Peregrine Oil & Gas, LP v. HRB Oil & Gas, Ltd and VHPM, LLC ( 2018 )

Opinion issued August 30, 2018
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-17-00180-CV
———————————
PEREGRINE OIL & GAS, LP, Appellant
V.
HRB OIL & GAS, LTD. AND VHPM, LLC, Appellees
On Appeal from the 190th District Court
Harris County, Texas
Trial Court Case No. 2016-45652
MEMORANDUM OPINION
Appellant, Peregrine Oil and Gas, LP (“Peregrine”), challenges the trial
court’s judgment in favor of appellees, HRB Oil & Gas, Ltd. and VHPM, LLC
(collectively “HRB”), on its claims against HRB for breach of contract and money
had and received. In six issues, Peregrine contends that the trial court erred in
granting summary judgment in favor of HRB and denying Peregrine’s
summary-judgment motion.
We affirm in part and reverse and remand in part.
Background
In its original petition, filed on July 8, 2016, Peregrine alleges that it entered
into an agreement with HRB and other entities entitled “Participation Agreement,
Block A-155, Galveston Area, South Addition, OCS-G 30654” (the “Participation
Agreement”), which set forth the terms and conditions under which the parties
would “participate in the drilling of wells” on an offshore oil and gas lease
between Peregrine and the United States Department of Interior, Minerals
Management Service.
To earn an interest from Peregrine, the “Operator” under the lease, HRB and
the other entities had to, pursuant to the Participation Agreement, pay their share of
expenses. Under Exhibit “A” to the Participation Agreement, HRB was entitled to
an 8.10811% working interest and 6.43243% net revenue interest “before payout”
and an 6.06108% working interest and 4.82432% net revenue interest “after
payout.” Peregrine, as Operator, marketed production under the lease for HRB,
“remitting proceeds attributable to [HRB’s] interest on a monthly basis” and also
“deliver[ing] monthly joint interest billing (“JIBs”) statements to [HRB] . . . for
its . . . respective share of . . . costs and expenses.” In December 2015, Peregrine
2
notified HRB that a reconciliation of accounts was necessary because Peregrine
had come to realize that the payouts and JIBs issued in June 2013 had been made
based on the before-payout interest and should have been made based on the after-
payout interests as set forth in the Participation Agreement. According to
Peregrine, HRB owed it $210,883.31. And despite its requests, HRB failed to
reimburse Peregrine. Thus, Peregrine, through March 2016, retained $39,648.54 in
sales from HRB’s production under the lease and applied that amount to HRB’s
“obligations” to Peregrine. However, HRB refuses to pay the remaining
$171,234.77 owed.
Peregrine asserts causes of action against HRB for breach of contract, based
on HRB’s alleged refusal to return “those funds credited to it but for which it did
not own any working interest” under the Participation Agreement, and for money
had and received. It seeks recovery of $171,234.77, the amounts remaining from
its overpayments to HRB, pre-judgment and post-judgment interest, and attorneys’
fees.
HRB answered, generally denying Peregrine’s claims and asserting various
affirmative defenses. It subsequently filed a Motion for Partial Summary
Judgment, arguing that Peregrine’s breach-of-contract claim failed as a matter of
law because “its mere acceptance of overpayments due to Peregrine’s negligence
cannot be considered a breach of contract” under the Participation Agreement.
3
And HRB asserted that the two-year statute of limitations barred Peregrine’s claim
for money had and received.
After Peregrine obtained a continuance of the summary-judgment hearing, it
deposed HRB’s corporate representative, Ben Hale. Peregrine asked Hale about
HRB’s compliance with the Participation Agreement and the Offshore Operating
Agreement (“OOA”), which is attached as Exhibit “C” to the Participation
Agreement.
HRB then filed its Amended Motion for Partial Summary Judgment,
asserting that there is no “promise or undertaking of HRB to pay Peregrine any
amounts for alleged overpayments” in paragraph 4 of the Participation Agreement,
the assignment delineating HRB’s working and revenue interests (“Assignment”),
the OOA, or the Accounting Procedure attached to the OOA. It stated that “[i]t
became clear during the deposition of HRB’s corporate representative that
Peregrine is now contending that HRB has a contractual obligation under the
[OOA] to repay Peregrine the alleged prior overpayment of production revenues
and pipeline revenues.” And HRB asserted that the OOA has no provisions
“relating to the accounting for (or repayment of) revenues received from the sale of
production (or transportation revenues received from third parties).” Rather, the
OOA “only addresses the payment of costs incurred in the operation of the” lease.
