Samson Lone Star Ltd. P'ship v. Hooks

• Decision Date: 15 March 2016
• Docket Number: NO. 01–09–00328–CV,01–09–00328–CV
• Citation: 497 S.W.3d 1
• Parties: Samson Lone Star Limited Partnership, n/k/a Samson Lone Star, L.L.C., Appellant/Cross–Appellee v. Charles G. Hooks, III, Individually and as Independent Executor of the Estate of Charles G. Hooks, Jr., As Trustee of the Scott Ira McKeever Trust and the David Wayne McKeever Trust, and on Behalf of Chas. G. Hooks & Son, A General Partnership, McKeever Partnership, Ltd., and Charles G. Hooks III and Sue Ann Hooks, As Co–Trustees Under the Will of Charles G. Hooks, Sr., Appellees/Cross–Appellants
• Court: Texas Court of Appeals

497 S.W.3d 1

Samson Lone Star Limited Partnership, n/k/a Samson Lone Star, L.L.C., Appellant/Cross–Appellee

v.Charles G. Hooks, III, Individually and as Independent Executor of the Estate of Charles G. Hooks, Jr., As Trustee of the Scott Ira McKeever Trust and the David Wayne McKeever Trust, and on Behalf of Chas. G. Hooks & Son, A General Partnership, McKeever Partnership, Ltd., and Charles G. Hooks III and Sue Ann Hooks, As Co–Trustees Under the Will of Charles G. Hooks, Sr., Appellees/Cross–Appellants

NO. 01–09–00328–CV

Court of Appeals of Texas, Houston (1st Dist.).

Opinion issued March 15, 2016

Rehearing Overruled August 16, 2016

Supplement Opinion issued August 16, 2016

M.C. Carrington, Mehaffy Weber P.C., Beaumont, TX, Dick Watt, Watt Beckworth Thompson Henneman & Sullivan LLP, Houston, TX, Michael V. Powell, Cynthia Keely Timms, Locke Lord LLP, Dallas, TX, for Appellant.

Paul F. Simpson, McGinnis, Lochridge & Kilgor, L.L.P., David M. Gunn, Erin H. Huber, Beck Redden LLP, Houston, TX, Patton G. Lochridge, J. Derrick Price, McGinnis, Lochridge & Kilgor, L.L.P., Shannon H. Ratliff, Marla Broaddus, Ratliff Law Firm, PLLC, Austin, TX, for Appellees.

Panel consists of Justices Keyes, Massengale, and Lloyd.

OPINION

Evelyn V. Keyes

, Justice

Samson Lone Star Limited Partnership, n /k /a Samson Lone Star, L.L.C. (“Samson”), originally appealed the trial court's final judgment in favor of appellees, Charles G. Hooks, III, Individually and as Independent Executor of the Estate of Charles G. Hooks, Jr., as Trustee of the Scott Ira McKeever Trust and the David Wayne McKeever Trust, and on Behalf of Chas. G. Hooks & Son, a General Partnership, McKeever Partnership, Ltd., and Charles G. Hooks III and Sue Ann Hooks, as Co–Trustees Under the Will of Charles G. Hooks, Sr. (collectively, “Hooks”). The judgment arose from an oil and gas case Hooks filed against Samson with respect to three oil and gas leases, two in Hardin County, Texas and one in Jefferson County. Hooks asserted multiple causes of action against Samson, including breach of contract, fraud, fraudulent concealment, statutory fraud, and negligent misrepresentation. The trial court granted summary judgment in favor of Samson on Hooks' claim that Samson breached certain offset obligations under the leases, and it granted summary judgment in favor of Hooks on his claim that Samson breached the “most favored nations” clause in the leases and breached the leases related to the “unpooling” of Hooks' two leases in Hardin County. The issues of fraud and underpayment of royalties on “formation production” were tried to a jury, which found in Hooks' favor. The trial court's final judgment awarded Hooks more than $21 million in damages based on the summary judgment rulings and the jury's verdict.

On appeal, this Court reversed the judgment in favor of Hooks except for an agreed ad valorem tax payment. See Samson Lone Star, Ltd. P'ship v. Hooks, 389 S.W.3d 409, 439 (Tex.App.—Houston [1st Dist.] 2012)

, aff'd in part and rev'd in part, 457 S.W.3d 52 (Tex.2015). The Texas Supreme Court reversed our holding that the fraud claims and breach of offset obligations under the Hardin County Leases were barred by limitations and our holding that Samson had not breached the most-favored-nations clause. Hooks v. Samson Lone Star, Ltd. P'ship, 457 S.W.3d 52, 61, 63, 69 (Tex.2015). It affirmed in part and reversed in part our determination of the applicable post-judgment interest rate, and it affirmed our holdings on the formation-production and unpooling claims. Id. at 65–66, 70. It remanded the case to this Court for us to consider the factual sufficiency of the jury's fraud limitations findings, the legal and factual sufficiency of the jury's findings on Hooks' fraud claims, the damages for Hooks' claim that Samson breached the most-favored-nations clause, and the merits of Hooks' claim that Samson breached its offset obligations under his leases in Hardin County.

