Escondido Resources II, LLC v. Justapor Ranch, L.C. ( 2015 )

ACCEPTED
04-14-00905-CV
FOURTH COURT OF APPEALS
SAN ANTONIO, TEXAS
10/26/2015 12:26:32 PM
KEITH HOTTLE
NO. 04-14-00905-CV
CLERK
***
FILED IN
IN THE COURT OF APPEALS 4th COURT OF APPEALS
SAN ANTONIO, TEXAS
FOURTH DISTRICT OF TEXAS
10/26/2015 12:26:32 PM
SAN ANTONIO, TEXAS
KEITH E. HOTTLE
Clerk
***
ESCONDIDO RESOURCES II, LLC,
Appellant
V.
JUSTAPOR RANCH COMPANY, L.C.,
Appellee
***
APPELLEE’S RESPONSE TO APPELLANT’S REPLY BRIEF
Jose M. “Joe” Rubio, Jr. Timothy Patton
State Bar No. 17362100 State Bar No. 15633800
JOE RUBIO LAW FIRM TIMOTHY PATTON, P.C.
1000 Washington Street, Suite 4 14546 Brook Hollow Blvd. #279
Laredo, Texas 78040 San Antonio, Texas 78232
Phone: 956-712-2223 Phone: 210-832-0070
Patton G. Lochridge
State Bar No. 12458500
Carlos R. Soltero
State Bar No. 00791702
J. Derrick Price
State Bar No. 24041726
MCGINNIS LOCHRIDGE & KILGORE, L.L.P.
600 Congress Avenue, Suite 2100
Austin, Texas 78701
Phone: 512-495-6044
Attorneys for Appellees
ORAL ARGUMENT REQUESTED
TABLE OF CONTENTS
Page
Table of Contents i
Index of Authorities iii
I. Escondido’s Interpretation of XIV’s Opening Phrase Is Clearly 1
Incorrect
II. All Royalty Payment Deadlines Are Meaningful Under Justapor’s 3
Construction
III. Escondido Mischaracterizes Justapor’s Response to Its 4
Nonpayment vs. Underpayment Argument
IV. Escondido Impermissibly Construes the Lease By Looking at the 5
Harm Caused by Its Breach and Then Working Backward to Its
Construction
V. Escondido’s “$1 Underpayment” Argument Illustrates Both Its 7
Flawed Working-Backward Approach to Lease Construction and
to Oil and Gas Title Ownership
VI. The Record Conclusively Establishes That Escondido Never 9
Made a Single True-Up Payment to Correct Its Underpayments
in 2011, 2012 and 2013
VII. Escondido’s HSC Argument Misses the Dispositive Point 10
VIII. The Unchallenged Summary Judgment Conclusively Establishes 11
that Escondido’s Defenses to Lease Termination, Based on Jones’
Conduct, Are Meritless
IX. Escondido Waived Its Appellate Waiver/Estoppel Arguments 12
X. Escondido’s Curious Approach to “Witness Testimony” and the 14
Proof on Its Intentional Underpayments
XI. A Few Words About Justapor’s Supposed Record “Confusion” 17
Are Warranted
Prayer 18
Certificate of Service 19
Certificate of Compliance 20
ii
INDEX OF AUTHORITIES
Page
Coastal Oil & Gas Corp. v. Roberts, 8
28 S.W.3d 759 (Tex. App.-Corpus Christi 2000,
pet. granted, judgm’t vacated w.r.m.)
