Stinnett v. Colorado Interstate Gas Co. , 227 F.3d 247 ( 2000 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-10882
PEGGY MASTERSON STINNETT; PEGGY MASTERSON STINNETT, Trustee
of the R.B. Masterson Trusts; The Bennett Masterson Trust #1
and the Ben Masterson Stinnett Trust; LAUREL S. EMMETT;
SIDNEY S. BOYCE; MARY KRITSER MILLER; GEORGE SHELBY MILLER;
JOHN SIEBERT MILLER; MARTHA MILLER JARNAGIN; ELIZABETH K.
MASTERSON, Co-Trustee of the R. B. Masterson III Trust;
WILLIAM A. MASTERSON, Co-Trustee of the R. B. Masterson III
Trust; MARY LEWIS KLEBERG, Trustee of the Mary Lewis Kleberg
Trust; NATIONSBANK CORPORATION, Trustee of the T. B. Masterson
Jr. Trust; FIRST NATIONAL BANK OF AMARILLO, Trustee of the
Anna Belle Kritser Testamentary Trust; Trustee of the David
Sloan Kritser Trust; Trustee of the Shelby Masterson Kritser
Trust; Trustee of the Tom Moylan Kritser Trust; and Trustee
of the Mary Kritser Miller Trust; AMARILLO NATIONAL BANK,
Joint-Trustee of the Michael Weymouth Campbell Life Income
Trust; MARY ANN MUSICK, Joint-Trustee of the Michael
Weymouth Campbell Life Income Trust; ANN CAMPBELL MUSICK,
Custodian for Sarah Elizabeth Campbell; MICHAEL CAMPBELL,
Custodian for Sarah Elizabeth Campbell; TEXAS COMMERCE
BANK-AUSTIN, NA, Trustee of the Zachary T. Scott, Jr. Trust
No. 1 U/A dated November 1, 1941; The Zachary T. Scott,
Jr. Trust No. 2 U/A dated January 17, 1944; The Zachary T.
Scott, Jr. Trust No. 3 U/A dated December 16, 1952; The Ann
Scott Hearon Trust No. 1 U/A dated November 1, 1941; The Ann
Scott Hearon Trust No. 2 U/A dated January 17, 1944; and The
Ann Scott Hearon Trust No. 3 U/A dated December 16, 1952;
GEORGE C. MILLER, Executor of the Mary Kritser Miller Estate;
AMARILLO NATIONAL BANK, Trustee of the Susan Weymouth Snyder
Trust; The Betsy Bradshaw Life Income Trust; The Edmond L.
Bradshaw Revocable Trust; The Mary Ann Campbell Musick
Trust; The Thomas C. Campbell Revocable Trust; The Thomas C.
Campbell Children’s Trust f/b/o Karly Nicole Campbell; The
Thomas C. Campbell Trust f/b/o Skyler Elise Campbell; The
Shannon Kay Parr Revocable Trust; The Michael W. Campbell II
Trust; The M. W. Campbell Children’s Bond Trust; The Michael
Weymouth Campbell Children’s Trust f/b/o Michael Weymouth
Campbell, III and Sarah Elizabeth Campbell; The Thomas Betsy
Jane Campbell Lien Trust; and the Betsy Campbell Lien Trust;
Plaintiffs-Appellants-Cross-Appellees,
versus
COLORADO INTERSTATE GAS COMPANY,
Defendant-Third Party Plaintiff-
Appellee-Cross Appellant,
versus
MESA OPERATING LIMITED PARTNERSHIP,
Third Party Defendant-Appellee-Cross-Appellant.
___________________
Appeal from the United States District Court for the
Northern District of Texas, Amarillo
___________________
September 8, 2000
BEFORE DAVIS, SMITH, and WIENER, Circuit Judges
WIENER, Circuit Judge.
Grounded in mineral exploration, development, and production
in the panhandle of Texas with a history almost as long as that
State’s oil and gas industry itself, the case that engenders the
instant appeal requires interpretation of contractual provisions
contained in several agreements and application of such
interpretation to facts that are either undisputed or have been
determined by a jury. The plaintiffs (collectively, “the
Mastersons”), as lessors and successors in interest to lessors of
minerals in the West Panhandle Field (the “Field”), instigated this
litigation in district court on the jurisdictional basis of
diversity citizenship, asserting damage claims for and related to
underpayment of lease royalties. The action was brought in 1992
against Colorado Interstate Gas Company (“CIG”) which in turn
2
impleaded Mesa Operating Limited Partnership (“Mesa”), the operator
of the Field.1
The long —— and frequently rancorous and litigious ——
contractual history of the oil and gas interests that lie at the
center of this controversy was consolidated and restated in 1955 in
a new and comprehensive mineral lease (the “1955 Lease”) from the
Mastersons as lessors to CIG as lessee. Over the ensuing decades
the parties entered into various supplemental and related
agreements and engaged in litigation of which the instant action is
but the latest chapter. After the district court dismissed some of
the Mastersons’ claims and a lengthy trial resulted in the jury’s
determination that the Texas theory of quasi-estoppel barred
recovery of all but a modicum of the multi-million dollar amount
sued for, the court entered a take-nothing judgment in favor of
CIG. This appeal ensued.
