Motion,Ex Parte: PEREGRINE OIL & GAS LP vs. HRB OIL & GAS LTD

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                                CAUSE NO. 2016-45652

PEREGRINE OIL & GAS LP, § IN THE
Plaintiff, : 190™ DISTRICT COURT
v. ; HARRIS COUNTY, TEXAS
HRB OIL & GAS Ltd. and :
VHMP, LLC, §
Defendants. :

DEFENDANT HRB OIL & GAS LTD.’S SUPPLEMENT TO
MOTION TO EXCLUDE THE EXPERT TESTIMONY OF JEFF WEEMS

Defendant HRB Oil & Gas Ltd. (“HRB”) submits this Supplement to its Motion to Exclude
the Expert Testimony of Jeffrey Weems (“Mr. Weems”), and respectfully shows the Court the
following:

1. As a result of Dallas County’s “Shelter in Place” Orders and subsequent COVID orders,
counsel for Defendant HRB Oil & Gas, Ltd. did not have access to certain documents referenced
in its Motion to Exclude the Expert Testimony of Jeff Weems (the “Motion to Exclude”) at the
time it was filed in this case on May 1, 2020,

2. HRB is filing this Supplement to its Motion to Exclude to provide the Court with copies
of the following documents which are referenced in HRB’s Motion to Exclude:

Exhibit A: The August 30, 2018 Memorandum Opinion by the Court of Appeals for
the First District of Texas in this case.

Exhibit B: Plaintiff's Expert Witness Designation.
Exhibit C: _ Deposition of Jeffery Dan Weems (December 11, 2019)
3. Plaintiff is in possession of each of the documents attached hereto, therefore, there is no
potential unfair surprise as a result of the filing of this Supplement,

[Signature Page Follows]

US_Active\114723695\V-1Dated: October 12, 2020
/s/ Barry F. Cannaday
Barry F. Cannaday
Dentons US LLP
2000 McKinney Ave.
Suite 1900
Dallas, Texas 75201
(214) 259-0900 (telephone)
(214) 259-0910 (facsimile)
barry.cannaday@dentons.com

ATTORNEY FOR DEFENDANTS

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the above and foregoing document was
served by email, facsimile, electronic mail or Certified Mail/Return Receipt Requested in
accordance with the Texas Rules of Civil Procedure on October 12, 2020 to the following
counsel of record:

Michael D. Jones

mjoines@jonesgill.com

Joseph D. Porter

jporter@jonesgill.com

Jones Gill Porter Crawford & Crawford LLP
6363 Woodway, Suite 100

Houston, Texas 77057

/s/ Barry F. Cannaday
Barry F. Cannaday

US_Active\114723695\V-1EXHIBIT A
TO

SUPPLEMENT TO MOTION TO EXCLUDE EXPERT
TESTIMONY OF JEFF WEEMSOpinion issued August 30, 2018

 

In The

Court of Appeals
For The

First District of Texas

NO. 01-17-00180-CV

PEREGRINE OIL & GAS, LP, Appellant
Vv.
HRB OIL & GAS, LTD. AND VHPM, LLC, Appellees

 

On Appeal from the 190th District Court
Harris County, Texas
Trial Court Case No. 2016-45652

 

MEMORANDUM OPINION
Appellant, Peregrine Oil and Gas, LP (“Peregrine”), challenges the trial
court’s judgment in favor of appellees, HRB Oil & Gas, Ltd. and VHPM, LLC
(collectively “HRB”), on its claims against HRB for breach of contract and money

had and received. In six issues, Peregrine contends that the trial court erred ingranting summary judgment in favor of HRB and denying Peregrine’s
summary-judgment motion.

We affirm in part and reverse and remand in part.

Background

In its original petition, filed on July 8, 2016, Peregrine alleges that it entered
into an agreement with HRB and other entities entitled “Participation Agreement,
Block A-155, Galveston Area, South Addition, OCS-G 30654” (the “Participation
Agreement”), which set forth the terms and conditions under which the parties
would “participate in the drilling of wells” on an offshore oil and gas lease
between Peregrine and the United States Department of Interior, Minerals
Management Service.

To earn an interest from Peregrine, the “Operator” under the lease, HRB and
the other entities had to, pursuant to the Participation Agreement, pay their share of
expenses. Under Exhibit “A” to the Participation Agreement, IRB was entitled to
an 8.10811% working interest and 6.43243% net revenue interest “before payout”
and an 6.06108% working interest and 4.82432% net revenue interest “after
payout.” Peregrine, as Operator, marketed production under the lease for HRB,
“remitting proceeds attributable to [HRB’s] interest on a monthly basis” and also
“deliver[ing] monthly joint interest billing (“JIBs”) statements to [HRB]... for

ils... respective share of... costs and expenses.” In December 2015, Peregrinenotified HRB that a reconciliation of accounts was necessary because Peregrine
had come to realize that the payouts and JIBs issued in June 2013 ted been made
based on the before-payout interest and should have been made based on the after-
payout interests as set forth in the Participation Agreement. ‘According to
Peregrine, HRB owed it $210,883.31. And despite its requests, HRB failed to
reimburse Peregrine. Thus, Peregrine, through March 2016, retained $39,648.54 in
sales from HRB’s production under the lease and applied that amount to HRB’s
“obligations” to Peregrine. However, HRB refuses to pay pe remaining
$171,234.77 owed. |

Peregrine asserts causes of action against HRB for breach of contract, based
on HRB’s alleged refusal to return “those funds credited to it but for which it did
not own any working interest” under the Participation Agreement, and for money
had and received. It seeks recovery of $171,234.77, the amounts remaining from
its overpayments to HRB, pre-judgment and post-judgment interest, nd attorneys’
fees.

