Taub v. Houston Pipeline Co.

• Court: Texas Court of Appeals
• Writing for the Court: Ross
• Citation: Taub v. Houston Pipeline Co., 75 S.W.3d 606 (Tex. App. 2002)
• Decision Date: 10 April 2002
• Docket Number: No. 06-01-00073-CV.,06-01-00073-CV.
• Petition History: pet. denied
• Parties: Henry J.N. TAUB, H. Ben Taub, Henry J.N. Taub, II, Kitchco Realty, Ltd., Marcy Taub, and Metco Petro, Ltd., Appellants, v. HOUSTON PIPELINE COMPANY and HPL Resources Company, Appellees.

75 S.W.3d 606

Henry J.N. TAUB, H. Ben Taub, Henry J.N. Taub, II, Kitchco Realty, Ltd., Marcy Taub, and Metco Petro, Ltd., Appellants, v. HOUSTON PIPELINE COMPANY and HPL Resources Company, Appellees.

No. 06-01-00073-CV.

Court of Appeals of Texas, Texarkana.

Submitted February 27, 2002.

Decided April 10, 2002.

Rehearing Overruled June 11, 2002.

Richard D. Watt, R. Kyle Hawes, Kerry C. Williams, Chamberlain, Hrdlicka, White, Michael A. Lam, A. Randall Friday, Crady, Jewett & McCulley, LLP, Houston, for appellants.

Carrin F. Patman, Matthew F. Carroll, Bracewell & Patterson, LLP, Houston, for appellees.

Before CORNELIUS, C.J., GRANT and ROSS, JJ.

OPINION

Opinion by Justice ROSS.

Henry J.N. Taub, H. Ben Taub, Henry J.N. Taub, II, Kitchco Realty, Ltd., Marcy Taub, and Metco Petro, Ltd. (collectively, the Taubs) appeal from a summary judgment granted in favor of Houston Pipeline Company and HPL Resources Company (collectively, HPL). Enron Oil & Gas Company was an additional defendant, but the Taubs settled with Enron before this appeal.

Background

This case concerns a 254-acre tract of land in northern Harris County overlaying the Bammel Field, a natural gas field discovered in the 1930s. The Taubs owned the surface rights. By the 1960s, Houston Natural Gas Production Company owned the Bammel Field. The Bammel Cockfield sand, an oil and gas reservoir approximately 6,200 feet below the surface, had been substantially depleted. Houston Natural Gas desired to turn this depleted reservoir into a natural gas storage facility, and to accomplish this, needed to unitize the oil and gas leases, and required additional rights to use the surface in ways that exceeded its rights under the oil and gas leases.

Houston Natural Gas, along with the lessors of oil and gas leases, and the Taubs entered into two agreements. The first was the Unit Agreement, which unitized the oil and gas leases, permitting Houston Natural Gas to utilize the Bammel-Cockfield sand for gas storage. The second was the Collateral Agreement, out of which this dispute arose.

Under the Collateral Agreement, finalized September 15, 1966, Houston Natural Gas relinquished all surface rights under the oil and gas leases, except the right to use designated two-acre well sites located immediately around the actual drilling locations and related surface easements, so long as these sites were used for certain specified operations.

The Taubs contend that, as a result of the Collateral Agreement, the operators had:

determinable fee estates permitting use of the 2-acre wellsites and related easements, and each estate automatically terminated when a site was no longer used for storage or other operations. By entering into the Collateral Agreement, and in exchange for agreeing to the Unit Agreement and creation of a gas storage facility beneath their surface, the surface owners [Taubs] immediately recovered most of their surface rights and limited the Operator's remaining interest to determinable fee estates in specific 2-acre wellsites and related easements.

The Collateral Agreement provided that, after September 1, 1972, any well site on the property not used by the operator for "drilling, reworking, storage, injection, repressuring, or production, during any period of 365 consecutive calendar days with respect to a Unit Well used for Unit Operations ... Operator's right to use said Wellsite shall automatically terminate...." The Collateral Agreement further provided that, if there was not an oil, gas, disposal, or injection well on one or more well sites on September 1, 1973, the operator's right to use such well sites "shall automatically terminate." Further, within ninety days after termination, the operator was to plug and cement any well, remove all equipment and facilities, level and clean the surface, and file an instrument acknowledging termination. Henry Taub, designated in the agreement as the "Landowners' representative," was to be sent a copy of each such filed instrument within fifteen days after the document was returned to the operator by the county clerk.

In 1971, Houston Natural Gas filed a "Partial Release of Surface Under Oil, Gas and Mineral Leases," as provided in the Collateral Agreement. This released all of Houston Natural Gas' interests in the surface except for the following: well sites, designated as 3M, 5M, and 6M; a heater site, designated as 4M; pipeline easements, designated as 7M, 8M, and 9M; and a roadway easement, designated as 1M (see Appendix A).

