Court Opinion

ID: 4070132
Source: CourtListenerOpinion
Date Created: 2016-09-30 01:03:34.060094+00
Date Added: 2024-06-11T14:33:03.675619
License: Public Domain

ACCEPTED
                                                                                                     06-15-00044-CV
                                                                                          SIXTH COURT OF APPEALS
                                                                                                TEXARKANA, TEXAS
                                                                                               12/21/2015 4:21:49 PM
                                                                                                    DEBBIE AUTREY
                                                                                                              CLERK

                                   No. 06-15-00044-CV

                            IN THE SIXTH COURT OF APPEALS        FILED IN
                                                          6th COURT OF APPEALS
                                  TEXARKANA, TEXAS          TEXARKANA, TEXAS
                                                          12/22/2015 8:08:00 AM
                 BURLINGTON RESOURCES OIL & GAS COMPANY, LP,   DEBBIE AUTREY
                                               Appellant,          Clerk
                                               v.
        PETROMAX OPERATING CO., INC., WOODBINE ACQUISITION, LLC,
              PETRO TEXAS, LLC, CH4 ENERGY II, LLC, AND
                  TEXCAL ENERGY SOUTH TEXAS, L.P.,
                                                              Appellees.

                                  BRIEF OF APPELLEES

THOMPSON & KNIGHT LLP             HANKINSON LLP                     BECK REDDEN LLP
  Greg W. Curry                    Deborah G. Hankinson               David J. Beck
  State Bar No. 05270300           State Bar No. 00000020             State Bar No. 00000070
  greg.curry@tklaw.com             dhankinson@hankinsonlaw.com        dbeck@beckredden.com
  Richard B. Phillips, Jr.         Stephanie Dooley Nelson            David M. Gunn
  State Bar No. 24032833           State Bar No. 24002006             State Bar No. 08621600
  rich.phillips@tklaw.com          snelson@hankinsonlaw.com           dgunn@beckredden.com
  Gregory D. Binns                750 N. St. Paul St., Suite 1800     Thomas E. Ganucheau
  State Bar No. 24027148          Dallas, Texas 75201                 State Bar No. 00784104
  greg.binns@tklaw.com            214-754-9190; Fax: 214-754-9140     tganucheau@beckredden.com
One Arts Plaza                    Counsel for Appellee                Jim Taylor
1722 Routh Street, Suite 1500     TexCal Energy South Texas, L.P.     State Bar No. 00788512
Dallas, Texas 75201                                                   jtaylor@beckredden.com
214-969-1700; Fax: 214-969-1751   PIERCE & O’NEILL, LLP             1221 McKinney, Suite 4500
Counsel for Appellee               Jesse R. Pierce                  Houston, TX 77010
Woodbine Acquisition, LLC          State Bar No. 15995400           713-951-3700; Fax: 713-951-3720
n/k/a MD America Energy LLC        jpierce@pierceoneill.com         Counsel for Appellees,
                                   Brian K. Tully                   PetroMax Operating Co., Inc.,
ATCHLEY, RUSSELL, WALDROP          State Bar No. 24039217           Petro Texas LLC, and
 & HLAVINKA, LLP                   btully@pierceoneill.com          CH4 Energy II, LLC
  Jeffery C. Lewis                4203 Montrose Boulevard
  State Bar No. 12280950          Houston, Texas 77006              CANTEY HANGER LLP
  jlewis@arwhlaw.com              713-634-3600; Fax: 713-634-3601     Brad D’Amico
1710 Moores Lane                  Counsel for Appellee                State Bar No.00783923
Texarkana, Texas 75503            TexCal Energy South Texas, L.P.     bd@canteyhanger.com
903-792-8246; Fax: 903-792-5801                                     1999 Bryan Street, Suite 3300
Counsel for Appellee                                                Dallas, TX 75201
Woodbine Acquisition, LLC                                           214-978-4100; Fax: 214-978-4150
n/k/a MD America Energy LLC                                         Counsel for Appellee
                                                                    PetroMax Operating Co., Inc.
                     ORAL ARGUMENT CONDITIONALLY REQUESTED
                     IDENTITY OF PARTIES AND COUNSEL

      In addition to the counsel listed in Appellant’s Brief, please note the

appearance of the following additional counsel:

David M. Gunn                                     Deborah G. Hankinson
State Bar No. 08621600                            State Bar No. 00000020
dgunn@beckredden.com                              dhankinson@hankinsonlaw.com
Jim Taylor                                        Stephanie Dooley Nelson
State Bar No. 00788512                            State Bar No. 24002006
jtaylor@beckredden.com                            snelson@hankinsonlaw.com
BECK REDDEN LLP                                   HANKINSON LLP
1221 McKinney, Suite 4500                         750 N. St. Paul St., Suite 1800
Houston, TX 77010-2010                            Dallas, Texas 75201
(713) 951-3700                                    Phone: 214-754-9190
(713) 951-3720 (Fax)                              Fax: 214-754-9140
Counsel for Appellees,                            Counsel for Appellee
PetroMax Operating Co., Inc.,                     TexCal Energy South Texas,
Petro Texas LLC, and                              L.P.
CH4 Energy II, LLC

Jeffery C. Lewis
State Bar No. 12280950
jlewis@arwhlaw.com
ATCHLEY, RUSSELL, WALDROP
   & HLAVINKA, LLP
1710 Moores Lane
Texarkana, Texas 75503
Phone: 903-792-8246
Fax: 903-792-5801
Counsel for Appellee
MD America Energy, LLC
f/k/a Woodbine Acquisition LLC
                                           TABLE OF CONTENTS

                                                                                                                  Page
IDENTITY OF PARTIES AND COUNSEL .......................................................................... i

TABLE OF CONTENTS ................................................................................................. ii

INDEX OF AUTHORITIES............................................................................................. iv

STATEMENT OF THE CASE ........................................................................................ vii

STATEMENT REGARDING ORAL ARGUMENT ........................................................... viii

ISSUE PRESENTED...................................................................................................... ix

STATEMENT OF FACTS.................................................................................................1

SUMMARY OF THE ARGUMENT ....................................................................................8

ARGUMENT ...............................................................................................................10

         I.       PRINCIPLES OF CONTRACT CONSTRUCTION. .........................................10

         II.      THE ONLY REASONABLE INTERPRETATION OF THE
                  ASSIGNMENT. .......................................................................................11

         III.     BURLINGTON’S CONSTRUCTION IS NOT REASONABLE. ........................14

                  A.        Burlington’s Construction Requires Ignoring
                            Essentially All of the Granting Clause. ....................................16

                  B.        Burlington’s Construction Makes No Sense in
                            Light of the Obligations/Indemnity Clause. .............................17

                  C.        Burlington’s Construction Does Not Explain
                            Why Exhibit A Would Switch the Order From
                            the Text, or Adequately Explain What
                            “Associated Wells” Is Supposed to Mean. ...............................18

                  D.        Burlington Does Not Explain Why It Would Be
                            Necessary to Reserve the Odom Lease. ....................................20

                                                            ii
                  E.       Burlington’s Construction Renders the “Less
                           and Excepted” Clause Essentially Meaningless,
                           or Completely Misleading.........................................................21

                  F.       The Leases Cannot Be What Was Reserved
                           Because They Cannot Be “From” the Wells. ...........................23

         IV.      PAROL EVIDENCE CANNOT BE USED TO ALTER THE
                  PLAIN MEANING OF THE ASSIGNMENT AND DOES NOT
                  CHANGE THE EQUATION IN ANY EVENT. ..............................................25

                  A.       The Alleged Evidence of “Surrounding
                           Circumstances.” ........................................................................26

                           1.       The Auction Catalog. ......................................................26

                           2.       The Understanding of the Purchaser and
                                    Seller. ..............................................................................30

                  B.       The Post-Transaction Parol Evidence. ......................................32

                  C.       This Court Should Not Rely on Parol Evidence
                           in Construing a Deed. ...............................................................33

         V.       BURLINGTON IS NOT ENTITLED TO JUDGMENT ON ITS
                  25% ISSUE. ...........................................................................................35

PRAYER FOR RELIEF ..................................................................................................37

CERTIFICATE OF SERVICE ..........................................................................................41

CERTIFICATE OF COMPLIANCE ..................................................................................42

APPENDIX

         Assignment and Bill of Sale (Supp. CR 1:64-69) .................................. TAB A

         Order Granting Defendants’ Motion for Summary Judgment
         on Title Issues (CR 1617) ....................................................................... TAB B

         Order Denying Burlington’s Motion for Partial Summary
         Judgment Seeking Various Declarations (CR 1618-19) ........................ TAB C

                                                           iii
                                        INDEX OF AUTHORITIES

CASES                                                                                                       Page(s)

Am. Mfrs. Mut. Ins. Co. v. Schaefer
  124 S.W.3d 154 (Tex. 2003) .............................................................................. 36

Americo Life, Inc. v. Myer
  440 S.W.3d 18 (Tex. 2014)...........................................................................26, 33

Anglo-Dutch Petroleum Int’l, Inc.
  v. Greenberg Peden, P.C.
  352 S.W.3d 445 (Tex. 2011) .............................................................................. 26

Capitan Enters., Inc. v. Jackson
  903 S.W.2d 772 (Tex. App.—El Paso
  1994, writ denied) ............................................................................................... 36

Cincinnati Life Ins. Co. v. Cates
   927 S.W.2d 623 (Tex. 1996) .............................................................................. 35

Coker v. Coker
  650 S.W.2d 391 (Tex. 1983) .............................................................................. 10

Day & Co., Inc. v. Texland Petroleum, Inc.
  786 S.W.2d 667 (Tex. 1990) .............................................................................. 34

In re Dillard Dept. Stores, Inc.
    186 S.W.3d 514 (Tex. 2006) .............................................................................. 33

State v. Dunn
   574 S.W.2d 821 (Tex. Civ. App.—Amarillo
   1978, writ ref’d n.r.e.) ......................................................................................... 34

El Paso Field Servs., L.P. v. MasTec N. Am., Inc.
   389 S.W.3d 802 (Tex. 2012) .............................................................................. 10