Thus, even “assuming arguendo that Peregrine’s retroactive calculations are
4
correct (which HRB disputes), HRB has no contractual obligation under the
Assignment, the Participation Agreement or the [OOA] . . . to repay Peregrine the
alleged overpayment of revenues made by Peregrine.” HRB argued that
Peregrine’s breach-of-contract claim fails “as a matter of law” because HRB did
not breach any contractual provision. And it further argued that Peregrine’s claim
for money had and received fails “as a matter of law” because it was brought
outside the two-year statute of limitations.
HRB attached to its Amended Motion for Partial Summary Judgment the
Participation Agreement, the Assignment, and the Payout Notification and Request
for Assignment (“Payout Notification”) in which Peregrine stated that “payout”
under the Participation Agreement had occurred on June 1, 2013. The Payout
Notification further advised HRB that Peregrine had made retroactive adjustments
to HRB’s costs and revenues based on the payout date and its belief that it had
overpaid HRB by $210,883.31. HRB also attached to its motion Peregrine’s
responses to HRB’s first and second interrogatories in which Peregrine admitted
that its claim for breach of contract is based upon the alleged breach of Paragraph 4
of the Participation Agreement and the terms of the Assignment.
In its response to HRB’s Amended Motion for Partial Summary Judgment,
Peregrine argued that because HRB had filed the motion before Peregrine had filed
its amended petition, HRB’s motion does not address the expanded basis for its
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breach-of-contract claim under Article 8.7 of the OOA. In relevant part, this
provision requires that “if a party believes that Operator’s charges, or a portion
thereof, are incorrect,” it must “nevertheless pay the charges claimed by Operator”
and then later “notify Operator that the charges are in dispute.” Peregrine further
asserted that Hale, in his deposition, admitted to HRB’s failure to comply with this
provision. Thus, even assuming that HRB is correct that the overpayments at issue
were not proper charges under the OOA, the OOA’s plain language required HRB
to first pay the charges and then object to their validity. Peregrine further argued
that the statute of limitations does not bar its claim for money had and received
because it did not begin to run until November 2015, when Peregrine sent HRB an
invoice for the overpayments.
Peregrine attached to its response the Participation Agreement; a copy of a
September 2014 email regarding payout; an Accounts Receivable Summary
Statement, dated November 30, 2015; the Payout Notification; a Notice of Pending
Default, dated February 9, 2016; and the deposition transcript of Hale in which he
testified that although HRB had received a JIB including account adjustments in
the amount of $210,883.31, it did not pay this amount. It also attached the
Affidavit of Timothy A. Austin, a Vice President of Business Development and
Land for Peregrine. In it, he testified about the billing and payment practices
between Peregrine and HRB, explaining that reconciliation of the accounts was
6
necessary because “between June 2013 and April 2014, all non-Operators received
and paid JIBs based on their incorrect and higher before[-]payout . . . working
interest” and “had been paid proceeds of production by Peregrine at their incorrect
and higher [before-payout] net revenue interest.” Austin further stated that he had
more than thirty-five years of experience in the oil and gas industry and
reconciliation of accounts and reimbursement for overpayments after payout is a
common practice in the industry.
In its reply, HRB asserted that the only “charges” it was obligated to pay
under Article 8.7 of the OOA were “costs incurred in connection with operations.”
Specifically, HRB asserted that there are “no provisions of the OOA directly
addressing what ‘charges’ Peregrine is authorized to include in JIBs and the other
provisions of the OOA, coupled with common sense and Peregrine’s own
statements, support the conclusion that the ‘charges’ covered by Article 8.7—and
for which HRB is contractually obligated to pay—are the costs associated with the
drilling, completing, equipping and operating a well.” To hold otherwise,
according to HRB, would impose a contractual obligation on it to pay any charge
Peregrine includes in its JIBs, which is unreasonable as those charges “must have
some relation to the costs of drilling, completing, equipping or operating” the
lease. In regard to the statute of limitations barring Peregrine’s claim for money
had and received, HRB asserted that Peregrine’s argument in its response concerns
7
only tolling and it did not plead for the application of the discovery rule or
fraudulent concealment.
