Burlington Resources Oil & Gas Company, LP v. Petromax Operating Co., Inc., Woodbine Acquisition, LLC, N/K/A MD America Energy, LLC, Petro Texas, LLC, CH4 Energy II, LLC, and Texcal Energy South Texas, LP ( 2015 )
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ACCEPTED 06-15-00044-CV SIXTH COURT OF APPEALS TEXARKANA, TEXAS 10/20/2015 7:43:29 PM DEBBIE AUTREY CLERK No. 06-15-00044-CV IN THE SIXTH DISTRICT COURT OF APPEALSFILED IN 6th COURT OF APPEALS TEXARKANA, TEXAS 10/21/2015 8:59:00 AM Burlington Resources Oil & Gas Company LP, DEBBIE AUTREY Clerk Appellant, v. PetroMax Operating Co., Inc., Woodbine Acquisition, LLC, Petro Texas, LLC, Ch4 Energy II, LLC, and TexCal Energy South Texas L.P., Appellees. On Appeal from the 12th Judicial District Court Madison County, Texas, Cause No. 12-13130-012-10 BRIEF FOR APPELLANT Fred Hagans Kirsten M. Castañeda Kendall C. Montgomery Roger D. Townsend HAGANS BURDINE MONTGOMERY ALEXANDER DUBOSE JEFFERSON & RUSTAY, P.C. & TOWNSEND LLP 3200 Travis, Fourth Floor 1844 Harvard Street Houston, Texas 77006 Houston, Texas 77008 Vincent L. Marable III John R. Mercy PAUL WEBB, P.C. Mercy Carter Tidwell, L.L.P. 221 N. Houston Street 1724 Galleria Oaks Drive Wharton, Texas 77488 Texarkana, Texas 75503 ATTORNEYS FOR APPELLANT Oral Argument Requested IDENTITY OF PARTIES AND COUNSEL Appellant: Kirsten M. Castañeda State Bar No. 00792401 Burlington Resources Oil & kcastaneda@adjtlaw.com Gas Company LP ALEXANDER DUBOSE JEFFERSON & TOWNSEND LLP 4925 Greenville Avenue, Suite 510 Dallas, Texas 75206 Roger D. Townsend State Bar No. 20167600 rtownsend@adjtlaw.com ALEXANDER DUBOSE JEFFERSON & TOWNSEND LLP 1844 Harvard Street Houston, Texas 77008 John R. Mercy State Bar No. 13947200 jmercy@texarkanalawyers.com MERCY CARTER TIDWELL, L.L.P. 1724 Galleria Oaks Drive Texarkana, Texas 75503 Appellate counsel Fred Hagans State Bar No. 08685500 fhagans@hagans-law.com Kendall C. Montgomery State Bar No. 14293900 kmontgomery@hagans-law.com HAGANS BURDINE MONTGOMERY & RUSTAY, P.C. 3200 Travis, Fourth Floor Houston, Texas 77006 ii Vincent L. Marable III State Bar No. 12961600 trippmarable@sbcglobal.net PAUL WEBB, P.C. 221 N. Houston Street Wharton, Texas 77488 Trial and appellate counsel Bennie D. Rush State Bar No. 17400425 1300 11th Street, Suite 300 Huntsville, Texas 77340-3857 Trial counsel Appellee Brad D’Amico PetroMax Operating Co., Inc. State Bar No. 00783923 bd@canteyhanger.com CANTEY HANGER LLP 1999 Bryan Street, Suite 3300 Dallas, Texas 75201 David J. Beck State Bar No. 00000070 dbeck@beckredden.com Thomas E. Ganucheau State Bar No. 00784104 tganucheau@beckredden.com BECK REDDEN LLP 1221 McKinney Street, Suite 4500 Houston, Texas 77010-2010 Trial and appellate counsel David Hammit State Bar No. 08857660 DAVID HAMMIT, LLC 109 South Madison Street Madisonville, Texas 77864 Trial counsel iii Appellees David J. Beck Petro Texas, LLC, State Bar No. 00000070 Ch4 Energy II, LLC dbeck@beckredden.com Thomas E. Ganucheau State Bar No. 00784104 tganucheau@beckredden.com BECK REDDEN LLP 1221 McKinney Street, Suite 4500 Houston, Texas 77010-2010 Trial and appellate counsel John R. Bankhead State Bar No. 01676600 Attorney at Law 110 W. Cottonwood Madisonville, Texas 77864 Trial counsel Appellee Greg W. Curry Woodbine Acquisition, LLC State Bar No. 05270300 greg.curry@tklaw.com Gregory D. Binns State Bar No. 24027148 greg.binns@tklaw.com Richard B. Phillips, Jr. State Bar No. 24032833 rich.phillips@tklaw.com THOMPSON & KNIGHT LLP 1722 Routh Street, Suite 1500 Dallas, Texas 75201 Trial and appellate counsel Kevin R. Knight State Bar No. 11601400 LAW OFFICE OF ROGER KNIGHT, JR. P.O. Box 925 Madisonville, Texas 77864 Trial counsel iv Appellee Jesse R. Pierce TexCal Energy South Texas State Bar No. 15995400 L.P. jpierce@pierceoneill.com Brian K. Tully State Bar No. 24039217 btully@pierceoneill.com PIERCE & O’NEILL, LLP 4203 Montrose Blvd. Houston, Texas 77006 Trial and appellate counsel v TABLE OF CONTENTS Page Identity of Parties and Counsel ................................................................................ ii Table of Contents .....................................................................................................vi Index of Authorities .................................................................................................ix Statement of the Case...............................................................................................xi Issues Presented ..................................................................................................... xii 1. Burlington and the PetroMax Defendants disagree about the proper interpretation of an oil and gas assignment, which (in turn) determines whether certain leases are jointly owned and continue in effect an area of mutual interest (“AMI”) under an earlier letter agreement. a. Did the trial court err in rejecting Burlington’s interpretation as a matter of law, rather than holding the assignment to be ambiguous? b. Alternatively, did the trial court err in concluding that the PetroMax Defendants’ interpretation is reasonable, rather than enforcing Burlington’s interpretation as a matter of law? 2. Burlington also moved for summary judgment on its right to acquire 25% of oil and gas leases or mineral rights acquired by the PetroMax Defendants in the AMI, without any reduction or limitation based on the scope of Burlington’s joint ownership of leases/rights within the AMI. Did the trial court err in denying Burlington summary judgment on this issue? 3. Did the trial court err in granting the PetroMax Defendants’ summary judgment motion and denying Burlington’s summary judgment motion? Introduction ...............................................................................................................1 Summary of the Dispute ...........................................................................................2 Statement of Facts .....................................................................................................4 vi TABLE OF CONTENTS (CONT’D) Page I. The 1975 Letter Agreement created an Area of Mutual Interest intended to endure as long as any lease in the AMI was jointly owned. ..................................................................................................4 II. Upon succeeding Buttes as a party to the 1975 Letter Agreement, the PetroMax Defendants performed those obligations until 2012. ..........................................................................6 III. The PetroMax Defendants performed under the 1975 Letter Agreement with knowledge of a subsequent 1994 assignment. .......10 A. Southland listed four wells for sale at an auction, as reflected in the resulting assignment. ......................................10 B. The PetroMax Defendants obtained two title opinions, both of which interpreted the 1994 Assignment as conveying only Southland’s interest in the four wells.............12 IV. Regardless of its own experts’ title opinions, in 2012, the PetroMax Defendants abruptly disavowed their obligations. ............15 V. The trial court concluded the 1994 Assignment unambiguously conveyed not just the listed wells, but all of Southland’s ownership interest in the four leases. .................................................16 Summary of Argument ...........................................................................................17 Argument.................................................................................................................19 I. The interpretation of the 1994 Assignment as conveying only Southland’s interest in four wells—and not all of its interest in four entire leases—is reasonable. .......................................................19 A. As reflected in the 1994 Assignment, Southland auctioned its interest in four wells and expressly reserved other interests. ..........................................................................20 B. Burlington’s interpretation comports with the 1994 Assignment’s language and harmonizes its provisions. ..........23 C. Burlington’s interpretation also is consistent with the circumstances surrounding the 1994 Assignment. ..................26 vii TABLE OF CONTENTS (CONT’D) Page II. If the PetroMax Defendants’ interpretation also were reasonable, the resulting ambiguity would preclude summary judgment, requiring remand. ..............................................................28 III. However, Burlington offered the only reasonable interpretation of the applicable agreements, requiring rendition in Burlington’s favor. .............................................................................30 A. The 1994 Assignment conveys only Southland’s interest in the four enumerated wells. ...................................................30 B. In addition, the 1975 Letter Agreement does not provide for reduction of Burlington’s rights proportionate to the scope of its joint ownership. ....................................................34 Conclusion and Prayer ............................................................................................36 Certificate of Compliance .......................................................................................38 Certificate of Service ..............................................................................................39 Appendix 1975 Letter Agreement (CR:589-625) .......................................... Tab 1 1994 Assignment and Bill of Sale (CR:1029-34) ......................... Tab 2 Order Granting Defendants’ Motion for Summary Judgment on Title Issues (CR:1617).............................................................. Tab 3 Order Denying Burlington’s Motion for Partial Summary Judgment Seeking Various Declarations (CR:1618-19) .......... Tab 4 Order on Joint Motion to Sever and Abate (CR:1640-45) ............ Tab 5 viii INDEX OF AUTHORITIES Page(s) Cases Coker v. Coker,
650 S.W.2d 391(Tex. 1983) ............................................................19, 28, 30, 32 Columbia Gas Transmission v. New Ulm Gas, Ltd.,
940 S.W.2d 587(Tex. 1996) ..............................................................................30 DeSantis v. Wackenhut Corp.,
793 S.W.2d 670(Tex. 1990) ..............................................................................36 Entergy Gulf States, Inc. v. Summers,
282 S.W.3d 433(Tex. 2009) ..............................................................................29 Freeman v. Stephens Production Co.,
171 S.W.3d 651(Tex. App.—Corpus Christi 2005, pet. denied) ......................25 Houchins v. Devon Energy Prod. Co., L.P., No. 01-08-00273-CV,
2009 WL 3321406(Tex. App.—Houston [1st Dist.] Oct. 15, 2009, pet. denied) (mem. op.) ..............................................30 Hous. Expl. Co. v. Wellington Underwriting Ags., Ltd.,
352 S.W.3d 462(Tex. 2011) ........................................................................20, 26 J.M. Davidson, Inc. v. Webster,
128 S.W.3d 223(Tex. 2003) ..............................................................................19 Luckel v. White,
819 S.W.2d 459(Tex. 1991) ..............................................................................32 Neece v. A.A.A. Realty Co.,
322 S.W.2d 597(Tex. 1959) ..............................................................................35 Philipello v. Taylor, No. 10-11-00014-CV,
2012 WL 1435171(Tex. App.—Waco Apr. 25, 2012, pet. denied) (mem. op.) .................................................................20, 27 R&P Enters. v. LaGuarta, Gavrel & Kirk, Inc.,
596 S.W.2d 517(Tex. 1980) ..............................................................................32 ix INDEX OF AUTHORITIES (CONT’D) Page(s) Sun Oil Co. v. Madeley,
626 S.W.2d 726(Tex. 1981) ..................................................................20, 27, 29 Treatises Patrick H. Martin & Bruce M. Kramer, 2 WILLIAMS & MEYERS OIL & GAS LAW § 432 (4th ed. 2010) .............................................................................6 x STATEMENT OF THE CASE Nature of the Case: This is an oil and gas dispute. The parties disagree about whether Burlington jointly owns an interest in some leases in an area of mutual interest (“AMI”), as required to continue that AMI in effect. CR:445, 593, 1384. This question, in turn, is controlled by whether a 1994 Assignment: (1) conveyed an interest in four denominated wells while reserving other interests in four leases; or (2) conveyed all interests in four entire leases. CR:484-85; 1SCR:21-22. Course of Appellant (Plaintiff Burlington) filed suit against Proceedings: Appellees (collectively, the “PetroMax Defendants”), asserting claims such as breach of contract and declaratory judgment regarding its ownership rights and the AMI’s continuing effect. CR:443-48. The PetroMax Defendants denied these claims, Appellee PetroMax asserted a counterclaim for suit to quiet title, and Appellee Woodbine asserted counterclaims for suit to try title, trespass-to-try title, and declaratory judgment. CR:365, 1378-87. Burlington and the PetroMax Defendants filed competing summary-judgment motions on Burlington’s ownership rights relating to the AMI. CR:484-85; 1SCR:21-22. Trial Court The trial court denied Burlington’s summary-judgment Disposition: motion. CR:1618-19 (Apdx. Tab 4). The trial court granted the PetroMax Defendants’ summary judgment on title issues, ruling that: (1) Burlington owns no interest in the AMI; and (2) the AMI provision has terminated. CR:1617 (Apdx. Tab 3). On the parties’ joint motion, the trial court severed the remaining claims in order to render its summary judgment rulings final and abated the severed action pending this appeal. CR:1640-45 (Apdx. Tab 5). xi ISSUES PRESENTED 1. Burlington and the PetroMax Defendants disagree about the proper interpretation of an oil and gas assignment, which (in turn) determines whether certain leases are jointly owned and continue in effect an area of mutual interest (“AMI”) under an earlier letter agreement. a. Did the trial court err in rejecting Burlington’s interpretation as a matter of law, rather than holding the assignment to be ambiguous? b. Alternatively, did the trial court err in concluding that the PetroMax Defendants’ interpretation is reasonable, rather than enforcing Burlington’s interpretation as a matter of law? 2. Burlington also moved for summary judgment on its right to acquire 25% of oil and gas leases or mineral rights acquired by the PetroMax Defendants in the AMI, without any reduction or limitation based on the scope of Burlington’s joint ownership of leases/rights within the AMI. Did the trial court err in denying Burlington summary judgment on this issue? 3. Did the trial court err in granting the PetroMax Defendants’ summary judgment motion and denying Burlington’s summary judgment motion? xii INTRODUCTION When parties disagree about the proper interpretation of a contract, a trial court cannot reject a reasonable interpretation through summary judgment. If only one interpretation is reasonable, the trial court may grant summary judgment consistent with that interpretation. If more than one reasonable interpretation exists, no summary judgment may be granted. There is not a third option by which a trial court may choose between two reasonable contract interpretations—discarding one and embracing another—as a matter of law. Burlington and the PetroMax Defendants disagree on the proper interpretation of an oil and gas assignment. Burlington’s interpretation is reasonable. It comports with the circumstances surrounding the assignment, honors the assignment’s language, and harmonizes all the assignment's provisions. Indeed, two noted oil and gas lawyers hired by the PetroMax Defendants to offer title opinions---years before this lawsuit was filed---reached the same interpretation. Yet, when each side moved for summary judgment on its interpretation of the Assignment, the trial court not only denied Burlington’s motion, but also granted the PetroMax Defendants summary judgment consistent with their interpretation. The claims on appeal should be remanded (if the competing interpretation is reasonable) or judgment rendered in Burlington’s favor (if the competing interpretation is not reasonable). Either way, the summary judgment cannot stand. 1 SUMMARY OF THE DISPUTE The proper interpretation of the oil and gas assignment at issue will determine whether Burlington currently has rights in an area of mutual interest (the “AMI”). The AMI was created by agreement in 1975 (the “1975 Letter Agreement”), and it continues in effect as long as the 1975 Letter Agreement’s parties jointly own any leases within the AMI. It is undisputed that a lease called the Wilson Lease is located in the AMI. Whether the AMI continues in effect turns on whether Burlington’s ownership interest in the Wilson Lease was conveyed by a later assignment (the “1994 Assignment”). Burlington contends that it currently owns part of the Wilson Lease, which means the AMI continues in effect. If the AMI continues in effect, the 1975 Letter Agreement requires the PetroMax Defendants to offer Burlington a 25% working interest in all leases and mineral rights they have acquired in the AMI. The PetroMax Defendants contend that the ownership interests claimed by Burlington were conveyed away by the 1994 Assignment, which would mean the AMI terminated years ago. If the AMI no longer exists, Burlington has no right under the 1975 Letter Agreement to acquire a 25% working interest in the leases/rights the PetroMax Defendants have obtained in the AMI. None of the parties in this case was an original party to the 1975 Letter Agreement or the 1994 Assignment. Therefore, before delving into the relevant 2 facts, it is helpful to understand how everyone came to be involved in this dispute: • The 1975 Letter Agreement creating the AMI, and its attached Joint Operating Agreement, was between Aztec Oil & Gas Company and Buttes Resources Company. CR:589-625 (Apdx. Tab 1). • Aztec’s rights and obligations under the 1975 Letter Agreement passed through company mergers to Southland Royalty and ultimately to Burlington. CR:485 n.1, 626-30, 631-34, 635-36, 637. The 1994 Assignment, which was signed during the period that Southland had succeeded to Aztec’s rights, is between Southland and Samson Resources Company (which is not a party to this lawsuit). CR:1029-34 (Apdx. Tab 2). • Through a variety of agreements signed at various points in time, the PetroMax Defendants acquired part of Buttes’ interests in the AMI, subject to Buttes’ rights and obligations under the 1975 Letter Agreement and 1975 JOA. CR:489-90, 638-46, 647-58, 659-60, 661- 62, 663-785. Most of the communications between the parties relevant to this dispute occurred between Burlington and three of the PetroMax Defendants: PetroMax Operating Co., Inc., Woodbine Acquisition LLC, and TexCal Energy South Texas L.P. 3 STATEMENT OF FACTS To understand the 1994 Assignment, one must first understand the interests to which it applied. Hence, we present our Statement of Facts chronologically. I. The 1975 Letter Agreement created an Area of Mutual Interest intended to endure as long as any lease in the AMI was jointly owned. Forty years ago, Aztec and Buttes agreed to explore and develop oil and gas leases together. See CR:589. Back in 1975, Buttes owned an undivided one-half working interest in nine oil and gas leases. CR:589, 596. Through the 1975 Letter Agreement, Buttes conveyed to Aztec an undivided 25% interest in the leases. CR:589, 591-92. For future leases they might acquire, the parties established an Area of Mutual Interest (“AMI”). CR:593. If either party acquires a lease or mineral rights within the AMI, the 1975 Letter Agreement requires the acquiring party to offer the other party the same proportionate interest as in the original nine leases.
Id. Accordingly, ifAztec (now Burlington) acquires leases in the AMI, Buttes (whose interests are now partially held by the PetroMax Defendants) must be offered a 75% interest; likewise, if the PetroMax Defendants acquire leases in the AMI, then Burlington must be offered a 25% interest.
