Opinion
05-23-00096-CV
12-18-2024
SEGUNDO NAVARRO DRILLING, LTD., Appellant v. JOHNNY CHILTON AND SAN ROMAN RANCH MINERAL PARTNERS, LTD., Appellee
On Appeal from the 160th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-20-18518
Before Justices Carlyle, Goldstein, and Breedlove
MEMORANDUM OPINION
BONNIE LEE GOLDSTEIN JUSTICE
This is an appeal from a summary judgment in a case involving assignment of rights under an oil and gas lease. In two issues, appellant Segundo Navarro Drilling, Ltd. (Segundo Navarro) asserts that the trial court erred in (1) granting summary judgment on all of its claims against appellees Johnny Chilton and San Roman Ranch Mineral Partners, Ltd. (San Roman) (collectively, Appellees); and (2) denying Segundo Navarro's cross-motion for summary judgment on the same claims. We affirm in this memorandum opinion. See TEX. R. APP. P. 47.2(a), 47.4.
BACKGROUND
In 2018, San Roman entered into an oil and gas lease (the Lease) with Arkoma Drilling, LP (Arkoma). Under the terms of the lease, Arkoma was required to drill a certain number of wells per year. According to Segundo Navarro, Arkoma realized in 2020 that it could not meet this requirement and thus decided to assign its rights and obligations under the Lease to Segundo Navarro. Relevant here, the Lease included the following assignment and transfer provision:
Arkoma Drilling, LP subsequently assigned its rights under the Lease to Arkoma Drilling II, Ltd. We will refer to the two companies collectively as "Arkoma."
14. ASSIGNMENT AND TRANSFER CLAUSE
14.1 Subject to the terms, restrictions and conditions set out in this Paragraph 14, the rights of either party hereunder may be assigned in whole or in part but no change or division in ownership of the land or royalties, however accomplished, shall operate to enlarge the obligations or diminish the rights of [Arkoma]; and no change or division in the ownership of the mineral, royalty and/or leasehold rights subject to this Lease shall be binding on the other party until thirty (30) days after the other party shall have been furnished by certified U.S. mail at the other party's address specified herein, with a certified or photocopy of the recorded instrument or instruments evidencing such change. However, [Arkoma] shall be prohibited from (i) permitting the operator of this Lease to be anyone other than [Arkoma] or an affiliate of [Arkoma] and/or (ii) directly or indirectly transferring or assigning any portion of the leasehold working interest to any party other than an affiliate of [Arkoma], without the prior written consent of [San Roman], which consent shall not be unreasonably withheld or delayed.
On October 26, 2020, Arkoma and Segundo Navarro signed a letter of intent (LOI), setting forth their preliminary understanding as to the proposed assignment. The LOI contained both binding and nonbinding provisions. The nonbinding provisions contained the terms of the proposed assignment, such as purchase price, drilling rights to be transferred, and a closing date, among other things. The binding provisions set forth Arkoma and Segundo Navarro's agreement as to confidentiality, choice of law to be applied to the LOI, execution of the LOI in multiple counterparts, and termination rights. The termination clause provided that "[e]ither Party may terminate this letter of intent and thereafter this letter of intent shall have no force and effect and the Parties shall have no further obligations hereunder."
On October 30, 2020, four days after Arkoma and Segundo Navarro signed the LOI, Arkoma sent a letter to San Roman seeking the latter's consent to the assignment pursuant to Section 14.1 of the Lease. Chilton, as the president of San Roman's general partner, informed representatives from Arkoma that he was "not inclined" to sign the consent, ostensibly due to prior litigation between San Roman and Segundo Navarro. The Arkoma representatives, wanting to avoid "creating any friction" with San Roman, decided not to go through with the assignment. Thus, on November 10, 2020, Arkoma notified Segundo Navarro that it was exercising its option to terminate the LOI.
On December 15, 2020, Segundo Navarro filed this lawsuit against San Roman and Chilton. It asserted claims for tortious interference with an existing contract, tortious interference with a prospective business relationship, and civil conspiracy. The parties filed competing motions for summary judgment on all three claims. The trial court denied Segundo Navarro's motion, granted San Roman and Chilton's motion, and entered a take-nothing judgment against Segundo Navarro on all its claims. This appeal timely followed.
