Amoco Prod. Co. v. Alexander - 622 S.W.2d 563 (Tex. 1981)

Rule:

Exemplary damages are not allowed for breach of contract. Even if the breach is malicious, intentional or capricious, exemplary damages may not be recovered unless a distinct tort is alleged and proved.

Facts:

Respondent lessors brought suit against petitioner lessee for damages due to field-wide drainage claiming that petitioner was obligated to increase oil production on respondents' leases by drilling additional wells. The district court, as affirmed by the court of appeals, awarded actual and exemplary damages in favor of the respondents. Petitioner lessee appealed, arguing that exemplary damages were not recoverable because the respondent lessors failed to plead a tort allowing recovery of exemplary damages. 

Issue:

Were exemplary damages recoverable, notwithstanding the fact that respondent lessors failed to plead a tort? 

Answer:

No.

Conclusion:

The court first held that an operator who failed to act as a reasonably prudent operator by not applying for drilling permits was liable for loss caused by the failure to drill wells. However, according to the court, a breach of the implied covenant to protect against drainage was a contract action and would not support recovery of exemplary damages absent proof of an independent tort. Accordingly, the judgment of the court of appeals was modified to prohibit the recovery of exemplary damages and affirmed as modified.