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Cody Texas, L.P. v. BPL Exploration, Ltd.

Court of Appeals of Texas, Fourth District, San Antonio

December 11, 2019

CODY TEXAS, L.P., Appellant

          From the 49th Judicial District Court, Zapata County, Texas Trial Court No. 8, 665 Honorable Jose A. Lopez, Judge Presiding

          Sitting en banc [1] : Sandee Bryan Marion, Chief Justice Patricia O. Alvarez, Justice Luz Elena D. Chapa, Justice Irene Rios, Justice Beth Watkins, Justice Liza A. Rodriguez, Justice.


          Beth Watkins, Justice.


         Appellant Cody Texas, L.P. appeals a November 15, 2017 final judgment in favor of appellee BPL Exploration, Ltd. The trial court signed that judgment on remand after this court reversed the trial court's denial of Cody's petition for bill of review. See Cody Tex., L.P. v. BPL Expl., Ltd., 513 S.W.3d 522, 543 (Tex. App.-San Antonio 2016, pet. denied) (Cody I). For the reasons explained below, we overrule our December 14, 2016 opinion in Cody I; recall the mandate in that appeal; permanently suspend enforcement of our December 14, 2016 judgment in that appeal; vacate the trial court's November 15, 2017 final judgment; and render judgment denying Cody's petition for bill of review.


         A. The Underlying Dispute

         This is the second lawsuit and the third direct appeal arising from a conveyance of mineral interests between Cody and two non-parties: Choctaw Corporation and Queen Sand Resources ("QSR"). These mineral interests included working interests owned by Choctaw and covered by a joint operating agreement that gave BPL a preferential right to purchase them ("the JOA properties"). The joint operating agreement required Choctaw to give BPL written notice of any proposed sale of the JOA properties and to include "full information concerning [the] proposed disposition" in that notice. The joint operating agreement specified that its terms ran with the land and were binding on the parties to the agreement and their successors.

         In April of 2000, Cody offered to buy the JOA properties from Choctaw. At the same time, it offered to buy overriding royalty interests from QSR that were not covered by the joint operating agreement. Cody and QSR also agreed to a second transaction in which Cody would sell 25% of the JOA properties to QSR. Although Cody assigned the JOA properties an "Allocated Value" of $947, 000, a letter agreement between Choctaw and QSR showed that Choctaw would receive only $777, 000 for them. Choctaw, Cody, and QSR agreed the effective date of the two transactions would be January 1, 2000, and they also agreed that Cody and QSR, as purchasers of the JOA properties, were entitled to receive proceeds from any operations on those properties after January 1, 2000.

         During these negotiations, Choctaw notified BPL of the proposed sale. It told BPL that it planned to sell the JOA properties to Cody and that the price allocated by Cody was $947, 000. Choctaw later confirmed that price to BPL. However, Choctaw did not disclose that: (a) it would only receive $777, 000 for the JOA properties; (b) Cody would immediately transfer 25% of the JOA properties to QSR; or (c) the backdated effective date of the transfer meant Cody and QSR would receive six additional months' worth of proceeds from any operations on the JOA properties. BPL requested the additional information required by the terms of the joint operating agreement, but Choctaw refused to supply that information, citing a confidentiality agreement. In reliance on Choctaw's representations, BPL waived its preferential right to purchase the JOA properties.

         On June 30, 2000, Choctaw, Cody, and QSR executed their various conveyances, and on July 11, 2000, they filed the conveyance documents in the Zapata County deed records. The only price information listed in these publicly available documents shows that the JOA properties were conveyed for "$10.00 and other good and valuable consideration."

         B. The Original Trial and Dismissed Appeal

         BPL learned about Cody's transfer to QSR for the first time in 2004. On November 28, 2005, it filed suit against Cody, as Choctaw's successor, for breach of the joint operating agreement. During the discovery period in that lawsuit, BPL first learned the terms of the Cody-Choctaw-QSR transaction that Choctaw had refused to disclose in 2000. BPL then amended its petition to add a fraud claim against Cody, contending it was damaged by Choctaw's misrepresentations and failure to disclose information required by the joint operating agreement. It also contended that Choctaw's conduct prevented it from discovering its legal injury until several years after the conveyances.

         Cody countered that BPL's breach of contract and fraud claims were barred by limitations. BPL argued, however, that the statute of limitations was tolled by the discovery rule and the fraudulent concealment doctrine. After hearing evidence during a week-long bench trial, the trial court found that Choctaw's duties under the joint operating agreement had transferred to Cody[2]and that BPL's breach of contract and fraud claims were not barred by limitations. On May 13, 2013, the trial court signed a final judgment awarding damages and attorneys' fees to BPL. However, the district clerk did not notify the parties of the signing of that judgment.

         On October 9, 2013, after the trial court's plenary power expired, the trial court signed a second final judgment. This was the first judgment the district clerk sent to the parties, and Cody attempted to appeal it. However, because we concluded the second judgment was void and Cody had not timely appealed the May 13, 2013 judgment, we dismissed the appeal for want of jurisdiction.[3]

         C. The Bill of Review and the First Substantive Appeal (Cody I)

         Next, Cody filed a bill of review petition in the trial court. In that petition, Cody argued its failure to timely file a notice of appeal after the trial on the merits was the result of official mistake unmixed with its own negligence. It also alleged it had three meritorious grounds to appeal the trial court's May 31, 2013 final judgment.

         The parties filed competing motions for summary judgment on the required elements of Cody's bill of review. In its motion for summary judgment, Cody only asserted its limitations defense as a meritorious ground for appeal, arguing that the claims BPL asserted in 2005 were barred as a matter of law because the challenged transactions occurred in 2000 "and the instruments reflecting those transactions were recorded in the public records of Zapata County on July 11, 2000." Cody argued that the discovery rule did not apply to BPL's claims as a matter of law "because the existence of public records conclusively negates the essential discovery rule element of 'inherently ...

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