528 S.W.3d 708
Tex. App.2017Background
- In 2008 Chesapeake entered a letter agreement to buy deep (below Cotton Valley) mineral term assignments from Buffco/Twin and others; the deal included the 680‑acre Geisler Gas Unit and allocated $20,000/acre in due‑diligence provisions.
- Chesapeake’s title due diligence mistakenly failed to discover recorded assignments showing Harleton owned a 50% non‑op working interest (Capital owned 3%, Twin 25%, Freeman Resources 22%). Chesapeake paid $13.6M for the Geisler allocation; Shore Freeman disbursed $6.8M each to Buffco/Twin and Freeman Resources.
- Harleton learned of the closing and asserted it had been entitled to a right‑of‑first‑refusal (ROFR) under a 2003 co‑development agreement/JOA and sued, seeking specific performance, unjust enrichment, and a constructive trust; the trial court granted relief and imposed a constructive trust over $6.8M.
- Defendants appealed. The court of appeals reviewed competing summary‑judgment motions and ruled key issues de novo.
- The court reversed, holding Harleton’s unjust‑enrichment claim was time‑barred, Chesapeake could not recover an alleged overpayment from Freeman (due to the Letter Agreement’s due‑diligence/waiver scheme), Harleton was not a third‑party beneficiary entitled to attorneys’ fees, and therefore lacked standing to enforce the Letter Agreement; judgment was rendered that Harleton take nothing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a constructive trust/unjust‑enrichment remedy could lie | Harleton: defendants were unjustly enriched by pocketing money paid by Chesapeake and a constructive trust should be imposed | Defs: unjust‑enrichment claim barred by two‑year statute of limitations; no underlying timely cause | Held: unjust‑enrichment claim barred by limitations; constructive trust improper; Harleton takes nothing |
| Whether Chesapeake may recover an alleged overpayment ($408,000) from Freeman | Chesapeake: overpaid because it intended to buy 100% and should recover excess paid for Capital’s 3% | Freeman: Letter Agreement required Chesapeake to do due diligence and, by contract, waived title defects if not timely asserted | Held: Letter Agreement governs; Chesapeake assumed risk and conclusively waived defects when it failed to timely notify; no recovery from Freeman |
| Whether Harleton is entitled to attorneys’ fees for breach of the Letter Agreement | Harleton: Chesapeake breached non‑ops clause and Harleton may recover fees under Texas law for contract claims | Chesapeake: Harleton is not a party nor an enforceable third‑party beneficiary of the Letter Agreement | Held: Harleton is not a third‑party beneficiary with enforcement rights; cannot recover attorneys’ fees under Tex. Civ. Prac. & Rem. Code §38.001 |
| Whether trial court had subject‑matter jurisdiction over Harleton’s contract claim | Harleton: could enforce the Letter Agreement (standing) | Defs: Harleton lacks privity and is not an intended beneficiary; no standing | Held: Harleton lacked standing to assert breach; absence of third‑party‑beneficiary status is jurisdictional and claim dismissed with prejudice |
Key Cases Cited
- Elledge v. Friberg‑Cooper Water Supply Corp., 240 S.W.3d 869 (Tex. 2007) (two‑year limitations applies to unjust enrichment)
- Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000) (when express contract governs, quasi‑contract recovery is generally unavailable)
- Burlington N. R.R. Co. v. Sw. Elec. Power Co., 966 S.W.2d 467 (Tex. 1998) (overpayments under a contract may give rise to restitution in limited circumstances)
- MCI Telecomm. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647 (Tex. 1999) (rules for third‑party beneficiary status; donee vs creditor vs incidental beneficiary)
- First Bank v. Brumitt, 519 S.W.3d 95 (Tex. 2017) (intent to confer enforceable rights on third party must be clearly spelled out)
- El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802 (Tex. 2012) (parties may contractually allocate risk of mistake/due‑diligence results)