                       United States Court of Appeals,

                                  Fifth Circuit.

                                   No. 95-40204.

           MITCHELL ENERGY CORPORATION, Plaintiff-Appellee,

Maurice Sherman Bliss, et al., Intervenors Plaintiffs-Appellees,

                                         v.

    SAMSON RESOURCES COMPANY, Defendant-Intervenor Plaintiff-
Appellant.

                                 January 11, 1996.

Appeal from the United States District Court for the Eastern
District of Texas.

Before WIENER, EMILIO M. GARZA and BENAVIDES, Circuit Judges.

     WIENER, Circuit Judge:

     In the action underlying this appeal, a jury found Defendant-

Appellant Samson Resources Company (Samson), the lessee/operator of

a gas well (the Well), liable for conversion and fraud for its

failure to disclose and pay amounts owed to the Appellees as a

result   of    gas     production     from       the   Well.    Plaintiff-Appellee

Mitchell      Energy       Corporation   (Mitchell)        is   Samson's   unleased

cotenant1     in     the    mineral   interests         involved   in   this   case;

Intervenors-Appellees Maurice Bliss, et al. (Intervenors), lessors

of oil and gas leases now owned by Samson, were treated as unleased

cotenants based on the jury's finding that Samson had repudiated


     1
      As explained more fully below, Samson and Mitchell are
cotenants in the mineral interests constituting the Samson
Trammel Trust Gas Unit # 1. The term "unleased cotenant" has
been used by the parties and is used in this opinion to denote
the fact that Mitchell did not execute an oil and gas lease with
Samson, the lessee/operator who drilled the Well.

                                             1
these leases.    The total actual and punitive damages awarded were

approximately $3 million and $50 million, respectively. Concluding

that Texas law does not support a tort action for conversion or

fraud under the instant circumstances, we REVERSE the judgment of

the district court in part, MODIFY that judgment in part, and as

modified RENDER the judgment in favor of Mitchell and Intervenors.

                                     I

                         FACTS AND PROCEEDINGS

     Samson is lessee and operator of the Well by virtue of several

oil and gas leases covering lands within the Samson Trammel Trust

Gas Unit # 1 (the Unit).       The Unit covers 704 acres of the William

Johns Survey A-39 in Polk County, Texas.

     Beginning in 1980, Samson acquired oil and gas leases from

Exxon,   Republic   National    Bank,    Trustee,   and   the   Intervenors,

covering most of the mineral interests that would eventually

constitute the Unit.2    Samson drilled the Well and began producing

it in 1981.     As permitted by the pooling clauses in the leases,

Samson established the Unit by filing a Unit Designation in the

public records of Polk County on February 27, 1984.

     It turned out, however, that Samson had failed to obtain oil

and gas leases covering approximately five percent of the mineral

interests   comprising   the    Unit.     Beginning   in   1989,   Mitchell

obtained leases covering these unleased mineral interests while


     2
      In many cases, the Intervenors are heirs of the           original
lessors. In addition, two of the Intervenors' leases            were
obtained in 1973 by Highland Resources, Inc and later           assigned to
Samson. Samson obtained ratification of these leases            in 1980.

                                     2
acquiring other leases in the course of doing title work in and

around the Unit area for the purposes of its own drilling.            That is

how Mitchell came to own an unleased mineral interest in the Unit.

     As stipulated at trial, ownership of the Unit is as follows3:

             Mitchell Energy Corporation               4.93323%

             Intervenors                               5.55961%

             Republic National Bank, Trustee          82.94986%

             Exxon                                     5.20014%

     From 1981 to 1994, the Unit produced gross revenue of over $15

million.4    Although Exxon and Republic National Bank, Trustee were

paid royalties pursuant to their leases, the Intervenors were not

paid royalties, and Mitchell was not paid its share of profits

(gross production less expenses) as an unleased cotenant.             Samson

neither notified Mitchell or Intervenors of the well production nor

sent division orders to Intervenors for execution.

     Mitchell made its first demand for an accounting on February

5, 1991.         After Samson refused this demand, Mitchell filed an

action in Texas state court for an accounting, as well as damages

for conversion and "fraudulent taking."             This action was later

removed     to    federal   district   court   by   Samson   on   grounds    of

diversity.       Upon learning of the Well from Mitchell, Intervenors

joined the suit and asserted that Samson had breached their leases

and committed fraud and conversion.            Prior to their joining the

     3
      These ownership percentages total to only 98.64284%.             The
owners of the remaining 1.35716% remain unknown.
     4
      The Railroad Commission records reflecting the volume of
gas produced from this well are available to the public.

