Filed: Aug. 12, 2005
Latest Update: Feb. 21, 2020
Summary: United States Court of Appeals Fifth Circuit F I L E D UNITED STATES COURT OF APPEALS August 12, 2005 For the Fifth Circuit _ Charles R. Fulbruge III Clerk No. 04-40901 _ SUNWEST OPERATING COMPANY, LLC, Plaintiff - Counter Defendant-Appellant, VERSUS CLASSIC OIL & GAS, INC., ET AL., Defendants, SAM B. COBB, JR., Defendant-Appellee, SCOTT L. SUMMERS; DOVE CREEK ENERGY, INC., Defendants - Counter Claimants - Appellees. Appeal from the United States District Court for the Eastern District of Texas
Summary: United States Court of Appeals Fifth Circuit F I L E D UNITED STATES COURT OF APPEALS August 12, 2005 For the Fifth Circuit _ Charles R. Fulbruge III Clerk No. 04-40901 _ SUNWEST OPERATING COMPANY, LLC, Plaintiff - Counter Defendant-Appellant, VERSUS CLASSIC OIL & GAS, INC., ET AL., Defendants, SAM B. COBB, JR., Defendant-Appellee, SCOTT L. SUMMERS; DOVE CREEK ENERGY, INC., Defendants - Counter Claimants - Appellees. Appeal from the United States District Court for the Eastern District of Texas 6..
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United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
August 12, 2005
For the Fifth Circuit
___________________________
Charles R. Fulbruge III
Clerk
No. 04-40901
___________________________
SUNWEST OPERATING COMPANY, LLC,
Plaintiff - Counter Defendant-Appellant,
VERSUS
CLASSIC OIL & GAS, INC., ET AL.,
Defendants,
SAM B. COBB, JR.,
Defendant-Appellee,
SCOTT L. SUMMERS; DOVE CREEK ENERGY, INC.,
Defendants - Counter Claimants - Appellees.
Appeal from the United States District Court
for the Eastern District of Texas
6:02-590-LED
Before DAVIS, STEWART AND DENNIS, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:*
This case presents a dispute over a claim to leasehold mineral interests arising under two
oil and gas leases. The district court resolved the issues on cross-motions for summary judgment
interpreting two assignments of the leases in the chain of title. Based on our reading of the
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
assignments which the parties have stipulated are unambiguous, we concur with the judgment of
the district court in favor of the defendants.
I.
In August of 1975, Joseph O. Tompkins and others executed an Oil, Gas and Mineral
Lease in favor of Little Wolf, Inc. covering 76.18 acres in Panola County, Texas (the “J.
Tompkins Lease”). In December 1975, A.T. Tompkins and J.C. Tompkins executed an Oil, Gas
and Mineral Lease in favor of Floyd G. Miller, Jr. covering 64.56 acres in Panola County, Texas
(the “A.T. Tompkins Lease”)( the J. Tompkins Lease and the A.T. Tompkins Leases are
collectively referred to as the “Tompkins Leases”). Both leases have been continuously held in
effect by production.
In April 1979, portions of the land covered by the Tompkins Leases were incorporated
into the Velma Daniels Gas Unit. A 20-acre tract covered by the J. Tompkins Lease and a 27.01
acre tract covered by the A.T. Tompkins Lease were not included in the Velma Daniels Gas Unit
(the “Excluded Acreage”). By various assignments, Snyder Oil Company (“Snyder”) acquired a
majority working interest in the Tompkins Leases, including rights to the Excluded Acreage.
Snyder’s interest was subject to a Net Profits Interest which had been granted by Snyder’s
predecessor in title to Texas American Bank by a conveyance dated June 1988 (the “Net Profits
Conveyance”).
In February 1995, Snyder agreed to sell a package of oil and gas properties, including the
Tompkins Leases, to Enron Oil & Gas Co. Snyder executed a Purchase Agreement with Enron.
