United States District Court, S.D. Texas, Corpus Christi Division
ORDER ON MOTION TO ALTER OR AMEND FINAL
GONZALES RAMOS UNITED STATES DISTRICT JUDGE
the Court is Plaintiffs, Texas Lone Star Petroleum
Corporation (TLSPC) and Jeffrey Cobbs' (Cobbs'),
Motion to Alter or Amend Final Judgment (D.E. 95). In that
motion, they seek four corrections to the Court's final
judgment, issued January 3, 2017. Defendants Chesapeake
Exploration, LLC and Chesapeake Operating, LLC filed a
response, opposing each of the four requested corrections.
D.E. 96. The parties then exchanged additional briefing. D.E.
97, 98. After due consideration and for the reasons set out
herein, the motion is GRANTED IN PART and DENIED IN PART.
Offset of Underpayments Extinguishing Defendants'
argue that the parties' Joint Pretrial Order includes as
an admission of fact, “That as of February 14, 2016,
Chesapeake has applied approximately $101, 399.42 in
production runs due on Cobbs' overrides to the amount
that Chesapeake claims it has overpaid Jeff Cobbs.”
D.E. 62, p.15, ¶ 19. As Defendants point out, the Court
previously denied any claim to an offset of underpayments
against the recovery of overpayments because Plaintiffs had
not expressly pled the claim or requested that relief.
reconsideration, the Court finds that the admission, stated
in the past tense, is articulated in such a way as to make a
pleading for that recovery superfluous. See Nat G.
Harrison Overseas Corp. v. Am. Tug Titan, 516 F.2d 89,
96 (5th Cir.), modified on other grounds, 520 F.2d
1104 (5th Cir. 1975) (en banc); Gibbs v. Randolph,
250 F.2d 41, 43 (5th Cir. 1957) (stipulations and admissions
render pleading amendments unnecessary as no evidence need be
offered to prove the matter). Cobbs' right of offset, as
implied in the admission of fact, was stipulated and exceeds
the amount of the relevant overpayment claim. The Court
GRANTS IN PART the motion (D.E. 95) and will amend the
judgment to eliminate Defendants' recovery of $37, 864.14
Judgment Supported by Pleadings
contend that they are entitled to a take-nothing judgment
because Defendants sought recovery of overpayments made to
Plaintiffs only to the extent that those overpayments
represented overriding royalties owed to third parties,
Northwest Energy and Jerry House. Plaintiffs claim that there
is no such money owed to Northwest Energy or Jerry House
because Defendants voluntarily paid them prior to trial for
their previously underpaid interests. Such voluntary
payments, Plaintiffs assert, cannot support a claim for
damages against an overpaid overriding royalty interest
are correct with respect to the common law governing
improperly paid overriding royalty interests and the Court
previously so held. D.E. 84 (citing Gavenda v. Strata
Energy, Inc., 705 S.W.2d 690, 692 (Tex. 1986);
Frymire Eng'g Co. ex rel. Liberty Mut. Ins. Co. v.
Jomar Int'l, Ltd., 259 S.W.3d 140, 142 (Tex. 2008)).
However, the judgment here is based upon the enforcement of
the division orders as contracts. D.E. 84, pp. 15-20.
Consequently, the damages question is only a matter of
quantifying how much Plaintiffs were overpaid during the time
the parties treated the division orders as being in effect.
The reason they were overpaid is immaterial-unless
Defendants' pleadings and the joint pretrial order
limited their recovery.
contend that Defendants did, in fact, limit their request to
only the amounts that should have been paid to Northwest
Energy and Jerry House. The record in this regard lacks
clarity. In their Second Amended Counterclaim (D.E. 53),
Defendants described overpayments made due to mistakes made
by their analysts in calculating Plaintiffs' interest, as
well as failing to properly account for interests assigned to
Northwest Energy and Jerry House. In conclusion, they prayed
for “damages equal to the amount Chesapeake Exploration
and Chesapeake Operating have overpaid Plaintiffs . . .
.” D.E. 53, p. 6. In their proposed conclusions of law,
Defendants requested recovery of all overpayments without
differentiation. D.E. 60, ¶¶ 14, 16, 17. Plaintiffs
did not object to those proposals.
Joint Pretrial Order, the contentions of the parties include
the following language:
Defendants' counterclaim is for overpayments of
overriding royalty made to Plaintiffs. The Defendants contend
that the overpayments result from the fact that Plaintiffs
made assignments of portions of their overriding royalty
interest but did not notify Defendants of these assignments,
which resulted in Defendants paying Plaintiffs amounts that
should have been paid to third parties. Defendants have paid
these third parties and seek to be reimbursed for the amounts
paid to Plaintiffs that should have been paid to
D.E. 62, p. 6. Plaintiffs' response to that contention
includes the global representation that “any
overpayment based on the division order . . . is
unenforceable as a contract as no consideration exists to
support it.” D.E. 62, p. 7. Contested issues of fact
included whether the division orders provided for refund of
“any overpayments.” D.E. 62, p. 19, ¶¶
9, 10. Yet a contested issue of law was whether Plaintiffs
were required under the division orders to repay funds that
should have been paid to other overriding royalty interest
owners. Id. at 26.
evidence at trial included details regarding overpayments
based on both Defendants' clerical errors and the failure
to acknowledge the interests of Northwest Energy and Jerry
House. At no time did Plaintiffs object to the proof that
some of the overpayments made pursuant to division orders
included those based on clerical errors, which were in turn
included in Defendants' damages calculation. In amended
proposed findings of fact and conclusions of law, Defendants
claimed that TLSPC and Cobbs were overpaid because they were
paid on interests owned by third parties and because of
mistakes. D.E. 81, p. 11, ¶¶ ...