HRB answered, generally denying Peregrine’s claims and asserting various
affirmative defenses. It subsequently filed a Motion for Partial Summary
Judgment, arguing that Peregrine’s breach-of-contract claim failed as a matter of

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law because “its mere acceptance of overpayments due to Peregrine’s negligence

cannot be considered a breach of contract” under the Participation Agreement.|

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And HRB asserted that the two-year statute of limitations barred a claim

for money had and received. |
After Peregrine obtained a continuance of the nnn hee hearing, it
deposed HRB’s corporate representative, Ben Hale. Peregrine asked Hale about
HRB’s compliance with the Participation Agreement and the OffsHore Operating
Agreement (“OOA”), which is attached as Exhibit “C” to the! Participation

Agreement. |
HRB then filed its Amended Motion for Partial Sumanaty Judgment,
asserting that there is no “promise or undertaking of HRB to pay eregrine any
amounts for alleged overpayments” in paragraph 4 of the Partcipatin Agreement,
the assignment delineating HRB’s working and revenue interests (“Assignment”),
the OOA, or the Accounting Procedure attached to the OOA. It sated that “[i]t
became clear during the deposition of HRB’s corporate representative that
Peregrine is now contending that HRB has a contractual obligatjon under the
[OOA] to repay Peregrine the alleged prior overpayment of setsiateon revenues
and pipeline revenues.” And HRB asserted that the OOA has no provisions
“relating to the accounting for (or repayment of) revenues received fiom the sale of
production (or transportation revenues received from third parties). Rather, the

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OOA “only addresses the payment of costs incurred in the operation, of the” lease. |
OSS Incutret’ In the Oper pecans

Thus, even “assuming arguendo that Peregrine’s retroactive ctberaitons arecorrect (which HRB disputes), HRB has no contractual obligation under the
Assignment, the Participation Agreement or the [OOA] . . . to repay, Peregrine the
alleged overpayment of revenues made by Peregrine.” HRB argued that
Peregrine’s breach-of-contract claim fails “as a matter of law” because HRB did
not breach any contractual provision. And it further argued that Peregrine’s claim
for money had and received fails “as a matter of law” because it was brought
outside the two-year statute of limitations. |

HRB attached to its Amended Motion for Partial Summary Judgment the
Participation Agreement, the Assignment, and the Payout Notification and Request

for Assignment (“Payout Notification”) in which Peregrine stated that “payout”

————

 

 

under the Participation Agreement had occurred on June 1 a The Payout

Notification further advised HRB that Peregrine had made retroactive adjustments
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to HRB’s costs and revenues based on the payout date and its baer that it had

overpaid HRB by $210,883.31. HRB also attached to its motion Peregrine’s
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responses to HRB’s first and second interrogatories in which Peregrine admitted

that its claim for breach of contract is based upon the alleged breach of Paragraph 4
of the Participation Agreement and the terms of the Assignment. |

In its response to HRB’s Amended Motion for Partial st ry Judgment,

Peregrine argued that because HRB had filed the motion before Peregrine had filed

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its amended petition, IIRB’s motion does not address the ogni? basis for its

|breach-of-contract claim under Article 8.7 of the OOA. In relevant part, this

provision requires that “if a party believes that Operator’s charges, or a portion

thereof, are incorrect,” it must “nevertheless pay the charges claimed by Operator”
and then later “notify Operator that the charges are in dispute.” Pefegrine further
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asserted that Hale, in his deposition, admitted to HRB’s failure to comply with this
provision. Thus, even assuming that HRB is correct that the overpayments at issue
were not proper charges under the OOA, the OOA’s plain language required HRB
to first pay the charges and then object to their validity. Peregrine ! her argued
that the statute of limitations does not bar its claim for money had and received
because it did not begin to run unti! November 2015, when Peregrin¢ sent HRB an
invoice for the overpayments.

Peregrine attached to its response the Participation Apresstsas a copy of a
September 2014 email regarding payout; an Accounts Receivable Summary
Statement, dated November 30, 2015; the Payout Notification; a Notice of Pending
Default, dated February 9, 2016; and the deposition transcript of Hale in which he
testified that although HRB had received a JIB including account #djustments in
the amount of $210,883.31, it did not pay this amount. It alsa attached the
Affidavit of Timothy A. Austin, a Vice President of Business De lstopment and

Land for Peregrine. In it, he testified about the billing and payment practices

between Peregrine and HRB, explaining that reconciliation of the) accounts wasnecessary because “between June 2013 and April 2014, all non-Operators received
and paid JIBs based 1 on their incorrect_and higher before[-]payout ... working
interest” and “had been paid proceeds of production by Peregrine at {their incorrect
and higher [before-payout] net revenue interest.” Austin further stated that he had
more than thirty-five years of experience in the oil and gas|industry and
reconciliation of accounts and reimbursement for overpayments after payout is a
common practice in the industry.

In its reply, HRB asserted that the only “charges” it was obligated to pay

 

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under Article 8.7 of the OOA were “costs incurred in connection with operations."(
Specifically, HRB asserted that there are “no provisions of the OOA directly

addressing what ‘charges’ Peregrine is authorized to include in JIBs and the other

 

provisions of the OOA, coupled with common sense and Peregrine’s own
statements, support the conclusion that the ‘charges’ covered by,
for which HRB is contractually obligated to pay—are the costs assotiated with the
drilling, completing, equipping and operating a well.” To hqld otherwise,
according to HRB, would impose a contractual obligation on it to pay any charge
Peregrine includes in its JIBs, which is unreasonable as those charges “must have
some relation to the costs of drilling, completing, equipping or operating” the
lease. In regard to the statute of limitations barring Peregrine’s claim for money

* . ns |
had and received, HRB asserted that Peregrine’s argument in its response concernsonly tolling and it did not plead for the application of the discovery rule or
fraudulent concealment.

On November 8, 2016, Peregrine filed its first amended original petition,
adding, among other items, the allegation that HRB had breached the OOA by
failing to pay Peregrine the $210,883.31 owed to it after delivery of the November
2015 invoice. This, according to Peregrine, was contrary to the ex press terms of
Article 8.7 of the OOA, which requires a party who believes the Operator's
charges are incorrect to “nevertheless pay the charges claimed by Operator” and
}
then “notify Operator that the charges are in dispute... .”

