Crimson Exploration, Inc. v. Magnum Producing L. P. ( 2015 )

ACCEPTED
13-15-00013-CV
THIRTEENTH COURT OF APPEALS
CORPUS CHRISTI, TEXAS
8/24/2015 8:12:32 PM
CECILE FOY GSANGER
CLERK
No. 13-15-13-CV
_____________________________________________________
FILED IN
13th COURT OF APPEALS
In the Thirteenth Court of Appeals
CORPUS CHRISTI/EDINBURG, TEXAS
Corpus Christi, Texas 8/24/2015 8:12:32 PM
CECILE FOY GSANGER
_____________________________________________________
Clerk
Crimson Exploration Inc.; Kerr-McGee Oil & Gas Onshore LP; Westport Oil
& Gas Company; Crimson Exploration Operating Inc. (successor by merger
to Southern G. Holdings LLC); Anadarko Petroleum Corporation;
Anadarko E&P Company LP; Exco Resources Inc.; and Aubris Resources
f/k/a United Resources LP,
Appellants,
v.
Magnum Producing LP,
Appellee.
_____________________________________________________
BRIEF OF APPELLANTS
_____________________________________________________
James G. Munisteri David M. Gunn
Texas Bar No. 14667380 Texas Bar No. 08621600
Stacy R. Obenhaus Erin H. Huber
Texas Bar No. 15161570 Texas Bar No. 24046118
John MacVane Beck Redden
Texas Bar No. 24085444 1221 McKinney, Suite 4500
Gardere Wynne Sewell LLP Houston, Texas 77010
1000 Louisiana, Suite 2000 Tel: 713.951.6278
Houston, Texas 77002 Fax: 713.951.3720
Tel: 713.276.5500 dgunn@beckredden.com
Fax: 713.276.5555 ehuber@beckredden.com
jmunisteri@gardere.com
sobenhaus@gardere.com COUNSEL FOR
jmacvane@gardere.com DEFENDANTS-APPELLANTS
Oral argument requested
Identity of Parties and Counsel
Defendants/Appellants: Counsel:
Crimson Exploration Inc. James G. Munisteri
Kerr-McGee Oil & Gas Onshore LP Stacy R. Obenhaus
Westport Oil & Gas Company John MacVane
Crimson Exploration Operating Inc. Gardere Wynne Sewell LLP
(successor by merger to Southern 1000 Louisiana, Suite 2000
G. Holdings LLC) Houston, Texas 77002
Anadarko Petroleum Corporation
Anadarko E&P Company LP David M. Gunn
Exco Resources Inc. Erin H. Huber
Aubris Resources f/k/a United Beck Redden
Resources LP 1221 McKinney St., Suite 4500
Houston, Texas 77010
[Crimson parties only]
Marcus F. Schwartz
Schwartz & Schwartz
P. O. Box 385
Hallettsville, Texas 77964
Plaintiff/Appellee: Counsel:
Magnum Producing LP James T. Clancy
Clinton W. Twaddell, III
Branscomb PC
802 N. Carancahua, Suite 1900
Corpus Christi, Texas 78401-0036
Frank Weathered
Dunn Weathered Coffey Rivera &
Kasperitis PC
611 S. Upper Broadway
Corpus Christi, Texas 78401
i
Table of Contents
Identity of Parties and Counsel..............................................................................i
Table of Contents ................................................................................................... ii
Index of Authorities.............................................................................................. vi
Statement of the Case ......................................................................................... xiv
Statement Regarding Oral Argument............................................................... xv
Issues Presented .................................................................................................. xvi
Statement of Facts ...................................................................................................1
I. Before The Events At Issue, The Simpson Lease Terminated....................1
II. Uncertain About The Simpson Lease’s Validity, Magnum And
Others Signed Contracts To Secure Their Claimed Interests. ..................1
III. Despite These Contracts, Rights Under The Simpson Lease—
Including Magnum’s Rights—Remained Uncertain. ..................................6
IV. Crimson Disputed Magnum’s Interest, and Magnum Filed Suit............10
Summary of Argument ........................................................................................13
Standard of Review...............................................................................................18
Argument ...............................................................................................................19
I. The Trial Court Erred In Awarding Magnum Real Property
Interests Absent Proof of an Assignment [Issue 1]....................................19
A. Oil and gas working interests and overriding royalties
constitute real property interests transferred by
conveyance—i.e., by a deed.................................................................19
B. Magnum sued on a contract, not a conveyance or deed. ................20
1. The SMSA and JOA are contracts, not deeds or conveyances. ..........21
ii
2. The LOI is a contract, not a deed or conveyance..................................22
C. The judgment could not properly award Magnum a working
interest or overriding royalties—or stipulated damages and
fees. ..........................................................................................................26
II. This Court Should Reverse The Trial Court’s Judgment And
Render Judgment That Magnum Take Nothing. .......................................27
A. Magnum cannot recover for breach of contract in the
alternative. ..............................................................................................27
1. The LOI is an unenforceable agreement to agree: the LOI omits
essential terms of a binding contract [Issue 2]..........................................28
2. Limitations bars suit for damages and specific performance of
the LOI’s obligation to convey interests [Issue 3]. ...................................31
3. The SMSA imposed no obligations to assign Zalman leases
[Issue 4]. ..........................................................................................................39
4. The JOA imposed no obligations to assign Zalman leases
[Issue 4]. ..........................................................................................................41
B. Magnum did not prove rights in the 2008 Zalman lease. ...............41
C. Magnum did not prove rights in the 2006 Zalman lease. ...............42
D. Magnum cannot recover in the alternative based on other
claims pleaded, because the claims were dismissed without
objection. .................................................................................................43
E. The trial court should have granted the operators’ summary
judgment motion—and therefore this Court must do so................44
1. Judgment may be granted on a cross-motion for summary
judgment.........................................................................................................44
2. The operators are entitled to judgment for title to the working
interests...........................................................................................................45
3. Magnum could not recover the overriding royalty interests,
either................................................................................................................46
iii
4. The operators are entitled to judgment on all other claims
asserted. ..........................................................................................................46
III. Even If Magnum Had Assignments Of The Lease Interests At
Issue, The Judgment Should Be Reversed [Issue 3]...................................47
A. The trial court erred in granting Magnum any relief, because
Magnum’s summary judgment motion requested none
[Issue 3]. ..................................................................................................47
1. A summary judgment motion must specifically, expressly
present the grounds for summary judgment—including any
relief granted..................................................................................................48
2. Magnum’s motion did not specifically, expressly request an
award of a working interest—a trespass-to-try-title remedy.................49
3. Magnum’s motion did not specifically, expressly request
declaratory relief regarding the overriding royalty interests.................51
B. The trial court’s ruling was harmful...................................................52
IV. Alternatively, Remand Is The Only Proper Relief. ....................................53
A. Remand to determine fact issues regarding limitations issue........54
B. Remand to resolve ambiguity in the LOI. .........................................54
C. Remand to resolve issues regarding proper scope of relief............56
V. Only A Modified Judgment Could Ever Be Proper [Issue 5]...................57
A. Judgment for Magnum could only involve an award of
damages and attorneys’ fees for breach of contract.........................57
B. Judgment for declaratory relief should be substantially
modified..................................................................................................58
Prayer ......................................................................................................................63
Certification............................................................................................................65
Certificate of Service .............................................................................................65
iv
Appendix A: Order on Motions for Summary Judgment (Oct. 22, 2013)
Appendix B: Partial Judgment (Apr. 9, 2014)
Appendix C: Order Granting Plaintiff’s Motion to Correct Clerical
Error Nunc Pro Tunc
Appendix D: Supplemental Summary Judgment Order (Oct. 22, 2014)
Appendix E: Final Judgment (Nov. 24, 2014)
Appendix F: Master Settlement Agreement Exhibit A (plat)
Appendix G: Amanda De La Croix plat
Appendix H: Joint Operating Agreement art. VIII, § B
Appendix I: Letter of Intent Oct. 8, 2013
Appendix J: Zalman well operators chart
Appendix K: Timeline
Appendix L: Glossary of oil and gas law terms
v
Index of Authorities
Page(s)
CASES
Adams v. Cannan,
253 S.W.2d 948 (Tex. Civ. App.—San Antonio 1952, writ ref’d
n.r.e.) ..................................................................................................................40
AGD LP v. Quest Principal Inves. Inc.,
No. 13-12-720-CV, 2014 WL 6602314 (Tex. App.—Corpus Christi
Nov. 20, 2014, no pet) ......................................................................................44
Alford v. Krum,
671 S.W.2d 870 (Tex. 1984)..............................................................................58
Am. Tobacco Co. v. Grinnell,
951 S.W.2d 420 (Tex. 1997)..............................................................................18
Amber Oil & Gas Co. v. Bratton,
711 S.W.2d 741 (Tex. App.—Austin 1986, no writ).....................................40
Amedisys Inc. v. Kingwood Home Health Care LLC,
437 S.W.3d 507 (Tex. 2014)..............................................................................54
Bachler v. Rosenthal,
798 S.W.2d 646 (Tex. App.—Austin 1990, writ denied).............................40
Bailey v. Williamson,
129 S.W.2d 1162 (Tex. Civ. App.—El Paso 1939, no writ) .........................37
Barber v. Colorado ISD,
901 S.W.2d 447 (Tex. 1995)..............................................................................35
Barker v. Eckman,
213 S.W.3d 306 (Tex. 2006)........................................................................32, 38
Borderlon v. Peck,
661 S.W.2d 907 (Tex. 1983)..............................................................................38
vi
Bowman v. Lumberton ISD,
801 S.W.2d 883 (Tex. 1990)..............................................................................48
BP Am. Prod. v. Marshall,
342 S.W.3d 59 (Tex. 2011)................................................................................38
Cartwright v. Cologne Production Co.,
182 S.W.3d 438 (Tex. App.—Corpus Christi 2006, pet. denied) ...............48
Cheek v. Metzer,
116 Tex. 356, 291 S.W. 860 (1927) ...................................................................35
Chesapeake Operating Inc. v. Denson,
201 S.W.3d 369 (Tex. App.—Amarillo 2006, pet. denied)..........................61
City of Fort Worth v. Johnson,
388 S.W.2d 400 (Tex. 1964)..............................................................................52
Consumer Portfolio Servs. Inc. v. Obregon,
No. 13-09-548-CV, 2010 WL 4361765 (Tex. App.—Corpus Christi
Nov. 4, 2010, no pet.) .......................................................................................48
Cont’l Royalty Co. v. Marshall,
239 S.W.2d 837 (Tex. Civ. App.—Texarkana 1951, no writ)......................24
Creditwatch, Inc. v. Jackson,
157 S.W.3d 814 (Tex. 2005)..............................................................................18
Currie v. Burgess,
132 Tex. 104, 120 S.W.2d 788 (1938)...............................................................24
De Benavides v. Warren,
674 S.W.2d 353 (Tex. App.—San Antonio 1984, writ ref’d n.r.e.).............53
Dow Chem. Co. v. Bright,
89 S.W.3d 602 (Tex. 2002)................................................................................44
El Paso Field Servs., L.P. v. Mastec N. Am., Inc.,
389 S.W.3d 802 (Tex. 2012)..............................................................................28
vii
Exploration Co. v. Vega Oil & Gas Co.,
843 S.W.2d 123 (Tex. App.—Houston [14th Dist.] 1992, writ
denied) ...............................................................................................................41
Exxon Corp. v. Emerald Oil & Gas Co.,
348 S.W.3d 194 (Tex. 2011)..............................................................................39
FM Props. Operating Co. v. City of Austin,
22 S.W.3d 868 (Tex. 2000)................................................................................44
Fortis Benefits v. Cantu,
234 S.W.3d 642 (Tex. 2007)..............................................................................27
Frost Nat’l Bank v. L & F Distribs., Ltd.,
165 S.W.3d 310 (Tex. 2005)........................................................................27, 28
George v. Vick,
686 S.W.2d 99 (Tex. 1984)..........................................................................44, 58
Getty Oil Co. v. Blevco Energy Inc.,
722 S.W.2d 51 (Tex. App.—Eastland 1986), writ dism’d, 770 S.W.2d
569 (Tex. 1989) ............................................................................................28, 29
Gordon v. W. Houston Trees Ltd.,
352 S.W.3d 32 (Tex. App.—Houston [1st Dist.] 2011, no pet.) ..................20
Green v. Canon,
33 S.W.3d 855 (Tex. App.—Houston [14th Dist.] 2000, pet. denied)........20
Hagar v. Martin,
277 S.W.2d 195 (Tex. Civ. App.—Dallas 1955, writ ref’d n.r.e.) ...............40
Halbert v. Green,
156 Tex. 223, 293 S.W.2d 848 (1956)...............................................................45
Harlan v. Vetter,
732 S.W.2d 390 (Tex. App.—Eastland 1987, writ ref’d n.r.e.)....................20
Hoover v. Gregory,
835 S.W.2d 668 (Tex. App.—Dallas 1992, writ denied)..............................32
viii
Hunt v. Heaton,
643 S.W.2d 677 (Tex. 1982)..............................................................................45
Hurbrough v. Cain,
571 S.W.2d 216 (Tex. Civ. App.—Tyler 1978, no pet.)..........................35, 37
Jay Petroleum LLC v. EOG Res. Inc.,
332 S.W.3d 534 (Tex. App.—Houston [1st Dist.] 2009, no pet.) ................56
Kennedy Con. Inc. v. Forman,
316 S.W.3d 129 (Tex. App.—Houston [14th Dist.] 2010, no pet.) .............50
Kerlin v. Sauceda,
263 S.W.3d 920 (Tex. 2008)..............................................................................38
Knapp Med. Ctr. v. Grass,
443 S.W.3d 182 (Tex. App.—Corpus Christi 2013, pet. denied) ...............18
Land v. Turner,
377 S.W.2d 181 (Tex. 1964)..............................................................................50
Lehmann v. Har-Con Corp.,
39 S.W.3d 191 (Tex. 2001)..........................................................................44, 57
Li Li v. 1821 W. Main Dev. LLC,
No. 14-10-1227-CV, 2011 WL 5926679 (Tex. App.—Houston [14th
Dist.] Nov. 29, 2011, pet. denied)...................................................................25
Lile v. Smith,
291 S.W.3d 75 (Tex. App.—Texarkana 2009, no pet.).................................50
Marifarms Oil & Gas, Inc. v. Westhoff,
802 S.W.2d 123 (Tex. App.—Fort Worth 1991, no writ).............................40
Marrs & Smith P’ship v. D.K. Boyd Oil & Gas Co.,
223 S.W.3d 1 (Tex. App.—El Paso 2005, pet. denied).................................62
Martin v. Amerman,
133 S.W.2d 262 (Tex. 2004)..............................................................................56
ix
Martin v. McDonnold,
247 S.W.3d 224 (Tex. App.—El Paso 2006, no pet.).....................................50
Masgas v. Anderson,
310 S.W.3d 567 (Tex. App.—Eastland 2010, pet. denied) ..........................45
Matagorda Cty. Appraisal Dist. v. Coastal Liquids Partners LP,
165 S.W.3d 329 (Tex. 2005)........................................................................19, 49
Mattox v. Cnty. Comm’rs Ct.,
389 S.W.3d 464 (Tex. App.—Houston [14th Dist.] 2012, pet.
denied) ...............................................................................................................49
Mays v. Pierce,
203 S.W.3d 564 (Tex. App.—Houston [14th Dist.] 2006, pet.
denied) ...............................................................................................................32
McConnell v. Southside ISD,
858 S.W.2d 337 (Tex. 1993)............................................................17, 18, 48, 58
McCormick v. Krueger,
593 S.W.2d 729 (Tex. Civ. App.—Houston [1st Dist.] 1979, writ
ref’d n.r.e.) .........................................................................................................41
MCT Energy Ltd. v. Collins,
No. 07-13-304-CV, 2014 WL 5422918 (Tex. App.—Amarillo Oct. 21,
2014, no pet.) ...............................................................................................50, 52
MGM Fin. Corp. v. Woodlands Operating Co.,
292 S.W.3d 660 (Tex. 2009)..............................................................................56
Moore v. Dilworth,
142 Tex. 538, 179 S.W.2d 940 (1944)...............................................................35
Pearcy v. Envtl. Conservancy of Austin & Cent. Tex. Inc.,
814 S.W.2d 243 (Tex. App.—Austin 1991, writ denied).............................35
Petro Pro, Ltd. v. Upland Res., Inc.,
279 S.W.3d 743 (Tex. App.—Amarillo 2007, no pet.)..................................58
x
Plainsman Trading Co. v. Crews,
898 S.W.2d 786 (Tex. 1995)..............................................................................58
Positive Feed, Inc. v. Guthmann,
4 S.W.3d 879 (Tex. App.—Houston [1st Dist.] 1999, no pet.) ....................52
Quicksilver Res., Inc. v. CMS Mktg. Servs. & Trading Co.,
No. 02-03-251-CV, 2005 WL 182951 (Tex. App.—Fort Worth Jan.
27, 2005, pet. denied) .......................................................................................49
Reilly v. Rangers Mgmt., Inc.,
727 S.W.2d 527 (Tex. 1987)..............................................................................54
Richardson v. Allstate Tex. Lloyd’s,
72 S.W.3d 779 (Tex. App.—Dallas 2007, no pet.) ........................................49
Rogers v. Ricane Enters. Inc.,
884 S.W.2d 763 (Tex. 1994)..............................................................................49
Samano v. Sun Oil Co.,
621 S.W.2d 580 (Tex. 1981)..............................................................................40
Seureau v. ExxonMobil Corp.,
274 S.W.3d 206 (Tex. App.—Houston [14th Dist.] 2008, no pet.) .............39
Shell Oil Co. v. Ross,
356 S.W.3d 924 (Tex. 2011)..............................................................................38
Simpson v. Curtis,
351 S.W.3d 374 (Tex. App.—Tyler 2010, no pet.) ........................................61
Smith v. Davis,
No. 12–12–00169–CV, 2013 WL 2424266 (Tex. App.—Tyler June 5,
2013, no pet.) ...............................................................................................19, 31
Smith v. Sabine Royalty Corp.,
556 S.W.2d 365 (Tex. Civ. App.—Amarillo 1977, no writ) ............30, 31, 35
S. Plans Switching Ltd. v. BNSF Railway Co.,
255 S.W.3d 690 (Tex. App.—Amarillo 2008, pet. denied)..........................33
xi
Stephens Cnty. Museum, Inc. v. Swenson,
517 S.W.2d 257 (Tex. 1974)..............................................................................20
Stine v. Stewart,
80 S.W.3d 586 (Tex. 2002)................................................................................32
Stroud Prod. LLC v. Hosford,
405 S.W.3d 794 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) ........19
Sunac Petroleum Corp. v. Parkes,
416 S.W.2d 798 (Tex. 1967)..............................................................................41
Sw. Guar. Trust Co. v. Hardy Rd. 13.4 Joint Venture,
981 S.W.2d 951 (Tex. App.—Houston [1st Dist.] 1998, pet. denied) ........52
T.O. Stanley Boot Co. v. Bank of El Paso,
847 S.W.2d 218 (Tex. 1992)..............................................................................31
Tex. Parks & Wildlife Dep’t v. Sawyer Trust,
354 S.W.3d 384 (Tex. 2011)..............................................................................49
Travis v. City of Mesquite,
830 S.W.2d 94 (Tex. 1992)................................................................................48
Universal C.I.T. Credit Corp. v. Daniel,
243 S.W.2d 154 (Tex. 1951)..............................................................................54
Wagner & Brown, Ltd. v. Horwood,
58 S.W.3d 732 (Tex. 2001)................................................................................38
Walker v. Kleiman,
896 S.W.2d 413 (Tex. App.—Houston [1st Dist.] 1995, no writ) ...............25
White v. Moore,
760 S.W.2d 242 (Tex. 1988)..............................................................................54
Willy v. Winkler,
No. 01-10-115-CV, 2010 WL 5187719 (Tex. App.—Houston [1st
Dist.] Dec. 23, 2010, no pet.)............................................................................49
xii
Wolfe v. Devon Energy Prod. Co.,
382 S.W.3d 434 (Tex. App.—Waco 2012, pet. denied)................................52
Young Refining Corp. v. Pennzoil Co.,
46 S.W.3d 380
(Tex. App.—Houston [1st Dist.] 2001, pet. denied) ........................29, 30, 62
STATUTES
Tex. Prop. Code Ann. Ch. 22 .........................................................................49, 50
Tex. Civ. Prac. & Rem. Code § 16.004 ................................................................32
Tex. Civ. Prac. & Rem. Code § 16.051 ................................................................32
Tex. Civ. Prac. & Rem. Code § 37.004 ................................................................49
OTHER AUTHORITIES
Tex. R. App. P. 9.4 .................................................................................................56
Tex. R. App. P. 43.2 .............................................................................45, 46, 55, 58
Tex. R. App. P. 43.3 .........................................................................................27, 53
Tex. R. App. P. 43.4 ...............................................................................................63
Tex. R. App. P. 44.1 ...............................................................................................52
Tex. R. Civ. P. 11............................................................................12, 26, 27, 43, 57
Tex. R. Civ. P. 131..................................................................................................63
Tex. R. Civ. P. 166a................................................................. 17, 18, 50, 51, 52, 58
Tex. R. Civ. P. 279..................................................................................................58
Tex. R. Civ. P. 783-809 ..........................................................................................53
xiii
Statement of the Case
Nature of the case: Lawsuit for damages, declaratory judgment,
and specific performance of a letter of intent
requiring the operators of oil and gas wells to
assign the plaintiff overriding royalty interests
and working interests in oil and gas leases.
Course of proceedings: The parties filed cross-motions for summary
judgment addressing liability. The trial court
granted plaintiff Magnum’s motion, rendering
an interlocutory summary judgment awarding
Magnum interests in the leases (but awarding
Magnum nothing from two defendants).
