Rock River Minerals, LP and Michael L. Cass v. Pioneer Natural Resources USA, Inc., Crownquest Operating, LLC & Crownrock, LP ( 2024 )

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
ROCK RIVER MINERALS, LP and § No. 08-23-00216-CV
MICHAEL L. CASS,
§ Appeal from the
Appellants,
§ 112th Judicial District Court
v.
§ of Upton County, Texas
PIONEER NATURAL RESOURCES USA
INC., CROWNQUEST OPERATING, LLC, § (TC# 20-07-U4825-OTH)
& CROWNROCK, LP,
Appellees.
MEMORANDUM OPINION
This case concerns the interpretation of an assignment of royalty interests. The facts are
undisputed; the only legal issue before us is whether Appellant Michael L. Cass’ assignment of his
royalty interests in oil, gas, and mineral leases included a depth limitation. We hold that it did not
and affirm the trial court’s summary judgment endorsing the same view.
I. FACTUAL AND PROCEDURAL BACKGROUND
By 1996, Cass owned a 2.125% overriding royalty interest in the production of minerals
from lands that are part of the Amerada and Cameron-Simmons leases. Those leases are included
in the North Pembrook Spraberry Unit and subject to a unit agreement that unitized the oil and gas
rights in the Spraberry Formation. In 1996, Cass executed an “Assignment and Bill of Sale” in
favor of Parker & Parsley Development, L.P., which became Pioneer Natural Resources USA, Inc.
The assignment and bill of sale signed by Cass grants, sells, conveys, assigns, and transfers to
Pioneer’s predecessor “all of the rights, interests, and properties described” in ten paragraphs
listing the categories of interests being conveyed. Those paragraphs in turn either directly or
indirectly reference an Exhibit A to the assignment that more particularly describes the lands and
leases from which the interests derive. Exhibit A in turn describes the lands as “all lands from the
surface of the earth to all depths located within the geographic boundaries of the [North Pembrook
Unit] as identified in the Unit Agreement and Unit Operating Agreement . . . .” It describes the oil
and gas leases as “all oil and gas leases, royalty interests and mineral interests included within the
[North Pembrook Unit], as to the lands included within such Unit, from the surface of the earth to
all depths. . . .”
Pioneer then assigned some of its interests to CrownRock, L.P. CrownQuest Operating,
LLC is the operator of the leased lands. In 2016 Cass sold some of his royalty interests at certain
depths (from the base of the Dean Formation to the base of the Wolfcamp formation) to
predecessors of Rock River Minerals, LP and Craddick Partners, Ltd.
In 2018 and 2019, CrownQuest drilled 12 wells within the geographic boundaries of the
assigned interests. Those wells produced from the Wolfcamp formation (which is deeper than the
Spraberry formation) and gave rise to this dispute. Cass filed suit seeking a declaration that he
continues to own a 2.125% overriding royalty interests in depths below the Spraberry Formation.
Because Rock River and Craddick also had interests in the property, Cass joined them as
involuntary plaintiffs. 1 We refer to Cass and Rock River collectively as Appellants and to Pioneer,
CrownRock and CrownQuest as Appellees.
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Craddick was dismissed as a party because it assigned all its interests to Rock River.
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The parties filed cross motions for summary judgment. As they do on appeal, Appellants
argued that the 1996 assignment, because it incorporates the unit agreement by reference,
conveyed only the royalty interests that were subject to that unit agreement (those from the
Spraberry Formation). Conversely, Appellees argued that the assignment included no depth
limitations because the exhibit describing the land states that it is “to all depths.” The trial court
denied Appellants’ motion for summary judgment and granted Appellees’ motions. The final
judgment specifies that the assignment conveyed Cass’ overriding royalty interests in the subject
lands “from the surface of the earth to all geological depths underlying the surface of the earth,
including geological depths below the base of the Spraberry formation, located within the
geographic boundaries of the North Pembrook Spraberry Unit. . . . .” Appellants filed this appeal,
challenging the trial court’s grant of Appellees’ motions for summary judgment and the denial of
their motion.
II. STANDARD OF REVIEW AND APPLICABLE LAW
A party is entitled to summary judgment when “there is no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of law.” Tex. R. Civ. P. 166a(c). “We
review a trial court’s summary judgment de novo”. Valence Operating Co. v. Dorsett, 164 S.W.3d
656, 661 (Tex. 2005). Although the denial of a motion for summary judgment cannot ordinarily
be appealed, if there are cross motions for summary judgment, “we consider both motions and
render the judgment that the trial court should have rendered.” Coastal Liquids Transp., LP v.
