Wes-Tex Tank Rental, Inc. v. Pioneer Natural Resources USA, Inc.--Appeal from 385th District Court of Midland County

Opinion filed April 5, 2007

In The

Eleventh Court of Appeals

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   No. 11-05-00396-CV

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WES-TEX TANK RENTAL, INC., Appellant

V.

PIONEER NATURAL RESOURCES USA, INC., Appellee

On Appeal from the 385th District Court

Midland County, Texas

Trial Court Cause No. CV44378

M E M O R A N D U M O P I N I O N

This is a breach of contract case brought by Wes-Tex Tank Rental, Inc. against Pioneer Natural Resources USA, Inc. The suit originally contained a fraud claim, but Wes-Tex nonsuited it. The trial court ruled that there was no valid enforceable contract and granted Pioneer=s motion for summary judgment. The trial court denied Wes-Tex=s motion for summary judgment in which Wes-Tex claimed that there was a valid contract. We reverse.

For several years prior to this dispute, Wes-Tex leased Afrac@ tanks to Pioneer. These frac tanks were used by Pioneer as a part of a Afrac job.@ A frac job opens underground fractures and increases the flow of oil.

On July 5, 2000, Pioneer and Wes-Tex, as contractor, entered into a AMaster Service/Sales Agreement@ (MSSA). This MSSA contained general terms that would govern certain aspects of goods and services provided by Wes-Tex to Pioneer. As stated in the MSSA:

WHEREAS, Company may, from time to time, in separate and independent transactions, retain Contractor to provide goods and/or services in connection with various Company projects;

WHEREAS, the parties hereto contemplate that the goods and services to be provided may be requested either orally or by written work order, delivery ticket or other written instrument by a representative of Company (ARepresentative@);

WHEREAS, the parties hereto desire to enter into a master contract setting forth the terms and conditions under which all goods and services shall be provided by Contractor for Company, unless the parties have agreed otherwise and have documented that agreement as hereinafter required:

NOW THEREFORE, for and in consideration of the mutual promises, hereinafter set forth, Company and Contractor agree as follows:

1) This Agreement, of and in itself, does not obligate Company to request goods or services from Contractor, nor does it obligate Contractor to provide goods or services to Company.

2) This Agreement shall control and govern as to all goods and services provided by Contractor for Company from and after its effective date. Neither verbal agreements or representations, nor written work orders, delivery tickets or any other written instruments used by Contractor or Company, shall become a part of any contract between Company and Contractor for any purpose other than to describe the goods and services to be performed by Contractor for Company and to designate the time at which said goods and services are to be delivered or performed. All offers and acceptances by and between Contractor and Company while this Agreement is in effect are expressly limited to and conditioned upon the parties= agreement to the terms of this Agreement. Should the parties desire to waive this provision, and agree that terms and provisions different from, or in addition to, those set out in this Agreement should be applicable to specified goods or services to be provided by Contractor, such waiver and agreement shall only be enforceable if contained in, or reflected by, a separate written instrument, signed by each of the parties, expressly referencing this Agreement and acknowledging and confirming the intention of the parties that same supersede and take priority over the terms and provisions of this Agreement.

After various discussions between the parties, under date of May 10, 2002, Wes-Tex sent a letter to Pioneer that contained the following language:

Wes-Tex Tank Rental, Inc. will guarantee our current rates on Frac Tank Rental on new completions and or work-overs of all wells in the West Texas Sprayberry area for the next 36 months.

If this agreement is accepted, Wes-Tex Tank Rental, Inc. will have first right of refusal on all frac tank work in the Sprayberry area.

The letter contains two signatures indicating acceptance by Pioneer on May 17, 2002.

Several months later, Pioneer began to complain to Wes-Tex about the condition of the frac tanks being furnished. Pioneer and Wes-Tex had various conversations and communications regarding the condition of the frac tanks. We note those conversations and communications, but in view of our holding in this case we need not detail them. In any event, on November 25, 2002, Pioneer notified Wes-Tex that the relationship between them was terminated.

Wes-Tex sued Pioneer alleging that Pioneer had breached the MSSA as amended by the letter agreement. After hearing motions for summary judgment filed by both parties, the trial court entered an order that said, in part: A[T]he >letter agreement= is not a valid enforceable [contract]@; the court then entered judgment for Pioneer.

In its motion for summary judgment, Pioneer claimed that the letter agreement did not constitute a valid contract and was not enforceable because it was made contrary to Paragraph 2 of the MSSA and Tex. Bus. & Com. Code Ann. ' 2 A. 208 (Vernon 1994), because it did not provide for mutuality of obligation, and because there was a prior breach of the MSSA that excused Pioneer from performance. Wes-Tex claimed in their motion for partial summary judgment that the letter agreement was a valid contract as a matter of law; it also made other assertions not necessary to discuss now because we agree that the letter agreement was a valid contract.

