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Parties Involved:
Cirrus Production Company
Appellant
Clajon Gas Company, L.P.,
Appellee

Document Text:

- FILLJl b 

UNITED STATES COURT OF APP~ ~c.t~ - -ren•Qidl. 

FOR THE TENTH CIRCUIT 100~ 

MAY 1 0 ,~.i., 

CIRRUS PRODUCTION COMPANY, 

Plaintiff-Appellant, 

v. 

CLAJON GAS COMPANY, L.P., a Limited 

Partnership, 

Defendant-Appellee. 

) 

) 

) 

) 

ROBERT L. ROECKER 

Clerk 

) No. 92-6357 

) (D.C. No. CIV-91-472-C) 

) (W.D. Okla.) 

) 

) 

) 

ORDER AND JUDGMENT* 

Before MOORE and BRORBY, Circuit Judges, and VAN BEBBER,** 

District Judge. 

**Honorable G. Thomas Van Bebber, District Judge, United States 

District Court for the District of Kansas, sitting by designation. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. ~ Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

The case is therefore ordered 

In this diversity case governed by Texas law, plaintiff 

Cirrus Production Co. appeals the district court's order of 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 92-6357 Document: 010110114094 Date Filed: 05/10/1993 Page: 1 
October 6, 1992, denying Cirrus's requests for attorney fees and 

for prejudgment interest and requiring Cirrus to pay the costs 

incurred by defendant Clajon Gas Co. after Cirrus rejected 

Clajon's offers of judgment. We affirm in part, reverse in part, 

and remand for further proceedings consistent with this order and 

judgment. 

Cirrus, as the supplier of natural gas, and Clajon, as the 

purchaser, entered into a gas purchase contract on May 31, 1990, 

to cover gas supplied to Clajon after June 1, 1990. Clajon paid 

Cirrus for the first month's delivery of gas, but thereafter held 

in suspense all payments for gas received. The parties 

corresponded about the suspended payments in August and September 

of 1990, but did not resolve the matter. 

Cirrus brought suit against Clajon in 1991 for breach of 

contract, conversion, fraud, and tortious bad faith. In June 

1991, Clajon made two offers of judgment to Cirrus pursuant to 

Fed. R. Civ. P. 68 for $464,121.32, the principal amount due under 

the contract at the time it terminated, plus amounts for attorney 

fees, costs, and interest. Cirrus rejected both offers of 

judgment. 

Thereafter, Cirrus and Clajon filed cross motions for partial 

summary judgment. The court granted summary judgment to Clajon on 

the conversion and fraud claims, and, upon reconsideration, on the 

bad faith claim, as well. Based on Clajon's confession of 

judgment in the principal amount due under the contract, the court 

entered judgment in favor of Cirrus on the contract claim in the 

amount of $464,121.32. 

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• 

Once judgment was entered on all the claims, Cirrus moved for 

attorney fees under Tex. Civ. Prac. & Rem. Code Ann. 

§§ 38.001-.006, for costs, and for prejudgment interest under 

Tex. Nat. Res. Code Ann. §§ 91.401-.406. Clajon objected to 

Cirrus's requests and also filed its own request for fees and 

costs incurred after Cirrus's rejection of the offers of judgment, 

based on Rule 68 and 28 U.S.C. § 1927. The court denied Cirrus's 

requests for attorney fees and prejudgment interest, granted 

Clajon's request for costs incurred after its two Rule 68 offers 

of judgment, and denied Clajon's request for costs, expenses, and 

attorney fees under 28 U.S.C. § 1927. 

We review the district court's findings of fact for clear 

error, O'Connor v. R.F. Lafferty & Co., 965 F.2d 893, 901 (10th 

Cir. 1992), and review its conclusions of law de novo, Heins v. 

Ruti-Sweetwater. Inc. (In re Ruti-Sweetwater. Inc.), 836 F.2d 

1263, 1266 (10th Cir. 1988). The parties agree that Texas law 

governs both the award of attorney fees and of prejudgment 

interest. See King Resources Co. v. Phoenix Resources Co. (In re 

King Resources Co.), 651 F.2d 1349, 1353 (10th Cir.) ("[I]n 

diversity cases generally, and certainly in this circuit, attorney 

fees are determined by state law and are substantive for diversity 

purposes."), cert. denied, 454 U.S. 881 (1981); Lone Mountain 

Prod. Co. v. Natural Gas Pipeline Co. of Am., 984 F.2d 1551, 1561 

(10th Cir. 1992) (" [I]n this diversity action, prejudgment interest 

is to be allowed if available under state law."). 

