SAM MYERS,FROM A COUNTY COURT APPELLANT, v. TRUE OIL COMPANY, APPELLEE

 
COURT OF APPEALS
    
FIFTH DISTRICT OF TEXAS
AT DALLAS
 
NO. 05-88-01462-CV
 
SAM MYERS,FROM A COUNTY COURT
 
        APPELLANT,
 
v.
 
TRUE OIL COMPANY,
 
        APPELLEE.OF DALLAS COUNTY, TEXAS
 
 
 
BEFORE JUSTICES STEWART, THOMAS AND WHITTINGTON
OPINION BY JUSTICE STEWART
AUGUST 18, 1989
        True Oil Company sued Sam Myers for delay rentals under oil and gas farmout agreements. After a default judgment was entered, the trial court granted a bill of review, setting aside the default judgment and ordering a new trial. Trial was to the court, which found that True Oil had paid delay rentals totaling $28,397.89, attributable to the farmout acreage, and that Myers was liable to True Oil for that sum, plus interest, attorney fees and costs. In five points of error, Myers contends that the court erred in: 1) entering judgment against Myers on a theory of sworn account because there was no sworn account as a matter of law; 2) entering judgment against Myers on any theory other than sworn account because sworn account was the only theory pled by True Oil; 3) entering judgment against Myers because there is no evidence to support the findings of fact necessary to sustain the judgment on any theory; 4) entering judgment against Myers because the findings of fact to sustain any theory of recovery are contrary to the great weight and preponderance of the evidence; and 5) entering judgment against Myers because the evidence is insufficient to support the findings of fact necessary to sustain the judgment on any theory of recovery. We disagree and affirm.
        Myers is in the oil and gas business. As a part of his business, he prospects for oil and gas by drilling test wells. In late 1983, Myers desired to drill test wells on two tracts of land in Hardin County, Texas. Myers did not own leases on the land, and he retained the services of Ben Carter, a land consultant in Houston, to secure the drilling rights on the land. Because the land was already leased, Carter obtained two farmout agreements from the leaseholders. Under each agreement, Myers was the farmee, and the farmors were, collectively, True Oil Company, Netumar Energy, Inc. and Robert A. Berliner.
        Myers drilled two wells on the farmout acreage. The first was spudded on March 18, 1984, and the second on April 15, 1984. Both wells were dry, and the prospects covered by the farmout agreements were abandoned.
        In May 1987 True Oil filed suit against Myers for reimbursement of his prorata share of the delay rentals paid by True Oil on leases alleged to have applied to the farmout acreage. FN:1 True Oil alleged that it was required to make the delay rental payments in order to maintain leases on the farmout acreage, and that, under the farmout agreements, True Oil was entitled to recoup those payments from Myers. The trial court found that True Oil was entitled to judgment against Myers in the amount requested by True Oil.
        In his second point of error, Myers argues that the trial court erred in entering judgment against him on any theory other than sworn account because sworn account was the only theory pled by True Oil. Myers also avers in his first point, which we will address later, that True Oil did not prove up a suit on a sworn account. True Oil contends that it was merely suing under the farmout agreement.
        True Oil had the burden to establish the existence of the contract sued upon, that it was ready and able to perform the contract, the occurrence of a condition upon which liability is based, the breach of the contract, and the amount due under the contract. Incorporated Carriers, Ltd. v. Crocker, 639 S.W.2d 338, 340 (Tex. App.--Texarkana 1982, writ ref'd n.r.e.)(citing Howell v. Kelly, 534 S.W.2d 737 (Tex. Civ. App.--Houston [1st Dist] 1976, no writ)).
        True Oil's original petition provides:
 
III.
        On or about November 15, 1983, Plaintiff entered into certain letter agreement [sic] or agreements with the Defendant (hereinafter referred to as the "Farmout Agreement"), whereby the Defendant, as Operator, promised and agreed to commence drilling operations and to drill a test well or wells. The Farmout Agreement provides, among other things, that:
 
