Ali Mustafa and Ali Reza Lahijani v. Americo Energy Resources, LLC ( 2022 )

Affirmed and Majority and Dissenting Opinions filed April 12, 2022.
In The
Fourteenth Court of Appeals
NO. 14-20-00202-CV
ALI MUSTAFA AND ALI REZA LAHIJANI, Appellants
V.
AMERICO ENERGY RESOURCES, LLC, Appellee
On Appeal from the 190th District Court
Harris County, Texas
Trial Court Cause No. 2017-68458
MAJORITY OPINION
Appellants Ali Mustafa and Ali Reza Lahijani appeal the trial court’s
granting of summary judgment in favor of appellee Americo Energy Resources,
LLC (“Americo”) based on statute of limitations. In two issues, which we construe
as one, appellants argue that the trial court erred in granting Americo’s amended
motion for summary judgment as to appellants’ negligence claim. We affirm.
I. BACKGROUND
The underlying facts are generally uncontested. In 1947, Union Producing
Company became the lessee of an oil, gas and mineral lease (the “Bash Lease”) on
225 acres of land. The Bash lease afforded the lessee the right to operate and drill
the land for five years; the lessee could continue to operate on the land if the lessee
continued to produce oil from the property.
In 2000 and 2004, appellants acquired the lessor’s rights under the Bash
lease by purchasing the ownership of several of the tracts of land covered by the
lease. The combined land was over thirteen acres of undeveloped property and
contained two oil wells: Bash A6 and Bash 1. When appellee purchased the Bash
Lease in 2002, Bash A6 had ceased production in marketable quantities, but Bash 1
continued production until November 2008.
In March 2016, Lahijani inspected the property with Pedram Lelazari,1 a
potential business partner for developing the land. Lelazari noticed a “white area”
around the saltwater tanks near Bash 1, which Lelazari believed was an indication
that the tank was leaking. No contamination was ever noticed or alleged to have
occurred near Bash A6. Lahijani contacted the Texas Railroad Commission
(“TRC”) and requested an investigation. The TRC ordered Americo to treat the soil
and remove leftover debris. In its letter to Americo, TRC also stated, “[d]uring the
inspection, Mr. Lahijani alleged that numerous spills have occurred in the past
resulting in dead vegetation on the lease.”
In June 2017, Americo was notified that appellants had again contacted the
TRC and that a joint inspection revealed oil-stained soil and salt crystals. In
1
We note that while both parties spell his name as “Lelazari,” his name is sometimes
spelled “Lalezari” in the summary judgment evidence. We will use the spelling employed by the
parties in the appellate briefs.
2
response, Americo hired a company to perform a solution treatment to the affected
area. Americo sent samples from the treated area to the TRC, which found that the
samples were within the regulatory limits.
In response, appellants hired David Heslep to test the soil and groundwater
on the property. In his affidavit, Heslep opined that “[a]ll evidence clearly
indicates the property has contamination as a result of the oil and gas operations
over time.”
In October 2017, appellants filed suit against Americo for breach of contract,
declaratory judgment, conversion, and negligence. The breach of contract,
declaratory judgment, and conversion claims were based on Americo’s alleged
failure to pay royalties to appellants and Americo’s potential drilling without
consent on the property. The negligence cause of action was based on Americo’s
failure to take the “requisite steps to prevent leaks or pollution to the property once
the wells became inactive.”
Americo’s original answer alleged that appellants’ claims were barred by
two-year and four-year statutes of limitations. Appellants filed an amended
petition, pleading the discovery rule and asserting that the statute of limitations
regarding negligence should be tolled because the allegedly negligent acts and
omissions of Americo were not discovered until March 18, 2016.
In May 2019, Americo filed a motion for summary judgment, arguing that
all of appellants’ causes of actions were barred by two-year and four-year statute of
limitations. As to appellants’ breach of contract, conversion, and declaratory
judgment claims that were predicated on Americo’s failure to pay royalties up until
2008 when production ceased, Americo argued appellants’ claims for royalties
beginning in 2008 and earlier were barred by the four-year statute of limitations
that govern contractual agreements. See Tex. Civ. Prac. & Rem. Code Ann.
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§ 16.004; Headington Oil Co., L.P. v. White, 287 S.W.3d 204, 214 (Tex. App.—
Houston [14th Dist.] 2009, no pet.) (“The statute of limitations for the recovery of
royalty payments is four years.”).
