Shell Western E & P, Inc. v. Pel-State Bulk Plant, LLC

509 S.W.3d 581, 2016 Tex. App. LEXIS 11538, 2016 WL 6247007
CourtCourt of Appeals of Texas
DecidedOctober 26, 2016
DocketNo. 04-15-00750-CV
StatusPublished
Cited by7 cases

This text of 509 S.W.3d 581 (Shell Western E & P, Inc. v. Pel-State Bulk Plant, LLC) 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
Shell Western E & P, Inc. v. Pel-State Bulk Plant, LLC, 509 S.W.3d 581, 2016 Tex. App. LEXIS 11538, 2016 WL 6247007 (Tex. Ct. App. 2016).

Opinion

OPINION

Opinion by:

Karen Angelini, Justice

Shell Western E & P, Inc., now known as SWEPI, LP, appeals from a [584]*584$3,190,017.05 judgment against it. Pel-State Bulk Plant, LLC, sued Shell after it perfected a lien on a mineral lease owned by Shell. Both Shell and Pel-State moved for summary judgment. The trial court granted Pel-State’s motion in part and denied Shell’s motion. On appeal, Shell argues the trial court’s summary judgment rulings are erroneous because the trial court did not construe two provisions of the Texas mineral lien statute correctly. We affirm.

Background

In 2010, Shell acquired a mineral lease on the Piloncillo Ranch, a 106,000-acre tract located in Dimmit, La Salle, and Webb counties in Texas. Shell hired Green Field, a general contractor, to perform fracking on wells on its mineral leases. In September 2011, Shell and Green Field signed a contract titled, “Contract for High Pressure Fracturing Services” (“the fracking agreement”). After entering into the fracking agreement with Shell, Green Field hired Pel-State, a subcontractor, to provide bulk fuel, fuel equipment, and other services to assist in developing Shell’s mineral lease.

In late June 2013, Pel-State sent Shell a lien claim notice informing Shell that Green Field was not paying it for the work Pel-State had performed on the Piloncillo lease. Shortly thereafter, Pel-State filed an affidavit in the appropriate county records, perfecting a mineral lien as authorized by the Texas Property Code. Later, Shell unencumbered its leasehold interest by filing a bond for 150% of the value of the lien claims. Shell then sold its interests in the Piloncillo lease.

In July 2013, Pel-State filed suit against Shell and Green Field. Green Field filed for bankruptcy. Because Shell had filed a bond, Pel-State’s remedy was to establish the validity of its lien in court and to obtain a judgment in its favor for the amount of its lien.

Pel-State and Shell filed cross-motions for summary judgment. Pel-State argued that the lien amount was $3,190,017.05 based on the invoices Green Field had failed to pay. Shell, on the other hand, argued the lien amount was only $713,700.40. Shell asserted that the amount of the lien was limited by two statutory provisions, section 56.006 and section 56.043 of the Texas Property Code. The trial court rejected Shell’s construction of these statutory provisions and rendered judgment against Shell for the amount claimed by Pel-State.1 Shell appealed.

Chapter 56 of the Texas Property Code

Chapter 56 of the Texas Property Code governs liens against mineral property. “A mineral contractor or subcontractor has a lien to secure payment for labor or services related to the mineral activities.” Tex. Prop. Code Ann. § 56.002 (West 2014). Property subject to a mineral lien includes: (1) the material, machinery, and supplies furnished or hauled by the lien claimant; (2) the land, leasehold, oil or gas well, and lease for oil and gas purposes for which the labor was performed or material, machinery, or supplies were furnished or hauled, and the buildings and appurtenances on this property; (3) other material, machinery, and supplies used for mineral activities and owned by the property owner listed in subdivision 2; and (4) other [585]*585wells and pipelines used in operations related to oil, gas, and minerals and located on property listed in subdivision 2. Id. § 56.003. To secure a mineral lien, a claimant must first serve the property owner with written notice that the lien is claimed, and then must file an affidavit with the county clerk of the county in which the property is located. Id. § 56.021. A claimant must enforce a mineral lien within the same time and in the same manner as a mechanic’s, contractor’s, or materialman’s lien under Chapter 53 of the Texas Property Code. Id. § 56.041(a).

Under Chapter 56, a property owner who is served with a mineral subcontractor’s notice may withhold payment to the contractor in the amount claimed until the debt on which the lien is based is settled or determined to not be owed. Id. § 56.043. In addition, Chapter 56 limits a property owner’s liability in two ways. First, “[a]n owner of land or a leasehold owner may not be subjected to liability” “greater than the amount agreed to be paid in the contract for furnishing material or performing labor.” Id. § 56.006. Second, the property owner is “not liable to the subcontractor for more than the amount that the owner owes the original contractor when the notice is received.” Id. § 56.043.

In construing sections 56.006 and 56.043, one Texas appellate court has stated,

[T]he lien is subordinate to the terms of the contract between the owner and his contractor. This obtains because [under section 56.006] the owner cannot be liable to the contractor' for more than their contract price, [] and [under section 56.043] he cannot be liable to a subcontractor for more than the amount he owes his contractor at the time he is served with notice of the subcontractor’s claim.
As a result, the owner is liable to a subcontractor only to the extent that he is liable to his contractor; thus, the right to the enforcement of the lien depends upon the state of the account between the owner and his contractor, and not upon the condition of the account between the contractor and his subcontractor, when the owner receives notice of the claim.

Energy-Agri Products, Inc. v. Eisenman Chem. Co., Inc., 717 S.W.2d 651, 653 (Tex.App.-Amarillo 1986, no writ) (internal citations omitted).

Issues Presented

On appeal, Shell presents the following issues:

(1) Did the trial court err in denying Shell’s cross-motion for summary judgment and in granting Pel-State’s motion for summary judgment?
(2) Did the trial court erroneously interpret Texas Property Code section 56.006 by calculating Pel-State’s mineral subcontractor lien using the cumulative sum of multiple contracts between Shell and Green Field, some of which were paid in full, rather than the amount of each specific contract for which Pel-State provided labor and materials?
(3) Did the trial court erroneously interpret Texas Property Code section 56.043 by not limiting Shell’s liability to the amount Shell owed Green Field on the lien notice date for each specific contract on which Pel-State’s claim was based?

Standard op Review

We review a trial court’s summary judgment rulings de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). When reviewing a summary [586]*586judgment, we take as true all evidence favorable to the nonmovant, and we indulge every inference and resolve any doubts in the nonmovant’s favor. Id.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
509 S.W.3d 581, 2016 Tex. App. LEXIS 11538, 2016 WL 6247007, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shell-western-e-p-inc-v-pel-state-bulk-plant-llc-texapp-2016.