Opinion
NO. 01-18-00962-CV
10-20-2020
SIANA OIL & GAS CO. LLC, Appellant v. WHITE OAK OPERATING COMPANY, LLC AND WHITE OAK RESOURCES VI, LLC, Appellees
On Appeal from the 164th Judicial District Court Harris County, Texas
Trial Court Case No. 2015-45224
MEMORANDUM OPINION
Appellant, Siana Oil & Gas Co. LLC ("Siana"), challenges the trial court's rendition of summary judgment in favor of appellees, White Oak Operating Company, LLC ("White Oak Operating") and White Oak Resources VI, LLC ("White Oak Resources") (collectively, "White Oak"), in White Oak's suit for breach of contract and for a declaratory judgment. In four issues, Siana contends that the trial court erred in granting summary judgment.
In a supplemental brief, Siana raises a fifth issue, challenging the trial court's conditional award of appellate attorney's fees. Due to our disposition below, we need not reach this issue. See TEX. R. APP. P. 47.1.
We reverse and remand.
Background
In White Oak Operating's fourth amended petition and White Oak Resources's first amended petition in intervention, White Oak alleged that Siana is an oil and gas exploration and operating company. In 2013, Siana bought an approximately 44% working interest in the oil and gas properties on the South Callaghan Ranch in Webb County, Texas (the "South Callaghan properties") from certain Exxon/Mobil entities ("Mobil"). This acquisition included land subject to a Joint Operating Agreement ("JOA"), which governed the rights and obligations of the operator and non-operator of the South Callaghan properties, including the expenses that the operator could charge to the non-operator, i.e., Siana, in joint interest billings ("JIBs").
White Oak Resources intervened in this suit after Siana challenged White Oak Operating's standing and capacity to sue it.
According to White Oak, when Siana purchased Mobil's interest in the South Callaghan properties, PetroPoint Energy Operating, LLC ("PetroPoint") was the operator under the JOA. In May 2014, White Oak Resources bought PetroPoint's interest and became the operator of the South Callaghan properties. In August 2014, White Oak Resources became the operator of the South Callaghan properties under the JOA.
When White Oak Resources took over as operator for the South Callaghan properties, it retained White Oak Operating to perform certain duties for White Oak Resources under a 2012 Contract Operating Agreement ("COA"). Under the COA, White Oak Operating performed the operator's day-to-day duties and services under the JOA.
White Oak further alleges that the wells that it operated under the JOA produced oil, natural gas liquids, and residue gas. And White Oak collected oil from the wells in tanks at or near the well site. White Oak Operating submitted JIBs to Siana pursuant to the JOA for certain operating expenses. From August 2014 through November 2014, Siana paid those invoices in full, sending a check payable to White Oak Operating.
The parties' dispute has its origins in December 2014, when Siana stopped paying the JIBs that White Oak Operating issued. In May 2015, Siana proposed to reduce the fixed rate, as adjusted, under the JOA from $2,285.36 per well to $1,000 per well. But White Oak never accepted Siana's proposal.
White Oak eventually notified Siana that it was in default under the JOA and, in December 2014, White Oak began charging Siana's account, on a monthly basis, for operating expenses, totaling $2,700,605.14, which were owed to White Oak.
Because Siana has failed to pay White Oak for its share of the operating expenses under the JOA, White Oak brought claims against Siana for breach of contract and sought a declaration of White Oak's rights under the JOA.
Siana answered, generally denying the allegations in White Oak Operating's amended petition and White Oak Resources's amended petition in intervention. Siana also brought several counterclaims, including breach of contract, breach of implied covenants, and unjust enrichment against White Oak Resources, specifically, as well as a counterclaim for civil conspiracy against White Oak.
In June 2016, White Oak Operating filed its first motion for summary judgment, to which Siana responded. In December 2016, after White Oak Resources intervened, White Oak filed a second amended summary-judgment motion. In April 2017, White Oak filed a third amended summary-judgment motion, to which Siana responded. The trial court denied White Oak's third amended summary-judgment motion.
In late March 2018, after the case had been on file for about three years, Siana's then-attorneys moved to withdraw from representation, asserting that "professional considerations require[d] termination of the[ir] representation." The trial court granted the motion to withdraw on April 15, 2018 and ordered Siana to obtain new counsel within thirty days of its order.
