Samson Exploration, LLC v. T. S. Reed Properties, Inc.
2015 Tex. App. LEXIS 10866
| Tex. App. | 2015Background
- Samson (lessee/operator) created two pooled gas units: the Black Stone (later amended/renamed Joyce DuJay) and the DuJay-A unit; overlapping depth/acreage issues arose between them.
- Samson amended the Black Stone unit in 2002 to narrow its depth, excluding production from a well on the Black-Stone lease; stakeholders in the Joyce DuJay unit accepted royalties after the amendment.
- Samson later created the DuJay-A Unit (declared effective as of first production) whose declared boundaries overlap the Joyce DuJay unit and include production from a Joyce DuJay lease well that perforates the shared zone.
- Multiple stakeholders (Joyce DuJay claimants and DuJay-A claimants, who trace interests to a T.S. Reed lease/amendment) sued Samson for unpaid royalties and breach of lease obligations; the trial court awarded damages to subsets of both claimant groups.
- On cross-motions for summary judgment the trial court (interlocutory rulings consolidated) awarded damages to several Joyce DuJay and DuJay-A claimants; Samson appealed and the court of appeals reviewed ratification, statute of limitations, estoppel/waiver, impracticability, scrivener’s-error/reformation, and damages/interest calculations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Joyce DuJay stakeholders can recover royalties after Samson amended the original unit to exclude the Black-Stone well | Joyce DuJay claimants: amendment was unauthorized; they are owed royalties from Black-Stone well | Samson: claimants were notified and accepted royalties under amended unit, thus ratified amendment | Court: claimants ratified the amendment by accepting payments and not challenging it; judgment for Samson (Joyce DuJay awards reversed and rendered for Samson) |
| Whether DuJay-A claimants can recover for breach where overlapping unit boundaries include common production zone | DuJay-A: Samson breached lease by attributing all common-zone production to Joyce DuJay and not DuJay-A | Samson: defenses include limitations, estoppel/ratification/waiver, impracticability, mistaken unit boundaries | Court: limitations and quasi-estoppel/waiver defenses fail; DuJay-A claimants entitled to recover on breach; summary judgment for DuJay-A claimants on these defenses affirmed |
| Whether Samson can reform the DuJay-A unit boundary (scrivener’s/mutual mistake) to eliminate overlap | Samson: unit declaration mistakenly omitted lower depth (attorney scrivener error); equity should reform instrument | DuJay-A: no mutual mistake, Samson alone erred and delayed; statute bars reformation; parties did not mutually err | Court: no evidence of mutual mistake or equitable grounds; reformation denied; Samson’s no-evidence attack fails |
| Whether trial court correctly calculated damages and interest (including pre-unit production and NPRI interest) | Plaintiffs (DuJay-A/NPRI): damages include royalties/interest from production dates as computed; cross-appeal for higher awards by DuJay-A | Samson: awards are excessive (include royalties before unit existed / interest from earlier dates); some interest rates wrong; seeks reimbursement from Joyce DuJay | Court: reversed DuJay-A principal and interest awards as excessive (included pre-unit production); NPRI interest awards excessive and remanded for recalculation; interest awards to Simpson-Omohundro & Marlborough affirmed; DuJay-A cross-appeal on proportional reduction denied |
Key Cases Cited
- Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211 (Tex. 2003) (standard of review for summary judgment)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (evidentiary standards and inference rules on summary judgment)
- Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910 (Tex. 1997) (defendant’s burden on traditional summary judgment to negate at least one element or establish an affirmative defense)
- Hooks v. Samson Lone Star, Ltd. P'ship, 457 S.W.3d 52 (Tex. 2015) (ratification by acceptance of royalties bars subsequent claim for excluded production)
- Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000) (ratification may bar claims induced by fraud where party accepted benefits)
- Centex Corp. v. Dalton, 840 S.W.2d 952 (Tex. 1992) (doctrine of impracticability / supervening impossibility in contract performance)
- Se. Pipe Line Co., Inc. v. Tichacek, 997 S.W.2d 166 (Tex. 1999) (lessee's pooling decision upheld unless in bad faith)
- Montgomery v. Rittersbacher, 424 S.W.2d 210 (Tex. 1968) (NPRI ratification by filing suit limits recovery to royalties accruing after ratification)
- Tittizer v. Union Gas Corp., 171 S.W.3d 857 (Tex. 2005) (contract interpretation governs operator's royalty/accounting obligations)