Hayes v. E.T.S. Enterprises, Inc.

• Decision Date: 09 May 1991
• Docket Number: No. 07-90-0073-CV,07-90-0073-CV
• Citation: 809 S.W.2d 652
• Parties: Joe W. HAYES, Ty M. Sparks, Cecil Meadows, and Susan Krehbiel, Appellants, v. E.T.S. ENTERPRISES, INC., Appellee.
• Court: Texas Court of Appeals

Page 652

809 S.W.2d 652

Joe W. HAYES, Ty M. Sparks, Cecil Meadows, and Susan Krehbiel, Appellants, v. E.T.S. ENTERPRISES, INC., Appellee.

No. 07-90-0073-CV.

Court of Appeals of Texas Amarillo.

May 9, 1991.

Rehearing Overruled June 5, 1991.

Robert L. Templeton & Associates, Amarillo, Joe W. Hayes, Ty M. Sparks, Canadian, for appellants.

Nickum and Naylor, Ronald D. Nickum, Amarillo, for appellee.

Before REYNOLDS, C.J., and BOYD and POFF, JJ.

BOYD, Justice.

In one point, appellants Joe W. Hayes, Ty M. Sparks, Cecil Meadows and Susan Krehbiel say the trial court erred in granting a summary judgment in favor of appellee E.T.S. Enterprises, Inc. We disagree and affirm the judgment of the trial court.

Appellants own an undivided mineral interest in the west one-half (W/2) of Section 4, Block Z-1, ACH & B Survey in Hemphill County, Texas (the Property). On April 2, 1982, Cecil Meadows and wife Emma Jean Meadows, executed an oil and gas lease to Tom L. Scott, Inc., covering the Property. On May 14, 1982, this lease was conveyed to the Pogo Producing Company (Pogo).

On November 30, 1983, the Meadows conveyed a 1.5/320 mineral interest to appellant Joe W. Hayes, and a like interest to appellant Ty M. Sparks. On September 11, 1986, Hayes conveyed a .75/320 mineral interest to appellant Susan Krehbiel (nee Martha Susan Hayes).

On February 20, 1985, Pogo executed a "farm out" agreement to appellee by the terms of which appellee was obligated to drill a test well upon a pooled unit which included all of Section 4. Appellee commenced drilling operations upon the tract on or about April 5, 1985, and completed a producing well on December 27, 1985.

On May 14, 1985, during the course of appellee's drilling operations, Pogo executed a release of the oil and gas lease. Subsequently, on June 24, 1985, by an instrument denominated as a "Revocation and Rescission of Release of Oil and Gas Leases," which recited it had not been its intent to release its oil and gas lease, Pogo sought to revoke and rescind the release. By an instrument dated March 19, 1986, but which recited its effective date as of October 2, 1985, and which recited it was made without express or implied warranty of title, Pogo assigned the lease to appellee. In the transfer, Pogo retained an overriding royalty interest equal to the difference between all existing leasehold burdens of record and 25% of 8/8 production.

In the action giving rise to this appeal, appellee sought a declaratory judgment that Pogo's release was ineffective because it was the result of a mistake. They further alleged even if Pogo's release was effective, appellee had obtained a limitation title to an oil and gas leasehold estate pursuant to Texas Civil Practice & Remedies Code Annotated § 16.024 (Vernon 1986) (three year statute). Appellee's successful motion for summary judgment was also based upon these grounds.

Appellants contend the summary judgment should not have been granted on either ground. Initially, they contend that any mistake in the execution of the release was a unilateral one on Pogo's part and cannot support either cancellation or rescission. Alternatively, they say, if such a unilateral mistake is to be the basis of the relief sought, it must meet the requirements of a "remedial mistake." Those requirements do not exist, they continue, because (a) there exists a genuine issue of material fact whether the execution and filing of the release was in fact a mistake, (b) appellee offered no summary judgment proof that to enforce the release would be unconscionable, and (c) there exists a genuine issue of material fact whether Pogo exercised ordinary care in the execution and filing of the release.

With regard to the limitation contention, appellants contend that appellee did not prove the unbroken chain of title from the sovereign to appellee which is a requisite of the three year limitation statute. They also contend that the effect of the release was to make appellee and appellants co-tenants, and a fact question exists as to whether appellee repudiated appellants' title.

