Opinion
No. 04-04-00312-CV
Delivered and Filed: April 6, 2005.
Appeal from the 229th Judicial District Court, Starr County, Texas, Trial Court No. Dc-02-24, Honorable Alex Gabert, Judge Presiding.
Affirmed.
Sitting: Catherine STONE, Justice, Sarah B. DUNCAN, Justice Karen ANGELINI, Justice.
MEMORANDUM OPINION
Robert Bennett alleged Michael Quigley fraudulently induced him to perform geological services in relation to an oil and gas lease. When Quigley did not compensate Bennett as promised, Bennett sued Quigley under multiple theories of liability, including a fraudulent inducement theory. A jury found in Bennett's favor on each of his theories of liability. Based on Bennett's election to recover his fraud damages, the trial court rendered a judgment in his favor for $1,000,000. Quigley challenges the jury's verdict in six issues. We affirm.
Background
Michael Quigley, an independent oil and gas operator, acquired oil and gas leases from George Samano in 1978. Approximately 19 years later, during the first weeks of April of 1997, Quigley decided to sell his interest in the leases. Quigley planned on selling the leases in exchange for, among other things, an overriding royalty interest in all future oil production from the leases.
When Quigley found a potential buyer, Louis Drefus Natural Gas ("LDNG"), Quigley asked Robert Bennett, a petroleum geologist, to help him prepare for the sales presentation to LDNG. Specifically, Quigley asked Bennett to provide geological assistance on the geologic and developmental history of the leases. Bennett orally agreed to assist Quigley without compensation as a favor to Quigley's partner, Roger Steward, even though Bennett would normally receive an overriding royalty interest in all future revenue from a particular lease as compensation for his services.
Bennett presented evidence that he is a generating petroleum geologist, and does not perform his services on an hourly or daily basis.
After Bennett orally agreed to assist Quigley, Quigley asked Bennett to perform additional services, including analyzing seismic data acquired from the leases and producing a geologic map of the leases. When Bennett was approached by Quigley to draft the geological map, Bennett informed Quigley that he had other projects to complete. Quigley, however, told Bennett "Don't worry . . . I'll take care of you." Bennett once again orally agreed to assist Quigley with the Samano Leases. Based on their discussion, Bennett proceeded to prepare the map for Quigley, which Quigley later used to make his sales presentation to LDNG.
On May 28, 1997, LDNG informed Quigley that it was not interested in acquiring the Samano Leases. After LDNG rejected the idea of acquiring the Samano Leases, Quigley asked Bennett to compile another map of the Samano Leases. Bennett, however, did not complete this map.
In April 1998, Quigley negotiated and completed a deal with Coastal Oil and Gas, U.S.A., L.P. for the Samano Leases. As part of the deal, Quigley secured an overriding royalty interest in the leases. Neither Bennett nor his geologic map played any role in the sale to Coastal. Sometime after the deal was consummated, Bennett contacted Quigley and inquired about receiving compensation for the geologic services he provided in connection with the leases. Quigley informed Bennett that "we'll get it hashed out; we'll get it done."
Coastal eventually began its drilling operations on the Samano Leases during February of 2001. By the spring of 2001, Coastal had drilled several producing wells on the leases. Bennett contacted Quigley again regarding his compensation after he learned two more producing wells were drilled on the Samano Leases. During their conversation, Bennett reminded Quigley, "we need to hash this deal out before they get too far and we can't keep track of it all."
In September of 1999, Coastal hired its own geologist to determine where it should begin its drilling operations on the leases.
It is estimated that the Samano Leases will yield more than $400,000,000 worth of oil and gas over their lifetime.
Quigley finally met with Bennett in August of 2001 to discuss Bennett's compensation. When Bennett met with Quigley, however, no satisfactory resolution to the issue was reached. Quigley ended the meeting when he thought Bennett was "trying to shake [him] down." Sometime thereafter, Bennett and Quigley had another conversation regarding Bennett's compensation. Once again, no resolution was reached by the parties.
