DCP Sand Hills Pipeline, LLC v. San Miguel Electric Cooperative, Inc. ( 2020 )

Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-19-00288-CV
DCP SAND HILLS PIPELINE, LLC,
Appellant
v.
SAN MIGUEL ELECTRIC COOPERATIVE, INC.,
Appellee
From the 36th Judicial District Court, McMullen County, Texas
Trial Court No. M-16-0033-CV-A
Honorable Starr Boldrick Bauer, Judge Presiding
OPINION ON MOTION FOR REHEARING
Opinion by: Beth Watkins, Justice
Sitting: Rebeca C. Martinez, Justice
Irene Rios, Justice
Beth Watkins, Justice
Delivered and Filed: November 18, 2020
AFFIRMED IN PART; VACATED IN PART; REVERSED AND REMANDED IN PART
On September 28, 2020, appellee San Miguel Electric Cooperative, Inc. filed a motion for
rehearing of our August 12, 2020 opinion and judgment in this case. We deny the motion, sua
sponte withdraw our August 12, 2020 opinion and judgment, and substitute this opinion and
judgment in their stead.
Appellee sued appellant DCP Sand Hills Pipeline, LLC seeking: (1) a declaration that
DCP’s pipeline easement was invalid, void, or voidable; (2) a declaration that its strip mining
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rights under a lignite lease were superior to DCP’s pipeline easement rights; and (3) a permanent
injunction requiring DCP to relocate its pipeline. In response, DCP asserted that San Miguel’s
lignite lease had expired and sought to condemn the land covered by its easement. On cross-
motions for summary judgment, the trial court declared San Miguel’s strip mining rights superior
to DCP’s pipeline easement rights and dismissed DCP’s condemnation counterclaim. The trial
court then ordered DCP to move its pipeline and awarded San Miguel attorney’s fees.
On DCP’s appeal, we: (1) reverse the portion of the trial court’s judgment granting San
Miguel’s motion for summary judgment on DCP’s condemnation counterclaim; (2) vacate the
portion of the trial court’s judgment denying DCP’s motion for summary judgment on the right to
take; (3) reverse the portion of the trial court’s judgment awarding San Miguel attorney’s fees; (4)
affirm the portion of the trial court’s judgment granting the remainder of San Miguel’s motion for
summary judgment; (5) affirm the portion of the trial court’s judgment denying DCP’s motion for
summary judgment; and (6) remand the cause to the trial court for further proceedings.
BACKGROUND
San Miguel is a nonprofit electric cooperative that owns and operates a power plant that
furnishes electricity to South Texas Electric Cooperative, Inc. South Texas Electric Cooperative
then distributes power to thirty-nine counties in South Texas. The only source of fuel for San
Miguel’s power plant is the lignite it strip mines in Atascosa and McMullen counties.
DCP is a common carrier, operating a twenty-inch pipeline that runs near the surface of the
land for 721 miles in twenty-eight Texas counties. DCP’s pipeline is part of a larger pipeline
system that transports 20% of all the natural gas liquids produced in the Permian Basin and Eagle
Ford Shale to the Gulf Coast for processing.
In 1954, Clifton and Nora Wheeler granted San Miguel’s predecessor in interest a no-term
coal, lignite, and mineral lease covering 2,200 acres in McMullen County (“the Wheeler Tract”).
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This lignite lease granted San Miguel exclusive rights from the surface to a depth of 350 feet to
harvest lignite and other minerals by strip mining—a method that destroys the surface. It also
reserved the Wheelers’ right to explore oil, gas, and other minerals below 350 feet so long as such
exploration did not interfere with the strip mining operations. In 1975, the Wheelers and San
Miguel’s predecessor amended the lease to reserve the Wheelers’ right to use the surface for
grazing and agriculture so long as that use did not interfere with the strip mining operations.
