1776 Energy Partners, LLC and 1776 Energy Operators, LLC v. Marathon Oil EF, LLC and Marathon Oil EF II, LLC ( 2023 )

Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-20-00304-CV
1776 ENERGY PARTNERS, LLC and 1776 Energy Operators, LLC,
Appellants/Cross-Appellees
v.
MARATHON OIL EF, LLC and Marathon Oil EF II, LLC,
Appellees/Cross-Appellants
From the 218th Judicial District Court, Karnes County, Texas
Trial Court No. 17-02-00033-CVK
Honorable Russell Wilson, Judge Presiding
Opinion by: Beth Watkins, Justice
Sitting: Beth Watkins, Justice
Liza A. Rodriguez, Justice
Lori I. Valenzuela, Justice
Delivered and Filed: March 29, 2023
AFFIRMED IN PART; REVERSED AND RENDERED IN PART AND REMANDED IN
PART
Appellants/cross-appellees 1776 Energy Partners, LLC and 1776 Energy Operators, LLC
(collectively, 1776) challenge a final judgment following a summary judgment and a jury trial.
Appellees/cross-appellants Marathon Oil EF, LLC and Marathon Oil EF II, LLC (collectively,
Marathon) challenge the portion of the judgment rendering a declaratory judgment in 1776’s favor
and awarding attorney’s fees to 1776. We reverse the declaratory judgment in 1776’s favor, render
judgment dismissing the claim underlying that declaratory judgment, and remand the cause for
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further proceedings on 1776’s claim for attorney’s fees. We affirm the remainder of the trial court’s
judgment.
BACKGROUND
Marathon and 1776 are parties to several joint operating agreements (JOAs) under which
they share expenses and revenues from wells drilled in areas in which they both hold ownership
interests. A JOA is a contract that, inter alia, defines the area to which the contract applies,
identifies the parties’ proportionate ownership of the contract area, explains the parties’ rights and
obligations, and establishes procedures to be followed if a party defaults on its obligations. Each
party’s share of the expenses and revenues is typically determined by its proportionate ownership
interest in the well.
Each JOA in this case designates an operator for wells drilled under that contract. The
operator conducts the drilling and other operations at the well site, including the sale of any oil or
gas produced. The operator recoups those costs by sending joint interest billing invoices (JIBs) to
participating non-operator working interest owners. The participating non-operator working
interest owners are obligated to pay the JIBs sent by the operator, and the operator is obligated to
pay revenues owed to the participating non-operator working interest owners. Either an operator
or a non-operator working interest owner may propose new wells in the contract area, and the
JOAs establish procedures that control the proposal of and participation in a new well.
Three JOAs between 1776 and Marathon are relevant to this appeal: (1) the Culberson
Hughes JOA; (2) the “Longhorn” JOAs, which cover three separate pooled units; and (3) the
Bordovsky JOA. The Culberson Hughes and Longhorn JOAs designate Marathon as the operator
and 1776 as a non-operator working interest owner. The Bordovsky JOA designates 1776 as the
operator and Marathon as a non-operator working interest owner. This means that for wells drilled
under the Culberson Hughes and Longhorn JOAs, 1776 is required to reimburse Marathon for
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1776’s share of the cost of the wells and, in turn, Marathon is required to pay 1776 the revenue
1776 is entitled to from those wells. In contrast, for wells drilled under the Bordovsky JOA, 1776
is responsible for ensuring Marathon timely receives revenue that it is owed, and Marathon must
timely pay its share of costs associated with the wells.
In 2012, a Zavala County trial court imposed a constructive trust on 1776’s assets in a
lawsuit that is unconnected to this case. As a result of the constructive trust, 1776 began to suffer
cash flow problems. Between April and September of 2014, 1776 failed to pay Marathon more
than $2 million in revenue from the Bordovsky wells. 1776 initially held the money in suspense
due to a title issue, but by the time that issue was resolved, 1776 had spent the money on other
bills. In February of 2015, 1776 stopped paying its share of expenses under the Culberson Hughes
JOA because it did not have the money. At that time, there was only one well drilled under the
Culberson Hughes JOA, which was called the 301H well. 1776 also stopped paying its share of
expenses under the Longhorn JOAs.
For approximately two years, Marathon tried to resolve 1776’s unpaid amounts. However,
in August of 2016, Marathon received information that it believed showed 1776 was planning to
drill a new well. Marathon questioned how 1776 could fund a new well when it still owed
Marathon millions of dollars on wells that already existed. 1776 responded that the new well would
be funded by a separate company. Following this dispute, the parties’ relationship deteriorated.
At some point, Marathon began to use a process called “netting” to recoup 1776’s
outstanding debts. Netting is using revenue owed to a party to pay down that party’s debts. The
parties agree that Marathon was permitted to net within the Culberson Hughes JOA; in other words,
it is undisputed that Marathon could properly take revenue it would have otherwise paid to 1776
under the Culberson Hughes 301H well and apply that revenue to JIBs 1776 failed to pay under
that same JOA. The parties disagree about whether the JOAs permitted Marathon to “cross-net,”
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or apply revenue owed to 1776 under one JOA to debts 1776 owed under another JOA. Marathon
engaged in both netting and cross-netting throughout the time relevant to this appeal.
On October 28, 2016, Marathon sent 1776 and the other working interest owners in the
Culberson Hughes JOA authorizations for expenditure (AFEs) proposing three new wells in the
Culberson Hughes contract area. Those wells were designated as the 2H, 3H, and 4H wells. As
permitted by the JOA, Marathon’s AFEs included a “cash call” indicating the working interest
owners would need to pay their proportionate shares of the drilling and completion costs upfront
to participate in these wells. When Marathon issued the AFEs, 1776 owned approximately 64% of
the working interest in the Culberson Hughes contract area, and Marathon owned approximately
20% of the working interest.
The AFEs indicated that 1776’s share of the drilling and completion costs would be $9.4
million. Under the terms of the JOA, 1776 had thirty days to elect whether to participate in the
new wells. If it elected to participate, the JOA required it to pay the cash call within fifteen days
of the date of election. If 1776 elected not to participate, or if it elected to participate but failed to
timely pay the cash call, the JOA provided for it to be deemed “non-consent” in the wells. If 1776
were deemed non-consent, the JOA allowed the other working interest owners to acquire 1776’s
interest in the new wells until the new wells reach “payout.”
On November 23, 2016, 1776 elected to participate in the new wells, so the JOA required
it to pay the cash call by December 12, 2016. 1776 told Marathon it would “forward the cash call
portion of the drilling costs for the three (3) wells as provided for” in the JOA, and it asked
Marathon to notify 1776 “when Marathon stimulates the wells, so 1776 can forward it’s [sic]
portion of the completion costs for each well.”
But 1776 did not have the money to pay the cash call, so throughout mid-December of
2016, it negotiated with outside funders to raise the money. Contemporaneously, it also presented
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three separate funding proposals to Marathon. In the first funding proposal, 1776 offered to pay
the entire $9.4 million cash call for the new wells. 1 As part of this proposal, 1776 asked Marathon
to amend the Culberson Hughes JOA and sign a partial release of lien. The amendment and partial
release would have provided that Marathon could only apply the cash call funds to the new wells
and could not use that money to pay down 1776’s outstanding debts. 1776 identified this
amendment as a prerequisite to its outside funders’ agreement to provide cash for the proposal.
The parties agree that without this amendment, Marathon could properly take any funds 1776 paid
under the Culberson Hughes JOA, including the cash call for the new wells, and apply that money
to 1776’s oldest unpaid debts under the Culberson Hughes JOA. Marathon refused to amend the
JOA or to sign the partial release of lien, so the first funding proposal fell apart.
On December 12, 2016, Marathon sent 1776 a notice of default stating:
To date, Marathon has not received 1776’s proportionate share of the estimated
costs to drill the [new wells]. As a result, 1776 has defaulted on its obligation,
pursuant to [the JOA], to fund its proportionate share of the estimated costs to drill
the referenced wells. The JOA states that if such default is not cured by appropriate
payment on or before five (5) days after this Notice of Default, then the non-
defaulting parties may elect to treat such default in the manner as described in the
JOA.
The evidence shows that both 1776 and its outside funders were aware that the December 12 letter
gave 1776 five days to cure the default by paying the cash call. In response to the notice of default,
a 1776 employee emailed Marathon a picture of a man pulling out empty pants pockets.
In the second funding proposal, 1776 offered to pay the $9.4 million cash call for the new
wells, plus what it owed in unpaid JIBs on the Culberson Hughes 301H well. In his December 14,
1
At some point during the AFE process, Marathon decided the non-operator working interest owners could participate
in the new wells by paying only the drilling costs upfront instead of both the drilling and completion costs. 1776
Energy Operators’s president, Richard Bobigian, testified that Marathon never told 1776 that it could participate by
paying only the drilling costs. However, 1776’s November 23, 2016 written election to participate in the wells
indicated that 1776 intended to pay only the drilling costs until after the wells were stimulated. Additionally, a
December 12, 2016 letter from Marathon to 1776 stated that 1776 did not pay its “proportionate share of the estimated
costs to drill the” new wells and identified 1776’s share of the drilling costs as $1,856,930.52.
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2016 email proposing this arrangement to Marathon, 1776 Energy Operators’s president, Richard
Bobigian, estimated that 1776 owed approximately $1 million on the 301H well. A Marathon
employee, Keith Wiles, responded to Bobigian’s offer by noting that Marathon’s own records
showed 1776 owed $1.8 million on the 301H well. 2 Wiles asked Bobigian to confirm that 1776
intended to pay this higher amount. In response to Wiles’s request for confirmation, Bobigian told
Wiles, “[S]ee if you can make it work on your side, and I will do the same.” The evidence shows
that Bobigian knew the outside funders may be hesitant to “swallow an added 1.8 million.” While
Bobigian testified that he later told Wiles over the phone that 1776 would pay the full $1.8 million,
Wiles testified that phone call never occurred and that as far as he knew, 1776 never confirmed
that it was willing to pay $1.8 million toward the 301H debt. On December 15, 2016, one of 1776’s
outside funders replied to Bobigian’s description of the second funding proposal with an email
stating, “We need to think about what a more global Marathon solution might look like and if
that’s doable from this end.” The record does not show that Marathon ever explicitly accepted or
rejected the second funding proposal.
On December 16, 2016, Bobigian asked Marathon’s Wiles to “call [Bobigian] as soon as
possible” so the two could discuss “craft[ing] a global settlement with Marathon.” The global
settlement that 1776 presented was an offer to pay its entire existing debt to Marathon, plus the
drilling and completion costs of the three new wells. Also on December 16, Marathon agreed to
extend 1776’s cash call deadline until the close of business on December 22, 2016. In his email
accepting the extension, Bobigian stated that Marathon’s description of the amounts 1776 owed
“are consistent with the scope of our understanding of the indebtedness to Marathon.” Bobigian
2
The $1.8 million 1776 owed on the 301H well is separate from the $1,856,930.52 Marathon estimated as 1776’s
share of the drilling costs for the 2H, 3H, and 4H wells.
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testified that this third funding proposal did not come to fruition because 1776 and its outside
funders did not reach an agreement on terms.
On December 23, 2016, Bobigian sent Marathon an email thanking it for the extension and
stating that 1776 “was not able to complete the financing arrangements. The closing and funding
fell apart because the new money couldn’t get comfortable with the notion that Marathon could
apply the $9.5 million cash call to aged receivables.” Bobigian also noted that “1776 and the new
money source could not reach terms on the additional funding.” It is undisputed that 1776 never
paid the cash call for the Culberson Hughes 2H, 3H, and 4H wells.
