Opinion
NO. 02-13-00349-CV
03-24-2016
ALLEGIANCE EXPLORATION, LLC, ENEXCO, INC., CENTENNIAL GROUP, LLC, AND KINGSWOOD HOLDINGS, LLC APPELLANTS v. CHARLES CHANDLER DAVIS, FABDA, INC., THOMAS M. MCMURRAY, AS TRUSTEE OF THE TMM FAMILY TRUST, AND NASA ENERGY CORP. A/K/A NASA EXPLORATION, INCORPORATED APPELLEES
FROM THE 16TH DISTRICT COURT OF DENTON COUNTY
TRIAL COURT NO. 2011-10854-16 MEMORANDUM OPINION
See Tex. R. App. P. 47.4.
This summary judgment appeal involves three successive mineral leases on a tract of land, multiple conveyances of the leased property, and one gas well. The dispute among the parties is about which of the three leases are still live.
The appellants—Allegiance Exploration, LLC; Enexco, Inc.; Centennial Group, LLC; and Kingswood Holdings, LLC (collectively the Allegiance parties)—all argue that the third lease is in effect and that the prior two leases terminated by their own terms. The appellees—Charles Chandler Davis; FABDA, Inc.; Thomas M. McMurray, as trustee of the TMM Family Trust (TMM); and NASA Energy Corp. a/k/a NASA Exploration, Incorporated (NASA)—argue that the third lease is ineffective.
In four issues, the Allegiance parties argue that the trial court erred by granting summary judgment for NASA, Davis, FABDA, and McMurray and by failing to render certain declarations in favor of the Allegiance parties. Because we hold that the trial court erred by granting summary judgment and by not rendering the requested declarations, we reverse the trial court's judgment.
A. Background
The dispute in this case arose out of Davis's and McMurray's attempts to have declared void a lease that Allegiance signed with FABDA. Due mainly to acts taken by Davis and, to a lesser extent, McMurray, the factual background and procedural history of this case is not short.
Property is conveyed to FABDA, which executes the three leases at issue in the case
In 2000, FABDA became the owner of real property in Denton County. FABDA stands for "Friday Afternoon Beer Drinkers Association." Davis is chairman and a director of FABDA. FABDA has no employees, and the only people involved in the management or operation of FABDA are Davis and his ex-wife.
The property at issue is a tract of 4.61 acres (the FABDA tract or the Property) in Denton County. On April 20, 2000, Owen Charles Davis, acting as trustee of the Davis Family Trust, conveyed the Property to FABDA. The deed stated that it is subject to any previously filed reservations and exceptions to the extent they were still in effect, but it contained no new reservations or exceptions. The deed does not specifically mention any previous conveyances of any part of the mineral estate, or indeed any specific reservations or exceptions at all. The record does not explain what Owen's connection is to FABDA, though his last name suggests a relation to Appellee Davis.
At some point, ownership of part of the Property's mineral estate was conveyed to other parties besides FABDA, but the record does not make it clear when in the chain of title that occurred. The ownership of the FABDA tract's mineral estate was at the time of these proceedings shared among a number of people, but which people and what percentage they own apparently varies across the Property. From what we can determine in the record, at the time of the proceedings in this case, the mineral ownership of the western 3 acres of the Property differs from the mineral ownership on the eastern 1.6 acres.
The Allegiance parties alleged that for part of the FABDA tract, FABDA owned an undivided one-half of the mineral estate, with the other undivided half owned by Christopher M. Watts and four others, each of whom also owns other property abutting the FABDA tract. From McMurray's petition, it appears that the Watts ownership applied to the western three acres.
In 2010, Watts and the four others executed oil and gas leases with Centennial Group (the Watts leases), which then assigned the leases to Allegiance, Enexco, and Centennial. The leases cover more acreage than is contained within the FABDA tract, and the Allegiance parties pled that these leases covered the FABDA tract and lands abutting it.
McMurray further pled that, as for the remaining 1.6 acres of the Property, other individuals owned 1/16th of the mineral estate and that the well completed by the Allegiance parties on the tract (and at issue in this case) is located on that 1.6 acres. The Allegiance parties for their part pled that "part of the FABDA [t]ract is or may be owned by various other individuals, included but not limited to" individuals who had, between 2009 and 2011, executed oil and gas leases with Kingswood Holdings. It is not clear from the record whether these leases included the minerals owned by these individuals under the FABDA tract or only minerals on adjacent properties. The Allegiance parties refer to these leases as the "Fritz leases," and we shall do the same.
Kingswood Holdings assigned the Fritz leases to Allegiance, Enexco, and Centennial. The Fritz leases and the Watts leases were all executed after the three leases at issue in this case were signed.
Davis, on behalf of FABDA, executes three different leases on the FABDA tract
Between 2005 and 2008, Davis, on behalf of FABDA, executed three separate leases covering the Property.
Lease number 1: the NASA lease. Davis signed the first of the three leases in March 2005. NASA was the lessee. We will refer to this lease as "the NASA lease." The NASA lease had a primary term of one year. Also in March 2005, NASA signed a certificate of pooling authority, and that certificate listed a lease with FABDA covering 3.61 acres. A file stamp on the certificate shows that it was filed with the Wichita Falls Oil & Gas Division of the Railroad Commission in January 2009 and filed with the Railroad Commission in Austin in March 2009 (after FABDA had signed the other two leases at issue in this case). The NASA lease covered all 4.61 acres of the FABDA tract, and we cannot tell from the record whether the certificate misstates the acreage or if it refers to some other lease. In August 2005, NASA filed a permit application with the Railroad Commission for a well on the Property. The Commission granted the permit in September 2005.
See Glover v. Union Pac. R. Co., 187 S.W.3d 201, 213 (Tex. App.—Texarkana 2006, pet. denied) (observing that "[o]wners of undivided portions of oil and gas interests are tenants in common" and that "[a]bsent an agreement to the contrary, a cotenant has the right to lease his or her interest without joinder of other cotenants").
In May 2006 (several months after the end of the NASA lease's primary term), drilling operations were conducted on the property, and although a well—the Piper No. 1 well—was drilled, it was not completed. The operator conducting the operations was listed as G & F Oil, Inc., not NASA. Other reports filed with the Commission about operations on the wellbore listed an entity called Saddle Creek as the operator. It is undisputed that at the end of the NASA lease's primary term in March 2006, there was no completed well on the property.
FABDA was a co-owner of Saddle Creek Energy Development, L.P. According to an affidavit Davis executed in 2008 (which was recorded by Allegiance's attorney in March 2010), Davis had acted in a management capacity with Saddle Creek. Davis swore in the affidavit that Saddle Creek caused the Piper No. 1 well to be drilled, that Saddle Creek outsourced operation duties for various wells (including the Piper No. 1 well) to Ventana (another entity that Davis had an ownership and management interest in), and that although the Piper No. 1 well had been drilled and cased, it had not been completed.
Lease number 2: the Pritchard lease. At some point, Saddle Creek filed for Chapter 11 bankruptcy. According to an assignment executed by McMurray on Saddle Creek's behalf, the bankruptcy court appointed McMurray as reorganization officer for Saddle Creek. In that capacity, on April 7, 2008, McMurray caused Saddle Creek to transfer to himself a one percent working interest in the Piper No. 1 well and one percent of the leases covering the acres surrounding the well bore. The assignment stated that it was done in compliance with an order of the bankruptcy court. The NASA lease was included in that assignment. The assignment does not indicate how Saddle Creek had the authority to assign an interest in a lease executed by FABDA.
In connection with Saddle Creek's bankruptcy, on May 28, 2008, Davis signed on FABDA's behalf the second oil and gas lease on the Property. The lessee was Gregory Pritchard, as trustee of the bankruptcy estate of Saddle Creek. We therefore refer to this lease as "the Pritchard lease." In January 2009, Mark Weisbart replaced Pritchard as the trustee for Saddle Creek's bankruptcy estate.
The Pritchard lease acknowledged that FABDA had previously signed a lease with NASA, but it avoided making any representations about the NASA lease's continuing validity. Specifically, the Pritchard lease stated, "This lease may be subject to [the NASA lease]. [Pritchard as trustee] makes no representations as to the validity of the [NASA lease]. [FABDA] covenants and agrees not to extend, renew, amend, or modify the [NASA lease]." [Emphasis added.]
The Pritchard lease had a primary term of three years "and for as long thereafter as [1] oil or gas . . . are produced in paying quantities [a] from the leased premises or [b] from lands pooled therewith or [2] this lease is otherwise maintained in effect pursuant to the provisions hereof." The lease could alternatively be maintained past the primary term if Pritchard were engaged in drilling, reworking, "or any other operations reasonably calculated to obtain or restore production therefrom." It is undisputed that by the end of May 2011, there was no completed well on the property, much less one that was capable of production, and that neither Pritchard nor Weisbart had engaged in drilling, reworking, or other operations on the property.
Lease number three: the Allegiance lease. The third lease at issue in this case was signed in the same year as the Pritchard lease, on November 20, 2008. This lease was with Allegiance, and we refer to this lease as "the Allegiance lease." Davis signed this lease both as a representative of FABDA and also in his individual capacity "for the purposes of the representations and indemnities made by him" in an addendum to the lease. FABDA board minutes showed that Davis and his ex-wife approved this lease as directors of FABDA (and Davis as president and director of Saddle Creek). The minutes indicate that the leasehold estate included the Piper No. 1 well, which had been drilled but not completed.
Like the Pritchard lease, the Allegiance lease had a primary term of three years "and for as long thereafter as oil or gas or other substances covered hereby are produced in paying quantities from the leased premises or from lands pooled therewith or this lease is otherwise maintained in effect pursuant to the provisions hereof." The lease further provided that a shut-in well capable of producing oil and gas by the end of the primary term would be deemed to be producing in paying quantities for purposes of the lease. Thus, either production in paying quantities or the capability of production in paying quantities would extend the lease beyond its primary term.
If Allegiance wished to rely on the capable-of-production provision, the lease required it to pay a shut-in royalty. Under the terms of the lease, however, the failure to pay the shut-in payment would not cause the lease to terminate. The Allegiance lease also included a provision for extending the lease beyond its primary term if Allegiance were engaged in drilling, reworking, or other operations to obtain production.
The addendum attached to the Allegiance lease discussed the Pritchard lease. It recognized the existence of the Pritchard lease, and, although the lease stated it was effective as of the date of its signing, it also stated that Allegiance's rights to conduct operations under the lease would not begin until the Pritchard lease had terminated as to the land and depths covered by the Pritchard lease. If the Pritchard lease were still in effect at the end of the Allegiance lease's primary term, the Allegiance lease would expire as to whatever land and depths were held by the Pritchard lease.
For its part, FABDA stated in the lease that it
represents and warrants that [it] has not entered into any agreement to renew the [Pritchard] Lease, and that [FABDA] has not amended the [Pritchard] Lease so as to extend the primary term thereof. [FABDA], its heirs, successors, or assigns, shall not execute any instrument or instruments, ratifications, amendments, or corrections or cause in any manner the extension, modification, renewal of, or any change in the [Pritchard] Lease [and] shall not execute any new
lease covering any of the leased premises during the primary term of this lease.
The lease also provided for an extension of the primary term if Allegiance or its successor were to challenge the validity of the Pritchard lease in court:
3. . . . [U]pon the expiration of the primary term of this lease, if the validity of the [Pritchard] Lease is challenged by Lessee, or any then owner of the mineral estate in the leased premises, in a court of law (the "Litigation"), the primary term of this lease shall continue until one hundred and eighty (180) days following the date judgment entered in said Litigation becomes final and nonappealable.We will refer to this provision as the 180-day litigation extension.