Peregrine subsequently filed a motion for summary judgment on its

 

breach-of-contract claim against HRB, asserting that Article 22.5) of the OOA
obligated HRB to reimburse it for its costs incurred in delivering d disposing of
HRB’s share of oil, gas, or condensate. Despite receiving an invoic in November
2015,' which included the amount that HRB owed to Peregrine as b result of the
account adjustments, HRB failed to pay Peregrine. Peregrine further asserted that
Article 8.7 of the OOA requires a party disputing a charge from the Operator to

first pay the charge and then notify the Operator that it objects to the kharge. Thus,

according to Peregrine, “HRB’s continued non-payment of the amounts owed

Peregrine also asserted that it had complied with its obligations under the OOA to
perform all account adjustments within twenty-four months of the end of the
calendar year in which the incorrect payments or charges were made.

8{Participation Agreement] and OOA constitute a breach of contract,” warranting

Peregrine and [its] . . . disregard and failure to follow the provisions et forth in the
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summary judgment in its favor. |

Peregrine attached to its summary-judgment motion the} Participation

 

Agreement; an Accounts Receivable Summary Statement sent to HRB in
November 2015 that includes a “Miscellaneous Invoice” for $210,883.31; the
Payout Notification, dated December 15, 2015, and sent to HRB; the deposition
transcript of Hale; and the affidavit of Austin.

In its response to Peregrine’s summary-judgment motion, te asserted that
it had no contractual obligation to return any overpaid revenues. And, even if it
did, it disputed Peregrine’s “calculation of the alleged overpayments because
Peregrine’s calculation of payout included gas transportation revenues owed to
HRB under a completely separate and distinct Production Handling Agreement.”
Thus, as such, revenues “should not have been credited as prodution revenues
from the Test Well which was the subject of the Participation Agree ! ent.”

After a hearing, the trial court, on February 8, 2017, denied Peregrine’s
summary-judgment motion and granted HRB’s summary judgment|motion, And
Peregrine filed a motion for reconsideration. Then, on March 8, 2017, the trial
court withdrew and replaced its February 8, 2017, order with an Ashended Order,

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specifying that HRB’s “Amended Motion for Partial Summary Judginent asserting

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|that the breach of contract claims in [Peregrine’s] First Amended Original Petition
fail, as a matter of law, to state a cause of action is GRANTED.” It further granted
HRB’s “Amended Motion for Partial Summary Judgment asserting that Texas’ [s]
two[-]year statute of limitations applies to [Peregrine’s] claims for overpayments.”
And it denied Peregrine’s motion for reconsideration. The trial court signed its
final judgment in favor of HRB on April 18, 2017.

Amended Pleadings

 

In its first and second issues, Peregrine argues that the trial court erred in
granting summary judgment in favor of HRB on a superseded pleading because
after HRB had filed its amended summary-judgment motion, Peregrine filed its
first amended original petition, asserting a new basis for its brea h-of-contract

claim.

Generally, “|a| plaintiff's timely filed amended pleading supersedes all
previous pleadings and becomes the controlling petition in the cage.” Elliott v.
Methodist Hosp., 54 8.W.3d 789, 793 (Tex. App.—lIlouston [1st Dist) 2001, pet.
denied); see also TEX. R. Civ. P. 63, 65. A plaintiff timely files an amended
pleading if it does so seven days before trial. TEX. R. Clv. P. 63; see also Sosa v.
Cent. Power & Light, 909 S.W.2d 893, 895 (Tex. 1995) (under rule 63, leave not
required for plaintiff to amend if amended petition filed “seven Lays or more

before the date of trial” (internal quotations omitted)). For purposes of rule 63,|
“[a] summary judgment proceeding is a trial.” Goswami v. Metro. Sav. & Loan

Assn, 751 $.W.2d 487, 490 (Tex. 1988); Wheeler v. Yettie Kersting|Mem'l Hosp.,
761 S.W.2d 785, 787 (Tex. App.—Houston [1st Dist.] 1988, writ denied).

Peregrine filed its first amended original petition on November 8, 2016, and
the record shows that the trial court signed its order granting mae judgment
almost three months later on February 8, 2017. Thus, Peregrine Umely filed its
first amended original petition. See Sosa, 909 S.W.2d at 895 wahond amended
petition timely filed “exactly one week before a scheduled sumr jary judgment
hearing”). Accordingly, we conclude that Peregrine’s first amended original
petition was its live pleading at the time that the trial court rendered summary
judgment on its claims. See Sosa, 909 S.W.2d at 895; Elliott, 54 $.W.3d at 793.

Once a plaintiff has timely amended its petition to add new claims, the
defendant is not entitled to a summary judgment on the plaintiff's entire case,
unless the defendant amends or supplements its summary-judgment motion to
address the newly-added claims. See Rotating Servs. Indus., Inc. y. Harris, 245
S.W.3d 476, 487 (Tex. App—Houston [1st Dist.] 2007, pet. denied); see also
Sosa, 909 S.W.2d at 895 (when amended petition timely filed, trial a urt must base
its decision on amended pleading, not any superseded petition); Johyson v. Rollen,

818 S.W.2d 180, 183 (Tex. App—Houston [1st Dist.] 1991, no writ) (“A summaryjudgment may not be granted...on a cause of action not addressed in the
summary judgment proceeding.”).