On remand, Samson argues that: (1) & (2) the evidence was legally and factually insufficient to support the jury's verdict on Hooks' common law and statutory fraud claims; (3) the evidence was legally and factually insufficient to support the damages awarded on Hooks' fraud claims, which requires a remand “for a reduction and recalculation of the fraud damages, including attendant prejudgment and post-judgment interest issues”; (4) the evidence was factually insufficient to support the jury's finding on limitations for the fraud claim; and (5) we must recalculate the damages owed to Hooks' based on his most-favored-nations claim, including the applicable rate of prejudgment interest.

In a single cross issue, Hooks challenges the trial court's denial of its motion for summary judgment on his claims that Samson breached certain offset obligations with respect to the Hardin County Leases.

We reverse the trial court's judgment and remand for a new trial, unless Hooks accepts the remittitur we suggest below, in which case we will modify the judgment and affirm as modified.

I. SAMSON'S APPEAL ON REMAND

Background

A. Hooks' Fraud Claim Relating to the Jefferson County Lease

In 1999, Hooks entered into an oil and gas lease with Samson covering 640 acres Hooks owns in Jefferson County (the “Jefferson County Lease”). Hooks also entered into two oil and gas leases with Samson covering tracts in Hardin County—a 95–acre tract and a 10–acre tract (the “Hardin County Leases”). All three leases, including the Jefferson County Lease, contained a section called “Offset Obligations,” in which Samson covenanted to operate the leased premises as a reasonably prudent operator would and to protect the leased premises from drainage. The offset obligation provision specifically provided that if a gas well were completed within 1,320 feet from the leased premises, then, within 90 days from the date of the sale of first production from that well, Samson must take one of three actions: (1) commence with due diligence operations for the actual drilling of an offset well; (2) pay Hooks “compensatory royalties”—in addition to any royalties currently due—in a sum equal to the royalties that would be payable under the Lease on the production from the adjacent or nearby producing well as if it had been producing on the leased premises; or (3) release the offset acreage. The Jefferson County Lease did not provide for pooling.

The Lease also contained a provision providing for a “late charge” for unpaid royalties:

All past due royalties (including any compensatory royalties payable under [the offset obligations provision] ) shall be subject to a Late Charge based on the amount due and calculated at the maximum rate allowed by law commencing on the day after the last day on which such monthly royalty payment could have been timely made and for each calendar month and/or fraction thereof from the date until paid, plus attorney's fees, court costs, and other costs in connection with the collection of the unpaid amounts. Any Late Charge that may become applicable shall be due and payable on the last day of each month when this provision becomes applicable.

Hooks' Leases contained a “most favored nations” clause providing that, under certain circumstances, the royalties payable to Hooks must be elevated to match the highest royalty payable to Samson's other lessors.

In March 2000, a third-party surveyor created a plat for a proposed gas well, the Black Stone Minerals No. 1 (“BSM 1 well”), on a tract adjacent to the Jefferson County Lease. This plat showed that the surface drillsite was outside the 1,320–foot buffer zone around Hooks' Jefferson County Lease that triggered Samson's offset obligations under the Lease. However, the well was a directional well that slanted away from the surface drillsite, and the plat showed that Samson planned for a bottom hole location 1,080 feet from Hooks' Jefferson County Lease. Samson filed the March 2000 plat with the Railroad Commission of Texas.

In April 2000, Samson began to drill the BSM 1 well. A directional survey, completed in July 2000 and also filed with the Railroad Commission, showed that the BSM 1 well bottomed 1,184 feet from Hooks' Jefferson County Lease, within the 1,320–foot buffer zone. Samson completed the BSM 1 well in August 2000, and the first gas sales occurred in late October 2000.

Samson then began the process of reconfiguring the BSM 1 pooling unit. A new plat, dated November 16, 2000, incorrectly placed the well's bottom hole at “±1400' scaled” from the border of Hooks' Jefferson County Lease. In December 2000, Samson filed a copy of this plat with the Railroad Commission as part of an application to pool. As the supreme court pointed out, the plat was signed by Samson's landman, Glenn Lanoue, who certified that it was “a true and correct plat based on the best of my knowledge.” See Hooks, 457 S.W.3d at 59–60

.

At trial, Lanoue testified regarding the creation of that plat. He did not give the surveyor the information from the directional survey showing the exact location of the BSM 1 well bottom hole. Rather, he sent the surveyor information indicating that the bottom hole of the BSM 1 well was “740 feet from the east line and 290 feet from the south line,” which resulted in the notation on the plat that the bottom hole was “±1400' scaled” from the Jefferson County Lease. He testified at trial that he created these notations himself. He further testified that he intended the numbers to be “[a]s accurate as a land guy is using a ruler on a scaled piece of paper that might not even be to scale.”

On February 15, 2001, Samson sent Hooks a letter offering to pool 50 acres covered by the Jefferson County Lease into the re-designated BSM 1 pooling unit. Attached to the letter was a copy of the plat of the reconfigured unit that Samson had filed with the Railroad Commission in December 2000.

On February 20, 2001, before accepting Samson's offer to pool—which would require amendment of Hooks' Jefferson County Lease to permit...