Friendswood Dev. Co. v. McDade & Co.
   926 S.W.2d 280 (Tex. 1996) .............................................................................. 10

Frost Nat’l Bank v. L&F Distribs., Ltd.
   165 S.W.3d 310 (Tex. 2005) .............................................................................. 36

                                                          iv
Garza v. Prolithic Energy Co., L.P.
  195 S.W.3d 137 (Tex. App.—San Antonio
  2006, pet. denied)................................................................................................ 32

Gonyea v. Kerby
  No. 10-12-00182-CV, 2013 WL 4040117
  (Tex. App.—Waco Aug. 8, 2013, pet. denied) ................................................... 34

Houston Exploration Co. v. Wellington
  Underwriting Agencies, Ltd.
  352 S.W.3d 462 (Tex. 2011) ........................................................................25, 26

J.M. Davidson, Inc. v. Webster
   128 S.W.3d 223 (Tex. 2003) ........................................................................14, 25

Kachina Pipeline Co., Inc. v. Lillis
  471 S.W.3d 445 (Tex. 2015) ........................................................................14, 25

King v. First Nat’l Bank of Wichita Falls
   192 S.W.2d 260 (Tex. 1946) .............................................................................. 12

Lewis v. Midgett
  448 S.W.2d 548 (Tex. Civ. App.—Tyler
  1969, no writ) ...................................................................................................... 34

Matagorda Cnty. Hosp. Dist. v. Burwell
  189 S.W.3d 738 (Tex. 2006) .............................................................................. 25

MCI Telecomms. Corp. v. Tex. Utils. Elec. Co.
  995 S.W.2d 647 (Tex. 1999) .............................................................................. 10

Mitchell v. Mitchell
   445 S.W.3d 790 (Tex. App.—Houston
   [1st Dist.] 2014, no pet.) ..................................................................................... 35

Pich v. Lankford
   302 S.W.2d 645 (Tex. 1957) .............................................................................. 12

Sun Oil Co. (Delaware) v. Madeley
   626 S.W.2d 726 (Tex. 1981) ........................................................................25, 26

                                                            v
Valence Operating Co. v. Dorsett
   164 S.W.3d 656 (Tex. 2005) ........................................................................10, 35

OTHER AUTHORITIES

Bruce M. Kramer,
   The Sisyphean Task of Interpreting Mineral
   Deeds and Leases: An Encyclopedia of
   Canons of Construction,
   24 TEX. TECH L. REV. 1, 14 (1993)..................................................................... 34

                                                    vi
                           STATEMENT OF THE CASE

Nature of the case        This oil and gas case turns on the interpretation of a 1994
                          Assignment that is 3-pages long with a 1-page exhibit.

                          The parties dispute whether the assignment conveyed
                          four described leases, or only four specific wells. If it
                          conveyed four leases, then the area of mutual interest
                          (“AMI”) on which Appellant’s claims rely expired and
                          Appellant’s claims fail. If it conveyed only four specific
                          wells, Appellant’s claims remain subject to Appellees’
                          other defenses and the case should be remanded.

Trial court               12th District Court, Madison County, Texas (Hon.
                          Donald L. Kraemer, presiding)

Course of proceedings     Burlington filed suit against Appellees (collectively, the
                          PetroMax Defendants) alleging a breach of the AMI
                          provisions of a 1975 Letter Agreement. Appellees
                          denied these claims and filed counterclaims seeking to
                          quiet their title. The two sides filed competing summary
                          judgment motions centering on the issue of whether the
                          AMI had expired.

Trial court disposition   The trial court denied Burlington’s summary judgment
                          motion and granted the PetroMax Defendants’ summary
                          judgment motion. The trial court ruled that

                             (1) Burlington owns no interest in the AMI; and

                             (2) the AMI provision has terminated.

                          The court severed the remaining claims to make its
                          summary judgment final.

                                         vii
                  STATEMENT REGARDING ORAL ARGUMENT

       Oral argument is not necessary because this appeal involves application of

familiar contract-construction principles to an unambiguous assignment. But if the

Court grants Burlington’s request for oral argument, the PetroMax Defendants

reserve their right to participate.

                                       viii
                               ISSUE PRESENTED

      The issue on appeal is whether the trial court properly interpreted the 1994

Assignment as conveying four oil and gas leases and not just four wells without the

underlying leases.

                                        ix
                              STATEMENT OF FACTS

      The resolution of the case turns entirely on the interpretation of a 3-page

assignment with a 1-page exhibit.       The important facts in this appeal, those

necessary for resolution, are simply stated.

      In 1975, Buttes Resources Company owned an undivided one-half working

interest in nine oil and gas leases. CR:589.        Buttes and Aztec Oil and Gas

Company entered into a letter agreement to facilitate joint efforts to explore for and

develop oil and gas. As part of that agreement, Buttes conveyed to Aztec an

undivided 25% interest in those nine leases. CR:589, 591-92.

      In addition, Buttes and Aztec entered into an area of mutual interest (“AMI”)

agreement providing that if either party obtained an oil and gas interest within the

boundaries of the AMI, it was obligated to offer the other party a participation in

that interest proportionate to their ownership of the original nine leases. In other

words, Buttes would have to offer Aztec an undivided 25% interest, and Aztec

would have to offer Buttes an undivided 75% interest. CR:593.

      The 1975 Letter Agreement provided that the AMI would remain in force

and effect only so long as there continued to exist jointly-owned leases within the

AMI. CR:593. It is undisputed that six of the original nine leases no longer exist
or are no longer jointly owned.1 The only three leases still at issue are 1) the Gibbs

Lease, 2) the Wilson Lease, and 3) the Buchanan Lease.

         Much has changed since 1975. The original interests held by Buttes and

Aztec have changed hands multiple times. Ultimately, the PetroMax Defendants2

are assignees of a portion of Buttes’s interest. CR:437. Burlington3 is a successor

in interest to Aztec. CR:435, 437.4 Importantly, an intermediate successor in

interest to Aztec, in Burlington’s chain of title, was a company called Southland

Royalty Company. CR:435, 437.

         This is significant because in 1994, Southland entered into an assignment

(the “Assignment”) with Samson Resources Company that involved all three of the

disputed leases – the Gibbs, Wilson, and Buchanan leases.5 Supp. CR 1:64-69.

More specifically, the Assignment stated that Southland

1
  See Appellant’s Brief at 5. Four of the original leases terminated in 1979 at the end of their
primary terms. CR:74. With regard to a fifth lease, all but one well was assigned to a third party
5in 1981, and the remaining well was assigned to another third party in 1997. Id. A sixth lease
expired upon cessation of production in 1999. Id.
2
  Defendants/Appellees PetroMax Operating Co., Inc. (“PetroMax”), Woodbine Acquisition,
LLC (“Woodbine”), Petro Texas, LLC, CH4 Energy II, LLC, and TexCal Energy South Texas,
L.P. (“TexCal”).
3
    Plaintiff/Appellant Burlington Resources Oil & Gas Company, LP.
4
  There are at least four other successors to Aztec’s interests. Supp CR 3:842, 3:1277-78,
3:2147-2763. Defendant Woodbine is also an assignee of a portion of Aztec’s interest. Supp CR
3:67-105, 2531-58.
5
    The Assignment is attached as Appendix A.

                                                2
      does hereby assign, transfer, grant and convey to Samson Resources
      Company ... all of Assignor’s right, title and interest in and to the
      following: (i) The oil and gas leases ... particularly described on Exhibit
      “A” ... (collectively the “Leases”) ... (ii) The wells ... on the Leases ...

Supp. CR 1:64 (emphasis added).           In addition, the Assignment contains a

reservation clause providing that Southland reserved from the conveyance certain

interests “specifically noted and reflected on Exhibit ‘A’.” Id.

      Exhibit A described four oil and gas leases as follows:

Supp. CR 1:68.

      The position of the PetroMax Defendants is that the four leases described in

Exhibit A were conveyed in 1994, that the conveyance included the non-exclusive

list of wells associated with the leases that is set forth at the bottom of the exhibit,

and that the only properties exempt from the assignment were the wells identified

in the “Less and Excepted” clause appended to the list of leases. Supp. CR 1:13-

17; Supp. CR 2:1339-40, 1352.

                                           3
       Indeed, that is what Samson believed it purchased. Supp. CR 2:1362-65.

Moreover, for more than sixteen years, that is what Southland, and its successors

(including Burlington), believed it sold. Supp. CR 1:115, 117, 119, 121-22; see

also Supp. CR 2:1464-73, 1873.

       For its part, Burlington contends that the Assignment did not convey the four

leases described in Exhibit A, or any lease. Appellant’s Brief at 19. Rather,

Burlington takes the position that the Assignment conveyed only four specific wells,

and nothing else. Id.; CR:1411. Consequently, Burlington argues that Southland

continued to own the four oil and gas leases described in Exhibit A, and that it

(Burlington) eventually succeeded to those interests. Appellant’s Brief at 14.

       There are other issues that would require adjudication at trial if the Court

were to accept Burlington’s interpretation of the Assignment. Because the trial

court determined that the AMI terminated, it never addressed other issues, such as

the affirmative defenses raised by the PetroMax Defendants,6 and the 25%

proportionate-reduction issue discussed in Appellant’s Brief.                        See CR:1148;

Appellant’s Brief at 34-35.              However, this dispute rises or falls with the

interpretation of the Assignment.

6 These defenses include that Burlington (and its predecessors) waived enforcement of the AMI provision
and that the AMI provision (i) does not satisfy the statute of frauds; (ii) lacks an essential term; and
(iii) violates the Rule Against Perpetuities. Supp. CR 3:42-43. Burlington makes no effort to address
these defenses in its brief.

                                                   4
       PetroMax7 acquired its interest in the Wilson Lease in 2009 and embarked

on a plan to drill new wells on the lease. CR:647-58. Based on a 2007 title

opinion,8 PetroMax sent Burlington various Authorities for Expenditure (“AFEs”)

regarding participation in proposed wells on the Wilson Lease. Supp. CR 2:1326-

28, 1330-32, 1334-36, 1343, 1352.