The Allegiance lease also mentioned the NASA lease, but only in the property description included in the lease; it described the land as the tract described in the deed to FABDA and described in the NASA lease filed in the County records. The Allegiance lease did not state that it was subject to the NASA lease, and it did not mention the NASA lease in any other section. The addendum likewise had no mention of the NASA lease.
Mutual release is signed and ratified
On the same day the Allegiance lease was executed, Davis, FABDA, and Allegiance executed a conditional mutual release stating that the release was binding if, within thirty days of the date of the release, at least twenty-five people named in the document as members of the Allegiance Group ratified the release and if the ratifications were delivered to Davis.
The release stated that, conditioned on the satisfaction of specified conditions precedent, Allegiance and the members of Allegiance Group released FABDA and Davis from any and all claims and liabilities that Allegiance and its members had in connection with Saddle Creek. One of the specified conditions was that the NASA lease had expired by its terms and was without further force and effect. Another condition was that Allegiance was able to cause the Piper No. 1 well to be completed and "to cause production to occur from such well." The next sentence of the release stated that this condition was "deemed satisfied upon the commencement of the flow of gas produced from said completed well through the sales meter under and pursuant to the terms of the [Allegiance lease], as per the immediately preceding sentence." This condition could also be satisfied if Allegiance took an interest in the Pritchard lease and caused the well to be completed and caused production. Ratification of the release by more than twenty-five members of Allegiance group were emailed to Davis on December 18, 2008, and sent to him by FedEx on the same day.
Allegiance assigned the Allegiance lease to the Allegiance parties, but only so far as it covered the subsurface from the surface of the property down to 7,300 feet below the surface.
McMurray sues Davis in Dallas County and FABDA files for bankruptcy
Meanwhile, in Dallas County, McMurray had sued Davis and successfully obtained a temporary injunction against him. The order was signed on November 4, 2008, and amended on November 6—before the Allegiance lease was executed and the release was signed and ratified. The Dallas trial court found after a hearing that Davis had made misrepresentations to the Texas Secretary of State and to McMurray about the existence of certain entities; that, relying on those misrepresentations, McMurray had entered into a partnership with Davis relating to oil and gas ventures; that, without telling McMurray, Davis had taken money from the partnership account and transferred it to an account he controlled; and that after McMurray found out about the transfers, Davis had promised to return the funds but had failed to do so.
A trial date on the matter was set for 2009. The trial court enjoined Davis and FABDA (and Ventana) from "[s]elling, transferring, assigning, mortgaging, encumbering, or in any other manner alienating any property valued (fair market value) of over $250, in the possession of Davis, whether personalty or realty."
Also in November 2008, FABDA filed for chapter 11 bankruptcy protection. The bankruptcy court dismissed the case with prejudice to FABDA's rights to re-file for chapter 11 bankruptcy for ninety days because FABDA's failure to comply with a court order to provide a creditor list "constitute[d] a willful failure" to abide by the court's orders. The order was signed on November 19, 2008—the day before FABDA executed the Allegiance lease.
The FABDA tract changes hands several times
On January 15, 2010, FABDA, through Davis, conveyed the Property to Thomas McMurray, P.C., by general warranty deed. The deed contained a statement purporting to reserve to FABDA "the right to grant a homestead exemption [that had been] filed in" Denton County property records the month before on December 8, 2009. The deed was filed in the property records of Denton County.
Then, ten days later, on January 25, 2010, the P.C. conveyed the Property by general warranty deed to Michael J. Whitten, as trustee for Appellant TMM. (Whitten was the same attorney who had represented Davis in connection with the conditional mutual release.) This deed contains an acknowledgment of "the homestead exemption" filed on December 8, 2009. The deed was filed in the property records.
The next month, on February 15, 2010, Thomas McMurray, P.C. executed a "remainderman lease" granting to Davis a life estate on the FABDA tract "as separate exempt homestead." The instrument granted to Davis the right to possession of the surface estate but did not grant to Davis the right to execute mineral leases. Thomas McMurray, P.C. is named as remainderman. The document does not indicate by what authority Thomas McMurray, P.C. could convey a life estate on the property, given that it had already conveyed its interest in the property to TMM. The record does not indicate that this document was filed in the property records of Denton County. The signatures on the document are not witnessed or notarized.
Davis tries to extend the Pritchard lease, and the Allegiance parties take steps to complete a well on the FABDA tract
On March 11, 2011—approximately two months before the end of the Pritchard lease's primary term and after FABDA had conveyed away its interest in the Property—Davis, on behalf of FABDA, executed and filed a document attempting to extend the primary term of the Pritchard lease. The document stated that it extended the primary term of that lease "for One (1) year from the effective date of the primary term as determined in accordance with paragraph Fourteen (14) of the Lease." The attempted extension does not specify whether the extension is from the end of the primary term, though presumably that was the intent.
The paragraph of the Pritchard lease referenced in the attempted extension is the paragraph recognizing that the NASA lease had previously covered the Property and providing that FABDA "covenants and agrees not to extend, renew, amend, or modify" the NASA lease. The attempted extension further stated that FABDA "specifically does not recognize the validity of" the NASA lease, and it "DOES NOT RECOGNIZE, REVIVE, RATIFY, RENEW, OR EXTEND such inoperative, ineffective, expired, unreleased cloud on title, and such release, waiver[,] and extinguishment . . . is hereby demanded." Thus, at that point in time, Davis took the position that the Pritchard lease was still in effect and the NASA lease was not. By the time of the judgment in this case, Davis had reversed his position on these leases, as we discuss below.
In June 2011, Weisbart, as trustee for the bankruptcy estate of Saddle Creek, assigned the estate's remaining interest in the FABDA lease to Kingswood Holdings. Allegiance's attorney testified by affidavit that, at the hearing for approval of the assignment by the bankruptcy court, Davis opposed approval of the assignment. He further testified that he spoke with McMurray at the hearing, and McMurray told him that he (McMurray) would be able to claim that the Allegiance lease was void because it was executed while the injunction was in place in his Dallas County case against Davis, and that McMurray said his "problem" with the lease was "the manner the pie was divided"—that is, "his trust needed a greater interest."
On October 13, 2011, Allegiance's attorney informed McMurray (but not Davis) that the Allegiance parties intended to start completion of the well four days later on October 17. Davis somehow learned of the plans, and on October 17, when Enexco employees and subcontractors showed up to work on the well, they found that Davis had blocked off the entrance to the property and was refusing the workers access. Davis offered to give Enexco a forty-five-day license to access the property in exchange for a payment of $3,000. In the license agreement he offered to sign, he stated that he was the owner of the FABDA tract.
With the end of their lease's primary term nearing, the Allegiance parties sought relief in Denton County against Davis, FABDA, and Whitten as TMM's trustee. They filed an application for a temporary restraining order, a temporary injunction, and a permanent injunction. They asserted that they had the right to access the surface of the Property under the Allegiance lease, the Watts leases, and a production unit they had designated, and that they were in danger of losing the lease because it was so near the end of the primary term. The trial court granted the TRO and set a hearing date for the temporary injunction application.
Davis and FABDA filed a motion to vacate and for forfeiture stating that FABDA "does not have an oil and gas lease with Allegiance, as alleged, the lease was terminated due to the acts and omissions of [the Allegiance parties]." McMurray filed an answer as trustee of TMM; the answer stated that he had replaced Whitten as trustee.
On November 3, 2011, after a hearing, the trial court issued a temporary injunction. The Allegiance parties then commenced drilling operations. Enexco completed the well between November 9 and November 11, 2011. On November 11, Ralph Rather, vice president of Enexco, turned on the well switch, and gas flowed out of the wellhead at an estimated rate of 2.5 million cubic feet per day. The pressure on that day was 1,200 pounds, and gas flowed for approximately an hour until the valve was closed. Rather then shut in the well. Rather tendered to McMurray and to Davis checks for the shut-in royalty on November 18, 2011.
The litigation continues, and a bench trial is held, but the trial court ultimately renders summary judgment
After the trial judge voluntarily recused herself, a new judge was appointed. The Allegiance parties then filed a traditional motion for partial summary judgment asking for declaratory relief, including a declaration that Davis did not have a valid homestead interest in the property.
The new judge vacated the TRO that had been entered in favor of Allegiance as void ab initio. Davis then filed an answer asserting that the Allegiance lease had terminated by its own terms at the end of its primary term.
McMurray, as trustee of TMM, filed a motion for partial summary judgment, the first of five he filed below. He sought a declaration that the Allegiance lease was of no effect because its primary term had expired. He argued that because the well on the Property needed a tank battery and because the well was not hooked up to a pipeline, the well was not capable of production. Thus, he argued, the Allegiance lease terminated under its own terms.
McMurray also filed an original petition seeking declaratory relief for TMM. By amended petition filed in February 2012, McMurray asserted that the Pritchard lease had expired by its own terms, that Davis did not have authority to execute the March 2011 attempted extension of the Pritchard lease, and that the attempted extension violated the terms of the Allegiance lease. He further asserted that the Allegiance lease had terminated by its own terms because the Allegiance parties did not complete a well capable of production on the Property. He thus took the position that neither the Pritchard lease nor the Allegiance lease were in effect.
The Allegiance parties then filed a second traditional motion for partial summary judgment. They argued and attached evidence intended to show that the Piper No. 1 well was capable of production in paying quantities at the end of the primary term, thus countering McMurray's summary judgment ground. But they also asserted the ground that, even if the well were not capable of production, the lease was still saved because of the 180-day litigation extension. They made these same arguments in their response to TMM's motion. In response, McMurray argued that because the Allegiance parties were arguing that the Pritchard lease had expired, they were not challenging the validity of the Pritchard lease, and thus the 180-day litigation extension did not apply.
Davis filed a plea in intervention on behalf of six different entities, but the trial court struck the interventions of all six.
Although McMurray had previously taken the position that the Pritchard lease had expired in 2011 because Davis's attempted extension of it was of no effect, on May 25, 2012, McMurray executed and filed in the property records an instrument ratifying Davis's attempted extension. If the ratification were effective, it would extend the Pritchard lease by one year, but because of the timing of McMurray's ratification, there would be only three days remaining on the Pritchard lease's primary term. Five days later, Davis filed the 2010 Remainderman Lease in the trial court.
McMurray then filed an amended petition asserting that TMM had ratified Davis's attempted extension of the Pritchard lease, but that lease as extended had by that time expired (given that his ratification would have caused the lease to extend by only three days). He further argued that because of the extension, under the Allegiance lease's terms, it was not in effect. This argument was based on language in the Allegiance lease that if the Pritchard lease were still in effect at the end of the Allegiance lease's primary term (in November 2011), the Allegiance lease would expire. Thus, under McMurray's argument, the Allegiance lease expired at the end of the day on November 20, 2011, because the Pritchard lease was still in effect due to his ratification, but the Pritchard lease had, as of the time of his petition, also expired under its own terms.
Thus, although McMurray's arguments had changed, he still took the position that neither the Pritchard lease nor the Allegiance lease was in effect. McMurray filed a second motion for partial summary judgment with this additional ground.
The Allegiance parties filed an amended petition alleging that they had designated a production unit for the Piper No. 1 well that included the Allegiance lease, the Watts leases, and the Fritz leases (the Fritz Lease Piper Unit Designation).
In August 2012, the trial court held a bench trial. At the trial, the parties tried the issue of whether the Piper No. 1 well was capable of production at the end of the Allegiance lease's primary term. The trial court subsequently rendered an interlocutory declaratory judgment declaring that the 180-day litigation extension applied, that Davis's attempted extension of the Pritchard lease and McMurray's attempted ratification of that extension were void, and that the Allegiance lease was valid and in effect.