Gibson v. Turner, 1
294 S.W.2d 781 (Tex. 1956)
Hebisen v. Nassau Dev. Co., 2
754 S.W.2d 345 (Tex. App.-
Houston [14th Dist.] 1988, writ denied)
Hitzelberger v. Samedan Oil Corp., 3, 8, 9
948 S.W.2d 497 (Tex. App.-Waco 1997, pet. denied)
Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 3
320 S.W.3d 829 (Tex. 2010)
McConnell v. Southside Indep. Sch. Dist., 13, 14
858 S.W.2d 337 (Tex. 1993)
Natural Gas Clearinghouse v. Midgard Energy Co., 7
113 S.W.3d 400 (Tex. App.-Amarillo 2003, pet. denied)
Natural Gas Pipeline Co. v. Pool, 7, 8,
124 S.W.3d 188 (Tex. 2003) 9, 12
Range Res. Corp. v. Bradshaw, 1
266 S.W.3d 490 (Tex. App.-Fort Worth 2008, pet. denied)
Tex. R. Civ. P. 11 12
Tex. R. Civ. P. 91a 12
Tex. R. Civ. P. 166a(c) 13, 14
Tex. R. Civ. P. 166a(i) 12
iii
I. Escondido’s Interpretation of XIV’s Opening Phrase Is Clearly
Incorrect
After close to 100 pages of briefing, Escondido has finally discussed the
opening phrase of the ipso facto termination provision of the Lease – the phrase
establishing that the summary judgment on lease termination should be affirmed.
As previously discussed, ipso facto termination under XIV is triggered if
Escondido fails to pay royalties to Justapor “in the manner hereinabove provided.”
(Br.13-15, 34-35). Under any common sense reading, “the manner hereinabove
provided” necessarily refers to the two “hereinabove” provisions in the Lease that
define Escondido’s royalty payment obligations to Justapor: III(b), requiring
royalties to be paid based on the highest of the four price floors, and III(g),
requiring true-up payments by the March 1 deadline for royalties underpaid during
the preceding year. (Id.).
In response, Escondido essentially announces that any contract or lease that
uses the words, “herein” or “hereinabove,” is vague and ambiguous, citing one
commentator’s opinion that is unsupported by any case citations. (E.Rep.7, 12).
In reality, Texas courts have repeatedly concluded that contracts and leases,
including contractual provisions governing royalty and other payment obligations
that use “herein” or “hereinabove,” are clear, unequivocal and unambiguous as a
matter of law. See, e.g., Gibson v. Turner, 294 S.W.2d 781, 782-88 (Tex. 1956);
Range Res. Corp. v. Bradshaw, 266 S.W.3d 490, 494-96 (Tex. App.-Fort Worth
2008, pet. denied); Hebisen v. Nassau Dev. Co., 754 S.W.2d 345, 350 (Tex. App.-
Houston [14th Dist.] 1988, writ denied).
Next, Escondido creates a proximity test, claiming that because III(g)’s true-
up provision appears “eight pages” earlier in the Lease than XIV, it is
inconceivable that Escondido’s failure to timely true-up could result in Lease
termination. (E.Rep.7, 12). First, this argument is contrary to the just-cited cases
recognizing that when a contract refers to payment obligations as provided
“herein” or “hereinabove,” that contract unambiguously incorporates those
payment obligations whether they appear one page or twenty pages earlier in the
document. Second, Escondido’s arbitrary proximity test (stressing the 8 pages
between XIV and III(g)) becomes nonsensical when you consider that Escondido
has no problem at all with XIV’s ipso facto termination language applying to its
payment obligations in III(a) and (b) which appear 13 pages earlier in the Lease.
(E.Rep.15).
In effect, Escondido has rewritten XIV’s opening phrase to impermissibly
restrict its scope to state “Royalties payable to Lessor in the manner hereinabove
provided in Paragraph III(a), (b) but not in Paragraph III(g).” Escondido’s
interpretation also renders the opening phrase of XIV partially meaningless. XIV
refers to Escondido’s obligation to pay royalties to Justapor in “the manner
hereinabove provided,” and timely making true-up royalty payments under III(g) is
2
one of those “hereinabove provided” royalty payment obligations. Yet, Escondido
claims that the “hereinabove provided” language in XIV excludes III(g) and
includes only III(a) and (b).
Under the case law cited in Escondido’s brief, its effort to rewrite the Lease
– a rewrite rendering a crucial Lease provision partially meaningless and failing to
harmonize all of the Lease’s provisions – is improper and unreasonable.
