Devon Energy Prod. Co. v. KCS Res., LLC

Decision Date30 October 2014
Docket NumberNO. 14-13-00348-CV,14-13-00348-CV
CourtTexas Court of Appeals
PartiesDEVON ENERGY PRODUCTION COMPANY, L.P., Appellant v. KCS RESOURCES, LLC, Appellee

On Appeal from the 129th District Court Harris County, Texas

Trial Court Cause No. 2010-15225

MAJORITY OPINION

In this dispute over ownership of property in Louisiana, appellant Devon Energy Production Company, L.P., contends that the trial court erred in granting summary judgment in favor of appellee KCS Resources, LLC, on the ground that the trial court lacked subject matter jurisdiction over Devon's action for relief under the Uniform Declaratory Judgments Act. In a cross-issue, KCS contends the trial court erred in concluding that it also lacked jurisdiction to decide KCS'scounterclaim for attorney's fees under the Act. We affirm in part and reverse and remand in part.

BACKGROUND

Devon and KCS are parties to a Purchase and Sale Agreement, effective February 22, 2005, in which Devon agreed to sell to KCS certain oil and gas assets in Texas, Louisiana, and Mississippi (the PSA). The assets to be sold were listed in Exhibit A to the PSA, which was further divided into three sub-parts. Exhibit A-3 of the PSA identified "Leases and Lands" to be conveyed, including oil and gas leases, wells, mineral interests, and associated assets located in DeSoto Parish, Louisiana. Under the PSA, the assets included all of Devon's right, title, and interest in and to the oil and gas leases, lands, and wells described in Exhibit A as follows:

2.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, [Devon] agrees to sell, and [KCS] agrees to purchase and pay for, all of [Devon]'s right, title and interest in and to the following (less and except for the Excluded Assets, collectively, the "Assets"):

(a) the oil and gas leases more particularly described in Exhibit A, subject to any depth restrictions described in Exhibit A (collectively, the "Leases"), together with any and all other rights, titles, and interests of [Devon] in and to (i) the leasehold estates created thereby, subject to any depth restrictions described in Exhibit A and to the terms, conditions, covenants, and obligations set forth in the Leases and/or Exhibit A and (ii) the lands covered by the Leases or included in Units with which the Leases may have been pooled or unitized, subject to any depth restrictions described in Exhibit A (the "Lands"), including in each case, without limitation, fee interests, royalty interests, overriding royalty interests, production payments, net profits interests, carried interests, reversionary interests, and all other interests of any kind or character;

(b) all oil and gas wells located on the Leases and the Lands or on other leases or lands with which the Leases and/or the Lands

may have been pooled or unitized (collectively and including the wells set forth on Exhibit A, the "Wells"), and all Hydrocarbons produced therefrom or allocated thereto.

(Emphasis added). The PSA also included a forum selection clause specifying that Texas law applied and that all actions arising out of or related to the PSA would be exclusively litigated in Harris County.

After about six weeks of due diligence, the parties closed the deal on April 13, 2005. At the closing, Devon executed various deeds conveying the assets to KCS, including a "Deed, Assignment and Bill of Sale" conveying the DeSoto Parish properties (the DeSoto Deed). Although the parties had negotiated revisions to some of the deeds during the due diligence period, Exhibit A to the DeSoto Deed contained the same properties that were previously listed on Exhibit A-3 of the PSA, with no revisions other than the addition of recording information. On April 18, 2005, the DeSoto Deed was recorded in the public records of DeSoto Parish.

About five years later, a dispute arose between KCS and Devon concerning the scope of the mineral interests Devon conveyed to KCS in DeSoto Parish. That dispute is the subject of this lawsuit. KCS contends that Devon intended to convey all of its right, title, and interest in two mineral servitudes1 known as the "Olin Mathieson Servitude" and the "Riverwood Servitude" burdening ten sections of land. Conversely, Devon maintains that its conveyance was restricted to specific wells or wellbores located within the two mineral servitudes. For convenience, we will refer to the properties at issue as the "Disputed Properties."

In 2010, after Devon learned that KCS had mortgaged some of the DisputedProperties, Devon filed a "Petition to Quiet Disturbance" in Louisiana seeking to cancel KCS's mortgage on those mineral interests. Devon contends that, after it filed that petition, EXCO Resources, Inc., another oil and gas company, informed Devon that KCS was claiming an interest in wells in which Devon had retained an interest under the PSA. Recognizing that Devon and KCS "had different views regarding what interests were intended to be conveyed by the PSA," Devon argues that it filed this declaratory action in Texas in accordance with the PSA's forum-selection clause.