Davis then changed tactics. In January 2013, Davis filed in the property records a document entitled, "Report of Sale of Real Property and Personalty." The document stated that Davis, as substitute trustee, had foreclosed on the FABDA tract and sold the property at a foreclosure sale "under private power" to Arsenal Operating. On February 6, 2013, Davis filed a document purporting to be a substitute trustee's deed. In the document, Davis, on behalf of FABDA, conveyed to Arsenal Operating "all that real property" described in an exhibit to the deed. The document further stated that a foreclosure sale was held on January 1, 2013, and that Arsenal was the highest bidder. It stated that Davis "hereby b[ou]nd Thomas McMurray, P.C., and the TMM Family Trust . . . forever to warrant and defend this real property against all persons claiming it." It "specifically recognizes the revivor and reaffirmation of that certain oil and gas lease by and between Fabda, Inc. and NASA Energy Corp., dated March 5, 2005." It stated that the conveyance was "made pursuant to the powers conferred on [Davis] by private power of sale and pursuant to the Mineral Trespass Lien recorded in the Denton County property records."
The deed was attached to a judgment signed in a case against both Thomas McMurray, P.C. and TMM in the 431st district court of Denton County. The judgment does not identify the plaintiffs and is styled as "In re McMURRAY" (which may be due to Davis's tendency to incorrectly use "In re [party against whom the pleadings or motion is directed]" instead of the correct case style). But Davis is identified as attorney for the unidentified plaintiffs. The judgment orders that "the Plaintiffs have recovered judgment and enforced liens against the Thomas McMurray, P.C. and the TMM Family Trust for . . . the specific performance and exercise of private power sale of and transfer of certain real property interests including any claims."
This judgment does not make clear from whom and to whom the FABDA tract is being transferred, but given that it was filed with the foreclosure deed, it presumably was conveyed to Arsenal. (In an amended petition, the Allegiance parties asserted that on information and belief, Arsenal was a general partnership in which Davis was a partner, or it was an assumed named for Davis, or it was some other arrangement that "is not a formal entity formed under the laws of any state.")
The next day, Davis filed in the Denton County property records a "Ratification, Renewal[,] and Revival" of the NASA lease. The document stated that it extended the primary term of the NASA lease to March 7, 2016. The document was signed by Davis as chairman of FABDA and by Jerry Pratt, president and CEO of NASA. On February 19, NASA also filed a copy of this document in the property records.
The next month, McMurray filed a third motion for partial summary judgment. The motion asserted that the rule against perpetuities (RAP) made the Allegiance lease invalid because of the 180-day litigation extension. It further argued that the unit designated by the Allegiance parties was invalid because the Fritz leases covered property that had already been leased by a different lessee and that was already in a different production unit.
The trial court rendered an amended interlocutory declaratory judgment. The judgment contained most of the same declarations as its previous interlocutory judgment, but the court struck the language declaring that the Allegiance lease was extended by 180 days after the end of litigation and that the lease was valid, enforceable, and in effect. The judgment still declared that the attempted Pritchard extension and ratification were void. The judgment made no declarations about the NASA lease.
McMurray then filed a fourth motion for partial summary judgment. The fourth motion argued that the Allegiance lease was void because Enexco did not have a proper permit to operate the Piper No. 1 well. McMurray also filed an amended petition for TMM and asked that NASA be added to the case as an indispensable party. The trial court signed an order naming NASA as a party, and Davis filed an answer on behalf of NASA.
McMurray then filed a combined fifth motion for partial summary judgment and first no-evidence motion for summary judgment. In addition to various no-evidence grounds, this motion asserted that when Kingswood Holdings took the assignment of the Pritchard lease from Weisbart, it took the assignment subject to Davis's attempted extension, and Kingswood Holdings thereby ratified the extension or revived the Pritchard lease.
The Allegiance parties filed responses to each of McMurray's summary judgment motions as well as a supplement to their first motion. Davis filed ten motions for summary judgment on his own behalf and on behalf of FABDA, in addition to four pleas to the jurisdiction, a motion for judgment as a matter of law, and numerous other motions seeking to have the Allegiance parties' claims dismissed. He also filed a no-evidence summary judgment motion on behalf of NASA.
The trial court rendered judgment withdrawing its previous interlocutory judgment, denying the Allegiance parties' motions for summary judgment, granting Davis, FABDA, and NASA's motions in part, granting TMM's third and fourth partial summary judgment motions, and granting TMM's fifth traditional motion and first no-evidence motion in part.
The trial court's judgment included declarations that:
• the Allegiance lease violated the RAP because it came into existence while the NASA lease was still valid;The Allegiance parties now appeal.
• the Fritz leases owned by the Allegiance parties are not valid;
• the Allegiance lease expired within the primary term; and
• the Pritchard lease was revived when Kingswood Holdings took an assignment of it because the assignment was subject to Davis's extension.
B. Discussion
Before we begin our analysis of the issues, we address the relevance of one of the two supplemental clerk's records that were filed in this case. After this case was set for submission, we received a supplemental clerk's record that had been requested by Davis. This record of 721 pages consists of transcripts of the depositions of Davis and of Jerry Pratt, along with related exhibits. Davis filed these documents in the trial court on August 25, 2014, after the parties' opening briefs had been filed in this court and we had set this case for submission. These documents were not before the trial court when it rendered judgment, and they are therefore not relevant to the issues in this appeal. We do not consider them except to the extent they were otherwise a part of the original appellate record.
We also note that during the pendency of these proceedings, Davis was disbarred. The record does not inform of us of the basis for the disbarment as the issue did not arise in the trial court, but the briefs in Davis's disciplinary appeal suggest that the evidentiary panel of the State Bar grievance committee found that Davis "brought a proceeding, asserted an issue[,] or controverted an issue affecting [the Complainants who filed grievances against him] that was frivolous," "took positions that unreasonably increased the costs or other burdens of the case or that unreasonably delayed resolution of the matter," "knowingly made a false statement of material fact or law to a tribunal," and "engaged in conduct involving dishonesty, fraud, deceit[,] or misrepresentation." However, Davis has appealed the disbarment, and that appeal is still pending as of the time of this opinion. We did not consider the grievance committee's action or findings in our resolution of this appeal.
See App. Part II of Br. of Appellant at 41-42, Charles Chandler Davis v. Commission for Lawyer Discipline, No. 15-0615 (Tex. Nov. 18, 2015); Br. of Appellee at 38-39, Davis, No. 15-0615 (Tex. Jan. 13, 2016).
We now turn to the four issues raised by the Allegiance parties.
1. Issue One: Procedural Errors by the Trial Court.
In their first issue, the Allegiance parties assert that the trial court made two major procedural errors requiring reversal: (1) granting no-evidence summary judgment for NASA on an affirmative defense on which NASA bore the burden of proof and (2) setting aside its prior interlocutory declaratory judgment without giving the Allegiance parties notice and the opportunity to supplement their summary judgment proof. We begin with the first part of the issue challenging the summary judgment for NASA.
1.1. The trial court erred by granting no-evidence summary judgment for NASA on an affirmative defense on which NASA had the burden of proof.
NASA's no-evidence summary judgment motion asserted that "Plaintiffs cannot sustain their burden as to statute of limitations, all claims, or any claims which include NASA Energy, Corp. are time-barred, as a matter of law" and that "Plaintiffs cannot sustain a breach of duty claim, because . . . plaintiffs are time barred from any tort claim or other erroneously filed claim." In its judgment, the trial court granted no-evidence summary judgment for NASA, stating that the Allegiance parties' claims against NASA were time barred.
On appeal, the Allegiance parties contend that limitations are an affirmative defense and as such, NASA was not entitled to no-evidence summary judgment on the ground of limitations. They are correct.
SeeFieldtech Avionics & Instruments, Inc. v. Component Control.Com, Inc., 262 S.W.3d 813, 830 n.8 (Tex. App.—Fort Worth 2008, no pet.).
NASA argues in its brief that the Allegiance parties failed to raise this issue in the trial court. But in their response, the Allegiance parties pointed out that NASA's grounds were not directed at elements for which the Allegiance parties had the burden of proof at trial. And even were we to agree that the Allegiance parties' response did not challenge the adequacy of NASA's summary judgment grounds, NASA was nevertheless not entitled to summary judgment because NASA's grounds were not proper no-evidence grounds. Because NASA had the burden of proof on its affirmative defense, it was not entitled to summary judgment unless it produced evidence establishing its affirmative defense as a matter of law. Because it did not do so, the trial court's grant of summary judgment for NASA on these grounds was erroneous, and we therefore sustain this part of the Allegiance parties' first issue.
SeeNowak v. DAS Inv. Corp., 110 S.W.3d 677, 680 (Tex. App.—Houston [14th Dist.] 2003, no pet.) (holding that "[a] defendant urging summary judgment on an affirmative defense is in the same position as a plaintiff urging summary judgment on a claim," and "[t]hus, a defendant urging summary judgment on an affirmative defense must come forward with summary judgment evidence for each element of the defense").
See id.
1.2. Failure to give the Allegiance parties an opportunity to address issues.
The second part of this issue concerns the trial court's setting aside of its interlocutory declaratory judgment without giving the Allegiance parties an opportunity to address the issues that had previously been determined in the judgment. They raise this issue conditionally, depending on our disposition of their issue challenging the validity of Davis's attempted extension of the Pritchard lease and McMurray's ratification of it. Because we hold below that the attempted extension and ratification were of no effect, we do not address this part of the first issue.
2. Issue Two: No-Evidence Summary Judgment on Chapter 12 and Tortious Interference Claims.
In their second issue, the Allegiance parties ask whether the trial court erred by granting no-evidence partial summary judgment in favor of Davis, FABDA, and TMM. They separate this issue into two subissues, one attacking the no-evidence summary judgment on their tortious interference with contract claims and one challenging the judgment on their claims under civil practice and remedies code chapter 12.
Tex. Civ. Prac. & Rem. Code Ann. §§ 12.001-.007 (West 2002 & Supp. 2015).
2.1. The trial court erred by granting summary judgment on the Allegiance parties' chapter 12 claims.
The Allegiance parties pled violations of civil practice and remedies code section 12.002 against Davis, FABDA, and TMM. That section makes a person liable for making, presenting, or using a fraudulent document or other record under certain circumstances. The document must be made, presented, or used with the knowledge that the document is a fraudulent lien or claim against property or an interest in property; with the intent that the document be given the same legal effect as a court record or document of a court evidencing a claim against property or an interest in property; and with the intent to cause another person to suffer (1) physical injury, (2) financial injury, or (3) mental anguish or emotional distress.
Tex. Civ. Prac. & Rem. Code Ann. § 12.002(a).
Id.; Brewer v. Green Lizard Holdings, L.L.C. Series SR, 406 S.W.3d 399, 403 (Tex. App.—Fort Worth 2013, no pet.).
The Allegiance parties argue that the trial court erred by granting summary judgment on their chapter 12 claims because (i) issues of intent and knowledge are inappropriate for summary judgment, and (ii) they responded to the motions with evidence of the essential elements sufficient to defeat summary judgment. We first consider these arguments as to Davis and FABDA.
2.1.1. Davis and FABDA were not entitled to no-evidence summary judgment on the chapter 12 claims against them.
The Allegiance parties' chapter 12 claims against Davis and FABDA were based on Davis and FABDA's making of, use of, and presentment of the designation of homestead, the attempted extension of the Pritchard lease, and the two attempted renewals of the NASA lease.