On January 9, 2017, Marathon sent 1776 a letter that formally deemed 1776 non-consent
in the 2H, 3H, and 4H wells for failure to pay the cash call. Marathon and the other working interest
owners subsequently split 1776’s 64% proportionate share of the wells, as permitted by the JOA.
This increased Marathon’s ownership interest in the new wells from approximately 20% to
approximately 55%.
On January 18, 2017, representatives of 1776 and Marathon met at Marathon’s office.
During that meeting, 1776 asked for additional time to gather funding so it could be “let back into”
the new wells. Marathon responded that it could not grant 1776’s request because the election
period had ended and “we had offered up that non-consenting interest of 1776 to the other
participating parties.” After the meeting, 1776 sent Marathon a demand letter alleging that
Marathon had prevented 1776 from paying the cash call. The letter stated, “But for Marathon’s
false claim and statement [that it could apply the cash call payment to amounts owed outside the
Culberson Hughes JOA], 1776’s sale would have closed, funding of the AFEs for the New Wells
would have been timely tendered, and the 301H debt paid in full.”
On February 16, 2017, Marathon sued 1776. Marathon sought a declaration that 1776’s
“failure to make timely advance payment for drilling costs in connection with the Culberson
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Hughes [2H, 3H, and 4H] wells deems 1776 Energy Partners non-consent to the proposed
operation to drill those three wells.” Marathon also alleged that 1776 had breached the Culberson
Hughes and Longhorn JOAs by failing to pay drilling and operation expenses and had breached
the Bordovsky JOA by failing to make timely revenue payments.
On July 17, 2017, 1776 filed a counterclaim for breach of contract and declaratory
judgment. 1776 conceded that it owed money to Marathon and was in default under the terms of
the various JOAs. It alleged, however, that Marathon’s refusal to assure 1776’s outside funders
that it would not cross-net the new wells’ cash call against 1776’s old debts “was a repudiation
and anticipatory breach of the Culberson-Hughes JOA.” These counterclaims appear to arise solely
out of the failure of the second funding proposal. 1776 also sought declarations that: (1) “the
Culberson Hughes JOA does not require payment of existing obligations under separate JOAs to
participate in the drilling of the Culberson Hughes 2H, 3H, and 4H”; (2) “the $9,413,862.00 paid
by [1776] must be applied to only the estimated gross drilling costs for the Culberson Hughes 2H,
3H, and 4H”; and (3) “after [1776] pays the $9,413,862 estimated gross drilling costs for the
Culberson Hughes 2H, 3H, and 4H its working interest must be reinstated without reduction or
offset.” 1776’s original, first amended, and second amended counterclaims did not specifically
allege that cross-netting itself constituted an actionable breach of the JOA.
Marathon filed a motion for summary judgment on its breach of contract claim and 1776’s
counterclaims. Marathon’s motion alleged that at that time, 1776 owed Marathon “approximately
$838,000 in unpaid costs and interest” under the Culberson Hughes and Longhorn JOAs and “over
$2.5 million in unpaid revenues and interest for the Bordovsky” wells. Marathon attached
documentary evidence supporting these amounts. Marathon also argued that it was entitled to
judgment on 1776’s counterclaims.
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After Marathon sought summary judgment, 1776 amended its counterclaim to allege fraud
by nondisclosure. 1776 based this claim on an allegation that Marathon proposed the 2H, 3H, and
4H wells as a ploy to take over 1776’s interest in those wells. As evidence of this claim, 1776
pointed to what it called a “smoking gun” email from Marathon employee Matt Brown that
explained multiple options the JOA permitted Marathon to take after it proposed the new wells.
1776 also alleged that the AFEs identified a drilling date that was a month or more before Marathon
planned to actually begin drilling. 1776 alleged this purportedly inaccurate date showed that
Marathon rushed the AFE process to exclude 1776 from participating in the new wells. Marathon
then filed a supplement to its motion for summary judgment that challenged 1776’s fraud claim.
1776 argued Marathon was not entitled to summary judgment on either Marathon’s claims
or 1776’s counterclaims. It claimed the evidence showed Marathon anticipatorily breached and
repudiated the Culberson Hughes JOA “by demanding 1776 pay the entire amount past due on all
wells in addition to capital costs for the new Culberson-Hughes wells.” 1776 argued that the second
funding proposal did not require Marathon to amend the Culberson Hughes JOA or release any of
its rights under that contract, but merely required Marathon to “provide reasonable assurances that
Marathon would abide by the terms of the Culberson-Hughes JOA.” 1776 argued that but for
Marathon’s alleged repudiation, “1776 would have been entitled to the revenue and proceeds of
the” new wells.
On May 3, 2018, the trial court signed an order granting Marathon’s motion for summary
judgment in part. The trial court concluded that 1776 breached the Bordovsky JOA by failing to
pay revenues to Marathon and breached the Culberson Hughes and Longhorn JOAs by failing to
pay JIBs. The trial court rendered judgment against 1776 for $1,963,800.06 in principal and
$563,001.24 in interest under the Bordovsky JOA and $838,123.28 in principal and interest under
the Culberson Hughes and Longhorn JOAs. The award included credits to 1776 for revenue
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withheld by Marathon. The trial court also rendered declaratory judgments for Marathon on certain
issues “without considering 1776’s counter claims,” reserved Marathon’s claim for attorney’s fees
to be determined later, and noted, “In all other respects Marathon’s Motion for Summary Judgment
is denied.”
Both before and after the trial court granted partial summary judgment for Marathon, the
parties engaged in extensive discovery disputes. Marathon sought to exclude the trial testimony of
three of 1776’s expert witnesses because it contended that 1776’s expert disclosures were
inadequate. On March 27, 2018, the trial court ordered 1776 to file adequate expert designations
within fourteen days. The court’s order provided that if 1776 failed to do so, the court would
exclude three of 1776’s expert witnesses—Allen Cummings, Rex Morris, and Bobigian—from
testifying at trial. While 1776 amended its expert disclosures following this order, Marathon
argued the disclosures were still inadequate because “1776 has failed to describe any of its experts’
opinions and the basis for those opinions.” The trial court denied Marathon’s motion to exclude as
to Cummings, granted the motion as to Morris, and granted the motion as to Bobigian’s testimony
on future damages.
On October 8, 2018, 1776 sought leave to add a new breach of contract claim, which would
have alleged for the first time that cross-netting breached the JOAs. It also attempted to allege for
the first time that Marathon had converted 1776’s property “by improperly netting” revenues owed
to 1776 against debts owed by 1776, and it sought to add a third-party defendant. Marathon
responded that the pleading deadline had already passed, that the new claims 1776 sought to add
“could have been brought timely,” and that the amended pleading was prejudicial on its face. The
trial court denied 1776’s motion for leave to amend.
On November 6, 2018, 1776 filed a “Motion to Supplement and Reconsider Initial Grant
of Summary Judgment in Marathon’s Favor in Light of New Evidence.” 1776 argued that it had
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“uncovered new evidence casting doubt on Marathon’s damages for the alleged breaches of the
Longhorn JOAs.” The evidence upon which 1776 relied was deposition testimony from
Marathon’s corporate representatives regarding cross-netting. The trial court denied 1776’s
motion.
The parties tried this case to a jury in April of 2019. While the trial court had already
granted summary judgment on Marathon’s breach of contract damages, Marathon presented
updated evidence of its damages at trial. This evidence showed how the amounts 1776 owed had
changed due to the netting and cross-netting Marathon engaged in between the summary judgment
and the jury trial.
After both parties rested and closed, the trial court granted Marathon a directed verdict on
1776’s fraud by nondisclosure claim, stating:
I don’t find that there’s any evidence that Marathon did anything that it didn’t have
a legal right to do under the contract. It may have let 1776 sweat about whether it
was going to do something else, but it had the right to move the [drilling] dates
around. I think it had the absolute right to propose those wells for whatever reason
it wanted to propose them for.
The trial court also directed a verdict in 1776’s favor on its request for a declaration that the
Culberson Hughes JOA did not require 1776 to pay existing obligations under other JOAs to
participate in the 2H, 3H, and 4H wells. The parties then asked the jury to determine:
• whether 1776 had reasonable grounds to believe Marathon would commit a material breach
of the Culberson Hughes JOA on December 15–16, 2016 and, if so, whether Marathon
failed to provide reasonable assurances;
• whether Marathon communicated to 1776 that it was repudiating the Culberson Hughes
JOA without just excuse and, if so, when that communication occurred;
• whether 1776’s failure to comply with the Culberson Hughes JOA was a material breach
and, if so, when that breach occurred;
• what sum of money would reasonably compensate 1776 for Marathon’s failure, if any, to
comply with the Culberson Hughes JOA; and
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• the reasonable and necessary fees for both sides’ attorneys.
Importantly, the parties did not submit a question to the jury on the amount of Marathon’s breach
of contract damages. 1776 objected that such a submission was necessary because the evidence on
Marathon’s damages was not conclusive. 1776 also objected that the charge should have instructed
the jury that the trial court had granted directed verdict on one of 1776’s requests for declaratory
judgment.
The jury found that 1776 did not have reasonable grounds to believe Marathon would
commit a material breach of the Culberson Hughes JOA and that Marathon did not communicate
to 1776 that it was repudiating the Culberson Hughes JOA without just excuse. Because the jury
answered “no” to these questions, it did not answer the question regarding 1776’s damages. It also
found that 1776’s failure to comply with the Culberson Hughes JOA was a material breach that
occurred on January 1, 2015. Finally, the jury made findings on both sides’ reasonable and
necessary attorney’s fees.
On March 6, 2020, the trial court signed a final judgment that was consistent with the
summary judgment, the directed verdicts, and the jury’s verdict. On Marathon’s breach of contract
claims, the court rendered judgment for Marathon in the amount of $2,297,731.66 “[b]ased on the
May 3, 2018 [Summary Judgment] Order and the evidence presented at trial.” This amount
accounted for principal and interest Marathon was still owed under the Bordovsky JOA, as well
as credits Marathon had shown 1776 was owed under the Culberson Hughes and Longhorn JOAs.
The trial court also included an “alternative judgment to Marathon” to be awarded “[i]f, on appeal,
it should be determined that” Marathon’s damages were fully resolved as of the May 3, 2018
summary judgment. The “alternative” judgment awarded Marathon $3,603,853.88, a sum that
consisted of the amounts listed in the May 3, 2018 summary judgment order, plus interest that had
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accrued on the Bordovsky debt since the summary judgment, but without any credits Marathon
had applied since the summary judgment. The trial court awarded attorney’s fees to both parties.
On March 31, 2020, 1776 filed a motion to modify the judgment or, in the alternative, for
new trial. After that motion was denied by operation of law, 1776 timely filed a notice of appeal,
and Marathon filed a cross-appeal.
ANALYSIS
Appellate Jurisdiction
In its seventh issue, 1776 briefly argues that because the trial court’s judgment “offers two
alternative amounts of damages” to Marathon, the judgment “cannot be deemed ‘final.’” The
judgment recites, “This Final Judgment disposes of all claims between the parties. This is the final,
appealable judgment in this case.” We conclude this judgment is final and appealable. See, e.g., In
re Elizondo, 544 S.W.3d 824, 828–29 (Tex. 2018) (orig. proceeding) (per curiam) (holding that
unequivocal “finality phrases” must be taken “at face value”). We therefore turn to the merits of
this case.