Partial judgment awarding Magnum damages
and attorneys’ fees was later signed based on
the parties’ Rule 11 stipulation on those issues.
Trial court disposition: Final judgment awarding Magnum overriding
royalty interests and working interests in the
leases at issue; awarding it actual damages of
$4,755,699 for three of the operators’ failure to
pay royalties; awarding Magnum its attorneys’
fees; denying Magnum prejudgment interest;
and ruling that Magnum take nothing from
the remaining defendants.
xiv
Statement Regarding Oral Argument
Oral argument would assist the Court. The case involves complicated
facts regarding oil and gas leases, related agreements, percentage interests
in the leases, title issues, and the history of lease ownership. The case also
involves an unusual procedural history in the trial court below.
xv
Issues Presented
The broad issue is whether the trial court erred in granting summary
judgment for Magnum and denying summary judgment to the operators.
This issue encompasses these sub-issues:
1. Contract vs. conveyance: Did the court err in awarding Magnum
real property interests when Magnum only claimed a contract to convey
the interests but neither claimed nor proved an actual conveyance?
2. Enforceability: Does the language of the operative contract—a
letter of intent that provides for entering into “further agreements” in the
future—contain all essential terms needed to make it enforceable?
3. Statute of limitations: Did Magnum wait too long to sue?
4. Interpretation: Do the other contracts give Magnum rights?
5. Procedure:
(a) Did the court err in granting relief not expressly presented
in Magnum’s summary judgment motion?
(b) Are the operators entitled to summary judgment providing
that Magnum take nothing, or is remand needed to resolve
fact issues?
(c) If Magnum was entitled to relief, did the trial court err by
misconstruing the parties’ rights under the agreements and
leases, and is remand needed to resolve damages issues?
xvi
Statement of Facts
I. BEFORE THE EVENTS AT ISSUE, THE SIMPSON LEASE TERMINATED.
In 1956 some Simpson family members executed an oil and gas lease,
the so-called “Simpson lease,” leasing mineral interests in Lavaca County,
Texas (CR 2671-76). Over the next several years, gas wells were drilled on
lands that the lease covered and gas was produced (CR 2717-36). However,
there were two periods of no production, when shut-in royalties were not
paid properly: April-May 1979 and May-October 1989 (CR 1507-11, 1522-
26, 1538). Lawsuits were filed regarding the lease’s validity (CR 1210-12). In
2006 the trial court ruled—in Castle Oil & Gas Limited Partnership v. Kent
Circle Investments—that on or before January 1, 1996, the Simpson lease had
expired (CR 657-58). In 2007, an appeal of that matter was dismissed by this
Court based on a settlement (CR 2234-39).
II. UNCERTAIN ABOUT THE SIMPSON LEASE’S VALIDITY, MAGNUM AND
OTHERS SIGNED CONTRACTS TO SECURE THEIR CLAIMED INTERESTS.
Years before that ruling, however, several parties had settled
unrelated litigation regarding the Simpson lease. Specifically, Magnum
Producing LP signed a Supplemental Master Settlement Agreement
(“SMSA”) (which superseded an earlier Master Settlement Agreement
(“MSA”)) with other claimants who, while not disputing the Simpson
1
lease’s validity, disputed their respective interests under assignments and
agreements regarding Simpson lease lands [App. F, G] (CR 805-985, 987-
1191). Magnum claimed interests in half of the Simpson lease’s working
interest (CR 2662-63).
The SMSA’s terms addressed the disputes in various ways, including
by obligating the parties to execute cross-assignments and abide by a joint
operating agreement—the JOA. The SMSA obligated the well operator to
assign Magnum a 1% overriding royalty interest and a 26.25% working
interest after payout in the Simpson lease and in various other leases (CR
997-98, 1006-07, 1011, 1114-30, 1134-38). Excluded from the exchange was
the “Magnum Reserved Zone” (a.k.a. the “N & O Sands”), a specified
depth of oil-bearing sands in which Magnum claimed a working interest
through the Simpson lease (CR 993, 997, 1454, 2662-63, 2813-14). The SMSA
allowed the operator to drill a well on the Simpson lease lands and assign
Magnum the “deep rights” below the well’s productive zone (CR 1007).
United Oil & Minerals was the operator of Simpson lease wells at the
time and signed the SMSA (CR 1018, CR 2444). To hedge against the
possible invalidity of the Simpson lease, that same year United also signed
a “top lease”—a lease subject to the existing lease—covering some of the
2
same Simpson lease acreage. This was the so-called 2001 Zalman lease (CR
2663, 2699-2716). Later that year, United completed a well on the acreage—
the Zalman No. 3 well—and began producing gas from a depth of 12,736 to
12,746 feet (CR 2717-19). Under a “horizontal severance” clause, this 2001
Zalman lease later terminated as to depths below 12,846 feet, so United
signed another “top lease” on the same acreage—the 2003 Zalman lease—
as to depths below 12,920 feet (CR 2664, 2704, 2737-46).
Uncertainty about the Simpson lease’s validity arose as early as 1997
and continued thereafter (1SCR 342-47, 378-79). Magnum claimed interests
in the Simpson lease through assignment from Samedan Oil Corporation,
but knew about the uncertainty (CR 157-62, 200). Indeed, in the SMSA the
parties had expressly disclaimed warranties of the validity of the leases at
issue, including the Simpson lease (CR 1725).
However, United wanted to complete wells on the property in depths
covered by the “deep rights” released under the 2001 Zalman lease and
reacquired with the 2003 Zalman lease (i.e., the depths below 12,920 feet).
Therefore, in October 2003 United sent Magnum a proposal. United’s
proposal noted the continuing litigation over the Simpson lease and the
need to clear title to the “deep rights,” United proposed to assign Magnum
3
interests in United’s new top leases in exchange for Magnum releasing the
Simpson lease deep rights (CR 1290-91). Magnum made United a
counterproposal in a letter of intent—the LOI—and the parties signed it
that month (CR 1295-96) [Appendix I].
United made two basic promises in the LOI: (a) regarding the new
top leases, United promised to assign Magnum a 1% overriding royalty
interest convertible to a 26.25% working interest after payout
(proportionately reduced by 31.5% as to specified tracts and by 50% in
other tracts), and (b) United promised to treat the 2001 Zalman lease and
subsequent top leases on the acreage as valid “renewals” or “extensions” of
the Simpson lease under the MSA, so that as to those leases United would
assign Magnum the same interests “otherwise credited it under” the MSA:
a 1% overriding royalty interest and 26.25% “back-in” working interest (CR
1295-96). In exchange, Magnum agreed to (a) farm out to United the “deep
rights” under United’s new top leases (and the Simpson lease, if valid), and
(b) extend the SMSA’s deadline for United to assign the “deep rights” to
Magnum (CR 1295-96).
Magnum’s theory of the case focuses on the LOI (CR 2813-14). The
LOI says that its “guiding purpose” was for United “to assign to Magnum
4
interests in the leases” (CR 1296). But United never assigned anything. United
never assigned “deep rights” in the new top leases or shallower rights in
the 2001 Zalman lease (CR 1356-58, 1362, 1461-62).
Magnum never followed up with United—and never farmed out as
the LOI required. Magnum is a sophisticated oil and gas company with
interests in around 200 wells and knew how to obtain assignments (CR
1353-56). Instead Magnum slept on its rights. Magnum’s president,
Avinash Ahuja, thought that the LOI imposed on United an obligation to
execute an assignment, yet he never demanded an assignment because he
“thought we will be paid contractually” (CR 1470, 1476). He said that he
expected to receive an assignment “immediately after” execution of the LOI
or “[a]t any time,” but he “just thought they’ll get to it when they get to it”
(CR 690, 1477-78). Ahuja also said Magnum typically does not even record
such deals in the deed records (CR 1476).
The parties even exchanged drafts of a proposed Magnum farmout
agreement pursuant to the LOI (CR 707-26, 759-62), but years passed, and
United assigned nothing (CR 1357-59, 1362, 1461, 2137). Throughout this
time period, Magnum admittedly did “very little” to analyze title
regarding its supposed Zalman well interests (CR 1355).
5
United eventually assigned its interests as the operator in the Zalman
leases, and during the next several years the operator of the wells on the
lease acreage changed several more times (CR 2442-49). In 2004, operator
Westport Oil & Gas completed another gas well—the Zalman No. 4 well—
this time in the “deep rights” zone, and the Zalman No. 4 well began
producing (CR 2728-34). When the Zalman No. 3 well ceased producing in
2006, the next operator acquired yet another lease on that acreage—the
2006 Zalman lease, also at issue in this lawsuit (CR 2724-25, 2775-86).
Defendant Crimson Exploration Operating Inc. acquired its interest in 2007
and is currently the operator on lands the Zalman leases cover (to the
extent those leases have vested) (CR 2448-49, 2814).
[A timeline of the above events, and a chart of the succession of well
operators, is contained in Appendices J and K hereto. Appendix L contains
a glossary of the oil and gas terms in bold.]
III. DESPITE THESE CONTRACTS, RIGHTS UNDER THE SIMPSON LEASE—
INCLUDING MAGNUM’S RIGHTS—REMAINED UNCERTAIN.
In the years after the LOI was signed, no court definitively ruled on
the Simpson lease’s validity. As a result, in order to continue operations on
6
the leased acreage, the operators had little choice but to treat various
claimants as having possibly valid interests in the Zalman wells.
The Zalman No. 3 well paid out in 2004, but due to pending litigation
over the validity of the Simpson lease, the operator had held production
revenues in suspense (CR 1323). When the well required a “workover”
operation in late 2005, the operator (Westport Oil & Gas) had to determine
which working interest owners would participate: it assumed Magnum
had an overriding royalty interest through the SMSA, so Westport Oil &
Gas asked Magnum to elect whether to convert its interest to a working
interest and whether to participate in the workover by executing a
standard AFE or “authorization for expenditure” (CR 1323-24). Magnum
elected both (CR 1324-25). In doing so, it knowingly accepted a working
interest equal to only half what the trial court ultimately awarded Magnum
in this lawsuit (compare CR 1325 with CR 3349).
In 2006 the operator (KerrMcGee) proposed to “recomplete” the well
at a new depth (it was eventually recompleted in the Magnum Reserved
Zone (CR 2735)). KerrMcGee asked Magnum to execute an AFE for that
purpose (CR 2002). This AFE noted that the Simpson lease’s validity
remained in litigation, and so the operator would merely “assume” that
7
Magnum and other claimants “have the potential to have an interest in the
well” (CR 2002). Magnum elected to participate, even though the AFE it
executed only credited Magnum with half of the percentage interest
Magnum claims through the LOI (CR 2001, 2662-63, 2907-13).
For years the successive operators were each uncertain what
percentage Simpson lease interests (if any) were owned by Magnum or
others (CR 2033-46, 2056-61). Thus, current operator (Crimson) had no title
opinion prepared regarding the Magnum Reserved Zone until August
2008, relying instead on payment information inherited from prior
operators (CR 2079-80, 2135). But the operators nevertheless continued to
bill Magnum (and other claimants) anyway for workover costs (CR 2005-
07).
That the operators were unsure about Magnum’s possible interest is
no surprise, given the uncertainty regarding the Simpson lease’s validity—
an uncertainty Magnum acknowledges (CR 1691). In fact, not until 2008 did
Magnum itself assert that it was not being paid properly (CR 2094).
Moreover, the operators had little time to independently review title issues
because control of the Zalman lease operations changed hands frequently
from the time that United transferred them in 2003 until Crimson acquired
8
them in 2007 (CR 2444). At least one operator had no time to create
electronic records of land files before the successor operator had acquired
the interests, and some paper records had been stored off site (CR 2078). As
one operator’s employee later explained it, “we just pulled old Kerr-McGee
records and disbursed based on what we found . . . we used a spreadsheet
out of Kerr-McGee’s old system” and relied on a title opinion issued years
earlier to another working interest owner (CR 2079-80). Even Crimson,
when it acquired properties in 2007, typically did nothing more than
download its predecessor’s records (CR 2136). The uncertainty was so
acute that in 2009 even Magnum had to rely on “reasonable assumptions”
to calculate what it claimed it was owed under the Simpson lease (CR
2099).
When Crimson acquired its interests in the two Zalman wells in 2007,
Crimson performed due diligence that did not uncover any recorded
interest of Magnum in those wells (CR 125). Not until March 2009 did
Magnum even file the LOI in the county land records—as a contract (CR
743-50). In a March 19, 2009 letter to Crimson, Magnum asserted it had
been underpaid for its interests in the Zalman No. 3 and Zalman No. 4
wells (CR 2097-99).
9
At that point, Crimson more thoroughly analyzed the title issues for
the wells (instead of using predecessors’ records) (CR 2136). Because its
predecessor in the Zalman well properties did not update its joint interest
billing statements, Crimson updated old title opinions and did research to
unravel the title confusion (CR 2133-36, 2240-41). That updated title
research concluded that Crimson and the prior operators owed Magnum
nothing for production from the wells (CR 2115, 2133-38, 2799).
IV. CRIMSON DISPUTED MAGNUM’S INTEREST, AND MAGNUM FILED SUIT.
Crimson and Magnum had met to discuss the issue in 2010, but
Magnum could not identify a single assignment it had of any interest in
those wells (CR 2137-38). So instead, Magnum sued Crimson and the prior
operators to enforce its “contractual rights” in production from the wells
(CR 6-8; 1SCR 5). Magnum sued on November 16, 2010, for conversion and
breach of contract and sought damages, attorneys’ fees, interest, and costs
(CR 7).
The parties filed cross-motions for summary judgment. Magnum
filed a summary judgment motion asserting an interest in production from
the wells and seeking a ruling that it had “contractual rights” in the
Zalman leases (1SCR 4-22). In response, the operators asserted several
10
affirmative defenses, including limitations (CR 776-1484) and filed a cross-
motion for summary judgment against Magnum on all claims (CR 80-762).
A week before the hearing, Magnum amended its petition and added
claims for (a) violations of the Texas Natural Resources Code, and (b) a
declaratory judgment (CR 2812-19). This petition for the first time sought
specific performance of the LOI (CR 2815, 2818)—although Magnum did
not amend its summary judgment motion to seek specific performance.
The trial court held a hearing on January 25, 2013. By letter ruling
later the Court stated it would grant Magnum’s motion and deny the
operators’ motion (and that Magnum would take nothing from defendants
Sunoco Partners Marketing & Terminals and Copano Field
Services/Central Gulf Coast) (CR 2884-85). But without any further
briefing, Magnum proposed a summary judgment order awarding it
specific percentage working interests in the leases (CR 2901-06). The
operators objected that Magnum did not seek this relief in its motion but
had only sought judgment for liability for breach of contract (CR 2888-94).
The court signed Magnum’s proposed order (and amended it later nunc pro
tunc) (CR 2907-13; SCR 854-55) [Appendix A, C].
11
Based on the parties’ subsequent Rule 11 agreement stipulating as to
the amount of damages and attorneys’ fees to be awarded (but expressly
conditioned on a valid determination of liability), the court signed a partial
judgment for damages and fees against Crimson Exploration Operating,
Inc., Anadarko Petroleum Corp., and Aubris Resources (CR 3173-90)
[Appendix B]. The final judgment incorporated the prior, interlocutory
rulings (CR 3328, 3345-56) [Appendix D, E].
12
Summary of Argument
Some call oil and gas law a hybrid of contract law and property law.
This litigation demonstrates why, because the dispositive issues involve
aspects of both areas. This case also involves procedural issues dealing
with summary judgment practice and the drafting of judgments.
At the center of the storm are two Lavaca County natural gas wells:
the Zalman No. 3 and the Zalman No. 4. Magnum seeks millions of dollars
based on a claim that it is owed royalties on production from these wells
dating back to 2001.
The properties at issue were once covered by the 1956 Simpson lease.
But during the 1990s, doubts arose about whether the lease was still alive.
Those doubts complicated efforts to produce gas from the wells, and the
concerned parties reacted by executing some new documents.
First, the uncertainty about the Simpson lease led to the execution of
some “top leases,” designed as a backup that would kick into effect in case
the Simpson lease terminated—roughly as a homeowner who hopes to sell
might sign a backup contract in case the main buyer falls through. These
leases are referred as to the “Zalman leases.” Second, several contracts
13
were negotiated and signed in attempts to keep things from descending
into protracted litigation. Those contracts are at the core of this appeal.
The key contracts were between Magnum and United Resources, the
well operator at the time (but whose rights have passed down to Crimson):
MSA - Master Settlement Agreement Jan. 30, 2001
SMSA – Supp. Master Settlement Agreement May 31, 2001
JOA – Joint Operating Agreement May 31, 2001
LOI – Letter of Intent Oct. 8, 2003
The LOI is the most important, and it contains several promises:
• “You agree to assign to Magnum as to the Top Leases . . . an ORRI
of 1% and convertible to a 26.25% WI . . .”
• “You agree that . . . the ‘Zalman Leases’ . . . shall each be
considered for all purposes (and in particular for the purposes of
Paragraph 9B. of the [MSA]) as a ‘renewal(s) and extension(s)
obtained within one (1) year of the expiration’ of the Simpson
Lease . . .”
• “The parties agree that . . . the parties shall enter into such further
agreements and assignments as are necessary . . .”
14
• “It is agreed that . . . the obligation of [the operator] to assign to
Magnum certain deep rights . . . under Paragraphs 9J. and K. of
the [MSA] shall be extended . . . to January 1, 2005.”
At bottom, this appeal presents a clash about what the LOI means: is
it a conveyance of the Zalman lease interests, or simply a contract to convey
them? The judgment effectively ruled it was the former—a conveyance—
by awarding Magnum overriding royalties and working interests in the
Zalman leases (CR 3345-50). That is the fundamental error here: although
Magnum argued that the operators breached contracts to assign interests in
the leases—having assigned nothing—the court rendered judgment giving
Magnum title to those interests, as if assignments had occurred.
But no assignments had occurred, and no authority allowed the court
to treat the contract to assign those interests as itself the assignment. The
court could only grant a contract remedy—like specific performance and
damages. But Magnum’s motion did not seek that relief. The record thus
does not support the relief granted—i.e., an award of title to the Zalman
lease interests, and damages for not receiving royalties under the leases.
The trial court instead should have viewed this case as a contract
dispute. Viewed in that light, the core issues are (a) whether the LOI lacked
15
essential terms of an enforceable contract, and (b) when the four-year
limitations clock had run on claims for breach of the LOI from the
operators’ failure to assign the Zalman lease interests. Magnum loses on
both counts.
The LOI lacked all essential terms of an enforceable contract because
although it proposes a farmout agreement as part of the exchange, the LOI
does not contain all the terms of a farmout agreement. That was to come
later, as the LOI indicated, but Magnum and the operators never agreed on
farmout terms. As a result, the LOI is an unenforceable agreement-to-agree.
Regardless, by no later than July 2005 the clock had started running
on Magnum’s claims for breach of the LOI. That’s because the LOI required
certain rights to be assigned by that date, and by that date Magnum was on
notice that the operators had not assigned anything—nearly two years after
the LOI was executed. Even Magnum admitted that it expected assignment
of rights under the LOI “immediately after” the LOI’s execution. But
Magnum did not file this suit until November 2010, over 4 years after that
July 2005 date. Limitations thus bars the claims.
This contract case would be simpler if it did not come to this Court in
a wrapper of procedural issues, but there are additional flaws in how the
16
judgment came about. For example, the trial court granted relief beyond
what was requested by Magnum’s summary judgment motion, contrary to
McConnell v. Southside ISD, 858 S.W.2d 337 (Tex. 1993), and Texas Rule of
Civil Procedure 166a. Hence, this brief includes procedural points. But the
core of the appeal is a desire to see the contracts analyzed correctly.
This Court should render judgment that Magnum take nothing, but if
the Court disagrees, it must remand to resolve fact issues. And if this Court
rejects that approach, this Court can only give Magnum relief by modifying
the judgment to fix technical problems and remanding to adjust the award
of damages and attorneys’ fees.
17
Standard of Review
Unless otherwise noted herein, the summary judgment standard of
review applies, because the final judgment is based on liability determined
by an earlier summary judgment ruling (CR 3345-52).
This Court reviews a summary judgment de novo. Creditwatch, Inc. v.
Jackson, 157 S.W.3d 814, 816 n.7 (Tex. 2005); Knapp Med. Ctr. v. Grass, 443
S.W.3d 182, 187 (Tex. App.—Corpus Christi 2013, pet. denied). A summary
judgment is proper if there is no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law. See Tex. R. Civ. P.
166a(c). In determining whether a genuine issue of material fact exists,
evidence favorable to the responding party is taken as true; all reasonable
inferences are made and all doubts resolved in favor of the respondent.
Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997).
The motion “must itself expressly present the grounds upon which it
is made,” McConnell v. Southside ISD, 858 S.W.2d 337, 341 (Tex. 1993), and
“the non-movant’s failure to except or respond cannot supply by default
the grounds for summary judgment.” Id. at 342. Thus, “if the grounds for
summary judgment are not expressly presented in the motion for summary
judgment itself, the motion is legally insufficient.” Id.
18
Argument
I. THE TRIAL COURT ERRED IN AWARDING MAGNUM REAL PROPERTY
INTERESTS ABSENT PROOF OF AN ASSIGNMENT [ISSUE 1].
The final judgment awards Magnum overriding royalty interests and
working interests in four Zalman leases (CR 3345-56). That ruling is based
on the court’s earlier summary judgment decision (CR 2907-13). In their
motion for summary judgment, and in a response to Magnum’s motion, the
operators argued correctly that Magnum had never received assignments
of these property interests (CR 86-87, 95-98, 779, 785-92). The trial court
erred in awarding property interests to Magnum absent an assignment.
A. Oil and gas working interests and overriding royalties constitute
real property interests transferred by conveyance—i.e., by a deed.
An oil and gas lease working interest is a real property interest. See
Matagorda Cty. Appraisal Dist. v. Coastal Liquids Partners LP, 165 S.W.3d 329,
332 (Tex. 2005). An overriding royalty interest is a real property interest.
