                                                           F I L E D
                                                     United States Court of Appeals
                                                             Tenth Circuit
                UNITED STATES COURT OF APPEALS
                                                             DEC 1 2004
                       FOR THE TENTH CIRCUIT
                                                       PATRICK FISHER
                                                                 Clerk


D.J. SIMMONS INC.,

          Plaintiff-Appellee,

v.                                             No. 03-2010
                                     (D.C. No. CIV-99-1105-JP/LFG)
F. BRIAN BROADDUS; B/R                          (D. N.M.)
ENERGY PARTNERS, INC.,

          Defendants-Appellants.



PHOENIX ENERGY CONSULTING
SERVICES, INC.,

          Intervenor-Appellant




D.J. SIMMONS INC.,

          Plaintiff-Appellant-
          Cross-Appellee,

v.                                             No. 03-2024
                                     (D.C. No. CIV-99-1105-JP/LFG)
F. BRIAN BROADDUS; B/R                          (D. N.M.)
ENERGY PARTNERS, INC.,

          Defendants-Appellees-
          Cross-Appellants,
PHOENIX ENERGY CONSULTING
SERVICES, INC.,

            Intervenor-Appellee-
            Cross-Appellant.



D.J. SIMMONS INC.,

            Plaintiff-Appellee,

v.                                                       No. 03-2041
                                               (D.C. No. CIV-99-1105-JP/LFG)
F. BRIAN BROADDUS; B/R                                    (D. N.M.)
ENERGY PARTNERS, INC.

            Defendants-Appellants,



PHOENIX ENERGY CONSULTING
SERVICES, INC.,

            Intervenor-Appellant.




                          ORDER AND JUDGMENT            *




*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

                                        -2-
Before HARTZ , McKAY , and PORFILIO , Circuit Judges.



       After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination

of these appeals.   See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The cases

are therefore ordered submitted without oral argument.

       After a bench trial, the district court determined that defendants B/R

Energy Partners, Inc., Phoenix Energy Consulting Services, Inc., and F. Brian

Broaddus [hereinafter “B/R Energy”] are jointly and severally liable to plaintiff

D.J. Simmons, Inc., an oil and gas producer, for past-due payments for natural gas

liquids B/R Energy purchased from Simmons under contracts executed in 1995,

1996, and 1998. In a subsequent order, the district court denied Simmons’

request for prejudgment interest due under the contracts but awarded

postjudgment interest on the total judgment at a rate provided in the parties’

contracts. In a third order, the court modified the postjudgment interest rate and

reconsidered its denial of prejudgment interest. On reconsideration, the court

awarded interest on payments due under the 1995 contract, but again denied

prejudgment interest on payments due under the other two contracts.

       In appeal No. 03-2010, B/R Energy appeals from the award of contract

damages in the district court’s November 8, 2002, order. In appeal No. 03-2024,

                                         -3-
Simmons appeals from the court’s January 7, 2003, denial of prejudgment interest

on the 1996 and 1998 contracts. In appeal No. 03-2041, B/R Energy cross-

appeals from the award of prejudgment interest on the 1995 contract. The three

appeals have been consolidated, and our jurisdiction arises under 28 U.S.C.

§ 1291.

       With respect to the award of contract damages, we conclude that the district

court did not err in its utilization of price terms or in disallowing a marketing fee

to B/R Energy. We further conclude that the district court should have enforced

the parties’ agreement for prejudgment interest on past-due amounts on all three

contracts. Therefore, we affirm in part and reverse in part.

                                 I. Standard of review

       We review questions of law      de novo . We review findings of fact under a

clearly erroneous standard.     Las Vegas Ice & Cold Storage Co. v. Far W. Bank         ,

893 F.2d 1182, 1185 (10th Cir. 1990). “A finding of fact is ‘clearly erroneous’ if

it is without factual support in the record or if the appellate court, after reviewing

all the evidence, is left with a definite and firm conviction that a mistake has been

made.” Manning v. United States , 146 F.3d 808, 812 (10th Cir. 1998) (quotation

omitted). The interpretation of a contract is a legal question.         See K&V Scientific

Co. v. Bayerische Motoren Werke Aktiengesellschaft            , 314 F.3d 494, 497 (10th Cir.

2002). In resolving the legal issues in this         contract action that was removed to


                                               -4-
federal court, we apply the substantive law of New Mexico. See Sanpete Water

Conservancy Dist. v. Carbon Water Conservancy Dist.         , 226 F.3d 1170, 1178

(10th Cir. 2000).