KCS disputes Devon's account. According to KCS, EXCO contacted both Devon and KCS in the fall of 2009 to confirm who owned the Disputed Properties in connection with EXCO's plans to drill new wells in the area and, rather than acknowledge KCS's ownership, Devon seized an opportunity "to re-gain the now highly valuable" mineral interests. According to KCS, Devon sought to maintain its suit in both Louisiana and Texas by challenging the conveyance of different sections of the Disputed Properties in each action. KCS also argues that Devon's original pleadings in the Texas action sought a declaration as to the parties' rights under the DeSoto Deed and an adjudication of title to Louisiana real property, not declaratory relief under the PSA.

Litigation over the Disputed Properties proceeded in both Texas and Louisiana. In response to Devon's Louisiana petition, KCS answered and filed a counterclaim to have its rights under both the PSA and the DeSoto Deed declared in its favor, as well as alternative claims for fraud, misrepresentation, and violations of Louisiana law. KCS later amended its request for declaratory relief to seek a declaration as to the DeSoto Deed only. The Louisiana case has since been stayed pending the completion of the present case.

In the Texas action, KCS filed a motion to dismiss Devon's request fordeclaratory relief. Because Devon originally sought a declaration as to the parties' rights under the PSA and the DeSoto Deed in the Texas action, KCS argued that the Texas court lacked subject matter jurisdiction to interpret the DeSoto Deed and declare title to the Disputed Properties in Louisiana. The trial court treated KCS's motion as a plea to the jurisdiction and conditionally granted it, but allowed Devon the opportunity to amend its original petition.

Devon then amended its pleading to seek a declaration of the parties' intent regarding the conveyance of the Disputed Properties under the PSA alone. In response, KCS again challenged the court's jurisdiction over Devon's amended claims, arguing that the court must look first to the DeSoto Deed, not the PSA, because the conveyance provisions of the PSA had been merged into and were superseded by the conveyance provisions of the later-executed DeSoto Deed. The trial court denied KCS's motion, but stated that it would be willing to revisit the issue of subject matter jurisdiction later in the proceedings.

KCS later challenged the trial court's subject matter jurisdiction for a third time in a motion for summary judgment, arguing that a declaration of the PSA would not resolve the parties' dispute and would be an advisory opinion on a question of title to land in Louisiana. Although the trial court held a hearing on the motion, it made no ruling for several months. As the trial date approached, KCS amended its pleadings to file counterclaims for declaratory relief and alternatively, claims for fraud and negligent misrepresentation, subject to its jurisdictional challenge. Devon also filed a second amended petition.

The trial court granted KCS's motion for summary judgment on March 27, 2012, and ordered that Devon "take nothing" on its claims. Devon filed a motion to modify the trial court's summary judgment order, arguing that the trial court's ruling on the merits was improper and that the proper relief was to dismissDevon's claims for lack of subject matter jurisdiction. Shortly after that, KCS nonsuited all of its counterclaims except for its counterclaim for attorney's fees and costs as provided in the declaratory judgments act.

Almost a year later, on March 25, 2013, the trial court granted Devon's motion to modify and entered a final judgment dismissing Devon's declaratory judgment claims and KCS's attorney's fees claim for lack of subject matter jurisdiction. Both parties have appealed the final judgment.

ANALYSIS OF DEVON'S ISSUE
I. Summary of the Parties' Arguments

In its motion for summary judgment, KCS argued that the trial court lacked jurisdiction to interpret the conveyance terms of the PSA because any decision on that issue would be an impermissible advisory opinion that would not resolve the parties' dispute concerning the ownership of the Disputed Properties. KCS contended that the declaratory relief Devon seeks would be advisory for three reasons: (1) the PSA merged into the DeSoto Deed, so only the deed controls the respective rights of the parties; (2) the parties' intent under the PSA was superseded and mooted by the execution of the DeSoto Deed; and (3) the statute of frauds bars enforcement of any declaration since the PSA lacks the requisite recording information contained only in the DeSoto Deed. According to KCS, the final DeSoto Deed establishes the interests that were actually conveyed, and therefore any disagreement between the parties concerning ownership of the Disputed Properties must be resolved by a Louisiana court because the...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT