Court Opinion

ID: 3198715
Source: CourtListenerOpinion
Date Created: 2016-04-28 14:15:32.430462+00
Date Added: 2024-06-11T14:50:22.114516
License: Public Domain

NUMBER 13-14-00727-CV

                                   COURT OF APPEALS

                      THIRTEENTH DISTRICT OF TEXAS

                          CORPUS CHRISTI - EDINBURG

GLORIA GARCIA,                                                                          Appellant,

                                                      v.

GENESIS CRUDE OIL, L.P.,                                                                  Appellee.

                        On appeal from the 229th District Court
                              of Duval County, Texas.

                              MEMORANDUM OPINION
               Before Justices Benavides, Perkes, and Longoria
                 Memorandum Opinion by Justice Benavides
     By five issues,1 appellant Gloria Garcia appeals a take-nothing judgment entered

     1   Stated in full, the five issues include whether the trial erred in:

     (1) determining as a matter of law, that a cause of action under Texas Natural Resources
         Code § 91.404(a–b) can be extinguished, and the additional penalties to be imposed
         under Texas Natural Resources Code § 91.406 nullified and voided even if a suit is filed,
against her related to Garcia’s cause of action and declaratory action filed under the

Texas Natural Resources Code against appellee Genesis Crude Oil, L.P. (“Genesis”).

See TEX. NAT. RES. CODE ANN. §§ 91.404; 91.406 (West, Westlaw through 2015 R.S.).

We affirm.

                                          I.      BACKGROUND2

            as long as the payor tendered late payment of oil and gas proceeds and interest before
            trial commences;

        (2) determining as a matter of law, that statutory interest imposed under Texas Natural
            Resources Code § 91.403 provides the only mandatory penalty for late payments, even
            if the Payee has been forced to file suit to collect unpaid oil and gas proceeds and
            interest;

        (3) determining as a matter of law, that in order to be entitled to recover the statutory
            minimum award of $200.00 and reasonable attorney’s fees under Texas Natural
            Resources Code § 91.406 if suit is filed, the payee must still recover “actual” monetary
            damages in order to be entitle to favorable final judgment;

        (4) determining as a matter of law that the statutory language of Texas Natural Resources
            Code § 91.406 was plain and unambiguous, which precluded an inquiry into the
            legislative intent of enacting additional mandatory penalties if suit had to be filed, as an
            incentive to force the payor to timely pay proceeds from the sale of oil and gas; and

        (5) denying Garcia’s right to proceed to trial to establish the essential elements of her claim:

                a. after notice was given, Genesis breached its duty to timely pay proceeds from
                   the sale of oil and gas to [Garcia], pursuant to Texas Natural Resources Code
                   § 91.402(a)(1);

                b. Genesis was not excused from making a timely payment of oil and gas
                   proceeds, as there was no legitimate title dispute;

                c.   Reasonable attorney’s fees incurred by [Garcia] were established as a matter
                     of law; and

                d. A declaration of rights under the Texas Natural Resources Code, that Genesis
                   “is or was a ‘payor’ vis-à-vis [Garcia] and “has or hand” a duty to keep in place
                   a binding division order in connection with the subject lease under §
                   91.402(c)(1).
        2 This appeal was transferred from the Fourth Court of Appeals pursuant to a docket equalization
order issued by the Texas Supreme Court. See TEX. GOV’T CODE ANN. § 73.001 (West, Westlaw through
2015 R.S.).

                                                      2
        On July 19, 2012, Garcia, as sole successor mineral estate lessor3 of certain real

property in Duval County, filed suit against L.T.D. Explorations, Inc. (“LTD”) alleging that

LTD, as the purported successor lessee4 to the mineral estate, unreasonably used the

surface estate of the property and “breached the lease agreement by conducting business

on more land than it is entitled to under the lease.” Additionally, Garcia alleged that LTD

destroyed the surface estate and damaged the subsurface estate, to wit: “allow[ing] oil

and saltwater to pool all over the land, [leaving] trash and debris on the land and

[destroying] grass, brush[,] and trees on the land to [Garcia’s] detriment and damage.”