I.
Facts and Proceedings
Within a few years after execution of the 1955 Lease new
controversies arose, culminating in a settlement agreement (the
“1967 Settlement”). A key provision of that contract, and one that
1
Even though many of the parties to the instant litigation
are relative newcomers to the multi-decade leasing and production
history of the West Panhandle Field, we refer to the historical
lessors and their successors as the Mastersons and the historical
lessees as CIG, despite the fact that some of the information that
serves as background to the instant controversy involves
predecessors in interest on both sides of the lawsuit.
3
is central to this case, is a “favored nation clause” (“FNC”) which
was engrafted on the basic market value pricing scheme of the 1955
Lease. The FNC is contained in the third of four subsections of
Section A(2) of the 1967 Settlement: Subsection (a) fixes the
royalty rate of the 1955 Lease at 1/8th of 14¢ per mcf2 of gas
produced between July 1, 1967 and December 31, 1969; subsection (b)
fixes the royalty rate at 1/8th of the higher of 14¢ per mcf or
market value of the gas at the wellhead produced from January 1,
1970 through the remainder of the 1955 Lease term; subsection (c)
spells out the FNC; and subsection (d), which addresses maximum
royalty rates in the event of Federal Power Commission (“FPC”) gas
price regulation, is acknowledged by the parties to be irrelevant
to this litigation. In its entirety, subsection A(2)(c), the FNC,
states:
In the event that [CIG] should, at any time
after July 1, 1967, voluntarily pay to any of
its lessors in the West Panhandle Field
royalty for gas produced from the West
Panhandle and Red Cave Formations at a rate
based on a price per Mcf higher than that
price upon which royalties are then being
computed and paid to Masterson hereunder,
[CIG] agrees to pay to Masterson royalties at
the rate of one-eighth (1/8) of such higher
price from and after such time through the
remainder of the lease.
None appear to dispute that the 1967 Settlement in general and
the FNC in particular constituted the agreed disposition of the
Mastersons’ complaints about past disparities in payment of
2
Thousand cubic feet.
4
royalties, particularly in comparison to royalties paid to other
significant lessors in the Field (collectively the “Bivenses”).
Likewise undisputed is the overarching premise that, to function as
intended, the FNC had to operate in a single-price universe, in
which the Mastersons’ royalties would be calculated on the basis of
the highest gas price used for calculation of the Bivenses’
royalty.
The FNC worked as intended until the Federal Power Commission
(“FPC”) introduced price controls that established a multi-level
price scheme, keyed to the age of the well from which the gas in
question was produced. This change led the Mastersons and CIG to
modify their arrangement by executing another contract (the “1974
Agreement”) which created a tiered royalty calculation procedure.
Pertinent to this case is the provision in the 1974 Agreement that
payments made to the Mastersons under the 1955 Lease as modified by
the 1967 Settlement would be “in lieu of any and all other
royalties or payments to which [the Mastersons] might otherwise be
entitled.” The 1974 Agreement also specified that payment of
royalties to the Bivenses based on the same terms as those
contained in the 1974 Agreement would not trigger the FNC. The
thrust of this provision was to allow CIG to make the same pricing
“deal” with other lessors in the Field as made with the Mastersons
in the 1974 Agreement.
Matters became even more complex when, in 1978, the Federal
Energy Regulatory Commission (“FERC”) was created and empowered to
5
set maximum rates or “caps” on multiple categories of natural gas.
In response to this development, CIG entered into pricing
modifications with the Bivenses, then offered the same “deal” to
the Mastersons. Because this arrangement specified, among other
things, that eventually royalties would be calculated on the last
regulated rate preceding any eventual deregulation, the Mastersons
rejected it, preferring an arrangement following deregulation that
would require royalties to be calculated on the basis of the market
value of the gas.
Despite rejecting the same deal that CIG had consummated with
the Bivenses, the Mastersons nevertheless asserted claims under the
FNC based on one provision —— the so-called City Rate for gas sold
to Amarillo —— that was being used to calculate royalties paid to
other lessors under the very arrangement that the Mastersons had
rejected. In 1988, these claims led to yet another pair of
modifying contracts, the Lease Amendment Agreement (the “1988
Amendment”) and the 1988 Royalty Agreement (collectively, the “1988
Agreements”), effective October 1, 1988. By virtue of these
revisions, the Mastersons both achieved the increased royalties and
the City Rate and retained their right to claim royalties
calculated on the basis of market value rather than the last FERC
rate following deregulation.
