Pathfinder Oil & Gas, Inc. and Cathlind Energy, Llc v. Great Western Drilling, Ltd.
574 S.W.3d 882
| Tex. | 2019Background
- Great Western sent a June 1, 2004 letter offering Pathfinder the right to take a 25% working interest in certain Permian Basin leases if Pathfinder signed and returned the letter within 48 hours; Pathfinder accepted and returned the signed letter and later sent a signed participation agreement and payment after Great Western rescinded the offer.
- Great Western sued for a declaration that the Letter Agreement was not enforceable; Pathfinder counterclaimed for breach.
- The parties entered a four-paragraph pretrial stipulation: they limited jury issues to (1) whether the Letter Agreement was enforceable, (2) whether either party breached, and (3) specified affirmative defenses; they agreed that if the jury found in Pathfinder’s favor on those issues, Pathfinder would be entitled to specific performance and waived money damages.
- The trial court submitted only the stipulated questions; the jury found for Pathfinder on contract and breach, and the trial court ordered specific performance (transfer of a 25% working interest), past proceeds, prejudgment interest, and attorney’s fees.
- The court of appeals reversed, holding that Pathfinder still had to prove it was "ready, willing, and able" to perform (a prerequisite to specific performance) because Paragraph 3’s phrase "entitled to recover" required proof of entitlement to the equitable remedy; it rendered a take-nothing judgment.
- The Texas Supreme Court granted review and reversed the court of appeals, holding the parties’ stipulation limited the jury issues and thereby waived the need for a separate jury finding on "ready, willing, and able." The case was remanded for consideration of other unresolved issues.
Issues
| Issue | Plaintiff's Argument (Pathfinder) | Defendant's Argument (Great Western) | Held |
|---|---|---|---|
| Enforceability of the Letter Agreement | The Letter Agreement formed an enforceable contract conveying a 25% working interest. | The Letter Agreement was not an enforceable contract. | Not resolved on appeal (remanded); trial/jury found agreement enforceable. |
| Availability of specific performance absent separate finding of "ready, willing, and able" | The stipulation limited jury issues and made specific performance the agreed remedy upon prevailing on those issues, so no separate finding was required. | Paragraph 3’s "entitled to recover" required proof of entitlement to the remedy, including a jury finding that Pathfinder was "ready, willing, and able". | Court held the stipulation waived the need for a separate finding; the court of appeals erred. |
| Effect and scope of pretrial stipulation limiting jury issues | The stipulation’s plain language controlled; it waived all issues not submitted to the jury. | Paragraph 3 should be read to add an implied issue (entitlement to specific performance) beyond those listed in Paragraph 1. | Court held contract interpretation requires reading Paragraphs 1 and 3 together; "entitled to recover" refers back to Paragraph 1 and affirmative defenses, so no additional issue was added. |
| Award of past proceeds, interest, and fees despite stipulation waiving monetary damages | Specific performance included agreed accounting and payment of historical proceeds; stipulation permitted that relief as part of effectuating specific performance. | Awarding money and interest contradicted the parties’ waiver of money-damages claims. | Court did not resolve this on the specific stipulation question; remanded to court of appeals to address unresolved issues (including whether awards were supported). |
Key Cases Cited
- DiGiuseppe v. Lawler, 269 S.W.3d 588 (Tex. 2008) (specific performance requires proof a claimant is ready, willing, and able to perform when contested)
- URI, Inc. v. Kleberg County, 543 S.W.3d 755 (Tex. 2018) (surrounding circumstances may inform contract meaning but cannot create ambiguity)
- Shamrock Psychiatric Clinic, P.A. v. Tex. Dep’t of Health & Human Servs., 540 S.W.3d 553 (Tex. 2018) (stipulations are contracts and construed as such)
- Great Am. Ins. Co. v. Primo, 512 S.W.3d 890 (Tex. 2017) (contractual plain language controls over subjective intent)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (the entire instrument must be considered; no provision isolated from context)
- USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018) (elements of breach of contract explained)