In re Stroud Oil Properties, Inc.

• Decision Date: 21 August 2002
• Docket Number: No. 10-02-134-CV.,10-02-134-CV.
• Citation: 110 S.W.3d 18
• Parties: IN RE STROUD OIL PROPERTIES, INC. and Stroud Investments 2001, Ltd.
• Court: Texas Court of Appeals

Page 18

110 S.W.3d 18

IN RE STROUD OIL PROPERTIES, INC. and Stroud Investments 2001, Ltd.

No. 10-02-134-CV.

Court of Appeals of Texas, Waco.

August 21, 2002.

COPYRIGHT MATERIAL OMITTED

F. Franklin Honea, Winstead, Sechrest & Minick, P.C., Dallas, Jay B. Goss, Bruchez, Goss, Thorton, Meronoff & Hawthorne, P.C., Bryan, for appellant/relator.

Walker C. Friedman, Christian D. Tucker, Friedman, Suder & Cooke, P.C., Ft. Worth, Wayne T. Rife, West, Webb, Allbritton, Gentry & Rife, College Station, for appellee/respondent.

Before Chief Justice DAVIS, Justice VANCE, and Justice GRAY.

OPINION

REX D. DAVIS, Chief Justice.

Stroud Oil Properties, Inc. and Stroud Investments 2001, Ltd. (collectively, "Stroud") filed suit against Predator Development Company, L.L.C. in a Brazos County district court alleging various claims under a joint development agreement. Respondent, the Honorable Rick Davis, Judge of the 272nd District Court of Brazos County, granted Predator's motion to transfer venue to Tarrant County. Stroud contends that venue is mandatory in Brazos County because its suit seeks to remove an encumbrance (the joint development agreement) from its title under an oil and gas lease and to quiet its title under the lease. Stroud asks this Court to issue a writ of mandamus under section 15.0642 of the Civil Practice and Remedies Code compelling Respondent to set aside the venue order. See TEX. CIV. PRAC. & REM. CODE ANN. § 15.0642 (Vernon Supp.2002).

BACKGROUND

The parties entered the joint development agreement at issue in October 2000. The agreement provided that Predator would identify prospects in the Austin Chalk formation in Brazos and surrounding counties and acquire leases for those prospects approved by Stroud. Predator agreed to "use its best reasonable efforts to generate Prospects." Stroud agreed in turn "to use its best reasonable efforts to drill horizontal wells on the Prospects in the most expeditious manner commensurate with Predator's generation of Prospects." The agreement defined the respective working interests of the parties in the prospects.

Paragraph 6(D) of the agreement provided the following remedies if either party failed to meet its obligations.

Remedies. If Predator fails to propose Prospects in accordance with the subparagraph A.ii. above or if Stroud fails to adhere to the drilling schedule set out in subparagraphs B.iii. or B.iv. above (or if Stroud is in arrears with respect to payment of the Prospect Fee for six proposed Prospects meeting the Criteria at one time) then such party (the "Defaulting Party") shall be in default hereunder. In such event, the other party (the "Non-Defaulting Party") may give the Defaulting Party written notice of the default and the Defaulting Party shall have 15 days following receipt of such notice within which to cure the default. If the Defaulting Party fails to cure the default within the 15-day period, the Non-Defaulting Party shall have the right to terminate this Agreement. In the event of such termination, (a) the Non-Defaulting Party shall be free to develop the Joint Development Area free from the provisions hereof, (b) the Defaulting Party and its affiliates shall be prohibited from conducting or participating in oil and gas operations within the Joint Development Area or acquiring leases within the Joint Development Area for a period equal to the term set forth in the following paragraph and (c) the Defaulting Party shall assign to the Non-Defaulting Party all of its interest in leases within any then undrilled Prospects.

The agreement provides for a four-year term "[u]nless earlier terminated."

Stroud filed its original petition in December 2001. The original petition concerns "the Wood Prospect" in Brazos County which Predator allegedly proposed for development under the agreement. Stroud agreed and paid the required prospect fee. Predator subsequently determined that it could not acquire leases for this prospect. Under the terms of the agreement, Predator then had an obligation to proffer a substitute. Stroud alleged that Predator breached the contract by failing to provide a substitute prospect. Stroud contended that venue was proper in Brazos County under the general venue statute. See TEX. CIV. PRAC. & REM.CODE ANN. § 15.002(a)(1) (Vernon Supp.2002) (providing for venue "in the county in which all or a substantial part of the events or omissions giving rise to the claim occurred").

