Lloyd Michael Hamilton v. ConocoPhillips Co. and Burlington Resources Oil & Gas Co. LP ( 2024 )

NUMBER 13-22-00096-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
LLOYD MICHAEL HAMILTON, Appellant,
v.
CONOCOPHILLIPS CO. AND
BURLINGTON RESOURCES OIL
AND GAS CO. LP, Appellees.
On appeal from the 267th District Court
of DeWitt County, Texas.
MEMORANDUM OPINION
Before Chief Justice Contreras and Justices Longoria and Silva
Memorandum Opinion by Justice Longoria
Appellant Lloyd Michael Hamilton appeals from the trial court’s entering of a partial
take-nothing judgment against him in favor of appellees ConocoPhillips Co.
(ConocoPhillips) and Burlington Resources Oil & Gas Co. LP. (Burlington). By two issues,
appellant argues: (1) he did not consent as a matter of law to appellees’ use of his surface
estate for a horizontal well project, and (2) the trial court erred by granting appellees’
nonsuit of its claims without prejudice after a jury trial. We affirm in part and reverse and
render in part.
I. BACKGROUND
Appellant’s father, Graves Graham Hamilton, died in 2004, leaving behind his wife
Mary Ellen Hamilton, appellant, and appellant’s three siblings. Graves’s will provided for
the disposition of his approximately 2,000-acre ranch (Hamilton Ranch) between Mary
Ellen, appellant, and the three siblings. Specifically, Graves’s will divided and distributed
a 954-acre portion of the Hamilton Ranch into five parts and distributed the parcels to
appellant, to Mary Ellen, and in trust to appellant’s three siblings, respectively. The will
provided that the remaining acreage would be distributed in undivided interests to
appellant, Mary Ellen, and the siblings’ three trusts.
In 2007, appellant, Mary Ellen, the siblings, and other family members entered into
an oil and gas lease covering the Hamilton Ranch and surrounding land. The lease was
later assigned to Burlington. In 2019, Burlington and the landowners, including appellant,
entered into a production sharing agreement.
In 2020, after litigation was brought by Mary Ellen to partition the ranch properties,
the family members agreed to a surface partition. A mediated settlement agreement was
signed in May 2020, a family settlement agreement was signed and dated in July 2020,
and an agreed final judgment was rendered on August 11, 2020. Finally, the partition was
recorded in the DeWitt County property records on December 8, 2020.
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In July 2020, Burlington staked out boundaries of a proposed well pad. Appellant
objected to the location, stating that he had seen jaguarundis—an endangered cat
species thought to be extinct in Texas—in the area. Appellant suggested a different
location for the pad. Burlington relocated its pad to a different location than the one
suggested by appellant because the selected location had already been mostly cleared
and construction would pose less of a threat to any possible jaguarundis. The new pad
site encompassed four live oak and pecan trees and required construction of a road, and
therefore, on August 25, 2020, Burlington entered into a surface use agreement with Mary
Ellen prior to clearing the pad site. Burlington then secured the permits entitling it to drill
horizontal sharing wells.
Appellant filed suit against Burlington and its parent company ConocoPhillips in
September 2020, and he secured a temporary injunction based on the accommodation
doctrine, citing the alleged presence of jaguarundis. See Getty Oil Co. v. Jones, 470
S.W.2d 618, 622 (Tex. 1971) (setting forth the accommodation doctrine, which provides
that “where there is an existing use by the surface owner which would otherwise be
precluded or impaired, and where under the established practices in the industry there
are alternatives available to the lessee whereby the minerals can be recovered, the rules
of reasonable usage of the surface may require the adoption of an alternative by the
lessee”). Appellant later amended his petition to expand his claims, alleging, in addition
to the accommodation doctrine, that there was (1) breach of the lease and production
sharing agreements for failure to obtain appellant’s consent before constructing the pad
site, (2) trespass for failure to obtain appellant’s consent, and (3) breach of the lease for
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excessive surface use. Appellant also sought declaratory judgment invalidating the
surface use agreement between Burlington and Mary Ellen. Appellant did not just
complain about the location of the pad site, but also the planned use for the site for “off-
premises production.” Burlington answered and counterclaimed for (1) breach of contract
for appellant’s interference with its water permit application, (2) breach of contract based
on appellant’s interference with the use of the property, and (3) wrongful injunction.
A. Trial Court Rulings
During a pre-trial hearing, the trial court was asked by both sides to interpret the
production sharing agreement as a matter of law. Burlington argued that the production
sharing agreement gave it the right to place the pad on appellant’s property, thus
rendering the surface use agreement with Mary Ellen moot. In contrast, appellant argued
that the production sharing agreement was drafted to calculate the royalties payable on
oil and gas and that a separate surface use agreement was necessary to allow Burlington
to conduct the proposed drilling activities, including the construction of the drilling pad.
Both sides agreed that the trial court’s ruling on the effect of the production sharing
agreement could render certain claims moot for trial. The trial court allowed the parties to
brief the issue, among others, after the conclusion of the lengthy hearing.