On November 8, 2016, Peregrine filed its first amended original petition,
adding, among other items, the allegation that HRB had breached the OOA by
failing to pay Peregrine the $210,883.31 owed to it after delivery of the November
2015 invoice. This, according to Peregrine, was contrary to the express terms of
Article 8.7 of the OOA, which requires a party who believes the Operator’s
charges are incorrect to “nevertheless pay the charges claimed by Operator” and
then “notify Operator that the charges are in dispute . . . .”
Peregrine subsequently filed a motion for summary judgment on its
breach-of-contract claim against HRB, asserting that Article 22.5 of the OOA
obligated HRB to reimburse it for its costs incurred in delivering or disposing of
HRB’s share of oil, gas, or condensate. Despite receiving an invoice in November
2015,1 which included the amount that HRB owed to Peregrine as a result of the
account adjustments, HRB failed to pay Peregrine. Peregrine further asserted that
Article 8.7 of the OOA requires a party disputing a charge from the Operator to
first pay the charge and then notify the Operator that it objects to the charge. Thus,
according to Peregrine, “HRB’s continued non-payment of the amounts owed
1
Peregrine also asserted that it had complied with its obligations under the OOA to
perform all account adjustments within twenty-four months of the end of the
calendar year in which the incorrect payments or charges were made.
8
Peregrine and [its] . . . disregard and failure to follow the provisions set forth in the
[Participation Agreement] and OOA constitute a breach of contract,” warranting
summary judgment in its favor.
Peregrine attached to its summary-judgment motion the Participation
Agreement; an Accounts Receivable Summary Statement sent to HRB in
November 2015 that includes a “Miscellaneous Invoice” for $210,883.31; the
Payout Notification, dated December 15, 2015, and sent to HRB; the deposition
transcript of Hale; and the affidavit of Austin.
In its response to Peregrine’s summary-judgment motion, HRB asserted that
it had no contractual obligation to return any overpaid revenues. And, even if it
did, it disputed Peregrine’s “calculation of the alleged overpayments because
Peregrine’s calculation of payout included gas transportation revenues owed to
HRB under a completely separate and distinct Production Handling Agreement.”
Thus, as such, revenues “should not have been credited as production revenues
from the Test Well which was the subject of the Participation Agreement.”
After a hearing, the trial court, on February 8, 2017, denied Peregrine’s
summary-judgment motion and granted HRB’s summary-judgment motion. And
Peregrine filed a motion for reconsideration. Then, on March 8, 2017, the trial
court withdrew and replaced its February 8, 2017, order with an Amended Order,
specifying that HRB’s “Amended Motion for Partial Summary Judgment asserting
9
that the breach of contract claims in [Peregrine’s] First Amended Original Petition
fail, as a matter of law, to state a cause of action is GRANTED.” It further granted
HRB’s “Amended Motion for Partial Summary Judgment asserting that Texas’[s]
two[-]year statute of limitations applies to [Peregrine’s] claims for overpayments.”
And it denied Peregrine’s motion for reconsideration. The trial court signed its
final judgment in favor of HRB on April 18, 2017.
Amended Pleadings
In its first and second issues, Peregrine argues that the trial court erred in
granting summary judgment in favor of HRB on a superseded pleading because
after HRB had filed its amended summary-judgment motion, Peregrine filed its
first amended original petition, asserting a new basis for its breach-of-contract
claim.
Generally, “[a] plaintiff’s timely filed amended pleading supersedes all
previous pleadings and becomes the controlling petition in the case.” Elliott v.
Methodist Hosp., 54 S.W.3d 789, 793 (Tex. App.—Houston [1st Dist.] 2001, pet.
denied); see also TEX. R. CIV. P. 63, 65. A plaintiff timely files an amended
pleading if it does so seven days before trial. TEX. R. CIV. P. 63; see also Sosa v.
