Mapco, Inc. v. Carter

786 S.W.2d 368, 1989 Tex. App. LEXIS 3259, 1989 WL 201062

• Court: Court of Appeals of Texas
• Decided: November 16, 1989
• Docket: No. 09-88-198 CV
• Status: Published

Opinions

OPINION

BURGESS, Justice.

This an appeal of a judgment ordering partition and owelty in the division of a mineral estate.

The History of the Case

Clarence Carter, James Ross Carter and Clyde Carter (“The Carters”) filed suit against Mapco Underground Storage of Texas, Inc. (“M.U.S.T.”), and Texasgulf, a corporation, for partition of the mineral estate owned in cotenancy by said parties. They also sued M.U.S.T. for waste arising out of a salt leaching operation whereby M.U.S.T. created a cavern in the salt dome which comprised the mineral estate in dispute for the purpose of storing hydrocarbons. The Carters moved to sever the damage claim from the partition and amended the partition action to request partition of the salt owned by the parties in cotenancy. They later added a request for accounting of the salt removed during the course of the salt leaching operation.

M.U.S.T. contended the Carters were es-topped from asserting the cause of action because a previous suit filed by the trustees of the lessee of the Carters’ mineral interests had resulted in a final judgment which settled the rights of the parties in the Carters' suit. M.U.S.T. also pleaded the statute of limitations had run on any damage claim by the Carters. Texasgulf sold its mineral interest to Turkey Creek Mineral Trust (“Turkey”), which was also the Carters’ mineral lessee. Texasgulf was then dropped from the suit and Turkey joined the Carters’ partition action. The partition and damage suits were consolidated September 23, 1986. Thereafter, Turkey and the Carters amended their suit to allege only the claim for damages for waste. M.U.S.T. then filed a cross-action for partition of the entire mineral estate, to which Turkey and the Carters answered with a request for owelty. After M.U.S.T. requested the cavern be set aside to them on the basis it was an improvement constructed solely at its cost, Turkey and the Carters filed a supplemental petition alleging M.U.S.T. removed part of the mineral estate in bad faith and as trespassers, and requested damages for the market value of the salt, for waste, for accounting and for owelty by reason of the disproportionate value of the cavern in relation to the value of the rest of the mineral estate.

Bench trial was held on January 13,1988. At trial it was established that M.U.S.T. had conveyed all of its interest in the surface and the mineral estate pendente lite to Gordon Speer, who testified at trial. After trial and before judgment was entered, Landmark Minerals Trust, the purchaser pendente lite of Turkey, filed a motion to intervene. The same individual who appeared on behalf of Turkey appeared for Landmark.

The decree entered by the court found Gordon Speer was the owner of the entire surface estate above the mineral estate in question, and found he owned a ⅛ interest in the mineral estate. The court found Landmark Trust, as successor in interest to Turkey Creek Minerals Trust, owned a ⅜ interest in the mineral estate, and found James Ross Carter, Mrs. Clyde Carter and Clarence Carter each owned a separate ⅝ interest in a 42-acre tract out of the 126-acre mineral estate, all of which the trial court found were subject to the mineral lease of Turkey Creek Minerals Trust. The court found the property was susceptible to partition in kind, ordered the partition of the mineral estate with the 15.797-acre tract surrounding the cavern set aside to Gordon Speer and ordered an in personam owelty award in the amount of $450,000 against M.U.S.T.’s parent company, Mapco, Inc., with a lien against the property set aside to Speer in the event the judgment was not paid within sixty days. The court denied all other requested relief, cross-actions claims and damages. The judgment ordered Mapco, Inc. to pay all court costs, including the costs of commissioners to affect the partition between the mineral estate owners. Mapco Underground Storage of Texas, Inc. and Mapco, Inc. appealed.

Arguments on Appeal Points of Error

Appellants urge six points of error complaining the trial court erred in rendering an owelty award of $450,000, erred in entering findings of fact supporting an owelty award against Mapco, Inc., erred in entering a finding of fact that the mineral estate salt was the walls and lateral support for the cavern, erred in rendering an in personam owelty judgment against Map-co, Inc., erred in entering findings of fact supporting an in personam judgment against Mapco, Inc., and erred in entering findings that Mapco, Inc. was the real party in interest of M.U.S.T.

