Petro-Hunt, L.L.C. v. Wapiti Energy, L.L.C

Opinion issued March 8, 2012

In The

Court of

Appeals

For The

First District

of Texas

————————————

NO. 01-10-01030-CV

———————————

Petro-Hunt, L.L.C. , Appellant

V.

Wapiti

Energy, L.L.C. ,

Appellee

On Appeal from the 151st District Court

Harris County, Texas

Trial Court Case No. 2005-65635

MEMORANDUM OPINION

Appellant, Petro-Hunt, L.L.C, appeals

the trial court’s grant of summary judgment on liability and rendition of

judgment on damages and attorneys’ fees for the breach of contract claim

asserted by appellee, Wapiti Energy, L.L.C.

In five issues, Petro-Hunt argues (1) the trial court erred in granting

summary judgment because Wapiti failed to conclusively establish each element

of its breach of contract claim; (2) the trial court erred by determining that

Wapiti was not judicially estopped from asserting the production imbalance in

dispute was known; (3) the evidence establishes that Wapiti never suffered any

harm as a result of Petro-Hunt’s breach; (4) the trial court improperly

calculated damages by valuing the entire imbalance as of the gas value on a single

day; and (5) the trial court abused its discretion in awarding attorneys’ fees.

We affirm.

Background

The Conroe Field Unit is a pooled collection of oil and

gas interests in an area known as the Conroe Field. The Conroe Field Unit was created in 1977 and

is operated by ExxonMobil. Part of

ExxonMobil’s responsibility as operator of the Conroe Field Unit was to

allocate to the interest owners their proportionate share of the production for

the unit. The interest owners would then

be paid for their reported share of production.

For various reasons, ExxonMobil would subsequently make

adjustments to the production amounts.

ExxonMobil would report these adjustments, known as production

imbalances. If an interest had been

“overproduced,” this overproduction created a liability on the interest. If an interest had been “ underproduced ,”

this underproduction would create a benefit for the interest. Either way, a production imbalance affects

the value of an interest.

Petro-Hunt owned some interests in the Conroe Field

Unit. In 2001, Petro-Hunt entered into

an agreement to sell its interest to Wapiti.

This agreement was entitled the Purchase and Sale Agreement. The Purchase and Sale Agreement was made

effective June 1, 2001 with closing set to occur July 20, 2001 at 10:00

a.m. In the agreement, Petro-Hunt

represented and warranted that, to the best of its knowledge and information,

“there are no oil and gas production . . .

imbalances of which [Petro-Hunt] has notice relating to” the interests being

sold. The parties agreed that “[a] ll representations and warranties set forth in this Agreement . . . shall survive for a period of

twelve (12) months following Closing.”

The agreement recognized that not all matters would be

finalized as of the date of closing.

Accordingly, it provided:

As soon as practicable after Closing, but in no event

later than sixty (60) days after Closing, Seller shall prepare and deliver to

Buyer . . . a statement (“Final Settlement Statement”) setting forth

each adjustment or payment that was not finally determined as of Closing and

showing the calculation of such adjustment and the aggregate amount

thereof. . . . The

Parties undertake to agree with respect to the amounts of any post-closing

adjustments no later than ninety (90) days after Closing. The date upon which such agreement is reached

or upon which the aggregate amount of the adjustments is finally established

shall be called the “Final Settlement Date”.

The Party owing the agreed net amount under the adjusted Final Settlement

Statement shall deliver the requisite amount via wire transfer to the other

Party within five (5) business days of the Final Settlement Date.

It also provided that, after closing, the parties

“shall execute, acknowledge and deliver

or cause to be executed, acknowledged and delivered such instruments and take

such other action as may be necessary or advisable to carry out their

obligations under this Agreement and under any Exhibit, document, certificate

or other instrument delivered pursuant hereto.”

Some time after closing,

Petro-Hunt became aware that its representation and warranty that there were no

production imbalances in the relevant interests was not true. It acknowledged this in its Final Settlement

Statement, delivered to Wapiti on October 17, 2001. Specifically, Petro-Hunt represented:

The above settlement amount does not include any amounts

for gas imbalances, which were not known by Petro-Hunt LLC to exist at the time

the Purchase and Sale Agreement was signed or when the Sale from [Petro-Hunt]

to Wapiti was closed. As of this time,

the quantities of the gas imbalances are not known nor is

the method of pricing the imbalances agreed upon by Petro-Hunt LLC and Wapiti

Energy LLC. Settlement for the gas

imbalances will be made as soon as the amounts are known and mechanics of

settlement can be agreed upon by the Parties.

Petro-Hunt sent to Wapiti the amount it had otherwise

determined was owed, and Wapiti accepted this payment.