XI.
        (a)    Delay Rentals. As to any delay rental payments necessary to maintain a lease or leases comprising a part of the Farmout Acreage during the earning phase of the farmout agreement, OPERATOR shall pay 100% of the cost thereof applicable to the farmout acreage . . . ." Because the Defendant failed to commence drilling operations, it was necessary for Plaintiff to pay the delay rentals, as required by the said oil and gas lease agreements, to prevent the termination of the leases. Plaintiff paid the total sum of $92,993.77 in delay rentals, during the period of January 1984, through April, 1984, inclusive.
True Oil consistently referred to its claim in its petition as both an "account" and an "indebtedness." It alleged that Myers' obligation arose from his execution and delivery of the farmout agreements, and that, though proper presentment and demand had been made, Myers had refused to pay his prorata share of the delay rentals in the sum of $38,519.89.
        While we agree with Myers that True Oil's pleadings have many of the characteristics found in pleadings based on sworn account, we conclude that True Oil's pleadings are sufficient to support recovery under a contract theory and that they gave Myers fair notice of a breach of contract claim. Jay Fikes & Assoc. v. Walton, 578 S.W.2d 885, 889 (Tex. Civ. App.--Amarillo 1979, writ ref'd n.r.e.). See UMC, Inc. v. Coonrod Elec. Co., Inc., 667 S.W.2d 549, 553 (Tex. App.--Corpus Christi 1983, writ ref'd n.r.e.). Further, Myers failed to specifically point out any alleged defects in the pleadings by written exceptions and has, therefore, waived the alleged defects of which he now complains. TEX. R. CIV. P. 90; Westchester Fire Insurance Co. v. Alvarez, 577 S.W.2d 771 (Tex. 1978). Myers' second point is overruled. Because we have held that True Oil sufficiently pled a breach of contract theory to support its recovery, Myers' first point of error, contending that the trial court erred in basing the judgment on a sworn account theory, need not be addressed.
        In his third, fourth and fifth points, Myers argues that there was no evidence, or insufficient evidence, to support the findings of the court, or that the findings are against the great weight and preponderance of the evidence. When reviewing a no evidence challenge, we consider only the evidence and reasonable inferences drawn therefrom, which, when viewed in their most favorable light, support the jury verdict or court finding. We must disregard all evidence and inferences to the contrary of the fact finding. Stafford v. Stafford, 726 S.W.2d 14, 16 (Tex. 1987).
        An insufficient evidence point and a great weight and preponderance point attack the factual sufficiency of the evidence. In reviewing these factual insufficiency points, we will consider and weigh all of the evidence in the record that is relevant to the fact finding challenged. We may set aside the verdict or the trial court's finding on such a point only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).
        Myers has grouped these three evidentiary points for the purposes of argument. However, his argument is directed to the alleged inadmissibility of the farmout agreements and leases offered by True Oil and to the trial court's alleged misinterpretation of a delay rental provision in the farmout agreements. True Oil maintains that Myers has failed to make specific assignments of error regarding contract interpretation or rulings on admissibility of evidence and, therefore, he has waived any error on these grounds. Sears Roebuck & Co. v. Jones, 303 S.W.2d 432, 436-37 (Tex. Civ. App.--Waco 1957, writ ref'd n.r.e.); City of Deer Park v. State Ex. Rel. Shell Oil Co., 275 S.W.2d 77, 84 (Tex. 1955). We conclude that, considering the points and argument together, we can ascertain the errors of which Myers complains. Thus, we will address the merits of his complaints.
