Opinion
No. 01-08-01007-CV
Opinion Issued October 29, 2009.
On Appeal from the 333rd District Court, Harris County, Texas, Trial Court Cause No. 2008-13752.
Panel consists of Justices JENNINGS, HIGLEY, and SHARP.
MEMORANDUM OPINION
Appellant, ERG Resources, LLC ("ERG"), challenges the trial court's summary judgment, rendered in favor of appellee, Merlon Texas, Inc. ("Merlon"), in ERG's suit for breach of contract and conversion. In two issues, ERG contends that the trial court erred in granting Merlon's summary judgment motion and in denying ERG's summary judgment motion.
We affirm.
Background
In its original petition, ERG alleged that Merlon agreed to purchase oil and gas property owned by ERG in a document titled "[As]signment and Bill of Sale" (the "Assignment"), which the parties executed with an effective date of January 1, 2008. ERG asserted that the Assignment, in "express and unambiguous terms," stated that oil produced before January 1, 2008, and contained in the storage tanks (the "Oil") on the land subject to the agreement (the "Land"), "was the sole property of ERG." However, after the effective date of the Assignment, when ERG sent an invoice to Merlon for the value of the Oil, "Merlon refused to tender the $33,072 owed to ERG." ERG contended that by refusing to pay the $33,072, Merlon had breached its contract with ERG and committed the tort of conversion.
ERG attached to its petition the Assignment, which provides,
[ERG] . . ., herein called "Assignor," . . . does hereby grant, convey, sell, assign, and transfer unto [Merlon] . . ., herein called "Assignee," the following interests:
1. all of Assignor's right, title, and interest in those properties listed on the attached Exhibit "A", including but not limited to, any mineral interest, leases (whether one or more) or interests created under contracts, and the lands covered thereunder or any other oil and gas interests applicable to the interests described in Exhibit "A" hereto, inclusive, without limitation, the properties and/or oil and gas units located thereon, said interests and lands being located in Liberty County, State of Texas, together with the rights incident thereto, the personal property thereon, appurtenant thereto, or used or obtained in connection with said properties and/or oil and gas units; AND for the same consideration stated hereinabove, Assignor does hereby grant, convey, sell, assign, and transfer unto Assignee all of Assignor's right, title, and interest in and to the well or wells located upon the properties and/or oil and gas units, or on lands pooled or unitized with any portion thereof, or on lands located within any governmental drilling and spacing unit which includes any portion thereof, together with all casing, leasehold equipment, and personal property in or on or used in connection with said well or wells, (hereinafter collectively referred to as the "Property");
2. all of Assignor's interest in the production of oil, gas, or other minerals, inclusive of royalties, overriding royalties, production payments, rights to take royalties in kind, or other interests attributable to the Property;
3. all of Assignor's interest derived from unit agreements, orders and decisions of state and federal regulatory authorities establishing units, joint operating agreements, enhanced recovery and injection agreements, farmout agreements and farmin agreements, options, drilling agreements, exploration agreements, assignments of operating rights, working interests, subleases and rights above or below certain footage depths or geological formations, to the extent same is attributable to the Property;
4. all of Assignor's interest in rights-of-way, easements, servitudes and franchises acquired or used in connection with operations for the exploration and production of oil, gas or other minerals on or from the Property, including the rights to permits and licenses of any nature owned, held or operated in connection with said operations; and
5. To the extent of the interest sold, all of Assignor's right, title and interest in and to the oil, gas of any kind and nature, other hydrocarbons and other minerals in, on and produced from or allocated to the leasehold interest sold to the Assignee from and after the Effective Date hereof.
ERG also attached to its petition the invoice, a letter that ERG had sent to Merlon titled "SOUTH MARTHA FINAL GAUGES Invoice No. SM-2008" and dated January 3, 2008. In the letter, ERG wrote, "Please remit payment to ERG Resources, L.L.C. for the following crude oil volumes on the South Martha Field wells sold to Merlon effective 1/1/2008 . . . Total Due ERG $33,072.15."
