Opinion
CIVIL ACTION NO. SA-03-CA-0031 FB (NN)
January 6, 2004
ORDER DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT (DOCKET ENTRY 54) AND DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (DOCKET ENTRY 48)
The matters before me are plaintiffs motion for partial summary judgment and defendants' motion for summary judgment filed on November 17, 2003. After considering the motions for summary judgment, the entirety of the record in this matter, and the applicable case, statutory and regulatory law, I find that there are genuine issues of material fact which preclude judgment as a matter of law in this case. For the reasons set forth below, I hereby DENY plaintiff's motion for partial summary judgment and defendants' motion for summary judgment.
Docket Entry 54.
Docket Entry 48.
I have jurisdiction over this matter under 28 U.S.C. § 636(c). The parties have consented to proceed before a magistrate judge for all matters in this case, including trial and entry of judgment.
Statement of the Case
Plaintiff, Dvorken Family Limited Partnership ("plaintiff"), owns approximately 330 acres of real property near Chico, Texas ("Dvorken Property"). At the end of 1999, plaintiff and defendants, Martin Marietta Materials Southwest, Ltd. and Marietta Materials, Inc. ("defendants'"), entered into negotiations for defendants' lease of the Dvorken Property. After several months of negotiations, the parties signed the lease agreement ("Lease") in February 2000. By the terms of the Lease, which was captioned "Option and Rock Lease", plaintiff granted defendants an option to lease the Dvorken Property subject to the terms and conditions set forth therein. Among the terms and conditions set forth in the Lease was a "Purpose and Use" section — the provisions of the Lease at the core of the instant dispute. The salient portions of the Purpose and Use section (Section 2.3 of the Lease) provide:
(a) Lessee will have and hold the Property together with all privileges and appurtenances unto Lessee for and during the Term (as defined in Section 2.4 below) unless sooner terminated as hereinafter provided, for the full and exclusive right, privilege and option of the Lessee to, or to permit others to (i) mine, quarry and remove from the Property, by blasting and otherwise, deposits of rock, sand, stone, gravel, limestone, soil, earth, clay or other aggregate materials or minerals that may exist on, in or under the Property (hereinafter "the Leased Materials"), (ii) construct, operate, and maintain washing, crushing and other plants, machinery, dams, ponds, wells, canals, power lines, pipe lines, telephone lines, roads, ramps, railway spur lines or any other rail related equipment, stockpile areas, buildings and offices, and any other machinery or equipment on the Property, which, in the sole discretion of the Lessee are necessary or desirable for the processing, storing, distributing or selling of Leased Materials from the Property or other lands owned, leased or subleased by Lessee, (iii) use, at no cost, water in rivers, creeks, ponds, wells and other bodies of water located on or accessible to the property, (iv) transport Leased Materials across the Property for processing at Lessee's plant on the Property; (v) transport materials mined and removed from other properties owned or leased by Lessee for processing at Lessee's plant on the Property and (vi) use the Property for any other lawful purpose ancillary hereto, including any related industry or activity which in Lessee's sole discretion would facilitate or increase the sale and/or marketability of Leased Materials, as provided, for example, in Article 2.3(c) and (d) below.
Id. Appendix Pages 52-53.
Section 2.3(c) of the Lease requires defendants to pay plaintiff a royalty when defendants:
transport by truck or rail, fines, shale or other non-saleable waste materials (hereinafter collectively referred to as Tines') located on the Property for transport off-site to be blended with sand or other fine aggregates for sale of such blended products.
Id. Appendix Page 54.
Similarly, Section 2.3(d) of the Lease requires defendants to pay plaintiff a royalty when defendants:
transport Leased Materials off of the Property for processing at a plant located on other property owned or leased by Lessee.
Id. Appendix Page 54.
Importantly, a third provision of the Lease — Section 2.3(b) — requires defendants to pay plaintiff a royalty when defendants utilize the plant on the property, "for processing materials mined or removed from other properties owned or leased by Lessee in the vicinity of the Property."
Id. Appendix Page 53.
The Lease also contained a provision outlining defendants' rights of ingress and egress from the Dvorken Property. That provision provides:
Lessor hereby leases, lets and conveys to the Lessee, its successors or assigns, for a period described in Article 2.4 below, all those certain tracts or parcels of land described on Exhibit `A' attached hereto together with rights-of-way, easements and rights of ingress and egress therefrom (collectively, the `Property').