Harris County Appraisal Dist., 46 S.W.3d 880, 884 (Tex. 2001).
If the assignment and bill of sale is ambiguous, a fact issue exists, and summary judgment
is inappropriate. In all events, if it is unambiguous, we interpret it as a matter of law. Piranha
Partners v. Neuhoff, 596 S.W.3d 740, 744 (Tex. 2020). Determining whether a contract is
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ambiguous is also reviewed de novo. Piranha Partners, 596 S.W.3d at 743; MCI Telecomms.
Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650–51 (Tex. 1999).
III. ANALYSIS
A. Principles of contract interpretation
“As with any deed or contract, our task is to determine and enforce the parties’ intent as
expressed within the four corners of the written agreement.” Piranha, 596 S.W.3d at 743; Mark S.
Hogg, LLC v. Blackbeard Operating, LLC, 656 S.W.3d 671, 675 (Tex. App.—El Paso 2022, no
pet.) (applying principles of contract interpretation to an assignment). “We consider the entire
agreement and, to the extent possible, resolve any conflicts by harmonizing the agreement’s
provisions, rather than by applying arbitrary or mechanical default rules.” Piranha, 596 S.W.3d
744. A review of the assignment in this case requires us to review and harmonize not only the
provisions of the assignment, but also the exhibit to the assignment and the referenced unit
agreement. In re Estate of Renz, 662 S.W.3d 531, 539 (Tex. App.—El Paso 2022, pet. denied)
(“[W]hen, as here, several instruments comprise a single transaction, those instruments must be
construed together.”).
B. Description of the lands and leases in Exhibit A
We start with the granting language of the assignment and bill of sale. The assignment
includes ten paragraphs describing interests conveyed, the first of which grants the following:
All right, title and interest of Seller in, to and under the Oil, Gas and Mineral Leases
described on Exhibit “A”, including . . . the oil and gas leasehold estates, fee mineral
interests, royalty interests, overriding royalty interest, and other interests in the
lands which are described on Exhibit A, attached hereto and made a part hereof for
all purposes. (emphasis added)
The description of the lands in Exhibit A then states:
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Included herein are all lands from the surface of the earth to all depths located
within the geographic boundaries of the [North Pembrook Unit] as identified in the
Unit Agreement and Unit Operating Agreement . . . (emphasis added).
The oil and gas leases and mineral deeds conveyed are described in Exhibit A, also by
referencing the lands within the Unit:
This conveyance covers and includes all oil and gas leases, royalty interests and
mineral interests included within the above Unit, as to the lands included within
such Unit, from the surface of the earth to all depths. . . . (emphasis added)
The Unit Agreement in turn contains a map that shows the sections in Reagan and Upton Counties
which comprise the “Unit Area.” The Unit Agreement also defines the “Unitized Formation” as
“that subsurface portion of the Unit Area commonly known as the Spraberry Formation, which is
that source of supply designated by the Railroad Commission of Texas as the Spraberry Trend
Area Field.”
As Cass argues, and Appellees agree, an exhibit to an assignment that describes the
property can limit the property that is conveyed. See, e.g., Posse Energy, Ltd. v. Parsley Energy,
LP, 632 S.W.3d 677, 695 (Tex. App.—El Paso 2021, pet. denied) (holding that an assignment’s
exhibit describing the conveyed lease “INSOFAR AND ONLY INSOFAR as the lease covers the
proration units” limited the assignment to the depth of the proration unit); Dupnik v. Hermis, No.
04-12-00417-CV, 2013 WL 979199, at *2, 5 (Tex. App.—San Antonio Mar. 13, 2013, pet. denied)
(interpreting assignment to transfer only surface rights because the exhibit described the property
as “Tract No. two (the surface only)”).
The exhibit in this case limits the conveyance of interests to those within the geographic
boundaries of the unit. We then turn to the Unit Agreement to determine whether it unambiguously
describes the geographic boundaries of the unit. Here is where the parties differ in their
interpretations. Appellants urge us to define “geographic boundaries” to mean not just the
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horizontal surface boundaries of the land, but also the vertical subsurface boundaries of the
unitized formation. They point to the unit agreement’s definition of “Unitized Formation” as “that
subsurface portion of the Unit Area commonly known as the Spraberry Formation. . . .” and argue
that “geographic boundaries” means the boundaries of the subsurface depths of the Spraberry
formation. They reason that because the Unit Agreement pertains to the Spraberry Formation and
Exhibit A references the Unit Agreement to identify the boundaries of the lands, the conveyance
is limited to the depths of that formation.