(E.Rep.14, 16; see Br.28-31). Because Escondido’s construction of the Lease is
unreasonable and Justapor’s construes the Lease in its entirety, harmonizes all of
its provisions and is reasonable, Escondido is not entitled to rely on cases
precluding lease termination or forfeiture in which the lessor (unlike Escondido)
proffered a reasonable construction. See Hitzelberger v. Samedan Oil Corp., 948
S.W.2d 497, 505-07 (Tex. App.-Waco 1997, pet. denied); see also Kirby Lake
Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 842 (Tex.
2010)(recognizing that construing contract to authorize forfeiture permissible
absent reasonable construction precluding forfeiture).
II. All Royalty Payment Deadlines Are Meaningful Under Justapor’s
Construction
To be candid, Justapor’s counsel does not fully understand Escondido’s
argument that under Justapor’s construction either the annual true-up deadline or
the 60-day deadline is meaningless. (E.Rep.8, 13-14). In any event, both
3
deadlines are meaningful under Justapor’s construction, as well as being easily
understandable and fully reconcilable with ipso facto termination under XIV.
As explained in detail by Justapor’s owner, Jimmy Jones, who drafted these
provisions: (1) if the lessee fails to make any royalty payment by the 60-day
deadline, the Lease terminates on day 61; (2) if the lessee makes some payment by
the 60-day deadline but underpays the required royalty, then the lessee has not paid
royalties as required by the Lease; and then (3) if the lessee corrects the underpaid
royalties by the March 1 deadline, the Lease remains in effect, but if the lessee
does not, the Lease terminates. (Br.14-16, 34-35). Consequently, Justapor’s
construction reconciles and renders meaningful both the annual true-up deadline
and the 60-day deadline, as well as all other provisions of the Lease governing
Escondido’s royalty payment obligations. (Id.).
III. Escondido Mischaracterizes Justapor’s Response to Its Nonpayment vs.
Underpayment Argument
Justapor is not arguing that the Lease makes no distinction between
nonpayment and underpayment. (E.Rep.17-19). As just discussed, the Lease
distinguishes between nonpayments violating the 60-day deadline and
underpayments violating the 60-day deadline.
Justapor is arguing that the Escondido-manufactured distinction, whereby
ipso facto termination under XIV applies only to its complete nonpayment of a
monthly royalty and not to its failure to correct underpayments through true-up
4
payments, is contrary to unambiguous Lease language. (Br.42-45). More
specifically and as just discussed, Escondido’s “distinction” ignores the opening
phrase of XIV requiring Escondido to true-up underpayments by the annual March
1 deadline or face ipso facto termination. (Id.).
IV. Escondido Impermissibly Construes the Lease By Looking at the Harm
Caused by Its Breach and Then Working Backward to Its Construction
Escondido still hasn’t cited a single case to support its “disproportionate
result” defense which is based on comparing the alleged amount of Escondido’s
investment in the Lease to the harm to Justapor caused by Escondido’s breach and
the benefits received by Justapor before the breach occurred. No such case exists.
If a lessee breaches its contractual obligations under an oil and gas lease and
the lease unambiguously provides that such a breach results in lease termination,
Texas courts have uniformly recognized that the lease terminates under Texas law.
(Br.32-34, 47-48). Courts do not weigh the self-inflicted harm to the breaching
party against the damages caused to and benefits received by the innocent, non-
breaching party when deciding whether an unambiguous lease has terminated.
Courts enforce the lease as written. (Id.).
When construing contracts years if not decades after their execution, courts
do not retroactively determine the objective intentions of the parties at the time of
contracting to avoid an oppressive or harsh result (E.Rep.32) based on the
repercussions of a contract breach. To the contrary, courts construe contracts by
5
looking at the parties’ intentions as expressed in their contracts at the time of their
execution. (Br.28-29).