Cent. Power & Light, 909 S.W.2d 893, 895 (Tex. 1995) (under rule 63, leave not
required for plaintiff to amend if amended petition filed “seven days or more
before the date of trial” (internal quotations omitted)). For purposes of rule 63,
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“[a] summary judgment proceeding is a trial.” Goswami v. Metro. Sav. & Loan
Ass’n, 751 S.W.2d 487, 490 (Tex. 1988); Wheeler v. Yettie Kersting Mem’l Hosp.,
761 S.W.2d 785, 787 (Tex. App.—Houston [1st Dist.] 1988, writ denied).
Peregrine filed its first amended original petition on November 8, 2016, and
the record shows that the trial court signed its order granting summary judgment
almost three months later on February 8, 2017. Thus, Peregrine timely filed its
first amended original petition. See Sosa, 909 S.W.2d at 895 (second amended
petition timely filed “exactly one week before a scheduled summary judgment
hearing”). Accordingly, we conclude that Peregrine’s first amended original
petition was its live pleading at the time that the trial court rendered summary
judgment on its claims. See Sosa, 909 S.W.2d at 895; Elliott, 54 S.W.3d at 793.
Once a plaintiff has timely amended its petition to add new claims, the
defendant is not entitled to a summary judgment on the plaintiff’s entire case,
unless the defendant amends or supplements its summary-judgment motion to
address the newly-added claims. See Rotating Servs. Indus., Inc. v. Harris, 245
S.W.3d 476, 487 (Tex. App.—Houston [1st Dist.] 2007, pet. denied); see also
Sosa, 909 S.W.2d at 895 (when amended petition timely filed, trial court must base
its decision on amended pleading, not any superseded petition); Johnson v. Rollen,
818 S.W.2d 180, 183 (Tex. App.—Houston [1st Dist.] 1991, no writ) (“A summary
11
judgment may not be granted . . . on a cause of action not addressed in the
summary judgment proceeding.”).
However, although a trial court errs in granting summary judgment on a
ground or claim not addressed in a summary-judgment motion, such error is
rendered harmless if “the omitted cause of action is precluded as a matter of law by
other grounds raised in the case.” G & H Towing Co. v. Magee, 347 S.W.3d 293,
297–98 (Tex. 2011). Similarly, we may affirm the summary judgment if (1) the
amended or supplemental petition essentially reiterates previously-pleaded causes
of action, (2) a ground asserted in the summary-judgment motion conclusively
negates a common element of the newly- and previously-pleaded claims, or (3) the
original motion is broad enough to encompass the newly asserted claims.
Coterill-Jenkins v. Tex. Med. Ass’n Health Care Liab. Claim Trust, 383 S.W.3d
581, 592 (Tex. App.—Houston [14th Dist.] 2012, pet. denied).
Here, Peregrine asserts that HRB’s summary-judgment motion failed to
address the expanded factual basis for its breach-of-contract claim, as pleaded in its
first amended original petition, that “after delivery of its November 2015 JIB to
[HRB], demanding repayment of the $210,883.31 overpayment, [HRB] failed to
pay such amount, contrary to the express language of Article 8.7 of the OOA.”
However, even though HRB filed its amended summary-judgment motion before
Peregrine had filed its first amended original petition, “[i]t became clear during the
12
deposition of HRB’s corporate representative that Peregrine is now contending that
HRB has a contractual obligation under the [OOA] to repay Peregrine the alleged
prior overpayment of production revenues and pipeline revenues.” HRB further
asserted that the OOA has no provisions “relating to the accounting for (or
repayment of) revenues received from the sale of production (or transportation
revenues received from third parties)”; rather, it “only addresses the payment of
costs incurred in the operation of the” lease. It concluded, even “assuming
arguendo that Peregrine’s retroactive calculations are correct (which HRB
disputes), HRB has no contractual obligation under the Assignment, the
Participation Agreement or the [OOA] . . . to repay Peregrine the alleged
overpayment of revenues made by Peregrine,” and so “Peregrine’s breach of
contract cause of action must fail as a matter of law” because HRB did not breach
any contractual provision.
