John James HARKINS, et al., Appellants, v. NORTH SHORE ENERGY, L.L.C., Appellee.
No. 13-12-00504-CV.
Court of Appeals of Texas, Corpus Christi-Edinburg.
May 1, 2014.
Justice GARZA
J. Robert Goldsmith Jr., Goldsmith & Bogisch, Austin, TX, for Appellee.
Before Justices RODRIGUEZ, GARZA and PERKES.
Memorandum Opinion by Justice GARZA.
MEMORANDUM OPINION ON REHEARING
We issued our original memorandum opinion in this case on December 12, 2013. Appellants, John James Harkins et al.1 (“Harkins”) and Dynamic Production, Inc. (“Dynamic”), filed motions for rehearing and for en banc reconsideration. See
This sprawling oil and gas dispute involves a well drilled by North Shore on certain Goliad County land owned by Harkins. Harkins argues by three issues that the trial court erred by concluding that the well did not trespass on his property and by granting summary judgment to North Shore on that basis. Dynamic asserts by thirteen issues2 that the trial court erred by rendering partial summary judgment in favor of North Shore and by rendering judgment against Dynamic after trial on the issue of tortious interference with contract. We reverse and remand.
I. Background
A. The Option Agreement
On June 3, 2009, Harkins and North Shore entered into an agreement (the “Op
[Harkins] hereby grants to [North Shore] the exclusive right on and under the following described lands, situated in Goliad County, Texas, to-wit:
All that certain property more fully described on EXHIBIT “A” attached hereto and made a part hereof for all purposes.
(hereinafter called “Said Land”), the exclusive option to acquire oil and gas leases on all or a portion of Said Land under the terms and provisions of that certain Oil and Gas Lease form set forth on Exhibit “B” attached hereto and made a part hereof for all intents and purposes, subject to the following terms and conditions:
- For a period of twenty-four (24) months from the date hereof (hereinafter called the “Option Term”), [North Shore] shall have the exclusive option on Said Land.
- At any time and from time to time during the Option Term, [North Shore] has the right to exercise its exclusive option to acquire an Oil and Gas Lease covering all or a portion (as hereinafter provided) of Said Land pursuant to the terms and provisions set forth on the Oil and Gas Lease form attached as Exhibit “B”, (hereinafter called the “Oil and Gas Lease”) by tendering a check payable to [Harkins] in an amount equal to Two Hundred Dollars ($200.00) per net mineral acre for each net acre owned by [Harkins] selected by [North Shore] out of Said Land, on which such option and/or options are exercised by [North Shore] ....
....
- At such time as [North Shore] elects to exercise its option to acquire an Oil and Gas lease on Said Land pursuant to this Agreement, then such option as to such selected acreage shall expire and said Oil and Gas Lease shall become effective....
....
- This Option to Purchase Oil and Gas Lease is expressly made subject to the Oil, Gas, and Mineral Lease covering part of Said Land, and [North Shore] will be responsible for obtaining any consent from the Lessee that may be required. [North Shore]’s right to exercise its option to take an Oil and Gas Lease is also subject to the existing Lease on part of Said Land.
Exhibit “A” to the Option Agreement described two tracts of land, “Tract 1” and “Tract 2.” Pertinent to this case, “Tract 2” was described as follows:
Being 1,210.8224 acres of land, more or less, out of the 1673.69 acres out of the Caleb Bennett Survey, A-5, Goliad County, Texas and being the same land described in that certain Memorandum of Oil and Gas Lease dated March 14, 1996 from The Estate of Janie Frances Harkins, Deceased, to Export Petroleum Corporation and being recorded in Volume 50 at Page 454 of the Official Public Records of Goliad County, Texas to which deed reference is here made for a more complete description of said land.
The March 14, 1996 Memorandum of Oil and Gas Lease referenced above (the “Export Lease”) described the land to which it applied as follows:
Being 1273.54 acres situated in Goliad County, Texas, and being all of the
1673.69 acre tract described on EXHIBIT “A” attached hereto, SAVE AND EXCEPT a 400.15 acre tract described in a Memorandum of Oil and Gas Lease between the Estate of Janie Frances Harkins, deceased, and Hamm[a]n Oil & Refining, dated March 13, 1995, recorded in Volume __, Page __3, of the Public Records of Goliad County, Texas.
