Tri-C Resources, Inc. v. Estate of H.H. Coffield--Appeal from 128th District Court of Orange County

SUPREME COURT CASES

Laws-info.com » Cases » Texas » 10th District Court of Appeals » 2002 » Tri-C Resources, Inc. v. Estate of H.H. Coffield--Appeal from 128th District Court of Orange County

State: Texas

Court: Texas Northern District Court

Docket No: 10-00-00323-CV

Case Date: 12/31/2002

Plaintiff: Tri-C Resources, Inc.

Defendant: Estate of H.H. Coffield--Appeal from 128th District Court of Orange County

Preview:Tri-C Resources, Inc. v. Estate of H.H. Coffield--Appeal
from 128th District Court of Orange County
IN THE
TENTH COURT OF APPEALS
No. 10-00-323-CV
TRI-C RESOURCES, INC.,
Appellant
v.
ESTATE OF H.H. COFFIELD,
Appellee
From the 128th District Court
Orange County, Texas
Trial Court # A-990479-C
O P I N I O N
This appeal arises from competing summary judgment motions filed by the parties in an action for declaratory
judgment brought by appellant Tri-C Resources, Inc. [ Tri-C ]. Both parties agree the facts of the underlying case are
undisputed and that the claims of the parties present pure issues of law. The substance of the suit concerns the proper
apportionment of royalty interests in a unit created by two pooled oil and gas leases. Tri-C brought suit seeking a
judicial declaration that its position is correct with respect to the size of the royalty interest owned by the Estate of
H.H. Coffield [ the Estate ] in an 80-acre tract of land [ the southern tract ] that was pooled with another 249-acre
adjacent tract of land containing a producing well [ the northern tract ], in which the Estate had no previous royalty
interest, to create a 329 acre producing unit. Tri-C owns the two and gas leases that cover these tracts of land. Both
parties agree the Estate is bound by its ratification of a written pooling agreement under which it acquiesced to pool,
combine and unitize the leases relating to both land tracts. The dispute centers on the legal implications of that
ratification on the Estate s royalty interest.
Tri-C s position is that following ratification of the pooling agreement, the Estate s royalty interest should be
computed as 1/5 of 80/329, or .048632218. The Estate, on the other hand, contends Tri-C s calculation is wrong and
that the proper computation of its royalty interest is of 80/329, or .12150547. // The difference between the two figures
arises from the parties disparate views on whether the Estate s ratification of the pooling agreement combined and
file:///C|/Users/Peter/Desktop/opinions/PDFs1/5095.html[8/20/2013 7:16:12 PM]

unitized the leases so as to change the previously applicable royalty calculation reserved by the Estate in a land deed.
The trial court granted summary judgment in favor of the Estate, ruling that the Estate s ratification of the pooling
agreement entitled it to a share of the proceeds of the producing well located on the Northern tract without obligating
that its royalty interests be determined under the unitized leases. Tri-C appeals the trial court s ruling and presents
three issues:
1. Whether the Estate s ratification of the pooling agreement made its royalty interest subject to the unitized leases as a
matter of law;
2. Whether the Estate could avail itself of the benefits of the pooling agreement, while avoiding the limitation on its
royalty reservation in the unitized leases, by ratifying only the pooling agreement; and
3. Whether the Estate could participate in the pooling agreement, thereby availing itself of royalty payments from
production of a well on a tract of land in which it owns no interest, and not be bound by the terms of the governing
leases which determine the size of the royalty interest payable to all mineral interest owners.
We will reverse and render in favor of Tri-C.
The parties respective motions for summary judgment were traditional motions, as opposed to no-evidence motions.
See Tex. R. Civ. P. 166a. The general rules for reviewing traditional summary judgment motions are well-known. In a
summary judgment case, the issue on appeal is whether the movant met his summary judgment burden by establishing
that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law. Tex. R. Civ.
P. 166a(c); KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999); City of
Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). The burden of proof is on the movant, and all
doubts about the existence of a genuine issue of material fact are resolved against the movant. Rhone-Poulenc, Inc. v.
Steel, 997 S.W.2d 217, 223 (Tex. 1999); Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282 (Tex. 1996);
Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex. 1965).
In deciding whether there is a material fact issue precluding summary judgment, all conflicts in the evidence are
disregarded and the evidence favorable to the nonmovant is accepted as true. Rhone-Poulenc, 997 S.W.2d at 223;
Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 173 (Tex. 1995). Evidence that favors the movant's
position will not be considered unless it is uncontroverted. Great Am., 391 S.W.2d at 47.
The summary judgment will be affirmed only if the record establishes that the movant has conclusively proved all
essential elements of the movant's cause of action or defense as a matter of law. Clear Creek Basin, 589 S.W.2d at
678. Here, each party contended in the trial court that it was entitled to judgment as a matter of law under the
uncontroverted facts presented in the written documents in this case.
When an oil and gas lease is executed by the owners of different mineral interests in two or more tracts, the royalties
payable under the lease may be pooled. London v. Merriman, 756 S.W.2d 736, 739 (Tex. App. Corpus Christi, 1988,
writ denied). Under a pooling agreement all royalty interest owners in the land subject to the lease may share in
production no matter where the well is drilled on the leasehold. Id. By an effective ratification of the lease after its
creation, the non-executive (here, the Estate) accomplishes this result just as if it had been a party to the lease. Id.
(citing Standard Oil v. Donald, 321 S.W.2d 602, 605-06 (Tex. Civ. App. Fort Worth 1959, writ ref d n.r.e.)). In our
circumstances, however, there was no direct ratification by the Estate of the written lease covering the southern tract,
the Mega Chips lease, which provided that Tri-C pay as royalty a one-fifth share of production. Instead, what was
ratified in our case was the written Unit Designation, which incorporated by reference and attached exhibit attachment
the Mega Chips lease. The question before us then, is whether the Unit Designation ratification was tantamount to
ratification of the Mega Chips lease. We hold that it was.
file:///C|/Users/Peter/Desktop/opinions/PDFs1/5095.html[8/20/2013 7:16:12 PM]

