Opinion ID: 6108757
Heading Depth: 2
Heading Rank: 3

Heading: The Texas Natural Resources Code

Text: Burlington next challenges the court of appeals' holding that section 91.402(b) of the Natural Resources Code did not bar the Koopmanns' breach-of-contract claim, which arose from Burlington's suspension of royalty payments. See 542 S.W.3d 643 . The trial court granted Burlington's summary judgment motion as to all of the Koopmanns' non-declaratory claims, but the court of appeals reversed as to the Koopmanns' breach-of-contract claim. See id. at 661-62 . The court of appeals agreed that ownership of the NPRI was in  dispute, but rejected Burlington's claim that section 91.402 barred the Koopmanns' non-declaratory claims. Id. at 651 . First, noting that the statute was designed to protect royalty owners from unjustified payment delays by lessees, the court found that no language in subsection (b) can be reasonably understood to bar non-declaratory claims as a procedural vehicle for enforcing section 91.402. Id. at 662 . It next reasoned that accepting Burlington's interpretation of section 91.402 would mean that a declaratory judgment would essentially become the exclusive remedy for a violation of section 91.402(a), which is inconsistent with the nature and purpose of a declaratory judgment. Id. at 663 . The court of appeals affirmed the trial court's dismissal of the Koopmanns' other non-declaratory claims based on the economic-loss rule. Id. at 667-68 . The Koopmanns' breach-of-contract claim is based on the royalty clause in their lease with Burlington, which sets the amounts due on oil, gas, and all other minerals. The lease requires that the payments be made within sixty days after the end of the month in which production occurred-an earlier payment than required under section 91.402-and requires interest on late payments. The Koopmanns did not assert a claim regarding withheld royalty payments under section 91.404, but they did seek prejudgment interest under section 91.403. See TEX. NAT. RES. CODE § 91.403 (providing for interest on late royalty payments). 8 Burlington does not argue that it did not breach the lease agreement. It argues instead that section 91.402modified the common law rules that otherwise apply to oil and gas payments under leases, contracts, or deeds. The statute covers payees who are legally entitled to payment and payors who undertake to distribute oil and gas proceeds-both of which arise by virtue of contract-and thus, Burlington argues, the statute was intended to apply when contractual and leasehold rights are at issue. See id. § 91.401 (defining payee and payor). Further, by addressing timing of payments, excusing payors from making payments when there is a title dispute, and setting conditions for payment, Burlington asserts that the statute modifies parties' contractual rights and thus removes the Koopmanns' ability to prevail on a common law cause of action when the statute applies. Burlington points out that other parts of the Natural Resources Code explicitly state that those statutes do not override common law causes of action, but section 91.404(c) contains no such provision. See, e.g. , id. § 40.256 (The remedies in this chapter are cumulative and not exclusive.). Burlington suggests this Court apply the interpretative canon of expressio unius est exclusio alterius- the notion that the express mention of one thing excludes another-to conclude that the Legislature intentionally did not include a similar provision here. The Koopmanns do not fully respond to Burlington's arguments. They instead merely assert that section 91.402(b) is not intended to be a shield to liability, but serves only to extinguish prejudgment interest, citing Concord Oil Co. v. Pennzoil Exp. & Prod. Co. , 966 S.W.2d 451 , 461 (Tex. 1998). Additionally, the Koopmanns argue that there was no legitimate title dispute as to the NPRI. Citing Browning Oil Co. v. Luecke , 38 S.W.3d 625 , 647-48 (Tex. App.-Austin 2000, pet. denied), they assert that this dispute falls outside of the  chain of title and concerns only a failure to pay royalties. This Court has instructed that [a]brogating common-law claims 'is disfavored and requires a clear repugnance between the common law and statutory causes of action.'  Cash Am. Int'l, Inc. v. Bennett , 35 S.W.3d 12 , 16 (Tex. 2000) (quoting Holmans v. Transource Polymers, Inc. , 914 S.W.2d 189 , 192 (Tex. App.-Fort Worth 1995, writ denied) ). We have consistently declined to construe statutes to deprive citizens of common-law rights unless the Legislature clearly expressed that intent. Id ; see also Satterfield v. Satterfield , 448 S.W.2d 456 , 459 (Tex. 1969) (noting that a statute that deprives a person of a common law right will not be extended beyond its plain meaning or applied to cases not clearly within its purview). This Court has, however, found that a statutory claim may override a common law claim when the law governing the issue involves a unique set of standards and procedures. Waffle House, Inc. v. Williams , 313 S.W.3d 796 , 807 (Tex. 2010) (holding that the Texas Commission on Human Rights Act preempted an employee's common law negligence claim against her employer). This Court held last term that another portion of the Natural Resources Code that provides for a statutory cause of action did not exclude common law rights for the same harm. Forest Oil Corp. v. El Rucio Land & Cattle Co., Inc. , 518 S.W.3d 422 , 429 (Tex. 2017) (analyzing section 85.321, which permits a landowner to sue for damages for violation of the subchapter's waste provisions). We stated: [A]s the United States Supreme Court has observed, 'the force of any negative implication ... depends on context.'  