The March 13, 1995 Memorandum of Oil and Gas Lease (the “Hamman Lease”), in turn, contained a metes and bounds description of the 400.15-acre tract referenced in the Export Lease. Exhibit “A” to the Export Lease states:
Field notes of a 1673.69 acre tract, being a part of a tract of land conveyed from Cyrus B. Lucas, et al., to John J. O’Brien by Deed dated February 7, 1931, and recorded in Volume 66, Page 325 of the Deed Records of Goliad County, Texas;
Said 1673.69 acre tract is comprised of a portion of the Solon Bartlett Survey, Abstract 4 and the Caleb Bennett Survey, Abstract 5, is situated in Goliad County, Texas, approximately 4 miles north of the town of Blanconia and is described by metes and bounds as follows:
Beginning at a point in the center of Sarco Creek ...
[most of lengthy description omitted]
....
Thence S 82° 09’ W a distance of 8663.39 feet to the place of beginning, containing 1673.69 acres, more or less. Save and Except a 400.15 tract described in Participation Agreement dated November 8, 1995, between Hamman Oil and Refining Company and Alia Mesa Resources, Inc., et al., recorded in the Deed Records of Goliad County, Texas.4
B. North Shore’s Attempt to Secure Leases
In September 2009, North Shore paid Harkins nearly $33,000 with the objective of securing a lease on a 169.9-acre area enclosed entirely within “Tract 2” as defined in Exhibit “A” to the Option Agreement.5 A formal lease agreement was never executed.6 Nevertheless, North Shore proceeded to drill a well on the 169.9-acre tract that it identified. In December 2009, North Shore and Harkins executed an easement so that the well could be connected to a gas purchaser’s pipeline. According to an affidavit by Catherine Schaper, one of North Shore’s co-owners, North Shore paid Harkins and other surface rights owners over $17,000 for the easement, and the easement instrument contained a detailed survey plat showing the location of the well in relation to local boundaries and landmarks. Schaper further averred that North Shore spent over $700,000 to drill and complete the well. The well commenced production in January 2010.
Harkins knew that North Shore had built a well and initially assumed that it was situated on land covered by the Option Agreement. However, in March 2010, Harkins, relying on the advice of landman Bill Bishop, came to believe that the well
C. Dynamic’s Involvement
Meanwhile, Dynamic had expressed its interest in conducting seismic exploration activities on much of Harkins’ land, including on the tract purportedly leased by North Shore. Initially, Dynamic approached North Shore about obtaining permission to conduct those activities; however, after negotiations with North Shore failed in February 2010, Dynamic took the position that the right to approve seismic exploration actually belonged to Harkins. Dynamic then proceeded to negotiate directly with Harkins about acquiring seismic exploration rights. On March 19, 2010, Dynamic sent to Harkins a “Letter of Intent to Acquire Oil and Gas Lease” (the “Letter of Intent”) on the 400.15-acre tract identified in Exhibit “A” to the Hamman Lease.7 Subsequently, in April of 2010, Dynamic and Harkins executed an agreement (the “Seismic Permit”) granting Dynamic the right to conduct seismic exploration on various tracts of land, including:
1673.69 acres of land, more or less, situated in the Caleb Bennett Survey, A-5, Goliad County, Texas, being more fully described by metes and bounds in Exhibit “A” to that certain Memorandum of Oil and Gas Lease dated March 14, 1996 from the Estate of Janie Frances Harkins to Export Petroleum Corporation, recorded in Volume 50, Page 454, Official Public Records, Goliad County, Texas.
On June 17, 2010, Harkins and Dynamic entered into an oil and gas lease agreement (the “Dynamic Lease”) based upon the Letter of Intent sent by Dynamic in March. The Dynamic Lease was largely based on the form lease agreement attached as Exhibit “B” to North Shore’s Option Agreement. However, it contained additional provisions stating that: (1) Harkins would assign all of his causes of action against North Shore to Dynamic, (2) Dynamic would indemnify Harkins for any liability incurred by Harkins (including “attorney’s fees, expert’s fees and court costs”) “arising out of or by virtue of [the Option Agreement], the assignment of claims herein made or the granting of [the Dynamic Lease]”; and (3) Harkins would agree to participate in any litigation between Dynamic and North Shore.
D. Litigation Begins
North Shore then filed the instant lawsuit against both Dynamic and Harkins. In its original petition filed in August 2010, North Shore contended that “[t]he Option Agreement as written does not reflect the true agreement of the parties” due to a “scrivener’s error.” North Shore asserted that the parties intended for the Option Agreement to cover the land upon which the well was drilled, and it requested that
In subsequent amended petitions, North Shore contended that the Option Agreement included the disputed 400.15-acre tract and was not drafted erroneously.8 North Shore further claimed that Harkins repudiated the Option Agreement and that Dynamic tortiously interfered with the Option Agreement and committed “conscious and malicious geophysical trespass” by conducting seismic exploration on the allegedly leased land. North Shore further made an alternative claim for “recovery under assumpsit in lieu of geophysical trespass for the reasonable value of the use and occupation of the land and appropriation of trade secrets....” In its amended petitions, North Shore requested actual and exemplary damages from Dynamic as well as an order compelling Harkins to specifically perform the Option Agreement by executing oil and gas leases on the tracts identified by North Shore in September 2009. Harkins and Dynamic asserted counterclaims of trespass, tortious interference with contract, and conversion, and sought damages, declaratory relief, attorney’s fees, an accounting, and the appointment of a receiver to take over operation of the subject well.