Snyder and Bank One Texas, N.A. (“Bank One”), as successor in interest to Texas American
Bank, executed an Assignment of Oil, Gas and Mineral Leases including the Tompkins Leases
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(the “Snyder Assignment”).
In August 1995, Enron assigned all of its right, title and interest in the Tompkins Leases to
Sunwest, using the same property description for the leases as was used in the Snyder Assignment
(the “Enron Assignment”). In April 2002, Sunwest entered into a farmout agreement in favor of
Classic Oil & Gas, Inc. (“Classic”). The farmout agreement covered only that portion of the
Tompkins Leases outside of the Velma Daniels Gas Unit, i.e., the Excluded Acreage. Pursuant to
the farmout agreement, Sunwest executed an assignment of the relevant portions of the leases in
favor of Classic, retaining an overriding royalty interest in the Tompkins Trust Gas Unit, which
included the Excluded Acreage. Classic then drilled the Tompkins Trust Gas Unit #1 well on the
Excluded Acreage which is covered by the farmout agreement. The well produced. Sunwest
claims that it is owed its retained override in the well, which Classic refuses to pay.
Sunwest filed suit seeking declaratory judgment that it is the owner of the overriding
royalty interest in the Excluded Acreage. Defendants Dove Creek Energy, Inc. (“Dove Creek”)
and Scott L. Summers (“Summers”) filed an answer and counterclaim, seeking a declaratory
judgment, arguing that the Snyder Assignment and the Enron Assignment did not convey the
Excluded Acreage claimed by Sunwest. Dove Creek and Summers claim a competing mineral
interest on the Excluded Acreage.2 In its answer and amended complaint, Sunwest also raised
claims against defendant Sam B. Cobb, Jr., an attorney who had previously represented Dove
Creek, Summers and others, for negligent misrepresentation relating to an amendment of the
2
Summers and Dove Creek asserted an ownership interest in the Excluded Acreage to Classic,
however they never sought any determination of their interest in the District Court and did not
present any evidence of the leases or chain of title to support any ownership claim. Their position
in this litigation is simply against Sunwest’s ownership claim.
3
Tompkins Leases.
The case was decided by the district court on motions for summary judgment. Although
the Classic farmout agreement sets out the relationship of the parties to this appeal, the main issue
in this case relates to the interpretation of the Snyder Assignment and the Enron Assignment. The
parties stipulated that both assignments are unambiguous. The district court ruled that Sunwest
acquired no interest in the Excluded Acreage through the Snyder and Enron Assignments.
Although the district court also initially denied both parties’ motions for summary judgment on
Sunwest’s claim for negligent misrepresentation against Cobb, after consideration of motions by
the parties, it granted summary judgment in favor of Cobb. Sunwest appeals.
II.
The parties agree that the dispositive issue in this case is whether Sunwest acquired
leasehold rights in the Excluded Acreage as a result of the Snyder Assignment and the Enron
Assignment. We begin this inquiry within the limitations set by the parties. They have stipulated
that the assignments in question are unambiguous. Accordingly, our duty when construing an
unambiguous instrument is to ascertain the intent of the parties from all the language in the deed
applying a rule of construction known as the “four corners” rule. Luckel v. White, 819 S.W.2d
459, 461 (Tex. 1991). When seeking to ascertain the intent of the parties, we must attempt to
harmonize all parts of the deed, construing the instrument to give effect to all of its provisions.
Id. As this case was decided on motions for summary judgment, we review the issues de novo
applying the same standards as the district court. Boston Old Colony Ins. Co. v. Tiner Assoc.,
288 F.3d 222, 229 (5th Cir. 2002). We can affirm the district court if we agree that the Snyder
Assignment and the Enron Assignment conveyed only oil and gas leasehold rights within the
4
Velma Daniels Gas Unit, and not the Excluded Acreage.
III.
The Recitals in both the Snyder and Enron Assignments are identical in all material
respects and read as follows:
1. Assignor owns an interest in the oil and gas leases described on
Exhibit “A”attached hereto and made a part hereof (the “Leases”) which pertain to
the Lands described on Exhibit A (the “Lands”).