Merlon filed a general denial and, shortly thereafter, a summary judgment motion, in which it asserted that "ERG transferred to Merlon not only all the personal property associated with the Leases, but also all of ERG's rights to production, and all the oil, gas, and other hydrocarbons in and on the properties, on the Effective Date" and "nowhere in the Assignment is Merlon obligated to pay ERG for" the Oil. In its reply and cross-motion for summary judgment, ERG asserted that prior to January 1, 2008, ERG had extracted the Oil and "placed [it] into tanks for storage." ERG contended that the Oil "became ERG's personal property the moment it was extracted from the land" and the Assignment did not convey the Oil to Merlon.
The trial court denied ERG's summary judgment motion and granted Merlon's summary judgment motion.
Standard of Review
To prevail on a summary judgment motion, a movant has the burden of proving that it is entitled to judgment as a matter of law and that there is no genuine issue of material fact. Tex. R. Civ. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995). When a defendant moves for summary judgment, it must either (1) disprove at least one essential element of the plaintiff's cause of action or (2) plead and conclusively establish each essential element of its affirmative defense, thereby defeating the plaintiff's cause of action. Cathey, 900 S.W.2d at 341; Yazdchi v. Bank One, Tex., N.A., 177 S.W.3d 399, 404 (Tex. App. [1st Dist.] 2005, pet. denied). When both parties move for summary judgment and the trial court grants one motion and denies the other, the reviewing court should review the summary judgment evidence presented by both sides, determine all questions presented, and render the judgment that the trial court should have rendered. Tex. Workers' Comp. Comm'n v. Patient Advocates of Tex., 136 S.W.3d 643, 648 (Tex. 2004).
Summary Judgment
In its first and second issues, ERG argues that the trial court erred in granting Merlon's summary judgment motion and in denying ERG's summary judgment motion because, under the Assignment, "ERG retained right, title and interest in the [Oil]," and either the January 3, 2008, invoice created a contract for the sale of the production requiring Merlon to pay ERG or Merlon converted the Oil for its own use. ERG alternatively contends that the Assignment is ambiguous, precluding the trial court from entering summary judgment for either party.
Our primary concern in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument. Seagull Energy E P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006); Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). Usually, the intent of the parties can be discerned from the instrument itself. ExxonMobil Corp. v. Valence Operating Co., 174 S.W.3d 303, 312 (Tex. App. [1st Dist.] 2005, pet. denied). When an issue regarding the construction of a contract is presented, we must examine and consider the entire writing in an effort to harmonize and to give effect to all the provisions of the contract so that none will be rendered meaningless. Seagull Energy E P, Inc., 207 S.W.3d at 345. Contract terms will be given their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or different sense. Valence Operating Co., 164 S.W.3d at 662. A contract is ambiguous only if its meaning is uncertain or if it is subject to two or more reasonable interpretations. Seagull Energy E P, Inc., 207 S.W.3d at 345; Edascio, L.L.C. v. NextiraOne L.L.C., 264 S.W.3d 786, 796-97 (Tex. App. [1st Dist.] 2008, pet. denied). If a written contract is worded in such a way that it can be given a definite or certain legal meaning, then the contract is not ambiguous. SAS Inst., Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005). An ambiguity does not arise simply because the parties advance conflicting interpretations of the contract. Tex. Farm Bureau Mut. Ins. Co. v. Sturrock, 146 S.W.3d 123, 126 (Tex. 2004). When the parties have entered into an unambiguous contract, the courts will enforce the intention of the parties as written in the instrument. Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981).
ERG asserts that, in the Assignment, it "merely conveyed its right, title and interest to oil and gas severed from the property after January 1, 2008 ." ERG notes that paragraph 5 of the Assignment provides that ERG conveyed to Merlon,
. . . all of [ERG's] right, title and interest in and to the oil, gas of any kind and nature, other hydrocarbons and other minerals in, on and produced from or allocated to the leasehold interest sold to [Merlon] from and after the Effective Date hereof.
ERG further asserts that paragraph 5 "is the only paragraph that expressly conveys any and all rights to oil and gas produced from the leasehold" and paragraph 1 of the Assignment only conveys its interest "derived from leases and other interests created under contract."
