Trutec Oil and Gas v. Western Atlas Intern.

• Decision Date: 25 April 2006
• Docket Number: No. 14-04-00363-CV.,14-04-00363-CV.
• Citation: 194 S.W.3d 580
• Parties: TRUTEC OIL AND GAS, INC. d/b/a Martindale Associates Limited and Trutec Investment Services Company Limited, Appellants, v. WESTERN ATLAS INTERNATIONAL, INC., Western Atlas, Inc., Brass Exploration Unltd., Western Geophysical Co., Ltd., WI, Inc., Baker Hughes Incorporated, Brassco (Cayman) Limited, Brass Holding Limited, and JP Morgan Chase Bank, Appellees.
• Court: Texas Court of Appeals

Page 580

194 S.W.3d 580

TRUTEC OIL AND GAS, INC. d/b/a Martindale Associates Limited and Trutec Investment Services Company Limited, Appellants, v. WESTERN ATLAS INTERNATIONAL, INC., Western Atlas, Inc., Brass Exploration Unltd., Western Geophysical Co., Ltd., WI, Inc., Baker Hughes Incorporated, Brassco (Cayman) Limited, Brass Holding Limited, and JP Morgan Chase Bank, Appellees.

No. 14-04-00363-CV.

Court of Appeals of Texas, Houston (14th Dist.).

April 25, 2006.

Rand Patrick Nolen, Sylvia Davidow, Houston, for appellants.

Ann Ryan Robertson, James Robert Wetwiska, Katherine D. Mackillop, Murry B. Cohen, Houston, for appellees.

Panel consists of Justices FOWLER, EDELMAN, and GUZMAN.

OPINION

WANDA McKEE FOWLER, Justice.

This appeal arises from an agreement relating to a Nigerian oil prospecting license, which later became an oil mining lease. Appellants Trutec Oil and Gas, Inc., d/b/a Martindale Associates Limited and Trutec Investment Services Company Limited ("Trutec") sued appellees ("Western Atlas et al.")¹ and others for breach of contract, breach of fiduciary duty, conversion, tortious interference with contract, and conspiracy, and sought an accounting, a constructive trust, and a declaratory judgment. In the court below, Western Atlas et al., asserted that Trutec's lawsuit claimed an interest in Nigerian mineral interests and, thus, claims an interest in Nigerian real property. Agreeing with Western Atlas et al. about the nature of Trutec's suit, the trial court dismissed Trutec's claims for lack of subject matter jurisdiction. On appeal, Trutec contends the trial court erred in granting the motion to dismiss, because its lawsuit involves Nigerian realty only tangentially. Trutec characterizes its lawsuit as one involving personal property, and contends that the rights granted by the oil prospecting license are a privilege that conveys no interest in real property. We affirm because Trutec's lawsuit required the trial court to determine if Trutec had an ownership interest in real property located in Nigeria and, therefore, outside the court's jurisdiction.

A. FACTUAL BACKGROUND.

Trutec claims its interest arose from dealings with Moni Pulo Limited, a Nigerian company. In 1992, Moni Pulo was granted an oil prospecting license, denominated "Oil Prospecting License 230,"² to explore and prospect for oil in certain areas offshore Nigeria by the Federal Republic of Nigeria. Over time, Moni Pulo and Trutec entered into agreements relating to Oil Prospecting License 230; those agreements later became the focus of this lawsuit. The relationship among Moni Pulo, Trutec, and Western Atlas et al. is recounted in detail in this court's earlier opinion in Moni Pulo Ltd. v. Trutec Oil & Gas, Inc., 130 S.W.3d 170 (Tex.App.-Houston [14th Dist.] 2003, pet. denied), in which we held that the trial court lacked personal jurisdiction over Moni Pulo and dismissed the company from the case. We will limit our discussion here to the facts relevant to our disposition of this appeal.

In 1994, Moni Pulo and Trutec³ entered into a "Consultancy Agreement" in which Trutec agreed to perform certain services relating to Oil Prospecting License 230 in exchange for "10% (Ten percent) of equity and 10% of buying in fees realised in Oil Prospecting License 230 and any leases granted therefrom and any extensions thereof." According to Trutec, it was to provide a $1 million "signature bonus" payable to the government and to help find a "technical partner" to oversee development. Two years later, in January 1996, Moni Pulo and Trutec entered into a second consultancy agreement that allegedly superseded the 1994 agreement. This second agreement allegedly reduced Trutec's interest to "6% . . . of [the] equity shares" of Moni Pulo.

Shortly after this second consultancy agreement was executed, Moni Pulo entered into a Joint Venture Agreement with appellee Brass Exploration Unltd., a Nigerian unlimited-liability company.⁴ In this joint venture agreement, Moni Pulo, as "Owner," and Brass, as "Technical Partner," agreed to explore and develop Oil Prospecting License 230, and Moni Pulo assigned to Brass a 40% "Participating Interest" in all hydrocarbon exploration, development, production and sales from Oil Prospecting License 230.⁵ Among other things, the joint venture agreement provided that, upon the fulfillment of certain conditions, Brass would pay $845,455 to Trutec as "full and final payment" for "services rendered" to Moni Pulo. Moni Pulo and Brass also entered into an Operating Agreement to define their rights and obligations with respect to operations under Oil Prospecting License 230. The exploratory operations were apparently successful, and the area covered by Oil Prospecting License 230 was converted to an oil mining lease, Oil Mining Lease 114.

