Ranchero Esperanza, Ltd./Marathon Oil Company v. Marathon Oil Company/Ranchero Esperanza, Ltd.

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
RANCHERO ESPERANZA, LTD., §
No. 08-14-00152-CV
Appellant/Cross-Appellee, §
Appeal from the
v. §
112th District Court
§
MARATHON OIL COMPANY, of Crockett County, Texas
§
Appellee/Cross-Appellant. (TC#10-07-07204-A)
§
OPINION
This case involves the well-established rule in Texas that a cause of action for injury to
land is a personal right belonging to the person who owns the property at the time of injury, and
that a mere subsequent purchaser does not have standing to recover for injuries committed before
his purchase. Here, Marathon Oil Company plugged and abandoned Well 812 in 1989 and ceased
all activity as an operator on the property in 1999. Ranchero Esperanza, Ltd. purchased the
property in 2004. In July 2008, Well 812 began leaking salt water onto the surface of the land,
apparently due to injection activity being conducted nearby. Ranchero Esperanza alleges that
Marathon’s negligence in plugging Well 812 in 1989 allowed the salt water to reach the surface
and was a proximate cause of the surface damages around the well.
On traditional summary judgment, the trial court determined that Ranchero Esperanza as a
subsequent purchaser of the property did not have standing to assert its claims for negligence,
trespass, and nuisance. We conclude the trial court erred, because the surface damage from Well
812 was an injury that occurred in July 2008 when Ranchero Esperanza was the owner of the
property. We also conclude, however, that the trial court erred in denying Marathon’s alternative
ground for summary judgment based on statute of limitations. Accordingly, we reverse the trial
court’s judgment dismissing Ranchero Esperanza’s claims for lack of standing and render
judgment that Ranchero Esperanza take nothing because its claims are barred by the statute of
limitations.
BACKGROUND
In December 2004, Ranchero Esperanza bought a ranch in Crockett County, Texas,
consisting of approximately thirty-two sections of land. In addition to the surface estate,
Ranchero Esperanza owned an undivided one-half interest in the Trinity Aquifer under the
property.1 Well 812, the well at issue in this appeal, is located on one of the two most westerly
sections of the ranch, both of which are included in the Olson Unit.
The Olson Unit was formed by Marathon Oil in 1965 to implement secondary recovery of
hydrocarbons through water injection. Most of the wells within the Olson Unit were drilled in the
1940s and 1950s by Plymouth Oil or Midland Oil Company. Well 812 was drilled by Midland
Oil Company in 1957. In 1989, Marathon Oil plugged and abandoned Well 812, utilizing a
contractor for the plugging operations who had been approved by the Texas Railroad Commission
1
At the time suit was filed, the other half interest in the Trinity Aquifer was owned by Southwest Royalties, Inc.,
which Esperanza initially joined as an involuntary party-plaintiff to the lawsuit. Southwest Royalties subsequently
conveyed its one-half interest to Ranchero Esperanza and was dismissed from the lawsuit.
2
(RRC) and who performed the plugging operations in accordance with procedures approved in
advance by the RRC.
Marathon Oil sold and quit operating the Olson Unit in 1999. The Olson Unit was
subsequently acquired and operated by Aspen Operating Company, LLC in 2004.
On July 20, 2008, Aspen noticed a large amount of salt water flowing from Well 812.
Aspen worked to stop the flow of brine, and cleaned and remediated the area surrounding Well
812. Ranchero Esperanza alleged that it did not discover the leak until eight days later, on July
28, 2008, when its foreman, Ken Hartman, saw men and equipment in the area of Well 812 and
went over to investigate. Mr. Hartman testified that his attention was elsewhere at the time, but
had he driven over to the Well 812 area a week earlier, he might have discovered the leak.
Aspen later determined that one of its nearby producing wells, Well 711, had a subsurface
leak in its downhole tubing and casing, causing large volumes of salt water to leak out of its
wellbore and traverse through a subsurface salt formation to Well 812. After Aspen had begun
injecting salt water under pressure into the producing reservoir in the Olson Unit, salt water had
exited Well 711 and apparently traversed underground from Well 711 and entered Well 812 well
bore, traversed up the well bore, and exited holes in the surface casing above a subsurface depth of
50 feet, then traversed to the ground surface.
