in Re Eagleridge Operating, Llc

Supreme Court of Texas
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No. 20-0505
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In re Eagleridge Operating, LLC,
Relator
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On Petition for Writ of Mandamus
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Argued September 30, 2021
JUSTICE DEVINE delivered the opinion of the Court.
Justice Lehrmann did not participate in the decision.
In this premises-defect case, relator Eagleridge Operating, LLC
seeks mandamus relief from a trial court order striking its
responsible-third-party designation under Chapter 33 of the Texas Civil
Practice and Remedies Code. Eagleridge contends that a former wellsite
owner–operator bears continuing responsibility for injuries caused by a
burst gas pipeline under a theory that the former owner acted as an
independent contractor in constructing, installing, and maintaining the
pipeline. In Occidental Chemical Corp. v. Jenkins, we “reject[ed] the
notion that a property owner acts as both owner and independent
contractor when improving its own property” and held that, after the
creator of a dangerous premises condition has conveyed ownership of
real property, the property’s new owner “ordinarily assumes
responsibility for the property’s condition with the conveyance.” 1
Eagleridge failed to persuade the lower courts that Occidental is
inapplicable here because the former owner held a minority interest and
received an operations fee while serving as “operator of record” with a
co-owner’s assent. We agree with those courts that Occidental is
controlling and that the former owner’s responsibility for premises
defects did not survive conveyance of its ownership interest. We
therefore deny Eagleridge’s petition for writ of mandamus.
I
Aruba Petroleum, Inc. owned a minority working interest in the
Donnell 2H wellsite, served as operator of record, and received an
operations fee with the consent of the majority working-interest owner,
USG Properties Barnett II, LLC. 2 An “operator” is the “person who
assumes responsibility for the physical operation and control of a well
1478 S.W.3d 640, 644, 648 & n.7 (Tex. 2016) (noting that Sections 352
and 353 of the Restatement (Second) of Torts recognize a limited exception to
the general rule that a property owner’s responsibility for premise conditions
terminates on conveyance).
2 Eagleridge now disputes the existence of Aruba’s ownership interest
but did not do so in the trial court and, to the contrary, repeatedly
acknowledged Aruba’s ownership interest. The record also bears documentary
and testimonial evidence to that effect.
2
as shown by a form the person files with the [Texas Railroad
Commission] [that] the commission approves.” 3
As working-interest owners of undivided oil and gas rights, Aruba
and USG were tenants in common with possessory interests in land,
giving each the right to enter the premises to drill, produce, and
otherwise exploit the minerals without the consent of the other. 4 Absent
an agreement, the common law permits a mineral co-tenant to extract
oil and gas but requires a producing co-tenant to account to the
nonconsenting or nonproducing co-tenant for its pro rata share of
production, net of necessary and reasonable expenses incurred in
producing and marketing the same. 5 Absent an agreement, the common
3 TEX. NAT. RES. CODE § 89.002(2) (defining “operator” with respect to
abandoned wells); see id. § 91.551 (defining “operator” with respect to certain
drilling operations as “a person who assumes responsibility for the regulatory
compliance of a well as shown by a form the person files with the commission
and the commission approves”); 16 TEX. ADMIN. CODE § 3.58 (Certificate of
Compliance and Transportation Authority; Operator Reports); cf. TEX. NAT.
RES. CODE § 89.002(3) (defining “nonoperator” as a working-interest owner
who is not an “operator” as the term is defined in Section 89.002(2)).
4 Byrom v. Pendley, 717 S.W.2d 602, 605 (Tex. 1986); H.G. Sledge, Inc.
v. Prospective Inv. & Trading Co., 36 S.W.3d 597, 599 n.3 (Tex. App.—Austin
2000, pet. denied) (citing 8 HOWARD R. WILLIAMS & CHARLES J. MEYERS, OIL
AND GAS LAW 1191 (1999)); Willson v. Superior Oil Co., 274 S.W.2d 947, 950
(Tex. Civ. App.—Texarkana 1954, writ ref’d n.r.e.); see 1 EUGENE KUNTZ, A
TREATISE ON THE LAW OF OIL AND GAS § 5.1 (1987) (“As a consequence of the
division of ownership of a single tract among separate owners, no single owner
has exclusive or separate rights as to any particular portion of the tract, but
all such owners have a common ownership and share proportionately in the
enjoyment of the property as a whole.”).
