Opinion filed November 4, 2010




                                          In The


   Eleventh Court of Appeals
                                        __________

                                   No. 11-09-00167-CV
                                       __________

 CHARLES MARTIN AND BENNY MARTIN, INDIVIDUALLY AND AS
  INDEPENDENT COEXECUTORS OF THE ESTATE OF JUANITA
WYCHE, DECEASED, AND SUCCESSOR EXECUTORS OF THE ESTATE
        OF CHARLES D. WYCHE, DECEASED, Appellants

                                             V.

   SAGA PETROLEUM CORPORATION, SAGA PETROLEUM LLC,
     FOREST OIL CORP. F/K/A FORCENERGY GAS CORP., KAB
 ACQUISITION L.P. II, WILLIAM H. DORSEY, AND CHARLES E. FOX,
                            Appellees


                         On Appeal from the 118th District Court

                                   Howard County, Texas

                                 Trial Court Cause No. 40881


                                        OPINION
       The trial court entered summary judgment declaring that a production payment
designated as Production Payment ―C‖ in a July 1, 1959, assignment of oil and gas leases
terminated with respect to four tracts of property. Appellants Charles Martin and Benny Martin,
individually and as independent coexecutors of the estate of Juanita Wyche, deceased, and as
successor executors of the estate of Charles D. Wyche, deceased, are successors-in-interest to
one of the ―Sellers‖ identified in the assignment. Appellees Saga Petroleum Corporation, Saga
Petroleum LLC, Forest Oil Corp. f/k/a Forcenergy Gas Corp., KAB Acquisition L.P. II, William
H. Dorsey, and Charles E. Fox are successors-in-interest to the ―Buyer‖ identified in the
assignment. In their sole appellate issue, appellants assert that the trial court erred in granting
summary judgment to appellees. We reverse and remand this cause to the trial court for further
proceedings consistent with this opinion.
                                         Background Facts
       On July 1, 1959, Paul G. Wyche; Charles D. Wyche; H.L. Brinson; James M. Collins;
Charles S. Sharp; Carr P. Collins; Miles Woodall; and Carr P. Collins, Jr., as ―Sellers,‖ executed
an assignment of oil and gas leases to Continental Investors, Incorporated as ―Buyer.‖ In the
assignment, the Sellers sold and assigned their right, title, and interest in twelve oil, gas, and
mineral leaseholds, which were identified as tracts one through twelve, to Continental Investors.
This cause involves Tract 7 (L.C. Denman Lease), Tract 8 (TL & M ―A‖ and ―B‖ Leases), Tract
9 (Percy Jones Lease), and Tract 10 (L.C. Denman ―A‖ Lease). The Sellers retained and
reserved certain production payments, including the Tobe Foster Production Payment and
Production Payment C. The Tobe Foster Production Payment included Production Payment A
and Production Payment B. Production Payment A was a $1,000,000 production payment, and
Production Payment B was a $100,000 production payment. Production Payment C (PPC) was
to begin when the obligation to make the Tobe Foster Production Payment terminated.
       The parties to the assignment estimated the reserves of oil and gas remaining in the
twelve tracts as follows:    (a) 11,330,000 barrels of oil and other liquid hydrocarbons and
(b) 914,640,000 cubic feet of gas, casinghead gas, and other gaseous hydrocarbons.             The
assignment provided that an additional calculation of reserves would be performed if the Tobe
Foster Production Payment was retired:
            Since it is possible that said [PPC] may never become effective and since the
       parties intend that if it does become effective it shall not continue as to any tract
       for the duration of the economic life of the lease covering such tract, when the
       Tobe Foster Production Payment has been retired, said parties, if they can do so
       by mutual agreement, shall determine, separately as to each of the 12 tracts shown
       on Exhibit A, the number of barrels of liquid hydrocarbons and the number of

                                                2
       cubic feet of gaseous hydrocarbons that thereafter can be commercially produced
       and saved from each of said 12 separate tracts. In the absence of such mutual
       agreement such determination shall be made in the manner set out immediately
       below.