When Aspen re-entered Well 812 in 2008, it did not find a plug at the surface casing shoe
in the well, although a plug had previously been spotted and tagged there in 1989 when the well
was plugged. Aspen also discovered that the salt water leaking from Well 711 towards Well 812
had over time washed out a large cavern just below the surface casing shoe. In its efforts to
re-plug Well 812, Aspen spotted in the well more than fifty-nine truckloads of gravel and three
3
thousand sacks of cement in the cavern, but was unable to fill the cavern and establish circulation
in the well. Ranchero Esperanza filed suit on July 27, 2010, against Marathon Oil, Aspen, and
others. In its Third Amended Petition, which was the live pleading at the time of summary
judgment, Ranchero Esperanza asserted claims against Marathon Oil and Aspen for negligence,
trespass, and nuisance. Ranchero Esperanza sued for both surface damages and damages to the
aquifer “resulting from Aspen’s and Marathon’s failure to properly manage and operate the wells
on Ranchero Esperanza property.” Among other allegations, Ranchero Esperanza alleged that
“brine from Well 812 polluted the surface of the ranch, killing vegetation over several acres.”
Ranchero Esperanza raised the discovery rule in response to Marathon Oil’s assertion of
limitations, and claimed the “problem with the Olson Unit wells on Ranchero Esperanza did not
become apparent until the Ranchero Esperanza foreman, Ken Hartman, saw an uncontained flow
of brine from the Olson Unit Well 812 on July 28, 2008.”
Ranchero Esperanza also claimed additional problems with several other wells, including
Well 907. Ranchero Esperanza alleged that its discovery of casing leaks in other wells
demonstrated “that the problem that became apparent at Wells 812 and 907 is a field-wide
phenomenon[.]”2 As damages, Ranchero Esperanza sought $1.5 million “for remediation of
brine contamination below Wells 812 and 907, $1.6 million for monitoring all the Olson Unit
wells on the property for ten years, $3.7 million for diminution in the value of the property due to
environmental stigma, and unspecified damages for reduction in the value of the aquifer due to
contamination.
2
Ranchero Esperanza asserted that well files and cement logs revealed that 19 of the 39 Olson Unit wells on their
ranch “have had casing leaks during the time the Olson Unit was operated by Marathon and Aspen[,]” which “is
evidence of the corrosive environment in the Olson Unit[.]”
4
Marathon Oil filed a hybrid motion for summary judgment arguing in part that it was
entitled to traditional summary judgment because: (i) Ranchero Esperanza lacked standing to
assert claims against Marathon Oil; (ii) Ranchero Esperanza’s claims were barred by the statute of
limitations; and (iii) Marathon Oil had plugged Well 812 in accordance with applicable RRC rules
and regulations, and thus, had no liability for damages arising from any alleged improper
plugging.3 The trial court granted Marathon’s motion on the ground Ranchero Esperanza “lacks
standing to assert claims against Marathon,” and denied the motion in all other respects. The trial
court dismissed all of Ranchero Esperanza’s claims against Marathon due to Ranchero
Esperanza’s “lack of standing to assert such claims[.]” 4 Marathon filed a conditional
cross-appeal preserving its right to appeal the trial court’s denial of its alternative grounds for
summary judgment.
DISCUSSION
On appeal, Ranchero Esperanza contests the dismissal of its claims. Ranchero Esperanza
contends the trial court erred when it concluded that Ranchero Esperanza did not have standing to
sue Marathon for improperly plugging Well 812. In particular, Ranchero Esperanza contends that
it had standing to sue for the surface damages arising from Well 812 because that injury did not
occur until July 2008, after it had already acquired the property. We agree.
Standard of Review
We review the trial court’s grant of summary judgment de novo. Shell Oil Co. v. Writt,
3
Aspen also filed a motion for summary judgment. Marathon adopted by reference essentially all of the arguments
and evidence in Aspen’s motion.
4
The trial court denied Aspen’s motion for summary judgment, and severed Ranchero Esperanza’s claims against
Marathon to make a final judgment as to Marathon. The trial court entered a separate order abating Ranchero
Esperanza’s claims against Aspen pending the final outcome of this appeal.