5Byrom, 717 S.W.2d at 605; Cimarex Energy Co. v. Anadarko Petroleum
Corp., 574 S.W.3d 73, 96 (Tex. App.—El Paso 2019, pet. denied); Willson, 274
S.W.2d at 950.
3
law provides that if a co-tenant drills a dry hole, it does so at its own
risk, without the right to pro-rata reimbursement for the drilling costs. 6
To exercise operating rights effectively and to share the risks and
costs of drilling, it is not uncommon for co-tenants to make some sort of
contractual arrangement. 7 The basic function of an operating
agreement is to designate an operator, delineate the operator’s
authority, share expenses, and “spread the risk of drilling operations.” 8
The record reflects that, as operator of record for the Donnell 2H
wellsite, Aruba was responsible for drilling, operating, and servicing the
well and securing proper equipment. Aruba would also prepare Joint
Interest Billing statements accounting for the incurred expenses and
allocating them in proportion to the co-tenants’ ownership interests. In
6 Cimarex Energy, 574 S.W.3d at 96; Willson, 274 S.W.2d at 950; cf.
Byrom, 717 S.W.2d at 605 (asserting a co-tenant’s accounting for its mineral
extraction is based on “the value of any minerals taken, less the necessary and
reasonable costs of production and marketing”).
7 1 EUGENE KUNTZ, A TREATISE ON THE LAW OF OIL AND GAS § 5.6
(1987) (“If the parties involved are cotenants . . . they normally enter into an
operating agreement . . . or some other arrangement for cooperative
development and operation.”); 2 EUGENE KUNTZ, A TREATISE ON THE LAW OF
OIL AND GAS § 19A.6 (1989) (“When operating rights in the same land are
owned by more than one person, some sort of arrangement must be made
before the operating rights can be exercised effectively.”).
8 Seagull Energy E&P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 344
n.1 (Tex. 2006) (“An operating agreement is a contract typical to the oil and
gas industry whose function is to designate an ‘operator, describe the scope of
the operator’s authority, provide for the allocation of costs and production
among the parties to the agreement, and provide for recourse among the
parties if one or more default in their obligations.’” (quoting 3 ERNEST E. SMITH
& JACQUELINE L. WEAVER, TEXAS LAW OF OIL AND GAS § 17.3 at 17–7 (2d ed.
2006))); Hamilton v. Tex. Oil & Gas Corp., 648 S.W.2d 316, 322 (Tex. App.—El
Paso 1982, writ ref’d n.r.e.), disapproved on other grounds by Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex. 2005).
4
2013, while Aruba was the wellsite’s owner–operator, a gas line was
installed on the property, and Aruba and USG paid their proportionate
share of the pipeline construction expenses.
Four years later, in April 2017, Aruba conveyed its ownership
interest to USG and contemporaneously ceased serving as the
Donnell 2H operator of record. Several months before the conveyance,
USG had entered into a written contract with Eagleridge to serve as
operator, but Eagleridge did not assume control of the wellsite until May
1, 2017. A few months later, the gas line ruptured, injuring plaintiff
Earmon Lovern.
Lovern and his wife and children sued Eagleridge and USG,
asserting claims for negligence and gross negligence with respect to the
construction, installation, and maintenance of the pipeline, among other
things. Eagleridge timely filed a motion for leave to designate Aruba as
a responsible third party. 9 In its motion to designate, Eagleridge
asserted that Aruba, as a prior owner–operator, caused or contributed
to causing the Loverns’ injuries because it was responsible for installing
the gas line, selecting the materials used for its construction, and
determining its placement on the property.
