrohawk to lease all of the Family's qualifying mineral interests, and, by implication, that Petrohawk would lease the remainder of Plaintiffs' Properties. The parties all testified that the determination of qualifying mineral interests was an ongoing process, and the reason that only part of the Family's qualifying mineral interests were closed on August 27 was that Petrohawk was still performing its due diligence title research. As discussed above, before August 27, Petrohawk's landman had already identified at least 800 additional mineral acres that would be held over to the second closing and continued to identify and verify title to and keep Petrohawk informed of additional acreage as the second closing approached. In addition, as also noted above, Petrohawk's Herod testified that his understanding was that Petrohawk would lease all of the Family's qualifying mineral interests. Thus, there is sufficient evidence to support the second part of Question 2.
There is also evidence that both Petrohawk and Appellees agreed to a second closing on September 17. First, there is an August 13, 2008, email from Petrohawk's vice president and general counsel, David Elkouri, to other Petrohawk officers. This email states that Elkouri has talked with the Family's attorney and that "[w]e have an agreement on all major points.... This deal is going to close on the 27th on everything that we can verify title on. We will have a second (clean up closing) on September 17th." The email contains the typed signature block of "David S. Elkouri, Executive Vice President, General Counsel & Secretary, Petrohawk Energy Corporation." There is no dispute that he sent the email. The email reflects an agreement to have two closings, one August 27 and a second September 17. Ned Hartline, one of the Family's attorneys, confirmed that this email accurately reflected the parties' agreement. In addition, each of the Appellees who testified affirmed either that they agreed to the two closings or that Kim Schrivener and Hartline had authority to agree on their behalf. Schrivener also testified that Hartline had authority to agree to the extension and two closings and that the agreement to have two closings as stated in Elkouri's email was consistent with his authority.
Hartline confirmed that the statement regarding two closings was consistent with the conduct of all the parties after August
Thus, there was sufficient evidence for a reasonable and fair-minded jury to answer Question 2 in the affirmative. Although there was some testimony to the contrary, it was not conclusively established. The credibility of the witnesses and the weight to be given their testimony is the sole province of the jury, and an appellate court cannot impose its opinions to the contrary. City of Keller, 168 S.W.3d at 819. We overrule this point of error.
Petrohawk also asserts that there was legally insufficient evidence to support the jury's answer to Question 9.
A trial court is required to give "such instructions and definitions as shall be proper to enable the jury to render a verdict." TEX. R. CIV. P. 277. "An instruction is proper if it (1) assists the jury, (2)
The proper construction of the Agreement was contested in several pretrial motions. If the trial court resolves a dispute over the construction of a provision of a contract according to the rules of construction, it should include that interpretation when submitting the question on failure to comply or perform the contract. See STATE BAR OF TEXAS, TEXAS PATTERN JURY CHARGES — BUSINESS, CONSUMER, INSURANCE, EMPLOYMENT PJC 101.7 (2012). Although we do not have the trial court's specific rulings regarding its interpretation of the contract in the appellate record, we assume that the instructions accompanying Question 9 are reflective of its interpretation.
At trial, Petrohawk objected to the following instruction given under Question 9:
On appeal, Petrohawk contends that this (1) operated effectively as a directed verdict in Appellees' favor that they were not required to deliver leases at closing and that Petrohawk could be held liable for leasing mineral interests that Petrohawk never knew about or for which Appellees never delivered a lease and (2) improperly allowed the jury to find breach as well as an excuse for Appellees' failure to deliver leases.
We must first determine whether the trial court's instruction correctly construes these provisions of the Agreement. Our primary concern is to ascertain the intentions of the parties as expressed in the instrument. Valence Operating Co., 164 S.W.3d at 662; Craig Sessions, M.D., P.A., 412 S.W.3d at 742. Contract terms are given "their plain and ordinary meaning unless the instrument indicates a different meaning" is intended by the parties. Dynegy Midstream Servs., Ltd. P'ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex.