Res Judicata and Collateral Estoppel

Appellants argue appellees are bound by the pronouncements of the declaratory judgment entered in an earlier suit between trustees for Turkey and M.U.S.T. and Mapco, Inc., declaring the mineral lessee owns the salt in the mineral estate of the same tract, the surface owner has the right to leach caverns out of the salt formation for the purpose of creating storage facilities, the cavities thus formed would belong to the surface owner, the mineral owner has the right to mine the salt if the operations do not make unreasonable use of the surface, the mineral owner can claim the salt leached from the salt formation if it is removed within a reasonable time, without making an unreasonable use of the surface, and the mineral owner pays the surface owner the reasonable expense of bringing the salt to the surface, and if the mineral owner did not claim the salt within a reasonable time, the surface owner may dispose of it. Turkey was a party to this suit and bound by it. Appellants argue the Carters were represented by Turkey as their mineral lessee and were collaterally estopped by the terms of the judgment and the issues determined therein.

A party seeking to invoke the doctrine of collateral estoppel must establish (1) that the facts sought to be litigated in the second action were fully and fairly litigated in the first action; (2) that those facts were essential to the judgment in the first action; and (3) that the parties were cast as adversaries in the first action. Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816 (Tex.1984). Persons are privies to a judgment whose succession to the rights of property therein adjudicated are derived through or under a party to the action. Likewise, a person is bound by the adjudication of a litigated matter as if a party where he has a proprietary or financial interest in the judgment. Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 363 (Tex.1971). The parties will be bound by estoppel where they represented the same legal right. Olivarez v. Broadway Hardware, Inc., 564 S.W.2d 195 (Tex.Civ.App.—Corpus Christi 1978, writ ref’d n.r. e.). Appellants argue the Carters, by virtue of their mineral lease with Turkey, which was a party to the first suit, are estopped to deny the cavern belongs to appellants.

The judgment here appealed denied ap-pellees’ waste and damage claims and awarded owelty. Partition was not decided in the first suit and appellants concede an owelty award would not be barred by collateral estoppel. Appellants do not object to the finding of fact that the prior judgment did not adjudicate partition or owelty. However, they argue the enhanced value of the property set aside to Speer due to the presence of the cavern cannot be considered in the partition because the prior litigation awarded the cavern to surface owner, therefore the trial court’s findings that the salt walls of the cavern belonged to the mineral estate and were amenable to owelty were in error.

The burden of establishing collateral es-toppel is on the party seeking to invoke it. Tompkins v. Hooker, 200 S.W. 193 (Tex.Civ.App.—Texarkana 1917, no writ). At trial, appellants introduced a judgment in the prior case which established M.U.S.T. obtained a declaratory judgment against Turkey. They established through cross-examination of Turkey’s trustees that Turkey was the lessee of the mineral interests of the Carters, the leases were signed before the first suit was filed, the Mssrs. Carter knew what was going on between Turkey and M.U.S.T. before the first suit was filed, and James Ross Carter supposed Turkey’s trustee had a power of attorney to sue on his behalf, and anything the trustee did was all right with him. Apparently, the Carters were not named as parties in the first suit, nor was Turkey named therein as their representative. We do not find in the record of this cause a power of attorney giving Turkey the power to file the first suit. One of the Carters testified he would receive ⅛ of a judgment against Mapco, but appellants did not establish this to be true of the first suit. The mineral lease states the lessor retains a ⅜ royalty interest and shall receive Vs of any rents received by a storer, presumably in the cavern. The interests of Turkey and the Carters are not identical; Turkey owned the mineral interests subject to the royalty interests of the Carters. The trial court did not err in failing to find the Carters were collaterally estopped by the findings in the first suit.

Valuation and Division of the Mineral Estate

Appellants argue the owelty award is incorrect because the salt is evenly distributed throughout the tract, the salt has no market value, the amount removed from the minerals was less than M.U.S.T.’s share as a cotenant, there is no inequality because M.U.S.T.’s successor is entitled to use the cavern, and the award is 142 times the value of the portion of the mineral interest awarded to M.U.S.T.’s successor.

The property in question is located at a salt dome. It was undisputed the salt was evenly distributed throughout the property. Appellees’ expert witness testified the salt had a market value as salt and a separate value if removed as brine as a result of the leaching operation. He testified there was a market for salt and brine, although the total available supply may exceed demand. Appellees argued at trial the salt removed by M.U.S.T. had a value of $947,319. There was sufficient evidence to establish the salt had some value. However, the uncontested findings of fact entered by the trial court state the value of the mineral estate was $200 per acre, for a total of approximately $25,275 for the entire mineral estate, and $900 per acre for the entire surface estate. The finding submitted by appellees and contested by appellants was the underground storage facility was worth $1,750,840 including the salt walls and mineral support, which the trial court found to be part of the mineral estate. The findings do not state the cavern ownership or right of use. The $450,000 owelty award is in fatal conflict with the uncontested finding of the value of the partitioned mineral estate. Apparently, the trial court considered some unspecified part of the value of the underground storage facility to belong to the mineral estate, but there is no finding of fact on that issue. Nor do the findings of fact specify what costs of creating the cavern are considered.