...
The Leases, Lands, Equipment, Contracts, Production and Data are all
collectively referred to as the “Properties.”
6. Assignor agrees to assign all right, title and interest of Assignor in
and to the Properties to Assignee in order to vest Assignee with title in and to the
Properties.
The granting clauses in both assignments are also identical.
CONVEYANCE
. . . Assignor does hereby GRANT, BARGAIN, SELL, TRANSFER,
ASSIGN and CONVEY to Assignee, all of Assignor’s right, title and interest,
including any and all overriding royalty interest, in and to the Properties, to have
and to hold unto Assignee, its successors and assigns, forever.
The same Exhibit A was attached to both the Snyder Assignment, from Snyder to Enron, and the
Enron Assignment, from Enron to Sunwest. The exhibit is organized around the seller’s interest
in several oil and gas units and lists interests in leases falling within the different units. The
interest in the Tompkins Leases was described as follows:
Beckville
Panola County, Texas
VELMA DANIELS GAS UNIT NO. 1, 2, 3, 4, 5, 6
Seller’s interest in and to acreage allocated to the Velma Daniels Gas Unit
No. 1, more particularly described as 641.76 acres, more or less, out of the
5
Thomas M. Scott Survey, A-594, and the Joseph Spencer Survey, A-590, Panola
County, Texas, more particularly described in Gas Unit Designation for the Velma
Daniels No. 1, a counterpart of which is recorded in Volume 655, Page 13 of the
Deed Records of Panola County, Texas as amended and supplemented:
A list of leases follows including an accurate description of the Tompkins Leases, including their
original gross acreage.
Based on our reading of the conveyances, the district court properly concluded that the
Snyder Assignment did not effectively convey Snyder’s interest in those portions of the Tompkins
Leases covering the Excluded Acreage. Because Snyder did not convey an interest in the
Excluded Acreage to Enron in the Snyder Assignment, Enron could not convey an interest in that
area to Sunwest in the Enron Assignment.
All of the language in the Snyder Assignment is limited by the property description on
Exhibit A to the assignment. The description of the Velma Daniels Gas Unit describes the interest
conveyed as “Seller’s interest in and to acreage allocated to” the unit (emphasis added). We see
no other interpretation of this language except that it was meant to convey the Properties within
the unit and, by omission, exclude the Properties outside the unit. Some other units described on
Exhibit A use a similar pattern of description, i.e., indicating that what is being conveyed is
Seller’s interest in acreage “allocated to” various oil and gas units.
Our reading is reinforced by that fact that some units on Exhibit A describe the interests in
oil and gas units being conveyed in a very different manner. For example, the Belle Crawford
Unit is described as “Seller’s interest in and to the leases described below and the Crawford
Estate Oil Unit #1, . . . , including, but not limited to, all of Seller’s interest in and to the following
described leases.” Similar descriptions are used for the Tompkins Oil Unit and the Searcy Gas
6
Unit listed on Exhibit A. This form of description expresses the intention to convey Seller’s
interest in the leases both inside and outside the referenced units in two ways that are not present
in the description of the Velma Daniels Gas Unit. First, the interest is described as the leases and
the unit. Second, the lease listing is introduced by language indicating that property being
conveyed includes all of Seller’s interest in the listed leases. Because different wording was used
to describe interests in the various units, we cannot ignore the meanings that attach to the
different descriptions. The description of the Crawford Unit makes it very clear that the entirety
of the listed leases are conveyed in addition to Seller’s interest in the unit. In contrast, the
description of the Velma Daniels Gas Unit, including the Tompkins Leases, is clearly limited to
the acreage allocated to the unit.
