ELG Oil, LLC and ELG Utility, LLC v. Stranco Services, LLC ( 2019 )

Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-19-00088-CV
ELG OIL, LLC and ELG Utility, LLC,
Appellants
v.
STRANCO SERVICES, LLC,
Appellee
From the 218th Judicial District Court, Karnes County, Texas
Trial Court No. 16-03-00056-CVK-A
Honorable Walden E. Shelton, Judge Presiding 1
Opinion by: Sandee Bryan Marion, Chief Justice
Sitting: Sandee Bryan Marion, Chief Justice
Rebeca C. Martinez, Justice
Luz Elena D. Chapa, Justice
Delivered and Filed: October 9, 2019
REVERSED AND REMANDED
ELG Oil, LLC and ELG Utility, LLC appeal a summary judgment granted in favor of
Stranco Services, LLC allowing Stranco to foreclose on a mineral subcontractor’s lien. ELG
asserts the trial court erred in granting the summary judgment because Stranco failed to
conclusively establish it: (1) furnished or hauled material, machinery or supplies used in mineral
activities under contract with a mineral contractor, or (2) performed labor used in mineral activities
1
The Honorable Stella H. Saxon granted the partial summary judgment in favor of the appellee. The Honorable
Walden E. Shelton signed the final judgment.
04-19-00088-CV
under contract with a mineral contractor. We reverse the trial court’s judgment and remand the
cause to the trial court for further proceedings.
BACKGROUND
ELG entered into a contract with Turn-Key Specialists, Inc. to add natural gas bullet
storage tanks to the KDB Central Treatment Facility (the “Facility”), 2 and Turn-Key entered into
a subcontractor agreement with Stranco. 3 On March 3, 2016, Stranco filed the underlying lawsuit
against Turn-Key and ELG alleging various claims, including a claim to foreclose on a mineral
lien Stranco alleged it had against ELG’s property. After Turn-Key filed bankruptcy, Stranco’s
claims against ELG were severed into a separate cause. Stranco then moved for a partial summary
judgment on its claim to foreclose on its alleged mineral lien.
On November 16, 2018, the trial court granted Stranco’s motion. 4 On January 17, 2019,
the trial court signed an agreed order severing Stranco’s other pending claim into a separate cause. 5
On February 12, 2019, the trial court signed a final judgment incorporating the partial summary
judgment and awarding Stranco attorney’s fees.
STANDARD OF REVIEW
“A trial court’s decision to grant summary judgment is subject to de novo review.”
Schlumberger Tech. Corp. v. Pasko, 544 S.W.3d 830, 833 (Tex. 2018). “Courts review the record
in the light most favorable to the nonmovant, indulging every reasonable inference and resolving
any doubts against the motion.” Id. (internal quotation omitted). In order to be entitled to a
2
We note this contract was not included in the summary judgment evidence.
3
We note this contract also was not included in the summary judgment evidence.
4
Although ELG also filed a motion for summary judgment on Stranco’s claim to foreclose on the mineral lien, the
trial court did not rule on ELG’s motion.
5
The trial court previously granted a no evidence motion for summary judgment in favor of ELG on a portion of
Stranco’s trust fund claim, and Stranco non-suited the other portion of that claim.
-2-
04-19-00088-CV
summary judgment, the movant must establish “there is no genuine issue as to any material fact
and the moving party is entitled to judgment as a matter of law.” TEX. R. CIV. P. 166a
DISCUSSION
Section 56.002 of the Texas Property Code provides, “A mineral contractor or
subcontractor has a lien to secure payment for labor or services related to the mineral activities.”
TEX. PROP. CODE ANN. § 56.002. A “mineral subcontractor” is defined, in pertinent part, as a
person who:
(A) furnishes or hauls material, machinery, or supplies used in mineral activities
under contract with a mineral contractor or with a subcontractor; or
(B) performs labor used in mineral activities under contract with a mineral
contractor.
