Prosperity Energy Corp. v. Terfam Family, Ltd.

Decision Date29 June 2015
Docket NumberNUMBER 13-15-00184-CV,NUMBER 13-15-00234-CV
CourtTexas Court of Appeals

On appeal from the 93rd District Court of Hidalgo County, Texas.

On Petition for Writ of Mandamus.


Before Chief Justice Valdez and Justices Rodriguez and Longoria

Memorandum Opinion by Justice Longoria1

By petition for writ of mandamus and appeal, Prosperity Energy Corporation ("Prosperity") challenges an order denying its motion to transfer venue from Hidalgo County to Denton County based on the mandatory venue provision concerning real property and the statute allowing interlocutory appeals for venue determinations in any case involving multiple plaintiffs.2 See TEX. CIV. PRAC. & REM. CODE ANN. § 15.011(West, Westlaw through Ch. 46 2015 R.S.); id. § 15.003(b) (West, Westlaw through Ch. 46 2015 R.S.). We conditionally grant Prosperity's petition for writ of mandamus in cause number 13-15-00234-CV and dismiss Prosperity's appeal in cause number 13-15-00184-CV.


Terfam Family, Ltd. ("Terfam") and Lambert Quartey brought suit against Prosperity in Hidalgo County on grounds that Prosperity had failed to pay them amounts due under Lease Fund Agreements ("Agreements") and Addendums that they had executed with Prosperity. According to their original petition, the Agreements and Addendums required Terfam and Quartey to each pay $157,500 to Prosperity and Prosperity was to have repaid them those sums before May 1, 2013, but Prosperity "ha[d] not made payment on the outstanding debts due to [them] pursuant to the terms" of the Agreements. Terfam and Quartey alleged that venue was proper in Hidalgo County, Texas because "a substantial part of the event or omissions" that formed the basis of the suit occurred there. See id. § 15.002(a) (West, Westlaw through Ch. 46 2015 R.S.). Terfam and Quartey sought damages of "over $500,000 but not more than $1,000,000." They also sought attorney's fees, costs of suit, interest as provided by the Agreements and Addendums, and "[s]uch other and further relief to which [they] may be justly entitled."

The Agreements, which are separate as to Terfam and Quartey but substantially identical, state that the "parties are desirous of acquiring oil and gas leases in Denton County, Texas." The Agreements provide that Terfam and Quartey would each pay Prosperity $157,500, which Prosperity would use to purchase 334 acres in the WhitesCreek and Bolivar leases in Denton County. Prosperity would then "attempt" to sell the leases acquired on the property on such terms as "deem[ed] appropriate," provided that the sales price for the leases would be sufficient to reimburse Terfam and Quartey for the amounts due under the Agreements, $157,500, plus 10% interest, for a total amount of $173,250.

In addition to reimbursing Terfam and Quartey, Prosperity agreed to give them "in the form of an oil and gas assignment a one percent (1%) working interest, based on a (75%) net revenue lease." The Agreements state that the 1% working interest "is considered remuneration for funding the Lease Fund Agreement" and specify that after drilling certain wells, the one percent working interest would be subject to lease operating expenses under a standard joint operating agreement. Prosperity would determine the operator of the wells, and Terfam and Quartey would have the right of first refusal to acquire an additional 1% working interest in the remaining wells to be drilled on the property. The Agreements provide that when Terfam and Quartey fund the agreement, the ensuing assignment of the leases would bear their names as "partial" owners. The Agreements also contemplate the execution of assignments with regard to the property and state that Terfam and Quartey would execute and deliver assignments regarding the 334 acres when Prosperity paid Terfam and Quartey $173,250 each. The unexecuted form assignments, which were attached to the Agreements as exhibits, state that Terfam and Quartey assigned or sold Prosperity an undivided 100% leasehold or working interest in the "lands, and oil and gas leases described herein" and that Prosperity sold Terfam and Quartey an "undivided 50% leasehold or working interest in the lands, and oil andgas leases." The Agreements specifically provided that the relationship between the parties would be "solely that of tenants-in-common." The term of the Agreements was "for one year or at the end of the Prosperity offering to investors whichever comes first."

