Court Opinion

ID: 9776568
Source: CourtListenerOpinion
Date Created: 2023-08-29 19:39:16.576316+00
Date Added: 2024-06-11T09:09:10.832603
License: Public Domain

GONZALEZ, Justice,
dissenting.
I do not agree with the court that Tran-sco, with full knowledge of all material facts, intentionally or voluntarily relinquished a known right. It boggles my mind that the court concludes that Transco at the charge conference, renounced, repudiated, abandoned, or surrendered their claim that there was no evidence of a separate tort for which punitive damages could be awarded.1
I also disagree with the construction that the court has given to the purported “stipulation.” The court has taken charge objections out of context and has given them an interpretation that was never intended by the parties. By concluding that damages were stipulated, and that there might be different dollar amounts for contract and tort claims, the court also avoids the problem that exemplary damages may not be awarded without proof of a tort, separate and independent from the breach of contract, with actual damages.
A review of the facts will help put the objections to the charge in context. Transcontinental Gas Pipe Line Corporation (“Transco”) entered into a contract with American National Petroleum Company and Oil Investments Ltd. (“ANPC” and “OIL”) whereby Transco would take or pay for specific percentages of ANPC’s gas production capacity.
Some time thereafter, the market price of gas fell, and Transco began a series of attempts to renegotiate its contracts with various gas suppliers. ANPC and OIL agreed to modify their agreements, in one contract providing for a sole remedy in the event of a breach, and in the other replacing the take or pay obligation with a duty to ratably take. The market continued to decline and Transco proposed a new contract to all producers. Concurrently it began accepting only 3% of the capacity of producers who would not waive various contractual rights it might have against Transco. Transco also paid a higher price for gas bought from producers who agreed to the new contractual terms.
ANPC and OIL refused to waive any of their rights under their contract with Tran-sco, and attempted to counter the 3% program by prevailing on their fellow interest owners to allow ANPC and OIL to sell more of their gas so as to bring them back into balance under balancing agreements between the interest owners and operators of the two fields. When the operators indicated their intent to honor the balancing agreements, Transco threatened to refuse acceptance of any ANPC or OIL gas. *281ANPC and OIL brought suit against Tran-sco alleging damages for breach of contract, breach of the implied covenant of good faith and fair dealing and tortious interference with contractual relations. ANPC and OIL sought both actual and punitive damages as well as injunctive relief. Transco countersued for payments made to ANPC for gas it never delivered.
The trial court awarded judgment non obstante veredicto to ANPC and OIL in the approximate amount of $4.7 million in actual damages, $16 million in punitive damages, $1 million in attorneys’ fees, and in-junctive relief. The court of appeals modified judgment by deleting the award of punitive damages because no independent tort or tort damages was shown.
ANPC and OIL have not and cannot claim surprise at Transco’s argument that contract damages cannot be the basis for an award based on tort. Transco moved for summary judgment on the basis that a tort separate and independent of the contract had not been pleaded.
In the conference on objections to the court’s charge, Transco objected to issues two, three and four relating to damages from its failure to perform certain contract duties in good faith, because Transco had stipulated to contract damages in the event of an affirmative finding, and the damages for breach of a general duty of good faith would be the same. Transco then objected to the submission of the tortious interference claim by stating:
We object to the submission of Special Issue No. 5 and 6 and 7 for the same reason, that is because of any actual damages which they may have sustained are the same as the Vermilion take or pay claim and the minimum take claim and the submission of those issues are unnecessary.
Just to be clear we are not objecting to the failure of the plaintiff to submit a damage issue in connection with Special Issues 5, 6 and 7 on the interference claim for the same reason we stated earlier in that we agree in the damages which would be recoverable from the defendant in an affirmative finding are the same as the damages recoverable for the Vermilion take or pay claim and the minimum pay claim and the Oak Vale claim.
(Emphasis added.) Transco did not in any way agree that the tortious interference issues could be submitted and then damages would be stipulated. To the contrary it objected to all issues relating to tortious interference because the only damages would be contract damages.
Transco’s statement is no more than a remark about the state of the evidence on damages, not a “stipulation” of damages for tortious interference. Before we try to give effect to the statements of counsel, we must interpret them in light of the circumstances in which they were made, including the allegations in the pleadings and the attitude of the parties with respect to the issues. Mann v. Fender, 587 S.W.2d 188, 202 (Tex.Civ.App.—Waco 1979, writ ref’d n.r.e.). We should not give them a greater effect than intended. Austin v. Austin, 603 S.W.2d 204, 207 (Tex.1980). If a purported stipulation is not clear or is ambiguous it should be disregarded. Sergeant v. Goldsmith Dry Goods Co., 110 Tex. 482, 221 S.W. 259, 261 (1920). Transco’s objection could have been more precisely stated, but the only reasonable interpretation of this objection is the argument Transco made at every level, that there can be no exemplary damages when the only injury is the failure to receive the economic benefit of a contract with the defendant caused by the defendant’s breach.
Transco expressly said that it did not object to the omission of a tort damage issue. The court concludes that Transco is bound by the rule of deemed findings of Tex.R.Civ.P. 279, if there is sufficient evidence to support an issue omitted without objection.2 The court concludes that there *282is some evidence to support the omitted issue because the record shows that the damages for tortious interference are different from the “total damages for Tran-sco’s breach of contract.” This conclusion, however, runs directly contrary to ANPC’s and OIL’s own assertions. In their application for writ of error, ANPC and OIL stated:
Under either a breach of contract or tortious interference claim in this case, the actual damages of ANPC and OIL would not be more than the volumes of gas taken, or which should have been taken, multiplied by a properly determined contract price.
⅜ sfs * * * jfc
