R.R. Comm’r of Tex. v. Gulf Energy Exploration Corp.
No. 14-0534
Case Summary written by Petrus Wassdorf, Staff Member.
JUSTICE LEHRMANN delivered the opinion of the Court.
Chapter 89 of the Texas Natural Resources Code provides a defense to liability for “damages that may occur as a result of acts done or omitted to be done . . . in a good-faith effort to carry out” chapter 89. Tex. Nat. Res. Code § 89.045. Gulf Energy entered into an oral agreement for the delay in the plugging of several wells by the Commission. Before the agreement was reduced to writing and signed by both parties, well 708S-5 was plugged as a result of an admitted clerical error by a Commission employee. Gulf Energy obtained permission of the legislature to sue the Commission. It brought breach-of-contract and negligence claims against the Commission and its contractor, Superior. Superior settled during jury deliberations. The Commission objected to the failure to submit a question to the jury on formation of a binding contract and to the absence of a question of good faith. The trial court found the commission liable on both issues and awarded the maximum allowed by the legislature. The court of appeals affirmed, finding that the Commission waived its contract complaint at trial, and even if preserved, any error was harmless. The court of appeals also held that the Commission waived the issue of good faith. The Commission again appealed.
Issues: Is the Commission entitled to the good-faith defense under § 89.045 and if so did the trial court err in failing to submit that question to the jury? And was a binding oral contract formed as a matter of law before the well was plugged?
Gulf Energy initially argued that the legislative permission that they obtained precluded the good-faith defense. The Court found, however, that the resolution specifically did not waive any defense except for the Commissions immunity from suit. Gulf Energy further argued that the good-faith defense applied only to discretionary action of the Commission. The Court found that the language in § 89.045 is broad foreclosing liability for “any damages” resulting from a good-faith effort to carry out chapter 89. Limiting the statute to discretionary acts would contravene the plain meaning of the statute and legislative intent.
The Court found that good faith is a subjective standard relying on several dictionary definitions and the Courts own interpretation of good faith in unrelated cases. Further, the Court agreed with an argument by the Commission that applying an objective standard would duplicate the negligence standard, and rejected Gulf Energy’s suggestion to import the good-faith element of the official immunity defense into this case. The good-faith question was not waived by the Commission when it failed to submit a definition along with their proposed jury question as there is no statutory definition and no case law providing explicit guidance. Further, charge error “is generally considered harmful” and not subject to harmless error. Accordingly the Court reversed the court of appeals, finding that a fact issue existed as to whether the acts or omissions by the Commission were conducted in good faith and the Commission was entitled to a jury question on this issue.
The second issue was when a binding contract was formed between the parties. The Commission argued that a contract was not formed until after the well was plugged. Finding that the Commissions objection to the contract question was similar in substance to its argument in the court of appeals, the Court determined that the Commission did not waive the contract formation question.
Relying on Foreca, S.A. v. GRD Development Co., 758 S.W.2d 744 (Tex. 1988), the Court found that the formation of a contract depends on the intent of the parties, which is usually a question for the trier of fact. In this case there was conflicting evidence as to whether the parties intended to be bound by the oral agreement, and was therefore an issue that should have been presented to the jury. Further, the court of appeals erred in finding that a contract was formed as a matter of law. Finally, the Court found that the good-faith defense is not limited to tort liability and could be utilized on the contract claim. The judgment of the court of appeals was reversed and the case remanded for a new trial.