The parties then set forth the procedure to be used for determining the reserves in the twelve
tracts in the absence of a mutual agreement. The parties referred to the process of determining
the reserves when the Tobe Foster Production Payment terminated as the ―initial redetermination
of reserves.‖   At some point, the Tobe Foster Production Payment terminated, and PPC
commenced. There is no evidence that the parties to the assignment or their successors made an
―initial redetermination of reserves.‖ The assignment provided the following with respect to
PPC:
             From and after the time said initial redetermination of reserves has been
       made in the manner set forth above, [PPC], as to any tract to which it becomes
       effective, shall continue in effect until, as to any particular tract, the earliest
       occurrence of the following two alternatives, to-wit:

             1. there remains in the ground and unproduced under said particular tract not
       less than 10% of the commercially recoverable reserves estimated in said initial
       redetermination to have been in and under said particular tract.

            2. 15 years from the Effective Date [July 1, 1974].

             At that time there shall be one additional, which shall be the final,
       redetermination of reserves under said particular tract, which redetermination
       shall be made in accordance with the procedure above set out for the making of
       said initial redetermination, and, from and after that time, said additional and final
       redetermination of reserves shall be controlling [insofar] as the continuance of
       [PPC] as to said particular tract is concerned.

There is no evidence that the parties to the assignment or their successors made a ―final
redetermination of reserves‖ as contemplated in the assignment.
       The assignment provided that PPC was to terminate ―as to each of said 12 tracts,
severally, when as to any particular tract there remains unproduced 10% of the commercially
recoverable liquid and gaseous hydrocarbons in and under such tract.‖ Upon the termination of
PPC in a tract, the interest that had been burdened by PPC in that tract would pass to the Buyer
under the terms of the assignment.




                                                 3
       On December 31, 1999, Fina Oil and Chemical Company filed this interpleader action.
Fina alleged that it had purchased oil from Tracts 7, 8, 9, and 10; that, as the purchaser of
production from these tracts, it was obligated to pay a share of the sales proceeds to various
parties, including the owners of PPC if PPC had not terminated; and that a dispute existed as to
whether PPC had terminated. Fina also alleged that competing claims existed as to some of the
sales proceeds and that, therefore, it had held those proceeds in suspense. Fina interpleaded
those proceeds into the registry of the court.
       On November 30, 2007, appellees filed their joint motion for summary judgment. They
sought a declaratory judgment that PPC had terminated as to Tract 7 (L.C. Denman Lease), Tract
8 (TL & M ―A‖ and ―B‖ Lease), and Tracts 9 and 10 (referred to collectively as the Denman A.
Jones Lease). They also sought a declaratory judgment determining the proper allocation of
funds that had been deposited into the registry of the court. To support their motion, appellees
relied on the affidavit of Kyle Huckaba, a petroleum engineer employed by appellee, Saga
Petroleum Corporation. Huckaba stated in his affidavit that he had determined ―the amount of
commercially recoverable reserves remaining under [the subject tracts] as of July 1, 1974.‖ In
calculating the reserves, Huckaba used information that was available as of July 1, 1974.
Huckaba also stated that he had determined ―the date (the 10% date) following July 1, 1974,
when each of [the subject leases and wells had] reached a point that there remained in the ground
and unproduced under each such tract 10% of the commercially recoverable liquid and gaseous
hydrocarbons in and under each such tract.‖ Based on his calculations, Huckaba concluded ―that
the 10% date‖ was reached on Tract 7 (L.C. Denman Lease) on or about December 2000, on
Tract 8 (TL & M ―A‖ and ―B‖ Leases) on or about December 1997, and on Tracts 9 and 10
(Denman A. Jones Lease) on or about December 1991. Huckaba also concluded that ―there were
no commercially recoverable amounts of gas from any of said tracts as of July 1, 1974.‖ Based
on Huckaba’s affidavit, appellees asserted that they were entitled to summary judgment that PPC
had terminated as to Tract 7 in December 2000, Tract 8 in December 1997, and Tracts 9 and 10
in December 1991.
       Appellants filed a response to appellees’ joint motion for summary judgment. In their
response, appellants relied on First City Nat’l Bank of Midland v. Concord Oil Co., 808 S.W.2d
133 (Tex. App.—El Paso 1991, no writ). In Concord Oil, the El Paso court analyzed and
interpreted the assignment that is the subject of this appeal. We will discuss Concord Oil in