3 

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I. Attorney Fees. 

In its complaint, Cirrus prayed for actual and punitive 

damages, as well as for "all attorneys' fees and costs of this 

action incurred by the Plaintiff in having to pursue this action, 

and such other relief as may be deemed appropriate." Appellant's 

App., Second Amended Complaint, at 6. A prevailing party on a 

contract claim may recover attorney fees under Texas law if it 

meets the requirements of Tex. Civ. Prac. & Rem. Code Ann. 

§ 38.002, which provides: 

To recover attorney's fees under this chapter: 

(1) the 

attorney; 

claimant must be represented by an 

(2) the claimant must present the claim to the 

opposing party or to a duly authorized agent of the 

opposing party; and 

(3) payment for the just amount owed must not have 

been tendered before the expiration of the 30th day 

after the claim is presented. 

The district court determined that Cirrus neither pleaded nor 

proved that it presented its contract claim to Clajon and 

concluded, therefore, that Cirrus could not recover attorney fees 

under the Texas statute. While we agree that Cirrus did not plead 

compliance with the statutory requirements in its complaint, we 

conclude that the court erred in holding that Cirrus failed to 

prove sufficient presentment of its claim under section 38.002. 

The provisions of section 38.002 do not constitute 

prerequisites to suit. A claimant need only satisfy the 

requirements of section 38.002 before judgment is entered on the 

underlying claim. See All Valley Acceptance Co. v. Durfey, 800 

4 

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.. S.W.2d 672, 676 (Tex. Ct. App. 1990) (per curiam); Stafford v. 

Brennan, 498 S.W.2d 703, 706 (Tex. Civ. App. 1973) (regarding 

Article 2226, the predecessor to sections 38.001-006). 

Many Texas cases have stated that a plaintiff must both plead 

and prove presentment of his claim and failure to pay to recover 

attorney fees. See. e.g., Guerra v. Brown, 800 S.W.2d 343, 345 

(Tex. Ct. App. 1990) (disallowing attorney fees because plaintiff 

"did not plead and prove presentment of his claim"); Stafford, 498 

S.W.2d at 706 ("The burden of proof is on the plaintiff to plead 

and prove presentment and failure to pay for thirty days in order 

to collect attorney's fees."). 

Virtually none, however, has refused to award attorney fees 

to a claimant who has proved presentment and failure to pay within 

thirty days, but has failed to allege those facts in its 

pleadings. See. e.g., Gunter v. Bailey, 808 S.W.2d 163, 166 (Tex. 

Ct. App. 1991) ("The award of reasonable attorney's fees to a 

plaintiff recovering on a valid claim founded on a written or oral 

contract preceded by proper presentment of the claim is 

mandatory."); Mendleski v. Silvertooth, 798 S.W.2d 30, 32 (Tex. 

Ct. App. 1990) (stating that "failure to properly plead presentment 

would be waived absent a special exception"); Arch Constr .• Inc. 

v. Tyburec, 730 S.W.2d 47, 50 (Tex. Ct. App. 1987) (holding that 

defendant "waived any error which complains of the failure of the 

pleadings to allege presentment" by failing to make a special 

exception to the pleadings under Tex. R. Civ. P. 90 or to object 

under Tex. R. Civ. P. 274 to the jury charge on the reasonableness 

of plaintiff's claimed attorney fees); see also Huff v. Fidelity 

5 

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Union Life Ins. Co., 312 S.W.2d 493, 499-500 (Tex. 1958) (holding 

plaintiff who proved presentment and failure to pay was entitled 

to attorney fees under Article 2226 even though his pleadings did 

not allege facts establishing presentment; defendant waived any 

defect in the pleadings by failing to specifically object under 

Tex. R. Civ. P. 90); cf. Enserch Corp. v. Shand Morahan & Co., 952 

F.2d 1485, 1501 (5th Cir. 1992) ("We can find no case where a party 

that clearly presented a claim for attorney fees for enforcing a 

contract (the situation section 38.001(8) addresses), yet failed 

to mention that statute, has been denied those fees. We find that 

[defendants] were clearly put on notice that [plaintiff], if it 

prevailed, would seek its attorney fees under the applicable 

statute, and that to deny [plaintiff] those fees would hold [it] 

to too rigid a pleading requirement."). 