It is axiomatic, and the evidence clearly indicates, that the amount of money received by ANPC and OIL would not have differed whether Samedan and Apache [the operators responsible for administering the operating agreements] had been allowed to honor their balancing agreements, or Transco had taken or paid according to its contracts.
(Emphasis added.) Why is the court so willing to stretch one statement by Transco during trial while at the same time it ignores this judicial admission of ANPC and OIL?
The court has concluded that there are different damages for the tort and breach of contract because Transco could have honored the balancing agreements and still been in violation of its own contract with the plaintiffs. The argument seems to be that (1) Transco did not pay enough for the little gas that it purchased, (2) did not purchase the amount of gas it would have if the balancing agreements had been honored, and (3) did not purchase as much as it should have under the contracts between plaintiffs and defendant. In each case the damage is the profit ANPC and OIL hoped to make from their contracts with Transco. The distinction is no more than the degree of damage caused by Transco’s breach of contract. Simply calling one amount tort and the other breach of contract misses the point of Transco’s argument: that the nature of the injury shows whether the cause of action truly sounds in tort, or whether it is merely a breach of contract cast in tor-tious terms.
We held in Amoco Production Co. v. Alexander, 622 S.W.2d 563, 571 (Tex.1981) that a breach of contract, even if malicious, intentional or capricious, will not support exemplary damages unless a distinct tort is alleged and proved. Merely including a claim of tort with a contract action does not allow for an award of exemplary damages unless it is proved that the distinct, willful tort caused actual damages. Bellefonte Underwriters Ins. Co. v. Brown, 704 S.W.2d 742, 745 (Tex.1986).3
The question is whether a tort distinct from breach of contract has been alleged when a single act, causing a single injury, is alleged to be both a tort and a breach of contract. We answered that question in Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617 (Tex.1986). In that case it was alleged that the defendant was grossly negligent in the construction of a house, and breached the warranty of good workmanship. We held:
The acts of a party may breach duties in tort or contract alone or simultaneously in both. The nature of the injury most often determines which duty or duties are breached. When the injury is only the economic loss to the subject of a contract itself, the action sounds in contract alone. [Citations omitted.] The Reeds’ injury was that the house they were promised and paid for was not the house they received. This can only be characterized as a breach of contract, and breach of contract cannot support recovery of exemplary damages.
* * sfc * * *
To support an award of exemplary damages in this case, the plaintiff must *283prove a distinct tortious injury with actual damages.
Id. at 618 (emphasis added). We observed that although mental anguish was pleaded, no issue was submitted for damages other than benefit of the bargain, and reversed the award of exemplary damages. Id.4
The common-law distinction between damages available for tort and contract are not new. For example, whether a purchaser may sue for breach of warranty or strict liability for a defective product depends on whether the product merely did not perform as promised (contract) or whether it caused physical harm to person or property (tort). Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77, 79 (Tex.1977). Also, parties suing for fraudulent inducement may receive the difference between the value of what they parted with and what they received, but not the hoped-for benefit of the bargain. Morriss-Buick Co. v. Pondrom, 131 Tex. 98, 113 S.W.2d 889 (1938). On the other hand, they may sue for breach of contract and receive the benefit of their bargain.
Thus we must examine what ANPC and OIL lost and what they might have received had the gas balancing agreements been fully performed. Each working interest owner separately contracts to sell gas to Transco. Pursuant to the operating agreement between the interest owners and the operator, all of the owners designated the operator of the field to be his agent in dealing with the purchaser. The operator determines the volume of gas each owner gets to sell to Transco in any given month. For various reasons the amount designated by the operator in each month may not match the owner’s true mineral interest.5 The gas balancing agreement is designed merely to assist the operator to insure that all of the individual interest owners eventually get to sell their own full share of the gas. Transco is not a party to these agreements. The gas balancing agreement does not alter the fact that the owners sell their gas pursuant to their own contract with the buyer. Consequently the sole benefit to be gained from the gas balancing agreements is the right to sell gas to Transco pursuant to the gas supply agreement between ANPC, OIL, and Transco.
Under the court’s theory, the only way for Transco to avoid interfering with the balancing agreement is to purchase gas from ANPC and OIL. The plaintiffs lost no sales to other parties, and suffered no loss of property or physical injury. They cannot receive both their actual damages in contract and their actual damages in tort without receiving a double recovery.6 It is clear, then, that the only damages ANPC and OIL suffered because of the claimed interference with the balancing agreement is the loss of the right to sell to Transco, and these damages are the same as for Transco’s breach of the gas supply contract. Having failed to show any injury that is not simply breach of contract, *284ANPC and OIL are not entitled to exemplary damages.
The unfortunate lesson to be learned from today’s opinion is that one should never “agree” to anything in open court for fear that an imperfect choice of words will be given an interpretation far beyond what was intended. The court has taken one passage out of context and concluded that Transco stipulated actual damages which would support punitive damages in the event of a finding of the other elements of tortious interference. In context it is clear that Transco was making the very argument it has made at every level in this case, that there can be no tort when the only damage is the benefit of the bargain with the defendant. Transco objected to the entire submission of all the tort issues for that very reason. In this case there has been no injury other than the loss of profit that the plaintiffs should have made from their contract with the defendant. Without a tort injury, the plaintiffs have nothing but a breach of contract cause of action dressed up in the trappings of tort.
For the above reasons, I dissent.
COOK, J., joins this opinion.