No work occurred on the Wheeler Tract for a number of years. By 1972, however, San
Miguel’s predecessor in interest began strip mining lignite north of the Wheeler Tract, and in 1975,
San Miguel started preparing to mine the Wheeler Tract. To that end, it conducted environmental,
archeological, anthropological, and aerial studies, examined flood plain surveys, and drilled holes
to extract cores on different areas of the property. It also built a highway overpass across the land.
In 2011, DCP agents negotiated a pipeline easement over the Wheeler Tract with Lee
Wheeler and Nancy Wheeler Plumlee, two of the Wheelers’ grandchildren and successors in
interest. During these negotiations, Lee told DCP about the lignite lease, and DCP met with San
Miguel to discuss the pipeline’s proposed route. By August of that year, DCP and San Miguel
agreed on a route that would not interfere with San Miguel’s planned mining operations, and DCP
installed its first pipeline on the Wheeler Tract.
In December of 2011, DCP began negotiating with Lee and Nancy about a second pipeline.
Lee and Nancy subsequently granted DCP a fifty-foot-wide easement to construct and operate a
second pipeline over twelve acres of the Wheeler Tract. In early 2013, DCP completed installation
of this second pipeline 4,000 to 5,000 feet north of the first pipeline. It is undisputed that both
pipelines were located south of San Miguel’s actual mining operations at the time and that DCP
did not discuss this second pipeline with San Miguel.
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In March of 2014, San Miguel discovered the second pipeline in a section of the Wheeler
Tract referred to as Area G, and informed DCP that the pipeline interfered with its future mining
operations. At the time, San Miguel was not actually mining Area G and had not yet filed a permit
for Area G with the Texas Railroad Commission; however, it sent DCP a copy of its future mining
sequence showing its plan to mine Area G and asserted a superior right to use the surface of the
Wheeler Tract under its lignite lease. DCP told San Miguel it would discuss relocating the
pipeline, and San Miguel moved forward with its mining plan by applying for a permit to mine
Area G.
DCP ultimately refused to move the second pipeline and San Miguel sued seeking: (1) a
declaration that the pipeline easement granted by the Wheelers to DCP was invalid, void, or
voidable to the extent it interfered with San Miguel’s rights under the lignite lease; (2) a declaration
that San Miguel’s rights under the lignite lease were superior to DCP’s rights under the pipeline
easement; (3) a permanent injunction requiring DCP to relocate the pipeline; and (4) attorney’s
fees. In response, DCP filed a counterclaim seeking to condemn the land covered by its pipeline
easement. It also argued that the lignite lease was invalid 1 and that San Miguel was not entitled to
attorney’s fees under the Uniform Declaratory Judgments Act (UDJA) because San Miguel’s
requested relief was a disguised trespass to try title action for which attorney’s fees are not
recoverable.
After the parties filed competing motions for summary judgment, the trial court granted
San Miguel’s motion and denied DCP’s motions, and the parties agreed to a bench trial regarding
San Miguel’s requests for an injunction and attorney’s fees. After the bench trial, the court signed
1
In related litigation between the Wheelers and San Miguel pending in the same trial court, the Wheelers also argued
the lignite lease was invalid. The trial court rejected that argument and we affirmed, finding the lignite lease valid.
See Wheeler v. San Miguel Elec. Coop., No. 04-19-00332-CV, 2020 WL 3547987, at *6–7 (Tex. App.—San Antonio
July 1, 2020, pet. filed) (op.).
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a judgment: declaring San Miguel’s rights under the lignite lease superior to DCP’s pipeline
easement rights; declaring DCP’s pipeline easement void, invalid, and/or voidable; awarding
attorney’s fees to San Miguel under the UDJA; and ordering DCP to remove the sections of its
pipeline that interfered with San Miguel’s strip mining operations.
DCP attempted to supersede the judgment by posting a bond; San Miguel asked to post
security to enforce the judgment. The trial court denied DCP’s request and authorized San Miguel,
as a judgment creditor, to post security in the amount of $7,000,000 to enforce the judgment. After
San Miguel posted a letter of credit, DCP filed its notice of appeal and relocated the pipeline.