The Loverns filed a combined motion to strike Aruba’s
designation and motion for partial summary judgment, arguing that
under this Court’s opinion in Occidental, a former premises owner has
no duty, and thus no responsibility, with respect to the condition of
property after conveyance—even as the creator of an allegedly defective
9 See TEX. CIV. PRAC. & REM. CODE § 33.004(a), (f), (h).
5
improvement. 10 As the Loverns pointed out, Occidental had overturned
a lower court’s ruling that a premises owner could act in a “dual
capacity” as both (1) owner of the premises where the dangerous
condition existed and (2) creator or designer of the dangerous
condition. 11 In Occidental, we expressly “reject[ed] the notion that a
property owner acts as both owner and independent contractor when
improving its own property” and instead held that an owner–creator’s
duties “generally run[] with the ownership or control of the property,”
passing on to the new owner when property is sold. 12
In response, Eagleridge urged that Occidental is distinguishable
on its facts because it involved a sole owner–operator’s premises
improvements while, here, Aruba was not merely a property owner but
also received a fee to serve as operator of record and made improvements
to the property in that capacity. Based on these distinctions, Eagleridge
argued that Occidental does not preclude a property owner from
factually and legally wearing two hats, each with different consequences
under the law. In that vein, Eagleridge took the position that
premises-liability principles would not dictate the existence or extent of
Aruba’s duty because, under ordinary negligence principles, Aruba had
a duty as an “independent contractor” and that duty did not terminate
when its control over the property ceased.
10 478 S.W.3d 640, 648 (Tex. 2016).
11 Id. at 647.
12 Id. at 644, 648 (citing RESTATEMENT (SECOND) OF TORTS §§ 351-54
(AM. L. INST. 1965)).
6
The trial court granted the motion to strike and the motion for
partial summary judgment, prompting Eagleridge to seek mandamus
relief, which the court of appeals denied. In a split decision, the court
held that Occidental precludes Eagleridge’s argument that Aruba acted
in a dual capacity—one in which its responsibility for premises defects
admittedly did not survive termination of its ownership interest and the
other in which it would remain liable as an independent contractor with
respect to improvements it had allegedly constructed on the property
during its ownership term. 13 Because Occidental holds that an owner
does not act as an independent contractor with respect to improving its
own property, the court held that, as a former property owner at the
time of the accident, Aruba had no potential responsibility for the
Loverns’ injuries and the trial court properly struck the
responsible-third-party designation. 14
The dissent concluded that the designation was proper because
Eagleridge produced some evidence that Aruba was “working under a
third party contract” with the majority-interest owner, USG, when it
allegedly constructed a hazardous condition and, if the jury so found,
Aruba would remain responsible in its capacity as an independent
contractor. 15 The dissent declared Occidental distinguishable on its
facts, concluding that the articulated rule applies only when “the owner
13 627 S.W.3d 478, 480-81 (Tex. App.—Dallas 2020).
14 Id.15 Id. at 481-82, 484 (Whitehill, J., dissenting).
7
does the work itself, that is, without hiring an actual independent
contractor to do the work for the owner.” 16
The dissent would have applied the rule in Strakos v. Gehring,
which disavowed the “accepted work” doctrine and held that an
independent contractor is not relieved of responsibility for shoddy work
“solely because his work has been completed and accepted in an unsafe
condition.” 17 The dissent cited Strakos for the proposition that “there
can be concurrent negligence cases involving an injury caused by a
dangerous property condition when two different people are responsible
for that dangerous condition.” 18 Although acknowledging that Strakos
involved two separate (non-owner) contractors performing separate
tasks with respect to the dangerous condition, the dissent concluded
that a property owner can nonetheless “have concurrent negligence
liability for a dangerous property condition when that person acts as
both (i) a partial owner with premises liability duties and (ii) an actual
independent contractor under contract with a third party.” 19 In short,
notwithstanding Aruba’s ownership interest, the dissent viewed
evidence of Aruba’s agreement to serve as operator of record and receipt
of an operation fee as raising a fact issue that it was acting as a third
party which, in turn, raised a fact issue as to whether Aruba had a duty
that survived conveyance of its ownership interest to USG.
16 Id. at 481.
17 Id. at 482 (citing Strakos v. Gehring, 360 S.W.2d 787, 790-91 (Tex.
1962)).