Appellees, on the other hand, argue that the Unit Agreement is only used to determine the
boundaries of the surface of the land, but not the depth of the land, from which the conveyed oil
and gas rights derive. We agree with Appellees.
The incorporation of the Unit Agreement does not necessarily mean that every provision
of that agreement is relevant to or limits the conveyance. In Piranha, for example, an assignment
of interests attached as an exhibit included information about the land, an associated well, and a
lease. Piranha, 596 S.W.3d at 745. The parties disagreed about which of those described the
royalty interests that were conveyed: the land, the well, or the lease. After harmonizing the
language of the assignment and the exhibit, the Court held that the assignment conveyed the royalty
interests in production under the entire lease and that the information in the exhibit about the land
and well only because it “more clearly identified the [] Lease under which the overriding royalty
existed.” Id. at 754; see also Occidental Permian, Ltd. v. Citation 2002 Inv. LLC, 689 S.W.3d 899,
906 (Tex. 2024) (holding that specific information in an exhibit to an assignment with depth
specifications did not limit the conveyance to those depths but was “descriptive of tracts found
within each conveyed estate”). The Unit Agreement here is incorporated for an express purpose:
to describe the geographic boundaries of the lands in which the royalty interests are held. As with
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the exhibit in Piranha, the Unit Agreement serves to more clearly identify the property by defining
the boundaries but does not otherwise limit the conveyance.
The plain meaning of “geography” is “a science that deals with the description,
distribution, and interaction of the diverse physical, biological, and cultural features of the earth’s
surface.” https://www.merriam-webster.com/dictionary/geography (last visited Sept. 17, 2024).
The term “geographic boundaries,” then, is interpreted according to its plain language as surface
boundaries. Mark S. Hogg, 656 S.W.3d at 675–76 (“The expressed intent [of the parties] is
determined by the plain language used in the contract.”). The unit agreement clearly and
unambiguously defines those surface boundaries. It incorporates an exhibit that lists all the tracts
in the unit with their legal description and a map with “unit boundary” marked. The assignment
therefore conveys the interests within those surface boundaries, but “to all depths.”
Moreover, even if “geographic boundaries” encompassed subsurface depth boundaries, the
grant is of the interests in “all lands from the surface of the earth to all depths located within the
geographic boundaries of the [North Pembrook] Unit. . . .” and “all royalty interests and mineral
interests included within the above Unit, as to the lands described within such Unit.” (emphasis
added). In interpreting agreements, “we concentrate of the specific language the parties chose. . .
.” Hogg, 656 S.W. 3d at 656; Great Am. Ins. v. Primo, 512 S.W.3d 890, 893 (Tex. 2017) (“word
choice evinces intent.”). Here, the parties chose the word “unit,” not “unitized formation,” to define
the boundaries of the conveyance. The Unit Agreement defines that “Unit Area” as the “lands
described by Tracts in Exhibit A and shown on Exhibit C. . . .” It describes “Tract” as “each parcel
of land described as such and given a Tract number in Exhibit A.” “Unitized Formation,” on the
other hand, is defined by the Unit Agreement as only “the subsurface portion of the unit area.” The
unit therefore is a larger area of which the unitized formation is only a part. Other provisions of
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the assignment confirm this interpretation. Paragraph D of the assignment grants “[a]ll right, title
and interest of Seller in any pooled or unitized acreage or rights included . . . within the lands
described in Exhibit ‘A’. . . . ” This provision demonstrates that the parties distinguished between
the “unitized acreage” and the “lands described in Exhibit A” and considered the former to be only
a subset of the latter.
Had Cass intended to convey only royalty interests in the unitized formation or in the
Spraberry Formation, he could have easily done so. Cf. Posse Energy, 632 S.W.3d at 694–95
(finding that the assignment was limited because the property description limited the interests
conveyed to “the proration units”). Instead, he conveyed interests within the unit which is different
from and not limited by the depths of the unitized formation.
IV. CONCLUSION
The assignment unambiguously conveyed all overriding royalty interests Cass owned in
all depths of the lands within the surface boundary of the North Pembrook Unit. The trial court’s
grant of summary judgment for Pioneer, CrownQuest, and CrownRock and denial of summary
judgment for Cass and Rock River is affirmed.
JEFF ALLEY, Chief Justice
October 18, 2024
Before Alley, C.J., Palafox, and Soto, JJ.
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