Opinion ID: 6859
Heading Depth: 3
Heading Rank: 4

Heading: Exxon's cross-appeal

Text: 87 On cross-appeal, Exxon asserts that the district court erred in determining that the operating agreement called for simple rather than compound interest. As stated earlier, the relevant contractual provision provides: 88 Each Non-Operator shall pay its proportion of all bills within thirty (30) days after receipt. If payment is not made within such time, the unpaid balance shall bear interest monthly at the rate of twelve percent (12%) per annum or the maximum contract rate permitted by the applicable usury laws in the state in which the Joint Property is located, whichever is the lesser, plus attorney's fees, court costs, and other costs in connection with the collection of unpaid amounts. 89 Exxon argued before the district court that the above provision clearly and unambiguously calls for compound interest. The district court, however, determined that the COPAS accounting procedures called for the application of simple interest. In reaching this conclusion, the district court relied on COPAS bulletin No. 5. COPAS bulletins explain the COPAS accounting procedures. Exxon argued that COPAS bulletin No. 5 was irrelevant to the issue before the district court because bulletin No. 13 was the current bulletin at the time the contract at issue was executed. The district court, however, determined that bulletin No. 5 was the applicable bulletin because a COPAS bulletin remains effective until a subsequent bulletin expressly overrules it. Because bulletin No. 13 did not expressly overrule No. 5, the district court looked to that bulletin for guidance. Bulletin No. 5 stated that simple interest should accrue on all unpaid payments. 90 As further support for its contention that the joint operating agreement provides for compound interest, Exxon relies on Texon Energy Corp. v. Dow Chem. Co., 733 S.W.2d 328 (Tex.App.--Houston [14th Dist.] 1987, writ ref'd n.r.e.). In Texon, the court interpreted the following provision as clearly and unambiguously providing for compound interest: If payment is not made within such time, the unpaid balance shall bear interest monthly at the rate of twelve percent (12%) per annum. Id. at 331. The Texon court rejected the argument that the term unpaid balance referred to the unpaid principal balance because it believed that such a construction rendered the term monthly totally meaningless. Id. 91 CMR argues that Texon is not persuasive authority because Mississippi law requires that a contract specify that interest will be compounded while Texas does not have such a requirement. To support this contention, CMR relies on this court's decision in Stovall v. Illinois Cent. Gulf R.R., 722 F.2d 190 (5th Cir.1984). In Stovall, we considered whether interest awarded by a 1981 judgment was intended to be computed on a simple basis or instead to be compounded annually. Id. at 191. We concluded that pre-judgment interest was to be compounded annually and post-judgment interest was to be compounded on a simple basis. Id. We concluded that MISS.CODE ANN. Sec. 75-17-1(1), which provided that the legal rate of interest was to be six percent (6%) per annum, calculated according to the actuarial method, had the technical meaning that interest be computed at the specified rate, compounded annually. Id. at 192. Thus, we upheld the district court's determination that pre-judgment interest should be computed at six percent per annum, compounded annually. Id. 92 In determining the proper rate of interest for post-judgment interest, we construed MISS.CODE ANN. Sec. 75-17-7, which provided that judgments on accounts  'shall bear interest at the rate of eight percentum (8%) per annum'  as providing for simple interest. Id. In reaching this conclusion, we noted that the general rule is that when interest is allowable, it is to be computed on a simple rather than compound basis in the absence of express authorization otherwise. Id. 93 However, even if Mississippi follows the general rule that when interest is allowed it is to be computed on a simple rather than compound basis absent express authorization, we believe that the contract provision at question unambiguously and as a matter of law calls for compound interest. Therefore, we reverse the district court's determination that the joint operating agreement between Exxon and CMR provided for simple interest. 94 In conclusion, we affirm the district court's determination that paragraph four of the COPAS accounting procedures, as applied here, did not violate Sec. 15-1-5, reverse the district court's determination that the conclusive presumption applies to the amounts Exxon billed CMR for February and May 1985, and reverse the district court's determination that the joint operating agreement called for simple interest.