Moreover, the Texas Supreme Court has upheld the entry of 

default judgments that included awards for attorney fees under 

sections 38.001-.002 even though the pleadings, which prayed for 

attorney fees, failed to allege that the defendant did not tender 

performance within thirty days of the plaintiffs' demands. 

Paramount Pipe & Supply Co. v. Muhr, 749 S.W.2d 491, 496 (Tex. 

1988) ("Certainly the omission to allege that [defendant] failed to 

tender payment within thirty days would have been subject to 

attack by special exception. We conclude, however, that the 

petitions gave [defendant] fair notice that [plaintiffs] were 

seeking recovery of attorney's fees."). But see Nettles v. Del 

Lingco of Houston, 638 S.W.2d 633, 635 (Tex. Ct. App. 

1982) (holding that pleadings were not sufficient to sustain 

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default judgment for attorney fees under Article 2226 because they 

failed to allege that plaintiff presented its claim to defendant, 

who failed to tender amount owing within thirty days). 

Therefore, we conclude as a matter of substantive Texas law 

that so long as a claimant prevails on a claim that would support 

the award of fees under section 38.001 and proves compliance with 

the requirements of section 38.002, he is entitled to an award of 

attorney fees, regardless of whether he properly pled compliance 

with the requirements of section 38.002. We turn then to the 

evidence before the district court. 

Pursuant to the May 31 gas purchase contract between Cirrus 

and Clajon, Clajon had the right to take and purchase 100% of 

Cirrus's "Delivery 

Contract, at 13-14. 

deliveries of gas 

Capacity." Appellant's App., Gas Purchase 

The contract further provided that after 

commenced, Clajon had to give Cirrus, on or 

about the last day of the month, "a statement with payment for the 

quantity of gas delivered during the preceding calendar month." 

Id. at 28. 

Clajon's president, Robert C. Lyon, averred in an affidavit 

that Cirrus began delivering gas to Clajon immediately after 

May 31, 1990, and that Clajon paid Cirrus for the gas delivered 

during 

at 1. 

the first month. 

Before Clajon 

Appellee's Supplemental App., Lyon Aff., 

paid for the second month, however, 

representatives of Cirrus made statements in depositions conducted 

in ongoing state litigation over the parties' previous gas 

purchase contracts that led Mr. Lyon to believe Cirrus was 

repudiating the May 31 contract. Therefore, Clajon "suspended 

7 

Appellate Case: 92-6357 Document: 010110114094 Date Filed: 05/10/1993 Page: 7 
payments for gas delivered subsequent to June 30, 1990." Id . at 

2 . Clajon, however, "provided monthly, suspense reports to Cirrus 

fo r each month's payment that was suspended." Id. 

The parties corresponded about the suspended payments in 

August and September of 1990. Mr. Gill, the president of Cirrus, 

wrote Mr. Lyon on September 10, stating in pertinent part: "I 

have reviewed the contract and find no provision in it which would 

authorize you to suspend our payments under the present 

circumstances. Your cooperation in immediately releasing 

the payments which you are holding in suspense will be 

appreciated." Appellant's App., Br. in Supp. of Pl.'s Application 

for Attorney Fees & Prejudgment Interest, Ex. A, at 248. On 

September 28, Mr. Gill wrote Mr. Lyon confirming the parties' 

agreement , that "the contract dated May 31, 1990 between Cirrus 

Production Company and Clajon Gas Company, L.P. is the exclusive 

instrument governing the deliveries of gas of Cirrus after 

June 1, 1990." Id., Ex. B, at 249. 

By its terms, the Texas attorney fee statute is to be 

"liberally construed to promote its underlying purposes." Tex. 

Civ. Prac. & Rem. Code Ann. § 38.005. "[N]o particular form of 

presentment is required .. . . " Criton Corp. v. Highlands Ins. 

Co., 809 S.W.2d 355, 358 (Tex. Ct. App. 1991); see also Ashford 

Dev., Inc. v. USLife Real Estate Servs. Corp., 661 S.W.2d 933, 936 

(Tex. 1983) ("Article 2226 does not require that the presentment of 

the claim to the debtor be in any particular form or manner."). 