Further, in reply to Peregrine’s response, HRB also asserted that the only
“charges” it was obligated to pay under Article 8.7 of the OOA are for “costs
incurred in connection with operations.” Specifically, HRB asserted that there are
“no provisions of the OOA directly addressing what ‘charges’ Peregrine is
authorized to include in JIBs and the other provisions of the OOA, coupled with
common sense and Peregrine’s own statements, support the conclusion that the
‘charges’ covered by Article 8.7—and for which HRB is contractually obligated to
13
pay—are the costs associated with drilling, completing, equipping and operating a
well.” To hold otherwise, according to HRB, would impose a contractual
obligation on it to pay any charge Peregrine includes in its JIBs, which is
unreasonable as those charges “must have some relation to the costs of drilling,
completing, equipping or operating” the lease.
Even though HRB filed its amended summary-judgment motion before
Peregrine had filed its first amended original petition, the amended motion was
broad enough to encompass the newly asserted claims in Peregrine’s new petition.2
See id. And the trial court, in its March 8, 2017 amended order, specifically
granted summary judgment on the “breach of contract claims in [Peregrine’s] First
Amended Original Petition.” Accordingly, we hold that the trial court’s
summary-judgment was not based on a superseded pleading.
We overrule Peregrine’s first and second issues.
Summary Judgment
In its third, fifth, and sixth issues, Peregrine contends that the trial court
erred in granting summary judgment on Peregrine’s claims for breach of contract
and money had and received and in denying Peregrine summary judgment on its
claim for breach of contract.
2
Having concluded that HRB’s summary-judgment motion was broad enough to
encompass the newly asserted claim in Peregrine’s first amended original petition,
we need not address HRB’s claim that Peregrine waived its argument to this
alleged defect.
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To prevail on a summary-judgment motion, a movant has the burden of
establishing that it is entitled to judgment as a matter of law and there is no
genuine issue of material fact. TEX. R. CIV. P. 166a(c); Cathey v. Booth, 900
S.W.2d 339, 341 (Tex. 1995). When a plaintiff moves for summary judgment on
its own claim, it must conclusively prove all essential elements of its cause of
action. Rhône–Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999). When a
defendant moves for summary judgment, it must either (1) disprove at least one
essential element of the plaintiff’s cause of action or (2) plead and conclusively
establish each essential element of its affirmative defense, thereby defeating the
plaintiff’s cause of action. Cathey, 900 S.W.2d at 341; Yazdchi v. Bank One, Tex.,
N.A., 177 S.W.3d 399, 404 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).
When deciding whether there is a disputed, material fact issue precluding summary
judgment, evidence favorable to the non-movant will be taken as true. Nixon v.
Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985). “Every reasonable
inference must be indulged in favor of the non-movant and any doubts must be
resolved in its favor.” Id. at 549.
When, as here, both sides move for summary judgment and the trial court
grants one motion and denies the other, we review the summary judgment proof
presented by both sides and determine all questions presented. See Centerpoint
15
Energy Hous. Elec., L.L.P. v. Old TJC Co., 177 S.W.3d 425, 430 (Tex. App.—
Houston [1st Dist.] 2005, pet. denied).
Breach of Contract
In its third and sixth issues, Peregrine argues that the trial court erred in
granting HRB summary judgment, and denying Peregrine summary judgment, on
Peregrine’s breach-of-contract claim because HRB did not “conclusively negate
any element” of the claim and Peregrine “conclusively established each essential
element” of the claim.
A successful breach-of-contract claim requires proof of the following
essential elements: (1) the existence of a valid contract, (2) performance or
tendered performance by the plaintiff, (3) breach of the contract by the defendant,
and (4) damages sustained by the plaintiff as a result of the defendant’s breach.
B & W Supply, Inc. v. Beckman, 305 S.W.3d 10, 16 (Tex. App.—Houston [1st
Dist.] 2009, pet. denied); Winchek v. Am. Express Travel Related Servs. Co., 232
S.W.3d 197, 202 (Tex. App.—Houston [1st Dist.] 2007, no pet.).
In construing a written contract, the primary concern is to ascertain and give
effect to the parties’ intentions as expressed in the document. Italian Cowboy
Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011);
Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 311–12 (Tex. 2005).
We begin with the contract’s language. Italian Cowboy, 341 S.W.3d at 333.
16
Contract terms are given their plain, ordinary, and generally accepted meanings
unless the contract itself shows that the terms were used in a technical or different
sense. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).
When a contract contains an ambiguity, a fact issue arises as to the intent of the
parties and, therefore, granting summary judgment is improper. See Plains Expl.