                                       3
suit, Intervenors had made no demand on Samson.

     The two sides paint diametrically opposed pictures of Samson's

motives and conduct. Samson presented evidence at trial, including

several title opinions, indicating that the reason Mitchell and

Intervenors had not been paid was because the ownership of those

mineral estates was not clear and royalties attributable to the

questionable estates were being held "in suspense" until Samson was

certain of the true ownerships. Mitchell and Intervenors countered

with expert testimony that there was no title dispute in 1980, the

year in which Samson began work on the Well, and that Samson had

sufficient information to determine the correct ownership of these

minerals.

     The money due the allegedly unknown owners was not segregated

or placed in an escrow account by Samson.     Instead, Samson used

these funds in its own business, a practice which Samson insists is

common in the industry.    Some of these funds were distributed by

Samson to other working interest owners of the well who were

affiliates of Samson.   Neither did Samson make accounting entries

on its books to reflect the suspension of these funds.      Samson

describes this bookkeeping omission as a failure of communication

among its employees;      the Appellees describe it as intentional

obfuscation.

     The jury found against Samson on both the conversion and fraud

claims and assessed actual damages of $1,354,752.11 for Mitchell

and $1,664,222.80 for the Intervenors.    The jury also found that

Samson had repudiated the Intervenors' leases.    Accordingly, the


                                  4
actual damages for the Intervenors were calculated as if they were

unleased cotenants rather than lessors under the lease agreements.

Punitive damages in the amounts of $10 million and $40 million were

awarded    to      Mitchell   and   the    Intervenors,   respectively.   In

addition, the judgment of the district court enjoins Samson to pay

Mitchell and Intervenors 100 percent of their mineral percentages

in the future, without deduction for expenses, and awards Mitchell

attorneys' fees of $65,718.75 pursuant to the Eastern District

Civil Justice and Delay Reduction Plan.

     Samson filed a Motion for Judgment as a Matter of Law and a

Motion for a New Trial, both of which were denied.                Samson now

appeals.

                                          II

                                     ANALYSIS

A. STANDARD   OF   REVIEW

         A jury's findings of fact will not be overturned unless the

facts and inferences point so strongly and overwhelmingly in favor

of one party that the court believes that reasonable jurors could

not arrive at a contrary verdict.5              We review a district court's

application of state law de novo.6             Most of the relevant facts in

this case are uncontested, and this opinion focuses primarily on

the district court's determination and application of Texas law.

B. THE LEGAL RELATIONSHIPS BETWEEN   THE   PARTIES

     5
      Vero Group v. ISS-International Serv. Sys., 971 F.2d 1178,
1181 (5th Cir.1992).
     6
      Salve Regina College v. Russell, 499 U.S. 225, 231, 111
S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991).

                                           5
           Mitchell's    predecessors           had   not   leased    their    mineral

interests in the Unit to Samson or anyone else.                  Thus, as the owner

of undivided mineral interests in the Unit, Mitchell is Samson's

unleased cotenant and was properly treated as such by the district

court.

          The Intervenors, on the other hand, had leased their mineral

interests in the Unit to Samson.                  The jury found, however, that

Samson had repudiated these leases.7                    Thus, the district court

treated the Intervenors as unleased cotenants, rather than as

lessors under the lease agreements, which Samson contends was

error.      We agree.

          In Texas, an oil and gas lease conveys an estate in real

property to the lessee, namely, a fee simple determinable in the

mineral estate.8        Samson thus retains title to the minerals under

its   leases    for     as   long   as   production         in   paying     quantities

continues.       Absent      a   specific       lease   clause   to   the    contrary,

nonpayment of royalty does not terminate an oil and gas lease;                     the

lessor's sole remedy lies in an action for damages based on breach

of covenant.9

      The leases in the instant case contain no clause providing for

      7
      Interrogatory No. 3 defined "repudiation" to mean "when a
party indicates by its words or actions that it is not going to
perform its obligations under an agreement or lease and shows a
fixed intention to abandon, renounce and refuse to perform the
agreement or lease without just excuse."
      8
       Jupiter Oil Co. v. Snow, 819 S.W.2d 466, 468 (Tex.1991).
      9
      Moriss v. First Nat'l Bank of Mission, 249 S.W.2d 269, 279
(Tex.Civ.App.—San Antonio 1952, writ ref'd n.r.e.); 1 E. Smith &
J. Weaver, TEXAS LAW OF OIL AND GAS § 4.6D at 195-0 (1994).