ANALYSIS
Mootness
Because mootness is a threshold issue that implicates subject matter jurisdiction, we begin
by addressing San Miguel’s argument that DCP’s condemnation counterclaim became moot when
it relocated the pipeline. See City of Helotes v. Miller, 243 S.W.3d 704, 708 (Tex. App.—San
Antonio 2007, no pet.). According to San Miguel, since DCP no longer seeks to condemn the land
covered by its easement, this court’s actions cannot affect DCP’s rights. Below, however, DCP
sought a declaratory judgment that before it should be ordered to move the pipeline, San Miguel
“would first need to advance to DCP all damages DCP would incur in connection with” moving
the pipeline. The trial court set that amount at $7,000,000 and required San Miguel to post security
before it ordered DCP to move the pipeline.
DCP’s entitlement to those damages is affected by our disposition. As a result, this court’s
judgment will affect these parties’ rights. See Pinnacle Gas Treating, Inc. v. Read, 104 S.W.3d
544, 545 (Tex. 2003) (per curiam) (holding that because appellate court judgment affirming or
reversing a trial court’s order affected parties’ substantial rights, a live controversy existed).
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Furthermore, while Texas Rule of Appellate Procedure 24.2(a)(3) provides the trial court
with a “measure of discretion” in enforcing judgments pending appeal, “that discretion does not
extend to denying a party any appeal whatsoever.” In re Dall. Area Rapid Transit, 967 S.W.2d
358, 360 (Tex. 1998) (per curiam). Compliance with a judgment does not moot an appeal “if the
judgment debtor clearly expresses an intent that he intends to exercise his right of appeal and
appellate relief is not futile.” Miga v. Jensen, 96 S.W.3d 207, 211–12 (Tex. 2002). Here, DCP
expressed an intent to appeal before the trial court ordered it to move the pipeline. It also attempted
to supersede the judgment to allow the pipeline to continue operating pending appeal. In such
circumstances, the trial court’s post-judgment orders should not be able to destroy a party’s ability
to seek appellate review of that judgment. In re Dall. Area Rapid Transit, 967 S.W.2d at 360.
We therefore hold DCP’s relocation of the pipeline in compliance with the trial court’s
orders did not moot its appeal. Next, we turn to the substance of the parties’ cross-motions for
summary judgment.
Standard of Review
We review the trial court’s grant or denial of summary judgment de novo. FM Props.
Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). To receive summary judgment,
the movant must show there is no genuine issue as to any material fact and that it is entitled to
judgment as a matter of law. TEX. R. CIV. P. 166a(c); Schuhardt Consulting Profit Sharing Plan
v. Double Knobs Mountain Ranch, Inc., 468 S.W.3d 557, 565 (Tex. App.—San Antonio 2014, pet.
denied). Once the movant establishes its right to judgment as a matter of law, the burden shifts to
the nonmovant to produce evidence raising a genuine issue of material fact. TEX. R. CIV. P.
166a(c). We consider the evidence in the light most favorable to the nonmovant, indulging all
reasonable inferences and resolving all doubts in the nonmovant’s favor. Valence Operating Co.
v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Schuhardt, 468 S.W.3d at 566. When reviewing a
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ruling on cross-motions for summary judgment, we render the judgment the trial court should have
rendered. FM Props., 22 S.W.3d at 872; Schuhardt, 468 S.W.3d at 566.
Validity of Lignite Lease
San Miguel requested—and the trial court granted—a declaratory judgment that San
Miguel’s rights under the lignite lease were superior to DCP’s rights under the pipeline easement,
and that DCP’s pipeline easement was void, invalid, and/or voidable. DCP argued this claim
sought to determine title to real property and, as such, was required to be brought as a trespass to
try title action. DCP also argued San Miguel failed to conclusively establish that it had made the
rental payments needed to continue this no-term lease.