See Stroud Prod. LLC v. Hosford, 405 S.W.3d 794, 818 (Tex. App.—Houston
[1st Dist.] 2013, pet. denied). “A purchaser takes title to real property solely
through a deed . . . An instrument that does not operate as a present
conveyance of title to real property is a contract to convey rather than a
deed.” Smith v. Davis, No. 12–12–00169–CV, 2013 WL 2424266, at *4 (Tex.
19
App.—Tyler June 5, 2013, no pet.) (citing Stephens Cnty. Museum, Inc. v.
Swenson, 517 S.W.2d 257 (Tex. 1974)). To obtain judgment for working
interests or overriding royalty interests, Magnum needed a deed or some
form of conveyance assigning those property interests.
B. Magnum sued on a contract, not a conveyance or deed.
No document on which Magnum relies to support its judgment is a
deed or conveyance; they are just contracts. For an instrument to convey
real property, that instrument must contain “operative words or words of
grant showing an intention by the grantor to convey to the grantee title to a
real property interest.” Gordon v. W. Houston Trees Ltd., 352 S.W.3d 32, 43
(Tex. App.—Houston [1st Dist.] 2011, no pet.); Harlan v. Vetter, 732 S.W.2d
390, 392 (Tex. App.—Eastland 1987, writ ref’d n.r.e.). Language in the
instrument anticipating future acts to effect a conveyance demonstrates
that the instrument is not a deed. Thus, in Green v. Canon, 33 S.W.3d 855
(Tex. App.—Houston [14th Dist.] 2000, pet. denied), the letter of intent was
“insufficient to constitute a deed . . . the language of the instrument clearly
contemplates future action, instructing appellants to call a lawyer and
urging them to ‘get started as soon as you can’ so they can benefit from a
homestead exemption.” Id. at 858.
20
Magnum’s petition and summary judgment motion asserted that the
contracts—the SMSA, JOA, and LOI—were the basis for Magnum’s rights
(CR 2813-18; 1SCR 4-5, 9-22). But none of these three contracts is a deed or
conveyance of real property interests. Indeed, Magnum’s petition admits the
contracts are what they purport to be: “settlement agreements” for which
Magnum pleaded specific performance (CR 2813, 2818).
1. The SMSA and JOA are contracts, not deeds or conveyances.
The SMSA is a settlement agreement resolving litigation and related
disputes (CR 987-1191). The SMSA obligates the parties to assign lease
interests, but those assignments are attached as separate instruments that
the SMSA had required the parties to independently execute (CR 1114-30,
1134-42, 1187-91). The SMSA does not reference the Zalman leases.
The JOA is a standard joint operating agreement in the oil and gas
industry (CR 1058-1108). The JOA sets out the respective contractual
obligations of the working interest owners with regard to lease operations,
but the JOA does not convey interests in any leases—nor does it reference
the Zalman leases.
Thus, neither the SMSA nor JOA constitutes a deed or conveyance of
any Zalman lease interests. Those two documents are contracts.
21
2. The LOI is a contract, not a deed or conveyance.
Magnum ultimately conceded that its case depends not on those two
contracts but on the LOI, which Magnum said “incorporates rights granted
Magnum under” the other agreements and “creates Magnum’s interests in
the subsequent 2001 and 2003 top leases” (CR 2815, 2858). However, the
LOI is not conveyance, either. As explained below, the LOI is just a contract
to convey Zalman lease interests and lacks essential terms that the parties
anticipated would appear in a future contract that Magnum never signed.
First, the LOI states it is a contract—“The parties agree that this letter
agreement is a letter of intent”—and repeatedly employs the language of a
contract: “We agree to farmout to you . . . You agree to assign to Magnum
as to the Top Leases . . . You agree that the following described Oil and Gas
Leases . . . shall each be considered for all purposes . . . This agreement
shall, in all things, be binding” (CR 1295-96). The LOI states it is a
“counterproposal” to the proposal that United sent Magnum on October 3,
2003 (CR 1295). In short, the LOI rejected the United offer of contract terms
and offered new terms that United accepted by signing it.
Second, the LOI contemplates that a separate instrument be executed
to assign all the interests—most importantly, those in paragraph 2 therein.
22
The LOI states: “The parties agree . . . that the parties shall enter into such
further agreements and assignments as are necessary to effectuate the intent
expressed herein” (emphasis added). The LOI contemplates a separate
assignment for all interests. The LOI says that United “agree[s] to assign”
leases. The LOI also provides that “the guiding purpose of this agreement
is for you to assign to Magnum interests in the Top Leases.” And the LOI
expressly extends the deadline to separately assign “deep rights” under
MSA paragraphs 9J and 9K. In this way, the LOI anticipates future acts to
effect the agreed-upon conveyances.
Third, the LOI incorporated the MSA, which itself also contemplated
separate instruments to effect the conveyances contemplated therein. The
MSA contemplated “further documentation” to transfer interests granted
therein, and assignment forms are attached (CR 819-20, 824-26, 829, 928-55).
LOI paragraph 2 refers to MSA paragraph 9B, which states that interests
granted in “extension or renewal” leases “shall be assigned” to Magnum
(CR 819-20). Magnum concedes that the SMSA, JOA, and LOI “must be
read together” (1SCR 12). Construed together, they confirm an intention for
separate instruments to effect contemplated assignments.
23
Construed as a whole, the LOI defeats attempts to locate in isolated
phrases an implied, present intent to convey. As one court explained:
It is true that the instrument contains words appropriate to a
present conveyance. The use of the words ‘sold and conveyed’
are presumptively words of conveyance, as insisted by
appellant. But it also contains expressions not only
inappropriate to a conveyance but entirely contrary to such
purport. The instrument, of course, must be construed as a
whole . . . “It is universally established, however, that even
though an instrument use such words, if, considering same as a
whole, it reasonably appears that the parties contemplate a
subsequent deed of conveyance, the contract will be construed
as executory and not as a deed.”
Continental Royalty Co. v. Marshall, 239 S.W.2d 837, 840 (Tex. Civ. App.—
Texarkana 1951, no writ) (construing contract that contained the phrase
“we, [the sellers], for and in consideration of $8.33-1/3 per acre, to be paid
by the [the buyers], do hereby bargain, sell and convey . . . ”); cf. Currie v.
Burgess, 132 Tex. 104, 108, 120 S.W.2d 788, 790 (1938) (executory contract to
convey land not a conveyance).
Fourth, the LOI contains no operative grant language—e.g., “to have
and to hold” or “United hereby assigns.” In short, the LOI contains no
words of grant indicating a present intent to convey Zalman lease interests.
For that reason Magnum argued—consistent with its theory that the LOI
24
was a contract—that it “grants Magnum the contractual right to a conveyance”
of the Zalman lease interests (CR 1704) (emphasis added).
Fifth, in subsequent instruments, Magnum itself acknowledged that
the LOI was an agreement. The November 2004 letter agreement that
amended the LOI deadline for assigning “deep rights” refers to the LOI as
an “Agreement.” By implementing an exchange of additional consideration
in order to amend the LOI, the letter implicitly acknowledged that the LOI
constitutes a contract (CR 1299). In a “Memorandum of Agreement” by
which Magnum filed the LOI in county clerk land records, its general
partner’s president swore under oath that the LOI was “an agreement with
United Resources . . . which agreement set out certain rights and
obligations” regarding the Zalman leases (CR 743-45).
Sixth, Magnum’s petition pleaded that the LOI was an “agreement”
and sought specific performance of the LOI through “formal conveyance of
interests” (CR 2815, 2818). This pleading constitutes a binding judicial
admission that the LOI is a contract, not a conveyance. See, e.g., Li Li v. 1821
W. Main Dev. LLC, No. 14-10-1227-CV, 2011 WL 5926679, at *4 (Tex. App.—
Houston [14th Dist.] Nov. 29, 2011, pet. denied); Walker v. Kleiman, 896
S.W.2d 413, 415-16 (Tex. App.—Houston [1st Dist.] 1995, no writ).
25
By effectively ruling that the LOI was an instrument that conveyed
mineral rights, the trial court’s ruling threatens the utility of the letter of
intent as a convenient device by which oil and gas operators can jointly
outline a business plan and agree to implement the plan with formal
instruments that are properly written and recorded. The letter of intent is
almost universally a means of initiating such a plan, not consummating it.
Based on the trial court’s ruling that the LOI was both the contract and the
performance of it, the oil and gas industry can have no certainty that their
outline of the intent to pursue a joint business plan will not be severed
from the flexible framework of contract law and deemed to be a done deal.
C. The judgment could not properly award Magnum a working
interest or overriding royalties—or stipulated damages and fees.
Absent an actual conveyance instrument, Magnum was not entitled
to summary judgment awarding it the Zalman lease interests, and the
judgment against the operators in that regard should be reversed. As a
result, the award of damages and attorneys’ fees must be reversed. That
award was based on the parties’ Rule 11 stipulation providing: “Absent an
order or judgment establishing liability, these stipulations shall not provide
independent grounds for a judgment” (CR 3173, 3184, 3186). Reversing the
26
judgment for liability thus eliminates the contractual basis for an award of
damages and fees. Thus, because the judgment for liability must be
reversed, this Court must enforce the Rule 11 stipulation by reversing the
award of damages and fees as well. See Fortis Benefits v. Cantu, 234 S.W.3d
642, 651 (Tex. 2007) (court has a ministerial duty to enforce valid Rule 11
agreement).
II. THIS COURT SHOULD REVERSE THE TRIAL COURT’S JUDGMENT AND
RENDER JUDGMENT THAT MAGNUM TAKE NOTHING.
Upon reversing the trial court’s judgment, this Court must render the
judgment the trial court should have rendered. Tex. R. App. P. 43.3. This
court must render summary judgment that Magnum take nothing because
(a) Magnum cannot recover on the claims it asserted, and (b) the summary
judgment record supports a take-nothing judgment for the operators.
A. Magnum cannot recover for breach of contract in the alternative.
Magnum could only recover for breach of contract, the only theory
argued in its summary judgment motion (1SCR 4-22). That motion sought
to enforce only “contractual rights” in the SMSA, the JOA, and the LOI
(1SCR 4-5). Interpretation of these agreements presented a legal issue based
on contract construction rules. See Frost Nat’l Bank v. L & F Distribs., Ltd.,
27
165 S.W.3d 310, 312 (Tex. 2005). This Court must “construe a contract by
the language contained in the document,” El Paso Field Servs., L.P. v. Mastec
N. Am., Inc., 389 S.W.3d 802, 811 (Tex. 2012), and must attempt to
harmonize all contract provisions by analyzing them “with reference to the
whole agreement,” Frost Nat’l Bank, 165 S.W.3d at 312. Magnum’s contract
theory of recovery fails for the reasons explained below.
1. The LOI is an unenforceable agreement to agree: the LOI omits essential
terms of a binding contract [Issue 2].
The LOI does impose obligations on the operators to assign certain
Zalman lease interests. But the LOI does not contain all essential terms of
the bargain. As Magnum’s president said, both parties “agreed that it may
need to be changed to [a] formal agreement” (CR 1471-72). This is
particularly true regarding the “farmout proposed” therein. The LOI does
not contain precise terms of the farmout; indeed, the parties never reached
agreement on those terms (CR 707-26, 759-62, 1357-59, 1362, 1461, 2137).
Therefore, the LOI is not an enforceable contract, and judgment for
Magnum based on a contract theory is improper.
Three cases demonstrate that the LOI is unenforceable. In Getty Oil
Co. v. Blevco Energy Inc., 722 S.W.2d 51 (Tex. App.—Eastland 1986), writ
28
dism’d, 770 S.W.2d 569 (Tex. 1989), the letter agreement stated: “Getty Oil
will farmout to Blevco Energy, providing a mutually acceptable agreement can
be reached . . .” Id. at 52 (emphasis in original). The court of appeals ruled
that this instrument “does not contain all of the essential elements of the
agreement” because, among other things, it was “subject to a ‘mutually
acceptable agreement’ with reference to the details of the agreement, such
as the location of the test well and the acreage to be included in the initial
unit.” Id. at 53.
The LOI contains similar language, as it (a) gives basically no terms
of the proposed farmout agreement, and (b) provides that “the parties shall
enter into such further agreements and assignments as necessary to effectuate
the intent expressed herein” (emphasis added). A farmout was an essential
term: the LOI expressly made the farming out of these interests in exchange
for an assignment “the guiding purpose of this agreement” (CR 1296).
The case of Young Refining Corp. v. Pennzoil Co., 46 S.W.3d 380 (Tex.
App.—Houston [1st Dist.] 2001, pet. denied), shows that the LOI itself does
not constitute a farmout. In that case the court of appeals noted that the
“primary characteristic of the farmout is the obligation of the assignee to
drill one or more wells on the acreage as a prerequisite to completion of the
29
transfer.” Id. at 389. The court held: “The Pennzoil/Southland contract does
not give Southland the right, nor does it impose on Southland a duty, to
drill a well on the Bass Pecan lease. Therefore, as a matter of law, the
Pennzoil/Southland contract is not a farm-out.” Id. (emphasis added).
The LOI imposes no express obligation on the operators to drill wells
on the acreage—and so omits a “primary characteristic” of farmout
agreements. In addition, the LOI lacks many terms that often appear in
farmouts, including the timing for completion of drilling operations,
pooling terms, ingress and egress conditions, performance obligations and
indemnities, insurance, and reassignment (see CR 129-145).
Third, in Smith v. Sabine Royalty Corp., 556 S.W.2d 365 (Tex. Civ.
App.—Amarillo 1977, no writ), the plaintiff argued that an exchange of
letters resulted in a binding farmout agreement. The court of appeals ruled,
however, that the initial “offer” letter lacked all the essential terms of the
agreement—namely, the terms of the proposed farmout agreement:
The letter merely outlined a proposal under which Sabine
would grant a lease to Dalco at some time and Dalco would, in
turn, farm out its interest to Smith . . . Regarding the proposed
farmout agreement between Dalco and Smith, nothing is
mentioned about any terms other than Smith’s drilling
obligation, his right to an eventual assignment from Dalco and
30
Dalco’s option for a 50% backin interest after payout. No other
details of the arrangement are mentioned . . .
Id. at 370. The same is true of the LOI: it was merely an agreement to assign
leases in exchange for a farmout, but was not itself the farmout. Moreover,
in Smith the letter at least imposed a drilling obligation. The LOI imposes
no such obligation (by contrast with that set forth in an executed farmout
agreement in the record as between other parties) (CR 129-55).
A contract that leaves essential terms open for future negotiation is
unenforceable. T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221
(Tex. 1992). The LOI left essential terms open: the terms of the farmout. As
the operators argued, the LOI was thus unenforceable (CR 98-100, 793-95).
2. Limitations bars suit for damages and specific performance of the LOI’s
obligation to convey interests [Issue 3].
Another reason this Court may not render judgment for Magnum on
its contract theory is that limitations bars the LOI’s enforcement.
Magnum’s summary judgment motion sought judgment for breach
of its “contractual rights” (1SCR 5). At the hearing Magnum said that it
sought contract damages and “specific performance” for conveyance of
Zalman lease interests (2 RR 11 [01-25-13]). A claim for “debt” or “specific
performance of a contract for the conveyance of real property” must be
31
filed “not later than four years after the day the cause of action accrues.” See
Tex. Civ. Prac. & Rem. Code §§ 16.004(a), 16.051 (emphasis added); Stine v.
Stewart, 80 S.W.3d 586, 592 (Tex. 2002).
A breach of contract claim generally accrues when the breach occurs,
or when the claimant has notice of facts sufficient to place it on notice of the
breach. Barker v. Eckman, 213 S.W.3d 306, 311 (Tex. 2006); Stine, 80 S.W.3d at
592. A party breaches a contract when the party fails to perform a duty or
breaches an obligation the contract imposes. See Mays v. Pierce, 203 S.W.3d
564, 575 (Tex. App.—Houston [14th Dist.] 2006, pet. denied); Hoover v.
Gregory, 835 S.W.2d 668, 677 (Tex. App.—Dallas 1992, writ denied).
This lawsuit was filed on November 16, 2010 (CR 4). The operators
argued that the contract claim accrued at the very latest on July 1, 2005, and
that because this was more than four years before suit was filed, limitations
barred the contract claim (CR 108, 783-85). As shown below, the operators
established that the claim accrued at the very latest in July 2005, and thus
limitations had expired when suit was filed in 2010. Therefore, the trial
court could not properly grant Magnum a judgment on its breach of
contract claim.
32
(a) Limitations bars claims regarding “deep rights” leases—the 2003
Zalman lease and 2006 Zalman lease.
Because the 2001 Zalman lease held the shallower rights (where the
Zalman No. 3 well was drilled), the 2003 Zalman lease and 2006 Zalman
lease implicated the “deep rights” in the subject acreage (i.e., depths below
12,920 feet, where the Zalman No. 4 well was drilled) (CR 2663-64, 2667-68,
2737, 2775). SMSA paragraph 9 allowed the operator to drill a well and
then assign Magnum minerals below the depth in which that well was
completed (CR 1727-28). The LOI set a new deadline to assign these “deep
rights,” a deadline extended to July 1, 2005 (CR 1296, 1299). No assignment
occurred by that date (CR 2137), so there was a breach on July 2, 2005.
Case law confirms this. In South Plans Switching Ltd. v. BNSF Railway
Co., 255 S.W.3d 690 (Tex. App.—Amarillo 2008, pet. denied), the breach
occurred when the defendant, at a closing, delivered a quitclaim deed to
real property rather than (as promised) an outright assignment of the fee.
Id. at 707 (“If BNSF was required to assign leases in some way other than
by quitclaim deed, on July 2, 1999, when the deal was closed, SAW must
have actual knowledge that there were no lease assignments made.”). Here,
because breach occurred July 2, 2005, the limitations period on Magnum’s
33
claim for an assignment of the deep rights expired four years later, by July
2, 2009. This lawsuit was filed in 2010 (CR 4). As to the “deep rights” to be
assigned under SMSA paragraphs 9J and 9K, the limitations period had
expired when suit was filed.
The Zalman No. 4 well was completed in the “deep rights” zone—at
a depth of 14,223 feet (CR 2728-29). The court should have granted
summary judgment that Magnum take nothing on its claim for breach of
obligations to assign the 2003 Zalman lease and the 2006 Zalman lease
interests, and its claim for interests in or production from the Zalman No. 4
well, because these claims were filed outside the limitations period, over
four years after July 2, 2005.
(b) Limitations bars claims regarding the 2001 Zalman lease.
When the LOI was signed in 2003, there were no “deep rights” in the
2001 Zalman lease; in 2002, that lease had terminated as to depths below
12,846 feet (the lowest depth from which the Zalman No. 3 well was then
producing), pursuant to the lease’s horizontal termination clause (CR 2664,
2667, 2704). The operators nevertheless contend that assignment of rights in
that lease were also due by the LOI’s July 1, 2005 deadline. See infra section
IV.B. But even if they were not, limitations had still expired for a claim to
34
assign those interests, because under Texas law those interests had to be
assigned within a reasonable time; a reasonable time had expired by July 1,
2005; and that date was more than four years before suit was filed.
When a contract does not provide a time for performance, the law
will imply that a performance must occur within a reasonable time. Moore
v. Dilworth, 142 Tex. 538, 542, 179 S.W.2d 940, 942 (1944); Pearcy v. Envtl.
Conservancy of Austin & Cent. Tex. Inc., 814 S.W.2d 243, 246 (Tex. App.—
Austin 1991, writ denied). What is a “reasonable time” presents a question
of law when the material facts and circumstances are not disputed. E.g.,
Barber v. Colorado ISD, 901 S.W.2d 447, 450 (Tex. 1995); Cheek v. Metzer, 116
Tex. 356, 366, 291 S.W. 860, 863 (1927). Texas law presumes that time is of
the essence in contracts for the sale of mineral interests. Hurbrough v. Cain,
571 S.W.2d 216 (Tex. Civ. App.—Tyler 1978, no pet.).
Thus, in Smith v. Sabine Royalty Corp., the court of appeals set aside a
jury’s finding that a 63-day delay in accepting a farmout proposal was
reasonable; the court held that the delay was unreasonable as a matter of
law. 556 S.W.2d at 369.
This lawsuit was filed November 16, 2010, so the question is whether,
before November 16, 2006, a reasonable time had passed for performance
35
of the October 2003 LOI obligation to assign rights in the 2001 Zalman
lease. The record establishes that (as the operators argued) by July 1, 2005,
nearly two years after the LOI was signed, a reasonable time for
performing it had passed:
• When Magnum signed the LOI in October 2003, Magnum believed it
should receive an assignment of its interests “immediately after” (CR
690), but Magnum did not receive an assignment “immediately after.”
• Late in 2003, the parties exchanged farmout proposals but failed to agree
(CR 707-26, 759-62), putting Magnum on notice that year (and certainly
by the end of 2004) that it had received no assignment.
• By July 1, 2005, nearly two years after signing the LOI, United had failed
to assign the “deep rights,” and that failure put Magnum on notice of
breach for other LOI assignment obligations (CR 689-90).
• The Zalman No. 3 well started producing in May 2001, but except for
two months in early 2002, Magnum was paid no overriding royalty, so
Magnum received no monthly payments in 2003 through April 2006,
when the zone stopped producing (CR 2097-98), putting Magnum on
notice from late 2003 forward that it had no assignment.
36
This case is like Hurbrough v. Cain, 571 S.W.2d 216 (Tex. Civ. App.—Tyler
1978, no pet.), where a letter agreement required overriding royalty
interests to be assigned to the plaintiff on leases acquired during a 5-year
period from August 1969 to August 1974. The agreement was “silent as to
the time of performance by [the defendants], i.e., when they were to convey
to appellant such overriding royalty interest as set out in the letter.” Id. at
221. The court noted the “reasonable time” rule and emphasized “the rule
in Texas . . . that time is of the essence in a contract for the sale of a mineral
interest.” Id. The court held that the lawsuit filed in May 1976 fell within
the limitations period for leaseholds obtained in 1973 but the suit fell
outside the limitations period for leases obtained from 1969 to 1970. Id. at
222. The court concluded that, as a matter of law, for leases acquired in
September 1970 royalties should have been assigned by May 1972—a
“reasonable period” of less than two years. Id.