The incentive for CIG to (1) increase the Mastersons’ royalty
on so-called old gas, (2) pay the City Rate, and (3) permit the
Mastersons to retain the right to be paid royalties calculated on
6
the basis of market value pricing following deregulation, was the
release provision set forth in paragraph 9 of the 1988 Amendment,
in which the Mastersons agreed to release CIG and Mesa from all
claims, whether known or unknown, disclosed or undisclosed, related
directly or indirectly to gas produced under the 1955 Lease prior
to 1989. Regarding royalty payments related to gas produced under
the 1955 Lease after 1988, the parties agreed, in paragraph 7 of
the 1988 Amendment and paragraph 1(b) of the 1988 Royalty
Agreement, that all such payments would be “in lieu of any other
rate” and would “fully satisfy and comply with the provisions of”
the 1955 Lease and all intervening revisions and modifications.
Before trial, the district court granted a partial summary
judgment in favor of the Mastersons, holding the FNC valid; and, on
the eve of trial, the court granted a partial summary judgment in
favor of CIG, dismissing the Mastersons’ fraud and breach of
fiduciary duty claims and denying their “discovery rule” exceptions
to CIG’s release and statute of limitation defenses.
A considerable portion of the testimony and documentary
evidence presented to the jury during the trial addressed the
machinations of the parties and their representatives that
transpired between the effective date of the 1988 Agreements (or
possibly even prior to that date) and the date in 1992 when the
instant lawsuit was filed. That evidence centers primarily on (1)
the positions taken by the parties and their representatives vis-a-
vis one another, (2) the appropriate gas price or prices to be used
7
in the calculation of royalties, (3) the theories and bases of the
claims, and (4) matters disclosed and not disclosed in allegedly
disingenuous communications between and among those who were
purported to be secretly scheming and plotting claims and defenses
to claims. Rather than recounting all the details, it suffices for
the moment that the jury ultimately credited the version of these
actions and communications that led to its finding of quasi-
estoppel against the Mastersons on their post-1988 claims.
II.
Analysis
A. Fraud and Breach of Fiduciary Duty
As the district court dismissed the Mastersons’ claims of
fraud and breach of fiduciary duty, we address them first. In
making its rulings on these issues, the district court did so as a
matter of law, grounding its decisions in material facts that are
not in dispute. Our review is therefore plenary.
1. Fraud
In setting the stage for its ruling on the Mastersons’ fraud
claim, the district court correctly noted the elements of such a
claim in Texas: (1) A material representation was made (2) that
was false when made (3) by a speaker who either knew the statement
was false or made it as a positive assertion recklessly and without
knowledge of its truth (4) with the intent that the statement be
acted on, and (5) the party opposite acted in reliance on the false
material representation and (6) was injured as a result of doing
8
so.3 The foundation of the Mastersons’ claim of fraud is the
omission from CIG’s monthly royalty statements of any information
about the rates CIG was using to calculate the royalties it was
paying to the Bivenses. As such, the Mastersons’ fraud allegations
rest entirely on CIG’s silence; CIG is not accused of making any
affirmative misrepresentation regarding the rates used to figure
the royalties being paid to the Bivenses.
We have long recognized that Texas’s law of fraud does not
impose liability for silence except when the one who has remained
silent is under a special duty to speak.4 In recognition of this
requirement when a claim of fraud is based on failure to speak, the
Mastersons advance the theory that the FNC produced a fiduciary
relationship between themselves and CIG, which relationship is
sufficient to meet the special duty requirement of fraud through
silence.
2. Fiduciary Relationship
The district court concluded that the Mastersons’ contention
that the FNC embodies a fiduciary duty requiring CIG to divulge
with each royalty statement the additional information about the
rate of royalty being paid to the Bivenses finds no support in the
applicable case law. We agree. In Texas, a “fiduciary
3
See, e.g., Eagle Properties, Ltd. v. Sharbauer, 807 S.W.2d
714, 723 (Tex. 1990).
4
See Hickok Prod. & Dev. Co. v. Texas Co., 128 F.2d 183, 185
(5th Cir. 1942).
9
relationship is an extraordinary one and will not be lightly
created.”5 Fiduciary duties do not abound in every, or even most,
garden variety, arms-length contractual relationships, even those
among trusting friends.6
More specifically, favored nation clauses are anything but
rara avis in the Texas oilpatch; and there is a plethora of
opinions implicating Texas mineral contracts to be found in the
pages of the South Western Reporter and the Federal Reporter. Yet
in our independent research we have failed to locate any cases
holding that a favored nation clause in a contract between an oil
and gas lessor and its lessee produces a fiduciary relationship;
and the Mastersons have cited us to none. In attempting to do so,
however, they have referred us to cases which they advance as
holding that a variety of contractual relationships gives rise to
fiduciary duties. Their reliance on these cases is unavailing.
Manges v. Guerra,7 for example, eschews a rule of contract-based
fiduciary duty, holding instead that such a duty “arises from the
relationship and not from express or implied terms of the contract
5
Castillo v. First City BancCorp. of Texas, 43 F.3d 953, 957
(5th Cir. 1994) (quoting Tel-Phonic Servs., Inc. v TBS Int’l, Inc.,
975 F.2d 1134, 1143 (5th Cir. 1992).
6
See Crim Truck & Tractor Co. v. Navistar Int’l Transp.