Applicable Law
Under the Texas Property Code, a “trespass to try title action is the method of determining
title to lands, tenements, or other real property.” TEX. PROP. CODE ANN. § 22.001(a). A trespass
to try title action “is typically used to clear problems in chains of title or to recover possession of
land unlawfully withheld from a rightful owner.” See Martin v. Amerman, 133 S.W.3d 262, 265
(Tex. 2004). The Texas Supreme Court recognizes that a trespass to try title action is the proper
procedural vehicle “when the claimant is seeking to establish or obtain the claimant’s ownership
or possessory right in the land at issue.” Lance v. Robinson, 543 S.W.3d 723, 736 (Tex. 2018).
But if the plaintiff seeks a declaration regarding the defendants’ authority to obstruct the plaintiffs’
access to the disputed area, then the claimant may receive declaratory relief under the UDJA. See
id. at 734–35.
The UDJA provides:
A person interested under a deed, will, written contract, or other writings
constituting a contract or whose rights, status, or other legal relations are affected
by a statute, municipal ordinance, contract, or franchise may have determined any
question of construction or validity arising under the instrument . . . and obtain a
declaration of rights, status, or other legal relations thereunder.
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TEX. CIV. PRAC. & REM. CODE ANN. § 37.004(a). A declaratory judgment action “provides an
efficient vehicle for parties to seek a declaration of rights under certain instruments[.]” Martin,
133 S.W.3d at 265. “[A] litigant’s couching its requested relief in terms of declaratory relief does
not alter the underlying nature of the suit.” Tex. Parks & Wildlife Dep’t v. Sawyer Tr., 354 S.W.3d
384, 388 (Tex. 2011).
Application
We agree with San Miguel that it was not required to bring its claims under the trespass to
try title statute because it was not seeking to establish its ownership or possessory right in the
disputed land. See Lance, 543 S.W.3d at 736. San Miguel’s primary request was to invalidate
DCP’s easement—it asked the trial court to construe DCP’s pipeline easement, compare DCP’s
rights under the pipeline easement to San Miguel’s rights under the lignite lease, and declare that
San Miguel’s rights were superior to DCP’s rights. When a claimant seeks to establish the validity
of an easement, the trespass to try title statute does not apply. Id. Many courts, including this
court, have recognized the UDJA as the proper vehicle for determining the validity of an easement.
See, e.g., Roberson v. City of Austin, 157 S.W.3d 130, 141 (Tex. App.—Austin 2005, pet. denied)
(holding landowner seeking validity of sewer easement properly brought action under UDJA);
Knight v. Buckbriar, L.P., No. 04-01-00539-CV, 2002 WL 1285292, at *2 (Tex. App.—San
Antonio June 12, 2002, no pet.) (mem. op.) (holding trial court did not abuse its discretion in
awarding attorney’s fees in declaratory judgment action when party sought construction of
easement and rights thereunder).
Additionally, through its requests, San Miguel did not seek a determination of title—i.e.,
who owned an interest in a particular estate—nor did it seek to recover possession of land it alleged
DCP was unlawfully withholding. See Martin, 133 S.W.3d at 265. This case does not involve
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competing claims of ownership; instead, this case hinges on a determination of rights under a lease
and easement. The UDJA, which is to be liberally construed, expressly provides for a
determination of such rights under written instruments like leases and easements. See TEX. CIV.
PRAC. & REM. CODE §§ 37.002(b), 37.004(a). We therefore overrule DCP’s argument that San
Miguel was required to bring a trespass to try title action to determine whether its rights under the
lignite lease were superior to DCP’s pipeline easement rights.
With regard to DCP’s contention that San Miguel failed to establish the validity of its
lignite lease, San Miguel presented evidence of all conveyances from Clifton and Nora Wheeler
to San Miguel and of the delay rental payments it made since acquiring the lease in 1978. DCP
argues San Miguel failed to present evidence of the delay rental payments that were required to be
made prior to 1978, and that San Miguel’s own evidence demonstrates delay rental underpayments
from 1986 through 2017.