In the Agreement, paragraph 2 provides that "[a]t the Closing, the applicable Lessors will execute and deliver to Petrohawk, Oil and Gas Leases leasing each separate tract." Paragraph 3 provides that these leases shall provide for a lease bonus of $23,500.00 for each net mineral acre "that is delivered by Lessors to Lessee without Title Defects." The same paragraph defines title defects as "any matter that would cause the title to the properties to fail to qualify as `Defensible Title.'" It then goes on to provide that the "Leases will include and the Lease Bonus will be paid on all of Lessors' mineral interests under those properties ... with Defensible Title." Petrohawk concentrates its construction of the Agreement on these three clauses to conclude that its obligation to pay the lease bonus was only triggered when the Family delivered leases without title defects. However, that is not the end of our inquiry since there is another clause that impacts the duties of the parties under the Agreement.
Paragraph 4 provides,
(Emphasis added).
Petrohawk contends that paragraph 4 of the Agreement merely gave Petrohawk the right (not the obligation) to perform title examinations. However, this clause requires Petrohawk to keep Lessors informed of its results and notify Lessors of any title defect at least five days before closing. Petrohawk's construction would render this clause meaningless, since it is only by performing title examinations that Petrohawk hoped to fulfill these obligations. Further, Petrohawk's interpretation is contradicted by the testimony of its officers. Herod testified that it is customary in the industry for companies like Petrohawk to verify mineral ownership and to prepare the leases for execution, which is what it did in this instance. He also testified that in accord with the Agreement, Petrohawk relied solely on its own title examination and due diligence to determine whether there was defensible title to the interests it was going to lease from the Family. Walsh testified that the only leases of qualifying mineral interests that
Since we assume the parties intended "every clause to have some effect and in some measure to evidence their agreement," see City of Pinehurst, 432 S.W.2d at 518, we reject the construction urged by Petrohawk. Rather, in considering the Agreement in its entirety and the surrounding circumstances, we find that a proper construction is that the parties intended that Petrohawk would perform the title examinations, verify those mineral interests that were without title defects, and keep the Family informed of its results so they could have the opportunity to cure any title defects Petrohawk identified. At the very least, it contained an implied promise by Petrohawk to perform the title examination and advise the Family of the mineral interests that would be acceptable. "[I]f one party makes an express promise that cannot reasonably be performed absent some type of performance by the other party, courts may imply a return promise so the dealings of the parties can be construed to mean something rather than nothing at all." Mann Frankfort Stein & Lipp Advisors, Inc. v Fielding, 289 S.W.3d 844, 850 (Tex.2009).
In construing the duties of Petrohawk under paragraph 4 with the other provisions, it becomes apparent that since only leases for minerals that were without title defects would be acceptable, before the Family could execute and deliver leases without title defects, Petrohawk must first perform a title examination and inform them of the mineral interests that would be acceptable. Until Petrohawk performed its title examination and advised the Family of the qualifying mineral interests, the Family could not "execute and deliver" qualifying leases. "[W]hen it is clear that performance expressly promised by one party is such that it cannot be accomplished until a second party has first performed, the law will deem the second party to have impliedly promised to perform the necessary action." Id. at 851. If Petrohawk failed to perform its title examination or, having done it, failed to inform the Family of the qualifying mineral interests, then the Family members would be unable to "execute and deliver" leases covering minerals without title defects. It follows that Petrohawk cannot fail to perform these duties, then hide behind the Family's consequent failure to execute and deliver leases to avoid its duty to pay the lease bonus on all the Family's qualifying mineral interests.