                                    II. Relevant facts

      We need not repeat the thorough recitation of facts set forth in the district

court’s November 8, 2002, order except as the facts relate to the issues on appeal.

B/R Energy purchased all of Simmons’ gas output at the wellheads, where it was

metered and then transported to the Chaco processing plant, which is owned by

El Paso Field Services   1
                             (EPFS). Simmons agreed that costs for processing and

transportation would be deducted from the price B/R Energy paid for Simmons’

gas. At Chaco, the gas was separated into “residue gas” and various liquid gas

components. Simmons was to be paid based on its yearly contract price for each

component, times the number of MMBtus        2
                                                  for the various components, minus the

processing, transportation, and other fees set forth in the contract. B/R Energy

contracted separately with various companies who were purchasing the residue

gas from B/R Energy for the transportation and processing of the gas. Those

contracts were confidential.


1
        Because it is undisputed that B/R Energy and Simmons agreed to a flat-rate
processing fee for all gas produced in 1996-1998, the purported Chaco-Blanco
split is not relevant to the issues raised on appeal. We need not discuss it.
2
      “MMBtu” means 1,000,000 British Thermal Units.

                                            -5-
      The 1995 purchase contract did not specify what the processing fees were

or how they would be determined, but Simmons admitted that the parties agreed

that Simmons would pay for the processing fees. Therefore, the district court

found that B/R Energy was entitled to off-set its actual processing costs, whether

they were in the form of a flat rate per MMBtu or in the form of an amount of

liquids retained by the processing plant in lieu of charging a processing fee,

against the money it owed to Simmons.

      In the 1996 and 1998 contracts, however, Simmons and B/R Energy

expressly agreed that Simmons would pay a flat-rate per MMBtu for processing

its gas based on the total amount of gas that was metered, no matter what the

actual processing cost was to B/R Energy. Accordingly, B/R Energy reduced the

gross amount due to Simmons by the flat-fee processing cost. In addition, the

contracts specifically provided that Simmons would receive credit for 100% of its

liquid gas production.

      In 1998 Simmons discovered that the reports it received from B/R Energy

indicated that Simmons was not being paid for about 40% of the liquids it was

producing. Simmons questioned whether B/R Energy was double charging for

processing by paying both the flat-rate processing fee and by B/R Energy not

reporting or paying for the amount of liquids that Chaco retained in lieu of

charging B/R Energy a processing fee. Documentary evidence obtained in


                                         -6-
discovery established that Simmons was not paid for 39% of its liquid production

even though it had already paid for processing through offset by the flat-rate fee.

Thus, the district court found that B/R Energy had double-charged Simmons for

processing, thereby breaching its 1996 and 1998 contracts to charge only a flat

rate per MMBtu for processing.

      The district court also accepted Simmons’ expert’s testimony that B/R

Energy had further failed to pay the proper base prices for liquid gas components

under all three contracts. The court concluded that B/R Energy owed Simmons

$716,806 on the 1996 contract and $489,029 on the 1998 contract, and that B/R

Energy had underpaid for liquids in its 1995 contract in the amount of $130,507.

The court then reduced the total amount owed by $54,750 because of a mistake

Simmons’ expert admitted he had made in his audit.

      The district court rejected B/R Energy’s argument that it was entitled to

recover marketing fees on all three contracts. It found that neither the 1995 nor

the 1996 contracts referenced such fees, and that the 1998 contract provided for

payment of marketing fees only if they were assessed to B/R Energy, but no third

party had in fact assessed any marketing fees. The court later awarded

prejudgment interest on the damages arising from the breach of the 1995 contract

and postjudgment interest on the entire damage award.




                                         -7-
                               III. Motion to dismiss

      We first address Simmons’ argument that two of the defendants’ appeals

must be dismissed because Broaddus and Phoenix Energy confessed judgment and

waived all rights to appeal on any ground in a pre-trial stipulation designed to

resolve certain of Simmons’ claims.   See B/R Energy’s App., Vol. I at 317. The

stipulation provided:

      F. Brian Broaddus and the Phoenix Energy Consulting Services, Inc.,
      Defendants in this action, hereby stipulate and confess judgment as
      follows: that each is jointly and severally liable with B/R Energy
      Partners, Inc., for any and all damages of any kind, interest and cost,
      if any, which this Court may enter against B/R Energy Partners, Inc.,
      in the final judgment in this action, and hereby expressly waive all
      rights to appeal said final judgment on any grounds.

