486 S.W.3d 703
Tex. App.2016Background
- Burlington (successor to Southland) and Buttes entered a 1975 Area of Mutual Interest (AMI) agreement giving Burlington a potential 25% undivided interest in certain leases within the AMI, with rights to be offered interests in future acquisitions.
- In 1978 Southland entered a farmout with Petromark (predecessor to Woodbine) under which Petromark performed drilling and would receive assignments as units were declared; some wells on the Wilson lease were treated as Petromark interests.
- In 1994 Southland executed a broad assignment to Samson (the 1994 assignment) conveying “all right, title and interest” in leases described on Exhibit A and wells/equipment, while reserving certain interests specifically noted on Exhibit A (including an Exception Clause identifying certain wells).
- Burlington later conveyed additional interests in 1997 and over time parties treated title inconsistently; several title exams reached conflicting conclusions whether Burlington retained any interest in the Wilson lease portion of the AMI.
- Burlington sued Appellees (PetroMax, Woodbine, et al.) seeking declarations that the AMI remained in effect and that Burlington retained a 25% interest; the trial court granted Appellees’ summary judgment, concluding the 1994 assignment conveyed Burlington’s remaining AMI interests and the AMI expired. The court of appeals affirmed.
Issues
| Issue | Burlington's Argument | Appellees' Argument | Held |
|---|---|---|---|
| Whether the 1994 assignment conveyed Burlington’s leasehold interests in the AMI (including the Wilson lease) | The 1994 assignment is ambiguous; Exhibit A mixes conveyed and reserved interests so Burlington retained leasehold interests | The 1994 assignment unambiguously conveyed Burlington’s interests in the listed leases except expressly reserved lands/wells in Exhibit A (Odom, Wilson #4, Buchanan #2) | The assignment is unambiguous and conveyed Burlington’s interests in the AMI leases (except the expressly excepted wells); summary judgment for Appellees affirmed |
| Whether extrinsic evidence or industry practice can create ambiguity in the 1994 assignment | Extrinsic evidence (auction records, course of dealing, title practice) show the parties understood the assignment as conveying only specific wells | Parol/extrinsic evidence not admissible to alter an unambiguous written assignment; the four corners control | Court refused to create ambiguity by extrinsic evidence; relied on plain text of the assignment |
| Whether the AMI survived given Burlington’s conveyances | AMI persists unless leasehold jointly owned within the area is extinguished | AMI terminates when Burlington assigned the remaining interests in the leases comprising the AMI | AMI expired because Burlington assigned its remaining interests; declaratory relief denied |
| Whether any factual disputes precluded summary judgment | Burlington argued factual issues exist about what was conveyed and what was reserved | Appellees asserted the documentary record is definitive and no material fact issue exists | Court found no genuine fact issue; legal construction dispositive, summary judgment proper |
Key Cases Cited
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (summary judgment standard; de novo review)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (contract construction: ascertain parties’ intent from four corners)
- Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903 (Tex. 1982) (explaining purpose and operation of AMI agreements)
- Tex. Utils. Elec. Co. v. City of Waco, 919 S.W.2d 436 (Tex. App.—Waco 1996, writ denied) (parol evidence inadmissible to vary unambiguous contracts)
- Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118 (Tex. 1996) (contract ambiguity principles)
- Kachina Pipeline Co., Inc. v. Lillis, 471 S.W.3d 445 (Tex. 2015) (extrinsic evidence may inform contract text only when ambiguity exists)