18 Id. at 484.
19 Id.
8
In this original proceeding, as in the lower courts, Eagleridge
argues that Aruba’s duty is not determined by Occidental. But
Eagleridge also raises two new issues: one concerning the proper
construction of the proportionate-responsibility statute and the other
asserting an unpleaded and previously unasserted exception to the rule
that a landowner’s responsibility for premises conditions terminates on
conveyance. 20 After briefs on the merits were filed, and the Loverns had
objected to Eagleridge’s newly raised issues, we abated the original
proceeding pursuant to Texas Rule of Appellate Procedure 7.2(b) to
allow a successor trial judge to reconsider the original ruling. The
mandamus record shows that the successor judge was only asked to
consider Occidental’s application to the circumstances alleged in this
case. On that matter, the judge found Occidental controlling and
declined to make “an exception to Occidental’s dual-role analysis for
liability of an independent contractor that also owns a
fractional-working interest in the property.” 21
Because the trial court was asked only to consider Occidental’s
application, we will not address Eagleridge’s other issues. This is an
original proceeding, so Eagleridge’s failure to raise those issues in the
20USG did not designate Aruba as a responsible third party or join the
trial-court filings on the matter, but in the court of appeals, USG filed an
amicus brief supporting Aruba’s designation as a responsible third party and,
in this Court, filed briefing as a real party in interest aligned with Eagleridge.
21Lovern v. Eagleridge Operating, LLC, No. DC-18-05402 (192nd Dist.
Ct., Dallas County, Tex. Apr. 26, 2021) (order confirming plaintiff’s motion to
strike responsible third party).
9
court of appeals is not prohibitive of our consideration. 22 But its failure
to raise the issues in the trial court—both initially and after
abatement—is an entirely different matter. 23 “Due to the extraordinary
nature of the remedy, the right to mandamus relief generally requires a
predicate request for action by the respondent, and the respondent’s
erroneous refusal to act.” 24 Eagleridge has given us no reason to relax
that requirement. 25 Mandamus will not issue unless the respondent
judge clearly abused her discretion, and she could not have done so as to
unpleaded and unpresented issues. Accordingly, we confine our review
to whether Occidental precludes Aruba’s responsibility for any defects
in the pipeline.
22In re AIU Ins., 148 S.W.3d 109, 121 (Tex. 2004) (holding that failure
to present an argument in the court of appeals did not preclude mandamus
relief where all arguments had been presented to the trial court).
23 Id.; cf. West v. Solito, 563 S.W.2d 240, 244 (Tex. 1978) (“We do not
pass on the merits of these arguments because the release that is central to
both of these arguments was not placed in issue before the trial court, thus
depriving that fact finder of the opportunity to determine from the facts and
circumstances surrounding the release if there was an implied waiver of the
privilege.”).
24In re Coppola, 535 S.W.3d 506, 510 (Tex. 2017) (declining to consider
a ripeness challenge that was first raised in the mandamus petition).
25 See In re Perritt, 992 S.W.2d 444, 446 (Tex. 1999) (relaxing the
predicate request-and-refusal requirements because the record established
that a recusal request would have been futile and merely a formality given that
a codefendant’s recusal request on the same grounds had already been denied)
(quoting Terrazas v. Ramirez, 829 S.W.2d 712, 723 (Tex. 1991)).
10
II
A
In any cause of action to which Chapter 33 of the Texas Civil
Practice and Remedies Code applies, “[t]he trier of fact, as to each cause
of action asserted, shall determine the percentage of responsibility” for
the alleged harm as to each claimant, defendant, settling person, and
properly designated responsible third party. 26 A “responsible third
party” is “any person who is alleged to have caused or contributed to
causing in any way the harm for which recovery of damages is sought,
whether by negligent act or omission, by any defective or unreasonably
dangerous product, by other conduct or activity that violates an
applicable legal standard, or by any combination of these.” 27
Section 33.004 generally permits a tort defendant to designate a person
as a responsible third party by filing a motion “on or before the 60th day
before the trial date.” 28 The trial court “shall grant leave to
designate . . . a responsible third party” unless a party timely objects
and establishes that (1) the defendant did not plead sufficient facts
concerning the person’s alleged responsibility to satisfy the pleading
requirements in the rules of civil procedure, and (2) after an opportunity
26 TEX. CIV. PRAC. & REM. CODE §§ 33.002(a), .003(a), .004(a).
27 Id. § 33.011(6).
28 Id. § 33.004(a); see id. § 33.002 (making the
proportionate-responsibility statute applicable to tort and
deceptive-trade-practices claims).
11
to replead, the pleading defect persists. 29 This standard is reminiscent
of special exceptions.