The trial court ultimately granted Burlington’s request to construe the lease and
production sharing agreement as granting Burlington the right to conduct off-lease
production by creating a sharing well. Effectively, the trial court’s pre-trial ruling narrowed
the scope of the jury trial to appellant’s claim regarding the accommodation doctrine.
A jury trial was held and at the close of evidence, the jury rendered a unanimous
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verdict in favor of Burlington, rejecting appellant’s claim for breach of the accommodation
doctrine. The trial court then signed a judgment in Burlington’s favor, ordering that
appellant take nothing on his claims, denying appellant’s request for declaratory judgment
and permanent injunction, dissolving the temporary injunction, and instructing the parties
to confer on a schedule for a hearing on damages related to Burlington’s counterclaim.
Burlington subsequently nonsuited its counterclaim “without prejudice,” and the trial court
rendered an order granting the nonsuit, resulting in a final judgment. This appeal
followed. 1
II. PRE-TRIAL RULINGS
By his first issue, appellant argues that the trial court erred by: (1) denying his claim
for a declaratory judgment that the surface use agreement between Mary Ellen and
Burlington was invalid; and (2) refusing to submit jury questions on liability and damages
for breach of the lease, breach of the production sharing agreement, and trespass.
A. Standard of Review
Texas Rule of Civil Procedure 166(g) provides that a court may hold a pre-trial
hearing to identify “legal matters to be ruled on or decided by the court.” TEX. R. CIV. P.
166(g). This rule authorizes trial courts to decide matters that, though ordinarily fact
questions, have become questions of law because “reasonable minds cannot differ on
the outcome.” See Walden v. Affiliated Computer Servs., Inc., 97 S.W.3d 303, 322 (Tex.
App.—Houston [14th Dist.] 2003, pet. denied). When a Rule 166(g) order disposes of
claims in this fashion, the order is akin to a summary judgment or directed verdict, and
1 We note that appellant does not challenge the jury’s finding on the accommodation doctrine.
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appellate review is de novo. See id. at 324 (reviewing a Rule 166 order under the standard
that applies to directed verdicts); McCreight v. City of Cleburne, 940 S.W.2d 285, 287
(Tex. App.—Waco 1997, writ denied) (equating a Rule 166 order with a partial summary
judgment); see also City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005) (holding
the legal sufficiency test is the same for summary judgments, directed verdicts, and
appellate no-evidence review).
B. Discussion
1. Breach of Contract
A breach of contract plaintiff must prove: “(1) a valid contract exists; (2) the plaintiff
performed or tendered performance as contractually required; (3) the defendant breached
the contract by failing to perform or tender performance as contractually required; and
(4) the plaintiff sustained damages due to the breach.” See Pathfinder Oil & Gas, Inc. v.
Great W. Drilling, Ltd., 574 S.W.3d 882, 890 (Tex. 2019) (citing USAA Tex. Lloyds Co. v.
Menchaca, 545 S.W.3d 479, 501 n.21 (Tex. 2018)).
Appellant contends that, as a matter of law, he did not consent to appellees’ use
of his surface estate for the horizontal-well project to include off-lease production. He
argues that because his consent was not given, Burlington breached the lease agreement
when it moved forward with its project. There is no dispute that the lease grants Burlington
the right to explore for and produce oil and gas on the Hamilton Ranch. The parties further
agree that the lease, standing alone, does not allow Burlington to drill a horizontal sharing
well. The parties differ, however, in the interpretation of the production sharing
agreement. Appellees argue that the lease and the production sharing agreement, taken
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together, authorized them to conduct the challenged activities.
As the parties discussed at oral argument in this matter, the relevant portion of the
production sharing agreement is section 5, which states:
Appellant argues that, though the production sharing agreement provides for an
easement for additional surface uses, the language following subsection 5(d) above
requires that those surface uses be governed by the existing terms of the lease, which do
not permit the drilling of a horizontal well. Appellees contend that such an interpretation
“renders hollow” the very purpose of the production sharing agreement, which is to allow
the proposed horizontal drilling activity. At oral argument, appellant agreed that if the
“subject however to the following limitations, terms and provisions” language was
removed from subsection 5(d) of the production sharing agreement, appellees would
have an easement for the surface use of appellant’s land.
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In reviewing a contract, a court examines the entire agreement and seeks to
harmonize and give effect to all its provisions so that none will be rendered meaningless,
useless, or inexplicable. Gastar Expl. Ltd. v. U.S. Specialty Ins., 412 S.W.3d 577, 583
(Tex. App.—Houston [14th Dist.] 2013, pet. denied) (first citing Gilbert Tex. Constr., L.P.
v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 126 (Tex. 2010); and then citing
Evanston Ins. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 668 n.27 (Tex.