At the very least, this evidence creates a fact issue regarding whether:
(a) the date of July 1, 2005, was a “reasonable period of time” for assigning
Magnum all lease rights the LOI promised, and (b) Magnum was otherwise
on notice of a breach more than four years before this lawsuit was filed. See
Bailey v. Williamson, 129 S.W.2d 1162, 1162-63 (Tex. Civ. App.—El Paso
37
1939, no writ) (fact issue existed regarding whether July 3 contract to assign
lease was performed within a reasonable time when lease was assigned
September 14). In that case, remand would be proper. See infra section IV.A.
(c) Limitations was not tolled by the discovery rule or fraud.
Magnum argued the discovery rule, a limited exception that defers
accrual of a cause of action until the injury was or could have reasonably
been discovered. Shell Oil Co. v. Ross, 356 S.W.3d 924, 929 (Tex. 2011). For
the discovery rule to apply, “the nature of the injury must be inherently
undiscoverable.” See Barker v. Eckman, 213 S.W.3d 306, 312 (Tex. 2006). But
failure to perform a contract for gas royalties is not inherently
undiscoverable. See Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 736-37
(Tex. 2001); BP Am. Prod. v. Marshall, 342 S.W.3d 59, 66-67 (Tex. 2011).
Magnum also asserted that fraudulent concealment tolled limitations.
Kerlin v. Sauceda, 263 S.W.3d 920, 925 (Tex. 2008). However, “fraudulent
concealment ends when a party learns of facts, conditions, or circumstances
which would cause a reasonably prudent person to make inquiry, which, if
pursued, would lead to discovery of the concealed cause of action.” See
Borderlon v. Peck, 661 S.W.2d 907, 909 (Tex. 1983). The operators could not
conceal Magnum’s failure to receive an assignment. Magnum knew about
38
that when the operators assigned nothing “immediately after” the LOI. See
Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 232 (Tex. 2011);
Seureau v. ExxonMobil Corp., 274 S.W.3d 206, 213, 226 (Tex. App.—Houston
[14th Dist.] 2008, no pet.).
Because neither the discovery rule nor any fraudulent concealment
prevented the limitations period from expiring on Magnum’s contract
claim, limitations bars the enforcement of all Zalman lease assignment
obligations in the LOI.
3. The SMSA imposed no obligations to assign Zalman leases [Issue 4].
To the extent Magnum relies on the SMSA as the basis for its claimed
interests, the argument fails. The SMSA does not grant contractual rights to
the Zalman leases. None of those leases is mentioned in the SMSA.
The SMSA grants contractual rights to receive interests in the Simpson
lease, but the SMSA was ineffective in that regard because the lease had
terminated before the SMSA was signed. In April-May 1979, and in May-
October 1989, there was no production from wells on Simpson lease lands
and no payment of shut-in royalties. See supra p. 1. As a result, in the Castle
lawsuit the trial court ruled that the lease terminated by 1996 (CR 657-58).
39
That was correct. The cessation of production for time periods stated
in the lease, without timely shut-in royalty payments, terminates the lease
automatically, even if the well is later put back in production. E.g., Samano
v. Sun Oil Co., 621 S.W.2d 580, 584 (Tex. 1981); Bachler v. Rosenthal, 798
S.W.2d 646, 650 (Tex. App.—Austin 1990, writ denied); Adams v. Cannan,
253 S.W.2d 948, 951 (Tex. Civ. App.—San Antonio 1952, writ ref’d n.r.e.).
The lease will not continue beyond its primary term absent timely shut-in
royalty payments. Marifarms Oil & Gas, Inc. v. Westhoff, 802 S.W.2d 123,
125–26 (Tex. App.—Fort Worth 1991, no writ); Amber Oil & Gas Co. v.
Bratton, 711 S.W.2d 741, 743 (Tex. App.—Austin 1986, no writ). Thus, the
Simpson lease had indeed terminated. See, e.g., Hagar v. Martin, 277 S.W.2d
195, 197 (Tex. Civ. App.—Dallas 1955, writ ref’d n.r.e.).
The SMSA granted rights to assignment of an “extension or renewal”
of the Simpson lease “obtained within one (1) year of the expiration of said
Lease(s)” (1SCR 40). But that provision does not matter, either. The Zalman
leases are new leases, not extensions or renewals of the Simpson lease (CR
2663-64, 2666, 2699-2716, 2737-46, 2775-86). Each lease warrants that it is a
top lease only (CR 2706-07, 2744-45, 2775-76). Moreover, because the
Simpson lease had terminated by January 1, 1996, the SMSA could only
40
ensure rights in a renewal/extension lease obtained by January 1, 1997
(within one year of the expiration of the Simpson lease). The Zalman leases
were executed in 2001 or later, too late to satisfy this requirement.1
4. The JOA imposed no obligations to assign Zalman leases [Issue 4].
To the extent Magnum relies on the JOA as the basis for its claimed
interests, the argument fails. The JOA does not expressly obligate anyone
to assign Zalman lease interests. The JOA mentions none of those leases.
The JOA imposed on the operators an obligation to assign renewals
or extensions of the Simpson lease obtained within six months after that
lease terminated (CR 1381). But that does not matter, because the Zalman
leases were signed well over six months after the Simpson lease
terminated. So even if the Zalman leases were renewals/extensions of the
Simpson lease, the JOA imposed no obligation to assign interests in them.
B. Magnum did not prove rights in the 2008 Zalman lease.
The judgment grants relief regarding a 2008 Zalman lease (CR 3355).
Magnum’s motion sought no relief regarding that lease; the 2008 Zalman
1 When a leasehold estate under a lease expires, royalty interests reserved in that lease
terminate. See Sunac Petroleum Corp. v. Parkes, 416 S.W.2d 798, 804 (Tex. 1967). Parties
cannot avoid this rule by simply agreeing that a new lease will constitute a “renewal
and extension” of an expired lease. Id. at 802-03; Exploration Co. v. Vega Oil & Gas Co.,
843 S.W.2d 123, 125-26 (Tex. App.—Houston [14th Dist.] 1992, writ denied); McCormick
v. Krueger, 593 S.W.2d 729 (Tex. Civ. App.—Houston [1st Dist.] 1979, writ ref’d n.r.e.).
41
lease is not in the record (1SCR 5 [n.3]; CR 1689 [n.3], 2662-2788). Magnum
thus did not show it was entitled to interests in that lease. See infra section
III.A, pp. 46-50.
C. Magnum did not prove rights in the 2006 Zalman lease.
Magnum has no rights in the 2006 Zalman lease because (a) the LOI
is an unenforceable agreement-to-agree, (b) limitations has expired, and (c)
the other contracts grant no rights to Zalman leases. Supra section II.A.
In addition, the LOI only granted Magnum a contractual right to an
assignment of this lease if it was “taken and/or . . . effective within one
year of release of all or part of the lands covered by the Simpson Lease”
(CR 1295). Magnum did not prove this. The 2006 Zalman lease was a top
lease subject to both the 2001 Zalman lease and the 2003 Zalman lease. The
2001 Zalman lease released deep rights in March 2002 (CR 2664, 2667), but
the 2006 Zalman lease was not taken within a year of that date. As to the
2003 Zalman lease, Magnum admitted that it could not show whether, after
the Zalman No. 4 well failed to produce in 2008, well operations prevented
the lease from releasing lands at depths at which that well was completed
(the 2003 Zalman lease covered only that depth) (CR 2667, 2668 [¶¶17,19]).
Rather, Magnum asserted hypothetical positions—“[i]f the Operator saved
42
the 2003 lease” and “[i]f the 2003 lease did terminate for lack of operations”
and “[t]o the extent the 2006 top lease is effective”—conceding it could not
prove either (CR 2668, 2790-91, 2849).
If the 2003 lease is still in effect, the 2006 lease has not vested and
may never vest, since by its terms it terminates if it does not vest within 10
years after the expiration of its 2-year primary term (CR 2776). Because
Magnum did not establish that the 2003 Zalman lease terminated, Magnum
did not establish an obligation to assign the 2006 Zalman lease under the
LOI.2
D. Magnum cannot recover in the alternative based on other claims
pleaded, because the claims were dismissed without objection.
Magnum cannot recover for conversion because (a) it has no property
interest in the leases, and thus no interest in production from them, and (b)
it filed no motion seeking relief for conversion (1SCR 5-22; CR 2928). The
only relief Magnum sought under the Texas Natural Resources Code was
for prejudgment interest (3SCR 1704, 1714-20). The court denied that relief
2 Magnum’s motion sought no specific performance of the LOI, so no basis exists for
granting Magnum any assignment of the lease for that reason, too. In addition, because
the 2006 Zalman lease only covers deep rights where the Zalman No. 4 well was
completed, if Magnum were entitled to rights in the 2006 Zalman lease it may only
recover as damages the minimal production from the Zalman No. 4 well. Such damages
would have to be redetermined on remand, because the parties’ Rule 11 stipulation on
damages included production from the Zalman No. 3 well (CR 3188-90).
43
(CR 3328), and Magnum sought no other relief under the Code. The
judgment thus disposed of these claims, without objection (CR 3353). See
Lehmann v. Har-Con Corp., 39 S.W.3d 191, 200 (Tex. 2001); AGD LP v. Quest
Principal Inves. Inc., No. 13-12-720-CV, 2014 WL 6602314, at *4 (Tex. App.—
Corpus Christi Nov. 20, 2014, no pet). So Magnum cannot recover on these
claims in the alternative. See George v. Vick, 686 S.W.2d 99, 100 (Tex. 1984).
E. The trial court should have granted the operators’ summary
judgment motion—and therefore this Court must do so.
1. Judgment may be granted on a cross-motion for summary judgment.
When both sides file a summary judgment motion and the trial court
grants one and denies the other, the appellate court reviews both motions
and renders the judgment the trial court should have rendered. Dow Chem.
Co. v. Bright, 89 S.W.3d 602, 605 (Tex. 2002). In doing so, the court considers
all evidence accompanying both motions. See FM Props. Operating Co. v.
City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). Based on the arguments set
forth above, this Court should modify the judgment, rendering summary
judgment that Magnum take nothing from Crimson, Aubris Resources, and
Anadarko Petroleum, and affirming the judgment as so modified.
44
2. The operators are entitled to judgment for title to the working interests.
This Court should render a judgment that Magnum take nothing on
its claims for a working interest in the leases. See Tex. R. App. P. 43.2(c). As
explained below, with respect to the working interests the final judgment
essentially awards trespass-to-try-title relief. See infra section III.A.2. When
a plaintiff does not prove its case in a trespass-to-try-title action, the proper
judgment is that the plaintiff take nothing, divesting the plaintiff of title to
the lands in controversy and vesting title in defendant. See Hunt v. Heaton,
643 S.W.2d 677, 679 (Tex. 1982); Halbert v. Green, 156 Tex. 223, 228, 293
S.W.2d 848, 851-52 (1956). Magnum proved no conveyance of interests in
the Zalman leases, and the contracts conveyed no title to such interests. See
supra sections I, II. So Magnum had no title to the working interest.
Because Magnum could not prove title to the working interest,
Magnum should recover nothing on such title claims. The operators’
summary judgment motion requested that relief (CR 86-87, 95-98, 100-04,
111). That motion should have been granted, so rendition of judgment is
proper that Crimson owns the disputed Zalman lease working interests.
See Masgas v. Anderson, 310 S.W.3d 567, 570-71 (Tex. App.—Eastland 2010,
pet. denied).
45
3. Magnum could not recover the overriding royalty interests, either.
Similarly, Magnum may not recover overriding royalty interests. The
operators’ motion requested that relief, on the grounds that Magnum could
not prove it had received conveyances of these interests (CR 86, 95-98). The
record thus supports judgment for the operators on that issue. See supra
section I (citing authorities requiring a conveyance instrument).
4. The operators are entitled to judgment on all other claims asserted.
The operators are entitled to judgment on Magnum’s claim for breach
of contract because, as the operators argued in their cross-motion, (a) the
LOI was unenforceable, (b) any claim on the LOI was barred by limitations,
and (c) neither the SMSA nor the JOA gave Magnum rights in the Zalman
leases (CR 95-104, 106-09). See supra section II.A, pp. 26-40 (authorities).
Magnum never requested judgment for conversion or recovery under
the Texas Natural Resources Code (other than prejudgment interest) either
by motion or otherwise, and without objection those claims were resolved
on the merits by final judgment (rather than, e.g., by dismissal on mootness
grounds). See supra section II.D (and legal authorities therein). Judgment on
those claims is thus properly affirmed. Tex. R. App. P. 43.2(a).
46
III. EVEN IF MAGNUM HAD ASSIGNMENTS OF THE LEASE INTERESTS AT
ISSUE, THE JUDGMENT SHOULD BE REVERSED [ISSUE 3].
Should this court decide that the parties’ agreements did constitute
conveyances of the Zalman lease interests—which might otherwise support
an award of those interests—this Court should reverse the judgment and
either render judgment for the operators (section II.E) or remand the case
(section IV), because Magnum’s summary judgment motion was legally
insufficient to support a summary judgment awarding overriding royalty
interests and working interests in the Zalman leases.
A. The trial court erred in granting Magnum any relief, because
Magnum’s summary judgment motion requested none [Issue 3].
Magnum’s summary judgment motion did not specifically, expressly
present the basis for the summary judgment the trial court rendered. The
motion (a) failed to specify any relief that was sought and (b) asserted
breach of “contractual rights” rather than a claim for trespass-to-try-title or
conversion of its royalty interests (1SCR 4-5, 22). In short, as the operators
objected before the court signed the summary judgment (CR 2888-94), the
motion was legally insufficient to support the grant of any relief, never
mind the sweeping relief that the court granted.
47
1. A summary judgment motion must specifically, expressly present the
grounds for summary judgment—including any relief granted.
Summary judgment “cannot be affirmed on a ground not specifically
presented in the motion.” Travis v. City of Mesquite, 830 S.W.2d 94, 100 (Tex.
1992). The grounds for summary judgment must be “expressly presented
in the motion.” McConnell, 858 S.W.2d at 342. Thus, in Cartwright v. Cologne
Production Co., 182 S.W.3d 438 (Tex. App.—Corpus Christi 2006, pet.
denied), this Court reversed part of a summary judgment granting an
accounting, because although the petition sought that relief the plaintiffs
“did not raise this issue in their motion for summary judgment.” Id. at 447.
Similarly, after reversing a take-nothing summary judgment, the
Texas Supreme Court declined to render judgment on a cross-motion for
fees that only sought “partial summary judgment as to liability on the
contracts but not as to damages.” See Bowman v. Lumberton ISD, 801 S.W.2d
883, 889-90 (Tex. 1990). Likewise, this Court declined to award specific
performance when the motion had not “expressly presented” that remedy.
Consumer Portfolio Servs. Inc. v. Obregon, No. 13-09-548-CV, 2010 WL
4361765, at *9 (Tex. App.—Corpus Christi Nov. 4, 2010, no pet.).
48
A trial court errs “by granting relief that no party requested in any
summary-judgment motion.” See Mattox v. Cnty. Comm’rs Ct., 389 S.W.3d
464, 469 (Tex. App.—Houston [14th Dist.] 2012, pet. denied). This error is
reversed routinely. Willy v. Winkler, No. 01-10-115-CV, 2010 WL 5187719, at
*2-3 (Tex. App.—Houston [1st Dist.] Dec. 23, 2010, no pet.); Richardson v.
Allstate Tex. Lloyd’s, 72 S.W.3d 779, 792 (Tex. App.—Dallas 2007, no pet.);
Quicksilver Res., Inc. v. CMS Mktg. Servs. & Trading Co., No. 02-03-251-CV,
2005 WL 182951 (Tex. App.—Fort Worth Jan. 27, 2005, pet. denied).
2. Magnum’s motion did not specifically, expressly request an award of a
working interest—a trespass-to-try-title remedy.
The judgment awards Magnum a percentage working interest in the
Zalman leases (CR 3345-56). A working interest in an oil and gas lease is a
possessory interest in real property. Coastal Liquids Partners, 165 S.W.3d at
332; Rogers v. Ricane Enters. Inc., 884 S.W.2d 763, 768-70 (Tex. 1994). Except
for boundary disputes, a trespass-to-try-title action under chapter 22 of the
Texas Property Code is the sole means of adjudicating disputed claims of
title to real property; such claims cannot be adjudicated by declaratory
judgment. See Tex. Parks & Wildlife Dep’t v. Sawyer Trust, 354 S.W.3d 384
(Tex. 2011); Tex. Civ. Prac. & Rem. Code § 37.004(c).
49
Magnum did not plead a boundary line dispute, so it could only have
the court adjudicate its percentage working interest in the Zalman leases by
proving a claim of trespass-to-try-title—i.e., by proving either: (a) superior
title from a common source, (b) a chain of conveyances from the sovereign,
(c) title by limitations, or (d) prior possession not abandoned. See, e.g., Land
v. Turner, 377 S.W.2d 181, 183 (Tex. 1964); Lile v. Smith, 291 S.W.3d 75, 77-79
(Tex. App.—Texarkana 2009, no pet.). To obtain judgment for such relief,
Magnum’s summary judgment motion had to expressly seek and prove
that relief. See MCT Energy Ltd. v. Collins, No. 07-13-304-CV, 2014 WL
5422918, at *2-3 (Tex. App.—Amarillo Oct. 21, 2014, no pet.).
Magnum’s motion did not seek adjudication of title as “the specific
grounds therefor.” No trespass-to-try-title issues were “expressly set out in
the motion or in an answer or any other response.” Tex. R. Civ. P. 166a(c).
The motion did not cite chapter 22 of the Texas Property Code or related
case law or any of the four established methods for proving title. In short,
the motion was legally insufficient to obtain judgment in trespass-to-try-
title, so the court should not have awarded Magnum any percentage
working interest in the Zalman leases. See Kennedy Con. Inc. v. Forman, 316
S.W.3d 129, 135-37 (Tex. App.—Houston [14th Dist.] 2010, no pet.); cf.
50
Mart. v. McDonnold, 247 S.W.3d 224, 230 (Tex. App.—El Paso 2006, no
pet.) (plaintiff’s motion satisfied Rule 166a because it “clearly identifies
their cause of action and the four methods by which they could prove title
to their land”).
3. Magnum’s motion did not specifically, expressly request declaratory
relief regarding the overriding royalty interests.
When Magnum filed its summary judgment motion, the live petition
asserted conversion and breach of contract and sought damages, interest,
attorneys’ fees, and costs (CR 22-23). The motion argued that Magnum had
“contractual rights” allowing it “to participate in the current lease,” but
sought no declaratory relief, specific performance, damages, or any relief at
all, never mind specific interests in the Zalman leases (SCR 4-5, 9, 22). In
short, no request for declaratory relief, for overriding royalties or anything
else, was “expressly set out in the motion.” Tex. R. Civ. P. 166a(c).
Magnum first pleaded declaratory relief a week before the summary
judgment hearing (CR 2816), but Magnum did not request such relief until
after the court had ruled (CR 2884-85). It was only then that Magnum
submitted a proposed order, for the first time seeking such relief through
51
the back door (3SCR 1680, 1691-97). The trial court could not properly grant
that relief, because Magnum’s motion did not request it.
B. The trial court’s ruling was harmful.
The trial court’s error was harmful. See Tex. R. App. P. 44.1(a).
First, the operators were denied 21-day notice under Rule 166a of the
relief requested, and the opportunity to timely brief the above errors. See,
e.g., Positive Feed, Inc. v. Guthmann, 4 S.W.3d 879, 881 (Tex. App.—Houston
[1st Dist.] 1999, no pet.).
Second, declaratory judgment cannot adjudicate title to a possessory
interest in real property, like the Zalman lease working interests here. See
MCT Energy, 2014 WL 5422918, at *2-3; Wolfe v. Devon Energy Prod. Co., 382
S.W.3d 434, 460-61 (Tex. App.—Waco 2012, pet. denied); Sw. Guar. Trust
Co. v. Hardy Rd. 13.4 Joint Venture, 981 S.W.2d 951, 957 (Tex. App.—
Houston [1st Dist.] 1998, pet. denied) (“[T]he declaratory judgment act will
not supplant a suit to quiet title . . . .”). The operators were prevented from
timely raising this issue as well.
Third, if the motion had sought declaratory relief—or even specific
performance—the operators could have timely asserted in their response a
laches defense: (a) unreasonable delay in asserting rights, and (b) good faith
52
change of position by another to his detriment because of the delay. City of
Fort Worth v. Johnson, 388 S.W.2d 400, 403 (Tex. 1964). The record, see supra
pp. 5-7, would support that defense. See De Benavides v. Warren, 674 S.W.2d
353, 362 (Tex. App.—San Antonio 1984, writ ref’d n.r.e.). The operators
were precluded from timely preserving this point for appeal.
Fourth, if the motion had properly sought relief in trespass-to-try-
title, the operators could have objected that the claim had not been pleaded
properly under technical pleading requirements. Tex. R. Civ. P. 783-809.
Fifth, the judgment contained significant errors. See infra section V.
Magnum conceded that the judgment contained error when, months later,
it filed a motion to correct one such error nunc pro tunc (CR 2928-53; 1SCR
854-55). The operators were denied an opportunity to timely bring these to
the court’s attention in a summary judgment response.
IV. ALTERNATIVELY, REMAND IS THE ONLY PROPER RELIEF.
If this Court were to determine that operators Crimson Exploration,
Aubris Resources, and Anadarko Petroleum are not entitled to judgment
that Magnum take nothing, the only proper alternative relief is a remand
for further proceedings as to these defendants. Tex. R. App. P. 43.3.