Id. Appendix Page 51.
Defendants exercised their option under the Lease in February 2001. On or before June 2001, defendants secured funding for the construction of a haul road across the Dvorken Property. Aside from providing access within and across the Dvorken Property, the haul road also runs from the nearby Chambers Property (also leased and operated by defendants) to State Highway 101, the main highway used by customers of both the Dvorken and Chambers quarries. Since the haul road was completed, defendants have begun marketing the Dvorken and Chambers quarries jointly as the "Chico Quarry."
Docket Entry 54, at 5.
The haul road was completed in mid-2002. Shortly after defendants began using the haul road, plaintiff brought this action in federal court arguing that defendants' transport of off-site materials from the Chambers Property across the Dvorken Property — in certain circumstances, notably when an additional royalty payment is not made — constitutes a breach of the Lease, a trespass, and a continuing harm necessitating injunctive relief.
In the instant motion for partial summary judgment, plaintiff asserts that defendants' use of the haul road to, inter alia, transport materials from the Chambers Property in a short cut across the Dvorken Property to Highway 101 violates the Lease, thereby constituting a trespass and entitling plaintiff to a permanent injunction and summary judgment as a matter of law. Conversely, defendants assert that they are entitled to judgment as a matter of law because their use of the property is consistent with the terms of the Lease and does not constitute a breach of the Lease, a trespass or a basis for permanent injunctive relief.
Docket Entry 54.
Docket Entry 48.
Applicable Legal Standards
A. Summary Judgment StandardFederal Rule of Civil Procedure 56 governs motions for summary judgment. Rule 56 provides in pertinent part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law
FED. R. CiV. P. 56(c); Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986).
Rule 56 requires that there be no genuine issue of material fact A fact is material if it might affect the outcome of the lawsuit under the governing law A dispute concerning a material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Therefore, summary judgment is proper if, under governing laws, there is only one reasonable conclusion as to the verdict; if reasonable finders of fact could resolve a factual issue in favor of either party, summary judgment should not be granted.
Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986), Thomas v. LTV Corp. , 39 F.3d 611, 616 (5th Cir. 1994).
Anderson , 477 U.S. at 248, Wise v. E.I. DuPont De Nemours Co. , 58 F.3d 193, 195 (5th Cir. 1995).
Anderson , 477 U.S. at 249.
The movant on a summary judgment motion bears the initial burden of informing the court of the basis for its motion and identifying those portions of the record which it alleges demonstrate the absence of a genuine issue of material fact. To satisfy this burden, the movant must either submit evidentiary documents that negate the existence of some material element of the nonmoving party's claim or defense, or if the crucial issue is one for which the nonmoving party will bear the burden of proof at trial, merely point out that the evidentiary documents in the record contain insufficient proof concerning an essential element of the nonmoving party's claim or defense Regardless of whether the movant accompanies its summary judgment motion with affidavits or other evidentiary materials, the motion must be granted if the evidence before the court demonstrates that the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied. Once the movant has carried that burden, the burden then shifts to the party opposing the motion to present affirmative evidence in order to defeat a properly supported motion for summary judgment.
Celotex Corp. , 477 U.S. at 323.
Edwards v. Aguillard , 482 U.S. 578, 595 n. 16 (1987), and Celotex Corp. , 477 U.S. at 325.
Id.
Anderson, 477 U.S. at 257.
Importantly, the non-moving party cannot discharge this burden by referring to the mere allegations or denials of the non-moving party's pleadings. Rather, the non-movant must, either by submitting opposing evidentiary documents or by referring to evidentiary documents already in the record, set out specific facts showing the existence of a genuine issue for trial. The court will look at the record in the light most favorable to the non-movant drawing all inferences most favorable to that party. Nevertheless, "conclusory allegations, speculation, and unsubstantiated assertions are inadequate to satisfy the non-movant's burden " Summary judgment is mandated if the non-movant fails to make a showing sufficient to establish the existence of an element essential to his or her case on which he or she bears the burden of proof at trial. Accordingly, summary judgment motions permit the court to resolve lawsuits without the necessity of trials if there is no genuine dispute as to any material facts and the moving party is entitled to judgment as a matter of law.
FED R Civ P 56(e), Anderson , 477 U.S. at 250, State of Texas v. Thompson , 70 F.3d 390, 393 (5th Cir. 1995).