Americo argued that appellants’ negligence claim accrued when the Bash
lease stopped producing in paying quantities. Americo further averred that
appellant’s pleadings failed to establish that the injury was inherently
undiscoverable. In further support of its position, Americo asserted that due to the
oil field equipment left on the ground and readily visible after oil production
ceased in 2008, the type of injury complained of by appellants was inherently
discoverable in nature. Thus, according to Americo, appellants’ claims for
negligence were barred by the two-year statute of limitations applicable to claims
for injury to property because appellants failed to perform any due diligence to
discover the injury. See Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a).
In support of their motion for summary judgment, Americo submitted the
affidavit of Mehdi Sadeghi, one of Americo’s petroleum engineers. According to
Sadeghi, Americo acquired the Bash A6 and Bash 1 wells in 2002. Bash A6 ceased
producing oil in 1998 before Americo even acquired it, and Bash 1 ceased
production in 2008.
Appellants filed an opposition to Americo’s motion for summary judgment.
In their opposition, appellants admitted that prior to his visit in 2016, Lahijani had
not visited the property since 2010. But appellants claimed that they did not
discover or have a reason to discover any problems with the property until 2016,
when Lelazari indicated that the white areas around the well should be
investigated, which appellants claim was the first indication that soils and water
should be tested. Appellants claimed that evidence of visible oil equipment above
ground was not sufficient to make appellants aware of any possible contamination,
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nor was the presence of equipment an indication that a landowner should perform
due diligence to discover potential contamination.
In its amended motion for summary judgment, Americo again argued that
appellants’ alleged injury was not inherently undiscoverable. Americo averred that
appellants should have discovered the nature of their injury by November 1, 2008,
when all production stopped, or at the latest by February 2015, when the tanks
were cleaned out and all oil products were removed. Americo attached the affidavit
of Malek Hadipour, the lease operator, to support its claim. According to the
affidavits of both Sadeghi and Hadipour, JEM Field services removed the contents
of the steel production tanks on the Bash 1 site in February 2015, but left the tank
bottoms on site after they finished the cleanout. According to Sadeghi, “[t]he tank
bottoms consisted of sand, soil, oil and salt water residue from produced water,
leaving a noticeable area of stained soil.” The affidavit of Sadeghi further explains
that Hadipour personally observed there were not leaks or spills during the removal
process, but that staining from the tank bottoms remained after the February 2015
tank clean out. Hadipour concluded that “[n]o other activities or operations were
conducted on the Property that could have caused any deposit of tank bottoms, oil
stain or deposit of salt crystals after February 27, 2015.” Because appellants did
not file their lawsuit until October 2017, more than two years after February 27,
2015, Americo claimed that appellants’ negligence claim was barred by the statute
of limitations.
On December 30, 2019, the trial court granted Americo’s motion for
summary judgment and dismissed appellants’ claims with prejudice. Appellants
timely filed their appeal.
II. DISCOVERY RULE
In their sole issue, appellants argue that the trial court erred in granting
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Americo’s motion for summary judgment as to their negligence claim for soil and
groundwater contamination based on statute of limitations.2 Appellants argue that
the trial court erred in finding that: (1) the presence of equipment, debris, and soil
discoloration do not prohibit the application of the discovery rule; and (2) Americo
met its burden of negating the existence of any factual dispute regarding its statute
of limitation defense.
A. STANDARD OF REVIEW
A party moving for traditional summary judgment must establish there is no
genuine issue of material fact and it is entitled to judgment as a matter of law. See
Tex. R. Civ. P. 166a(c); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d
211, 215–16 (Tex. 2003); Markwardt v. Tex. Indus., Inc., 325 S.W.3d 876, 881
(Tex. App.—Houston [14th Dist.] 2010, no pet.). A defendant moving for
summary judgment must conclusively negate at least one element of the plaintiff’s
theory of recovery or plead and conclusively establish each element of an
affirmative defense. Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex.
1995). If the defendant establishes its right to summary judgment, then the burden
shifts to the plaintiff to raise a genuine issue of material fact. Id. We review the
granting of summary judgment de novo. Knott, 128 S.W.3d at 215. We take as true
all evidence favorable to the nonmovant and indulge every reasonable inference
and resolve any doubts in favor of the nonmovant. See Markwardt, 325 S.W.3d at
881.
2
Appellants do not challenge the trial court’s summary judgment as to their claims for
breach of contract, declaratory judgment, and conversion. In their appellate brief, appellants only
discuss the discovery rule in regard to the two-year statute of limitations. The negligence claim is
the only claim subject to a two-year statute of limitations; the other claims are all subject to a
four-year statute of limitations.