DISCUSSION
I. Standard of Review and Summary Judgment Standard
We review summary judgments de novo. De La Cruz v. Kailer, 526 S.W.3d 588, 592 (Tex. App.-Dallas 2017, pet. denied). Under the traditional summaryjudgment standard, the movant has the burden to show there is no genuine issue of material fact and it is entitled to judgment as a matter of law. Vince Poscente Int'l, Inc. v. Compass Bank, 460 S.W.3d 211, 213-14 (Tex. App.-Dallas 2015, no pet.) (citing TEX. R. CIV. P. 166a). In deciding whether there is a disputed fact issue precluding summary judgment, we take evidence favorable to the nonmovant as true. Id. at 214. We indulge every reasonable inference, and resolve any doubts, in the nonmovant's favor. Id. at 214. Once the movant establishes its right to summary judgment as a matter of law, the burden shifts to the nonmovant to present evidence raising a genuine issue of material fact, thereby precluding summary judgment. Id. A genuine issue of material fact exists if the nonmovant produces more than a scintilla of probative evidence regarding the challenged element. Id.
A plaintiff who moves for summary judgment on its own claims must conclusively establish every necessary element in its favor. Riner v. Neumann, 353 S.W.3d 312, 314 (Tex. App.-Dallas 2011, no pet.). A matter is conclusively established by the evidence if ordinary minds could not differ as to the conclusion to be drawn from the evidence. Id. A defendant is entitled to traditional summary judgment if it conclusively disproves at least one essential element of the plaintiff's claim or conclusively establishes every element of an affirmative defense. Ward v. Stanford, 443 S.W.3d 334, 342 (Tex. App.-Dallas 2014, pet. denied). When the parties file cross-motions for summary judgment, each party bears the burden as to its own motion. McKinney Millennium, LP v. Collin Cent. Appraisal Dist., 599 S.W.3d 57, 60 (Tex. App.-Dallas 2020, pet. denied). If the trial court grants one party's motion and denies the other's, we consider both motions, review the evidence presented by both sides, determine all issues presented, and render the judgment the trial court should have rendered. Id.
II. Analysis
Here, the parties filed cross-motions for summary judgment on all three of Segundo Navarro's claims. The trial court granted San Roman and Chilton's motions, which Segundo Navarro challenges in its first issue. The trial court denied Segundo Navarro's own motion, which Segundo Navarro challenges in its second issue. Because we are required to consider the cross-motions together and render the judgment the trial court should have rendered on the issues presented, see id., we will address the trial court's rulings on a claim-by-claim basis.
A. Tortious Interference with Existing Contract
We first consider whether there were fact issues pertaining to the elements of Segundo Navarro's claim for tortious interference with an existing contract. The elements of tortious interference with an existing 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. Kroger Specialty Infusion CA, LLC v. Sturns, No. 05-22-01276-CV, 2024 WL 2205660, at *6 (Tex. App.-Dallas May 16, 2024, no pet.) (mem. op.) (citing Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000)).
We begin with the first element. Segundo Navarro argues that the LOI was subject to interference because it contains all the essential terms to establish a valid contract. Segundo Navarro further argues that the at-will status of the LOI does not affect the outcome because such contracts are still subject to interference. Appellees respond the issue is not whether the LOI contains essential terms or whether it is terminable at will, but rather whether the LOI's obligatory provisions have been breached.
We perceive Appellees' argument to conflate the first two elements of a claim for tortious interference with an existing contract. But Appellees are correct in focusing on the obligatory provisions of the LOI in the context of the first element. "The focus in evaluating a tortious interference claim begins . . . on whether the contract is subject to the alleged interference." ACS Inv'rs, Inc. v. McLaughlin, 943 S.W.2d 426, 431 (Tex. 1997) (emphasis added). In ACS Investors, McLaughlin entered into an agreement for the sale of AMS II, a company he co-owned, to First
Texas Savings Association. Id. at 427. After the sale, AMS II became the "AMS Division" of First Texas, and the purchase agreement contained a provision giving McLaughlin an option to purchase forty-nine percent of the AMS Division at the end of five years following the sale. Id. at 428. First Texas subsequently entered into a series of transactions culminating in the sale of the AMS Division to ACS Investors. See id. McLaughlin sued ACS Investors for tortious interference with an existing contract, arguing that the agreement abrogated his 49% buy-back option. See id. at 430. The jury entered verdict in McLaughlin's favor, but the supreme court reversed. The court held that the agreement was "not subject to McLaughlin's tortious interference allegations" because it authorized First Texas to sell the AMS Division to a third party "despite McLaughlin's limited purchase rights." Id. at 431. Further, the agreement gave First Texas the right, but not the obligation, to buy McLaughlin's option. See id. In other words, because McLaughlin's purchase option was not obligatory, there could be no interference for its abrogation.
