Tawes v. Barnes
340 S.W.3d 419
| Tex. | 2011Background
- Moose Oil & Gas owned a Baker Lease in Lavaca County and sold a working interest to Moose Assignees including Tawes.
- Barnes owned a Barnes Lease with Dominion through assignments; Barnes sought royalties on production from Baker Unit wells.
- Dominion-Moose signed WIUA and JOA for a pooled Baker Unit; WIUA assigned operator duties and cost/royalty allocations; JOA governed drilling and responses to non-consent wells.
- Two non-consent Baker-Barnes wells (No. 1 & No. 2) were drilled; Tawes and Moose consented; Dominion went non-consent and Moose became operator.
- JOA Royalty Provision required consenting parties to pay royalties for non-consent wells; Barnes sued for unpaid royalties; bankruptcy proceedings followed; Tawes acquired Moose's interests.
- Texas Supreme Court certified questions to the Fifth Circuit and held Barnes cannot enforce the Dominion-Moose Agreements as a third-party beneficiary or by privity of estate; first certified question answered in the negative.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can Barnes enforce the Dominion-Moose Agreements as a third party beneficiary or via privity of estate? | Barnes argues the JOA Royalty Provision directly benefits her as a lessee and thus creates third-party beneficiary status or privity via Tawes. | Tawes argues the JOA Royalty Provision is incidental to general accounting and does not directly benefit Barnes; no privity exists. | No; Barnes cannot enforce via either theory. |
| Does Tawes’s involvement create privity of estate with Barnes? | Barnes contends Tawes’s assumption of Dominion's royalties creates privity of estate. | Tawes argues no privity of estate because no permanent transfer of Barnes's lease interest occurred. | No privity of estate; Barnes cannot enforce. |
| If Tawes is responsible under the JOA, does the JOA Royalty Provision extend liability beyond Tawes’ interest or otherwise alter liability? | Barnes seeks broad liability under the Royalty Provision. | Tawes contends any such liability would be limited to his interest and the agreement’s terms. | Not reached; the court did not address remaining questions because the first two issues fail. |
Key Cases Cited
- MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647 (Tex. 1999) (third-party beneficiary rights depend on clear intent when benefits are direct, not incidental)
- Stine v. Stewart, 80 S.W.3d 586 (Tex. 2002) (clear intent to benefit a third party shown by specific plan to repay a debt)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (contract interpretation; no single provision controls; consider whole instrument)
- Seagull Energy E&P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342 (Tex. 2006) (JOAs govern cost and revenue allocations; custom and context inform interpretation)
- Amco Trust, Inc. v. Naylor, 159 Tex. 146, 317 S.W.2d 47 (Tex. 1958) (privity of estate concept; assignment of entire lease interest required for estate privity)
- Lone Star Gas Co. v. Mexia Oil & Gas, Inc., 833 S.W.2d 199 (Tex. App. Dallas 1992) (privity of estate runs with land; pays covenants that run with the lease)
- Regency Advantage Ltd. P'ship v. Bingo Idea-Watauga, Inc., 936 S.W.2d 275 (Tex. 1996) (requires express assumption language to impose liability via sublessee)