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Swampfox Oilfield Services, LLC v. Blackjack Oil Company, Inc.

Court of Appeals of Mississippi

April 9, 2019

SWAMPFOX OILFIELD SERVICES, LLC APPELLANT
v.
BLACKJACK OIL COMPANY, INC. APPELLEE

          DATE OF JUDGMENT: 06/26/2017

          MARION COUNTY CIRCUIT COURT TRIAL JUDGE: HON. ANTHONY ALAN MOZINGO

          ATTORNEY FOR APPELLANT: F. DOUGLAS MONTAGUE III

          ATTORNEY FOR APPELLEE: JEFFREY TODD WAYCASTER

         EN BANC.

          J. WILSON, P.J.

         ¶1. Blackjack Oil Company had a lease on a previously abandoned oil well in Walthall County. Blackjack contracted with Swampfox Oil Services to attempt to drill the well to a depth of 3400 feet. Swampfox encountered difficulties in the well and eventually lost an expensive drill bit, provided by Blackjack, in the well hole. Swampfox fished for the bit for two days but could not retrieve it, and Blackjack then decided to plug and abandon the hole.

         ¶2. Swampfox filed suit in the Marion County Circuit Court, alleging that Blackjack failed to make payments required under the parties' contract. Blackjack answered and denied that it owed Swampfox anything. Blackjack also filed a counterclaim for damages for the loss of the well and the cost of having to drill a new well.

         ¶3. The case proceeded to trial, and the jury returned a verdict in favor of Blackjack on both Swampfox's claim and Blackjack's counterclaim. On the counterclaim, the jury found that Blackjack should recover damages of $10, 971.85. After judgment was entered on the jury's verdict, Swampfox filed a motion for judgment notwithstanding the verdict (JNOV) or a new trial, which the trial court denied, and then appealed. On appeal, Swampfox argues (1)that it proved that Blackjack failed to make payments required by the parties' contract; (2)that Blackjack's counterclaim is barred by the contract's consequential damages waiver; and (3) that it is entitled to a new trial based on hearsay testimony from one witness.

         ¶4. We hold that the verdict in favor of Blackjack on Swampfox's claim was supported by substantial evidence and was not against the overwhelming weight of the evidence; therefore, the judgment in favor of Blackjack on Swampfox's claim is affirmed. However, we agree with Swampfox that Blackjack's counterclaim is barred by the parties' contract; therefore, we reverse and render judgment in favor of Swampfox on the counterclaim. Finally, we hold that the hearsay testimony at issue does not require a new trial. Therefore, the judgment of the circuit court is affirmed in part and reversed and rendered in part.

         FACTS AND PROCEDURAL HISTORY

         ¶5. Blackjack obtained a lease to drill on a previously abandoned oil well in Walthall County. Blackjack reentered the well in November 2014, but its progress stalled around 2269 feet. Blackjack then hired Swampfox to attempt to reach a depth of 3400 feet.

         ¶6. Representatives from Blackjack and Swampfox negotiated the terms of the parties' contract. They started with an International Association of Drilling Contractors (IADC) form "Drilling Bid Proposal and Daywork Drilling Contract." However, the parties made significant typed and handwritten changes to the form, and the final contract did not provide for a daily drilling rate, as contemplated by the form. Rather, Swampfox would earn a "flat fee" of $20, 000 if it reached the target depth of 3400 feet. At trial, the parties disagreed about the meaning of many provisions of the contract. However, all agreed that the gist of the contract was that Swampfox would attempt to drill the well to the target depth and would primarily use its own equipment. The contract was signed on April 25, 2015.

         ¶7. In mid-May 2015, Swampfox moved its rig onto the well site. At that point, no one had worked on the well for four months. Swampfox's primary onsite representatives were its owner and president, Richard Thomas, and a contractor/consultant named Tony Hines. Blackjack's onsite representative was Jack Cox.

         ¶8. Swampfox reached the concrete plug in the well sometime in June. However, they were unable to penetrate the plug, so they asked Blackjack for a stronger polycarbonate diamond cutter bit (PDC bit). Blackjack provided the bit as requested. On June 9, the bit became stuck. Neither Thomas nor Hines was present at the time, but Cox was on site. The Swampfox crew pulled the drill and the bit out, cleaned it, and reentered the hole. The PDC bit then came off in the hole.