5
__S.W.3d__, 2015 WL 2328678, at *3 (Tex. May 15, 2015); Merriman v. XTO Energy, Inc., 407
S.W.3d 244, 248 (Tex. 2013). The evidence is viewed in the light most favorable to the
nonmovant. Shell Oil Co., 2015 WL 2328678, at *3; City of Keller v. Wilson, 168 S.W.3d 802,
824 (Tex. 2005). In reviewing the record, we indulge every reasonable inference in favor of the
nonmovant, and resolve any doubts in favor of the nonmovant. Shell Oil Co., 2015 WL 2328678,
at *3; Buck v. Palmer, 381 S.W.3d 525, 527 (Tex. 2012).
Standing
Standing is a component of subject-matter jurisdiction. DaimlerChrysler Corp. v. Inman,
252 S.W.3d 299, 304 (Tex. 2008) (“A court has no jurisdiction over a claim made by a plaintiff
without standing to assert it.”). As a prerequisite to subject-matter jurisdiction, a lack of standing
may be raised in a motion for summary judgment. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d
547, 553–54 (Tex. 2000). The movant for summary judgment bears the burden to establish the
absence of standing. Roskey v. Texas Health Facilities Comm’n, 639 S.W.2d 302, 303 (Tex.
1982) (per curiam); La Tierra de Simmons Familia, Ltd. v. Main Event Entm’t, LP, No.
03-10-00503-CV, 2012 WL 753184, at *4 (Tex.App. – Austin Mar. 9, 2012, pet. denied).5 We
therefore must determine if Marathon established that Ranchero Esperanza lacked standing as a
matter of law. See STICO Mut. Ins. Co., RRG v. Advanced Polymer Coatings, Inc., 412 S.W.3d
56, 58 n.1 (Tex.App. – El Paso 2013, no pet.) (“When a defendant moves for summary judgment
based on a lack of standing, it must conclusively establish the defense as a matter of law.”); La
Tierra de Simmons Familia, 2012 WL 753184, at *4.
5
See also Mission Consol. Indep. Sch. Dist. v. Garcia, 372 S.W.3d 629, 635 (Tex. 2012) (stating that in reviewing a
plea to the jurisdiction, the defendant has the burden to show that the trial court lacks jurisdiction); Heckman v.
Williamson Cnty., 369 S.W.3d 137, 150 (Tex. 2012) (stating that a trial court must grant a plea to the jurisdiction if the
defendant presents undisputed evidence that negates the existence of the trial court’s jurisdiction).
6
“It is well established that a cause of action for injury to land is a personal right belonging
to the person owning the property at the time of injury, and a mere subsequent purchaser cannot
recover for an injury committed before his or her purchase.” La Tierra de Simmons Familia,
2012 WL 753184, at *5. “For more than 100 years, this Court has recognized that a cause of
action for injury to real property accrues when the injury is committed. The right to sue is a
personal right that belongs to the person who owns the property at the time of the injury, and the
right to sue does not pass to a subsequent purchaser of the property unless there is an express
assignment of the cause of action.” Exxon Corp. v. Emerald Oil & Gas Co., L.C., 331 S.W.3d
419, 424 (Tex. 2010) (citations omitted); see Vann v. Bowie Sewerage Co., Inc., 127 Tex. 97, 90
S.W.2d 561, 562–63 (1936) (“Where injury to land results ... the right of action for all the damages
resulting from the injury accrues to the owner of the land at the time the thing that causes the injury
commences to affect the land.”).6
A subsequent landowner may assert a cause of action for pre-existing injuries only if there
is an express assignment of the cause of action. See, e.g., Emerald Oil, 331 S.W.3d at 424; Cook
v. Exxon Corp., 145 S.W.3d 776, 780 (Tex.App. – Texarkana 2004, no pet.). Ranchero Esperanza
does not contend that it obtained an express assignment of any causes of action from the prior
owner when it purchased the property. Therefore, Ranchero Esperanza had standing to assert its
claims in this lawsuit only if the injury occurred after it acquired the property in December 2004,
“either because that is when the first injury occurred or because a new injury occurred.” See La
Tierra de Simmons Familia, 2012 WL 753184, at *5.
6
See also Boerschig v. Southwestern Holdings, Inc., 322 S.W.3d 752, 767 (Tex.App. – El Paso 2010, no pet.); Exxon
Corp. v. Pluff, 94 S.W.3d 22, 27 (Tex.App. – Tyler 2002, pet. denied); Senn v. Texaco, Inc., 55 S.W.3d 222, 225
(Tex.App. – Eastland 2001, pet. denied); Lay v. Aetna Ins. Co., 599 S.W.2d 684, 686 (Tex.Civ.App. – Austin 1980,
writ ref’d n.r.e.).
