M & M Resources, Inc. and Energy Land Resources v. DSTJ, LLP, DSTJ Corporation and Milestone Operating, Inc.

564 S.W.3d 446
CourtCourt of Appeals of Texas
DecidedNovember 15, 2018
Docket09-18-00083-CV
StatusPublished
Cited by1 cases

This text of 564 S.W.3d 446 (M & M Resources, Inc. and Energy Land Resources v. DSTJ, LLP, DSTJ Corporation and Milestone Operating, Inc.) 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
M & M Resources, Inc. and Energy Land Resources v. DSTJ, LLP, DSTJ Corporation and Milestone Operating, Inc., 564 S.W.3d 446 (Tex. Ct. App. 2018).

Opinion

In The

Court of Appeals

Ninth District of Texas at Beaumont

_________________

NO. 09-18-00083-CV _________________

M & M RESOURCES, INC. and ENERGY LAND RESOURCES, Appellants

V.

DSTJ, LLP, DSTJ CORPORATION and MILESTONE OPERATING, INC., Appellees ________________________________________________________________________

On Appeal from the 172nd District Court Jefferson County, Texas Trial Cause No. A-172,979 ________________________________________________________________________

OPINION

M & M Resources, Inc. (M & M) and Energy Land Resources (ELR) appeal

two orders issued by the trial court under Texas Civil Practice and Remedies Code

section 51.014(d) sustaining DSTJ, L.L.P.’s (DSTJ) and Milestone Operating, Inc.’s

1 (Milestone) special exceptions and partial motion to strike. 1 See Tex. Civ. Prac. &

Rem. Code Ann. § 51.014(d) (West Supp. 2017). The trial court orders at issue are

(1) “Order Sustaining Defendants’ Special Exceptions to Plaintiffs[’] and Third-

Party Defendants’ 7th Amended Original Petition” signed February 9, 2018; and (2)

“Order Granting Defendants’ Motion to Strike Paragraphs 22 (‘M & M’s

Declaratory Judgment’) and 32–33 (‘Attorney’s Fees’) in Plaintiffs[’] and Third-

Party Defendants’ 8th Amended Original Petition” signed February 22, 2018. M &

M and ELR assert their sole issue on appeal is “whether . . . ratification, which is a

fact question . . . can be determined under Section 37.004 of the Texas Civil Practice

and Remedies Code.” DSTJ and Milestone disagree with M & M and ELR’s framing

of the issue and contend it is correctly framed as

“[w]hether the trial court abused its discretion when the Court sustained Appellee’s special exceptions and, thereafter, struck portions of Appellants’ pleadings seeking declaratory relief and attorney’s fees due to substantive defects; namely, that the dispute over the title to mineral rights, which Appellants claim reside[] with them due to alleged termination [of] an Assignment of mineral leases, should have been brought as a trespass to try title claim, under which attorney’s fees may not be awarded.”

1 The trial court’s orders granted Appellants the right to bring a permissive interlocutory appeal. 2 We determine Appellees have properly framed the issue. See Tex. R. App. P. 38.1(e)

(“The statement of an issue or point will be treated as covering every subsidiary

question that is fairly included.”).

Factual Background2

The underlying lawsuit involves a dispute over certain mineral estates in

Jefferson County, Texas, specifically oil and gas leases. ELR and its owners, A.M.

“Mickey” Phelan, III and Daniel Phelan, operate as “landmen” acquiring oil and gas

leases of mineral interests. DSTJ3 alleges it retained ELR in 2001 to negotiate with

landowners in Jefferson County and obtain leases of mineral properties in the

Bennett Blackman 4 and Gilleland Surveys. During 2001 and 2002, ELR procured

several leases in the area DSTJ desired. Rather than acquire the leases in the name

of DSTJ, ELR acquired the leases in the name of M & M, another company in which

the Phelans had an ownership interest. M & M then executed an “Assignment of Oil,