On March 12, 2002, John Faulkinberry ,

a vice president for Wapiti at the time, sent a letter on behalf of Wapiti to

Alan Bain, Vice President of Real Estate Development at Petro-Hunt. The letter listed outstanding matters that

needed to be addressed to finish closing on the Purchase and Sale

Agreement. Included in that list was the

production imbalance. On December 2,

2003, Faulkinberry sent a letter to Bain asserting

that the information needed to determine the production imbalance had been

completed by ExxonMobil. Faulkinberry asserted that, based on ExxonMobil’s numbers,

Petro-Hunt owed Wapiti $349,730. In his

affidavit attached to Wapiti’s motion for summary judgment, Faulkinberry

asserted that Bain called him in January 2004 and told him “that Petro-Hunt

refused to pay Wapiti for the gas imbalance.”

Wapiti sued Petro-Hunt on October 14, 2005, for breach of

contract. In 2007, Wapiti amended its

pleadings to add a fraud claim, though that claim was ultimately dropped on the

first day of trial.

In March 2007, Wapiti sought summary judgment on liability

only for its breach of contract claim.

Wapiti attached to its motion for summary judgment, among other things,

the affidavit of Lori Sims Hanagriff , a contract

worker for ExxonMobil that worked on “over/short statements

reflecting producer imbalances” for the Conroe Field Unit. These reports “showed both the current month

amount and the cumulative amount, in mmbtu [million

British thermal units], of over- or under-production of gas (also referred to

as a producer imbalance) for each Conroe Field Unit working interest owner or

owner group for each production month.”

Attached to Hanagriff’s

affidavit was a copy of the “Adjusted Over & Short

Report for the production months of July 2000 through February 2002.” Portions of this report were sent by Faulkinberry to Bain along with the December 2, 2003

letter. According to Hanagriff ,

the attached report “shows ExxonMobil’s final calculation of the gas imbalances

attributable to each Conroe Field owner for each of the production months of

July 2000 through February 2002.”

The trial court ultimately granted Wapiti’s motion for

summary judgment on liability for the breach of contract claim. A bench trial subsequently

commenced on March 23, 2010 for the remaining issues of damages and attorneys’

fees. The trial court awarded Wapiti

$424,811.80 in actual damages and $318,113 in attorneys’ fees with an

additional $25,000 for a successful defense of an appeal, $10,000 for a

successful defense of a petition for review before the Texas Supreme Court, and

$15,000 for a successful defense of a full appeal before the Texas Supreme

Court. The trial court also filed

findings of fact and conclusions of law for damages on the breach of contract

claim and for Petro-Hunt’s affirmative defenses.

Summary Judgment on Breach of Contract Liability

In its first issue, Petro-Hunt argues the trial court

erred in granting summary judgment because Wapiti failed to conclusively

establish each element of its breach of contract claim. In its second issue, Petro-Hunt argues that

the trial court erred by determining that Wapiti was not judicially estopped

from asserting the gas imbalance was known.

A.

Standard of Review

The summary-judgment movant must conclusively establish

its right to judgment as a matter of law. See MMP,

Ltd. v. Jones , 710 S.W.2d 59, 60 (Tex. 1986). Because summary

judgment is a question of law, we review a trial court’s summary judgment

decision de novo. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844, 848

(Tex. 2009).

To prevail on a “traditional”

summary-judgment motion, asserted under Rule 166a(c), a movant must prove that

there is no genuine issue regarding any material fact and that it is entitled

to judgment as a matter of law. See Tex. R. Civ. P.

166a(c); Little v. Tex. Dep’t of Criminal Justice , 148 S.W.3d

374, 381 (Tex. 2004). A matter is conclusively

established if reasonable people could not differ as to the conclusion to be

drawn from the evidence. See City of Keller v.

Wilson , 168 S.W.3d 802, 816 (Tex. 2005).

When a party moves

for summary judgment on a claim for which it bears the

burden of proof , it must show that it is entitled to prevail on each

element of its cause of action. See Parker v. Dodge , 98 S.W.3d 297, 299

(Tex. App.—Houston [1st Dist.] 2003, no pet.).

The party meets this burden if it produces evidence that would be

sufficient to support an instructed verdict at trial. Id.

To determine if

there is a fact issue, we review the evidence in the light most favorable to

the nonmovant , crediting favorable evidence if

reasonable jurors could do so, and disregarding contrary evidence unless

reasonable jurors could not. See Fielding , 289 S.W.3d

at 848 (citing City of

Keller , 168 S.W.3d at 827 ).

We indulge every reasonable inference and resolve any doubts in the nonmovant’s favor. Sw. Elec. Power Co. v. Grant ,

73 S.W.3d 211, 215 (Tex. 2002).

B.

Analysis

In part of its first issue, Petro-Hunt argues the trial court

could not have granted summary judgment because certain portions of Wapiti’s

summary judgment should have been excluded.

Petro-Hunt raised hearsay and improper authentication objections to

certain exhibits. It also raised an

objection to one affidavit because the affiant had not been previously

disclosed pursuant to rule 194 of the Texas Rules of Civil Procedure. See

Tex. R. Civ. P. 194.2(e), 194.3.