7
Both Marathon and Ranchero Esperanza agree that the overarching issue in this case is
when a cause of action accrued for the alleged injury to the property. The date a cause of action
accrues is normally a question of law. Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620, 623 (Tex.
2011); Schneider Nat’l Carriers, Inc. v. Bates, 147 S.W.3d 264, 270 (Tex. 2004); see Hooks v.
Samson Lone Star, Ltd. P’ship, 457 S.W.3d 52, 57 (Tex. 2015). Generally, 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. Etan Indus., Inc., 359 S.W.3d
at 623; Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 221 (Tex. 2003).
Ranchero Esperanza argues that although Marathon Oil negligently plugged Well 812 in
1989, no legal injury from that negligence occurred until July 2008 when salt water flowed to the
surface near Well 812. Ranchero Esperanza asserts that when it bought the property in December
2004, there was nothing affecting the land around Well 812, but that “a cause of action accrued for
the first time” when Well 812 began to flow salt water to the surface in July 2008; therefore,
“Esperanza, as owner of the land, had standing to assert that cause of action.”
In contrast, Marathon Oil contends that any cause of action accrued immediately “at the
time of the allegedly improper plugging in 1989,” and that Ranchero Esperanza lacked standing
because a cause of action did not pass when it purchased the property in 2004. Marathon Oil
recognizes that it is the person who owns the property “at the time of the injury” who has standing
to sue. Indeed, Marathon Oil cites to numerous cases holding that it is the time of the injury that
controls who has standing. See, e.g., Exxon Corp., 331 S.W.3d at 424 (“a cause of action for
injury to real property accrues when the injury is committed”); Vann, 90 S.W.2d at 562-63
(“Where injury to land results … the right of action for all the damages resulting from the injury
8
accrues to the owner of the land at the time the thing that causes the injury commences to affect the
land.”). Marathon Oil contends that the legal injury here occurred contemporaneously with its
alleged deficient plugging of Well 812 in 1989.
To help clarify the distinction between when a cause of action accrues immediately at the
time the wrongful act is committed and when it accrues later, Ranchero Esperanza relies on the
analysis of the Austin Court of Appeals in Zidell v. Bird, 692 S.W.2d 550 (Tex.App. – Austin
1985, no pet.). There, the Court was attempting to determine when a legal malpractice claim
accrued for purposes of the statute of limitations. Id. at 553. In doing so, the Court explained
that the “legal injury rule” is applied “to determine when a cause of action accrues in cases where
the defendant’s conduct is separated in time from the harm which it causes the plaintiff.” Id. at
554. The “central idea of the rule is that the plaintiff’s cause of action accrues when the
defendant’s conduct first becomes ‘unlawful’ as to the plaintiff under the law applicable to the
circumstances of the case.” Id. The Court reviewed and compared “lawful acts” cases
(involving conduct for which there was no immediate right of action under the applicable law)
with “unlawful acts” cases (involving conduct for which there was an immediate right of action
under the applicable law). Id. at 554-55. Ultimately, the Court concluded “[t]he distinctions to
be drawn seem fine indeed and the decisions are not easy to reconcile.” Id. at 555.
The one consistency we discern from the case law is that before a cause of action accrues
there must be – at a minimum – some injury, “be the damage however slight.” See Houston
Water-Works Co. v. Kennedy, 70 Tex. 233, 236, 8 S.W. 36, 37 (1888). Indeed, the
landowner-standing cases demonstrate that there can be a delay between the wrongful act and the
first resulting injury, and any cause of action does not accrue until the first injury occurs.
9
For instance, in Haire v. Nathan Watson Co., 221 S.W.3d 293 (Tex.App. – Fort Worth
2007, no pet.), new homeowners sued the geotechnical engineering firm that had performed the
soil analysis years before during the initial development stages of the subdivision. The court held
the homeowners had standing to bring claims against the geotechnical engineering firm, because
the structural damage to their home due to the excessive swelling of the soils beneath their home
arose after they had purchased the home. Id. at 298. Likewise, the Texas Supreme Court
recognized in Vann v. Bowie Sewerage Co., 127 Tex. 97, 90 S.W.2d 561, 562 (1936), that for
purposes of standing, an injury to the land accrues: “to the owner of the land at the time the thing
that causes the injury commences to affect the land. In legal contemplation, the injury to the land
occurs at that time.” (emphasis added). The landowners in Vann were held not to have standing
because the “nuisance of which the Vanns complain had already injured said land when Vann
bought it[.]” Id. at 563; see also La Tierra de Simmons Familia, 2012 WL 753184, at *5
(recognizing that a subsequent landowner can have standing to sue “either because that is when the
first injury occurred or because a new injury occurred”).
