EP Energy E&P Co. v. Storey Minerals, Ltd.
| Decision Date | 26 January 2022 |
| Docket Number | 04-19-00534-CV |
| Court | Texas Court of Appeals |
| Parties | EP ENERGY E&P COMPANY, L.P., Appellant/Cross-Appellee v. STOREY MINERALS, LTD., Maltsberger/Storey Ranch, LLC, and Rene R. Barrientos, Ltd., Appellees/Cross-Appellants |
From the 81st Judicial District Court, La Salle County, Texas Trial Court No. 18-05-00083-CVL Honorable Russell Wilson Judge Presiding
This is an appeal from a summary judgment in which the trial court construed a most-favored-nations clause (MFN clause) in three identical oil & gas leases and granted summary judgment for Storey Minerals, Ltd., Maltsberger/Storey Ranch, LLC, and Rene R. Barrientos, Ltd. (MSB). EP Energy E&P Company L.P. (EP Energy) argues the trial court erred by (1) misconstruing the MFN clause's plain language; (2) failing to consider the surrounding circumstances in construing the clause; and (3) ordering it to amend the leases pursuant to the clause. The trial court's judgment is affirmed in part and reversed and rendered in part.
The parties[1] entered into three identical oil and gas leases containing an MFN clause in 2009.[2] These leases are known as the "A leases." Article II of the A leases required EP Energy to pay $500 in bonuses per net mineral acre for the right to lease MSB's real property. EP Energy acquired two additional leases-the "First Presbyterian" lease and the "Donaldson Brown" lease- triggering the MFN clause's requirement to amend the A leases and pay additional bonus per net mineral acre. Once MSB learned EP Energy acquired the triggering leases, it demanded the opportunity to review them. EP Energy eventually provided the leases and tendered an amendment to the A leases reflecting increased bonuses but no increase in delay rentals.[3] The parties disagreed on amounts due for bonuses and delay rentals, and MSB filed suit for breach of the A leases, attorney's fees, and expert fees.
MSB moved for partial traditional summary judgment against EP Energy, arguing it breached the MFN clause by failing to amend the leases and pay higher bonuses and delay rentals. MSB sought damages and specific performance, requiring EP Energy to amend the A leases. EP Energy moved for traditional summary judgment on MSB's claim, arguing the MFN clause's plain language and surrounding circumstances established it did not breach the MFN clause because it tendered an amendment to the A leases and offered to true-up bonus payments. It further argued MSB was not entitled to specific performance.
The trial court denied EP Energy's motion and granted MSB summary judgment requiring EP Energy to amend the A leases and pay bonuses consistent with the difference between the original bonus and the bonus in the Donaldson Brown lease, which had higher bonuses than the First Presbyterian lease. The court also denied MSB's summary judgment motion on delay rentals, concluding neither triggering lease provided for higher delay rentals. After the parties stipulated MSB's damages under the court's final judgment as $41, 034, 055 for all A leases, the trial court rendered final judgment for MSB, concluding EP Energy breached the MFN clause and ordered it to amend the A leases and pay the $41 million in unpaid bonus damages.
EP Energy timely appealed.[4]
"We review a summary judgment de novo." Valores Corporativos, S.A. de C.V. v. McLane Co., 945 S.W.2d 160, 162 (Tex. App.-San Antonio 1997, writ denied). A de novo review means we review the record and determine "'anew' all grounds and issues raised by each timely filed motion and response." Timothy Patton, Summary Judgments in Texas § 8.06[1] (3d ed. 2019). If the parties file competing summary judgment motions, and the trial court grants one motion and denies the other, then we review all the summary judgment evidence, determine all issues presented, and render the judgment the trial court should have rendered. See Trial v. Dragon, 593 S.W.3d 313, 317 (Tex. 2019); Comm'rs Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997).
Here the parties agree as they did in the trial court that the MFN clause's language is plain and unambiguous, but they dispute its meaning. We review lease construction questions de novo. Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550, 554 (Tex. 2002). "In construing an unambiguous lease, our primary duty is to ascertain the parties' intent as expressed within the lease's four corners." Id.; see, e.g., Piranha Partners v. Neuhoff, 596 S.W.3d 740, 743-44 (Tex. 2020); see also Plains Expl. & Prod. Co. v. Torch Energy Advisors Inc., 473 S.W.3d 296, 305 (Tex. 2015) ("Mere disagreement over the interpretation of an agreement does not necessarily render the contract ambiguous."). We read all parts of the lease together, ensuring each provision is given effect and no provision is rendered meaningless, and we use the plain, grammatical meaning of the language in the lease unless doing so "would clearly defeat the parties' intentions." Anadarko, 94 S.W.3d at 554 (citing Fox v. Thoreson, 398 S.W.2d 88, 92 (Tex. 1966)); Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 479-80 (2019).