The Declaratory Judgment in 1776’s Favor
In its cross-appeal, Marathon argues the trial court erred by rendering a declaratory
judgment in 1776’s favor. Because our resolution of this question is dispositive of 1776’s fifth
issue regarding a proposed jury instruction on the declaratory judgment, we address Marathon’s
cross-appeal and 1776’s fifth issue together.
Standard of Review and Applicable Law
The Uniform Declaratory Judgments Act provides:
A person interested under a deed, will, written contract, or other writings
constituting a contract or whose rights, status, or other legal relations are affected
by a statute, municipal ordinance, contract, or franchise may have determined any
question of construction or validity arising under the instrument . . . and obtain a
declaration of rights, status, or other legal relations thereunder.
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TEX. CIV. PRAC. & REM. CODE ANN. § 37.004(a). Under the UDJA, a court “may award costs and
reasonable and necessary attorney’s fees as are equitable and just.” TEX. CIV. PRAC. & REM. CODE
ANN. § 37.009.
“A declaratory judgment is appropriate only if a justiciable controversy exists as to the
rights and status of the parties and the controversy will be resolved by the declaration sought.”
Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995); Hous. Chronicle Publ’g Co. v.
Thomas, 196 S.W.3d 396, 401 (Tex. App.—Houston [1st Dist.] 2006, no pet.). Texas courts lack
jurisdiction to render advisory opinions that do not resolve a live controversy. Valley Baptist Med.
Ctr. v. Gonzalez, 33 S.W.3d 821, 822 (Tex. 2000) (per curiam). “To constitute a justiciable
controversy, there must exist a real and substantial controversy involving genuine conflict of
tangible interests and not merely a theoretical dispute.” Bonham, 907 S.W.2d at 467 (internal
quotation marks omitted). Because a UDJA claim that seeks a declaration of “‘what the law would
be on a hypothetical set of facts’” is not ripe for adjudication, a trial court lacks subject matter
jurisdiction to render such a declaration. See Robinson v. Parker, 353 S.W.3d 753, 755–56 (Tex.
2011) (quoting Patterson v. Planned Parenthood of Hous. & Se. Tex., Inc., 971 S.W.2d 439, 444
(Tex. 1998)). “We review questions of subject matter jurisdiction de novo.” Sw. Elec. Power Co.
v. Lynch, 595 S.W.3d 678, 682 (Tex. 2020).
Application
The declaratory judgment at issue provides:
The Culberson-Hughes JOA does not require payment of existing obligations under
separate JOAs to participate in the drilling of the Culberson-Hughes 2H, 3H, and
4H wells.
While this declaration construes a written contract, see TEX. CIV. PRAC. & REM. CODE § 37.004(a),
Marathon contends it resolves a hypothetical situation rather than a live controversy.
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We agree. Even if the Culberson Hughes JOA did not require 1776 to pay non-Culberson
Hughes debts to participate in the new wells, it is undisputed that the JOA required 1776 to pay
the cash call and that 1776 never did so. Because 1776 never paid the required cash call, the trial
court’s declaration about whether Marathon could impose additional obligations on 1776’s
participation in the wells resolved a hypothetical situation that would not have determined the
dispute between these parties. See Hous. Chronicle Publ’g, 196 S.W.3d at 401 (UDJA claim is not
justiciable unless the parties’ dispute “will actually be determined by the judicial declaration
sought”). The declaration therefore did not resolve a “genuine conflict of tangible interests”
between the parties and was an advisory opinion. See Bonham, 907 S.W.2d at 467; Hous.
Chronicle Publ’g, 196 S.W.3d at 401. Because the trial court lacked subject matter jurisdiction to
render that advisory declaration, we must reverse it and render judgment dismissing 1776’s request
for a declaratory judgment on this point.3 See Robinson, 353 S.W.3d at 755–56; see also Tex. Dep’t
of Pub. Safety v. Styron, 226 S.W.3d 576, 579 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (if
a trial court lacks subject matter jurisdiction, appellate court must set the judgment aside and
dismiss the claim).
In its fifth issue, 1776 argues the trial court erred by refusing to instruct the jury on the
declaratory judgment at issue in Marathon’s cross-appeal. Because we have concluded the trial
court lacked authority to render that declaration, we cannot say the trial court acted arbitrarily,
unreasonably, or without reference to guiding rules or principles by refusing to instruct the jury on
3
1776 argues we should affirm the declaratory judgment because “there was no evidence presented at trial to show
that the Culberson Hughes JOA permitted cross-netting” and because Marathon “did not move for directed verdict on
the grounds that 1776 Energy’s declaratory judgment claims did not involve a ‘live controversy.’” But it is well-
established that “[s]ubject matter jurisdiction is essential to the authority of a court to decide a case.” Tex. Ass’n of
Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993). A trial court’s subject matter jurisdiction is never
presumed; a challenge to subject matter jurisdiction can never be waived and can be raised for the first time on appeal.
See, e.g., Martinez v. Estrada, 392 S.W.3d 261, 263 (Tex. App.—San Antonio 2012, pet. denied).
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it. See Columbia Rio Grande Healthcare, L.P. v. Hawley, 284 S.W.3d 851, 856 (Tex. 2009) (we
review jury instructions for abuse of discretion). We therefore overrule 1776’s fifth issue.
While we have concluded the trial court lacked jurisdiction to consider the discrete UDJA
claim Marathon challenges, we disagree with Marathon’s assertion that this error requires us to
render a take-nothing judgment on 1776’s claim for attorney’s fees. The UDJA permits a trial court
to award fees to both prevailing and non-prevailing parties. See TEX. CIV. PRAC. & REM. CODE
§ 37.009; Barshop v. Medina Cnty. Underground Water Conservation Dist., 925 S.W.2d 618, 637–
38 (Tex. 1996). Here, the trial court considered multiple UDJA claims for which no jurisdictional
impediment exists. We therefore remand this cause to the trial court for a determination of whether
1776 was entitled to an award of attorney’s fees in connection with the parties’ remaining UDJA
claims. See Barshop, 925 S.W.2d at 637–38.
1776’s Issues
Challenges to the Summary Judgment Order
In its first issue, 1776 asserts six challenges to the trial court’s May 3, 2018 summary
judgment in Marathon’s favor.
Standard of Review and Applicable Law
This court reviews a summary judgment de novo. See, e.g., Valence Operating Co. v.
Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). The trial court granted Marathon a traditional summary
judgment on its breach of contract claims, including its claim for breach of contract damages. To
be entitled to a traditional summary judgment on its own claim, Marathon was required to
conclusively establish all essential elements of that claim. Compass Bank v. Durant, 516 S.W.3d
557, 565 (Tex. App.—Fort Worth 2017, pet. denied). The required elements of a breach of contract
claim are: “(1) a valid contract; (2) the plaintiff performed or tendered performance; (3) the
defendant breached the contract; and (4) the plaintiff was damaged as a result of the breach.”
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Brooks v. Excellence Mortg., Ltd., 486 S.W.3d 29, 36 (Tex. App.—San Antonio 2015, pet. denied)
(internal quotation marks omitted).
Application
A. Did Marathon’s motion for summary judgment seek an award of monetary damages?
1776 first contends that the money damages awarded in the summary judgment order
should be reversed because “the [summary judgment order] determined liability only, as Marathon
did not plead for actual damages in any amount or in their grounds for relief.” (emphasis in
original). The prayer of Marathon’s motion for summary judgment asked the trial court to
“determine that 1776 breached the JOA by failing to pay revenues and to pay costs and expenses
to Marathon as required” and to “award Marathon all such other and further relief to which it may
be entitled.” Additionally, the body of the motion identified the amount 1776 owed as what “[t]his
case is about,” described the unpaid amounts Marathon sought, and cited evidence in support of
those amounts. Because Marathon’s request for damages was included in the motion itself, the
motion was procedurally sufficient to support the summary judgment order. See TEX. R. CIV. P.
166a(c); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993).
B. Was Marathon entitled to summary judgment against both 1776 entities?
In its second challenge to the summary judgment order, 1776 argues Marathon did not
show it was entitled to judgment against both 1776 Energy Operators and 1776 Energy Partners.
1776 argues Marathon did not present any evidence showing the two entities agreed to be liable
for each other’s debts or that the parties to the various JOAs are in privity with each other.
We construe this as a contention that Marathon did not establish that 1776 Energy
Operators and 1776 Energy Partners were liable in the capacity in which they were sued. Lack of
capacity is an affirmative defense that must be specifically pleaded and verified by affidavit or it
is waived. TEX. R. CIV. P. 93; Werner v. Colwell, 909 S.W.2d 866, 870 (Tex. 1995). 1776’s live
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answer described “1776 Energy Partners, LLC and 1776 Energy Operators, LLC” collectively as
“‘Defendants,’” did not assert that the two entities were legally separate, and did not plead that
either or both of them were not liable in the capacity in which Marathon sued them. Furthermore,
the record contains multiple documents filed by 1776—including 1776’s summary judgment
response—in which 1776 affirmatively treated the two entities as one. On this record, we conclude
this complaint is not preserved for our review. See TEX. R. CIV. P. 93; Werner, 909 S.W.2d at 870.
C. Did the trial court err by considering cross-netted amounts in calculating Marathon’s
damages?
In its third challenge to the summary judgment order, 1776 argues the trial court erred by
considering evidence of cross-netting in the calculation of Marathon’s summary judgment
damages. 1776 contends that the summary judgment order improperly “appl[ied] revenues
Marathon owed to 1776 Energy on separate, distinct JOAs to the debts allegedly owed by 1776
Energy to Marathon.” 1776 did not present any evidence to show that Marathon’s cross-netting
raised a genuine issue of material fact as to the amount of Marathon’s damages at the time of the
summary judgment proceedings. TEX. R. CIV. P. 166a(c). Similarly, 1776 has not demonstrated
that any application of the cross-netted amounts during the summary judgment proceeding resulted
in a judgment that ordered 1776 to pay amounts it did not actually owe. As a result, 1776 has not
shown that this error, if any, probably resulted in the rendition of an improper judgment. TEX. R.
APP. P. 44.1(a).
D. Should the trial court have refused to consider a declaration Marathon offered in support
of its damages?
In its fourth challenge to the summary judgment order, 1776 argues the trial court erred by
considering a declaration authored by Marathon employee Mark King. An affidavit supporting a
motion for summary judgment “shall be made on personal knowledge, shall set forth such facts as
would be admissible in evidence, and shall show affirmatively that the affiant is competent to
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testify to the matters stated therein.” TEX. R. CIV. P. 166a(f). Defects in the substance of an affidavit
may be raised for the first time on appeal, but defects in the form of an affidavit must be objected
to and ruled on in the trial court or they are waived. See Seim v. Allstate Tex. Lloyds, 551 S.W.3d
161, 166 (Tex. 2018) (per curiam).
1776 first argues the declaration does not show that King had personal knowledge of the
terms of the JOAs or the calculation of Marathon’s damages. While 1776 did not raise this
argument below, we have noted that “case law from the Texas Supreme Court indicates no
objection was required” to preserve an objection to a lack of personal knowledge. See Porterfield
v. Deutsche Bank Nat’l Tr. Co., No. 04-20-00151-CV, 2021 WL 4976560, at *11 (Tex. App.—
San Antonio Oct. 27, 2021, pet. denied) (mem. op. on reh’g) (citing Marks v. St. Luke’s Episcopal
Hosp., 319 S.W.3d 658, 666 (Tex. 2010)). This argument is therefore preserved for our review.
