Kasino et al v. Barrow Shaver Resources Company, LLC et al

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
IN RE:
BARROW SHAVER RESOURCES
COMPANY, LLC,
Debtor.
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CASE NO: 24-33353
CHAPTER 11
RAYMOND KASINO, et al.,
Plaintiffs,
VS. ADVERSARY NO. 25-3440
BARROW SHAVER RESOURCES
COMPANY, LLC,
Defendant.
SUPPLEMENTAL MEMORANDUM OPINION GRANTING IN
PART AND DENYING IN PART MOTIONS FOR SUMMARY
JUDGMENT (RELATES TO ECF NOS. 121, 130, 131, 132, & 133)
On May 18, 2026, this Court issued a memorandum opinion (the
“Opinion”) granting in part and denying in part the cross-motions for
summary judgment of Barrow Shaver Resources Company LLC (the
“Debtor”) and Raymond Kasino and LaWanda Turner (the “Plaintiffs”).
This supplemental opinion is to be read in conjunction with the Opinion
and aims to resolve the four reserved issues of (i) whether any exception
to the statute of frauds applies to the alleged ORRIs; (ii) if so, whether
any genuine issues of material fact exist with respect to the ORRIs; (iii)
whether the Consultant death provision in the Consulting Agreements
is ambiguous; and (iv) if so, what effect the parties’ course of conduct in
paying Mrs. Turner production revenues after the death of Mr. Turner
has on enforcement of the Consultant death provision.
United States Bankruptcy Court
Southern District of Texas
ENTERED
October 14, 2026
Nathan Ochsner, Clerk
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For the reasons stated below, the Court finds:
1. Alleged ORRIs on which the Debtor paid production revenues to
the Plaintiffs and reported their ownership to taxing authorities
prior to the Involuntary Petition Date (the “Paid ORRIs”) are
excepted from the statute of frauds under the doctrine of partial
performance.
2. No alleged ORRI on which the Debtor never paid production
revenues is excepted from the statute of frauds.
3. The Plaintiffs are entitled to enforcement of the conveyance of
Paid ORRIs.
4. Whether a particular alleged ORRI is a Paid ORRI is a question
of fact to be resolved under the procedure set out in the
Conclusion.
5. The Consultant death provision does not divest ORRIs earned
before a Consultant’s death; it only prevents new ORRIs from
accruing after death.
6. Because Mr. Turner retired before his death, his entitlement was
fixed under the retirement provision, and all his interests pass to
his estate. No ORRI accrues to his estate on a well that first
produced after his death.
BACKGROUND
The Court incorporates the background of the Opinion and
restates only the facts relevant to the reserved issues.
On June 13, 2019, the Debtor entered into identical Consulting
Agreements with Mr. Turner and Mr. Kasino, under which each agreed
to “identify, generate, [and] evaluate” oil and gas Prospects for the
Debtor.1 The “Consultant Participation Program” described in the
1 ECF No 110-13.
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agreement provides that in exchange for the Plaintiffs’ services, the
Debtor will “set aside” for each consultant either:
*A maximum [ORRI] not to exceed one percent (1%) of 8/8ths out
of the overriding royalty interest which [the Debtor] earns or
retains with respect to the Prospect, effective as of the time such
ORRI is earned by [the Debtor], provided that, the lease burdens
and deal terms allow for a 1% ORRI; or
*If ORRI of least [sic] one percent (1%) is not available under deal
terms, Consultant will earn 50% of whatever ORRI [the Debtor]
earns or retains.2
The Consulting Agreement also provides that this compensation
is “in addition to the salary or day rate Consultant receives as an
employee or independent contractor,” and the Consultant “shall
continue to receive bonuses.”3 It further states that it “supersede[s] any
prior oral or written agreements, or understandings between Barrow
Shaver and Consultant with respect to such matters.”4 It also contains
a provision that “record title to the underlying oil and gas
properties…shall at all times remain in the name of [the Debtor], so long
as [the Debtor] is the operator of the property” (the “Record Title
Provision”).5
The agreement also addresses what happens to a Consultant’s
interests when his relationship with the Debtor ends. “Upon the time of
Consultant’s retirement or other disassociation with [the Debtor], the
earned producing ORRI will be assigned to Consultant on all owned and
drilled wells in any Prospects during Consultant’s tenure with [the
Debtor]” (the “Retirement Provision”).6 The same provision continues:
“As for any pending projects or well(s) at such time Consultant
disassociates with Barrow Shaver will thereafter be assigned to
2 ECF No. 110-13.
3 ECF No. 110-13.
4 ECF No. 110-13.
5 ECF No. 110-13.
6 ECF No. 110-13.
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Consultant one-half of the percentage of ORRI otherwise payable during
the time in which Consultant is in business relationship with Barrow
Shaver.”7 The Consulting Agreement further provides that “[i]n the
event of the death of the Consultant, no additional ORRI are payable,
except for those interests that have already been assigned to Consultant
of record, which therefore pass to the beneficiaries of the Estate of the
Consultant, by Will or Texas state intestacy laws” (the “Death
Provision”).8
The Consultant Participation Program accounted for the greater
part of the Plaintiffs’ total compensation. Before joining the Debtor, the
Plaintiffs each earned approximately $250,000 USD or more per year as
geologists.9 Under the Consulting Agreement, Mr. Kasino received a
base salary of approximately $120,000.10 Mr. Shaver testified that that
the salary was meant to cover the Consultants’ baseline expenses and
that the ORRIs were intended to make up for the pay gap and fund his
and Mr. Turner’s retirements.11 Mr. Kasino testified that he “took the
position because [he] felt the risk of a lower salary would be
compensated by the upside [he] could receive on overrides.”12
When a Prospect came into production, the Consultant
Participation Program operated through the Debtor’s ordinary
accounting and tax systems. Mr. Shaver decided how the overriding
royalty for the Prospect would be allocated, while the head of the
Debtor’s land department prepared a spreadsheet of ownership interests
that was entered into the Debtor’s accounting system.13 The accounting
system generated monthly pay decks from which production revenues
were paid to interest holders, including the Plaintiffs.14 The
spreadsheet was also sent to the Debtor’s external property tax
7 ECF No. 110-13.
8 ECF No. 110-13.
9 ECF No. 89-1 at 137–138.
10 ECF No. 89-1 at 137-138.
11 ECF No. 89-1 at 138:13–15.
12 ECF No. 89-1 at 52:24–53:5.
13 ECF No. 89-1 at 181–183.
14 ECF No. 89-1 at 192:11–22.
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consultant who reported each owner’s interest in each Prospect to the
county appraisal districts.15 The counties then listed the payees,
including the Plaintiffs, as the owners of their reported interests and
assessed ad valorem taxes against each, which the Plaintiffs paid.16
Third parties who were able to find the Plaintiffs’ interests from the
appraisal records sent unsolicited offers to purchase them.17 In just the
two years preceding the Involuntary Petition Date, the Debtor paid Mr.