& Prod. Co. v. Torch Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex. 2015)
(“Summary judgment is not the proper vehicle for resolving disputes about an
ambiguous contract.”); Moncrief v. ANR Pipeline Co., 95 S.W.3d 544, 546–47
(Tex. App.—Houston [1st Dist.] 2002, pet. denied) (analyzing whether ambiguity
existed, which would create fact issue precluding summary judgment).
Peregrine specifically argues that HRB breached Article 8.7 of the OOA
because it refused to pay the November 2015 JIB within forty-five days of billing
for the complained-of overpayments.3 Peregrine asserts that HRB was “required to
first pay the charge and then initiate an objection to the charge.” HRB asserts that
the allegedly overpaid revenues are not “charges due” under the OOA. And,
absent any contractual provision obligating HRB to refund overpaid revenues,
Peregrine cannot sustain a breach-of-contract claim.
Article 8 of the OOA provides, in relevant part:
3
Peregrine does not raise any issues on appeal regarding its assertion below that
HRB breached the Participation Agreement.
17
8.1 Basis of Charge to the Parties. Subject to the
provisions of this Agreement, Operator shall pay all costs incurred
under this Agreement, and each Party shall reimburse Operator in
proportion to its Participating Interest. All charges, credits, and
accounting for expenditures shall be made and done pursuant to
“Exhibit C.”
8.7 Unpaid Charges and Default. If a Party fails to pay the
charges due under this Agreement within forty-five (45) days after
rendition of Operator’s statement, . . . Operator [may] issue[] a notice
of default . . . . If a Party believes that Operator’s charges, or a
portion thereof, are incorrect, that Party shall nevertheless pay the
charges claimed by Operator and may notify Operator that the
charges are in dispute. Thereafter, Operator and the Non-Operator
shall attempt to resolve the issue within sixty (60) days after receipt of
payment.
(Emphasis added.)
Article 8.7 clearly provides that a party should first pay “charges” and then
notify the Operator of any charge that is in dispute. However, the term “charges”
is not defined specifically anywhere in the Participation Agreement, the OOA, or
the Accounting Procedure Offshore Joint Operations (“Accounting Procedure”) in
Exhibit “C” to the OOA. And while the Accounting Procedure does set forth the
expenses that the “Operator shall charge the Joint Account,”4 including specific
direct charges and overhead for which Peregrine may charge the Joint Account, it
4
The Accounting Procedure defines “Joint Account” as “the account showing the
charges paid and credits received in the conduct of the Joint Operations and which
are to be shared by the Parties.” “Joint Operations” is defined as “all operations
necessary or proper for the development, operation, protection and maintenance of
the Joint Property.” And “Joint Property” is defined as “the real and personal
property subject to the [OOA] to which this Accounting Procedure is attached.”
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also contemplates “unusual charges and credits” that “shall be separately identified
and fully described in detail” in regard to “Statements and Billings.”
Additionally, the plain meaning of the word “charge” does not provide any
guidance as to whether an invoice for return of overpayments under these
circumstances constitute a “charge” that must be paid first, regardless of whether it
is in dispute. As a noun, “charge” is defined as a “[p]rice, cost, or expense.”
Charge, BLACK’S LAW DICTIONARY (9th ed. 2009). As a verb, the word “charge”
is defined as “[t]o demand a fee” or “to bill.” Id.
Here, the parties’ intent is unclear in regard to what charges a non-operator
is required to pay, even when they are contested, to avoid breaching Article 8.7 of
the OOA. On the one hand, Article 8.7 does provide that the non-operator must
pay the Operator’s charges, even if it believes that they are incorrect. It may then
subsequently notify the Operator if any charge is in dispute. And “charges” is
undefined. Further, Timothy Austin, a Vice President for Business Development
and Land for Peregrine who has worked in the industry for “more than thirty-five
years,” stated in his affidavit that such reconciliation of accounts and
reimbursement for overpayments after payout is a common practice in the
industry.5 On the other hand, Article 8.1 of the OOA requires that all “charges,
5
To determine whether a contract is ambiguous, we may examine extrinsic
evidence to interpret the contractual terms used by the parties so long as such
evidence does not contradict or vary the meaning of the explicit language of the
19
credits and accounting for expenditures shall be made and done pursuant to” the
Accounting Procedure. And the Accounting Procedure does not appear to account
for charges in the form of reimbursement of allegedly overpaid revenues. It
appears that the parties did not intend for the term “charges,” in regard to HRB’s
obligation to pay before contesting, to include anything that Peregrine might
possibly include in an invoice. However, it is not clear wheter the parties intended
the word “charges” to be interpreted as broadly as argued by Peregrine, as
narrowly as argued by HRB, or somewhere in between.
