In Re Cornerstone E & P Company
| Citation | 435 B.R. 390 |
| Decision Date | 09 August 2010 |
| Docket Number | Bankruptcy No. 09-35228-BJH-11.,Adversary Nos. 09-3447-bjh, 09-3448, 09-3450, 09-3452, 09-3457. |
| Parties | In re CORNERSTONE E & P COMPANY, L.P., et. al., Debtors. Baker Hughes Oilfield Operations, Inc., et. al., Plaintiffs v. Union Bank of California, N.A. n/k/a Union Bank, N.A., et. al., Defendants. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas |
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Kenneth P. Green, Phil F. Snow, Jr., Snow Fogel Spence LLP, Annie E. Catmull, Melissa A. Haselden, Hoover Slovacek LLP, Carl Dore, Jr., Kristin S. Wallis, Dore & Associates, P.C., Houston, TX, Andrew D. Schwartz, Michael D. Gray, Ramsey and Gray, P.C., Eric Huddleston, Elias, Books, Brown & Nelson, P.C., Oklahoma City, OK, for Plaintiffs.
Brian Christopher Mitchell, Michael L. Dinnin, Samuel Martin Stricklin, William Jarrell Moore, Bracewell & Giuliani, LLP, John C. Middleton, Scott W. Everett, Haynes and Boone, LLP, Dallas, TX, for Defendants.
Before the Court are: (i) defendant Union Bank of California, N.A. n/k/a Union Bank, N.A.'s (“Union Bank's”) Motion for Summary Judgment and Brief in Support (the “Union Bank Motion”); (ii) plaintiffs Baker Hughes Oilfield Operations, Inc. (“Baker Hughes”), Schlumberger Technology Corporation, Simons Petroleum, Inc., Texas CES, Inc. (“Texas CES”), T.K. Stanley, Inc. (“Stanley”), Pumpco Energy Services, Inc., I.E. Miller Services, Inc. (“Miller”), Bridgeport Tank Trucks, LLC, and Select Energy Services, LLC d/b/a Tejas Oilfield Services's (collectively, the “Baker Hughes Plaintiffs”) Motion for Partial Summary Judgment and Brief in Support (the “Baker Hughes Motion”); (iii) plaintiffs Awesome Transport, LLC, Phantom Drilling Fluids Company, BJ Services Co., USA, Weatherford U.S., L.P., and Precision Energy Services's (collectively, the “Oklahoma Plaintiffs”) Motion for Partial Summary Judgment and Brief in Support (the “Oklahoma Properties Motion”); and (iv) plaintiffs Weatherford U.S., L.P. and Precision Energy Services's (the “Weatherford Plaintiffs”) 1 Motion for Partial Summary Judgment and Brief in Support (the “Texas Properties Motion”) (collectively, the “Motions”). The Court heard the Motions on July 23, 2010 (the “Hearing”).
The Court has jurisdiction over the parties and the issues raised in the Motions in accordance with 28 U.S.C. §§ 1334 and 157, either because the issues are core issues or because the parties have consented to the Court's entry of a final judgment. This Memorandum Opinion and Order contains the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.
Cornerstone E & P Company, L.P. (“the Debtor”), is a Texas limited partnership. On August 6, 2009, the Debtor and its general partner, Cornerstone Southwest GP, LLC (together with the Debtor, “Cornerstone”), a Texas limited liability company, each filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code. On August 7, 2009, the Court consolidated the two cases for procedural purposes only, with joint administration under case number 09-35228-bjh. Cornerstone is a private, independent oil and gas exploration and production company with interests in Texas and Oklahoma. All of Cornerstone's oil and gas assets are owned and operated through the Debtor. 2
In December 2006, the Debtor entered into a credit agreement (the “Credit Agreement”) with Union Bank to finance the Debtor's operations. Cornerstone Southwest GP, LLC guaranteed the Debtor's obligations under the Credit Agreement. In connection with the Credit Agreement, the Debtor executed in favor of Union Bank a Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Production (the “Texas Deed of Trust”), which Union Bank filed in the property records of Hill County, Texas on January 4, 2007. The Debtor and Union Bank also entered into the First Supplement to the Texas Deed of Trust (the “Texas Supplement”) (collectively, the Texas Deed of Trust and the Texas Supplement will be referred to as the “Texas Mortgage Documents”), which Union Bank filed in the property records of Hill County, Texas on October 10, 2008.