Id. To accept,the offeree must elect participation within 15 days and reimburse the other for its share of the acquisition costs.
Id. A JointOperating Agreement (the “1975 JOA”) governs operation and participation in wells drilled on jointly-held leases within the AMI. To drill a well 4 on the jointly-held leases without all parties’ consent, the 1975 JOA requires the party wishing to drill to notify the other parties in advance and give them a chance to participate. CR:602-03 (§§11, 12). The 1975 Letter Agreement provides that the AMI continues in effect as long as jointly owned leases exist in the AMI. CR:593. After the first three years, the AMI shrank to a boundary two miles outside the jointly-owned leases in the area at that time. CR:593-94. As it turned out, at the end of three years, all nine original leases remained jointly owned. CR:487; see also CR:74-75. So, the AMI continued in effect with a boundary of two miles outside those leases. CR:594. It is undisputed that five of the original leases no longer exist and that a sixth lease is no longer jointly owned by Aztec’s successor-in-interest, Burlington.1 Three of the original leases remain in the AMI: (1) the Wilson Lease; (2) the Gibbs Lease; and (3) the Buchanan Lease. RR:7, 33. Burlington claims an ownership interest in each of these leases, but for purposes of summary judgment, focused its attention on the Wilson Lease. CR:436, 490-99; RR:7. 1 Four of the original leases terminated in 1979 at the end of their primary terms. CR:74. With regard to a fifth lease, all but one well was assigned to a third party in 1981, and the remaining well was assigned to another third party in 1997. CR:74, 77. A sixth lease expired upon cessation of production in 1999. CR:74. 5 II. Upon succeeding Buttes as a party to the 1975 Letter Agreement, the PetroMax Defendants performed those obligations until 2012. The PetroMax Defendants succeeded to Buttes’ rights and obligations under the 1975 Letter Agreement, and they initially acknowledged and performed those obligations. In doing so, they repeatedly recognized Burlington’s continuing ownership rights in the Wilson Lease. For example, when defendant TexCal conveyed to defendant PetroMax certain rights in the Wilson Lease in a 2009 farmout agreement, 2 they both acknowledged Burlington’s rights to notice and participation in wells governed by the 1975 JOA. CR:647, 651, 658-59. Indeed, TexCal limited PetroMax’s right to earn under the farmout agreement to wells in which “Third Parties” did not participate. CR:656. “Third Parties” included Burlington (denoted by the name of its parent, ConocoPhillips). CR:656. And, in proposing the initial test well and subsequent wells contemplated by the farmout agreement, PetroMax would be required to give notices under the 1975 JOA.
Id. 3 2A “farmout agreement” is a contract to assign oil and gas lease rights in certain acreage upon the completion of drilling obligations and the performance of any other covenants and conditions set forth in the agreement. Patrick H. Martin & Bruce M. Kramer, 2 WILLIAMS & MEYERS OIL & GAS LAW § 432 (4th ed. 2010). 3 See also CR:659 (amending Farmout Agreement to remove from excepted lands— i.e., to add to the acreage subject to Farmout Agreement—the 160-acre drilling unit for the Wilson #5 Well), 661-62 (amending the DeFacto Termination provision and again including provisions regarding continuing rights to notice and participation under 1975 JOA). 6 Similarly, in 2011, defendants Woodbine, PetroMax, Petro Texas, and CH4 Energy expressly acknowledged in a Purchase and Sale Agreement that “Burlington Oil & Gas Company owns an undivided 25% interest in and to 1537.83 acres out of that certain Oil and Gas Lease dated August 29, 1974, between James D. Wilson, as Lessor, and Curran R. Campbell, Inc., as Lessee . . . ,” i.e., the Wilson Lease. CR:663, 781. The defendants further acknowledged that “[t]his is an outstanding interest that has been non-consented in both the Wilson #1H and Wilson #2H wells.”
Id. They also“anticipated that Burlington (now Conoco-Phillips) will continue to go non-consent on future wells.”
Id. In additionto these acknowledgments and agreements among themselves, the PetroMax Defendants asserted the AMI’s continuing force and effect—and Burlington’s continued joint ownership of the Wilson Lease—in communications with Burlington. For instance, in 2009, TexCal and PetroMax sent Burlington Authorities for Expenditure (“AFEs”) regarding participation in drilling the Wilson #1H and #2H wells (i.e., the same wells referenced two years later in the Woodbine/PetroMax Purchase Agreement discussed above). CR:786-87, 793-94. The cover letters identify TexCal “as the current Operator of the Contract Area covered by” the 1975 JOA. CR:786, 793. In proposing that PetroMax drill these two wells on the Wilson Lease, both letters also notify Burlington that, “[i]n accordance with the provisions of Article 12 of the JOA, you have 30 days after receipt of this 7 notice in which to indicate your election to participate in the proposed drilling of the above referenced well and to pay the cost thereof.” CR:787, 794. The enclosures (i.e., ballots and accompanying AFEs) reflect that, upon an election to participate, Burlington would have a 25% working interest in the proposed wells. CR:789, 792, 796. PetroMax also sent Burlington an AFE proposing to drill another well4 on the Wilson Lease. CR:804-09. In the cover letter, PetroMax stated that, under the terms of the 1975 JOA, Burlington had 30 days after receipt to return its election to participate. CR:804. And, after Woodbine acquired interests from PetroMax, Woodbine sent AFEs to Burlington for drilling five additional wells5 on the Wilson and Gibbs Leases. CR:810-12, 814-17, 820-21, 825-26, 832-33, 837-38, 849-50. As anticipated, Burlington went “non-consent” on several of the proposed wells.6 CR:496-97. For each of these wells, Burlington wrote to Woodbine in 2012 and requested that Woodbine provide payout statements, regulatory information, and plats. CR:497. Woodbine provided payout statements dated May 30, 2012, reflecting 4 This AFE concerned the Dunman/Wilson No. 1-H Well. CR:804. 5 These AFEs concerned the Wilson #3H, Wilson #6H, Wilson #5H, Gibbs #1H (later drilled as the Gibbs #2H Well), and Dunman Wilson A #2H wells. CR:810- 12, 814-17, 820-21, 825-26, 832-33, 837-38, 849-50. 6 These non-consent wells were the Dunman/Wilson No. 1-H, Wilson #1H, Wilson #2H, Wilson #3H, and Wilson #6H wells. CR:496-97. 8 Burlington’s working interest in the non-consent wells on the Wilson Lease as follows (CR:497-98): Non-Consent Well Burlington Interest Wilson #1H Well .25 Wilson #2H Well (a/k/a Wilson Unit “A” # 2H) .24531250 Wilson #3H Well .24531250 Wilson #6H Well .25 Dunman/Wilson No. 1-H Well .10535714 Burlington did elect to participate in other wells on the Wilson and Gibbs Leases, including the Wilson #5H Well.7 CR:820, 1136-37. Woodbine accepted Burlington’s election to participate in the Wilson #5H Well. CR:498, 1137. Woodbine also availed itself of the benefits of the 1975 Letter Agreement, accepting Burlington’s payments of its share of the required costs. CR:498; see also CR:1137. In accordance with its obligations under the 1975 Letter Agreement, Woodbine paid Burlington proceeds from the Wilson #5H Well totaling $1,335,253.59. CR:498, 1137. 7 The wells in which Burlington elected to participate were the Wilson #5H, Gibbs #1H, and Dunman Wilson A #2H wells. CR:820, 1136-37. 9 III. The PetroMax Defendants performed under the 1975 Letter Agreement with knowledge of a subsequent 1994 assignment. During the years that the PetroMax Defendants performed their obligations under the 1975 Letter Agreement and recognized Burlington’s ownership rights in the Wilson Lease, they did so with knowledge of a 1994 Assignment of certain interests by a previous Aztec successor-in-interest, Southland Royalty. A. Southland listed four wells for sale at an auction, as reflected in the resulting assignment. In 1994, Southland listed for sale in an auction its interests in four wells in the AMI: (1) the Wilson James D. Unit 2; (2) the Wilson James D. #3 (misspelled as the “Wilson James D.O.” well); (3) the Buchanan 1; and (4) the Gibbs Bros. 1. CR:1497. We will refer to the first two wells, both offered for auction from the Wilson Lease, as Wilson #2 and Wilson #3. These two wells were located on one of the two separate tracts of land that comprise the Wilson lease.
Id. As shownby the map on the following page, the Wilson Lease consists of two non-contiguous tracts. 10 • Tract 1 is the larger tract and contains the Wilson #1, Wilson #4, and Wilson #5 wells. • Tract 2 is the separate, smaller tract and contains the Wilson #2 and Wilson #3 wells. At the auction, Samson Resources Company purchased the interests sold by Southland. CR:1029. Southland and Samson signed the 1994 Assignment. CR:1031. The assignment provides for an Exhibit A that will both: (1) particularly describe the Interests—including “oil and gas leases, leasehold interests, rights, and interests attributable or allocable to the oil and gas leases or leasehold interests by virtue of 11 pooling, unitization, communitization, and operating agreements” being conveyed; and (2) specifically note and reflect the “certain lands, leases, properties, interests, leasehold rights, depths or formations” that Southland “reserves and retains unto itself from the Interests . . . .” CR:1029. Thus, the Assignment provided that Exhibit “A” would set forth both the interests being conveyed away and the interests being reserved by Southland. Indeed, Exhibit “A” contains two separate lists: (1) a list of four leases owned by Southland, with an exception for lands attributable to wells Southland previously had farmed out; and (2) a list of “Associated Wells.” CR:1033. Unfortunately, Exhibit “A” does not specify which list sets forth the conveyed interests and which list sets forth the reserved interests.
Id. However, consistentwith the listing of only four wells in the auction catalog, the very first words in the 1994 Assignment are: “Well Name: BUCHANAN 1, GIBBS BROS 1, WILSON JAMES 2 AND WILSON JAMES 3”.
Id. B. ThePetroMax Defendants obtained two title opinions, both of which interpreted the 1994 Assignment as conveying only Southland’s interest in the four wells. The two lists in Exhibit A to the 1994 Assignment led to confusion for both the PetroMax Defendants and Burlington. Consequently, before sending the 2009 12 AFEs to Burlington in connection with drilling on the Wilson Lease, TexCal and PetroMax obtained two title opinions about whether Burlington still owned any working interest in that lease. In 2007, TexCal retained J. Jan Jircik, a Texas lawyer who is Board Certified in Oil, Gas and Mineral Law by the Texas Board of Legal Specialization, to perform a title opinion. CR:860. Jircik did not interpret the 1994 Assignment as conveying all of Southland’s interest in the Wilson Lease, but instead interpreted the 1994 Assignment as if it included only Southland’s interest in the Wilson #2 and Wilson #3 wells and the associated production units, i.e., Southland’s interest in Tract 2. CR:896. Jircik opined that the interest Southland had reserved in the Wilson Lease “was eventually acquired by Burlington Resources Oil & Gas Company, L.P.”
Id. Accordingly, asto the two Wilson wells listed for auction, expressly identified at the top of the 1994 Assignment, and included as “Associated Wells” on its Exhibit “A,” Jircik concluded that Burlington did not own any gross working interest. CR:863- 64. But as to wells located on Tract 1 of the Wilson Lease,8 Jircik opined that Burlington owned a gross working interest of .2500000. CR:862, 865-66. In 2009, PetroMax retained Ronald Moore, another Texas lawyer Board Certified in Oil, Gas and Mineral Law by the Texas Board of Legal Specialization, 8 At the time, these wells were the Wilson #1, Wilson #4, and Wilson #5 Wells. CR:862, 865-66. 13 to provide a title opinion on acreage in the Wilson lease. CR:1035. Moore likewise concluded that Burlington owned a working interest in several portions of the Wilson lease. CR:1035-37. Jircik’s opinion was provided to PetroMax and Woodbine. CR:501. There is no evidence, however, that either of the title opinions was provided to Burlington. Upon receiving the 2009 AFEs from PetroMax proposing wells to be drilled on the Wilson Lease, Burlington initially informed PetroMax that it “has completed a diligent review of files internal and external and determined Burlington has no working interest. The files show that all interest has been conveyed out to other parties.” 3SCR:2075; RR:51-52. In response to Burlington’s contention, Moore supplemented his opinion. CR:1079. He set forth “Jircik’s and our interpretation” that Burlington did own a “25% WI in Wilson Lease less 160 acre Production Units for Wilson No. 2 and 3 wells”. CR:1080 (emphasis added). He also opined that, in the 1994 Assignment, “Southland Royalty Company assigned what appears to be only its interest in the Wilson Well Nos. 2 and 3 Production Units to Samson Resources Company, leaving the balance of its interest still owned by Southland (2210/34).” CR:1079. Burlington later reached the same conclusion. As described above in Section II, Burlington elected to participate in certain wells and paid its share of the costs. 14 Burlington also asserted its right to payout statements and other information regarding non-consent wells in which it did not elect to participate. In sum, for 18 years, Burlington and the PetroMax Defendants operated consistently with the interpretation of the 1994 Assignment as conveying only the interests offered at auction: the four wells and associated production units. IV. Regardless of its own experts’ title opinions, in 2012, the PetroMax Defendants abruptly disavowed their obligations. In 2012, the PetroMax Defendants abruptly changed position. Woodbine asserted that, contrary to the Jircik opinion, Burlington had “divested the last of its interest in the Wilson Lease as of September 9, 1994” and “does not own an interest in . . . the Wilson Lease . . . .” CR:1130. Woodbine attempted to return to Burlington $190,692.84, purported to be the costs Burlington had paid in association with the Wilson #5H well minus the well proceeds Woodbine had already paid Burlington. CR:1130-31. Woodbine also stopped work on another proposed well in which Burlington had elected to participate. 9 See CR:1131. Only after repudiating Burlington’s right to participate did Woodbine drill that well.
Id. Burlington’s demandsfor the PetroMax Defendants to comply with the ongoing requirements of the 1975 Letter Agreement have been met consistently with refusal. CR:1130-31, 1138-40. Woodbine has obtained permits for at least 11 wells 9 This was the Dunman Wilson A #2H well. CR:1130-31. 15 associated with the Wilson lease, without providing Burlington notice or an opportunity to participate. CR:1138-39. Woodbine and PetroMax also have acquired leases within the AMI without offering the requisite 25% working interest to Burlington. CR:1139. V. The trial court concluded the 1994 Assignment unambiguously conveyed not just the listed wells, but all of Southland’s ownership interest in the four leases. Burlington filed the underlying lawsuit in order to enforce its rights under the 1975 Letter Agreement and 1975 JOA. CR:433-49. Besides requesting declaratory relief, Burlington brought separate claims for, inter alia, breach of contract, specific performance, conversion, and breach of duty to pay proceeds. CR:443-48. In addition to the PetroMax Defendants’ denials of these claims (CR:322, 364-65, 1390-91, 1397-98), PetroMax asserted a counterclaim for suit to quiet title, and Woodbine asserted counterclaims for suit to try title, trespass-to-try title, and declaratory judgment. CR:365, 1378-87. Burlington and the PetroMax Defendants filed competing summary-judgment motions on the questions regarding Burlington’s ownership rights relating to the AMI. CR:484-85; 1SCR:21-22. Each side moved for summary judgment regarding Burlington’s ownership interest in any leases within the AMI to continue the AMI in effect. CR:484-85; 1SCR:21-22. The trial court denied Burlington’s summary-judgment motion, but 16 granted the PetroMax Defendants’ competing motion on title issues. CR:1617-19. The trial court ruled that: 1. Burlington does not own any interest in the AMI described in the 1975 Letter Agreement made the basis of this suit; and 2. The AMI provision in the 1975 Letter Agreement has terminated. CR:1617. On joint motion by all parties, the trial court severed the remaining claims into a separate lawsuit in order to render its partial summary judgment final. CR:1632, 1635, 1640-43. The trial court then abated the severed case pending this appeal. CR:1643. Thus, the severed issues remain pending and are not presented for review in this appeal. SUMMARY OF ARGUMENT Burlington’s interpretation of the 1994 Assignment is reasonable. Burlington’s interpretation comports with the very first words of the assignment, setting forth only interests in four wells to be conveyed. Burlington’s interpretation also honors the assignment’s reservation provision. Unless Exhibit A is interpreted so that the list of wells sets forth the interests being conveyed and the list of leases sets forth the interests being reserved, the reservation provision would be rendered meaningless. 17 Moreover, Burlington’s interpretation is consistent with the circumstances surrounding the assignment. Only Southland’s interests in four wells were offered for sale at auction. And the interpretation’s reasonableness is confirmed by two title opinions from board certified lawyers who were hired long before suit was filed, not by Burlington, but by the PetroMax Defendants. Because Burlington’s interpretation is reasonable, the trial court’s summary judgment rejecting that interpretation cannot stand. What happens next—remand or rendition—depends on whether the PetroMax Defendants’ competing interpretation also is reasonable. If the competing interpretation were reasonable, the 1994 Assignment would be ambiguous. On that basis, the matter should be remanded for trial. But if, as shown below, the PetroMax Defendants’ interpretation is unreasonable, then as a matter of law, Burlington is entitled to rendition of judgment that the AMI continues in effect. Burlington also moved for summary judgment that its right to obtain a 25% working interest in leases and mineral rights is not proportionately reduced based on any decrease in the scope of Burlington’s joint ownership interests generally in the AMI. The 1975 Letter Agreement provides for proportionate reduction of the 25% requirement under other circumstances, but not based on diminution of the number 18 or size of leases/rights held jointly by Burlington in the AMI. Accordingly, Burlington also is entitled to summary judgment on this point. ARGUMENT I. The interpretation of the 1994 Assignment as conveying only Southland’s interest in four wells—and not all of its interest in four entire leases—is reasonable. The 1994 Assignment expressly provides that its Exhibit A lists both the interests being conveyed and the interests being reserved. CR:1029. The problem is that, in setting forth the two lists, Exhibit A does not expressly identify which list sets forth the interests being conveyed and which sets forth the interests being reserved. See CR:1033. But the language and circumstances surrounding the creation of the 1994 Assignment demonstrate that it is reasonable to interpret the 1994 Assignment to convey only Southland’s interest in the enumerated wells. Whether a contract is ambiguous is a question of law. E.g., Coker v. Coker,
650 S.W.2d 391, 394 (Tex. 1983). A contract is ambiguous whenever it is reasonably susceptible to more than one meaning.
Id. at 393.When a contract is ambiguous, its interpretation presents a question of fact precluding summary judgment.