Davis and FABDA asserted as no-evidence grounds that there is no evidence "that [Davis] or FABDA . . . participated in any fraudulent transaction or recorded any fraudulent instrument" and or that Davis or FABDA "filed any document with the intent to cause another person to suffer financial injury and or mental anguish or distress." Thus, Davis and FABDA challenged the first and third element of a chapter 12 claim, but not the second. The trial court granted summary judgment on both of these grounds.
The Allegiance parties make no argument in their brief that Davis's filed homestead designation was a fraudulent document. We therefore do not consider whether the trial court erred by granting summary judgment to the extent their chapter 12 claims were based on that document.
Similarly, in their response to the motion below, the only evidence the Allegiance parties pointed out as evidence of a fraudulent document was the attempted extension of the Pritchard lease. They did not name any other specific evidence in their response as evidence of their chapter 12 claim against Davis and FABDA. This attempted extension, however, supports the chapter 12 claims.
Davis executed and filed the attempted extension of the Pritchard lease, naming FABDA as lessor, at a time when neither he nor FABDA had an ownership interest in the property that would authorize signing or extending a mineral lease on the property. The attempted extension of the Pritchard lease, though stating it was "between" FABDA and Pritchard, was done without the consent or knowledge of Weisbart, Saddle Creek's bankruptcy trustee. This court has upheld a 12.002 claim based in part on a fraudulent instrument of conveyance of real property. The attempted extension was filed on behalf of FABDA in the real property records of Denton County. Thus, the Allegiance parties produced sufficient evidence to, at the least, raise a fact issue about whether Davis and FABDA, by filing the attempted extension of the Pritchard lease, filed a fraudulent instrument. The trial court therefore erred by granting summary judgment on this ground.
See Alexander v. Kent, No. 02-13-00469-CV, 2015 WL 6759333, at *15 (Tex. App.—Fort Worth Nov. 5, 2015, no pet.) (noting the general rule in Texas that "'(a) corporation's employee is personally liable for tortious acts which he directs or participates in during his employment'" (citations omitted)).
See Extraction Res., Inc. v. Freeman, 555 S.W.2d 156, 159 (Tex. Civ. App.—El Paso 1977, writ ref'd n.r.e.) ("It is elementary that one cannot convey what he does not own.").
See Brewer, 406 S.W.3d at 404 (upholding a summary judgment granted on a section 12.002 claim that was based in part on a fraudulent deed).
Relying on the open mines doctrine, Davis contends in his brief that he retained the executive right to lease the minerals by way of his life estate in the FABDA tract. We will consider this argument despite Davis's incorrectly including it in his statement of facts.
SeeAltman v. Blake, 712 S.W.2d 117, 118 (Tex. 1986) (noting that the mineral estate is comprised of five rights, including the executive right, which is the right to lease); see also KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 80 (Tex. 2015) (noting that the holder of the executive right has the power to make and amend leases).
See Tex. R. App. P. 38.1(g), 38.2(a)(1).
The open mines doctrine addresses one specific question: if minerals are produced from real property under a lease that was in existence at the creation of a life estate on the property, between the holder of the life estate and the remainderman, who receives the proceeds? The doctrine "provides a limited exception to the general rule that a life tenant is liable to the remaindermen for waste if he uses the corpus of the estate." "Texas courts have applied the open mine doctrine only to leases that the [grantor of the life estate] executed and that are in effect at" the creation of the life estate. Where it applies, it does not allow the life tenant to create new mineral leases on the property.
SeeClyde v. Hamilton, 414 S.W.2d 434, 439 (Tex. 1967).
McGill v. Johnson, 799 S.W.2d 673, 676 (Tex. 1990); see also Moore v. Vines, 474 S.W.2d 437, 439 (Tex. 1971) (quoting Blackstone for the proposition that "[t]o open the land to search for mines . . . is waste," but it is not waste for a life tenant to continue operating mines that were opened before the creation of the life estate, and extending that doctrine to wells producing under a lease executed by the grantor of the life estate and to wells drilled under authority of an existing lease).
McGill, 799 S.W.2d at 676.
Moore, 474 S.W.2d at 440 (stating that the open mines doctrine does not apply to leases not in existence at the time of the vesting of the life estate).
The open mines doctrine did not give Davis the right to execute the attempted extension. If the doctrine does apply only to leases in existence at the time of the creation of the life estate, then logically it also applies only to leases as they exist at that time, meaning that the life tenant does not have the authority to extend the lease beyond the terms granted by the creator of the life estate. But even if the doctrine would allow a life tenant to amend a lease to extend the primary term, the applicability of the open mines doctrine depends on the instrument creating the life estate, and the instrument in this case indicates no intention to give Davis the executive right.
Seeid.
See Bradshaw, 457 S.W.3d at 80 (holder of executive right has right to amend mineral leases).
See McGill, 799 S.W.2d at 676; see also Inwood N. Homeowners' Ass'n, Inc. v. Harris, 736 S.W.2d 632, 635 (Tex. 1987) ("Homestead rights, however, may not be construed so as to avoid or destroy pre-existing rights.").
The instrument from Thomas McMurray, P.C. granting Davis a life estate grants to Davis the right to possession of the surface estate but does not grant to Davis any right to execute a mineral lease. And we point out that at the time that Thomas McMurray, P.C. signed the remainderman lease granting Davis the life estate, it had already conveyed the property to TMM. And although Davis claimed in the 2009 designation of homestead that he had held a life estate on the property since 2000, the public records before the trial court did not support that statement (and, even if it did, the Pritchard lease was not in existence at the time of the creation of that life estate). The deeds conveying the property to FABDA and then from FABDA to Thomas McMurray, P.C. do not create a life estate (although the deed to the P.C. reserves to FABDA the right to grant Davis the homestead exemption Davis had previously filed in 2009). No other conveyance in the record shows any intent to create a life estate giving Davis the right to modify the terms of the Pritchard lease to extend its primary term. The record before the trial court did not support the applicability of the open mines doctrine.
With respect to Davis and FABDA's other summary judgment ground, "[i]ntent to defraud is not susceptible to direct proof; therefore, it invariably must be proven by circumstantial evidence," and "[i]ssues of knowledge and intent are rarely appropriate for summary judgment." Davis signed the deed conveying the property from FABDA to the P.C. and later signed the attempted Pritchard extension, and Davis was at the time a licensed attorney. This is at least some evidence that Davis knew when he executed the attempted extension that FABDA no longer owned the property or its minerals, that the lessee had not consented to an extension of the lease, that FABDA had already executed a new lease with Allegiance, and that the attempted extension would create a cloud on the Allegiance parties' interest in the property. And this document was filed after Davis had signed the Allegiance lease promising that FABDA would take no steps to extend or renew the Pritchard lease.
Gordon v. W. Houston Trees, Ltd., 352 S.W.3d 32, 46 (internal quotation marks and citation omitted).
Tex. Rice Land Partners, Ltd. v. Denbury Green Pipeline-Tex., LLC, 457 S.W.3d 115, 121 (Tex. App.—Beaumont 2015, pet. pending) (quoting Murray v. Cadle Co., 257 S.W.3d 291, 302 (Tex. App.—Dallas 2008, pet. denied)).
SeeGordon, 352 S.W.3d at 46.
The evidence produced by the Allegiance parties, at the least, raised a fact issue about whether the attempted extension was, "by its timing and its terms, . . . intended to remove the property from [the Allegiance parties'] reach," and thus whether the extension was intended to cause the Allegiance parties to suffer financial injury. We therefore agree with the Allegiance parties that they at least raised a question on this ground. We sustain the Allegiance parties' second issue as to the chapter 12 claims against Davis and FABDA.
See id.
SeeSmith v. O'Donnell, 288 S.W.3d 417, 424 (Tex. 2009) (stating that if the nonmovant brings forward more than a scintilla of probative evidence that raises a genuine issue of material fact, then a no-evidence summary judgment is not proper).
2.1.2. TMM was not entitled to no-evidence summary judgment on the chapter 12 claim against it.
With respect to the chapter 12 claim against TMM, the Allegiance parties alleged that TMM violated section 12.002 by its making, use of, and presentment of its ratification of Davis's attempted extension of the Pritchard lease (attempted ratification) on FABDA's behalf. McMurray argued in TMM's no-evidence summary judgment motion that there was no evidence that TMM had knowledge that any document executed by TMM was fraudulent because TMM owned the property at issue; no evidence of intent given that it owned the property; and no evidence of damages caused by TMM.
As these were the only grounds raised, they were the only three grounds on which the trial court could have granted summary judgment for TMM on this claim. The trial court granted summary judgment on all three grounds.
FortWorth Star-Telegram v. Street, 61 S.W.3d 704, 708 (Tex. App.—Fort Worth 2001, pet. denied) ("[A] summary judgment may not be granted on grounds not raised by the movant in his motion.").
We begin with the last ground. The Allegiance parties pled that McMurray filed the attempted ratification "with the intent to cause [the Allegiance parties] to suffer financial injury and/or mental anguish or emotional distress." In his motion, although McMurray argued that there was no evidence of damages caused by TMM under this claim, he did not challenge the evidence as to whether he had intended to cause either (1) financial injury or (2) mental anguish or emotional distress. As the Allegiance parties point out, section 12.002 does not require a finding of actual damages. The trial court therefore should not have granted summary judgment on this ground.
See Tex. Civ. Prac. & Rem. Code Ann. § 12.002 (making intent to cause injury an element of liability under the section and providing for an award of either actual damages or $10,000); Vanderbilt Mortg. & Fin., Inc. v. Flores, 692 F.3d 358, 371 (5th Cir. 2012) (interpreting section 12.002 and holding that statutory damages are an alternative to actual damages under that section and thus actual damages are not required to maintain a claim).
As for TMM's other two grounds, they are both premised on the trust's ownership of the FABDA tract at the time of the attempted ratification's filing. TMM did own the property at the time of the filing, but if the Allegiance lease were valid, it did not own property rights then held by the Allegiance parties, and it was their ownership interest that the attempted ratification affected. As the Allegiance parties pointed out to the trial court, "[o]ne cannot unilaterally file a document in the real property records and trump a valid and existing oil and gas lease." TMM's grounds are therefore premised on the legal conclusion that the Allegiance lease was invalid, despite the trial court's then-standing interlocutory declaratory judgment that the Allegiance lease was not invalid. Given the existence of the Allegiance lease at the time of the attempted ratification, the timing of McMurray's ratification, and McMurray's previous position that the Pritchard lease had not been extended, the fact that TMM had a property interest in the FABDA tract did not negate McMurray's knowledge about whether the attempted ratification was fraudulent or whether McMurray executed and filed it with the intent that it be given legal effect. TMM's summary judgment grounds were not sufficient to be entitled to summary judgment.
See Tex. R. Civ. P. 166(a)(i).
Further, as noted above, issues of knowledge and intent are generally inappropriate for summary judgment. And as the Allegiance parties pointed out below and on appeal, McMurray is a licensed attorney. He acknowledged at the bench trial that he is active in the oil and gas industry, and he characterized himself to the trial court as an expert on oil and gas law. His own filings indicate that he believed that Davis's attempted extension of the Pritchard lease was of no effect, which, given his knowledge as an attorney, is at least some evidence of his knowledge at the time of his filing of whether the Allegiance parties had vested rights under their lease that his attempted ratification would affect. The timing and content of his own filings in this case is at least some evidence that, regardless of TMM's ownership interest in the FABDA tract, he understood and intended the effect that an extension of the Pritchard lease would have had, and that he intended, by making and filing the ratification, to render the Allegiance lease void. We hold that, regardless of whether the Allegiance parties can prove or McMurray can negate the requisite knowledge and intent at trial, the trial court erred by granting summary judgment on the chapter 12 claim on the specific grounds raised by McMurray.