The judgment stated Speer should have the underground storage facility and a 15.-797-acre parcel with the well at its center set aside to him as his ⅛ mineral interest, subject to the compensating owelty judgment. The evidence produced at trial about the value of the walls of the cavern was limited to testimony regarding the value of the cavern itself. There are no findings of fact to support a judgment attributing the value of the cavern to the mineral estate, which is essential to its being considered in for owelty purposes. There is insufficient evidence to support the $450,-000 award of owelty out of an estate valued at $25,275. Appellees cannot be entitled to owelty under the findings of fact in this case.

The structure was created at the sole expense of M.U.S.T. The cost of creating the structure was $9,300,000. Appel-lees argue the cost of creating a similar cavern would be $800,000. As a cotenant producing minerals and creating an improvement, M.U.S.T. had the duty to account to its non-consenting cotenants for the minerals produced, less the necessary and reasonable costs of production. Cox v. Davison, 397 S.W.2d 200 (Tex.1965). It appears from the record the cost of production was far greater than the value of the minerals produced. There is some evidence the costs of production were not reasonable through testimony it cost less to dig the salt out than to leach it and that the value of solid salt is greater than brine. This would support an action for damages, which was denied by the court and not appealed from. It would not support owelty on partition. Appellees argue appellants acted in bad faith in creating the cavern, and therefore are not entitled to contribution for the cost of creating it. A non-joining cotenant has no obligation to pay for improvements. Perez v. Hernandez, 658 S.W.2d 697 (Tex.App.—Corpus Christi 1983, no writ). Neither does he own the improvements erected at the sole expense of his cotenant. Where improvements have been made on the partitioned property, the improved portion will be allotted to the joint owner who had made the improvement. Cleveland v. Milner, 141 Tex. 120, 170 S.W.2d 472 (Tex. Comm’n App.1943, opinion adopted); Bouquet v. Belk, 404 S.W.2d 862 (Tex.Civ.App.—Corpus Christi 1966, writ ref’d n.r.e.). If the improvement cannot be allotted to the party who made them, then that party has a right of compensation from the cotenants receiving the improvement. Whitmire v. Powell, 103 Tex. 232, 125 S.W. 889 (1910); Poenisch v. Quarnstrom, 386 S.W.2d 594 (Tex.Civ.App.—San Antonio 1965, writ ref’d n.r.e.). Ap-pellees claimed a share in their cotenant’s improvement without paying for its construction. Owelty is an inappropriate remedy because the overwhelming weight and preponderance of the evidence supports the finding the salt is of uniform value throughout the partitioned estate. There is no evidence that the minerals comprising the cavern walls have more or better minerals than the rest of the estate. There is no evidence beyond the existence of the cavern to support enhanced value of the portion allotted to Speer. Appellees’ state in their brief the cavern is the most essential factor in the disparity in value between the tracts. Therefore, even if the cavern were an improvement to the mineral estate as asserted by appellees, M.U.S.T. created the cavern and is entitled to its improvement without regard to the enhancement of the value of the estate partitioned to it caused solely by the presence of that improvement. Appellants’ first point of error is sustained.

In Personam Judgment Against Mapco, Inc.

Appellants next complain the trial court erred in awarding the owelty judgment in personam against Mapco, Inc. Owelty is properly awarded between coten-ants to effectuate an equitable partition of their property. Sayers v. Pyland, 139 Tex. 57, 161 S.W.2d 769 (1942); Bouquet v. Belk, 376 S.W.2d 361 (Tex.Civ.App.—San Antonio 1964, no writ). Appellees produced no evidence at trial that Mapco, Inc. was an owner of the property, nor did they produce evidence showing M.U.S.T. was an alter ego of Mapco, Inc. We can find no pleadings where appellees made Mapco, Inc. a party defendant, no allegations of agency or alter ego between Mapco, Inc. and M.U.S.T., no allegations Mapco, Inc. is or was an owner of an interest in the mineral estate. There is insufficient evidence to support the trial court’s findings that M.U.S.T. is the alter ego of Mapco, Inc. and that Mapco, Inc. is the equitable owner of M.U.S.T.’s interest in the mineral estate. Accordingly, appellants’ sixth point of error is sustained.

We cannot reverse the owelty award without disturbing the partition of the mineral estate.

The judgment of the trial court is reversed in part and the partition action is remanded for new trial. The judgment of the trial court is in all other matters affirmed.

We do not find it necessary to rule on appellants’ points of error two, three, four and five, or on appellees’ cross-point, and decline to do so.

AFFIRMED IN PART; REVERSED AND REMANDED IN PART.

WALKER, C.J., not sitting.