Swepi, L.P. v. Camden Resources, Inc.

• Decision Date: 14 April 2004
• Docket Number: No. 04-03-00067-CV.,04-03-00067-CV.
• Citation: 139 S.W.3d 332
• Parties: SWEPI, L.P. (d/b/a Shell Western E & P), KLT, Inc. and KLT Gas, Inc., Appellants, v. CAMDEN RESOURCES, INC., Appellee.
• Court: Texas Court of Appeals

139 S.W.3d 332

SWEPI, L.P. (d/b/a Shell Western E & P), KLT, Inc. and KLT Gas, Inc., Appellants, v. CAMDEN RESOURCES, INC., Appellee.

No. 04-03-00067-CV.

Court of Appeals of Texas, San Antonio.

April 14, 2004.

Rehearing Overruled June 1, 2004.

Appeal from the 229th Judicial District Court, Duval County, Alex W. Gabert, J James D. Thompson, III, Benjamin Elmore, Gwen Samora, Mark C. Rodriguez Vinson & Elkins, L.L.P., Houston, Sinead O'Carroll, Vinson & Elkins, L.L.P., Austin, Edmundo O. Ramirez, Ellis, Koeneke & Ramirez, L.L.P., McAllen, F. Franklin Honea, Law Office of F. Franklin Honea, Dallas, for appellants.

Bruce W. Claycombe, Peter D. King, Ronald D. Gray, Geary, Porter & Donovan, P.C., Addison, J. Woodfin Jones, Alexander Dubose Jones & Townsend LLP, Richard P. Marshall, Jr., Scott, Douglas & McConnico, L.L.P., Austin, David D. Towler, San Diego, David F. Johnson, Winstead Sechrest & Minick, P.C., Dallas, for appellee.

Sitting: ALMA L. LOPEZ, Chief Justice, SANDEE BRYAN MARION, Justice and PHYLIS J. SPEEDLIN, Justice.

OPINION

Opinion by PHYLIS J. SPEEDLIN, Justice.

SWEPI, L.P. d/b/a Shell Western E & P ("SWEPI"), and KLT, Inc. and KLT Gas, den Resources, Inc. ("Camden"). We reverse the judgment of the trial court and remand for further proceedings.

BACKGROUND AND PROCEDURAL HISTORY

This case arises out of a dispute regarding the placement and drilling of a well on property formerly leased by the Casas family to SWEPI for oil and gas production (the "Casas Tract"). Although SWEPI has gas wells on the adjacent property, it never drilled on the Casas Tract because it did not believe there was sufficient gas to justify the cost. After SWEPI's lease expired, the Casas family leased the property to Camden. In April 2001, Camden drilled a producing gas well, the Casas Well No. 1, close to the lease line of the adjacent property leased by SWEPI. The Casas family sued SWEPI (the "Casas suit") for failing to drill on the Casas Tract, claiming that SWEPI allowed its adjacent wells to drain the gas reserves from underneath the Casas Tract.

SWEPI asserted in defense that the Casas Well No. 1 is not drilled vertically, but deviates into the adjacent tract leased by SWEPI and is producing gas from that reservoir rather than from the reservoir beneath the Casas Tract. In July 2001, the Texas Railroad Commission ("RRC") initiated an investigation to determine whether the Casas Well No. 1 is vertically drilled in compliance with its statewide Rules 11 and 37 which regulate the drilling and spacing of oil and gas wells. SWEPI filed an independent complaint with the RRC requesting that the Casas Well No. 1 be shut in and a directional survey be ordered under Rule 11 to determine the well's bottom hole location. On October 1, 2001, SWEPI instituted this suit against Camden (the "Camden suit") alleging sub-surface trespass and conversion by the Casas Well No. 1. KLT, which has a 50% working interest in SWEPI's lease adjacent to the Casas Tract, also sued Camden for sub-surface trespass and conversion, in addition to illegal production, fraudulently obtaining a production allowable from the RRC, misappropriation of trade secrets and unfair competition. KLT's suit against Camden was ultimately transferred and consolidated with SWEPI's suit.¹

In support of its defense against the Casas's claims for drainage and in support of its own trespass and conversion claims against Camden, SWEPI filed a discovery motion in each suit requesting entry onto the Casas Tract to perform a directional survey and a bottom pressure test to determine precisely where the Casas Well No. 1's production originates.² Camden and the Casas family objected to SWEPI's request to conduct the tests, arguing that a partial directional survey had already been done and the cost of shutting in the well to conduct the additional tests was unnecessary and unduly burdensome. After a hearing on January 7, 2002, the trial court denied SWEPI's request for the tests in the Casas suit, and held the discovery request in abeyance in the Camden suit.