Kasino $963,705.47 and Mr. Turner and his estate $651,168.36 through
this process “on account of their alleged ORRIs.”18
Mr. Turner retired from his position with the Debtor in July 2023
and died on March 31, 2024.19 The Debtor continued to pay production
revenues to Mr. Turner after his retirement and to Mrs. Turner after his
death.20 According to the TRO hearing testimony, those payments were
made at the full ORRI on wells that were producing when Mr. Turner
retired and at one-half on wells that began producing afterward.21 The
Debtor suspended all payments for both Plaintiffs around July 2024
after the Involuntary Petition was filed.22
The Opinion directed the Parties to re-brief the reserved issues
within 21 days, with responses due seven days later.23 The reserved
issues are ripe for decision.
JURISDICTION & LEGAL STANDARD
28 U.S.C. § 1334(a) provides the District Courts with jurisdiction
over this proceeding. 28 U.S.C. § 157(b)(1) states that “Bankruptcy
judges may hear and determine all cases under title 11 and all core
proceedings arising under title 11, or arising in a case under title 11,
15 ECF No. 89-1 at 129:11–130:12, 192:1-22.
16 ECF No. 2-4; ECF No. 89-1 at 32:14–33:20, 70:4–71:8, 131:8–132:4.
17 ECF No. 90-2, 90-3.
18 ECF No. 121.
19 ECF No. 89-1 at 21:6–10; ECF No. 1.
20 ECF No. 130 ¶ 8; ECF No. 89-1.
21 ECF No. 89-1 at 25:22–26:22, 59:20–60:3.
22 ECF No. 121 at 6.
23 ECF No. 121 at 48.
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referred under subsection (a) of this section, and may enter appropriate
orders and judgments, subject to review under section 158 of this title.”
This proceeding has been referred to this Court under General Order
2012-6 (May 24, 2012). This Court has jurisdiction in this proceeding as
it is a core proceeding which the Court can consider under 28 U.S.C. §§
157(b)(2)(A), (B), (C), (H) and (K). The Court has constitutional
authority to enter final orders and judgments. Stern v. Marshall, 564
U.S. 462, 486–87 (2011). And venue is proper under 28 U.S.C. §§ 1408
and 1409.
Under FED. R. CIV. P. 56, as incorporated into this adversary
proceeding through FED. R. BANKR. P. 7056, a movant is entitled to
summary judgment if it demonstrates to the Court “there is no genuine
dispute as to any material fact and [the movant] is entitled to judgment
as a matter of law.” FED. R. CIV. P. 56(a). A dispute pertaining to a
material fact is “genuine” if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether there is
a disputed material fact precluding summary judgment, “courts consider
the evidence in the light most favorable to the nonmovant[.]” Spivey v.
Robertson, 197 F.3d 772, 774–75 (5th Cir. 1999) (citing Anderson, 477
U.S. at 248–49). However, the “nonmovant must respond to the motion
for summary judgment by setting forth particular facts indicating that
there is a genuine issue for trial.” Id. “[U]nsubstantiated assertions are
not competent summary judgment evidence.” Ragas v. Tenn. Gas
Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998) (citing Celotex Corp. v.
Catrett, 477 U.S. 317, 324 (1986)). “After the nonmovant has been given
an opportunity to raise a genuine factual issue, if no reasonable juror
could find for the nonmovant, summary judgment will be granted.” Id.
(citing Celotex Corp., 477 U.S. at 322).
When invoking the statute of frauds, the party seeking to enforce
the contract bears the burden of proving an exception. Duradril, L.L.C.
v. Dynomax Drilling Tools, Inc., 516 S.W.3d 147, 158 (Tex. App.—
Houston [14th Dist.] 2017, no pet.). Whether an exception applies is
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“generally a question of fact,” Hairston v. S. Methodist Univ., 441 S.W.3d
327, 334 (Tex. App.—Dallas 2013, pet. denied), but where the
underlying facts are undisputed and the parties differ only as to their
legal effect, the question may be resolved on summary judgment. See
Craig v. B. Riley FBR, Inc., No. 3:19-CV-0058-G, 2020 WL 6889018, at
*13-14 (N.D. Tex. Nov. 23, 2020). A party asserting that a fact is
genuinely disputed must “cit[e] to particular parts of materials in the
record”; conclusory assertions that fact issues exist do not suffice. FED.
R. CIV. P. 56(c)(1)(A); Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458
(5th Cir. 1998).
Whether a contract is ambiguous is a question of law. Coker v.
Coker, 650 S.W.2d 391, 393-94 (Tex. 1983). A contract is ambiguous
only if, after the rules of construction are applied, it remains reasonably
susceptible to more than one meaning; the parties’ disagreement does
not make it so. Columbia Gas Transmission Corp. v. New Ulm Gas,
Ltd., 940 S.W.2d 587, 589 (Tex. 1996). If a contract is ambiguous,
extrinsic evidence, including the parties’ course of performance, is
admissible to determine its meaning, Nat’l Union Fire Ins. Co of
Pittsburgh, PA v. CBI Indus., Inc., 907 S.W.2d 517, 520–21 (Tex. 1995),
and where that evidence is undisputed the question may still be resolved
on summary judgment.
The nature of a debtor’s interest in property is determined by
state law, Butner v. United States, 440 U.S. 48, 54 (1979); In re T.S.C.
Seiber Servs., L.C., 771 F.3d 246, 250 (5th Cir. 2014), and the estate
takes that interest subject to the same limitations that bound the
debtor. 11 U.S.C. § 541(d).
DISCUSSION
The reserved issues fall into two groups, and the Court resolves
them as follows. The first is (i) whether any of the Plaintiffs’ alleged
ORRIs are excepted from the statute of frauds, and if so, what are they
entitled to on account of them. The second is (ii) the meaning of the
Consultant death provision and its effect on the claimed interests of Mr.
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Turner’s estate. The remaining claims under this adversary proceeding,
which neither Party has briefed, are reserved. For the reasons stated
below, the Parties’ motions for summary judgment are granted in part
and denied in part.
I. PAID ORRIS ARE EXCEPTED FROM THE STATUTE OF FRAUDS.
In its Opinion issued on May 18, 2026, this Court found that every
element of a valid conveyance of the ORRIs under Texas law was met
but one. The Consulting Agreement is in writing, identifies the grantor
and grantee, contains present words of grant, and was signed, delivered,
and accepted.24 However, it lacks a sufficient description of the property
to be conveyed, failing the statute of frauds.25 The Court further held
that to the extent any ORRI was conveyed, the Plaintiffs hold an
equitable interest in it that is excluded from the Debtor’s estate, and
that the Debtor cannot avoid this conveyance under § 544(a) or § 548.26
The remaining question is whether the description defect is excused as
to any of the alleged ORRIs.
The Court finds that the defect is excused as to the Paid ORRIs.
The doctrine of partial performance excepts those interests from the
statute because the absence of formal possession does not defeat the
exception for an interest that is non-possessory by nature, the Plaintiff’s
performance is unequivocally referable to the Consulting Agreement,
and because denying enforcement would amount to a virtual fraud.
The exception entitles the Plaintiffs to the interests themselves
rather than to reliance damages, because the Consulting Agreement
effected a present conveyance and because state law, not bankruptcy
policy, defines what the Plaintiffs own. The Plaintiffs’ alternative
theories do not change that result, and the only genuine issue of
material fact that remains is which alleged interests qualify as Paid
ORRIs.
24 ECF No. 121 at 12, 24.
25 ECF No. 121 at 14–17.
26 ECF No. 121 at 35,42,47.
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A. Partial Performance Excepts Paid ORRIs.
This Court reserved judgment only as to interests the Debtor
made payments on and reported (the “Paid ORRIs”), holding that only
these interests are candidates for an exception. The Court’s prior ruling
on interests supported only by internal documents stands, and interests
on which no payments were made remain barred.
The Debtor argues that the partial performance test under Hooks
v. Bridgewater, 111 Tex. 122, 229 S.W. 1114 (1921) is controlling. The
Court does not agree. Applying Hooks to the facts of this case would be
improper because the Consulting Agreement is a signed instrument that
is deficient only in its description of property, not merely an oral
agreement for the sale of land. The applicable elements of partial
performance under Texas law, unequivocally referable performance and
virtual fraud, are met. The Plaintiffs’ acceptance of below market
compensation, execution of division orders and payment of ad valorem
taxes on the interests can only be explained as incidents of ownership.
The Debtor’s own payments and tax reporting further confirm that they
were referable to the Consulting Agreement alone. Because the
Plaintiffs gave up substantial compensation in reliance of the
Consulting Agreement, the estate would otherwise keep both the
Prospects and the ORRIs, and an unsecured claim is not a substitute for
a paying royalty interest, virtual fraud is also satisfied.
(1) Only Paid ORRIs Are Candidates for the Exception.
The Opinion granted summary judgment to the Debtor on two
categories of alleged ORRIs: those identifiable only through reference to
the Division Orders or Division of Interest Listings, and those whose
evidentiary support is solely a line ledger entry.27 It reserved judgment
as to ORRIs that may be excepted from the requirements of the statute
of frauds by virtue of the Debtor having paid the Plaintiffs on account of
those interests, as evidenced by various property tax records.28 The
27 ECF No. 121 at 17.
28 ECF No. 121 at 17 n.72.
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Plaintiffs’ brief nonetheless asks the Court to grant summary judgment
on all three categories.29 As to the first two, that request is effectively a
motion for reconsideration. However, the Plaintiffs identify no new
evidence, no intervening change in the law, and no error in the Court’s
application of Morrow v. Shotwell, 477 S.W.2d 538, 540–41 (Tex. 1972).
Therefore, it is denied.30
However, the operative distinction is not the internal document
in which an alleged ORRI happens to appear. It is whether the Debtor
paid production revenues on the interest and reported the Plaintiff’s
ownership of it to the county taxing authorities before the Involuntary
Petition Date. An interest that appears in a Division of Interest Listing
and was also paid and reported falls within the reserved category. The
Court will refer to ORRIs meeting both conditions as “Paid ORRIs.”
At the other end are interests in Prospects that were never
drilled, or in wells that never produced. No production revenue was paid
on account of those interests, no ownership was reported, and no taxes
were assessed. The only evidence of their conveyance is the Consulting
Agreement itself, which the Court has held is deficient, and there is no
performance by either Party to which any exception could attach. The
Plaintiffs contend that a Consultant fully performed each time he
tendered a Prospect, regardless of whether it was ever drilled.31 Even
accepting that premise, this does not give rise to an identifiable interest.
The Consulting Agreement sets aside “up to 1%” out of whatever ORRI
the Debtor retains in a Prospect, which is a quantity that cannot be
29 ECF No. 131 at 19.
30 The Plaintiffs rely on Anderson Energy Corp. v. Dominion Okla. Tex. Expl.
& Prod., Inc., 469 S.W.3d 280, 295–96 (Tex. App.—San Antonio 2015, no pet.), Gates
v. Asher, 280 S.W.2d 247, 248 (Tex. 1955), and Thagard Mining P’ship, LP v. Cass, 726
S.W.3d 871, 882 (Tex. App.—Eastland 2025, pet. denied) for the proposition that a
property description may be aided by extrinsic documents. Each of those cases permits
extrinsic evidence only where the instrument itself contains a “nucleus” of description
to which the evidence can be applied. The Opinion held that the Consulting Agreement
contains no such nucleus. Therefore, those authorities do not call the Court’s prior
ruling into question.
31 ECF No. 131 at 12–13.
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determined until the Prospect is leased, drilled, and begins producing.
For these Prospects, nothing was ever allocated, set aside, paid, or
reported.32 An exception to the statute of frauds can excuse the absence
of a description of an interest that exists, but it cannot supply an interest
that never came into being. Therefore, summary judgment on the
conveyance of those interests is granted for the Debtor and denied for
the Plaintiffs.
(2) The Hooks Possession Test Does Not Apply.
Under Texas law, partial performance requires the satisfaction of
two elements. First, the performance must be “unequivocally referable
to the agreement[.]” Wiley v. Bertelsen, 770 S.W.2d 878, 882 (Tex. App.–
Texarkana 1989, no writ). To be unequivocally referable to an
agreement, the performance must be “unintelligible,” or at least
“extraordinary” when considered on its own, “without the aid of words
of promise.” Nat’l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419,
427 (Tex. 2015) (citation omitted); see Chevalier v. Lane’s, Inc., 213
S.W.2d 530, 533-34 (Tex. 1948). In other words, “the purpose of the. . .
performance must be to fulfill a specific agreement.” Id. Second, denial
of enforcement must amount to “a virtual fraud.” Carmack v. Beltway
Dev. Co., 701 S.W.2d. 37, 41 (Tex. App.—Dallas 1985, no writ). To
satisfy virtual fraud, the party relying on the contract must show that
it has suffered a substantial detriment for which it has no adequate
remedy, and that the other party, if permitted to plead the statute,
would reap an unearned benefit. Exxon Corp. v. Breezevale Ltd., 82
S.W.3d 429, 439 (Tex. App.—Dallas 2002, pet. denied); Carmack, 701
S.W.2d at 40.
The Debtor argues that a stricter test applies. Relying on Hooks
and its progeny, the Debtor contends that a party seeking to enforce
conveyance of real property must show payment of consideration,
surrender of possession, permanent and valuable improvements to the
property (or facts making the transaction fraudulent if not enforced),
32 ECF No. 110-13.
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and that the possession must be “indispensable.”33 Crucially, the Debtor
also concedes that the Consulting Agreement is a “hybrid instrument —
part geological services contract, part alleged conveyance — so the
governing partial performance standard is unclear.”34
The Court does not agree that Hooks applies to the facts of this
case. Hooks, and cases that apply it, involve wholly oral contracts for
the sale of land in which every term of the agreement, including the
parties, consideration, and land itself, must be proven by conduct rather
than by writing. In these factual settings, possession and improvements
serve both an evidentiary and reliance function in the sense that the
vendee’s occupation of a particular tract is what identifies the land that
the oral agreement contemplated. This case is different. The Consulting
Agreement is a signed writing that satisfies every requirement of a
conveyance except description. The grantor, grantee, words of grant,
and consideration are all established by the instrument itself. The only
element left to parol is the identification of the specific leases in which
the “set aside” interests lie. The narrower question presented is whether
the Parties’ performance corroborates that identification with the
certainty equity requires. That is the question the traditional partial
performance test asks, and it is the test the Court applied when it
reserved this issue.35
Therefore, the Debtor’s possession argument does not define the
inquiry. However, because the Debtor presses the issue as dispositive,
and because the Court’s answer to it bears on the referability analysis
that follows, the Court addresses it before turning to the elements of the
controlling test.
33 ECF No. 130 ¶¶ 22–23 (citing Hooks, 229 S.W. at 1116; Swinehart v.
Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., 48 S.W.3d 865, 882–83
(Tex. App.–Houston [1 st Dist.] 2011, pet. denied)).
34 ECF No. 130 ¶ 21.
35 ECF No. 121 at 18 (citing Carmack).
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(3) Possession Is Not Required to Enforce a Non-
Possessory Interest.
Even if Hooks was controlling here, its possession element would
not defeat the exception. The Debtor asserts that the Plaintiffs never
took possession of the ORRIs, which it claims is fatal under Swinehart
and Carpenter.36 The Debtor further claims that the Court “has already
found” that the Debtor “retained possession of the alleged ORRIs.”37 The
Court made no such finding.
The Opinion held that the Debtor retained legal title to the
ORRIs, pending a sale of the underlying property or the Consultant’s
dissociation.38 Legal title and possession are separate constructs, and
the Opinion held in the same passage that the Plaintiffs hold equitable
rights to receive ORRI payments, the right to acquire legal title pending
the sale of the underlying property, and the right to assign those
interests to a third party.39
More fundamentally, an overriding royalty is a non-possessory
interest. It carries no right to occupy the land, drill, operate, or produce.
It is a right to a share of production, free of the costs associated with this
production. T-Vestco Litt-Vada v. Lu-Cal One Oil Co., 651 S.W.2d
284,291 (Tex. App.—Austin 1983, writ ref’d n.r.e.); Standard Oil Co. of
Tex. v. Marshall, 265 F.2d 46, 54 (5th Cir. 1959); 2 WILLIAMS & MEYERS,
OIL AND GAS LAW § 418.1. The Consulting Agreement further provides
that record title “shall at all times remain in the name of [the Debtor],
so long as [the Debtor] is the operator of the property.”40 The Debtor is
effectively asking the Court to deny enforcement because the Plaintiffs
failed to take a form of possession that interests of this kind do not
permit, and that the Parties’ agreement did not contemplate.
36 ECF No. 130 ¶¶ 2,14, 20–23.
37 ECF No. 130 ¶ 2.
38 ECF No. 121 at 31–33.
39 ECF No. 121 at 34.
40 ECF No. 110–13.
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To the extent the Hooks line of cases requires something in the
nature of possession, the equivalent for an interest of this kind is present
nonetheless. The Plaintiffs received the production stream attributable
to the interests for years. They were assessed and the associated ad
valorem taxes were paid. The Plaintiffs were recognized as the owners
by the county appraisal districts as well as third parties who sought to
purchase these interests.41 These incidents of ownership represent the
furthest extent of possession that one could assert for an interest of this
kind.
Lastly, Swinehart and In re Haber Oil Co., 12 F.3d 426 (5th Cir.
1994) are not instructive here. Both concerned an alleged oral
agreement to assign working interests that no signed instrument
accounted for. The geologist in these cases sought to supply the
agreement’s terms from leases, investor materials, and operating
documents created afterward, and the court held that such documents
could not furnish the “framework or skeleton” of the agreement.
Swinehart, 48 S.W.3d at 875, 877-78; Haber Oil, 12 F.3d at 430–31.
Regardless of what “possession” of such an interest might have entailed,
the geologist in those cases had no signed instrument, no present words
of grant, and no adjudication that the operator’s own records and tax
filings identified his interests. Furthermore, the Fifth Circuit’s decision
in Haber Oil turned on the trustee’s status as a bona fide purchaser
under § 544(a)(3) and on the tracing requirements for a constructive
trust, both of which are issues that this Court has already resolved in
the Plaintiffs’ favor.42 Carpenter similarly involved an alleged oral
agreement to assign a working interest and would also be improperly
applied to the facts of this case.
With the issue of possession resolved, the Court turns to the two
requirements of the governing partial performance test.
41 ECF No. 90-2,3.
42 ECF No. 121 at 30–35, 36–42.
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(4) Plaintiffs’ Performance is Unequivocally Referable
to the Consulting Agreement.
The Debtor’s principal argument is that the Plaintiffs’
performance cannot be unequivocally referable to the Consulting
Agreement because the Plaintiffs were salaried geologists whose
everyday work of generating and evaluating Prospects is fully explained
by their employment.43 The Court disagrees.
The Debtor relies on a line of Texas cases which held that services
compensated by a salary do not constitute partial performance
associated with a separate promise for additional compensation. “[A]
salary compensates for services rendered; if a person receives payment
for his services, those services will not act as an exception to the statute
of frauds.” Holloway v. Dekkers, 380 S.W.3d 315, 324 (Tex. App.—Dallas
2012, no pet.) (citation omitted); see also Wiley, 770 S.W.2d at 882; Biko
v. Siemens Corp., 246 S.W.3d 148, 161 (Tex. App.—Dallas 2007, pet.
denied); Timmons v. Scarbrough, Medlin & Assocs., Inc., No. 05-05-
00235-CV, 2005 WL 3436706, at *4–5 (Tex. App.—Dallas Dec. 15, 2005,
no pet.); Daesang Corp. v. Stone, No. 05-95-01760-CV, 1997 WL 557091,
at *4 (Tex. App.—Dallas Sept. 9, 1997, pet. denied); Martinez v. DKTA
Enters., Ltd., No. 07-19-00116-CV, 2020 WL 2786942, at *9–11 (Tex.
App.—Amarillo May 29, 2020, no pet.); Fuller v. Wholesale Elec. Supply
Co. of Hous., Inc., 631 S.W.3d 177, 185-86 (Tex. App.—Houston [14 th
Dist.] 2020, pet. denied); Exxon, 82 S.W.3d at 440–41.
Those cases do not control here for three reasons. First, each of
the cases above involved an oral or unexecuted promise of additional
compensation, the very existence of which was disputed. Salary was the
only consideration established by the records, allowing the
“unequivocally referable” element to serve its intended function of
preventing a party from fraudulently manufacturing a promise for
additional compensation from conduct that was equally consistent with
ordinary employment. Here, the Consulting Agreement is signed and in
43 ECF No. 130 ¶¶ 24–30.
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writing, and its existence and purpose are undisputed. The Consulting
Agreement explicitly states that payments on account of the ORRIs are
“in addition to the salary or day rate,” and that it supersedes any prior
understanding “with respect to such matters.”44 The Debtor also does
not identify any other agreement under which ORRIs could have been
owed to the Consultants. There is no question here as to whether
performance can prove the existence of a contract, which is what the
cases listed above ask. The contract here is on the record. The proper
question to ask here would be whether performance can be sufficient to
identify property, which is something that is not addressed by any of the
above cases.
Second, even on their own terms, those cases bar the exception
only where the salary fully compensates the services. Daesang, 1997
WL 557091, at *4. The Court has already found the opposite to be true
in this case. The Plaintiffs each agreed to a significantly reduced salary
in exchange for the potential upside of acquiring ORRIs for the
Prospects they helped develop.45 Mr. Shaver testified that the salary was
meant to cover baseline expenses.46 In the words of Mr. Kasino, the
salary provided “grocery money.”47 More importantly, when Mr. Shaver
was questioned on if he “consider[ed] just paying [the Plaintiffs] a
straight salary,” he explicitly responded “No . . . The overrides are what
give them the incentive to really come up with good prospects and work
as hard as they can for their retirement.”48 Where the undisputed
evidence shows that equity as opposed to salary was the consideration
that induced the work, the work is referable to the equity agreement.
Davis v. Insurtek, Inc., No. 05-09-01029-CV, 2010 WL 5395668, at *3-4
(Tex. App.—Dallas Dec. 30, 2010, no pet.).