SeeAland v. Martin, 271 S.W.3d 424, 430-31 (Tex. App.—Dallas 2008, no pet.) (noting that the trial court had applied the appellant's intention to create a cloud on the title of the appellee's property to the second element—intent that the document at issue be given the same legal effect as a court record evidencing a valid claim).
2.2. The Allegiance parties presented evidence on each challenged element of their tortious interference claims.
In the next part of their second issue, the Allegiance parties challenge the trial court's granting of no-evidence summary judgment on their tortious interference with contract claims against Davis, FABDA, and TMM. The elements of a claim for tortious interference with contract are "(1) an existing contract subject to interference, (2) a willful and intentional act of interference with the contract, (3) that proximately caused the plaintiff's injury, and (4) caused actual damages or loss." "To establish tortious interference with existing contract, a plaintiff is not limited to showing the contract was actually breached. Any interference that makes performance more burdensome or difficult or of less or no value to the one entitled to performance is actionable."
Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000).
Khan v. GBAK Props., Inc., 371 S.W.3d 347, 359-60 (Tex. App.—Houston [1st Dist.] 2012, no pet.) (emphasis added); see also Tippett v. Hart, 497 S.W.2d 606, 610 (Tex. Civ. App.—Amarillo 1973, writ ref'd n.r.e.) (including within the tort "not merely the procurement of a breach of contract, but all invasion of contract relations, including any act injuring or destroying persons or property which retards, makes more difficult or prevents performance"); Restatement (Second) of Torts §§ 766 & cmt. h & k, 766A (1979) (including within the tort instances when interference with the plaintiff's or third party's performance comes through preventing the performance or making performance impossible).
2.2.1. Davis and FABDA's no-evidence motion was procedurally defective as to the tortious interference claims against them.
Davis and FABDA asserted three no-evidence grounds addressing this claim, two of which the trial court granted. These two grounds, however, do not "state the elements as to which there is no evidence"; they merely assert the conclusions that there was no evidence either Davis or FABDA tortiously interfered with a contract. We agree with the Allegiance parties that these two grounds do not conform with the requirements for a no-evidence summary judgment ground because they do not specifically state the elements for which there is no evidence. They are nothing more than conclusory statements. Accordingly, the trial court should not have granted summary judgment for Davis or FABDA on the tortious interference claims against them. We sustain this part of the Allegiance parties' second issue.
See Tex. R. Civ. P. 166a(i).
Seeid.; Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009).
See Sanchez v. Mulvaney, 274 S.W.3d 708, 710 (Tex. App.—San Antonio 2008, no pet.) (stating that a conclusory no-evidence ground is legally insufficient as a matter of law).
2.2.2. Allegiance presented sufficient summary judgment evidence on their tortious interference claim against TMM.
With respect to their tortious interference claim against TMM, the Allegiance parties had pled that McMurray as trustee had tortiously interfered with their contract with FABDA. McMurray's no-evidence summary judgment motion set out three no-evidence grounds on this claim. McMurray did not assert a ground challenging the existence of a contract subject to interference.
See Prudential Ins. Co., 29 S.W.3d at 77 (setting out the elements of a claim for tortious interference).
McMurray's first ground challenged the second element of a tortious interference claim, stating that "there is no evidence that [TMM] willfully and intentionally interfered with the contract." In their response below and in their brief on appeal, the Allegiance parties argued that there was no fact issue that McMurray had filed a ratification of Davis's attempted extension of the Pritchard lease and that issues of intent are not generally appropriate for summary judgment.
There is no fact question about whether McMurray was aware of the Allegiance lease when he filed the attempted ratification. Nor is there a fact issue about whether McMurray intentionally filed the attempted ratification. McMurray does not deny that he filed the attempted extension; in fact, he relied on it below as a ground for summary judgment. The attempted ratification was filed in the middle of litigation over which lease on the FABDA tract was in effect. There is no dispute that by filing the attempted extension, McMurray, a licensed attorney experienced in the oil and gas business, was attempting to have the Allegiance lease declared void, thereby taking away the Allegiance parties' rights to the minerals under the lease and making it impossible for them to obtain any benefits from the lease. And we agree with the Allegiance parties that, given these facts, there is at least a fact issue as to McMurray's intent to interfere with the Allegiance parties' contract with FABDA. We hold that the trial court should not have granted summary judgment on this ground.
See Khan, 371 S.W.3d at 359-60; see also Sw. Bell Tel. Co. v. John Carlo Tex., Inc., 843 S.W.2d 470, 472 (Tex. 1992) (stating that intentional interference requires not just intent by the actor to do the interfering act, but also that "'the actor desires to cause the consequences of his act, or that he believes that the consequences are substantially certain to result from it'" (citation omitted)).
SeeTex. Rice Land Partners, 457 S.W.3d at 121.
SeeO'Donnell, 288 S.W.3d at 424.
McMurray's second ground for summary judgment on this claim was that "there is no evidence that the [Allegiance parties] have any damages since there is no pipeline built to the well and the [Allegiance parties] ha[ve] admitted same in admissions even up to the present date." McMurray thus attacks the evidence as to only one category of possible damages: profit from sales of hydrocarbons from the well. He does not in this ground recognize that the Allegiance parties might suffer any other kind of damages. Because the Allegiance parties could have suffered some other type of damages, the trial court should not have granted summary judgment on this ground. And in fact, the Allegiance parties produced evidence that McMurray's attempted extension caused a cloud on their title and decreased the value of the lease.
SeeHill v. Heritage Res., Inc., 964 S.W.2d 89, 126 (Tex. App.—El Paso 1997, pet. denied) (stating that, in a tortious interference claim, "[a] plaintiff must be able to show that the act of interference was the proximate cause of the damages suffered by it" and that this "classic proximate cause test" includes the elements of cause in fact and foreseeability).
Further, in response to McMurray's narrow ground, the Allegiance parties argue that McMurray's actions delayed when they would be able to market the hydrocarbons produced from the well. And in the trial court they provided evidence that the reason there is no pipeline connected to the well is that Crosstex does not want to connect the well to its nearby pipeline until the litigation resolving rights to the well is concluded. Thus, they produced some evidence, sufficient to raise a fact issue, that the interference with the Allegiance lease by Davis and McMurray was the reason no pipeline had been connected and the reason no production from the well has been sold. We agree with the Allegiance parties that they produced some evidence of damages resulting from McMurray's filing of the attempted ratification.
Finally, McMurray asserted that there was no evidence that any damages were caused by TMM because the assignment of the Pritchard lease to Kingswood Holdings revived the Pritchard lease. TMM asserted a traditional summary judgment ground asking the trial court to grant summary judgment on this very premise—that the Kingswood Holdings assignment revived the Pritchard lease. By raising this same point as a no-evidence ground, TMM attempted to shift its burden to prove this ground to the Allegiance parties. As the Allegiance parties pointed out below and in this court, TMM had no pleadings to support the traditional ground seeking a declaration on this point. The trial court therefore should not have granted summary judgment on this ground.
See Tex. R. Civ. P. 301 ("The judgment of the court shall conform to the pleadings."); Cunningham v. Parkdale Bank, 660 S.W.2d 810, 813 (Tex. 1983) "[A] judgment must be supported by the pleadings and, if not so supported, it is erroneous."); Gillis v. MBNA Am. Bank, N.A., No. 2-08-058-CV, 2009 WL 51027, at *1 (Tex. App.—Fort Worth Jan. 8, 2009, no pet.) (mem. op.) ("A trial court may not grant a summary judgment on an unpled cause of action.").
Further, regardless of the procedural problems with this ground, because we hold below that the Kingswood Holdings assignment did not revive the Pritchard lease, we further hold here that the trial court erred by granting summary judgment on this ground. We sustain this final part of the Allegiance parties' second issue.
3. Issue Three: The trial court erred by granting traditional summary judgment for TMM.
The Allegiance parties ask in their third issue whether the trial court erred by granting traditional summary judgment in favor of TMM based on TMM's third, fourth, and fifth traditional motions for partial summary judgment. The Allegiance parties break this issue into three main subissues, one for each granted motion.
3.1. TMM was not entitled to judgment as a matter of law on its third traditional motion for partial summary judgment.
In the first part of their third issue, the Allegiance parties challenge the trial court's grant of TMM's third traditional motion for partial summary judgment. TMM's motion for partial summary judgment requested five declarations: (1) that the Allegiance lease was void because it expired in its primary term, or, alternatively, (2) that it never became valid because it was a top lease to the NASA lease; (3) that the Allegiance lease violated the RAP because it was a top lease to the NASA lease; (4) that the Fritz Lease Piper Unit Designation was not valid because the Fritz leases owned by the Allegiance parties were top leases of no effect; and (5) that the Fritz leases executed by Mitchell were still valid and in full force held by production.
The trial court granted the motion in part, making the five requested declarations in the final judgment.
3.1.1. TMM did not establish as a matter of law that the Allegiance lease had expired by its own terms.
In TMM's petition, it alleged that the Allegiance lease expired in its primary term due to lack of production and lack of a valid shut-in payment. In his third summary judgment motion, however, McMurray made no clear argument about the basis for his contention that the lease expired at the end of its primary term.
The Allegiance parties argue, and we agree, that McMurray did not show TMM's entitlement to summary judgment on the ground that the Allegiance lease had expired by its own terms. The Allegiance parties asserted in their petition that they had completed a well on the FABDA tract itself and that this well was capable of producing in paying quantities. Thus, under the lease's terms, they did not need to rely on production from another property within the pooled unit to hold the lease past the primary term. McMurray's third motion did not mention, much less produce evidence on, the question of production from the well. Further, as we discuss below, the Allegiance parties established as a matter of law that the well was capable of production in paying quantities and that no shut-in payments were necessary to hold the lease. Because McMurray did not meet his burden to establish this ground as a matter of law, the trial court should not have granted McMurray's motion for summary judgment on that ground. We sustain this part of the Allegiance parties' third issue.
Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009) (setting out the standard of review for a traditional summary judgment motion and stating that "[t]he party moving for traditional summary judgment bears the burden of showing no genuine issue of material fact exists and it is entitled to judgment as a matter of law.").
3.1.2. The rule against perpetuities is inapplicable to the Allegiance lease.
The Allegiance parties also challenge the trial court's judgment that their lease violated the RAP and was therefore void and of no effect. The basis for the trial court's declaration was TMM's summary judgment ground that the Allegiance lease was executed while the NASA lease was still in existence. McMurray's summary judgment ground fails for two reasons: the Allegiance lease's language did not violate the RAP, and he failed to establish the NASA lease (or for that matter, any lease on the Property but the Allegiance lease) was still in existence.
Even if the NASA lease were still in existence when the Allegiance lease was executed—and as we discuss below, McMurray did not show that it was—that fact alone would not make the Allegiance lease void under the RAP. A mineral lease executed while another lease is in existence may violate the RAP, but it does not necessarily do so, and the language of the Allegiance lease determined what it conveyed and therefore whether it violated the RAP. When a mineral owner executes an oil and gas lease, the owner conveys the mineral estate to the lessee, but as a determinable fee. The mineral owner retains a possibility of reverter, which "is the presently vested right to future possession of the mineral estate upon termination of the lease." When the mineral lease ends, the right to possession of the mineral estate reverts from the lessee back to the owner of the mineral estate. The owner can sell or assign that presently-vested right to future possession of the mineral estate.
See, e.g., Jupiter Oil Co. v. Snow, 819 S.W.2d 466, 467 (Tex. 1991) (upholding a deed that granted a one-sixteenth interest in the grantor's mineral estate as well as part of the grantor's possibility of reverter).
Concord Oil Co. v. Pennzoil Expl. & Prod. Co., 966 S.W.2d 451, 460 (Tex. 1998).