                                            6
termination    upon   the   failure   to   pay    royalty.           Moreover,    all

conditions necessary for Samson to retain the fee (i.e., production

in   paying   quantities)    have   been   satisfied.              Therefore,    even

assuming that Samson's failure to pay royalties to the Intervenors

was intentional, as a matter of law this conduct could not result

in Samson's mineral estate terminating and reverting back to the

Intervenors.

       Intervenors, insisting that Texas law permits an oil and gas

lease to be repudiated in these circumstances, erroneously rely on

cases discussing the doctrine of repudiation.10                       That doctrine

provides that a lessor may be estopped from asserting that a lease

has terminated as a result of the lessee 's nonperformance when the

lessor has directly contributed to that nonperformance.11                       Thus,

this doctrine relieves a lessee from any obligation to conduct

operations which are necessary to maintain the lease while a

judicial resolution of the controversy between the lessee and

lessor over the validity of the lease is pending.12                    The doctrine

of repudiation, however, provides no support for Intervenors'

position that Samson, the lessee, has repudiated these leases.

Furthermore, the other cases relied on by Intervenors involve the

rescission of ordinary bilateral contracts—as opposed to oil and


      10
      E.g., Cheyenne Resources, Inc. v. Criswell, 714 S.W.2d
103, 105 (Tex.App.—Eastland 1986, no writ).
      11
      1 E. Smith & J. Weaver, TEXAS LAW          OF   OIL   AND   GAS § 4.5F at 191
(1994).
      12
      Exploracion de la Estrella Soloataria Inc. v. Birdwell,
858 S.W.2d 549, 554 (Tex.App.—Eastland 1993, no writ).

                                      7
gas leases, which convey estates in realty—and are therefore

inapposite.     Thus, we conclude as a matter of law that Samson's oil

and gas leases—mineral estates—have not terminated by repudiation

or otherwise, so that Intervenors must be treated as lessors under

oil and gas leases, not as unleased cotenants.

C. CONVERSION

      Under Texas law, a party commits conversion if it exercises

wrongful dominion and control over personal property belonging to

another.13    The right to payment for minerals already severed from

the ground is considered personal property, not realty.14     Mitchell

and Intervenors thus argue that the jury properly found Samson

liable for the tort of conversion for failing to pay them the

amounts they were owed.      We disagree, concluding that Texas law

does not support a tort action for conversion of the proceeds of

mineral production under these circumstances.

      As for Mitchell, it and Samson are cotenants in the mineral

interests within the Unit.       A unique legal relationship exists

between cotenants.     Unlike one who is not a party to the cotenancy,

any cotenant has the right to extract minerals from the common

property without consent or participation of the other cotenants.15

This right is subject only to a duty to account for the other


     13
      Waisath v. Lack's Stores, Inc., 474 S.W.2d 444, 446
(Tex.1971).
     14
      Phillips Petroleum Co. v. Adams, 513 F.2d 355, 363 (5th
Cir.), cert. denied, 423 U.S. 930, 96 S.Ct. 281, 46 L.Ed.2d 259
(1975).
     15
          Byrom v. Pendley, 717 S.W.2d 602, 605 (Tex.1986).

                                   8
cotenants' proportionate part of the value of the oil and gas

produced,       less   their     proportionate       part     of    the   drilling   and

operating expenses.16          Thus, the parties do agree that Samson did

not convert gas by producing it and selling it.17                         Instead, the

issue is whether a tort action lies against Samson for converting

the proceeds of the gas sales when it failed to pay Mitchell.                          We

conclude that no conversion action lies.

      Mitchell has not cited, and we have not found, a Texas case

that has held one cotenant liable for the tort of conversion for

failing to pay another cotenant the profits to which that other

cotenant        is   entitled.       The     law,     of    course,       provides   the

nonconsenting        cotenant     a remedy—the        right    to    an   accounting.18

Moreover,        a   Texas   statute       also     allows,    at     least    in    some

circumstances, the recovery of interest and attorneys' fees when

recovering these amounts due.19 This right to an accounting for the

profits of production, however, is not a tort remedy for which

punitive damages are available.

