BP Am. Prod. Co. v. Carlos M. Zaffirini Sr., Dolores Angelina De La Garza, Clarissa De La Garza, Cristina Lorena Benavides, Servando Roberto Benavides, Delia Hilda Benavides Martinez, Maria Eugenia Benavides Gutierrez, Las Tinajas Minerals, Ltd.

• Decision Date: 30 August 2013
• Docket Number: No. 04–11–00550–CV.,04–11–00550–CV.
• Citation: 419 S.W.3d 485
• Parties: BP AMERICA PRODUCTION COMPANY, Appellant v. Carlos M. ZAFFIRINI Sr., Dolores Angelina De la Garza, Clarissa De La Garza, Cristina Lorena Benavides, Servando Roberto Benavides, Delia Hilda Benavides Martinez, Maria Eugenia Benavides Gutierrez, Las Tinajas Minerals, Ltd., and Diana Benavides Solis, Appellees.
• Court: Texas Court of Appeals

419 S.W.3d 485

BP AMERICA PRODUCTION COMPANY, Appellant

v.Carlos M. ZAFFIRINI Sr., Dolores Angelina De la Garza, Clarissa De La Garza, Cristina Lorena Benavides, Servando Roberto Benavides, Delia Hilda Benavides Martinez, Maria Eugenia Benavides Gutierrez, Las Tinajas Minerals, Ltd., and Diana Benavides Solis, Appellees.

No. 04–11–00550–CV.

Court of Appeals of Texas, San Antonio.

Aug. 30, 2013.

Donato D. Ramos Jr., Law Offices of Donato D. Ramos, Laredo, TX, Stephen G. Tipps, Baker Botts, L.L.P., Houston, TX, for Appellant.

Carlos M. Zaffirini Sr., Guadalupe Castillo, Zaffirini & Castillo, James K. Jones Jr., Adan Gonzalez, Jones & Gonzalez, P.C., Laredo, TX, Patton G. Lochridge, McGinnis Lochridge & Kilgore, L.L.P., Austin, TX, for Appellees.

Sitting: CATHERINE STONE, Chief Justice, SANDEE BRYAN MARION, Justice, and PATRICIA O. ALVAREZ, Justice.

OPINION

Opinion by: PATRICIA O. ALVAREZ, Justice.

This is an appeal from the trial court's judgment denying Appellant's motions for summary judgment and granting Appellees' motions for summary judgment in a suit involving the construction of an oil and gas lease. Appellant BP America Production Company executed two separate leases to produce oil and gas from the same mineral estate in Webb County. When a dispute arose over one of the leases, BP filed a declaratory-judgment action and various claims against all the lessors. In turn, the lessors counterclaimed against BP. Later, BP and the lessors filed competing summary judgment motions. The trial court denied BP's motions, granted the lessors' motions, and BP appealed. We affirm in part and reverse in part the trial court's judgment, render in part, and remand the cause to the trial court for further proceedings consistent with this opinion.

Background

BP executed two separate leases to produce oil and gas from the same mineral estate on approximately 7,520 acres of the Santa Elena Ranch in Webb County. It first executed a lease with Diana Solis (Solis lease) for her 30% interest in the undivided mineral estate. Shortly thereafter, BP intensified its negotiations with the lessors holding the remaining 70% interest; we refer to the combined 70% interest holders as Lessors.¹

BP and Lessors repeatedly negotiated the bonus provision terms—the central question in this appeal. BP finally executed a second lease (Zaffirini lease) with Lessors, including Solis's family members, who are co-owners of the remaining 70% interest. When a dispute arose over the amount of bonus BP was required to pay under the Zaffirini lease's Favored–Nations ² clause, BP filed a declaratory-judgment action for the court to determine its obligations under the Zaffirini lease. Lessors, Solis, and BP filed competing summary judgment motions. The trial court denied BP's summary judgment motions, granted Lessors' summary judgment motions, and awarded Lessors (and Diana Solis) a total of approximately $3.9 million in damages and attorney's fees.

A. Solis Lease

We first address the Solis lease because of its role in this dispute between BP and Lessors. In the Solis lease, BP agreed to pay Solis $1,300 per acre as bonus. The Solis lease also contains a Favored–Nations clause. The clause requires that while Solis's lease is in effect,³ if BP agrees to more favorable bonus or royalty terms with any other co-owner in the same mineral estate, BP must pay Solis according to the more favorable terms. This requirement to pay Solis additional bonus is the predicate for BP's dispute with Lessors—as described below.

B. Zaffirini Lease

After BP executed the Solis lease, it continued negotiations with Lessors: Solis's family members, some others, and Carlos M. Zaffirini Sr. BP initially offered Lessors a $1,300 per acre bonus. Lessors countered by asking for a $1,300 per acre bonus and a separate $700 per acre consent-to-assignment fee that the parties would not treat as bonus. BP increased their offer to $1,750 per acre and proposed specific bonus provision language. After more negotiations, Lessors accepted BP's payment offer and the bonus provision language, and the parties executed the Zaffirini lease.

