Great N. Energy, Inc. v. Circle Ridge Prod., Inc.

• Citation: 528 S.W.3d 644
• Decision Date: 22 March 2017
• Docket Number: No. 06-16-00015-CV.,06-16-00015-CV.
• Parties: GREAT NORTHERN ENERGY, INC., Appellant v. CIRCLE RIDGE PRODUCTION, INC., Appellee
• Court: Court of Appeals of Texas

528 S.W.3d 644

GREAT NORTHERN ENERGY, INC., Appellant

v.CIRCLE RIDGE PRODUCTION, INC., Appellee

No. 06-16-00015-CV.

Court of Appeals of Texas, Texarkana.

Submitted: November 21, 2016

Decided: March 22, 2017

Rehearing Denied May 2, 2017

Supplemental Opinion May 3, 2017

William J. Gardner, William J. Gardner, PC, Longview, TX, for appellant.

Dean A. Searle, Ronan S. Searle, Searle & Searle, PC, Michael T. Runyan, Runyan Law Firm, PC, Marshall, TX, for appellee.

Before Morriss, C.J., Moseley and Burgess, JJ.

OPINION

Opinion by Justice Burgess

This case involves a complicated dispute between Circle Ridge Production, Inc. (Circle Ridge), and Kevin Stephens against Great Northern Energy, Inc. (Great Northern), arising out of the sale and foreclosure of certain oil and gas interests in Harrison County. We affirm the trial court's judgment in part and reverse in part.

I. Introduction

A. Summary of the Dispute

Briefly, Circle Ridge and Stephens sold certain oil and gas leases referred to by the parties as the O'Benco leases¹ to Great Northern in exchange for a $700,000.00 promissory note, a $180,000.00 cash payment to Circle Ridge, and a $20,000.00 cash payment to Stephens. The promissory note was secured by a deed of trust, listing Dean A. Searle as trustee and both Circle Ridge and Stephens as the "beneficiary [sic]." After the sale, Stephens agreed with Great Northern to sell his undivided interests in the O'Benco leases to Great Northern in consideration for receiving stock in Rangeford Resources. However, the Rangeford Resources agreement never materialized.

Subsequently, Great Northern defaulted on the promissory note, and Circle Ridge instituted foreclosure of the O'Benco leases against Great Northern. Great Northern's interests in the O'Benco leases were sold at public auction, and Circle Ridge acquired all of Great Northern's interests in the O'Benco leases by virtue of its winning bid. However, Great Northern continued its physical possession of the wells included in the O'Benco leases despite the foreclosure. Great Northern took the position that because Stephens had assigned his interests in the O'Benco leases to it as part of the Rangeford Resources agreement, and because the deed of trust listed both Circle Ridge and Stephens as the "beneficiary [sic]," Circle Ridge could not institute foreclosure by itself. Circle Ridge and Stephens asserted that Stephens never assigned his interests in the O'Benco leases to Great Northern because the Rangeford Resources agreement was never completed.

Both parties filed suit, and the two suits were ultimately consolidated in the 71st Judicial District Court of Harrison County. The case proceeded to trial on Circle Ridge's claims for trespass to try title and breach of contract against Great Northern as well as Great Northern's claims against Circle Ridge and Stephens for breach of contract and breach of the duty of good faith and fair dealing and a competing claim of trespass to try title. The trial court granted a directed verdict in favor of Stephens on Great Northern's breach of contract claim and granted both Stephens and Circle Ridge directed verdicts on Great Northern's breach of the duty of good faith and fair dealing claims. The trial court also granted a directed verdict in favor of Circle Ridge on its own breach of contract claim against Great Northern.

The case then proceeded to trial before the jury and Great Northern's wrongful foreclosure claim. The jury found in favor of Circle Ridge and against Great Northern.² Pursuant to the jury's verdict, and the trial court's directed verdicts, the trial court entered judgment quieting title to the oil and gas interests in Circle Ridge and awarding it $637,114.15 in damages for breach of contract against Great Northern, together with attorney's fees and court costs. Great Northern filed this appeal.

B. Issues on Appeal

On appeal, Great Northern argues that the trial court erred in (1) excluding evidence of an alleged assignment of Stephens' interest in the promissory note, (2) in granting the above-mentioned directed verdicts against Great Northern in favor of Circle Ridge, (3) in failing to grant a directed verdict in favor of Great Northern on its wrongful foreclosure claim against Circle Ridge, (4) in awarding $637,114.15 to Circle Ridge for breach of the promissory note, (5) in quieting title in favor of Circle Ridge, (6) in permitting opposing counsel to make certain comments during voir dire and closing argument, (7) in submitting the wrongful foreclosure questions to the jury, (8) in failing to grant its motions for mistrial, (9) in denying motions for new trial and judgment notwithstanding the verdict, and (10) in awarding $150,873.37 in attorney's fees.