Third, the Plaintiffs’ performance goes beyond just developing the
Prospects. The record shows specific instances of conduct performed by
44 ECF No. 110–13.
45 ECF No. 121 at 47.
46 ECF No. 110–4 at 89:6–13.
47 ECF No. 110-19 at 14:2-8.
48 ECF No. 89-1 at 138:13–15.
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the Plaintiffs that cannot be explained by their employment at all. For
example, the Plaintiffs accepted compensation that was significantly
less than the fair value of their services throughout the life of the
Consultant Participation Program.49 The only intelligible explanation
for this kind of forbearance is that the Plaintiffs accepted a reduced
salary as the price to participate in the ORRI program. The program,
by its terms, “supersede[s] any prior oral or written agreements, or
understanding . . . with respect to such matters.”50
They also executed Division Orders certifying ownership of their
interests in identified leases and paid ad valorem taxes assessed to them
on these interests.51 The Debtor contends that the tax payments were
merely “legal obligation[s] tied to income received.”52 This is a
fundamental misunderstanding of how mineral interests are taxed in
Texas. Under the Texas Tax Code, each separate interest in minerals is
listed in the name of its owner, and the resulting ad valorem tax is
assessed based on the appraised market value of the interest. The
market value of the interest is determined based on projections of future
income the interest itself will yield. It is not based on the income the
owner happened to receive. TEX. TAX CODE §§ 25.12(a), 23.175. The
Plaintiffs were assessed and paid those taxes because the Debtor
reported them to the counties as the owners of the interests, and the
counties listed them as such.53 Paying property tax on an interest “alone
and without the aid of words of promise is unintelligible…unless as an
incident of ownership.” Westergren, 453 S.W.3d at 427. A salaried
employee does not pay the property taxes on his employer’s royalty.
The Debtor’s own conduct supports this point. The Debtor
concedes that it paid the Plaintiffs a combined total of approximately
$1.6 million in production revenues “on account of their alleged ORRIs”
during the two year lookback period alone, and that it did so through
49 ECF No. 89-1 at 137:14–138:11, 52:24–53:5.
50 ECF. No. 110-13.
51 ECF No. 2-4; ECF No. 89-1 at 33:1–11, 70:15–19; ECF No. 110-19 at 32:14–33:20.
52 ECF No. 130 ¶ 31.
53 ECF No. 89-1 at 129:11–130:12, 131:8–132:4.
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pay decks allocating a stated percentage of production from a stated well
to each Consultant.54 It concedes that it reported those same interests
on a well by well basis to the county appraisal districts.55 The Debtor
also concedes that it continued paying Mrs. Turner, who was never the
Debtor’s employee, after her husband’s death.56 The Debtor is correct
that the partial performance doctrine focuses on the enforcing party’s
performance. Tex. Co. v. Burkett, 296 S.W. 273, 279 (Tex. 1927).
However, the opposing party’s performance is competent evidence of
what the enforcing party’s performance was referable to, and Texas and
Fifth Circuit courts have both treated opposing parties’ payments as
exactly that. Smith v. Smith, 541 S.W.3d 251, 262 (Tex. App.—Houston
[14th Dist.] 2017, no pet.) (employer’s payment of commissions was
evidence of partial performance of oral commission agreement)57; Chase
v. Hodge, 95 F.4th 223, 230 (5th Cir. 2024) (question of whether
“payments to [enforcing party] could not have been made except as a
share of profits”). There is “no other design” that the debtor’s payments
and tax reporting could have been made for than to perform the
Consulting Agreement. Chevalier, 213 S.W.2d at 534.
Therefore, the Court finds that the Plaintiffs’ performance is
unequivocally referable to the Consulting Agreement.
54 ECF No. 89-1 at 181:11–182:18, 192:11–22.
55 ECF No. 110-13.
56 ECF No. 130 ¶ 8.
57 The Debtor distinguishes Smith on the grounds that the employee’s
performance was tied solely to the oral commission agreement with no discussion of
salary, and it observes that Duradril’s reference to performance by “either party”
arose on a jury-charge complaint that was not preserved. Neither point affects the
use the Court makes of these cases. The Court does not hold that the Debtor’s
performance substitutes for the Plaintiffs’. It holds that the Debtor’s payments and
tax reporting are evidence of what the Plaintiffs’ own performance was referable to,
and Smith treated an employer’s payments in as exactly that kind of evidence. 541
S.W.3d at 262.
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(5) Denial of Enforcement Would Amount to Virtual
Fraud.
To prove a virtual fraud under Texas law, three elements must be
satisfied. There must be a showing of (i) substantial detriment to the
party relying on the contract (ii) for which there is no adequate remedy,
and (iii) an unearned benefit to the opposing party if permitted to plead
the statute. Carmack, 701 S.W.2d at 40. Each element is established
through the record.
The Plaintiffs gave up the difference between their market rate
and their salary for the duration of their tenure in reliance of the ORRI
program. Mr. Shaver intended this reliance, as shown through his
testimony that the overrides were meant to fund the Plaintiffs’
retirements and that he made sure any deal included ORRIs for them.58
The Debtor’s contention that the Plaintiffs suffered no detriment
because they “were paid millions of dollars through salary, bonuses, and
production related compensation” conflates the consideration the
Plaintiffs received with the consideration they gave up, and is contrary
to this Court’s prior finding.59 Therefore, the Court finds that the
element of substantial detriment is met.
If the statute is enforced, the Debtor’s estate would retain the
Prospects that the Plaintiffs were instrumental in developing. These
are the same Prospects that Mr. Shaver admits he “wouldn’t be here
right now” without.60 The estate would also retain the ORRIs the
Debtor explicitly agreed to set aside for the Plaintiffs, and on which it
issued payments on account of for years. The Court has already found
that the Plaintiffs’ services were reasonably equivalent in value to the
ORRIs. The Debtor would necessarily be reaping an unearned benefit if
it were to keep both the services provided by the Plaintiffs and the
ORRIs.
58 ECF No. 89-1 at 138:9–15; ECF No. 110-4 at 97:16–98:16.
59 ECF No. 130 ¶ 3.
60 ECF No. 110-4 at 120:11–15.
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The Debtor argues that the Plaintiffs have an adequate remedy
because even if the statute is enforced, they filed proofs of claim and can
proceed through the claims allowance process.61 The Court does not find
this argument persuasive. An overriding royalty is an interest in real
property, and Texas law treats interests in real property as unique. The
ordinary remedy for a completed conveyance of real property is the
property itself, not its price. Kress v. Soules, 261 S.W.2d 703, 704 (Tex.