However, “[a]n affiant’s assertion of ‘personal knowledge may be based on a review of corporate
business records.’” Id. (quoting Botello v. MidFirst Bank, No. 05-19-00461-CV, 2020 WL
3263434, at *3 (Tex. App.—Dallas June 17, 2020, no pet.) (mem. op.)). King’s declaration stated
that during the relevant time, he was Marathon’s Service Manager for Joint Interest Accounting
Services and his duties included “overseeing the collection of joint interest receivables, which are
the joint interest billings (‘JIBs’) that Marathon sends to working interest owners in units that
Marathon operates.” King further stated he was “familiar with the manner in which Marathon
maintains these” records and that based on his review of those records, he was “knowledgeable
about the amounts that 1776 owes Marathon in unpaid costs and expenses in several wells that
Marathon operates,” including the wells drilled under the Culberson Hughes and Longhorn JOAs.
These assertions were sufficient to show King’s personal knowledge. See id.Next, 1776 contends that King’s declaration was conclusory. A conclusory affidavit
expresses an inference or draws a legal conclusion without providing the underlying supporting
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facts. See Hilderbran v. Tex. Sw. Council, Inc., Boy Scouts of Am., No. 04-20-00112-CV, 2021
WL 2211353, at *5 (Tex. App.—San Antonio June 2, 2021, no pet.) (mem. op.). Because a
conclusory affidavit is legally no evidence, this complaint asserts a defect in substance that can be
raised for the first time on appeal. See Browne v. City of San Antonio, No. 04-11-00219-CV, 2012
WL 11756, at *4 (Tex. App.—San Antonio Jan. 4, 2012, pet. denied) (mem. op.). King’s
declaration explained the method Marathon uses to determine how much money it is owed,
identified the time periods for which 1776 failed to make required payments, stated the amounts
that 1776 failed to pay, and explained how much of those unpaid amounts had been offset by
revenues that accrued to 1776’s working interest. Based on this information, the declaration stated
a total amount owed. None of the statements in the declaration expressed legal conclusions or
unsupported inferences; the declaration consisted solely of factual statements that could, if untrue,
have been readily controverted. See Hilderbran, 2021 WL 2211353, at *5; see also La China v.
Woodlands Operating Co., L.P., 417 S.W.3d 516, 520 (Tex. App.—Houston [14th Dist.] 2013, no
pet.). King’s declaration therefore was not conclusory.
Finally, 1776 argues King’s declaration was defective because it was accompanied by and
relied on unauthenticated balance summaries. As support for this assertion, 1776 cites a Texas
Supreme Court opinion holding that summaries of voluminous records “are not the best evidence
of the underlying records.” Black Lake Pipe Line Co. v. Union Constr. Co., Inc., 538 S.W.2d 80,
92–93 (Tex. 1976), overruled on other grounds by Sterner v. Marathon Oil Co., 767 S.W.2d 686,
690 (Tex. 1989). Failure to assert and obtain a ruling on a best evidence objection in the trial court
waives that issue on appeal. See Chance v. CitiMortgage, Inc., 395 S.W.3d 311, 315 (Tex. App.—
Dallas 2013, pet. denied). Similarly, a complaint that an affidavit refers to unsworn or unattached
materials is a defect of form that must be objected to and ruled on in the trial court to preserve
error. See Seim, 551 S.W.3d at 162–64; Kotzur v. Kelly, 791 S.W.2d 254, 256–57 (Tex. App.—
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Corpus Christi–Edinburg 1990, no writ). Because 1776 did not raise any objections to the form of
King’s declaration below, we decline to consider those objections on appeal. TEX. R. APP. P. 33.1;
Seim, 551 S.W.3d at 162–64; Chance, 395 S.W.3d at 315.
E. Was Marathon required to prove the affirmative defense of setoff?
In its fifth challenge to the summary judgment order, 1776 argues Marathon did not
establish that it “had a right to setoff” and, as a result, “the trial court should not have applied the
revenues [Marathon] owed to [1776] under the Longhorn JOAs to debts [1776] allegedly owed
under the Culberson-Hughes JOA.” 1776 argues this is reversible error because “[a] trial court
cannot grant a summary judgment on grounds not presented in the motion.”
1776’s response to Marathon’s motion for summary judgment argued that 1776 was
entitled to “any just offset and credits for its counterclaims and amounts owed to 1776 by
Marathon.” (emphasis added). A party generally “cannot complain on appeal that the trial court
took a specific action that the complaining party requested[.]” Tittizer v. Union Gas Corp., 171
S.W.3d 857, 862 (Tex. 2005) (per curiam). Furthermore, Marathon was the plaintiff on the breach
of contract claims resolved in the summary judgment order. The “right of setoff” that 1776
contends Marathon failed to prove is an affirmative defense against a breach of contract claim, not
a required element of such a claim. See Tenet Health Sys. Hosps. Dall., Inc. v. N. Tex. Hosp.
Physicians Grp., P.A., 438 S.W.3d 190, 204 (Tex. App.—Dallas 2014, no pet.). 1776 cites no
authority holding that a plaintiff is required to plead or prove a setoff defense to support a summary
judgment on the plaintiff’s own breach of contract claim, and we have found none. We therefore
overrule this complaint.
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F. Was the trial court required to vacate the summary judgment based on evidence presented
at trial?
In its final challenge to the summary judgment order, 1776 argues the trial court erred by
denying 1776’s motion to reconsider the summary judgment. A trial court that has granted a motion
for summary judgment “generally has no obligation to consider further motions on the issues
adjudicated by the summary judgment.” Macy v. Waste Mgmt., Inc., 294 S.W.3d 638, 651 (Tex.
App.—Houston [1st Dist.] 2009, pet. denied) (internal quotation marks omitted). When a party
asks a trial court to reconsider a prior summary judgment, the court has discretion “to simply deny
[the motion for reconsideration] without considering its substance.” Charbonnet v. Shami, No. 04-
12-00711-CV, 2013 WL 2645720, at *5 (Tex. App.—San Antonio June 12, 2013, pet. denied)
(mem. op.); see also Circle X Land & Cattle Co., Ltd. v. Mumford Indep. Sch. Dist., 325 S.W.3d
859, 863 (Tex. App.—Houston [14th Dist.] 2010, pet. denied) (op. on reh’g) (when motion for
reconsideration is filed after summary judgment, trial court “may ordinarily consider only the
record as it existed before hearing the motion the first time”). Furthermore, a trial court may refuse
to consider new evidence attached to a motion to reconsider a summary judgment. PNP Petroleum
I, LP v. Taylor, 438 S.W.3d 723, 730–31 (Tex. App.—San Antonio 2014, pet. denied). Because
the trial court had discretion to deny 1776’s motion for reconsideration without considering its
substance, we overrule 1776’s argument on this point. See id.; Charbonnet, 2013 WL 2645720, at
*5; Macy, 294 S.W.3d at 651.
Having overruled each of 1776’s challenges to the summary judgment, we overrule 1776’s
first issue.
Pleading Amendment
In its second issue, 1776 argues the trial court erred by denying its motion for leave to file
a third amended counterclaim. This amended counterclaim would have alleged that Marathon’s
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cross-netting breached the JOAs and converted 1776’s property. Marathon responds that the
proposed amendment was prejudicial on its face.
Standard of Review and Applicable Law
The docket control order that was in effect at the relevant time indicates that the parties’
pleading deadline had already expired when 1776 filed its motion for leave to amend. A trial court
may enter a docket control order setting deadlines for the parties to amend their pleadings. TEX.
R. CIV. P. 166; Heirs of Garcia v. Parr, No. 04-12-00767-CV, 2014 WL 3928602, at *9 (Tex.
App.—San Antonio Aug. 13, 2014, pet. denied) (mem. op.). A trial court has broad discretion to
enforce a docket control order. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 240–41 (Tex.
2001); In re C.S., No. 01-07-00267-CV, 2007 WL 4231049, at *6 (Tex. App.—Houston [1st Dist.]
Nov. 20, 2007, no pet.) (mem. op.). Once a docket control order’s pleading deadlines have passed,
the parties must obtain leave of court to amend their pleadings. TEX. R. CIV. P. 63; Attalla v. Loyc
Invs. Ltd. Co., No. 01-21-00078-CV, 2022 WL 2976223, at *5 (Tex. App.—Houston [1st Dist.]
July 28, 2022, pet. denied) (mem. op.). The trial court must grant leave to amend unless: (1) the
opposing party shows evidence of surprise or prejudice; or (2) the amendment is prejudicial on its
face and the opposing party objects to the amendment. See Halmos v. Bombardier Aerospace
Corp., 314 S.W.3d 606, 622 (Tex. App.—Dallas 2010, no pet.); San Antonio State Hosp. v.
Koehler, 981 S.W.2d 32, 37 (Tex. App.—San Antonio 1998, pet. denied) (if amendment is
prejudicial on its face, opposing party need not show surprise or prejudice). An amendment is
prejudicial on its face if it: “(1) asserts a new substantive matter which reshapes the nature of the
trial; (2) is of such a nature that it could not have been anticipated in light of the development of
the case up until the time of amendment; and (3) would detrimentally affect the opposing party’s
presentation of its case.” Tex. Black Iron, Inc. v. Arawak Energy Int’l Ltd., 566 S.W.3d 801, 827
(Tex. App.—Houston [14th Dist.] 2018, pet. denied).
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“When, as here, amendments that introduce new substantive matters have been refused by
the court under Rule 63, the burden of showing an abuse of discretion is on the complaining party,
rather than on the opposite party to show surprise.” Oliva v. Davila, 373 S.W.3d 94, 100 (Tex.
App.—San Antonio 2011, pet denied); see also Hardin v. Hardin, 597 S.W.2d 347, 349–50 (Tex.
1980). A trial court’s denial of a motion for leave to amend “will not be disturbed unless the
complaining party shows a clear abuse of discretion.” Tex. Black Iron, 566 S.W.3d at 827. A trial
court abuses its discretion if its ruling is arbitrary, unreasonable, or without reference to guiding
rules or principles. Murphy v. Arcos, 615 S.W.3d 676, 696 (Tex. App.—Dallas 2020, pet. denied)
(op. on reh’g en banc). Under this standard of review, we may not substitute our judgment for the
trial court’s. See Givens v. Anderson Columbia Co., Inc., 608 S.W.3d 65, 71 (Tex. App.—San
Antonio 2020, pet. denied). “[A] trial court does not abuse its discretion merely because it decides
a discretionary matter differently than an appellate court would in a similar circumstance.” Id.Application
To determine if an amendment is prejudicial on its face, a trial court must first consider
whether the amendment asserts a new substantive matter that would reshape the nature of the trial.
Tex. Black Iron, 566 S.W.3d at 827. We do not believe the trial court behaved arbitrarily or
unreasonably by concluding that 1776’s proposed amendment did so for at least two reasons.
First, the trial court could have reasonably determined that the amended counterclaim
would have “presented a new basis for liability” that Marathon had not prepared to defend against.
See Koehler, 981 S.W.2d at 37. 1776’s live counterclaim—its second amended—alleged that
Marathon breached the Culberson Hughes JOA by refusing to promise that it would not apply
1776’s cash call payment to debts owed under other JOAs. It is undisputed that 1776 never paid
the cash call, so the question of what Marathon would have done with that payment was purely
hypothetical. In contrast, 1776’s proposed third amended counterclaim would have alleged that
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Marathon breached the JOAs by cross-netting funds that actually existed and were owed to 1776.