53
A. Remand to determine fact issues regarding limitations issue.
At the very least fact issues exist regarding whether, outside the
limitations period, a reasonable time had expired for assigning all interests
the LOI required the operators to assign. See supra section II.A.2(b), p. 36.
B. Remand to resolve ambiguity in the LOI.
Fact issues would also preclude summary judgment if this Court
determined that the LOI was ambiguous. When a contract on which a suit
is brought is ambiguous, “summary judgment is improper because the
interpretation of the instrument is a question of fact for the jury.” Reilly v.
Rangers Mgmt., Inc., 727 S.W.2d 527, 529 (Tex. 1987). Reversal and remand
is appropriate even if the summary judgment response does not assert
ambiguity. E.g., Amedisys Inc. v. Kingwood Home Health Care LLC, 437
S.W.3d 507, 517 (Tex. 2014); White v. Moore, 760 S.W.2d 242, 243 (Tex. 1988).
A contract is ambiguous “when the application of pertinent rules of
interpretation to the face of the instrument leaves it genuinely uncertain
which one of two or more meanings is the proper meaning.” Universal
C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154, 157 (Tex. 1951).
The parties dispute two key aspects of the LOI’s meaning.
54
First, the parties disputed whether the January 1, 2005 assignment
deadline (later extended to July 1, 2005) applied to all lease interests to be
assigned, or just to “deep rights” in the 2003 Zalman lease. See supra section
II.A.2. That deadline should apply to all interests to be assigned, because
the LOI refers to assignment deadlines in both paragraph 9J and paragraph
9K in this regard, and the respective assignment obligations therein
encompass interests at all depths, not just the “deep rights” (CR 824-26,
928-39).
Second, the parties disputed whether Magnum was to receive a full
100% of the 31.5% x 26.25% working interest (as the judgment awards) or
only 50% of the 31.5% x 26.25% working interest—the percentage to which
Magnum would have been entitled under the Simpson lease pursuant to
the SMSA’s proportionate reduction clause (CR 819-20) (because, as
Magnum concedes, it owned only a 50% interest in the Simpson lease at
that time) (CR 2001, 2662-63, 2684, 2907-13). In short, Magnum’s lease
interests under the LOI must be proportionately reduced by 50%. See infra
section V.B, p. 59.
If ambiguity exists, remand is proper. Tex. R. App. P. 43.2(d).
55
C. Remand to resolve issues regarding proper scope of relief.
Finally, even if Magnum is entitled to some relief, a remand to the
trial court is the most appropriate way to determine that remedy.
Should this Court alter any liability determinations, the trial court
should reconsider the awards for damages and attorneys’ fees. See, e.g., Jay
Petroleum LLC v. EOG Res. Inc., 332 S.W.3d 534, 539 (Tex. App.—Houston
[1st Dist.] 2009, no pet.). If Magnum did not prove a working interest in the
leases, its attorneys’ fees award should be reversed in part, since a plaintiff
cannot recover fees in trespass-to-try-title. See Martin v. Amerman, 133
S.W.2d 262, 267 (Tex. 2004). The trial court should also consider an award
of attorneys’ fees to the operators for prevailing, even in part, on the
declaratory judgment relief, as “the Declaratory Judgments Act allows fee
awards to either party in all cases.” MGM Fin. Corp. v. Woodlands Operating
Co., 292 S.W.3d 660, 669 (Tex. 2009).
Moreover, although the operators seek correction of the declaratory
relief in the alternative, infra section V, correcting the declaratory judgment
is a complicated matter and the rules’ word limitations preclude broader
discussion of the errors. See Tex. R. App. P. 9.4(i)(2). In lieu of this Court
parsing the leases, the matter should be fully briefed in the trial court.
56
Finally, if a remand is proper, this Court may only remand the breach
of contract claim, not the claims for conversion and violation of the Natural
Resources Code (CR 2815-16), because: (a) Magnum’s motion requested no
relief as to these claims, but sought judgment only as to “breach of contract
claims” (CR 2928), and (b) the judgment “disposes of all claims and parties,
is final and is appealable” (CR 3353). In short, without objection the trial
court ruled that Magnum take nothing for conversion and violation of the
Code. Lehmann, 39 S.W.3d at 200. Those claims are resolved.
V. ONLY A MODIFIED JUDGMENT COULD EVER BE PROPER [ISSUE 5].
A. Judgment for Magnum could only involve an award of damages
and attorneys’ fees for breach of contract.
Even if Magnum were entitled to judgment, it could only recover a
judgment for damages and attorneys’ fees based on breach of contract.
Magnum’s motion sought a judgment for liability for “its breach of contract
claims” (CR 2928), and was not based on any other theory. See supra section
III.A. Therefore, at best Magnum can recover—based upon the parties’
Rule 11 stipulation—only damages and fees based on that theory of
liability.
57
At no time did Magnum file any motion seeking declaratory relief,
specific performance of the LOI, damages for conversion, or a recovery
under the Natural Resources Code (except for prejudgment interest, which
the trial court denied). No such relief having been requested, no judgment
for such relief in the alternative is proper, as such relief has been waived.
See George v. Vick, 686 S.W.2d at 100; Tex. R. Civ. P. 166a(c), 279.
B. Judgment for declaratory relief should be substantially modified.
Assuming the trial court properly rendered a judgment awarding
interests in the Zalman leases and wells, the judgment must be modified to
correct several mistakes. Tex. R. App. P. 43.2(b). Some mistakes result from
the court granting relief not supported by the summary judgment motion
or evidence, see McConnell, 858 S.W.2d at 342, and others were asserted by
post-judgment motion (CR 3359-72). This Court should correct these errors
in that judgment. See Petro Pro, Ltd. v. Upland Res., Inc., 279 S.W.3d 743, 748-
52 (Tex. App.—Amarillo 2007, no pet.); Ostrowski, 38 S.W.3d at 253.
The rules of contract construction, discussed above, also apply in
construing the leases. Plainsman Trading Co. v. Crews, 898 S.W.2d 786 (Tex.
1995); Alford v. Krum, 671 S.W.2d 870 (Tex. 1984). This Court should make
the following corrections—or remand these matters to the trial court:
58
• Under the LOI, Magnum was to receive the interests “credited”
to it under the SMSA—resulting in an award of a 31.5% x 26.25% x 50%
working interest (not the 100% that the judgment awards), due to
Magnum’s 50% interest in the Simpson lease (CR 2001, 2662-63, 2684,
2907-13).
• The judgment grants relief regarding a 2008 Zalman lease (CR
3355). That relief should be deleted. Supra section II.B.
• Magnum did not prove whether the 2003 Zalman lease or the
2006 Zalman lease was effective, so Magnum cannot have judgment as
to either lease. See supra section II.C.
• The operators contend that the record establishes termination
of the Simpson lease. Should this Court conclude otherwise, Magnum
can recover no working interests or overriding royalty interests through
the Zalman leases: they are all top leases, dependent upon termination
of the Simpson lease (CR 2663-64, 2666, 2699-2716, 2737-46, 2775-86).
Magnum had to prove when the underlying Simpson lease expired, and
it did not, but equivocated about that issue: “the expiration of the
Simpson Lease—whenever that occurred” (1SCR 15). The judgment was
equally equivocal (CR 3347). If the record does not establish termination
59
of the Simpson lease, Magnum did not prove it had interests through
any Zalman lease, and Magnum has no right to judgment in that regard.
• The judgment awards Magnum interests as to “wells” and “any
wells” on the subject lands (CR 3348-49). Magnum only sought relief
regarding the Zalman No. 3 and Zalman No. 4 wells (1SCR 9, 22). The
judgment should not grant relief as to “wells” or “any wells” generally.
• The court improperly declared an interest in the 2003 Zalman
lease “as amended on October 15, 2003 to include two additional tracts”
as allegedly reflected in a lease amendment (CR 3355). Magnum’s
motion did not request that relief (1SCR 5 [n.3]; CR 1689 [n.3]).
• The judgment declares that Magnum’s interests arise from the
SMSA and the JOA, which “are binding on” the operators (CR 3347). If
Magnum has any interests, they arise only from the LOI (CR 2815 [¶22];
1SCR14-15). Because the Simpson lease expired the operators are not
bound by the JOA, or SMSA: rights under those agreements depend on
a valid Simpson lease. The above relief should be deleted.
• The judgment errs in granting interests in the leases as to “all
depths” and all “depths outside the Magnum Reserved Zone,” and in
declaring that Magnum’s interests “are identical to those interests
60
Magnum owned in and under the Simpson lease,” as the agreements
describe (CR 3348-49). This was error because, to the extent effective:
• The 2001 Zalman lease terminated as to all depths below 12,846 feet.
• The 2003 Zalman lease terminated as to all depths below 14,532 feet.
• The 2006 Zalman lease terminated as to all depths below 12,234 feet.
(CR 2664, 2667, 2668). Magnum has no interests in these deep rights.
• The judgment grants a 50% leasehold estate and 50% working
interest in certain depths in the “Simpson Gap Tract” in addition to a 1%
overriding royalty interest and 26.25% working interest after payout,
proportionately reduced to a 50% interest. Magnum’s petition only sought
an interest proportionately reduced to a 31.5% interest (CR 2816). The
judgment should grant no relief regarding the “Simpson Gap Tract” or it
should be modified to award only a 31.5% interest, not a 50% interest, in
that regard. See Simpson v. Curtis, 351 S.W.3d 374, 380-81 (Tex. App.—
Tyler 2010, no pet.) (vacating injunctive relief not pleaded); Chesapeake
Operating Inc. v. Denson, 201 S.W.3d 369, 373-74 (Tex. App.—Amarillo
2006, pet. denied) (modifying declaratory relief).
• The judgment grants Magnum “the right to participate” in the
subject leases (CR 3347). The LOI does not say “participate.” The term
61
refers to benefits from bonuses, rentals, and/or royalties, not leases. See
Marrs & Smith P’ship v. D.K. Boyd Oil & Gas Co., 223 S.W.3d 1, 14 (Tex.
App.—El Paso 2005, pet. denied). That language is properly deleted.
• The judgment says that “even if [the Simpson lease] was
terminated, and regardless of when it was terminated,” the contracts
grant Magnum specific lease rights (CR 3347) (brackets omitted). The
judgment should say that the Simpson lease terminated on or before
January 1, 1996. See supra p. 1.
• The judgment declares that Magnum’s interests in the Zalman
leases “are identical to those interests Magnum owned in and under the
Simpson lease, as . . . described in the Settlement Agreements” (CR
3348). But LOI ¶ 2 says Magnum’s interests are to be calculated as in
LOI ¶ 1. There should be no “identical” interests language.
• The judgment declares that a farmout has been “effected by the
Settlement Agreements” (CR 3348). Magnum’s motion did not seek that
relief, and the agreements do not “effect” a farmout. See supra section
II.A. The parties exchanged proposed farmout drafts but never executed
one (CR 1357-59, 1362, 1461, 2137). The judgment should not recognize
or presume a farmout. See Young Refining, 46 S.W.3d at 389.
62
Prayer
This Court should reverse the final judgment rendered against the
operators; modify it to render judgment that Magnum take nothing and
that the operators own the disputed working interests in the Zalman leases;
affirm the judgment as modified; and award the operators their costs. See
Tex. R. App. P. 43.4; Tex. R. Civ. P. 131.
63
Respectfully submitted,
/s/ Stacy R. Obenhaus
James G. Munisteri David M. Gunn
Texas Bar No. 14667380 Texas Bar No. 08621600
Stacy R. Obenhaus Erin H. Huber
Texas Bar No. 15161570 Texas Bar No. 24046118
John MacVane Beck Redden
Texas Bar No. 24085444 1221 McKinney, Suite 4500
Gardere Wynne Sewell LLP Houston, Texas 77010
1000 Louisiana, Suite 2000 Tel: 713.951.6278
Houston, Texas 77002 Fax: 713.951.3720
Tel: 713.276.5500 dgunn@beckredden.com
Fax: 713.276.5555 ehuber@beckredden.com
jmunisteri@gardere.com [Crimson parties only]
sobenhaus@gardere.com
jmacvane@gardere.com
COUNSEL FOR DEFENDANTS-APPELLANTS
64
Certification
I certify that this document (including Appendices K and L) contains
13,691 words, apart from those parts excluded by Texas Rule of Appellate
Procedure 9.4(i)(1).
/s/ Stacy R. Obenhaus
Stacy R. Obenhaus
Certificate of Service
I certify that a copy of this document was served August 24, 2015, by
delivery to the following through the electronic case manager:
Frank Weathered James T. Clancy
Dunn Weathered Coffey Rivera & Branscomb PC
Kasperitis PC 802 N. Carancahua, Suite 1900
611 S. Upper Broadway Corpus Christi, Texas 78401-0036
Corpus Christi, Texas 78401 Fax: 361.888.8504
Fax: 361.883.1899
Macklin K. Johnson
Law Offices of Macklin K. Johnson
109 East Second Street
Hallettsville, Texas 77964
Fax: 361.798.3217
/s/ Stacy R. Obenhaus
Stacy R. Obenhaus
65
Appendix A
Order on Motions for Summary Judgment
(Oct. 22, 2013)
(CR 2907-13)
CAUSE NO. 10-11-21591-CV
MAGNUM PRODUCING L.P., IN THE DISTRICT COURT
VS. LAVACA COUNTY, TEXAS
COPANO FIELD SERVICES/CENTRAL
GULF COAST L.P., et al., 25th JUDICIAL DISTRICT
ORDER ON MOTIONS FOR SUMMARY JUDGMENT
On January 25, 2013 came on for consideration in the above-entitled and numbered cause
Plaintiff's Traditional Motion for Summary Judgment (the "Magnum Motion") against Crimson
Exploration, Inc.; Crimson Exploration Operating, Inc.; Southern G Holdings, LLC; Exco
Resources, Inc.; Anadarko Petroleum Corporation; Anadarko E&P Company, LP; Kerr-McGee
Oil & Gas Onshore, LP; Westport Oil & Gas Company, LP; and Aubris Resources, LP f/k/a
United Resources, LP (hereinafter collectively the "Operators"). Also on said date came on for
consideration the Operators' cross-motion for summary judgment (the "Operators' Motion")
against Plaintiff. Also on said date came on for consideration the cross-motion for summary
judgment filed by Copano Field Services/Central Gulf Coast , L.P. (the "Copano Motion"). Also
on said date came on for consideration the cross-motion for summary judgment filed by Sunoco
Partners Marketing & Terminals, L.P. (the "Sunoco Motion").
The court considered: (1) the Magnum Motion; (2) the Operators' Motion; (3) the
Copano Motion; (4) the Sunoco Motion; (5) any and all responses and replies in support of or in
opposition to the Magnum Motion, Operators' Motion, Copano Motion, and Sunoco Motion; (6)
Operators' Supplemental Motion for Summary Judgment and Motion for Leave to File
Supplemental Motion for Summary Judgment and Late Summary Judgment Evidence; (7)
Plaintiff's Response to Operators' Supplemental Motion for Summary Judgment and Motion for
SLR. /3
o'clock&
err T. Ft ,ke, Clerk
{C0839357.DOC:3} 1 DIST . 1 C S VACA COUNTY, D(
B A At' Aso-4AZ._ Deputy
Page 2907
Leave to File Supplemental Motion for Summary Judgment and Late Summary Judgment
Evidence; (8) all summary judgment evidence, including late-filed evidence made the subject of
Operators' motion for leave and Plaintiff's response to Operators' motion for leave; (7) the
pleadings on file at the time of the hearing; and (8) argument of counsel, and determined that:
1. the Magnum Motion should be in all things GRANTED;
2. the Sunoco Motion should be in all things GRANTED;
3. the Copano Motion should be in all things GRANTED; and
4. the Operators' Motion should be in all things DENIED.
IT IS THEREFORE DECLARED, ADJUDGED AND DECREED that even if that
certain oil, gas and mineral lease recorded at Volume 90, Page 270, Oil and Gas Records of
Lavaca County, Texas (the "Simpson Lease") was terminated, and regardless of when it was
terminated, the January 30, 2001 Master Settlement Agreement and May 30, 2001 Supplemental
Master Settlement Agreement each by and between Magnum Producing and Operating Company
n/k/a Magnum Producing, LP and United Oil & Minerals Limited Partnership n/k/a Aubris
Resources, LP, et. al. (the "Settlement Agreements"), the January 30, 2001 Joint Operating
Agreement by and between Magnum Producing and Operating Company n/k/a Magnum
Producing, LP and United Oil & Minerals Limited Partnership n/k/a Aubris Resources, LP, et. al.
(the "JOA") and the October 8, 2003 Letter Agreement by and between Magnum Producing and
Operating Company n/k/a Magnum Producing, LP and United Resources, LP n/k/a Aubris
Resources, LP (the "Letter Agreement"), all of which are binding on the Operators, give
Magnum Producing, LP ("Magnum") the right to participate in any renewal, extension, or top
lease taken by any of the Operators or their successors or assigns, covering lands that were the
subject of the Simpson Lease, and which were taken by or assigned to the Operators before
(C0839357.DOC:3) 2
Page 2908
October 8, 2003, or which became effective within one year of the expiration date of the
immediately preceding lease covering lands that were the subject of the Simpson Lease,
including but not limited to the oil, gas and mineral leases described in Exhibit "A".
IT IS FURTHER DECLARED, ADJUDGED AND DECREED that Magnum's interests
in and under those certain oil, gas and mineral leases described in Exhibit "A" to this Judgment
are identical to those interests Magnum owned in and under the Simpson Lease, as those interests
are described in the Settlement Agreements. Specifically, before taking into consideration the
farmout to the Operators effected by the Settlement Agreements, Magnum's interests include:
1. A 31.5% leasehold interest as to the "Simpson 310 Acre Tract" (all
depths), the "Simpson 320 Acre Tract" (all depths) and the western forty
(40) acres of the "Simpson Gap Tract" (all depths) as those lands are
defined in Exhibit "B" to this Judgment;
2. A 50% leasehold interest as to the "Simpson Gap Tract", as such land is
defined in Exhibit "B", save and except the westerly forty (40) acres of the
"Simpson Gap Tract";
IT IS FURTHER DECLARED, ADJUDGED, AND DECREED that by virtue of the
farmout to the Operators effected by the Settlement Agreements, JOA and Letter Agreement,
Magnum owns and is entitled to leasehold interests in the leases described in Exhibit "A,"
together with interests in production proceeds from wells covered by the leases described in
Exhibit "A," (or any extension or renewal of the leases described in Exhibit "A" which are
obtained within one (1) year of the expiration of the leases described in Exhibit "A") equal to:
1. A 31.5% leasehold estate and working interest in production from depths
between 12,075 feet and 12,265 feet, inclusive (the "Magnum Reserved
Zone"), under the applicable lease(s) described in Exhibit "A" to this
Judgment, as to wells located on the "Simpson 310 Tract," "Simpson 320
Tract," and the western forty (40) acres of the "Simpson Gap Tract,";
2. A 50% leasehold estate and working interest in production from depths
between 12,075 feet and 12,265 feet, inclusive (the "Magnum Reserved
Zone"), under the applicable lease(s) described in Exhibit "A" to this
(C0839357.DOC:3) 3
Page 2909
Judgment, as to wells located on the "Simpson Gap Tract," save and
except the western forty (40) acres of the "Simpson Gap Tract;"
3. A 1% of 31.5% overriding royalty interest in production before "payout"
(as "payout" is defined in the Settlement Agreements), from depths
outside the Magnum Reserved Zone under the applicable lease(s)
described in Exhibit "A" to this Judgment, as to wells located on the
"Simpson 310 Tract," "Simpson 320 Tract," and the western forty (40)
acres of the "Simpson Gap Tract;"
4. A 1% of 50% overriding royalty interest in production before "payout"
(as "payout" is defined in the Settlement Agreements) from depths outside
the Magnum Reserved Zone under the applicable lease(s) described in
Exhibit "A" to this Judgment, as to wells located on the "Simpson Gap
Tract" less and except the western forty (40) acres of the "Simpson Gap
Tract;"
5. Upon "payout" (as "payout is defined in the Settlement Agreements) of
and election to participate in any wells located on the "Simpson 310
Tract," "Simpson 320 Tract," and the western forty (40) acres of the
"Simpson Gap Tract;", a 26.25% of 31.5% leasehold estate and working
interest in after-payout production from all depths outside the Magnum
Reserved Zone under the oil, gas and mineral leases described in Exhibit
"A" to this Judgment; and
6. Upon "payout" (as "payout is defined in the Settlement Agreements) of
and election to participate in any wells located on the "Simpson Gap
Tract," save and except the western forty (40) acres of the "Simpson Gap
Tract," a 26.25% of 50% leasehold estate and working interest in after-
payout production from all depths outside the Magnum Reserved Zone
under the oil, gas and mineral leases described in Exhibit "A" to this
Judgment.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Magnum's take
nothing from Defendants Copano Field Services/Central Gulf Coast , L.P. and Sunoco Partners
Marketing & Terminals, L.P.
Signed this day of
JUDGE PRESIDING
{C0839357.DOC:3 } 4
Page 2910
APPROVED AS TO FO
T. Clancy
nsel for Magnu ► Producing LP
{09839357.DOC:3} 5
Page 2911
EXHIBIT "A"
1. Oil gas and mineral lease entered February 14, 2001 by and between Joe A. Zalman, Jr.
and wife, Margaret L. Zalman 2000 Family Limited Partnership, et al. as LESSOR and
United Oil & Minerals Limited Partnership as LESSEE, covering 699.595 acres more or
less in Lavaca County, Texas, a memorandum of which is recorded at Volume 226, Page
516 of the Official Property Records of Lavaca County, Texas.