Although trial courts have no discretion to deny a timely filed
motion to designate absent a pleading defect and an opportunity to cure,
the trial court must strike the designation if, after an adequate time for
discovery, (1) a party asserts that no evidence supports the designated
person’s responsibility for the claimant’s injury or damage, and (2) the
defendant fails to “produce[] sufficient evidence to raise a genuine issue
of fact.” 30 Consistent with the statute’s language, our courts of appeals
have described the standard of review as mirroring a no-evidence
summary judgment. 31
As a general proposition, mandamus is warranted only when “the
trial court clearly abused its discretion and the relator has no adequate
appellate remedy.” 32 We have held that the mandamus standard is
satisfied when a trial court erroneously denies a party’s timely filed
motion to designate a responsible third party. 33 The issue here is not
the same but is arguably analogous: whether the trial court erroneously
29 Id. § 33.004(g).
30Id. § 33.004(l). Chapter 33 also prohibits “a submission to the jury of
a question regarding conduct by any person without sufficient evidence to
support the submission.” Id. § 33.003(b).
31See Ham v. Equity Residential Prop. Mgmt. Servs., Corp., 315 S.W.3d
627, 631 (Tex. App.—Dallas 2010, pet. denied); cf. Flack v. Hanke, 334 S.W.3d
251, 262 (Tex. App.—San Antonio 2010, pet. denied) (opining that “[t]he
similarity in language between Section 33.004(l) and a no-evidence summary
judgment is not coincidental”).
32 In re Coppola, 535 S.W.3d 506, 508 (Tex. 2017).
33 In re Mobile Mini, Inc., 596 S.W.3d 781, 788 (Tex. 2020).
12
struck Aruba’s designation as a responsible third party. The Loverns,
as real parties in interest, question whether mandamus is appropriate
when a designation has been stricken—as opposed to being denied in
the first instance—because the decision to grant leave to designate is
made on the pleadings while an order striking a designation is based on
the merits and is similar to a summary judgment, for which mandamus
is usually unavailable. The Loverns suggest that mandamus from an
order striking a responsible-third-party designation should only be
permitted when the relator demonstrates that the benefits of mandamus
outweigh any detriments in the particular case. We need not decide this
issue, however, because we conclude that the trial court did not abuse
its discretion in striking Aruba’s designation.
B
When an independent contractor erects a structure or creates a
condition on behalf of an owner or possessor of land, “the modern
approach is to place [such] contractors on the same footing as
manufacturers of goods and apply the same general principles of
negligence even after” the landowner or possessor has accepted the
contractor’s work. 34 Renouncing the “accepted work” doctrine, our
Strakos opinion, like Section 385 of the Second Restatement of Torts,
recognizes that an independent contractor or third party who creates a
dangerous property condition while making improvements “on behalf of”
property owners may remain responsible under ordinary negligence
principles for injuries the condition causes even after the contractor has
34 Strakos v. Gehring, 360 S.W.2d 787, 792 (Tex. 1962).
13
completed the work and no longer has control over the condition or the
premises. 35 But “Strakos speaks only to the actions of third parties” and
“does not purport to separate a property owner’s responsibility for
dangerous property conditions from the owner’s control over the
property.” 36
As we explained in Occidental, a property owner “may have
responsibility for a dangerous condition on its property whether created
by the owner or others,” but the property owner’s duty is “not the same”
as an independent contractor’s for any such condition. 37 Rather, the
owner’s duty “is rooted in its control over the property, which is to say
premises liability.” 38 “Under premises-liability principles, a property
owner generally owes those invited onto the property a duty to make the
premises safe or to warn of dangerous conditions as reasonably prudent
under the circumstances,” but this duty “generally runs with the
35 Occidental Chem. Corp. v. Jenkins, 478 S.W.3d 640, 646-47 (Tex.
2016) (discussing Strakos and Section 385). But see Allen Keller Co. v.
Foreman, 343 S.W.3d 420, 425 (Tex. 2011) (holding that an independent
contractor had no duty to rectify an unreasonably dangerous premises
condition arising from the construction of an improvement where the contract
required the contractor’s strict compliance with what was ultimately a faulty
design, the contract afforded the contractor no discretion to vary from its
terms, and the work conformed to required specifications).
36 Occidental, 478 S.W.3d at 646.
37 Id.
38 Id. When an injury results from a contemporaneous negligent
activity on the premises, rather than the property’s condition, ordinary
negligence principles apply. Id. at 644. Here, neither the allegations nor the
evidence implicates Aruba in a contemporaneous negligent activity.