Despite 1776’s insistence that both of these claims arise out of cross-netting, it has not argued that
“the evidentiary proof required to support [the new breach of contract claim] is the same for an
already pleaded cause of action[.]” See Smith Detective Agency & Nightwatch Serv., Inc. v. Stanley
Smith Sec., Inc., 938 S.W.2d 743, 749 (Tex. App.—Dallas 1996, writ denied).
Second, the trial court could have reasonably concluded that 1776’s proposed amendment
introduced a new damages model. 1776’s existing anticipatory breach and repudiation claims tied
1776’s damages to its inability to participate in the 2H, 3H, and 4H wells. Those claims did not
allege that Marathon had actually received any funds that it was contractually obligated to pay
1776. In contrast, 1776’s proposed amendment alleged that Marathon had, through cross-netting,
received and withheld money that belonged to 1776. While 1776 argues this new damages model
was “based on recently discovered matters,” its motion for leave indicated that those matters were
related to money owed to 1776 by Marathon on the existing wells. Neither 1776’s motion for leave
nor its appellate brief explains why 1776 could not have discovered that issue earlier through the
exercise of reasonable diligence. “[W]hen it appears that the new matter was known to the party
seeking to file the amendment, or by reasonable diligence it could have been known by the party,
the request [to amend] should be denied.” Geis v. Colina Del Rio, LP, 362 S.W.3d 100, 116 (Tex.
App.—San Antonio 2011, pet. denied); see also Zarate v. Rodriguez, 542 S.W.3d 26, 38–39 (Tex.
App.—Houston [14th Dist.] 2017, pet. denied) (noting party’s “new cause of action was a claim
that, by exercising reasonable diligence, she could have discovered and asserted much earlier”).
The second factor in determining if an amendment is prejudicial on its face considers
whether the amendment could “have been anticipated [by the opposing party] in light of the
development of the case up until the time of amendment[.]” Tex. Black Iron, 566 S.W.3d at 827.
Here, the “development of the case up until the time of amendment” includes the fact that the trial
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court granted summary judgment for Marathon on its breach of contract claim before 1776 sought
to amend its anticipatory breach claim. See id. 1776 argues Marathon nevertheless could have
anticipated the proposed amendment because “Marathon admitted that the cross-netting claims
had been in 1776 Energy’s counterclaims all along.” Marathon argued below, however, that it
could not have anticipated the proposed amendment precisely because 1776 had long been aware
of Marathon’s cross-netting and did not assert that cross-netting breached the JOAs and supported
a new damages model until late in the case. Marathon’s response to 1776’s motion for leave also
noted that 1776 itself had previously described “offset[s]” and “revenue netting” as “general
matters of accounting [that] are not anticipated to be hotly contested, if at all.” On this record, we
cannot say the trial court committed a clear abuse of discretion by crediting Marathon’s argument
over 1776’s. See Zarate, 542 S.W.3d at 38–39; see also Givens, 608 S.W.3d at 71.
The final factor in the “prejudicial on its face” analysis asks whether the amendment would
detrimentally affect the opposing party’s presentation of its case. Tex. Black Iron, 566 S.W.3d at
827. As 1776 notes, the trial did not begin until six months after it sought leave to amend its
counterclaim. But under the docket control order in effect at the relevant time, discovery closed
nearly four months before 1776 sought leave to amend; indeed, the record shows that on the day
the trial court denied 1776’s motion for leave to amend, it also denied 1776’s motion to reopen
discovery. 1776 has not argued that Marathon could have defended against the new counterclaim
without additional discovery, nor has it argued that Marathon could have successfully sought an
extension of the discovery period. Furthermore, 1776 did not seek leave to allege that cross-netting
breached the JOAs until several months after the trial court granted Marathon a summary judgment
that accounted for cross-netting. The trial court could have reasonably determined that reopening
an issue the parties had already litigated and the trial court had resolved in Marathon’s favor would
detrimentally affect Marathon’s presentation of its case.
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Under these circumstances, we cannot say the trial court acted arbitrarily or unreasonably
by denying 1776’s motion for leave to amend. See Geis, 362 S.W.3d at 116–17. We overrule
1776’s second issue.
Exclusion of Bobigian’s Testimony on Future Damages
In its third issue, 1776 argues the trial court erred by excluding Bobigian’s expert testimony
on 1776’s future damages.
Standard of Review and Applicable Law
This court reviews a trial court’s exclusion of expert testimony for abuse of discretion. See
Tex. Dep’t of Transp. v. Able, 35 S.W.3d 608, 617 (Tex. 2000). Even where a trial court errs in
excluding evidence, such error usually is not reversible unless the complaining party “show[s] that
the judgment turns on the particular evidence excluded or admitted.” Id.; Borkert v. Tworek, No.
04-16-00529-CV, 2018 WL 842981, at *6 (Tex. App.—San Antonio Feb. 14, 2018, no pet.) (mem.
op.).
Application
After the trial court granted a directed verdict on 1776’s fraud by nondisclosure claim, the
jury rejected 1776’s anticipatory breach and repudiation claims, so it did not answer the question
submitted to it regarding 1776’s damages. On appeal, 1776 suggests the jury refused to answer the
damages question because 1776’s causes of action “require a showing of ‘injury’ for a claimant to
prevail” and Bobigian’s excluded testimony on future damages would have established such
injury. The record does not support this assertion. The liability questions on 1776’s anticipatory
breach and repudiation claims did not instruct the jury that injury was a required element of those
claims. Because we must presume that the jury followed the instructions it was given, see Hawley,
284 S.W.3d at 862, we may not credit 1776’s suggestion that the jury rejected its anticipatory
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breach and repudiation claims because the trial court excluded Bobigian’s testimony on future
damages. See Able, 35 S.W.3d at 617.
With regard to 1776’s fraud by nondisclosure claim, the trial court stated on the record why
it directed a verdict in Marathon’s favor:
I don’t find that there’s any evidence that Marathon did anything [regarding the
proposal of the new 2H, 3H, and 4H wells] that it didn’t have a legal right to do
under the contract. It may have let 1776 sweat about whether it was going to do
something else, but it had the right to move the [drilling] dates around. I think it
had the absolute right to propose those wells for whatever reason it wanted to
propose them for [i]f they thought that they didn’t amount to waste of the estate.
Nothing in the record indicates that the trial court rejected the fraud claim because 1776 failed to
present evidence of damages. Accordingly, 1776 has not shown that the final judgment on that
issue turned on the exclusion of Bobigian’s testimony. See id.
We overrule 1776’s third issue.
Fraud by Nondisclosure
In its fourth issue, 1776 argues the trial court erred by disposing of 1776’s fraud by
nondisclosure claim on directed verdict.
Standard of Review and Applicable Law
This court “review[s] a trial court’s grant of directed verdict de novo, using the legal
sufficiency standard appellate courts apply to no-evidence summary judgments.” City of Baytown
v. Schrock, 645 S.W.3d 174, 178 (Tex. 2022) (footnote omitted). In reviewing a directed verdict,
this court may consider “any reason the directed verdict should have been granted, even if that
reason was not explicitly stated by the movant.” Pena v. Guerrero, No. 04-19-00874-CV, 2020
WL 7232136, at *10 (Tex. App.—San Antonio Dec. 9, 2020, no pet.) (mem. op.) (citing Ibarra v.
Nat’l Constr. Rentals, Inc., 199 S.W.3d 32, 37 (Tex. App.—San Antonio 2006, no pet.)).
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A directed verdict is proper if a claimant fails to present evidence that raises a genuine
issue of material fact on one or more of the required elements of the claim. See, e.g., Hudson v.
Cooper, 162 S.W.3d 685, 687–88 (Tex. App.—Houston [14th Dist.] 2005, no pet.). The required
elements of fraud by nondisclosure are: “(1) the defendant concealed from or failed to disclose
certain facts to the plaintiff; (2) the defendant had a duty to disclose the facts to the plaintiff; (3)
the facts were material; (4) the defendant knew the plaintiff was ignorant of the facts and the
plaintiff did not have an equal opportunity to discover the facts; (5) the defendant was deliberately
silent when he had a duty to speak; (6) by failing to disclose the facts the defendant induced the
plaintiff to take some action or refrain from acting; (7) the plaintiff relied on the defendant’s
nondisclosure; and (8) the plaintiff was injured as a result of acting without the undisclosed facts.”
Bazan v. Munoz, 444 S.W.3d 110, 119 (Tex. App.—San Antonio 2014, no pet.).
Application
1776’s fraud by nondisclosure claim is based on its allegation that Marathon did not intend
to drill the 2H, 3H, and 4H wells if 1776 paid the required cash call. 1776 alleged Marathon
proposed the wells solely to “wrest 1776’s significantly greater working interest from [it], or if
unsuccessful to simply not drill the proposed wells at all.” On appeal, 1776 argues there is more
than a scintilla of evidence that: (1) Marathon failed to disclose that it did not intend to drill the
wells; 4 (2) Marathon had a duty to disclose that alleged fact; (3) Marathon knew 1776 did not have
an equal opportunity to discover Marathon’s true intent; (4) Marathon intended to induce 1776 to
act or refrain from acting; and (5) 1776 was injured as a result of acting without fact of the
undisclosed alleged fact.
4
The record shows Marathon did, in fact, drill the 2H, 3H, and 4H wells.
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After reviewing the evidence, we hold the trial court correctly concluded that 1776 failed
to raise a fact issue on a required element of its fraud by nondisclosure claim. 1776’s brief argues,
inter alia, “The Cash Call Letter and AFEs did not indicate that Marathon planned to apply the
Cash Call Amount to other debts and then deem 1776 Partners to be a non-consenting party to the
Culberson Hughes 2H, 3H, and 4H wells.” (emphasis in original). Again, however, 1776 never
paid the cash call. 1776 cites no provision of the JOA and no legal authority showing that Marathon
had a duty to disclose what it planned to do with funds 1776 never paid. Accordingly, 1776 has
not shown that more than a scintilla of evidence supports the “duty to disclose” element of its fraud
by nondisclosure claim. See id.Even if Marathon owed such a duty, the record does not support 1776’s contention that it
was ignorant of the true facts and did not have an equal opportunity to discover those facts. See id.The evidence shows that both 1776 and its outside funders: (1) assumed Marathon would apply
the cash call to 1776’s outstanding debts; and (2) repeatedly asked Marathon to promise it would
not do so. This evidence conclusively negates the fourth element of 1776’s fraud by nondisclosure
claim. See id.; see also Watkins v. Rolling Frito-Lay Sales, LP, No. 05-16-00367-CV, 2017 WL
2665985, at *4 (Tex. App.—Dallas June 21, 2017, no pet.) (mem. op.) (affirming directed verdict
where evidence conclusively negated required element).
Finally, we see no evidence that 1776 was damaged by acting without the undisclosed facts.
Like any fraud claim, fraud by nondisclosure requires the claimant to show that his damages were
caused by the defendant’s culpable acts. See Potter v. HP Tex. 1 LLC, No. 05-18-01513-CV, 2020
WL 1672556, at *7 (Tex. App.—Dallas Apr. 6, 2020, no pet.) (mem. op.). 1776 argues that it
“would have received $2,555,010.00 in profits from the Culberson Hughes 2H, 3H, and 4H Wells
had Marathon applied the Cash Call Amount to those wells only or if 1776 Partners had more time
to secure funding.” But 1776 did not participate in the new wells because it never paid the cash
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call, and it identifies no evidence showing that Marathon’s purported nondisclosure caused that
nonpayment. Furthermore, it is undisputed that Marathon gave 1776 an extension of time to secure
the funding necessary to participate in the new wells. 1776 cites no evidence showing it would
have paid the cash call if Marathon had granted it a second extension.