The trial court did not rule on any of these

objections. Objections of hearsay are

objections to the form of evidence, which are waived without a ruling on the

objection. See Wilson v. Gen. Motors Acceptance Corp. , 897 S.W.2d 818 , 821–22

(Tex. App.—Houston [1st Dist.] 1994, no writ) (holding hearsay in affidavit is

defect in form); Vice v. Kasprzak , 318 S.W.3d 1, 11 (Tex. App.—Houston [1st

Dist.] 2009, pet. denied) (holding defects to form of evidence are waived

without securing a ruling). The same is

true for objections to improper authentication.

See Watts v. Hermann Hosp. , 962 S.W.2d 102, 105

(Tex. App.—Houston [1st. Dist.] 1997, no pet.) ( holding

objection to authentication of records attached to motion for summary judgment

waived because not raised in trial court); Commint Technical Servs ., Inc. v. Quickel , 314 S.W.3d 646, 651 (Tex. App.—Houston [14th

Dist.] 2010, no pet.) ( holding absence of ruling on

objection to form challenging propriety of authentication forecloses consideration

on appeal); David v. David , No.

01-09-00787-CV, 2011 WL 1326222 , at *3 (Tex. App.—Houston [1st Dist.] 2011, no

pet.) ( mem . op.) (holding

defects in authentication are defects of form).

Because Petro-Hunt did not obtain a ruling on these objections, they

cannot be considered on appeal.

At oral argument, Petro-Hunt argued that the trial court

implicitly ruled on their objections, relying on Frisch v. Westin Homes of Tex., Inc. , No. 01-04-00152-CV, 2005 WL

729502 (Tex. App.—Houston [1st Dist.] March 31, 2005, no

pet.)

( mem . op.). In that case, this Court acknowledged a Fort

Worth Court of Appeals case that held that objections to form are preserved

when the objections are written and the record indicates in some way that the

trial court ruled on the objection either expressly or implicitly. Id.

at *3 n.4 (citing Frazier v. Yu , 987

S.W.2d 607 , 609–10 (Tex. App.—Fort Worth 1999, pet. denied)). This Court also acknowledged, however, other

courts that have held “that the granting of a summary judgment motion does not

necessarily provide an implicit ruling that either sustains or overrules

objections to the summary judgment evidence.” Id. (citing Well Solutions,

Inc. v. Stafford , 32 S.W.3d 313, 317 (Tex. App.—San Antonio 2000, no pet.);

Dolcefino v. Randolph , 19 S.W.3d 906, 926 (Tex.

App.—Houston [14th Dist.] 2000, pet. denied)).

Petro-Hunt argues that we held in Frisch that an implicit overruling could exist. We disagree.

We held, “Even if a trial court’s summary judgment is adequate to infer

that it impliedly had sustained a movant’s specific objections to the

non-movant’s summary judgment evidence under Rule 33.1(a), here, [appellee]’s

global objection is too general to present an issue for review.” Id. at *4. In a

footnote, we added that an implied ruling on objections may exist under other

circumstances. Id. at *4 n.5. Nowhere in the opinion did we hold that

implied rulings on objections did exist.

Since then, however, this Court has resolved the issue we

left open in Frisch . “[A] trial court’s ruling on an objection to

summary judgment evidence is not implicit in its ruling on the motion for

summary judgment.” Delfino v. Perry Homes , 223 S.W.3d 32, 35 (Tex. App.—Houston [1st Dist.]

2006, no pet.) ( citing Well Solutions , 32 S.W.3d at 317 ).

Accordingly, there is no implied ruling from the trial court.

For its objections about an affiant not being previously

disclosed, Petro-Hunt cites no authority for the rules concerning disclosing

witnesses, their application to summary judgment proceedings, how error is

shown, how harm is established, or how any of these rules apple to this case. Petro-Hunt also does not show that it sought

a continuance based on the undisclosed witness.

Petro-Hunt has wholly failed to brief this argument on

either the law or the law’s relation to the facts of this case. See

Tex. R. App. P. 38.1( i ) (requiring brief to contain clear and concise argument

for contentions made “with appropriate citations to authorities and to the

record”). Although appellate courts

generally construe the briefing rules liberally, points of error or issues

unsupported by the citation of authority present nothing for the court to

review. Arias v. Brookstone , L.P. , 265 S.W.3d

459, 470 (Tex. App.—Houston [1st Dist.] 2007, pet. denied); Harris Cnty . Mun . Util. Dist. No. 48 v. Mitchell , 915

S.W.2d 859, 866 (Tex. App.—Houston [1st Dist.] 1995, writ denied). Accordingly, we hold that Petro-Hunt waived

any error relating to any failure to timely disclose a witness.

Next we consider whether Wapiti met its summary judgment

burden. In its motion for summary

judgment, Wapiti argued it could establish as a matter of law that Petro-Hunt

breached the Purchase and Sale Agreement.