       After receiving these AFEs, Burlington9 reviewed its internal records, which

reflected that it no longer owned any such interest because the Wilson Lease had

been sold to Samson in the 1994 Assignment. Supp. CR 1:115, 117, 119, 121-22;

see also Supp. CR 2:699-700, 1464-73, 1873; Supp. CR 3:1494-1877, 1583, 1671,

1686-87, 1718, 1728-32, 1738.           For instance, an internal memorandum dated

August 28, 2009, stated as follows:

       Burlington Resources received multiple ballot letters in regards to the
       Wilson #1 H Well, James D Wilson Lease . . . . The ballot listed
       Burlington Resources Oil & Gas Company (BROG) as a successor in
       interest to Southland royalties . . . . The remaining interest was sold
       from BROG to Samson Resources in September 1994 . . . . The

7
 The interests of the other Appellees (Petro Texas, LLC; CH4 Energy II, LLC; TexCal South
Texas, L.P.; and Woodbine) derive from PetroMax’s original interest.
8
  Attorney J. Jan Jircik prepared a Leasehold Estate Title Opinion dated as of January 4, 2007
that concluded that Burlington possessed an interest in the Wilson Lease. CR:861. Attorney
Ron Moore performed subsequent title work. In part of his work, Moore simply incorporated,
without critical analysis, Jircik’s conclusions with respect to the Southland Assignment. Supp.
CR 2:1355. That is industry practice. Id. When subsequently requested to focus on the
Southland Assignment, Moore concluded that it “apparently conveys all of Southland’s right,
title and interest in and to” the leases at issue. Supp. CR:2:1359.
9
  It should be noted that Burlington’s immediate predecessor was ConocoPhillips and some of
this initial review was undertaken by ConocoPhillips.

                                              5
      systems and files show that this Assignment conveyed all interest in
      the primary lease. All systems and files show that BROG does not
      have any interest in the proposed lease.

Supp. CR 1:121.     Accordingly, Burlington responded that it owned no such

interest, and thus it would not participate. Supp. CR 1:121-22; Supp. CR 3:1671,

1684-85.    This cycle was repeated several times over the next two years as

PetroMax, and subsequently Woodbine, proposed additional wells.          See, e.g.,

Supp. CR 3, 1690-91, 1697-1706, 1774-77.

      However, in late 2011, after several successful wells had been drilled,

Burlington changed its tune.    Supp. CR 1:124.       Supposedly based on a new

interpretation of the 1994 Assignment, Burlington took the position that it did, in

fact, own an interest in the Wilson Lease. Supp. CR 2:1807; Supp. CR 3:1740-43.

Furthermore, Burlington claimed that it had succeeded to Aztec’s rights under the

1975 Letter Agreement and that, pursuant to the AMI, it should have been offered

a 25% participation in all of the new wells. CR:12.

      After further review of the 1994 Assignment, the PetroMax Defendants

determined that the Wilson Lease had been sold in the 1994 Assignment and thus

the AMI had terminated. Supp. CR 1:12.

      Burlington filed suit seeking to enforce its alleged rights in the AMI.

CR:10-17.    The PetroMax Defendants denied Burlington’s claims and filed

counterclaims seeking to quiet title.    CR:313-20.     Each side filed summary

                                        6
judgment motions focusing mainly on whether the AMI remained in force and

effect. CR:479-528, Supp. CR 1:4-24. The trial court denied Burlington’s motion

and granted the PetroMax Defendants’ motion, ruling that Burlington does not own

any interest in the AMI and that the AMI had terminated.10 CR:1617-19. On a

joint motion by all parties, the trial court severed the remaining claims into a

separate lawsuit in order to render its summary-judgment ruling final. CR:1640-

45. Burlington then filed this appeal.

10
     See Appendices B & C attached hereto.

                                             7
                          SUMMARY OF THE ARGUMENT

      The sole issue in this appeal is whether the 1994 Assignment conveyed

certain oil and gas leases or only four oil wells and not the underlying leases. If it

conveyed the described leases, as the trial court determined, the 1975 AMI

agreement on which Burlington’s claims rely terminated, and Burlington’s claims

cannot stand.

      The Assignment on its face is unambiguously the sale of leases, including

the wells thereon, and not just the sale of individual wells separated from their

underlying leases. The Assignment explicitly sells and conveys “[t]he oil and gas

leases . . . particularly described on Exhibit ‘A’.” In turn, Exhibit A particularly

describes the leases subject to the sale. This language could not be clearer, and

certainly would not have been used if the intention were to sell only particular

wells and not the underlying leases.

      The Assignment also expressly conveys “[t]he wells . . . on the Leases.”

Exhibit A lists four such associated wells, but this does not purport to be an

exclusive list of all the wells subject to the sale; it does not restrict the conveyance

to those four wells or deny conveyance of all other wells on the leases. To the

contrary, only a few wells were excepted from the sale. This was done pursuant to

the Assignment’s reservation clause, which reserved “from the Interests those

certain . . . interests . . . as specifically noted and reflected on Exhibit ‘A’.” The

                                           8
only such reservation specifically noted and reflected on Exhibit A was the explicit

exception of the wells in the “Less and Excepted” clause.

      This contractual language can have only one meaning. The Assignment

conveys the oil and gas leases particularly described on Exhibit A in their entirety,

including the four listed associated wells and all other wells on those leases,

subject only to the explicit exception of the specifically noted wells in the “Less

and Excepted” clause.

      Burlington’s contrary interpretation departs from the Assignment’s plain

language and logical structure. Burlington’s argument, which rests on speculation

and empty theorizing about extrinsic historical facts, is wholly without merit.

                                          9
                                     ARGUMENT

I.     PRINCIPLES OF CONTRACT CONSTRUCTION.
     The dispute in this case turns on the interpretation of the Assignment. The

construction and interpretation of an unambiguous contract is a question of law for

the Court. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex. 2005)

(construing an oil and gas operating agreement); MCI Telecomms. Corp. v. Tex.

Utils. Elec. Co., 995 S.W.2d 647, 650 (Tex. 1999).             Whether a contract is

ambiguous is a question of law for the Court. Friendswood Dev. Co. v. McDade &

Co., 926 S.W.2d 280, 282 (Tex. 1996); Coker v. Coker, 650 S.W.2d 391, 394 (Tex.

1983). The Supreme Court recently summarized the proper approach to contract

construction:

       In construing a contract, we must ascertain and give effect to the parties’
       intentions as expressed in the writing itself. In discerning the parties’
       intent, “we must examine and consider the entire writing in an effort to
       harmonize and give effect to all the provisions of the contract so that none
       will be rendered meaningless.” We begin our analysis with the contract’s
       express language. If we determine that the contract’s language can be
       given a certain or definite legal meaning or interpretation, then the
       contract is not ambiguous and we will construe it as a matter of law. But,
       “if the contract is subject to two or more reasonable interpretations after
       applying the pertinent rules of construction, the contract is ambiguous,
       creating a fact issue on the parties’ intent.”

El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 805-06 (Tex.

2012) (internal citations and quotations omitted). In this case, the Assignment can

be given a certain and definite legal meaning, and there is only one reasonable

interpretation.

                                          10
II.   THE ONLY REASONABLE INTERPRETATION OF THE ASSIGNMENT.

                                              The Assignment begins with a very

                                            broad grant.     Specifically, it states

                                            that   Southland       [Assignor]    “does

                                            hereby assign, transfer, grant, and

                                            convey unto Samson [Assignee] all

                                            of Assignor’s right, title and interest

                                            in and to the following:”

                                              (i) The “oil and gas leases” described
                                            on Exhibit A, including all the rights
                                            and interests that normally accompany
                                            a lease, which is defined as the
                                            “Leases.”
                                              (ii) The wells and equipment on the
                                            Leases.
                                              (iii) All the agreements related to, or
                                            affecting, the Leases.
                                              (iv) The Assignor’s rights to certain
                                            revenues or gas attributable to
                                            Assignor’s interest in the Leases.
             Supp. CR 1:64.
                                            The    sum     total    of   these    four

                                            subsections is then defined as the

                                            “Interests.”

      The Assignment also has a narrow reservation clause excepting from

transfer only those certain interests “specifically noted and reflected on Exhibit

‘A’.” Supp. CR 1:64.

                                       11
       The first thing Exhibit A does, right at the top, is describe four leases:

Supp. CR 1:68. This list of the four leases being assigned corresponds to clause (i)

in the granting clause of the Assignment. Supp. CR 1:64, 68. Exhibit A also

includes a list of the key wells associated with these leases, set out at the bottom of

the exhibit, under the heading “Associated Wells.” Id. That list corresponds to

clause (ii) of the granting clause of the Assignment. Supp. CR 1:64, 68. Finally, the

“Less and Excepted” clause in Exhibit A identifies specific wells as exempted from

the Assignment and corresponds to the Assignment’s reservation11 clause. Id.

       Numbered paragraph 1 of the Assignment sets forth an extensive

obligations/indemnity provision.          Supp. CR 1:65.          Pursuant to that provision,

Samson (the assignee) agreed to

11
   Texas courts have long recognized that while there is a distinction between a reservation and
an exception in a deed, the “terms are frequently used interchangeably and indiscriminately.”
King v. First Nat’l Bank of Wichita Falls, 192 S.W.2d 260, 262 (Tex. 1946); see also Pich v.
Lankford, 302 S.W.2d 645, 650 (Tex. 1957) (“The words ‘exception’ and ‘reservation’ are not
strictly synonymous . . ., but they are often used interchangeably.”). It was Burlington itself that
pointed this out to the trial court in its summary judgment briefing. CR:516.

                                                12
                                                 assume and perform, any and all
                                                 obligations and all of the
                                                 liabilities ... of [Southland] under
                                                 the Interests and existing oil and
                                                 gas leases....

                                               Furthermore, Samson agreed to

                                                 protect, defend, indemnify, and
                                                 hold [Southland] harmless from
                                                 and against any and all claims
                                                 losses, damages ... attributable to
                                                 or arising out of (i) ownership or
                                                 operation of the Interests
                                                 subsequent to the Effective Date,
                                                 and (ii) [Samson’s] assumption
                                                 of any liability or obligation in
                                                 accordance with this paragraph.