Imagine the havoc and uncertainty in legal and contractual relationships that
would ensue if courts could summarily disregard legally enforceable agreements
whenever they found that enforcing an agreement (that had indisputably been
breached) would be inequitable because of a perceived “disproportionate” impact
on the contracting parties. Take this case. Escondido claims that the loss of its
alleged $31 million investment is disproportionate in light of the roughly $81,000
in unpaid royalties owed to Justapor. What if Escondido’s lost investment was $2
million or $1 million or $100,000, would a court still be entitled to disregard the
unambiguous Lease because it viewed the result as “disproportionate”? What
would be the impact on this “disproportionate result” analysis if Justapor’s lost
royalties were $500,000? What is the ratio or trigger point for determining when a
court is entitled to disregard an unambiguous contract under Escondido’s
“disproportionate result” test? And what is the appellate standard of review for
this novel “equitable” approach to disregarding legally enforceable arguments?
The answer to all of these questions is that Escondido’s “disproportionate
result” defense does not exist and none of the above hypotheticals are relevant to
determining the enforceability of an unambiguous contract. Courts do not
retroactively determine the enforceability of a contract by engaging in a highly
6
fact-specific, cost-benefit analysis focusing on the relative positions of the
contracting parties at the time of the contract breach occurring years after that
contract was signed. As one court stressed:
For a court to change the parties’ agreement merely because it did not
like the contract, or because one of the parties subsequently found it
distasteful, would be to undermine not only the sanctity afforded the
instrument but also the expectations of those who created and relied
upon it.
Natural Gas Clearinghouse v. Midgard Energy Co., 113 S.W.3d 400, 407 (Tex.
App.-Amarillo 2003, pet. denied)
V. Escondido’s “$1 Underpayment” Argument Illustrates Both Its Flawed
Working-Backward Approach to Lease Construction and to Oil and
Gas Title Ownership
According to Escondido: “Yet Justapor’s reading means that the lease would
terminate because of even a $1 underpayment that Escondido does not catch and
correct by March 1, even if Escondido does not learn about it until later. That
interpretation is unreasonable and inequitable.” (E.Rep.33).
Actually, Justapor’s interpretation is 100% consistent with Texas law.
An oil and gas lease is a fee simple determinable conveyance. Natural Gas
Pipeline Co. v. Pool, 124 S.W.3d 188, 192 (Tex. 2003). The lessee’s interest is
“determinable” because its interest terminates automatically and reverts to the
lessor upon the occurrence of an event, such as the absence of production in paying
quantities, or other terms or conditions that the lease specifies as causing lease
7
termination. Id. Indeed, several courts have held that a lessor’s failure to comply
with its royalty payment obligations violated a condition or special limitation in the
lease and resulted in the lease terminating. See Coastal Oil & Gas Corp. v.
Roberts, 28 S.W.3d 759, 763 (Tex. App.-Corpus Christi 2000, pet. granted,
judgm’t vacated w.r.m.); Hitzelberger, 948 S.W.2d at 503-04.
The amount by which the lessee fails to comply with a condition (whether
it’s $1, $100 or $81,000) has no effect on title because title reverts automatically to
the lessor on failure of the condition. It is a matter of the automatic reversion of
title to the lessor and not the quantitative amount of the breach by the lessee. See
Pool, 124 S.W.3d at 192.
For example, the lessor in Hitzelberger missed two royalty payments due to
a clerical error. Hitzelberger, 948 S.W.2d at 502 n.1. The court of appeals held
that the lease terminated as a matter of law emphasizing that “it is the lessee’s
responsibility to comply with [the] lease.” See id. at 505-10. (Br.33)(citing cases
where courts held that oil and gas leases terminated due to lessee’s $2.96
underpayment and late $50 payment).