However, although a trial court errs in granting summary — ona
ground or claim not addressed in a summary-judgment motion, }such error is
rendered harmless if “the omitted cause of action is precluded as a matter of law by
other grounds raised in the case.” G & H Towing Co. v. Magee, 347 S.W.3d 293,
297-98 (Tex. 2011). Similarly, we may affirm the summary oe if (1) the
amended or supplemental petition essentially reiterates previously-pleaded causes
of action, (2) a ground asserted in the summary-judgment motion conclusively
negates a common element of the newly- and previously-pleaded claims, or (3) the
original motion is broad enough to encompass the newly asserted claims.
Coterill-Jenkins v. Tex. Med. Ass’n Health Care Liab. Claim Trust, 383 S.W.3d
581, 592 (Tex. App—Houston [14th Dist.] 2012, pet. denied). |

Here, Peregrine asserts that HRB’s summary-judgment motion failed to
address the expanded factual basis for its breach-of-contract claim, ‘ pleaded in its
first amended original petition, that “after delivery of its November 2015 JIB to
[HRB], demanding repayment of the $210,883.31 overpayment, [HRB] failed to
pay such amount, contrary to the express language of Article 8.7 of the OOA.”
However, even though HRB filed its amended summary-judgment motion before

[

Peregrine had filed its first amended original petition, “[i]t became clear during the

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12deposition of HRB’s corporate representative that Peregrine is now contending that
HRB has a contractual obligation under the [OOA] to repay Peregrine the alleged
prior overpayment of production revenues and pipeline revenues.”| HRB further
asserted that the OOA has no provisions “relating to the accounting for (or
repayment of) revenues received from the sale of production (or transportation
revenues received from third parties)”; rather, it “only addresses the payment of
costs incurred in the operation of the” lease. It concluded, even “assuming
arguendo that Peregrine’s retroactive calculations are correct |(which HRB
disputes), HRB has no contractual obligation under the Assignment, the
Participation Agreement or the [OOA]. . .to repay Peregrine the alleged
overpayment of revenues made by Peregrine,” and so “Peregrine’s breach of
contract cause of action must fail as a matter of law” because HRB did not breach
any contractual provision.

Further, in reply to Peregrine’s response, HRB also asserted that the only

 

“charges” it was obligated to pay under Article 8.7 of the OOA fr for “costs

incurred in connection with operations.” Specifically, HRB asserted that there are

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“no provisions of the OOA directly addressing what ‘charges’ Peregrine is
authorized to include in JIBs and the other provisions of the 00a) coupled with

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common sense and Peregrine’s own statements, support the conclusion that the

 

‘charges’ covered by Article 8.7—and for which HRB is contractually obligated to

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|pay—are the costs associated with drilling, completing, equipping ar
well.” To hold otherwise, according to HRB, would impose
obligation on it to pay any charge Peregrine includes in its JI
unreasonable as those charges “must have some relation to the co:

completing, equipping or operating” the lease.

d operating a
a contractual
Bs, which is

ts of drilling,

Even though HRB filed its amended summary-judgment motion before

Peregrine had filed its first amended original petition, the amended motion was

broad enough to encompass the newly asserted claims in Peregrine’s

new petition?

1
See id. And the trial court, in its March 8, 2017 amended order, specifically

granted summary judgment on the “breach of contract claims in [Peregrine’s| First

Amended Original Petition.” Accordingly, we hold that the
summary-judgment was not based on a superseded pleading.
We overrule Peregrine’s first and second issues.

Summary Judgment ,

In its third, fifth, and sixth issues, Peregrine contends that

trial court’s

he trial court

erred in granting summary judgment on Peregrine’s claims for men of contract

and money had and received and in denying Peregrine summary judgment on its

claim for breach of contract.

Having concluded that HRB’s summary-judgment motion was b

oad enough to

encompass the newly asserted claim in Peregrine’s first amended original petition,
we need not address HRB’s claim that Peregrine waived its argument to this

alleged defect.
14To prevail on a summary-judgment motion, a movant has

the burden of

establishing that it is entitled to judgment as a matter of law and there is no

genuine issue of material fact. TEX. R. Civ. P. 166a(c); Cathey

. Booth, 900

S.W.2d 339, 341 (Tex. 1995). When a plaintiff moves for summary judgment on

its own claim, it must conclusively prove all essential elements of its cause of

action. Rhdéne—Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1

defendant moves for summary judgment, it must either (1) dispro

999). When a

le at least one

essential element of the plaintiff's cause of action or (2) plead and conclusively

establish each essential element of its affirmative defense, thereby’
plaintiff's cause of action. Cathey, 900 S.W.2d at 341; Yazdchi v. B
N.A., 177 8.W.3d 399, 404 (Tex. App—Houston [lst Dist.] 2005

When deciding whether there is a disputed, material fact issue preclu

defeating the
ank One, Tex.,
pet. denied).

ding summary

judgment, evidence favorable to the non-movant will be taken as true. Nixon v.
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Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). “Ev
inference must be indulged in favor of the non-movant and any d
resolved in its favor.” Id. at 549.

When, as here, both sides move for summary judgment and

ry reasonable

ubts must be

ithe trial court

grants one motion and denies the other, we review the summary judgment proof

presented by both sides and determine all questions presented. Sée CenterpointEnergy Hous. Elec., L.L.P. v. Old TIC Co., 177 S.W.3d 425, 430|(Tex. App.—
Houston [1st Dist.] 2005, pet. denied).
Breach of Contract

In its third and sixth issues, Peregrine argues that the trial court erred in
granting HRB summary judgment, and denying Peregrine summary) judgment, on
Peregrine’s breach-of-contract claim because HRB did not “conclusively negate
any element” of the claim and Peregrine “conclusively established leach essential
element” of the claim.

A successful breach-of-contract claim requires proof of the following

 

essential clements: (1) the existence of a valid contract, (2) performance or
tendered performance by the plaintiff, (3) breach of the contract by the defendant,
and (4) damages sustained by the plaintiff as a result of the defenfant’s breach.
B& W Supply, Inc. v. Beckman, 305 $.W.3d 10, 16 (Tex. App.-Houston [Ist
Dist.] 2009, pet. denied); Winchek v. Am. Express Travel Related Servs, Co., 232
S.W.3d 197, 202 (Tex. App.—Houston [1st Dist.] 2007, no pet.).

