Hibernia Energy III, LLC v. Ferae Naturae, LLC
| Decision Date | 20 December 2022 |
| Docket Number | 08-21-00092-CV |
| Parties | HIBERNIA ENERGY III, LLC, Appellant, v. FERAE NATURAE, LLC, Appellee. |
| Court | Texas Court of Appeals |
Appeal from the 112th Judicial District Court of Reagan County Texas (TC# CV02322)
Before Rodriguez, C.J., Palafox, and Alley, JJ.
The genesis of this case is a 1997 judgment obtained by original judgment creditors against two individuals (the original judgment debtors). The original judgment creditors filed an abstract of the judgment in various Texas counties, including Reagan County, where the original judgment debtors had an interest in a mineral lease, thereby creating a judgment lien on that lease. Through a series of transactions, Appellant Hibernia Energy III, LLC (Hibernia) and its co-defendant at trial, TRP Midland, LLC (TRP) had acquired the original judgment debtors' interests in that lease. In turn Appellee Ferae Naturae, LLC (Ferae) was assigned the judgment lien that encumbered the lease. Ferae then filed suit against Hibernia and TRP to foreclose on the lien. The trial court granted Ferae's motion for summary judgment, entered a final judgment foreclosing the lien, and issued an order of sale, directing the sale of both Hibernia and TRP's interests in the lease. Both Hibernia and TRP appealed, but TRP has since resolved its dispute with Ferae and is no longer a party to the appeal.
In its appeal, Hibernia contends that the trial court erred in granting summary judgment. In addition, Hibernia contends that the trial court's order of sale incorrectly described the mineral interests subject to the lien, and mistakenly included a working interest in the lease that was not subject to the lien. Although we disagree with the bulk of Hibernia's arguments, and affirm the trial court's final judgment foreclosing the judgment lien, we remand this matter to the trial court to modify the order of sale: (1) to address how the order must be modified given TRP's settlement with Ferae; (2) to ensure that the relief set forth in the order corresponds with the relief that Ferae requested in its pleadings; and (3) to ensure that the individual judgment debtors are given the proper credits for the proceeds from the sale of the lease that corresponds with their respective interests.[1]
Following a jury trial in 1997, a group of plaintiffs, including Patricia Love Stephens (Patricia) and other affiliated individuals (collectively, the Stephens Entities), obtained a money judgment against two brothers, Frank W. Cass (Frank), and Michael L. Cass (Michael) for breach of contract, conversion, and fraud. The trial court's 1997 final judgment awarded substantial actual and punitive damages against both Frank and Michael.
On appeal, we at first upheld the jury's verdict and its award of damages, rejecting all the Casses' claims of error; the Texas Supreme Court denied a petition for review. Cass v. Stephens, No. 08-97-00582-CV, 2001 WL 28092, at *35 (Tex.App.--El Paso Jan. 11, 2001, pet. denied), cert. granted, judgment vacated, 538 U.S. 1054 (2003). As the writ history reflects, the United States Supreme Court granted certiorari on the limited question of whether the punitive damages awards were excessive, and the Court directed us to reconsider that question considering State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408 (2003) (). On remand, and after considering the factors set forth in Campbell, we reformed the punitive damages awards, finding that $300,000 was a reasonable punitive damages award against Frank individually, and that $300,000 was also a reasonable punitive damages award against Frank and Michael, jointly and severally. See Cass v. Stephens, 156 S.W.3d 38, 77 (Tex.App.--El Paso 2004, pet. denied). We affirmed the trial court's judgment in all other respects. Id. at 79. After both the Texas Supreme Court and the United States Supreme Court denied review of our decision, this Court issued its mandate.
In the interim, while the matter was pending on appeal, a Dallas County district court judge issued a turnover order directing the sheriff to execute on all oil and gas and mineral interests held by Frank in Dallas County to allow the Stephens Entities to begin collecting on their judgment The sheriff executed on properties held by Frank in August 1999, and Frank was given a $25,000 credit on the judgment.
