OF JUDGMENT: 06/26/2017
COUNTY CIRCUIT COURT TRIAL JUDGE: HON. ANTHONY ALAN MOZINGO
ATTORNEY FOR APPELLANT: F. DOUGLAS MONTAGUE III
ATTORNEY FOR APPELLEE: JEFFREY TODD WAYCASTER
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.
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.
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.
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.
AND PROCEDURAL HISTORY
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
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.
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
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
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.
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.
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.
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.
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.
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.
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.
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
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 ...