Celotex Corp. , 477 U.S. at 324. Fields v. City of South Houston, Texas , 922 F.2d 1183, 1187 (5th Cir. 1991), Neff v. American Dairy Queen Corp. , 58 F.3d 1063, 1065 (5th Cir. 1995), cert. denied , 516 U.S. 1045 (1996).
Hibernia Nat'l Bank v. Garner , 997 F.2d 94, 97 (5th Cir. 1993) See also Little v. Liquid Air Corp. , 37 F.3d 1069, 1075 (5th Cir. 1994) (holding that a nonmovant cannot discharge her burden with doubt as to the material facts, by conclusory allegations, unsubstantiated assertions, or by only a scintilla of evidence).
See Douglass v. United Services Auto. Ass'n , 79 F.3d 1415, 1429 (5th Cir. 1996) (citing Forsyth v. Barr , 19 F.3d 1527, 1533 (5th Cir.). cert. denied . 513 U.S. 871 (1994)).
Celotex Corp. , 477 U.S. at 322 ("In such situation, there can be `no genuine issue as to any material fact,' since a complete failure of the proof concerning an essential element of the nonmoving party's case necessarily renders all other fact, immaterial") Id. at 323.
See Fields , 922 F.2d at 1187.
In the instant case, plaintiff moves for summary judgment arguing that defendants breached the lease agreement, and, consequently, committed trespass, by utilizing the haul road for the transport of Chambers Property materials. As a result, plaintiff asserts that it has established breach of contract, trespass and its entitlement to a permanent injunction as a matter of law.
Aside from opposing plaintiff's motion for summary judgment, defendants also move for summary judgment. Defendants assert that their use of the Property does not exceed the scope of the Lease, and constitutes neither breach of contract nor trespass. For the reasons set forth below, it is my finding that neither party is entitled to judgment as a matter of law.
Analysis
Plaintiff moves for summary judgment on the basis that the undisputed evidence establishes defendants' breach of contract and trespass as a matter of law. To establish its entitlement to judgment as a matter of law, plaintiff proffers the following arguments in support of its position that defendants breached the Lease:(1) that defendants' purported interpretation of the Lease renders certain of the contractual provisions mere surplusage which is forbidden by basic principles of contract interpretation; (2) that defendants' use of the haul road as a short cut to State Highway 101 from the Chambers property is not an "ancillary" use as contemplated by the Lease, but rather violates the explicit terms of the Lease; (3) that defendants' purported utilization of the Chambers and Dvorken tracts was not possible at the time the Lease was signed and is not, therefore, viable justification for defendants' use of the haul road to transport off-site materials across the Dvorken Property; and (4) that defendants' use of the Dvorken Property violates the basic principles governing mining leases. Because defendants' use of the property exceeds and breaches the terms of the Lease, plaintiff further avers that it has established defendants' trespass as a matter of law. Finally, plaintiff contends that, as a matter of law, it meets all the requirements for obtaining a permanent injunction.
In the alternative, plaintiff argues that genuine issues of material fact exist as to whether (1) defendants exercised their sole discretion in good faith; and (2) the Dvorken Property received any actual benefit from defendants' construction of the haul road
Docket Entry 52, at 11-13.
A. Plaintiff's breach of contract cause of action.
1 The requisite elements of a breach of contract claim
Under Texas law, a breach of contract cause of action requires pleading and, eventually, proof of the following elements:
`(1) the existence of a valid contract, (2) that the plaintiff performed or tendered performance, (3) that the defendant breached the contract; and (4) that the plaintiff was damaged as a result of the breach'
Bridgmon v. Array Systems Corp. , 325 F.3d 572, 577 (5 th Cir. 2003), citing Frost Nat'l Bank v. Burge , 29 S.W.3d 580, 593 (Tex App. — Houston [14th Dist] 2000, no pet).
Thus, to assess the viability of a breach of contract claim, the court must first analyze the contract in dispute.
2. Basic principles of contract interpretation and the contract at bar.
In order to determine whether summary judgment is appropriate on a breach of contract claim, the court must first look at the contract itself. As a threshold matter, the court is required to determine if the contract is ambiguous. When determining the ambiguity of a contract, the
Hussong v. Schwan's Sales Enterprises, Inc. , 896 S.W.2d 320, 324 (Tex App. — Houston [lst Dist.] 1995), "In determining whether summary judgment is proper based upon a contract, the trial court must first determine whether the contract is ambiguous."