Although a limitations case, Geochemical Surveys v. Dietz, 340 S.W.2d 114 (Tex.Civ.App.
– Austin 1960, writ ref’d n.r.e.), is instructive. There, owners of a farm sued an oil well lessee in
1958 for destroying their water wells by negligently disposing of salt water in unlined earthen pits
on the farmers’ property and adjoining lands between 1952 and 1957. The defendant argued that
the owners’ cause of action accrued when the salt water was first deposited into the earthen pits.
Id. at 116. The Dietz court held that the acts of the lessee “in depositing salt water in the earthen
tanks … did not constitute an invasion of appellees’ property, were not necessarily injurious to it,
and they, of themselves, gave appellees no cause of action.” Id. at 117. Rather, the injury
10
sustained by the landowners “was the pollution of their well. Prior to this injury appellees had no
cause of action.” Id.
In contrast, Houston Water-Works v. Kennedy, 70 Tex. 233, 8 S.W. 36 (1888), represents a
situation in which the cause of action accrued immediately upon the commission of the wrongful
act because the injury occurred concurrently with that act. In installing a water pipe in Kennedy’s
building, the Water Works cut away a portion of an arch to make way for the pipe. Id. at 37. The
arch was not open to view, and the cutting was unknown to Kennedy. Id. The cutting of the arch
removed support for one corner of the building, which years later caused settling of the building
and serious property damage. Id. at 36-37. The Court held that Kennedy’s cause of action
accrued immediately when the arch was cut because Kennedy suffered a legal injury when the
unauthorized hole was drilled through the supporting arch without his permission. Id. at 37.
Ranchero Esperanza, on the other hand, did not sustain any surface damages from
Marathon Oil’s alleged deficient plugging of Well 812, until salt water was released from Well
812 onto the surface of its property in July 2008. Any cause of action for those damages did not
accrue until that time – a time at which Ranchero Esperanza was the owner of the property.
Marathon Oil asserts that we must classify Ranchero Esperanza’s surface damages arising
from Well 812 as “permanent,” and that this compels the conclusion that any cause of action
accrued in 1989 because any “breach occurred and any associated injury commenced, if at all,
when Well 812 was allegedly improperly plugged in 1989.”
In making this argument, Marathon Oil candidly admits that the courts are split on whether
the characterization of an injury as temporary or permanent is relevant to the issue of standing.7
7
See La Tierra de Simmons Familia, Ltd., 2012 WL 753184, at *9 n.9 (“There is some disagreement among the courts
of appeals about whether the characterization of an injury as temporary or permanent is even relevant to the issue of
11
We need not decide this issue, which has been described as “one of the oldest and most complex in
Texas law.” Schneider Nat'l Carriers, Inc. v. Bates, 147 S.W.3d 264, 268 (Tex. 2004). Even
when an injury to land has been characterized as permanent, the Texas Supreme Court has
repeatedly recognized that the underlying cause of action accrues when the wrongful act effects an
injury. See, e.g., Schneider Nat'l Carriers, 147 S.W.3d at 270 (“A permanent nuisance claim
accrues when injury first occurs or is discovered[.]”); Natural Gas Pipeline Co. of Am. v. Justiss,
397 S.W.3d 150, 153 (Tex. 2012) (“A permanent nuisance claim accrues when the condition first
‘substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or
annoyance to persons of ordinary sensibilities.’”) (quoting Schneider Nat'l Carriers, Inc., 147
S.W.3d at 269–70); see also Bayouth v. Lion Oil Co., 671 S.W.2d 867, 868 (Tex. 1984) (cause of
action for permanent injury to land accrues on discovery of first actionable injury); Moreno v.
Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex. 1990) (“a cause of action can generally be said to
accrue when the wrongful act effects an injury”). These cases recognize that there can be, and
often is, a delay between the wrongful act and the resulting injury.