Corp., 823 S.W.2d 591, 594-95 (Tex. 1992).
7
673 S.W.2d 180 (Tex. 1984).
10
or deed.”8 As mineral lessors and lessee, the Mastersons and CIG
are not in a fiduciary relationship.9 In actuality, the facts of
the cases relied on by the Mastersons to support the proposition
that a mineral lessee is in a fiduciary relationship with his
lessor are so distinguishable from the instant facts as to be
inapposite.10 Our de novo review of the district court’s dismissal
of the Mastersons’ claims grounded in fraud and fiduciary duty
satisfies us that the court was correct, and we affirm.
B. The Mastersons’ Pre-1989 Claims
1. Release Clause: 1988 Amendment.
8
Id. at 183; see also Schlumberger Tech. Corp. v. Swanson,
959 S.W.2d 171, 177 (Tex. 1997) (tightly restricting holding of
Manges while stating that “a holder of executive rights to a
mineral estate owes a fiduciary duty to the non-executive
interest”)
9
See HECI Exploration Co. v. Neel, 982 S.W.2d 881, 884 (Tex.
1998) (“Texas law has never recognized a fiduciary relationship
between a lessee and royalty owners.”); Mitchell Energy Corp. v.
Sampson Resources Co., 80 F.3d 976, 985 (5th Cir. 1996)(applying
Texas law); Hurd Enters., Ltd. v. Bruni, 828 S.W.2d 101, 112 (Tex.
App.-San Antonio 1992, writ denied); Cambridge Oil Co. v. Huggins,
765 S.W.2d 540, 544-45 (Tex. App.-Corpus Christi 1989, writ
denied).
10
Sanus/New York Life Health Plan v. Dube-Seybold-Sutherland
Management, Inc., 837 S.W.2d 191, 199 (Tex. App.-Houston [1st
Dist.] 1992) (holding HMO had fiduciary obligations in its
treatment of member physician partnership which was “totally
dependent on [certain patient] information and relied exclusively
on [HMO] to provide it”); LeCuno Oil Co. v. Smith, 306 S.W 2d 190,
192 (Tex. Civ. App.-Texarkana 1957, writ ref’d n.r.e.) (concerning
a relationship “distinguishable from that found in most cases of
this kind,” in that lessee was both gas producer and pipeline
operator, enabling it to “contract[] with itself respecting prices
of gas at the wellhead.”).
11
The Mastersons’ damage claims for underpayment of royalties
and related matters both before and after 1989, and CIG’s
contentions in opposition to claims for both periods, require
interpretation of the several contracts implicated by those claims
and defenses. Initially, therefore, we must determine whether the
1955 Lease and subsequent amendments and contracts affecting it are
ambiguous or unambiguous, as our standard of review depends on the
answer to that threshold question: Interpretation of ambiguous
contracts implicates questions of fact,11 which we review for clear
error; interpretation of unambiguous contracts presents questions
of law,12 which we review de novo. Whether a contract is or is not
ambiguous, however, is a question of law,13 which we review de novo.
A contract is ambiguous only if its meaning is susceptible of
multiple interpretations when subjected to applicable rules of
contract construction and interpretation.14 The mere fact that
lawyers may disagree on the meaning of a contractual provision is
not enough to constitute ambiguity.15
11
See In re: Fender, 12 F.3d 480, 485 (5th Cir. 1995).
12
See REO Indus., Inc. v. Natural Gas Pipeline of America,
932 F.2d 447, 453 (5th Cir. 1991).
13
Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529 (
Tex. 1987).
14
See Exxon Corp. v. West. Tex. Gathering Co., 868 S.W.2d
299, 302 (Tex. 1993); Nguyen Ngoc Giao v. Smith & Lamm, P.C., 714
S.W.2d 144, 147 (Tex. App.-Houston [1st Dist.] 1986).
15
See D.E.W., Inc. v. Local 93, Laborers’ Int’l Union of N.
Am., 957 F.2d 196, 199 (5th Cir. 1992).
12
The district court performed the correct analysis on the
pertinent portions of the 1967 Settlement as well as subsequent
amendments and agreements relative to the 1955 Lease and concluded
that all provisions of those modifying contracts implicated in this
case are unambiguous. For essentially the same reasons, we agree
and therefore proceed to construe those contracts and their
pertinent provisions de novo.16 This in turn obligates us to give
effect to the clear written expression of the intent of the
parties.17
Although the FNC provision which first appeared in the 1967
Settlement lies at the heart of the Mastersons’ claims, both before
1989 and following 1988, we bifurcate consideration of their claims
because different legal and factual considerations apply, depending
on which of those time periods is involved. The FNC as contained
in section A(2)(c) of the 1967 Settlement specifies that if at any
time CIG voluntarily pays to any of its major lessors in the Field
royalties calculated on the basis of a higher rate than the rate on
which the Mastersons’ are being figured, CIG must pay the
Mastersons’ c royalty based on such higher rate, from that time
through the remainder of the lease. The Mastersons’ claims based
on CIG’s alleged violation of the FNC date from 1975 and thus
16
See Temple-Inland Forest Prods. Corp. v. United States, 988
F.2d 1418, 1421 (5th Cir. 1993).
