Houston Pipeline Co. v. Bank of America, N.A.

213 S.W.3d 418, 165 Oil & Gas Rep. 485, 2006 Tex. App. LEXIS 7486, 2006 WL 2435404
CourtCourt of Appeals of Texas
DecidedAugust 24, 2006
Docket01-03-01263-CV
StatusPublished
Cited by26 cases

This text of 213 S.W.3d 418 (Houston Pipeline Co. v. Bank of America, N.A.) 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
Houston Pipeline Co. v. Bank of America, N.A., 213 S.W.3d 418, 165 Oil & Gas Rep. 485, 2006 Tex. App. LEXIS 7486, 2006 WL 2435404 (Tex. Ct. App. 2006).

Opinion

OPINION

ELSA ALCALA, Justice.

Appellant, Houston Pipeline Company LP (Houston Pipeline), appeals from a declaratory judgment entered by the trial court declaring relative rights in natural gas between Houston Pipeline and appel-lee, Bank of America, N.A. (the Bank). In five issues, Houston Pipeline contends the following: (1) the declaratory judgment violated the automatic bankruptcy stay of the Enron Company’s (Enron) and related entities’ bankruptcies; (2) the declaratory judgment violated the declaratory judgments act by affecting interests of absent parties and by not resolving the controversy; (3) the declaratory judgment was not entered in support of a ripe and justiciable controversy; (4) unresolved questions of material fact precluded entry of summary judgment on three of the four declarations; and (5) the trial court erred by summarily rejecting Houston Pipeline’s counterclaim. *422 We conclude that the trial court’s entry of the declaratory judgment violated the automatic bankruptcy stay, thus rendering the judgment void. Accordingly, we vacate the trial court’s judgment and dismiss the case.

Background

Houston Pipeline operates the Bammel Gas Reservoir, injecting and removing gas to sell to consumers in southeast Texas. In 1997, Houston Pipeline, at the time a subsidiary of Enron, sold natural gas to the Bammel Gas Trust (Bammel Trust), a trust created by Enron and the Bank, for $232 million. The Bank, through a lender group, provided the loan proceeds for the purchase, for which a security agreement was executed. After the sale, Houston Pipeline had the right to use the natural gas in the Bammel Reservoir in exchange for an obligation to pay fees to the Bam-mel Trust, and the Bank had a security interest in that gas.

In 2001, Enron sold Houston Pipeline to AEP Energy Services Gas Holding Company (AEP). To facilitate this second sale, the Bammel Trust released Houston Pipeline’s liabilities and obligations resulting from the first sale, and leased the natural gas in the Bammel Reservoir to BAM Lease Co. (LeaseCo), another subsidiary of Enron, but Houston Pipeline still had the right to use the natural gas in the Bammel Reservoir.

A series of documents was created relating to these transactions (collectively, the “Transaction Documents”), which refer to the natural gas variously as “storage gas,” “pledged gas,” “cushion gas” and “working gas.” 1 Unless otherwise noted, we refer to the natural gas in the Bammel Gas Reservoir as the “Storage Gas,” which includes the pledged gas, cushion gas, and working gas. As a result of the sale of Houston Pipeline to AEP, the parties executed “amended and restated” documents. Several of these documents are at issue in this case. 2

*423 In December 2001, after executing the amended and restated Transaction Documents, Enron, LeaseCo, and other Enron affiliates filed for bankruptcy. The Bank subsequently filed a declaratory judgment action, the subject of this appeal, in state trial court, contending that Houston Pipeline’s right to use the Storage Gas was subject to the Bank’s security interest in the Storage Gas. The trial court granted summary judgment for the Bank and entered the following declarations (the Declarations):

(a) [Houston Pipeline] is estopped to deny that the Trustee is the owner of the Storage Gas;
(b) [The Bank] as Administrative Agent holds a security interest that is, as against [Houston Pipeline], a valid and first-priority security interest in the Storage Gas;
(c) As a result of Bankruptcy Events involving Enron Corp. and BAM Lease Company, Events of Default and Guaranty Defaults have occurred under the Participation Agreement, the Guaranty, and the Security Agreement (as amended and restated);
(d) Any rights of [Houston Pipeline] to use the Storage Gas under or based on the Right to Use Agreement, the Consent and Acknowledgment Agreement, the Master Transaction Agreement, or any other Transaction Document (as amended and restated) are subject to the Trustee’s ownership rights in and to the Storage Gas and Bank of America as Administrative Agent’s security interest in the Storage Gas.

The following Transaction Documents are relevant to this case: Pressurization and Storage Gas Borrowing Agreement, Right to Use Agreement, Cushion Gas Consent, Amended and Restated Security Agreement, and Amended and Restated Performance Guaranty.

Pressurization Agreement

The Pressurization and Storage Gas Borrowing Agreement (Pressurization Agreement) granted Houston Pipeline the right to use the Storage Gas in exchange for payments of pressurization fees to Bammel Trust and gave the Bank a security interest in the Storage Gas. The Amended and Restated Pressurization Agreement (Amended Pressurization Agreement) reflected a lease of the Storage Gas by Bammel Trust to LeaseCo and released Houston Pipeline’s obligations and liabilities to the Bammel Trust. Lea-seCo assumed Houston Pipeline’s obligation to pay pressurization fees and also became obligated to provide “Exchange Gas” to Bammel Trust in exchange for the Storage Gas. Houston Pipeline also purchased 25 Bcf 3 of the Storage Gas from Bammel Trust and sold 10.5 Bcf of the Storage Gas to LeaseCo. After this transaction, 55 Bcf of the Storage Gas was left in the Bammel Gas Reservoir. The ownership rights to this 55 Bcf of Storage Gas is at issue here.

Right to Use Agreement

LeaseCo and Houston Pipeline executed a Right to Use Agreement that provides that “so long as no [Houston Pipeline] Default has occurred and is continuing ... LeaseCo will have sufficient rights in and to the [Storage Gas] to enable it to make, and that it will cause and allow [the Storage Gas] to be available to [Houston Pipeline] ... for [Houston Pipeline’s] right to Quiet Enjoyment at all times during the Term.” The term was for 30 years with an option to renew for another 20 years. The Bank consented to the Right to Use Agreement and incorporated the terms of *424 that agreement into the Cushion Gas Consent.

Cushion Gas Consent

The Cushion Gas Consent contains an express consent by the Bank, Houston Pipeline, the Bammel Trust trustee, and LeaseCo to the terms and conditions of the Right to Use Agreement. The Cushion Gas Consent further provides that Houston Pipeline has the right to cure any “Event of Default” in the performance or payment of obligations set forth in the Transaction Documents. Upon an Event of Default that “could adversely affect Houston Pipeline’s rights under or pursuant to the Right to Use Agreement,” the Bank was required to send a written notice of the Event of Default to the Bammel Trust trustee, LeaseCo, and Enron, among others, to trigger Houston Pipeline’s right to cure. Any “Guaranty Default” defined in the Performance Guaranty is labeled in the Cushion Gas Consent as an Event of Default.

Security Agreement

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Bluebook (online)
213 S.W.3d 418, 165 Oil & Gas Rep. 485, 2006 Tex. App. LEXIS 7486, 2006 WL 2435404, Counsel Stack Legal Research, https://law.counselstack.com/opinion/houston-pipeline-co-v-bank-of-america-na-texapp-2006.