Again, courts do not decide whether a lease has terminated based on the
monetary significance of the contract breach or the reason for the failed condition –
even though in this case, the record conclusively establishes that Escondido made
the conscious decision to deliberately underpay Justapor. (Br.19-25). Courts
8
decide whether the lease terminated by objectively determining whether an event
specified in the lease as causing lease termination did or did not occur. See Pool,
124 S.W.3d at 192.
Here, XIV provided: "In the event that such royalties are not paid and
become delinquent ... this lease shall terminate ipso facto on the date that such
royalties were due and not paid.” (CR278)(emphasis in Lease). This clear and
unequivocal language in XIV specifies the legal impact if Escondido breaches the
determinable fee condition in the Lease (Escondido’s obligation to pay royalties as
“hereinabove provided”): Ipso Facto Termination. The amount of Escondido’s
breach is irrelevant. Once Escondido violated its obligation to pay true-up
royalties as “hereinabove required” by the Lease, the Lease terminated and
automatically reverted to Justapor. See Hitzelberger, 948 S.W.2d at 505-09.
VI. The Record Conclusively Establishes That Escondido Never Made a
Single True-Up Payment to Correct Its Underpayments in 2011, 2012
and 2013
Escondido’s claim, that it didn’t violate its obligation to make true-up
payments because it made “reconciliation payments,” mischaracterizes the record.
(E.Rep.21). The record conclusively establishes that Escondido never made a
single payment under III(g) to cure its underpayments in 2011-2013. (Br.20-21,
25). Indeed, Deupree testified unequivocally that Escondido never made any true-
up payments to correct those underpayments. (Id.; CR563-64, 584).
9
As also conclusively established by the record, these “reconciliation
payments” had nothing to do with Escondido’s underpayments in 2011-13. Those
payments were intended by Escondido to reconcile an increase in Justapor’s
royalty interest on one well, the Augusta-Kenton No. 5H well, and to reimburse
Justapor for overcharged taxes. (CR1376-77, 1401-02, 1411).
VII. Escondido’s HSC Argument Misses the Dispositive Point
Justapor’s initial brief demonstrated that Escondido’s Houston Ship Channel
(HSC) argument is contrary to a commonsense reading of the amendment and its
own Vice-President’s testimony, as well as being nonsensical. (Br.9-12, 36-39).
Let’s assume for the moment, though, that Escondido is correct and the HSC
amendment replaced the other pricing floors.
It is undisputed that Escondido never paid Justapor royalties based on the
HSC price. As its President readily conceded, Escondido made the conscious
decision to pay Justapor less than the HSC price and Escondido never made any
true-up payments to correct those deliberate underpayments to Justapor. (Br.19-
21)(quoting Deupree).
So ... even if Escondido has somehow correctly construed the scope of the
HSC amendment, the record conclusively establishes that Escondido still
underpaid Justapor because Escondido didn’t even pay Justapor as required by its
own construction of the amendment.
10
VIII. The Unchallenged Summary Judgment Conclusively Establishes that
Escondido’s Defenses to Lease Termination, Based on Jones’ Conduct,
Are Meritless
Escondido’s continued insistence that it can rely on defenses based on
Jimmy Jones’ conduct, despite the unchallenged summary judgment absolving him
of having breached any fiduciary obligations or having done anything
inappropriate, borders on frivolous.
Justapor sued Escondido alleging lease termination. In response to
Justapor’s lease termination claim, Escondido raised defenses alleging misconduct
by Jones. The trial court determined that those defenses were meritless as a matter
of law for multiple independent reasons. (Br.49-52). It is undisputed that
Escondido has not challenged the summary judgment disposing of those defenses
or, in any fashion, argued that the summary judgment is incorrect. Under this
record, all of Escondido’s defenses and accusations based on Jones’ conduct must
be considered meritless as a matter of law by this Court. (Id.).
Escondido contends that the unchallenged summary judgment “does not
extend to Justapor’s affirmative claim of lease termination on which it bears the
burden of proof.” (E.Rep.33-34)(Escondido’s emphasis). That contention
misplaces and misconstrues the burdens of proof imposed on the parties and
ignores the legal effect of the unchallenged summary judgment. To prove its
entitlement to lease termination, Justapor was required to establish that the Lease
11
provided that it would terminate on the occurrence of a specified event and that
this event occurred. See Pool, 124 S.W.3d at 192. Escondido’s personal attacks
on Jones are irrelevant to Justapor’s burden of proof on lease termination.