        Myers first contends that the trial court erred in admitting the two farmout agreements because they did not contain the signatures of the other two farmors, Netumar Energy and Berliner, and because True Oil failed to authenticate Myers' signature on them. The record reflects that the farmout agreements admitted bear the signatures of True Oil and "Myers". Tom Walker testified without objection that the exhibits were his originals, that copies of the agreements were sent by Myers to True Oil, Berliner and Netumar Energy, Inc., that each signed the copies of the agreements received and returned them to Myers, and that Myers was the only one in possession of copies of the agreements with all of the parties' signatures. The trial court could infer from Walker's testimony that there was no single copy of each farmout agreement that all four parties had signed, that each farmor signed a separate copy of each agreement, and that the three copies of each made up the two executed contracts. Further, Walker's testimony established that he was a witness with knowledge of the authenticity of the proffered agreements and that the exhibits were what True Oil claimed them to be, i.e., true copies of the farmout agreements in effect between the farmors and Myers, the farmee. We hold that Walker's testimony satisfied the requirements of Texas Rules of Evidence 902(a) and 902(b)(1) and that the farmout agreements were admissible under those rules. See Western Fed. Sav. & Loan Ass'n v. Atkinson Fin. Corp., 747 S.W.2d 456, 464 (Tex. App.--Fort Worth 1988, no writ).
        Moreover, Myers was put on notice by True Oil's pleadings that the contents of the two farmout agreements would be a subject of proof at the hearing. Walker testified that Myers had possession of the originals signed by all three farmors, and Myers admitted in deposition testimony that was before the court that he had complete copies of these agreements in his files. Since Myers did not produce the complete farmout agreements at the hearing, other evidence of the contents of the agreements was admissible. TEX. R. CIV. EVID. 1004(4). We reject Myers' contention that the farmout agreements were inadmissible because the copies offered were not signed by the other two farmors.
        Myers next contends that True Oil failed to authenticate Myers' signature on the copies of the agreements admitted. The record reflects that Myers admitted in his deposition that he was a party to the two farmout agreements at issue. In light of Myers' admission to being a party to these agreements, we hold that True Oil was not required to authenticate Myers' signature as a prerequisite to their admission. Accordingly, we further hold that the trial court did not err in admitting P-1 and P-2, the two farmout agreements.
        Myers also contends that, even if the farmout agreements are admissible, they preclude a finding that he is liable for any of the delay rentals paid by True Oil. He bases his argument on the identical provision in both agreements that states that the operator (Myers) will pay 100% of the cost of delay rentals applicable to the farmout acreage "during the earning phase of the farmout agreement." Myers maintains that the "earning phase" of each agreement arises at the point in time after which a test well is completed as a well capable of producing oil or gas in commercial quantities (also referred to in the agreements as an "earning test well"); that it is undisputed that Myers drilled two test wells, both of which were dry; that, since neither well was an earning well, there never was an "earning phase" under either farmout agreement; that, therefore, his liability for delay rentals never arose; and that his refusal to pay delay rentals was not a breach of either agreement.
        The contract provision in question states:
    (A)    Delay Rentals. As to any delay rental payments necessary to maintain a lease or leases comprising a portion of the farmout acreage during the earning phase of this farmout agreement, OPERATOR shall pay 100% of the cost thereof applicable to the farmout acreage and such costs shall be deemed as a cost included under the definition of payout for the earning well as discussed above. Subsequent to the completion of the earning well as provided for herein, the payment of delay rentals shall be controlled by the terms of the JOA.
 