In construing a written contract, the primary concern is to ascertain and give
effect to the parties’ intentions as expressed in the document. thiton Cowboy
Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 334 (Tex. 2011);
Frost Nat'l Bank v. L & F Distribs., Ltd., 165 8.W.3d 310, ste (Tex. 2005).

We begin with the contract’s language. Jtalian Cowboy, 341 SiW.3d at 333.

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|Contract terms are given their plain, ordinary, and generally accepted meanings

unless the contract itself shows that the terms were used in a techni

dal or different

sense. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662) (Tex. 2005).

When a contract contains an ambiguity, a fact issue-arises as to the intent of the

parties and, therefore, granting summary judgment is improper. See Plains Expl.

& Prod. Co. v. Torch Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex. 2015)

 

(“Summary judgment is not the proper vehicle for resolving disputes about an

ambiguous contract.”); Moncrief v. ANR Pipeline Co., 95 8.W.3d 544, 546-47

(Tex. App—Houston [1st Dist.] 2002, pet. denied) (analyzing whether ambiguity

existed, which would create fact issue precluding summary judgment).

Peregrine specifically argues that HRB breached Article 8.

because it refused to pay the November 2015 JIB within forty-five

7 of the OOA

days of billing

for the complained-of overpayments.’ Peregrine asserts that HRB was “required to

first pay the charge and then initiate an objection to the charge.” HRB asserts that

the allegedly overpaid revenues are not “charges due” under the;OOA. And,

absent any contractual provision obligating HRB to refund overpaid revenues,

Peregrine cannot sustain a breach-of-contract claim.

Article 8 of the OOA provides, in relevant part:

HRB breached the Participation Agreement.
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Peregrine does not raise any issues on appcal regarding its asseafion below that

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8.1 Basis of Charge to the Parties. Subject | to the
provisions of this Agreement, Operator shall pay all costs incurred
under this Agreement, and each Party shall reimburse Operator in

accounting for expenditures shall be made and done pu
“Exhibit C.”

ant to

8.7 Unpaid Charges and Default. Ifa Party fails to|pay the
charges due under this Agreement within forty-five (45) days after
rendition of Operator’s statement, . . . Operator [may] issue[] notice
of default.... If a Party believes that Operator’s chargds, or a

charges claimed by Operator and may notify Operator
charges are in dispute. Thereafter, Operator and the Non~
shall attempt to resolve the issue within sixty (60) days after r
payment.

(Emphasis added.)
Article 8.7 clearly provides that a party should first pay “chai

notify the Operator of any charge that is in dispute. However, the t

proportion to its Participating Interest. All charges, u and

portion thereof, are incorrect, that Party shall nevertheless = the

hat the
perator
eipt of

ges” and then

erm “charges”

is not defined specifically anywhere in the Participation | the OOA, or

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the Accounting Procedure Offshore Joint Operations (“Accounting Procedure”) in

Exhibit “C” to the OOA. And while the Accounting Procedure dogs set forth the

expenses that the “Operator shall charge the Joint Account,” incl

direct charges and overhead for which Peregrine may charge the Jo

The Accounting Procedure defines “Joint Account” as “the accoul
charges paid and credits received in the conduct of the Joint Operat

uding specific

int Account, it

int showing the
ions and which

are to be shared by the Parties.” “Joint Operations” is defined asj“all operations

necessary or proper for the development, operation, protection and

maintenance of

the Joint Property.” And “Joint Property” is defined as “the rea] and personal

property subject to the [OOA] to which this Accounting Procedure

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s attached.”also contemplates “unusual charges and credits” that “shall be separately identified

and fully described in detail” in regard to “Statements and Billings.”

Additionally, the plain meaning of the word “charge” does n

t provide any

guidance as to whether an invoice for return of overpayments under these

circumstances constitute a “charge” that must be paid first, regardless of whether it

is in dispute. As a noun, “charge” is defined as a “[p]rice, cost; or expense.”

Charge, BLACK’S LAW DICTIONARY (9th ed. 2009). As a verb, the
is defined as “[t]o demand a fee” or “to bill.” Jd.

Here, the parties’ intent is unclear in regard to what charges

ord “charge”

non-operator

is required to pay, even when they are contested, to avoid breaching Article 8.7 of

the OOA. On the one hand, Article 8.7 does provide that the non.

operator must

pay the Operator’s charges, even if it believes that they are incorrect. It may then

subsequently notify the Operator if any charge is in dispute. Ani

“charges” is

undefined. Further, Timothy Austin, a Vice President for Business} Development

and Land for Peregrine who has worked in the industry for “more than thirty-five

years,” stated in his affidavit that such reconciliation of

accounts and

reimbursement for overpayments after payout is a common ptactice in the

industry.» On the other hand, Article 8.1 of the OOA requires that all “charges,

To determine whether a contract is ambiguous, we may examine extrinsic

evidence to interpret the contractual terms used by the parties sp long as such

evidence does not contradict or vary the meaning of the explicit

19

language of the|

credits and accounting for expenditures shall be made and done pursuant to” the
Accounting Procedure, And the Accounting Procedure does not appear to account
for charges in the form of reimbursement of allegedly overpaid|revenues. It
appears that the parties did not intend for the term “charges,” in reg ard to HRB’s
obligation to pay before contesting, to include anything that Peregrine might
possibly include in an invoice. However, it is not clear wheter the peste intended

the word “charges” to be interpreted as broadly as argued by |Peregrine, as

 

 

narrowly as argued by HRB, or somewhere in between.

We conclude that the summary-judgment evidence in the rpeord raises a
genuine issue of material fact as to whether the alleged operon are
“charges” due under the agreement. See .M Davidson, Inc. v. Webster, 128
S.W.3d 223, 229 (Tex. 2003) (contract ambiguous if subject to} two or more
reasonable interpretations). Accordingly, we hold that the trial ¢ourt erred in
granting HRB summary judgment on Peregrine’s breach-of-contract ¢laim,

We sustain Peregrine’s third issue,

Having held that there is a fact issue as to whether HRB breached Article 8.7
of the OOA, this same fact issue precludes summary judgment in Pelegrine’s favor
on its breach-of-contract claim. See Steel, 997 S.W.2d at 223 bicncie must

!
conclusively prove each essential element of its cause of action tobe entitled to
|

written contract. See Nat'l Union Fire Ins. Co. of Pittsburgh, Pa, v. CBI Indus.,
Inc., 907 $.W.2d 517, 521 (Tex. 1995).