Stroud filed its first amended petition two weeks later. In this pleading, Stroud alleged that the parties had agreed to sufficient prospects under their agreement.¹ Stroud contended that Predator breached the parties' agreement because it "retained interests in the assignments greater than [those to] which it was entitled." Stroud alleged causes of action for breach of contract, fraud, specific performance, and declaratory relief. Stroud averred that venue was mandatory in Brazos County under section 15.011 of the Civil Practice and Remedies Code because it sought "recovery of interests in real property, to remove encumbrances from the title of real property, for recovery of damages to real property, and to quite title to real property, and a part of such real property is located in Brazos County." Id. § 15.011 (Vernon Supp.2002).

Predator filed a motion to transfer venue in January 2002. Predator denied that venue was mandatory or proper in Brazos County. Regarding mandatory venue² under section 15.011, Predator contended that Stroud is:

not seeking to recover an interest or estate in real property located in Brazos County, to partition real property located in Brazos County, to remove encumbrances from the title of real property located in Brazos County, to recover damages to real property located in Brazos County, or to quite title to real property located in Brazos County. Instead, to the extent that any real property located in Brazos County is even involved in this lawsuit, such real property is involved only incidentally and not directly.

Predator also explained its contentions that proper venue lies in Tarrant County and that Brazos County is an inconvenient venue. Predator asked Respondent to transfer the suit to a district court in Tarrant County.

Stroud filed its second amended petition and a response to Predator's motion to transfer venue in February 2002. Stroud's second amended petition contains additional venue allegations. Stroud specifically alleges in this pleading that the joint development agreement:

constitutes an encumbrance upon Stroud's title to the oil and gas leasehold interests it owns in the Contract Area of the Joint Development Agreement situated in Brazos, Burleson, Lee and Fayette Counties, Texas, including that certain Partial Assignment of Oil, Gas and Mineral by and between Stroud Oil Properties, Inc[.] as assignee, and Menard Energy Corp., assignor, covering lands situated in Brazos County, Texas. That is, the Joint Development Agreement, on its face, especially paragraphs 4 and 6D and Article III and Article Viii on [sic] its Joint Operating Agreement (referred to therein), encumbers any interests in an oil and gas leases [sic] within the Contract Area which any party thereto may acquire. This litigation is brought in part to remove such encumbrances from Stroud's title to leasehold interest in the Contract Area, including Brazos County, and to quiet title to such interests.

Stroud added a "quiet title" cause of action in its second amended petition in which it requests that the trial court "remove the Joint Development Agreement as an encumbrance upon Stroud's title." Stroud included a similar request in its prayer for relief.

Stroud provided a copy of the partial assignment of an oil, gas and mineral lease (referenced in its second amended petition) as an attachment to an affidavit filed in support of its response to Predator's motion to transfer venue. The assignor Menard Energy Corporation executed the assignment on January 17, 2002. The assignment conveys to Stroud an interest in an oil, gas and mineral lease (hereinafter, the "mineral interests") covering 1,123.6 acres of land in Brazos County "from the surface of the earth to the base of the Austin Chalk Formation." Menard reserved a twenty percent working interest in the lease.

Predator filed a reply to Stroud's response in April 2002. Predator complained that Stroud did not own the interests identified in its second amended petition at the time Stroud filed suit. Predator alleged that the joint development agreement does not constitute an encumbrance on Stroud's mineral interests because: (1) Predator has not asserted any claim to the mineral interests under the agreement; (2) Predator filed a disclaimer of any interest in Stroud's mineral interests; and (3) Stroud's mineral interests do not constitute a "prospect" as defined by the agreement and thus the agreement does not apply to the lease.

Respondent signed an order granting Predator's motion to transfer venue on April 15, 2002. Respondent did not specify the basis for his ruling.

PERTINENT AUTHORITIES

"A plaintiff's choice of venue stands unless challenged by proper motion to transfer venue." In re Missouri Pac. R.R., 998 S.W.2d 212, 216 (Tex.1999) (orig.proceeding). To constitute a "proper motion to transfer venue," the motion must specifically deny the venue facts pleaded by the plaintiff. See TEX.R. CIV. P. 87(3)(a); GeoChem Tech. Corp. v. Verseckes, 962 S.W.2d 541, 543 (Tex.1998); Sanes v. Clark, 25 S.W.3d 800, 803 (Tex. App.-Waco 2000, pet. denied); Maranatha Temple, Inc. v. Enterprise Prods. Co., 833 S.W.2d 736, 740 (Tex.App.-Houston [1st Dist.] 1992, writ denied).

If the defendant specifically denies any of the venue facts pleaded by the plaintiff, the plaintiff must make prima facie proof of the venue fact(s) denied. See TEX.R. CIV. P. 87(2)(b), (3)(a); Missouri Pac. R.R., 998 S.W.2d at 216. If the defendant fails to specifically deny any of the pleaded venue facts, they are...