2008)). Unambiguous language used by the parties in a contract should be accorded its
plain grammatical meaning unless it definitely appears that the intention of the parties
would thereby be defeated. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex. 1985); Fox
v. Thoreson, 398 S.W.2d 88, 92 (Tex. 1966). Our primary goal in interpreting a contract
is to give effect to the intent of the parties as expressed in the agreement itself, not from
the parties’ present interpretation. First State Bank v. Keilman, 851 S.W.2d 914, 922 (Tex.
App.—Austin 1993, writ denied).
Appellant asks this Court to interpret the “subject however to the following
limitations, terms and provisions” language as requiring appellees to seek a separate
surface use agreement to receive the exact easements granted to appellees by section
5. This roundabout interpretation would render the entirety of section 5 meaningless. See
Shell Oil Co. v. Khan, 138 S.W.3d 288, 292 (Tex. 2004) (stating that we must not construe
one clause in a manner that renders other provisions meaningless). The very purpose of
section 5 is for the surface owner to grant Burlington an easement and right-of-way to
conduct operations for a sharing well so that Burlington may operate as intended under
the production sharing agreement. Accordingly, we do not construe the “subject however
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to” language as requiring Burlington to seek separate consent to any surface use for the
purposes of operating a sharing well. See id. Therefore, the trial court did not err in
interpreting the production sharing agreement as granting appellees the easement as a
matter of law. Having interpreted the production sharing agreement as granting the
easement, we further conclude that appellant’s breach of contract claim necessarily fails
as appellant’s claim relied upon his assertion that appellees were required to seek his
consent under the production sharing agreement. Thus, the trial court did not err in
rendering a take-nothing judgment on appellant’s breach of contract claim.
2. Trespass
Appellant also argues that the trial court erred in failing to submit his trespass claim
to the jury. Appellant’s trespass claim, however, relies upon the same underlying
allegations as his breach of contract claim: that appellees illegally entered his property
without his consent. Having already determined that the production sharing agreement
granted appellees an easement onto the surface of the estate, and that further consent
was not necessary, we further conclude that appellant’s trespass claim necessarily fails.
The trial court did not err in rendering a take-nothing judgment on appellant’s trespass
claim.
3. Declaratory Judgment
Appellant raised a claim seeking declaratory judgment that the surface use
agreement signed by Mary Ellen was invalid as to his property because he did not sign it.
Appellant’s argument is that “the Surface Use Agreement is invalid and did not provide
Defendants the consent needed for Defendants’ off-Leased-Premises project.” Again, we
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have already determined that the production sharing agreement grants appellees the
easement for the project and obviates the need for further consent. As such, we need not
reach the merits of appellant’s argument as to the validity of the surface use agreement.
See TEX. R. APP. P. 47.1 (“The court of appeals must hand down a written opinion that is
as brief as practicable but that addresses every issue raised and necessary to final
disposition of the appeal.”). The trial court did not err in entering a take-nothing judgment
on appellant’s declaratory judgment claim.
We overrule appellant’s first issue.
III. BURLINGTON’S COUNTERCLAIM
In his second issue, appellant argues that the trial court erred in granting, without
prejudice, Burlington’s nonsuit of its wrongful injunction counterclaim. Appellant asserts
that Burlington waived its counterclaim under Texas Rule of Civil Procedure 279 because
it “failed to prove or submit jury questions on its counterclaims at trial,” and therefore,
dismissal should have been with prejudice. In response, appellees argue that a wrongful
injunction claim can be brought in a subsequently filed lawsuit and need not be brought
in the same lawsuit as the injunction itself. We agree with appellant.
While we do not dispute appellees’ assertion that a wrongful injunction claim could
be filed either as a counterclaim or a separate suit, see Sweezy Constr., Inc. v. Murray,
915 S.W.2d 527, 531 (Tex. App.—Corpus Christi–Edinburg 1995, no writ), here,
appellees specifically filed their claim as a counterclaim within the pending lawsuit. The
counterclaim was never severed prior to trial, nor was there any request to do so.
Appellees presented no direct evidence or testimony at trial regarding their counterclaim,
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nor did they attempt to establish the damages element of a wrongful injunction claim. See
Energy Transfer Fuel, L.P. v. Bryan, 322 S.W.3d 409, 414 (Tex. App.—Tyler 2010, no
pet.) (stating that under either theory of wrongful inunction, a claimant must prove that
issuance of the injunction resulted in damages). Additionally, appellees did not request
any jury charge question related to their counterclaim. As such, we find that appellees
waived their counterclaim for wrongful injunction and the trial court erred in granting the
nonsuit without prejudice. See TEX. R. CIV. P. 279 (“Upon appeal all independent grounds
of recovery or of defense not conclusively established under the evidence and no element
of which is submitted or requested are waived.”). We sustain appellant’s second issue.
IV. CONCLUSION
We affirm the trial court’s order entering a take-nothing judgment for appellant on
his claims for declaratory judgment, breach of contract, and trespass. We reverse the trial
court’s order granting appellees’ nonsuit without prejudice on appellees’ wrongful
injunction claim and render judgment that appellees take nothing on said claim.
NORA L. LONGORIA
Justice
Delivered and filed on the
8th day of February, 2024.
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