On May 24, 2018, White Oak filed its motion for final summary judgment, asserting that White Oak was entitled to judgment as a matter of law on its claims for breach of contract and for a declaratory judgment. White Oak also asserted that it was entitled to judgment as a matter of law on Siana's counterclaim for unjust enrichment and there was no evidence to support a Siana's counterclaims for unjust enrichment, breach of contract, breach of implied covenants, and civil conspiracy. A hearing on White Oak's motion was set for July 27, 2018.
On July 20, 2018, Siana filed an amended motion for continuance, requesting that trial court continue the hearing on White Oak's final-summary-judgment motion and asking for an additional thirty days to allow its newly-retained counsel to familiarize himself with the case and prepare a response to White Oak's summary-judgment motion. In its motion for continuance, Siana explained that on April 16, 2018, its two previous attorneys withdrew from representation. After their withdrawal, Siana had difficulty finding suitable new counsel. It initially hired an attorney, but when that attorney had difficulty managing the case, Siana sought to find new counsel. The next law firm that Siana tried to hire ran a conflicts check and discovered a conflict preventing it from accepting the representation. That firm then referred Siana to its current counsel, which Siana retained on July 16, 2018 after a conflicts check. Siana's counsel filed a notice of appearance on July 17, 2018 and received the file from Siana's previous counsel on July 19, 2018.
After White Oak responded to Siana's amended motion for continuance, the trial court denied Siana's motion. On July 24, 2018—three days before the hearing on White Oak's final-summary-judgment motion—Siana filed its summary-judgment response. The next day, it filed an amended summary-judgment response, and it requested that the trial court extend the time to file its summary-judgment response. It also asked the court to consider its late-filed summary-judgment response. In its motion to extend time, Siana again explained that Siana retained new counsel within in the time allotted by the trial court, but that counsel failed to file an appearance before the thirty-day deadline imposed by the court. It also became evident to Siana that that attorney was not competent to handle the matter. Siana then sought to hire a certain law firm, but that firm had a conflict that prevented it from representing Siana. When Siana was finally able to retain appropriate and competent counsel, counsel quickly filed an appearance in the trial court and obtained Siana's file from its previous attorney a day before the summary-judgment response was due. According to Siana, its counsel was able to file its summary-judgment response on July 24, 2018 and its amended response the next day.
Siana, in its motion to extend time, argued that the trial court should extend the time for Siana to file its summary-judgment response and should consider the late-filed response because Siana acted in good faith, diligently located substitute counsel after its attorneys withdrew from representation, and White Oak would not be prejudiced by the extension of time.
On July 27, 2018, the trial court signed an order denying Siana's motion to extend time to file its summary-judgment response and to consider its late-filed response. The same day, the trial court signed a final judgment, granting White Oak summary judgment, awarding White Oak $380,448.37 in damages, $40,445.12 in interest, attorney's fees, court costs, and post-judgment interest. The trial court also awarded White Oak the following declaratory relief:
The trial court dismissed Siana's counterclaims against White Oak with prejudice.
a. White Oak has not transferred or assigned operational duties and responsibilities under the JOA, and even if it had, Siana ratified White Oak's service as operator under the JOA, and is judicially estopped from taking any position to the contrary based on its conduct in this lawsuit.
b. Pursuant to the JOA, article VII, White Oak holds a valid and subsisting lien on Siana's interests in oil and gas leases and oil and gas interests in the contract area governed by the JOA.
c. Under this lien, the JOA, and at law, White Oak is entitled to 100% of Siana's interest in the oil, gas, and other minerals produced pursuant to the JOA—including, but not limited to, the proceeds from any sale of oil, gas, or other minerals under the JOA—until the judgment is satisfied in full and Siana has paid
its share of the operating expenses in full, including any future expenses accrued after final judgment is signed herein.
d. Pursuant to Siana's failure to pay its share of the joint interest billing expenses and the terms of the JOA, all liens granted to White Oak by Siana in the JOA are hereby foreclosed.
e. By virtue of said lien, White Oak may pursue all remedies under the JOA and Texas law to satisfy its lien and recover the outstanding indebtedness owed by Siana, including, but not limited to, the foreclosure and sale of Siana's oil and gas interests subject to the JOA, of which any proceeds shall be applied to satisfy the amount of the indebtedness owed to White Oak as set out in this judgment.