Id. Read in context, the stipulation clearly foreclosed only an appeal of the issue

of joint and several liability. Simmons’ motion to dismiss the appeals is denied.

                              IV. Appeal No. 03-2010

      A. Retention versus flat-rate fee for processing     . In appeal

No. 03-2010, B/R Energy first argues that the district court erred by including

“unwritten price terms” in the 1996 and 1998 contracts that required B/R Energy

“to pay Simmons for liquid gallons that were never available” to B/R Energy.

Essentially it contends that it was obligated to pay Simmons only for the liquid

gallons remaining after Chaco took 39% of the liquid production notwithstanding

the fact that B/R Energy had already charged a processing fee. B/R Energy’s


                                         -8-
Opening Br. at 1, 19. It is undisputed that Chaco retained 39% of the liquid

gallons produced in lieu of charging B/R Energy a processing fee. As the district

court noted, B/R Energy offered, and Simmons selected, an option under the 1996

and 1998 contracts specifically providing for a flat-rate processing fee per

MMBtu on all gas that Chaco processed. Simmons paid that fee. Simmons

rejected B/R Energy’s alternative option of paying for processing through

retention of a percentage of production. B/R Energy claims that the court

erroneously ignored the commercial context of the contracts. It claims that, if

marketers paid producers for liquid gallons the marketer did not receive, the

marketer would go out of business. This argument ignores the fact that B/R

Energy had already been reimbursed for processing and had no right to double

charge for processing by also passing along the retention loss to Simmons.      See

B/R Energy’s App., Vol. II at 493-94, 498-99. There was no need for the district

court to rely on or discuss trade usage or custom when the contract specifically

provided for a particular type of processing fee. The district court did not err in

requiring B/R Energy to pay Simmons the contract price for all of its liquid

production.

      B. Average 30-day pricing versus 5-day pricing.            The district court also

found that the “evidence establishes that Simmons was underpaid for [its] liquids”

in the 1995 contract, B/R Energy’s App., Vol. I at 334. The court accepted


                                           -9-
Simmons’ expert’s testimony regarding proper pricing to calculate breach-of-

contract damages for all three contracts. B/R Energy briefly argues that the

district court erred in requiring B/R Energy to pay for liquid gallons based on 30-

day OPIS average pricing instead of on the 5-day OPIS average price that EPFS

ordinarily paid or on the 10-day OPIS average price that Simmons currently

receives from a different gas purchaser. B/R Energy’s Opening Br. at 41-42.

The parties’ 1996 contract provided:

       Liquid credits: Natural gas liquids pricing will be based upon EPFS
       OPIS non-TET Mt. Belvieu averages per component . . . .
       Recoveries are based upon current mole percent averages provided by
       EPFS . . . .

B/R Energy’s App., Vol. I at 251. The 1998 contract provided:

       NGL [natural gas liquid] Pricing: Prices paid for component gallons
       of NGL products shall be based on Mt. Belvieu OPIS averages. . . .

Id. An EPFS representative testified that “the industry standard of OPIS [is] that

you pay on the OPIS average. The OPIS [average] is a 30-day average.”         Id. Vol.

IV at 1536. A Simmons representative testified that he believed that all contracts

were for OPIS “30-day average because the term of [Simmons’] contract was a

year and [it] was paid monthly”    id. Vol. III at 826, and because other price

references in the parties’ contract were to a monthly publication,   id. at 827.

Simmons’ expert testified that, when a gas contract

       just says Mt. Belvieu averages, then it would be a 30-day average.
       Parties can negotiate and contract and use one day or five day or ten

                                            -10-
      day averages. [In] the absence of that specific language, then the
      proper pricing would be the pricing for the entire [30-day] time
      period. So if I have a May 2002 production, I would want to have an
      average for all 31 days in May, not just an average for one day or
      five days.

Id. Vol. II at 474-75. The court also based its finding of improper pricing on the

expert’s testimony that B/R Energy had not used the correct mole percent

recoveries provided by EPFS,     see id. at 496 and 500-01, and had improperly

deducted marketing fees,   id. at 515-16. We conclude that the district court did

not err in accepting Simmons’ expert’s testimony and that substantial evidence

supports the court’s findings.

      C. Marketing fee.        B/R Energy argues that the district court erred in

disallowing a marketing fee as contrary to the parties’ intent and to trade usage.