See id.
BP Am. Prod. Co. v. Laddex, Ltd., 458 S.W.3d 683, 686 (Tex. App.—Amarillo 2015, pet. pending) (emphasis added).
Id.
Id.
In his third summary judgment motion, McMurray argued that the Allegiance lease contained language that indicated it conveyed a springing executory interest that took effect upon the determination of the (unspecified) determinable fee. We disagree about the interest conveyed under the Allegiance lease. Unlike the language at issue in Peveto v. Starkey, the Allegiance lease did not merely state that it became effective only upon the expiration of the prior lease. The Allegiance lease stated that it was subject to the Pritchard lease to the extent that the Pritchard lease was valid and that Allegiance had no rights to conduct operations under the lease until the Pritchard lease had terminated. But it did not say that the lease—the conveyance itself—became effective only after the Pritchard lease had terminated. Indeed, the lease specifically states that it became effective as of November 20, 2008.
645 S.W.2d 770, 772 (Tex. 1982) (construing a royalty deed stating that "this grant shall become effective only upon the expiration of [a prior] Deed" and holding that the language created a springing executory interest and that the deed therefore violated the RAP). But see Jupiter Oil Co., 819 S.W.2d at 467 (upholding a deed that granted part of the grantor's possibility of reverter).
We hold that, construing the lease in its entirety, it contains language expressing the intent to convey to Allegiance a presently vested interest in the mineral estate—specifically, FABDA's interest in its right to future possession of the mineral estate. Because the Allegiance lease conveyed a vested interest, it did not violate the RAP.
And importantly, TMM's motion did not explain the basis for its assertion that the NASA lease executed between FABDA and NASA on the FABDA tract was still in existence at the time of the Allegiance lease's execution. Nor did he point out evidence of its existence to the trial court.
The Allegiance parties argue that McMurray "did not provide any evidence that the NASA lease was in force and effect" and that he "actually put on evidence and pleadings to the contrary." They note TMM's live pleadings stated "that there was no production from the [Property] as of June 7, 2012, 'nor has there [ever] been.'" We agree.
We have reviewed the evidence attached to and referenced by McMurray's third motion, as well as "the pleadings, admissions, affidavits, stipulations of the parties, and authenticated or certified public records" on file before the trial court's judgment. The NASA lease had a primary term of one year "and as long thereafter as oil, gas[,] or other minerals is produced from or operations are conducted on said land or land with which said land is pooled." McMurray produced no evidence showing as a matter of law that during the primary term of the NASA lease, a well was completed and was producing on the FABDA tract or that operations, as that term was defined in the lease, were being conducted on the tract. Further, McMurray produced no evidence showing as a matter of law that during the primary term of the NASA lease, the lease was pooled into a production unit and that there was production at the end of the primary term or that operations were being conducted on land with which the FABDA tract was pooled.
See Tex. R. Civ. P. 166a(c).
McMurray asserted that the Fritz leases were invalid because they were top leases, as the Fritz lessors had previously executed leases with NASA that had been pooled into the Russell Ranch production unit and that were held by production within that unit. But as we discuss next, his evidence failed to indicate the relevance of this assertion. He attached to his third motion at least some evidence that leases taken by NASA with some of the Fritzes as lessors had been pooled into the Russell Ranch Unit, but he did not attach evidence establishing as a matter of law that NASA had pooled its 2005 lease on the FABDA tract into a unit on which there was production by the end of that lease's primary term. And McMurray asserted in his live pleadings that the well completed by the Allegiance parties "is the only well on any lands covered in any purported pooling agreement covering this land." [Emphasis added.]
Even considering the evidence attached to McMurray's fourth motion for partial summary judgment, McMurray did not establish as a matter of law that the NASA lease continued past the expiration of its primary term on March 7, 2006. McMurray attached to his fourth motion some evidence that NASA had filed a certificate of pooling authority that included a lease with FABDA—a certificate not filed with the Railroad Commission until 2009. He also included evidence that in 2005, preparations had been made to drill a well on the FABDA tract and that in June 2006 (after the end of the primary term of the NASA lease), drilling operations were conducted on the FABDA tract by Saddle Creek and G & F Oil. But, as we stated above, there was no evidence showing as a matter of law that NASA was conducting operations (as defined in the lease) on the FABDA tract at the end of the primary term, that the well worked on by NASA was ever completed and producing prior to the execution of the Allegiance lease (and in fact the evidence established the contrary), or that the lease had been pooled into a unit that was producing at the end of the primary term. And the record shows that Davis had filed a document in the trial court purporting to be signed by the president of NASA, Jerry Pratt, on September 27, 2005, suggesting the opposite. The affidavit stating that although operations had been done on the Property in March 2005, such as moving dirt and leveling the site pad, as well as engineering work and making road improvements, the availability of drilling rigs in the area was "scarce and unavailable." Pratt further stated that the NASA lease had been assigned to Command Capital Corporation on September 15, 2005. Pratt was named as president and CEO of Command Capital in addition to being president of NASA. None of this evidence indicates anything but that the NASA lease expired at the end of its primary term.
McMurray argues in his brief that the conditional mutual release signed by the Allegiance group "clearly shows the existence of the 'NASA lease.'" If this statement is an argument that the release shows that the NASA lease was still in effect at the time of the release's signing, we disagree. The release acknowledged that there had been a lease with NASA prior to the Pritchard lease. The release listed as a condition precedent to the release that the NASA lease "has at this time expired by its terms and is without further force and effect." Thus, the release acknowledged that there had been a lease with NASA on the tract, but it does not acknowledge or accept the continued existence of that lease.
Because McMurray failed to show his entitlement to judgment as a matter of law on the ground that the Allegiance lease violated the RAP due to the existence of the NASA lease, the trial court erred by granting summary judgment for McMurray on that ground. We sustain this part of the Allegiance parties' third issue.
3.1.3. TMM did not show his entitlement to declarations regarding the unit designation.
As noted under the last subissue, in McMurray's third motion for partial summary judgment, he asserted as a ground that the Fritz leases held by the Allegiance parties are top leases, that the bottom leases on the Fritz properties are held by production, and that the Fritz leases held by the Allegiance parties are therefore null and void. Based on these assertions, he asked for a declaration that the Fritz Lease Piper Unit Designation filed by the Allegiance parties was null and void and of no force and effect. The trial court's final judgment made that requested declaration.
On appeal, the Allegiance parties argue that the Fritz leases are not part of the summary judgment record and that the parties to those leases were not part of the suit, and thus the trial court could not grant summary judgment declaring them void. They also argue that McMurray does not have a justiciable interest or standing to obtain declarations about the Fritz leases or the Fritz Lease Piper Unit Designation. They point out that TMM's petition stated that a foreclosure sale had been held in January 2013 wherein TMM's rights in the FABDA tract were sold.
The Texas Declaratory Judgments Act provides in relevant part that
[a] person interested under a deed, will, written contract, or other writings constituting a contract or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder.
Tex. Civ. Prac. & Rem. Code Ann. § 37.004(a) (West 2015).
TMM's live pleadings at the time of judgment stated that on January 1, 2013, a foreclosure sale was held wherein TMM's rights in the property were sold at foreclosure and that "[a] judgment was entered in the 431st [district court] on January 11, 2013, that was final on February 11, 2013." He also stated, however, that TMM was the current owner of the property. McMurray attached to his third summary judgment motion the 2013 document purporting to be a substitute trustee's deed in which Davis, on behalf of FABDA, conveyed to Arsenal Operating the FABDA tract, documents we noted above.
Based on TMM's pleadings alone, the trial court should not have rendered a declaration for TMM regarding the status of the Fritz leases or the Fritz Lease Piper Unit Designation, because TMM's pleadings indicate that TMM no longer had any rights to the property or any basis on which it could seek such a declaration. And the foreclosure deed and judgment then raised a fact question about whether TMM had any such basis. Accordingly, McMurray did not show TMM's entitlement to the requested declarations as a matter of law, and the trial court erred by granting TMM's third motion for partial summary judgment and rendering the declarations. We sustain this part of the Allegiance parties' third issue.
See Cunningham, 660 S.W.2d at 813.
Having sustained the Allegiance parties' challenges to the grounds in TMM's third motion for partial summary judgment that were granted by the trial court, we hold that the trial court erred by granting judgment on that motion.
3.2. The trial court erred by granting TMM's fourth traditional motion for summary judgment.
In the next part of their third issue, the Allegiance parties challenge the granting of summary judgment based on TMM's fourth motion for partial summary judgment. McMurray asserted in the motion that the Allegiance lease expired in its primary term, and specifically that the Allegiance parties did not have a proper permit for the well, and thus the lease could not move to the secondary term. McMurray did not assert any other specific ground in this motion for why the Allegiance lease expired as a matter of law at the end of its primary term, other than the failure to have a permit. Nevertheless, the trial court rendered judgment on both the specific ground and on the general assertion that the Allegiance lease "is void and of no force and effect because the lease has expired in its primary term and was legally incapable of moving to the secondary term as a matter of law." Despite the defectiveness of McMurray's motion, on appeal the Allegiance parties addressed other basis on which the trial court could have determined as a matter of law that the lease expired at the end of its primary term.
3.2.1. The Allegiance parties established as a matter of law that the Allegiance lease was capable of producing in paying quantities at the end of the lease's primary term.
The Allegiance parties argue that they produced evidence that the well was capable of producing in paying quantities before the end of the primary term and McMurray did not produce evidence establishing the contrary as a matter of law. We agree.
McMurray attached no evidence to his motion relevant to whether the well was capable of production. Thus, the trial court should not have granted this motion on the ground that the well was not capable of production at the end of the primary term. And, as the Allegiance parties argue elsewhere in their brief and as we discuss below in their fourth issue, they established as a matter of law that the well is capable of producing in paying quantities. We sustain this part of the Allegiance parties' third issue.
See Tex. R. Civ. P. 166a(c).
3.2.2. The trial court erred to the extent it granted judgment that the 180-day litigation exemption did not apply.
The Allegiance parties argued that the 180-day litigation extension extended the primary term. We agree with the Allegiance parties that McMurray did not include any argument or evidence in his fourth motion for summary judgment addressing this ground. The trial court therefore should not have granted summary judgment on this ground. In his third summary judgment motion, McMurray had argued that the 180-day litigation extension violates the RAP, but the trial court did not include a declaration on that point in its ruling on that motion. The Allegiance parties challenged the applicability of the RAP to the lease elsewhere in their brief, and we have already held that the Allegiance lease conveys a presently-vested right and therefore does not violate the RAP. Thus, to the extent that the trial court granted summary judgment on this ground, it was both an erroneous conclusion of law and an erroneous grant on a ground not included in TMM's fourth motion for summary judgment. We sustain this part of the Allegiance parties' third issue.
See Fielding, 289 S.W.3d at 848; see also Timpte Indus., 286 S.W.3d at 310 ("It is well settled that a trial court cannot grant a summary judgment motion on grounds not presented in the motion.").
3.2.3. Enexco's permit was irrelevant to the validity of the Allegiance lease.
The Allegiance parties further argue that the trial court erred by granting McMurray's fourth motion for partial summary judgment on the specific ground that the lease did not continue past the primary term because Enexco did not have a proper permit. In McMurray's motion, he argued that the Allegiance lease had expired by its own terms because Enexco, the operator of the well, did not have a valid permit to extract minerals or perform drilling operations. McMurray cited no authority in support of his argument. The trial court nevertheless agreed with him. The Allegiance parties argue that the Railroad Commission has no bearing on the validity and effectiveness of the Allegiance lease, and we agree.