        On October 10, 2013, two division orders 5 were issued to Garcia related to

Garcia’s mineral interest in 68.4 acres of land located in Duval County.                    The division

orders—one effective on December 1, 2010 and the other January 1, 2011—authorized

Genesis to receive and purchase such oil from the land and give credit to Garcia.

        On January 23, 2014, LTD filed a third-party petition against Genesis alleging that

Genesis had suspended royalty payments owed to Garcia under the division orders

following Garcia’s father’s death.             Furthermore, LTD alleged that any damages

assessed against LTD by Garcia were due to the “negligent actions and/or omissions

and/or breaches and/or conduct” of Genesis. On June 25, 2014, Garcia amended her

        3According to Garcia’s pleadings, Garcia and her now-deceased father Willie De La Fuente served
as mineral estate lessors of the estate in question since August 3, 1994. Garcia further asserted that De
La Fuente died on December 12, 2008, and she became “fully vested” with the mineral estate at issue.

       4 According to Garcia’s pleadings, the original lessee to the mineral estate was Uvalde Energy

Corporation.
        5 A “division order” is an agreement signed by the payee directing the distribution of proceeds from
the sale of oil, gas, casinghead gas, or other related hydrocarbons. TEX. NAT. RES. CODE ANN. § 91.401(3)
(West, Westlaw through 2015 R.S.). The order directs and authorizes the payor to make payment for the
products taken in accordance with the division order. Id.

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petition and added Genesis as a defendant, alleging inter alia that Genesis was required

to timely pay royalties and was liable to pay for all of her damages, plus interest and

attorney’s fees under the Texas Natural Resources Code.

       On September 22, 2014, Garcia amended her petition for a fourth time—the live

pleading before us—and named Genesis as the sole defendant.         In this petition, Garcia

sought a declaratory judgment to determine the rights and obligations of the parties under

the natural resources code, including whether:       (1) Genesis is a statutorily-defined

“payor”; (2) Garcia is a statutorily-defined “payee”; and (3) Genesis had a duty to “tender

and maintain a binding division order reflecting the ownership interests of Garcia” on the

lease, so long as Genesis remains a payor. Additionally, Garcia asserted a cause of

action under the natural resources code asserting that Genesis breached its duty to: (1)

timely pay proceeds to Garcia; and (2) submit a division order to Garcia.    In addition to

the declaratory relief, Garcia also requested that Genesis pay a $200.00 minimum award

under the natural resources code section 91.406 as well as reasonable attorney’s fees

under the same statute.     Genesis answered this amended petition asserting various

defenses, including that it has fulfilled any obligations to Garcia under the Texas Natural

Resources Code.

       On October 14, 2014, Genesis filed its amended motion for final summary

judgment alleging that as a matter of law: (1) Garcia does not have a cause of action

under the Texas Natural Resources Code for “Nonpayment of Oil and Gas Proceeds or

Interest” when all such proceeds and interest have been indisputably paid; (2) Garcia is

not entitled to attorney’s fees under the Texas Natural Resources Code; and (3) Garcia

cannot replead a claim for “Nonpayment of Oil and Gas Proceeds or Interest” as a

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declaratory judgment.

       On November 3, 2014, the trial court granted Genesis’s motion for summary

judgment and ordered that Garcia take nothing on her claim for non-payment of oil or gas

proceeds and interest pursuant to natural resources code section 91.404(c); that she

additionally take nothing on her claim against Genesis for attorney’s fees and a

mandatory minimum of $200.00 under section 91.406 of the natural resources code; and

all other relief requested was denied. This appeal followed.

                               II.    SUMMARY JUDGMENT

       By her first four issues, Garcia asserts that the trial court erred by granting

Genesis’s motion for summary judgment.

A.     Standard of Review

       We review summary judgments de novo. Merriman v. XTO Energy, Inc., 407
S.W.3d 244, 248 (Tex. 2013); Nalle Plastics Family L.P. v. Porter, Rogers, Dahlman &

Gordon, P.C., 406 S.W.3d 186, 199 (Tex. App.—Corpus Christi 2013, pet. denied). We

take as true all evidence favorable to the non-movant and indulge every reasonable

inference and resolve any doubts in the non-movant's favor. Joe v. Two Thirty Nine Joint

Venture, 145 S.W.3d 150, 157 (Tex. 2004).