17
Ideal Lease Serv., Inc. v. Amoco Prod. Co., 662 S.W.2d 951,
953 (Tex. 1983).
13
implicate the periods 1975 through 1988, and 1989 and following.
The reason for our bifurcation will become evident when we test the
efficacy of the release provision of the 1988 Amendment’s Paragraph
9 (the “Release”), which states:
Lessors do hereby release and forever
discharge Lessee from all causes of actions,
claims and demands, known or unknown, of
whatever type, which Lessor has ever had, now
have or may have hereafter arising out of,
incident to, or directly or indirectly
connected with gas produced to the [1955]
Lease prior to October 1, 1988 and from
October 1, 1988 to 1989, except as those
royalties are to be paid as provided herein.
Pretermitting consideration at this juncture of the years 1989
and following, we turn to the language of the Release to see if it
bars the Mastersons’ FNC claims for the period 1975 through 1988.
The Mastersons do not appear to dispute the absence of ambiguity in
the Release or even CIG’s interpretation of its wording, only its
legal effects. Their contention is that Texas law requires such
releases to be specific and that the Release is not sufficiently
specific to exonerate CIG from pre-1989 liability under the FNC.
The Mastersons rely primarily on Victoria Bank & Trust Co. v.
Brady,18 in response to which CIG relies primarily on the standard
of specificity announced more recently in Memorial Med. Ctr. of
East Texas v. Keszler.19 The district court agreed with CIG’s
18
811 S.W.2d 931 (Tex. 1991).
19
943 S.W.2d 433 (Tex. 1997). In a post-argument letter
furnished by CIG pursuant to Federal Rule of Appellate Procedure
28(j), we are referred to the recent Texas Supreme Court case of
14
position which, because it presents a question of law, we review de
novo.
Both Victoria Bank and Memorial Medical Center recognize that
to be legally enforceable a release must “mention” the claim or
claims being released.20 We are satisfied that “mentioning” does
not require particularized enumeration or detailed description,
only that the claim being released come within the express
contemplation of the release provision when viewed in context of
the contract in which the release provision is contained, here the
1988 Amendment.21 We conclude, as did the district court, that this
standard is met by the Release vis-à-vis the pre-1989 claims
asserted by the Mastersons.
The 1988 Amendment is concerned with the calculation of
royalties under the 1955 Lease as modified in 1967 and 1974. The
Release, embedded as it is in paragraph 9 of the 1988 Amendment,
addresses “all causes of action” arising out of “gas produced
Keck, Mahin & Cate v. National Union Fire Ins. Co. of Pittsburgh,
20 S.W.3d 692, 698 (Tex. 2000) (“Nothing in Brady forbids such a
broad-form release. Brady simply holds that the release must
‘mention’ the claim to be effective. It does not require that the
parties anticipate and identify each potential cause of action
relating to the release’s subject matter. Although releases often
consider claims existing at the time of execution, a valid release
may encompass unknown claims and damages that develop in the
future.”) (internal citations omitted).
20
Memorial Medical Center, 943 S.W.2d at 434; Victoria Bank
& Trust Co., 811 S.W.2d at 938.
21
Memorial Medical Center, 943 S.W.2d at 435; Victoria Bank
& Trust Co., 811 S.W.2d at 938-39; Keck, Mahin & Cate, 20 S.W.3d at
698.
15
pursuant to the [1955] Lease.” Surely the accusation that CIG
failed to comply with its FNC obligations presents a cause of
action that arises out of gas produced pursuant to the 1955 Lease,
and is thus covered by the Release.
We likewise find unavailing the Mastersons’ argument that the
1988 Amendment was so narrowly tailored as to cover only two very
specific items, FERC Order 4051 and the City Rate. Even though
most of the provisions of the 1988 Agreements address those two
matters, read in full context those contracts address the entire
relationship between the parties. In addition, the plain language
of the Release itself reflects the clear intention of the parties
that its coverage be broader than just the FERC Order and the City
Rate, i.e., that it apply to claims arising from or connected with
other provisions of predecessor contracts of which the FNC is one,
irrespective of the primary focus of the 1988 Amendment of which
the Release is a part. The Mastersons’ contentions to the contrary
notwithstanding, Texas law does not proscribe enforcement of such
generally-worded release provisions as long as they can be fairly
read as “mentioning” the kinds or classes of claims intended to be
covered.22
In addition to their insistence that (1) the Release is not
sufficiently specific to block their claims for CIG’s purported
violations of the FNC, and (2) the Release should be applied only
22
See Mem. Med. Ctr. of East Texas, 943 S.W.2d at 434-35;
Keck, Mahin & Cate, 20 S.W.2d at 697-98.