The language of the Allegiance lease does not require a proper permit for the lease to extend past the primary term. Thus, McMurray's argument had merit only if the law requires a permit for a mineral lease to be valid. As the Allegiance parties point out, however, the Railroad Commission has no power to determine property rights. Thus, even if McMurray had established as a matter of law that Enexco did not have a proper permit—and the Allegiance parties pointed out summary judgment evidence to dispute that assertion—that would not be enough to establish as a matter of law that the Allegiance lease did not continue into the secondary term.
SeeDuncan Land & Expl., Inc. v. Littlepage, 984 S.W.2d 318, 328 (Tex. App.—Fort Worth 1998, pet. denied) (stating that the Railroad Commission does not have jurisdiction to void contracts or the power to determine property rights); Est. of Grimes v. Dorchester Gas Producing Co., 707 S.W.2d 196, 203 (Tex. App.—Amarillo 1986, writ ref'd n.r.e.) (stating the "well-recognized rule" that "the Railroad Commission is a conservation body and does not have jurisdiction to effect a change of property rights," and, accordingly, misrepresentations made to the Commission to obtain permits could not void the lease at issue).
The trial court erred by granting summary judgment on this ground. We sustain this part of Allegiance's third issue.
Having sustained the Allegiance parties' challenges to the trial court's granting of TMM's fourth motion for partial summary judgment, we hold that the trial court erred by granting judgment on that motion.
3.3. The trial court erred by granting TMM's fifth motion for summary judgment.
3.3.1. McMurray was not entitled a declaration that the conditional mutual release was part of the parties' contract.
The Allegiance parties next address TMM's fifth summary judgment motion. The trial court's judgment granting the motion included decrees that the contract at issue in the breach of contract claim contains the Allegiance lease, its addendum, and the conditional mutual release. It also decreed that the Allegiance parties' breach of contract claim against TMM is limited to the filing of the ratification of Davis's attempted extension of the Pritchard lease. The Allegiance parties assert that TMM was not entitled to declarations regarding the Allegiance lease or limiting its breach because it had no pleading to support the requests.
McMurray's only mention in his summary judgment motion of a ground about the contents of the Allegiance lease was his assertion, without argument or citation to authorities, that the trial court should find that the release was part of the lease agreement. His only evidence on that point was the documents themselves and his own conclusory affidavit, which stated that "[t]he conditional mutual release was a part of the contract per Charles C. Davis, as an officer of FABDA, Inc.[] The contract contains three parts attached [to the motion] as Exhibit 1-3." Neither the lease nor its addendum mention the release—as McMurray recognized in his live pleadings. The release expresses no intent to make the terms of the release part of the lease.
We agree with the Allegiance parties that the trial court erred by declaring that the conditional mutual release is part of the contract rather than a separate, stand-alone contract because McMurray had no pleading requesting such relief. McMurray's live pleadings were his fourth amended petition and the supplement to his fourth amended petition. He requested no such relief in his fourth amended petition. In his supplement to the petition, he asserted as a fact that "the Conditional Mutual Release . . . is a part of the contract of 'FABDA Lease' as the parties have testified to in open Court." He did not, however, request any such declaration (nor did he tell the court when the Allegiance parties testified in open court that the release was part of the Allegiance lease or at any point attach to any motion or pleading a transcript of that testimony as evidence). None of the relief he requested in either his fourth amended petition or his supplement could be construed as asking for any such declaration. The Allegiance parties objected to the summary judgment ground based on a lack of pleadings to support it. Accordingly, the trial court erred by granting summary judgment on this ground.
See Tex. R. Civ. P. 301; Cunningham, 660 S.W.2d at 813.
Likewise, TMM's pleadings at the time of judgment did not plead for a declaration that the breach of contract claim against it be limited to the filing of the extension ratification. The trial court therefore should not have granted summary judgment on this ground. We sustain this part of the Allegiance parties' third issue.
3.3.2. The Allegiance parties did not ratify or revive the Pritchard lease.
The Allegiance parties next challenge the trial court's summary judgment on the basis of revivor and ratification.
TMM asserted in its fifth motion for partial summary judgment that Saddle Creek bankruptcy trustee Weisbart's assignment of the Pritchard lease to Kingswood Holdings either revived the Pritchard lease or ratified Davis's attempted extension. The trial court granted the motion and included the following declarations in its judgment.
• When Weisbart assigned the Pritchard lease to Kingswood Holdings, Davis's attempted extension of the Pritchard lease was already on file in the county's property records.
• When Weisbart assigned the Pritchard lease, Kingswood Holdings took the assignment subject to that extension. Kingswood Holdings therefore ratified the attempted extension or revived the Pritchard lease, if it was by that time expired.
• Accordingly, because the Pritchard lease was still in effect up to May 28, 2012, the Allegiance lease, by its terms, never came into existence.
• And because McMurray's act of executing and filing the ratification of Davis's attempted extension did not extend the Pritchard lease beyond the date already contained in Davis's extension—which Kingswood Holdings had already by that time ratified—TMM did not cause the Allegiance parties damages.
"The doctrines of revivor and ratification are frequently confused and are often used interchangeably." Revivor applies where an effective conveyance of a property interest has terminated on its own terms. When applied, the doctrine of revivor causes the creation of a new estate in land. Revivor requires the execution of a formal document that "expressly recognize[s] in clear language the validity of the lifeless deed or lease."
Sun-Key Oil Co., Inc. v. Whealy, No. 2-06-198-CV, 2006 WL 3114466, at *4 (Tex. App.—Fort Worth Nov. 2, 2006, no pet.) (mem. op.).
Id.
Bradley v. Avery, 746 S.W.2d 341, 344, 345 (Tex. App.—Austin 1988, no writ) (explaining the difference between ratification and revivor).
Id.; see also Westbrook v. Atlantic Richfield Co., 502 S.W.2d 551, 556 (Tex. 1973).
The doctrine of ratification is similar in that it, too, requires "the subsequent execution of a formal document" that "expressly recognized in clear language the validity" of a prior instrument or conveyance. But where revivor applies to a lease that was valid at execution but subsequently terminated, ratification applies to a conveyance that was inoperative or invalid in its original execution.
Whealy, 2006 WL 3114466, at *4 (quoting Bradley, 746 S.W.2d at 344).
Id.
The Allegiance parties make multiple arguments in this part of their brief. They first argue that McMurray had no pleading to support his requested declarations regarding revivor and ratification. They make further arguments asserting that Davis's attempted extension and McMurray's attempted ratification of it were void as a matter of law; that the Weisbart assignment did not ratify the attempted extension or revive the Pritchard lease; that even if the Weisbart assignment had such an effect, then in that case the trial court was incorrect to declare the Pritchard lease expired because the Pritchard lease would be held by production from the Piper No. 1 well; and that if the Pritchard lease was extended but expired as the trial court declared, then the Allegiance lease is still in its primary term because of the 180-day litigation extension. We see no reason to address the latter arguments because we agree that TMM had no pleadings to support the requested declarations and that the Weisbart assignment did not result in either ratification or revivor.
In his live pleadings on behalf of TMM, McMurray pled that his own ratification of the attempted extension revived the Pritchard lease. He sought a declaration to that effect. But he did not plead any revivor or ratification by way of the Weisbart assignment and he requested no such declarations. His supplemental petition on behalf of TMM did not mention ratification or revivor.
Further, even if his pleadings had been sufficient to support the judgment, his summary judgment grounds did not support the requested declarations. McMurray argued both revivor and ratification in his motion. His first argument was that, by the act of taking an assignment of the Pritchard lease from Weisbart, Kingswood Holdings revived the Pritchard lease. He argued that if the Pritchard lease were expired at the time of the Weisbart assignment, then the Weisbart assignment revived it because Kingswood Holdings took the assignment "subject to" all instruments in the property records, including Davis's attempted extension.
His ratification argument was also based on Davis's attempted extension. McMurray did not dispute that, at the time Davis signed the attempted extension on FABDA's behalf, FABDA had already conveyed away its rights to the Property. But he argued that if the Pritchard lease were not expired at the time of the Weisbart assignment, then because Kingswood Holdings took the assignment "subject to" all instruments in the property records, including Davis's attempted extension, the Weisbart assignment ratified the extension. That is, because Davis's extension was filed in the real property records at the time of the Weisbart extension, then the assignment either revived the Pritchard lease (if the lease were then expired) or it ratified Davis's attempted extension.
The ratification argument fails. As the Allegiance parties point out, the Weisbart assignment did not mention the extension at all. And although the assignment stated that Weisbart did not assign the interests already granted by him to assignees in certain prior assignments he had made of the lease as trustee, it did it not state that it was made subject to all instruments filed in the chain of title.
In TMM's motion, McMurray argued that the following language in paragraph four subpart (iii) of the Weisbart assignment ratified the extension: "all contracts, agreements, and title instruments to the extent attributable to and affecting the Well, and Personal Property and Incidental Rights in existence." This language, standing alone, does not indicate that the assignment is "subject to" Davis's attempted extension. But even in context, the language does not support ratification. The assignment indicated that the terms and conditions of the assignment would attach to and run with "Personal Property and Incidental Rights." The definition of "Personal Property and Incidental Rights" included the language McMurray referenced—contracts, agreements, and title instruments "to the extent attributable to and affecting the [Piper No. 1 well]." Thus, the terms and conditions of the assignment would run with contracts, agreements, and title instruments "to the extent attributable to and affecting the [Piper No. 1 well]." This language did not recognize the validity of previous instruments filed in the title records or indicate that the assignment was subject to such instruments. Nothing in the assignment "expressly recognized in clear language the validity" of the attempted extension, and it therefore did not act as a ratification of that instrument.
See id.
We further note that, as the Allegiance parties point out, at the time of both Davis's attempted extension and the Weisbart assignment to Kingswood Holdings, FABDA did not own the minerals of the FABDA tract and had no authority to execute an extension of the lease. Applying the doctrine of ratification would mean that Weisbart, Kingswood Holdings, and FABDA could among them work to convey away any rights TMM had in the minerals as owner of the FABDA tract, not to mention the vested property rights that the Allegiance parties had under their lease.
McMurray's revivor argument also fails. He did not argue that the Weisbart assignment itself revived the lease, and indeed, although the assignment conveyed the trustee's remaining interest in the Pritchard lease, it made no representations or assertions about the continued validity of that lease. McMurray's revivor argument in the summary judgment motion was based on the same language in Davis's attempted extension, and, for the same reason that the ratification argument failed, the revivor argument also fails. The assignment simply does not recognize the validity of Davis's attempted extension. Accordingly, the assignment did not revive the Pritchard lease.
Further, as the Allegiance parties point out and we noted above, revivor creates a new estate in land. Because the Pritchard lease expired on its own terms in May 2011, the right of the Allegiance parties to conduct operations on the FABDA tract took effect at that time. The Weisbart assignment therefore occurred after the Allegiance parties' rights under the lease began. If a revivor had occurred, it would create a new estate on top of the Allegiance lease. As the Allegiance parties point out, this new estate could not trump the Allegiance lease then in effect. For this argument to be valid, it would have to be permissible for the Pritchard lease to lapse in May 2011 (because as McMurray consistently recognized below, Davis had no right to extend the lease), the Allegiance parties would then have the right to conduct operations under their lease, and then the Weisbart assignment could revive the Pritchard lease, thereby retroactively depriving the Allegiance parties of their right to conduct the operations they had already done.
Bradley, 746 S.W.2d at 345.
We hold that the trial court erred by granting TMM's fifth traditional motion for partial summary judgment on the ground of revivor or ratification, and, accordingly, we sustain this part of the Allegiance parties' third issue. We need not reach the remainder of the Allegiance parties' arguments relating to revivor and ratification.