                                                 4
detail in our analysis below. In this cause, appellants opposed summary judgment on two
grounds: (1) that appellees, by their motion, sought ―to circumvent the specific provisions of the
assignment in question as reaffirmed by the decision in Concord Oil Company that specific
procedures are to be utilized to make a determination as to the termination date for [PPC]‖ and
(2) that ―[t]he calculations utilized by [Huckaba were] incorrect because those calculations [did]
not encompass information obtainable after July, 1974 in direct contravention of the Court of
Appeals[’s] Opinion in Concord Oil Company.‖
       Appellants filed the affidavit of T. Scott Hickman, a petroleum engineer with fifty years
experience, in opposition to appellees’ motion. Hickman stated in his affidavit that he had been
the president of T. Scott Hickman and Associates for the past thirty-five years and that he had
over thirty years experience evaluating the PPC at issue in this cause. He also stated that he had
become familiar with the El Paso court’s opinion in Concord Oil. Hickman set forth the
following quote from Concord Oil:
            Construing the assignment as a whole, the parties intended that a PPC would
       terminate when there remained unproduced not less than 10 percent of the
       reserves that existed on July 1, 1974. The final redetermination provisions were
       included to allow for any adjustment in the reserves determined by the initial
       determination that was warranted by later information.

See Concord Oil, 808 S.W.2d at 137. Hickman stated that ―Huckaba’s calculations of the July 1,
1974 reserves and subsequent determination of the termination date of PPC is, in my opinion,
seriously flawed and grossly inadequate.‖ He also stated that Huckaba had not used ―any
information later than July 1, 1974,‖ and that, therefore, Huckaba had failed to use ―later
information‖ as required by Concord Oil. Hickman further stated that actual production for the
subject tracts had been 50% greater than Huckaba’s reserve estimates for the tracts and that all
the tracts were still producing commercial quantities of oil and gas. Hickman concluded that,
because Huckaba failed to use information that became available after July 1, 1974, his
calculations ―greatly underestimate[d] the reserves and thus ha[d] the effect of causing the
termination of PPC to be many years too early.‖
       On April 27, 2009, the trial court entered an order granting appellees’ joint motion for
summary judgment. The trial court found that PPC terminated as to the subject tracts as follows:
L.C. Denman (Tract 7) – December 2000; TL & M ―A‖ and ―B‖ (Tract 8) – December 1997; and
Denman A. Jones (Tracts 9 and 10) – December 1991. The trial court also ordered the district

                                                  5
clerk to disburse the funds that had been paid into the registry of the court as specified in the
order.
                                         Standard of Review
         Appellees filed a traditional motion for summary judgment. We apply the well-
recognized standard of review for traditional summary judgments. Questions of law are reviewed
de novo. St. Paul Ins. Co. v. Tex Dep’t of Transp., 999 S.W.2d 881, 884 (Tex. App.—Austin
1999, pet. denied). To determine if a fact question exists, we must consider whether reasonable
and fair-minded jurors could differ in their conclusions in light of all the evidence presented.
Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007). We must consider all
the evidence in the light most favorable to the nonmovant, indulging all reasonable inferences in
favor of the nonmovant, and determine whether the movant proved that there were no genuine
issues of material fact and that it was entitled to judgment as a matter of law. Nixon v. Mr. Prop.
Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).
                                     Construction of Assignment
         Neither appellants nor appellees contend that the assignment is ambiguous, and we
conclude that the assignment is unambiguous. See Lopez v. Munoz, Hockema & Reed, L.L.P., 22
S.W.3d 857, 861 (Tex. 2000) (Where contract language can be given a definite legal meaning
and it is not reasonably susceptible to more than one meaning, the contract is unambiguous.).
The construction of an unambiguous contract is a question of law for the court. Coker v. Coker,
650 S.W.2d 391, 393 (Tex. 1983); Worldwide Asset Purchasing, L.L.C. v. Rent-A-Center E.,
Inc., 290 S.W.3d 554, 560 (Tex. App.—Dallas 2009, no pet.); Concord Oil, 808 S.W.2d at 137.
When the parties disagree over the meaning of an unambiguous contract, the court must
determine the parties’ intent by examining and considering the entire writing in an effort to give
effect to and harmonize all provisions so that none will be rendered meaningless. Coker, 650
S.W.2d at 393; Rolling Lands Invs., L.C. v. Nw. Airport Mgmt., L.P., 111 S.W.3d 187, 196 (Tex.
App.—Texarkana 2003, pet. denied); Concord Oil, 808 S.W.2d at 137.
                                               Analysis
         The facts in this cause are similar to the facts in Concord Oil. In that case, the parties did
not make an initial redetermination of reserves when the Tobe Foster Production Payment
terminated. Instead, in a 1969 letter agreement, the parties agreed to waive the initial
redetermination of reserves and to make a final redetermination of reserves after July 1, 1974.