Id. (quoting Marx. v.Gen. Revenue Corp. , 568 U.S. 371 , 381, 133 S.Ct. 1166 , 185 L.Ed.2d 242 (2013) ). [T]he expressio unius canon does not apply unless it is fair to suppose that [the Legislature] considered the unnamed possibility and meant to say no to it. Id. (quoting same). Though it is certainly possible to read a negative implication in Section 85.321, this Court noted, it is hardly necessary . Id. (emphasis in original). This Court has also upheld Texas's strong public policy favoring freedom of contract. Phila. Indemnity Ins. Co. v. White , 490 S.W.3d 468 , 471 (Tex. 2016). Absent compelling reasons, courts must respect and enforce the terms of a contract the parties have freely and voluntarily entered. Id. (citing Royston, Rayzor, Vickery, & Williams, LLP v. Lopez , 467 S.W.3d 494 , 503-04 (Tex. 2015) ). As a general rule, parties may contract as they wish so long as the agreement reached does not violate positive law or offend public policy. Id. at 475. In certain contexts where the Legislature sets certain rights and obligations between parties, it has explicitly allowed parties to contract around those rights to a certain extent. See, e.g. , TEX. BUS. ORGS. CODE § 152.002 (detailing the rights and duties a partnership agreement can and cannot waive); TEX. PROP. CODE § 92.061 (stating that these obligations and remedies are in lieu of existing common and statutory law, but that [o]therwise, this subchapter does not affect any other right of a landlord or tenant under [any] contract). In White , this Court construed the Property Code provision that imposes repair duties on landlords, noting: [T]o the extent the Property Code imposes limitations on contracting in the leasehold-repair context, the Property Code reflects the Legislature's public-policy determinations on the matter. 490 S.W.3d at 479 (discussing TEX. PROP. CODE § 92.061 ). We held, however, that the provision in the lease agreement at issue was not unenforceable per se because it could  be performed without violating the Property Code, even though it was overly broad and could have encompassed scenarios in which a landlord would have had a nonwaivable statutory duty to repair. Id. at 483-84 (The provision would be unenforceable per se only if it could not be performed without violating the Property Code.). Natural Resources Code section 91.402 reads in pertinent part: (a) The proceeds derived from the sale of oil or gas production from an oil or gas well ... must be paid to each payee by payor on or before 120 days after the end of the month of first sale of production from the well.... (b) Payments may be withheld without interest beyond the time limits set out in Subsection (a) of this section when there is: (1) a dispute concerning title that would affect distribution of payments; .... TEX. NAT. RES. CODE § 91.402(a) - (b). Section 91.404(c) reads: (c) A payee has a cause of action for nonpayment of oil or gas proceeds or interest on those proceeds as required in Section 91.402 or 91.403 of this code in any court of competent jurisdiction in the county in which the oil or gas well is located. Id. § 91.404(c). The statute was passed in 1983, Act of May 24, 1983, 68 th Leg., R.S., ch. 228, 1983 Tex. Gen. Laws 966 (codified as amended at TEX. NAT. RES. CODE §§ 91.401 -.406), at a time when payment schedules were not included in leases: Current law is totally vague as to deadlines for royalty payments. Most leases don't specify deadlines either, and there is no law specifically protecting Texas royalty owners from deliberate delay of their royalty checks. Many delays stem from legitimate questions about the validity of titles or the whereabouts of royalty owners. But some oil operators have raised title questions just to put off payments. House Research Organization Bill Analysis, Tex. H.B. 1775, 68th Leg. R.S. (1983). We have recognized that the statute was designed to protect the interest of royalty owners. Concord Oil Co. , 966 S.W.2d at 461 . However, as Burlington points out, the statute also clearly contemplates protecting payors during legitimate title disputes. See TEX. NAT. RES. CODE § 91.402(b). In Concord , we held that the statute precluded a common law claim for prejudgment interest. 966 S.W.2d at 461-63 . But that was a case in which there was not a contractual relationship between the parties-each was a producer arguing that it was entitled to the proceeds at issue. Id. at 453-54 . Burlington is correct that the statute imposes specific obligations on lessors and lessees: payment deadlines, payment conditions, interest rates, and excusal for non-payment when there is a title dispute. See TEX. NAT. RES. CODE § 91.402. Thus, it is possible that this unique set of standards and procedures, see Waffle House, Inc. , 313 S.W.3d at 807 , reflects the Legislature's public policy determinations on the matter. See White , 490 S.W.3d at 479 . But we have required clear repugnance between a statutory and a common law cause of action to find that the former precludes the latter. See Cash Am. Int'l, Inc. , 35 S.W.3d at 16 . As Burlington points out, the statute does not affirmatively state, as other parts of the Natural Resources Code do, that other common law causes of action are still available to disgruntled payees. See e.g. , TEX. NAT. RES. CODE § 40.256. Again, though it is certainly possible to read a negative implication in section  91.404(c), it is hardly necessary . See Forest Oil Corp. , 518 S.W.3d at 429 . Section 91.404(c) provides a cause of action for a payee if the payor does not comply with the requirements set out in section 91.402, but this does not mean that the statute abrogates a common law claim for breach of contract when there is a controlling lease between the parties. See White , 490 S.W.3d at 479 . Here, the parties agreed in several respects to terms different from what is suggested in section 91.402. The Koopmanns claim that Burlington breached the terms of the lease when it failed to pay them royalties on the disputed NPRI, and absent clear language from the Legislature indicating an intent to abrogate a common law cause of action, we cannot hold that section 91.402 precludes their claim for breach of contract. We affirm the court of appeals' holding on this issue.