[l]anguage used by parties should be accorded its plain, grammatical meaning unless it definitely appears that the intention of the parties would thereby be defeated. . .;
Id .
If the contract — or any term therein — is ambiguous, the court is permitted to utilize extrinsic or parol evidence to establish the meaning of said term or phrase. Moreover, if the contract is ambiguous, "granting a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue." If, however, the contract is unambiguous, the court may not utilize parol evidence to interpret the contract but may interpret the contract as a matter of law. Stated another way,
Id .
Id ., "If the contract is worded so that it can be given a certain and definite meaning or interpretation, it is not ambiguous; the court will construe the contract as a matter of law."
The parol evidence rule is a rule of substantive law which provides that extrinsic evidence is not admissible to vary, add to, or contradict the terms of a written instrument that is facially complete and unambiguous . . . Only if the intention of the parties as expressed on the face of the document is doubtful may the court resort to parol evidence to resolve the doubt.
Perez v. Alcoa Fujikura, Ltd. , 969 F. Supp. 991, 1006 (W.D. Tex. 1997) (internal citations omitted).
Above all, the court's focus at all tunes is enforcing the parties' original intent in drafting the contract.
In the instant case, I find that the Lease, and particularly the Purpose and Use Section therein, is unambiguous as a matter of law. It clearly grants defendants the rights, inter alia, to: (1) mine the Dvorken Property; (2) construct, operate and maintain equipment, water sources, lines (power, pipe and telephone), roads, ramps, railways and buildings on the Dvorken Property; (3) use all bodies of water on or near the Dvorken Property; (4) transport Leased Materials across the Dvorken Property for processing thereon; (5) transport off-site materials onto the Dvorken Property for processing thereon; and (6) use the property for any other lawful purpose ancillary to the aforementioned uses which, in defendants' sole discretion, facilitates or increases the sale and/or marketability of Leased Materials. Similarly, the ingress and egress provisions grant defendants unfettered rights of entry and exit subject only to the other terms of the Lease.
Appendix to Plaintiff Dvorken Family Limited Partnership's Motion for Partial Summary Judgment, Tab 5, Appendix Pages 52-53.
Moreover, the Lease sets forth the three circumstances under which defendants are required to pay plaintiff an additional royalty for their use of the Dvorken Property: (1) when defendants transport off-site materials onto the Dvorken Property for processing at the plant located on the Dvorken Property; (2) if and when defendants transport off-site materials onto the Dvorken Property to manufacture other kinds of products, such as asphalt, concrete or ready mix concrete, in the event that defendants construct an asphalt or concrete plant on the Dvorken Property; and (3) when defendants transport materials from the Chico Quarry over the Dvorken Property by rail. Thus, the Lease clearly conveys defendants' rights and the circumstances which necessitate defendants' payment of additional royalties.
Appendix to Plaintiff Dvorken Family Limited Partnership's Motion for Partial Summary Judgment, Tab 5, § 2.3(b), Appendix Page 53.
Id ., § 2.5(a), Appendix Page 56.
Id ., § 3.4, Appendix Page 59.
Although plaintiff has never explicitly argued that the Lease is ambiguous, plaintiff has submitted parol evidence in support of its interpretation of the Lease. In particular, plaintiff has submitted evidence of the parties' negotiations in drafting the Lease, as well as various drafts of the Lease to show modifications made to the Lease during the negotiation process. Because I find that the Lease is unambiguous as a matter of law, I shall not consider plaintiff's extrinsic evidence.
See Docket Entry 54, at 3-4; Appendix Tabs 4 and 6.
In its responsive pleading, plaintiff argues that it submitted evidence of the parties' negotations in order to illuminate, not alter or amend, the parties' intent in drafting the contract, a use permitted by the relevant case authority. See Docket Entry 56; Baty v. Protech Ins. Agency , 63 S.W.3d 841, 848 (Tex.App.-Houston [14th Dist] 2001). I find, however, that plaintiff is attempting to utilize the extrinsic evidence of the parties' negotations to narrow — i.e. to modify — the unambiguous language of the Lease as it relates to defendants' rights to enter, exit and use the Dvorken Property. Since plaintiff is using the aforementioned evidence to alter — as opposed to illuminate — the extrinsic evidence will not be considered.