E. Summary Judgment Motions
The parties each moved for summary judgment. In its summary judgment motion, North Shore contended that the Option Agreement unambiguously included the 400.15-acre Hamman Lease tract and that, because North Shore complied with the agreement’s provisions regarding invocation of the option, Harkins should be compelled to specifically perform his obligations under the agreement. North Shore noted that, until Dynamic became involved in the case, no party believed that the 400.15-acre Hamman Lease tract was excluded. As evidence, North Shore presented a map produced by Dynamic in discovery which purported to identify the land optioned to North Shore under the Option Agreement; the map demarcates the boundaries of the 400.15-acre Hamman Lease tract but does not appear to indicate that the tract was excluded from the land made available for lease in the Option Agreement.9 North Shore argued that the Hamman Lease had expired before the parties executed the Option Agreement and that “[t]he parties did not intend to pointlessly exclude a large square of useful acreage in the middle of an optioned tract....” North Shore further argued that the Option Agreement gave it the “exclusive right to explore for oil and gas” on the optioned area. In support of the motion, North Shore attached affidavits by its principals Schaper and W. Troy West, as well as its attorney J. Robert Goldsmith, averring to the facts set forth in North Shore’s petition and summary judgment motion.
The motion for summary judgment filed by Harkins and Dynamic asserted both traditional and no-evidence grounds. First, the defendants’ motion alleged that North Shore had produced no evidence that Harkins repudiated the Option Agreement. Second, Harkins and Dynamic argued that North Shore had produced no evidence that it had exclusive exploration rights regarding the land at issue and, therefore, North Shore’s trespass, conversion, and conspiracy claims must fail. Third, the defendants asserted that North Shore had not established an assumpsit cause of action. Fourth, Harkins and Dynamic argued that North Shore was not entitled to reformation of the Option Agreement because there was no unilateral or mutual mistake as to its terms; instead, Harkins and Dynamic alleged that the Option Agreement unequivocally excludes the 400.15-acre Hamman Lease tract from its property description. Finally, the defendants’ summary judgment motion stated that North Shore produced no evidence establishing its entitlement to exemplary damages or attorney’s fees.
Harkins and Dynamic also filed an objection to North Shore’s summary judgment evidence, contending that various parts of the three affidavits were unreliable and inadmissible.
On September 9, 2011, the trial court: (1) denied the motion for summary judgment filed by Harkins and Dynamic in its entirety; (2) overruled Harkins’s and Dynamic’s objections to North Shore’s affidavits; and (3) granted partial summary judgment to North Shore in a series of four separate orders. The four orders granting relief to North Shore stated respectively and in relevant part as follows:
The Court finds as a matter of law that under the provisions of the [Option Agreement] ... [Dynamic], which is not a party to the Option Agreement, does not have the right to conduct exploratory operations on either Tract 1 or Tract 2 as described in the Option Agreement during the term of the Option Agreement.
....
It is hereby ORDERED that the Oil and Gas lease from [Harkins], as Lessors, to [Dynamic], as Lessee, covering 400.15 acres in the Caleb Bennett Survey, dated June 17, 2010 ... is removed as a cloud on the rights, titles, and interests held by [North Shore] under [the Option Agreement], and the Oil and Gas Leases covering 169.9 acres which have this day been ordered by this Court to be executed and delivered.
....
It is therefore ORDERED that within 15 days of the date of this Order, [Harkins] shall execute and return the respective Oil and Gas Lease counterparts to [North Shore] as lessee, covering 570.941 acres out of Tract 1 as described in the [Option Agreement] that are currently in the possession of [Harkins].
....
It is therefore ORDERED that [Harkins] shall execute and return the form Oil & Gas Lease to [North Shore] as lessee which is attached as Exhibit B to the [Option Agreement], covering 169.9 acres out of the Caleb Bennett Survey A-5, Goliad County, Texas, within 15 days from the date the leases are delivered to Defendants’ counsel.