Supp. CR. 1:65 (emphasis added). Because the term “Interests” was defined to

include all the Leases particularly described on Exhibit A, the wells and equipment

on the Leases, the agreements related to the Leases, and certain revenues related to

the Leases, Supp. CR 1:64, this indemnity provision further demonstrates that

Samson was acquiring all of Southland’s ownership interests with respect to those

leases, subject only to the narrow reservations clause.

      In short, Southland conveyed all that it had related to the Interests to

Samson, and Samson accepted responsibility for it.          Samson would not have

accepted responsibility for the operations on, and the liabilities of, the leases if it

                                          13
was not receiving ownership of the leases. Nor would Samson have agreed to

indemnify Southland for claims arising from ownership of, or operations on, the

leases unless ownership of the leases was being transferred to it.

       The PetroMax Defendants’ reading of the Assignment is the only

construction that conforms to the agreement’s plain language and logical structure.

Moreover, it harmonizes and gives meaning to each provision—the granting

clause, the reservation clause, the obligations/indemnity clause, the “Less and

Excepted” clause, and the “Associated Wells” listing. See J.M. Davidson, Inc. v.

Webster, 128 S.W.3d 223, 229 (Tex. 2003) (courts must examine the entire writing

in an effort to harmonize and give effect to all provisions). The Assignment can be

given a definite legal meaning.      The granting clause states that Southland is

conveying all the leases described on Exhibit A, reserving only what is specifically

noted and reflected as being reserved. Exhibit A describes the four leases being

conveyed and refers to four associated wells on the leases, reserving only the

specifically identified wells in the “Less and Excepted” clause.        There is no

ambiguity. Kachina Pipeline Co., Inc. v. Lillis, 471 S.W.3d 445, 450 (Tex. 2015).

III.   BURLINGTON’S CONSTRUCTION IS NOT REASONABLE.

       Burlington’s purported reading of the Assignment rests on a false premise. It

argues that because Exhibit A has two lists, one of oil and gas leases and another of

associated wells, one list must identify conveyed interests while the other list

                                         14
identifies reserved interests.     Appellant’s Brief at 11-12.        This is a strained

misreading that ignores the Assignment’s language and logical structure. The two

lists in Exhibit A correspond to clauses (i) and (ii) of the Assignment’s granting

clause. Supp. CR 1:64, 68. Both lists identify conveyed interests. The first list on

Exhibit A “particularly described” the “oil and gas leases” being conveyed pursuant

to clause (i) of the Assignment; the second list identifies four of the “wells . . . on the

Leases” that are explicitly included in the conveyance pursuant to clause (ii) of the

Assignment. Id. The reserved interests subject to the Assignment’s reservation

clause are then separately identified in the “Less and Excepted” addendum to the list

of the leases being conveyed.           Id.        There is nothing difficult about this

straightforward reading of the Assignment and its Exhibit A.

      Even so, Burlington argues that its contrary interpretation of the

Assignment—that only the four “Associated Wells” were assigned and no leases—is

the only reasonable interpretation, or is at least as reasonable as the interpretation of

the PetroMax Defendants. Appellant’s Brief at 29-30. But it is not. An assignment

conveying only four specific wells would never have been drafted in the manner of

the 1994 Assignment, with its primary focus on leases (including the Odom lease,

where none of the four “Associated Wells” was located).

                                              15
     A.    Burlington’s Construction Requires Ignoring Essentially All of
           the Granting Clause.

                                        The Assignment clearly states that

                                    Southland is assigning the “oil and gas

                                    leases ... described on Exhibit ‘A’.” Supp.

                                    CR 1:64. In turn, Exhibit “A” describes

                                    four leases. Supp. CR 1:68. The granting

                                    clause goes so far as to define these leases,

                                    and all rights, wells, equipment, and

                                    agreements attendant to them, as the

                                    “Leases.” Supp. CR 1:64. In fact, the

                                    granting clause uses some form of the term

                                    “lease” no fewer than fourteen times. Id.

                                    Burlington’s construction requires the

                                    Court to ignore all of this because,

                                    according to Burlington, the reservation

                                    clause essentially nullifies the entire
Supp. CR 1:64.
                                    granting clause rendering it effectively

                                    surplusage.       Rather,    according    to

                                    Burlington, Southland was not assigning

                                    any leases, only four wellbores.

                                   16
      Burlington’s argument that “Leases” actually means “wells” defies

credibility. If the intention really had been to assign just four wellbores, surely the

granting clause would not have looked anything like it does.

      B.     Burlington’s Construction Makes No Sense in Light of the
             Obligations/Indemnity Clause.

      In the obligations/indemnity clause, Samson agreed to assume and perform

all of Southland’s liabilities and obligations in the Interests. Supp. CR 1:65.

Furthermore, Samson agreed to indemnify Southland for any claims, liabilities, or

obligations arising out of ownership or operation of the Interests. Id.

      “Interests” is a defined term in the Assignment. It includes

      (i) the leases described on Exhibit A (defined as the “Leases”);

      (ii) the wells and equipment on the Leases;

      (iii) all agreements related to the Leases; and

      (iv) certain revenues related to the Leases.

Supp. CR 1:64. Moreover, the definition of “Interests” is not diminished or curtailed

in any way by the reservation clause. Id. Hence, when Samson agreed to these

obligations, it agreed to them with respect to all of the leases described in Exhibit

A—the Odom, the Gibbs, the Wilson, and the Buchanan. Supp. CR 1:65, 68.

      If all that Samson received in this Assignment was four specific wellbores,

and not the Leases themselves, it would make no sense for Samson to assume the

obligation to perform under the Leases and to indemnify Southland for claims

                                          17
arising out of the ownership or operation of the Leases. It makes even less sense

given that none of the Associated Wells was on the Odom Lease. Supp. CR 2:12;

RR 36. Why would Samson agree to any obligations with respect to the Odom

Lease when it was not receiving any well or other interest from that lease?

       The only reasonable construction is that Southland was assigning to Samson

all of its interests in the Leases and saying—it is your baby now.

       C.      Burlington’s Construction Does Not Explain Why Exhibit A
               Would Switch the Order From the Text, or Adequately Explain
               What “Associated Wells” Is Supposed to Mean.

       This agreement was an assignment. Hence, it is hardly any surprise that the

text of the Assignment starts off, right out of the box, with a description of what is

being assigned. Supp. CR 1:64. Only after describing what is being assigned does

the text of the Assignment discuss what is being reserved. Id.

       One might expect that Exhibit A would follow the same structure. But,

according to Burlington, the drafters of the Assignment, for some unexplained

reason, and without identifying what they were doing, switched the order12 in

Exhibit A. Hence, according to Burlington, this is how the Assignment is to be

construed:

12
   The PetroMax Defendants contend that the leases described at the top of Exhibit “A” were
being assigned, including the wells on those leases, specifically including the “Associated Wells”
identified in the Exhibit. The wells being reserved from the Assignment were identified in the
“Less and Excepted” addendum immediately below the descriptions of the leases being assigned.

                                               18
Supp. CR 1:64, 68.

      But it makes no sense that the drafters of the Assignment would switch the

order from the text of the Assignment to Exhibit A. Moreover, it makes no sense

that in an assignment, Exhibit A would focus on, and place front and center, not

what was being assigned, but rather what was being reserved.

      Also, if the intent were to assign just the four wells, why would Exhibit A

list those four wells at the bottom of the exhibit in what looks like a footnote under

the heading “Associated Wells”? Why not call them “Assigned Wells” if that were

the intent? And why not list them first?

      Finally, Burlington’s explanation of what those wells were “associated” with

is inadequate. According to Burlington, they were not “associated” with anything

referenced in the Assignment itself. Rather, Burlington contends that they were

“associated” with an auction that is nowhere identified in the Assignment.

                                           19
Appellant’s Brief at 32. The PetroMax Defendants’ construction, that these key13

wells were “associated” with the leases to be assigned, described three-inches up

the page on Exhibit A, is the only reasonable interpretation.

       D.      Burlington Does Not Explain Why It Would Be Necessary to
               Reserve the Odom Lease.

Supp. CR 1:68.

       According to Burlington, the four leases described at the top of Exhibit A

were being reserved, and only the four “Associated Wells” listed at the bottom

were being conveyed. But not a single one of those four wells was on the Odom

Lease. Supp. CR 2:12; RR 36. Hence, why would it be necessary to reserve the

13 Burlington argues that this list of “Associated Wells” could not have been a list of all wells on
the identified leases because it did not identify the Wilson #1 Well. Appellant’s Brief at 26. But
this listing was not intended to be a listing of all wells. Rather, it was only a listing of the key
wells associated with the leases. The Wilson #1 well was subject to a 600% after payout penalty
when Southland went non-consent. Id. at 33; CR:1417. Hence, it might never have had any value.

                                                20
Odom Lease when it was not implicated by what was being conveyed? Burlington

does not even attempt to address this question.

      E.     Burlington’s Construction Renders the “Less and Excepted”
             Clause Essentially Meaningless, or Completely Misleading.

Supp. CR 1:68.

      Burlington argues that the “Less and Excepted” clause is not a true

reservation because the assignor had no continuing ownership in the wells

identified in that clause. Appellant’s Brief at 24. That is a trivial debating point

that ignores the substance of what the parties to the Assignment were doing.

Southland reserved, or excepted, the named wells in the “Less and Excepted”

clause precisely because it no longer owned them and therefore was unable to

convey them.

      Burlington’s argument with regard to this point rests in its entirety on the

boilerplate language “reserves and retains unto itself.” Id.; Supp. CR 1:64. To be

sure, the assignor could not retain an interest it had already lost or conveyed away,

                                         21
but Southland did, in fact, continue to own an interest in these wells—a 5%

override.    Supp. CR 1:126-34; Supp. CR 2:571-74.                   Burlington ignores this

undisputed evidence. Southland did retain unto itself an interest in those wells that

was excepted from the Assignment.14                 However, even if Southland had not

continued to own that interest, the boilerplate phrase—retains unto itself—is

merely a lawyer’s unnecessarily elaborate way of saying “excepts from transfer.”

