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Verde Minerals, LLC v. Koerner

United States District Court, S.D. Texas, Corpus Christi Division

December 3, 2019

VERDE MINERALS, LLC, et al, Plaintiffs,
v.
DIANE DUNCAN KOERNER, et al, Defendants.

          ORDER ON KOERNER DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

          NELVA GONZALES RAMOS UNITED STATES DISTRICT JUDGE.

         Before the Court is a motion for summary judgment on Plaintiffs' third amended class action complaint filed by Defendants Diane Duncan Koerner, Kimberly K. Sheridan, Stacey E. Koerner, and Charles D. Duncan (collectively, the Koerner Defendants). D.E. 108. Defendants primarily challenge Plaintiffs' breach of covenant claim because Burlington Resources Oil & Gas Company LP (Burlington), a nonparty to this action and the operator-lessee of the oil and gas interests at issue, assumed any obligation to pay royalties. The remaining defendants, Jo Ann Crawford Floyd, Barbara Braun Wolin, as Trustee of the Robyn Louis Wolin Trust, Virginia Kathleen Pittman Rothermel, Charles T. Rothermel III, Elizabeth Pittman Clark, and Ansel P. Clark (collectively, the Crawford Defendants) joined and adopted this argument.[1] D.E. 112. Plaintiffs responded (D.E. 113) and the Koerner Defendants replied (D.E. 116). For the following reasons, the Koerner Defendants' motion for summary judgment is DENIED.

         STANDARD OF REVIEW

         Summary judgment is proper if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). “A genuine dispute of material fact means that evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Royal v. CCC & R Tres Arboles, L.L.C., 736 F.3d 396, 400 (5th Cir. 2013) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (internal quotation marks omitted)). A party may also move for summary judgment when the dispute is purely over issues of law. Neff v. Am. Dairy Queen Corp., 58 F.3d 1063, 1065 (5th Cir. 1995). “[E]ven if the issue of law is complex or requires difficult questions of interpretation, summary judgment is still appropriate if there is no triable issue of fact.” Trade-Winds Envtl. Restoration, Inc. v. Stewart, No. CIV. A. 06-3299, 2008 WL 236891, at *4 (E.D. La. Jan. 28, 2008).

         BACKGROUND

         The Court previously described the facts of this case in the order denying the Crawford Defendants' motion for summary judgment (D.E. 123), which the Court hereby incorporates by reference. For purposes of this motion, the Court sets out the procedural history.

         Plaintiffs originally sued Defendants for breach of covenant, breach of fiduciary duties, and conversion, and sought a declaratory judgment and injunctive relief. In their second amended complaint, Plaintiffs brought claims against Burlington and later dismissed Burlington without prejudice. Subsequently, Defendants filed a 12(b)(6) partial motion to dismiss. D.E. 55. The Court dismissed the claims for conversion, injunctive relief, and punitive damages for failure to state a claim and dismissed the request for declaratory relief as duplicative of the breach of covenant claim. D.E. 68.

         In the third amended complaint, Plaintiffs dropped the claim for breach of fiduciary duties, restated a claim for declaratory judgment, and added Burlington to the lawsuit for violation of the Texas Natural Resources Code (TNRC). Soon after, Burlington filed a motion to dismiss. D.E. 81. Because Plaintiffs failed to show that Burlington was liable under the TNRC, the Court granted the motion to dismiss. D.E. 96. Thus, Burlington is no longer a party to this action.

         Plaintiffs' remaining claims are for declaratory judgment and breach of covenant. Plaintiffs allege that Defendants are bound by the covenants contained in the Hawley Deeds (Deeds) to deliver and pay to Plaintiffs a portion of the proceeds for oil and gas found and sold from the Hawley-Ayers Survey (the Property). The Court held that the Deeds conveyed a floating royalty interest. D.E. 123.

         Now, Defendants move for summary judgment, arguing that they cannot be liable for a breach of covenant claim as the lessors of the Property. Defendants' argument is solely an issue of law.[2] Defendants also argue that the Deeds conveyed a personal payment covenant that does not run with the land and the Deeds are invalid under the statute of frauds-arguments previously rejected by the Court. D.E. 123. The Court declines to revisit these arguments and addresses only the breach of covenant claim.

         DISCUSSION

         Defendants argue that in a typical oil and gas dispute, the plaintiff alleging failure to pay royalties sues the operator-lessee, not the lessor, for breach of contract or violations of the TNRC. Thus, Plaintiffs are asserting the breach of covenant claim against the wrong party because it is Burlington who is liable for any royalties owed under the terms of Burlington's lease with Defendant Diane Crawford (the Lease). Defendants' argument fails for the following reasons.

         A. The Deeds created an obligation to pay and deliver royalties.

         Plaintiffs argue that the Hawley Deeds define Defendants' obligations, which is the basis of the breach of covenant ...


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