16
to the FERC Order and the City Rate, the Mastersons also advance
fraud as a ground to avoid enforcement of the Release. They insist
that CIG knew full well it had violated the 1955 Lease, as
modified, when it negotiated and entered into the 1988 contract
that contains the Release. The thrust of this argument is that
CIG’s silence in the face of such knowledge was a fraudulent
attempt to avoid liability under the FNC. Our foregoing analysis
of the Mastersons’ claim of fraud through failure to divulge
(silence), as distinct from affirmatively uttering a false
statement, is applicable here; but their fraud assertion regarding
the Release fails for another, independent reason as well. The
Release expressly applies to “all causes of action,” including
those that at the time were “disclosed or undisclosed.” The plain
language of the Release demonstrates that, in exchange for the
benefits and concessions granted to the Mastersons, CIG bargained
for and received an express release from those past violations that
were undisclosed as well as any that were disclosed. This negates
the contention that CIG was under any obligation, whether from
provisions of the 1988 Amendment or Texas law, to list or otherwise
disclose prior lease violations, if any. The record confirms that
the Mastersons —— themselves anything but “widows and orphans” ——
and their sophisticated legal and financial advisors were well
aware, before signing on, that the Release would —— in their own
colorful vernacular —— “wash all [of CIG’s] sins away.”
17
The Mastersons have cited us to no authority holding that
bargaining for such a release is fraudulent. Like the district
court before us, we are convinced that, as a matter of law, the
Release bars the Mastersons from prosecuting claims for violations
assertedly occurring from 1975 through and including 1988.23
2. Claims for 1989 and Following
a. “In lieu of” defense
One affirmative defense asserted by CIG in preclusion of
recovery by the Mastersons is founded on the Texas doctrine of
quasi-estoppel. This defense was credited by the jury and, at
least by implication, by the district court. Before reaching
quasi-estoppel, however, we are constrained to address CIG’s
contractual contention that enforcement of the Mastersons’ post-
1988 claims is precluded by a fair reading of pertinent portions of
the subject agreements. The contract provision to which CIG
invites our attention is the “in lieu of” provision in the 1988
Amendment.24 Paragraph 7 of that contract states:
23
The district court also found the Mastersons’ pre-1989
claims barred by the statute of limitations. As we conclude de
novo that the Release bars such recovery, we need not address the
statute of limitations. Having familiarized ourselves with the
relevant facts, the legal arguments advanced by the parties in
their briefs, and the reasoning of the district court, however, we
note in passing that the district court appears to have “gotten it
right” on time bar as well.
24
CIG also advanced an “in lieu of” provision contained in
the 1974 Agreement. Having concluded that the Release effectively
absolves CIG from claims of violating its obligations under the
1955 Lease occurring prior to 1989, however, it is not necessary
for us to focus on the “in lieu of” provision of the 1974
18
Lessors agree that all royalty payments made
pursuant to this Agreement are in lieu of any
other rate, reimbursement or method of
measurement and shall constitute and be deemed
full payment by Lessee for all gas, including
casing head gas, produced pursuant to the
Lease and shall fully satisfy and comply with
the provisions of the [1955] Lease as amended
herein. Except as stated in this Agreement,
the Lease is not otherwise amended.(emphasis
added).
As a foundation for its argument that payments made pursuant
to the specific provisions of the 1988 Agreements fully satisfy and
comply with the provisions of the 1955 Lease as amended, CIG
attempts to distinguish the “Agreement” referred to in Paragraph 7
(the 1988 Amendment) from the “Lease” referred to in that paragraph
(the 1955 Lease). From that starting point, CIG contends that the
portions of the 1955 Lease that were not expressly restated in the
1988 Agreements —— specifically, the FNC as incorporated by
reference into the 1955 Lease by the 1967 Settlement —— are of no
force or effect after 1988. This creative but unsupported
interpretation is fatally flawed for several reasons. First, we
need not go beyond the plain wording of the provisions of the 1988
Amendment which proclaim that “[e]xcept as stated in this
[Amendment] Agreement, the [1955] Lease is not otherwise amended.”
This declaration states the diametric opposite of CIG’s proffered
interpretation which would posit that any provision of the 1955
Agreement, even though the similarity in wording of the 1974 and
1988 provisions would make our analysis generally applicable to
that provision in the earlier agreement, and thus to the pre-1989
claims, were they not barred by the Release.
19
Lease that is not reiterated in this 1988 Amendment is no longer in
force or effect. That might well be a fair provision in a document
purporting to be a total restatement or republication of an earlier
agreement but not in an errata-type amendment like the 1988
Amendment. Absent an express statement to that effect, no accepted
canons of contractual interpretation would support such a reading.25
To accept CIG’s reading of the 1988 Amendment as broadly repealing
all provisions of the 1955 Lease other than those expressly
reiterated in the 1988 Amendment also runs contrary to the express
declaration of the latter.