"[A]ll that is necessary is that an assertion of a debt or claim 

and a request for compliance be made to the opposing party, and 

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• 

the failure of that party to render performance." Adams v. 

Petrade Int'l. Inc., 754 S.W.2d 696, 719 (Tex. Ct. App. 1988). 

In Huff v. Fidelity Life Ins. Co., the Texas Supreme Court 

determined that correspondence between the parties showing that 

the plaintiff was claiming that the defendant owed him certain 

commissions and that the defendant was refusing to pay the 

commissions was sufficient to support an award of attorney fees 

under Article 2226. 312 S.W.2d at 500. The court noted that "'to 

meet the terms of the statute it is not indispensable that the 

demand be evidenced by firm and commanding language. It may be 

couched in customarily-used polite language of the day. All that 

is required is the assertion of a right under the contract and a 

request for compliance therewith.'" Id. (quoting National Life & 

Accident Ins. Co. v. Dove, 174 S.W.2d 245, 247 (Tex. 1943)); see 

also Criton Cor;:p., 809 S.W.2d at 358 (holding that testimony from 

president of general contractor that he called president of 

subcontractor "and presented his request that full performance be 

tendered and [the request] was refused" was sufficient evidence of 

presentment); Adams, 754 S.W.2d at 719 (holding evidence that 

claimant sent appellant letter summarizing terms of parties' gas 

purchase contract and stating that payment was due upon 

presentation of invoice and later presented appellant's 

representatives with gasoline contracts and invoices for 200,000 

barrels of gasoline was sufficient presentment); Chandler v. 

Mastercraft Dental Cor;:p. of Tex. Inc., 739 S.W.2d 460, 470 (Tex. 

Ct. App. 1987) (holding evidence that attorney for plaintiff 

"discussed in detail" with attorney for defendants the defendants' 

9 

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belief that they were no longer required to abide by covenant not 

to compete was sufficient evidence of presentment). 

We conclude that Mr. Gill's correspondence with Mr. Lyon 

constituted sufficient presentment of Cirrus's contract claim to 

Clajon. The letters apprised Clajon that Cirrus was relying on 

the May 31 contract, that the contract did not authorize Clajon to 

suspend payments for gas received, and that Cirrus wanted Clajon 

to pay it the monies being held in suspense. 

The district court determined that Mr. Gill's letters did not 

constitute adequate presentment. In so ruling, the court recited 

Clajon's arguments against presentment, but did not specifically 

state on which, if either, of the arguments the court relied in 

reaching its conclusion. 

Clajon's first argument, which it also advances on appeal, 

was that because the May 31 contract was still ongoing when Cirrus 

requested that Clajon remit the payments being held in suspense, 

Cirrus did not yet have a "mature claim" for payment. We reject 

this argument. Payment was due under the contract on a monthly 

basis. Cirrus did not have to wait until the contract expired or 

terminated to bring suit for Clajon's failure to make each monthly 

payment as it became due. 

Mr. 

Clajon's second 

Gill's letters 

argument, also advanced on appeal~ was that 

could not constitute presentment of the 

contract claim because they did not recite a sum certain that was 

owed. We reject this argument, as well. Although the Texas cases 

cited by Clajon and the district court happen to involve demands 

for payment of specific sums, Texas case law, in general, does not 

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appear to require demand of a sum certain. See Lone Star Steel 

Co. v. Scott, 759 S.W.2d 144, 157 (Tex. Ct. App. 1988) (holding 

that admission by defendant employer that plaintiff employee "had 

repeatedly requested payment for his suggestion" on how to improve 

employer's manufacturing process was "sufficient proof of 

presentment under Section 38.002"); Chandler, 739 S.W.2d at 470 

(holding that discussion between plaintiff's and defendants' 

attorneys about defendants' belief that they did not have to 

adhere to covenant not to compete was sufficient evidence of 

presentment to support award of attorney fees to plaintiff 

employer on claim for breach of covenant); Arch Constr .• Inc., 730 

S.W.2d at 50 (holding that homeowners' presentation of punch list 

to contractor was sufficient evidence of presentment to support 

award of attorney fees on homeowners' claim for breach of 

remodeling contract); cf. Adams, 754 S.W.2d at 719-20 (holding 

that although seller of gasoline demanded payment of the full 

amount due under the contract and recovered as damages only the 

difference between the market value and the contract price of the 

gasoline, on a promissory estoppel theory, seller's presentment 

was sufficient to support an award of attorney fees). 