HPL acquired the interests of Houston Natural Gas around 1988 and continued its operations in the area. As reflected in responses to requests for admissions, sometime before February 1, 1990, the 4M and 5M sites were not used for "drilling, reworking, storage, injection, repressuring, or production" for 365 consecutive calendar days during the period between February 1, 1988 and January 31, 1990. HPL did not plug the well, remove all equipment, clean the surface, or file the documentation required by the Collateral Agreement. The 5M well was not plugged until April 8, 1994.

In 1993, HPL assigned its nonstorage rights in the Bammel Field to Enron, which wanted to drill a new well at a new site near the 5M site. Because of the Collateral Agreement and a partial release signed in 1971, Enron was required to obtain from the Taubs a new surface site for its well. In November 1993, Enron's employee, Warren Davis, approached Henry Taub about obtaining a new site. Henry Taub asserts in his deposition that, even though the rights to use 4M and 5M had actually terminated, he was personally unaware of the termination because the well had not been plugged and he had not received the notice required under the Collateral Agreement. He further testified he entered into negotiations with Enron, believing HPL and Enron still had rights regarding the 4M and 5M sites. In these negotiations, Davis proposed to Henry Taub that Enron enter into a new surface agreement with the Taubs for a two-acre well site, in exchange for Enron arranging for the release of the 5M site back to the Taubs.

At the Taubs' request, Enron had two surveys made of the 4M and 5M sites, one in January 1994 and one in April 1994. The Taubs suggest the sites are falsely labeled on the surveys as "existing" sites.

On the "release" of the 5M well site, the Taubs entered into a new Surface Use Agreement with Enron on June 22, 1994. Enron drilled two new deep wells at this location. Henry Taub testified that, had he known the 4M and 5M sites had already been abandoned, he would not have entered into the surface agreement with Enron. Further, in July 1998, HPL removed a twelve-inch pipeline from the 7M and 8M rights-of-way and installed a twenty-inch pipeline.

An agreement and several supplements to that agreement, entered into between the Taubs, Enron, and HPL in May 1996 tolled the statute of limitations until December 4, 1998, for any litigation by the Taubs.

On December 4, 1998, the Taubs sued HPL and Enron, asserting claims arising from the Collateral Agreement. Generally, the Taubs claimed: 1) HPL lost its lease rights to three surface sites, 4M, 5M, and 6M, and became a trespasser by failing to use them for drilling, reworking, storage, injection, repressuring, or production for a 365 day consecutive period; 2) HPL breached the lease agreement as to two other surface sites, 7M and 8M, by replacing a twelve-inch pipeline with a twenty-inch pipeline; and 3) HPL fraudulently induced the Taubs to enter into a separate surface agreement with Enron. Causes of action asserted by the Taubs included a declaratory judgment that HPL's right to use the surface had terminated, breach of contract, fraud, trespass, breach of fiduciary duty, and breach of the covenant of good faith and fair dealing.

The trial court signed an interlocutory order on November 27, 2000, granting HPL's motion for summary judgment. The order disposed of all the Taubs' claims against HPL. The order granted Enron's motion for summary judgment on all the Taubs' claims, except those related to the 6M well site. The Taubs' motion for summary judgment was denied. On December 19, 2000, the Taubs moved for reconsideration of the trial court's interlocutory order, alleging, among other things, that new deposition testimony had been obtained which proved portions of HPL's evidence to be false. The Taubs also moved for severance of the claims disposed of by the summary judgment. The motion for reconsideration was denied, but the severance motion was granted, making the interlocutory summary judgment order final.

Issues

The claims asserted by the Taubs in the trial court that are the subject of this appeal include: 1) breach of the Collateral Agreement by HPL with respect to the 4M and 5M sites; 2) HPL's fraud and conspiracy to commit fraud related to the 1994 Surface Use Agreement with Enron, and related to the 1994 drill site and the 2M site; 3) breach of the Collateral Agreement by HPL with respect to the 6M site; and 4) trespass by HPL with respect to the 4M and 5M sites, the 6M site, and by the installation of the twenty-inch pipeline on the 7M and 8M sites.

The overriding issue in this appeal, as contended by the Taubs, is whether the district court erred by granting summary judgment in favor of HPL and then erred by refusing to reconsider the summary judgment. They contend the resolution of this issue turns on: 1) whether, after HPL's determinable fee estates terminated, the Taubs should have regained title to and possession of the surface sites; 2) whether, after HPL's determinable fee estates terminated, HPL breached the Collateral Agreement by failing to plug wells, remove facilities and equipment, clean the sites, file instruments acknowledging the terminations, and notify the Taubs; 3) whether HPL committed fraud, or conspired with Enron to commit fraud, by inducing the Taubs to enter into a Surface Use Agreement granting Enron the right to use two...