Bennett filed suit against Quigley on February 1, 2002, alleging multiple theories of liability, including quantum meruit, fraud, and conversion theories. A jury found in Bennett's favor on each of his theories of liability. The jury awarded Bennett $1,000,000 in damages for his fraud claim, $1,000,000 for his conversion claim, and $2,500 for his quantum meruit claim. Based on Bennett's election to recover his fraud damages, the trial court rendered judgment in his favor for $1,000,000.
Discussion
In his first four issues, Quigley challenges the jury's findings regarding Bennett's fraudulent inducement cause of action. First, Quigley argues that there is insufficient evidence demonstrating an agreement existed between the parties. Second, Quigley argues that even if an agreement existed, it is unenforceable under the Statute of Frauds. Third, Quigley argues there is insufficient evidence to support the $1,000,000 awarded by the jury as damages for fraudulent inducement. In his fifth and sixth issues, Quigley argues Bennett's quantum meruit and conversion causes of action are barred by limitations.
The Oral Agreement
Quigley claims there is insufficient evidence to support a finding that an oral agreement existed between the parties regarding the Samano Leases. A party who challenges the legal sufficiency of the evidence supporting an issue upon which it did not have the burden of proof must demonstrate that there is no evidence to support the adverse finding. Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983). In reviewing a no evidence complaint, we consider only the evidence and inferences supporting the finding and we disregard all evidence and inferences to the contrary. Southwest Key Program, Inc. v. Gil-Perez, 81 S.W.3d 269, 274 (Tex. 2002). If there is any evidence supporting the finding, we must uphold the finding and overrule the no evidence complaint. ACS Investors, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997).
A party attacking the factual sufficiency of an adverse finding on an issue on which the other party had the burden of proof must demonstrate that there is insufficient evidence to support the adverse finding. Hickey v. Couchman, 797 S.W.2d 103, 109 (Tex.App.-Corpus Christi 1990, writ denied). In reviewing a factual sufficiency challenge, we must first consider, weigh, and examine all of the evidence which supports and which is contrary to the jury's determination. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). We should set aside the verdict only if the evidence that supports the jury's finding is so weak as to be clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).
At trial, Bennett testified that Quigley asked him to provide geological assistance regarding the Samano Leases for purposes of securing a buyer for the leases. Bennett's initial role was to help Quigley interpret geological data and explain the developmental history of the leases. When Quigley sought to expand Bennett's role in the project by having Bennett analyze seismic data and produce a geologic map for Quigley, Bennett informed Quigley that he had other projects to complete. Quigley assured Bennett that he would "take care of [him]" if he provided the additional geological services that he needed. Following this discussion, Bennett proceeded to prepare a time structure map that Quigley used during his sales presentation to LDNG.
Although Quigley's recollection of the events leading to the production of the time structure map may have differed from Bennett's during trial, Quigley did not dispute that he had an agreement with Bennett for geological services. According to Quigley, he told Bennett "well do us a favor, work what you can . . . and I'll pay you for your time for doing it." Based on the evidence presented, we conclude there is both legally and factually sufficient evidence to support a finding that an agreement existed between Bennett and Quigley.
Statute of Frauds
Quigley next argues that even if an agreement did exist, the agreement is unenforceable under the Statute of Frauds because it concerns an interest in real property. Whether a contract falls within the statute of frauds is a question of law. Bratcher v. Dozier, 162 Tex. 319, 346 S.W.2d 795, 796 (1961).