The summary judgment evidence, however, explains the underpayments DCP identified to
be the result of a 1986 partition agreement under which Clifton Wheeler, Jr. received a 1/3 interest
in the Wheeler Tract. San Miguel’s summary judgment evidence shows that Clifton Wheeler, Jr.’s
delay rental payments were 1/3 of the total due for the Wheeler Tract. To support this argument
below, DCP was required to present evidence that the delay rental payments due after the 1986
partition were not paid as the lease required. DCP, however, only cited its own pleadings.
Pleadings are not proper summary judgment evidence. See, e.g., Hersch v. Tatum, 526 S.W.3d
462, 470 (Tex. 2017). For these reasons, and for the reasons described in this court’s July 1, 2020
opinion in Wheeler v. San Miguel Electrical Cooperative, we reject those arguments. See 2020
WL 3547987, at *3–5. We therefore overrule DCP’s challenges relating to the lease’s validity.
DCP’s Condemnation Counterclaim
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Below, DCP alleged it was a common carrier with the power of condemnation. TEX. NAT.
RES. CODE ANN. § 111.019(b) (authorizing a common carrier to “enter on and condemn the land,
rights-of-way, easements, and property of any person or corporation necessary for the construction,
maintenance, or operation of the common carrier pipeline.”). After San Miguel requested
injunctive relief requiring DCP to move its pipeline, DCP asserted an alternative counterclaim for
condemnation under Texas Property Code sections 21.003 and 21.017. San Miguel argued the
land was already dedicated to a public use, so under the paramount importance doctrine, DCP
could not condemn the land for a different public use. The trial court agreed, and ultimately
ordered DCP to move its pipeline.
Applicable Law – Paramount Importance Doctrine
Under the paramount importance doctrine, a party may prevent a condemnation by
showing: (1) the property is already devoted to a public use; and (2) the condemnation would
practically destroy or materially interfere with the use to which it has been devoted. Canyon Reg’l
Water Auth. v. Guadalupe-Blanco River Auth., 258 S.W.3d 613, 616–17 (Tex. 2008) (internal
quotations omitted). If the proposed condemnee makes that showing, then the burden shifts to the
proposed condemnor to establish that the necessity for the condemnation is “so great as to make
the new enterprise of paramount importance to the public, and it cannot be practically
accomplished in any other way.” Id. at 617 (internal quotations omitted).
In addition, the Texas Supreme Court instructs that we “must look to the entire use of the
affected property, and not a portion of its use, when considering practical destruction or material
interference.” Id. If the practical destruction test only applied to a part of the affected property,
then “[e]very utility pole, railroad, highway, or storm drain” would practically destroy the existing
public use of a small portion of the land, and a condemnee would “always shift” the burden. Id.
at 618. “Such an application . . . would render the practical destruction inquiry superfluous.” Id.
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Application
Assuming without deciding San Miguel’s use constitutes a public use, the summary
judgment evidence exposes fact questions about whether DCP condemning the land around its
pipeline would practically destroy or materially interfere with San Miguel’s existing public use.2
Id. at 617 (internal quotations omitted). Specifically, the summary judgment evidence shows San
Miguel was not actually mining the Wheeler Tract in 2012 when DCP acquired its easement or
installed the second pipeline. Instead, the evidence shows it began preparing to mine the Wheeler
Tract in 1975 by expending significant amounts of money on environmental, archeological,
anthropological, and aerial studies, conducting flood surveys, and drilling and extracting on the
tract. And while San Miguel argues it intended to mine Area G, which is located on the Wheeler
Tract, the evidence shows it did not apply for a permit to mine Area G until after DCP installed
the second pipeline. On this conflicting evidence, we cannot conclude San Miguel proved that its
use of the Wheeler Tract was “existing” as a matter of law.