                                                   6
However, the parties did not make such a final redetermination. Concord Oil, 808 S.W.2d at
135. The appellants in Concord Oil, which we will refer to collectively as the Bank, were either
original sellers under the assignment or successors-in-interest of original sellers. The appellee
was Concord Oil, the successor-in-interest of Continental Investors, the buyer under the
assignment. Id. at 134-35.
       Concord Oil sought a declaratory judgment that PPC had terminated on Tracts 11 and 12.
The El Paso court explained that, alternatively, Concord Oil requested ―an order setting the
procedure to be used by the parties to determine the quantities of oil which could be
commercially produced, based on the data available in 1974 and 1975.‖ Id. at 135-36. The Bank
requested a declaratory judgment that PPC was still in effect on the tracts. Id. at 136. The trial
court entered an order requiring that the parties attempt to establish the reserves that existed in
the subject tracts in a manner that followed the procedure set forth in the assignment for
establishing reserves. The order required that the parties try to determine, by mutual agreement,
the total reserves existing in the tracts on three different dates: (1) July 1, 1974, which was
fifteen years from the effective date of the assignment; (2) December 20, 1985; and
(3) August 17, 1989, which was the date of the trial court’s order. Id. The parties each selected
an engineer, and those engineers agreed on a determination of gross oil reserves in barrels as
follows:
       Effective Date    D.M. Womack (Tract 11)       J.C. Womack (Tract 12)
       7/1/74            93,740 barrels                    273,368 barrels
       12/20/85          45,394 barrels                    132,526 barrels
       8/17/89           23,377 barrels                      68,248 barrels
The trial court concluded that July 1, 1974, was the proper date for determining the reserves. Id.
The trial court entered a judgment declaring that PPC had not terminated as to either of the tracts
but would terminate when 90% of the oil reserves existing on July 1, 1974, had been produced.
Thus, the trial court concluded that PPC would terminate on Tract 11 when 84,366 barrels of oil
had been produced from the reserves of 93,740 barrels and on Tract 12 when 246,031.2 barrels
of oil had been produced from the reserves of 273,368 barrels. Id.
       On appeal, the Bank asserted that the trial court had erred in adopting July 1, 1974, as the
final determination date. The Bank argued that the trial court should have adopted August 17,
1989, the date the trial court issued its order, as the date for making the final determination of