 
(Emphasis added).
        True Oil contends that the above underlined portions of the farmout agreements delineate two distinct periods: the earning phase, when the operator pays one hundred percent of the cost of the delay rentals, and the period subsequent to the completion of an earning well, when payment of the delay rentals is governed by the joint operating agreement (JOA). True Oil argues that to hold that the "earning phase" is coincidental with the period "subsequent to the completion of an earning well" under the contract would cause the two underlined provisions to be irreconcilable. The term, "earning phase," was not defined in the contracts. However, Walker testified as an expert that the "earning phase" referred to in a farmout agreement is a period of time beginning with the execution of the farmout agreement and continuing until the operator has performed under the agreement.
        In interpreting contracts, we are to harmonize and give effect to all provisions of the contract so that none of the provisions are rendered meaningless. Universal CIT Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 158 (1951). We may consider the conduct of the parties that indicates the construction that they placed on the contract in determining the parties' true intent. Consolidated Eng'g Co. v. Southern Steel Co., 699 S.W.2d 188, 193 (Tex. 1985). Any doubts in interpretation of a contract are resolved against the party who prepared it. Bethel v. Butler Drilling Co., 635 S.W.2d 834, 838 (Tex. App.--Houston [14th Dist.] 1982, writ ref'd n.r.e.).
        We agree with True Oil that the farmout agreements provide for two distinct periods, the "earning phase" and the period "subsequent to completion of an earning well." To hold otherwise would render several portions of the agreement meaningless.
        Also, in exhibit P-21, a letter from Myers' agent to True Oil, the agent states that Myers was invoiced for one hundred percent of the delay rentals and should have been invoiced for only seventy-five percent. This evidence of the parties' conduct supports the findings of the trial court. Consolidated Eng'g, 699 S.W.2d at 193. Further, the agreements at issue were drafted by Myers' agent, and thus any doubts regarding their interpretation are to be resolved against Myers. Bethel, 635 S.W.2d at 838. Based on the evidence and the above authorities, we hold that the trial court properly interpreted the farmout agreements to require Myers to pay delay rentals during the period between the execution of the agreements and the completion of an earning well.
        Finally, Myers attacks the trial court's finding that the delay rentals paid by True Oil were "necessary to maintain a lease or leases comprising a portion of the farmout acreage." Although Myers admits that the leases offered in evidence contain property descriptions covering the farmout acreage under one or the other of the farmout agreements, he maintains that, because True Oil is not shown as a party in the leases and because True Oil failed to introduce written assignments of the leases, or competent evidence thereof, showing title in True Oil, it did not prove that it owned the leases on which it paid the delay rentals at issue. Consequently, Myers argues, the leases were inadmissible.
        The record reflects that P-3 through P-18 each consisted of a copy of a check for delay rental and the lease agreement pursuant to which the delay rental was paid. The two farmout agreements provided that:
        The FARMORS own undivided interests created by certain oil, gas and mineral interests which, to the extent that they cover lands included within the farmout area (being the land area within the red outline on Exhibit "A" attached hereto and made a part hereof), are covered and affected by this agreement.
        The record further reflects that, through Lynn Lovett's testimony, True Oil established that a portion of the land covered by each lease was within the red outline on Exhibit "A" attached to the respective farmout agreements. We conclude that this evidence is both legally and factually sufficient to support the trial court's finding that the leases admitted were applicable to the farmout acreage. We further conclude that Myers is bound by the recitation in the farmont agreements acknowledging the farmors' ownership of the leases covering the farmout acreage, and once it was established that the leases in fact covered the farmout acreage, True Oil did not have the burden to prove its ownership by independent evidence. We also conclude that Walker's testimony was sufficient to authenticate the leases under Texas Rules of Evidence 901(a) and 901(b)(1). He testified that the offered leases were in the original lessee's name and that thereafter each lease was assigned to various parties until eventually an assignment was made to True Oil in all sixteen leases. He also testified that he had worked for True Oil a little over eight years and that he had worked in the land management department in 1983 and also at the time of trial. We conclude that the evidence supported a finding that he was a witness with knowledge. TEX. R. CIV. EVID. 901(b)(1). We also conclude that his testimony constituted sufficient evidence to support a finding that the matter in question was what its proponent claimed. TEX. R. CIV. EVID. 901(a). For all these reasons, we hold that the leases were properly admitted.
        The record also supports the trial court's finding that the delay rental payments were necessary to maintain a lease or leases comprising the farmout acreage. Walker testified that the $92,993.77, the total sum of the delay rentals paid on the sixteen leases, covered land both inside and outside the farmout acreages; that if True Oil had left it to Myers to pay the rentals, and he did not pay, the entire leases, not just that portion of the lease covering the acreage within the farmout agreement, would have terminated. Myers' only testimony regarding the necessity of delay rental payments was that it is "devastating" if a delay rental payment is missed. We hold that the evidence was both legally and factually sufficient to show it was necessary for True Oil to make the delay rental payments.
        Myers has not contested the trial court's finding that the amount of the delay rentals paid that was attributable to Myers' share was $28,397.89. We overrule Myers' third, fourth and fifth points.
        The trial court's judgment is affirmed.
 
                                                          
                                                          ANNETTE STEWART
                                                          JUSTICE
 
DO NOT PUBLISH
TEX. R. APP. P. 90
88-01462.F
 
FN:1 A delay rental is an optional payment made by a lessee to the landowner to extend an oil and gas lease if drilling operations have not commenced during the principal term of the lease.
File Date[01-02-89]
File Name[881462F]