More to the point, when the 1988 Amendment is construed as a
whole, it becomes clear that Paragraph 7's “in lieu of” provision
does not render the FNC nugatory or, in CIG’s terms, “fulfilled.”
Specifically, CIG argues that, because Paragraph 7 specifies that
“all royalty payments made pursuant to this [1988] Agreement are in
lieu of any other rate...,” all royalty payment obligations of
Section A(2) of the 1967 Settlement are satisfied by payments to
the Mastersons pursuant to Paragraph 3 of the 1988 Amendment. The
flaw in this logic lies in the language of paragraph 3 of the 1988
Amendment that states unambiguously that “[t]he provisions of
paragraphs A(2)(a) and (b)” of the 1967 Settlement are the ones
replaced by paragraph 3. As paragraph 2 of the 1988 Amendment
25
See Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 529
(Tex. 1987) (a contract and its subsequent modifications must be
considered as a whole).
20
makes pellucid, paragraph 3 replaces only the two denominated sub-
paragraphs of Paragraph A(2) of the 1967 Settlement, i.e., A(2)(a)
and A(2)(b); clearly nothing in the 1988 Agreements repeals or
otherwise affects or supplants subparagraph A(2)(c) of the 1967
Settlement, which, as we know, is the FNC.
When we hark back to the declaration in the 1988 Amendment to
the effect that “[e]xcept as stated in [the 1988] Amendment, the
[1955] Lease is not otherwise amended,” no doubt can remain that
payments made “pursuant to” the 1988 Agreements must comply with
the provisions of the FNC. Inasmuch as (1) the 1988 Amendment
declares the continued efficacy of all provisions of, inter alia,
the 1967 Settlement that are not expressly repealed, substituted,
or modified by provisions of the 1988 Agreements, and (2)
subparagraph A(2)(c), the FNC provision, is not expressly
supplanted, payments made in conformity to those contracts must
conform to the FNC as well.
We agree with the Mastersons and the district court that the
“in lieu of” provisions of Paragraph 7 of the 1988 Amendment do not
shield CIG from the Mastersons’ post-1988 FNC claims. That leaves
quasi-estoppel as CIG’s last bastion.
b. Quasi-estoppel
With the Mastersons’ post-1988 claims being free from the
strictures of time bar and from the assertion by CIG, which we have
rejected, that those claims are precluded by the “in lieu of”
provisions of Paragraph 7 of the 1988 Amendment, CIG as appellee
21
can sustain the finding of the jury and judgment of the district
court only by prevailing under the Texas doctrine of quasi-
estoppel. A generally accepted verbalization of that doctrine
states:
[The principle of] quasi-estoppel precludes a
party from asserting, to another’s
disadvantage, a right inconsistent with a
position [it has] previously taken. The
doctrine applies when it would be
unconscionable to allow a person to maintain a
position inconsistent with one to which he
acquiesced, or from which he accepted a
benefit.26
Despite its awarding of a relatively nominal recovery to the
Mastersons, the jury found that they are quasi-estopped from
asserting the multimillion dollar claim that is the principal
thrust of this litigation. Quasi-estoppel is a factual
determination and thus the province of the jury, which we review by
testing the sufficiency of the evidence. When we do so, we will
reverse only if no reasonable jury could have arrived at the
26
Lopez v. Muñoz, Hockema & Reed, L.L.P. et al, 22 S.W.3d
857, 864 (Tex. 2000) (quoting Atkinson Gas Co. v. Albrecht, 878
S.W.2d 236, 240 (Tex. App.-Corpus Christi 1994, writ denied)
(citations omitted). See also Bristol-Meyers Squibb Co. v. Barner,
964 S.W.2d 299, 302 (Tex. App.-Corpus Christi 1998)
(“Misrepresentation by one party, and reliance by the other, are
not necessary elements of quasi-estoppel.”) (citations omitted);
Vessels v. Anschutz Corp., 823 S.W.2d 762, 765-66 (Tex. App.-
Texarkana 1992, writ denied). Contrary to the Mastersons’
assertion, the Texas Supreme Court’s opinion in Trevino v.
Turcotte, 564 S.W.2d 682, 687 (Tex. 1978) has not added the
additional element of “full requisite knowledge” of the facts and
law to the definition of quasi-estoppel. But, even if Trevino did
stand for that proposition, which it does not, the Mastersons’
assertion that they lacked such knowledge is refuted by the record.
22
verdict, considering “all the evidence...in the light and with all
reasonable inferences most favorable to the party” in whose favor
the verdict was rendered.27
A review of the evidence presented to the jury in this case
does not produce an overwhelming weight either favoring or
rejecting a factual basis for quasi-estoppel. Thus the evidence
does not support an indisputable factual conclusion either way. It
follows, therefore, that reasonable jurors and reasonable juries
could differ, thus precluding a conclusion on appellate review that
no reasonable jury could have found quasi-estoppel.
