CabelTel International Corporation N/K/A New Concept Energy, Inc. v. Chesapeake Exploration, L.L.C., F/K/A Chesapeake Exploration Limited Partnership and Chesapeake Operating, Inc.

Citation: Not availableDocket: 02-11-00224-CV

Court: Court of Appeals of Texas; July 12, 2012; Texas; State Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

CabelTel International Corporation, now known as New Concept Energy, Inc., appeals a trial court's summary judgment favoring Chesapeake Exploration, L.L.C. and Chesapeake Operating, Inc. The court reviewed motions from both parties regarding rehearing and affirmance of the trial court's judgment. The background reveals that in January 2006, Chesapeake entered a Joint Operating Agreement (JOA) with KEX Energy, LLC for oil and gas exploration in Arkansas, designating Chesapeake as the operator responsible for billing costs to the non-operator, KEX. KEX later assigned its rights to CabelTel in May 2006. Chesapeake stopped receiving payments in June 2006, and despite CabelTel's acknowledgment of a debt and a warning of legal action, CabelTel did not pay the outstanding balance of $556,217.28. Chesapeake filed suit, and the trial court granted summary judgment for amounts owed through December 2007.

The appellate review standard involves assessing evidence favorably for the nonmovant and recognizing that a plaintiff must conclusively prove all essential elements to obtain summary judgment. CabelTel challenges the payment obligation, claiming Chesapeake failed to demonstrate that CabelTel received the necessary billing statements to trigger this obligation. While acknowledging receipt of the statements, CabelTel argues that Chesapeake’s evidence lacked specificity regarding the mailing process. Chesapeake's evidence included the JOA, an affidavit from its Vice President, and deposition testimony from CabelTel's expert, establishing the procedural requirements for billing as per the JOA.

Goben's affidavit confirms that Chesapeake sent monthly billing statements to CabelTel. Talley's testimony indicates that CabelTel provided him with Joint Interest Billing statements from 2006 to March 2007 for an accounting report, establishing that CabelTel received these statements. Actual evidence of receipt negates the need to rely on presumptions, as supported by Childers v. Childers, where proof of receipt was deemed sufficient. CabelTel did not dispute Chesapeake's evidence regarding the receipt of the June 2006 to March 2007 bills, failing to raise a factual issue.

CabelTel's motion for rehearing claims that the evidence does not specify when the April to December 2007 bills were received. The only evidence regarding receipt dates comes from emails between Talley and Chesapeake from April 2009. Despite CabelTel's argument that a factual dispute exists due to the twenty-four-month exception period in the Joint Operating Agreement (JOA), Talley's testimony indicates he never made a written exception or claim for adjustment, rendering this argument ineffective regarding the earlier bills.

For bills from April to December 2007, there is no direct evidence of receipt, necessitating reliance on circumstantial evidence to establish a presumption of receipt. A presumption can arise if there is proof that a letter was properly addressed, stamped, and mailed. Chesapeake cites several cases supporting that the standard practice of mailing and Goben’s affidavit can establish this presumption, as seen in Cooper v. Hall and Adams v. John Hancock Mutual Life Insurance Co.

In *Texaco, Inc. v. Phan*, the court held that a presumption of receipt arises when a default notice is automatically generated by the court’s computer, correctly addressed, and mailed by a vendor. Similarly, in *Jimmy Swaggart Ministries v. City of Arlington*, the presumption was upheld based on the court clerk's testimony about proper mailing procedures. In contrast, Chesapeake failed to provide evidence of its mailing procedures beyond stating it complied with the Joint Operating Agreement (JOA). The mere issuance of monthly billing statements did not demonstrate proper addressing, sufficient postage, or appropriate mailing to CabelTel. Citing *Tex. Emp. Ins. Ass’n v. Wermske*, the court noted that no presumption of receipt can arise from inadequate mailing practices. Chesapeake’s evidence for bills from April to December 2007 did not establish a presumption of receipt, leading to a conclusion that summary judgment on those bills was inappropriate. Consequently, CabelTel's first issue regarding those bills was sustained, rendering the remaining issues unnecessary for consideration.

CabelTel's second issue challenged the summary judgment based on a potential fact issue regarding the timely written exceptions to the billing statements. The JOA stipulates that bills to Non-Operators are presumed accurate after 24 months unless exceptions are made within that period. CabelTel contended that Talley had made timely exceptions via email, affidavit, and reports starting April 20, 2009, and argued that these exceptions met the JOA requirements. Talley’s affidavit invoked COPAS guidelines, specifically AG-19, which defines an "exception" as a written audit finding that includes detailed supporting documentation submitted to the Operator prior to or alongside the Audit Report.

Talley testified that the language in the Joint Operating Agreement (JOA) regarding written exceptions and claims for adjustment is standard and that he failed to submit such a written exception, which is necessary to challenge the presumptive truth of the bills. CabelTel did not raise a factual issue regarding the timeliness of its written exception. In its motion for rehearing, CabelTel referenced the case Paint Rock Operating, LLC v. Chisholm Exploration, Inc., where marking up billing statements was deemed sufficient for a written exception. However, the appellate court clarified that its ruling was specific to that case and did not establish a general standard for what constitutes a written exception. Talley confirmed that COPAS guidelines, including AG-19, applied to the JOA, and he did not make a written exception as defined in the contract.

CabelTel's argument that Chesapeake obstructed Talley's audit attempts was dismissed since Talley admitted he never conducted an audit, and there was no evidence that CabelTel attempted an audit independently. Consequently, CabelTel's claims regarding audit rights were overruled. Additionally, CabelTel contested the accuracy of charges in Chesapeake's invoices. However, due to the absence of timely written exceptions or claims for adjustment, Chesapeake's invoices are deemed accurate and conclusive as per the JOA, leading to the overruling of CabelTel’s arguments regarding billing accuracy.

CabelTel's issues regarding the June 2006 to March 2007 bills have been overruled, leading to the affirmation of the trial court’s summary judgment in favor of Chesapeake for that period. Conversely, CabelTel's first issue concerning the April 2007 to December 2007 bills is sustained, resulting in a reversal of the trial court's summary judgment for those bills and a remand for further proceedings. The case references that Chesapeake did not move for summary judgment on its suit on account claim, and a settlement was reached regarding the remaining disputed amount. CabelTel contends it did not agree to AG-19 governance; however, documentation indicates that the Accounting Procedure section in the Joint Operating Agreement includes COPAS terms, which CabelTel's expert confirmed apply. The court finds no genuine dispute about the applicability of AG-19 definitions to the JOA. Additionally, testimony reveals that CabelTel did not issue any written exceptions or claims for adjustments regarding the agreement as required. Chesapeake established a sum of $540,069.81 owed by CabelTel for the specified months. On rehearing, Chesapeake waived its claim on the remaining disputed bills but failed to provide authority for modifying the judgment accordingly, leading to the denial of its request.