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Seven N. Holdings, L.P. v. Mathis & Sons, Inc.

Court of Appeals of Texas, Eleventh District

January 24, 2014

MATHIS & SONS, INC., Appellee.

On Appeal from the 39th District Court Haskell County, Texas Trial Court Cause No. 11, 670

Panel consists of: Wright, C.J., Willson, J., and Bailey, J.



Seven N. Holdings, L.P. (Seven Holdings) and 7N Oil & Gas Bonanza, L.P. (7N Oil & Gas) appeal the trial court's judgment that maintained a lien against Seven Holdings and awarded attorney's fees and costs to Mathis & Sons, Inc. (Mathis & Sons). We affirm.

I. Evidence at Trial

The "Wirz Lease" refers to an oil, gas, and mineral lease originally entered into between Seven Holdings, as lessee, and Richard and Kay Wirz, as lessors. The lease was recorded in the official public records of Baylor County. Seven Holdings assigned its interest in the lease to 7N Oil & Gas on August 27, 2008, and this assignment was properly recorded in the official records of Baylor County.[1]

Records filed with the Texas Railroad Commission show that 7N Oil & Gas is the operator of the Wirz Lease, but the records incorrectly show Seven Holdings' address rather than the correct address of 7N Oil & Gas. 7N Oil & Gas is in Houston, and Seven Holdings operates in Aubrey. The general partner for both Seven Holdings and 7N Oil & Gas is Jabela Holdings, L.L.C. (Jabela). Laurie D. Nickell is Jabela's general partner, and she is also the registered agent for Seven Holdings. Jerry D. Nickell, Laurie Nickell's husband, serves as the registered agent for 7N Oil & Gas.

Jerry Nickell hired contract pumper Donnie Harrington to perform work on the Wirz Lease. At Harrington's request, Mathis & Sons provided oilfield and fluid disposal services on the Wirz Lease from October 28, 2008, to March 6, 2009. Mathis & Sons also rented and delivered a frac tank to the Wirz Lease. Harrington told Terry Mathis, the president of Mathis & Sons, to send the invoices for the provided services to 7N Oil & Gas.

Subsequently, Mathis & Sons sent twenty-two invoices for services performed on the Wirz Lease to Seven Holdings' address in Aubrey. Unsure of the proper party to bill, Mathis & Sons addressed these invoices using a variety of names, including "7N Holdings, L.P., " "7N Oil and Gas, " and "7N Holding Company." 7N Oil & Gas initially paid two of the invoices, but the other twenty invoices went unpaid.

Mathis finally checked the Baylor County records in an effort to find out who was the proper party upon which to make demand for the unpaid balance. Mathis discovered the original Wirz Lease but failed to find the subsequent assignment to 7N Oil & Gas. Based on the information contained in the original Wirz Lease agreement, Mathis & Sons made demand on Seven Holdings for the balance of the unpaid invoices.

Mathis contacted Jerry Nickell several times about the unpaid invoices, but Jerry refused to pay them and also failed to give an explanation for not paying them. Mathis & Sons then filed a lien on the Wirz Lease under Chapter 56 of the Texas Property Code.[2] Mathis also removed the rented frac tank from the Wirz lease. In order to remove the tank, Mathis emptied the contents of the tank into the casing of the Wirz lease well.

Mathis & Sons then brought a Chapter 53[3] foreclosure and enforcement suit against Seven Holdings. After Seven Holdings responded with a verified denial that indicated that 7N Oil & Gas was the proper party to the litigation, Mathis & Sons amended its claim to include 7N Oil & Gas as an additional defendant. Almost two years after Mathis & Sons first demanded payment, 7N Oil & Gas sent Mathis & Sons a cashier's check for the balance of the unpaid invoices. Because the check did not include additional compensation for interest and attorney's fees, Mathis & Sons refused to accept it.

Mathis testified that his decision to pump the contents of the frac tank back down the Wirz Lease well, to retrieve the rented frac tank, represented standard practice in the industry. Mathis stated that his actions should have damaged no oil and should not have prevented later retrieval of the oil. Royce Dean Walker, an expert witness for Mathis, also testified that Mathis's decision to pump the fluid back down the well should not have affected the value of any oil in the well and should not have prevented its recovery.

In his testimony, Harrington described the fluid in the rented frac tank as "slop" and compared it to "gun grease." Jerry Nickell disputed Harrington's assessment of the oil and testified that the tank contained 242 barrels of good quality oil, valued at $72 a barrel. Jerry referred to Mathis's decision to pump the oil back down the well as "unheard of, " and he also testified that, as a result of Mathis's actions, he was unable to recover the oil that Mathis had pumped back down the well. Jerry claimed the lost oil "had a market value of" $17, 000, which represented his damages.

The trial court maintained the Chapter 56 lien against Seven Holdings and ordered Seven Holdings and 7N Oil & Gas to pay Mathis & Sons $16, 000 for attorney's fees and costs. In its findings of fact, the trial court stated that Mathis's decision to remove the rented frac tank and discharge its contents into the Wirz Lease well did not result in damages because the contents were of no or nominal value.

II. Issues Presented

Seven Holdings and 7N Oil & Gas present the following issues (as paraphrased by this court):

(1) Did the trial court err when it held Seven Holdings and 7N Oil & Gas jointly and severally liable for Mathis & Sons' ...

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