The rules governing the decision of appeals from summary judgments are well established. Under Rule 166a of the Texas Rules of Civil Procedure, ¹ the summary judgment movant must establish there is no genuine issue of fact and the movant is entitled to judgment as a matter of law. MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex.1986); City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex.1979). We are required to view summary judgment evidence in the light most favorable to the non-movant and resolve any doubt of the existence of a genuine issue of material fact against the movant. Nixon v. Mr. Property Management, 690 S.W.2d 546, 548-49 (Tex.1985); Montgomery v. Kennedy, 669 S.W.2d 309, 311 (Tex.1984). Since the trial court did not specify which of appellee's theories was relied upon for summary judgment, it will be affirmed on appeal if any of the theories advanced are meritorious. Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76, 79 (Tex.1989); Carr v. Brasher, 776 S.W.2d 567, 569 (Tex.1989).

Another case styled Pogo Producing Company v. Cecil Meadows et al., No. 32,319-A in the 47th District Court of Randall County, involved the same facts and legal issues in controversy in this case. Although appellee was not a party to that suit, the trial court allowed depositions taken in that case to be used in this one.

As summary judgment evidence and pertinent to its mistake ground, appellee attached excerpts from the deposition of Kenneth Good, an employee of Pogo, taken in the instant case. In that deposition, Good testified that, although he intended to sign the release at the time he did so, he would not have signed it had he known of the farm-out agreement to appellee and that well drilling operations were proceeding upon the tract in question. He recited the preliminary procedures that were standard in his company and said that, by the time a release was submitted to him, his signature was a mere formality as the release had been cleared by those below him responsible for its accuracy.

He also stated this was the only time such a mistake had been made by Pogo in the twelve years of his employment, and it was made because the information about the farm-out and the well drilling was not included. Had he known about this missing information, he would not have signed and "would also determine how the error occurred and have the situation corrected." He averred that there was absolutely nothing to be gained by Pogo by executing the release where a farm-out existed and drilling had commenced. He characterized the signing of the release as a "mistake. A clerical error. A fluke."

The summary judgment motion was also supported by the affidavit of John W. Chisholm, appellee's senior vice president in charge of administration of oil and gas leases, production, marketing and well operations. He averred that the well on the premises was spudded on April 5, 1985, and was completed on December 27, 1985, with an absolute open flow potential of 17,500,000 cubic feet of gas per day.

In opposition to appellee's motion, and relevant to the mistake contention, appellants advanced deposition testimony of Gina Gresham taken in the Randall County case. Ms. Gresham was also an employee of Pogo. In that testimony, she recounted in some detail the procedures followed by Pogo in the preparation of releases of oil and gas leases and the company's endeavors to ensure their accuracy. She said the farm-out agreement was not in Pogo's file on the premises at the time it was checked by Cathy Zella, the employee designated to do so, nor was it there at the time the release was executed.

Under Pogo's standard operating procedure at the time, had the information about the agreement been in the file, no release would have been prepared. She said the release "was an error, 'big time.' You don't prepare a release on a producing lease." After the execution of the release was discovered, she discussed the mistake with everyone in her department, "and built up better procedures." She also said, "We just don't prepare releases like we used to." In addition, she told Bruce May, another employee of Pogo, that he was partly responsible for the error, because "the obligation dates on these instruments (the farm-out agreements) were such that he should have taken immediate action to note the files with this information. And I'm sure I made him aware of that."

Appellants also presented excerpts from deposition testimony of Bruce May taken in the other suit. In that testimony, May said that Ms. Gresham had told him he was partially responsible for the execution of the release and that Cathy Zella was also responsible because she prepared the release. He said that "HBP" was the code placed in files held by production but it had not been placed in the file in question. That code should have been inserted in files where a lease had been farmed out and a well spudded. However, May did not feel responsible because he felt Pogo should not rely exclusively upon code symbols in the files but should consult with the district land office to determine lease activity.

In their response, appellants also referred to portions of deposition testimony of Good taken in the suit to which Pogo was a party. In those portions, Good said he was the only person who signed releases for Pogo. When a release was put on his desk, he did not make an independent investigation to determine if it should be executed since he had given that responsibility to the manager of land administration. When he received releases to be executed, they were accompanied by a memorandum that "basically explains to me that the lease has expired and that it's an order to execute the release." Whenever Good received such a memorandum, he assumed that whatever steps that needed to have been taken to verify the correctness of the release had been taken. At the time...