We recognize that there is some language within the assignments that would support
Sunwest’s interpretation that the interest in the Excluded Acreage was also conveyed. For
example, the assignments convey “all of Assignor’s right, title and interest . . . in and to the
Properties.” The term “Properties” includes the Assignor’s interest in “Leases” and “Lands” and
it is apparently not disputed that Snyder owned an interest in the Tompkins Leases as to the
Excluded Acreage. Sunwest also argues that the Tompkins Leases are listed on Exhibit A under
the heading for the Velma Daniels Gas Unit with original acreage amounts that include the
Excluded Acreage. The weakness of this argument is that although the term Properties includes
“the Leases, Lands,” etc., the terms Leases and Lands are defined by reference to Exhibit A. As
stated above, Exhibit A limits the interest conveyed in the Tompkins Leases to the “acreage
allocated to the Velma Daniels Gas Unit.” Accordingly, the assignment of “all of Assignor’s
right, title and interest in and to the Properties” simply means that Snyder conveyed all of its
7
interest in the Tompkins leases as limited by the description on Exhibit A to that area within the
Velma Daniels Gas Unit. The phrase cannot alter what constitutes “Properties” to include the
Excluded Acreage.
Sunwest also points to Exhibit B to the Snyder Assignment which lists the wells being
assigned. Exhibit B contains the following statement: “IT IS ASSIGNOR’S INTENTION TO
CONVEY ALL RIGHT, TITLE AND INTEREST IN AND TO THE WELLS AND THE
LEASES COVERED THEREBY WHETHER OR NOT CORRECTLY REFLECTED
ABOVE.” The list of wells includes several Daniels Gas Unit wells. However, as pointed out by
Sunwest, all of the wells listed are located within the Velma Daniels Gas Unit, not on the
Excluded Acreage. We decline to read this description of the wells conveyed by the assignment
as altering the description of the lease interests conveyed.
As its final argument based on the four corners of the assignments, Sunwest points out
that Bank One joined the Snyder Assignment to convey its Net Profits Interest covering the
Tompkins Leases. The assignment contains the following provision:
Bank One, Texas, N.A., Trustee, does hereby join in this Assignment for
the purpose of transferring all of its interest created by that certain Conveyance of
Net Profits Overriding Royalty Interest, [recordation information omitted]. . . and
does hereby assign to Assignee such interest in consideration of the premises. By
such execution, the net profits overriding royalty interest conveyed is hereby
merged into and shall become part of the working interest hereby transferred.
In oil and gas law, “merger” is the “extinguishment of a lesser estate by merger into a greater
estate when the greater and the lesser estate coincide and meet in one and the same person
without any intermediate estate.” Williams & Meyers, 8 M Manual of Oil & Gas Terms 116. It is
undisputed that Bank One’s net profits interest created by the referenced conveyance covered the
8
entirety of the Tompkins Leases, including the Excluded Acreage. Accordingly, the only way
Bank One could both convey “all of its interest created by” by the referenced Conveyance of Net
Profits Overriding Royalty Interest and have its net profits interest “merged into and . . . become
part of the working interest conveyed” is if Snyder conveyed a working interest covering the
entirety of the Tompkins Leases. Under the terms of the Snyder Assignment, Bank One, like
Snyder, is “Assignor.” We read the Snyder Assignment as limiting Bank One’s conveyance of the
net profits interest to the Leases and Lands described on Exhibit A, which we have determined to
exclude the Excluded Acreage. Attempting to harmonize all of the parts of the assignment and
give effect to all of its provisions, as directed by Luckel, we conclude that Bank One’s stated
intention to convey “all of its interest” must be read like the language in the conveyancing
paragraph, “all of Assignor’s right, title and interest,” as limited by the property descriptions on
Exhibit A. With this interpretation, Bank One’s “net profits overriding royalty interest conveyed”
does “merge into and . . . become part of the working interest hereby transferred,” however only
to the extent of the acreage allocated to the Velma Daniels Gas Unit. This interpretation
forecloses Sunwest’s argument that the assignments conveyed to it Bank One’s net profits interest
as to the Excluded Acreage even if we concur with the district court that the working interest in
the Tompkins Leases was conveyed only as to the area within the Velma Daniels Gas Unit.