In Swinehart v. Stubbeman, McRae, Sealy, Laughlin, Browder, Inc., our sister court held that agreements for geological services, like the one at issue here, are subject to the Statute of Frauds because the primary purpose of such agreements is "to secure interests in oil and gas leases." 48 S.W.3d 865, 877 (Tex.App.-Houston [14th Dist.] 2001, pet. denied). There, a petroleum geologist entered into a geological service agreement with an oil company. Id. at 871. As part of the agreement, the geologist was to provide his services locating, evaluating, and recommending oil and gas prospects in exchange for a retained revenue interest after the sale of any prospect recommended by him. Id. The court held that "it is clear that the primary purpose of the contract was to secure interests in oil and gas leases. The gathering of geological information was merely a means to an end, that is, to locate prospective leases and to ultimately obtain mineral interests in those leases." Id. at 877.
Like the agreement in Swinehart, the primary purpose of the parties' oral agreement in this case was to acquire royalty interests in the Samano Leases. Bennett's geological services were a means to that end. See id. Because the primary purpose of the parties' oral agreement was to acquire an interest in real property, the agreement is unenforceable under the Statute of Frauds.
See id. The record indicates that Bennett previously acknowledged that this suit concerns a contract for real property. In his response to Quigley's motion to transfer venue from Starr County (the county where the Samano Leases are located) to Nueces County (the county where Quigley resides), Bennett argued that his right to future royalty payments is a claim for real property, thereby making venue mandatory in Starr County. See Tex. Civ. Prac. Rem. Code Ann. § 15.011 (Vernon 2002).
Benefit-of-the-Bargain Damages
Quigley also claims the evidence is legally and factually insufficient to support the $1,000,000 awarded by the jury as damages for fraudulent inducement. In support of his claim, Quigley acknowledges that Texas recognizes two measures of damages for fraud: the benefit-of-the-bargain measure and the out-of-pocket measure. Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671, 681 (Tex. 2000). "Benefit-of-the-bargain damages are the difference between the value as represented and the value received." Id. By contrast, "[o]ut-of-pocket damages compensate a defrauded party for the difference between the value of that with which he or she has parted and the value actually received." Id. Quigley further recognizes that where the statute of frauds makes the parties' underlying agreement unenforceable, the plaintiff is precluded from recovering benefit of the bargain damages. See Haase v. Glazner, 62 S.W.3d 795, 799 (Tex. 2001). Under his sufficiency complaint, Quigley asserts that Bennett is precluded from recovering benefit-of-the-bargain damages in this case because the statute of frauds makes the parties' underlying agreement unenforceable. See id. He therefore claims there is insufficient evidence of the proper measure of damages, i.e., Bennett's out-of-pocket damages, because Bennett's evidence on damages pertains only to benefit-of-the-bargain damages.
Here, the jury was asked the following fraud damages question:
What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Robert Bennett for his damages, if any, that resulted from such fraud?
Consider the following elements of damages, if any, and none other.
* * *
The reasonable value of Robert Bennett's compensable work at the time and place it was performed.
Answer in dollars and cents: $1,000,000
It is obvious from this question that the jury was asked to determine Bennett's damages based on a benefit-of the-bargain measure of damages. This question was improper because it permitted the jury to find damages based on the wrong measure. See id. Quigley, however, failed to point out to the trial court that an improper measure of damages was submitted to the jury. Because Quigley failed to object to the lack of a jury instruction on the proper measure of damages, Quigley waived his right to complain that Bennett offered insufficient evidence of the proper measure of damages. See Haskett v. Butts, 83 S.W.3d 213, 220 (Tex.App.-Waco 2002, pet. denied) (concluding defendant waived complaint that evidence was insufficient to show which of plaintiff's medical expenses may have been associated with claims in the lawsuit because defendant did not object or request instruction requiring jury to segregate damages); Columbia/HCA Healthcare Corp. v. Cottey, 72 S.W.3d 735, 747 (Tex.App.-Waco 2002, no pet.) (holding defendants could not complain on appeal that jury awarded damages which would not otherwise be recoverable for fraudulent inducement because there was no objection to charge as submitted).