Id. at 394.In determining whether a contract is ambiguous, courts examine and consider the entire writing, striving to harmonize and give effect to all provisions so that none is rendered meaningless. J.M. Davidson, Inc. v. Webster,
128 S.W.3d 223, 229 (Tex. 2003);
Coker, 650 S.W.2d at 393. Courts also consider the facts and circumstances 19 surrounding the contract’s execution. E.g., Hous. Expl. Co. v. Wellington Underwriting Ags., Ltd.,
352 S.W.3d 462, 469 (Tex. 2011); Sun Oil Co. v. Madeley,
626 S.W.2d 726, 731-32 (Tex. 1981); Philipello v. Taylor, No. 10-11-00014-CV,
2012 WL 1435171, at *7 (Tex. App.—Waco Apr. 25, 2012, pet. denied) (mem. op.). In this case, the 1994 Assignment’s text and surrounding circumstances establish that Burlington’s interpretation is reasonable. A. As reflected in the 1994 Assignment, Southland auctioned its interest in four wells and expressly reserved other interests. The 1994 Assignment exists because Southland decided to auction off its interest in four wells. CR:1497. Consistent with Southland’s auction listing, the first words in the 1994 Assignment are: “Well Name: BUCHANAN 1, GIBBS BROS 1, WILSON JAMES 2 AND WILSON JAMES 3”. Compare CR:1029 (emphasis in original) with CR:1497 (auction listing). The 1994 Assignment expressly provides that Southland is conveying some interests, but reserving others. CR:1029. The assignment discusses both conveyance and reservation in general terms, expressly leaving the particulars and specifics to be set forth in Exhibit A.
Id. In describingthe conveyance and reservation generally, the 1994 Assignment speaks in broad, generic terms. For instance, the assignment describes the interests being conveyed (defined collectively as the “Interests”) to include: The oil and gas leases, leasehold interests, rights and interests attributable or allocable to the oil and gas leases or leasehold interests by virtue of pooling, unitization, communitization, and operating 20 agreements, licenses, permits, and other agreements, all more particularly described on Exhibit “A” hereto, limited as to the lands and depths indicated on Exhibit “A” (collectively the “Leases”), together with identical undivided interests in and to all the property and rights incident thereto . . . . CR:1029. And, the assignment describes the interests being reserved equally broadly (id.): [Southland] reserves and retains unto itself from the Interests those certain lands, leases, properties, interests, leasehold rights, depths or formations as specifically noted and reflected on Exhibit “A” . . . . As provided in the 1994 Assignment, Exhibit A sets forth two lists in the following format: (1) a list of all the interests Southland owned in four leases; and (2) a list of the same four wells on the assignment’s first page: 21 The top list is untitled. CR:1033. It names the Odom, Gibbs, Wilson, and Buchanan Leases: The right side of the top list sets forth the legal description of each lease.
Id. Under thelegal descriptions appears an exception for acreage Southland had farmed out and retained only an overriding royalty interest: 22 Thus, the top list specifically notes and reflects all of Southland’s ownership interest in the entirety of the four, denominated leases.10 On the other hand, the bottom list names only the wells that appear at the top of the 1994 Assignment and in the auction catalogue: B. Burlington’s interpretation comports with the 1994 Assignment’s language and harmonizes its provisions. Interpreting Exhibit A so that the top list describes the interests Southland is reserving from the 1994 Assignment and the bottom list describes the interests Southland is conveying is consistent with: (1) the list of four wells at the top of the assignment; (2) the language providing that Exhibit A describes both interests being conveyed and interests being reserved to Southland; and (3) the entire reservation provision, which expressly provides that Southland reserves and retains to itself the 10 After the 1994 Assignment was signed, the Odom Lease expired upon cessation of production in 1999. CR:74. 23 certain lands, leases, properties, interests, leasehold rights, depths or formations as specifically noted and reflected on Exhibit A. Compare CR:1029 (setting forth language in 1994 Assignment) with CR:1033 (Exhibit A). If both lists in Exhibit A described the interests conveyed, then contrary to the reservation provision, no part of Exhibit A would note or reflect any interest being reserved. The exception, in the top list of leases, of acreage Southland had previously farmed out from the four leases does not constitute a “reservation.” The exception describes an interest Southland did not own. By definition, Southland could not “reserve and retain unto itself” an interest it did not own. Rather than constituting the reservation, the exception describes what is not included in the reservation: the portions of the leases that Southland had farmed out under a previous agreement. See CR:74-75, 82-85, 501-05, 1380-81. Without this exception, the top list would not have accurately described all of the interest Southland owned in the four leases. By accurately describing the interest Southland did own in the four leases, the top list identifies with reasonable certainty the interest Southland reserved and retained unto itself from its conveyance of the four wells. The PetroMax Defendants suggest instead that use of the term “leases” in the description of the interests being conveyed must mean that the 1994 Assignment conveys the leases set forth in Exhibit A. Yet, the term “leases” appears in both the provision describing the interests being conveyed and the provision describing the 24 interests being reserved. CR:1029. Because it is used to describe generally both types of interests, the term does not aid in determining whether the list of leases on Exhibit A describes the interests being conveyed or the interests being reserved. Moreover, in describing both conveyed and reserved interests, the assignment speaks not only of “leases,” but also of “interests” less than an entire lease.
Id. So, justas it is possible that an entire lease could fall into either category, it is possible for interests less than an entire lease (i.e., four wells and their associated production units) to fall into either the category of interests being conveyed or the category of interests being reserved. The general use of the term “leases” must be read in conjunction with the list of specific wells set forth at the top of the same page. For example, in Freeman v. Stephens Production Co.,
171 S.W.3d 651, 653 (Tex. App.—Corpus Christi 2005, pet. denied), a deed purported to convey “that certain lot, tract or piece or parcel of land . . . .” Despite this general description of the interests conveyed as a single lot, the deed later specifically described the interests conveyed as “All of Lot 1, Block 15; Lot 2, Block 15; The West 17.51 acres of Lot 3, Block 15; All of Lot 10, Block 15,” etc.
Id. Reading theentire deed as a whole, it was reasonable to interpret the singular phrase “lot, tract or piece or parcel of land” to mean multiple lots.
Id. at 654.In this case, it is equally reasonable to interpret the interests collectively defined as the “Leases” to mean only the wells and related production units specifically identified at the top of the first page. Compare
id. at 653-54with CR:1029. 25 Unless Southland’s interest in the four wells was the only interest being conveyed, there was no reason to list those four wells at the top of the first page or in Exhibit A. If the 1994 Assignment conveyed all of Southland’s interest in the four leases, there was no reason to highlight four of the wells on those leases. Southland’s interest in the four wells already would be part of the conveyance of all its interest in the leases. Nor can the list of “Associated Wells” be explained as an inventory of all the wells on the four leases. For example, the “Associated Wells” list does not identify the Wilson #1 well. See CR:1033. The plain language of the 1994 Assignment establishes the reasonableness of Burlington’s interpretation. Southland assigned only its interest in the enumerated wells (i.e., the wellbores and related production units), while reserving the remainder of its interest in the Wilson, Gibbs, Buchanan, and Odom leases. C. Burlington’s interpretation also is consistent with the circumstances surrounding the 1994 Assignment. Even without considering the surrounding circumstances, Burlington’s interpretation comports with the language in, and harmonizes the provisions of, the 1994 Assignment. See Argument
§I(A), supra. Nonetheless, it is appropriate also to consider the circumstances surrounding the assignment. Circumstances that existed prior to and contemporaneous with the execution of the 1994 Assignment are properly examined in determining whether the assignment is ambiguous. See Hous. 26
Expl., 352 S.W.3d at 469;
Madeley, 626 S.W.2d at 731-32; Philipello,
2012 WL 1435171, at *7. Southland offered for auction only its interest in four wells. CR:1497. Southland did not list for auction only the wellbore, nor did it offer the entire leasehold. Instead, Southland’s auction listings encompassed: (1) its interest in the Wilson #3, Buchanan 1, and Gibbs Bros 1 wells; and (2) an “after payout only” interest (“APO”) only with regard to the Wilson James D. Unit 2 Well. Compare
id. (reproduced above,listing interests offered by Southland) with CR:1459 (listing another seller’s wellbore interest with the notation “WELLBORE 27 ONLY”) and CR:1475 (listing another seller’s entire leasehold interest with the notation “LEASEHOLD”). The limited scope of interests submitted by Southland to the auction house is echoed by: (1) the discrete list of four wells at the top of the 1994 Assignment; and (2) the discrete list of four wells on Exhibit A. It is entirely reasonable to read the 1994 Assignment, including Exhibit A, as conveying only those particular interests Southland actually offered for auction and reserving to Southland all other interests it owned. Because Burlington’s interpretation of the 1994 Assignment is reasonable, the trial court erred in granting summary judgment in the PetroMax Defendants’ favor. See
Coker, 650 S.W.2d at 393-94. The only question remaining is whether reversal of the summary judgment should be accompanied by: (1) remand for further proceedings in the trial court consistent with this Court’s opinion and judgment; or (2) rendition of summary judgment in Burlington’s favor. This remaining question turns on whether the PetroMax Defendants’ competing interpretation of the 1994 Assignment also is reasonable. II. If the PetroMax Defendants’ interpretation also were reasonable, the resulting ambiguity would preclude summary judgment, requiring remand. Despite the logic and consistency with Texas law demonstrated by Burlington’s interpretation, the PetroMax Defendants contend that the 1994 28 Assignment should be interpreted to convey all of Southland’s interest in the Wilson, Gibbs, Buchanan, and Odom leases, except for the lands attributable to the H.K. Odom Wells, James D. Wilson #4 Well and the Buchanan #2 Well. Even if this interpretation were reasonable (see Argument §III(A), infra), it would not support summary judgment against Burlington’s own reasonable interpretation. Faced with two, competing reasonable interpretations, a court cannot conclude that, given all the language, the 1994 Assignment “plainly and clearly discloses the intention of the parties.” See
Madeley, 626 S.W.2d at 731-32. The inherent reasonableness of Burlington’s interpretation is confirmed not only by the 1994 Assignment and its surrounding circumstances, but also by the fact that not one, but two, accomplished oil and gas lawyers hired by the opposing parties reached the same interpretation before any litigation arose. The PetroMax Defendants’ repeated invocation of “plain language” to support their now-contrary position does not diminish the reasonableness of the earlier title opinions they themselves obtained. “[R]easonable people ‘will sometimes disagree about what reasonable people can disagree about,’ but even so, it is difficult to maintain that language is plain in the face of a substantial, legitimate dispute over its meaning.” Entergy Gulf States, Inc. v. Summers,
282 S.W.3d 433, 446 (Tex. 2009) (Hecht, J., concurring). 29 To the extent that the Court finds PetroMax Defendants’ competing interpretation of the 1994 Assignment reasonable, the resulting ambiguity would preclude summary judgment. See
Coker, 650 S.W.2d at 394. That ambiguity would require reversal of the trial court’s summary judgment rulings and remand for further proceedings consistent with this Court’s opinion and judgment.
Id. III. However,Burlington offered the only reasonable interpretation of the applicable agreements, requiring rendition in Burlington’s favor. A. The 1994 Assignment conveys only Southland’s interest in the four enumerated wells. In truth, however, the PetroMax Defendants’ interpretation is unreasonable. Competing interpretations of a contract do not create an ambiguity unless both are reasonable. Columbia Gas Transmission v. New Ulm Gas, Ltd.,
940 S.W.2d 587, 589 (Tex. 1996). Because the PetroMax Defendants’ interpretation is unreasonable, this Court should render judgment in Burlington’s favor, ruling as a matter of law that the AMI continues in effect. To interpret the 1994 Assignment as conveying all of Southland’s interest in entire leases fails to harmonize all provisions of the contract and renders some of the contractual language meaningless. For example, reading both lists as collectively describing the conveyed interests would render meaningless the 1994 Assignment’s reservation provision. See Houchins v. Devon Energy Prod. Co., L.P., No. 01-08- 00273-CV,
2009 WL 3321406, at *4-5 (Tex. App.—Houston [1st Dist.] Oct. 15, 30 2009, pet. denied) (mem. op.) (stating principle that an interpretation that fails to harmonize the provisions is not reasonable). This provision expressly “reserves and retains” to Southland the “certain lands, leases, properties, interests, leasehold rights, depths or formations as specifically noted and reflected on Exhibit ‘A’ . . . .” CR:1029. What lands, leases, properties, interest, leasehold rights, depths or formations are specifically noted and reflected on Exhibit A? Exhibit A gives us two options: (1) the set of four leases; and (2) the set of four wells. CR:1033. No one contends that the set of four wells was reserved and retained. Such a contention would be unreasonable given that these were the same wells submitted for auction and listed at the top of the Assignment’s first page. CR:1029, 1497. That leaves only the set of leases at the top of Exhibit A to describe the reserved interests. Yet, the PetroMax Defendants contend that the reservation is limited to the narrow “exception” from the listed leases. As discussed above in Section I(B), the exception describes acreage Southland had already farmed out. See CR:74-75, 82-85, 501-05, 1380-81; see also 2SCR:14. Southland could not reserve to itself an interest it did not hold at the time of the Assignment, i.e., “the lands attributable to the H.K. Odom Wells, James D. Wilson #4 Well and the Buchanan #2 Well.” CR:1033 (emphasis added). On the other hand, it was logical for Southland to (1) convey its interest in the four listed wells, and (2) reserve the 31 remainder of its interest in the four listed leases, which it owned with the exception of the lands attributable to the farmed-out wells. Reading both lists on Exhibit A as describing the interests being conveyed also would render impermissibly meaningless the list of four wells in the Assignment and on Exhibit A. See Luckel v. White,
819 S.W.2d 459, 462 (Tex. 1991);
Coker, 650 S.W.2d at 393; R&P Enters. v. LaGuarta, Gavrel & Kirk, Inc.,
596 S.W.2d 517, 518-19 (Tex. 1980). If the Assignment conveyed all of Southland’s interest in the four listed leases, including interests in any wells drilled on them, there was no reason to list four of the wells included in that transfer. It is illogical to read the title of the list of wells—i.e., “Associated Wells”— to mean “the wells associated with the four above leases.” For instance, the Wilson #1 well, which also was located on the Wilson Lease, is not included in the list of “Associated Wells.” CR:1033. Thus, the list does not set forth the wells “associated” with the four leases, but instead identifies the wells “associated” with the sale at auction, i.e., the only interests being assigned. That the 1994 Assignment and Exhibit A afford different treatment to different wells on the Wilson Lease is entirely consistent with the surrounding circumstances. Recall that the Wilson Lease consists of two, non-contiguous tracts. The Wilson #2 and #3 wells—whose wellbores and associated production units formed the entirety of Tract 2—were included in the list of four wells being 32 conveyed. Because Southland had farmed out its interest in the Wilson #4 well, Exhibit A excepted the lands attributable to that well from the Wilson Lease interest that Southland reserved to itself. But, the Wilson #1 well was not conveyed (through the list of four wells) or carved out from the reservation (through an exception to the list of four leases). Southland did not offer its interest in that well at auction, so it was not included in the auction catalogue, the list of wells at the top of the 1994 Assignment, or the list of “Associated Wells” in Exhibit A. Unlike the Wilson #4 well, Southland still owned its working interest in the Wilson #1, though the interest was subjected to an after-payout penalty when Southland went non-consent. Therefore, unlike the Wilson #4 well, the Wilson #1 was not included in the exception from the list of leases. As a result, Southland reserved and retained unto itself its interest in the Wilson #1 well, which it holds to this day. 11 The PetroMax Defendants’ interpretation ignores these distinctions. It would render meaningless the list of wells in the 1994 Assignment, the assignment’s reservation provision, and the list of “Associated Wells” on Exhibit A. 11 In addition, although the Wilson #5 well has quit producing, Burlington still owns an interest in the leasehold acreage pursuant to Humble Resources Company’s re- assignment of all interest in the Wilson #5 and associated acreage after termination of its farmout agreement. CR:922-1028, 1037. 33 Consequently, the PetroMax Defendants’ interpretation does not comply with contract construction principles and is unreasonable. Burlington’s interpretation is the only reasonable interpretation. It compels the conclusion that, as a matter of law, Burlington still jointly owns an interest in (at the very least) the Wilson #1 well, which continues the AMI in effect. Consequently, in the alternative to the remand requested above, Burlington is entitled to rendition of judgment that, pursuant to the 1975 Letter Agreement and 1994 Assignment, its ownership interest continues the AMI in effect. B. In addition, the 1975 Letter Agreement does not provide for reduction of Burlington’s rights proportionate to the scope of its joint ownership. Finally, in its summary-judgment motion, Burlington sought a ruling that the 1975 Letter Agreement does not provide for a reduction of the undivided 25% interest to be offered to Burlington in leases and mineral rights within the AMI if Burlington’s joint ownership in the nine original leases diminishes over time. CR:523-26. The 1975 Letter Agreement provides that the AMI continues in effect “as long as leases are jointly owned within such area . . . .” CR:593. Upon acquiring any oil and gas leases or mineral rights within the AMI, Buttes agreed to offer to Aztec an undivided 25% interest in those leases/rights.
Id. No provisionwas made for a reduction in that percentage if Aztec’s (or later, Burlington’s) ownership share of leases/rights within the AMI diminished over time.
Id. 34 Hadthe parties wanted to provide for that reduction, they knew how to do so. The 1975 Letter Agreement does provide for a proportionate reduction in the interest required to be offered to Aztec if Buttes acquires less than the full 100% interest in an oil and gas lease or mineral rights in the AMI. CR:593. But the parties chose not to make a similar provision for any reduction in proportion to Aztec’s joint ownership of leases within the AMI. Texas courts are not allowed to rewrite the agreement to add such a provision. See, e.g., Neece v. A.A.A. Realty Co.,
322 S.W.2d 597, 600 n.3 (Tex. 1959). As shown above, Burlington is entitled to reversal of the trial court’s holding that the AMI provision terminated. Because Burlington offered the only reasonable interpretation regarding its undiminished right to a 25% interest in leases/rights acquired within the AMI, this Court should reverse the trial court’s denial of summary judgment on that issue, as well. Further, the Court should render judgment that Burlington’s rights under the 1975 Letter Agreement and AMI to the offer of a 25% interest in leases or mineral interests acquired in the AMI by Buttes’ successors- in-interest are not subject to reduction or limitation based on Burlington’s ownership share of leases and rights within the AMI. 35 CONCLUSION AND PRAYER In determining whether ambiguities exist in oil and gas assignments, it is critical to analyze and apply consistently the principles that govern all contracts. The most basic policy of contract law is to protect the parties’ justified expectations. DeSantis v. Wackenhut Corp.,
793 S.W.2d 670, 677 (Tex. 1990). The ability to form justifiable expectations about contractual rights and obligations depends, in turn, upon the certainty with which parties may predict how the law will interpret and enforce their agreement.