To the extent that Escondido raised personal attacks on Jones as defenses to
lease termination, Justapor sustained its summary judgment burden to establish that
those defenses are meritless as a matter of law. (Br.51-52). Escondido, not
Justapor, had the burden of proof to raise fact issues on its defenses involving
Jones’ conduct. It did not, and the trial court was required to grant summary
judgment in favor of Justapor on no-evidence grounds. See Tex. R. Civ. P.
166a(i). Escondido has not complained on appeal that the trial court erred by
concluding that Escondido failed to sustain its burden of proof.
Escondido’s final word on this issue is a grandiose reference to what “the
law is not required to tolerate.” (E.Rep.34). What the law should not tolerate is a
party making numerous slanderous (albeit privileged) accusations, losing by
summary judgment because its accusations are meritless and then acting on appeal
as if it had never lost the summary judgment.1
IX. Escondido Waived Its Appellate Waiver/Estoppel Arguments
Escondido readily acknowledges its failure to mention “waiver” or
“estoppel” by name in its summary judgment response. (E.Rep.28). Escondido
1
Escondido never joined Jones as a party personally in this suit nor has Escondido otherwise sued Jones. Of course,
had Escondido done so, the company would have opened itself up to a counterclaim for damages by Jones. See Tex.
R. Civ. P. 11; Tex. R. Civ. P. 91a.
12
nevertheless claims that it implicitly raised these affirmative defenses in its
response at CR951-53. (Id.). Those cited pages are not even part of Escondido’s
substantive defensive response to Justapor’s motion for summary judgment. They
appear in the “Background Facts” section of Escondido’s response discussing its
summary judgment evidence. (CR943-56). In the substantive “Argument and
Authorities” section, where Escondido expressly identified and argued numerous
defensive theories, the concepts of waiver and estoppel were never mentioned,
much less argued.
Rule 166a states: “Issues not expressly presented to the trial court by ... [the]
response shall not be considered on appeal as grounds for reversal.” Tex. R. Civ.
P. 166a(c). Consistent with Rule 166a(c)’s mandatory language, the supreme court
has emphasized: “issues a non-movant contends avoid the movant's entitlement to
summary judgment must be expressly presented by written answer to the motion or
by other written response to the motion and are not expressly presented by mere
reference to summary judgment evidence." McConnell v. Southside Indep. Sch.
Dist., 858 S.W.2d 337, 341 (Tex. 1993)(emphasis added). (Br.40-41)(citing cases).
As established by McConnell, Escondido’s “mere reference to summary
judgment evidence” in its response – a response that never mentioned, much less
argued, the defenses of waiver and estoppel – does not “expressly present” those
defenses as required by Rule 166a. Consequently, Escondido’s appellate
13
waiver/estoppel arguments cannot be considered as a ground for reversal and were
waived. (Br. 40-41).
The Fountains Int’l case cited by Escondido is not in point. (E.Rep.29). It
does not involve summary judgment practice where issues must be “expressly
presented” to be preserved for appellate review. See McConnell, 858 S.W.2d at
341; Tex. R. Civ. P. 166a(c). Rather, it involves the unrelated issue of the
sufficiency of a petition to state a claim for relief under fair notice standards.
Lastly, Escondido’s claim that Justapor did not respond on the merits to its
waiver/estoppel arguments, other than citing “its entire statement of facts,” is
incorrect. (E.Rep.29). Justapor specifically identified the two sections of its
Argument that addressed why those defenses are legally and factually meritless.
(Br.41 n.7).
X. Escondido’s Curious Approach to “Witness Testimony” and the Proof
on Its Intentional Underpayments
Escondido has an exceedingly curious and decidedly one-sided view of
“witness testimony” regarding the Lease and proof on its “intentions” when
making royalty payments.