For instance, in Tennessee Gas Transmission Co. v. Fromme, 153 Tex. 352, 269 S.W.2d
336 (1954), the landowner contended Tennessee Gas was negligent in permitting water containing
harmful chemicals from its compressor station to flow upon her land. Id. at 337. In determining
that the landowner’s claim was barred by limitations, the Supreme Court applied the rule that when
there is a direct invasion of one’s property of a permanent character, the original invasion is the
standing.”); Senn, 55 S.W.3d at 226 (“The distinction between temporary and permanent damages is meaningless with
respect to the issue of standing.”); Pluff, 94 S.W.3d at 28 (rejecting argument that injury must be characterized prior to
consideration of standing, citing Senn); Cook, 145 S.W.3d at 779 (“characterization of an injury as temporary or
permanent is not relevant under these circumstances”); see also Denman v. CitgoPipeline Co., 123 S.W.3d 728,
734-35 (Tex.App. – Texarkana 2003, no pet.) (rejecting argument that alleged injuries were temporary, citing Senn
and Pluff); but see Denman v. SND Operating, L.L.C., No. 06-04-00061-CV, 2005 WL 2316177, *4 (Tex.App. –
Texarkana Sept. 23, 2005, no pet.) (“we disagree that the distinction between temporary and permanent injuries is
necessarily irrelevant” to question of standing).
12
injurious act, and that in such cases, the cause of action accrues and limitations begins to run from
the date of the first invasion. Id. It is apparent from the decision in Fromme that the landowner’s
claim was barred by limitations not because her claim accrued when the compressor station was
built. The mere erection of the plant did not constitute an invasion of landowner’s rights.
Rather, the landowner’s cause of action accrued when the plant first began discharging affluent
onto her land, more than two years before the landowner filed suit. Id. at 337-38 (“the evidence
introduced in the case conclusively reveals that respondent’s legal rights were invaded the moment
water from the petitioner’s plant began to flow upon her land.”). Likewise, Ranchero Esperanza’s
legal rights were invaded, and its causes of action accrued, the moment the salt water from Well
812 began to flow upon its land.
Marathon Oil contends that Texas courts have repeatedly held that causes of action for the
alleged improper plugging of an oil and gas well always accrue at the time of the plugging. All of
the cases cited by Marathon Oil in support of this proposition, however, involve situations where
the injury to the property had occurred before the plaintiff-landowner owned the property. For
example, Brooks v. Chevron USA Inc., No. 13-05-029-CV, 2006 WL 1431227, at *7 (Tex.App. –
Corpus Christi-Edinburg May 25, 2006, pet. denied), involved alleged contamination of soils from
pollution or contaminates generated by the oil and gas facilities or activities occurring before the
purchase, a contention that “is undisputed and is also apparent from [plaintiff’s] petition.”
Likewise, Denman v. Citgo Pipeline Co., 123 S.W.3d 728, 730, 734 (Tex.App. – Texarkana 2003,
no pet.), and Denman v. SND Operating, L.L.C., No. 06-04-00061-CV, 2005 WL 2316177, at *5
(Tex.App. – Texarkana Sept. 23, 2005, no pet.), both involved unused pipelines and oil field
equipment left on the property before the plaintiff-landowners purchase of the property, and soil
13
contamination arising from operations occurring before the plaintiff-landowners purchase of the
property.
Exxon Corp. v. Emerald Oil & Gas Co., L.C., 331 S.W.3d 419 (Tex. 2010), addressed
whether “section 85.321 of the Texas Natural Resources Code allows a subsequent mineral lessee
to maintain a cause of action against a prior lessee for damages to the mineral interest that
occurred prior to the time the subsequent lessee obtained its interest.” Id. at 420 (emphasis
added). Thus, the very question being addressed in Emerald Oil assumed the damages and
injuries occurred before the purchase. Further, the plaintiff’s complaint in Emerald Oil was that
when it tried to re-enter the wells plugged and abandoned by Exxon years before the purchase, it
had difficulty because Exxon allegedly had improperly plugged the wells by placing considerable
quantities of metal, refuse, environmental contaminates, non-drillable materials, and cut casings
into the well shafts. Id. at 421. Thus, the Exxon case involved injuries to the wells themselves
that occurred at the time the wells were plugged. In contrast, the surface damages alleged by
Ranchero Esperanza involve surface damages arising from an allegedly deficient plugging that
subsequently failed and allowed salt water to surface after the property was purchased by
Ranchero Esperanza.