Siana moved for new trial, re-urging the grounds it raised in its amended motion for continuance and its motion to extend time to file a summary-judgment response and to consider its late-filed response. Siana attached to its motion, the affidavit of Tom Ragsdale, Siana's owner. In the motion for new trial, Siana further explained that its two previous attorneys withdrew from representation in April 2018 based on a disagreement "over how the terms of [a mediated settlement agreement in the case] were supposed to work." In compliance with the 30-day deadline imposed by the trial court's order, Siana initially replaced those attorneys with an attorney who was already handling other matters for the company. However, unbeknownst to Siana, that attorney did not timely file an appearance in the case, and Siana soon came to realize that that particular attorney was unable to competently manage its legal matters, including this case. Siana then renewed its search for new counsel. During its search, Siana explored the possibility of hiring in-house counsel and interviewed one lawyer for the position, but that lawyer accepted a position at a law firm before Siana extended an employment offer. Siana then sought to engage a certain law firm, but its conflicts check revealed that that firm had represented White Oak in another matter and could not represent Siana in this case. In early July, Siana met with another law firm and after a conflicts check, it was able to retain new counsel on July 16, 2018. Siana's new counsel filed an appearance in the trial court immediately and began drafting a response to White Oak's final-summary-judgment motion. After its amended motion for continuance was denied, Siana filed its summary-judgment response on July 24, 2017 and its motion to extend time to file a summary-judgment response and to consider Siana's late-filed response. According to Siana, its inability to timely file its summary-judgment response was a direct result of its lack of counsel, its previously-hired counsel's failure to inform of it of the trial court's deadlines, and its difficulties, despite its diligence, in retaining competent counsel before its summary-judgment response was due.
After White Oak responded to Siana's new-trial motion, the trial court denied the motion.
Denial of Motion for Extension of Time
In its fourth issue, Siana argues that the trial court erred in denying its motion to extend time to file a summary-judgment response because Siana was unable to obtain new counsel until shortly before its summary-judgment response was due and White Oak would not have been prejudiced by the trial court's consideration of a late-filed response.
We review the trial court's ruling denying additional time to file a summary-judgment response under an abuse-of-discretion standard. Carpenter v. Cimarron Hydrocarbons Corp., 98 S.W.3d 682, 686-87 (Tex. 2002). We consider whether the trial court committed an abuse of discretion on a case-by-case basis. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 161 (Tex. 2004). "The trial court abuses its discretion when it acts without reference to any guiding rules or principles." Carpenter, 98 S.W.3d at 687; Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).
Siana also made this argument in its motion for new trial, which the trial court denied. We review a trial a trial court's denial of a motion for new trial under the same abuse-of-discretion standard. See Dolgencorp of Tex., Inc. v. Lerma, 288 S.W.3d 922, 926 (Tex. 2009).
The summary-judgment rules afford a party who did not have adequate time an opportunity to obtain additional time to file a response to a summary-judgment motion, either by moving for leave to file a late response or by requesting a continuance of the summary-judgment hearing. See TEX. R. CIV. P. 166a(c ); Perez v. Williams, 474 S.W.3d 408, 416 (Tex. App.—Houston [1st Dist.] 2015, no pet.). The trial court should permit a party to file a late summary-judgment response if the party establishes good cause for failing to timely respond and if allowing the late filed response will not cause any undue prejudice to the other party. See Carpenter, 98 S.W.3d at 688; see also Wheeler v. Green, 157 S.W.3d 439, 443 (Tex. 2005). Good cause is established by showing that the failure to timely respond was an accident or mistake, not intentional or the result of conscious indifference. Wheeler, 157 S.W.3d at 443. Undue prejudice depends on whether allowing the late response will delay trial or significantly hamper the other party's ability to prepare. See Medina v. Raven, 492 S.W.3d 53, 58 (Tex. App.—Houston [1st Dist.] 2016, no pet.). When a party seeks an extension to file a summary-judgment response or a continuance asserting that the withdrawal of its counsel constitutes good cause, the party must show that the failure to be represented at trial was not due to its own fault or negligence. Villegas v. Carter, 711 S.W.2d 624, 626 (Tex. 1986).