Plaintiff has proffered several other arguments in support of its position that defendants breached the Lease as a matter of law. Each of the arguments involves the interpretation of Section 2.3(a)(vi) of the Lease — the provision of the Lease which grants defendants the right to:
use the Property for any other lawful purpose ancillary hereto, including any related industry or activity which in Lessee's sole discretion would facilitate or increase the sale and/or marketability of Leased Materials. . . .
Appendix to Plaintiff Dvorken Family Limited Partnership's Motion for Partial Summary Judgment, Tab 5, Appendix Pages 52-53.
Having found that said provision, and the Lease as a whole, is unambiguous, I shall address each of plaintiffs arguments in turn,
3. Defendants' interpretation of the Lease does not render certain provisions of the Lease mere surplusage.
Plaintiff first asserts that defendants interpret Section 2.3(a)(vi) of the Lease as an "all-inclusive right to use the Dvorken Property as they see fit," rendering the "specific rights granted in subsections (i)-(v) . . . mere surplusage" in violation of general principles of contract construction and interpretation.
Docket Entry 54, at 9.
Although plaintiff is correct that all the provisions of a contract must be read as having meaning and cannot be regarded as mere surplusage, plaintiff's assertions regarding defendants' interpretation of the Lease and the status of particular provisions therein are incorrect.
See Federal Deposit Ins. Corp. v. K-D Leasing Co. , 743 S.W.2d 774. 776 (Tex App-El Paso 1988, no writ), citing R.H. Sanders Corp. v. Haves , 541 S.W.2d 262 (Tex Civ App. — Dallas 1976, no writ).
Defendants do not contend that Section 2.3(a)(vi) of the Lease grants them limitless rights. Rather, defendants claim that they have the "right under the Lease Agreement to use the haul road to transport materials from the Dvorken and Chambers tracts . . ." Defendants aver that they have this right because, in their sole discretion, the transportation of the same increases the sale and/or marketability of Dvorken Property materials (i.e. "Leased Materials"). Defendants assert that only the nearby Chambers Property is capable of producing certain "washed" products because, the Chambers Property, unlike the Dvorken Property, has a large water supply Since certain materials are required to be washed by law, defendants argue that the sale and/or marketability of unwashed Dvorken Property Leased Materials is augmented by defendants' ability to provide both washed and unwashed materials from one geographic area. Defendants assert that this one-stop-shop, from which customers can purchase all the mined materials they need from one seller, increases the sale and/or marketability of Dvorken Property materials.
Docket Entry 48, at 12.
See Docket Entry 48.
Defendants' interpretation of Section 2.3(a)(vi) does not render the previous provisions of the Lease, Section 2.3(a)(i-v), mere surplusage. Rather, defendants' interpretation gives full force to all provisions of the Lease — including the provision of the Lease allowing defendants to utilize the Dvorken Property for any lawful, ancillary use which, in defendants' sole discretion increases the sale and/or marketability of Dvorken Property materials. For these reasons, I find plaintiffs contention — that defendants' interpretation of the Lease renders many of the provisions therein mere surplusage — unavailing.
4. Defendants' use of the haul road is an ancillary use and does not violate the explicit terms of the Lease.
Plaintiff next presents a series of arguments in support of its position that defendants' use of the haul road is not an "ancillary use" as contemplated by the Lease. In particular, plaintiff asserts that the doctrines of ejusdem generis and expressio unius est exclusio alterius, as well as the clear intent of the parties in drafting the Lease, preclude the conclusion that defendants' use of the haul road constitutes an ancillary use. In support of its position that defendants' use of the haul road is not ancillary to the acceptable uses enumerated in the contract, plaintiff asserts that the seemingly expansive grant of rights provided in Section 2.3(a)(vi) of the Lease is limited by the specific examples enumerated in the paragraphs which precede and follow said section. Plaintiff argues that this position is supported by the doctrines of ejusdem generis and expressio unius est exclusio alterius.
The doctrine of ejusdem generis is a structural mechanism for analyzing documents, most commonly used in statutory construction and analysis. The doctrine
See, e.g. Hilco Electric Cooperative v. Midlothian Butane Gas Co., Inc. , 111 S.W.3d 75, 81 (Tex. 2003).
provides that, if words of a specific meaning are followed by general words, the general words are interpreted to mean only the class or category trained by the specific words.