20summary judgment). Accordingly, we hold that the trial court did not err in

denying Peregrine’s summary judgment on its breach-of-contract cla
We overrule Peregrine’s sixth issue.

In its fifth issue, Peregrine contends that the trial court, in

im.

rendering its

decision, erred in relying on Mobil Producing Texas & New Mexico, Inc. v.

Cantor, 93 S.W.3d 916 (Tex. App.—Corpus Christi 2002, no pet.).
stands for the proposition that, absent a contractual obligation on poi
be no breach of contract for a defendant’s failure to return alleged

and, thus, there could only “be recovery under a quasi-contract tl

Mobil merely
t, there could
verpayments,

heory such as

unjust enrichment.” Jd. at 919-20. This principle is directly applicable to the

present case. If there is no contractual provision on point that would prevent HRB

from accepting, or requiring HRB to return, alleged revenue 9verpayments,
]

Peregrine would only be able to seek recovery through a claim in bouity, not for

breach of contract. See Fortune Prod. Co v. Conoco, Inc., 52 S.

3d 671, 684

(Tex. 2000) (citing Sw. Elec. Power Co. v. Burlington N. R.R., 966 S.W.2d 469-70

(Tex. 1998) (recognizing overpayments under a contract can be rec!

theory of restitution or unjust enrichment under certain circumstan

vered under a

ces)). This is

consistent with HRB’s argument in the trial court and on appeal that there is no

contractual provision that governs return of the alleged revenue

And there is nothing in the record to suggest that the trial court ©

21

verpayments.

trapolated thereasoning of Mobil beyond this basic legal principle. Accordingly.
the trial court did not err in its reliance, if any, on Mobil.

We overrule Peregrine’s fifth issue.
Money Had and Received

In its fourth issue, Peregrine argues that the trial court erred in
summary judgment on Peregrine’s claim for moncy had and receive

the two-year statute of limitations because the claim did not accrue

we hold that

granting HRB
d as barred by

ntil Peregrine

had performed a reconciliation of accounts in November 2015 and realized how

much money it had allegedly overpaid HRB. See TEx. Civ. PRAC.
ANN. § 16.003 (a) (Vernon 2017); Merry Homes, Inc. v. Luc Dao, 35
884 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (holding clai

had and received governed by two-year statute of limitations

|
unjust-enrichment claims). |

& REM. CODE

9 S.W.3d 881,

 

ms for money

applicable to

When a cause of action accrues is a question of law. Pra ident Life &

Accident Ins. v. Knott, 128 8.W.3d 211, 221 (Tex. 2003). A cduse of action

|
accrues and the statute of limitations begins to run when facts come

that authorize a party to seek a judicial remedy, regardless of when

into existence

he plaintiff is

 

aware of such facts. /d. When applicable, the discovery rule will toll the statute of
/

{
limitations such that it does not begin to run until the date on which the plaintiff
i

knew or reasonably should have known of the facts giving rise to its cause of

|
22 |
jaction. Barker v. Eckman, 213 S.W.3d 306, 311-12 (Tex. 2006). The discovery

rule is an affirmative defense that must be affirmatively pleaded and
312. To invoke the discovery rule, a plaintiff must establish that its
inherently undiscoverable and objectively verifiable. Id.

A person must bring a suit for money had and received no
years after the date the cause of action accrues. Merry Homes, 359

(holding claims for money had and received governed by two-

limitations applicable to unjust-enrichment claims). A cause of act
|
had and received generally accrues when money is paid. Merry Hon

Dao, No. 14-16-00724-CV, 2017 WL 4159206, at *3 (Tex. App.—

Dist.] Sept. 19, 2017, no pet.) (mem. op.) (citing City of Beaumont
S.W.2d 448, 452 (Tex. 1947); Autry v. Dearman, 933 S.W.2d 182,

App.—Houston [14th Dist.] 1996, writ denied)).

proved, Jd. at

injury is both

ater than two
8.W.3d at 884
ear statute of
on for money
ies, Inc. v. Luc
Houston [14th
y. Moore, 202

190 n.7 (Tex.

Here, it is undisputed that over two years had passed from the date of the last

overpayment until Peregrine sued HRB for money had and received.° Peregrine

asserts, however, that its cause of action for those funds did not acer
had reconciled its accounts and submitted a JIB for repayment in Ni

It is true that certain circumstances may affect an accrual date,

 

6

between the date of payout, June 2013, and the date by which
adjusted to reflect their correct after-payout interests, May 2014. P
file suit until July 8, 2016.

23

e until after it
vember 2015.

uch as when

Peregrine admits that it performed the reconciliation of accounts for a period

accounts were
regrine did notmoney is originally held rightfully, but later retained incquitably,| or where the
viability of a cause of action depends upon the outcome of another case. See, e.g.,
HEB, L.L.C. v. Ardinger, 369 S.W.3d 496, 513 (Tex. App.—Fort Worth 2012,
pet. denied) (holding claim for money had and reccived did not) accrue when
money paid, but instead when party retained funds paid under jcontract after
contract rescinded). But, this is not the case here where Peregrine’s Claim is that it
accidentally overpaid IIRB by not adjusting the interest after payout) and it did not
become aware of the problem until it had reconciled its accounts and sought

reimbursement in the November 2015 JIB. And Peregrine neither pleaded nor

 

raised a fact issue about application of the discovery rule or fraudulent
concealment regarding its cause of action for money had and received. See Woods
v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988) (holding discovery
rule waived where not pleaded or proved). |

Peregrine argues that because it followed the Accounting Procedure within
the time provided in the OOA, its cause of action did not accrue until it had
reconciled its accounts. It is effectively arguing for the application of the
discovery rule as it is relying on its November 2015 reconciliation pf accounts as
the date it discovered the erroneous overpayments. See Barker, 213 8.W.3d at 312
(discovery rule works to toll statute of limitations until date on which plaintiff

|
|
i
|
i

knew facts giving rise to injury).