It would be nonsensical to read that phrase, as Burlington apparently does, to deny

a seller the power to exclude from the terms of a sale a property it no longer owns.

       Moreover, Burlington’s argument just does not make sense. Essentially,

Burlington argues that the particularized list of leases itself must be the reservation,

and that the only purpose of the “Less and Excepted” clause was to clarify what

was not included in the leases that were being reserved. Appellant’s Brief at 24.

But it would not be necessary to clarify what was not included in leases that were

not being assigned. Rather, this provision was only necessary to clarify what was

not included in what was being assigned, which was the leases listed “above.”

14
   Southland sold this interest to Tri-Union in a subsequent transaction. Supp. CR 1:170-75;
Supp. CR 2:691-92. An internal Southland email states that the purpose of this transaction was
to sell the remainder of Southland’s interest in the original leases. CR:2015. Thus, the fact that
this 5% override was the only interest sold to Tri-Union is consistent with the conclusion that the
1994 Assignment conveyed Southland’s interest in the four leases, not just the specific wells.

                                               22
      In fact, if the drafters of this Assignment were “less and excepting”

something from interests that were being reserved, then the logical conclusion

would be that the wells identified in the “Less and Excepted” clause were, in fact,

being assigned. But Burlington itself admits that those wells were not subject to

conveyance under the Assignment.

      F.    The Leases Cannot Be What Was Reserved Because They Cannot
            Be “From” the Wells.

Supp. CR 1:64.

      The granting clause defines the term “Interests” to include (i) the Leases

described on Exhibit A; (ii) the wells and equipment on the Leases; (iii) all

                                        23
agreements related to the Leases; and (iv) certain revenues related to the Leases.

The reservation clause then states that what is reserved is “from the Interests.”

Supp. CR 1:64.

Supp. CR 1:68.

      Burlington’s construction is that what was assigned was the four

“Associated Wells” listed at the bottom of Exhibit A and what was reserved is the

four leases at the top. But that simply cannot work. For instance, because none of

the “Associated Wells” are on the Odom Lease, the Odom Lease cannot be “from”

the “Associated Wells.” More generally, however, the leases are broader than just

the four “Associated Wells.” While the “Associated Wells” could be “from” the

leases, the leases could not be “from” the “Associated Wells.” As an analogy,

Texas can be “from” the United States, but the United States cannot be “from”

Texas.

                                       24
      In the end, the Assignment rather clearly says that Southland was conveying

to Samson the “Leases” described in Exhibit A, and all that normally comes with

leases. Burlington spent a mountain of ink trying to convince the trial court that,

even though the Assignment did in fact say this in the granting clause, it took it all

away in the reservation clause and all that was conveyed was four specific wells.

The trial court properly rejected Burlington’s construction, though, because it is

unreasonable. It makes a mockery of the Assignment’s structure, is at odds with

its language, and renders various provisions of the Assignment either meaningless

or nonsensical.

IV.   PAROL EVIDENCE CANNOT BE USED TO ALTER THE PLAIN MEANING OF
      THE ASSIGNMENT AND DOES NOT CHANGE THE EQUATION IN ANY EVENT.

       “In construing a contract, the primary concern of the court is to ascertain

the true intentions of the parties as expressed in the instrument.” J.M. Davidson,
128 S.W.3d at 229. “‘In the usual case, the instrument alone will be deemed to

express the intention of the parties for it is the objective, not subjective, intent that

controls.’” Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd.,

352 S.W.3d 462, 469 n.25 (Tex. 2011) (quoting Sun Oil Co. (Delaware) v.

Madeley, 626 S.W.2d 726, 731 (Tex. 1981)); Matagorda Cnty. Hosp. Dist. v.

Burwell, 189 S.W.3d 738, 740 (Tex. 2006). If a “contract is so worded that it can

be given a definite or certain legal meaning, then it is not ambiguous.” Kachina

Pipeline Company, Inc. v. Lillis, 471 S.W.3d 445, 450 (Tex. 2015) (internal

                                           25
quotations omitted). Moreover, the “parol-evidence rule precludes considering

evidence that would render a contract ambiguous when the document, on its face,

is capable of a definite legal meaning.” Americo Life, Inc. v. Myer, 440 S.W.3d 18,

22 (Tex. 2014).

       The rule does not prohibit consideration of surrounding circumstances that

aid in the construction of the contract’s language by showing context. Sun Oil, ,

626 S.W.2d at 731; Houston Exploration, 352 S.W.3d at 469. However, there are

limits. Anglo-Dutch Petroleum Int’l, Inc. v. Greenberg Peden, P.C., 352 S.W.3d
445, 451 (Tex. 2011). While

      [u]nderstanding the context in which an agreement was made is
      essential in determining the parties’ intent as expressed in the
      agreement, [] it is the parties’ expressed intent that the court must
      determine. Extrinsic evidence cannot be used to show that the parties
      probably meant, or could have meant, something other than what their
      agreement stated.

Id. (emphasis in original).   Hence, the Court can only consider “surrounding

circumstances that inform, rather than vary from or contradict, the contract text.”

Houston Expl., 352 S.W.3d at 469.

      A.    The Alleged Evidence of “Surrounding Circumstances.”

            1.     The Auction Catalog.

      In this case, Burlington urges the Court to consider an auction catalog as

evidence of surrounding circumstances. Appellant’s Brief at 12, 23, & 33. But

there is only one reasonable interpretation of the Assignment and it can be given a

                                        26
definite legal meaning.    Specifically, the Assignment conveyed four leases to

Samson with limited exceptions. Burlington cannot resort to extrinsic evidence of

surrounding circumstances to create an ambiguity, or vary or contradict the text.

Id.

      Moreover, consideration of this catalog does not aid in the construction of

the Assignment. The catalog is a hearsay marketing brochure developed by a third

party, based on information provided by numerous sellers that the clearinghouse

did not purport to verify, over two decades ago. CR:1445-1523. It simply does

not, by itself, provide sufficient context of anything. It certainly does not, for

instance, support Burlington’s construction of the Assignment.

      Essentially, Burlington notes that the auction catalog, which listed some 500

oil and gas properties for sale from multiple sellers, listed four Southland wells—the

Gibbs Bros. #1, Wilson #3, Wilson #2, and Buchanan #1. Because the catalog only

listed these wells, and does not reference the leases on which the wells were situated,

Burlington argues that this must mean that only those four wells were up for auction,

and not any Southland leases. Appellant’s Brief at 27. Burlington further reasons

that because there is a header on the first page of the Assignment identifying those

wells, and they are listed on Exhibit A under the heading “Associated Wells,” that

must mean that those four wells were all that was conveyed in the Assignment.

Appellant’s Brief at 12, 23, & 27-28; Supp. CR 1:64, 68.

                                          27
      Burlington’s syllogism does not work.        First, neither this Court, nor

Burlington, nor the auction participants themselves, can/could rely on the catalog

as providing a completely accurate description of what was being sold.        For

instance, the catalog made the following disclaimers:

CR:1453-54.     Moreover, the bottom of every page of property listings in the

catalog bore the following disclaimer:

                                         28
CR:1459.

      Instead, the catalog stated that there would be copies of the sale documents

at the auction for review prior to the bidding. CR:1446.

CR:1454.

      The message was clear. It would be the sale documents the sellers would

bring to the auction that would control what was actually sold, not the auction

catalog.    Indeed, Southland executed and notarized the Assignment on

September 9, 1994—five days prior to the auction. Supp. CR 1:66-67. Moreover,

Brian Exline, who executed the Assignment on behalf of Samson, testified that he

reviewed the Assignment prior to making the purchase, and Samson executed the

Assignment on the day of the auction. Supp. CR 1:66; Supp. CR 2:1364.

      Another problem is that Burlington’s argument assumes that when the

catalog listed the wells, and not the underlying leases, that meant that the wells

would be sold separately from the leases. But in actual fact, multiple listings in the

catalog identified significant numbers of wells for sale as being “WBO” or

“Wellbore Only.” See, e.g., CR:1467, 1475-77, 1485, 1489-95, 1498, 1508-09,

                                         29
1512-13, and 1515-19.      That was not the case with the wells at issue here,

suggesting that more than just the wells would be sold. CR:1497.

      Indeed, that was confirmed by the testimony of Brian Exline who, in 1994,

was employed by Samson, the purchaser, as a Supervisor—Special Projects. Supp.

CR 2:1362. In that capacity, he executed the Assignment on Samson’s behalf.

Supp. CR 1:66. He testified that Wellbore Only properties sell for less than those

that include the leasehold. Supp. CR 2:1364-65. He further testified that had these

properties been Wellbore Only, Samson may not have purchased them. Id. But

the auction catalog does not list them as being Wellbore Only. Id.; CR:1497. In

fact, Exline confirmed that he reviewed the Assignment prior to the purchase and

concluded that it was not a Wellbore Only assignment. Supp. CR 2:1364-65.

Most importantly, however, Exline understood that the Assignment “convey[ed]

the wells and the leases with only a limited exclusion.” Id. at 1365.

             2.    The Understanding of the Purchaser and Seller.

      In the end, perhaps the best evidence of the surrounding circumstances to

this sale of oil and gas interests is the understanding of the buyer and the seller.

These are not the subjective opinions of interested parties to the litigation. Neither

Samson nor Southland has any dog in this fight. And Southland clearly believed it

sold, and Samson clearly believed it purchased, the four leases described on

Exhibit A, and all their wells and equipment and related agreements, save for the

                                         30
specific wells set out in the “Less and Excepted” carve-out. Supp. CR 2:1363-64;

Supp. CR 1:115.