Id. This essentiallegal framework is weakened by summary judgments that stray from fundamental principles governing contract construction, particularly in an area of widespread importance such as oil and gas assignments. Appellant Burlington Resources Oil & Gas, L.P. asks this Court to reverse the trial court’s summary-judgment rulings and (1) either remand the issues to the trial court for further proceedings consistent with this Court’s opinion and judgment, or render judgment that the AMI continues in effect; and (2) render judgment that Burlington’s rights to acquire a 25% interest in leases or mineral interests acquired by Buttes’ successors-in-interest in the AMI are not subject to reduction or limitation based on the scope of Burlington’s joint ownership of leases and rights within the AMI. Burlington also asks for all other relief to which it is entitled at law or in equity. 36 Respectfully submitted, /s/ Kirsten M. Castañeda John R. Mercy Kirsten M. Castañeda State Bar No. 13947200 State Bar No. 00792401 jmercy@texarkanalawyers.com kcastaneda@adjtlaw.com MERCY CARTER TIDWELL, ALEXANDER DUBOSE L.L.P. JEFFERSON & TOWNSEND LLP 1724 Galleria Oaks Drive 4925 Greenville Avenue, Suite 510 Texarkana, Texas 75503 Dallas, Texas 75206 Tel: (903) 794-9419 Tel: (214) 369-2358 Fax: (903) 794-1268 Fax: (214) 369-2359 Vincent L. Marable III Roger D. Townsend State Bar No. 12961600 State Bar No. 20167600 trippmarable@sbcglobal.net rtownsend@adjtlaw.com PAUL WEBB, P.C. ALEXANDER DUBOSE 221 N. Houston Street JEFFERSON & TOWNSEND LLP Wharton, Texas 77488 1844 Harvard Street Tel: (979) 532-5331 Houston, Texas 77008 Fax: (979) 532-2902 Tel: (713) 523-2358 Fax: (713) 523-4553 Fred Hagans State Bar No. 08685500 fhagans@hagans-law.com Kendall C. Montgomery State Bar No. 14293900 kmontgomery@hagans-law.com HAGANS BURDINE MONTGOMERY & RUSTAY, P.C. 3200 Travis, Fourth Floor Houston, Texas 77006 Tel: (713) 222-2700 Fax: (713) 547-4950 Attorneys for Appellant Burlington Resources Oil & Gas Company LP 37 CERTIFICATE OF COMPLIANCE I certify pursuant to TEX. R. APP. P. 9.4(i)(3) that this Brief complies with the length limitations of Rule 9.4(i) and the typeface requirements of Rule 9.4(e). 1. Exclusive of the contents identified by Rule 9.4(i)(1) and inclusive of all textboxes, footnotes, and endnotes, this Brief contains 7,543 words as counted by the Word Count function of Microsoft Word 2010. 2. This Brief has been prepared in proportionally spaced typeface using: Software Name and Version: Microsoft Word 2010 Typeface Name: Times New Roman Font Size: 14 point /s/ Kirsten M. Castañeda Kirsten M. Castañeda 38 CERTIFICATE OF SERVICE I hereby certify that on the 20th day of October, 2015, a true and correct copy of the foregoing Brief, including Appendix and hyperlinked materials, is served on Appellee by e-mail and e-service via efile.txcourts.gov to counsel of record as described below: Mr. Brad D’Amico Mr. David J. Beck bd@canteyhanger.com dbeck@beckredden.com CANTEY HANGER LLP Mr. Thomas E. Ganucheau 1999 Bryan Street, Suite 3300 tganucheau@beckredden.com Dallas, Texas 75201 BECK REDDEN LLP Counsel for Appellee PetroMax 1221 McKinney Street, Suite 4500 Operating Co., Inc. Houston, Texas 77010-2010 Counsel for Appellees PetroMax Mr. Greg W. Curry Operating Co., Inc., Petro Texas Greg.Curry@tklaw.com LLC, and CH4 Energy II, LLC Mr. Gregory D. Binns Gregory.Binns@tklaw.com Mr. Jesse R. Pierce Mr. Richard B. Phillips, Jr. JPierce@pierceoneill.com Rich.Phillips@tklaw.com Mr. Brian K. Tully THOMPSON & KNIGHT LLP BTully@pierceoneill.com 1722 Routh Street, Suite 1500 PIERCE & O’NEILL, LLP Dallas, Texas 75201 4203 Montrose Blvd. Counsel for Appellee Woodbine Houston, Texas 77006 Acquisition, LLC n/k/a MD America Counsel for Appellee TexCal Energy LLC Energy South Texas, LP /s/ Kirsten M. Castañeda Kirsten M. Castañeda 39 No. 06-15-00044-CV IN THE SIXTH DISTRICT COURT OF APPEALS Burlington Resources Oil & Gas Company LP, Appellant, v. PetroMax Operating Co., Inc., Woodbine Acquisition, LLC, Petro Texas, LLC, Ch4 Energy II, LLC, and Texcal Energy South Texas L.P., Appellees. On Appeal from the 12th Judicial District Court Madison County, Texas, Cause No. 12-13130-012-10 APPENDIX TO BRIEF FOR APPELLANT Tab 1975 Letter Agreement (CR:589-625) ..................................................................... 1 1994 Assignment and Bill of Sale (CR:1029-34) .................................................... 2 Order Granting Defendants’ Motion for Summary Judgment on Title Issues (CR:1617) ...................................................................................................... 3 Order Denying Burlington’s Motion for Partial Summary Judgment Seeking Various Declarations (CR:1618-19) .......................................................... 4 Order on Joint Motion to Sever and Abate (CR:1640-45) ...................................... 5 40 Tab 1 Tab 1 ' ,_ .. : BUTTES RESOUHCES COMPANY SOUTHWEST DlVlSJbN TELEX: 1100 MILAM MAIL] NG ADDR£55 '71!12:.?.:97 P. 0. BOX 20&7 SUITE 733 HOUSTON, TEX,t.S 7700 I HOUSTON, TEXAS 77002 (713) 2Z~.i414 January 7, 1975 Mr. 'lhomas E. Scott Aztec Oil & Gas Company 2000 First National Bank Building Dallas, Texas 75202 Re: Drilling and Joint Operating Agreement - Aztec Oil & Gas Gompwy 00-660 - So. Zulch Prospect Madison, Brazos and Grirhes Cos., Texas Dear Mr. Scott: Buttes Resources Company (hereinafter referred to as "BRC") owns an undivided one-half (1/2) working interest in and to the oil and gas lea.ses. described. and 'r.eferred. to in. Exl;jib;Lt "A" attached hereto and made a part hereof, which leases and the lands covered thereby are referred to herein as "said leases". You have expressed' a desire to participate with BRC in the drilling of a test well in search of oil or gas subject to the terms and conditions hereinafter contained, and this letter, when accepted by you in the space hereinbelow provided, shall set forth the terms of our agreement concerning the drilling of such test well and the operation and development of said leases. - I. Prior to comnencing drilling operations of the test well, BRC shall ·cause title to the tract of land upon which such test well is to be drill- ed to be examined by an attorney of its choice. II. BRC agrees to furnish you the following information: A. A plat on which said leases and the proposed location of the test well are noted. 589 . ·1.· Mr. Scott -2- January 7, 1975 B. The estimated cost of drilling the test well to 9,200 feet, including the cost of all open hole logging Which will be condUcted. Such estimated costs are set forth on the author:ization for expenditure (ARE;); attached hereto ,
171 S.W.3d 651L__ _ _ _ days from receipt of tiUe report for this purpose. If t ttle to any lease, or oil and gas interest, is finally rejected by the examining attorney, all parties- s then be asked to state in writing whether they will waive the title defects and ac~t the leases o · ter'ests, or ':"hether they will ~tand on the attorney's opinion. If one or more parties refuse to waive t' detects. this agreement shall, in t~at case, be_ terminated and abandoned, and all abstracts and title pers shall be returned to their senders. If all title.s are approv~ .by t~ enmining at~ torneys., or accepted by all partieS, and if' all leases are accepted as to primary terms, royalty provisions, drilli. obligations and s-pecial burdens, all subsequent :provisions ot this agreement shall become operative B. Failure of Title: A«or aP ti\les aFe ap~'£9" e~ SF a:ae'O'p•o;! 1 Any defects ot title that may develOp shall be the joint re- sponsibility of aU parties and, if a title loJi$ occurs, it shall be the lo~ of all parties, with eaeh bearing its pro- portionate part of the loss and 0! any liabilities incurre~ in the loss. If such a loss occurs, there· shall be no change in, or adjustment of, the interests of the patties in the remaining portion of the Unit Area. C. Loss o[ Leases For Other Than Title Failure: If any lease or interest subject to this agreeme11t be lost through failure to develop or because express or implied covenants have not been performed, or if any lease be permitted to expire at the end of its primuy tenn and not be renewed or extended, the loss shall not be C f title and all such losses shall be joint losses. and shall be borne by all parties in proportion to their interests and there shaU be no readjust- ment of interests in the remaining portl.on of the Unit Area. 3. lRJLEt...SBB BIL .um GA:S IH'f'EBES'J!S the purpose of this agreement as if it were a leased interest under the !ann of a· s ease attached as Exhibit "B" and for the primary term therein stated. As to ests,. the owner shall receive roya1ty on to,~.sJ'-'"hal1lrgwasu!l.e;a;s;e attached hcr.eto as Erl\ibtt ''B". Such party shall, however, be of this agreement relating to lessees, to the extent that it ow~s 4. INTERESTS OF PARTIES Exhibit "A" lists all of (he parties, and their :respective petcentagtf! or fx:actional interests undel thiii agreement. Unless cllanged by, other provisions, all costs and liabilities lnc~d in operations under this con- tract shall be borne and paid, and all equipment a,nd material acquired in operations on the Unit Area shall be owned, by the parties as their interests are given in Exhibit "A". All productlon of oil and gas from the Unit Area, subject to the payment of lessor's royalties, shall a:J.so be owned by ihe parties in the samt- manner. -·- "Joint Los&" 600 A.A,P.J.:. FORM 610 ' " . U the_ futeres:t of any party in any ·.oil and gas lease covered Qy this agreement is subject to an overriding royalty, production _payment, Or other charge over and above the usual one .. eigthh ( Ml) royalty, Such party shall assume an(i alone bear all such excess obligations and shall account for them t_o th~ oWners: tbeteof out of. its share of the working interest production of the Unit. Area. 5. OPERATOR OF UNIT Buttes Resources Company _______________ shall ---::C.:..:C:..:C:::::.::.::::_c::.::r::::e:..._ be tl\e Operator of the Unit .Area, and Shall ~ontlucr and direct and haVe full control ot all operations on the Unit Area as per- mitted and required by; and within the limits_ of, this agreement. It shall conduct all such operations in a good . and workmanlike manner, but it shaH have no liability as Oper.ator to the other parti~s for losses sustained, or liabUities _Incurred, except such as may result froril gross negligence Or from breach of the provi~ions of tbis agxeetnent. 6. EMPLOtEl:.S The number of employees and their sel~ction, and the hou-rs of labor and the compensation for ~ervices performed, shall ~ determined b:f Operator. All emplOyees shall be the- employees et Operator. On or before the'"·---- day of _ _ _ _ _ _ _ _ _ _ 19 _ _! Operator .shall corornence t 1- ing of a well for oil and gas in the following location: and shall thereafter continue the drilling of the well with due diligen unless granite or other practically impenetrab substance .is encountet·ed at a lesser depth or unless all parties agree to complete the well at a lesser -d Operator shall make reason e tests ol all formations encountered during drilling which give indica- tion of containing oil and g n quantities sufficient to test, unless thi4 agreement shall be limited in its ap- plication to ~ specific maWm or formations, in which event Op-eratur shall be required to test only the formation or to co.tions to which- this agreenJent may apply. perator's judgment the- wen wlll not pr.oduee oil or gas in paying quantities, and it wishes to abandon the tetit as a dry hole, it shall firSt secure the consent ot all parties to the plugging, and the • 8, COSTS AND EXPENSES EXcept as herein otherwise specifically provided, Operator shall promptly pay and discharge aU costs and expenses_ incurred in the developmetlt and operation of the Unit Area pursuant to this agreement and shall charge each of the parties hereto with their respective proportionate shares upon the -coSt and expense basis provided in the Acco\lnting Pr~cedure attached hereto and marked Exhibit ''C". If any provision o( E~ hibit "C'• should be inconsistent with any provision contained in the body of this agreement, the provisiOns in. the body of this agreement shall prevail. Operator, .at its election, shall have the right from t,ime to time to demand and reCeive from the other parties payment in ad'Vance of their respective shar.es of the estimated amount of the costs to be incurred in a:perations hereunder during the next SUC(Ieeding month, which right may be exercised only by submission to each such party of an itemized statement of sud). e$Umated costs, togetb~T with an invoiCe for its S}lare there- of. Each such statement and invoice for the paym~nt in advand! of .estimated costs shall be submitted on or before the 20th day of the next preceding mont-h. Each: party shall pay to Operator ifs proportionate share of. such estimate within fifteen (15) days after such esthna~ and invoice is received.. If any par_ty fails t~r its 0 share of said es-timate within said time, the amount due shall beaT interest at the rate of.:N. percent( per annum until paid. Proper adjustment shall be made rno»thly between advances and actual cost, to the end that each party shall bear and pa'y its. proportiOnate shate· of actl.ltl1 cost$ incurred, and no more. _,_ Revjsed 1967 601 9. OPERA':\'OR'S LIEN Operator is given a first and pref-erred lien on the interest ot each party covered by this contract, and In each party's interest ln oi1 and gas produced and the proceeds thereof, and upon each party's interest in ma- terial and equipment, to secure the payment Of a:ll sums due from each such party to Operator, In the event any party fails to pay any amount owing by it to Ope•ator as its share of such costs and ex'pense or such advance estimate within the time J.irnited for payment thereof, Operator, w~thout prejudice to . other elj:isting remedies, is authorized, at iU election, to collect from the: purchaser or Pu•chasers Of oU or gas, the proceeds accruing to the working interest or interests in the Unit Area of the delinquent party up to the amount owing by such party, and each purchaser of oil or gas is authori~ed to rely upoh Operator's statement· as to the amount O'W'ing by such party. In the event of the neglect or failure of any non-operating party to promptly pay its proportionate part of the cost and expense o! development and operation when due-, lhe other non-operating parties and Operator; within thirty (30) days after the rend.ition of s_!:atements therefor by Operatot", shall proportionately contribute to the payment of such delinquent indebteCiness"'and the non~operatin&: parties so contributing shall be entitled to the same lien rights as are granted to Operator in· this section. 'Upon the payment· by such delinquent or . defaulting party to Operator of any amount or amounts on such delinqu.entindebt~dneSs, Or upon .any recovery on behalf of the non-operating parties \lnder the lien conferred aboVe, the amount or amounts- so paid or rep covered shall be· distributed and. paid by Operator to the other non-op.erating parties .and Oper~tor propor- tionately in accordance with the contributions theretofore made by them. 10. TERM OF AGREEMENT This agreement shall remain in full force and effect for as long as any of the oil and gas leases subjected to this agl'eement remain or are continued in force as to any part of the Unit Area, whether by production, ex- tension, renewal or otherwise. ,.... ;,.o&,_..,...,..,,....,._.,.........,....,,._y,,_.;.,..,¥<'1l- rl rn'iiW' EXHIBIT .. c ,. I Attached to and made a part ot .. .21?:..£~.~-~~e~me.nt - - - - - - I -----------------------·----------·---- ACCOUNTING PROCEbURE JOINT OPERATIONS L GENERAL PROVISIONS 1. Definitions "J"oint Account" shall mean the account showing the charges and credits accruing because ot the Joint Operations and whi<:h are to be shared by the Parties, "Joint Property" shall titean the real and personal property subject to the agreement to wblch this. Accounting Procedure is attached. - t•Joint Ope-rations" shall mean ,aU operation's ·necessary or proper-for the development, operation protection and ma-intenance of the Joint Property. ' "Operator" shall mean the party designated to conduct the Joint Operations. "Non-Operator_s" shall mean the parti~ to this agreement other than the Oper!ltor. ''Parties" shall mean Operator and Non-Operators, "Material" shall m·~an personal property, equipment or supplies acquired or held tor use on the J.oin.t Property. "Controllable· Material" shall be defined as set forth uhder the subparagraph selected below: A. [ ] Material which at the time is so classified ID the Material Classification Manual as most recently rec- or.nmended by the Council of Petroleum Accountants Societies· ot. North. America. B. [X] Matetial which is ordiJlarlly so <:lassified _and controlled by Operator in the conduct of its operaticsns. List shall be funrlshed Non-Op~ators upo.n request. 