Siana argues that it had good cause for its failure to timely file a summary-judgment response because it had been unable to obtain new counsel until shortly before its response was due. And Siana provided the trial court with uncontroverted details concerning its search for counsel.
In response, White Oak asserts, on appeal, that Siana did not provide the trial court with a basis to grant its motion to extend time to file a summary-judgment response. According to White Oak, the fault lies with Siana for failing to secure new counsel until shortly before Siana's summary-judgment response deadline. White Oak states that on April 16, 2018, the trial court ordered Siana to retain new counsel within thirty days. But Siana did not comply with the trial court's thirty-day deadline for retaining new counsel. This assertion by White Oak, however, fails to recognize that Siana was unaware that its previous attorney, which it hired in compliance with the trial court's order, failed to timely appear in the case. And once Siana discovered that its then-attorney was not competently handling its legal matters in this case, Siana began searching again for new representation.
White Oak also points outs that Siana had previously changed legal representation during the course of the case as a reason for the trial court not to grant Siana's motion to extend. According to White Oak, Siana's first attorney withdrew before early 2017, citing Siana's failure to pay its legal fees as the reason for withdrawal. And, more recently, Siana's second and third attorneys moved to withdraw in late March 2018, prompting the trial court's April 16, 2018 order requiring Siana to find new counsel. Siana, however, explained, that its attorneys' decision to withdraw stemmed from a difference of opinion about the effect of a mediated settlement agreement. Thus, we disagree with White Oak that these circumstances show the kind of dilatory conduct or fault on the part of Siana that supports the denial of the extension requested here.
White Oak cites to its own response in opposition to Siana's motion for continuance for this assertion, which fails to specify the date of withdrawal for Siana's first attorney.
Instead, the record shows that Siana hired an attorney in compliance with the trial court's April 16, 2018 order. When Siana then realized that that attorney was having difficulty handling Siana's legal matters competently, Siana renewed its search for counsel about a month after its other counsel had been retained in the case. Siana's renewed search for an attorney was also around the same time that White Oak filed its final summary-judgment motion. The details that Siana provided to the trial court of its search for new counsel show reasonable diligence in conducting the search. Further, we note that given that Siana's summary-judgment response was filed with its motion to extend time only four days after its summary-judgment response deadline and before the trial court's hearing on White Oak's final-summary-judgment motion, the trial court's granting of the requested extension would not have caused a significant delay in the proceedings or harmed White Oak. See Medina, 492 S.W.3d at 58.
"[C]ases should be decided on the merits rather than on a procedural default, when possible." Tex. Dep't of Aging & Disability Servs. v. Mersch, 418 S.W.3d 736, 742 (Tex. App.—Houston [1st Dist.] 2013, no pet.). When a trial court allows one attorney to withdraw and another to enter the case, "it must give the party time to secure new counsel and time for the new counsel to investigate the case and prepare for trial." Villegas, 711 S.W.2d at 626; see also McAleer v. McAleer, 394 S.W.3d 613, 618-19 (Tex. App.—Houston [1st Dist.] 2012, no pet.) (detailing party's efforts to obtain new counsel and noting representation by prior counsel, who was mostly uncommunicative for final two months of discovery period and failed to conduct and complete discovery, resulted in need for new counsel due to no fault of party).
We conclude that the uncontroverted evidence shows that Siana's failure to have representation in time to timely file its summary-judgment response was not due to its own fault or negligence. See Villegas, 711 S.W.2d at 626. And Siana established good cause for failing to timely respond and its late-filed response did not cause any undue prejudice to White Oak. See Carpenter, 98 S.W.3d at 688. Thus, we hold that the trial court erred in denying Siana's motion to extend time to file a summary-judgment response.
We sustain Siana's fourth issue.
Due to our disposition of Siana's fourth issue, we need not address its remaining issues. See TEX. R. APP. P. 47.1.
Conclusion
We reverse the judgment of the trial court and remand the case for further proceedings consistent with this opinion.
Julie Countiss
Justice Panel consists of Justices Kelly, Goodman, and Countiss.