Prior to 1995, B/R Energy was simply a marketer, selling Simmons’ gas on

Simmons’ behalf to purchasers. B/R Energy was paid a marketing fee for the

sales by the purchaser, which was passed on to Simmons. After 1995, however,

B/R Energy was the actual purchaser–not just the marketer–of Simmons’ gas.

The 1995 and 1996 contracts did not mention a charge for marketing fees. B/R

Energy’s App., Vol. IV at 1426-27. The 1998 contract provided for Simmons to

pay only for any “marketing fees assessed.”       Id. , Vol. I at 251. B/R Energy does

not contest the district court’s finding that “no marketing fees were assessed to

[B/R Energy].”   Id. at 336. This unchallenged finding is sufficient to support the


                                           -11-
court’s conclusion that B/R Energy is not entitled to recover fees that it was not

charged.

       D. Simmons’ arguments on rulings from which it did not cross-

appeal. Much of Simmons’ response brief in this appeal is dedicated to arguing

that the district court erred in not awarding it enough damages on the 1995

contract. Because Simmons did not cross-appeal on this issue from the district

court’s November 8, 2002, order awarding damages, we will not consider its

arguments. See Savage v. Cache Valley Dairy Ass'n, 737 F.2d 887, 889 (10th Cir.

1984) (per curiam) (“the filing of a timely      cross-appeal is mandatory and

jurisdictional”); Hansen v. Director, OWCP,          984 F.2d 364, 367 (10th Cir. 1993)

(noting rule that appellee may not attack the district court’s decision with a view

toward enlarging its own rights or lessening the rights of its adversary absent a

cross appeal); Housing Auth. of Kaw Tribe v. City of Ponca City        , 952 F.2d 1183,

1195 (10th Cir. 1991) (“An appellee may present an argument on appeal only if it

does not enlarge the rights conferred by the original judgment.”);       cf. Roe v.

Cheyenne Mountain Conference Resort, Inc., 124 F.3d 1221, 1227-28 (10th Cir.

1997) (holding that appellee’s    jurisdictional issue may be considered without a

cross-appeal).




                                              -12-
                       V. Appeals No. 03-2024 and 03-2041

      A. Denial of prejudgment interest.              Each of the parties’ gas purchase

contracts provided for the payment of 18% per annum interest on unpaid amounts

due under the gas purchase contracts.     See Simmons’ App., Vol. III at 1079, 1101,

1119. Simmons urged enforcement of these interest agreements as part of its

complaint for contract damages. Its expert included the contract rate of interest in

calculating the total damages Simmons sustained from B/R Energy’s breach. The

district court did not expressly adopt this part of the expert’s testimony or

Simmons’ proposed findings on the issue, but it awarded a damages amount

“together with interest . . . as allowed by law” in its November 8, 2002, judgment.

Id. , Vol. II at 667. Simmons moved for clarification or reconsideration by a

motion to amend the judgment, arguing that it was entitled to interest as a matter

of right, asking the court to specify the amounts of prejudgment and postjudgment

interest, and submitting a calculation for contractual interest based on the court’s

damage award. In so moving, Simmons also cited an inapplicable but analogous

New Mexico statute which provides,      “in the absence of a written contract fixing a

different rate ,” for imposition of not more than a fifteen percent interest rate for

money due by contract as a matter of right.          Id. at 672 (quoting N.M. Stat. Ann.

§ 56-8-3) (emphasis added). B/R Energy responded by arguing that Simmons was

not entitled to recover prejudgment interest because the amounts due were not


                                              -13-
“reasonably ascertainable.”     See id. at 700. In its order of November 29, 2002,

the district court agreed with B/R Energy’s arguments, citing a New Mexico

Supreme Court case in which the court held that prejudgment interest should be

awarded under section 56-8-3 as a matter of right when “‘a party has breached a

duty to pay a definite sum of money or the amount due under the contract can be

ascertained with reasonable certainty by a mathematical standard fixed in the

contract or by established market prices.’”      Id. at 688 (quoting Sunwest Bank of

Albuquerque, N.A. v. Colucci , 872 P.2d 346, 351 (N.M. 1994) (further quotation

omitted)). The district court also noted that        Colucci held that, “[w]hen the

payment due under the contract is not fixed or readily ascertainable, a district

court may, in its discretion, award prejudgment interest.” Simmons’ App., Vol. II

at 688.

       In denying Simmons’ request for prejudgment interest, the district court

noted that the gas purchase contracts expressly provided for a different rate of

interest than provided in section 56-8-3, but concluded that Simmons’ right to

recover prejudgment interest was dependent on whether the payments due were

“readily ascertainable from the contract,” and that “the amount due was not

readily ascertainable at the time of the breach.”        Id. at 690.