     Similarly, the authorities relied on by Mitchell fail to

     16
          Id.
     17
      Samson argues that Mitchell's concession on this point is
fatal because Interrogatory No. 1 asked whether Samson
"intentionally converted property or revenues." Samson thus
essentially contends that this interrogatory was based on two
theories, the first of which (i.e., conversion of real property)
was not legally sound. We find this argument unpersuasive in
that
we do not interpret this interrogatory to be based upon two legal
theories.
     18
          E.g., Cox v. Davison, 397 S.W.2d 200 (Tex.1965).
     19
          See Tex.Nat.Res.Code Ann. §§ 91.401-91.406.

                                            9
support    the    contention       that     conversion      is    a    proper    remedy.

Although it is certainly true that the Texas courts have found that

the proceeds from the sale of oil and gas can be the subject of

conversion, each case in which the courts of Texas have so held

involved a trespasser or other person with no legal right in and to

the minerals.20        As discussed above, however, a cotenant has the

legal right to extract and sell minerals from the common property.

Thus, this line of cases lacks relevance to the issue before us.

Similarly,       the    Gardner     Machinery      case,     which      involved     the

conversion of sale proceeds by an agent selling particular items of

machinery owned by its principal, is also inapposite.21

       Texas law does recognize that one cotenant may have an action

for   conversion        against    another       cotenant    in       certain    limited

circumstances.         Thus, "a suit for conversion may be maintained by

one   tenant     in    common     against    another     tenant        in   common   who

appropriates the entire property owned in common between them."22

We note that in Grabes the property owned in common was machinery;

profits from real property were not involved.                    The rule announced

in that case is inapplicable to the situation at hand.                          The most

that can be said for the instant case is that only proceeds of


      20
      E.g., W.B. Johnson Drilling Co. v. Lacy, 336 S.W.2d 230
(Tex.Civ.App.—Eastland 1960, no writ).
      21
      Gardner Machinery Corp. v. U.C. Leasing, Inc., 561 S.W.2d
897 (Tex.Civ.App.—Beaumont 1978, writ dism'd).
      22
      Grabes v. Fawcett, 307 S.W.2d 311, 315
(Tex.Civ.App.—Texarkana 1957, no writ) (citing Friemel v. Crouch,
189 S.W.2d 764 (Tex.Civ.App.—Amarillo 1945, writ ref'd w.o.m.))
(emphasis added).

                                            10
production have been "appropriated," not the entire mineral estate

owned by the cotenants.          Therefore, the unique situation under

which one cotenant may have an action for conversion against

another cotenant is not present.

       Mitchell, Intervenors, and Samson all argue that the line of

cases involving money as the subject of conversion supports their

respective positions on this issue. Texas jurisprudence holds that

money can be the subject of conversion, but only when it is in the

form of specific chattel, such as old coins, or when "the money is

delivered to another party for safekeeping, the keeper claims no

title, and the money is required and intended to be segregated,

either substantially in the form in which it was received or as an

intact fund."23     An obligation to pay money generally, however, is

treated differently under Texas law.         "Where money is involved, it

is   subject   to   conversion    only    when   it   can   be   described   or

identified as a specific chattel, but not where an indebtedness may

be discharged by the payment of money generally."24

      We first note that none of these "money conversion" cases

involves the right of a cotenant with respect to profits from the

common property.       Thus, these cases are not truly on point.

      23
      Dixon v. State, 808 S.W.2d 721, 723 (Tex.App.—Austin 1991,
writ dism'd w.o.j.).
      24
      Crenshaw v. Swenson, 611 S.W.2d 886, 891
(Tex.Civ.App.—Austin 1980, writ ref'd n.r.e.). See Gronberg v.
York, 568 S.W.2d 139, 144 (Tex.Civ.App.—Tyler 1978, writ ref'd
n.r.e.) (holding that an employee could not recover against his
employer on the theory of conversion when he did not seek return
of specific money but was only seeking repayment of money
generally which he alleged was wrongfully withheld from his
commissions).

                                     11
Although Mitchell does have a right to a percentage of the profits

of production, this does not give Mitchell a right to a specific

and identifiable portion of the proceeds received that could be

considered specific chattel.       Rather, Mitchell's right is to an

amount equal to its proportionate share of the value of gas

produced, which is not necessarily the same as the amount of the

sale proceeds less reasonable drilling and operating expenses.

