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

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CabelTel International Corporation, now known as New Concept Energy, Inc., appealed a summary judgment granted by the trial court in favor of Chesapeake Exploration, L.L.C., and Chesapeake Operating, Inc. The appellate court reviewed motions from both parties regarding rehearing and waiver of claims, ultimately denying these requests and substituting a new opinion. The background reveals that Chesapeake entered into a Joint Operating Agreement (JOA) with KEX Energy, LLC for oil and gas exploration, designating Chesapeake as the operator. CabelTel later acquired KEX Energy's interests but failed to make payments, resulting in Chesapeake's lawsuit for $556,217.28. The trial court granted summary judgment for Chesapeake for amounts owed through December 2007.

The appellate court's review standard is de novo, emphasizing the need to view evidence favorably towards the nonmovant. CabelTel contested the judgment by claiming Chesapeake did not sufficiently prove that it received the monthly Joint Interest Billing statements required by the JOA, arguing that the lack of specific evidence of mailing undermined the presumption of receipt. Chesapeake did not seek summary judgment on its account claim, and the parties settled other disputed amounts.

Chesapeake submitted evidence for summary judgment, including the Joint Operating Agreement (JOA), an affidavit from Randy Goben, and deposition testimony from CabelTel's expert, Jimmy Talley. The JOA outlines that Chesapeake must bill Non-Operators by the month's end for their share of the Joint Account. Goben's affidavit confirms that Chesapeake sent monthly bills to CabelTel. Talley received Joint Interest Billing statements from 2006 to March 2007 for his accounting report, indicating that CabelTel received these statements, negating the need for a presumption of receipt. CabelTel did not present evidence to dispute Chesapeake's claim of receipt for bills from June 2006 to March 2007, leading to the conclusion that CabelTel's payment obligations were activated.

CabelTel argued that the timing of receipt for bills from April to December 2007 was unclear, referencing emails from April 2009. However, since Talley did not file any written exceptions regarding the bills, the timing of receipt was deemed irrelevant for those earlier bills. CabelTel did not provide evidence for any billing statements from April to December 2007, necessitating an examination of circumstantial evidence for those periods. Chesapeake argued that the JOA and Goben's affidavit, which stated that they issued bills per the JOA, could create a presumption of receipt based on established circumstantial evidence, such as proof of proper mailing.

Adams v. John Hancock Mut. Life Ins. Co. established that a presumption of mailing arises when evidence shows that an application was processed according to established routine practices. Similarly, in Texaco, Inc. v. Phan, the presumption was based on automated procedures for generating and mailing default notices. In contrast, Chesapeake failed to provide sufficient evidence of its mailing practices regarding billing statements to CabelTel, merely claiming compliance with the Joint Operating Agreement (JOA). The court noted that Chesapeake did not demonstrate whether the statements were correctly addressed, stamped, or mailed, referencing Tex. Emp. Ins. Ass’n v. Wermske, which ruled that no presumption exists when a letter is left unmailed without proper addressing. Consequently, Chesapeake's evidence was inadequate to create a presumption of receipt for the April to December 2007 bills, leading to the conclusion that summary judgment was inappropriate for these bills, as Chesapeake did not conclusively prove all essential elements of its claim. CabelTel's first issue regarding these bills was sustained, and the court opted not to address additional issues related to them. Furthermore, CabelTel argued in its second issue that a genuine fact issue existed regarding the timeliness of its written exceptions to the billing statements, which is critical under the JOA stipulation that such exceptions must be made within 24 months to affect the presumption of accuracy of the bills.

CabelTel claims that Talley made sufficient exceptions to billing statements under the Joint Operating Agreement (JOA) beginning April 20, 2009, using various formats including email and affidavit. Talley's affidavit, dated June 9, 2010, asserted that COPAS guideline AG-19, which defines an “exception” as a written audit finding submitted with supporting details, applied to the JOA. Despite this, Talley admitted in his deposition that he never submitted a written exception or claim for adjustment as required by the JOA, which meant that CabelTel did not raise any factual dispute regarding its timely written exception. 

CabelTel referenced Paint Rock Operating, LLC v. Chisholm Exploration, Inc. to argue that AG-19 did not apply, where the court found that marked-up billing statements constituted a sufficient written exception. However, the Paint Rock case did not address whether emails or non-audit reports could serve as a written exception under the JOA. Talley’s testimony confirmed that he did not make a written exception as defined in the contract. Consequently, the court overruled CabelTel’s second issue.

Regarding CabelTel’s third issue, it argued that summary judgment was improper due to a genuine fact dispute over Chesapeake's compliance with audit rights under the JOA. CabelTel alleged that Chesapeake obstructed Talley’s audit efforts, yet Talley himself testified that he did not conduct an audit, stating explicitly that no audit engagement occurred. Hence, without an attempt at an audit, CabelTel could not claim that Chesapeake prevented one, leading to the overruling of CabelTel’s third issue.

For the fourth issue, CabelTel contended that there was a factual dispute regarding the costs incurred as reflected in Chesapeake’s invoices. However, as established in the second issue, the JOA dictates that Chesapeake’s billing is presumed true and correct unless timely written exceptions are filed.

CabelTel failed to provide timely written exceptions or claims for adjustment, leading to the presumption that Chesapeake's invoices are accurate. This is supported by the precedent set in Winchek v. Am. Exp. Travel Related Servs. Co., where the creditor successfully established the amount owed through testimony regarding monthly statements. Consequently, all of CabelTel’s issues concerning the June 2006 to March 2007 invoices were overruled, affirming the trial court's summary judgment in favor of Chesapeake for those periods. However, CabelTel’s first issue regarding the April 2007 to December 2007 invoices was sustained, resulting in a reversal of the trial court's summary judgment for those bills and a remand for further proceedings. The confirmed amount owed by CabelTel for the earlier period totals $540,069.81. Chesapeake waived claims to other disputed bills but did not provide supporting authority for modifying the judgment to reflect only the established amount, leading to the denial of its request.