4. Issue Four: the Allegiance parties were entitled to certain declarations.
In their fourth issue, the Allegiance parties ask whether the trial court erred by failing to render judgment declaring that: (i) the Piper No. 1 well was capable of production in paying quantities and was shut in, and the appropriate shut-in royalties were paid prior to November 20, 2011; (ii) litigation extended the primary term of the Allegiance Lease until 180 days after a final and non-appealable judgment is rendered in this case; and (iii) Appellees' attempts to unilaterally "extend" expired leases are void.
The parties tried to the bench the issue of whether the Allegiance lease was valid and enforceable, including the question of whether the Piper No. 1 well was capable of producing in paying quantities. The parties presented evidence at the hearing, but they also told the court that they had presented evidence on the issue with their respective motions for summary judgment. The trial court stated that it would "take into consideration all that's been presented up to this point that relates to what [they were] doing" at the hearing that day. Thus, the trial court also considered the parties' evidence that had previously been submitted to the court.
The Supreme Court of Texas has said that a well that is "capable of production in paying quantities" means
a well that will produce in paying quantities if the well is turned "on," and it begins flowing, without additional equipment or repair. Conversely, a well would not be capable of producing in paying quantities if the well switch were turned "on," and the well did not
flow, because of mechanical problems or because the well needs rods, tubing, or pumping equipment.That court summarized its definition thusly: "we hold that a well is capable of production if it is capable of producing in paying quantities without additional equipment or repairs." For the well's production to constitute "paying quantities," "there must be facilities located near enough to the well that it would be economically feasible to establish a connection so that production could be marketed at a profit."
Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550, 558 (Tex. 2002) (quoting Hydrocarbon Mgt., Inc. v. Tracker Exploration, Inc., 861 S.W.2d 427, 433-34 (Tex. App.—Amarillo 1993, no writ)).
Id.
Id. at 559 (op. on reh'g).
At the bench trial, Ralph Rather, vice president of Enexco, testified about the work Enexco had done to complete the well. He testified that on November 11, 2011, he turned the well switch on, and gas was flowing. They "took some choke coefficients and calculated a rate of about 2.6 million [cubic feet] a day. And it had a steady flowing pressure of about 850 to 900 pounds." He testified that no additional equipment or repairs were needed for gas to flow out of the wellhead on that date; "You could open up the valve and that thing would flow at 800, 900 pounds."
Rather further testified that the well was "going to be a gas condensate type of reservoir," with mostly gas but with "quite a bit of liquid associated with the gas," and that the rich gas produced by the well with "five or six different complexes in it" sells at a premium over a dry gas.
Rather was asked how profitable he thought the well could be, and he testified "it would easily make an excess of a million dollars." He stated that the closest pipeline is one owned by Crosstex that is located "[a]bout 23 to 26 hundred feet away," and the Allegiance parties had signed a pipeline agreement with Crosstex. Rather further testified that Davis "informed the pipeline people that there was a lawsuit in progress, and basically told them they ought to be careful," and after that, Crosstex "put this thing on hold until we got a resolution in this case."
Rather further testified that a tank battery "has nothing to do with" the ability of the well to flow and that no tank battery had been added yet because they first wanted to see where the pipeline would connect to the well.
In an affidavit included with the Allegiance parties' previously-filed summary judgment evidence, Rather testified that the parties have a contract with Crosstex to connect the well to its pipeline and that this connection would cost about $300,000 to construct. He also testified that Enexco has a contract to market the gas from the well. And he testified that it did not make sense to install a tank battery before installation of the pipeline "because Enexco must first ascertain the location and connection point for the pipeline." And he stated that the parties were negotiating a right-of-way from Crosstex's pipeline to the well.
Jimmy Barger also testified at the bench trial. Barger testified that he worked for American Peak and that on November 11, 2011, he witnessed a test done on the Piper No. 1 well. He stated that "[w]e opened the well up, started flowing gas. . . . Estimate about two and half million in gas. . . . And we shut the well in."
The Allegiance lease called for shut-in payments of "one dollar per acre then covered by this lease," but it also specifically provided that if Allegiance failed to pay a shut-in royalty, that failure rendered Allegiance liable for the amount due but would not cause the lease to terminate. Nevertheless, the Allegiance parties had submitted summary judgment evidence to the trial court that Rather had tendered a check to both Davis and to McMurray as trustee for $4.61 each, and that these checks had been tendered on November 18, 2011—before the end of the primary term.
The Allegiance parties produced sufficient evidence in the trial court to establish as a matter of law that gas will flow from the well without additional equipment or repair, that the well is situated near a gas pipeline, that the parties have a contract with the owner of the pipeline to connect to that pipeline, and that the well will be profitable. They therefore produced sufficient evidence to be entitled to a declaration that the well was capable of production in paying quantities. They also produced sufficient summary judgment evidence to show that they tendered shut-in payments to Davis and McMurray on November 18, 2011. Thus, they produced evidence that demonstrated their right to their first requested declaration as a matter of law.
Seeid. at 558.
McMurray's testimony did not counter the Allegiance parties' evidence; he testified at the hearing that he personally did not know if the well was ever completed. He had previously submitted as summary judgment evidence his own affidavit stating that the well had no tank battery or production equipment located on the property and that there was no pipeline connected to the well and no easements to allow access to the pipeline. But the Allegiance parties produced uncontroverted evidence that the well did not need the tank battery to flow, that they will be able to connect to a pipeline, and that the well will make a profit. In a separate affidavit, McMurray made the conclusory assertion that there was no production in paying quantities from the well, but he offered no evidence or factual basis for that conclusion. McMurray's evidence was not enough to defeat the Allegiance parties' entitlement to their requested declarations. And Davis offered no evidence controverting the Allegiance parties' evidence about the well's capability of production.
Because the Allegiance parties proved their entitlement to the first requested declaration as a matter of law, we hold that the trial court erred by failing to render the requested declaration.
The second requested declaration regarding the applicability of the 180-day litigation extension was requested in the Allegiance parties' second summary judgment motion and in their requested conclusions of law filed with the trial court before and after the bench trial. The trial court's interlocutory declaratory judgment rendered after the bench trial declared that the primary term of the Allegiance lease was extended until 180 days following the date the judgment in this case becomes final and non-appealable. However, the amended interlocutory declaratory judgment the trial court subsequently rendered omitted this declaration.
Under its plain language, the 180-day litigation extension applied "if the validity of the [Pritchard] lease is challenged by the Lessee, or any then owner of the mineral estate in the leased premises," and it acted to continue the primary term of the lease for 180 days "following the date judgment entered in said Litigation becomes final and non-appealable."
As the Allegiance parties note, a few days before the end of the primary term of the Allegiance lease, the Allegiance parties filed an amended petition in the trial court pointing out that Davis had filed the attempted extension of the Pritchard lease on behalf of FABDA. The petition asserted that while the Allegiance parties did not believe that Davis or FABDA had the authority to extend the Pritchard lease, Davis's actions had "created uncertainty on whether the [Pritchard lease] is in force and effect," and they therefore sought a declaration that the Pritchard lease had expired. Accordingly, the Allegiance parties challenged the validity of the Pritchard lease before the end of the primary term. The 180-day litigation extension therefore applied, and it extended the primary term of the Allegiance lease. Because the Allegiance parties demonstrated as a matter of law that the 180-day litigation extension applied, the trial court erred by failing to render the requested declaration.
The third requested declaration—that Davis's attempted extension of the Pritchard lease and McMurray's attempted ratification of that extension were void—had been included in the trial court's interlocutory declaratory judgment and its amended interlocutory judgment, but the trial court withdrew the declaration in its final judgment. The Allegiance parties argue that they were entitled to the declaration as a matter of law and that the trial court's final judgment setting aside the declaratory judgment should be reversed by this court.
We have already held that Davis's attempt at extending the Pritchard lease was of no effect. We likewise agree with the Allegiance parties that McMurray's attempt to unilaterally extend the Pritchard lease was of no effect. The ratification was filed after the Allegiance parties' rights under their lease had vested, and as we noted above, McMurray could not unilaterally trump the existing lease.
As the Allegiance parties note, the attempted extension and McMurray's attempted ratification were made without the consent of the lessee under the Pritchard lease. And the Allegiance parties produced evidence on that point in the trial court. McMurray's attempted ratification, on its face, did not contain the signature of the lessee, and no other document he filed or produced contained the lessee's acceptance of the lease extension. Weisbart testified at the bench trial that he did not consent to the extension of the Pritchard lease, had no agreement with FABDA to do so, and did not give authority to anyone to do so.
McMurray argues in his brief, with no citation to authority, that "[a] granting instrument in Texas involving [an] interest in real property must be signed by the grantor. This is completely different than a contract for widgets since our case involves real property rights and issues." We read these statements to argue that an extension of the primary term of an oil and gas lease without the lessee's consent is valid because only the lessor's consent is necessary for a conveyance. But acceptance by a grantee is necessary for a conveyance of real property. And further, a mineral lease is both a conveyance and a contract; the interest conveyed is a determinable fee, and the conveyance is subject to terms and conditions set out in the lease. We disagree with McMurray's assertion that he could unilaterally bind a lessee to a mineral lease without the lessee's consent.
SeePuckett v. Hoover, 202 S.W.2d 209, 211 (Tex. 1947).
Nat. Gas Pipeline Co. of Am. v. Pool, 124 S.W.3d 188, 192 (Tex. 2003); Browning Oil Co., Inc. v. Luecke, 38 S.W.3d 625, 643-45 (Tex. App.—Austin 2000, pet. denied) (stating that a mineral lease is both a contract and a conveyance and construing the parties' rights and obligations in light of the terms of their lease).
We therefore hold that the Allegiance parties were entitled to a declaration that Davis's attempted extension of the Pritchard lease and McMurray's ratification of that extension were of no effect. We sustain the Allegiance parties' fourth issue.
5. Davis's jurisdictional argument
Finally, in a section of his brief challenging this court's jurisdiction, Davis makes arguments that are not entirely clear and, to the extent we can understand them, are entirely without merit. He cites to Street v. Honorable Second Court of Appeals, but he does not explain how that case is relevant. That case has to do with the finality of a judgment for purposes of bringing a Stowers action and is completely inapplicable here. Davis further argues that this court has no jurisdiction over the appeal because the case is moot. He does not, however, explain why the case is moot, and we disagree that it is. He also appears to argue that the Allegiance parties failed to properly invoke this court's appellate jurisdiction under Texas Rules of Appellate Procedure 24.1 and 25.1(h). Those rules discuss suspending enforcement of the trial court's judgment, not invoking this court's jurisdiction. We overrule Davis's challenge to our jurisdiction.
756 S.W.2d 299 (Tex. 1988).
See Tex. R. App. P. 24.1, 25.1(h). --------
C. Conclusion
Having sustained the Allegiance parties' first issue in part, their second issue, and their third issue in part, we reverse the trial court's judgment.
Having sustained the Allegiance parties' fourth issue, we render a declaratory judgment that: (1) the Piper No. 1 well was capable of production in paying quantities and was shut in, and the appropriate shut-in royalties were paid prior to November 20, 2011; (2) the primary term of the Allegiance lease is extended under the terms of the lease until 180 days after a final and non-appealable judgment is rendered in this case; and (3) Davis and McMurray's attempted extensions of the Pritchard lease were of no effect. We remand this case to the trial court for further proceedings consistent with this opinion. All motions pending before this court in this case are denied.
/s/ Lee Ann Dauphinot
LEE ANN DAUPHINOT
JUSTICE PANEL: DAUPHINOT, GARDNER, and WALKER, JJ. GARDNER, J. and WALKER, J., concur without opinion. DELIVERED: March 24, 2016