The standard of review for traditional summary judgments is well recognized. We must consider the summary judgment evidence in the light most favorable to the nonmovant, indulging all reasonable inferences in favor of the nonmovant, and determine whether the movant proved that there were no genuine issues of material fact and that it was entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 49 (Tex.1985). A defendant is entitled to summary judgment if it either disproves an element of each of the plaintiff=s causes of action or establishes an affirmative defense on each of the plaintiff=s causes of action as a matter of law. Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997). When both parties move for summary judgment on the same issues and the trial court grants one motion and denies the other, we consider the summary judgment evidence presented by both sides; we determine all questions presented; and, if we determine the trial court erred, we render the judgment the trial court should have rendered. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).

Wes-Tex claims in its first three issues on appeal that the letter agreement was a valid contract as a matter of law and that it modified the MSSA. It is important to note that the trial court did not deal with any breach of contract issues in its ruling. The trial court=s ruling was very specific: the contract was not Aa valid enforceable@ contract. The essence of that holding is that the contract was not valid. When a trial court=s order granting summary judgment does not specify the grounds relied upon, we must affirm the summary judgment if any of the summary judgment grounds are meritorious. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 873 (Tex. 2000). However, when a trial court is explicit in giving the reasons for its ruling, summary judgment can be affirmed only if the theory relied upon by the trial court is meritorious even though there are other grounds stated in the motion. State Farm Fire & Cas. Co. v. S.S. & G.W., 858 S.W.2d 374, 380 (Tex. 1993).

To be valid, a contract must be based upon consideration. Cherokee Commc=ns, Inc. v. Skinny=s, Inc., 893 S.W.2d 313, 316 (Tex. App.CEastland 1994, writ denied). Consideration is a present exchange bargained for in return for a promise. Id. The concept of consideration is sometimes referred to as mutuality of obligation. Id. The letter agreement in this case required Wes-Tex to maintain its current frac tank rates in the Sprayberry area for a period of 36 months. The agreement further required that Pioneer give Wes-Tex the first right of refusal on all frac tank work in the Sprayberry area. Pioneer argues that there was no consideration because Wes-Tex could refuse all work under the agreement and the promise was, therefore, illusory. A promise is illusory when it fails to bind the promisor. See Light v. Centel Cellular Co. of Tex., 883 S.W.2d 642, 645 (Tex. 1994). Wes-Tex did not promise to do any work; it promised to maintain its current rates. The promise relating to the first right of refusal was Pioneer=s promise. The contract was not illusory.

Even if we were to hold that the consideration involved an illusory promise by Wes-Tex, the summary judgment evidence shows that both parties performed in accordance with the letter agreement. This performance would render the contract valid. Hutchings v. Slemons, 174 S.W.2d 487, 489 (Tex. 1943); Cherokee, 893 S.W.2d at 316. Mutuality of obligation is determined at the time of enforcement, not at the time of the making of the agreement. Hutchings, 174 S.W.2d at 489; Cherokee, 893 S.W.2d at 316. The agreement was supported by consideration.

Pioneer argues further that the agreement contravened the provisions of Paragraph 2 of the MSSA. We have quoted that portion of the agreement earlier in this opinion. It is the general rule that parties can modify a contract even in the face of self-imposed limitations. Rhoads Drilling Co. v. Allred, 70 S.W.2d 576, 583 (Tex. 1934). It has long been the law in Texas that parties who have the power to make a contract have the power to Aunmake or modify it regardless of self-imposed limitations.@ Id.; Groce v. P. B. Yates Mach. Co., 288 S.W. 161, 162 (Tex. Comm. App. 1926, approved by Tex. S. Ct.); see Universal C.I.T. Credit Corp. v. Stewart, 262 F.2d 745, 749 (5th Cir. 1959).

In Groce, the contract contained this provision:

[T]his contract shall not hereafter be changed or modified in any respect unless a written memorandum, embodying such changes or modifications, duly dated, signed by both parties hereto, and bearing distinct date reference to this contract be attached to and made a part of this agreement.

Groce, 288 S.W. at 162. The court held that the clause did not prevent a modification that was not in accordance with it:

[I]t is no more than a statement that able-minded persons, on to-morrow [sic], will not have contractual capacity despite their investment with it by nature and the law. In all material respects the contract involved was executory, and if there was a novation or modification, the mutual promises, expressed or implied, furnished whatever consideration was needed. The power mentioned, of course, includes ability to waive performance of provisions embraced in the original contract.

Id. at 162.

Wes-Tex and Pioneer had the power to enter into the MSSA, and they likewise had the power to enter into the subsequent May 10 letter agreement.

Pioneer also complains that the trial court was correct in its summary judgment because the letter agreement did not comply with Section 2 A. 208. Even if we assume the applicability of that section, it requires only that the modification be in writing and in this case it was.

We do not reach the other arguments in this appeal because the only issue that we may

consider is that specifically ruled upon by the trial court. S.S., 858 S.W.2d at 380.

The letter agreement constitutes a valid contract, and summary judgment should have been granted accordingly for Wes-Tex and denied to Pioneer. The first, second, and third issues presented by Wes-Tex are sustained.

We reverse and render judgment that the letter agreement is a valid contract. We reverse and remand the remaining issues to the trial court.

JIM R. WRIGHT

CHIEF JUSTICE

April 5, 2007

Panel consists of: Wright, C.J.,

McCall, J., and Strange, J.