2. Statements and Billings Ope~tor shall bill Non-Operators on or be1ore the last day of eaeh month --for their proportionate share ot costs and expenses for the preceding month. Such bills will be accompanied -by statem~nts reflecting the total charges and credits as set forth under the subpar!lil""aph selected below: A. [ ] Statement in detail of all charges and credits to the Joint Account. B. [X] Statement of all charges and credits to the Joint Account, summarized by appropriate- classifications indleative of the nature. th-ereof. C. [ ) Statement of all charges and credits to the Joint AccoUnt, swnrnarized by appropriate dassification indicative of the. nature thereof·, except that items of ControllAble Material md unusual charges ·and credits shall be detailed. S. Advances and "Payments b;y "Non-Opcntors Unleu otherwise provided tor in the agreement,_ the Opetator may require the ]ion-Operators to advance their share of estimated cash outlay for the succeeding .month's operation, Operator shall adjust each monthly billing to reflect advances received from the Non-Operators. Each Non-Operator shall pay its proportion of aU bills within fifteen (l~) days after receipt If payment is not made witlUn sueh time, the unpaid balance shall bear interest monthly at the rate of ten per cent ~lO'f'0 ) per annum or the maximum contract rate ~ermitted by the applicable usury laws in the state in which the Joint Property is located, whichever is the lesser. 4. Adjustments Payment of any such -bills shall not prej.udice the right of any Non-Operator to protest or q'Uestion the correctness thereof; provided however, all bills and statements 'rendered to Non-Operators by Operator during any calendar year shall conclusivey be presumed to be true and co·rrect af~r twenty-four (_2.4) months following the end of any such calendar year, unless wi~ the said. twenty-four ~2.4) month period a Non-Operator takes written exception thereto and J?B-kes claim on Operator ~or ~djustment. No adjustment favcir~ble to Operator shall be made- unle$ it is made within the same prescri~d period. The. provisions of this paragrap)t shall not prevent adjustments. resulting from a physical in-ventory of the Join,{;- Property as provideQ. for in Section vn. 5. Audits A Non.-Opet:ator, upon notice in wtiting to "Operator and aU other' N"on-Operatot:s, sb~l have the ri·ght 'o audit Operator's accoup.t.s and recor&J relating to the acco1-1nting hereunder for any calendar year within the twenty-fOllr (2.4) JllOnth period following tl"le _end of- such calendar yea"T; provided howev-er, the making: of an audit shall not extend the time for the taking of written exception to arid the adjustments of aCCounts as provided for ln Paragraph 4 o1 this Section I. Where there ate two or more .lilon-'OPerators, the N-on-Operatori!l Sl"!-all make eyery reasonable effort to conduct joint .or s4n~ltaneous audits, in a manner which Will result in a minimum ot inconvenience to the Operator. Operator shall bear no portion of the Non-Operators' audit oost iDeurred under this paragraph unless agreed to by the Operator. 6. Appr~valby Non-Operaton Where an approval or other agreement of Non-Operators is expressly required under Paragraphs 5A.. 5B, 6A and a of Section Il:, Section III, Section V, Section VI, and Pa'ragr.al?h 4 of Section Vll,. of this Accounting Procedure and if the weement to which this· AccoUnting Procedure. is attache_d cQntains no contrary provisions: in reJ!:ard thereto, the Operator shall notify all Non-Operators and the agreement or approv;tl of a majority in interest of the Non- Operators shall be controlling' on· all Non-Operators, -1- 615 'F· . . . I'•Ii''' ' ··' ).,, .q(J H. DIRE.CT CHARGES Operator shall cJ::iarge. the Joint Accouht with the following items: 1. Rentals and Royalties Lease rentals and. x:oyalties paid by Operator for the Joint Operations. 2. Labor A. (1) Salaries and wages of Opetator's employees directly employed on the Joint Property in the conduct of Joint Operations. (Z) Salaries of Arst-level supervisors in the field if such charges are excluded !rom overhead rates in Option A of Section m. (3) Salaries and wages of technical employees temporarily assisned to and directly employed on the Joint Property if such charges are excluded from overhead rates in Option :B of Section m (4) Salaries and wage!; .ot technical employees either teml)orarily or perm~ently as.slgned to an.d directly employed in the opeJ11.tion of the Joint Property if such cilarges -are excluded from overhead rates in Option C ot. Section Ill. B. Oper~t.O".f's cost of holiday,. vacation, sickness and diSability bene!its and other customary allowances paid to the employees whost! salaries and wages are chargeable to the Joint Account under Paragraph .2A of this Section II and Paragraph rA of Section Ill; except that in the case of those employees only a pi'o rata portion of whosfl! salaries and wages are chargeable to -the Joint Account under Paragrat:~h lA of Section 10 1 not more than the same pro rata portion oi the benefits and allowances he1·ein provided for shall be charged· to the Joint Account. Cost under this Paragraph 2)3_ 11\ay be charged on a "when and as paid basis'' or by ''percentage asse:smeht" Qn the amount of salaries and wages chargeable to the J()lnt Account. under Paragraph 2A of this Se;cbon II and Paragraph IA of Section m. lf percentage as&eSsment is used, tbe rate shall be b~d on the Operator's cost ex~rience. C. Expenditures or. contributions made pursuant to assessments imposed by governmental authority. whi.ch are applicable to. Operator's labor cost of sal~ies ami wages chargeable to the Joint Account under Paragraphs 2A and 2:S of this Section n and Paragraph 1A of. Section III. D. Reasonable personal expenses of those employees whose salaries and wages are chargeable to the Joint Ac- ~unt under Paragraph 2A of this Section U and fot which expenses the enipl~ees are teiJI~bursed under Operator's usual practice. ·3. Employee Benefits dperator;s current cost of established plans for emplOyees' group life insUrance, hospitalization, pension, retire.,. ment, stock purchase, "Utrift, bonus, and other bene;fit Pians of a like nature, applicable to Operator's labor cost chargeable to the· Joint Account under Paragraphs 2A and 2B of this SE!ction II and Paragraph IA of Section III shall be chargeable as indicated in the subparagraph selected below-: A. ( ] 0perator1s actual cost. B. (XI" Operator's actual cost not to ~:xceed fifteen per cent (15%). 4. Material Material purchased or furnished by Operator for use on the Joint Property as provided under Section IV. So· far as it is reasonably practical and consistent with efficient and economical operation, only such Material shall be purchased for or transferred to the Joint Property as may be required for· irrunediate use; and the accumula~on of surplus stocks shall be avoided. 5.. Transportation Transportation of ~ployees and Materia~ necessary for the Joint Operations hut subject to the following limita- tions: A. If Material is moved tO the Joint Property from: the Operator's warehoUse or other properties, no charge shall be made to the Joint Acaojmt_ for a distance greater than the distance from the .nearest reliable supply store, recognized barge terminal, or railway receiving point where like material is normally available, unless agreed to by Operator and Non-O~erators. B. If surplUS Materi•l.is moved. to Operator's. warehoU're or other storage point, no charge shall be made to the Joint Account for a distance g"eater t.hal1 the distance to the neatest relia\;lle supply store, recognized "barg~ terminal, or railway Tll!:ceiv.ing point unless agreed to by Operators and Non-Operators. No charge shall be made to the Joint Account for moving Material to oth~r propt!rties belongblg to O:Perator, unless agreed to by Operator and Non-Operators. c. In the appllcation of Subparagraphs A and B above, there sh•ll be nJJ equalizatian of ac~al ~oss trucking costs of $100 or less. 6. Services A. The cost of contract services and utilities procured. from outside ~oUrces Qther than services covered by Para- Jraph 8 of this Section II and Paragraph lB of Section UI. The cost of professiopal consultant -services shall not be charged to the Joint Account unless agreed to by Operat-or and Non-Operators:. B. Use and service of equipment and facilities ·furniShed by Operator as provided in ParagraPh 5 of Section IV. 7. Darrragt;S and Lo~s to Joint Pro11erty All costs or expenses necessary for the repair or replacement of Joint Propert:y made necessary because of damages or losses incurred by ftr.e, flood, stb"rm, theft; accident; or o_tber ca';lse, except to the extent that the damag!!" or Joss could have been avoid-ed through the exerc~se of reasonable dihgence. on th~ part of Operator,· Operator· shall f!ll"nish Non-OperatorS written notice of damages or lossef iJ:~.C\.!.rred as soon as pra"ticable after a report the1·eof has been received by Operator. 8. Legal Bx,pense Ait cQsts and expens.es of handling investigating, and set~b)g Ittiga,tion ·or claims ansmg by reason of tl:te. Joint Operations or neceSsa-ry to proted or recove_r the Joint Property, inclu~g, .but not limited. ta, !ttorney's fees, court cos.ts, cost of inve~tigation or procuring evidence and amounts. p~1d m setUemen~•.or satisfachon of anys;u~h litigation or claims; provided, (a) no t:barge sh.Ul be n1ade for tl!.e serv1ces. of Operators legal staff or ot~er reg- ularly .employed pen~onnel (such services- being considcted. to be Ad,mUnstntive Ov~htad under Section Ill), unless agreed t-o by Opetator and Non-Operators, and {b) ~o ch~rge shall_ be_ made for the fees and expenses of oUtside attoljleys unless the en'lployni.ent of such attotneys lS agreed to by Operator and Noh-Op~ators. 9. Taxes All taxes of every kind and nature assessed or l~vied upon or fu co.nnection wlth the Joint Property, the ~peration thereof, ot the production therefrom:, and which taxes have been paid by the Operator for the benefit of the PartieS. -2- 616 ,-'-----;'----------------------~~~~~I - Ia~-- I Net premiums pt~id for insure.nce req.uir:ed to be carried on the Joint PropertY fot the protection of the Parties. In the event Joint Operations 11-re conducted in a state in which Opera_tor may act m self-insurer for Workmen'$ I Compensation andjo:r Employers Lla.bility unde~ the respective stnte's l.a:wS' Operator may at its election include ' the risk under- its self-insurance prcrgram ·and in that event, Operator shall i~cJude a charg~ therefor on th~ follow- ingbasis: ---·--·---------~e£_~-~---~~---~~E-~-~~p~~---~~_,l;.?~_f::~--~~~-~::.~~E:.~~~~L~~:.~.?!.~---·-------------------·---------- -------·--·-·········· ····-·-----···-····---·-------------- -----·-····-··-- .... ··--------~-- ······-··---------------·--------·-----·---- ··-----··--··········-----·· ······---··--··-······--·-·-·-----·····--········-··-············ --·-------···- ·-···-···-···········---··-···---·----· 11. Oth~tr Expenditures Any other eXpenditure not covered or dealt with In the foregoing provisions of this Section II, or in Section Ill, and which is incurred by the Operator for the nece:sl)ary and proper conduct ot the Joint Operations. lll. INDIRECT CHA~ES Operator may charge the Joint Account. for indirect costs either by use of an allo~ation of district expenSe items plu$ the rate for administrative overhead, and phu the warehousing charges·, all as ptovided klr in Paragraph 1 of this Sec- tion lll or by combining all three ?f said items under the r:a~es provided for in Paragraph 2 or 3 o% thb Section ill, .u indicated next below: OPERATOR SHALl. C"6ARGE INDUlEC:r COSTS TO THE JOINT ACCOUNT· UNDER THE TERMS OF: [ ] Paragraph 1. (District Expense, Admini$trative Overhead and Warehousing") [X] Paragraph 2. (Combined ltates - Well Basis) [ ] Paragraph 3. (Combined Rates - Percentage Basis) The cost and eXpense ot services from outside sources in C()nnection with matters of taxation,. traffic, accounting or matters before or involving governmental agencies shall be considered as included in the overhead rates provided for In the above selected Pa1:agraph oi this Section m unless such caSt and expense are agreed to by Oper.atol' and Non- Operators as a direct charge to the Joint A-ccount. THE OVERHEAD RATES PROVIDED FOR IN ANY OF TBE PARAGitAPRS SELEOTE·o AB.OVE A. [ ] shall [XJ shall not include salaries and personal expenses of first-level s~pervisors in the field. B. [ J shall [J(] shall not include salaries, wages and personal expenses -of teehni<;al employees temporarily as- signed to and directly em{)loyed on the Joint Property. C. [ Xl shall ( ] :shaU not include salaries, wages and personal exp.enS!Os e>t techni~l employe:e;s ~ithe~; tempo- rarily or permanently assigned tel and dil'ectly em.i?loyed in the ope;ation of the .::roint Propert;Yo 1. District Expense, Administrative Overhead and Wareltousing A. District Expense Operator sh<~ll charge the Joint Account with a. pro rata portion of the salaries, wages and expem;es of Operator's production superintendent and other employees serving the Joint Property and ather properties of the Operator in the same operating area, whose time. is not allocatefl Do!plh"} "Eoch"W411 Ht11-l fM All Wolh; 0T¥!" Tu (2) [ ] Percentage Basis PERCENTAGE BA;.SIS Development: ···--··-··-----·· Percent· ( ·%) ot·the cost .Of development ot the JOint Property exclusive of cost.~ pn,- vided under Paragrapb 8 of. Section .n and. all salvage .credits. Operating: -----··--··---······· Per:cent ( %) of the cost of operating the Joint Pro~~ty e.:11:du~ve of Costs _-provided under: Paragnphs 1 and ·8 of Section II, all sal:va~e credits:; the v~Iue of ll1.]ected subs~ces purchase_d for seconda:ry recovery and all taxes and assessments which are lev1ed, .assessed .and ;pa1d upon the Itnrtt>ral -·- interest in and to the: Joint Property. '' ------·----· J 617 r-'-·· C. Operator's Warehouse Operaling an.d Maintenance Expense [ ] Indude_d in district :expense [ ] No chnrge either dlfect or indirect ( ] Perc~tage basis (describe full)') .. ····-··+>••••·······-------·········-·······-~------···----~--------·······-·--·------ ---------····------········-----,.------· ··-------·····-····-· 2. Combine(l Rates- Well Basis Oper-atOr shall charge the Joint A-cCount for the seJ.·vices covered by Paragraph 1 of this Section III on the basis indicated below: 3. Combined. Rates- Perctmtag-eBnsis Operator· shall charge the Joint Account for Jhe services covered by Paragraph 1 of this Section III ·on the b<~sili indieated below: A. Pevelopment: .. Percent ( %) ot the cost of development erator from vendee. Any claim by vendee related to such sale shall be charged back to- the Joint Account if and when paid by Operator. VJ. BASIS OF PRICING lUATERIAL TRANSFERRED FROM JOINT ACCOUNT Material ~urchased by either Operator or Non-Operators or divided. ii)_ kind,. unless agreed to ~Y OPerator and Non- Operators shall be priced on the following l;:!asis: L New Prico Defined New pr-ice as used in this- Section VI shall be the price specified fot new Material in Section IV. 2. New MatCI'iat New Material {Condition "A"), being new Material procured for the JOint Property but never used1 at one hundred per .cent (100%) oLcurrent new price (plus sales tax if any), 3. Good Used Material Good used Material (Condition "B"), being qsed M3te.Tial in sound and serviceable condition, suitable for- reuse without reconditioning: ' A. At seventy-five per cent (7S%) of current new price ii Material was charged to Joint Attount as nC!w, or B. At sixty-five per cent (65o/c) at current new price if Material was originally charged to the Joint Account as secondhand at seventy-five per cent (75%) of new price. 4. Other Used Matel'ial Used Material (Condition "C"), at fifty per cent (SO%) of cummt new price, belD.g used Material which: A. Is not in sound and· serviceable condition but suitable for reus¢ after reconditioning, or B. Is serviceable for original function but not suit~ble for reconditioning. 5. Bad-Order Material Material (Condition "D"), no longer suitable for its original purpose without excessive repair c-ost but Usable fut· :rome other pUrpose at a price Comparab-le with that of It-ems normally used :or suOWh ---·· '·' ,.; ' \ I I \ 622 CUR\<.AN R. CAMPBELL, INC. l!tll\ tti\f'll\. Ol" ·r Ht~ SOl• I tiWl";:-;T tH;II DI~G llO\'.:noN. TliXAS 1100~ \"Till ~~.(.J).l.II'J S:O.:...rt11- ·N91\.""'fti ZULCU PROSPECT lMES COUNTIES. TEY~S l1r. W. A. NotWtl\Y 8106 Mulli.ns Houston, Texas , 77036 This letter is tO evidence and confirm an agreemen~ between you (Novotny) and the undersigned (CaQpbell) as !allows: l. (a) As used herein, the term "Existing Burdens" means all royalties and overriding royalties burdening any lease re.fcrred to he·rei.n at the.. time it is acquired by Campbell or its s\lcces.S·ors o:r assigns. (b) As u!>c.d herein, the t.erm u~.rea of Hutual lnterest 11 moans the area outlined in blue on thc plat attached h·ercto and made .a part hereof and signed by the. President of Campbell for purposes of id"entificar.ion. 2. As t.o all leases acqui;red by C:a-rupbell, its s\lcc-essor.s or assigns, on actea.ge loc.a~ed '-'!thin the Area of Mutual Interes·t. 1 N.owotny shall be assignad the following overrid-ing royalties: (i) lf the ~ist.in& Burdens are 1/Sth or less • then the over- riding royalty shall be l/24th of 8/8ths. (ii) If the Existing Durdcns are g;r·eate:r than ~/8th. but. not greater than l/Gt.h, t.hen the ovcrridin~ royalty shall be l/48th of 8/8ths. (iii) H k~x.istinr, Burdens a-re .greater than 1/6th, then Nowotny. shall not be entitled t.o s.ny ovex(iding royalty . .3. All assignments of ove:rridj:t\& toyaltiC!s to be made under t:.