14
ownership or control of the property and upon a sale ordinarily passes
to the new owner.” 39
Eagleridge asserts that, legally and factually, this case lies in the
interstices of our negligence jurisprudence, falling closer to Strakos than
Occidental. Eagleridge concedes that Occidental would control but for
Aruba’s paid engagement as operator of record, and it acknowledges
that, as a working-interest owner, Aruba could have installed the
pipeline even if USG had not consented. The question we must
determine is whether property-owner Aruba could become an
independent contractor with respect to its co-tenant, USG, because
Aruba was compensated—in some fashion under the terms of some
agreement 40—to take responsibility for operating the wellsite even
though it had the right, both as an owner and as an operator of record,
to construct improvements on the property.
39 Id. (citing RESTATEMENT (SECOND) OF TORTS §§ 351-54 (AM. L. INST.
1965)). The Restatement recognizes an exception that extends the duration of
a property seller’s responsibility if the seller actively conceals or fails to
disclose a condition but only if the purchaser does not know or have reason to
know of the condition or risk and, depending on the circumstances, any such
liability continues only until the purchaser discovers the condition or has a
reasonable opportunity to discover it and take precautions. RESTATEMENT
(SECOND) OF TORTS § 353; see Occidental, 478 S.W.3d at 648 n.7 (referencing
the exception but stating that it was not implicated under the facts of that
case). Eagleridge did not plead or present this exception in the trial court and
adduced no evidence that USG—the purchaser of Aruba’s interest—did not
know or have reason to know about the condition.
40The record does not include evidence of any written agreement
between Aruba and USG with regard to wellsite operations, but it is
undisputed for purposes of the issue before us that there was some agreement
between the working-interest owners to share expenses and pay an unspecified
operations fee to Aruba.
15
In Occidental, the sole owner–operator of a chemical plant,
Occidental, upgraded the plant’s chemical vats by adding devices that
allowed for the addition of acid to the vats. 41 Occidental used its own
employees to design, construct, and install the device, 42 as its status as
owner and operator authorized it to do. After Occidental sold the plant
to another company, 43 one of the devices malfunctioned, injuring a
worker. 44 The worker sued Occidental, alleging that its negligent design
of the acid-addition system caused his injuries. 45 Based on jury findings
supporting Occidental’s statute-of-repose defense, the trial court
rendered judgment that the worker take nothing. 46
The court of appeals reversed, holding that Occidental occupied
“dual roles” as owner and as creator of a dangerous condition and its
responsibility could be determined independently with respect to each
of those capacities. 47 Although the court concluded that Occidental, as
a former owner, no longer had premises-liability exposure, the court
nonetheless held that, under ordinary negligence principles, Occidental
retained a duty arising from its installation of the device. 48
41 Occidental, 478 S.W.3d at 642-43.
42 Id. at 644.
43 Id. at 643.
44 Id.
45 Id.
46 Id.
47 Id. at 643-45, 647.
48 Id. at 643-45.
16
We reversed and rendered judgment that Occidental had no
responsibility, and thus no liability, for the plant’s condition after
conveyance of its ownership interest. In doing so, we repudiated the
lower court’s “dual-role” analysis and “the notion that a property owner
acts as both owner and independent contractor when improving its own
property, subjecting itself to either premises-liability or
ordinary-negligence principles depending on the injured party’s
pleadings.” 49 Instead, “premises-liability principles apply to a property
owner who creates a dangerous condition on its property, and [] the
claim of a person injured by the condition remains a premises-liability
claim as to the owner–creator, regardless of how the injured party
chooses to plead it.” 50 Occidental’s liability was foreclosed because it no
longer bore any responsibility for the property’s condition, which the
property’s new owner had assumed along with the conveyance. 51
Occidental precludes the dual-role analysis Eagleridge
champions here. Occidental holds that a property owner, when making
improvements on its own property, acts solely in its capacity as an owner
and not as an independent contractor. 52 The analysis is not altered by
evidence that USG paid Aruba to operate the wellsite, which we accept
as true. Occidental’s core holding is based on ownership, 53 and Aruba
was a property owner exercising its possessory right to develop its
49 Id. at 647-48.
50 Id. at 648.
51 Id. at 648-49.
52 Id. at 648.
53 Id. at 646.
17
property when it allegedly installed the gas line. Just as in Occidental,
the record shows Aruba was at all relevant times a property owner
improving its own property, not a third party acting on behalf of a
property owner. An operating agreement might incentivize a fractional
working-interest owner to exercise its operating rights, but those rights
are inherent in the ownership interest. Aruba’s right to construct the
pipeline was independent of, did not arise from, and was not
extinguished by its agreement to serve as operator of record. 54
Eagleridge adduced no evidence to the contrary. Consequently, Aruba’s
responsibility to any person injured from the gas line must arise from
premises liability, and when USG acquired Aruba’s ownership interest,
it “assumed responsibility” for the property condition its co-owner
purportedly created. 55
54 Not all mineral fee or leasehold interests carry possessory or
development rights. See Yowell v. Granite Operating Co., 620 S.W.3d 335, 341
n.1, 344 (Tex. 2020) (explaining that an overriding royalty interest is a
non-possessory property interest in a share of production that is created and
paid out of a lessee’s interest under a mineral lease); Lesley v. Veterans Land
Bd., 352 S.W.3d 479, 487 (Tex. 2011) (comparing the property rights of
executive and non-executive mineral-interest owners); Anadarko Petroleum
Corp. v. Thompson, 94 S.W.3d 550, 554 (Tex. 2002) (“A Texas mineral lease
grants a fee simple determinable to the lessee.”). We do not address
Occidental’s application to a situation in which a mineral-interest holder
lacking the property right to construct improvements contracts to do so with
someone who holds that right.
55 The parties dispute whether the record contains any evidence that
Aruba itself installed the pipeline and, thus, whether Aruba could ever be held
responsible as an independent contractor under Strakos. Because we resolve
this case on other grounds, we need not decide this evidence-sufficiency
question.
18
Aruba’s receipt of compensation for its efforts as operator of
record neither transforms it from an owner into an independent
contractor or third party nor materially distinguishes the facts of this
case from Occidental. Rather, the payment of a fee among co-owners
reflects the reality that revenues and expenses are typically shared
proportionally, but time and labor often are not. The owner in
Occidental was not an independent contractor merely because it may
have reaped economic rewards from improvements to the property, and
Aruba is not any less of an owner because it was compensated on the
front end rather than solely on the back end. Here, the record bears
evidence of tasks Aruba was required to undertake as operator of record
that served the interests of both co-tenants, including but not limited to
operating the well, securing equipment, and preparing Joint Interest
Billing statements tracking the co-tenants’ proportionate share of
expenses. It is not at all surprising that an owner undertaking such
tasks might make an agreement that, in substance, reallocates revenues
and expenses with respect to jointly beneficial efforts. Such an
arrangement is, in essence, a true-up among co-owners, and it should
not ordinarily subject the owners to different duties post-conveyance
with respect to the same property condition.
In sum, we decline to create an exception to Occidental’s
dual-capacity analysis for a fractional working-interest property owner
who also takes responsibility for wellsite operations as an operator of
record. Being financially compensated for managing your property
interests in a tenancy in common does not give rise to a third-party
relationship with respect to the property but is more akin to
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reapportioning revenues and expenses among co-owners. When the sole
owner of property, like the owner–operator in Occidental, does all the
work and retains all the revenue, the owner is no less compensated for
its operation efforts than Aruba was while working for the benefit of all
the working-interest owners. Under the exception Eagleridge
advocates, some owner–operators would have open-ended liability while
other owner–operators would not. Eagleridge does not offer any reason
why the law should inject such disparity and uncertainty into co-tenancy
relationships.
III
On the record before the Court, we hold that an agreement strictly
between tenants in common to allocate expenses, assign responsibilities,
and compensate for disparate efforts in a joint endeavor does not create
an exception to Occidental as to improvements each party would
otherwise have been free to construct without the consent of the other.
The trial court did not abuse its discretion in striking Eagleridge’s
responsible-third-party designation because Aruba ceased to have any
responsibility for the premises conditions, and thus had no duty under
premises-liability principles, after USG acquired Aruba’s ownership
interests. We therefore deny Eagleridge’s mandamus petition.
John P. Devine
Justice
OPINION DELIVERED: March 11, 2022
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