SWEPI sought mandamus relief from this Court in the Casas suit. While SWEPI's petition for mandamus was pending, the RRC issued an order on May 9, 2002. Based on the information submitted by Camden,³ the RRC found that the Casas Well No. 1 was drilled in compliance with statewide Rules 11 and 37. The RRC denied SWEPI's request for a directional survey under Rule 11, finding that SWEPI had failed to show "probable cause to suspect" the well was not bottomed within its lease boundaries. Based on the RRC's ruling, Camden moved for summary judgment on the trespass and conversion claims asserted by SWEPI and KLT, arguing their claims were now barred by collateral estoppel, res judicata and the rule of capture. After a hearing on Camden's summary judgment motion on October 24, 2002, the trial court granted summary judgment against SWEPI and KLT on all of their claims, excluding KLT's trade secret and unfair competition claims. The trial court signed the order granting summary judgment in the Camden suit on October 30, 2002.

On February 5, 2003, this Court issued its opinion in the mandamus proceeding in the Casas suit, holding that SWEPI was entitled to conduct a directional survey and bottom pressure test on the Casas Well No. 1. See In re SWEPI, L.P., 103 S.W.3d 578, 588 (Tex.App.-San Antonio 2003, orig. proceeding) (finding SWEPI's discovery request was timely, and the tests were relevant, based on good cause and not unduly burdensome). We acknowledged the RRC's order, but held that the RRC findings were not binding on the trial court and were not preclusive of the trespass and conversion claims. Id. On February 14, 2003, without ordering the requested directional survey, the trial court proceeded to enter a final judgment granting Camden's motion for summary judgment against SWEPI and KLT in the Camden suit.⁴ SWEPI filed a motion for new trial asserting that our opinion in SWEPI was dispositive of Camden's summary judgment motion and SWEPI's discovery request in the Camden suit.⁵ The trial court declined to hold a hearing, and the motion was overruled by operation of law. On appeal, SWEPI and KLT ask this Court to reverse the summary judgment and remand for trial on their trespass and conversion claims against Camden.⁶

SUMMARY JUDGMENT

We review the grant of a summary judgment de novo. Ingalls v. Standard Gypsum, L.L.C., 70 S.W.3d 252, 255 (Tex.App.-San Antonio 2001, pet. denied). We will affirm a summary judgment only if the record establishes there is no genuine issue of material fact, and the movant is entitled to judgment as a matter of law on a ground set forth in its motion. Tex.R. Civ. P. 166a(c); see Cathey v. Booth, 900 S.W.2d 339, 341 (Tex.1995); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985). Issues not expressly presented to the trial court by written motion, answer or other response may not be considered on appeal as grounds for reversal.⁷ Tex.R. Civ. P. 166a(c); see McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339 (Tex.1993). If the movant relies on an affirmative defense as the basis for summary judgment, he must conclusively prove each element of the affirmative defense as a matter of law. Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex.1972); Johnson & Johnson Med., Inc. v. Sanchez, 924 S.W.2d 925, 927 (Tex.1996).

The plaintiff may defeat a defendant's summary judgment motion by presenting evidence that raises a fact question on at least one element of each affirmative defense. Torres v. Western Casualty & Surety Co., 457 S.W.2d 50, 52 (Tex.1970). In determining whether there is a disputed issue of material fact precluding summary judgment, we must accept as true all evidence in favor of the non-movant and indulge all reasonable inferences in the non-movant's favor. Nixon, 690 S.W.2d at 549; see also American Tobacco Co., Inc. v. Grinnell, 951 S.W.2d 420, 425 (Tex.1997). If the order is general and does not specify the grounds on which the trial court granted summary judgment, on appeal the non-movant must negate any grounds on which the court could have granted the summary judgment. Basse Truck Line, Inc. v. First State Bank, 949 S.W.2d 17, 19 (Tex.App.-San Antonio 1997, writ denied).

ANALYSIS

As the grounds for its summary judgment motion, Camden asserted the affirmative defenses of collateral estoppel and res judicata⁸ premised on the RRC's finding that the Casas Well No. 1 was drilled in compliance with its statewide Rules 11 and 37.⁹ Camden maintained that because the RRC has primary jurisdiction over whether a well complies with its rules, the RRC's order operated as a final adjudication of the factual issues underlying the trespass and conversion claims brought by SWEPI and KLT; thus, any attempt to re-litigate those issues and claims was barred by collateral estoppel. Camden asserted that the trespass and conversion claims must fail as a matter of law because the RRC found "no probable cause to suspect" the well was not bottomed on the Casas lease, and that the well was drilled in compliance with the RRC's spacing and vertical drilling rules; therefore, the only way for SWEPI and KLT to prevail on their trespass and conversion claims was by proving facts opposite to those already found by the RRC. In addition, Camden asserted that under the rule of capture it was entitled to all production from the legally drilled well regardless of the source of the oil and gas.

1. Collateral Estoppel

The doctrine of collateral estoppel, or issue preclusion, is designed to promote judicial efficiency, protect parties from multiple lawsuits and prevent inconsistent judgments by precluding relitigation of issues. Sysco Food Services, Inc. v. Trapnell, 890 S.W.2d 796, 801 (Tex.1994). As an affirmative defense, collateral estoppel must be pled by the party asserting it. Tex.R. Civ. P. 94. A party asserting collateral estoppel must establish that the facts to be litigated in...