The cause proceeded to trial in July of 2012 on North Shore’s tortious interference and assumpsit claims.10 After trial, the jury found that Dynamic intentionally interfered with the Option Agreement and caused North Shore to suffer $574,000 in actual damages. The jury also found by clear and convincing evidence that North Shore’s damages resulted from malice on the part of Dynamic, and it assessed $1.7 million in exemplary damages. Finally, with respect to North Shore’s assumpsit claim, the jury concluded that North Shore was entitled to $88,800 representing the “reasonable market value of the seismic testing at the time and place it occurred” and $46,250 representing the “reasonable market value of the processed seismic data.” The trial court denied the defendants’ motions for new trial and to modify the judgment and rendered judgment on May 18, 2012: (1) ordering Dynamic to pay North Shore actual damages of $709,050 and exemplary damages of $1,148,000,11 plus postjudgment interest on those amounts; (2) awarding North Shore trial attorney’s fees of $405,33812 “in connection with its suit on a written contract against [Harkins],” plus postjudgment interest, payable by Harkins; and (3) incorporating the previously-rendered summary judgment orders. The trial court rendered findings of fact and conclusions of law chiefly related to North Shore’s recovery of attorney’s fees. This appeal followed.
II. Discussion
A. Summary Judgment
Harkins’s first two issues and Dynamic’s first, second, and seventh issues argue that the trial court erred in its September 9, 2011 summary judgment rulings.
1. Standard of Review
A motion for summary judgment may be brought on no-evidence or traditional grounds. See
We review the trial court’s granting of a traditional motion for summary judgment de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003); Branton v. Wood, 100 S.W.3d 645, 646 (Tex. App.—Corpus Christi 2003, no pet.). A motion for traditional summary judgment must show that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law.
When both parties move for summary judgment and the trial court grants one motion and denies the other, we review both parties’ summary judgment evidence and determine all questions presented. See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000); Warrantech Corp. v. Steadfast Ins. Co., 210 S.W.3d 760, 765 (Tex. App.—Fort Worth 2006, no pet.). Our task is to render the judgment that the trial court should have rendered. See FM Props., 22 S.W.3d at 872; Warrantech, 210 S.W.3d at 765. We will affirm a summary judgment if any of the theories presented to the trial court and preserved for appellate review are meritorious. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004).
2. Applicable Law
When a written contract is so worded that it can be given a certain or definite legal meaning or interpretation, it is not ambiguous, and the court construes it as a matter of law. Am. Mftrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). On the other hand, a contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). This determination is made in light of the circumstances present when the parties entered into the contract. Ganske v. Spence, 129 S.W.3d 701, 707 (Tex. App.—Waco 2004, no pet.) (citing Grimes v. Andrews, 997 S.W.2d 877, 881 (Tex. App.—Waco 1999, no pet.)). An ambiguity does not arise simply because the parties advance conflicting interpretations of the contract. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). For an ambiguity to
Extrinsic evidence of intent is admissible only if the contract is ambiguous on its face. See Friendswood Dev. Co. v. McDade & Co., 926 S.W.2d 280, 283 (Tex. 1996); CenterPoint Energy Houston Elec., LLP v. Old TJC Co., 177 S.W.3d 425, 431 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (“A court may consider the parties’ interpretations of the contract through extrinsic or parol evidence only after a contract is first determined to be ambiguous.”). A mere disagreement about the proper interpretation of a contract, however, does not make the contract ambiguous; the instrument is ambiguous only if, after application of the rules of construction, the contract is reasonably susceptible to more than one meaning. Brown v. Havard, 593 S.W.2d 939, 942 (Tex. 1980); Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 157 (1951).
3. Interpretation of Property Description
Harkins argues by his first issue that the trial court erred in granting partial summary judgment to North Shore, and in denying summary judgment to Harkins. Dynamic similarly argues by its first issue that the trial court erred in granting partial summary judgment to North Shore, and it argues by its second issue that the trial court erred by denying summary judgment to Dynamic. These issues each pose the question of whether North Shore’s well was drilled on land covered by the Option Agreement.13 This is the central issue in this appeal and it turns on the interpretation of the description of land in the Option Agreement and the references contained therein.