       In advancing a traditional motion for summary judgment, the movant has the

burden to show there is no genuine issue of material fact, and it is entitled to judgment as

a matter of law on the issues expressly presented to the trial court by written motion,

answer, or other response. TEX. R. CIV. P. 166a(c). When a party moves for summary

judgment based upon an affirmative defense, as here, the movant must establish each

element of its defense as a matter of law. Johnson & Johnson Med., Inc. v. Sanchez,

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924 S.W.2d 925, 927 (Tex. 1996).          Unless the movant conclusively establishes the

affirmative defense, the non-movant plaintiff has no burden in response to a motion for

summary judgment filed on the basis of an affirmative defense.       Gonzalez v. City of

Harlingen, 814 S.W.2d 109, 112 (Tex. App.—Corpus Christi 1991, writ denied) (citing

Torres v. Western Cas. & Surety Co., 457 S.W.2d 50, 52 (Tex. 1970); see also David

Hittner & Lynne Liberato, Summary Judgments in Texas: State and Federal Practice, 52

HOUS. L. REV. 777, 862 (2015) (“Unless the movant conclusively establishes the

affirmative defense, the nonmovant-plaintiff has no burden to present summary judgment

evidence to the contrary.”).   If the defendant meets this burden, the plaintiff must then

produce evidence raising a genuine issue of material fact to avoid summary judgment on

the affirmative defense. Vu v. ExxonMobil Corp., 98 S.W.3d 318, 320 (Tex. App.—

Houston [1st Dist.] 2003, pet. denied).

B.    Discussion

      1. Texas Natural Resources Code Section 91.404(c)

      We begin with Garcia’s cause of action against Genesis brought under section

91.404(c) of the natural resources code. Section 91.404(c) states:

      A payee has a cause of action for nonpayment of oil or gas proceeds or
      interest on those proceeds as required in Section 91.402 or 91.403 of this
      code in any court of competent jurisdiction in the county in which the oil or
      gas well is located.

TEX. NAT. RES. CODE ANN. § 91.404(c). As a pre-requisite to suit, section 91.404 requires

that a payee notify a payor in writing of the non-payment, and the payor has thirty days

after receiving such written notice to pay the proceeds due, or provide “reasonable cause”

for nonpayment to the payee. See id. § 91.404(a)–(b). The relevant part of section

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91.402 states: “the proceeds derived from the sale of oil or gas production from an oil or

gas well located in this state must be paid to each payee by payor on or before 120 days

after the end of the month of first sale of production from the well.” Id. § 91.402(a) (West,

Westlaw through 2015 R.S.). Furthermore, section 91.403 states that if payment has not

been made within the time limits specified in section 91.402, the payor must pay interest

to a payee. See id. § 91.403(a) (West, Westlaw through 2015 R.S.).

       Under Garcia’s cause of action in this case, Garcia asserted that Genesis “failed

to pay the proceeds due to her from the sale of oil and gas” on her mineral lease. In its

summary judgment motion, however, Genesis asserts an affirmative defense that

because it had tendered full payment of proceeds and interest to Garcia, her cause of

action against Genesis fails as a matter of law. We agree. In a response to written

discovery propounded by Genesis to Garcia—and attached to Genesis’s motion for

summary judgment—Garcia stated that “[a]ll royalty principal [of $26,222.25] has now

been paid to [her] from funds previously held in suspense by Genesis.” In that same

answer to discovery, Garcia notes that she is still owed $585.47 in statutory interest for

the failure to pay her timely royalties. See id. Furthermore, in a June 25, 2014 letter

from Genesis’s counsel to Garcia’s counsel—likewise attached as summary judgment

evidence—Genesis tendered a $585.47 check to Garcia for the “statutory interest”

claimed by Garcia under the natural resources code related to certain royalty payments

that had been suspended following Garcia’s father’s death.

       Therefore, by Garcia’s admissions in written discovery to being paid the unpaid

royalties of $26,222.25 and only having $585.47 in statutory interest outstanding, which

was later paid by Genesis on June 25, 2014, Genesis is entitled to summary judgment

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over Garcia’s cause of action for non-payment of proceeds and statutory interest under

section 91.404(c). Genesis conclusively showed that full royalty and interest payments

had been made to Garcia to defeat the gravamen of her section 91.404 cause of action,

and Garcia failed to produce evidence raising a genuine issue of material fact to avoid

summary judgment on this issue. See id. § 91.404.

