Schmidt v. Rodriguez (In re Rodriguez)

524 B.R. 111
CourtUnited States Bankruptcy Court, S.D. Texas
DecidedDecember 19, 2014
DocketBankruptcy No. 12-07018; Adversary No. 11-07012
StatusPublished
Cited by1 cases

This text of 524 B.R. 111 (Schmidt v. Rodriguez (In re Rodriguez)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schmidt v. Rodriguez (In re Rodriguez), 524 B.R. 111 (Tex. 2014).

Opinion

MEMORANDUM OPINION

MARVIN P. ISGUR, Bankruptcy Judge.

Dewey Bellows Operating Company, Ltd.’s Motion for Summary Judgment, (ECF No. 239), is granted in part and denied in part. Petitioning Creditors are barred from recovery of saltwater disposal revenues accruing after the spill on San Gregorio Ranch. To the extent the motion seeks to bar recovery for saltwater disposal revenues accruing before the spill, the motion is denied.

Background

The procedural history of this case and the accompanying litigation is extremely convoluted. The Court issued a Memorandum Opinion on November 16, 2012 which dealt extensively with the underlying events that preceded the involuntary bankruptcy of Gabriel G. Rodriguez. (ECF No. 129); Schmidt v. Rodriguez (In re Rodriguez), 2012 WL 5830639 (Bankr. S.D.Tex. Nov. 16, 2012). It is not necessary to repeat this history in detail again. However, the Court will summarize the history of the involuntary bankruptcy, the pre-petition state court appellate rulings, and the state court litigation between the Petitioning Creditors and Dewey Bellows Operating Company, Ltd.

Land Dispute Between Debtor and Plaintiffs

On January 22, 1943, Maria Lopez de Peña devised nine tracts of land to her nephew Santiago Rodriguez, the adoptive father of Debtor Gabriel Rodriguez. Rodriguez v. Garza, 2007 WL 2116411 at *1 (Tex.App. July 25, 2007) (Garza III). The terms of the will stated that if Santiago died without lawful issue of his body, the land would pass to Eusebia Lopez de Rodriguez (Maria’s sister) or her heirs and descendants. Id. Santiago died intestate on October 19, 1984. He was survived only by his wife and Debtor, who remained in possession of the nine tracts of land. Id. On July 8, 1986, the heirs and descendants of Eusebia Rodriguez (the “Petitioning Creditors”) filed suit in Starr County District Court seeking a declaration that they had superior title to the nine tracts of land. (ECF No. 47-1). In response, Debtor filed a probate action in the Starr County Court at Law (sitting as the Starr County Probate Court) on August 4, 1986. (ECF No. 47-4). Debtor obtained an order from the Starr County Court at Law granting he and his mother equal shares of Santiago Rodriguez’s estate and appointing him independent administer of the estate. (ECF No. 72-3 at 3).

Petitioning Creditors’ suit in the Starr County District remained active, although it is unclear what happened in the intervening years. Twelve years after the Court at Law’s order, the District Court dismissed Petitioning Creditors’ suit for lack of jurisdiction on June 10, 1998. (ECF No. 47-12).1 On July 14, 1998, Petitioning Creditors refiled in the Starr County Court of Law. (ECF No. 47-2). The second lawsuit contained the same prayer for relief that Petitioning Creditors had superior title to Debtor, but also sought additional damages for wrongfully diverted oil and gas royalties. Id. at 6. The Starr County Court of Law dismissed the second lawsuit for lack of jurisdiction. [116]*116On appeal, the Texas Court of Appeals reversed the dismissal after finding the Court of Law had jurisdiction, and remanded for further consideration. Garza v. Rodriguez, 87 S.W.3d 628 (Tex.App. 2002) (Garza II).

On remand, the Starr County Court of Law granted Petitioning Creditors’ summary judgment motion that they held superior title to the nine tracts of land. (ECF No. 47-5). The Court of Law also severed the title action into a new case (Cause No. PR-98-37(B)), while keeping all other claims for royalties in the original case (Cause No. PR-98-37). (ECF No. 47-5). The Texas Court of Appeals affirmed the grant of summary judgment in the title action. Rodriguez v. Garza, 2007 WL 2116411 (Tex.App. July 25, 2007) 0Garza III). The court held that Maria Peña granted Santiago Rodriguez the land in fee simple subject to an executory limitation. Id. at *2. Once the stated event in the will occurred, i.e. Santiago dying without “lawful issue of his body,” title to the land vested in the Petitioning Creditors.2 Id. The affirmation by the Court of Appeals of judgment for Petitioning Creditors resolved the underlying land dispute.

Salt Water Disposal Agreement and Additional Litigation

Although it was ultimately determined that Debtor was not the-rightful landowner, he possessed the land from Santiago Rodriguez’s death until some point after December 8, 2005. On October 22, 2002, Debtor entered into a Saltwater Disposal Agreement (“SWDA”) with Dewey Bellows Operating Company, Ltd. (ECF No. 30, Ex. B-l). Under the SWDA’s terms, Debtor leased two acres of San Gregorio Ranch to Dewey Bellows to operate a commercial saltwater disposal system. (ECF No. 30, Ex. B-l). The SWDA contained a provision requiring Dewey Bellows to pay Debtor all damages sustained by the operations and repair all damage done to the land. (ECF No. 47-14 at 3). The SWDA also contained the following Indemnification Provision:

[Lessee] shall indemnify and hold lessor harmless from all loss and liability arising from lessee’s operations regardless of whether it arises from lessor’s acts of negligence or that of others. Gerality [sic] of this lessee shall indemnify and hold lessor harmless from all loss and liability for claims asserted to arise out of lessee’s operations with respect to: (a) discharge of saltwater, oil, or of hazardous substances as defined by any federal, state or local environmental law, or the presence of hazardous substances affecting the leased premises whether or not the same originates or emanates from the leased premises or any continuous property owned or occupied by lessee: and (b) removal costs, incurred or required by federal state of [sic] local government with respect to saltwater, oil or hazardous substances.

Id.

At some point in 2007 or early 2008, saltwater from the disposal operation spilled onto San Gregorio Ranch. (ECF No. 30 at 2). The parties agree that the spill caused extensive damage to the ranch. In light of the additional damages caused by the spill, Petitioning Creditors amended their suit against Debtor to include causes of action of negligence, trespass, and waste. (ECF No. 47-3 at 6-7). In September 2007, Petitioning Creditors also filed suit against Dewey Bellows Operating Company, Ltd., Dewey Bellows [117]*117(the owner of the company), and Gary Bellows (the owner’s son). (ECF No. 46 at 10). The original petition was filed before the spill’s discovery, but was amended several times. The fourth amended petition alleged causes of action for: (i) negligence, gross negligence, and waste; (ii) trespass; and (iii) fraudulent transfers. (ECF No. 30, Ex. B-6 at 7-11).

The case was tried before a jury in September 2009. In its jury charge, the court asked the jury two questions related to negligence. The first question read as follows:

Did the negligence, if any, of Dewey Bellows Operating Company Ltd. proximately cause damage to San Gregorio Ranch or its owners?
For this question only Dewey Bellows Operating Company Ltd. was negligent if—
a. Dewey Bellows Operating Company Ltd. undertook to perform services it knew or should have known were necessary for the protection of San Gregorio Ranch, and
b. Dewey Bellows Operating Company Ltd.

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Related

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S.D. Texas, 2022

Cite This Page — Counsel Stack

Bluebook (online)
524 B.R. 111, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schmidt-v-rodriguez-in-re-rodriguez-txsb-2014.