We conclude that the summary-judgment evidence in the record raises a
genuine issue of material fact as to whether the alleged overpayments are
“charges” due under the agreement. See J.M. Davidson, Inc. v. Webster, 128
S.W.3d 223, 229 (Tex. 2003) (contract ambiguous if subject to two or more
reasonable interpretations). Accordingly, we hold that the trial court erred in
granting HRB summary judgment on Peregrine’s breach-of-contract claim.
We sustain Peregrine’s third issue.
Having held that there is a fact issue as to whether HRB breached Article 8.7
of the OOA, this same fact issue precludes summary judgment in Peregrine’s favor
on its breach-of-contract claim. See Steel, 997 S.W.2d at 223 (plaintiff must
conclusively prove each essential element of its cause of action to be entitled to
written contract. See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus.,
Inc., 907 S.W.2d 517, 521 (Tex. 1995).
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summary judgment). Accordingly, we hold that the trial court did not err in
denying Peregrine’s summary judgment on its breach-of-contract claim.
We overrule Peregrine’s sixth issue.
In its fifth issue, Peregrine contends that the trial court, in rendering its
decision, erred in relying on Mobil Producing Texas & New Mexico, Inc. v.
Cantor, 93 S.W.3d 916 (Tex. App.—Corpus Christi 2002, no pet.). Mobil merely
stands for the proposition that, absent a contractual obligation on point, there could
be no breach of contract for a defendant’s failure to return alleged overpayments,
and, thus, there could only “be recovery under a quasi-contract theory such as
unjust enrichment.” Id. at 919–20. This principle is directly applicable to the
present case. If there is no contractual provision on point that would prevent HRB
from accepting, or requiring HRB to return, alleged revenue overpayments,
Peregrine would only be able to seek recovery through a claim in equity, not for
breach of contract. See Fortune Prod. Co v. Conoco, Inc., 52 S.W.3d 671, 684
(Tex. 2000) (citing Sw. Elec. Power Co. v. Burlington N. R.R., 966 S.W.2d 469–70
(Tex. 1998) (recognizing overpayments under a contract can be recovered under a
theory of restitution or unjust enrichment under certain circumstances)). This is
consistent with HRB’s argument in the trial court and on appeal that there is no
contractual provision that governs return of the alleged revenue overpayments.
And there is nothing in the record to suggest that the trial court extrapolated the
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reasoning of Mobil beyond this basic legal principle. Accordingly, we hold that
the trial court did not err in its reliance, if any, on Mobil.
We overrule Peregrine’s fifth issue.
Money Had and Received
In its fourth issue, Peregrine argues that the trial court erred in granting HRB
summary judgment on Peregrine’s claim for money had and received as barred by
the two-year statute of limitations because the claim did not accrue until Peregrine
had performed a reconciliation of accounts in November 2015 and realized how
much money it had allegedly overpaid HRB. See TEX. CIV. PRAC. & REM. CODE
ANN. § 16.003 (a) (Vernon 2017); Merry Homes, Inc. v. Luc Dao, 359 S.W.3d 881,
884 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (holding claims for money
had and received governed by two-year statute of limitations applicable to
unjust-enrichment claims).
When a cause of action accrues is a question of law. Provident Life &
Accident Ins. v. Knott, 128 S.W.3d 211, 221 (Tex. 2003). A cause of action
accrues and the statute of limitations begins to run when facts come into existence
that authorize a party to seek a judicial remedy, regardless of when the plaintiff is
aware of such facts. Id. When applicable, the discovery rule will toll the statute of
limitations such that it does not begin to run until the date on which the plaintiff
knew or reasonably should have known of the facts giving rise to its cause of
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action. Barker v. Eckman, 213 S.W.3d 306, 311-12 (Tex. 2006). The discovery
rule is an affirmative defense that must be affirmatively pleaded and proved. Id. at
312. To invoke the discovery rule, a plaintiff must establish that its injury is both
inherently undiscoverable and objectively verifiable. Id.