However, paragraph 1 expressly conveys ERG's "right, title, and interest in [the Land], . . . inclusive, without limitation, the properties and/or oil and gas units located thereon, . . . together with . . . the personal property thereon, appurtenant thereto, or used or obtained in connection with said properties and/or oil and gas units." (Emphasis added). The parties agree that the Oil, which had been severed from the Land by production, is personal property. See Humble Oil Ref. Co. v. West, 508 S.W.2d 812, 817 (Tex. 1974).
Paragraph 5 expressly conveys "[t]o the extent of the interest sold, all of [ERG's] right, title and interest in and to the oil, gas of any kind and nature, other hydrocarbons and other minerals in, on and produced from or allocated to the leasehold interest sold to [Merlon] from and after the Effective Date." This language is historically used to transfer a mineral estate, that is, the oil, gas, and other minerals in place, not severed from the ground. Gex v. Tex. Co., 337 S.W.2d 820, 825 (Tex. Civ. App.-Amarillo 1960, writ ref'd n.r.e.) (deed conveying "all the oil, gas and other minerals on, in or under the described land" was held to be mineral deed, not grant of royalty interest); Bank One, Tex., Nat'l Ass'n v. Alexander, 910 S.W.2d 530, 532 (Tex. App.-Austin 1995, writ denied) (citing 1 Howard R. Williams Charles J. Meyers, Oil and Gas Law § 304.4, at 475 (1994 ed.) ("[a]n instrument that grants or reserves `the oil, gas and other minerals in, on and under' or `in and under' described land, without further provisions relating to the minerals, creates a mineral interest")); 1 Ernest E. Smith Jacqueline L. Weaver, Texas Law of Oil and Gas § 3.5 (1994) (noting that traditional language used to create mineral fee is reference to "oil, gas, and other minerals in, on, and under the described land"). Thus, paragraph 5 gives Merlon a mineral interest — an interest in the oil and gas in place as of the Effective Date of the Assignment. Paragraph 5 does not conflict with paragraph 1. Paragraph 1 addresses the conveyance of all kinds of personal property, including the Oil "thereon" the Land, while paragraph 5 addresses the conveyance of the oil and gas in place.
The plain language of paragraph 1 conveys " personal property thereon . . . used or obtained in connection with [the Land] and/or oil and gas units." (Emphasis added). The parties agree that the Oil, which had been severed and stored in the tanks, was personal property. Thus, the Oil was "personal property thereon" the Land as of the effective date of the assignment and was conveyed as personal property by paragraph 1 of the Assignment. Accordingly, we hold that ERG, in the Assignment, unambiguously conveyed its right, title, and interest in the Oil to Merlon.
ERG next argues that ERG and Merlon "formed a valid Article 2 contract with regard to the Oil" because it sent to Merlon "an invoice confirming the sale [of the Oil] and Merlon failed to object withing ten (10) days." In support of its argument, ERG relies upon Texas Business and Commerce Code section 2.201(b), which provides that a contract for the sale of goods is enforceable between two merchants
if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements . . . against such party unless written notice of objection to its contents is given within ten days after it is received.
Tex. Bus. Com. Code Ann. § 2.201(b) (Vernon 2009).
However, a contract for the sale of goods can only exist when there is a contract or agreement to pass "title from the seller to the buyer for a price." Id. § 2.106(a) (Vernon 2009). Here, ERG has not asserted that its invoice confirmed any contract other than the Assignment, which conveyed the Oil to Merlon for the consideration recited therein. ERG asserts that it measured the volume of the Oil on January 1, 2008, and then sent Merlon the invoice on January 3, 2008. However, by January 3, 2008, Merlon had already obtained title to the Oil via the Assignment. Because ERG did not have title to the Oil, it cannot rely on section 2.201(b) to establish a contract for the sale of the Oil from ERG to Merlon. For the same reason, the Oil was not subject to conversion by Merlon.
Accordingly, we hold that the trial court did not err in granting Merlon's summary judgment motion. Having held that the trial court did not err in granting Merlon's summary judgment motion, we further hold that the trial court did not err in denying ERG's cross-motion for summary judgment.
We overrule ERG's first and second issues.
Conclusion
We affirm the judgment of the trial court.