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B. APPLICABLE LAW
“As a general rule, ‘a cause of action accrues when a wrongful act causes
some legal injury, even if the fact of injury is not discovered until later, and even if
all resulting damages have not yet occurred.’” Id. (quoting S.V. v. R.V., 933 S.W.2d
1, 4 (Tex. 1996)). The discovery rule, when applicable, defers accrual of a cause of
action until the plaintiff knew—or, exercising reasonable diligence, should have
known—of the facts giving rise to the cause of action. See HECI Exploration Co.
v. Neel, 982 S.W.2d 881, 886 (Tex. 1998); B. Mahler Interests, L.P. v. DMAC
Constr., Inc., 503 S.W.3d 43, 49 (Tex. App.—Houston [14th Dist.] 2016, no pet.);
Markwardt, 325 S.W.3d at 881.
However, the discovery rule is limited to those rare “circumstances where
the nature of the injury incurred is inherently undiscoverable and the evidence of
injury is objectively verifiable.” Cosgrove v. Cade, 468 S.W.3d 32, 36 (Tex. 2015);
see Via Net v. TIG Ins., 211 S.W.3d 310, 313 (Tex. 2006) (per curiam) (“While the
Legislature’s silence on accrual in most cases leaves that question to the courts, we
have restricted the discovery rule to exceptional cases to avoid defeating the
purposes behind the limitations statutes.”); LaTouche v. Perry Homes, LLC, 606
S.W.3d 878, 883 (Tex. App.—Houston [14th Dist.] 2020, pet. denied). An injury is
not inherently undiscoverable when it could be discovered through the exercise of
reasonable diligence. BP Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 66 (Tex.
2011). “Whether an injury is inherently undiscoverable is a legal question that is
decided on a categorical rather than case-specific basis; the focus is on whether a
type of injury rather than a particular injury was discoverable.” Via Net, 211
S.W.3d at 314 (emphasis in original).
When a plaintiff discovers or should have discovered the cause of his injury
and whether a particular plaintiff exercised due diligence in so discovering are
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generally questions of fact. Pirtle v. Kahn, 177 S.W.3d 567, 572 (Tex. App.—
Houston [1st Dist.] 2005, pet. denied). However, if reasonable minds could not
differ about the conclusion to be drawn from the facts, the commencement of the
limitations period may be determined as a matter of law. Id.A defendant seeking summary judgment based on limitations must (1)
conclusively prove when the cause of action accrued and (2) negate
the discovery rule, if it applies and has been pleaded or otherwise
raised, by proving, as a matter of law, there is no genuine issue of fact
about when the plaintiff discovered, or in the exercise of reasonable
diligence should have discovered, the nature of her injury.
Markwardt, 325 S.W.3d at 882.
C. APPLICATION
Appellants argue that Americo did not meet its summary judgment burden of
establishing as a matter of law the date of appellants’ injury and of negating as a
matter of law the application of the discovery rule. Appellants argue that the
presence of equipment, debris, and soil discoloration does not prove as a matter of
law the date appellants should have been aware of their injury or the inapplicability
of the discovery rule.
We first note that appellants do not challenge the application of a two-year
statute of limitations to their negligence claim. See Tex. Civ. Prac. & Rem. Code
Ann. § 16.003(a). Second, we note that while appellant complains about the
“finding[s]” of the trial court, the order granting Americo’s motion for summary
judgment contains no findings. The order simply grants the motion. Therefore, we
review de novo whether Americo: (1) conclusively proved when the cause of
action accrued, and (2) negated the discovery rule. See id.; Tex. R. Civ. P. 166a(c);
Markwardt, 325 S.W.3d at 882.
The affidavits of Sadeghi and Hadipour established that Americo never
operated the Bash A6 well, which ceased production in 1998. Additionally, the
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affidavit of Hadipour established that Americo produced oil from the Bash 1 well
from approximately 2002 and 2008 and then continued to store oil on the property
until February 2015. Hadipour testified that no activity occurred on the property
that could have caused the alleged violation after February 27, 2015. Appellants
did not produce any evidence to dispute this evidence. The affidavits conclusively
established that any activity performed by Americo could not have caused any
deposit of tank bottoms, oil stains, or salt residue after February 2015.
Furthermore, Hadipour’s affidavit established that the contamination was
discoverable on February 27, 2015, because of the discoloration present and visible
on the ground at that time. This summary judgment evidence is undisputed, and
thus, conclusively established that appellants’ claim began to accrue, at the latest,
in February 2015, and that consequently the alleged contamination occurred more
than two years prior to when appellant filed suit on October 13, 2017. See
ExxonMobil Corp. v. Lazy R Ranch, LP, 511 S.W.3d 538, 544 (Tex. 2017).