      It may have been that the four “Associated Wells”—the Gibbs Bros. #1,

Wilson #3, Wilson #2, and Buchanan #1—were what got Samson’s attention and

made it interested in the purchase. But that does not mean that Samson would not

have been interested in acquiring the underlying leases on which those wells were

situated.   Moreover, it may be that, because these were the important wells

underlying the purchase, the drafters of the Assignment, in an abundance of

caution, listed those four wells in a tag line on the front page of the Assignment

and in the “Associated Wells” clause at the bottom of Exhibit A to make it

abundantly clear that the these four wells were among the assets being conveyed.

Supp. CR 1:64, 68. It was twenty-one years ago and we may never know.

      But the point is, both Samson and Southland, the actual participants in the

transaction, were aware of the auction catalog at the time of sale. Despite this,

they interpreted the Assignment as assigning the four leases described in

Exhibit A, and not just the four “Associated Wells.”          If this evidence of

“surrounding circumstances” did not aid the parties to the transaction in reaching

the interpretation Burlington now places on the Assignment, it is hard to see how it

could aid this Court in arriving at that interpretation.

                                           31
       In short, the Assignment unambiguously states that Southland was

conveying the leases described on Exhibit A to Samson, and both Samson and

Southland believed that the auction catalog was consistent with that proposition.

Hence, the auction catalog provides no support whatsoever for disturbing the trial

court’s proper construction of the Assignment.

       B.       The Post-Transaction Parol Evidence.

       The confused history of the parties’ understandings or misunderstandings

long after the execution of the Assignment15 can shed no light on the proper

construction of the 1994 Assignment.

       Basically, the PetroMax Defendants, based on the faulty Jircik title opinion,

took actions, over a period of several years, consistent with the understanding that

Burlington owned an interest in the Wilson Lease. However, a title opinion is not

proper evidence in the consideration of an unambiguous contract or deed. Garza v.

Prolithic Energy Co., L.P., 195 S.W.3d 137, 146 (Tex. App.—San Antonio 2006,

pet. denied).

       For its part, Burlington, relying on the land files from Southland and

subsequent parties in Burlington’s chain of title, took the position, over a period of

15
  Southland and Samson executed this Assignment in 1994. The confusion that is the subject of
the post-Assignment parol evidence is dated long after 1994 and relates to parties other than
Southland or Samson.

                                             32
years, that it did not own an interest in the Wilson Lease. See Supp. CR3:308, 310,

312, 314-15.

      After the success of the wells drilled by PetroMax, Burlington suddenly got

motivated. It re-examined everything, abandoned its long-held position, and then

espoused the position the PetroMax Defendants originally advanced based on the

faulty Jircik title opinion. This prompted the PetroMax Defendants to re-examine

everything, abandon their initial position, and espouse Burlington’s initial position.

      In the end, the Court should ignore the post-contract actions of both sides to

this dispute. While this history may shed light on why Burlington filed this action,

it sheds no light on, and cannot change, the unambiguous meaning of the

Assignment. In re Dillard Dept. Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006)

(“The objective intent as expressed in the agreement controls the construction of an

unambiguous contract, not a party’s after-the-fact conduct.”). The Assignment is

unambiguous, and the parol evidence rule precludes consideration of the post-

contract conduct of both sides. Americo Life, 440 S.W.3d at 22.

      C.       This Court Should Not Rely on Parol Evidence in Construing a
               Deed.

      The Assignment is a title document filed of record in the Madison County

Clerk’s office. Supp. CR. 1:64. Although some courts have consulted evidence of

surrounding circumstances in construing an unambiguous deed, “the majority of

deed and mineral deed cases clearly prefer the route of using other canons and not

                                         33
extrinsic evidence or surrounding circumstances to ascertain the intent of the

parties.” Bruce M. Kramer, The Sisyphean Task of Interpreting Mineral Deeds

and Leases: An Encyclopedia of Canons of Construction, 24 TEX. TECH L. REV. 1,

14 (1993). There is an important policy reason for this: “Title examiners would

no longer be able to rely on the written word. Individual adjudication of deeds

would lead to disparate results depending on factors extraneous to the instrument.”

Id. at 19.

       In this case, relevant canons of construction include the following:

        The assignment should be interpreted to convey the greatest
         possible estate. See Day & Co., Inc. v. Texland Petroleum, Inc.,
         786 S.W.2d 667, 668 (Tex. 1990).

        Uncertain reservations or exceptions fail. See Lewis v. Midgett,
         448 S.W.2d 548, 551-52 (Tex. Civ. App.—Tyler 1969, no writ).

        The assignment must be construed against Burlington (the grantor)
         and in favor of Samson (the grantee). See Gonyea v. Kerby, No.
         10-12-00182-CV, 2013 WL 4040117, at *3 (Tex. App.—Waco
         Aug. 8, 2013, pet. denied); State v. Dunn, 574 S.W.2d 821, 824
         (Tex. Civ. App.—Amarillo 1978, writ ref’d n.r.e.).

Each of these canons of construction supports the construction of the PetroMax

Defendants that the Assignment conveyed the four leases described in Exhibit A,

not just the four wells under the “Associated Wells” heading.

                                         34
V.    BURLINGTON IS NOT ENTITLED TO JUDGMENT ON ITS 25% ISSUE.
      Burlington also seeks rendition of a judgment that it is entitled to be offered

the full 25% interest that Buttes agreed to offer to Aztec in the 1975 Letter

Agreement, even though Burlington at most owns only a fraction of Aztec’s

original interest. Appellant’s Br. at 34-35. The trial court denied Burlington’s

motion on this issue. See id. at xii (Burlington’s Issue 2 asks: “Did the trial court

err in denying Burlington summary judgment on this issue?”); CR:1618.

      This issue is not properly here. Appellate courts normally do not review

denials of summary judgment. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623,

625 (Tex. 1996). This rule has an exception for cases where the parties file cross-

motions on the same issue. Valence Operating Co. v. Dorsett, 164 S.W.3d 656,

661 (Tex. 2005). But the PetroMax defendants did not file a cross-motion on this

issue (Supp. CR 1:8), so the exception does not apply. See Mitchell v. Mitchell,

445 S.W.3d 790, 801 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (“[T]he

cross-motion exception is inapplicable . . . because the parties did not move for

summary judgment on the same issue . . . .”). The Court should decline to reach

the issue.

      This issue will not arise at all if the Court rejects Burlington’s Issue 1, as it

should. But even if Burlington were to prevail on Issue 1, the procedural posture

of the case would still make it inappropriate for the Court to reach Issue 2.

                                         35
      Finally, and in any event, Burlington’s argument in this regard lacks merit.

In the 1975 Letter Agreement, Buttes agreed to offer Aztec 25% of interests

acquired in the AMI in the future. CR:593. Under Burlington’s construction, every

successor to Aztec would be entitled to be offered 25% of any interests acquired

within the AMI by Buttes or its successors. This would require Buttes’s successors

to offer more than 25% of interests they acquire and would impermissibly change

the terms of the 1975 Letter Agreement. See Am. Mfrs. Mut. Ins. Co. v. Schaefer,

124 S.W.3d 154, 161 (Tex. 2003) (holding that courts “may neither rewrite the

parties’ contract nor add to its language”); Capitan Enters., Inc. v. Jackson, 903
S.W.2d 772, 776 (Tex. App.—El Paso 1994, writ denied) (holding that rights of

non-assigning party “are neither enhanced nor diminished by the assignment”).

      Burlington’s construction is unreasonable and even absurd. There are more

than five assignees of Aztec’s interests in the land covered by the AMI (including

Defendant Woodbine). Supp. CR 3:2147-2763. Under Burlington’s construction,

Defendant Woodbine would be required to offer itself 25% of any interest that it

acquires.   Moreover, Burlington’s construction would require each of Aztec’s

successors to be offered 25% of any interest acquired by a successor to Buttes,

which would be mathematically impossible.         See Frost Nat’l Bank v. L&F

Distribs., Ltd., 165 S.W.3d 310, 313 (Tex. 2005) (rejecting a construction of a

contract that would be unreasonable, inequitable, and oppressive).

                                        36
                                   PRAYER FOR RELIEF

       The trial court properly construed the unambiguous Assignment. In that

Assignment, Southland conveyed the leases described in Exhibit A, along with

their wells, equipment, and related agreements, to Samson, save for a narrow

exception not relevant here. That is the only reasonable interpretation of the

Assignment. Accordingly, Burlington has no interest in the Gibbs, Wilson or

Buchanan leases. Consequently, there are no longer any leases jointly owned

between the parties to the 1975 Letter Agreement, and the AMI created by that

agreement expired.        Hence, Burlington’s claims, which all depend upon the

continued existence of the AMI, have no basis. The Court should affirm. 16

16
  Should the Court determine that the Assignment is ambiguous, it should remand. Likewise,
should the Court somehow determine that Burlington’s construction of the Assignment is the
only reasonable construction, it should also remand in light of the numerous affirmative defenses
asserted by the PetroMax Defendants, which the court below had no occasion to consider.

                                               37
 Respectfully submitted,
 BECK REDDEN LLP

 By: /s/ David M. Gunn
      David J. Beck
      State Bar No. 00000070
      dbeck@beckredden.com
      David M. Gunn
      State Bar No. 08621600
      dgunn@beckredden.com
      Thomas E. Ganucheau
      State Bar No. 00784104
      tganucheau@beckredden.com
      Jim Taylor
      State Bar No. 00788512
      jtaylor@beckredden.com
 1221 McKinney, Suite 4500
 Houston, TX 77010-2010
 (713) 951-3700
 (713) 951-3720 (Fax)
 Counsel for Appellees,
 PetroMax Operating Co., Inc.,
 Petro Texas LLC, and
 CH4 Energy II, LLC

 CANTEY HANGER LLP

 By: /s/ Brad D’Amico
      Brad D’Amico
      State Bar No.00783923
      bd@canteyhanger.com
 1999 Bryan Street, Suite 3300
 Dallas, TX 75201
 (214) 978-4100
 (214) 978-4150 (Fax)
 Counsel for Appellee
 PetroMax Operating Co., Inc.