The elements for a breach of contract claim are: (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 breach. Wright v. Christian & Smith , 950 S.W.2d 411, 412 (Tex. App.—Houston

[1st Dist.] 1997, no writ). A

party may obtain summary judgment on liability only and then try damages issues

on their merits. Tex. R. Civ. P. 166a( a); McAllister v. Samuels , 857 S.W.2d 768,

774 (Tex. App.—Houston [14th Dist.] 1993, no writ). Accordingly, we consider whether Wapiti

established as a matter of law Petro-Hunt’s liability for breach of contract. [1]

Both of the parties acknowledge that a valid contract

existed: the Purchase and Sale Agreement.

Nor is there any dispute that Wapiti performed or tendered performance

under the contract. The only element in

dispute, then, is whether Petro-Hunt breached the contract.

Petro-Hunt represented and warranted in the agreement

that, to the best of its knowledge, there were not any production imbalances

related to the interests being sold.

There is no evidence in the record to suggest that the representation

and warranty was not true at the time.

Regardless, that representation and warranty survived the closing date

of the agreement, and, on October 17, 2001, Petro-Hunt acknowledged that it had

become aware of a production imbalance.

Petro-Hunt represented that payment would be made once the amounts were

known and the “mechanics of settlement can be agreed upon by the Parties.”

The Purchase and Sale Agreement obligated Petro-Hunt to

“take such other action as may be necessary or advisable to carry out their

obligations under this Agreement and under any . . . document

. . . or other instrument delivered pursuant” to the agreement. Furthermore, it was Petro-Hunt’s initial

obligation to prepare a statement “setting forth each adjustment or payment

that was not finally determined as of Closing and showing the calculation of

such adjustment and the aggregate amount thereof.” While Petro-Hunt did deliver to Wapiti a

statement setting forth some of the adjustments and payments, it acknowledged

in that statement that the adjustments and payments were not complete due to

the outstanding issue of production imbalance.

Accordingly, it had not fulfilled this obligation under the contract.

The evidence also shows that, at least as of October 2002,

ExxonMobil had issued its “final calculation of the gas imbalances attributable

to each Conroe Field owner for each of the production months of July 2000

through February 2002.” In December

2003, Faulkinberry sent the relevant portions of this

report to Bain and asked Petro-Hunt to complete its obligations to pay the

imbalance. In January, 2004, “Petro-Hunt

refused to pay Wapiti for the gas imbalance.”

We hold that this evidence is sufficient to meet Wapiti’s burden of

showing that Petro-Hunt breached the Purchase Settlement Agreement.

Petro-Hunt argued at trial and on appeal that the Purchase

and Sale Agreement required the agreement of the parties on the post-closing

amounts. “Without such agreement, under

the terms of the [Purchase and Sale Agreement], the post-closing amounts were

not due.” Petro-Hunt argued that no

agreement was possible because the amount of the imbalance, if any, was not

known.

Petro-Hunt acknowledges that ExxonMobil was the field

operator for the Conroe Field Unit at all times relevant to determining the

production imbalance. It does not

dispute that ExxonMobil was the entity responsible for reporting the volume of

all productions imbalances for the Conroe Field Unit. Hanagriff’s

affidavit established that ExxonMobil made its final calculation of the gas

imbalances at least as of October 2002.

This is sufficient evidence to establish that the amount of the

production imbalance was known.

Petro-Hunt asserts there is an unresolved fact issue on

whether the production imbalance was known because Faulkinberry

testified in a deposition for another lawsuit that the ExxonMobil numbers were

wrong. That lawsuit was brought by

Wapiti against Duke Energy Field Services, L.P. and Crosstex

Energy Service, L.P. In his deposition, Faulkinberry discussed another interest in the Conroe Field

Unit that Wapiti had obtained from another entity, Ocean Energy. That interest is separate from the interests

in dispute in this case.

In the deposition, Faulkinberry

discussed the report from ExxonMobil on the production imbalance for Ocean

Energy. According to Faulkinberry ,

the ExxonMobil report showed there was a production imbalance that required

Wapiti to pay Ocean Energy for the adjustment.

Faulkinberry testified that he could not

“verify or understand or substantiate Exxon’s imbalance numbers.” He also testified that he had employed

auditors to understand it, “and to this date we do not understand it. To this date, they do not understand

it.” Ultimately, Faulkinberry

asserted that he believed the production imbalance numbers were wrong. Regardless, Wapiti accepted “to use the

imbalance number as shown in Exxon’s producer over/short statement” and paid

Ocean Energy for the production imbalance.

We first note that Petro-Hunt never established that the

production imbalance report discussed in Faulkinberry’s

prior deposition was the same production imbalance report relied on for this

case. Even if we were to assume that the

two reports were the same, however, this is not sufficient evidence to create a

fact issue.

