Vela v. Pennzoil Producing Co.

• Court: Texas Court of Appeals
• Writing for the Court: KLINGEMAN
• Citation: Vela v. Pennzoil Producing Co., 723 S.W.2d 199 (Tex. App. 1986)
• Decision Date: 26 November 1986
• Docket Number: No. 04-84-00558-CV,04-84-00558-CV
• Parties: Adrian VELA, et al., Appellants, v. PENNZOIL PRODUCING COMPANY, et al., Appellees.

Page 199

723 S.W.2d 199

Adrian VELA, et al., Appellants, v. PENNZOIL PRODUCING COMPANY, et al., Appellees.

No. 04-84-00558-CV.

Court of Appeals of Texas San Antonio.

Nov. 26, 1986.

Patton G. Lochridge, Austin, for appellants.

Donato Ramos, Mark D. Willett, Laredo, for appellees.

Before ESQUIVEL, BUTTS and KLINGEMAN ^*, JJ.

OPINION

KLINGEMAN, Justice (Assigned).

This is a suit in Zapata County, Texas by a family of landowners (the Velas) against the lessee of an oil and gas lease (Pennzoil) for cancellation of certain pooling and unitization designations, and for other affirmative relief. Both sides filed motions for summary judgment. The trial court granted Pennzoil's motion for summary judgment, but refused to grant the Velas' motion for summary judgment. The Velas timely perfected their appeal.

In this opinion the Velas will sometimes be referred to as appellants, plaintiffs, or the Velas. Pennzoil Producing Company, et al, will be referred to as either appellees, defendants, or Pennzoil.

The Velas, who are landowners in Zapata County, executed separate oil, gas and mineral leases on two different tracts of land, which leases were later acquired by Pennzoil. The first lease was dated November 20, 1972 and covered a tract of 158.3 acres; the second lease was dated February 24, 1973 and covered a tract of 160 acres. Problems arose between the Velas and Pennzoil as to the validity of Pennzoil's tender of shut-in payments, and after some negotiation, a ratification agreement was executed by the Velas, who received a cash consideration in connection with such ratification. The effect of this ratification is one of the questions involved in this appeal.

After production had been obtained, appellee filed two unit designations and pooling agreements in the Deed Records of Zapata County on July 1, 1977. Appellees contend that the filing of the unitization agreements in the Deed Records of Zapata County put appellants on notice of their existence, and the Velas were charged with full notice of the contents and effects of such pooling agreements. Appellees further contend that such unitization agreements were expressly authorized by the provisions of the leases signed by appellants, and which were binding on appellants. They further contend that the production obtained on the Velas' tracts constituted production effective to hold the two leases in existence.

Appellants contend that they were totally unaware of the filing of such unitization agreements in the Deed Records of Zapata County, both at the time they were filed and for an extended period thereafter. After learning of the existence of such pooling and unitization agreements, they had some investigations made and reached certain conclusions, including their opinion that Pennzoil improperly exercised the pooling power, and that the placing of appellants' lands in the two units was done in bad faith. Subsequently a suit was filed for cancellation of the unit provisions, for monetary damages, and for other affirmative relief.

Both appellants and appellees filed motions for summary judgment. The trial court granted appellees' motion for summary judgment, but did not grant appellants' motion for summary judgment.

Appellants assert nine points of error in which they contend:

(1) The trial court erred in granting summary judgment that appellants, the Velas, take nothing against Pennzoil.

(2) The trial court erred in granting summary judgment for Pennzoil against appellants.

(3) The trial court erred in failing to grant summary judgment for appellants.

(4) Appellants established as a matter of law that the execution of the ratification agreement did not release appellants' claim against Pennzoil for bad faith pooling of their land.

(5) The trial court erred in failing to grant partial summary judgment for appellants.

(6) The property description contained in the unit designation was insufficient as a matter of law and violated the terms and provisions of the Texas Statute of Frauds.

Our discussion in this opinion will be basically in two general areas: (1) Pennzoil's motion for summary judgment, and (2) the Velas' motion for summary judgment. They will be discussed in the order above listed. In addition we will discuss the various contentions made by both appellants and appellees, including but necessarily restricted to:

(1) The release and ratification agreement.

(2) The effect of the filing of the proposed pooling and unitization unit designation in the public records of the county where the land was located.

(3) Good and bad faith pooling and unitization.

(4) The statute of limitations.

PENNZOIL'S MOTION FOR SUMMARY JUDGMENT

Pennzoil asserts that its motion for summary judgment was properly granted by the trial court, because the summary judgment evidence established as a matter of law that:

(1) The unit designations made by them were fully authorized under the terms and provisions of the leases signed by the Velas, and were based on competent geological information obtained by appellees, and such units are in the best interest of both lessor and lessee.