2. Oil, gas and mineral lease entered September 10, 2003 by and between Joe A. Zalman Jr.
and Margaret L. Zalman 2000 Family Limited Partnership, et al. as LESSOR and United
Resources, LP as LESSEE, covering 699.595 acres, more or less in Lavaca County,
Texas, a memorandum of which is recorded at Volume 295, Page 848 of the Official
Property Records of Lavaca County, Texas, and as amended on October 15, 2003 to
include two additional tracts comprising 310 acres, more or less and 108.865 acres, more
or less, as reflected by the recorded amendment at Volume 297, Page 690 of the Official
Property Records of Lavaca County, Texas.
3. Oil, gas and mineral lease entered August 17, 2006 by and between Joe A. Zalman, Jr.
and Margaret L. Zalman 2000 Family Limited Partnership, et al. as LESSOR and Kerr-
McGee Oil & Gas Onshore, LP, covering 1438.46 acres, more or less in Lavaca County,
Texas, a memorandum of which is recorded at Volume 392, Page 847 of the Official
Property Records of Lavaca County, Texas.
4. Oil, gas and mineral lease entered August 11, 2008 by and between Joe A. Zalman, Jr.
and Margaret L. Zalman 2000 Family Limited Partnership, et al., covering 1128.46 acres,
more or less in Lavaca County, Texas, a memorandum of which is recorded at Volume
465, Page 19 of the Official Property Records of Lavaca County, Texas.
{C0839357.DOC:3 } 6
Page 2912
EXHIBIT "B"
1. "Simpson 310 Acre Tract": 310 acres, more or less, out of the Amando De La Croix
Survey, A-112, Lavaca County, Texas; being the same lands described in that certain
"Partial Assignment of Oil and Gas Lease" dated May 19, 1997 by and between .IWR
Exploration, Inc., et al., as Assignor and United Oil & Minerals, Inc., as Assignee,
recorded in Volume 126 at Page 307 of the Official Records of Lavaca County, Texas.
2. "Simpson 320Acre Tract": 320 acres, more or less, out of the Amando De La Croix
Survey, A-112, Lavaca County, Texas; being that certain 320 acres lying immediately
east of and contiguous to the above described 310 acre tract with the western boundary
line of said 320 acres being common with the eastern boundary line of said 310 acre tract;
the northern and southern boundaries of said 320 acres being common with the northern
and southern boundaries of the said Amando De La Croix Survey, respectively; and, the
eastern boundary of said 320 acres being parallel to and a sufficient distance from its said
western boundary to comprise 320 acres more or less.
3. "Simpson Gap Tract": lands lying within the Amando De La Croix Survey, A-112, the
northern boundary of which is the northern boundary line of said survey, the southern
boundary of which his the southern boundary line of said survey, the western boundary of
which is the eastern boundary of the "Simpson 320 Acre Tract" being more particularly
described in that certain Supplemental Master Settlement Agreement dated May 30, 2001
by and between Magnum Producing & Operating Company and United Oil & Minerals,
LP, et. al. and the eastern boundary of which is the western boundary of the "Simpson
870 Acre Tract" being more particularly described in that certain Supplemental Master
Settlement Agreement dated May 30, 2001 by and between Magnum Producing &
Operating and United Oil & Minerals, LP, et al.
{C0839357.DOC:3} 7
Page 2913
Appendix B
Partial Judgment
(Apr. 9, 2014)
(CR 3173-90)
No. 10-11-21591-CV
MAGNUM PRODUCING LP IN TEE DISTRICT COURT
vs.
25th JUDICIAL DISTRICT
COPANO FIELD SERVICES/CENTRAL §
GULF COAST LP, et al.
LAVACA COUNTY,'TEXAS
PARTIAL JUDGMENT
Based on this Court's Order on Motions for Summary Judgment (signed October
22, 2013) [Exhibit A] (including such revisions as this Court may make thereto nunc pro
tunc) and the parties' rule 11 agreement (filed on or about March 27, 2014) (the "Rule 11
Agreement") [Exhibit B], this Court renders partial judgment as follows:
DAMAGES
1. Magnum Producing LP ("Plaintiff') shall recover from Aubris Resources,
LP damages in the amount of $10,048.38.
2. Plaintiff shall recover from Anadarko Petroleum Corporation damages in
the amount of $361,671.25.
3. Plaintiff shall recover from Crimson Exploration Operating Inc. damages in
the amount of $4,383,979.74.
REMAINING DEFENDANTS
4. Plaintiff shall take nothing from the defendants not named in the preceding
paragraphs. In particular, Plaintiff shall take nothing from Copano Field Services/Central.
Gulf Coast LP, Sunoco Partners Marketing & Terminals LP, Crimson Exploration Inc.,
FILED
o'clock Psi
erry T. Hen e, C!ork
MP CA COLLCH,
By 0441 . Deputy
Page 3173
Southern G Holdings LLC, Anadarko E&P Company LP, Kerr-McGee Oil & Gas
Onshore LP, Westport Oil & Gas Company LP, and United Resources LP Vida United
Oil and Minerals LP.
INTEREST
5. Plaintiff shall recover, on all amounts awarded above, postjudgment
interest at the rate of 5% per annum from the date a final judgment is signed until paid in
full in accordance with Chapter 304, Texas Finance Code.
6. The availability and amount of prejudgment interest, if any, shall be
determined as set forth in the Rule 11 Agreement [Exhibit A].
ATTORNEYS' FEES & COSTS
7. Plaintiff shall recover attorneys' fees and costs from Aubris Resources LP,
Anadarko Petroleum Corporation, and Crimson Exploration Operating Inc., jointly and
severally, in the amount of $350,000. Except as otherwise provided in the Rule 11
agreement [Exhibit B], this amount shall constitute full and final compensation for any
attorneys' fees and costs incurred by Plaintiff prior to final judgment.
8. Plaintiff shall recover fees and costs from Aubris Resources LP, Anadarko
Petroleum Corporation, and Crimson Exploration Operating Inc., jointly and severally, in
the following amounts in the event of an appeal:
a. $75,000 for an appeal to the Thirteenth Court of Appeals;
b. $15,000 for filing or responding to a petition for review in the Texas
Supreme Court;
c. $15,000 for filing or responding to a brief on the merits in the Texas
Supreme Court;
Page 3174
d. $10,000 for preparing and presenting oral argument to the Texas Supreme
Court;
e. $5,000 for filing or responding to a motion for rehearing in the Texas
Supreme Court.
PARTIAL JUDGMENT
9. This is intended to be a partial judgment reflecting the issues resolved by
the Court and by the parties' stipulations thus far.
a 41A-
SIGNED this 1 day of dtAA7
HONORABLE JUDGE W. C. KIRKENDALL
Page 3175
AGREED AS TO FORM:
James G. Munisteri, Gardere Wynne Sewell LLP
Counsel for Defendants
AP"
T. Clancy, Br scomb PC
C nsel for Plaintiffs
GardcrcOl - 6431941v.3
Page 3176
CAUSE NO. 10-11-21591-CV
MAGNUM PRODUCING L.P., IN THE DISTRICT COURT
VS. LAVACA COUNTY, TEXAS
COPANO FIELD SERVICES/CENTRAL
GULF COAST L.P., et al., 25th JUDICIAL DISTRICT
ORDER ON MOTIONS FOR SUMMARY JUDGMENT
On January 25, 2013 came on for consideration in the above-entitled and numbered cause
Plaintiffs Traditional Motion for Summary Judgment (the "Magnum Motion") against Crimson
Exploration, Inc.; Crimson Exploration Operating, Inc.; Southern G Holdings, LLC; Exco
Resources, Inc.; Anadarko Petroleum. Corporation; Anadarko E&P Company, LP; Kerr-McGee
Oil & Gas Onshore, LP; Westport Oil & Gas Company, LP; and Aubris Resources, LP f/k/a
United Resources, LP (hereinafter collectively the "Operators"). Also on said date came on for
consideration the Operators' cross-motion for summary jud gment (the "Operators' Motion")
agsirmt Plaintiff. Also on said date came on for consideration the cross-motion for summary
judgment filed by Copano Field Services/Central Gulf Coast , L.P. (the "Copan() Motion"). Also
on said date came on for consideration the cross-motion for summary judgment filed by Sunoco
Farmers Marketing & Terminals, L.P: (the "Sunoco Motion").
The court considered: (1) the Magnum Motion; (2) the Operators' Motion ; (3) the
Copan Motion; (4) the Sunoco Motion; (5) any and all responses and replies in support of or in
opposition to the Magnum Motion, Operators' Motion, Copano Motion, and Sunoco Motion; (6)
Operators' Supplemental Motion for Summary Judgment and Motion for Leave to File
Supplemental Motion for Summary Judgment and Late Summary Judgment Evidence; (7)
Plaintiff's Response to Operators' Supplemental Motion for Summary Judgment and Motion for
USD
EXHIBIT A to Partial Judgment o'clock
ke Clerk
{C0839357.DOC:3 I
't MCA COUNTY, TX
Deputy
Page 3177
Leave to File Supplemental Motion for Summary Judgment and Late Summary Judgment
Evidence; (8) all summary judgment evidence, including late-filed evidence made the subject of
Operators' motion for leave and 'Plaintiff's response to Operators' motion for leave; (7) the
pleadings on file at the time of the hearing; and (8) argument of counsel, and determined that:
1. the Magnum Motion should be in all things GRANTED;
2. the Sunoco Motion should be in all things GRANTED;
3. the Copano Motion should be in all things GRANTED; and
4. the Operators' Motion should be in all things DENIED.
IT IS THEREFORE DECLARED, ADJUDGED AND DECREED that even if that
certain oil, gas and mineral lease recorded at Volume 90, Page 270, Oil and Gas Records of
Lavaca County, Texas (the "Simpson Lease") was terminated, and regardless of when it was
terminated, the January 30, 2001 Mister Settlement Agreement and May 30, 2001 Supplemental
Master Settlement Agreement each by and between Magnum Producing and Operating Company
n/k/a Magnum Producing, LP and United Oil & Minerals Limited Partnership n/k/a Aubris
Resources, LP, et. al. (the "Settlement Agreements"), the January 30, 2001 Joint Operating
Agreement by and between Magnum Producing and Operating Company n/k/a Magnum
Producing, LP and United Oil & Minerals Limited Partnership n/k/a Aubris Resources, LP, et. al.
(the "JOA") and the October 8, 2003 Letter Agreement by and between Magnum Producing and
Operating Company n/k/a Magnum Producing, LP and United Resources, LP n/k/a Aubris
Resources, LP (the "Letter Agreetnent"), all of which are binding on the Operators, give
Magnum Producing, LP ("Magnum") the right to participate in any renewal, extension, or top
lease taken by any of the Operators' or their. successors or assigns, covering lands that were the
subject of the Simpson Lease, and which were taken by or assigned to the Operators before
(C01339357.DOC13) 2
Page 3178
October 8, 2003, or which became effective within one year of the expiration date of the
immediately preceding lease covering lands that were the subject of the Simpson Lease,
including but not limited to the oil, gas and mineral leases described in Exhibit "A".
IT IS FURTHER DECLARED, ADJUDGED AND DECREED that Magnum's interests
in and under those certain oil, gas and mineral leases described in Exhibit "A" to this Judgment
are identical to those interests Magnum owned in and under the Simpson Lease, as those interests
are described in the Settlement Agreements. Specifically, before taking into consideration the
farmout to the Operators effected by the Settlement Agreements, Magnum's interests include:
1. A 31.5% leasehold interest as to the "Simpson 310 Acre Tract" (all
depths), the "Simpson 320 Acre Tract" (all depths) and the western forty
(40) acres of the "Simpson Gap Tract" (all depths) as those lands are
defined in Exhibit "B" to this Judgment;
2. A 50% leasehold interest as to the "Simpson Gap Tract", as such land is
defined in Exhibit "B", save and except the westerly forty (40) acres of the
"Simpson Gap Tract";
IT IS FURTHER DECLARED, ADJUDGED, AND DECREED that by virtue of the
farmout to the Operators effected by the Settlement Agreements, JOA and Letter Agreement,
Magnum owns and is entitled to leasehold interests in the leases described in Exhibit "A,"
together with interests in production proceeds from wells covered by the leases described in
Exhibit "A," (or any extension or renewal of the leases described in Exhibit "A" which are
obtained within one (1) year of the expiration of the leases described in Exhibit "A") equal to:
1. A 31.5% leasehold estate and working interest in production from depths
between 12,075 feet and 12,265 feet, inclusive (the "Magnum Reserved
Zone"), under the applicable lease(s) described in Exhibit "A" to this
Judgment, as to wells located on the "Simpson 310 Tract," "Simpson 320
Tract," and the western forty (40) acres of the "Simpson Gap Tract,";
2. A 50% leasehold estate and working interest in production from depths
between 12,075 feet and 12,265 feet, inclusive (the "Magnum Reserved
Zone"), under the applicable lease(s) described in Exhibit "A" to this
(C01139357.DOC:3) 3
Page 3179
Judgment, as to wells located on the "Simpson Gap Tract," save and
except the western forty (40) acres of the "Simpson Gap Tract;"
3. A 1% of 31.5% overriding royalty interest in production before "payout"
(as "payout" is defined in the Settlement Agreements), from depths
outside the Magnum Reserved Zone under the applicable lease(s)
described in Exhibit "A" to this Judgment, as to wells located on the
"Simpson 310 Tract," "Simpson 320 Tract," and the western forty (40)
acres of the "Simpson Gap Tract;"
4. A 1% of 50% overriding royalty interest in production before "payout"
(as "payout" is defined in the Settlement Agreements) from depths outside
the Magnum Reserved Zone under the applicable lease(s) described in
Exhibit "A" to this Judgment, as to wells located on the "Simpson Gap
Tract" less and except the western forty (40) acres of the "Simpson Gap
Tract;"
5. Upon "payout" (as "payout is defined in the Settlement Agreements) of
and election to participate in any wells located on the "Simpson 310
Tract," "Simpson 320 Tract," and the western forty (40) acres of the
"Simpson Gap Tract;", a 26,25% of 31.5% leasehold estate and working
interest in after-payout production from all depths outside the Magnum
Reserved Zone under the oil, gas and mineral leases described in Exhibit
"A" to this Judgment; and
6. Upon "payout" (as "payout is defined in the Settlement Agreements) of
and election to participate in any wells located on the "Simpson Gap
Tract," save and except the western forty (40) acres of the "Simpson Gap
Tract," a 26.25% of 50% leasehold estate and working interest in after-
payout production from all depths outside the Magnum Reserved Zone
under the oil, gas and mineral leases described in Exhibit "A" to this
Judgment.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Magnum's take
nothing from Defendants Copan° Field Services/Central Gulf Coast , L.P. and Sunoco Partners
Marketing & Terminals, L.P.
Signed this day of 6410
JUDGE PRESIDING
(C0839357.DOC:3} 4
Page 3180
APPROVED AS TO FO
T. Clancy
el for Magn Producing LP
{C0839357.DOC:3} 5
Page 3181
EXHIBIT "A"
1. Oil gas and mineral lease entered February 14, 2001 by and between Joe A, Zalman, Jr.
and wife, Margaret L. Zalman 2000 Family Limited Partnership, et al. as LESSOR and
United Oil & Minerals Limited Partnership as LESSEE, covering 699.595 acres more or
less in Lavaca County, Texas, a memorandum of which is recorded at Volume 226, Page
516 of the Official Property Records of Lavaca County, Texas.
2. Oil, gas and mineral lease entered September 10, 2003 by and between Joe A. Zalman Jr,
and Margaret L. Zalman 2000 Family Limited Partnership, et al. as LESSOR and United
Resources, LP as LESSER, covering 699.595 acres, more or less in Lavaca County,
Texas, a memorandum of which is recorded at Volume 295, Page 848 of the Official
Property Records of Lavaca County, Texas, and as amended on October 15, 2003 to
include two additional tracts comprising 310 acres, more or less and 108.865 acres, more
or less, as reflected by the recorded amendment at Volume 297, Page 690 of the Official
Property Records of Lavaca County, Texas.
3, Oil, gas and mineral lease entered August 17, 2006 by and between Joe A. Zalman, Jr.
and Margaret L. Zalman 2000 Family Limited Partnership, et at as LESSOR and Kerr-
McGee Oil & Gas Onshore, LP, covering 1438.46 acres, more or less in Lavaca County,
Texas, a memorandum of which is recorded at Volume 392, Page 847 of the Official
Property Records of Lavaca County, Texas.
4. Oil, gas and mineral lease entered August 11, 2008 by and between Joe A. Zalman, Jr.
and Margaret L. Zalman 2000 Family Limited Partnership, at al., covering 1128.46 acres,
more or less in Lavaca County, Texas,. a memorandum of which is recorded at Volume
465, Page 19 of the Official Property Records ef Lavaca County, Texas.
{C0839357.DOC:3} 6
Page 3182
EX1M3IT "B"
1. "Simpson 310 Acre Tract": 310 acres, more or less, out of the Amando De La Croix
Survey, A-112, Lavaca County, Texas; being the same lands described in that certain
"Partial Assignment of Oil and Gas Lease" dated May 19, 1997 by and between ,IWR
Exploration, Inc., et al., as Assignor and United Oil & Minerals, Inc., as Assignee,
recorded in Volume 126 at Page 307 of the Official Records of Lavaca County, Texas.
2. "Simpson 320Acre Tract": 320 acres, more or less, out of the Amando De La Croix
Survey, A-112, Lavaca County, Texas; being that certain 320 acres lying immediately
east of and contiguous to the above described 310 acre tract with the western boundary
line of said 320 acres being common with the eastern boundary line of said 310 acre tract;
the northern and southern boundaries of said 320 acres being common with the northern
and southern boundaries of the said Amando De La Croix Survey, respectively; and, the
eastern boundary of said 320 acres being parallel to and a sufficient distance from its said
western boundary to comprise 320 acres more or less.
3. "Simpson Gap Tract": lands lying within the Amando De La Croix Survey, A-112, the
northern boundary of which is the northern boundary line of said survey, the southern
boundary of which his the southern boundary line of said survey, the western boundary of
which is the eastern boundary of the "Simpson 320 Acre Tract" being more particularly
described in that certain Supplemental Master Settlement Agreement dated May 30, 2001
by and between Magnum Producing & Operating Company and United Oil & Minerals,
LP, et. al, and the eastern boundary of which is the western boundary of the "Simpson
870 Acre Tract" being more particularly described in that certain. Supplemental Master
Settlement Agreement dated May 30, 2001 by and between Magnum Producing &
Operating and United Oil & Minerals, LP, et al.
{C0839357.DOC3} 7
Page 3183
GARDERE
attorneys and counselors www.gardere.com
713/276-5500 (direct)
713/276-5555 (facsimile)
jmunisteri@gardere.com
March 27, 2012
Via facsimile: 361-888-8504
James T. Clancy
Clinton W. Twaddell
Branscomb PC
802 N. Carancahua, Suite 1900
Corpus Christi, Texas 78470-0700
Re: No. 10-11-21591-CV; Magnum Producing, L.P. v. Copano Field Services/Central, Gulf
Coast L.P., et al.; In the 25th District Court, Lavaca County, Texas
Dear Jim and Clint:
Crimson Exploration Inc., Kerr-McGee Oil & Gas Onshore LP, Westport Oil and Gas Company,
Crimson Exploration Operating Inc. (successor by merger to Southern G. Holdings LLC), Aubris
Resources LP Mc/a United Resources L.P.), Anadarko Petroleum Corporation, Anadarko E&P
Company LP, and EXCO Resources Inc. ("Defendants") agree to the following terms, subject to
their right to appeal the Order on Motions for Summary Judgment (signed October 22, 2013) and
all relief and grounds for liability therein:
1. Damages: The parties stipulate to damages as follows:
a. Magnum Producing L.P. ("Plaintiff") shall recover from Aubris Resources LP
damages in the amount of $10,048.38;
b. Plaintiff shall recover from Anadarko Petroleum Corporation damages in the
amount of $361,671.25;
c. Plaintiff shall recover from Crimson Exploration Operating Inc. damages in the
amount of $4,383,979.74; and
d. Plaintiff shall not be entitle to recover any damages not described in this
paragraph.
EXHIBIT "B" TO PARTIAL JUDGMENT FILED ON OR ABOUT 3/28/2014
Page 3184
2. Attorneys' fees and costs: The parties stipulate to attorneys' fees and costs as follows:
a. Plaintiff shall recover attorneys' fees and costs from Aubris Resources LP,
Anadarko Petroleum Corporation, and Crimson Exploration Operating Inc.,
jointly and severally;
b. Plaintiff shall not recover attorneys' fees or costs from the remaining Defendants;
c. Reasonable and necessary appellate fees and costs for Plaintiff are as follows:
i. $75,000 for an appeal to the Thirteenth Court of Appeals;
ii. $15,000 for filing or responding to a petition for review in the Texas
Supreme Court;
iii. $15,000 for filing or responding to a brief on the merits in the Texas
Supreme Court;
iv. $10,000 for preparing and presenting oral argument to the Texas Supreme
Court;
v. $5,000 for filing or responding to a motion for rehearing in the Texas
Supreme Court.
d. Plaintiff shall recover $350,000, and only $350,000, for all attorneys' fees and
costs incurred prior to the entry of a final judgment, subject to subparagraph 2.e.,
below.
e. The stipulation in subparagraph 2.d., above, shall not apply if, as a result of delay
caused by any Defendant, the Court fails to hear the parties' cross-motions for
summary judgment on pre-judgment interest on or about April 9, 2014. See
"Briefing Schedule," subparagraph 4.b., below. For example, delays caused by
Plaintiff, the Court's calendar, or otherwise not caused by a Defendant shall not
affect the stipulation in subparagraph 2.d., above.
3. Postjudgment Interest: The parties stipulate to postjudgment interest as provided in
chapter 304 of the Texas Finance Code.