The parties thereafter executed Addendums to the Agreements for the purpose of clarifying and adding to the terms of the Agreements. The Addendums are also separate but substantially identical. Prosperity agreed to reimburse Terfam and Quartey $157,500 plus ten percent per year from January 1, 2011 until paid, but not later than May 1, 2013. In addition to the 1% working interest in the four productive wells that had been drilled in Denton County, Prosperity agreed to assign Terfam and Quartey an additional 1.5% working interest in those wells. Prosperity agreed to begin immediate reimbursement of the $157,500 upon execution of the Addendums. The Addendums delineated further specific payment arrangements and amounts and specified that if Prosperity had not paid the balance of the principal and interest on or before May 1, 2013, the "default" date, then the interest charged would increase to 15% on the unpaid balance of principal and Prosperity would assign an additional 0.50% working interest to Terfam and Quartey on the first well drilled on the Whites Creek lease.

Prosperity filed a motion to transfer the lawsuit to Denton County on grounds that the Agreements granted Terfam and Quartey interests in oil and gas working interests and net revenue lease interests for real property located in Denton County, thus making the entire action subject to the mandatory venue provision pertaining to land. See id. § 15.011. Prosperity further argued that its principal office was located in Dallas County, Texas, and that all relevant events pertaining to the suit had occurred there. See id. §15.002(a)(3). Prosperity supported its motion to transfer venue to Denton County with an affidavit from Rick Parmer, the CEO of Prosperity, who stated in relevant part that:

The purpose of the lease fund agreement was to acquire oil and gas leases in Denton County, Texas. In return, Plaintiffs were to be paid monies and be granted interests in the oil and gas leases to be acquired. I did not in my individual or representative capacity travel to or meet any representative of Plaintiffs in Hidalgo County, Texas. The negotiations with Plaintiffs were conducted in Dallas County, Texas. All other communications were done by phone or by email. No Prosperity representative including myself were ever in Hidalgo County, Texas when we communicated with any representative of Plaintiffs. Prosperity's principal office is in Dallas County, Texas.

By response to the motion to transfer venue, Terfam and Quartey alleged that they did not seek to recover real property, but instead sought "only money damages under breach of contract." They further argued that the relevant events pertaining to the lawsuit occurred in Hidalgo County and supported their response to the motion to transfer with affidavits from Quartey and Onuwa Terry, the president of OMEE, LLC, a Texas Limited Liability Company which is the general partner of Terfam. By affidavit, Terry testified that Prosperity's representatives solicited him to invest in their company through a phone call to him when he was in McAllen, Texas, and that all negotiations with Prosperity occurred in Hidalgo County. Terry stated that the Addendum was entered "with the understanding" that Prosperity would make payments required by the Addendum to Terfam in McAllen, that "the agreement for payment was that payment was to be made to Terfam in McAllen, Texas," and Prosperity made three payments to Terfam by wire-transfer to Terfam's McAllen bank account.

Quartey provided similar testimony. Quartey asserted that Prosperity's representatives solicited him to invest in the company by a telephone call placed to himin McAllen, Texas, and that he never negotiated with Prosperity's representatives anywhere but Hidalgo County. Quartey asserted that he signed the Agreement and the Addendum in McAllen, Texas. Quartey stated that the Addendum was entered "with the understanding" that Prosperity would make payments required by the Addendum to Quartey in McAllen, that "the agreement for payment was that payment was to be made to me in McAllen, Texas," and Prosperity made three payments to Quartey by wire-transfer to Quartey's McAllen bank account.

Prosperity's motion to transfer venue was set for hearing on June 25, 2014, but was reset because the court reporter was absent. The motion to transfer was again set for July 30, 2014, but the parties passed that hearing by agreement. The hearing was reset for October 13, 2014. That day, counsel for Terfam and Quartey appeared for the hearing, but counsel for Prosperity did not. On October 15, 2014, the trial court denied Prosperity's motion to transfer venue. Thereafter, Prosperity alleged that it had not received notice of the October 13, 2014 hearing or the trial court's order denying transfer. The trial court concluded that Prosperity failed to receive notice and set aside and vacated its order denying Prosperity's motion to transfer venue.

On November 18, 2014, Prosperity filed a first amended motion to transfer venue. The amended motion reasserts the arguments made previously but also avers that Terfam and Quartey had filed "affidavits of equitable title" to the working interests under the agreements at issue in Denton County. The affidavits, which are separate but substantially identical, provide, in relevant part:

4. In

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