The question then becomes whether the trial court's instruction was erroneous under the proper construction of the Agreement and, if it was erroneous, whether it was harmful. In its instruction, the trial court appears to have attempted to convey the proper construction. However, the instruction was incomplete. The jury should have been instructed that the Agreement required Petrohawk to perform its title examination to determine the existence of defensible title before Appellees had a duty to execute and deliver leases and that if Petrohawk failed or refused to perform the title examination, or, having performed
The error was, however, harmless, since the jury's findings on other issues sufficiently support the judgment. Shupe, 192 S.W.3d at 579. The jury answered three questions in favor of Appellees that when taken together, demonstrate that the instruction was harmless. First, the jury found in answer to Question 6 that each Appellee was at all times ready, willing and able to perform the Agreement. In addition, Question 7 asked the jury whether Petrohawk's failure to perform title examinations excused Appellees' failure to execute and deliver additional leases, a question which was answered in the affirmative. Finally, Question 8 asked if Appellees' failure to execute and deliver additional leases was excused because Petrohawk repudiated its obligations under the Agreement, which was also answered in the affirmative. Both Questions 7 and 8 contained the following instruction:
Petrohawk does not challenge the sufficiency of the evidence to support the jury's answers to Questions 6, 7, or 8. The same evidence that supports the jury's answers to Questions 6, 7, and 8 would support an affirmative answer to Question 9 if it had included the instruction that should have been given. See St. Joseph Hosp., 94 S.W.3d at 530. Therefore, we find that any error in this instruction was harmless and that there is sufficient evidence that supports the jury's answer to Question 9 with the instruction that should have been given. We overrule this point of error.
Petrohawk also objected to the following instruction given under Question 9:
Once again, we must determine whether the instruction properly construes the Agreement. Petrohawk concentrates on this single clause in the Agreement and contrasts "all rights" with "rights owned by Lessors" to conclude that the parties must have intended that "all rights" means that the Family was required to own 100 percent of the fee mineral estate in the Haynesville Shale, whereas it could own only a partial mineral estate in the Bossier Shale. However, this construction conflicts with other provisions in the Agreement that indicate the parties intended Petrohawk to lease all of the Family's mineral interests and would render these provisions meaningless.
First, we look to the Agreement itself. There are two clauses pertinent to this analysis. The first, unnumbered paragraph provides,
(Emphasis added). Paragraph 3 provides,
(Emphasis added).
In order to determine the parties' intention, we must construe these two paragraphs together such that all of the provisions are given effect and none is rendered meaningless. Craig Sessions, M.D., P.A., 412 S.W.3d at 745. Further, when we consider the circumstances prior to and contemporaneously with the making of the Agreement, the meaning becomes clear, as does the reason for the use of the differing phrases in paragraph 3(iii). It is undisputed that Petrohawk and the Family were familiar with the oil and gas production in east Harrison County in 2008, the effect that pre-existing oil or gas production may have on the availability of mineral rights to be leased in certain strata, and the location of the relevant geological formations. There were three geological formations or strata that were of concern: the Cotton Valley, the Bossier Shale, and the Haynesville Shale. The Haynesville Shale is the
Looking back at the Agreement with this in mind, we see in the first paragraph that the parties intended that Petrohawk would lease all of the Family's unleased mineral interests in the subject area as long as those interests included, at a minimum, the Haynesville Shale (its primary focus), and those depths of the Bossier Shale that were unleased and not held by production (its secondary focus). They recognized that some of the tracts would be held by producing wells that contained vertical Pugh clauses so that not all depths of the Bossier Shale would be available to lease. But they intended that whatever depths of the Bossier Shale were unleased and not held by production would be included in the Agreement and would be leased by Petrohawk. At the same time, the Agreement makes clear that the leases must include all the Family's mineral interests to all depths of the Haynesville Shale. The last sentence of the first paragraph emphasizes that the oil and gas leases "shall include all depths, subject to the lease provisions contemplated in paragraph 3 herein ... that are currently unleased or not currently producing." Paragraph 3(iii) then requires the leases to include "all rights in the Haynesville Shale and rights owned by Lessors in the Bossier Shale." In other words, the leases must include the rights to all depths in the Haynesville Shale and the rights to all depths currently unleased or currently not producing owned by the Lessors in the Bossier Shale. This interpretation gives effect to all of the pertinent provisions of the Agreement and none is rendered meaningless.