4. Prejudgment Interest: The parties do not stipulate to the amount or availability of
prejudgment interest. The issue will be submitted to the Court by cross-motions for
summary judgment as further described in this paragraph.
a. Stipulations: For purposes of the cross-motions for summary judgment on the
issue of prejudgment interest, and for no other purposes, the parties stipulate to
the following facts:
i. Written notice of Plaintiff's claims was received on March 19, 2009 for
purposes of calculating prejudgment interest.
Page 3185
ii. Plaintiff incurred its damages on the dates and in the amounts specified in
the spreadsheet attached hereto as Exhibit 1.
If the Court concludes that prejudgment interest is available (an issue to
which the parties do not stipulate), prejudgment interest shall be allocated
exclusively in accordance with the allocations specified in "Damages,"
paragraph 1, above. The party or parties responsible for any damages
shall also be responsible for the prejudgment interest, if any, associated
therewith.
b. Briefing Schedule: The briefing schedule for the cross-motions for summary
judgment on the issue of prejudgment interest shall be as follows:
i. The parties shall serve their initial motions for summary judgment on
prejudgment interest by email on or before March 28, 2014.
ii. Plaintiff shall serve its motion to correct clerical error nunc pro tunc by
email on or before March 28, 2014.
iii. The parties shall serve any responses to the motions for summary
judgment and to Plaintiff's motion to correct clerical error nunc pro tunc
by email on or before April 4, 2014.
iv. The parties shall serve any replies to the motions for summary judgment
and to any response to Plaintiff's motion to correct clerical error nunc pro
tunc by email not later than noon on April 8, 2014.
v. Plaintiffs motion to correct clerical error nunc pro tune and the cross-
motions for summary judgment will be heard on April 9, 2014, or as
shortly thereafter as the Court's calendar will accommodate.
5. Preservation of issues: Nothing contained herein, and nothing in the judgment(s) based
on this agreement, is intended or should be interpreted as a waiver of the Defendants'
right to appeal the Order on Motions for Summary Judgment (signed October 22, 2013).
Absent an order or judgment establishing liability, these stipulations shall not provide
independent grounds for a judgment. Through this Rule 11 agreement, Defendants do
not concede liability on any of Magnum's claims or waive any objections to an award of
prejudgment interest.
6. Amended pleadings: The parties may amend their pleadings on or before March 28,
2014.
7. The current April 9, 2014 trial date is continued.
Page 3186
Pursuant to Rule 11 of the Texas Rules of Civil Procedure, please sign in the space provided
below and return a signed copy to me for filing with the court,
Sincerely,
James G. Munisteri
AGREED TO:
James T. Clancy,
Attorney for Plaintiff
GARDERE WYNNE SEWELL LLP
1000 Louisiana, Suite 3400, Houston, Texas 77002-5011 ■ 711276.5500 Phone ■ 713.276,5555 Fax
Austin ■ Dallas ■ Houston ■ Mexico City
Garclere01 -6432040v.2
Page 3187
EXHIBIT 1 TO RULE 11
Production Month Zaimao 3 Damages Zalman 4 Damages Combined Zalman 3 and 4 barrages
May-01 $266.47 $0.00 $266.47
June-01 51,244.81 $0.00 $1,244.81
Yu1y-01 $97040 $0.00 $970A0
August-41 $857.92 $0.00 $857.92
September-01 $574.53 $0.00 $574.53
October-01 8433.99 $0.00 $433.99
November-01 $646.25 $0.00 $646.25
December-01 $471.89 $0.00 $471.89
Janoary-02 $11.11 $0.00 $11.11
Febraary432 $264.04 $0.00 $264.04
March-02 8361.67 $0.00 $361.67
A9r11-02 $429.07 $0.00 $429.03
May-02 $391.72 $0.00 $393.72
Jurse-02 $298.13 $0.00 $298.13
July-02 $27862 $0.00 $278.62
Aux tt-02 $23954 $0.00 $239.54
Soptembor-02 $226.84 $0.00 $226.89
October-02 $205,22 $0.00 $205.22
November-02 $143.73 $0.00 $143.73
Deoseaber-02 $128.16 $0.00 $128.16
January-03 $38.09 $0.00 $38.09
February-03 $12.73 $0.00 $12.73
Merch-03 $1.07 $0.00 $1.07
. Apri1-03 311.81 $0.00 $11.81
mezp-03 8/37 $0.00 $2.37
Jurte-03 $2.01 $0.00 $2.01
July-03 80.00 $0.00 $0.00
Auaus1-03 $42,55 $0.00 $42.59'
September-03 $423.52 $0.00 $423.52
0otober-03 $547.66 $0.50
... $547.66
November-03 $520.15 $0.00 $520.45
Deoember.03 3537.07 $0.00 $537.07
Tanoiry-04 $722.92 $0.00 $722.92
Febraty,04 $516.46 $0.00 $516,46
March-04 $585.07 $0.00 $585.07
Aprii-04 $513.15 $0.00 $513.15
5.Lay-04 5635.91 4405.87 $230.04
Jone-04 $11,491.80 41,161,21 $10,330.59
July-04 _ $10,340.82 481213 $9,527.99
Au9um-104 $10,135.98 4481.06 $9,654.92
Etaplember-94 $6,741.94 -$258.47 $6,483.47
0ctober-04 $8,401.15 -5241.[1 88,160.03
November.04 $9,353.93 -5746.87 $9,107.06
Deeember-04 $1,954.45 -42230.15 $7,724.30
Januery-05 $6,858.19 -$171.58 $6,686.61
rebniesy-05 $5,781.21 -$148.38 $5,632.83
Mereb-05 35,825.91 -$155.78 $5,670.13
April-05 $5,585.81 -$148.13 $5,437.68
Mey-05 54,591.88 4134.03 $4,457.85
iona-o5 83,429,50 -8101104 53,321.46
Jeiy-05 $3,162.48 -$115.14 $3,047.34
Auguit-05 34,640,62 -$10756 $4,533.06
September-05 4131.99 4131.99
October-05 4171.67 -$171.67
November-05 -$11922 -$119.22
December-05 -$69.70 -$69.70
January-06 81.083.44 486.42 $977.02
February-06' $1,20535 467.16 $1,138.39
Marek-06 4/4.541.83 -$64.85 414,566.60
Apr4-06 -51,078.24 458.42 -$1,136.66
May-06 4381.40 -$60.63 -3442.03
7uae-06 4792.47 450.13 -$842.60
July-06 -$249,54 446.12 -$295.66
Augue-a 5, 4724.33 -$5271 -1777.04
Page 3188
EXHIBIT I TO RULE 11
Septembe o . 46.173,04 -$46.95 45,219.99
Ode.. I r 4416.70 -$3293 4449.63
November I r $44,318,68 44601 $44,342.67
December 0 `` 3237.607.03 451.0. $237,556.01
January-0 *1613,455.55 -raiz $168,426.86
February-07 $177,310.64 -345.70 $177,264.94
21enth-07 $188,541.49 .351,31 $188,490.18
April-07 3131,79813 $236.49 $132,034.62
May-07 3139,624.52 $250.17 $139,874.69
31ne-07 $172,911,33 $217.44 $173,129.27
July-07 3151.49533 $185.19 3151,680.22
August-07 $119,557.26 $34919 $119,907.15
September-07 $129,101.49 331056 $129,619.05
October-07 314014902 $14132 $140,990.34
November-1 3146.418.21 32502 $146,443,23
December-0 $115,730.37 $3417 $115,765.24
3 3144,904.76 $5.06 $144,909.82
February". $152,405.07 $000 $152,405.07
Maoh.-08 $187,559,44 $0.00 $187,559.44
Aprii-08 3164,780.67 $0.00 3164,780.67
May-08 $175,229,82 360233 $175,831.95
1ono-08 3172,020.18 $1.016.66 $173,036.84
July-08 $172,557,48 317068 $173,423,16
Angust-08 6121,842.50 $501.54 $122,344.04
September-08 $85,126.83 5338.24 $85,485.07
OeLober-08 $63,931.07 $634.72 $84,565.79
November-08 $61,053.14 $227.67 $61,280.81
Decerntrer-08 $29,573.62 $220.65 $29 79.4.27
Januasy-09 343.469.87 817111 $43,640.98
February-09 333,094./3 SI 1127 $33,206.05
Minch-09 329.058.80 312168 $29,181.43
April-09 333,601.59 $1 1493 $33,716.52
M8y-09 $24,240.60 $83,45 $24,324.05
June-. ' 328.50345 181.67 $28,585.12
hi 1. 47,716.19 863.95 $27,800.14
August-09 $10,074.51 $68.96 $10,143.47
September-DS 318,23736 $58.77 $18,296.13
October-09 317,44737 47537 $37,573.34
November-49 $34,397,98 $83.00 $14,480,98
December-D9 320,77041 386,04 $20,856.45
January-10 336.579.38 $10597 $36,685,35
Febotery-10 $33,18233 $90.78 $33,273.61,
march-10 826,05,91 1134.43 $26,890.34
Ain0-10 $22,16315 $70.94 $22,234.79
zutD,1 . 127,791.90 $54.27 $27,846.17
June-JO $20,87736 683.38 $20,960.74
July-10 329,04734 689.63 $29,137.02
Au000t-10 323,763.40 $77.36 323,841.26
8eptember-10 $19,31597 39702 *19,412.99
actchu-10 $15,010.80 396.13 *15,106.93
November:10 $6,455.63 $68.55 $6,524.13
Dttembar-10 $4,344.07 $11117 $4,425.89
3anuary-11 515,089.26 316.11 $15,175.37
5elowary-11 317,652.78 $61.73 $17,714.51
Maroh-11 $21,553.77 $62.60 $21,636.67
Apra-11 $20,33505 $83.48 $20,413.53,
May-11 315,333.26 $73.73 $15,406.99
Jome-11 312,793.17 369.12 $12,867.29
July-11 317,221,93 364.77 $17,28630
Anna et-11 $19,518,12 $60-31 $19,57843
September--11 $13,652,37 346.37 $13,708.74
Octo3er-11 $13,95146 $1651 $14,005-3 7
Novorabenl 1 312,749.67 $41,78 $12,791.45
De0embar-11 $10,928.93 $3821 $10,967.14
Jammay-12 $10,057,01 $3293 $10,089.94
February-17 $12,024.65 $31.03 $12,055.68
Mamba $7,127.67 479.06 $7,15693
Alrild. $11,600.85 $24.57 $11,625.42
May-12 312,63015 338.86 $12,659.01
June-12 $19.114.42 471.31 389,405.73
Page 3189
EXHIBIT 1 TO RULE 11
Ili1Y-12 46,030.18 517.00 -$5,993.18
Augmt.-12 :13,04317 $37.69 $13,081,46
septembor-12 :8,40716 512.16 $8,420.02
oathcf-12 :14910.70 50.88 $11,911.58
IstentemSor-12 i4,855,64 $0.03 $4,895.67
December-12 :8,65901 W.25 $8,659.26
housty-13 512,790.76 $0.02 $12,790.78
Febraery43 $7,472.67 SCLOO $7.472.67
Marsh-13 513,384.401 50.05 $13,384.45
Apr11.15 $8,60827 51.46 $8,608.73
May-13 11146,01 s052 $8,846,53
June-13 58.948.68 50.38 $8,999.06
July-13 $5.124.62 $0.06 $5 124.68
August-13 42,352.31 $0.00 -$2,352.31
&pecker-13 41,66616 -$1,606.26
October-13 $0.00
S4,755,699.37
Page 3190
Appendix C
Order Granting Plaintiff’s Motion to Correct Clerical Error
Nunc Pro Tunc
(Apr. 25, 2014)
(Supp. CR 854-55)
Page 854
Page 855
Appendix D
Supplemental Summary Judgment Order
(Oct. 22, 2014)
(CR 3328)
No. 10-11-21591-CV
MAGNUM PRODUCING L.P., IN THE DISTRICT COURT
vs. LAVACA COUNTY, TEXAS
COPANO FIELD SERVICES/CENTRAL §
GULF COAST L.P., et al., 25th JUDICIAL DISTRICT
SUPPLEMENTAL SUMMARY JUDGMENT ORDER
This court rules as follows on the motions set for the below:
1. Plaintiff's Traditional Motion for Summary Judgment on Entitlement to and
Amount of Prejudgment Interest is denied; Defendants' Traditional Motion for Summary
Judgment Regarding Prejudgment Interest is granted.
2. Defendants' Motion to Supplement Summary Judgment Record and
Reconsider Summary Judgment Ruling is denied.
3. The objections in paragraphs 22 and 23 of Plaintiff's Reply to Defendants'
Response to Plaintiff's Motion on Entitlement to and Amount of Prejudgment Interest are
overruled, and the objection in paragraph 24 is sustained only as to the Baker affidavit.
4. Defendants' Motion to Reconsider Exclusion of Baker and Grady Affidavits
(Aug. 25, 2014) is granted in part: the affidavit of Edward Joseph Grady is admitted as
evidence for, and was considered in the court's ruling on, the summary judgment motions
regarding prejudgment interest. Otherwise, the motion denied.
Signed this 1/T11.16—clay of COcla 2014.
/0-?.fILED
r A.D., 29 /5/
at Ira s o'clock A M
he T H nke, Clerk
JUDGE PRESIDING
DIST T CO VACA COUNTY, TX
B Deputy
Page 3328
Appendix E
Final Judgment
(Nov. 24, 2014)
(CR 3345-56)
CAUSE NO. 10-11-21591-CV
MAGNUM PRODUCING L.P., IN THE DISTRICT COURT
VS. LAVACA COUNTY, TEXAS
COPANO FIELD SERVICES/CENTRAL
GULF COAST L.P., et al., 25th JUDICIAL DISTRICT
FINAL JUDGMENT
This is the final judgment between Plaintiff Magnum Producing, L.P. ("Magnum"), and
Defendants Crimson Exploration, Inc.; Crimson Exploration Operating, Inc., successor by
merger to Southern G. Holdings, LLC; EXCO Resources, Inc.; Anadarko Petroleum
Corporation; Anadarko E&P Company, LP; Kerr-McGee Oil & Gas Onshore, LP; Westport Oil
& Gas Company, LP; and Aubris Resources, L.P. f/k/a United Resources, LP (collectively, the
"Operators"), Copano Field Services/Central Gulf Coast, L.P. ("Copano"), and Sunoco Partners
Marketing & Terminals, L.P. ("Sunoco").
The parties brought cross-motions for partial summary judgment on liability, which the
Court heard on January 25, 2013, determined by order dated October 22, 2013, and corrected
nunc pro tune by order dated April 25, 2014 (the "First Summary Judgment"). On April 9, 2014,
the Court rendered a Partial Judgment on damages, attorney's fees, and post judgment interest
(the "Damages Judgment"), reflecting the parties' stipulation by Rule 11 agreement (which Rule
11 agreement expressly preserved the right to appeal the Court's summary determination of
liability). Also on April 9, the Court heard the parties' cross-motions for partial summary
judgment addressed to the availability of prejudgment interest, and the Court determined that
such interest was unavailable. At the same time, certain defendants moved the Court for leave to
Ii-ow FILED
re; P-1-
at /0: o'clock M
Sherry7 Henko C ,ark
-
{C1000486.DOCX: I } COURT LAV C COUNTY, TX
Page 3345
supplement the First Summary Judgment record and to reconsider the October 22, 2013
summary judgment ruling.
FIRST MOTIONS FOR SUMMARY JUDGMENT
Magnum moved for summary judgment against the Operators (the "First Magnum
Motion for Summary Judgment"), the Operators moved for summary judgment against Magnum
(the "First Operators' Motion for Summary Judgment"), Copano moved for summary judgment
against Magnum (the "Copano Motion"), and Sunoco moved for summary judgment against
Magnum (the "Sunoco Motion"). The Court heard these motions on January 25, 2013, and
considered (1) the [First] Magnum Motion [for Summary Judgment]; (2) the [First] Operators'
Motion [for Summary Judgment]; (3) the Copano Motion; (4) the Sunoco Motion; (5) any and all
responses and replies in support of or in opposition to the [First] Magnum Motion [for Summary
Judgment], [First] Operators' Motion [for Summary Judgment], Copano Motion, and Sunoco
Motion; (6) Operators' Supplemental Motion for Summary Judgment and Motion for Leave to
File Supplemental Motion for Summary Judgment and Late Summary Judgment Evidence; (7)
Plaintiff's Response to Operators' Supplemental Motion for Summary Judgment and Motion for
Leave to File Supplemental Motion for Summary Judgment and Late Summary Judgment
Evidence; (8) all summary judgment evidence, including late-filed evidence made the subject of
Operators' motion for leave and Plaintiff's response to Operators' motion for leave; ([9]) the
pleadings on file at the time of the hearing; and ([10]) argument of counsel.
The Court entered an order on October 22, 2013, which it modified nunc pro tunc by
order dated April 25, 2014. As corrected the Court rendered a declaratory judgment by which it
declared, adjudged and decreed that:
2
Page 3346
[Elven] if that certain oil, gas and mineral lease recorded at Volume 90, Page 270,
Oil and Gas Records of Lavaca County, Texas (the "Simpson Lease") was
terminated, and regardless of when it was terminated, the January 30, 2001
Master Settlement Agreement and May 30, 2001 Supplemental Master Settlement
Agreement each by and between Magnum Producing and Operating Company
n/k/a Magnum Producing, LP and United Oil & Minerals Limited Partnership
n/k/a Aubris Resources, LP, et al. (the "Settlement Agreements"), the January 30,
2001 Joint Operating Agreement by and between Magnum Producing and
Operating Company n/k/a Magnum Producing LP and United Oil & Minerals
Limited Partnership n/k/a Aubris Resources, LP, et al. (the "JOA") and the
October 8, 2003 Letter Agreement by and between Magnum Producing and
Operating Company n/k/a Magnum Producing, LP and United Resources LP n/k/a
Aubris Resources, LP (the "Letter Agreement"), all of which are binding on the
Operators, give Magnum Producing, LP ("Magnum") the right to participate in
any renewal, extension, or top lease taken by any of the Operators or their
successors or assigns, covering lands that were the subject of the Simpson Lease,
and which were taken by or assigned to the Operators before October 8, 2003, or
which became effective within one year of the expiration date of the immediately
preceding lease covering lands that were the subject of the Simpson Lease,
including but not limited to the oil, gas and mineral leases described in Exhibit A
attached to this Final Judgment.
3
Page 3347
Magnum's interests in and under those certain oil, gas and mineral leases
described in the Exhibit A attached to this Final Judgment are identical to those
interests Magnum owned in and under the Simpson Lease, as those interests are
described in the Settlement Agreements. Specifically, before taking into
consideration the farmout to the Operators effected by the Settlement
Agreements, Magnum's interests include:
a. A 31.5% leasehold interest as to the "Simpson 310 Acre Tract" (all
depths), the "Simpson 320 Acre Tract" (all depths) and the western
forty (40) acres of the "Simpson Gap Tract" (all depths) as those lands
are defined in Exhibit B to this Final Judgment.
b. A 50% leasehold interest as to the "Simpson. Gap Tract", as such land
is defined in Exhibit B to this Final Judgment, save and except the
westerly forty (40) acres of the "Simpson Gap Tract";
By virtue of the farmout to the Operators effected by the Settlement Agreements,
JOA and Letter Agreement, Magnum owns and is entitled to leasehold interests in
the leases described in Exhibit A, together with interests in production proceeds
from wells covered by the leases described in Exhibit A to this Final Judgment
(or any extension or renewal of the leases described in Exhibit A to this Final
Judgment which are obtained within one (1) year of the expiration of the leases
described in Exhibit A) equal to:
1. A 31.5% leasehold estate and working interest in production from the
stratigraphic equivalent of that certain interval as seen between the
electric log depths of 12,075 feet and 12,265 feet in the Bridge-
Mitchell E-5 Well located in the Sarah Wilmans Survey A-492,
Lavaca County, Texas and as seen at the log depths in the Migl-Quinn
No. 2 well (log depth 10,800'-10,920'), the Migl-Quinn No. 2-A well
(log depth 10,800'-10,920'), and the Migl-Quinn No. 3-A well (log
depth 11,030'41,162') (the "Magnum Reserved Zone"), under the
4
Page 3348
applicable lease(s) described in Exhibit A to this Final Judgment, as to
wells located on the "Simpson 310 Tract," "Simpson 320 Tract," and
the western forty (40) acres of the "Simpson Gap Tract;"
2. A 50% leasehold estate and working interest in production from the
stratigraphic equivalent of that certain interval as seen between the
electric log depths of 12,075 feet and 12,265 feet in the Bridge-
Mitchell E-5 Well located in the Sarah Wilmans Survey A-492,
Lavaca County, Texas and as seen at the log depths in the Migl-Quinn
No. 2 well (log depth 10,800'-10,920'), the Migl-Quinn No. 2-A well
(log depth 10,800'-10,920'), and the Migl-Quinn No. 3-A well (log
depth 11,030' - 11,162') (the "Magnum Reserved Zone"), under the
applicable lease(s) described in Exhibit A to this Final Judgment, as to
wells located on the "Simpson Gap Tract," save and except the
western forty (40) acres of the "Simpson Gap Tract;"
3. A 1% of 31.5% overriding royalty interest in production before
"payout" (as "payout" is defined in the Settlement Agreements), from
depths outside the Magnum Reserved Zone under the applicable
lease(s) described in Exhibit A to this Final Judgment, as to wells
located on the "Simpson 310 Tract," "Simpson 320 Tract," and the
western forty (40) acres of the "Simpson Gap Tract;"
4. A 1% of 50% overriding royalty interest in production before "payout"
(as "payout" is defined in the Settlement Agreements), from depths
outside the Magnum Reserved Zone under the applicable lease(s)
described in Exhibit A to this Final Judgment, as to wells located on
the "Simpson Gap Tract," less and except the western forty (40) acres
of the "Simpson Gap Tract;"
5. Upon "payout" (as "payout" is defined in the Settlement Agreements)
of and election to participate in any wells located on the "Simpson 310
Tract," "Simpson 320 Tract," and the western forty (40) acres of the
"Simpson Gap Tract," a 26.25% of 31.5% leasehold estate and
working interest in after-payout production from all depths outside the
Magnum Reserved Zone under the oil, gas and mineral leases
described in Exhibit A to this Final Judgment; and
6. Upon "payout" (as "payout" is defined in the Settlement Agreements)
of and election to participate in any wells located on the "Simpson Gap
Tract," save and except the western forty (40) acres of the "Simpson
Gap Tract," a 26.25% of 50% leasehold estate and working interest in
after-payout production from all depths outside the Magnum Reserved
Zone under the oil, gas and mineral leases described in Exhibit A to
this Final Judgment.