\\e p1·ovied.on.s hereof Shall be made·without: warranty; either expressed Or iutplied, and (·ach ctsstsnoient shall rorovide, as to each lease. that should the Lessor, tli"erein own less than the entire fee simple estar.e in the oil, ~as and other r:li.nerals in ; by si-gning t.he .attached copy hereof at the place pr:ovided and returning sallle to. Campbell. Yours ve1-y truly, C:UP.RAN R. CA.'iP.BELL, INC. /JJ ' /[• . ' ·i Cd~!1r1 (J~L''cl!<£( Curran R. Gamp.bell, ~resi-d-ent APPROVED A."iD ACCEPTED: this_;.._day of~,~i-~-' 1914. W. A. )1owotny....- ......... - .... ·~-~ .. ·-·-··-- ·---.-----~....,--~~-·---....·-----·-~··· ' ........ 624 ,· f T II: MA11:51Qt".-l .~ I t----+----:'·Ct: 'll WDUNHAM J. M ct:mt\:': 1:. c:-.~~~·~~-Etl., ,1n11 \'. .\. :~~~~;oT::\' s]•'''q nnt lDl .. . "'•'"•' . '. I ( ' I', '•(' { ( ~-\1\"!I:Xr!'':\: ·,~} :'f''':,• { , ~~-:~--L--, . \. - l --·· ·-' •. ,·.. '-'-<" -- ··---· ' ~·', ) ' ' 1 •· , t , ' ·• ·t ',. '.., · ~:.;...~··-··· .,.r·-_,-,,.,_,.r ; 'I ' ·-·- ---,- ~~~:~r·-·~:. .---_........ . . . .--~----- Il ... : - ' - ' ....... .,......- 625 -- .· Tab 2 Tab 2 ,.'\o ··; ... _.. VOL 417 ""' 709 Well Name: BUCHANAN 1, GIBBS BROS. 1, WILSON JAMES 2 AND WILSON JAMES 3 1.2235 ASSIGNMENT AND BILL OF SALE STATEOFTEXAS § § KNOW ALL MEN BY THESE PRESENTS THAT: COUNTY OF MADISON § SOUTMl.AND ROYALTY COMPANY, a Delaware Corporation, whose address i& 400 N. Sam. H<>uston Parkway Eas~ Suite 1200, flouston, Texas noso C'Asslgnor"), for and in conoiderallon of ONE flUNDRED DOLLARS ($100.00) and other good and valuable conskieration, receipt of which is here acknowledged, does hereby assign, transfer, grant ~ convey unto whose address is ("Auignee"), an of Assignor's right, tiDe and interest in and to the following: 0) The oil and gas leases, leasshold interesls, righ!a and interests a1bibutable or aBocable to the oil and gas leases or leasehold in.terests by virtue of poo6ng, unitization, communitiUtion, and operating agreementS, Hcenses, pennits, and other agreements, all more particularly described on ExhiM "A' hereto, Hmfted as to the lands and depths indicated on Exhibft "A" (collectively the 'Leasss"), together with identical undivided interests in and to all the property and rights incident thereto, including, but not limited to, a!\ rights tn, to and under all agreements, product purchase and sale contracts, leases, permits, rights..of-way, easements, licenses, farmouts, options, orders, and other contracts or agreements of a similar nature to the extent same relate to the Leases; (ii) The wells, equipment, materials and other personal property, fiXtures and improvements on the Leases as of the EffecUve Date (as hereinafter def~ned), app1.:.1rtenant thereto or used or obtained in connection with the Leases or with the production, treatment, sale or disposal of hydrocarbons or waste produced therefrom or attributable thereto, and all other appurtenances thereunto belonging (the "Equipment"); provided, however, Equipment shall not include vehicles, communications equipment, tools, warehouse stock, compressors or leased equipment located on the Leases; (iiij All unitization, communltization, pooJing, and operating agreements, and the units created thereby which relate to the Leases or interests therein described on Exhibit "A" or which relate to any units or wens located on the Leases, including any and all units formed under orders, regulations, rules, and other offiCial acts of the governmental authority having jurisdiction, together with any right, title and Interest created thereby in the Leases; and (iv) All of Assignor's rights to claim revenues or gas resulting from any underproduction attributable to Assignor's interest in the Leases. Al·of Assignor's interest in the above-mentioned assets is herein collectively mferred to as the "Interests" . .Assignpr reserves and retains unto itself from the Interests those certain lands, leases. ;properties, interests, leaSehold rights, depths or formations as .specifically noted and reflected on:~ibit ~'A" ,and the right of joint use of any agreements ass1gned hereunder where needed f_or tAe exp~n, d~Welopment, and operation of any rights or acreage (either horizontally or \fel'ti.e:a&ly) retaine(i by Assignor or where needed in order to exercise ancillary rights in, or for . - to, adjoinlng or nearby properties .owned by Assignor. TO HAVE AND TO HOLD the Interests unto Assignee, its successors and assigns, forever, :s.u_bject to -the follow!~ terms and conCrtions: SM:ASSIGNR.DOC ~~8130194 11-~\§0rract EXHIBIT Copy of OrigineJ Rled in Madison County Clerk's Office z~ 1029 - .. .... ,. , - •., 1. This Assignment is a~pted subject to, and Assignee agrees to assume and perform any and all of the iabl6ties and obUgations. or allegad or thraatonad liabilities and obligations, of Assignor under the Interests and existing on and gas teases assignments, operating agreements, product purchase and sale contracts leases' permits, rights--of-way, ficenses, easements, options, orders, and a~y oth.,; agreements or contracts ~utable to and affecting tha Interests, Including but not 1111'11ted to, any and aD obligations (I) to pay and deiver royalties, overr1dlng royelties, non-participating royalties, and other burdens on production, (ii) In connection with or arising out of balancing of overproduction or underproduction from the Interests and (~i) in compliance with aU laws and governmental regulations wtth respect ~ the Interests including, but not llmltad to, the lawful plugging and abandonment of oil and gaa wells and the restoration of the surface of the land as nearly as possible to its prelease condition, whether or not such liabilities and obligations, or aUeged or threatened liabirlties and obligations, are caused by Assignor's negligence and 'Mlether or not such liabilities and oblgatlons, or alleged or threatened liabiUUes and obligations, arise .during the period of, or from, or In connection With Assignor's ovmership or operation of the Interests. Without limltatlon of the foregoing, Assignee agrees to assume and perform any and aD of the UabilitieA and obligations, or aUeged or threatened liabilities and obligations, of Assignor for claims, losses, damages, costs, expenses, diminutions In vatue, suits, and causes of action of any ldnd or character, with respect to the environmental condition of the Interests, regardless of when the events occurred that caused such condition to exist and whether or not caused by or attributable to Assignors negligence. Assignee shall, to the fullest extent permitted by law, protect, defend, indemnify and hold Assignor and its directors, officers, employees, agents and representatives of each of them, harmless from and against any and all claims, losses, damages, casts. expenses, diminutions in value, suits, causes of action or judgments of any kind or character with respect to any and all liabilities and obligations or alleged or threatened liabilities and obligations, including, but not limited to, any interest, penalty and any attorneys' fees and other costs and expenses incurred in coMection with Investigating or defending any claims or actions, whether or not resulting in .any liability, attributable to or arising out of (I) ownership or operation of the Interests subsequent to the Eff.ectlve Date, and (ii} Assignee's assumption of any !iabfiity or obligation In accordance with this paragraph. THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED FOR IN THIS ASSIGNMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, OR OTHER FAULT OF ASSIGNOR. 2. THIS ASSIGNMENT AND BILL OF SALE IS EXECUTED, DELIVERED, AND ACCEPTED WITHOUT ANY REPRESENTATION, WARRANTY OR COVENANT OF TmE OF ANY KIND OR NATURE, EITHER EXPRESS, IMPLIED OR STATUTORY. THE INTERESTS ARE BEING CONVEYED AND ASSIGNED TO AND ACCEPTED BY THE ASSIGNEE IN THEIR "AS IS, WHERE IS" CONDillON AND STATE OF REPAIR, AND WITH ALL FAULTS AND DEFECTS, WITHOUT NN REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR NATURE, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MARKETABILITY, QUALITY, CONDITION, MERCHANTABILITY, ANDIOR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED. IT IS UNDERSTOOD AND AGREED THAT ASSIGNEE SHALL ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE IS" CONDITION AND STATE OF REPAIR AND WITH ALL FAULTS AND DEFECTS, INCLUDING, BUT NOT LIMITED TO, THE PRESENCE OF NATURALLY OCCURRING RADIOACTIVE MATERIAL (NORM). IN ADDITION, ASSIGNOR MAKES NO REPRESENTATION, COVENANT OR WARRANTY, EXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY OR COMPLETENESS OF NN DATA DELIVERED TO ASSIGNEE WITH RESPECT TO THE INTERESTS, OR CONCERNING THE QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF AtfY, ATTRIBUTABLE TO THE INTERESTS, OR THE ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS, OR THE PRICES WHICH ASSIGNEE IS OR WILL BE ENTITLED TO RECEIVE FOR ANY SUCH HYDROCARBONS. 3. TO THE EXTENT APPLICABLE TO THE INTERESTS OR NN PORTION THEREOF, 2 'I ATrue and Correct (---~------~--~~-----------------------~--yct~O-ri~-M-1---- Filad in Madison County Clerl<'s Office ~· 1030 , .•.>.:..,: ' ... vo: 417 "" 711 ASSIGNEE HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), TEXAS BUSINESS & COMMERCIAL CODE. -4. This Assignment and Blll of Sale shall inure to the benefit of and be binding upon the parties hereto, their heirs, successors and assigns. 5. This Assignment end Bill of Sale may. be executed by Assignor and Assignee in ony number of counterparts, each of which shan be deemed an original instrument, but all of which together shaJI e;onstitute one and the same instrument. 4"'- IN WITNESS WHEREOF, this instrument is executed the-.:!_ d&y of September, 1994, but shall be etrecthle as of lhe 1st day of September, 1994 (the "Effective Datej. ASSIGNOR SOUTHLAND ROYALTY COMPANY ATTEST: By~ ~--------------- Name: Kent Beers Title; Attomey-jn-fact ASSIC¥NEE ~S>s> ~"'L~pu.'-,t'j <) c'S>~~~. . ~. ATTEST: ~--------------- ·i i I A True and Correm Copy of OriginaJ Aled in MadisOn County Clerk's Office 1031 ·------~- - 1 'IOL 4.17 t"'b 712 I STATE OF TEXAS § § COUNTY OF HARRIS § BEFORE ME, the undersigned au1hority, on this day personally appeared Kent Beers, Attorney-in-Fact for Southland Royalty Company, a Delaware Corporation, known to me to be the person whose name is Subscribed to the foregoing Instrument, and acknowtedged to me that he executed the same for the purposes ancl consideration therein expressed and in the capacity therein &tilted. /7/J GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this~ day of September, 1994. CORPORATION ACKNOWJ EOGMENT STATE OF TEXAS § § COUNTY OF HARRIS § BEFORE ME, the undersigned authority, on this day personally appeared ~==;;;==;;=~;;=;,;;;:;;;=;=~;;;;~;:;;~~~~~~~~ ~ known to me to be of the person and officer whoSe name Is subscribed to the foregoing instrument. and acknowladged 1o me that he/she executed the same for the purposes and consideration therein expressed and in the capacity therein stated as the act and deed of said corporation. GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this _ _ day of September, 1994. MY COMMISSION EXPIRES: Notary Public in and for the S1ate of Texas ATTORNEY-IN..fACT STATEOFTEXAS § § COUNTY OF HARRIS § BEEOR~ ME, the undersigned authority, on this ~}"'rsonally,JI!'~ed~~ ~1( I l )')t, , Attomey· -Fact for ~ ~I llalll!ln/J known to me to be the person whose name is subscribed to the foregoing Instrument~ :1 acknowledged to me that sheJhe executed the same for the purposes and consideration therein expressed and In the capacity therein stated. GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this & day of September, 1994. 4 ATrue and Gorrec\ Copy at Original Filed in MadisOn -~ Gountv Clerl<'s Office . J. ---,------~-____.....,.-.,~I '.. \· 1032 ' ·--------- EXHIBIT A Page 1 or E:dl1bit CO filE IlL ..•..• lYPE lNSTitlKNT .•... IMST DAlE. GRAifltfllESSO!t•..•.•••...•• ............ GRNITEE lESSEE ............................... RECilmlNB DATA. LEGN. DESCRlPTlOII .............. ,, ......... . OZ1187QO Oll NIO Gt!S LEASE 10/08114 HENRY K.. llOOK, ET UX CURRAII R. CAMPBELL. INC, 2:11661 BRAZOS 943 IGES, IIH IR LESS. t£SCRIBEO IIIIDSE. COONTY ( I 021186110 02.118900 OIL NIO GAS l.EASl OIL NO GAS LEASE 08/lA./74 08/29/74 GIBBS BI!OD£iiS Alii CCI4PAHY JAI£5 D. WILSON, IND. & IND. EX. CUJIAAH R. CAMPBEll. lltC. CURRAH R. CAMPBEll. INC. 203/414 tMnlSO. 184.1 ACRES, lfliE OR lESS, DESCRIBED IN crutnY ~·~LEASE. l£ASE. 203/-464 HNJISON 20n.33 ACREs. NlRE OR USS, DESCRIBED IN 02119500 Oll NtD &AS -LU.SE 10111174 RA'OOND B. B~. ET UX COORAN R. CAMPBELL. IN.C. 211679 BRAZOS COUHTY 222.06 ACA!S, tO\E OR LESS, DESCRIBED IN \.EASE. 1 LESS H«J EXCEPTED FROH 11£ AIIOVE ME TilE lA.1m ATlRIBliTABLE 'Rl 1liE tl. K. 0004:1/EU.S.J.. JAMES D. Wll.SOH #4 ~!ELL MD ll!E. BUCIIAIWI w: wru.. J ,j 'I I j ASSOCtmP WEl!.S • PROPERlY MJIIBER ••• DP WELL HUMBER WELL NI\ML .................. , , ••••..•••••••..••. • LOCATION ......... ························· 21188 GIBBS BROS 1 A. NIJNLEV SvY., A·l76 21189 21189 ""' 1409,81464 85900 WILSOM JN£5 0 13 Wll.SOM JAHES 0 12 JESSE K. OAVIS SVY. A·103 J£SSE K. DAVIS SVY., A-103 twUllN NEVELL£ SVY .. A-185 21195 6900 BOOW!AIIl ~ P- c ;!:': -.l g:ng» c 8:~ ~3's_ a; ;;' "'" ~ c..:> Q~o~ c. ::l. (0 ~!ii~ §' I ~~I!!\) '6 ·, 1033 ~·----~---· _ .. --· .... _;.., ' - ... -·~·-·'"'"···~.~----. - .!< .• FILED IJ~' a/ • . $£P 2 I 1994 ~ :,~:~~Fo;•;:,SON }G 'i•,;~if.:~\lq,LEMAN, O«k of th• CouniY c.,.,'"'"' I for said County do hervbv certify that the ab(We \n~~L;~~~~:i:~ ~~d ihe ~- ,day o f ¥ - - . 19 9. ¥.'. "" fllodfoc """din mv offi" tho -::~- "'v of~ 19. :·'~'· .. " . . /1,·: ". 'i'. .... o'dock .. ,(J.....m.anddiJiyrecordedthe, ....~ayof. - - - •· ... 19 .. f. ... at ...~P.6...... o'dock /J ... "'1: A~(:;A.•I! •.I.Jl acordsohaidCountv,inVol.., .m.in . •W};: ~- .,-,-~7 "Q" • . , .. , .. , ofPatp!S ,ll ./. WITNESS my hand and seal of said office, this~~-~- .dtH of. ~;(j;A 4!4"""".... .,,19 .?f. ... , f)!k:_ln.~ County aerk., Madison County, Texil$ ,_. 1034 Tab 3 Tab 3 No. 12-13130-012-10 BURLINGTON RESOURCES OIL & GAS § IN THE DISTRICT COURT OF COMPANYLP, § § Plaintiff, § § V. § § PETROMAX OPERATING Co., INC., MD § MADISON COUNTY, TEXAS AMERICA ENERGY LLC § f/k/ a/WOODBINE ACQUISITION LLC, § PETRO TEXAS LLC, CH4 ENERGY II, § LLC, and TEXCAL ENERGY SOUTH § TEXAS, LP, § § Defendants § 12TH JUDICIAL DISTRICT ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT ON TITLE ISSUES On this day came on for consideration Defendants Motion for Summary Judgment on Title Issues (the "Motion"). This Court having considered the Motion, all responses and replies, together with any exhibits, and the arguments of counsel, has determined that the Motion should be, and hereby is, GRANTED. It is therefore, ORDERED, ADJUDGED, and DECREED that: 1. Burlington does not own any interest in the AMI described in the 1975 Letter Agreement made the basis of this suit; and 2. The AMI provision in the 1975 Letter Agreement has terminated. Signed this /0 day of--+'~""------'--'-'-'----'----~· 2014 ~ ...1 Filect~his ' "- Day of i ,r_-~•'iL • I ,20/C,· , ' \e at~··'· ~ . · 1• 0<. ~O'clock Judge Presiding -l t{_. /.5 ,_ - . Cieri< L<_ c · - t2fh 1278th Judicial District c 0 ,, . MADISON COUNTY' r",: c C.\.. ..._. - - - - - - D·s•·· · 1617 Tab 4 Tab 4 No.12-13130-012-10 BURLINGTON RESOURCES OIL & GAS § IN THE DISTRICT COURT OF COMPANYLP, § § Plaintiff, § § v. § § PETROMAX OPERATING Co., INC., MD § MADISON COUNTY, TEXAS AMERICA ENERGY LLC § f/k/ a/WOODBINE ACQUISITION LLC, § PETRO TEXAS LLC, CH4 ENERGY II, § LLC, and TEXCAL ENERGY SOUTH § TEXAS, LP, § § Defendants § 12TH JUDICIAL DISTRICT ORDER DENYING BURLINGTON'S MOTION FOR PARTIAL SUMMARY JUDGMENT SEEKING VARIOUS DECLARATIONS On this day came on for consideration Burlington Resources Oil & Gas Company LP's ("Burlington") Motion for Partial Summary Judgment Directed to Defendants Woodbine and PetroMax and Seeking Declarations that: 1) the Area of Mutual Interest of the January 7, 1975, Letter Agreement Remains in Force and Effect, 2) Burlington Jointly Owns a Leasehold Interest Within the Area of Mutual Interest and 3) Burlington's Rights Under the 1975 Letter Agreement and AMI Are Not Subject to Reduction or Limitation Based on the Amount of Burlington's Leasehold Ownership (the "Motion"). This Court having considered the Motion, all responses and replies, together with any exhibits, and the arguments of counsel, has determined that the Motion should be, and hereby is, DENIED. ,_!._ ) i ',......_ Filed Tpis 1 Day -~ of (~ -e , 20 I~· ·.. \ at£. ~l~:L m O'clock '//..:1 oc.J · ~ · . Clerk 12th /278th Judicial District Court 1618 -1- MADISON COUNTY, TEXAS _ _ _ _ _ _ Deputy Judge Presiding 1619 -2- Tab 5 Tab 5 Mar131512:48p p.4 CAUSE NO. 12-13130-012-10 BURLINGTON RESOURCES OIL & § IN THE DISTRICT COURT OF GAS COMPANY LP § § v. § § PETROMAX OPERATING CO., INC., § MADISON COUNTY, TEXAS WOODBINE ACQUISITION, LLC, n/k/a§ MD AMERICA ENERGY, LLC, § PETRO TEXAS, LLC, CH4 ENERGY II,§ LLC, and TEXCAL ENERGY SOUTH § TEXAS L.P. § 12TH JUDlCIAL DISTRICT ORDER ON JOINT MOTION TO SEVER AND ABATE The Court, having considered the Joint Motion To Sever And Abate, has concluded that the motion should be granted and hereby renders the following order: It is hereby ORDERED, ADJUDGED and DECREED that the following claims asserted in this case by the following parties are hereby severed and made the subject of a separate action styled Burlington Resources Oil & Gas Company LP v. PetroMax Operating Co. Inc. Woodbine Acauisition. LLC n/kla MD America Energy, LLC, Petro Texas, LLC. CH4 Energy II, LLC, and TexCal Energy South Texas L.P., in the 12th Judicial District Court of Madison County, Texas, and having docket number 12-13130-012-10-A: Filed This / q Day ot 7)~ ,20 IS at.