Under ACS Investors, our consideration of the first element is not limited to the validity and enforceability of the LOI; we must also consider what act of interference is alleged and whether the contract is subject to that alleged interference. See id. Here, the alleged act of interference is Appellees' unreasonable withholding or delay in approving the assignment contemplated by the LOI. However, as in ACS Investors, there is no provision in the LOI that obligated Arkoma to enter into an assignment with Segundo Navarro; both parties could terminate the LOI at will, at which point the LOI would "have no force and effect" and the parties would "have no further obligations" under it.
Because the LOI did not obligate either party to enter into an assignment, it was not subject to the interference alleged by Segundo Navarro against Appellees as a matter of law. We conclude that there are no genuine issues of material fact as to the first element of Segundo Navarro's claim for tortious interference and that Appellees negated that element as a matter of law. Accordingly, we need not consider the remaining elements. See TEX. R. APP. P. 47.1; Ward, 443 S.W.3d at 342 ("A defendant is entitled to traditional summary judgment if it conclusively disproves at least one essential element of the plaintiff's claim[.]"). We affirm the trial court's grant of summary judgment on this claim in Appellees' favor.
B. Tortious Interference with Prospective Business Relationships
We now turn to Segundo Navarro's claim for tortious interference with a prospective contract or business relationship. To prove a cause of action for tortious interference with a prospective contract, the plaintiff must establish the following elements: (1) a reasonable probability that the plaintiff would have entered into a business relationship with a third party; (2) an intentional, malicious intervention or an independently tortious or unlawful act performed by the defendant with a conscious desire to prevent the relationship from occurring or with knowledge that the interference was certain or substantially likely to occur as a result of its conduct; (3) a lack of privilege or justification for the defendant's actions; and (4) actual harm or damages suffered by the plaintiff as a result of the defendant's interference, i.e., the defendant's actions prevented the relationship from occurring. Anderton v. Cawley, 378 S.W.3d 38, 59 (Tex. App.-Dallas 2012, no pet.). We focus on the second element as it is dispositive.
Segundo Navarro asserts that San Roman's withholding or delay of its consent to the assignment contemplated by the LOI was unreasonable and therefore constituted a breach of Section 14.1 of the Lease between San Roman and Arkoma. Segundo Navarro argues that this breach was "unlawful" and therefore satisfies the "independently tortious or unlawful" prong of the second element. Appellees respond that the second element requires proof that the defendant violated a tort or statutory duty, and a contractual breach cannot satisfy this element. We agree with Appellees.
On this point, the supreme court's decision in Wal-Mart Stores, Inc. v. Sturges is directly applicable. See 52 S.W.3d 711, 726 (Tex. 2001). In Sturges, the supreme court noted that although Texas has long recognized this cause of action, "the core concept of liability-what conduct is prohibited-has never been clearly defined." Id. at 712-13. The court thus set out to provide some clarity as to the type of conduct that would support the second element of the tort. See id. After reviewing the history of the tort in Texas and other states, the court stated:
It appears that in most Texas cases in which plaintiffs have actually recovered damages for tortious interference with prospective business relations, the defendants' conduct was either independently tortious-
in the four cases noted, defamatory or fraudulent-or in violation of state law. For the same reasons accepted by the Supreme Court of California in Della Penna, and by the Seventh Circuit in Speakers of Sport, and advanced by Professor Perlman and other legal commentators, we see no need for a definition of tortious interference with prospective business relations that would encompass other conduct.Id. at 726. Thus, under Sturges, the type of conduct that will support a claim for tortious interference with prospective business relationships is limited to violations of a tort or statutory duty.
Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th 376, 392, 902 P.2d 740, 751 (1995).
Speakers of Sport, Inc. v. ProServ, Inc., 178 F.3d 862, 867 (7th Cir. 1999).
Harvey S. Perlman, Interference with Contract and Other Economic Expectancies: A Clash of Tort and Contract Doctrine, 49 U. CHI. L. REV. 61, 63-64 (1982).