Ranchero Esperanza’s causes of action for surface damages arising from the allegedly
deficient plugging of Well 812 did not accrue in 1989 when Marathon Oil plugged the well, but
rather accrued in July 2008 when the surface damages first resulted from the alleged deficient
plugging. We believe the present case can be analogized to the building of a deficient dam that
years later fails and floods the landowner’s property. Even if the defendant was negligent in
building the dam years before, the landowner’s rights are not invaded, and his cause of action does
14
not accrue, until the dam actually fails and damages the property. In the present case, the prior
landowner’s rights were not invaded when Marathon Oil installed the plug in 1989, but rather the
current landowner’s rights were invaded in July 2008 when the plug allegedly failed and caused
surface damages. Because Ranchero Esperanza owned the property at the time the first damages
occurred from the improper plugging of Well 812, it had standing to sue for those particular
surface damages. Accordingly, the trial court erred in granting summary judgment on the ground
that Ranchero Esperanza lacked standing to sue. Ranchero Esperanza’s sole issue on appeal is
sustained.8
Limitations
This does not conclude our inquiry, however. Because we have concluded that the trial
court erred in granting summary judgment on lack of standing, we must address Marathon Oil’s
conditional cross-points. As mentioned above, Marathon Oil also moved for traditional summary
judgment on the ground that Ranchero Esperanza’s claims were barred by the statute of
limitations. While the trial court granted Marathon’s motion on the ground Ranchero Esperanza
lacked standing, it denied the motion in all other respects. Marathon filed a conditional
cross-appeal preserving its right to appeal the trial court’s denial of its alternative grounds for
summary judgment.
The parties agree that all of Ranchero Esperanza’s causes of action are subject to the
two-year statute of limitations. Marathon Oil contends that it established limitations as a matter
of law by showing that Aspen discovered the salt water leak at Well 812 on July 20, 2008.
Marathon Oil asserts that this “injury” caused Ranchero Esperanza’s surface damage claims to
8
Because we hold that Ranchero Esperanza has standing to sue for surface damages arising from Well 812, we do not
address its alternative argument that the trial court’s ruling that it lacked standing violated the Open Courts Provision
of the Texas Constitution.
15
accrue on July 20, 2008, at the latest, and that Ranchero Esperanza’s claims are barred by
limitations because it did not file suit until over two years’ later on July 27, 2010. Marathon Oil
also contends that the discovery rule is inapplicable to this case, and in any event Ranchero
Esperanza’s foreman, Ken Hartman, stated that while he did not discover the leak until July 28,
2008, when he saw men and equipment in the area of Well 812 and went over to investigate, he
admitted that his attention was elsewhere at the time, and had he driven over to the Well 812 area a
week earlier, he might have discovered the leak.
A defendant moving for summary judgment on the affirmative defense of limitations has
the burden to conclusively establish that defense. KPMG Peat Marwick v. Harrison Cty Housing
Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). The defendant 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,9 by proving as a matter of law that there is no genuine issue of material fact
about when the plaintiff discovered, or in the exercise of reasonable diligence, should have
discovered the nature of its injury. Id. at 748.
We conclude that Marathon Oil proved as a matter of law that, at the latest, Ranchero
Esperanza’s causes of action accrued on July 20, 2008, when Aspen discovered salt water flowing
onto the surface from Well 812. We also conclude that the discovery rule does not apply because
the nature of the injury incurred – surface damages arising from salt water flowing from a well
onto the surface – is not inherently undiscoverable. Because it is undisputed that Ranchero
Esperanza did not file suit until July 27, 2010, which was over two years after its causes of action
accrued, its claims are barred by limitations.
As a general rule, a cause of action accrues for limitations purposes when a wrongful act
9
Ranchero Esperanza pleaded the discovery rule.
16
causes some legal injury, even if the fact of the injury is not discovered until later and even if all
resulting damages have not yet occurred. Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex.