5
Page 3349
It was further ordered, adjudged and decreed by the First Summary Judgment that
Magnum take nothing from Defendants Copano Field Services/Central Gulf Coast, LP and
Sunoco Partners Marketing & Terminals, LP.
DAMAGES, POST-JUDGMENT INTEREST AND ATTORNEYS' FEES
(THE DAMAGES JUDGMENT)
On March 27, 2014, after the Court rendered the First Summary Judgment, Plaintiff
Magnum and the Operators (Defendants Crimson Exploration, Inc.; Crimson Exploration
Operating, Inc., successor by merger to Southern G. Holdings, LLC; EXCO Resources, Inc.;
Anadarko Petroleum Corporation; Anadarko E&P Company, LP; Kerr-McGee Oil & Gas
Onshore, LP; Westport Oil & Gas Company, LP; and Aubris Resources, LP f/k/a United
Resources, LP) entered an agreement pursuant to Rule 11, which agreement the parties submitted
to the Court. On the basis of its prior First Summary Judgment and the parties' Rule 11
Agreement (which Rule 11 agreement expressly preserved the right to appeal the Court's
summary determination of liability), the Court rendered its judgment on damages, postjudgment
interest and attorneys' fees as follows:
1. Magnum Producing LP shall recover from Aubris Resources, LP damages in
the amount of $10,048.38.
2. Plaintiff shall recover from Anadarko Petroleum Corporation damages in the
amount of $361,671.25.
3. Magnum shall recover from Crimson Exploration Operating Inc. damages in
the amount of $4,383,979.74 through the date of this Final Judgment.
6
Page 3350
4. Magnum shall take nothing from the defendants not named in the preceding
numbered paragraphs. In particular, Magnum shall take nothing from Copano
Field Services/Central Gulf Coast LP, Sunoco Partners Marketing &
Terminals LP, Crimson Exploration Inc., Southern G. Holdings LLC,
Anadarko E&P Company LP, Kerr-McGee Oil & Gas Onshore LP, Westport
Oil & Gas Company LP, United Resources LP f/k/a United Oil and Minerals
LP, and EXCO Resources, Inc.
5. Magnum shall recover, on all amounts awarded above, postjudgment interest
at a rate of 5% per annum from the date a final judgment is signed until paid
in full in accordance with Chapter 304, Texas Finance Code.
6. Magnum shall recover attorneys' fees and costs from Aubris Resources LP,
Anadarko Petroleum Corporation, and Crimson Exploration Operating Inc.,
jointly and severally, in the amount of $350,000. This amount shall constitute
full and final compensation for any attorneys' fees and costs incurred by
Plaintiff prior to final judgment.
7. Magnum shall recover fees and costs from Aubris Resources LP, Anadarko
Petroleum Corporation, and Crimson Exploration Operating Inc., jointly and
severally, in the following amounts in the event of an appeal:
a. $75,000 for an appeal to the Thirteenth Court of Appeals;
b. $15,000 for filing or responding to a petition for review in the Texas
Supreme Court;
c. $15,000 for filing or responding to a brief on the merits in the Texas
Supreme Court;
7
Page 3351
d. $10,000 for preparing and presenting oral argument to the Texas Supreme
Court;
e. $5,000 for filing or responding to a motion for rehearing in the Texas
Supreme Court.
f. Appellate attorneys' fees and costs for the respective stages of appellate
proceedings above are conditioned on CEEREEETUgagr appellate
Vil.ANA-te_ a 44 &icon ce at
proceedings at that stage of appellate review and cEN02171:4
af-fifming this final judgment.
SECOND MOTIONS FOR SUMMARY JUDGMENT ON PREJUDGMENT
INTEREST AND TO SUPPLEMENT THE RECORD AND RECONSIDER
SUMMARY JUDGMENT RULING
The Plaintiff filed its Motion for Summary Judgment on Entitlement to and Amount of
Prejudgment Interest Against Operators Crimson Exploration Operating, Inc., Anadarko
Petroleum Corporation and Aubris Resources LP ("Plaintiff's Interest Motion"), and Defendants
filed a cross-motion for Summary Judgment Regarding Prejudgment Interest Against Plaintiff
("Defendants' Interest Motion"), and Defendants filed a Motion to Supplement the Summary
Judgment Record and Reconsider the Summary Judgment Ruling ("Defendants' Motion to
Supplement"). On April 9, 2014, the Court considered these motions.
The Court entered an Order on October 27, 2014. It is therefore, ordered, adjudged, and
decreed that:
1. Plaintiff's Traditional Motion for Summary Judgment on Entitlement to and
Amount of Prejudgment Interest is denied; Defendants' Traditional Motion
for Summary Judgment Regarding Prejudgment Interest is granted; and
8
Page 3352
2. Defendants' Motion to Supplement Summary Judgment Record and
Reconsider Summary Judgment Ruling is denied.
3. The objections in paragraphs 22 and 23 of Plaintiffs Reply to Defendants'
Response to Plaintiff's Motion on Entitlement to and Amount of Prejudgment
Interest are overruled, and the objection in paragraph 24 is sustained only as to
the Baker affidavit.
4. Defendants' Motion to Reconsider Exclusion of Baker and Grady Affidavits
(Aug. 25, 2014) is granted in part: the affidavit of Edward Joseph Grady is
admitted as evidence for, and was considered in the court's ruling on, the
summary judgment motions regarding prejudgment interest. Otherwise, the
motion is denied.
THIS JUDGMENT DISPOSES OF ALL CLAIMS AND PARTIES, IS FINAL AND IS
APPEALABLE.
Signed this the day of °' -44.k4ftt:772i
JUDGE PRESIDING
APPROVED AS TO FORM:
9
Page 3353
Counsel for Magnum Producing LP
APPROVED AS TO FORM:
James Munisteri
Counsel for Defendants
10
Page 3354
EXHIBIT "A"
1. Oil gas and mineral lease entered February 14, 2001 by and between Joe A. Zalman, Jr.
and wife, Margaret L. Zalman 2000 Family Limited Partnership, et al. as LESSOR and
United Oil & Minerals Limited Partnership as LESSEE, covering 699.595 acres more or
less in Lavaca County, Texas, a memorandum of which is recorded at Volume 226, Page
516 of the Official Property Records of Lavaca County, Texas.
2. Oil, gas and mineral lease entered September 10, 2003 by and between Joe A. Zalman Jr.
and Margaret L. Zalman 2000 Family Limited Partnership, et al. as LESSOR and United
Resources, LP as LESSEE, covering 699.595 acres, more or less in Lavaca County,
Texas, a memorandum of which is recorded at Volume 295, Page 848 of the Official
Property Records of Lavaca County, Texas, and as amended on October 15, 2003 to
include two additional tracts comprising 310 acres, more or less and 108.865 acres, more
or less, as reflected by the recorded amendment at Volume 297, Page 690 of the Official
Property Records of Lavaca County, Texas.
3. Oil, gas and mineral lease entered August 17, 2006 by and between Joe A. Zalman, Jr.
and Margaret L. Zalman 2000 Family Limited Partnership, et al. as LESSOR and Kerr-
McGee Oil & Gas Onshore, LP, covering 1438.46 acres, more or less in Lavaca County,
Texas, a memorandum of which is recorded at Volume 392, Page 847 of the Official
Property Records of Lavaca County, Texas.
4. Oil, gas and mineral lease entered August 11, 2008 by and between Joe A. Zalman, Jr.
and Margaret L. Zalman 2000 Family Limited Partnership, et al., covering 1128.46 acres,
more or less in Lavaca County, Texas, a memorandum of which is recorded at Volume
465, Page 19 of the Official Property Records of Lavaca County, Texas.
11
Page 3355
EXHIBIT "B"
1. "Simpson 310 Acre Tract": 310 acres, more or less, out of the Amando De La Croix
Survey, A-112, Lavaca County, Texas; being the same lands described in that certain
"Partial Assignment of Oil and Gas Lease" dated May 19, 1997 by and between .TWR
Exploration, Inc., et al., as Assignor and United Oil & Minerals, Inc., as Assignee,
recorded in Volume 126 at Page 307 of the Official Records of Lavaca County, Texas.
2. "Simpson 320 Acre Tract": 320 acres, more or less, out of the Amando De La Croix
Survey, A-112, Lavaca County, Texas; being that certain 320 acres lying immediately
east of and contiguous to the above described 310 acre tract with the western boundary
line of said 320 acres being common with the eastern boundary line of said 310 acre tract;
the northern and southern boundaries of said 320 acres being common with the northern
and southern boundaries of the said Amando De La Croix Survey, respectively; and, the
eastern boundary of said 320 acres being parallel to and a sufficient distance from its said
western boundary to comprise 320 acres more or less.
3. "Simpson Gap Tract": lands lying within the Amando De La Croix Survey, A-112, the
northern boundary of which is the northern boundary line of said survey, the southern
boundary of which his the southern boundary line of said survey, the western boundary of
which is the eastern boundary of the "Simpson 320 Acre Tract" being more particularly
described in that certain Supplemental Master Settlement Agreement dated May 30, 2001
by and between Magnum Producing & Operating Company and United Oil & Minerals,
LP, et. al. and the eastern boundary of which is the western boundary of the "Simpson
870 Acre Tract" being more particularly described in that certain Supplemental Master
Settlement Agreement dated May 30, 2001 by and between Magnum Producing &
Operating and United Oil & Minerals, LP, et al.
12
Page 3356
Appendix F
Master Settlement Agreement Exhibit A (plat)
(CR 838)
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Page 838
Appendix G
Amanda De La Croix plat
(CR 1226)
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Page 1226
Appendix H
Joint Operating Agreement art. VIII, § B
(1SCR 111)
If any party secures a renewal of any oil and gas lease subject to this
agreement, all other parties shall be notified promptly, and shall have the
right for a period of thirty (30) days following receipt of such notice in
which to elect to participate in the ownership of the renewal lease, insofar
as such lease affects lands within the Contract Area, by paying to the party
who acquired it their several proper proportionate shares of the acquisition
cost allocated to that part of such lease within the Contract Area, which
shall be in proportion to the interests held at that time by the parties in the
Contract Area.
...
. . . Any renewal lease taken before the expiration of its predecessor
lease, or taken or contracted for within six (6) months after the expiration of
the existing lease shall be subject to this provision; but any lease taken or
contracted for more than six (6) months after the expiration of an existing
lease shall not be deemed a renewal lease and shall not be subject to the
provisions of this agreement.
The provisions in this Article shall also be applicable to extensions of oil
and gas leases.
Appendix I
Letter of Intent
Oct. 8, 2013
(CR 1295-96)
10/10/03 FRI 17:24 FAX 361 8840366 MAGNUM PROD & OPER CO. 4002
MAGNUM 500 N. SHOREU?.E • 5UrtE 322
CORPUS CHRISTI, TEXAS 78471
MAGNUM PRODUCING G. OPERATING COMPANY
301/1382-3058
October 8, 2003 FAX 381/88443355
United Resources, L.P.
1001 Weetbank Drive
Austin, Texas 78740
AT Etic Sigsbey Re: Proposal for a Deep Prospect on Zalman Acreage
Speaks, S. W. Field
Lavaca County, Texas
Gentlemen:
This letter represents a counter proposal to the proposal reflected in your letter dated October 3, 2003
addressed to Magnum Producing & Operating Company ("Magnum'). Your letter addressed your acquisition of
two new leases and your proposed act/Medan of the third lease, whichleases est calledthe !Top Lessee. The Top
Leases cover ThIcts 1,11, EL IV, V end VI of the attached plat We agree to flumout to you the Vatmson Lew and
the Top Leases as to the depths and horizons that were to be assigned to Magnate under Paragraphs 9L and K. of
the Master Settlement Agreement, (less the zones above the stratigraphic equivalent of 14,990' as to the $1„we
3.11)Asolog,) SAVE AND EXCEPT the "Map= Reserved Zone" as defined in the Master Settlement
Agreement subject to satisfaction of the following , to-wit
1) You agree to assign to Magnum as to the Top Leases, the following
acet.vesei-e.if te..-i-o Cf.
an ORRI of 1% ant$26.25% WI (with an NRI equal to a 26.25% proportionate pad of the NRI
currently available to United Resources. LP.) after payout on a well-by-well basis, proportionately
...---------- reduced to (1) Magnum's 31.S% in Tracts V, VI the westem 40 acres of Tract IV and (ii) 50% WI in
-Neil, Ill and everything east of the western 40 acres of Tract N after re-assignment to Magnum as
per terms of the Term Assignment of Oil, Gas and Mineral Lease dated eflectivc October 1, 1996
filed in Volume 109, at Page 157 as corrected and amended by and between Magnum Producing &
Operating Company and Louis Dreyths Nannel Gas Corp,. Before such ereassigrunent, Magnum's
rights under Tracts', II andEI shall be covered by such Term Aasignmem. These interests represent
Magnum's retained interest under the farroout proposed herein.
2) You agree that the following described Oil and Gas Leases (called herein the "Lamm Lease?), to-wit:
a. Oil and Gas Lease dated February 14, 2001 filed in Volume 226 at Page 516, Official Records, Lavaca
County, Texas from Joe A. 7nInian ct al to United Oil and Minerals, L.P.
Lavaca
b. Oil and Gas Lease dated February 14,2001 filed in Volume 226 at Page 526, Official Records,
County, Texas from Yoe A. Zalman at al to United Oil and Minerals, L.P.
c. Any other top leases taken by you or assigned to you prior to this date or which art taken and/or which
become effective within one year of release of all or part of the lands covered by the Simpson Lease,
shall each be considered for all purposes (and in particular for the purposes of Paragraph 913. of the Master
year of the expiration° of the
Settlement Agreement) as a "renewal(s) and extension(s) obtained within one (1)
2001 ('Muster
'All underlined terms !seminar-a defined in the Master Settlement Agreement dated as of January 30,
Settlement Agreement')
FAMAGNUMWAI ERLENAvisucli,■ thillect Etcsocnees ZntrrunAera in Ay Sit WiliOn.d0;
loll v'_007
Page 1295
10/10/03 FRI 17:25 FAX 361 8649355 MAGNUM PROD & OPER CO. 11003
United Resources, L.P.
Lettcr Agreement ZaImen Acreage
SW Speaks Field, Lavaca Co., TX
October 8, 2001
Page 2 or2
Massionkem, so that Magnum shall be entitled to all interests otherwise credited it under the Master Settlement
Agreement relative to the 5ininsonagaae, as to such leases. Further Magnum, as to such leases, shall be entitled to
the interests credited to it in Paragraphs 3 end 4 of the Master Settlement Agreement as to the wells scheduled in
Exhibits D-1, 2 and E-1, 2. In the oven the Zalman Leases are proven to be valid leases (instead of the%moon
tease) Magnum's ORRI and NRI as to the Zalrosn Leases shall be calculated based on the interests reflected on
item 1 above.
3) As to any well drilled under this Agreement, Magnum, or its representatives, shall have access to the rig
floor, at its sole risk and expense, and shall be entitled to all well data, including logs, at the same time it is
available to United Resources, L.P. ("United").
4) As to any well drilled under this Agreement, if such well is a dryhole and United elects not to complete in
any zone previously earned by United, then United will plug off the open bole part of such well, move the rig off,
clean the location and assign such well to Magnum to complete in the Magnum Reserved Zone or any other zone(a)
not earned by United.
S) If any well drilled under this Agreement is completed by United, them if such well ceases to produce, then
reassignment of such well and associated leasehold shalt be covered by a thither agreement containing cessation of
production clause form in Producers 88 (7169) Paid-UP Lease Form.
6) No pooling shall b e allowed for wells drilled on Tracts IV, V, and VI unless they are pooled with each other.
United Resources, LP. represents that it is vested with sufficient leasehold interest in the Top Leases and the
7.alman Leases to perform all of its obligations herein.
The parties agree that this letter agreement is Riefler of intent and that the parties shall enter into such Lather
agreements and assignments as are necessary to effeemate the intuit expressed herein. Ills agreed that the guiding
purpose of this agreement is for you to assign to Magnum interests in the Top Leases, so that Magnum can turnout
to you the depths covered by the Top Leases (whither under the Sireuggiagie or the Top Leases) and to ensure
that Magnum shall continue to be vested, as to the Top Leases and the batman Leases, each and ovary interest as
otherwise credited to Magnum under the SinmsonLesse in the Master Settlement Agreement (subject to increase
ORRNR1 as per Paragraph I and 2 above) provided however that the obligation of United Resources. LP., as the
successor to United Oil and Minerals Limited Partnership, to assign to Megaton certain deep tights under the
lualsonlAsse, the Top Leases and/or the Zalman Leases, as the case maybe, under Paragraphs 9J, and1C- of the
Master Settlement Agreement shall be extended from June 1, 2001 and January 1, 2002 respectively to January 1,
2005, at which time such obligation shall arise. This agreement shall, in all things, be binding upon the parties
hereto and their successors and assigns.
Please indicate your acceptance of this agreement by signing in the space provided below. If you have any
questions, please call me et (361) 882-3858, extension 105,
AGUED to and ACCEPTED this Very traly yours,
/o day of October, 2003
Avinash C. Alga
President
F:NCAONUMWAI-ERLINAVIvarlisUnlial Panourcata ZaInsuaare Lir Air Steve unrsiomdoe 10f1.0J2005
Page 1296
Appendix J
Zalman well operators chart
(CR 2444)
Page 2444
Appendix K
Timeline
Dec. 31, 1956 Simpson lease executed (CR 2671-76).
Jan. 1, 1996 Simpson lease terminated by this date (CR 657-58).
Jan. 30, 2001 MSA (CR 805-985).
Feb. 14, 2001 2001 Zalman lease (CR 2699-2716).
May 21, 2001 Zalman No. 3 well completed 12,736-12,746’ (CR 2717-19).
May 30, 2001 SMSA [and JOA] (CR 987-1191).
Sept. 10, 2003 2003 Zalman lease (CR 2737-46).
Oct. 3, 2003 United proposes letter of intent to Magnum (CR 1290-91).
Oct. 8, 2003 LOI executed (CR 1295-97).
Dec. 1, 2003 United sells its interests to Westport (CR 2444).
Feb. 20, 2004 United sends Magnum proposed farmout agreement;
Magnum returns it with comments (CR 707-26, 759-62).
May 4, 2004 Zalman No. 4 well completed 14,223-14,432’ (CR 2728-34)
May 2004 Zalman No. 3 well paid out (CR 1323).
June 2004 Westport merges into Kerr-McGee (CR 2444).
July 1, 2015 LOI deadline to assign “deep rights.” No assignment of
lease rights occurs (CR 1299, 1356-58, 1362, 1461-62).
Dec. 7, 2005 Magnum invited to back in to .04134350 working interest
in Zalman No. 3, and elects to participate (CR 1323-25).
Feb. 7, 2006 Castle litigation summary judgment rules Simpson lease
terminated before January 1, 1996 (CR 657-58).
July 19, 2006 Magnum elects to participate in the Zalman No. 3 well
recompletion in the “R” Sands (from 12,736’ to 12,746’)
with .041344 working interest (CR 2001-02).
Aug. 17, 2006 2006 Zalman lease (CR 2775-86).
Sept. 12, 2006 Kerr-McGee decides to recomplete Zalman No. 3 well in
N&O Sands (Magnum Reserved Zone) (CR 2002).
Dec. 2, 2006 Zalman No. 3 well recompleted in N&O Sands (12,108’ -
12,134’) (CR 2735).
May 2007 Crimson acquires Kerr-McGee interests as operator in the
Zalman wells and leases (CR 2444).
Nov. 16, 2010 Magnum files this lawsuit (CR 4).
Appendix L: glossary of oil and gas law terms
Farmout agreement:
A “farmout” is a contract, between working interest owners, in which one
owner with no desire itself to pursue drilling operations agrees to assign its
working interest, or a part of it, to another owner who agrees to serve as
the well operator and do the drilling. The assignor sometimes reserves for
itself an overriding royalty interest or production payment. The primary
characteristic of the “farmout” is the assignee’s obligation to drill a well on
the acreage as a prerequisite to completing transfer of its working interest.
See Mengden v. Peninsula Prod. Co., 544 S.W.2d 643, 645 n.1 (Tex. 1976);
Young Ref. Co. v. Pennzoil Co., 46 S.W.3d 380, 389 (Tex. App.—Houston [1st
Dist.] 2001, pet. denied).
Overriding royalty interest:
An “overriding royalty” interest is a “percentage of the gross production
carved from the working interest but, by agreement, not chargeable with
any of the expenses of operation.” MacDonald v. Follett, 142 Tex. 616, 619,
180 S.W.2d 334, 336 (1944).
Shut-in royalty:
“A shut-in royalty clause ‘provides for a substitute or contractual method
of production, which will maintain the lease in force and effect when a gas
well is drilled and for which no market exists’ . . . The shut-in royalty is
considered constructive production and will maintain the lease if its terms
are satisfied.” Hydrocarbon Mgmt., Inc. v. Tracker Exp., Inc., 861 S.W.2d 427,
432-33 (Tex. App.—Amarillo 1993, no writ).
Working interest:
A “working interest” is the operating interest under an oil and gas lease
whereby the lessee has the exclusive right to drill and produce the
minerals. See Young Ref. Corp., 46 S.W.3d at 389.