38
 HANKINSON LLP

 By: /s/ Deborah G. Hankinson
      Deborah G. Hankinson
      State Bar No. 00000020
      dhankinson@hankinsonlaw.com
      Stephanie Dooley Nelson
      State Bar No. 24002006
      snelson@hankinsonlaw.com
 750 N. St. Paul St., Suite 1800
 Dallas, Texas 75201
 (214) 754-9190
 (214) 754-9140 (Fax)

 PIERCE & O’NEILL, LLP
      Jesse R. Pierce
      State Bar No. 15995400
      jpierce@pierceoneill.com
      Brian K. Tully
      State Bar No. 24039217
      btully@pierceoneill.com
 4203 Montrose Boulevard
 Houston, Texas 77006
 (713) 634-3600
 (713) 634-3601 (Fax)

 Counsel for Appellee
 TexCal Energy South Texas, L.P.

39
 THOMPSON & KNIGHT LLP

 By: /s/ Greg W. Curry
      Greg W. Curry
      State Bar No. 05270300
      greg.curry@tklaw.com
      Richard B. Phillips, Jr.
      State Bar No. 24032833
      rich.phillips@tklaw.com
      Gregory D. Binns
      State Bar No. 24027148
      greg.binns@tklaw.com
 One Arts Plaza
 1722 Routh Street, Suite 1500
 Dallas, Texas 75201
 (214) 969-1700
 (214) 969-1751 (Fax)

 ATCHLEY, RUSSELL, WALDROP
      & HLAVINKA, LLP
      Jeffery C. Lewis
      State Bar No. 12280950
      jlewis@arwhlaw.com
 1710 Moores Lane
 Texarkana, Texas 75503
 (903) 792-8246
 (903) 792-5801 (Fax)
 Counsel for Appellee
 Woodbine Acquisition, LLC
 n/k/a MD America Energy LLC

40
                          CERTIFICATE OF SERVICE

      I hereby certify that on December 21, 2015, a true and correct copy of the
above and foregoing Brief was forwarded to all counsel by the Electronic Service
Provider, if registered, otherwise by email, as follows:

Kirsten M. Castañeda                    Roger D. Townsend
kcastaneda@adjtlaw.com                  rtownsend@adjtlaw.com
ALEXANDER DUBOSE JEFFERSON              ALEXANDER DUBOSE JEFFERSON
 & TOWNSEND LLP                           & TOWNSEND LLP
4925 Greenville Avenue, Suite 510       1844 Harvard Street
Dallas, TX 75206                        Houston, TX 77008

John R. Mercy                           Fred Hagans
jmercy@texarkanalawyers.com             fhagans@hagans-law.com
MERCY CARTER TIDWELL, L.L.P.            Kendall C. Montgomery
1724 Galleria Oaks Drive                kmontgomery@hagans-law.com
Texarkana, TX 75503                     HAGANS BURDINE MONTGOMERY
                                          & RUSTAY, P.C.
Vincent L. Marable III                  3200 Travis, Fourth Floor
trippmarable@sbcglobal.net              Houston, TX 77006
PAUL WEBB, P.C.
221 N. Houston Street
Wharton, TX 77488

                            Counsel for Appellant,
                 Burlington Resources Oil & Gas Company LP

                                        /s/ David M. Gunn
                                        David M. Gunn

                                      41
                       CERTIFICATE OF COMPLIANCE

       1.   This brief complies with the type-volume limitation of
Tex. R. App. P. 9.4 because it contains 7,589 words, excluding the parts of the
brief exempted by Tex. R. App. P. 9.4(i)(2)(B).

      2.    This brief complies with the typeface requirements of Tex. R. App. P.
9.4(e) because it has been prepared in a proportionally spaced typeface using
Microsoft Word 2007 in 14 point Times New Roman font.

      Dated: December 21, 2015.

                                        /s/ David M. Gunn
                                        David M. Gunn
                                        Counsel for Appellees, PetroMax
                                        Operating Co., Inc., Petro Texas, LLC,
                                        and CH4 Energy II, LLC

                                       42
                        No. 06-15-00044-CV

                 IN THE SIXTH COURT OF APPEALS
                       TEXARKANA, TEXAS

       BURLINGTON RESOURCES OIL & GAS COMPANY LP,
                                           Appellant,
                                    v.
PETROMAX OPERATING CO., INC., WOODBINE ACQUISITION, LLC,
      PETRO TEXAS, LLC, CH4 ENERGY II, LLC, AND
           TEXCAL ENERGY SOUTH TEXAS L.P.,
                                           Appellees.

       On Appeal from the 12th District Court, Madison County, Texas
                  Trial Court Cause No. 12-13130-012-10

                              APPENDIX

 Tab

  A Assignment and Bill of Sale (Supp. CR 1:64-69)
  B Order Granting Defendants’ Motion for Summary Judgment
    on Title Issues (CR 1617)
  C Order Denying Burlington’s Motion for Partial Summary
    Judgment Seeking Various Declarations (CR 1618-19)
          TAB A
Assignment and Bill of Sale
    (Supp. CR 1:64-69)
                                                    ".'·'

                                                                                                                    ,   ...,

                                                                                       ~OL 417 "''' 709
                      V»>fi Name; BUCHANAN 1, GIBBS BROS. 1, WlLSON JAMES 2AND WILSON JAMES 3

                                                ASSIGNMENT AND BILL OF SALE

     STATE OF TEXAS                         §
                                            §                 KNOW ALL MEN BY THESE PRESENTS THAT:
     COUNTY OF MADISON                      §

     SOUTHLAND ROYALTY COMPANY, a Delaware Corporation, whose address is 400 N.
     Sam Houston Parkway East, Suite 1200, Houston, Texas 77060 (''Assignor"), for and in
     consideration of ONE HUNDRED DOLLARS ($100.00) and other good and valuable
     consideration, receipt of which is here                acknowledged, does hereby assign, transfer, grant
    ~d      convey     unto                                                          whose      address    is
       \.>::.                   ~<._>;::,             c.;
    f'Assignee"), all of Assignor's right. title and interest mand to the following:

            (i)           The 011 and gas leases, leasehold interests, rights. and interests attributable or
                          allocable to the oil and gas leases or leasehold interests by virtue of pooling,
                          unitization, communitization, and operating agreementS, licenses, pennits, and
                          other agreements, all more particularly described on Exhibit "A" hereto, llmited
                          as to the lands and depths indicated on Exhibit •A" (collectively the •Leases"),
                          together with identical undivided interests in and to aJI the property and rights
                          incident thereto, including, but not limited to, all rights in, to and under an
i
                          agreements, product purchase and sate contracts, leases, permits,
'                         rights-of~way, easements, licenses, farmouts, options, orders, and other
                          contracts or agreements of a similar nature to the extent same relate to the
                          Leases;

                          The wells, equipment, materials and other personal property, fixtures and
                          improvements on the Leases as of the Effective Date (as hereinafter defined),
                          appurtenant thereto or used or obtained in connection with the Leases or with
                          the production, treatment, sale or disposal of hydrocarbons or waste produced
                          therefrom or attributable thereto, and all other appurtenances thereunto
                          belonging (the "Equipment'}; provided, however, Equipment shall not include
                          vehicles, communications equipment, toots. warehouse stock, compressors or
                          leased equipment located on the Leases;

            Qii)          All unitization, communitization, pooling, and operating agreements, and the
                          units created thereby which relate to the Leases or interests therein described
                          on Exhibit "A• or which relate to any units or wells located on the leases,
                          including any and all units formed under orders, regulations, rules, and other
                          official acts of the governmental authority having jurisdiction, together.with any
                          right, title and interest created thereby in the Leases; and

            Qv)           All of Assignor's rights to claim revenues or gas resulting from any
                          underproduction attributable to Assignor's interest in the Leases.

    All of Assignor's interest in the above-mentioned assets is herein collectively referred to as the
    "Interests".
    .Assign~;Jr reseJVes and retains unto itself from the Interests those certain lands, leases,
    -properties, interests, leasehold rights, depths or fonnations as speci1ically noted and reflected
     on:Exhibit "A", .and the right of joint use of any agreements assigned hereunder where needed
     f.orthe exploration, development, and operation of any rights or acreage (either horizontally or
     verti.~11y) retain~ by Assignor or where needed in order to exercise ancillary rights in, or for
     .access to, adjoining· or-nearby properties.owned by Assignor.

    TO HAVE.AND TO HOLD the Interests unto Assignee, its successors and assigns, forever,
    ,s_ubject to ·the fol)pwing terms and conditions:

    SM:ASSIGNR.Q9C
    R~~         8130194

                                                               -1-
                                                                                                11-'lliAI~'eOrrect
                                                                                                Copy oi Original
                                                                                                Filed in Madison
                                                                                                County ClerK's Office
                                                            64
                                                                               --.     -~--.-.   ----------

                 ..,

                            'IOL   417 t>•» 710
                       1.      This Assignment is accepted subject to, and Assignee agrees to assume and perform
                               any and all of the liabilities and obligations, or alleged or threatened Dabilities and.
                               obligations, of Aulgnor under the Interests and existing oi1 and gas leases
                                assignments, operating agreements, product purchase and sale contracts, leases'
                                permits, rights-of-.way, licenses, easements, options, orders, and any othe~
                                agreements or contracts attributable to and affecting the lnteres1s, inclu<;ting but not
                                limited to, any and aD obligations (i) to pay and deliver royalties, overr1ding royalties,
                                non-parUcipa:ting royalties, and other burdens on production, 00 in connecfion with or
                               alising out of balancing of overproduction or underproduction from the Interests, and
                                Oii) in compliance with aU laws and governmental regulations With respect to the
                                Interests including, but not limited to, the lawful plugging and abandonment of oil and
                               gas wells and the restoratio.n of the surlace of the land as nearly as possible to its
                               prelease condition, whether or not such liabirlties aOO obrtgations, or alleged or
                               threatened liabilities and obligations, are caused by Assignor's negligence and whether
                               or not such liabilities and obligations, or alleged or threatened liabiTd:ies and
                               obligations, arise .during the period of, or from, or in connection with Assignor's
                               ownership or operation of the Interests. Without fimitation of the foregoing, Assignee
                               agrees to assume and perform any and an of the liabilities and obligations. or alleged
                               or threatened liabilities and obligations, of Assignor for claims., losses, damages, costs,
                               expenses, diminutions in value, suits, and causes of action of any kind or character,
                               with respect to the environmental condition of the Interests, regardless of when the
                               events occurred that caused such cond'Jtion to exist and whether or not caused by or
                               atbibutable to Assignor's negligence. Assignee shall, to the fullest extent permitted by
                               taw, protect, defend, indemnify and hold Assignor and its directors, officers,
                               employees, agents and representatives of each of them, harmless from and against
                               any and all daims, losses, damages, costs, expenses, diminutions in value, suits,
                               causes of action or judgments of any kind or character with respect to any and all
                               liabilities and obOgations or alleged or threatened tiabftfties and obr~gation~ inc:luding,
                               but not limited to, any interes~ penalty and any attorneys' fees and other costs and
                               e>cpenses incurred in connection with investigating or defending any claims or actions,
                               whether or not resulting in any liability, attributable to or arising out of (i) ownership or
                               operation of the Interests subsequent to the Effective Date, and (ii} Assignee's
                               assumption of any liability or obligation in accordance with this paragraph.