In July 2008 (after we issued our mandate affirming the trial court's final judgment as reformed) the Stephens Entities filed an abstract of judgment in several counties in Texas where the Casses owned property. See TEX.PROP.CODE ANN. § 52.001 (). The abstract stated that together with court costs and prejudgment interest, as of July 1, 2008, Frank owed $13,178,325.88, and Michael owed $1,911,741.24 on the judgment. In addition, it reflected that Frank was entitled to a $25,000 credit based on the amount collected with the prior turnover order.
In September 2016, the Stephens Entities assigned all their rights and interests in the underlying judgment and judgment liens to Patco Energy, Ltd. (Patco), of which Patricia Stephens was the general partner. Patco thereafter made two assignments significant to this appeal. First, in 2016 Patco assigned its interests in certain oil and gas leases in Upton County to Crown Rock, L.P. (Crown Rock) and Parsley DE Lonestar, LLC (Parsley). This transaction reflected that Patco had judgment liens in Upton County-based on the underlying judgment against the Casses-and Patco agreed to make a partial assignment to Crown Rock of any interest it had in the judgment liens. In exchange, Crown Rock and Parsley agreed to pay Patco $20,200,000. Thereafter, in June 2017, Crown Rock and Parsley assigned a portion of their interest in the judgment liens to Pioneer Natural Resources USA, Inc. (Pioneer) for an undisclosed sum of money.
Second, in August 2019, Patco made a partial assignment of its interest in the underlying judgment to Appellee Ferae Natura, LLC (Ferae). That assignment was limited to any interests in oil, gas and other minerals owned by the Casses, or their heirs or assignees, in Reagan County. This assignment was duly filed in the Reagan County public records.
To keep the 2008 original abstract of judgment alive as required by the Property Code, Patco filed a First Subsequent Abstract of Judgment in July 2018.[2] This abstract reflected the same $25,000 credit to Frank, and stated that, as of June 1, 2018, with post judgment interest, Frank owed $34,896,266.54 and Michael owed $4,946,733.43 on the judgment.
When the original abstract of judgment was first filed in Reagan County in 2008, the Casses owned a working interest in a mineral lease in that county, known as the Branch Lease-the subject of this appeal. In September 2018, by separate assignments, Michael and Frank transferred their interests in the Branch Lease, "below the base of the Dean Formation," to TRP Midland, LLC (TRP). Then in April 2019, TRP made a partial assignment to Hibernia of its interest in the Branch Lease, limited to a specified 80 acres of the lease.
In January 2020, Ferae filed its original petition seeking to foreclose its judgment lien on the Branch Lease, naming among others, Hibernia and TRP (collectively, the Defendants). The suit requested an order of sale corresponding to the interest in the lease that previously belonged to the Casses. In its petition, Ferae alleged that the Defendants had purchased their respective interests in the lease with notice of the existing judgment lien, based on the abstract of judgment on file in Reagan County.
After answering Ferae's lawsuit, the Defendants sought to bring the other "judgment creditors" into the case, including Patco, Crown Rock, Parsley, and Pioneer, all of whom the Defendants asserted were "necessary" parties to the lawsuit. Defendants theorized that any credit the Casses might receive from the sale of the Branch Lease would effectively cut into the other judgment creditors' ability to collect on their interest in the judgment. To that end, the Defendants filed a third-party petition naming the Stephens Entities and Patco, seeking among other things, an accounting of any payments they received on the underlying judgment, and a declaration that the underlying judgment was satisfied.
In May 2020, Ferae moved for summary judgment, seeking a judicial foreclosure on its lien and an order of sale of the interest in the Branch Lease that the Defendants had received from the Casses. In its motion, Ferae contended that the undisputed evidence established that it acquired the right to foreclose on the lien from Patco and that: (1) the Casses owned an 82% working interest in the Branch Lease when the original and later abstracts of judgment were filed in Reagan County; (2) the filing of the abstracts of judgment created a judicial lien on all property then-owned by the Casses in Reagan County; and (3) the Casses transferred their interests in the Branch Lease to the Defendants subject to that lien. Ferae attached...
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