       Simmons then moved for a new trial, again on the issue of its right to

recover prejudgment interest. It argued that the amounts due were clearly able to


                                              -14-
be calculated with a mathematical formula set out in the contracts at the time of

B/R Energy’s breach, using the published indexes and fees agreed upon by the

parties and the volumes reported by El Paso Field services, which were reported

to B/R Energy on a monthly basis. And it argued that it was entitled to the

interest provided in the gas purchase contract on unpaid amounts as   eo nomine

damages regardless of the statutory rates found in section 56-8-3.

      The district court reconsidered its November 29, 2002, order and held that,

because Simmons had become entitled to breach-of-contract damages on the 1995

contract solely because B/R Energy used the wrong price in calculating the

amount due Simmons, the damages were ascertainable with reasonable certainty

and prejudgment interest should be awarded at the interest rate provided in the

contract. Id. at 722. The court upheld its prior order denying prejudgment

interest on the 1996 and 1998 contracts.

      On cross-appeal, B/R Energy continues to argue that the amount it owed

Simmons was not easily ascertainable and, therefore, no prejudgement interest

should have been awarded on any of the three contracts. B/R Energy continues to

ignore the distinction between contractual and statutory rights to interest.

      Interest is classified as contract or conventional interest, judgment
      interest, and prejudgment interest. Interest prescribed by contract
      may be recovered according to the contract terms, subject to usury
      and other regulatory statutes.
      ...


                                          -15-
      So far as valid, the contract establishes the parties’ rights, including rights
      to interest, its rate, and its computation. So contractual provisions for
      interest authorize the award of interest . . . when the law would not do so in
      the absence of a contract.

D. Dobbs, H   ANDBOOK ON   L AW OF R EMEDIES , 245-46 (2d Ed. 1993);   see also

R ESTATEMENT OF C ONTRACTS § 337(a) (cmt. a) (1932) (“In cases where it is

promised, interest is an agreed compensation for consideration received; and it is

payable because it is promised and not as reparation for a previous breach of

duty.”). B/R Energy makes much of the fact that Simmons’ expert had to amend

his damage calculations three times based on information received during

discovery, reasoning that the amount due was therefore not reasonably

ascertainable under section 56-8-3. As mentioned     supra , however, section

56-8-3, by its own terms applies only in those actions on a contract where the

contract is silent as to prejudgment interest.

      The undisputed fact remains that the 1996 and 1998 contracts expressly

provided that Simmons was to receive credit for 100% of its liquid gas

production. The district court’s findings that B/R Energy underpaid for liquid

gallons based on the price terms of the contract is supported by substantial

evidence. B/R Energy expressly agreed to pay interest on amounts due. Thus,

interest began accruing at the contract rate on the amounts due the first month of

B/R Energy’s failure to pay the amount due under the contracts. We conclude

that the district court erred in not enforcing the parties’ agreement that B/R

                                         -16-
Energy would pay 18% per annum interest on all unpaid amounts due under the

1996 and 1998 gas purchase contracts.    See United Props. Co. v. Walgreen

Props., Inc. , 82 P.3d 535, 539 (N.M. Ct. App. 2003) (“When a contract was freely

entered into by parties negotiating at arm’s length, the duty of the courts is

ordinarily to enforce the terms of the contract which the parties made for

themselves.” (quotation omitted));   Nearburg v. Yates Petroleum Corp.   , 943 P.2d

560, 571 (N.M. Ct. App. 1997) (citing New Mexico Supreme Court case for the

premise that (“[a] court should . . . not interfere with the bargain reached by the

parties unless the court concludes that the policy favoring freedom of contract

ought to give way to one of the well-defined equitable exceptions, such as

unconscionability, mistake, fraud, or illegality,” and enforcing agreement to pay

amounts that were not ascertainable at the time the agreement was made).




                                         -17-
       In appeal No. 03-2010, we AFFIRM the judgment on contract damages in

favor of Simmons. In appeal No. 03-2024, we REVERSE the district court’s

denial of prejudgment interest on the 1996 and 1998 contracts and REMAND for

further proceedings. In appeal No. 03-2041, we AFFIRM the award of

prejudgment interest on the 1995 contract.


                                                Entered for the Court



                                                Monroe G. McKay
                                                Circuit Judge




                                       -18-