The parties dispute the meaning of EP Energy's obligations under this part of the MFN clause:
If at any time during the existence of this lease, the lessee . . . acquires an Oil and Gas Lease on a portion of the leased premises with any . . . entity that owns a mineral interest in the leased premises on such terms that the . . . bonus . . . [is] greater than th[at] provided to be paid to lessor hereunder, lessee expressly stipulates, warrants, and agrees that it will execute an amendment to this lease, effective as of the date of the third party lease on the leased premises, to provide that the lessor hereunder shall receive thereafter the same percentage (per net mineral acre) . . . bonus . . . as any subsequent lessor of the leased premises to the extent that such . . . bonus . . . [is] greater than those provided to be paid herein. To the extent that the . . . bonus . . . in any subsequent lease [is] less than provided herein, lessor hereunder shall continue to receive the . . . bonus . . . as provided in this lease. . . . This Paragraph XXVI shall not apply to any lease or contract with a mineral owner that covers less than twenty (20) net mineral acres. (emphasis added)
The parties agree EP Energy: (1) acquired oil and gas leases subject to the MFN clause that provided a bonus "greater than those provided to be paid" to MSB, and (2) was required to "execute an amendment to [the A leases], effective as of the date of the third party lease on the leased premises, to provide that [MSB] shall receive thereafter the same percentage (per net mineral acre)" of bonus on the A leases.
However, EP Energy argues it was only obligated to make payments beginning on the acquired lease's effective date if there were bonuses it decided were payable from that date forward on acreage subject to the A leases. To illustrate, the Donaldson Brown lease had a September 25, 2013 effective date-five days before the end of the A leases' primary term on September 30, 2013. Under EP Energy's construction, the MFN clause required it to pay $4, 700 per net mineral acre-the difference between $5, 200 and the original $500 bonus in Article II-only for acreage it decided to pay bonuses on during those five days.
Under MSB's MFN clause reading, because the Donaldson Brown lease provided $5, 200 per net mineral acre-the highest amount of the two triggering leases-MSB would be entitled to the same $4, 700 bonus per net mineral acre for all acreage subject to the A leases as of September 25, 2013. The trial court agreed with MSB and construed the MFN clause to provide it was entitled to a $4, 700 bonus per net mineral acre along with the amendment to the A leases effective as of September 25, 2013.
We apply the plain, ordinary, and generally accepted meaning of the MFN clause's disputed terms. See Barrow-Shaver, 590 S.W.3d at 480. The parties dispute the meaning of "effective." Neither the clause nor any other provision in the A leases defines "effective." Black's Law Dictionary defines "effective" as "in operation at a given time." Effective, Black's Law Dictionary (11th ed. 2019) available at Westlaw. The parties also dispute the meaning of "thereafter." Not defined in the A leases, "thereafter" means "afterward" or "later." Thereafter, Black's Law Dictionary (11th ed. 2019) available at Westlaw; see, e.g., McMordie v. McMordie, 07-14-00393-CV, 2015 WL 4536614, at *3 (Tex. App.-Amarillo July 24, 2015, pet. denied) (mem. op.) (defining "thereafter" to mean "afterward").[5] Substituting the definitions for the language, the MFN clause provides EP Energy is required to execute an amendment to the A leases, operative on the date EP Energy enters into a third-party lease, to provide to MSB afterward the same higher bonus per net mineral acre as it provided in a third-party lease. Applying this plain language, we construe the relevant provisions as requiring EP Energy to pay the same higher bonus per net mineral acre it paid in the Donaldson Brown lease.
EP Energy's reading of the MFN clause requires construing it in conflict with Article II, which provides an unqualified $500 bonus per net mineral acre. Once EP Energy acquired a lease subject to the MFN clause, under EP Energy's reading, the clause divided bonuses into bonuses paid before triggering the clause and bonuses paid after triggering it. Bonuses paid before triggering the clause were...
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