(2) The ratification agreement signed by appellants totally bars them from any recovery against appellees.

(3) The pooling and unitization designations were made in good faith, and that the summary judgment evidence establishes this as a matter of law.

(4) The oil, gas and mineral leases involved fully authorized lessee to form the pooled acreage as a unit, by filing in the Deed Records of Zapata County an instrument designating and describing the pooled acreage as a pooled unit, and provides that upon such filing the units shall be effective as to all parties, their heirs, successors and assigns.

(5) The legal description of the properties involved is sufficient as a matter of law and does not violate the Texas Statute of Frauds.

Pennzoil, as the movant in its motion for summary judgment, had to establish that it was entitled to the judgment as a matter of law.

A summary judgment may be properly granted only when there is no genuine issue of material fact. TEX.R.CIV.P. 166-A. The burden of proof in a summary judgment case is on the movant, and all doubts as to the existence of a genuine issue of material fact are resolved against the movant. All conflicts in evidence are disregarded, and the evidence which tends to support the position of the party opposing the motion is accepted as true. Farley v. Prudential Insurance Co., 480 S.W.2d 176, 178 (Tex.1972); Great American Reserve Insurance Co. v. San Antonio Plumbing Supply Co., 391 S.W.2d 41 (Tex.1965).

In reviewing a summary judgment record, it is the duty of an appellate court to apply the following rules:

(1) The movant for summary judgment has the burden of showing that there is no genuine issue of material fact, and that it is entitled to judgment as a matter of law. TEX.R.CIV.P. 166-A(e); Gibbs v. General Motors Corp., 450 S.W.2d 827 (Tex.1970).

(2) In deciding whether or not there is a disputed material fact issue precluding summary judgment, evidence favoring the non-movant will be taken as true. Cowden v. Bell, 157 Tex. 44, 300 S.W.2d 286 (1957).

(3) Every reasonable reference must be indulged in favor of the non-movant and any doubt resolved in their favor. Hudnall v. Tyler Bank & Trust Co., 458 S.W.2d 183 (Tex.1970); Womack v. Allstate Insurance Co., 156 Tex. 467, 296 S.W.2d 233 (1956); Gulbenkian v. Penn, 141 Tex. 412, 252 S.W.2d 929 (1952).

RELEASE AND RATIFICATION

Pennzoil relies heavily on its contention that the release and ratification agreement signed by appellants totally bars them from any recovery against Pennzoil, and entitled Pennzoil to a summary judgment as a matter of law.

Appellants deny this vigorously and contend:

(1) The dispute over the units had not arisen at the time of the signing of the ratification agreement and therefore was not encompassed in that settlement agreement.

(2) The ratification agreement is simple and unambiguous. It refers only to the ratification of the oil, gas and mineral lease covering the 160 acre tract. No mention is made of unitization or of any gas unit, whether existing or to be formed thereafter, or of Pennzoil's conduct in creating such unit. Appellants acknowledge that they may have approved or adopted the terms of the lease, but they did not approve or adopt Pennzoil's violation of the lease terms (bad faith exercise of the pooling clause in the lease).

In essence they contend that the lease ratification agreement by its own terms does not bar this suit.

In support of such contention they cite the case of Yelderman v. McCarthy, 474 S.W.2d 781, 784 (Tex.Civ.App.--Houston [1st Dist.] 1971, writ ref'd n.r.e.). In Yelderman the lessor did ratify a unit created by its lessee. In that case the working interest owner under a mineral lease filed a unit declaration that was unauthorized under the terms of the lease. It was claimed, however, that the lessors had ratified the unauthorized unitization by accepting royalty checks tendered as payment reflecting the lessor's specific interest in the unit. In holding that the ratification had occurred, the court stated:

The authority granted the lessee ... to effect a unitization of the mineral interests included [in the lease] with other mineral interests in the immediate vicinity constituted him the agent of the lessors with limited authority.... A principal will be held to have ratified the unauthorized action of his agent in dealing with his property by any conduct affirming the action, including the acceptance of benefits flowing therefrom, if the principal has knowledge of the agent's action. (Emphasis supplied)

Yelderman, 474 S.W.2d at 784.

Appellants further rely on language in the case of Westbrook v. Atlantic Richfield Co., 502 S.W.2d 551 (Tex.1973). This case is not exactly in point as it involved a dispute of whether a plaintiff had a working interest, or royalty interest, in certain property. The Supreme...