Similarly, to defeat DCP’s condemnation counterclaim, San Miguel was required to prove
that DCP’s condemnation of the easement would practically destroy or materially interfere with
San Miguel’s strip mining operations as a matter of law. San Miguel presented evidence that not
being able to mine the land covered by DCP’s pipeline easement would sterilize 743,919 tons of
lignite. However, as summary judgment evidence, DCP presented a letter it received from San
Miguel calculating that maintaining DCP’s pipeline would only sterilize 550,000 tons of lignite.
Whether the sterilized amount is 550,000 tons or 743,919 tons, the parties agree that the
total amount of lignite in Area G is 5,089,000 tons. We cannot conclude that sterilization of 10.8%
or 14.6% of Area G practically destroys or materially interferes with San Miguel’s use as a matter
2
The conflicts in the summary judgment evidence make it unnecessary for us to reach the question of whether San
Miguel’s strip mining of lignite constitutes a public use under these circumstances. See TEX. R. APP. P. 47.1.
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of law. Cf. City of San Antonio v. TPLP Office Park Props., 218 S.W.3d 60, 66–67 (Tex. 2007)
(per curiam) (closing access point to business park did not materially impair access to the park
when several other access points remained). We therefore hold San Miguel failed to conclusively
establish that the paramount importance doctrine prohibited DCP from condemning the land
covered by its pipeline easement for a different public use. Because we are required to render the
judgment the trial court should have rendered, we reverse the portion of the trial court’s judgment
granting San Miguel’s motion for summary judgment with regard to DCP’s condemnation
counterclaim and vacate the portion of the trial court’s judgment denying DCP’s motion for
summary judgment on the right to take. See FM Props., 22 S.W.3d at 872.
Attorney’s Fees Under the UDJA
DCP also argues the trial court improperly awarded attorney’s fees to San Miguel under
the UDJA. DCP’s sole argument on this point relates to San Miguel’s improper characterization
of a trespass to try title action as a declaratory judgment. Attorney’s fees are recoverable under
the UDJA; they are not recoverable under the trespass to try title statute. Coinmach Corp. v.
Aspenwood Apartment Corp., 417 S.W.3d 909, 926 (Tex. 2013). Because we have concluded that
San Miguel was entitled to declaratory judgments that the pipeline easement was void, invalid,
and/or voidable, and that San Miguel’s rights under the lignite lease are superior to DCP’s rights
under the pipeline easement, we would normally affirm the attorney’s fee award. However,
because we have also concluded the trial court erred in granting summary judgment in favor of
San Miguel, we remand the issue of attorney’s fees to the trial court for reconsideration as to
whether this award of attorney’s fees is equitable and just. See Neeley v. W. Orange–Cove Consol.
Indep. School Dist., 176 S.W.3d 746, 799 (Tex. 2005); Teal Trading & Dev., LP v. Champee
Springs Ranches Prop. Owners Ass’n, 534 S.W.3d 558, 596 (Tex. App.—San Antonio 2017),
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aff’d, 593 S.W.3d 324 (Tex. 2020); Hausser v. Cuellar, 345 S.W.3d 462, 471 (Tex. App.—San
Antonio 2011, pet. denied).
CONCLUSION
Having determined that the trial court erroneously concluded DCP’s condemnation
counterclaim was barred by the paramount importance doctrine as a matter of law, we reverse the
portion of its judgment granting San Miguel’s motion for summary judgment on DCP’s
condemnation counterclaim, vacate the portion of its judgment denying DCP’s motion for
summary judgment regarding DCP’s condemnation counterclaim, reverse the portion of its
judgment awarding San Miguel attorney’s fees, affirm the portion of the trial court’s judgment
granting the remainder of San Miguel’s motion for summary judgment, affirm the portion of the
trial court’s judgment denying DCP’s motion for summary judgment, and remand the cause to the
trial court for further proceedings consistent with this opinion.
Beth Watkins, Justice
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