Id. § 56.001(4)(A),(B). A “mineral contractor” is defined as “a person who performs labor or
furnishes or hauls material, machinery, or supplies used in mineral activities under an express or
implied contract with a mineral property owner or with a trustee, agent, or receiver of a mineral
property owner.” Id. § 56.001(2). “Mineral activities” are defined, in pertinent part, as “digging,
drilling, torpedoing, operating, completing, maintaining, or repairing . . . an oil or gas pipeline.”
Id. § 56.001(1); see also Adams v. Starside Custom Builders, LLC, 547 S.W.3d 890, 894 (Tex.
2018) (noting courts must adhere to statutory definitions).
In its motion for summary judgment, Stranco asserted it was entitled to a judgment
allowing it to foreclose on its mineral lien against ELG’s property as a matter of law because it
“furnished ‘material, machinery, or supplies used in mineral activities’ and performed ‘labor used
in mineral activities’ under a contract (the Agreement) with a mineral contractor (TURN-KEY) in
September 2015 and October 2015 thereby qualifying STRANCO as a ‘mineral subcontractor’
entitled to claim the lien in Section 56.002 of the Texas Property Code to secure payment for
STRANCO’s labor and services related to such mineral activities.” In its brief, Stranco asserts
-3-
04-19-00088-CV
that it was only required to prove that its labor and services “related to” or were “used in” mineral
activities. Applying the statutory definition of mineral subcontractor, however, we hold Stranco
was required to conclusively establish the labor and services it provided were “used in” mineral
activities. See Adams, 547 S.W.3d at 894. Accordingly, we examine the summary judgment
evidence to determine whether Stranco conclusively established the material, machinery, and
supplies it furnished and the labor it provided were used in “digging, drilling, torpedoing,
operating, completing, maintaining, or repairing . . . an oil or gas pipeline.” Id. § 56.001(1).
Stranco primarily relies on the affidavit of its owner stating Stranco contracted with Turn-
Key and performed mineral activities on ELG’s property “including, but not limited to, hydrostatic
pressure testing, torqueing, dewatering, and drying of pressure tested pipe in connection with
constructing, repairing, or maintaining oil or gas pipelines and the pipeline terminal station.” The
affidavit further stated Stranco “furnished materials, machinery, and supplies used in connection
with constructing, repairing, and maintaining oil or gas pipelines and the pipeline terminal station.”
The summary judgment evidence also included two affidavits from an ELG project
manager and an affidavit from an ELG project engineer. One of the project manager’s affidavits
and the project engineer’s affidavit described the work or project as “the engineering, procurement
and construction of a new natural gas line bullet tank addition.” The project manager’s second
affidavit stated the Facility was fully functional before the contract was entered into with Turn-
Key, and the scope of the work performed under the contract with Turn-Key was “to add bullet
storage tanks to the Facility.” That affidavit further stated the Facility “is not a gathering facility;”
therefore, it “does not have any oil or gas pipelines that ‘combine’ inside the Facility.” The project
manager’s second affidavit explained the Facility has three import pipelines that “terminate on the
outlet valves of the pig receivers before the Facility piping begins” and are “segregated from the
Facility piping by valves.” The affidavit also explained three export pipelines are also “segregated
-4-
04-19-00088-CV
from the Facility and begin with meters and then pig launchers,” and ELG did not own the export
pipelines. The affidavit further explained the work performed by Stranco “was solely limited to
the addition of bullet storage tanks within the Facility.”
“Affidavits supporting and opposing a motion for summary judgment must set forth facts,
not merely conclusions.” Gonzales v. Shing Wai Brass & Metal Wares Factory, Ltd., 190 S.W.3d
742, 746 (Tex. App.—San Antonio 2005, no pet.). “A conclusory statement is one that does not
provide the underlying facts to support the conclusion.” Id. “Thus, an affidavit that is merely a
sworn statement of the allegations in a pleading or that simply paraphrases statutory language is
conclusory and lacks probative force.” Lenoir v. Marino, 469 S.W.3d 669, 686 (Tex. App.—
Houston [1st Dist.] 2015), aff’d, 526 S.W.3d 403 (Tex. 2017).