Therefore, regardless of the extent to which this line of cases may

be relevant, we are satisfied that the obligation owed to Mitchell

under the law of cotenancy is more analogous to an obligation to

pay money generally than to return or deliver money as specific

chattel. Moreover, this conclusion comports with the fact that the

law of cotenancy provides no remedy for conversion under these

circumstances.

     Mitchell further argues that Texas Property Code section

75.102 supports a conversion action against a cotenant.           That

section provides that "[a] holder of abandoned property shall

preserve that property and may not by any procedure, including a

deduction for service, maintenance, or other charge, transfer,

convert, or reduce the property to the profits or assets of the

holder."25     This unclaimed property statute has no application to

the rights and remedies of cotenants.     Neither does the mere use of

the word "convert" in an illustrative list somehow create a cause

of action in tort where none exists independently. Therefore, this

argument by Mitchell fails.

     25
          TEX.PROP.CODE ANN. § 75.102 (Vernon 1995) (emphasis added).

                                    12
     At oral argument, Mitchell conceded that normally the only

remedy available in this type of situation is an action for an

accounting. Mitchell insists, however, that this case is different

because Samson neither made a bookkeeping entry to reflect that

these funds were held in suspense nor placed them in escrow.     We

are not convinced that the omission of these acts—which are not

expressly required by law—can somehow transform a right to an

accounting into the tort of conversion.   Accordingly, we conclude

that Mitchell has no action in conversion against its cotenant,

Samson, to recover its share of profits in the mineral estate.

     We reach the same conclusion as to Intervenors.   As discussed

above, they are properly treated as Samson's lessors under the oil

and gas leases, not as Samson's cotenants.   Their causes of action

sound only in contract, and not in tort.26   Thus, Intervenors too

have no claim for conversion.

D. FRAUD

      The jury also found that Samson had committed fraud.     This

finding was based on Samson's failure to disclose material facts

(i.e., that money was owed to Mitchell and Intervenors as a result

of gas production from the Well), which it purportedly had a duty

to disclose pursuant to an asserted fiduciary relationship. Samson

contends that such a position is not supported under Texas law—and

we agree.

      Absent a fiduciary or confidential relationship, the failure


     26
      See Harrison v. Bass Enter. Prod. Co., 888 S.W.2d 532, 536
(Tex.App.—Corpus Christi 1994, no writ).

                                13
to disclose information is not actionable as fraud.27        Under Texas

law neither a cotenancy nor a lessor/lessee relationship imports a

fiduciary relationship.28   Although a confidential relationship can

arise not only from technical fiduciary relationships but from

partnerships, joint ventures, and some informal relationships,29

there is no evidence in this case to suggest the existence of some

other relationship between Samson on the one hand and either

Mitchell or Intervenors on the other that could support such a

finding by the jury.

     Mitchell    contends   that   Samson   had   a   fiduciary   duty   of

disclosure as a matter of law, arguing that the duty to account, by

its very nature, includes the duty to disclose.          No authority is

cited for this contention, and we have found none through our own

research.     Mitchell's argument does not withstand scrutiny:           It

emerges as simply an attempt to bootstrap a cotenant's right to an

accounting into the tort of fraud based on failure to render an

accounting.

     Mitchell further contends that Samson was a trustee of that

     27
      Tempco Tamers, Inc. v. Crow-Houston Four, Ltd., 715 S.W.2d
658, 669 (Tex.App.—Dallas 1986, writ ref'd n.r.e.).
     28
      Matter of Fender, 12 F.3d 480, 486 (5th Cir.1994) (holding
that under Texas law cotenancy law "there is no fiduciary or
agency relationship (which might create such a duty) between the
cotenants unless they create it by agreement."); see Hurd Enter.
v. Bruni, 828 S.W.2d 101, 111-12 (Tex.App.—San Antonio 1992, writ
denied); Cambridge Oil Co. v. Huggins, 765 S.W.2d 540, 544
(Tex.App.—Corpus Christi 1989, writ denied) (holding that no
confidential or fiduciary relationship existed between oil and
gas lessee and lessor).
     29
      See Monnig's Dep't Store, Inc. v. Azasd Oriental Rugs,
Inc., 929 F.2d 197 (5th Cir.1991).

                                   14
portion of the proceeds of production from the Well to which

Mitchell was entitled.      Mitchell relies on a single phrase from a

single Texas case in which it is stated that "rents and profits

received   by    one   cotenant    are    held   by   him   in   trust   for   his

cotenants."30 That case then goes on to state that for the cotenant

to acquire title to these funds as a result of the running of the

statute of limitations, the cotenant must have repudiated the

trust.