A person must bring a suit for money had and received no later than two
years after the date the cause of action accrues. Merry Homes, 359 S.W.3d at 884
(holding claims for money had and received governed by two-year statute of
limitations applicable to unjust-enrichment claims). A cause of action for money
had and received generally accrues when money is paid. Merry Homes, Inc. v. Luc
Dao, No. 14-16-00724-CV, 2017 WL 4159206, at *3 (Tex. App.—Houston [14th
Dist.] Sept. 19, 2017, no pet.) (mem. op.) (citing City of Beaumont v. Moore, 202
S.W.2d 448, 452 (Tex. 1947); Autry v. Dearman, 933 S.W.2d 182, 190 n.7 (Tex.
App.—Houston [14th Dist.] 1996, writ denied)).
Here, it is undisputed that over two years had passed from the date of the last
overpayment until Peregrine sued HRB for money had and received.6 Peregrine
asserts, however, that its cause of action for those funds did not accrue until after it
had reconciled its accounts and submitted a JIB for repayment in November 2015.
It is true that certain circumstances may affect an accrual date, such as when
6
Peregrine admits that it performed the reconciliation of accounts for a period
between the date of payout, June 2013, and the date by which accounts were
adjusted to reflect their correct after-payout interests, May 2014. Peregrine did not
file suit until July 8, 2016.
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money is originally held rightfully, but later retained inequitably, or where the
viability of a cause of action depends upon the outcome of another case. See, e.g.,
H.E.B., L.L.C. v. Ardinger, 369 S.W.3d 496, 513 (Tex. App.—Fort Worth 2012,
pet. denied) (holding claim for money had and received did not accrue when
money paid, but instead when party retained funds paid under contract after
contract rescinded). But, this is not the case here where Peregrine’s claim is that it
accidentally overpaid HRB by not adjusting the interest after payout and it did not
become aware of the problem until it had reconciled its accounts and sought
reimbursement in the November 2015 JIB. And Peregrine neither pleaded nor
raised a fact issue about application of the discovery rule or fraudulent
concealment regarding its cause of action for money had and received. See Woods
v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988) (holding discovery
rule waived where not pleaded or proved).
Peregrine argues that because it followed the Accounting Procedure within
the time provided in the OOA, its cause of action did not accrue until it had
reconciled its accounts. It is effectively arguing for the application of the
discovery rule as it is relying on its November 2015 reconciliation of accounts as
the date it discovered the erroneous overpayments. See Barker, 213 S.W.3d at 312
(discovery rule works to toll statute of limitations until date on which plaintiff
knew facts giving rise to injury).
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In support of its position, Peregrine also relies on Article 1.4 of Exhibit C to
the OOA, which provides, in relevant part:
4. Adjustments
Payment of any such bills shall not prejudice the right of any
non-Operator to protest or question the correctness thereof; provided,
however, all bills and statements rendered to non-Operators by
Operator during any calendar year shall conclusively be presumed to
be true and correct after twenty-four (24) months following the end of
any such calendar year, unless within the said twenty-four (24) month
period a Non-Operator takes written exception thereto and makes
claim on Operator for adjustment. No adjustment favorable to
Operator shall be made unless it is made within the same prescribed
period . . . .
While this provision arguably requires Peregrine to question the correctness of past
bills and make adjustments within twenty-four months, nowhere does this
provision, or any other evidence in the record, demonstrate that the parties
intended to extend the statute of limitations for causes of action arising from
reconciliation of improper charges to accounts.
Accordingly, we hold that the trial court did not err in granting HRB
summary judgment on Peregrine’s claim for money had and received on the
ground that it is barred by the two-year statute of limitations.
We overrule Peregrine’s fourth issue.
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Conclusion
We reverse the portion of the trial court’s judgment granting HRB summary
judgment on Peregrine’s breach-of-contract claim and remand this claim to the trial
court for further proceedings consistent with this opinion. We affirm the
remainder of the trial court’s judgment.
Terry Jennings
Justice
Panel consists of Chief Justice Radack and Justices Jennings and Lloyd.
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