~mf'clock ~ .•• Clerk 12th I 270th Judlcl~;~l District Court 1640 MAOISON COUNjf. TEXAS • . "' -·- ~ s~ANNED Mar 13151248p p.5 a) Counts 1, 2, 4 and 5 of Defendant MD America Energy, LLC f/k/a Woodbine Acquisition LLC's First Amended Counterclaim, filed on September 26, 2014; b) The following portions of Count 3 of Defendant MD America Energy, LLC f/kla Woodbine Acquisition LLC's First Amended Counterclaim filed on September 26, 2014: (1) the request for a declaratory judgment related to record ownership in the Wilson #4 Well and the Buchanan #2 Well; (2) the request for a declaratory judgment that the notices of lis pendens related to this matter filed by BROG be dissolved; (3) the request for relief under Texas Property Code section 12.008 and Texas Civil Practice and Remedies Code section 12.002 arising from the wrongful nature of the notices of lis pendens; c) Defendant TexCal Energy South Texas, L.P.'s request for attorneys' fees contained in its Plea to the Jurisdiction, First Amended Answer and Special Exceptions to Plaintiffs' Second Amended Petition, filed on September 26, 2014, and d) Defendant PetroMax Operating Co., Inc.'s counterclaims for equitable suit to quiet title and attorneys' fees in its First Amended Plea to the Jurisdiction, Answer and Counterclaim and Special Exceptions to Plaintiffs First Amended Petition, filed on June 27, 2013. The district clerk is directed to file in Cause No. 12-13130-012-1 0-A the following pleadings previously filed in this case and orders previously rendered in this case: Plaintiff Burlington Resources Oil & Gas Company LP's Second Amended Petition, filed on July 3, 2013. 1641 Mar131512:48p p.6 v2. PetroMax Operating's First Amended Answer to Plaintiff's First Amended Petition, filed on June 27, 2013. >3. Defendants Petro Texas, LLC's and CH4 Energy II, LLC's Plea to the Jurisdiction, Answer and Special Exceptions, filed on June 26, 20"13. MD America Energy's Plea to the Jurisdiction, Answer, and {/ Special Exceptions to Plaintiff's Second Amended Petition, filed on September 26, 2014 '; 5. TexCal Energy South Texas' Plea to the Jurisdiction, First Amended Answer, and Special Exceptions to Plaintiff's Second Amended Petition, filed September 26, 2014 ' 6. Defendant MD America Energy, LLC f/k/a Woodbine Acquisition LLC's First Amended Counterclaim, filed on September 26, 2014. Plaintiff's Original Answer to Woodbine's Counterclaim and Special Exceptions filed on August 26, 20'19. '8. Defendant TexCal Energy South Texas, L.P.'s Plea to the Jurisdiction, First Amended Answer and Special Exceptions to Plaintiffs' Second Amended Petition, filed on September 26, 2014. ., 9. Defendant PetroMax Operating Co., Inc.'s First Amended Plea to the Jurisdiction, Answer and Counterclaim and Special Exceptions to Plaintiffs First Amended Petition, filed on June 27, 2013. The two summary judgment orders signed by this Court on December 10, 2014 .· 11. This Order on Joint Motion to Sever and Abate. 1642 SCANNED Mar131512:48p p.7 The effect of this order is to render final for appeal the summary judgment orders signed by this Court on December 10, 2014. It is ORDERED, ADJUDGED and DECREED that the severed case, Cause No. 12-13130-012-1 0-A, is hereby abated during the pendency of the appeal by Burlington Resources Oil & Gas Company LP of this Court's December 10, 2014, orders. Dated: ___,_I_,_7-..L~--=.:..::.:.__ _ _ _ , 201s DISTRICT JUDGE PRESIDING APPROVED AS TO FORM: HAGANS BURDINE MONTGOMERY & RUSTAY, P.C. 2 /- ' l/ By: -F...:.~:..!.e~~H~a-g_a.,t.ftr-;;,-r, ;:·'S,.:z:--c.......::=------- State Bar No. 08685500 fhagans@hagans-law.com Kendall C. Montgomery State Bar No. 14293900 kmontgomery@hagans-law.com 3200 Travis, Fourth Floor Houston, Texas 77006 Telephone: (713) 222-2700 1643 SCANNED Mar 131512:49p p.8 Telecopier: (713) 547-4950 ATTORNEYS FOR PLAINTIFF BURLINGTON RESOURCES OIL & GAS COMPANY LP THOMPSON & KNIGHT LLP By~~ State Bar No. 05270300 greg.curry@tklaw.com Richard B. phillips, Jr. State Bar No. 24032833 rich.phillips@tklaw.com 1722 Routh Street, Suite 1500 Dallas, Texas 75201 Telephone: (214) 969-1700 Telecopier (214) 969-1751 ATTORNEYS FOR DEFENDANT WOODBINE ACQUISITION, LLC, n/k/a MD AMERICA ENERGY,LLC BEcK REDDEN LLP ~·~f IJ!M, pr-~~ t/David J. Beck State Bar No. 0 000070 dbeck@beckredden. com Thomas E. Ganucheau State Bar No. 00784104 tganucheau@ beckredden. com 1221 McKinney Street, Suite 4500 Houston, Texas 77010 Telephone: (713) 951-3700 Telecopier: (713) 951-3720 1644 SCANNED Mar 131512:49p p.9 ATTORNEYS FOR DEFENDANTS PETROMAX OPERATING CO., INC., PETRO TEXAS LLC and CH4 ENERGY II, LLC PIERCE & O'NEILL, LLP ,.~[ r--~il~~~ State Bar No. 15995400 jpierce@pierceoneill.com Brian K. Tully State Bar No. 24039217 btully@pierceoneill.com 4203 Montrose Boulevard Hou~on,Texas77006 Telephone: (713) 634-3600 Te!ecopier: (713) 634-3601 COUNSEL FOR DEFENDANT TEXCAL ENERGY SOUTH TEXAS, LP 1645 SCANNED HYPERLINKED MATERIALS [Not included in paper copy] Freeman v. Stephens Production Co., (2005) 162 Oil & Gas Rep. 563
171 S.W.3d 651Court of Appeals of Texas, Corpus Christi–Edinburg. Paul FREEMAN, Appellant, v. STEPHENS PRODUCTION COMPANY, A Division of Stephen Group, Inc., et al., Appellees. No. 13–04–208–CV. | Aug. 18, 2005. | Rehearing Overruled Sept. 29, 2005. Synopsis Background: Production company alleging it was lessee of all oil, gas and other minerals under certain land brought action against grandson of grantor who conveyed land to lessors' predecessors in interest, seeking declaration that grantor did not reserve a one-half interest in the mineral estate. Grandson counterclaimed, and lessors filed plea in intervention. The 389th District Court, Hidalgo County, Leticia Lopez, J., granted production company summary judgment, and grandson appealed. Holdings: The Court of Appeals, Dori Contreras Garza, J., held that: [1] genuine issue of material fact as to whether reservation clause in grantor's deed applied to all land conveyed by deed or just one lot precluded summary judgment on production company's declaratory judgment claim; [2] genuine issue of material fact precluded summary judgment on estoppel by deed defense raised by grandson; and [3] evidence submitted by grandson on his adverse possession claim was insufficient to establish that grantor and his successors in interest actually possessed the mineral estate for the requisite period of time. Reversed and remanded. West Headnotes (10) [1] Judgment Particular Cases Genuine issue of material fact as to whether reservation clause in grantor's deed to lessors' predecessors in interest applied to all land conveyed by deed or just one lot precluded summary judgment, in declaratory judgment action brought by production company seeking declaration that grandson of grantor did not own a one-third of the one-half interest in the mineral estate allegedly reserved by grantor in all of land conveyed by deed. Cases that cite this headnote [2] Deeds Language of Instrument If the language of a deed is unambiguous, the court's primary duty is to ascertain the intent of the parties from the language of the deed by using the four corners rule. Cases that cite this headnote © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 Freeman v. Stephens Production Co.,
171 S.W.3d 651(2005) 162 Oil & Gas Rep. 563 [3] Contracts Ambiguity in General Whether a written instrument is ambiguous is a question of law for the court. Cases that cite this headnote [4] Contracts Existence of Ambiguity A written instrument is ambiguous if its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Cases that cite this headnote [5] Estoppel Nature and Elements in General “Estoppel by deed” stands for the general proposition that all parties to a deed are bound by the recitals therein, which operate as an estoppel, working on the interest in the land if it be a deed of conveyance, and binding both parties and privies; privies in blood, privies in estate, and privies in law. 4 Cases that cite this headnote [6] Estoppel Persons Estopped in General Estoppel by deed can be applied against grantors and grantees alike, along with their privies. 2 Cases that cite this headnote [7] Estoppel Persons to Whom Estoppel Is Available Although the party against whom estoppel by deed is sought must be a party or a privy, there is no corresponding requirement for the party invoking estoppel. 3 Cases that cite this headnote [8] Judgment Particular Cases Judgment Landlord and Tenant Cases Genuine issue of material fact as to whether acknowledgements in subsequent conveyances and mineral lease regarding mineral reservation in grantor's deed to mineral lessors' predecessors in interest acknowledged that all of property conveyed by deed or just one lot was subject to the reservation, precluded summary judgment on estoppel by deed defense raised by grantor's grandson, in declaratory judgment action brought by lessee of mineral estate seeking declaration that grandson of grantor did not own a one-third of the one-half interest in the mineral estate allegedly reserved by grantor in all of land conveyed by deed. Cases that cite this headnote [9] Judgment Evidence and Affidavits in Particular Cases Inventory of grantor's estate and affidavit of grantor's grandson regarding grandson's knowledge regarding the estate's inventory was insufficient to establish, in grandson's motion for summary judgment on his adverse possession claim, that grantor and his successors in interest owned a one-half interest in mineral estate allegedly reserved by grantor in all of land conveyed by grantor's deed, where such evidence did not prove or purport to prove that either grandson, © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 Freeman v. Stephens Production Co.,
171 S.W.3d 651(2005) 162 Oil & Gas Rep. 563 grantor, or any of grandson's predecessors in interest actually possessed the mineral estate for the requisite statutory period of time. Cases that cite this headnote [10] Mines and Minerals Adverse Possession Actual possession of the minerals must occur in order for a person to obtain ownership of a mineral interest by adverse possession. Cases that cite this headnote Attorneys and Law Firms *652 Carlos H. Ochoa, McAllen, Gary E. Ellison, Houston, Mickey Olmstead, Austin, for Appellant. Steven W. Ellis, Corpus Christi, Charles C. Murray, Atlas & Hall, J.W. Dyer, Dyer & Associates, McAllen, for Appellees. Donald G. Sinex, Houston, Peter A. Vermillion, Austin, for intervenors. Before Justices YA#NEZ, CASTILLO, and GARZA. OPINION Opinion by Justice GARZA. In this appeal from the trial court's final summary judgment, the parties dispute the terms of a 1946 deed by which Paul Freeman conveyed title to certain property to Kenneth R. Hixon and Mary Katherine Hixon (the “Freeman–Hixon Deed”). Freeman's grandson, also named Paul Freeman (“Paul”), claims that the Freeman–Hixon Deed reserved to his grandfather a one-half participating interest in and to all oil, gas, and other minerals in or under the land conveyed by the deed. Paul contends that he owns a one-third interest in this reservation. His claim is opposed by Stephens Production Company, which asserts rights to certain portions of the mineral estate through a mineral lease executed by the Hixons' successors in interest, some of who are intervenors in this matter and also oppose Paul's claim. Stephens filed suit for declaratory judgment against Paul and four other defendants, asking the trial court to declare that the disputed reservation in the Freeman–Hixon Deed only affected a portion of the *653 conveyed land known as Lot 288. 1 Paul counterclaimed, seeking a declaration that the reservation was not limited to Lot 288 but affected the entire property conveyed by the deed. Subsequently, the lessors of Stephens' mineral lease filed a plea in intervention, seeking a declaration that the Freeman–Hixon Deed did not reserve any mineral interest in the land covered by their mineral lease with Stephens (“the Closner Lots”) and to establish their ownership of the mineral estate of the Closner Lots. 2 1 The other defendants are Hemus, Ltd., which was non-suited; Paula Kendall Taylor, individually and as independent executrix of the Estate of Byrd Freeman Kendall, deceased; Clemmie Dora Freeman; and Charles Macon Freeman. 2 The intervenors are Charlie A. Hudson; Gregory T. Smith; Bruce Ihrig; Charlie Hudson, Jr.; David Drinkard; Meredith Land & Minerals Company; Winne Land & Minerals, Inc.; and M.G. and B.B. Smith Partners, Ltd. Stephens, Paul, and the intervenors each filed traditional motions for summary judgment, arguing that the Freeman–Hixon Deed was unambiguous and supported their respective positions. In addition, Stephens and the intervenors argued that Paul's © 2015 Thomson Reuters. No claim to original U.S. Government Works. 3 Freeman v. Stephens Production Co.,
171 S.W.3d 651(2005) 162 Oil & Gas Rep. 563 claim for declaratory relief was barred by res judicata. In response, Paul argued that the claims asserted by Stephens and the intervenors were barred by estoppel by deed and limitations. Before the trial court ruled on their motion, the intervenors settled their claims with all defendants other than Paul, and all claims between these defendants, the intervenors, and Stephens were dismissed with prejudice. The trial court then entered a final summary judgment for Stephens and the intervenors against Paul, who now appeals by four issues. Because genuine issues of material fact remain unresolved, we reverse the judgment of the trial court and remand for further proceedings consistent with this opinion. 3 3 The well-settled standard of review for summary judgments is concisely stated in Fiallos v. Pagan–Lewis Motors, Inc.,
147 S.W.3d 578, 582 (Tex.App.-Corpus Christi 2004, pet. denied). I. [1] In his first issue, Paul contends that the trial court erred as a matter of law by interpreting the reservation clause to apply only to Lot 288. Paul contends that the following language from the deed unambiguously reserves an undivided one-half interest in the mineral estate of all lots conveyed by the deed: I, Paul Freeman, ... do Grant, Sell and Convey, unto the said Kenneth R. Hixon and Mary Katherine Hixon of the County of Hidalgo of Texas all that certain lot, tract or piece or parcel of land lying and being situated in Hidalgo County, Texas, to-wit: All of Lot 1, Block 15; Lot 2, Block 15; The West 17.51 acres of Lot 3, Block 15; All of Lot 10, Block 15; All of Lot 9, Block 15; All of Lot 11, Block 15; All of Lot 12, Block 15; out of the Closner Subdivision of Porciones 71 and 72, also known as the San Juan Tract, Hidalgo County, Texas; EXCEPT such minerals as Grantor does not own; AND ALL of Lot No. 288 of the Kelly–Pharr Subdivision of Porciones 69 and 70, Hidalgo County, Texas; EXCEPT that there is reserved in Grantor an undivided one-half participating interest in and to all of the oil, gas or other minerals in or under said tract of land.... [2] [3] [4] If the language of a deed is unambiguous, the court's primary duty is to ascertain the intent of the parties from the language of the deed by using the “four corners” rule. *654 French v. Chevron U.S.A.,
896 S.W.2d 795, 796 (Tex.1995). Whether a written instrument is ambiguous is a question of law for the court. Lopez v. Munoz, Hockema & Reed,
22 S.W.3d 857, 861 (Tex.2000). A written instrument is ambiguous if its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Towers of Tex., Inc. v. J & J Systems, Inc.,
834 S.W.2d 1, 2 (Tex.1992). Such is the case here. No single reasonable meaning clearly emerges from the language of the instrument. To the contrary, we are equally uncertain and doubtful of the opposite interpretations advanced by the parties. The reservation speaks of its subject as a “tract.” Use of this singular noun indicates that the reservation applies only to Lot 288 and not to the other lots. Nevertheless, the first clause of the grant also speaks of a “lot, tract or piece or parcel of land,” even though the deed conveys eight different lots. Thus, the reservation's use of the singular noun “tract” to describe its subject is consistent with the deed's use of the singular noun “tract” to describe multiple lots and, in fact, the entire conveyance. This indicates that the reservation applies to all lots. Still, the deed refers to the Closner Lots collectively as the “San Juan Tract” and then proceeds to list Lot 288 separately, indicating that the Closner Lots and Lot 288 are treated as two different tracts. The reservation would then apply only to the second tract, Lot 288. Further complicating matters is the reservation's location in a clause rather than a separate sentence. It thus appears to modify only the noun immediately preceding it, Lot 288. Given the foregoing considerations, this Court can only speculate as to the effect of reservation. We are uncertain and doubtful of both interpretations advanced by the parties. Because the deed is ambiguous, the trial court erred by granting summary judgment based on its interpretation of the deed. A jury should hear evidence and determine the parties' intent. See Columbia Gas Transmission Corp. v. New Ulm Gas,