1997). Marathon Oil’s summary judgment proof established that on July 20, 2008, Aspen
discovered a large amount of salt water flowing from Well 812 onto the surface. We have
previously concluded that as a matter of law Ranchero Esperanza’s causes of action accrued for
purposes of standing on July 20, 2008, when Aspen discovered the salt water emerging from Well
812. Likewise, as a matter of law, July 20, 2008 is also the date Ranchero Esperanza’s causes of
action accrued for purposes of limitations. See Etan Indus., 359 S.W.3d at 623 (for purposes of
the statute of limitations, “a cause of action accrues when a wrongful act causes a legal injury”)
(citing Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 221 (Tex. 2003)). Marathon
Oil thus met its burden to establish as a matter of law when Ranchero Esperanza’s causes of action
accrued.
It is undisputed that Ranchero Esperanza first filed suit on July 27, 2010, which was over
two years’ after its causes of action accrued. Thus, unless the discovery rule applies to toll the
accrual of its causes of action, Ranchero Esperanza’s claims are barred by limitations. The
“discovery rule” is an exception to the general rule of accrual; when applicable, it provides that an
action does not accrue until the plaintiff knew, or in the exercise of reasonable diligence should
have known, of the wrongful act and resulting injury. Murphy, 964 S.W.2d at 270. Ranchero
Esperanza argues that under the discovery rule its causes of action did not accrue until its foreman,
Ken Hartman, discovered the leak on July 28, 2008, when he saw men and equipment in the area of
Well 812 and went over to investigate, thereby making its filing timely on July 27, 2010.
The discovery rule has generally been applied in cases where the nature of the injury
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incurred is “inherently undiscoverable” and the evidence of the injury is objectively verifiable.
Id.; S.V. v. R.V., 933 S.W.2d 1, 6 (Tex. 1996). “An injury is inherently undiscoverable if it is by
nature unlikely to be discovered within the prescribed limitations period despite due diligence.”
S.V., 933 S.W.2d at 7. The Supreme Court explained in Via Net, U.S. v. TIG Insurance Co., 211
S.W.3d 310 (Tex. 2006), that whether an injury is inherently undiscoverable is a legal question
“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.” Id. at 314 (emphasis in original); see also Hunt
Oil Co. v. Live Oak Energy, Inc., 313 S.W.3d 384, 389 (Tex.App. – Dallas 2009, pet. denied).
We conclude that the type of injury alleged in this case – surface damages arising from salt
water emerging from an oil well – is not inherently undiscoverable. Accordingly, the discovery
rule does not apply to toll the accrual of Ranchero Esperanza’s causes of action. Ranchero
Esperanza’s alleged injury involves tangible, visible things: oil and gas activities affecting the
surface of the property. Whether surface damages have been incurred is apparent to a landowner
by mere viewing. Surface damages are not hidden; they are in plain view. Further, diligence is
required by the owner of the surface as to the operation of oil and gas leases on its land.
“Inherently undiscoverable encompasses the requirement that the existence of the injury in not
ordinarily discoverable, even though due diligence has been used.” Computer Assocs. Int’l Inc. v.
Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996) (emphasis added). Even on a large ranch, a diligent
landowner keeping an eye on the oil and gas activities occurring on his land, could have discovered
surface damages arising from salt water emerging from a well, within two years of its appearance
on the surface. Simply put, surface damages arising from salt water emerging from a well are not
inherently undiscoverable, because they are the type of injuries that could be discovered through
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due diligence within a two-year limitations period.
Accordingly, the discovery rule does not apply, and Marathon Oil was not required to
negate the discovery rule in order to establish that limitations barred recovery as a matter of law.
The trial court thus erred in denying Marathon’s alternative ground for summary judgment that
Ranchero Esperanza’s claims were barred by limitations. Marathon Oil’s first conditional
cross-point is sustained.10
CONCLUSION
We conclude the trial court erred in granting summary judgment on lack of standing,
because the surface damage from Well 812 was an injury that occurred in July 2008 when
Ranchero Esperanza was the owner of the property. We also conclude that the trial court erred in
denying Marathon’s alternative ground for summary judgment based on statute of limitations,
because Marathon established that defense as a matter of law. Accordingly, we reverse the trial
court’s judgment dismissing Ranchero Esperanza’s claims for lack of standing and render
judgment that Ranchero Esperanza take nothing because its claims are barred by the statute of
limitations.
STEVEN L. HUGHES, Justice
July 24, 2015
Before McClure, C.J., Rodriguez, and Hughes, JJ.
10
Because our ruling on limitations disposes of the case, we do not address whether the trial court erred in denying
Marathon’s other cross-point concerning its compliance with RRC regulations.
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