C. BP's Payment to Solis

Immediately after the parties executed the Zaffirini lease, BP sent Solis a payment for approximately $1,026,000. According to BP, under the Solis lease Favored–Nations clause, BP was obligated to pay Solis an additional $450 per acre bonus because it had granted Lessors a more favorable bonus term than it had negotiated with her. After BP paid Solis, Lessors demanded that BP pay them another $450 per acre as bonus under the Zaffirini lease Favored–Nations clause claiming they had been paid only $1,300 per acre bonus.

D. BP Sues Lessors

BP rejected Lessors' demand and sued Lessors. BP's original petition sought declaratoryrelief, costs of suit, and attorney's fees; BP later added fraud and other claims against Lessors. In its fifth amended petition, BP asked the court to declare that, inter alia, Lessors were not entitled to any additional bonus, BP was entitled to a lease extension, and BP was entitled to costs and attorney's fees.

BP argued in the alternative—in case the court found that only $1,300 per acre of its payment to Lessors was bonus—that Solis was not entitled to an additional bonus payment, Solis must return the overpayment, and Lessors are not entitled to any additional bonus.

BP pled in the further alternative that the lease was ambiguous and extrinsic evidence should be considered. BP sued Solis to recover the additional $450 per acre it paid her; BP claimed money had and received, unjust enrichment, and unilateral mistake.

E. Lessors' Counterclaims

Lessors counterclaimed for breach of contract, specifically alleging that BP failed to pay Lessors the additional bonus it owed them under the Zaffirini lease's Favored–Nations clause. They sued BP for damages based on BP's alleged breach of “utmost good faith and fair dealing” standard of conduct that was provided in a lease clause. Lessors also alleged that BP's conduct was fraudulent, malicious, and grossly negligent, and they were entitled to exemplary damages.

F. Competing Motions for Summary Judgments

After a discovery period, the parties filed competing motions for summary judgment.⁴ The Zaffirini Lessors and Jones Lessors filed separate motions that each included traditional and no-evidence motions. In return, BP filed a single traditional motion against Lessors; it filed separate no-evidence motions against the Zaffirini Lessors and the Jones Lessors. We address each of the parties' motions below.

1. Zaffirini Lessors' Traditional Motion

The Zaffirini Lessors moved for traditional summary judgment on their counterclaim that BP breached the lease and the Zaffirini Lessors were entitled to damages, additional damages under lease paragraph 36.14, and attorney's fees. The Zaffirini Lessors also moved for summary judgment against BP's claim that the Zaffirini Lessors had a duty to cooperate and BP's claims of fraud, fraudulent inducement, promissory estoppel, fraud by nondisclosure, and negligent misrepresentation. Finally, the Zaffirini Lessors moved for traditional summary judgment against BP's declaratory-judgment claim that it was entitled to a lease extension.

2. Zaffirini Lessors' No–Evidence Motion

In their no-evidence motion, the Zaffirini Lessors asserted that BP produced no evidence of the Zaffirini Lessors' breach of contract, breach of duty to cooperate, fraud, fraudulent inducement, fraudulent concealment, fraud by nondisclosure, or negligent misrepresentation. The Zaffirini Lessors also asserted that BP produced no evidence that it was entitled to damages based on promissory estoppel or was entitled to a lease extension.

3. Jones Lessors' Joinder

The Jones Lessors joined the Zaffirini Lessors' traditional and no-evidence motions for summary judgment.

4. BP's Traditional Motion

In its traditional motion, BP moved for summary judgment against Lessors on its claims for declaratory judgment, breach of contract, breach of the duty to cooperate, fraud, fraudulent inducement, fraud by nondisclosure, promissory estoppel, and negligent misrepresentation, and sought attorney's fees and costs. BP also moved for summary judgment on its challenges to Lessors' claims that BP breached the lease, that BP breached its duty of utmost good faith and fair dealing, and that BP was liable for exemplary damages.

5. BP's No–Evidence Motion (Jones Lessors)

BP moved for no-evidence summary judgment against the Jones Lessors. It asserted they provided no evidence on their claims against BP for breach of contract, breach of the duty of good faith and fair dealing, fraud, gross negligence, and liability for additional damages under lease section 36.14.

6. BP's No–Evidence Motion (Zaffirini Lessors)

BP also moved for no-evidence summary judgment against the Zaffirini Lessors' claims. It asserted there was no evidence of BP's alleged breach of contract, breach of the duty of good faith and fair dealing, fraud, gross negligence, and liability for additional damages under lease section 36.14. BP's no-evidence motion also asserted that the Zaffirini Lessors presented no evidence on their affirmative defenses of BP's alleged non-reliance on their representations, BP's non-reliance disclaimer condition, BP's alleged failure to use due diligence or its own actions caused its injury, or contractual disclaimer. Finally, BP's no-evidence motion contended that the Zaffirini Lessors presented no evidence on their affirmative defenses of estoppel, promissory estoppel, quasi-estoppel, waiver, acquiescence, or release.

7. Jones Lessors' Summary Judgment Responses

The Jones Lessors also sought to join and adopt as their own the Zaffirini Lessors' June 27, 2011 response to BP's traditional and no-evidence motions for summary judgment.

G. Summary Judgment

After a June 30, 2011 hearing on the motions, the trial court granted the Zaffirini Lessors' and Jones Lessors' traditional and no-evidence motions...