1953); Scott v. Sebree, 986 S.W.2d 364, 370 (Tex. App.—Austin 1999, pet.
denied) (specific performance is “more readily available as a remedy for
the sale of real estate” because “damages are generally believed to be
inadequate in connection with real property”). A general unsecured
claim in a chapter 11 case in which the Debtor has sold substantially all
of its oil and gas properties and has filed a plan of liquidation is not an
adequate substitute for a producing royalty interest that the Debtor
itself treated as the Plaintiffs’ property for years. As such, the Court
finds that denying enforcement of the conveyance of the Paid ORRIs
would amount to a virtual fraud against the Plaintiffs.
For all the reasons stated above, summary judgment on the
application of the partial performance exception to the Paid ORRIs is
granted for the Plaintiffs and denied for the Debtor.
B. The Exception Entitles Plaintiffs to Conveyance.
The Debtor asserts that even if an exception applies, the Plaintiffs
should receive something less than the interests themselves. It argues
that a partial performance exception to the statute of frauds only
provides for reliance damages, and that the policies underlying the
Bankruptcy Code require such an exception to be narrowed or withheld
entirely in the case of the Plaintiffs. Neither argument succeeds.
The Debtor’s argument that partial performance only yields
reliance damages fails because the cases it relies on concern executory
contracts, whereas this Court has already held that the Consulting
Agreement effected a present conveyance. Once the statute’s bar is
61 ECF No. 130 ¶ 35.
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removed, there is nothing left to compel and nothing to measure in
damages. The exception entitles the Plaintiffs to the interests
themselves.
Its argument that bankruptcy policy requires the exception to be
narrowed fails because state law defines the Plaintiffs’ interests, and the
Court has already held that those interests are not property of the
Debtor’s estate. The principle of equal distribution only governs
property that belongs to Debtor’s estate.
(1) Plaintiffs Are Not Limited to Reliance Damages.
The Debtors argue that even if the partial performance exception
applies, the Plaintiffs’ only available remedy is reliance damages, which
would leave them with a prepetition general unsecured claim.62 It relies
on Exxon, 82 S.W.3d at 440–41; Sullivan v. Leor Energy, LLC, 600 F.3d
542, 549 (5th Cir. 2010); Wheeler v. White, 398 S.W.2d 93, 97 (Tex. 1965);
Fretz Constr. Co. v. S. Nat’l Bank, 626 S.W.2d 478, 483 (Tex. 1981); and
Burkett, 117 Tex. at 33.
Those cases address a different situation. Wheeler and Fretz are
promissory estoppel cases, and the limitation of that doctrine to reliance
damages reflects its core purpose, which is to make whole a promisee
who changed their position in reliance of a promise that was never
performed. Exxon and Sullivan likewise involved executory promises
that the promisor did not fulfill. Exxon concerned an alleged oral
undertaking to convey a working interest in the future, and Sullivan
dealt with an alleged oral promise of a bonus. In both cases, the
promisee sought expectation damages for a promise the statute made
unenforceable, and the court held that equity would go no further than
reliance. The passage from Burkett on which the Debtor relies, that “the
taking possession and making valuable improvements by the vendee
will as a general rule entitle him to a decree of specific performance”
(quoting 117 Tex. at 33), describes when a vendee under an oral
executory contract for the sale of land may obtain a decree compelling
62 ECF No. 130.
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his vendor to convey. It does not speak to an instrument that has been
held to have effected a present conveyance.
Here, there is no executory promise, nor is the contract oral. The
Court has held that the Consulting Agreement contains present words
of grant and effected a present conveyance of each ORRI as it was
earned, and that the Plaintiffs therefore held the equitable interest in
that ORRI while the Debtor retained bare legal title. The statute of
frauds did not render that conveyance void; it rendered it unenforceable.
TEX. BUS. & COM. CODE § 26.01(a). Applying the partial performance
exception removes the statute of frauds bar, leaving nothing left for the
Court to compel or to measure in damages. Because the statute of frauds
bar is lifted, each interest passed when it was earned, and the Plaintiffs
are its equitable owners. They are entitled to a declaration to that effect,
which is the relief the Complaint seeks.63 The Plaintiffs also ask that
the Debtor be required to execute the assignments of legal title where
the Consulting Agreement calls for them, which is upon a Consultant’s
retirement or other disassociation, and upon a sale of the underlying
property.64 That relief, when it becomes due, constitutes the completion
of a conveyance already made, not the enforcement of an executory
promise, and it is relief that Texas courts routinely grant for interests
in land. Kress, 261 S.W.2d at 704.
(2) Bankruptcy Policy Considerations Do Not Narrow
the Exception.
The Debtor also urges the Court to decline to apply, or to apply
narrowly, any equitable exception to the statute of frauds in light of the
Bankruptcy Code’s policy of equal distribution among creditors, the
statutory liens asserted by the service creditors who commenced this
case, and the sophistication of the Plaintiffs.65 The Debtor’s arguments
misapprehend what is at stake.
63 ECF No. 1.
64 ECF No. 133 at 11.
65 ECF No. 130 ¶¶ 5, 48–53; ECF No. 132 ¶¶ 29–32.
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The Plaintiffs’ interests in the ORRIs are defined by Texas law,
not the Bankruptcy Code. Butner, 440 U.S. at 54. The Court has also
already held that those interests are excluded from the estate under §
541(d) and are not avoidable under § 544(a) or § 548. Though the Debtor
relies on Begier v. IRS, 496 U.S. 53, 58 (1990), and In re Greystone III
Joint Venture, 995 F.2d 1274, 1277 (5th Cir. 1991), they concern
different issues. Both Begier and Greystone involved disputes over
property which was already deemed to be property of the estate. Neither
case raised the question of whether the property belonged to the estate
to begin with. That question is primarily answered by state law, and
the estate takes the Debtor’s interest subject to every limitation that the
debtor is bound by. 11 U.S.C. § 541(d); H.R. Rep. No. 95-595, at 367-68
(1977). Granting the Debtor’s request would mean applying Texas law
differently because the Debtor is in bankruptcy, which Butner forbids.