                               THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED
                               FOR IN THIS ASSIGNMENT SHALL BE APPLICABLE WHETHER OR NOT THE
                               LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR
                               IN PART FROM THE GROSS, . ACTIVE, PASSIVE OR CONCURRENT
                               NEGLIGENCE, OR OTHER FAULT OF ASSIGNOR.

                       2.      THIS ASSIGNMENT AND BILL OF SALE IS EXECUTED, DELIVERED, AND
                               ACCEPTED WITHOUT ANY REPRESENTATION, W~TY OR COVENANT OF
                               TITLE OF ANY KIND OR NA1URE, EITHER EXPRESS, IMPLIED OR STA1UTORY.
                               THE INTERESTS ARE BEING CONVEYED ANO ASSIGNED TO AND ACCEPTED
                               BY THE ASSIGNEE IN THEIR "AS IS, WHERE IS" CONDITION AND STATE OF
                               REPAIR, AND WITH ALL FAULTS AND DEFECTS, WITHOUT Af{'(
                               REPRESENTATION, WAAJ'Wfrf OR COVENANT OF ANY KIND OR NA1URE,
                               EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO,
                               WARRANTIES OF MARKETABILITY, QUALITY, CONDITION, MERCHANTABILITY,
                               AND/OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE
                               EXPRESSLY DISCLAIMED. IT IS UNDERSTOOD AND AGREED THAT ASSIGNEE
-~
                               SHALL ACCEPT ALL OF THE SAME IN THEIR "AB IS, WHERE IS" CONDITION
                               AND STATE OF REPAIR AND WITH ALL FAULTS AND DEFECTS, INCLUDING,
                               BUT NOT LIMITED TO, THE PRESENCE OF NA1URAU.Y OCCURRING
                               RADIOACTIVE MATERIAL (NORM).        IN ADDITION, ASSIGNOR MAKES NO
                               REPRESENTATION, COVENANT OR WARRANTY, EXPRESS, IMPLIED OR
                               STATUTORY, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA
                               DELIVERED TO ASSIGNEE WITH RESPECT TO THE INTERESTS, OR
                               CONCERNING THE QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF
                               At-ff, ATTRIBUTABLE TO 11-IE INTERESTS, OR THE ABILITY OF THE INTERESTS
                               TO PRODUCE HYDROCARBONS; OR THE PRICES WHICH ASSIGNEE IS OR
                               WILL BE ENTITLED TO RECEIVE FOR ANY SUCH HYDROCARBONS.

                       3.      TO THE EXTENT APPLICABLE TO THE INTERESTS OR ANY PORTION THEREOF,

                                                                         2
     '                                                                                                     A True and Correct
     I                                                                                                     Copy at Original
     -~                                                                                                    Filed in Madison
     . ---.,-,_,..-.----,.-.,.-.,.--=-"""""------------eoo-n_ty..,.C-Ie_rl<'s_Ofli"""""ce,_--

          ;,:'
                                                                    65
                                                                                                            .......

. ..

              ASSIGNEE HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE
              TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41
              TilROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT
              WAIVIED), TEXAS BUSINESS & COMMERCIAL CODE.

       4.     This Assignment and Sill of Sale shall inure to the benefit of and be binding upon the
              parties hereto, their heirs, successors and assigns.

       5.     This Assignment and Bill of Sale may _be executed by Assignor and Assignee in any
              number of counterparts, each of which shall be deemed an original instrument. but all
              of which together shall constitute one and the same instrument.
                                                                      -I"'
       IN WlTNESS WHEREOF, this instrument is executed the        ....:1__  d:::.y of September, 1994,
       but shaD be effective as of the 1st day of September, 1994 (the "Effective Date").

                                                          ASSIGNOR
                                                          SOUTHLAND ROYALTY COMPANY
       ATTEST:
       By: _ _ _ _ _ __
                                                          By:
                                                          Name: Kent Beers
                                                          Title: AttomeyMjn..fact

                                                          ASstqNEE

                                                           ~h"SF> ~"i?-SN-'-~5S ~~~~~
       ATTEST:

                                                          ~:~~g·~2f·
       By: _ _ _ _ _ _ __ _

                                                                                                                      !

                                                                                                                      '.
                                                                                         A True and Correct
                                                                                         Copy o1 Oliginal
                                                                                         Rled in MadisOn
                                                                                         County Clerk's Office

                                                 66
                                                                                       -~---·            --'----   ,_,__   ____ __ _
                                                                                                                              .       __._.,_

                                                                                                                      --.         ~---~.        ------

                                                .......... ;. ____ ·-                    ... .,·,.·-·-·---- '··-                     ....!0....•

 1
     '
             '/OL     4:17 >Ac> 712
 I       STATE OF TI:XAS                               §
                                                       §
         COUNTY OF HARRIS                              §

                    B~FORE ME, the undersigned authority, on this day petsenally appeared Kent Beers,
         Attorney-tn-Fact for Southland Royalty Company, a Delaware Corporation, known to me to be
         the person whose name is subsa1bed to the foregoing instrument, and acknowledged to me
         that he executed the same for the purposes and consideration therein expressed and in the
         capacity therein   stated.                              /li.J
         GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this L   day of September,
         1994.

                                       CORPORATION ACKNOW\_EQGMENT

         STATE OF TEXAS                                §
                                                       §
         COUNTY OF HARRIS                              §
 I                  BEFORE ME,        the undersigned authority, on this day personally appeared
                                                                                                                           of
                                                                                                            known to me to be
         the person and officer whose name is subscribed to the foregoing instrument, and
         acknowledged to me that he/she executed the· same for the purposes and consideration
         therein expressed and in the capacity therein stated as the act and deed of said corporation.

               GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this _ _ day of
         September, 1994.

         MY COMMISSION EXPIRES:
                                                                        Notary Public in and for the State of Texas

                                                      ATTORNEY4N-FACT

         STATEOFTEXAS                       §
                                            §
         COUNTY OF HARRIS                   §

                                                                                 ~~ersonally~eared~M
         BEfORE; ME, the undersigned authority, on this
          F)!( ll )"'f",                ,   Allomey~n-Eact                    for · Ct3C£l;SOO
         known to me to be the person whose name is subscribed to the foregoing instrument.;!
                                                                                                   ~50'~                          ":"TLJ
         acknowledged to me that she/he executed the same -for the purposes and consideration
         therein express~d and In the capacity therein stated.

 I
_i
         GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this                                     1.4_ day of September,
         1994.

         MY COMMISSION EXPIRES:

                                                                          4                                                ATrue and Correct
                                                                                                                           CollY of Original
                                                                                                                           Rled in Madison
                                                                                                                           CouniV Cle!!!~
'6           ~-                                                                                                                                                                                                                                 \

                                                                                                                                            68
                           ~---~----

                                                             ·-. ·.....-• ..   --···

                                                                    , .....~-- .:..                                                                                     .:I:.

                                                                                                 FILED
                                                                             I{[      p.•   QO    D'Q.OCK._>:Ci/"---~

                                                                                        ~~£P21W94

                    Il
                     STATE OF TEXAS
                       COUNTY OF MADISON        ~   0"
                                                     *- ~.
                                                                ~                            -~--······.:';j':"-   ••,-.
                                                                                       ,:·•. ~· ..;,~~C"{:~"'COLEMAN, Clerk of the CountY Coon io and
                                                                                       f:'·!:~;··_· . :____:;~-~~}?.
                                                                in;;*~;-~~\ti_;g~~d ~e ~- ,day of if.:. ,19?. Y.,
                     for said County do hereby certify that the above
                                                                  of':"~-   _·. ... · ~· 19.tf.'f:... at .• //./!'.~-, ... o'ctock
                                       av
                     wasfiledforrecord in my office the .).(#..dav
                      ...
                          (!_ .m. and    re:;;~d~e; ;u;..._
                                                     ... - .. day of.
                                                                      ~ -~"       · :'          9f.          'l' 6. . .... o.dock
                                                                        . ~:;~_ ... ;":'":•'19 ..••.. at ... ... I.
                                                     ....
                      ... t{ .m. in •. -#~:Co ~ecords of said CountY, in Vol.. '1117 ...... , of pages .7(1.9.,, ..... .
                       WliNESSmv hand and seal of~id office, this-??~.~- ,day of -~~;t'ka 11 :&.t.,., .._..... , 19 .9¥. .. ,.

                                                                                   8!!=lrl-~     Countv Oerlt, Madison County, Texas

;,;,.·

         I
         ~ L~----
                                                                                                                           STATE OF TE._,: ••::.,
                                                                                                                           COUNTY OF fAP.OISON             •
                                                                                                                           I. C~e Bamltl, County Clac'k ofUad!Uin County, Teal>
                                                                                                                           .:Jo herebY certify that the toregOing • a true .00 Cl:lfl'«ll copy
                                                                                                                           of the or!gw· record am .. aamo ~on \'eiCD'U In
                                                                                                                               n Lillo!                        ,._. ""· -''i:!:!;:11!-,;;=-
                                                                                                                           Page