Hussong v. Schwan's Sales Enterprises, Inc. , 896 S.W.2d 320, 325 (Tex App. — Houston 1995) See also Hilco Electric Cooperative , 111 S.W.3d, at 81, Carr v. Rogers , 383 S.W.2d 383, 387 (Tex 1964).
Similarly, the notion of expressio unius est exclusio alterius is a "familiar maxim," as opposed to a rule of contract construction, which, translated, means, "the expression of one thing implies the exclusion of others." Like the doctrine of ejusdem generis, expressio unius est exclusio alterius is an interpretative mechanism to give meaning to general terms in light of the specific words or examples provided in the body of the same text.
Rhorer v. Raytheon Engineers and Constructors. Inc. , 181 F.3d 634. 642. n. 11(5th Cir. 1999), citing Branson v. Greyhound Lines, Inc., Amalgamated Council Retirement Disability Plan . 126 F.3d 747, 758 (5th Cir. 1997).
Texas courts have repeatedly held that the doctrine of ejusdem generis "applies only when the contract is ambiguous" On the other hand, if the contract or contractual provision is unambiguous, the court "need not apply ejusdem generis," or any other interpretative technique, to the case.
Id. See also Dimotsis v. State Farm Lloyds , 5 S.W.3d 808, 811-812 (Tex App. — San Antonio 1999), "We do not resort to the ejusdem generis doctrine unless we have already determined that a term is ambiguous".
Hussong , 896 S.W.2d, at 325.
In the instant case, I have already found that the Lease, and all the contractual provisions therein, are unambiguous as a matter of law. Thus, I further find that plaintiff is attempting to utilize the concepts of ejusdem generis and expressio unius est expressio alterius "to create an ambiguity where none exists." For these reasons, it is my conclusion that the language of the contract stands on its own and I need not resort to the aforementioned principles of interpretation.
Dimotsis , 5 S.W.3d, at 811-812.
Finally, plaintiff's assertion that defendants' interpretation of the contract (to allow use of the haul road for the transport of off-site materials) imposes an unforeseen and unfair obligation on plaintiff is unavailing. It is a common precept of contract interpretation that contracts must be interpreted in such a manner that one party does not burden the other with an unanticipated obligation which was not part of the parties' original bargain. In this case, however, the provisions of the Lease clearly anticipate and allow defendants' transport of off-site materials onto the Dvorken Property. In certain situations, defendants must pay an additional royalty to utilize the processing center on the Dvorken Property to process off-site materials. And in other situations, the Lease allows the use of a road on the Dvorken Property for any reason which, in defendants' sole discretion, increases the sale and/or marketability of the Leased Materials, Because the Lease clearly contemplates and authorizes defendants' transport of off-site materials, as well as defendants' construction and use of a haul road, it is disingenuous for plaintiff to assert that defendants are attempting to impose an unforeseen obligation upon it.
See Neece v. A.A.A. Realty Co. , 322 S.W.2d 597, 602 (Tex 1959)
we are to construe contracts from a utilitarian standpoint bearing in mind the particular business activity sought to be served and need not embrace strained rules of interpretation which would avoid ambiguity at all costs, especially where there is danger of enforcing obligations which a contracting party never intended to assume
Plaintiff argues that the haul road impermissibly burdens its property There is no evidence of same Rather, the evidence shows (hat the haul road can be moved — in contrast to a rail line where the underlying materials are "sanitized" or incapable of subsequent extraction See Docket Entry 48, Exhibit F, at 117-119, Docket Entry 50, Exhibit E, at 117-119, Docket Entry 55, Exhibit A, at 117-119.
5. The fact that unitization was impossible at the time the contract was signed is not a persuasive argument.
Plaintiff's next argument in favor of its motion for partial summary judgment, and in opposition to defendants' motion for summary judgment, is that the unitization of the Chambers and Dvorken Properties was not possible at the time the parties signed the Lease because the properties were separated by a county road. Since courts must examine "the wording of the contract in light of the circumstances and facts existing at the time of the contract's making," plaintiff asserts that defendants' actions constitute a breach of the Lease and a trespass.
Docket Entry 54, at 14.
Id .
Although plaintiff correctly notes that "[c]ontracts are construed in the light of the facts existing at the time of their making," plaintiff has failed to establish the relevance of the fact that unitization was not possible at the time the parties entered into the Lease. Rather, defendants' use of the haul road to co-market and co-sell Dvorken Property materials with Chambers Property materials, i.e. to unitize the two properties, falls squarely within the ancillary use provision of the Lease provided defendants properly exercised their discretion in so doing.
