Acme Energy Servs., Inc. v. Staley

• Decision Date: 22 February 2019
• Docket Number: No. 08-17-00145-CV,08-17-00145-CV
• Citation: 569 S.W.3d 841
• Parties: ACME ENERGY SERVICES, INC. d/b/a Big Dog Drilling, Appellant, v. Sandra H. STALEY, Individually as Independent Executrix of the Estate of George G. Staley, Deceased, and as Trustee of the Tax Free Trust for Sandra H. Staley, Appellee.
• Court: Texas Court of Appeals

569 S.W.3d 841

ACME ENERGY SERVICES, INC. d/b/a Big Dog Drilling, Appellant,

v.Sandra H. STALEY, Individually as Independent Executrix of the Estate of George G. Staley, Deceased, and as Trustee of the Tax Free Trust for Sandra H. Staley, Appellee.

No. 08-17-00145-CV

Court of Appeals of Texas, El Paso.

February 22, 2019

ATTORNEY FOR APPELLEE: Hon. John A. ‘Jad’ Davis, Davis Gerald & Cremer PC, 400 W. Illinois, Suite 1400, P. O. Box 2796, Midland, TX 79702-2796.

ATTORNEY FOR APPELLANT: Hon. Michael D. Jones, Jones Gill LLP, 6363 Woodway Dr Ste 1100, Houston, TX 77057-1796.

Before Rodriguez, J., Palafox, J., and Larsen, Senior Judge, Larsen, Senior Judge (Sitting by Assignment)

OPINION

YVONNE T. RODRIGUEZ, Justice

Big Dog Drilling appeals the judgment of the trial court holding its lien on an oil-and-gas lease had been extinguished by a prior agreement. In Issues One, Two, and Three, Big Dog contends the trial court (1) erred by holding there is no debt owed to Big Dog for the Invoices; (2) erred in finding that no debt is owed on the Invoices; and (3) erred in finding the lien claimed by Big Dog had been extinguished. In Issues Four, Five, and Six, Big Dog contends the trial court (4) erred in holding that because the lien had been extinguished, Big Dog could not prevail on its claims; (5) erred in holding it would not be equitable and just for the trial court to award Big Dog attorney’s fees; and (6) erred in holding Big Dog is not entitled to recover attorney’s fees.¹ We affirm.

BACKGROUND

This consolidated case is about an oil-and-gas contractor who went belly up and the subcontractors who are seeking to satisfy invoiced obligations not fully paid in the contractor’s bankruptcy. The somewhat convoluted facts are as follows. In 2008, Endeavor Energy Resources, L.P., Big Dog Drilling, and Rig Movers Express performed oil-and-gas-related work on a well known as the A. G. Hill No. 1 Well. The well was located on mineral leases in Winkler County, Texas, known as the Section 6 Leases, and were at the time one-hundred percent owned by Heritage Consolidated Services and Heritage Standard Corporation. Heritage contracted with Lakehills Productions to provide materials and services on the A.G. Hill No. 1 Well, and Lakehills hired Endeavor, Big Dog, and Rig Movers as subcontractors. The Subcontractors performed the work as required and invoiced Lakehills for payment. But Heritage had stopped making payments to Lakehills, and Lakehills in turn did not pay the Subcontractors for their work. On December 23, 2008, the Subcontractors recorded statutory mineral property liens against Heritage and its ownership in the leases and the well, collectively covering $1,178,294.71 in amounts invoiced to Lakehills.² In July 2009, having still not received payment on the invoices, the Subcontractors filed separate suits to foreclose the liens, order a judicial sale of the well and the leases, and find Heritage jointly and severally liable for paying the invoiced amounts.

But before the Subcontractors filed their foreclosure suits, a separate dispute had arisen over an agreement involving the Section 6 Leases between Heritage and three other parties: Jeff Ragland, Dennis Rosini, and George G. Staley. Staley was a well-regarded geologist who had been hired by Heritage to overcome operational problems with the well and make it produce in paying quantities, for which he would receive an interest. In June 2009, as part of a settlement agreement, Heritage assigned working interests in the leases and well to the parties, with Staley receiving a 17.75 percent interest and Rosini and Ragland each receiving respective one-percent interests. Rosini and Ragland subsequently assigned their one-percent interests to Staley, leaving Staley with a 19.75 percent interest in the Heritage leases. Because the liens had been filed before these assignments were made, Staley took the assignments subject to the liens, but Staley never personally assumed an obligation to pay the invoices.

The Subcontractors' suits to foreclose their liens against Heritage proceeded, and Staley and the others were added as Heritage’s successors in interest. More than a year later in September 2010, while those suits were still pending, Heritage filed for Chapter 11 bankruptcy. The state trial court severed out the Subcontractors claims against Heritage to allow them to continue to pursue their claims against the remaining defendants in state court.