As Faulkinberry explained in

that deposition, the Exxon report tied every entry to a company, each of which

were represented by specific numbers.

“[I]f you knew within the Exxon system what number . . .

represented Ocean, then you could determine Ocean’s account number.” Putting Faulkinberry’s

testimony in context, it is apparent that all of Faulkinberry’s

discussions of the Exxon report concerned the amounts reported for Ocean

Energy. Faulkinberry

never testified that he examined the entire report and found it to be

wrong. His only testimony was that he

found the numbers reported for Ocean Energy to be wrong.

When testimony “could give rise to any number of

inferences, none more probable than another,” then the evidence does not rise

to “more than a scintilla to withstand a no-evidence challenge.” Blount v. Bordens ,

Inc. , 910 S.W.2d 931, 933 (Tex. 1995). When circumstances are consistent with either

of two facts and nothing shows that one is more probable than the other,

neither fact can be inferred. Transp. Ins. Co. v. Faircloth ,

898 S.W.2d 269, 278 (Tex. 1995).

The summary judgment standard of review requires us to

assume that ExxonMobil’s data for Ocean Energy was wrong. See Fielding , 289 S.W.3d at 848 (holding courts must view

evidence in light most favorable to nonmovant ). This does not, however, establish that the

data for Petro-Hunt was wrong. There is

no more reason to believe that Petro-Hunt’s data was wrong than to believe that

Petro-Hunt’s data was right. Because Faulkinberry’s deposition testimony does not make any

inference more probable than any other, it is not sufficient to create a fact

issue. See Blount , 910 S.W.2d at 933 .

We overrule Petro-Hunt’s first issue.

Petro-Hunt also argues that the same Faulkinberry

deposition testimony functions to judicially estop Wapiti from asserting that

the production imbalance numbers were known.

To prevail on a claim of judicial estoppel, the party asserting it must

show: (1) a sworn, inconsistent statement be made in a prior judicial

proceeding; (2) the party making the statement gained some advantage by it; (3)

the statement was not made inadvertently

or because of mistake, fraud, or duress; and (4) the statement was deliberate,

clear, and unequivocal. Galley v. Apollo Associated Servs .,

Ltd. , 177 S.W.3d 523 , 528–29 (Tex. App.—Houston [1st Dist.] 2005, no

pet.). We have already held that Faulkinberry’s deposition testimony from the earlier case does

not create a fact issue in this case.

For the same reasons, it cannot constitute an “inconsistent

statement.” Accordingly, judicial

estoppel does not apply.

We overrule Petro-Hunt’s second issue.

Bench Trial on Breach of Contract Damages

In its third issue, Petro-Hunt argues the evidence

establishes that Wapiti never suffered any harm as a result of Petro-Hunt’s

breach. In its fourth issue, Petro-Hunt

argues the trial court improperly calculated damages by valuing the entire

imbalance as of the gas value on a single day.

A.

Standard of Review

In an appeal from a bench trial, findings of fact have the

same weight as a jury’s verdict on special issues. Lee v. Lee , 981 S.W.2d 903, 905 (Tex. App.—Houston [1st Dist.]

1998, pet. denied). We review the

legal and factual sufficiency of the evidence supporting a trial court’s

findings of fact by the same standards that we apply to reviewing the legal or

factual sufficiency of the evidence supporting jury findings. Catalina v. Blasdel , 881 S.W.2d 295, 297

(Tex. 1994). Thus, if the

complaining party challenges the legal sufficiency of the evidence underlying

an adverse finding on which the party did not have the burden of proof, then

the party must demonstrate on appeal that there is no evidence to support the

finding. City of Pasadena v. Gennedy ,

125 S.W.3d 687, 691 (Tex. App.—Houston [1st Dist.] 2003, pet. denied). In such a review, we consider all the

evidence in the light most favorable to the prevailing party, indulging every

reasonable inference in that party’s favor, and disregard all evidence and

inferences to the contrary. Id. at 692 . We do not disregard contrary evidence if

there is no favorable evidence or if contrary evidence renders supporting

evidence incompetent or conclusively establishes the opposite. City of

Keller , 168 S.W.3d at 810–11 . If more than a scintilla of evidence supports

the finding, the no-evidence challenge fails.

Gennedy ,

125 S.W.3d at 692 .

In our review of factual sufficiency of the evidence, we

must consider and weigh all of the evidence.

Pool v. Ford

Motor Co. , 715 S.W.2d 629, 635 (Tex. 1986). We will set aside a verdict only if the

evidence is so weak or if the finding is so against the great weight and

preponderance of the evidence that it is clearly wrong and unjust. Id.

B.

Analysis

Petro-Hunt argues in its third issue that Wapiti never

suffered any harm as a result of the breach because it has completely mitigated

its damages and because the breach concerned a contingent liability that never

matured during Wapiti’s ownership of the interest.