We overrule 1776’s fourth issue.
Jury Question on Repudiation
In its sixth issue, 1776 argues the jury question on repudiation misstated the law and likely
confused or misled the jury.
Standard of Review and Applicable Law
We review a trial court’s submission of jury questions and instructions for abuse of
discretion. Hawley, 284 S.W.3d at 856. A trial court abuses its discretion if its decision was
arbitrary, unreasonable, or without references to guiding rules or principles. See id.
“A party objecting to a charge must point out distinctly the objectionable matter and the
grounds of the objection. Any complaint as to a question . . . on account of any defect, omission,
or fault in pleading, is waived unless specifically included in the objections.” TEX. R. CIV. P. 274.
To preserve a complaint for appellate review, “a party’s argument on appeal must comport with
its argument in the trial court.” Watts v. Watts, 396 S.W.3d 19, 23 (Tex. App.—San Antonio 2012,
no pet.); see also Hamid v. Lexus, 369 S.W.3d 291, 296 (Tex. App.—Houston [1st Dist.] 2011, no
pet.). The objection below must be specific enough to show “that [the] trial court was fully
cognizant of the ground of complaint and deliberately chose to overrule it.” Hamid, 369 S.W.3d
at 296 (internal quotation marks omitted, alteration in original).
Application
1776 argues the repudiation question misstated the law by conditioning Marathon’s
liability on a finding that Marathon expressly communicated to 1776 that it was repudiating
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without just excuse. In the trial court, 1776 did not object to the inclusion of the word
“communicate.” In fact, when Marathon objected that there was no evidence of a communication
expressing repudiation, 1776 responded, “There has been evidence.” Accordingly, to the extent
that 1776 now challenges the inclusion of the word “communicate” in the submission of this issue,
that complaint does not conform to the arguments it made below. TEX. R. CIV. P. 274; Hamid, 369
S.W.3d at 296.
1776 objected below that the phrase “without just excuse” should be submitted, if at all, as
part of a separate instruction, rather than in the question itself. 1776’s counsel stated:
[T]o excuse the failure to comply with repudiation it has to be without just excuse.
I don’t think it’s appropriate to modify whether or not Marathon repudiated the
Culberson Hughes JOA without just excuse. That goes to whether or not 1776 that
[sic] was excused.
This objection does not comport with the argument in 1776’s appellate briefing. See Hamid, 369
S.W.3d at 296. On appeal, 1776 argues that the inclusion of the phrase “without just excuse” in
the repudiation question may have confused or misled the jury into “believing that Marathon
needed to literally communicate to 1776 Partners that: ‘We are repudiating the Culberson Hughes
JOA without just excuse.’” The objection 1776 raised below did not inform the trial court that
1776 believed the proposed instruction might confuse or mislead the jury. See Allstate Vehicle &
Prop. Ins. Co. v. Reininger, No. 04-19-00443-CV, 2021 WL 2445622, at *7 (Tex. App.—San
Antonio June 16, 2021, pet. denied) (mem. op.). We therefore decline to consider this complaint
on appeal. TEX. R. CIV. P. 274; Reininger, 2021 WL 2445622, at *7.
1776 also contends that the repudiation submission should have instructed the jury that a
“nonrepudiating party may treat a repudiation as a breach of contract.” 1776 argues, “Because the
instruction was not included, the Jury may have been confused as to the effect of the materiality
of the finding that Marathon repudiated the JOA.” But the jury found Marathon did not repudiate
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the JOA, and 1776 has not challenged that finding. As a result, even if the trial court erred by
refusing the requested instruction, 1776 has not shown that error probably caused the rendition of
an improper judgment. See TEX. R. APP. P. 44.1; cf. Shupe v. Lingafelter, 192 S.W.3d 577, 580
(Tex. 2006) (per curiam) (failure to submit issue rendered harmless by jury’s other answer negating
that issue).
We overrule 1776’s sixth issue.
1776’s Remaining Issues
Under the heading of its seventh issue, 1776 asserts eight sub-issues that can be grouped
into two categories: (1) 1776’s challenges to the final judgment’s award of damages to Marathon;
and (2) 1776’s challenges to the award of attorney’s fees to Marathon.
1776’s Challenges to the Final Judgment’s Award of Damages to Marathon
A. Was 1776 still in default on the JOAs at the time of trial?
In its first sub-issue, 1776 contends the damages award in the final judgment should be
reversed because “by the time the trial took place, 1776 Energy was no longer in default on any of
the JOAs” and “1776 was owed credits.” The exhibit upon which 1776 relies does not support this
argument. That exhibit shows that at the time of trial, 1776 had a credit balance on the Culberson
Hughes and Longhorn JOAs, but not the Bordovsky JOA. A Marathon accountant, Lori Lewis,
testified that Marathon had applied the Culberson Hughes and Longhorn credits to 1776’s debt
under the Bordovsky JOA and that 1776 still owed Marathon money after the application of those
credits. While 1776 questioned Lewis sharply on cross-examination, she maintained that 1776
owed an outstanding debt under the Bordovsky JOA, and 1776 did not present any evidence to
controvert that testimony.
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B. Was the trial court required to submit Marathon’s damages to the jury?
In its second, third, and fourth sub-issues, 1776 argues: (1) it was denied a trial on
Marathon’s damages because the trial court refused to submit that issue to the jury; (2) Marathon
waived its claim for damages by failing to submit a jury question on that issue; and (3) the amount
of Marathon’s damages was controverted at trial and the trial court therefore made improper fact
findings on the amount owed. While 1776 concedes that “a trial court is not required to submit an
issue on an undisputed fact,” it claims that “the Record shows that the amount of Marathon’s
damages was definitely controverted.”
On this record, the trial court did not err by refusing to submit Marathon’s damages to the
jury. An interlocutory order granting summary judgment eliminates the necessity for the summary
judgment movant to introduce evidence at trial regarding the issues resolved in the order. See
Cunningham v. Eastham, 465 S.W.2d 189, 193 (Tex. App.—Houston [1st Dist.] 1971, writ ref’d
n.r.e.). This is because summary judgment is only proper on issues that are conclusively
established as a matter of law. See TEX. R. CIV. P. 166a(c). “Evidence is conclusive only if
reasonable people could not differ in their conclusions, a matter that depends on the facts of each
case.” City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005) (footnote omitted). If the
evidence is such that it “can be viewed in only one light,” the issues arising out of that evidence
“need not be submitted to a jury at all” because jurors may not properly reach a verdict contrary
to such evidence. Id. at 814–15. While the amount of a party’s unliquidated damages frequently
presents a question of fact to be resolved by a jury, that amount can, under certain circumstances,
be established as a matter of law. See, e.g., State v. Huffstutler, 871 S.W.2d 955, 960–61 (Tex.
App.—Austin 1994, no writ) (“A trial court is allowed to render judgment notwithstanding the
verdict and to substitute its own judgment of the proper measure of damages, but only in certain
specific circumstances.”).
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Here, the May 3, 2018 summary judgment order determined that 1776 owed Marathon: (1)
$1,963,800.06 in principal under the Bordovsky JOA; (2) $563,001.24 in interest under the
Bordovsky JOA; and (3) $838,123.28 in principal and interest under the Culberson Hughes and
Longhorn JOAs. During the April 2019 jury trial, Marathon presented evidence showing how its
cross-netting since the summary judgment order had reduced 1776’s debt. The trial court permitted
Marathon to present this evidence to the jury “to show what the basis is for [Marathon] asking for
attorney’s fees.”
1776 appears to argue that because the trial court admitted evidence on Marathon’s updated
damages, it necessarily reconsidered its prior summary judgment order and was therefore required
to submit Marathon’s damages to the jury. As support for this proposition, 1776 cites Texas
Supreme Court authority considering situations in which a trial court withdrew a previous
summary judgment order without allowing the parties to further litigate the issues resolved on
summary judgment. In those cases, the supreme court determined that the trial court denied the
parties “a fair opportunity to present evidence on issues that the court reinjected into the case by
withdrawing the summary judgment.” See Bi-Ed, Ltd. v. Ramsey, 935 S.W.2d 122, 123–24 (Tex.
1996) (per curiam); Elder Constr., Inc. v. City of Colleyville, 839 S.W.2d 91, 91–92 (Tex. 1992)
(per curiam). Here, however, nothing in the record indicates that the trial court withdrew, set aside,
or otherwise reconsidered its determination that Marathon had conclusively shown that 1776
breached the JOAs and Marathon was entitled to damages. See Cunningham, 465 S.W.2d at 193(“There is nothing in the record leading to an obvious conclusion that the trial judge set aside the
pre-trial order[.]”).
1776 does not contend that it presented any evidence below showing it owed Marathon a
different amount than that listed in the final judgment. Instead, it relies primarily on its cross-
examination of Lewis to argue that Marathon’s damages evidence was not conclusive. After
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thoroughly reviewing the record, we conclude 1776’s arguments on this point inaccurately
describe both Lewis’s testimony and the documentary evidence underlying that testimony.
First, 1776 argues that “Marathon’s Exhibit 68A shows two different amounts due and
owing.” This is not correct. Marathon’s Exhibit 68A shows one “Total Amount Due to Marathon”:
$2,442,274.51. This amount consisted of $2,058,767.83 in “Bordovsky – Principal” (i.e., revenues
owed by 1776); $801,930.54 in “Bordovsky – Interest”; $144,542.85 in “Bordovsky – Invoice and
Interest,” which represents JIBs 1776 did not pay to Marathon on the Bordovsky JOA; 5 $93,321.61
in credit owed to 1776 under the Culberson Hughes JOA; and $469,645.10 in credit owed to 1776
under the Longhorn JOAs. While there are multiple numbers listed in Exhibit 68A, those numbers
add up to one “Total Amount Due.”
1776 also argues, “Marathon’s Exhibit 66A contradicts both amounts listed in Exhibit
68A.” Again, Exhibit 68A listed only one total amount owed to Marathon. Additionally, the record
clearly explains the purported differences between Exhibits 68A and 66A. While the amount of
Bordovsky principal listed in Exhibit 68A is higher than that listed in Exhibit 66A, the amount in
Exhibit 68A is identical to the amount listed in Marathon’s Exhibit 66B. Lewis testified that
Marathon created Exhibit 66B to show what 1776 would owe Marathon in principal and interest
under the Bordovsky JOA “[i]f there was no revenue netting.” In other words, Exhibits 68A and
66B show the “un-netted” amount of Bordovsky principal due, while Exhibit 66A shows the
credits owed to 1776 have already been applied. Furthermore, Exhibit 66A shows only the
principal and interest owed to Marathon for unpaid Bordovsky revenues. It does not specify the
“netted” credits that Marathon applied to reach that number, and it does not include any amounts
for JIBs that 1776 failed to pay under the Bordovsky JOA. In contrast, the “amount due” chart at
5
The record does not indicate why non-operator Marathon sent JIBs to 1776 on the Bordovsky well.
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the bottom of Exhibit 68A shows a cumulative total that includes the relevant credits and debts
from all of the JOAs:
The purported discrepancies 1776 relies on are, therefore, not true discrepancies, but instead
figures that show the damages amounts two ways—with cross-netting and without cross-netting.
From summary judgment through trial, cross-netting was applied. Because the differences between
Exhibits 66A and 68A would not allow reasonable people to disagree about the amount of
Marathon’s damages, they do not show that the amount of Marathon’s damages was controverted
at trial. See City of Keller, 168 S.W.3d at 816.