Since the Agreement required Petrohawk to lease all of the Family's mineral interests that included the Haynesville Shale and did not require the Family to own 100 percent of the gross Haynesville Shale mineral acreage on any tract, we
Petrohawk also asserts that there is insufficient evidence to support the jury's affirmative answers to Questions 3 and 5. Petrohawk does not state whether its sufficiency challenge is to the legal sufficiency or the factual sufficiency to support the jury's answers. Therefore, we will treat it as a challenge to both. We have previously set forth the standard of review for a legal insufficiency challenge. When reviewing a jury verdict for factual sufficiency of the evidence, we consider and weigh all the evidence and only set aside the verdict "if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986) (per curiam). We find that there is sufficient evidence under both standards to support the jury's answers.
Question 3 asked whether the parties had agreed to extend the September 17, 2008, closing date to October 9, 2008. Question 5 asked whether Petrohawk had waived Appellees' compliance with the September 17, 2008, closing date.
SP Terrace, L.P., 334 S.W.3d at 284; see also Puckett v. Hoover, 146 Tex. 1, 202 S.W.2d 209, 211-12 (1947) (deadline to close purchase of mineral interest may be waived and evidence of waiver may be shown by writing, by parole, or from the circumstances or course of dealing); KMI Cont'l Offshore Prod. Co. v. ACF Petroleum Co., 746 S.W.2d 238, 243 (Tex. App.-Houston [1st Dist.] 1987, writ denied) ("[A] waiver can occur if a party knowingly possessing the right acts in such a manner that the party misleads the opposing party into believing that a waiver has occurred.").
The evidence showed that as with the first closing, difficulty in verifying title caused the second closing to be postponed until October 9, with a third, final closing on November 6. Schrivener testified that she sent a new schedule to Chadwick whereby she proposed the September 17 closing be postponed until October 9. This schedule was also forwarded to Petrohawk's Elkouri and Herod. On September 10, Herod emailed Chadwick asking how he was "coming on the title DD [due diligence] on the next closing (October 9 I believe)...." Herod stayed in contact with RWT to keep abreast of the number of additional mineral acres to be closed on October 9 and the third closing and to make sure the Family agreed on the "acreage splits." In late September, Herod asked the Family that the October 9 closing be moved up to October 8 instead. As late as October 6, internal emails indicated Petrohawk's expectation of closing on the
Thus, the weight of the evidence clearly supports the jury's answers finding that the parties extended the September 17 closing date to October 9 and that Petrohawk waived Appellees' compliance with the September 17 closing date. We overrule this point of error.
Petrohawk next complains that the evidence of damages is legally insufficient because Appellees failed to introduce evidence of the market value of the leases as of October 7, 2008. Question 11 instructs the jury to only consider this measure of damage: "[a]s to each tract that you answered `yes' in Question 9, the difference between $23,500 per net mineral acre and the market value of Plaintiffs' leases on October 7, 2008." The charge then defines "market value" as "the amount that would be paid in cash by a willing buyer who desires to buy, but is not required to buy, to a willing seller who desires to sell, but is under no compulsion to sell." By its answers, the jury impliedly found that the leases had no market value as of October 7, 2008. Petrohawk claims that Appellees proffered no evidence of the market value of the leases as of that date, attacking the credibility of Appellees' experts and lay testimony.
When the assumption on which an expert's opinion is based conflicts with undisputed testimony, then the expert's testimony lacks any probative value. City of Keller, 168 S.W.3d at 813; Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499-00 (Tex.1995). However, if there is conflicting evidence, this rule does not apply, and the expert's opinion can be considered. Marvelli v. Alston, 100 S.W.3d 460, 477-78 (Tex.App.-Fort Worth 2003, pet. denied). Further,
City of Keller, 168 S.W.3d at 819 (citations omitted).