Segundo Navarro argues that Appellees' delay or withholding of consent satisfies this standard because it is "unlawful" and a "violation of state law" to breach a contract. We disagree. Segundo Navarro cites no case, and we have found none, that stands for the proposition that A's (San Roman's) breach of its contract with B (Arkoma) can constitute interference as to B's (Arkoma's) prospective business relationship with C (Segundo Navarro). On the contrary, there is overwhelming authority for the proposition that a contractual breach is neither wrongful nor unlawful. As explained by Justice Holmes over a century ago, "[t]he duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it-and nothing else." The Path of the Law, 10 HARV. L. REV. 457, 462 (1897). This rule has not changed in the interim. See Cram Roofing Co., Inc. v. Parker, 131 S.W.3d 84, 91 (Tex. App.-San Antonio 2003, no pet.) ("While a contract may indeed have the force of law, breach of a contract is not necessarily an illegal activity."); See United States v. Blankenship, 382 F.3d 1110, 1133 (11th Cir. 2004) ("It is not illegal for a party to breach a contract[.]"); Benderson Dev. Co. v. USPS, 998 F.2d 959, 962 (Fed. Cir. 1993) ("To breach a contract is not unlawful; the breach only begets a remedy in law or in equity."); Windsor Secs., Inc. v. Hartford Life Ins. Co., 986 F.2d 655, 664 (3rd Cir.1993) ("Breach of contract is not illegal."); Patton v. Mid-Continent Sys., Inc., 841 F.2d 742, 750 (7th Cir.1988) ("Even if the breach [of contract] is deliberate, it is not necessarily blameworthy."). A contractual promise "is not a certification that the promisor will actually perform the specified acts, or presently intends to perform those acts, but is instead a grant of a legal right to the other party to either enjoy performance or receive damages." Blankenship, 382 F.3d at 1133; see also Parker, 131 S.W.3d at 91 (breach of contract not illegal, but rather a "civil breach" giving rise to potential "remedial awards" from a trial court).
Segundo Navarro argues that Appellees breached the Lease by withholding or delaying their consent to the assignment. Segundo Navarro lists various factors courts have used to determine whether a lessor's failure to consent to a mineral assignment is unreasonable. See, e.g., Mayo Found. for Med. Educ. &Research v. BP Am. Prod. Co., 447 F.Supp.3d 522 (N.D. Tex. 2020). This argument is immaterial. Even if San Roman breached the Lease, an issue we do not reach, that mere breach, without more, is insufficient as a matter of law to support the "independently tortious or unlawful" element of Segundo Navarro's claim for tortious interference with its prospective business relationship with Arkoma. We conclude that there are no genuine issues of material fact as to the second element of Segundo Navarro's claim for tortious interference with prospective business relationships and that Appellees negated the second element as a matter of law. Accordingly, we need not consider the remaining elements. See TEX. R. APP. P. 47.1; Ward, 443 S.W.3d at 342 ("A defendant is entitled to traditional summary judgment if it conclusively disproves at least one essential element of the plaintiff's claim[.]"). We affirm the trial court's grant of summary judgment on this claim in Appellees' favor.
C. Civil Conspiracy
Our resolution of the tortious-interference claims also disposes of Segundo Navarro's claim for civil conspiracy. A civil conspiracy involves a combination of two or more persons to accomplish an unlawful purpose, or to accomplish a lawful purpose by unlawful means. Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996). Civil conspiracy is not an independent tort; it is a theory of vicarious tort liability derivative of an underlying tort. Agar Corp., Inc. v. Electro Circuits Int'l, LLC, 580 S.W.3d 136, 142 (Tex. 2019). We have held that there are "a number of ways the viability of a conspiracy claim can be defeated by the claimant's failure to establish an underlying tort." W. Fork Advisors, LLC v. SunGard Consulting Services, LLC, 437 S.W.3d 917, 920 (Tex. App.-Dallas 2014, pet. denied). In West Fork, we cited the following examples:
The trial court may correctly grant summary judgment against the claimant on the underlying tort. See Ernst &Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 582-83 (Tex. 2001). The claimant may fail to plead the underlying tort on which he relies. See Wingert v. Devoll, No. 03-09-00440-CV, 2010 WL 3271744, at *7 (Tex. App.- Austin Aug. 20, 2010, pet. denied). Or the tort that the claimant does plead may not legally exist. See Chu v. Hong, 249 S.W.3d 441, 444-45 (Tex. 2008).Id. We explained that "[r]egardless of the reason for the failure of the underlying tort, there can be no independent liability for civil conspiracy." Id. (citing Four Bros. Boat Works, Inc. v. Tesoro Petroleum Cos., Inc., 217 S.W.3d 653, 668 (Tex. App.- Houston [14th Dist.] 2006, pet. denied)).
Here, the first example applies. Segundo Navarro's tortious-interference claims underlie its claim for civil conspiracy. Because we have concluded that the trial court correctly granted summary judgment as to the underlying torts, the civil-conspiracy claim must also fail. See id. We affirm the trial court's grant of summary judgment as to Segundo Navarro's claim for civil conspiracy claim.
CONCLUSION
We overrule Segundo Navarro's issues and affirm the trial court's judgment.
JUDGMENT
In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellee JOHNNY CHILTON AND SAN ROMAN RANCH MINERAL PARTNERS, LTD. recover their costs of this appeal from appellant SEGUNDO NAVARRO DRILLING, LTD.