1776 also argues that Lewis’s testimony and the “Amount Due” chart in Exhibit 68A were
inconsistent with the numbers shown in Exhibit 68A. Again, however, we do not believe any of
the purported discrepancies would allow reasonable people to disagree on Marathon’s damages:
• 1776 first contends that “Exhibit 68A shows the principal owed on Bordovsky as being
only $122,644.30.” But Lewis testified that the portion of Exhibit 68A that 1776 relies on
for this assertion shows only 1776’s unpaid JIBs under the Bordovsky JOA and does not
show the unpaid revenues owed to Marathon. 1776 did not present any evidence to
controvert this testimony.
• Next, 1776 asserts that “Lewis admitted that the damages amount could be off by
approximately $144,000.” The portion of the record 1776 cites for this assertion involves
a discussion of Lewis’s summary judgment declaration, not her trial testimony or exhibits.
Lewis testified that her summary judgment declaration contained estimates Marathon made
based on the best information available to it at that time. She testified that these estimates
were necessary because at that time, 1776 had told Marathon how much oil and gas had
been sold from the Bordovsky wells, but not the price at which they had sold. While 1776
implies Lewis testified that her declaration’s estimate was $144,000 higher than the amount
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actually owed to Marathon, she did not. To the contrary, Lewis testified that after she made
her declaration, Marathon received “a revenue statement from 1776 that included volumes,
as well as price. And that price that [1776] had received for the product was actually higher
than the price [Marathon] had used [in Lewis’s declaration]. . . . And so they owed us
approximately 100,000 more in principal than what I estimated.” Lewis did not testify that
any of the charts presented at trial were estimates, and 1776 did not present any evidence
to controvert Lewis’s testimony on these points. This failure to present controverting
evidence is significant, because Lewis testified that it would be “very unusual” for 1776 to
rely on Marathon’s information to determine what it owed on the Bordovsky wells because
“it’s [1776’s] operated wells and they have the volumes and they know the price they got.”
Cf. TEX. R. CIV. P. 166a(c).
• 1776 then argues that “Lewis testified it is possible 1776 Energy was overpaying Marathon
on the Bordovsky 1H and 2H wells” and that she “admitted that Marathon did not credit
1776 Energy for the overpayment on the Bordovsky 1 and 2H wells.” Lewis testified that
one of 1776’s checks to Marathon “had a different net revenue interest” 6 and that she
“never found out whether their interest was correct or our interest was correct.” She further
testified that she had stated in her deposition that if “their interest was correct, that they
had been overpaying us by .5 percent.” Lewis also testified, however, that she checked the
net revenue interest, “which is what [she] used to calculate Marathon’s amount due,” to
see “whether it matched what was in our accounting system” and that “[i]t matched in our
accounting system.” Lewis did not admit that Marathon failed to credit 1776 for an
overpayment—she did not admit that any such overpayment had occurred. 1776 does not
identify any evidence showing that an overpayment actually occurred. Cf. id.
• 1776 contends, “Lewis testified that the amount of interest owed on the Bordovsky JOA
had increased to $2,421,050.77,” but that Exhibit 68A shows the total interest as
$21,898.55. The portion of Exhibit 68A upon which 1776 relies shows the amount of
interest owed on unpaid Bordovsky JIBs, not the interest on unpaid Bordovsky revenue.
Accordingly, 1776’s assertion that that exhibit shows “the total interest as $21,898.55” is
factually incorrect. While it is true that the reporter’s record appears to show that Lewis
stated, “The amount of interest is $2,421,050.77,” the record also clearly shows that Lewis
was referring to Marathon’s Exhibit 66A at that time. Exhibit 66A shows the total amount
of principal and interest due under the Bordovsky JOA “w[ith] revenue payments” as
$2,421,050.77.
• 1776 argues, “The bottom of Exhibit 68A claims that the principal owed on Bordovsky
JOA is $801,940.54.” Exhibit 68A clearly labels this amount as “Bordovsky – Interest,”
not principal.
• 1776 argues that Lewis admitted “to not knowing if the interest was calculated correctly.”
The record citation 1776 provides for this assertion comes from the net revenue interest
discussion addressed above. As noted above, Lewis testified that she checked the net
revenue interest in question and “[i]t matched in our accounting system.” Nothing in
6
Net revenue interest is a number that is multiplied by the gross revenue from production to calculate net revenue
owed to a particular owner.
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Lewis’s testimony indicates that she did not know the proper percentage of contractual
interest to apply to 1776’s debts under the Bordovsky JOA.
• 1776 also argues that “[t]he debts allegedly owed on the Longhorn JOA and the Culberson
Hughes 301H Well were also controverted” because “Exhibit 68A does not show ‘credit
balance’ on the Culberson Hughes 301H Well being applied to the Bordovsky JOA.” But
Exhibit 68A plainly shows a “Culberson – Credit” of $93,321.61 being applied to reach
the total amount due to Marathon. Lewis testified that amount “represent[s] the amount of
revenue that we have netted from [the Culberson Hughes 301H well] and have applied
toward the Bordovsky.” She also testified that Marathon had not written 1776 a check for
that amount “[b]ecause there was still outstanding debt from the Bordovsky revenues that
1776 owed us.” Nothing in Lewis’s testimony implied that Marathon did not apply 1776’s
revenues earned under the Culberson Hughes and Longhorn JOAs to 1776’s outstanding
debt.
• 1776 also suggests that Lewis admitted that “Exhibit 68A shows that Marathon may have
also improperly withheld $1,032,998.21 from 1776 Energy.” We see no such admission in
Lewis’s testimony. That number appears at the bottom of the “Monthly Activity” column
of Exhibit 68A for the Culberson Hughes 301H well. Lewis testified that column shows
“how much was billed or paid” in each month listed. She also testified that the
$1,032,998.21 total in that column shows “the amount of JIB activity that would have been
hitting the account and the revenue netting.” Nothing in Lewis’s testimony supports a
conclusion that this amount was not applied to 1776’s debts or that it exceeded the debt
1776 owed.
• 1776 next argues that “Lewis admitted that Marathon withheld $2,358,891.72 in revenues
due and owing to 1776 Energy on the Longhorn JOAs” (emphasis in original). Again,
Lewis made no such admission. Lewis testified that the $2,358,891.72 amount listed in
Marathon’s Exhibit 68A was “the cumulative balance of recovery revenues on that
particular unit” and that the amount of that cumulative balance “that has not been used
from the Longhorn Wells to recover prior debts” was $427,731.59. 7 Lewis did not at any
point admit that Marathon owed 1776 $2,358,891.72.
• Finally, in a different section of its brief, 1776 similarly argues that in her deposition, Lewis
“admitted that 1776 admitted that 1776 Energy no longer owed any unpaid costs or
expenses on the Longhorn JOAs” and “admitted that Marathon actually owes 1776
Energy $1,840,945.28 before calculating interest” (emphasis in original). 1776 did not
admit Lewis’s deposition testimony into evidence or read any portions of that testimony
into the record. In any event, Lewis unequivocally testified that 1776 accrued credits on
the Longhorn and Culberson Hughes JOAs and Marathon applied those credits to unpaid
amounts 1776 owed under the Bordovsky JOA. She did not testify that Marathon owed
1776 $1,840,945.28.
7
Exhibit 68A shows a slightly larger credit to 1776: $469,645.10. The final judgment includes Exhibit 68A’s credit.
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1776 also contends that Bobigian “confirmed that Marathon has not shown that the
amounts Marathon owes 1776 Energy on the Longhorn JOAs was applied to any other JOA” and
that “Bobigian further testified that Marathon was not netting the Longhorn debt. Marathon was
simply ‘keeping’ it.” This argument, too, is inconsistent with the record. Bobigian did testify that
he believed Marathon owed 1776 “4– or $500,000 . . . for the first month’s production” on new
wells drilled under the Longhorn JOAs after the commencement of this lawsuit. Additionally,
1776’s counsel suggested at trial, and Bobigian agreed, that Lewis’s testimony and documentation
did not show “anything about any type of application of that debt to the Bordovsky.” But
Marathon’s Exhibit 68A clearly shows a “Longhorn – Credit” of $469,645.10 as of April 2019.
That number is consistent with Bobigian’s testimony that he believed 1776 was owed “4– or
$500,000” at the time of the April 2019 trial. Moreover, Bobigian did not testify, as 1776 now
implies, that Marathon was not cross-netting these new wells’ alleged revenues against 1776’s
existing debt. To the contrary, he testified that Marathon had originally promised not to cross-net
the new wells’ revenues, but then later told him it was “going to use [that revenue] to pay what
you owe on the Bordovsky.”
At its core, 1776’s contention that Marathon did not conclusively prove its damages
appears to rest on an assumption that Marathon’s cross-netting “improperly withheld” money from
1776. As noted above, 1776 did not timely plead that cross-netting breached the JOAs. 1776
therefore has not shown that a jury question was either required or proper on the issues of whether:
(1) Marathon’s cross-netting breached the JOAs; or (2) Marathon’s allegedly improper cross-
netting entitled 1776 to a monetary recovery. See TEX. R. CIV. P. 278; see also TEX. R. CIV. P. 301.
Nor has 1776 shown that the mere fact of Marathon’s cross-netting would permit reasonable
people to disagree about whether Marathon was entitled to recover the amounts listed in the final
judgment.
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After reviewing the record, we see no evidence that would allow reasonable people to
disagree about whether 1776 owed the amounts awarded to Marathon in the final judgment. As a
result, there was no need to submit that issue to the jury. See City of Keller, 168 S.W.3d at 814–
16. We therefore overrule 1776’s complaint on this point.
C. Does the final judgment improperly offset Marathon’s damages?
In its fifth sub-issue, 1776 argues the final judgment improperly offsets Marathon’s
damages because Marathon “did not plead that [it] had a right to cross-net 1776 Energy’s revenues,
nor did Marathon prove they had a right to cross-net.” 1776 also argues that the amount of damages
awarded in the final judgment does not comport with the evidence presented at trial. As noted
above, “setoff” or “offset” is an affirmative defense to a breach of contract claim. See Tenet Health
Sys., 438 S.W.3d at 204; see also Nussbaum v. OneWest Bank, FSB, No. 05-13-00081-CV, 2014
WL 2151996, at *3 (Tex. App.—Dallas May 21, 2014, pet. denied) (mem. op) (“The terms ‘offset’
and ‘setoff’ are commonly used interchangeably.”). 1776 has not cited any authority holding that
Marathon was required to plead or prove an affirmative defense in support of its own breach of
contract claim.
1776 also argues that Marathon’s Exhibit 68A shows Marathon withheld $2,358,891.72 in
revenues from the Longhorn JOA, that Marathon only applied $1,566,140.82 of revenues from the
Longhorn JOA to debts owed under the Culberson Hughes JOA, and that 1776 owes only
$122,644.30 in principal and $21,898.55 in interest under the Bordovsky JOA. The record does
not support 1776’s assertion that this evidence contradicts the final judgment.