     Mitchell's reliance on this isolated phrase is misplaced.

True, the "in trust" language of the case makes clear that the one

cotenant does not own the proceeds allocable to the other cotenant,

and describes the implications for the statute of limitations.

Nevertheless, this isolated and imprecise use of the word "trust"

does not justify the stretch that would be required to approbate

Mitchell's      assertion   that    a    cotenant's    failure     to    disclose

information regarding an accounting results in a breach of a

fiduciary duty which in turn can serve as the basis for the tort

remedy of fraud. Other Texas cases that involve an accounting owed

by a cotenant do not mention a fiduciary duty.

     We conclude that Samson had no confidential or fiduciary duty

vis-à-vis Mitchell or Intervenors.            It follows that no actionable

fraud could arise from Samson's failure to disclose information

about production from the Well or to pay them their respective

shares of the proceeds thereof.


     30
      Eddings v. Black, 602 S.W.2d 353, 358 (Tex.Civ.App.—El
Paso 1980, writ ref'd n.r.e.) (emphasis added).

                                         15
E. MODIFICATION   OF   JUDGMENT

     Samson concedes that, as a cotenant, Mitchell is entitled to

an accounting for its share of the net proceeds of production, and

that Intervenors are entitled to royalty payments in accordance

with their lease agreements. Moreover, the parties have stipulated

to minimum payments due based on evidence presented to the district

court.      As the record evidence available to us is sufficient to

permit a determination of the payments to which Mitchell and

Intervenors are entitled on the basis of our holding, we need not

remand this case to the district court for the calculation of

various amounts due and entry of judgment therefor.

1. Actual Damages for Mitchell

      In calculating the actual damages for Mitchell, the district

court awarded an amount equal to Mitchell's ownership percentage of

the gross revenues produced by the Well.        The court did not deduct

Mitchell's share of expenses and taxes from the gross amount of the

actual damages.          This was error.   Under Texas law, a producing

cotenant must account to nonproducing cotenants "on the basis of

the value of any minerals taken, less the necessary and reasonable

costs of production and marketing."31          Thus, Mitchell's actual

damages must take into consideration Mitchell's share of the

operating expenses.

     Citing Mayfield v. de Benavides,32 Mitchell argues that Samson


     31
          Byrom, 717 S.W.2d at 605 (emphasis added).
     32
      693 S.W.2d 500 (Tex.App.—San Antonio 1985, writ ref'd
n.r.e.).

                                      16
is a willful and deliberate converter who should not be able to

recover costs of production.         Mayfield, however, holds that a bad

faith trespasser      's   measure   of    damages   does   not   include   the

recovery of drilling and operating costs.33 In addition to the fact

that no finding was made that Samson was a bad faith trespasser,

Samson's valid leases with Exxon and Republic National Bank,

Trustee, would preclude such a finding as a matter of law.              Thus,

the district court's damage calculation for Mitchell is wrong and

must be reduced by Mitchell's share of drilling and operating

costs, taxes, and the like.

     Based on the evidence in the record (and before taking into

account prejudgment interest), the amount of actual damages payable

to Mitchell, calculated through September 30, 1994, is $424,999.82.

2. Actual Damages for the Intervenors

      The district court awarded actual damages to the Intervenors

as though they were unleased cotenants, rather than royalty owners,

based on the jury's finding that Samson repudiated the Intervenors'

leases.     As with Mitchell, this calculation was not reduced by the

Intervenors' share of expenses.

     That is immaterial as to Intervenors, though, because as a

matter of law the nonpayment of royalty cannot support a finding

that Samson repudiated their leases. Accordingly, the Intervenors'

damages must equate with their royalty interests under their

leases, not with the share of gross proceeds attributable to their

fee ownerships, regardless whether or not the latter is reduced by

     33
          Mayfield, 693 S.W.2d at 506.

                                      17
costs and expenses of production.

      In light of the evidence in the record (and before taking into

account prejudgment interest), the amount of royalty payments due

and   owing      to   Intervenors,   through    September   30,   1994,   is

$109,035.17.34

3. Prejudgment Interest

       The district court's judgment calculation included a Treasury

bill (T-bill) rate of interest applied to the actual damages.             On

top of that, prejudgment interest at a rate of 10 percent per annum

was added to the damages, which already included interest, clearly

constituting a double interest award.