Moreover, the evidence showed that Clajon was the party given 

the duty under the contract to calculate the amount due each month 

and that it provided monthly statements to Cirrus showing the 

amount it was holding in suspense. Therefore, Clajon knew exactly 

how much money was due when Cirrus asked that Clajon remit all 

payments being held in suspense. 

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Having concluded that Cirrus adequately presented its 

contract claim to Clajon, we must now consider whether Clajon's 

fail ure to tender immediate performance entitles Cirrus to an 

award of attorney fees. Although the pleadings establish that 

Clajon continued to suspend payments due under the contract after 

Mr . Gill's demand for payment in the fall of 1990, they also 

establish that Clajon made Cirrus two offers of judgment for 

$464,121.32, the amount claimed by Cirrus to be due under the 

contract, see Appellant's App., 1110 Second Amended Complaint, at 

3, and that Cirrus rejected those offers. Clajon argued before 

the district court that Cirrus's rejection of the offers of 

judgment precluded it from recovering attorney fees under the 

Texas statute or, at a minimum, limited the fees to which Cirrus 

would be entitled . Because the district court disposed of 

Cirrus's fee request on the ground that it did not plead or prove 

presentment, the court did not address Clajon's arguments about 

the effect of Cirrus's rejection of the offers of judgment. The 

district court should address these issues on remand. 

II. Prejudgment Interest. 

After the district court entered judgment in favor of Cirrus 

on the contract claim, Cirrus sought to recover prejudgment 

interest on the claim under Tex. Nat. Res. Code Ann. 

§§ 91.401-.406. This statute governs payment from the proceeds of 

the sale of oil or gas from a well located in Texas. See id. 

§ 91.401(1). Among other things, the statute sets forth the time 

for payment of proceeds and the right to interest on late 

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payments. Id. §§ 91.402, 91.403. The statute gives a payee "a 

cause of action for nonpayment of oil or gas proceeds or interest 

on those proceeds as required in Section 91.402 or 91.403 of this 

code." Id. § 91.404(a). Although the statute gave Cirrus a cause 

of action for nonpayment of interest on the gas proceeds, Cirrus 

failed to allege any claim for interest in its Second Amended 

Complaint. Cirrus also failed to amend its complaint to assert a 

claim for interest. Under the circumstances, the district court 

properly denied Cirrus's request for statutory prejudgment 

interest. See Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 

1484 (9th Cir. 1984) ("It is not 'the duty of the trial court or 

the appellate court to create a claim which appellant has not 

spelled out in his pleading.'") (quoting Case v. State Farm Mut. 

Automobile Ins. Co., 294 F.2d 676, 677-78 (5th Cir. 1961)). 

III. Clajon's Post-Offer-of-Judgment Costs. 

The district court awarded Clajon the costs it incurred after 

Cirrus rejected the two Rule 68 offers of judgment. The court 

noted that "[t]he only difference [between the offers and the 

judgment Cirrus ultimately received] is that the first two offers 

included small amounts for interest and attorney's fees, sums the 

Court has herein determined are not recoverable." Appellant's 

App., Order, at 404. The court then determined that because the 

offers of judgment included additional amounts for interest and 

attorney's fees that Cirrus did not ultimately recover, the 

judgment Cirrus obtained was not more favorable than Clajon's 

13 

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offer. Id. at 404-05. Therefore, the court awarded Clajon its 

post-offer costs under Rule 68. Appellant's App., Order, at 405. 

Our remand of the attorney fee issue may alter the factual 

basis for the district court's ruling on Clajon's request for 

post-offer costs. If the district court determines on remand that 

Cirrus is entitled to attorney fees, then it should determine 

whether the fee award affects its earlier determination that the 

judgment Cirrus obtained is not more favorable than Clajon's 

offers of judgment. 

The judgment of the United States District Court for the 

Western District of Oklahoma is AFFIRMED IN PART and REVERSED IN 

PART, and the case is REMANDED for further proceedings consistent 

with this order and judgment. 

Entered for the Court 

John P. Moore 

Circuit Judge 

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