Gas and Mineral Leases” (“the Assignment”) which assigned twenty-one leases in

2 After notifying the parties and receiving no objections, we take judicial notice of the records of the previous appeals in this matter. 3 DSTJ, L.L.P. is the successor in interest to DSTJ Corporation. 4 Exhibit “A” to the Assignment refers to the “Bennette Blackman Survey.” Other records as well as the parties refer to it as the “Bennett Blackman Survey,” as do we throughout this opinion. 3 the Bennett Blackman and Gilleland Surveys to DSTJ. 5 The Assignment was

executed on September 10, 2002, and signed by A.M. Phelan, III, president of M &

M. The Assignment reserved an override royalty interest and contained a provision

by which the assigned leases would automatically terminate and revert to M & M

upon default by DSTJ. Paragraph M of the Assignment states

If Assignee fails to make any payment under this Assignment when due, and still fails to pay within 30 days following receipt of Assignor’s written demand for payment by certified mail to the address shown above, return receipt requested, Assignor shall have the option to terminate this Assignment in its entirety at the expiration of that 30-day period by filing written notice of termination in the real property records of Jefferson County, Texas. Upon termination, the Leases shall automatically revert to Assignor without any further action, together with all of Assignee’s right, title and interest in all equipment, personal property and fixtures located on, or held or used in connection with the Leases. The reverted interests shall be free of all liens, security interests, production burdens and other encumbrances and defects created by, through or under Assignee, all of which shall be void as to Assignor. Assignor’s remedies in this Paragraph M are cumulative, and are in addition to any other legal or equitable remedies available to Assignor for Assignee’s breach of this Assignment.

DSTJ alleged in its counterclaim that M & M recorded the Assignment in the

Jefferson County property records before M & M sent it to DSTJ for review. A.M.

5 M & M executed a second Assignment on March 7, 2003, containing identical provisions and assigning ten additional leases in the Gilleland Survey to DSTJ, but the main dispute between the parties arises out of the first Assignment. 4 Phelan, III admitted in his testimony that he never gave DSTJ an opportunity to sign

and convey its acceptance of the Assignment.

In March 2004, M & M notified DSTJ they were in default of the Assignment

and made written demand for payment in a letter signed by Daniel Phelan. The same

day, ELR sent DSTJ a letter signed by Daniel Phelan specifically demanding

payment of all money due under the Barrier lease assigned by M & M to DSTJ. 6 On

July 28, 2004, M & M recorded a “Notice of Termination” of the Assignment from

M & M to DSTJ and giving notice that the leases in the Assignment automatically

reverted to M & M.7

Procedural Background

The procedural background is complex, but we will give a cursory recitation

of those facts, as they are helpful in determining the relationships of the parties and

the controversy in the underlying litigation.

Contemporaneously with recording the Notice of Termination, M & M filed

its “Petition for Declaratory Judgment” against DSTJ alleging that DSTJ failed to

make royalty payments due under the assignment for drilling and production

6 Chauncey Shephard Barrier was the Lessor, and M & M Resources, Inc. was the Lessee. The lease was included in the first Assignment from M & M to DSTJ. 7 The “Notice of Termination” was signed by A.M. Phelan, III. 5 associated with the Quail No. 1 well. M & M asserted the Assignment terminated

when DSTJ failed to make payment after written demand. M & M sought a

declaratory judgment under Chapter 37 of the Texas Civil Practice and Remedies

Code that the Assignment terminated; that any right, title and interest of DSTJ in the

leases made a part of the Assignment terminated; and, that all rights, title and

interests conveyed by the leases of the Assignment are owned by M & M. M & M

also sought to recover its costs and attorney’s fees under section 37.009 of the Texas

Civil Practice and Remedies Code. See Tex. Civ. Prac. & Rem. Code Ann.

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564 S.W.3d 446, Counsel Stack Legal Research, https://law.counselstack.com/opinion/m-m-resources-inc-and-energy-land-resources-v-dstj-llp-dstj-texapp-2018.