C. Resolution of Issues on Appeal

We affirm, in part, the trial court's judgment because we conclude that (1) the trial court did not abuse its discretion in making any of its evidentiary rulings related to the alleged assignment, (2) Great Northern did not preserve evidentiary challenges unrelated to the alleged assignment, (3) the motion for mistrial based on the trial court's evidentiary rulings was properly overruled, (4) Great Northern did not properly brief many of its challenges to the trial court's directed verdict ruling, (5) the properly briefed challenges to the trial court's directed verdict rulings are without merit, (6) the trial court's damage award was based on a stipulation by the parties, (7) the trial court properly quieted title in favor of Circle Ridge, (8) Great Northern failed to preserve complaints about (a) comments made during voir dire and closing argument, (b) challenges to the submitted jury charge, and (c) its appellate argument related to the trial court's denial of its motion for mistrial made during voir dire, and (9) the motions for new trial and judgment notwithstanding the verdict were properly denied. However, because attorney's fees were not properly segregated, we reverse the award of attorney's fees and remand the matter to the trial court for further proceedings consistent with this opinion.

II. Factual Background and Procedural History

Billy Joe Briscoe and Doug Friedel are the only two shareholders of Circle Ridge. On May 17, 2012, in exchange for $10,000.00, O'Benco III, LP, assigned its decimal working interests and decimal revenue interests in several oil and gas leases located in Harrison County, Texas, which the parties in this case collectively refer to as the O'Benco leases,³ to Circle Ridge and Stephens.

A. Circle Ridge and Stephens Sell Their Interests in the O'Benco Leases to Great Northern

Shortly after Circle Ridge and Stephens began production on wells located in the O'Benco leases, they received a call from Great Northern's President, Joe Loftis, who expressed an interest in acquiring their decimal working and revenue interests in the O'Benco leases. As consideration for Great Northern's execution and delivery of a $700,000.00 promissory note, a $180,000.00 cash payment to Circle Ridge, and a $20,000.00 cash payment to Stephens, Circle Ridge and Stephens assigned to Great Northern the interests they had acquired in the O'Benco leases, subject to certain reservations not relevant to the main issues in this case.

The assignment and bill of sale was executed by Circle Ridge and Stephens on September 11, 2012.⁴ It recited the promissory note as consideration and further stated,

[I]t is expressly agreed that the Assignors herein expressly reserve for themselves, their successors and assigns, the Vendor's Lien, as well as the superior title in and to the above described property, premises and improvements, against the above described property, premises and improvements until the above described Note and all interest thereon has been fully paid according to the face, tenor, effect and reading thereof, when this Deed shall become absolute, and to additionally secure Assignors in the payment of the Note, the Grantees have executed and delivered a Deed of Trust of even date herewith conveying the herein described property to Dean A. Searle, Trustee.

The promissory note was also executed on September 11, 2012, by Abercrombie. It provided that Great Northern would pay Circle Ridge and Stephens seventeen monthly installments of $38,000.00, plus an eighteenth installment of the remaining balance, beginning December 1, 2012, with each installment due on or before the first day of every month. The note also warned that a default in payment by Great Northern could result in the acceleration of the debt. The promissory note was secured by a document titled "DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF PRODUCTION, AND FINANCING STATEMENT OF OIL AND GAS PROPERTIES (INCLUDING AFTER ACQUIRED TITLE)," which we simply refer to as the deed of trust.

The deed of trust listed Dean A. Searle as the Trustee, and both "Circle Ridge Production, Inc. and Kevin Stephens" as the "Beneficiary [sic]," a fact which is critical to understanding the parties' arguments. The deed of trust, which also stated that Great Northern's default could result in the acceleration of the debt, provided, "Beneficiary shall have the right to assign all or a portion of its interest in this Deed of Trust to any subsequent holder of any portion of the Obligation." The deed of trust further specified that, in the event of default,

Beneficiary may request Trustee to proceed with foreclosure. In that event Trustee is expressly authorized and empowered, and it shall be his duty, on request by Beneficiary, and to the extent permitted by applicable Law, to sell all or any part of the Mortgaged Property at one or more sales, as an entirety or in parcels, at the place or places and otherwise in the manner and on such notice as may be required by applicable Law, or in the absence of any requirement, as Trustee and/or Beneficiary may deem appropriate, and to make conveyance(s) to the purchaser or purchasers at the sale. Any sale of any part of the Mortgaged Property shall be made to the

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