The evidence shows that the interest that Petro-Hunt sold

was overproduced, creating a liability in the interest. The evidence also shows that ExxonMobil sold

to Wapiti an interest that was underproduced . After netting all of the production interests

it had acquired in the Conroe Field Unit, Wapiti was left with an

underproduction position. Petro-Hunt

argues that this establishes that Wapiti has completely mitigated any damages

from its acquisition of Petro-Hunt’s interest.

Wapiti argues that this does not establish that it fully

mitigated its damages. We agree. The testimony at trial established that an

overproduction position creates a liability on the relevant interest, which

affects the value of the interest. When

Petro-Hunt and Wapiti entered into an agreement for Wapiti to purchase

Petro-Hunt’s interests in the Conroe Field Unit, Petro-Hunt represented and

warranted that there were no production imbalances relating to the interests

being sold. Petro-Hunt subsequently

learned that their interests were overproduced, and notified Wapiti,

acknowledging that adjustments would have to be made. These adjustments ultimately relate to the

value of the interests that Petro-Hunt sold to Wapiti. The parties agreed to a price based, in part,

on the representation that no production imbalances existed. When the overproduction position was

discovered, both parties acknowledged that an adjustment would have to be made.

The amount that Wapiti paid for other interests in the

Conroe Field Unit would have no effect on the damage Wapiti suffered for

overpaying Petro-Hunt based on Petro-Hunt’s inaccurate representation and

warranty. The amount that Wapiti

subsequently sold its interests to a third-party would have no effect on this

damage, either.

Petro-Hunt also argues that the breach concerned a

contingent liability that never matured during Wapiti’s ownership of the

interest. Wapiti disputes Petro-Hunt’s

assertion that the liability is contingent.

Assuming without deciding that the interest is contingent, however, this

argument is unavailing. The Purchase and

Sale Agreement required Wapiti to assume “all obligations and liabilities

arising from or in connection with any . . .

imbalances attributable to substances produced from the Interests before or

after the Effective Time.” By the

language of the contract, then, Wapiti accepted liability for any production

imbalances. Petro-Hunt ultimately

acknowledged that an imbalance existed and that a payment would need to be made

to address that imbalance. Even if the

imbalance only created a contingent liability and that contingency was never

triggered while Wapiti owned the interests, this does not change Petro-Hunt’s

obligations under the Purchase and Sale Agreement.

We overrule Petro-Hunt’s third issue.

Petro-Hunt argues in its fourth issue that the trial court

erred in assigning a value for the entire production imbalance based on the

value of gas on one day when the imbalance developed over a longer length of

time. This matter was discussed extensively

at trial between Petro-Hunt’s attorney and Wapiti’s testifying expert, Kyle

Pearson. The matter was best

encapsulated by a discussion of a hypothetical presented by Petro-Hunt’s

attorney. In that hypothetical, in one

month there was an overproduction of gas of 100 MMBtus

when one MMBtu was valued at $1. The next month, there was an underproduction

of gas of 50 MMBtus when one MMBtu

was valued at $2. In the first month,

the value of Petro-Hunt’s overproduction would have been $100. In the second month, the value of

Petro-Hunt’s underproduction would have been $100. Petro-Hunt’s attorney argued that this meant

there was no overall loss.

Pearson disagreed.

He testified that, regardless of how much money Petro-Hunt received or

lost due to the overproduction or underproduction, the critical inquiry is the

quantity of the overproduction and underproduction. Based on quantity, a 50 MMBtu

overproduction imbalance would still exist, and that liability would be

transferred to Wapiti. The fact that Petro-Hunt

did not suffer a net cash loss in this hypothetical would not mean that an

imbalance no longer exists.

As Pearson explained, the overproduction imbalance was

transferred to Wapiti on June 1, 2001, the closing date for the Purchase and

Sale Agreement. Because the imbalance

was transferred on that date, the value of the imbalance should have been

calculated based on the value of gas on that date. Pearson testified that $3.70 per MMBtu was a reasonable and correct figure.

We hold that Pearson’s explanation is legally sufficient

to support the trial court’s determination that the value of the production

imbalance should have been based on the value of gas on the closing date. Because Petro-Hunt does not provide any

support for why this determination is so against the great weight and

preponderance of the evidence that it is clearly wrong and unjust, we also hold

that it is factually sufficient.

We overrule Petro-Hunt’s fourth issue.

Bench Trial on Attorney’s Fees

In its fifth issue, Petro-Hunt argues the trial court

erred in awarding attorneys’ fees.

A.

Standard of Review

We review a trial court’s determination of attorneys’ fees

for an abuse of discretion. Ryan v. Abdel-Salam , 39

S.W.3d 332, 337 (Tex. App.—Houston [1st Dist.] 2001, pet. denied). In an appeal from a bench trial, we may “not

invade the fact-finding role of the trial court, who alone determines the

credibility of the witnesses, the weight to give their testimony, and whether

to accept or reject all or any part of that testimony.” Volume Millwork, Inc. v. W. Hous . Airport Corp. , 218 S.W.3d 722, 730 (Tex. App.—Houston [1st Dist.]

2006, pet. denied).

B.

Analysis

“A person may recover reasonable attorney’s fees . . . in addition to the amount of a valid

claim and costs, if the claim is for . . . an oral or written

contract.” Tex. Civ. Prac . & Rem. Code Ann.

§ 38.001(8) (Vernon 2008). “If

attorney’s fees are proper under section 38.001(8), the trial court has no

discretion to deny them.” Smith v. Patrick W.Y. Tam

Trust , 296 S.W.3d 545, 547 (Tex. 2009).

The reasonableness of an attorneys’ fee award generally

presents a question of fact. See Ragsdale v. Progressive Voters League ,

801 S.W.2d 880 , 881–82 (Tex. 1990); Haden

v. David J. Sacks, P.C. , 332 S.W.3d 503, 512 (Tex. App.—Houston [1st Dist.]

2009, pet. denied). An award of

attorneys’ fees must be supported by evidence that the fees were both

reasonable and necessary. See Stewart Title Guar. Co.

v. Sterling , 822 S.W.2d 1, 10 (Tex. 1991). In reviewing an attorneys’ fee award for

excessiveness, we may draw upon our common knowledge as justices of the court

and our experience as lawyers and judges.

C.M. Asfahl Agency v. Tensor, Inc. , 135 S.W.3d 768, 802

(Tex. App.—Houston [1st Dist.] 2004, no pet.).

Petro-Hunt presents two main arguments for why the trial

court erred in granting the full amount of attorneys’ fees requested by

Wapiti. First, Petro-Hunt argues that

Wapiti failed to segregate the attorneys’ fees incurred in prosecuting its

breach of contract claim from the attorneys’ fees incurred in prosecuting its

fraud claim. Second, Petro-Hunt argues

that Wapiti failed to establish that its fees were reasonable and necessary.

1.

Segregation

When a party presents multiple claims, some of which

support recovery of attorneys’ fees and some of which do not, the party must

segregate the attorneys’ fees attributable to claims for which fees are

recoverable. Tony Gullo Motors I, L.P. v. Chapa , 212

S.W.3d 299 , 310–11 (Tex. 2006). While

attorneys’ fees are recoverable for a breach of contract claim, they are not

recoverable for a fraud claim. Id. at 304 .

When Wapiti filed suit in 2005, it asserted the breach of

contract claim that is the subject of this appeal. In 2007, Wapiti amended its pleadings to add a

fraud claim. When the parties appeared

for trial in 2010, Wapiti announced it was dropping its fraud claim.

Petro-Hunt argues that Wapiti’s evidence for attorneys’

fees on its breach of contract claim fails to segregate the fees incurred on

its fraud claim. In making this

argument, Petro-Hunt fails to address the evidence submitted by Wapiti that

explicitly stated that the fees had been segregated.

After Petro-Hunt objected to some of their evidence on

attorneys’ fees, including a complaint that Wapiti had failed to segregate its

attorneys’ fees, Wapiti filed a reply.

The reply included a second affidavit from Wapiti’s lead attorney. That affidavit explicitly states:

While a tort claim of fraud was initially included in the

complaint because it was conceivably intertwined in the same nexus of operating

facts as the contract claim, the tort claim was not pursued beyond the initial

actions of this case and the actions for this claim were previously eliminated

from the billings to Wapiti. Billings for this tort claim are not

represented in this request to this Court.

Moreover, any factual investigation or document review for this matter

would have directly dealt with the operative facts for the breach of contract

claim.

(Emphasis added.)

We hold that this sworn statement is sufficient to establish that,

contrary to Petro-Hunt’s assertion, Wapiti had segregated its attorneys’ fees.

2.

Reasonable and Necessary

Factors that we consider in determining whether attorneys’

fees are reasonable include the following:

(1) the time and labor required, the novelty and difficulty of

the questions involved, and the skill required to perform the legal service

properly;

(2) the likelihood . . . that the acceptance of the

particular employment will preclude other employment by the lawyer;

(3) the fee customarily charged in the locality for similar

legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the

circumstances;

(6) the nature and length of the professional relationship with

the client;

(7) the experience, reputation, and ability of the lawyer or

lawyers performing the services; and

(8) whether the fee is fixed or contingent on results obtained

or uncertainty of collection before the legal services have been rendered.

Arthur Andersen

& Co. v. Perry Equip. Corp. , 945 S.W.2d 812, 818 (Tex. 1997) (quoting

Tex. Disciplinary Rules Prof’l Conduct R. 1.04, reprinted in Tex. Gov’t Code Ann. tit. 2, subtit .

G, app. A (Vernon Supp. 2011) (Tex.

State Bar R., art. X, § 9)).

Petro-Hunt argues

that Wapiti failed to break out time charged to particular tasks. While this was true for its evidence in its

initial briefing on attorneys’ fees to the court, Wapiti provided additional

evidence along with its reply to Petro-Hunt’s objections to their original

evidence. This additional evidence

included an itemized and monthly breakout of the work performed by Wapiti’s

attorneys for this case. Petro-Hunt did

not object to or otherwise address this additional evidence at trial or on

appeal.

Petro-Hunt acknowledges that Wapiti established that

Wapiti’s attorneys’ acceptance of work for Wapiti precluded them from providing

services to other clients or to Wapiti for other matters. It asserts, however, that “nothing about this

engagement or its subject matter precluded Wapiti’s attorney from working for

any types or classes of clients or matters.”

Petro-Hunt does not otherwise explain the significance of this

assertion.

Next, Petro-Hunt argues, “Although the hourly rates of

Wapiti’s counsel appear to be consistent with engagements of these types by

attorneys of the experience identified by Wapiti, the records provided by

Wapiti are insufficient to determine if the work performed by the various

attorneys at their respective billing rates is appropriate.” Petro-Hunt’s proof for this assertion is the

affidavit of one of their attorneys. The

affidavit was filed before Wapiti filed its reply, which included additional

evidence including an itemized and monthly breakout of the work performed by

Wapiti’s attorneys for this case.

Petro-Hunt made no effort, at trial or on appeal, to explain how this

additional evidence is insufficient.

Petro-Hunt also argues that the fact that the amount of

attorneys’ fees awarded to Wapiti ($318,113) was equal to 75% of the actual

damages awarded to Wapiti ($424,811.80) should have caused the trial court to

reduce the fees awarded. Attorneys’ fees

must bear some reasonable relationship to the amount in controversy. USAA Cnty . Mut . Ins. Co. v. Cook , 241 S.W.3d 93, 103 (Tex. App.—Houston [1st Dist.] 2007, no pet.). Even so, the amount of damages awarded is

only one factor in determining the reasonableness of a fee award. Id.

The mere fact that attorneys’ fees meet or exceed the amount of damages

does not automatically establish that the fees are unreasonable. See id.

at 98, 103 (upholding award of $23,310 in attorneys’

fees when amount of actual damages in judgment was $1,926.56); Bencon Mgmt. & Gen. Contracting, Inc. v.

Boyer, Inc. , 178 S.W.3d 198 , 209–10 (Tex. App.—Houston [14th Dist.] 2005,

no pet.) ( upholding award of $282,000 in attorneys’

fees when amount of actual damages in judgment was $81,336.83). While it is a factor to consider, simply

showing that the amount of attorneys’ fees awarded to Wapiti was equal to 75%

of the actual damages awarded to Wapiti does not, in itself, establish that

attorneys’ fees were not reasonable.

Petro-Hunt asserts that, before this case was initiated,

Wapiti’s counsel had litigated another case for Wapiti involving some of the

same matters. Petro-Hunt argues that,

because this prior litigation would have allowed Wapiti’s attorneys’ to “ramp

up” before bringing this litigation, this “ramp up” should have caused the

trial court to reduce the fees awarded.

Assuming without deciding that the prior litigation allowed Wapiti’s

attorneys’ to “ramp up” before bringing this suit, there is no proof that this

“ramp up” is not already reflected in the attorneys’ fees that were charged.

Finally, while Petro-Hunt acknowledges that Wapiti

presented evidence showing that it paid fees on an hourly basis, Petro-Hunt

complains that Wapiti failed to produce an attorneys’ fee agreement. Petro-Hunt does not explain why this was

necessary or otherwise should have affected the trial court’s determination.

Based on the foregoing, the only pertinent matter that

Petro-Hunt has asserted on appeal concerning the reasonableness of the award of

attorneys’ fees is that the amount of attorneys’ fees awarded to Wapiti was

equal to 75% of the actual damages awarded to Wapiti. As we have recognized above, this is only one

factor for the trial court to consider and does not, by itself, establish that

the award is unreasonable. See Cook , 241 S.W.3d at 98, 103 ; Bencon Mgmt. , 178 S.W.3d at 209–10.

We overrule Petro-Hunt’s fifth issue.

Conclusion

We affirm the judgment of the trial court.

Laura

Carter Higley

Justice

Panel consists of

Chief Justice Radack and Justices Higley and Brown.

[1] As part of its first issue, Petro-Hunt

argues that the trial court could not have granted summary judgment because

Wapiti failed to establish that it sustained any loss or damage as the result

of the alleged breach. Wapiti did not

move for summary judgment on damages, however.

Accordingly this cannot be a ground for reversing the trial court’s

rendition of summary judgment on liability.

See Tex. R. Civ. P. 166a( a) (allowing

parties to obtain summary judgment on liability and then try damages issues on

the merits); McAllister v. Samuels ,

857 S.W.2d 768, 774 (Tex. App.—Houston [14th Dist.] 1993, no writ) (recognizing

same).