In its initial brief, Escondido went to great lengths to discuss what its
officers supposedly believed the Lease and the HSC amendment to mean.
Justapor, in its reply brief, pointed out that virtually everything that Escondido said
about its officers’ purported understandings about Escondido’s royalty payment
14
obligations and the events occurring after the Lease was signed was not just
contrary to their deposition testimony, but largely consisted of subjective beliefs
irrelevant to determining Escondido’s obligations under the unambiguous Lease.
Now, Escondido wonders why we are talking about “witness testimony”
about impact of the HSC amendment and other issues. (E.Rep.24). Well ... we are
talking about (and Justapor is quoting) testimony from President Deupree and
Vice-President Wrather because Escondido’s descriptions of significant events and
its characterization of Deupree and Wrather’s testimony in its initial brief was,
quite often, directly contrary to their deposition testimony.
More specifically, we are discussing/quoting Deupree and Wrather because
Escondido’s own officers’ testimony demonstrates that, among other things:
Escondido’s appellate argument about the HSC amendment is contrary to any
straightforward reading of that document as Wrather readily agreed; Escondido’s
appellate argument about Justapor interfering with gas sales is contrary to both
Wrather and Deupree’s testimony; Escondido’s appellate argument that it didn’t
underpay royalties to Justapor is contrary to Deupree’s testimony that Escondido
underpaid Justapor even under Escondido’s construction of the HSC amendment;
Escondido’s appellate argument that it made true-up payments to correct its
underpayments in 2011-13 is contrary to both Deupree and Wrather’s testimony …
and so on. (Br.10-12, 13, 20-25, 37-38).
15
Escondido also professes confusion about “why Justapor emphasizes
Escondido’s intent regarding the amount of royalty payments.” (E.Rep.21). But in
the very next sentence, Escondido announces “that it in fact paid the royalties it
believed the parties had agreed it would pay.” (Id.). So ... evidently, what an
Escondido officer believes about Escondido’s royalty obligations under the Lease
and its underlying intent when making royalty payments only matters if that
belief/intent supports Escondido’s appellate arguments but not if it demonstrates
that the summary judgment should be affirmed.
In truth, the uncontroverted proof on Escondido’s intentions – its knowing
and deliberate underpayment of royalties for years – directly supports the trial
court’s conclusion that Escondido was guilty of bad faith trespass as a matter of
law. Escondido was well aware of the consequences of violating its royalty
obligations under the Lease – ipso facto termination – but it deliberately underpaid
Justapor anyway, continued to enter Las Tinajas and refused to leave the ranch and
give up the Lease even after it was caught shorting Justapor. (Br.17-21, 24, 46).
Those are not the actions of a lessor with an “honest and reasonable belief” in its
right to continue to develop a tract of land. (Br.46-47, 55-59).
In its reply brief, Escondido announces that there is a “bona fide dispute”
regarding its right to the Lease. (E.Rep.36). Who was it at Escondido that
believed there was a bona fide dispute? This brings up the same question that
16
Justapor asked in its initial brief that Escondido has never answered: “Yet, its brief
announces ‘Escondido had a good-faith belief in the superiority of its title.’
(Br.68). Who is it exactly at Escondido that supposedly had this good faith belief?
It certainly wasn’t Deupree or Wrather as is conclusively demonstrated by their
deposition testimony and exhibits which, on appeal, Escondido treats as
nonexistent [and still treats as nonexistent in its reply brief].” (Br.59).
XI. A Few Words About Justapor’s Supposed Record “Confusion” Are
Warranted
Escondido’s discussion of the Abington affidavit is borderline disingenuous.
Escondido acts as if this affidavit involved some inconsequential motion, like a
motion to compel discovery. (E.Rep.9). Actually, when Escondido filed
Abington’s testimony about its alleged investment in the Lease for the first time,
that affidavit supported Escondido’s motion for summary judgment – the motion
which is the basis for Escondido’s request for a reversal and rendition in this Court.