           State law governs the award of prejudgment interest in

diversity cases.35 Under Tex.Rev.Civ.Stat.Ann. art. 5069-1.05, the

proper rate of prejudgment interest is 10 percent per annum, not a

      34
      These actual damages are allocated among the Intervenors
as follows:

      Bliss Interest                 $    3,336.60

      Mayo Interest                       5,735.31

      Hair Interest                       7,647.04

      McCracken Interest                 33,367.01

      Gullick Interest                    7,647.04

      Nance Interest                     25,025.43

      Rowlan Interest                    25,025.43

      Cannon Interest                     1,251.31

      Total                          $109,035.17
                                     -----------
      35
           Harris v. Mickel, 15 F.3d 428, 429 (5th Cir.1994).

                                         18
T-bill rate of interest.   Moreover, the district court erred in

awarding a double recovery for the time value of money.36        As

Mitchell and Intervenors all but concede, the damage award should

include only one recovery for the time value of money, and that one

recovery should be calculated using the statutory 10 percent per

annum rate for prejudgment interest.37       Therefore, taking into

account the correct rate of prejudgment interest through February

2, 1995, the day before the district court's judgment was signed,

the judgment for actual damages through September 30, 1994 is

modified as follows:

      Appellee                Actual Damages



      Mitchell                    $766,719.00



      Bliss Interest                 $ 6,308.94

      Mayo Interest                   10,844.50

      Hair Interest                   14,459.25

      McCracken Interest              63,091.35

      Gullick Interest                14,459.25

      Nance Interest                  47,318.84

      Rowlan Interest                 47,318.84

      Cannon Interest                  2,366.01


     36
      Texas Farmers Ins. Co. v. Soriano, 844 S.W.2d 808, 830-31
(Tex.App.—San Antonio 1992), rev'd on other grounds, 881 S.W.2d
312 (Tex.1994).
     37
      The damages awarded by the district court reflect an
interest rate of less than 10 percent.

                                19
      Total For Intervenors                    206,167.00



      Total Actual Damages                    $972,886.00
                                              ___________



          Post-judgment       interest    on    money   judgments    recovered    in

federal district court is governed by 28 U.S.C. § 1961, even in

diversity cases.38       As the district court's judgment provided, this

entire judgment, which Mitchell and the Intervenors shall have and

recover against Samson in the amount of $977,886, plus costs of

court, shall      earn    interest       at    the   rate   of   7.03%,   compounded

annually, beginning on February 3, 1995, the day the district

court's judgment was signed, in accordance with 28 U.S.C. § 1961.39

4. Punitive Damages

      Texas law requires the existence of an independent tort to

support     an   award   of    punitive       damages.40     In    this   case,   the

independent torts of conversion and fraud are not supported by

Texas law.       The remedies to which Mitchell and Intervenors are

entitled, flowing as they do from actions for an accounting and for

breach of contract—and not from tort—do not supply a basis for




     38
      Nissho-Iwai Co. v. Occidental Crude Sales, 848 F.2d 613,
622 (5th Cir.1988).
     39
      See Fuchs v. Lifetime Doors, Inc., 939 F.2d 1275, 1280
(5th Cir.1991) (awarding post-judgment interest on the entire
amount of the judgment, including prejudgment interest).
     40
      See Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618
(Tex.1986).

                                          20
punitive damages.41    Therefore, the judgment with respect to the

award of punitive damages is reversed and vacated.

5. Additional Relief

     Under the heading "Additional Relief Granted," the district

court "Orders that Samson Resources Company pay to Mitchell Energy

Corporation 100% of its mineral interests and Intervenors 100% of

their mineral interests based on future production after September,

1994 for such time as the well in question produces in paying

quantities, without allowance for deduction of expenses."

      The amounts ordered to be paid in this "additional relief"

portion of the district court's judgment are incorrect.    Instead,

as we have noted, Mitchell's future right is to receive timely its

proportionate part of the proceeds of production less reasonable

operating expenses;     and Intervenors' future right is to receive

royalty payments timely, pursuant to the terms of their respective

lease agreements.     In light of our reversal of the judgment that

was premised on the theories of conversion and fraud and the fact

that the parties have an adequate remedy at law, we see no need to

remand this "additional relief" aspect of the district court's

judgment for disposition by that court.   Accordingly, the judgment

with respect to the "additional relief" is reversed and vacated.