Sunwest takes issue with the district court’s characterization of the Net Profits
Conveyance as “extraneous evidence” and “not necessary for consideration.” Even if we were to
consider that document because of its reference in the Snyder Assignment, it does not help
Sunwest’s cause. The property description attached to the Net Profits Conveyance as Annex A-1
describes the Tompkins Leases as follows:
9
Seller’s interest in and to the leases described below and the Velma Daniels Gas
Unit No. 1, more particularly described as 641.76 acres, more or less, out of the
Thomas M. Scott Survey, A-594, and the Joseph Spencer Survey, A-590, Panola
County, Texas, more particularly described in Gas Unit Designation for the Velma
Daniels No. 1, a counterpart of which is recorded in Volume 655, Page 13 of the
Deed Records of Panola County, Texas as amended and supplemented, which
interest Seller warrants and represents is entitled to no less than 0.0 leasehold
working interest in said unit to which is attributable no less than 0.374207 of 8/8
of the production from the above described unit; including, but not limited to, all
of Seller’s interest in and to the following described leases:
A list of leases follows, including an accurate description of the Tompkins Leases, including their
original gross acreage. We agree with Sunwest that this language supports a conclusion,
apparently undisputed, that Bank One acquired an interest in the Excluded Acreage in the Net
Profits Conveyance. However, the contrast between the property description above and that used
in the Snyder Assignment, confirms our conclusion that Bank One, like Snyder, did not convey
the entirety of its interest in the Tompkins Leases via the very different property description in the
Snyder Assignment.3
Finally, Sunwest argues that the district court erred by granting declaratory judgment in
this case in light of the Texas Supreme Court’s decision in Martin v. Amerman, 133 S.W.3d 262
(Tex. 2004). In Martin, the Texas Supreme Court held that a trespass-to-try-title case over a
3
We understand Sunwest’s confusion stemming from comments in the district court’s opinion
suggesting that Snyder’s working interest in the Tompkins Leases covered less that the entire original
acreage and/or that the formation of the Velma Daniels Gas Unit somehow affected Snyder’s
ownership of mineral interests as to the Excluded Acreage prior to Snyder’s assignment to Enron.
These statements are inconsistent with our reading of the parties’ undisputed facts. Also, we need
not address Sunwest’s argument that the district court improperly relied on the Snyder Purchase
Agreement to construe the Snyder Assignment. As we reach the same conclusion as the district court
based solely on our interpretation of the unambiguous assignments, we need not attempt to reconcile
every argument relied on by the district court. In the summary judgment context, “[w]e may affirm
a district court's ruling on summary judgment based on any legally sufficient ground, even one not
relied upon by the district court.” Jones v. Sheehan, Young & Culp, P.C., 82 F.3d 1334, 1337 (5th
Cir., 1996).
10
boundary dispute could not be brought under the Texas Declaratory Judgments Act. Id. A
trespass-to-try-title action has more stringent pleading and proof requirements than a declaratory
judgment action. We agree with the district court that Martin does not control this case because
Sunwest was unsuccessful in its quest for judgment that it was the owner of a mineral interest in
the Excluded Acreage. Martin also does not apply to Summers’ and Dove Creek’s counterclaim
because they did not seek judgment affirming their own title. Rather they sought a declaratory
judgment that the assignments did not convey the Excluded Acreage to Sunwest, which is a
proper subject for a declaratory judgment action. Martin recognized that the declaratory
judgments act “provides an efficient vehicle for parties to seek a declaration of rights under
certain instruments.”
Id. at 265.
IV.
Based on the foregoing, the district court did not err in entering judgment against Sunwest
and in favor of the defendants as to Sunwest’s interest in the Excluded Acreage. Sunwest
concedes that if the district court’s judgment as to the Excluded Acreage is affirmed, its other
claims against Dove Creek, Summers and Cobb also fail. Accordingly, the judgment of the district
court is AFFIRMED.
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