. When writ was granted the primary question in this case was whether the Arnold v. Nat’l County Mutual Fire Co., 725 S.W.2d 165 (Tex.1987), duty in tort of good faith and fair dealing is applicable to a "take or pay” oil and gas case. Rather than resolving the issue, my colleagues have chosen an easy (and in my opinion an erroneous) way out. This important issue will not go away. Postponing its resolution will only add to the burdens of litigation and continue to clog our dockets with these types of claims. We owe it to the bench, bar and affected parties to address the question. I would do so.

. The court relies on Turner, Collie & Braden, Inc. v. Brookhollow, Inc., 642 S.W.2d 160, 165 (Tex.1982) and Transport Insurance Co. v. Mabra, 487 S.W.2d 704, 707-08 (Tex.1972) as support for its contention that Transco’s failure to object to the omission of a tort damages issue waived requirement of submitting a correct issue to the jury. However, this reliance is misplaced because both these cases state that the issue will only be deemed if there is evidence to *282support the finding. Here, there is no evidence of injury in tort, separate from breach of contract damages.

. We disallowed a recovery for tortious interference in Bellefonte because no finding for damages from any tort were obtained. 704 S.W.2d at 745.

.See also International Bank, N.A. v. Morales, 736 S.W.2d 622 (Tex.1987); Texas Nat'l Bank v. Karnes, 717 S.W.2d 901, 903 (Tex.1986).
Other courts have come to the same conclusion. They have held that even if all other elements of a tort have been proven, the failure to show damages other than the loss of the benefit of the bargain between the parties precludes a recovery for exemplary damages. Adolph Coors Co. v. Rodriguez, 780 S.W.2d 477, 485 (Tex.App.—Corpus Christi 1989, writ denied) (no cause of action for negligence where only injury is economic losses under distributorship contract between parties); Lone Star Steel Co. v. Scott, 759 S.W.2d 144, 156 (Tex.App.—Texarkana 1988, writ denied) (exemplary damages may not be awarded for fraud when the only evidence of injury is loss of benefit of the bargain between employer and employee); Hebisen v. Nassau Development Co., 754 S.W.2d 345, 348 (Tex.App.—Houston [14th] 1988, writ denied) (no exemplary damages for fraud where only injury is economic loss under lease agreement between parties).

. For a discussion of the various reasons that an interest may be overproduced or underpro-duced, see Note, "Oil and Gas: Production Imbalance in Split Stream Gas Wells — Getting Your Fair Share,” 30 Okla.L.Rev. 955, 960-64 (1977).

. If it appears a tort claim is only an alternate theory and a court could not properly enter judgment for compensatory damages on both the contract and tort theories without granting double recovery, an award of exemplary damages is improper. See generally 22 Am.Jur.2d Damages § 752 at 810 (1988).