(CR798, 800, 890-91). The trial court sustained Justapor’s objections to that
affidavit, including Abington’s conclusory statement about Escondido’s
investment in the Lease – which appears in both affidavits. (CR1149, 1342, 1887).
As a practical matter, however, the critical point for appellate review is that
Abington’s testimony, whether successfully objected-to or not, is conclusory as are
all other materials cited by Escondido to support the amount of its alleged
investment in the Lease. (Br.54-55). There is simply no probative evidence in the
17
record on any dollar figure involving Escondido’s alleged investment – a critical
component of Escondido’s “equitable” arguments. (Br.47-48, 54-55).
Escondido’s brief initially claimed that it would later identify Justapor’s
other record citation “mistakes” (E.Rep.9). On the isolated occasions that
Escondido claims that Justapor mistakenly characterized testimony, Escondido is
incorrect. Justapor isn’t characterizing what an Escondido officer said; Justapor is
quoting him verbatim. (Compare Br.11 with E.Rep.26).
PRAYER
Justapor respectfully requests the Court to affirm the trial court’s judgment.
Respectfully submitted,
MCGINNIS LOCHRIDGE & KILGORE, L.L.P.
Patton G. Lochridge
State Bar No. 12458500
plochridge@mcginnislaw.com
Carlos R. Soltero
State Bar No. 00791702
csoltero@mcginnislaw.com
J. Derrick Price
State Bar No. 24041726
dprice@mcginnislaw.com
600 Congress Avenue, Suite 2100
Austin, Texas 78701
Telephone No.: (512) 495-6044
Facsimile No.: (512) 505-6344
By: /s/ Patton G. Lochridge
Patton G. Lochridge
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Jose M. “Joe” Rubio, Jr.
State Bar No. 17362100
joerubio@joerubiolawfirm.com
JOE RUBIO LAW FIRM
1000 Washington Street, Suite 4
Laredo, Texas 78040
Telephone No.: (956) 712-2223
Timothy Patton
State Bar No. 15633800
tpatton@tp-pc.com
TIMOTHY PATTON, P.C.
14546 Brook Hollow Blvd. #279
San Antonio, Texas 78232
Telephone No.: (210) 832-0070
Facsimile No.: (210) 579-1665
By: /s/ Timothy Patton
Timothy Patton
ATTORNEYS FOR APPELLEE
CERTIFICATE OF SERVICE
I hereby certify that on October 26, 2015, I electronically filed the foregoing
Appellee’s Response to Appellant’s Reply Brief with the Clerk of the Court using
the CM/ECF system which will send notification of such filing to the following:
Mr. James P. Keenan Ms. Kirsten Castañeda
keenan@buckkeenan.com kcastaneda@adjtlaw.com
Mr. J. Robin Lindley Alexander Dubose Jefferson &
lindley@buckkeenan.com Townsend LLP
Buck Keenan, LLP 4925 Greenville Avenue, Suite 510
700 Louisiana, Suite 5100 Dallas, Texas 75206
Houston, Texas 77002
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Mr. Robert Dubose Mr. Wallace B. Jefferson
rdubose@adjtlaw.com wjefferson@adjtlaw.com
Alexander Dubose Jefferson & Ms. Rachel A. Ekery
Townsend LLP rekery@adjtlaw.com
1844 Harvard Street Alexander Dubose Jefferson &
Houston, Texas 77008 Townsend LLP
515 Congress Avenue, Suite 2350
Austin, Texas 78701
/s/ Timothy Patton
Timothy Patton
CERTIFICATE OF COMPLIANCE
I hereby certify that this Appellee’s Response to Appellant’s Reply Brief
was prepared using Microsoft Word 2010 (Microsoft Office Home and Business
2010) which indicated that the total word count (exclusive of items listed in Rule
9.4(i)(1) of the Texas Rules of Appellate Procedure) is 3,878 words.
/s/ Timothy Patton
Timothy Patton
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