Geodyne Energy Income Production Partnership I-E v. Newton Corp.

97 S.W.3d 779, 157 Oil & Gas Rep. 805, 2003 Tex. App. LEXIS 614, 2003 WL 152732
CourtCourt of Appeals of Texas
DecidedJanuary 23, 2003
Docket05-02-00070-CV
StatusPublished
Cited by8 cases

This text of 97 S.W.3d 779 (Geodyne Energy Income Production Partnership I-E v. Newton Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Geodyne Energy Income Production Partnership I-E v. Newton Corp., 97 S.W.3d 779, 157 Oil & Gas Rep. 805, 2003 Tex. App. LEXIS 614, 2003 WL 152732 (Tex. Ct. App. 2003).

Opinion

*782 OPINION

Opinion by

Justice FARRIS (Retired).

This case involves liability for the costs of plugging an off-shore oil and gas well. In four points of error, Geodyne Energy Income Production Partnership I-E, Geo-dyne Energy Income Production Partnership I-F, Geodyne Production Partnership II-A, and Geodyne Resources, Inc. (collectively, Geodyne) appeal the trial court’s judgment in favor of The Newton Gorp. (Newton), contending (1) the trial court erred in granting judgment on Newton’s claim under the Texas Securities Act, Tex. Rev.Giv. Stat. Ann. arts. 581-1 to 581-43 (Vernon Supp.2003) (the TSA), because Newton still owns the security and because there is legally and factually insufficient evidence of (a) reliance, (b) causation, or (c) a misrepresentation or omission of material fact by Geodyne; (2) there is legally and factually insufficient evidence to support the jury’s finding that Geodyne owned a non-operating working interest in the well at the time it was required to be plugged or to support the award of attorney’s fees to Newton; and (3) the trial court erred in denying Geodyne’s indemnity claim against Newton.

Because Newton’s sole remedy under the TSA is to rescind the transaction, we modify the trial court’s judgment to rescind the sale of the oil and gas lease. We affirm the trial court’s judgment, as modified, on all grounds (other than the award of attorney’s fees to Newton) because (1) Newton was required to prove neither causation nor reliance to recover under the TSA and (2) the jury’s findings that Geo-dyne omitted a material fact in the sale of a security and Geodyne owned a non-operating working interest in the well at the time it was required to be plugged are not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. We reverse and remand the issue of attorney’s fees to the trial court for further consideration because Newton failed to carry its burden of establishing the fees could not be segregated.

Factual and PROCEDURAL Background

In 1978, the State of Texas granted an oil and gas lease in the Gulf of Mexico. In 1987, Geodyne acquired a ten-percent, non-operating working interest in the lease. In 1996, XPLOR Energy Operating Co. (XPLOR) acquired 14.79% of the lease and became the operator of the well on the lease, assuming responsibility for the physical operation of the well. Geodyne did not have responsibility for the daily operation of the well on the lease, but was responsible for paying ten percent of the operating costs and received ten percent of any revenues from the sale of oil and gas produced from the lease.

The lease contained a five-year primary term and then remained in effect so long as oil or gas was produced in paying quantities. If the well stopped producing oil or gas in paying quantities, the lessee could keep the lease in effect by beginning additional drilling or reworking operations within sixty days. On December 10, 1996, the well stopped producing oil and gas in paying quantities. XPLOR did not begin reworking or drilling operations on the lease within sixty days. Despite periodic attempts to restart the well, it never again produced oil or gas in paying quantities.

On December 10, 1997, Geodyne sold through a third-party auctioneer its ten-percent working interest in the lease, the well, and the equipment associated with the well to Newton for $300. In the sale documents, Newton agreed Geodyne had made no representations or warranties regarding oil and gas production; marketable title; condition; quality; fitness for general or particular purpose; merchanta *783 bility; accuracy of interest; or accuracy or completeness of any data, information, or material supplied to Newton. Newton also agreed to take the conveyed property “as is.”

In August 1998, XPLOR completed plugging and abandoning the well at a cost of $742,409.67. After both Geodyne and Newton declined to reimburse XPLOR ten percent of the plugging and abandoning costs, XPLOR sued both parties.

A jury determined Geodyne was the owner of the non-operating interest in the well at the time the well was required to be plugged and awarded XPLOR the plugging costs from Geodyne. The jury also found Geodyne violated the TSA and awarded Newton $800 on its TSA claim. The parties submitted the issue of attorney’s fees to the trial court on affidavit, and the trial court awarded Newton $161,269.53. Geodyne appealed. 3

Texas SecüRities Act

In its first point of error, Geodyne argues (1) there is legally and factually insufficient evidence of reliance or causation to support the jury’s finding Geodyne violated article 581-33A(2) of the TSA or to prove Geodyne made any misrepresentation or omission of material fact and (2) Newton is not entitled to damages because it still owns the interest.

To recover under the TSA, a buyer must prove a security was sold by means of (1) an untrue statement of material fact or (2) an omission to state a material fact that is necessary in order to make the statements made in light of the circumstances under which they are made not misleading. Tex.Rev.Civ. Stat. Ann. art. 581-33A(2) (Vernon Supp.2003); Tex. Capital Sec., Inc. v. Sandefer, 58 S.W.3d 760, 776 (Tex.App.-Houston [1st Dist.] 2001, pet. denied). An interest in or under an oil and gas lease is a security. Tex.Rev. Civ. Stat. Ann. art. 581-4A. An omission or misrepresentation is material “if there is a substantial likelihood that a reasonable investor would consider it important in deciding to invest.” Sandefer, 58 S.W.3d at 776; see Anheuser-Busch Cos., Inc. v. Summit Coffee Co., 858 S.W.2d 928, 936 (Tex.App.-Dallas 1993, writ denied), vacated on other grounds, 514 U.S. 1001, 115 S.Ct. 1309, 131 L.Ed.2d 192 (1995).

Article 581-33A(2) of the TSA is virtually identical in all relevant aspects to section 12(2) of the Federal Securities Act of 1933, 15 U.S.C.A. 771 (a)(2) (1997 & Supp.2002) (section 12(2)). Sandefer, 58 S.W.3d at 775; Anheuser-Busch Cos., Inc., 858 S.W.2d at 939. Accordingly, we look to federal cases interpreting section 12(2) as a guide in interpreting article 581-33A(2). Summers v. WellTech, Inc., 935 S.W.2d 228, 232-33 (Tex.App.-Houston [1st Dist.] 1996, no writ).

A Reliance

Geodyne first argues the evidence is legally and factually insufficient to prove Newton relied on any misrepresentation or omission by Geodyne. However, the TSA does not require the buyer to prove reb-anee. Hendricks v. Thornton, 973 S.W.2d 348, 360 (Tex.App.-Beaumont 1998, pet. denied) (rebanee is not an element of a claim under the TSA); Summers, 935 S.W.2d at 234 (TSA does not require plaintiff show he would not have purchased the stock if he had known of the abeged adverse material facts); Anheuser-Busch Cos., Inc., 858 S.W.2d at 936 (“An investor is not required to prove that he would have acted differently but for the omission or *784 misrepresentation.”); see In re Westcap Enters.,

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97 S.W.3d 779, 157 Oil & Gas Rep. 805, 2003 Tex. App. LEXIS 614, 2003 WL 152732, Counsel Stack Legal Research, https://law.counselstack.com/opinion/geodyne-energy-income-production-partnership-i-e-v-newton-corp-texapp-2003.