The record reflects that the parties operated under a so-
called “deal-for-deal” interpretation of the FNC for several of the
years in question. After sending monthly market price letters to
CIG in a now-apparent effort to imply continued reliance on the
proffered theory of their claims, the Mastersons precipitously
asserted claims against CIG based on a “weighted average price”
(“WAP”) interpretation of the FNC, a 180-degree change of position
by the Mastersons. Under their WAP interpretation, CIG would owe
them in excess of $61 million, clearly a change of position
detrimental to CIG. Significantly, the Mastersons even stipulated
that they would not be entitled to damages under a “deal-for-deal”
interpretation of the FNC.
27
Boeing v. Shipman, 411 F.2d 365, 374 (5th Cir. 1969) (en
banc), overruled on other grounds by Gautreaux v. Scurlock Marine,
Inc., 107 F.3d 331 (5th Cir. 1997) (en banc).
23
Our review of the jury’s finding of quasi-estoppel next leads
us to inquire whether the evidence was sufficient to support a
determination that the prior deal-for-deal position had produced an
advantage for the Mastersons. The record reflects that the
Mastersons intended and were able to use the FNC beneficially as a
“bargaining chip” or “tool” for leverage in dealings with CIG, and
that they received royalty price increases and preferable pricing
terms by pressing the deal-for-deal interpretation. A reasonable
jury could find, as this one did, that the Mastersons benefitted
from their previously maintained position.
We turn finally to the question whether a reasonable jury
could conclude that the Mastersons’ change of position was
unconscionable. The Mastersons have not assigned error to the
district court’s defining “unconscionable” as grossly unfair or
unjust. They have, however, attempted to characterize CIG’s
argument of unconscionability as merely quarreling with the size of
the Mastersons’ claim. We perceive this to be an inaccurate smoke
screening by the Mastersons to obfuscate the proper
characterization of CIG’s argument: The breaches the Mastersons
now assert could have been avoided had CIG not relied on and acted
in response to the Mastersons’ original deal-for-deal position as
maintained over a considerable period of time. Even though
reliance is not an element per se of quasi-estoppel, the
Mastersons’ allegation that CIG continuously breached the WAP
24
interpretation of the FNC, assertedly accumulating millions of
dollars in damages, was the product of its conforming to the deal-
for-deal interpretation as mutually understood by the parties.
This is relevant: When the correct analysis of the facts is
applied to another viable interpretation, i.e., that the Mastersons
stood mute despite their knowledge that CIG’s actions were —— in
the Mastersons’ opinion —— forming the basis of a multimillion
dollar claim against CIG that the Mastersons were confecting, we
cannot charge this jury with making a finding that no reasonable
jury could have made, i.e., that the Mastersons are unconscionable
in asserting their present claims on the basis of WAP after
cynically misleading CIG with the deal-for-deal theory for FNC
determination. We find no reversible error in the jury’s
determination of quasi-estoppel, and therefore affirm. A result of
affirming that finding is to make moot the Mastersons’ argument
that the jury’s award of $140,554.24 is not supported by the
evidence.28
III.
Conclusion
28
We nevertheless note that the record contradicts the
Mastersons’ insistence that the jury was not free to disregard the
“uncontradicted” testimony of the Mastersons’ expert, relying on
Webster v. Offshore Food Serv., Inc., 434 F.2d 1191, 1193 (5th Cir.
1970). Our review of the record demonstrates that the testimony
was disputed by impeachment on cross examination and by live
testimony of the witnesses.
25
Given the protracted and contentious history of the
relationship of the parties and their predecessors, we are not
sanguine that our judgment today will produce an end to
hostilities. That, however, is not our mission: As a court of
error, we are charged only with determining whether the errors of
fact and law asserted by appellants present valid reasons for
reversing the results reached by the district court and the jury.
For the reasons set forth above, we are convinced that affirmance,
not reversal, is in order. The Mastersons’ assertions of fraud and
breach of fiduciary duty were properly dismissed by the district
court for the reasons we have stated. Their claims for alleged
breach of contract occurring prior to 1989 are barred by the
Release they granted to CIG in the 1988 Amendment. The several
amendments and contractual supplements to the 1955 Lease do not bar
the Mastersons from asserting post-1988 breaches of the favored
nation clause because it was not repealed or supplanted by the “in
lieu of” provisions of Paragraph 7 of the 1988 Amendment: That
agreement affected only subparagraphs A(2)(a) and A(2)(b) of the
1967 Settlement, and not A(2)(c) in which the FNC is contained.
Nevertheless, the jury did not err reversibly in concluding as a
matter of fact that the Mastersons are quasi-estopped from
asserting and recovering on their post-1988 claims. Finally, the
district court’s take-nothing judgment against the Mastersons is
appropriate, despite the jury’s award of $140,554.24, given the
26
Mastersons’ concession that they cannot recover on a deal-for-deal
claim under the FNC, which was the basis of the jury’s award of
that sum. Therefore, the judgment of the district court and all
rulings implicated in this appeal are, in all respects
AFFIRMED.
27