Appellants do not seem to challenge Americo’s assertion that the latest date on
which appellants’ claim accrued was February 27, 2015. Instead, appellants focus
their arguments on the application of the discovery rule.
First, we must determine if the discovery rule applies by keeping in mind
that the discovery rule is only applicable in “exceptional cases.” Via Net, 211
S.W.3d at 313. That is, the discovery rule is restricted to cases where the type of
injury is objectively verifiable and inherently undiscoverable within the limitations
period. ExxonMobil, 511 S.W.3d at 544. Appellants acknowledge that claims based
on oil contamination of soil for surface spills are not inherently undiscoverable.
See id. (“Soil contamination from oil spills is unquestionably objectively
verifiable, but it is not inherently undiscoverable within the limitations period.”).
However, appellants attempt to distinguish the present case from ExxonMobil,
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arguing that landowners like the appellants cannot typically learn of ground water
contamination within the limitations period. Appellants further attempt to
distinguish the present case because it did not involve active, surface oil spills as in
ExxonMobil. We are unpersuaded by this argument.
In ExxonMobil, the plaintiff was a ranch owner who sued ExxonMobil for
soil and groundwater contamination caused by oil drilling and production. See id.
at 541. The ranch owner knew of many oil spills that occurred on the property and
was also made aware of cleanup operations. See id. In concluding that claims based
on soil contamination from oil spills are not inherently undiscoverable, the Texas
Supreme Court noted that “[t]here was nothing inherent in the possibility of
contamination that kept [plaintiff] from hiring [an expert to investigate possible
contamination] sooner.” Id. at 544.
We conclude the facts of this case are analogous to those in ExxonMobil.
The plaintiff in ExxonMobil raised claims for soil and groundwater contamination,
as did appellants. Although ExxonMobil involved surface oil spills, and the present
case did not, we still conclude that there is nothing inherent in the possibility of
soil or groundwater contamination that kept appellants from investigating potential
contamination sooner.
Here, the summary judgment evidence established that the tanks on Bash
Unit 1 containing sand, soil, oil, and saltwater residue were cleaned out on
February 25, 2015. According to Sadeghi’s affidavit, the cleaning of the tanks left
“a noticeable area of stained soil.” Further, the “tank bottoms remained on site
pending removal of the tanks,” which occurred on or about November 16, 2015.
Further, according to the TRC letter, appellant Lahijani complained, and was
aware, of numerous spills that had occurred prior to 2016 that had caused
vegetation to die on the property. Despite knowledge of the spills which caused
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loss of vegetation, appellants did not visit the property for approximately six years,
from 2010 to 2016. Appellants refute none of these facts. When appellants viewed
the property with Lelazari in 2016, he recognized signs of potential contamination:
oil-stained soil and white residue readily visible from the surface. This suggests
that the appellants would have discovered facts that led them to investigate their
injury had they exercised due diligence in visiting the property. See Marshall, 342
S.W.3d at 66; Computer Associates Intern., Inc. v. Altai, Inc., 918 S.W.2d 453, 456
(Tex. 1996) (“Inherently undiscoverable encompasses the requirement that the
existence of the injury is not ordinarily discoverable, even though due diligence
has been used.”).
Furthermore, as noted in ExxonMobil, the owner’s obligation of due
diligence goes beyond mere passive visual observation; owners must inquire into
the lessees’ activities. See ExxonMobil, 511 S.W.3d at 544 n.19; Taub, 75 S.W.3d
at 619–620. For six years, the plaintiffs’ use of diligence did not rise to the level of
even passive visual observation. Therefore, the type of injury alleged by appellants
in this case—soil and groundwater contamination stemming from oil and gas
operations— is not inherently undiscoverable. See ExxonMobil, 511 S.W.3d at
544; Via Net, 211 S.W.3d at 314; Taub, 75 S.W.3d at 619–620.
In summary, Americo conclusively established that appellants’ claim began
to accrue in February 2015 or earlier. We conclude that the discovery rule is
inapplicable in the present case to defer accrual of appellant’s claim. Appellants
filed suit on October 13, 2017, which was more than two years after February 27,
2015. Accordingly, the trial court did not err in granting Americo’s motion for
summary judgment. We overrule appellants’ two issues.
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III. CONCLUSION
We affirm the judgment of the trial court.
/s/ Margaret “Meg” Poissant
Justice
Panel consists of Chief Justice Christopher and Justices Hassan and Poissant
(Poissant, J., majority).
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