We find that the description of land in the Option Agreement is capable of more than one reasonable interpretation. The description of “Tract 2,” where North Shore drilled its well, is as follows: “Being 1,210.8224 acres of land, more or less, out of the 1673.69 acres out of the Caleb Bennett Survey, A-5, Goliad County, Texas and being the same land described in [the Export Lease].” This description can have two different reasonable meanings depending on what the phrase “and being the same land described in [the Export Lease]” is understood to modify. One reasonable interpretation would be that this phrase modifies “1,210.8224 acres of land, more or less.” That interpretation would be reasonable because the reference to “1,210.8224 acres” and the reference to “the same land described in [the Export Lease]” are both preceded by the word “[b]eing,” indicating that “1,210.8224 acres” refers to the same land as that to which the Export Lease applies. Moreover, the total amount of land to which the Export Lease applies is 1,273.54 acres,14 which may be considered “more or less” equivalent to “1,210.8824 acres.” See Slagle v. Clark, 237 S.W.2d 430, 433 (Tex. Civ. App.—Amarillo 1951, no writ) (noting that the presence of the words “more or less” in a deed “indicates a sale in gross, and not by acre” and constitutes “prima facie evidence that the parties intended to risk a not unreasonable gain or loss in the estimated quantity”). This interpretation, favored by Harkins and Dynamic, would mean that “Tract 2” is identical to the land to which the Export Lease was applica
North Shore argues that this interpretation is unreasonable because, “when one document refers to another for descriptive purposes, only the parts of the referenced document that can be harmonized with the information in the main document are looked to and the rest of the referenced document is to be ignored.” (Emphasis in original.) North Shore cites American Savings & Loan Ass’n of Houston v. Musick, 531 S.W.2d 581, 585 (Tex. 1975), and Sharp v. Fowler, 151 Tex. 490, 252 S.W.2d 153, 154 (1952), for that proposition, and it argues that “[t]he only part of the Export [Lease] that can be harmonized with information in the Option Agreement is the surveyor’s field notes on its Exhibit A describing the boundaries of a 1673.69 acre tract—exactly the size referred to in the Option Agreement in its description of Tract 2.” We note that the Musick and Sharp cases do not explicitly support the tenet of law set forth by North Shore. In any event, we do not find this argument persuasive. As noted above, the Export Lease described a 1,273.54-acre tract consisting of 1,673.69 acres minus the 400.15-acre Hamman Lease tract. This description can be harmonized with the Lease Agreement’s description of “1,210.8224 acres of land, more or less, out of the 1673.69 acres....” See Slagle, 237 S.W.2d at 433.
A second reasonable interpretation of the Lease Agreement’s property description would hold that “and being the same land described in [the Export Lease]” instead modifies the phrase “the 1673.69 acres out of the Caleb Bennett Survey.” Under this interpretation, the 1,673.69 acres referred to in the “Tract 2” description are the same 1,673.69 acres “described” in the Export Lease—but before the 400.15-acre Hamman Lease tract is excluded. This interpretation is reasonable because the Export Lease does, in fact, “describe” a tract of exactly 1,673.69 acres—even though it then explicitly states that the lease does not apply to all of that tract (that is, the Hamman Lease tract is part of the 1,673.69-acre tract described in the Export Lease but is not part of the property actually leased by that instrument). Under this interpretation, the Option Agreement’s reference to “1,210.8824 acres” could be viewed as merely referring to North Shore’s right to select a certain amount of land out of the 1,673.69 acres made available to it.15 This interpretation, favored by North Shore, would mean that North Shore had the option to lease any 1,210.8824 acres out of the entire 1,673.69-acre tract—including the Hamman Lease tract, where it drilled its well.
Harkins and Dynamic contend that this interpretation is unreasonable because it would contravene the statute of frauds. See, e.g., Bailey v. Mullens, 313 S.W.2d 99, 102 (Tex. Civ. App.—San Antonio 1958, writ ref’d n.r.e.) (“A sound rule of construction requires an interpretation under which the deed will be valid and operative in preference to one which will nullify it.”). With respect to property descriptions, the statute of frauds requires “a written memorandum which is complete within itself in every material detail, and which contains all of the essential elements of the agreement, so that the contract can
Because the Option Agreement is capable of more than one reasonable interpretation, it is ambiguous. See Milner v. Milner, 361 S.W.3d 615, 619, (Tex. 2012). “When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument is a question of fact for the jury.” Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 529 (Tex. 1987); Barrand, Inc. v. Whataburger, Inc., 214 S.W.3d 122, 129 (Tex. App.—Corpus Christi 2006, pet. denied).17 We therefore conclude that the trial court erred by granting partial summary judgment in favor of North Shore and that it did not err by denying Harkins’s and Dynamic’s motions for summary judgment. Harkins’s first issue is sustained in part and overruled in part. Dynamic’s first issue is sustained and its second issue is overruled.
B. Other Issues
The other issues raised by Harkins and Dynamic on appeal challenge aspects of the trial court’s judgment based on trial proceedings which, in turn, were based at least in part on the erroneous summary judgment rulings.18 Accordingly, we do not address these issues. See
III. Conclusion
We reverse the trial court’s judgment and remand the cause for further proceedings consistent with this memorandum opinion. See