6. Attorneys' Fees

      The district court's judgment also awards Mitchell attorneys'

fees in the amount of $65,718.75 pursuant to the Eastern District

of Texas Civil Justice and Delay Reduction Plan (Eastern District

     41
          See id.

                                  21
Plan).42   The sole foundation for Mitchell's attorneys' fees claim

is its letter of November 15, 1993.    Mitchell contends that this

letter constitutes an "offer of judgment" within the meaning of the

Eastern District Plan.   Samson counters that Mitchell's letter is

not sufficient, that it is merely a settlement proposal.   We agree

with Samson.

     The letter in question states Mitchell's belief that it is

"entitled to receive in settlement of the matter the sum of

$246,093.06 for past production plus $143,921.13 as pre-judgment

interest at the rate of 10%."     The next sentence in the letter


     42
      The relevant portion of the Eastern District of Texas
Civil Justice and Delay Reduction Plan reads as follows:

           Article Six. Miscellaneous Matters

                (9) Offer of Judgment. At the Management
           Conference or anytime thereafter, a party may make a
           written offer of judgment. If the offer of judgment is
           not accepted and the final in the case is of more
           benefit to the party who made the offer by 10%, then
           the party who rejected the offer must pay the
           litigation costs incurred after the offer was rejected.
           In personal injury and civil rights cases involving
           contingent attorneys' fees, the award of litigation
           costs shall not exceed the amount of the final
           judgment. The Court may, in its discretion, reduce the
           award of litigation costs in order to prevent undue
           hardship to a party.

                "Litigation costs" means those costs which are
           directly related to preparing the case for trial and
           actual trial expenses, including but not limited to
           reasonable attorneys' fees, deposition costs and fees
           for expert witnesses.

                The party who makes an offer of judgment shall set
           forth the deadline by which the offer must be accepted.
           The deadline must be reasonable. If the offer is not
           accepted in writing by the deadline, the offer is
           deemed rejected on that day.

                                 22
contains an offer to settle the case by having Mitchell sell its

working   interest   to   Samson   for   approximately   $91,000,   with

conditions on the royalty interest.        And the sentence after that

proposes, as an alternative to sale, that the parties enter into an

operating agreement.

      More significant than what Mitchell's letter says is what it

does not say:    It makes no reference to offering a "judgment";      it

appears to contemplate future negotiations; and it is also unclear

whether this settlement offer is conditioned on entering a sale or

an   operating   agreement.    Additionally,    although   the   Eastern

District Plan does not specify a format or require any "magic

words" for an offer of judgment, it does provide that the offer

must specify a deadline.       The closest thing to a deadline in

Mitchell's letter is the closing sentence which states, "I look

forward to hearing from you this week."        It would be too great a

stretch to call this imprecise language—which appears to be little

more than a courteous salutation—a deadline, particularly given the

other shortcomings of Mitchell's letter.

      These observations lead us to conclude that Mitchell's letter

does not rise to the level of an "offer of judgment" within the

contemplation of the Eastern District Plan. Accordingly, the award

of attorneys' fees for Mitchell is vacated.

                                   III

                              CONCLUSION

      Samson failed to disclose or pay the amounts owed to Mitchell

and Intervenors as a result of gas production from the Well.          As


                                   23
Samson's cotenant, Mitchell's remedy is an action for an accounting

of its proportionate share of the Well's profits, i.e., the value

of the gas produced less drilling and operating expenses.        As

Samson's lessors, Intervenors' remedy is a breach of contract claim

against Samson for the royalty payments owed to them pursuant to

the terms of their respective lease agreements.   Under Texas law,

Samson retains the mineral estate conveyed to it by the oil and gas

leases entered into with the Intervenors. Neither Mitchell nor the

Intervenors can maintain an action in tort against Samson for

conversion or fraud under these circumstances, and absent an

independent tort, punitive damages do not lie.     As the evidence

before the court is sufficient to enable us to calculate the

damages for which Samson is liable based on our holdings, the

judgment of the district court is reversed and vacated in part,

modified in part, and, as modified, rendered, as follows:    Samson

to pay Mitchell $766,719, plus costs of court, plus post-judgment

interest from February 3, 1995, until paid in full, at the rate of

7.03% per annum;      and Samson to pay Intervenors $206,167, plus

costs of court, plus post-judgment interest from February 3, 1995,

until paid in full, at the rate of 7.03% per annum.

     REVERSED and VACATED in part;     MODIFIED in part;    and, as

modified, RENDERED.




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