Believing that Moni Pulo had not kept its end of the bargain agreed to in the first consultancy agreement, Trutec Investment Services filed suit in Nigeria against Moni Pulo, Brass, Western Atlas International, Inc. and WI, Inc. In that suit, Trutec argued it was entitled to a "10% ... undivided participating interest in Block 230 granted to [Moni Pulo] . . . ." However, Trutec's representative apparently refused to continue to participate in the trial and left the country. Moni Pulo, 130 S.W.3d at 174. Consequently, the Nigerian court dismissed the suit. Id.

But the controversy did not end there. While the Nigerian case was still pending, Trutec filed this suit in Harris County against the same defendants and others, and alleged claims similar to those made in the Nigerian case. Moni Pulo filed a special appearance, which the trial court denied. On appeal, this court dismissed Moni Pulo from the suit based on lack of personal jurisdiction. Moni Pulo, 130 S.W.3d at 181.

Trutec made numerous claims against the remaining defendants, including breach of contract, conversion, tortious interference and unfair business practices, breach of fiduciary duties, and conspiracy. Trutec sought actual and exemplary damages, an accounting, a constructive trust, and declaratory relief. Appellees Western Atlas International, Inc., Western Atlas, Inc., Brass Exploration Unltd., Western Geophysical Co., Ltd, WI, Inc., Baker Hughes Incorporated, Brassco (Cayman) Limited, Brass Holding Limited, and JP Morgan Chase Bank (Chase Bank of Texas, N.A.) moved to dismiss Trutec's claims against them for lack of subject matter jurisdiction. On January 14, 2004, the trial court granted the motion to dismiss. Trutec filed a motion for reconsideration, which was overruled by operation of law. This appeal followed.

B. TRUTEC'S SUIT REQUIRES THE ADJUDICATION OF INTERESTS IN REAL PROPERTY.

Though our Moni Pulo opinion involved a different issue than this appeal, ironically, a footnote contained in that opinion has taken center stage in this appeal. We observed in the footnote that "Texas law would view Trutec's suit as a claim for a mineral interest[], and thus title to land," and so "Trutec's attempt to recast it as a mere suit for damages would be disregarded." See 130 S.W.3d at 180 n. 39 (citations omitted). In three issues, Trutec challenges this dicta by asserting that the district court had subject matter jurisdiction over its claims because (1) Trutec's lawsuit does not require the adjudication of title to foreign realty, (2) Trutec's claims involve personal property, and (3) the rights granted by Oil Prospecting License 230 are a privilege rather than an interest in real property. Finding that our previous dicta is accurate and resolves this appeal, we overrule Trutec's challenges. We explain below.

1. TEXAS COURTS CANNOT ADJUDICATE INTERESTS IN REAL PROPERTY LOCATED OUTSIDE THE STATE; INTERESTS IN OIL AND GAS LEASES ARE INTERESTS IN PROPERTY.

Texas courts may not adjudicate title to realty in another state or country; they do not have subject matter jurisdiction over property outside the state. Holt v. Guerguin, 106 Tex. 185, 163 S.W. 10, 12 (1914); Kelly Oil Co., Inc. v. Svetlik, 975 S.W.2d 762, 764 (Tex.App.-Corpus Christi 1998, pet. denied); Carmichael v. Delta Drilling Co., 243 S.W.2d 458, 459-60 (Tex. Civ.App.-Texarkana 1951, writ ref'd). Of significance here, interests in oil and gas rights—such as working interests and royalty interests in oil and gas leases—are considered interests in real property. See MCEN 1996 P'ship v. Glassell, 42 S.W.3d 262, 263 (Tex.App.-Corpus Christi 2001, pet. denied) (citing Renwar Oil Corp. v. Lancaster, 154 Tex. 311, 276 S.W.2d 774, 776 (1955); State v. Quintana Petroleum Co., 134 Tex. 179, 133 S.W.2d 112, 114-15 (1939)); Carmichael, 243 S.W.2d at 459-60; Kelly Oil Co., Inc., 975 S.W.2d at 764. As a result, the general prohibition against determining rights in real property located in other states or countries extends to rights in oil and gas leases in other states or countries. See Kelly Oil, 975 S.W.2d at 764; Miller v. Miller, 715 S.W.2d 786, 788-89 (Tex.App.-Austin 1986, writ ref'd n.r.e.); Carmichael, 243 S.W.2d at 459-60.

2. Trutec's Response for Why the General Rule Does Not Apply to Its Suit.

Trutec acknowledges this general prohibition against Texas courts adjudicating interests in non-Texas property, but maintains this general rule does not apply here. It contends that its breach of contract tort, and other claims are only "tangentially" related to real property, so that the trial court had jurisdiction over its claims and thus erred in dismissing its lawsuit. Trutec argues that its claims were brought to enforce in personam, or "transitory" rights that may be adjudicated in a Texas court. Trutec contends Western Atlas et al. has implicitly mischaracterized Trutec's suit as an in rem, or "local" action, and— without expressly saying so—relied on the "local action doctrine" to dismiss Trutec's claims. Trutec argues that the local action doctrine applies only when the asserted claims are limited strictly to the adjudication of foreign title. See ...