                                                7
reserves and that the trial court should have declared that PPC would not terminate until there
remained unproduced 10% of the reserves that existed on August 17, 1989. Concord Oil, 808
S.W.2d 136. In a cross-point, Concord Oil asserted that the trial court had erred in failing to
determine that PPC had terminated on the tracts. Concord Oil argued that, under the terms of the
assignment, PPC was to terminate when there had been depletion of 90% of the reserves as
estimated in the initial redetermination, which the assignment provided would be made when the
Tobe Foster Production Payment terminated.          Therefore, Concord Oil contended that the
assignment required PPC to terminate when there remained unproduced 10% of the reserves that
existed in 1969 when the Tobe Foster Production Payment terminated. Id. at 136-37.
       The El Paso court disagreed with both parties’ positions. Applying the rules relating to
the construction of unambiguous contracts to the assignment, the court concluded that ―the
parties intended that a PPC would terminate when there remained unproduced not less than 10
percent of the reserves that existed on July 1, 1974.‖ Id. at 137. Therefore, the court affirmed
the trial court’s judgment. Id. at 139.
       In this cause, the parties agree that, under the terms of the assignment, PPC terminates as
to a particular tract when there remains unproduced from that tract 10% of the reserves that
existed on July 1, 1974. However, they disagree as to the information that the assignment allows
to be used in determining those reserves. While appellees contend that the parties are limited to
using information that was available as of July 1, 1974, appellants contend that the parties may
also use information that became available after July 1, 1974. Appellants and appellees both rely
on Concord Oil to support their respective positions.
       Appellants contend that the engineers in Concord Oil used post-July 1, 1974 engineering
data in calculating the reserves that existed on July 1, 1974. The court stated in Concord Oil that
―[t]he final determination provisions were included to allow for any adjustment in the reserves
determined by the initial determination that was warranted by later information.‖ Concord Oil,
808 S.W.2d at 137. Appellants rely on this statement in asserting that the El Paso court’s
interpretation of the assignment ―made clear that information obtained later than July 1, 1974,
could be utilized to make a more accurate determination as to the amount of reserves existing on
July 1, 1974.‖ In fact, appellants assert that Concord Oil requires that post-July 1, 1974
information be used to determine the reserves that existed on July 1, 1974.



                                                8
       Appellees contend that appellants have taken the Concord Oil court’s reference to ―later
information‖ out of context. In contrast to appellants’ position, appellees assert that the court in
Concord Oil ―clearly limited‖ the use of ―later information‖ to information that came into
existence between the date of the initial redetermination, which the assignment provided would
be made when the Tobe Foster Production Payment terminated, and the date of the final
redetermination, which the assignment provided would be performed, at the latest, on July 1,
1974. Therefore, appellees contend that Concord Oil requires that only information existing as
of July 1, 1974, be used in determining the reserves.
       The El Paso court did not state in Concord Oil that the engineers used information that
became available after July 1, 1974, in determining the July 1, 1974 reserves. Based on a close
reading of the facts set forth in Concord Oil, we cannot conclude from the face of the opinion
that the engineers used post-July 1, 1974 information.          However, the opinion supports a
reasonable inference that the engineers used such information. The engineers agreed on reserves
existing as of three dates: July 1, 1974; December 20, 1985; and August 17, 1989. Concord Oil,
808 S.W.2d at 136. The opinion does not indicate that the engineers used anything less than all
available information, including information that became available after these dates, when they
performed their reserve determinations. Had the trial court ordered the engineers to limit the
information that they used for determining reserves for the three dates to information existing on
the respective dates or had the engineers limited the information that they used in such a manner
– that is, used three different sets of information for determining the reserves – we expect that the
El Paso court would have stated such an important fact in its opinion.
       As stated above, the court in Concord Oil concluded that ―the parties intended that a PPC
would terminate when there remained unproduced not less than 10 percent of the reserves that
existed on July 1, 1974.‖ Id. at 137. As evidenced by Hickman’s affidavit, if current information
is used to determine the reserves that existed on July 1, 1974, the reserve determination will be
much more accurate than if only information that existed on July 1, 1974, is used. Under this
circumstance, allowing the parties to use current information to determine the reserves is
consistent with the parties’ intent as expressed by the El Paso court. An accurate reserve
determination will effectuate that intent. Therefore, we conclude that Concord Oil and the terms
of the assignment allow the use of current information in determining the reserves that existed on



                                                 9
July 1, 1974. However, even assuming that the holding in Concord Oil does not support our
conclusion, we reach the same result based on the terms of the assignment.
       The trial court erred in granting summary judgment to appellees. Appellants’ issue is
sustained.
                                      This Court’s Ruling
       The judgment of the trial court is reversed, and this cause is remanded for proceedings
consistent with this opinion.




                                                            TERRY McCALL
                                                            JUSTICE


November 4, 2010
Panel consists of: Wright, C.J.,
McCall, J., and Strange, J.




                                               10