Piano v. Gulf Coast Investment Corp. , 429 S.W.2d 554, 556 (Tex.App.-Houston [14th Dist.] 1968).
6. Defendants' interpretation of the Lease, and use according thereto, does not violate the general principles governing mining leases .
Plaintiff's next argument in support of its position that defendants breached the Lease is that defendants interpretation of the Lease, and actions according thereto, violates the general principles which govern mining leases. In particular, plaintiff asserts that the applicable authority prohibits a lessee from utilizing the property leased under a mineral lease to mine another property without an express contractual provision so permitting. To support this proposition, and its position, plaintiff relies primarily on two cases which are factually distinguishable from the one at bar in important ways.
The first case plaintiff relies on is the Fourth Circuit's decision in Ross Coal Co. v. Cole , an appeal from the District Court for the Southern District of West Virginia. In Cole , the Fourth Circuit concluded that the deed at issue did not include an implied right for the lessee to construct and operate a tipple on the leased property for the removal of coal from other, adjacent tracts of land. The Cole Court predicated said finding, in pertinent part, on the evidence which established that the operation of such a tipple for the benefit of another property would significantly increase the burden on the leased property. The Court stated:
Ross Coal Co. v. Cole , 249 F.2d 600 (4th Cir. 1957).
Extending the implied right to operate a tipple for the removal of coal from adjacent lands would materially increase the burden upon the servient estate. Unless the deed, itself, provided such a right, it is not to be implied.
Id . at 605.
Similarly, in the second case cited by plaintiff, Wiser Oil Co. v. Conley , the Kentucky Court of Appeals cited myriad factors upon which it found that the lease therein at issue did not include an implied right to utilize the property for the benefit of another tract. In particular, the lessee wanted to employ a new technology for the removal of oil — not in existence at the time the parties entered into the lease — which would virtually destroy the property (the method of extraction included flooding the leased property). The Court stated that it was a well settled principle under Kentucky law that
Wiser Oil Co. v. Conley , 346 S.W.2d 718 (Ky. 1960).
`in the absence of an express agreement the holder of coal rights cannot use the surface owned by his grantor or lessor in producing, cleaning, marketing or in any way handling coal produced on the lands of another. The mining privileges and rights contained in the lease or deed relate to coal to be produced from the land covered by the instrument and none other.'
Conley , 346 S.W 2d, at 722 (internal citations omitted).
Importantly, both of the aforementioned cases were decided under the laws of West Virginia and Kentucky, and centered around mineral rights leases for the extraction of oil and coal.
In the instant case, aside from the fact that the Lease at issue is a lease both of real property and mineral rights, a broader lease than the ones at issue in the aforementioned cases, the Lease contains an explicit provision authorizing the defendants' construction and use of a haul road, as well as their ingress and egress from the property, for any reason which, in defendants' sole discretion, increases the sale and/or marketability of the Leased Materials. Said provision constitutes an explicit provision authorizing defendants' use of the Dvorken Property so long as they are exercising their sole discretion properly. This interpretation is supported by the other provisions of the Lease which charge additional royalty payments for defendants' transport of off-site materials onto the Dvorken Property for processing thereon. Clearly the Lease contemplated defendants' transport of off-site, mined materials on and over the Dvorken Property. Thus, defendants' construction and use of the haul road do not violate the principles governing mining leases.
7. Defendants' exercise of their sole discretion raises genuine issues of material fact.
As an alternative to its assertion that it is entitled to judgment as a matter of law, plaintiff asserts that genuine issues of material fact exist regarding defendants' exercise of their sole discretion pursuant to Section 2.3 of the Lease. In particular, plaintiff contends that there are triable issues of material fact regarding: (1) whether defendants exercised their sole discretion in good faith; and (2) whether plaintiff derived any actual benefit from defendants' exercise of their discretion. As will be seen, however, plaintiff's derivation of actual benefit is not the litmus test to determine whether defendants properly exercised their sole discretion. Therefore, plaintiff's latter argument will not be considered further.
Docket Entry 52, at 11-13.