On October 10, 2008, the Debtor also executed in favor of Union Bank a Mortgage, Line of Credit Mortgage, Security Agreement, Financing Statement, Fixture Filing and Assignment of Production (“the Oklahoma Mortgage”), which Union Bank filed in the property records of Hughes County, Oklahoma on October 14, 2008. 3
Each of the Mortgage Documents purports to grant Union Bank a security interest and lien on the Debtor's real and personal property, fixtures, and production from or attributable to the Debtor's oil and gas interests. The Mortgage Documents all contain exhibits (“Exhibit A” to the Texas Deed of Trust, the Texas Supplement, and the Oklahoma Mortgage, respectively) that list certain oil and gas leases as subject to the mortgage liens created by each of those documents. In addition, the Mortgage Documents contain language that purports to broaden the scope of the liens granted to Union Bank to property interests beyond those listed on the individual exhibits, as well as language that purports to grant Union Bank a lien on after-acquired assets and property interests. By virtue of advances made under the Credit Agreement, Union Bank asserts a secured claim against Cornerstone of $30,116,591.00, plus interest, fees, and other costs.
The Plaintiffs are mineral contractors who have filed statutory mechanics'/ materialmens' liens (“M/M Liens”) under Texas and Oklahoma law for unpaid pre-petition labor or materials provided to the Debtor in connection with the Debtor's oil and gas operations in Texas and Oklahoma (the “Subject Units” 4 ). The issues raised by the Motions concern the Debtor's leasehold interests and rights associated with nine wells in Hill County, Texas, one well in Maverick County, Texas, and fourteen wells in Hughes County, Oklahoma and the relative lien rights of Union Bank and the Plaintiffs.
Because of the number of parties involved and pleadings filed in this proceeding, a brief listing of the motions now before the Court may be helpful.
Union Bank filed the Union Bank Motion, to which the Baker Hughes Plaintiffs and the Weatherford Plaintiffs each filed responses (the “Baker Hughes Response to Union Bank Motion” and “Weatherford Plaintiffs Response to Union Bank Motion,” respectively). Plaintiffs Awesome Transport, LLC, and Phantom Drilling Fluids Company filed a separate response (the “Awesome/Phantom Response”), as did BJ Services Co., USA and Newpark Drilling Fluids, LLC (the “BJ Services Response”). Union Bank filed a consolidated reply (the “Union Bank Reply”). After the Hearing, the Weatherford Plaintiffs filed a sur-reply by leave of court on the issue of whether pooling of unrecorded leases with recorded leases constituted constructive notice under Texas or Oklahoma law (the “Weatherford Plaintiffs Sur-reply”).
The Baker Hughes Plaintiffs filed the Baker Hughes Motion seeking partial summary judgment on various issues. Cornerstone and Union Bank each filed a response (the “Cornerstone Response to the Baker Hughes Motion” and the “Union Bank Response to the Baker Hughes Motion,” respectively), to which the Baker Hughes Plaintiffs filed a combined reply (the “Baker Hughes Reply”).
The Oklahoma Plaintiffs filed the Oklahoma Properties Motion seeking partial summary judgment regarding the Oklahoma Properties. Union Bank filed a response in opposition (the “Union Bank Response to the Oklahoma Properties Motion”), and the Oklahoma Plaintiffs filed a reply (the “Oklahoma Properties Reply”). After the Hearing, Union Bank filed a sur-reply by leave of court on the issue of whether the Court is bound by the holding in Ladder Energy Co. v. Intrust Bank, N.A., 931 P.2d 83 (Okla.Ct.App.1996) (the “Ladder Sur-reply”), to which the Weatherford Plaintiffs filed a sur-sur-reply (the “Ladder Sur-sur-reply”). 5
The Weatherford Plaintiffs also filed the Texas Properties Motion seeking partial summary judgment regarding the Texas Properties. Union Bank filed a response in opposition (the “Union Bank Response to the Texas Properties Motion”).
In connection with the Motions, the parties also filed a Joint Statement Regarding (i) Contested Issues of Law; (ii) Stipulated Facts; and (iii) Contested Facts (the “Joint Statement”) and an agreed supplemental appendix (the “Supplemental Appendix”).
As part of the Joint Statement, the parties identified contested issues of law associated with each of the Motions. This Memorandum Opinion grants in part and denies in part various contested issues of law related to each of the Motions. As set forth below, any contested issue of law identified on the Joint Statement not addressed herein remains open for trial, which is scheduled to commence on August 9, 2010.
Summary judgment is appropriate when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). A genuine issue of fact exists “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Pylant v. Hartford Life & Acc. Ins. Co., 497 F.3d 536, 538 (5th Cir.2007) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). “A fact issue is material if its resolution could affect the outcome of the action.” Thompson v. Goetzmann, 337 F.3d 489, 502 (5th Cir.2003).
After the movant has presented a properly supported motion for summary judgment, the burden then shifts to the...
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...150 S.W.3d at 560 (construction that deletes express provisions from statute does violence to its terms). In re Cornerstone E & P Co., L.P. , 435 B.R. 390, 416 (Bankr. N.D. Tex. 2010). Thus, the Court must begin with the plain language of the statute and may only apply liberal construction ......
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