24In support of its position, Peregrine also relies on Article 1.4 gf Exhibit C to
the OOA, which provides, in relevant part:

4. Adjustments

Payment of any such bills shall not prejudice the right |of any
non-Operator to protest or question the correctness thereof, provided,
however, all bills and statements rendered to non-Operhor by
Operator during any calendar year shall conclusively be presymed to
be true and correct after twenty-four (24) months following the end of
any such calendar year, unless within the said twenty-four (24) month
period a Non-Operator takes written exception thereto and makes
claim on Operator for adjustment. No adjustment favorable to

Operator shall be made unless it is made within the same préscribed
period....

While this provision arguably requires Peregrine to question the correctness of past
bills and make adjustments within twenty-four months, soe does this
provision, or any other evidence in the record, demonstrate that the parties
intended to extend the statute of limitations for causes of action arising from
reconciliation of improper charges to accounts.

Accordingly, we hold that the trial court did not err in granting HRB
summary judgment on Peregrine’s claim for money had and re¢eived on the

ground that it is barred by the two-year statute of limitations.

We overrule Peregrine’s fourth issue.

aConclusion

We reverse the portion of the trial court’s judgment granting HRB summary
judgment on Peregrine’s breach-of-contract claim and remand this claim to the trial
court for further proceedings consistent with this opinion. We affirm the

remainder of the trial court’s judgment.

Terry Jennings

{
|
Justice |

Panel consists of Chief Justice Radack and Justices Jennings and Lloyd.

26EXHIBIT B
TO

SUPPLEMENT TO MOTION TO EXCLUDE EXPERT
TESTIMONY OF JEFF WEEMSPEREGRINE OIL & GAS, LP

Plaintiff

Vv.

HRB OIL & GAS, Ltd. and
VHPM, LLC

Defendants

11/18/2019 3:54 PM

Marilyn Burgess - District Clerk Harris County

CAUSE NO. 2016-45652

§
§
§
§
§
§
§
§
§
§
§
§

190" JUDICIAL DISTRICT

PLAINTIFF’S EXPERT WITNESS DESIGNATION

IN THE DISTRICT COURT OF

HARRIS COUNTY, TEXAS

Envelope No. 38588361
By: Ozuqui Quintanilla
Filed: 11/18/2019 3:54 PM

To: Defendants, HRB Oil & Gas, Ltd. and VHPM, LLC, by and through their
counsel of record, Barry M. Cannady, DENTONS US LLP, 2000 McKinney
Avenue, Suite 1900,Dallas, Texas 75201.

Peregrine Oil & Gas, LP, (“Peregrine”), Plaintiff in the above styled and numbered

cause, serves its Expert Witness Designation as required by the Docket Control Order in

this litigation upon Defendant.

Respectfully submitted,

/s/ Michael D. Jones

Michael D. Jones
mjones@jonesgill.com

Texas Bar No. 10929350
Joseph D, Porter
jporter@jonesgill.com

Texas Bar No. 16150100

JONES GILL PORTER CRAWFORD
& CRAWFORD LLP

6363 Woodway, Suite 1100
Houston, Texas 77057
713-652-4068 Phone
713-651-0716 Facsimile
ATTORNEYS FOR PLAINTIFFCERTIFICATE OF SERVICE

 

Ihereby certify that on this 18" day of November, 2019, a true and correct copy of the
above and foregoing was sent to all counsel of record at the following address by electronic
transmission, first class U. S. Mail, certified mail, return receipt requested, facsimile
transmission, email, messenger/hand delivery, or express delivery:

Barry F. Cannaday

DENTONS US LLP

2000 McKinney Avenue, Suite 1900
Dallas, Texas 75201

Telephone: (210 259-1855
Facsimile: (214) 259-1910
Barry.cannaday@dentons.com

/s/ Michael D. Jones
Michael D. JonesPLAINTIFF’S EXPERT WITNESS DESIGNATION

Rule 194.2(f, Tex.R.Civ.P. requires the disclosure of the following and it provides:

For any testifying expert:

lL. the expert’s name, address, and telephone number;

Response:

A.

Terrell M. Lanier
tlanier@taladroinvestments.com
Phone 713 589-6803

8022 Siney Gautreaux Road
Abbeville, LA 70510

Jeff Weems

Partner, Staff Weems, LLP
weems@staffweems.com
281-903-5989

6363 Woodway, Drive, Suite 1100
Houston, Texas 77057

Michael D. Jones

Partner, Jones Gill Porter Crawford & Crawford LLP
mjones@jonesgill.com

713-652-4068

6363 Woodway, Drive, Suite 1100

Houston, Texas 770572.

the subject matter on which the expert will testify;

Response:

A.

Terrell M. Lanier is a mixed fact and expert witness in this litigation.
Mr. Lanier will provide factual testimony but some of his testimony
can be considered expert testimony and as such Dome is designating
Mr. Smith as an expert witness. Mr. Lanier will testify as to
Peregrine’s calculation of payout for Block A-155, the preparation of
Joint Interest Billings delivered to the non-operators by Peregrine, and
the current status of the Joint Account as it pertains to all non-
operators, including the Defendants. Additionally, Mr. Lanier will
testify as to standard practices regarding accounting forrevenues and
txpenses from oil and gas operations, the calculation of payout, the
iethods of crediting non-operators for production sold by the
operator for the non-operators’ accounts and accounting for
miscellaneous income to be allocated to the participating parties. Mr.
Lanier will testify as to the $189,741.51 in unpaid amounts invoiced
to Defendants.