       2. Texas Natural Resources Code Section 91.406

       Next, we turn to the trial court’s ruling that Garcia take nothing on her claim against

Genesis for attorney’s fees and a mandatory minimum damages award of $200.00 under

section 91.406 of the natural resources code. Section 91.406 states the following:

       If a suit is filed to collect proceeds and interest under [Chapter 91], the court
       shall include in any final judgment in favor of the plaintiff an award of:

       (1) reasonable attorney's fees; and

       (2) if the actual damages to the plaintiff are less than $200, an additional
       amount so that the total amount of damages equals $200.

Id. § 91.406.

       Genesis argued in its motion for summary judgment that because Garcia’s section

91.404(c) cause of action fails as a matter of law, a plain reading of section 91.406

precludes her from recovering attorney’s fees or the minimum award of $200.00 as a

matter law. We agree.

       Courts have construed section 91.406 of the natural resources code to mean that

a plaintiff seeking attorney’s fees or the minimum actual damages award under it must

first prevail on a cause of action brought under chapter 91. See Ohrt v. Union Gas Corp.,

398 S.W.3d 315, 333 (Tex. App.—Corpus Christi 2012, pet. denied) (“Applying the plain

meaning of the word favorable, we consider any judgment favorable to the plaintiff when

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he obtains a measure of relief which leaves him in a better position than he held before

filing suit.” (internal quotations omitted)) (citing Headington Oil Co., L.P. v. White, 287
S.W.3d 204, 216 (Tex. App.—Houston [14th Dist.] 2009, no pet.)).         Accordingly, because

we hold that Genesis’s section 91.404 cause of action fails as a matter of law, no “final

judgment in favor of [Garcia]” existed to entitle her to reasonable attorney’s fees or

damages of the minimum award of actual damages under section 91.406.

       We overrule Garcia’s first four issues.

                             III.   DECLARATORY JUDGMENT

       By her fifth and final issue, Garcia asserts that the trial court erred by dismissing

her declaratory judgment action.

A.     Standard of Review and Applicable Law

       The purpose of declaratory judgments are to settle and to afford relief from

uncertainty and insecurity with respect to rights, status, and other legal relations; and the

declaratory judgment statutes are to be liberally construed and administered. TEX. CIV.

PRAC. & REM. CODE ANN. § 37.002(b) (West, Westlaw through 2015 R.S.). A declaratory

judgment is appropriate only if a justiciable controversy exists as to the rights and status

of the parties and the controversy will be resolved by the declaration sought.        Bonham

State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex. 1995).              To constitute a justiciable

controversy, there must exist a real and substantial controversy involving genuine conflict

of tangible interests and not merely a theoretical dispute.   Id.

       We review declaratory judgments under the same standards as other judgments.

TEX. CIV. PRAC. & REM. CODE ANN. § 37.010 (West, Westlaw through 2015 R.S.). In so

doing, we look to the procedure used to resolve the issue at trial to determine the standard

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of review on appeal.    See Tanglewood Homes Ass’n, Inc. v. Feldman, 436 S.W.3d 48,

65–66 (Tex. App.—Houston [14th Dist.] 2014, pet. denied). Here, because the trial court

resolved Garcia’s declaratory action through Genesis’s traditional motion for summary

judgment, we will review the propriety of the trial court’s denial of the declaratory judgment

under the same standards applied to summary judgment.         See XTO Energy, 407 S.W.3d

at 248; Two Thirty Nine Joint Venture, 145 S.W.3d at 157.