Our decision turns on the terms of the Unit Designation. In relevant part, the written Unit Designation, Tri-C
Resources, Inc. Stark Foundation No. 1 Gas Unit which was executed on September 18, 1998, provided:
The Subject Leases [the Stark Foundation lease and the Megachips, Inc. lease], any amendments or ratifications of
Subject Leases, and all contracts and agreements concerning or relating to the same which pertain to the leasehold,
mineral royalty, overriding royalty and/or production estates and rights in and under said lands, are hereby pooled,
combined and unitized for the purpose of creating said Unit. (emphasis added).
On February 3, 1999, Robert Ellett, the independent executor of the Estate, executed a written Ratification of this Unit
in which he agreed:
The Coffield Estate does hereby ratify the above-described unit designation for the Tri-C Resources, Inc. Stark
Foundation No. 1 Gas Unit, as fully and to the same extent as if the Estate of H.H. Coffield were an original party to
the unit designation.
The Estate s ratification of the unit designation, which incorporated by reference the Stark Foundation and Megachip
leases, is construed by us to have been an acceptance by the Estate of Tri-C s offer to apportion the royalty proceeds
under the pooled unit designation. Absent ratification of the unit designation, the Estate was not entitled to any share in
the production of the well given the well s location on a tract of land for which the Estate owned no royalty interests.
When presented with the offer to ratify the pooling agreement, the Estate was, in effect, presented with two choices:
(1) it could ratify the unit designation proposed by Tri-C and share in the royalty proceeds of the Stark well under the
provisions of the unitized leases; or (2) it could decline the offer for ratification of the unit designation and preserve
the royalty reserved under its deed. Had it chosen the latter option, the Estate would have been entitled to a
correspondingly greater royalty calculation if a producing well was drilled in the future on the 160-acre southern tract
of land for which it held a mineral interest. Instead, the Estate chose to participate in the pooling arrangement offered
by Tri-C for shared proceeds of the existing well on the northern tract.
The written ratification the Estate s executor signed on its behalf specifically provided for combination and unitization
of the royalty rights provided by the subject leases. To adopt the Estate s argument that by signing the agreement it
merely intended to acquiesce to the pooling of the land, without agreeing to pool and unitize the royalty interests set
forth in the leases, would require that we ignore the unambiguous language contained in the written unit ratification.
The Estate cites three cases in support of its contention that a royalty owner may ratify a Unit Designation without
being bound by the provisions of the lease of his tract. MCZ v. Triolo, 708 S.W.2d 49 (Tex. App. Houston [1st Dist.]
1986, writ ref d n.r.e.); Guaranty Nat l. Bank & Trust Co. v. May, 395 S.W.2d 80, 82 (Tex. Civ. App. Waco 1965, writ
ref d n.r.e.); May v. Cities Service Oil Co., 444 S.W.2d 822 (Tex. Civ. App. Beaumont 1969, writ ref d n.r.e.). We
agree with Tri-C that none of these cases involve the situation in which a royalty owner sought to participate in a
pooling agreement without ratifying the terms of the governing lease. In our case, the Estate ratified a unit agreement
which specifically provided for unification of the royalties from the pooling and unitization of the governing leases.
Our decision today holds the Estate to the terms of that agreement. Issues one, two and three are sustained.
The trial court s summary judgment order in favor of the Estate is reversed, and the cause is rendered in favor of Tri-
C.
DAVID L. RICHARDS
Justice
file:///C|/Users/Peter/Desktop/opinions/PDFs1/5095.html[8/20/2013 7:16:12 PM]

Before Chief Justice Davis,
Justice Vance, and
Justice Richards (Sitting by Assignment)
Reversed and rendered
Opinion delivered and filed December 31, 2002
Do not publish
[CV06]
file:///C|/Users/Peter/Desktop/opinions/PDFs1/5095.html[8/20/2013 7:16:12 PM]

Download 5095.pdf