         ¶9. Swampfox fished for the bit for two days but could not retrieve it. On June 11, Hines told Cox that he doubted that the project could be successful. Hines said he would plug and abandon the hole if it were up to him. Cox discussed Hines's recommendation with Blackjack's president, Kevin Wilson. Wilson and Cox agreed that the well should be plugged and abandoned. Cox notified the State Oil and Gas Board that Blackjack intended to plug and abandon the well. Cox also testified that he orally informed Thomas on June 11 that the hole would be abandoned and that Swampfox and its rig were released. On June 16, Blackjack provided Swampfox written notice of its intent to plug and abandon the well.

         ¶10. On June 15, Swampfox sent Blackjack an invoice showing total charges of $42, 928.40 and a balance due of $21, 428.40. The invoice included charges for, inter alia, the rental and use of various equipment, a $1, 500 mobilization fee and a $1, 500 demobilization fee, four days of "standby" time at $3, 000 per day, and a $9, 000 "cancellation fee." Swampfox sent additional invoices in July and September, but Blackjack did not pay the invoices.

         ¶11. In November 2015, Swampfox sued Blackjack in the Marion County Circuit Court. Swampfox sought payment for $86, 394.03 in unpaid invoices plus attorney's fees and pre-and post-judgment interest. Blackjack filed an answer and counterclaim. Blackjack's counterclaim sought $168, 000 in damages: $32, 000 for the lost lease on the well and $136, 000 for the cost of drilling a new well.

         ¶12. The case proceeded to a jury trial. Wes Wagner, Swampfox's CEO, testified that Swampfox and Blackjack negotiated and exchanged several drafts of the contract before the parties finally signed it. Wagner testified confidently about the meaning of various provisions of the contract. However, Wagner admitted that this was the first time that he had ever negotiated a contract of this nature or used an IADC form contract. Wagner testified that he struck through provisions of the form that the parties decided to amend or disregard, and he inserted text in places. He testified that Swampfox and Blackjack agreed on a flat fee of $20, 000 that Swampfox would earn if it reached a target depth of 3400 feet. The contract did not include a daily rate for drilling work.

         ¶13. As discussed above, on June 11, 2015, Cox orally told Thomas that Blackjack intended to plug and abandon the hole and that Swampfox and its rig were released. Nonetheless, Swampfox's crew allegedly remained onsite on "standby" through June 15. Swampfox claimed that they were waiting for instructions from Blackjack or written notice of their release. On June 16, Blackjack gave Swampfox written notice. Swampfox later invoiced Blackjack for $3, 000 per day for four days of standby time. Section 4.5 of the contract stated that Swampfox would be paid a "Standby Time Rate" of $3, 000 per day for time spent "waiting on orders" from Blackjack. However, Wilson had amended section 4.5 by handwriting in "After 24 Hrs of T.D." At trial, Wagner admitted that this meant that the "Standby Time Rate" applied only after Swampfox reached the target depth ("T.D.") of 3400 feet. There is no dispute that Swampfox never reached target depth.

         ¶14. Wagner acknowledged that the parties' contract did not provide for a day rate for drilling work until twenty-four hours after Swampfox reached the target depth. Wagner explained that the twenty-four hour provision was to allow Blackjack "one free day" in the event that it chose to bring in another company to complete the work after Swampfox reached the target depth. Wagner claimed that whether the target depth was reached or work stopped for some other reason, the cost of time spent "waiting on orders" was the same. That is why Swampfox invoiced Blackjack $3, 000 per day for standby time even though they had not reached target depth.

         ¶15. Wagner also testified about Exhibit A to the contract, which included a list of equipment, materials, and services that Blackjack was required to provide or pay for. Many of these items were struck through in the final contract. Yet, Wagner claimed that the "practical effect" of the strike-throughs was that the items were "not in the contract explicitly but rather implicitly." Wagner claimed that another provision in the contract required Blackjack to provide anything "not specifically furnished by" Swampfox. According to Wagner, this required Blackjack to pay for even the struck-through items. Some of the struck-through items are the subject of disputed charges in Swampfox's invoices.

         ¶16. Wagner also testified that Swampfox experienced some "cash flow" problems during their work on the well. Blackjack gave Swampfox a $5, 000 "advance" or "prepayment" to allow it to meet payroll and continue drilling.

         ¶17. Tony Hines testified that Blackjack was responsible for the drilling mud, but Swampfox was responsible for providing mud pumps. They tried two different pumps before renting one that worked. Hines testified that the job proved more difficult than Swampfox anticipated, and Swampfox had to ask Blackjack to provide additional equipment and chemicals. Swampfox lost one drill bit when they hit another drill bit that had been lost in ...


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