940 S.W.2d 587, 589 (Tex.1996); see also J. Hiram Moore, Ltd. v. Greer,
172 S.W.3d 609, ––––, No. 02–0455,
2005 WL 1186334, *4, 2005 Tex. LEXIS 428, *10 (May 20, 2005) (publication pending). Paul's first issue is sustained in part and overruled in part. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 4 Freeman v. Stephens Production Co.,
171 S.W.3d 651(2005) 162 Oil & Gas Rep. 563 II. [5] In his second issue, Paul contends that the trial court erred by denying his motion for summary judgment based on estoppel by deed. As this Court recently noted in Sauceda v. Kerlin, “Estoppel by deed stands for the general proposition that ‘all parties to a deed are bound by the recitals therein, which operate as an estoppel, working on the interest in the land if it be a deed of conveyance, and binding both parties and privies; privies in blood, privies in estate, and privies in law.’ ” Sauceda v. Kerlin,
164 S.W.3d 892, 915 (Corpus Christi, 2005, no pet. h.) (quoting Wallace v. Pruitt,
1 Tex. Civ. App. 231,
20 S.W. 728, 728– 29 (Tex.Civ.App.-Houston 1892, no writ)). In support of his motion for summary judgment, Paul produced evidence that Kenneth R. Hixon and other subsequent interest holders executed multiple conveyances, as well as an oil, gas, and mineral lease, acknowledging that the mineral reservation covered all land conveyed by the Freeman–Hixon Deed, including the Closner Lots. Based on this evidence, Paul argues that the doctrine of estoppel by deed prevents Stephens and the intervenors from taking a position contrary to that of Hixon and their other predecessors in interest. Stephens and the intervenors, in turn, argue that estoppel by deed cannot be *655 applied against grantees but only against grantors. They further contend that Paul cannot use estoppel by deed because he was not a party to the instruments upon which he relies. Finally, they maintain that the instruments produced as evidence by Paul conveyed interests in Lot 288, as well as the Closner Lots, and thus their references to the prior mineral reservation simply placed later grantees on notice of the reservation's existence as to certain acreage out of the land conveyed (i.e., Lot 288). [6] [7] We disagree with two of these contentions. First, estoppel by deed can be applied against grantors and grantees alike, along with their privies. See
id. at 915–916.Second, this Court is aware of no requirement that the litigant invoking estoppel by deed be a party to the deed. Although the party against whom estoppel is sought must be a party or a privy, to this Court's knowledge, there is no corresponding requirement for the party invoking estoppel. No cases imposing such a requirement have been cited by Stephens or the intervenors. [8] We turn to the evidence produced in support of Paul's motion. As argued by Stephens and the intervenors, the instruments relied upon by Paul convey interests in both the Closner Lots and Lot 288. Because there is no dispute that Lot 288 is subject to the reservation of the Freeman–Hixon Deed, the acknowledgment of the reservation in these instruments is not necessarily an acknowledgment that the reservation applies to the Closner Lots. In fact, two of the instruments use the same murky language and format as the Freeman–Hixon Deed, making this Court no more certain of their meaning than that of the Freeman–Hixon Deed. 4 4 These instruments are (1) a warranty deed from Kenneth Hixon and Katherine Hixon to Morris Granville Smith recorded on December 10, 1947 and (2) a special warranty deed from Morris Granville Smith and his wife, Barbara Smith, to intervenor M.G. and B.B. Partners, Ltd., which is dated August 29, 1997. However, one of the instruments uses a different format and provides some evidence that the reservation applies to the Closner Lots. This document, a special warranty deed, was executed on September 18, 2001 between intervenor M.G. and B.B. Smith Partners, Ltd. and Keller Real Estate Investments, Inc. (the “Smith–Keller Deed”). It specifically conveys 66.23 acres out of Lots 1, 2, 3, and 10, Block 15 of the Closner Subdivision, which it refers to as “Tract 1.” The Smith–Keller Deed states that Tract 1 is subject to the undivided one-half reservation provided for by the Freeman–Hixon Deed. Although the Smith–Keller Deed thus appears to be conclusive proof that the reservation applies to the Closner Lots, its evidentiary value is belied by a second conveyance made within the same deed. Along with Tract 1, the Smith–Keller Deed also conveys land referred to as “Tract 2,” which is comprised of 239.01 acres out of Lots 2, 3, 8, 9, 10, 11, 12, and 13, Block 15 of the Closner Subdivision and Lots 287, 288, 289, and 290 of the Kelly–Pharr Subdivision. Notably, the deed does not list the reservation provided for by the Freeman–Hixon Deed as one of the 47 reservations applicable to Tract 2. This is especially noteworthy because Tract © 2015 Thomson Reuters. No claim to original U.S. Government Works. 5 Freeman v. Stephens Production Co.,
171 S.W.3d 651(2005) 162 Oil & Gas Rep. 563 2 includes not only portions of the Closner Lots but also Lot 288. Tract 2 also includes Lots 2, 3, and 10, portions of which are included in Tract 1 and expressly made subject to the reservation of the Freeman–Hixon Deed. Further diminishing the evidentiary value of the Smith–Keller Deed is the exclusion of Lots 9, 11, and 12 of the Closner Subdivision from Tract 1. These lots are included in Tract 2, which is not expressly subject to the reservation *656 of the Freeman–Hixon Deed. In sum, the Smith–Keller Deed is some evidence that the reservation extends to the Closner Lots, but it is inconsistent and therefore insufficient to eliminate all genuine issues of material fact. See Tex.R. Civ. P. 166a(c). The final instrument submitted by Paul is a November 19, 1975 oil, gas, and mineral lease executed by Morris Granville Smith and Barbara Smith in favor of Paul S. Freeman, Paul's grandfather. The lease grants All our mineral interest in Lots One (1), Two (2), Three (3), Eight (8), Nine (9), Ten (10), Eleven (11), Twelve (12) and Thirteen (13) ... in Block Fifteen (15), John H. Closner, et al Subdivision, Hidalgo County, Texas; and Lot Two Hundred Eighty–Eight (288), out of the Kelly–Pharr Subdivision, Hidalgo County, Texas. The lease provides a “pooling” area of 320 acres and then states that “for purposes of calculating the rental payments hereinafter provided for, said land is estimated to comprise 160 acres, whether it actually comprises more or less.” According to Paul, the difference between the 320–acre pooling area and 160–acre estimation of the land proves that the Smiths only owned one-half of the mineral interest in the land, which is the same land conveyed by the Freeman–Hixon Deed. Paul argues that the Smiths thus acknowledged that the reservation of the Freeman–Hixon Deed extends to the Closner Lots. Although the mineral lease is some evidence to support Paul's contention, it fails to eliminate all genuine issues of material fact. See
id. The exactacreage of the land covered by the mineral lease is not stated anywhere in the lease. Paul assumes that the acreage is 320, but this amount is derived from the pooling provision, not from any statement regarding the exact acreage of the land. If the correct acreage of the land were 160 acres, Paul's theory would fail because the mineral interest conveyed would be 100% of what the Smiths owned. Without parol evidence, it is impossible to know with any certainty whether the actual acreage is 160, 320, or some other amount. Accordingly, Paul did not establish his entitlement to judgment as a matter of law on his defense of estoppel by deed. Paul's second issue is therefore overruled. III. In his third issue, Paul contends that the trial court erred by granting intervenors' motion for summary judgment based on res judicata. The trial court's judgment specifies that its decision was based on its interpretation of the Freeman–Hixon Deed, not on res judicata. The judgment states that the Freeman–Hixon Deed did not reserve any mineral interest in the Closner Lots to Paul Freeman Senior. Accordingly, this Court need not consider whether the judgment could be upheld based on res judicata. See Tex.R.App. P. 47.1; State Farm Fire & Cas. Co. v. S.S.,
858 S.W.2d 374, 380 (Tex.1993). Paul's third issue is overruled. IV. [9] [10] In his fourth issue, Paul contends that the trial court erred by failing to grant his motion for summary judgment against the intervenors based on limitations. According to Paul, the intervenors or their predecessors-in-title have been on notice of his grandfather's claim of ownership of the minerals since at least 1949 and are therefore barred by the statute of limitations from disputing ownership. We construe this as a claim of adverse possession, as the only authority relied upon by Paul is Natural Gas Pipeline Co. of America v. Pool,
124 S.W.3d 188, 192–93 (Tex.2003), a case involving a claim of adverse possession of a mineral estate. Paul's motion *657 for summary judgment alleges that his grandfather “long continued possession and exercise of dominion as an owner of one-half of the mineral in the subject lands”; however, the evidence attached to the motion © 2015 Thomson Reuters. No claim to original U.S. Government Works. 6 Freeman v. Stephens Production Co.,
171 S.W.3d 651(2005) 162 Oil & Gas Rep. 563 is insufficient evidence to prove this assertion. 5 Because actual possession of the minerals must occur, see
id., the trialcourt did not err by denying Paul's motion for summary judgment based on adverse possession. Paul's fourth issue is overruled. 5 Attached to the motion are an inventory of the estate of Pat Freeman and an affidavit by Paul, which discusses Paul's knowledge regarding the inventory. The evidence does not prove or purport to prove that either Paul, his grandfather, or any of Paul's other predecessors-in-interest actually possessed the mineral estate for the requisite statutory period of time. V. As it relates to the claims between Stephens, Paul, and the intervenors, the judgment of the trial court is reversed and the case is remanded for further proceedings consistent with this opinion. The remainder of the judgment, specifically, the dismissal with prejudice of the claims between Stephens, the other defendants, and intervenors, has not been challenged in this appeal and is therefore affirmed. See Tex.R.App. P. 44.1(b). All Citations
171 S.W.3d 651, 162 Oil & Gas Rep. 563 End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works. © 2015 Thomson Reuters. No claim to original U.S. Government Works. 7 The Oil&Gas Asset I CLEARINGHOUSE I P.O. Box 67l787 Houston, Texas 77267-l787 7ll/87J.4600 Fax 7ll/87l-IJOS5 Lot# Description Buyer Total I 164.13 FI.SXEN F-44 1 BPO W1 .135877 I-PO WI TX .136817 ANDREWS BOPD I BPO NRI .110400 APO NRI .110400 MCFD BPO ORRI .000000 APO ORR\ OPER'-TOR: M W PETROLEUM CORP DEPTH UMITI.TION .000000 MIDLAND FARMS SEllER: EL PI-SO PRODUcnON I 164.14 FI.SKfN N 1 8PO W1 BPO NRI .136817 .110400 APO WI I-PO NRI TX .1 35877 .110400 I-N DREWS BOPD MCFD I BPO ORR! .000000 APO ORRI .000000 MIDLAND FARMS OPERI.TOR: M W PETIIOLaJM CORP DEI'TH LMITI.TION SEU.ER: EL PASO PROOUCTlON I 165.1 UNIVERSm' E lll'O WI BPO NRI .062732 .043257 APO Wl APO NRI TX .062732 .043267 ANDREWS BOPD MCFO 15.00 4.00 I BPO ORRI .000000 APO ORR\ .000000 HUTEX OPERI.TOR: AA1ERICAN EXPt WEll80RE ONLY SELLER: SAMSON RESOURCES COMPANY I 166.1 NEWTON 1·'- BPO W1 BPO NRI .000000 .000000 I-PO WI APO NRI TX .000000 .000000 BORDEN BOPD MCFD 12.00 .00 I BPO ORRI .094492 APO ORRI .094492 DUNIGAN OPeRATOR: PERMIAN RESOURCES ROYALTY IH'TEREST SELLER: ARCO I 157.1 BUCHANAN 1 BPO W1 BPO NRI .250000 .203333 APOWI MONRI TX .250000 .203333 BRAZOS BOPD MCFO 14.00 28.00 I BPO ORRI .000000 APO ORR\ .000000 KURTEN WOODBINE 157.2 OPERATOR: BUTTES RESOURCES CO GIBBS BROS 1 sa.L!R: SOUTHLAND ROY1-LTV TX BRAZOS I BPO WI BPO NRI 8PO ORRI .250000 .188125 .000000 APOWI APO NRI I-PO ORRI .250000 .198125 .000000 BOPD MCFD 4.00 9.00 KURTEN WOODBINE ~ § I OPERATOR: BUTTES RESOURCES CO SEL.LER: SOUTiiLAND ROYALTY ""'- /<]' I 157.3 WILSON JAMES C 0 TX BRI-ZOS BPO WI BPO NRI Bp0 ORAl .250000 .203333 .000000 APO WI APO NRI I-PO ORRI .250000 .203333 .000000 BOPD MCFO 3.00 SHUT-IN KURTEN WOODBINE ~fY] I OPERATOR: BUTTES RESOUflCES CO SELLER: SOUTHLAND ROYALTY 151.4 WILSON JAMES 0 UNIT 2 TX BRAZOS BPO WI .000000 APO wt .250000 BOPD 11.00 I BPO NRI .000000 Ap0 NRI .2.03333 MCFD 12.00 BPO ORRI .000000 APO ORRI .000000 KURTEN WOODBINE OP£RATOR: 8UTTES RESOURCES CO SELlER: SOUTHLAND ROYALTY APO ONLY 1lQ cllt8lag hi PfO'Iided for oonvenlence purpos• only. AU Information Is providod wfthout warranty a to ecouracy or completenass. I Bidders shouk:l verify llllinform.tlon and the condition of proper1fe• being aold prior to biddtng. 1401 I 1497 BURCOP00001606 I The OiJ&Gas Asset I CLEARINGHOUSE P.O. Box67!787 Houston, TcXlLI77267-1787 71l/87H600 Fax 713/873-0055 I Lot# Description Buyer Total I t. t POR'TER-MA Y-FOWLER AL FAYETTE ~ BPOwt .112271 APO wt .097427 BOPO .oo 8PO NRI .098103 APO NRI .083783 MCfD 100.00 I 8PO ORR! .000000 APO ORAl OPERATOR: SAMSON RESOURCES .000000 t2 t4S-t3W SEU£11: SAMSON RESOURCES COMPANY "Q\ I 2.1 AUS'TlN W AIt ·9 • BPO wt 8PO NRI .103847 .087848 APO wt APO NRI AL .103647 .087848 LAMAR BOPO MCFD .oo SHUT-IN BPO ORR! .000000 APO ORAl .000000 9 135-tfiW I OPERATOR: MERIDIAN OIL SERVICES WELLBORE ONLY SEU.!R: SAMSON RESOURCES COMPANY 2.2 AUSTIN W Al&-1 3 AL LAMAR I BPO wt 8PO NRI .051508 .042611 BPO ORRI .000000 APO wt APO NRI APO ORRI .000000 .051608 .04251, BOPD MCFD 9 t4S-t5W .oo SHUT·IN OPERATOR: BRIDGE OIL COMPANY SELLER: SAMSON RESOURCES COMPANY I 2.3 OVERPRODUCED BY 1,502 MCF AS OF 10/93 BONZELL MCGEE t:l-8 AL LAMAR BPO wt ,C>4t 887 APO Wl .041667 BOPD .oo I BPO NRI .036319 BPO ORRI .000000 APO NRI APO ORRI OPERATOR: PRUET PRODUCTION .036319 .000000 MCFD 13 68-16W 190.00 SEUER: SAMSON RESOURCES COMPANY OVERPRODUCED BY 3,076 MCF AS OF 4194 I 3. t BROWN 11-9 AL LAMAR BPO wt .637214 APOWI BOPD .363641 .oo I BPO NRI .481217 BPO ORRI .000000 APO NRI APO ORAl .000000 OPERATOR: SAMSON RESOURCES MCFD .313128 1 15S.14W 95.00 SEUER: SAMSON RESOURCES COMPANY OPERATED PROPERTY, WELLBORE ONLY I 4.1 cu C.03-09 AL MOBILE BPO wt .060000 APO wt .060000 BOPD 5.80 .oo I BPO NRI .037600 APO NRI .037500 MCFD BPO ORRJ .000000 APO ORRI .000000 3 1N-3W OPERATOR: CITRONELLE UNIT MGR SELLER: ADVENT TRADING COMPANY I •• t TALLEY UNIT 18-1 BPO wt .044384 APO WI AR .044384 ,03883tl COLUMBIA BOPD 20.00 .oo BPO NRI .038836 APO NRI MCFD ,000000 I BPO ORRI .000000 A.PO ORRI 1 20S-22W OPERATOR: PHIWPS PETROLEUM SEllER: SAMSON RESOURCES COMPANY I I TttJs catalog I• provided for convenience purpone only, Alllnfonnation le provided without wamtnty .. to .ocuracy or completeness. Bidder- skould verify •II lnfon'Mtion and the condttlon of properdee be(ng eold prior to bidding. I ill 1459 BURCOP00001567 I The Oil&Gas Asset I CLEARINGHOUSE P.O. Box 67\787 Houston, Texas 77267-1787 713/873-4600 Fax 713/873-0055 I Lot# Description Buyer Total I 63.1 GEl& 11 BPO WI 1.000000 APOWI OK 1.000000 BlAINE BOPO 3.30 BPO NRI .805736 APO NRI .006736 MCfD 18.00 I BPO ORRI .802002 OPERATOR: MARATHON OIL APO ORRI .802002 3318N-10W SELLER: MARATHON OIL COMPANY GAS NRI•.802081 DISBURSEMENT RESPONSIBIUTY, WEL1.BORE ONLY I 84.1 GOULD 2~1 BPO WI .600000 APO WI OK .484375 BLAINE BOPD .90 BPO NRI .393760 APO NRI .381387 MCFD 16.00 I BPO ORRI .000000 APO ORRI OPERATOR: WARD PETROLEUM WB.J..BORE ONLY, OVERPRODUCED BY .000000 20 17N-13W SELLER: MAR4THON OIL COMPANY 10,423 MCF AS OF 1194 I 66.1 HELMER 1211-1 BPO WI .045747 APO WI OK .045747 BLAINE SCPO .00 BPO NRI .038684 APO NRI .038664 MCFD 119.00 I BPO ORRI .000000 APO ORRI OPERATOR: LOUIS DREYFUS NAT GAS LEASEHOLD, POSSIBlE BEHIND PIPE .000000 26 18N-11W SELLER: MARATHON OIL COMPANY I 65.2 AUDREY 11-28 BPOWI BPO NRI .000000 .000000 BPO ORRI .oo55n APO WI APO NRI APO ORRI OK .000000 .000000 .0056n BOPO MCFD BLAINE 26 18N-11W 3.10 79.00 I OPERATOR: LOUIS DREYFUS NAT GAS LEASEHOLD SELLER: MARATHON OIL COMPANY I 66.1 JANTZEN 34-1 BPO WI BPO NRI .260000 .206078 BPO ORRS .000000 APOWI APO NRI APO ORRI OK .260000 .206078 .000000 BLAINE BOPO MCFD 34 19N-10W .00 96.00 I OPERATOR: PETROLEUM RESERVE SELLER: MARATHON OIL COMPANY WB.J..BORE ONLY 86.2 JAI>lTZEN 34-2 OK BLAINE .408273 APO WI .263908 BOPO ,00 I BPOWI BPO NRI .341820 APO NRI .208252 MCFD 1.00 BPO ORRI .000000 APO ORRI .000000 34 19N-10W OPERATOR: PETROLEUM RESERVE SELLER: MARATHON OIL COMPANY WB.LBORE ONLY I 67.1 KARBER FARMS It OK BLAINE BPO WI .988760 APO WI .87181li BOPO .so I BPO NRI .maoo 8PC ORRJ .000000 APO NRI APO ORRI OPERATOR: MARATHON OIL .696363 .000000 MCFD 28 19N-12W SELLER: MARATHON OIL COMPANY 51.00 DISBURSEMENT RESPONSIBIUTY, WEUBORE ONLY, OVERPRODUCED BY 1,708 I MCF ASOF 4~ I This catliog ill provided for oonvenlence purpo1" only. Alllnfonnadon 11 provided without watnlnty a to 1oouraoy or completenet~•. Biddetl 1hould verify all Information and th1 conclhion of propertie• being •old prior ta bidding. I 1171 1475 BURCOP00001 583
Document Info
Docket Number： 06-15-00044-CV
Filed Date： 10/21/2015
Precedential Status： Precedential
Modified Date： 9/29/2016