Here, there was conflicting evidence that could support Horne's testimony. First, although the existence of Lelia Vaughan's email is not contested, the email does not mention when she received the inquiries to which she made reference.
Petrohawk also claims that damages should be limited to the $10,000,000.00 liquidated damages provision in paragraph 6 of the Agreement. We have previously noted that the Family fulfilled the conditions precedent at the August 27 closing, an event that required Petrohawk to choose to either go forward with leasing all of the Family's mineral interests fitting the description in the contract or forfeit the $10,000,000.00 as liquidated damages. The liquidated damages provision was a provision that protected Petrohawk in the event that it chose to not lease any of the Family's mineral interests. However, a party to a contract can waive provisions that are to its benefit. Joiner, 716 S.W.2d at 610. Since Petrohawk chose to go forward with leasing the Family's mineral interests, it waived the liquidated damages provision.
Section 38.001 of the Civil Practice and Remedies Code provides that for a claim based on an oral or written contract, "[a] person may recover reasonable attorney's fees from an individual or corporation." TEX. CIV. PRAC. & REM.CODE ANN. § 38.001(8) (West 2008). Petrohawk asserts that since the Petrohawk parties are a limited partnership and a limited liability company, attorney fees are not authorized to be awarded against them, citing Fleming & Associates, L.L.P. v. Barton, 425 S.W.3d 560 (Tex.App.-Houston [14 Dist.] 2014, pet. filed). However, Petrohawk failed to preserve this claim of error in the trial court. To preserve a complaint for appellate review, a party must present a timely request, objection, or motion to the trial court that states the specific grounds for the desired ruling. TEX. R.APP. P. 33.1(a); see State Dep't of Highways & Pub. Transp. v. Payne, 838 S.W.2d 235, 241 (Tex.1992); Holmes v. Concord Homes, Ltd., 115 S.W.3d 310, 313 (Tex. App.-Texarkana 2003, no pet.). If a party fails to follow this procedure, error is not preserved. Holmes, 115 S.W.3d at 313.
Although Petrohawk objected to the wording and absence of additional instructions at the charge conference, it made no such objection based on the unavailability of attorney fees under Section 38.001. Petrohawk claims that it preserved error in its motion for judgment non obstante veridicto by objecting that Question 13 (the question dealing with attorney fees) was immaterial. It reasons that since a complaint that attorney fees are not available under a statute is an assertion of immateriality, it therefore presents the issue of
Petrohawk also asserts that the jury's attorney fee award was excessive and not supported by factually sufficient evidence. The jury awarded Appellees fees of $3,500,000.00 through trial, $360,000.00 for an appeal to the court of appeals, and $360,000.00 for oral argument and completion of proceedings in the Texas Supreme Court. Petrohawk claims this award was excessive on the basis that the amount awarded is more than four times the "lodestar" amount of attorney fees.
The determination of the amount of fees that are reasonable and necessary is a question of fact for the jury. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex.1998). Factors to be considered in determining the amount of reasonable attorney fees include:
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex.1997); TEX. DISCIPLINARY RULES PROF'L CONDUCT R. 1.04, reprinted in TEX. GOV'T CODE ANN., tit. 2, subtit. G app. A (West 2005) (TEX. STATE BAR R., art. X, § 9). When reviewing a jury verdict for factual sufficiency of the evidence, we consider and weigh all the evidence and only set aside the verdict "if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." Cain, 709 S.W.2d at 176.
We do not reach the factual sufficiency question as it relates to the attorney fee award because remand is required as a result of the remittitur ordered by the trial court and accepted by Appellees.
We affirm that part of the trial court's judgment awarding damages to Appellees for Petrohawk's breach of contract. We reverse the part of the trial court's judgment as to attorney fees and remand that part of the case to the trial court for further proceedings consistent with this opinion.
(There then follows a chart listing thirty-two individual tracts identified by survey name, acreage, and RWT ID No., to which the jury could answer "Yes" or "No" for each tract.)