The statement in the affidavit of Stranco’s owner is conclusory because it does not provide
any facts showing how the materials, machinery, and supplies Stranco furnished or the labor it
performed on the bullet storage tanks was connected to the oil and gas pipelines such that the work
was used in mineral activities. In its brief, Stranco argues its labor and services were used in
mineral activities “because [the] natural gas storage tanks are likewise used in operating,
completing, or maintaining the natural gas pipelines that the KDB Facility has.” Stranco did not,
however, produce any summary judgment evidence explaining how the bullet storage tanks were
used in the operation, completion, or maintenance of the oil and gas pipelines. And, under our
standard of review, we must resolve all doubts in favor of ELG especially in light of the affidavit
of ELG’s project manager which stated the oil and gas pipelines are segregated from the Facility.
See Schlumberger Tech. Corp., 544 S.W.3d at 833. While we agree with Stranco’s argument that
its work did not have to be performed “on” the oil and gas pipelines themselves to establish its
work was “used in” mineral activities, without summary judgment evidence establishing the link
between the Facility’s bullet storage tanks and the operation, completion, or maintenance of the
-5-
04-19-00088-CV
oil and gas pipelines, Stranco has failed to conclusively establish that the materials, machinery,
and supplies it furnished or the labor it performed were “used in” mineral activities. 6 Although
we acknowledge we liberally construe the mineral lien statute to protect laborers and materialmen,
a “[l]iberal interpretation of a statute does not permit doing violence to the language of the statute.”
Wesco Distrib., Inc. v. Westport Group, Inc., 150 S.W.3d 553, 557 (Tex. App.—Austin 2004, no
pet.) And, the Texas Supreme Court has repeatedly instructed that we must adhere to the
definitions provided by the statute. See Adams, 547 S.W.3d at 894. Because Stranco failed to
meet its burden to conclusively establish its labor, materials, machinery, and supplies were “used
in” mineral activities, the trial court erred in granting the summary judgment. 7
CONCLUSION
The trial court’s judgment is reversed, and the cause is remanded to the trial court for
further proceedings.
Sandee Bryan Marion, Chief Justice
6
We note the three cases Stranco cited in its brief are readily distinguishable from the instant case. For example,
McCarty v. Halliburton Co., was an appeal after a bench trial in which the trial court found frac tanks were used in
drilling, completing and operating oil wells; therefore, the standard of review was different. 725 S.W.2d 817, 818-20
(Tex. App.—Eastland 1987, writ ref’d n.r.e.) (noting trial court’s findings of fact had same force and effect as a jury’s
verdict and would not be “disturbed on appeal unless they are so against the overwhelming weight of the evidence as
to be clearly and manifestly wrong”). The other two cases are federal cases which are not binding precedent. See Lee
M. Bass, Inc. v. Shell W. E & P, Inc., 957 S.W.2d 159, 162 n.4 (Tex. App.—San Antonio 1997, no pet.). In one of
those cases, although the federal court held “as a matter of law “ that “plumbing work on the living quarters of an
offshore platform can be sufficiently related to the mineral activities to qualify for a mineral property lien,” the federal
district court denied the defendants’ motion for summary judgment because “a genuine issue of material fact exist[ed]”
as to “whether the Plaintiff’s work [was] related to the mineral activities.” Sun Coast Plumbing Co. v. Shell Offshore,
Inc., No. B-09-204, 2010 WL 1404371, at *4 (S.D. Tex. Apr. 7, 2010) (emphasis added). In the other case, the
evidence established the company claiming the mineral lien was “a caterer to the offshore industry, supplying materials
and labor to feed the offshore crews.” World Hospitality, Ltd. v. Shell Offshore, Inc., 699 F. Supp. 111, 112 (S.D.
Tex. 1988). Accordingly, the evidence established the link between the company’s services and the oil well, and the
district court concluded “While a caterer may not have the traditional oil business mystique of a well logger or
mudman, it had men on the job site performing an essential function.” Id. at 113.
7
Because we reverse the trial court’s judgment on this basis, we need not address whether Stranco met its summary
judgment burden to conclusively establish it was “under contract with a mineral contractor” as that phrase is used in
the statutory definition of “mineral subcontractor.” See TEX. PROP. CODE ANN. § 56.001(4)(A), (B).
-6-