It is well settled under Texas law that, "[d]iscretion differs from uncontrolled will." Rather, "`[d]iscretion means the equitable decision of what is just and proper under the circumstances.'" Stated another way, discretion is the
Cowden v. Broderick Calvert , 114 S.W.2d 1166, 1171 (Tex 1938).
Id ., at 1171, citing The Styria v. Morgan , 186 U.S. 1, 22(1902).
`freedom to act according to honest judgment' and . . . [is] not `a word for arbitrary will or inconsiderate action.'
Id ., at 1171, citing Paquette v. City of Fall River, 278 Mass. 172, 179(1932).
Moreover, the mere fact that a contract authorizes the use of a subjective standard — one party's sole judgment — does not, alone, permit summary adjudication.
Greenwood v. Koven , 880 F. Supp. 186, 199 (S.D.N Y. 1995).
In this case, I find that there are genuine issues of material fact as to whether defendants, in their sole discretion, believed that construction and use of the haul road would increase the sale and/or marketability of the Leased Materials. While defendants need not establish that plaintiff derived actual benefit in order prove said fact, they must establish that increasing the sale and/or marketability of the Leased Materials was a factor in their decision to construct and operate the haul road to, inter alia, transport off-site materials across the Dvorken Property. The evidence submitted in support of plaintiff's assertion that defendants did not properly exercise their sole discretion consists of defendants' internal memoranda discussing construction of the haul road. Those documents do not explicitly reference any anticipated benefits to the sale and/or marketability of Dvorken Property materials. Accordingly, I find that there are genuine issues of material fact which preclude entry of summary judgment. For this reason, I find that neither party is entitled to judgment as a matter of law and both motions for summary judgment will be, and are, DENIED .
Appendix to Plaintiff Dvorken Family Limited Partnership's, Motion for Partial Summary Judgment, Tabs A, B, D, and E.
B. Plaintiff's trespass cause of action.
Plaintiff asserts that defendants' actions in breaching the Lease also constitute a trespass as a matter of law. In particular, plaintiff argues
By acting outside the scope of the parties' Lease Agreement, Martin Marietta is violating not only the terms of the contract, but the Dvorken Partnership's property rights. In analogous cases in which the extent of a lessee's rights under a mineral lease were at issue, Texas courts have held that the rights of the lessee embrace only those things permitted by the lease; when the lessee exceeds those rights, he or she becomes a trespasser.
Docket Entry 54, at 16.
Plaintiff is correct that use of leased property in a manner exceeding the scope of the lease constitutes a trespass under Texas law.
The right of the lessee in exploring for and producing oil and gas embraces only the doing of those things expressly granted or necessarily implied in the lease as necessarily incidental thereto. All property rights not granted are reserved in the lessor. The rights of the lessor and lessee are reciprocal and distinct. If either party exceeds those rights he becomes a trespasser
See Brown v. Lundell , 344 S.W.2d 863, 866 (Tex 1961).
Because there are triable issues regarding whether defendants' use of the Dvorken Property exceeded the scope of the Lease, there are also triable issues regarding plaintiff's trespass cause of action. As such, both plaintiff's motion for partial summary judgment and defendants' motion for summary judgment must be DENIED as to the trespass claim
C. Plaintiff's request for permanent injunctive relief.
Plaintiff asserts that its success in establishing its breach of contract and trespass causes of action, inter alia, establishes its entitlement to a permanent injunction.
Because the Dvorken Partnership prevails on the merits of its claims, the Dvorken Partnership seeks partial relief in the form of a permanent injunction. . . . As set forth above, the Dvorken Partnership has established that it is entitled to judgment as a matter of law on its claims for breach of contract and trespass. The other elements supporting a permanent injunction are also established.
Docket Entry 54, at 16-17.
For the reasons set forth above, however, there are genuine issues of material fact regarding whether defendants acted outside the scope of the parties' Lease Agreement, thereby breaching the contract and committing a trespass. Since plaintiff's request for permanent injunction is predicated on the success of its breach of contract and trespass causes of action, and triable issues remain as to the same, both plaintiff's motion for partial summary judgment and defendants' motion for summary judgment are DENIED as to plaintiff's request for permanent injunction.
Conclusion
For the reasons set forth, above, plaintiff's motion for partial summary judgment (Docket Entry 54) and defendants' motion for summary judgment (Docket Entry 48) are hereby DENIED . There are genuine issues of material fact which preclude either party obtaining judgment as a matter of law.
IT IS SO ORDERED.