Jeff Weems is an expert witness in this litigation. Mr. Weems will
testify as to the provisions of the Offshore Operating Agreement and
its related exhibits, including the COPAS exhibit. Mr. Weems will
also testify as to standard practices in the oil and gas industry
regarding 1) the timing and calculation of payout, 2) the necessity and
use of a reconciliation procedure to adjust accounts after payout, 3)
the provisions of the COPAS agreement for adjustments to the joint
account, and the collection of reconciliation amounts through the joint
account maintained by operator, based upon the provisions of the
Offshore Operating Agreement and its exhibits.

Mr. Jones will testify concerning the necessary attorney’s fees
incurred by Plaintiff in prosecuting this litigation. Mr. Jones will
testify concerning the reasonableness of the fees charged to Plaintiff
for this work in Harris County, Texas.

the general substance of the expert’s mental impressions and opinions and a
brief summary of the basis for them, or if the expert is not retained by,
employed by, or otherwise subject to your control, documents reflecting such
information.

Response:

A.

Mr. Lanier is of the opinion that Plaintiff correctly accounted for all

4G

revenues and expenses in calculating Payout, all expenses to be
charged to Defendants, all revenues to be disbursed to Defendants,
and all payments made by Defendants. Mr. Lanier is of the opinion
that Defendants have been correctly invoiced, and have failed to pay,
the sum of $189,741.51 through September of 2019, and that
additional amounts will be invoiced monthly going forward for
continuing expenses and operations.

Mr. Weems is of the opinion that the definition of payout is common!
understood in the industry. Mr. Weems is of the opinion that it is

typical in the industry for payout to be recognized some number of

2

months after the actual date of its occurrence. Mr. Weems is further
of the opinion that this delay typically results in a need for
reconciliation of the joint account to address over and under payments
by all parties in the period after payout but before determination of its
occurrence, due to differing working interests and net revenue
interests of the parties before and after payout. Mr. Weems is of the
opinion that the COPAS exhibit provides the authority for such a
reconciliation and a time period for its performance. Mr. Weems is
of the opinion that the COPAS a greement provides the non-operator
with procedures to challenge any invoices delivered by operator while
also protecting the operator from spurious or long-delayed challenges.
Mr. Weems is of the opinion that an invoice by operator to non-
operator is consistent with the OOA and the COPAS exhibit, and thus
valid, when such invoice 1) results at least in part from the marketing
of production by operator for the account of non-operator pursuant to
the OOA, 2) is the result of a reconciliation which also accounted for
all overpayments of expenses by non-operator during the period in
question, 3) is completed and is subsequently posted to the joint
account and invoiced to the non-operator within the time provided in
the COPAS. Mr. Weems is of the further opinion that a non-operator
which fails to pay such an invoice within the time allotted under the
OOA is in breach of the OOA. Mr. Weems is also of the opinion that
the operator and all non-operators, including HRB, have established a
course of dealing over the performance of the PA and the OOA which
establish that all parties intended that “charges” as set out in the OOA,
includes invoiced amounts as set out Peregrine’s pleadings.

Mr. Jones will testify about whether any attorneys’ fees incurred in
this matter are reasonable and necessary and comport with amounts
customarily charged in Harris County, Texas, for similar matters.

he expert is retained by, employed by, or otherwise subject to the control of
the responding party;B.

all documents, tangible things, reports, models, or data compilations
that have been provided to, reviewed by, or prepared by or for the
expert in anticipation of the expert’s testimony; and

the expert’s current resume and bibliography;

Response:

A.

Mr. Lanier has reviewed various invoices and supporting
documentation related to the Participation Agreement and Offshore
Operating Agreement for Block A- 155, Galveston South Addition for
Peregrine Oil & Gas, LP, and the Production Handling Agreement for
Block A-133 production through the Block A-155 platform, all for the
period from December of 2015 through September of 2019, and will
review additional monthly invoices as such are generated.

Mr. Weems has reviewed the Participation Agreement and the
Offshore Operating Agreement with all exhibits, and certain of the
pleadings, orders and opinions filed in this lawsuit.

Mr. Jones has reviewed or will review all of the pleadings, the
discovery and the expert reports from both Plaintiff and Defendants,
as well as the depositions of all deponents. Mr. Jones’ resume is
attached.TERRELL M. LANIER
11408 Twin Oaks Circle
Maurice, LA 70555
(281) 216-6944
Email: tlanier@taladroinvestments.com

CAREER BACKGROUND

SELF EMPLOYED
Consultant Jul 13 to current

Acted as CFO or Controller for upstream oil and gas companies. Provided accounting and financial
infrastructure setups for small to medium oil and gas start-ups as well as for mature oil and gas companies.
Managed day-to-day activities of all financially related departments including finance, accounting,
regulatory, risk management, budgeting and forecasting departments. Evaluated and made
recommendations on strategic acquisitions for the company and raised money from either institutions or
private equity to fund those projects.

- Cox Operating LLC Controller Jan 19 to May 19
- Peregrine Oil & Gas Companies Chief Financial Officer Jan 16 to Dec 18
-  Layline Energy LLC Controller Nov 14 to Dec 15
- Castleton Commodities International Controller Oct 13 to Sep 14

LAYLINE PETROLEUM LLC
Chief Financial Officer/Corporate Controller Jun 08 to Jun 13

Financial and accounting responsibilities for a private equity backed exploration and production company
who operated oil and natural gas wells in Texas, Louisiana, North Dakota and Indiana. Responsibilities
included:
- Preparation of ail financial statements including Balance Sheet, Profit and Loss Statements,
Cash Flow Statements and LOE Statements.
- Responsible for Revenue, Accounts Payable, Joint Interest Billings and Plant Accounting.
- Responsible for Federal and State tax returns including State Regulatory filings.
- Provided private equity monthly, quarterly and annual financial information.
-  Oversaw Risk Management on all company operated wells.
- | Worked with Land Department on Divi