Now proceeding in bankruptcy court, the Subcontractors filed proofs of claim to recover the invoiced amounts from Heritage. They also jointly filed an adversary proceeding in the bankruptcy court regarding the priority, and validity, of their respective debts and liens. Heritage moved for summary judgment in the adversary proceeding, claiming it did not owe the invoiced amounts and that the Subcontractors' liens were invalid. The bankruptcy court agreed and granted summary judgment in favor of Heritage on all claims, and its decision was affirmed on appeal to the federal district court.

The Fifth Circuit reversed, finding a fact question existed regarding whether Heritage owed the debt to the Subcontractors, and the case was remanded to the bankruptcy court for a determination of the validity of the debts. In June 2015, Heritage and the Subcontractors reached a settlement agreement to dismiss the adversary proceedings. This agreement provided that Heritage would acknowledge its liability for the debts, and the total amount owed to the Subcontractors would be reduced to a stipulated amount of $1,493,628.21, which represented the original invoiced amounts plus fifty percent of their prepetition interest and attorney’s fees. It also provided that $300,000 of the Stipulated Amount would be an allowed secured claim in Heritage’s bankruptcy, thus ensuring its payment, and the remaining $1,193,628.21 owed would be classified as a general unsecured claim. Paragraph seven of the agreement provided as follows:

7. Upon approval of this Stipulation, the parties agree that a dismissal with prejudice shall be filed in the Adversary Proceeding, with each party bearing their own costs and attorneys' fees and further agree that, other than the continued indebtedness of the Stipulated Amount under the terms of this Stipulation, Heritage and the Trustee on the one hand, and Endeavor and Acme on the other, release each other and their respective counsel, agents, subsidiaries, and affiliates from all claims, causes of action, rights, demands, actions, costs, judgments, expenses, damages and liabilities whatsoever, at law or in equity, whether known or unknown, that arise out of or relate to the facts and circumstances made the basis of the Adversary Proceeding, or that were or could have been asserted in the Adversary Proceeding and/or the Proofs of Claim. In that regard, Endeavor and Acme acknowledge and agree that their recovery hereunder shall be in full and final satisfaction of their putative claims and liens against any interests of Heritage and/or the Trust in Section 6 Assets, and they shall not assert or enforce any claims and liens against any such interests, including, without limitation, any interest currently attributed to Trius in Section 6 Assets and/or recovered by the Trust through enforcement of claims against Trius in Section 6 Assets. This release is not intended to release any claims or liens owned or held by Endeavor or Acme against George Staley, J.R. Operating Company, Dennis Rosini and their successors and assigns.

The bankruptcy court approved this settlement in August 2015, and the Subcontractors received payment from Heritage in accordance with the Stipulation.

The Subcontractors then returned to state court to attempt to foreclose on the interest held by Staley, who by this point had passed away and had left the interest to his wife, Sandra H. Staley, and to recover attorney’s fees. The trial court consolidated the Subcontractors' suits and a bench trial was held in March 2017 on partially stipulated facts. The parties stipulated that Staley was not personally liable for the debts on the invoiced amounts and that the Subcontractors were only seeking a judgment to foreclose the liens as to Staley’s interest in the well. At trial, Staley asserted the liens had been extinguished because the underlying debt had been extinguished—that the Subcontractors had expressly released the underlying debt of the invoiced amounts owed by Heritage in exchange for a priority interest in the bankruptcy proceeding and an allowance of the remaining balance as an unsecured claim, which Heritage had otherwise contested it owed. Staley contended the only claim reserved against her and her late husband’s estate by the release was a claim for unjust enrichment, and because no lien existed against Staley the line reserving a lien against him was without effect. The Subcontractors in turn argued the Stipulation was not a release of the underlying debt of the invoiced amounts but merely an agreement to priority status in the bankruptcy. At trial, the Subcontractors orally agreed to withdraw their claim for unjust enrichment, which was their only claim against Staley personally. The trial court held in favor of Staley, finding no debt was owed to the Subcontractors on the invoiced amounts due to the Stipulation Agreement in the bankruptcy. Because no debt was owed to the Subcontractors on the invoiced amounts, the court concluded the lien was extinguished and the plaintiffs could not succeed on their claims and foreclose on Staley’s interest. It also concluded that because the Subcontractors could not succeed on their claims, they were not entitled to attorney’s fees. This appeal followed.

DISCUSSION

The Underlying Debt and the Stipulation

In Issues One, Two, and Three, Big Dog contends the trial court erred in concluding the debts of the Invoiced Amounts were no longer owed because the underlying debt and lien were extinguished by the bankruptcy stipulation.

Standard...