To the extent that Quigley complains that no evidence was presented to support the jury's finding of fraud damages in the amount of $1,000,000, we are required to review the sufficiency of the evidence based upon the charge submitted, even if erroneous, not the charge which should have been submitted. Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). As previously discussed, when a party challenges the legal sufficiency of an adverse finding on which he did not have the burden of proof, he must demonstrate there is no evidence to support the adverse finding. Croucher, 660 S.W.2d at 58. In reviewing a no evidence issue, we must consider all of the record evidence in the light most favorable to the party in whose favor the verdict has been rendered and indulge every reasonable inference deducible from the evidence in that party's favor. Southwest Key Program, Inc., 81 S.W.3d at 274. If there is more than a scintilla of evidence to support the finding, the no-evidence challenge fails. Formosa Plastics Corp. USA, 960 S.W.2d at 48.
A party attacking the factual sufficiency of an adverse finding on an issue on which the other party had the burden of proof must demonstrate that there is insufficient evidence to support the adverse finding. Hickey, 797 S.W.2d at 109. In reviewing an insufficiency of the evidence challenge, we must first consider, weigh, and examine all of the evidence which supports and which is contrary to the jury's determination. Plas-Tex, Inc., 772 S.W.2d at 445. We should set aside the verdict only if the evidence that supports the jury's finding is so weak as to be clearly wrong and manifestly unjust. Cain, 709 S.W.2d at 176.
During trial, Bennett offered the expert testimony of Pete Huddleston regarding his damages. Huddleston determined that Bennett was entitled to a 1% overriding royalty interest as compensation for the services he rendered in connection with the Samano Leases. According to Huddleston, Bennett suffered approximately $4,042,501 in damages. Huddleston arrived at his damage calculation by concluding Bennett suffered $2,199,244 in damages for the present oil and gas production from the Samano Leases and $2,023,257 in damages for the future production from the leases.
Quigley argues there is insufficient evidence demonstrating that Bennett is entitled to an overriding royalty interest because Bennett is not a generating geologist, i.e., the type of geologist who customarily receives an overriding royalty interest as compensation for his services. Quigley cites the fact that Bennett failed to introduce reliable expert testimony that he is a generating geologist as support for his contention.
At trial, Bennett's expert, Bryan Poche, an independent originating geologist with more than 24 years experience, testified that a generating geologist is a geologist who "creates an independent idea of where to go drill." He distinguished a generating geologist from a consulting geologist, who is paid on an hourly or daily basis for his services. Poche testified that he considers Bennett a generating geologist because he developed independent ideas about where to drill for oil and gas deposits.
Regardless of the reliability of Poche's testimony on this point, the jury heard Bennett testify, without objection, that he has been an independent geologist in the business of generating oil and gas prospects for more than 20 years. He has neither worked as a consulting geologist nor provided geological services on a cash or per diem basis. According to Bennett, he works exclusively on an overriding royalty interest basis. Because it is within the province of the trier of fact to determine the credibility of the witnesses and the weight to be given their testimony, the jury was free to believe Bennett's testimony that he is a generating geologist who is entitled to royalty interests as compensation for his services. See McGalliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986) (recognizing the trier of fact may accept lay testimony over that of experts).
Quigley also argues under his sufficiency issues that the record lacks reliable expert testimony showing that Bennett is entitled to receive a royalty interest as compensation for his services when there is no agreement to that effect. Once again, regardless of the testimony offered by Bennett's experts, the jury was free to conclude that Bennett was entitled to damages based on an overriding royalty interest basis because Bennett himself testified that he did not work for anything but royalty interests. Accordingly, we hold the evidence is legally and factually sufficient to support the jury's finding of fraud damages in the amount of $1,000,000.
Conclusion
Having overruled each of Quigley's complaints regarding Bennett's fraud cause of action, the judgment of the trial court is affirmed. In light of the foregoing, we need not reach Quigley's remaining contentions concerning the impropriety of the jury's findings relating to Bennett's quantum meruit and conversion causes of action.