B.     Discussion

       In her request for declaratory relief, Garcia requested that the trial court declare

the following:

       (a) [Genesis] is the “payor” on the Willie De La Fuente Lease No. 54546000,
           as defined by the Texas Natural Resources Code, Section 91.401, et
           seq.;

       (b) [Garcia] is a “payee” as defined by the Texas Natural Resources Code
           Section 91.401, entitled to receive proceeds from the sale of oil and gas
           on the Willie De La Fuente Lease No. 54546000;

       (c) [Genesis] had and has a continuing duty to tender and maintain a
           binding division order reflecting the ownership interests of [Garcia] in the
           Willie De La Fuente Lease No. 5456000, as long as Genesis remains
           the Payor under the lease;

       (d) [Genesis] failed to timely pay proceeds from the sale of oil and gas to
           [Garcia] on the Willie De La Fuente Lease No. 54546000, pursuant to
           the statutory deadlines set out in Texas Natural Resources Code,
           Section 91.402;

       (e) [Genesis’s] failure to timely pay proceeds from the sale of oil and gas to
           [Garcia] on the Willie De La Fuente Lease No. 54546000 was not
           excused;

       (f) [Garcia] gave [Genesis] the required written notice of its failure to pay
           proceeds due from the sale of oil and gas and [Genesis] failed to pay
           those proceeds due within thirty days;

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       (g) [Garcia] filed suit under the cause of action created and allowed by
           Texas Natural Resources Code, Section 91.404;

       (h) [Garcia] is entitled to judgment in her favor pursuant to the Uniform
           Declaratory Judgment Act;

       (i) [Garcia] is entitled to recover the sum of $200.00 as the Minimum Award
           prescribed by Texas Natural Resources Code, Section 91.406;

       (j) [Garcia] is entitled to recovery reasonable attorney’s fees prescribed by
           the Texas Natural Resources Code, Section 91.406, in an amount to be
           determined by the trier of facts; [and]

       (k) [Garcia] is entitled by law and equity to recover reasonable and
           necessary attorney’s fees prescribed by Chapter 37, Texas Civil
           Practice and Remedies Code, in an amount that the Court finds
           equitable and just.

       Genesis argues that all of Garcia’s claims for declaratory relief are moot and fail

as a matter of law because they do not relate to a justiciable controversy.   Specifically,

Genesis asserts that Garcia (1) received a current division order in October 2013; (2) has

been paid all of the past due proceeds and interest owed; and (3) continues to receive

timely proceeds under her lease. We, again, agree with Genesis.

       Stated again, to constitute a justiciable controversy, there must exist a real and

substantial controversy involving genuine conflict of tangible interests and not merely a

theoretical dispute.   Beadle, 907 S.W.2d at 467.    Furthermore, declaratory relief is not

warranted unless the claim presents a “substantial controversy” of “immediacy and

reality.” Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620, 624 (Tex. 2011) (quoting Tex.

A&M Univ.–Kingsville v. Yarbrough, 347 S.W.3d 289, 290 (Tex. 2011)).           Although a

controversy may be moot, however, the capable-of-repetition doctrine is a rare exception

to the mootness doctrine.    Yarbrough, 347 S.W.3d at 290 (citing Williams v. Lara, 52
S.W.3d 171, 184 (Tex. 2001)).     This exception applies when the challenged act is of

                                            11
such short duration that the appellant cannot obtain review before the issue becomes

moot, and a reasonable expectation exists that the same action will occur again if the

issue is not considered.    Id.

         All of the actions complained about in Garcia’s fourth amended petition relate to

past conduct of untimely-paid proceeds by Genesis to Garcia, following Garcia’s father’s

death.    However, we held earlier that Genesis established as a matter of law that all past

proceeds and corresponding interest owed by Genesis were ultimately paid to Garcia.

Therefore, this conclusion renders Garcia’s requests for declarations (c)–(j) moot. See

Etan Indus., 359 S.W.3d at 624.            Additionally, Garcia presents no evidence that

Genesis’s remedial conduct of untimely-paying Garcia proceeds and interests are of a

short duration that she would not be able to obtain review before the issue becomes moot

again or that a reasonable expectation exists that Genesis has refused, will refuse, or

plans to refuse to timely pay proceeds to Garcia pursuant to the division orders, if her

declaratory issues are not considered. See Yarbrough, 347 S.W.3d at 290.          As such,

this likewise renders Garcia’s requests for declarations (a), (b), and (k) moot.        We

overrule Garcia’s fifth issue.

                                     IV.     CONCLUSION

         We affirm the trial court’s judgment.

                                                                GINA M. BENAVIDES,
                                                                Justice

Delivered and filed the
28th day of April, 2016.

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