558 S.W.3d 761
Tex. App.2018Background
- Crimson and ADAC jointly restructured interests from Elgin Holdings via an Overall Agreement and an Original Joint Operating Agreement (JOA) (March 2006); Crimson owned 77.5% and ADAC 22.5% of listed leases and warranted the listed exhibits constituted all Crimson leases in the Area of Mutual Interest (AMI).
- After discovering third‑party Ecco held nearby Rodessa acreage, parties executed an Ecco Participation Agreement and an Ecco JOA (June 2006) that (unlike the Original JOA) limited its AMI and contract area to the Rodessa formation and a smaller surface footprint.
- Crimson (operator) drilled three wells under the Ecco JOA; costs significantly exceeded estimates and ADAC defaulted on billings; Crimson deemed ADAC a non‑consenting party and sought collection remedies, including foreclosure of liens.
- Litigation: Crimson sued ADAC (2012) for unpaid JOA costs; ADAC counterclaimed alleging Crimson failed to convey leases it owned in the Original JOA AMI (the “Excluded Leases”) and failed to offer ADAC subsequent leases in the Original JOA AMI.
- The trial court granted Crimson comprehensive summary judgment and denied ADAC’s partial summary judgment. On rehearing appeal the court reexamined (a) whether the Original JOA AMI is depth‑limited to Rodessa; (b) whether the Ecco agreements supersede the Original JOA; (c) timeliness of ADAC’s Excluded‑lease claim; and (d) effect of deemed non‑consent and the amount of ADAC’s default.
Issues
| Issue | Crimson's Argument (Plaintiff) | ADAC's Argument (Defendant) | Held |
|---|---|---|---|
| 1) Is the Original JOA AMI limited to the Rodessa formation? | Exhibit A‑1 labels show "Rodessa" and parties intended Rodessa depth limitation. | Original JOA requires depth restrictions to appear in Exhibit A; Exhibit A lacks a depth restriction (except one lease). | Original JOA AMI is not limited to the Rodessa formation (except one lease). |
| 2) Do the Ecco Participation Agreement and Ecco JOA supersede the Original JOA? | Merger/integration clause in Ecco agreements covers the same subject matter and thus supersedes the earlier JOA. | Ecco agreements define a different, depth‑limited and smaller AMI; they do not expressly revoke the Original JOA. | Ecco agreements do not supersede the Original JOA; both operate concurrently and control their respective contract areas. |
| 3) Are ADAC’s claims to the Excluded Leases barred by limitations? | ADAC’s counterclaim was untimely; section 16.069 does not revive the claim because it arose from same transaction and ADAC filed too late. | ADAC invoked section 16.069 (and later section 16.068) to toll/relate back its counterclaim, making it timely. | ADAC’s Excluded‑lease claim is barred by limitations under §16.069; ADAC failed to timely raise §16.068 relation‑back before the trial court, so revival not applied. |
| 4) Effect of deemed non‑consent — remedies, suspension, foreclosure, and default amount | Deeming ADAC non‑consenting precludes suing for unpaid amounts but does not bar other remedies (suspension, foreclosure); Crimson established default amount. | Once deemed non‑consent ADAC was not in default and relief limited to production proceeds; also disputes amount of default. | Deemed non‑consent does not preclude other JOA remedies; suspension and foreclosure available. But Crimson failed to conclusively prove the $816,203.57 default amount; remand on amount. |
Key Cases Cited
- Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211 (Tex. 2003) (summary judgment standard and burden shifting)
- Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572 (Tex. 2006) (standards for reviewing summary judgment evidence in favor of nonmovant)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (JOA non‑consent and non‑operator rights under JOAs)
- Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195 (Tex. 1995) (burden shift once movant establishes right to summary judgment)
- M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22 (Tex. 2000) (movant’s burden on summary judgment)
- Nat’l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015) (distinguishing a covenant not to sue from a release)