First, Lewis testified that the $2,358,891.71 amount was “the cumulative balance of
recovery revenues” under the Longhorn JOA and that the amount of that cumulative balance “that
has not been used from the Longhorn Wells to recover prior debts” was $427,731.59. Exhibit 68A
shows a slightly larger credit to 1776—$469,645.10—which is accounted for in the final
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judgment’s amount still owed on the Bordovsky debt. Second, while Exhibit 68A’s chart on the
Culberson Hughes well contains a column showing a final “Rev Net Longhorn” of $1,566,140.82,
1776’s brief does not explain why this entry is inconsistent with the trial court’s judgment; we see
nothing in the record to support a conclusion to that effect. Finally, the $122,644.30 in principal
and $21,898.55 in interest under the Bordovsky JOA that 1776 points to in Exhibit 68A are for
unpaid JIBs under that JOA. That sum does not include revenue and interest on revenue owed to
Marathon under that JOA. For these reasons, 1776 has not shown that the final judgment
improperly offsets Marathon’s damages.
D. Does the final judgment improperly increase the damages awarded in the summary
judgment order?
In its sixth sub-issue, 1776 argues the final judgment “improperly increased the amount of
damages awarded to Marathon” under the Bordovsky JOA. 1776 contends that the final judgment
awarded Marathon $2,058,767.83 in unpaid revenues under the Bordovsky JOA, whereas the
summary judgment order awarded Marathon only $1,963,800.06 in unpaid Bordovsky revenue.
This argument ignores that the final judgment listed $2,058,767.83 as part of the total amount
owed by 1776 before any applicable credits. The final judgment went on to state, however, that
after the application of relevant credits, 1776 owed Marathon $1,618,445.52 in principal on the
Bordovsky debt. Additionally, the ultimate “TOTAL AWARD TO MARATHON” subtracts
$122,644.40 8 from the unpaid Bordovsky principal. That subtracted amount represents unpaid
JIBs on which the trial court rendered judgment for Marathon, but which Marathon elected not to
recover in this lawsuit. The record does not support 1776’s contention that the judgment contains
an improper “additur.”
8
1776 argues this amount “is awarded twice,” but the judgment does not show that this amount was awarded at all.
That amount is included in the $1,618,445.52 in Bordovsky principal on which the trial court rendered judgment for
Marathon, but it is subtracted from the “TOTAL AWARD TO MARATHON.”
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E. Is the final judgment sufficiently certain?
In its seventh sub-issue, 1776 argues the final judgment is not sufficiently certain because
its award of damages is “contingent on an appellate ruling.” We have already concluded that the
judgment is final and appealable. See In re Elizondo, 544 S.W.3d at 828–29. We further hold that
the judgment provides a “definite means of ascertaining” the parties’ rights. See Stewart v. USA
Custom Paint & Body Shop, Inc., 870 S.W.2d 18, 20 (Tex. 1994). This is because the district clerk
can ministerially review court documents—i.e., this court’s judgment and mandate—to determine
the total amount due to Marathon. See Tanglewood Homes Ass’n, Inc. v. Feldman, 436 S.W.3d 48,
60–61 (Tex. App.—Houston [14th Dist.] 2014, pet. denied). Accordingly, the judgment is
sufficiently certain to be enforceable.
1776 also argues the judgment awards Marathon an improper double recovery. “A double
recovery exists when a plaintiff is awarded more than one recovery for the same injury.” Marin
Real Estate Partners, L.P. v. Vogt, 373 S.W.3d 57, 76 (Tex. App.—San Antonio 2011, no pet.).
Here, the final judgment plainly indicates that Marathon may only recover one of the two listed
measures of damages. See id.For these reasons, we overrule each of 1776’s challenges to the amount of damages listed
in the final judgment.
1776’s Challenge to the Final Judgment’s Award of Attorney’s Fees to Marathon
In its eighth sub-issue challenging the final judgment, 1776 argues the trial court erred by
awarding Marathon $686,250 for attorney’s fees incurred after the May 3, 2018 summary
judgment.
A. Basis for the fee award and segregation of fees
1776 first argues that the Culberson Hughes JOA does not permit Marathon to recover any
attorney’s fees it incurred after the May 3, 2018 summary judgment because “none of the fees
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incurred by Marathon after May 3, 2018 were to collect financial obligations owed by 1776 Energy
on the Culberson Hughes JOA.” The final judgment is clear that the fees awarded for Marathon’s
breach of contract claim were “incurred through the May 3, 2018 [S]ummary [J]udgment Order.”
While Marathon’s requests for declaratory relief sought interpretations of the Culberson Hughes
JOA, it requested its attorney’s fees arising out of those declarations under the UDJA, not under
the JOA. See TEX. CIV. PRAC. & REM. CODE § 37.009. 1776 has not shown that the trial court
improperly awarded any post-summary judgment attorney’s fees under the Culberson Hughes
JOA.
Marathon incurred post-summary judgment attorney’s fees in: (1) prosecuting Marathon’s
own UDJA claims (which the summary judgment order expressly conditioned on the outcome of
1776’s counterclaims); and (2) defending against 1776’s anticipatory breach, repudiation, fraud
by nondisclosure, and UDJA counterclaims. The trial court rendered multiple declarations in
Marathon’s favor under the UDJA, and 1776 does not argue that those declarations were improper
or ask this court to reverse them. Nor does it dispute that Marathon could properly recover at least
some of its attorney’s fees for prosecuting its own UDJA claims and defending against 1776’s
UDJA counterclaims. See id. 1776 argues, however, that the UDJA did not permit the trial court
to award attorney’s fees to Marathon for its defense against 1776’s fraud claim and that Marathon
did not properly segregate its attorney’s fees.
A claimant seeking attorney’s fees must “segregate fees between claims for which they are
recoverable and claims for which they are not.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d
299, 311 (Tex. 2006). An exception to this general rule exists “when the attorney’s fees rendered
are in connection with claims arising out of the same transaction and are so interrelated that their
prosecution or defense entails proof or denial of essentially the same facts.” Id. (internal quotation
marks omitted). “Intertwined facts do not make tort fees recoverable; it is only when discrete legal
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services advance both a recoverable and unrecoverable claim that they are so intertwined that they
need not be segregated.” Id. at 313–14. The issue of whether fees can be segregated is subject to
“a hybrid standard of review” because that issue presents a mixed question of law and fact. See
Gallagher Headquarters Ranch Dev., Ltd. v. City of San Antonio, 269 S.W.3d 628, 641 (Tex.
App.—San Antonio 2008, pet. granted, judgm’t vacated by agr.).
The purportedly unrecoverable fees are those Marathon incurred in defending against
1776’s fraud by nondisclosure claim. That claim arose out of 1776’s assertion that Marathon
proposed the 2H, 3H, and 4H wells as a ruse to obtain 1776’s ownership interest in those wells.
As noted above, Marathon sought and received a number of declarations regarding the parties’
obligations under the JOAs, and the trial court directed a verdict in Marathon’s favor on 1776’s
fraud claim because it concluded Marathon had a contractual right to propose the new wells “for
whatever reason it wanted to propose them for.” Stated differently, Marathon sought and received
declarations on its legal rights under the contract, and the record shows those contractual rights
directly influenced the trial court’s decision to direct a verdict on 1776’s fraud claim. The record
therefore supports a conclusion that the legal services that advanced Marathon’s UDJA claims also
advanced its defense against 1776’s fraud claim. See Chapa, 212 S.W.3d at 313–14.
Additionally, Marathon’s expert on attorney’s fees, attorney Darrell Barger, testified that
after reviewing the parties’ pleadings, the motions filed in this case, and Marathon’s attorneys’
invoices, he concluded that “the same basic principles of the evidence” would apply to Marathon’s
defenses against both 1776’s breach of contract claims and its fraud claim. When he was asked
whether Marathon’s attorneys performed more work on the breach of contract issues or the fraud
issues, Barger testified, “In my opinion, it’s all the same. But most of the work is done on the
defending of the—and a presentation of the declaratory judgment.” He further testified, “In my
opinion, it’s all the same [work]” in prosecuting Marathon’s own UDJA claims and defending
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against 1776’s claims for breach of contract and fraud, and he stated, “The fraud is intertwined in
the breach of contract; so it’s all, in my opinion, the same issue.” He also opined that “It’s going
to be the same evidence. It may be different legal questions asked by the Court at the end of the
day, but it’s all the same evidence from that standpoint.” On cross-examination, Barger testified
that he “did not pull out any percentage for fraud” because he did “not see how [he] could possibly”
segregate the work Marathon’s lawyers performed in defending against 1776’s breach of contract
claim from the work they performed in defending against 1776’s fraud claim.
Based on this record, we do not believe the trial court erred by concluding that Marathon’s
fees could not be segregated. See Lowry v. Tarbox, 537 S.W.3d 599, 619 (Tex. App.—San Antonio
2017, pet. denied). We therefore overrule 1776’s argument to the contrary.
B. Evidentiary support for the fee award
1776 also argues the evidence is insufficient to support the fee award. When a party
challenges the legal sufficiency of an adverse finding on which it did not have the burden at trial,
it must establish that no evidence supports the finding. John Deloach Enters., Inc. v. Telhio Credit
Union, Inc., 582 S.W.3d 590, 595 (Tex. App.—San Antonio 2019, no pet.). In reviewing a legal
sufficiency challenge, this court views the evidence in the light most favorable to the finding. Id.A factual sufficiency challenge requires the complaining party to show that the evidence
supporting the finding is so weak as to make the finding clearly wrong and unjust. See, e.g., In the
Matter of the Marriage of Thrash, 605 S.W.3d 224, 230 (Tex. App.—San Antonio 2020, pet.
denied). In considering a factual sufficiency challenge, this court considers all the evidence and
may reverse the finding only if it is against the great weight and preponderance of the evidence.
See, e.g., Baribeau v. Gustafson, 107 S.W.3d 52, 61 (Tex. App.—San Antonio 2003, pet. denied).
A fee award under the UDJA must be both reasonable and necessary—which is a matter to
be determined by the jury—and equitable and just, which is a matter to be determined by the court.
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See Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998); see also TEX. CIV. PRAC. & REM. CODE
§ 37.009. “When a fee claimant seeks to recover attorney’s fees from an opposing party, it must
put on evidence of reasonable hours worked multiplied by a reasonable hourly rate, yielding a base
figure that can be adjusted by considerations not already accounted for in either the hours worked
or the rate.” Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 475 (Tex. 2019).
Here, the jury determined that Marathon incurred $1,190,000 “[f]or representation in the
trial court,” and the trial court rendered judgment that Marathon was entitled to recover $686,250
of that amount as fees incurred after the May 3, 2018 summary judgment. 1776 argues Marathon
did not present sufficient evidence that it incurred $686,250 in fees after the summary judgment.
1776 notes, however, that Marathon presented more than two years’ worth of its attorneys’
invoices and “[e]xpert testimony that the total to pursue the declaratory judgment claim and defend
against 1776’s fraud and contract claims was $915,000.” 1776 does not argue that Marathon’s
attorneys charged unreasonable hourly rates, logged an unreasonable number of hours, or
performed unnecessary work. Nor does 1776 contend that the invoices lack sufficient detail about
the work done or that Barger’s testimony was “too general to establish that the requested fees were
reasonable and necessary.” Id. at 505.
We conclude the evidence is legally and factually sufficient to support the amount of post-
summary judgment fees listed in the final judgment. We therefore overrule 1776’s contention that
there is no evidence to support that amount.
Having overruled each of 1776’s sub-issues, we overrule 1776’s seventh issue.
CONCLUSION
We reverse the trial court’s declaratory judgment in favor of 1776 and render judgment
dismissing the claim for which the trial court granted declaratory judgment in 1776’s favor. We
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remand this cause for a determination of whether 1776 was entitled to an award of attorney’s fees
on the parties’ remaining UDJA claims. We affirm the remainder of the trial court’s judgment.
Beth Watkins, Justice
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