The Plaintiffs’ sophistication as to business transactions does not
change the analysis. The Debtor relies on In re Jones, 77 B.R. 541, 550-
51 (Bankr. N.D. Tex. 1987) for its premise that “[w]henever one entering
into a business transaction fails to take the proper steps to protect his
interest…that person must bear the result of his failure.”66 The Debtor
drafted the Consulting Agreement, chose the “set aside” mechanism,
retained record title by its own terms, and controlled whether and when
formal assignments would be executed. Between a party that could have
documented its own performance and a party that performed in reliance
on that party’s promise to do so, the consequences of the deficient
drafting fall on the former.
C. The Plaintiffs’ Alternative Theories Do Not Change
the Result.
The Plaintiffs contend that the Debtor ratified the conveyances
by issuing Division Orders and Division of Interest Listings, and that
the doctrine of full performance independently removes the Consulting
66 ECF No. 132 at 21.
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Agreement from the statute.67 Neither contention affects the result
reached above.
Ratification does not apply here. The Debtor objects with respect
to the fact that ratification was not raised in the Plaintiffs’ original
motion or within the scope of the briefing that the Court requested. The
Court need not resolve that objection, because the theory fails on the
merits. A defective conveyance of an interest in land may be ratified
only by a subsequent written instrument, executed by the grantor, that
itself satisfies the statute of frauds and formally recognizes the earlier
conveyance. Kunkel v. Kunkel, 515 S.W.2d 941, 948 (Tex. Civ. App.—
Amarillo 1974, writ ref’d n.r.e) (deed lacking one grantor’s signature
ratified by that grantor’s later recorded release of vendor’s lien); MEI
Camp Springs, LLC v. Clear Fork, Inc., 623 S.W.3d 83, 92–96 (Tex.
App.—Eastland 2021, no pet.) (recorded memorandum of lease and
amendments cured missing description). The Division Orders are
signed by the Plaintiffs, not the Debtor. They are not instruments of
conveyance. At most, they ratify the payments under an existing lease.
City Nat’l Bank v. Bradshaw, 433 S.W.2d 955, 958 (Tex. Civ. App.—Fort
Worth 1968, no writ); see TEX. NAT. RES. CODE § 91.402. The Division of
Interest Listings are unsigned internal records. The Court has already
held that neither document can supply the description the Consulting
Agreement lacks, and the Plaintiffs cannot accomplish under a label of
ratification what Morrow forbids under the statute itself. Therefore,
summary judgment as to the issue of ratification is granted for the
Debtor.
Because the Court holds that partial performance excepts the
Paid ORRIs, it need not decide on whether the doctrine of full
performance would independently do so. As to interests on which
nothing was ever paid, full performance fails for the reason stated in
Part I.A.1 of this opinion. The Plaintiffs did not brief promissory
67 ECF No. 131 at 12–16.
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estoppel, equitable estoppel, or judicial admission, so the Court does not
reach those exceptions.
D. The Only Genuine Issue of Material Fact Is Which
Interests are Paid ORRIs.
The Debtor contends that whether any exception applies is a fact
intensive question that cannot be resolved on summary judgment.68 The
Court agrees that the exception must be applied on a per interest basis,
and that whether an exception applies is ordinarily a question of fact.
Hairston, 441 S.W.3d at 334. But a question of fact precludes summary
judgment only if it is genuine and the party asserting the genuine
dispute cites to the specific portions of the record that create it. FED. R.
CIV. P. 56(c)(1)(A); Ragas, 136 F.3d at 458. The Debtor cites no such
genuine dispute. The facts on which the Court’s holdings rest — the
terms of the Consulting Agreement, the Plaintiffs’ reduced
compensation, the Debtor’s payments, its tax reporting, the assessment
and payment of taxes, and the third party offers — all come from the
Debtor’s own instrument, records, pleadings, and witnesses. The Debtor
does not dispute these facts. Rather, it disputes their legal effect, which
is a question of law.
What the record does not yet establish is a complete list of
interests that qualify as Paid ORRIs. The tax records in the summary
judgment record are samples, and the Court declines to construct a well-
by-well schedule from the pay decks and Division of Interest Listings.
The Court reserves the issue of identification of the Paid ORRIs and will
resolve it under the procedure set forth in the Conclusion.
II. THE DEATH PROVISION DOES NOT DIVEST EARNED ORRIS.
The Opinion asked whether the Death Provision is ambiguous as
applied to Mr. Turner and, if so, what effect the Debtor’s continued
payments to Mrs. Turner have on its enforcement.69 Both parties
answer that the provision is unambiguous but propose very different
68 ECF No. 130 ¶¶ 46–47; ECF No. 132 ¶¶ 18–20.
69 ECF No. 121 at 19–20.
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interpretations. The Debtor reads the provision to terminate every
ORRI claimed by Mr. Turner’s estate, because none were “assigned . . .
of record.”70 Under the Plaintiffs’ interpretation, the provision cuts off
only the accrual of new ORRIs after death, leaving earned interests to
pass to Mr. Turner’s estate.71 The question then, is whether the Death
Provision divests ORRIs a Consultant earned before he died.
The Court finds that it does not. Read with the agreement as a
whole, the provision unambiguously limits only future accruals because
the word “additional” reaches only interests that would otherwise be
earned after death. Further, “assigned…of record” cannot mean the
county real property records without rendering the provision null under
the Record Title Provision. In any event, the provision does not govern
Mr. Turner’s earned interests because he retired before he died and his
right to their assignment vested under the Retirement Provision at that
time. Even if the provision were ambiguous, the Debtor’s undisputed
course of conduct in the form of continued payment to Mr. Turner after
retirement and to Mrs. Turner after his death would compel the same
construction. Mr. Turner’s entitlement was therefore fixed at his
retirement — the full ORRI on wells then producing, and one-half on
projects then pending as they came into production before his death —
and all of it passes to his estate.
A. The Death Provision Unambiguously Limits Only
Future Accruals.
A contract is constructed as a whole, so as to give effect to every
provision and to render none meaningless. Seagull Energy E&P, Inc. v.
Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006); Coker, 650 S.W.2d
at 393. Two features of the Death Provision, read against the rest of the
agreement, are sufficient to settle its meaning.
The first is the word “additional.” The Death Provision does not
say that no ORRI is payable upon death. Rather, it says that “no
70 ECF No. 130 ¶¶ 6, 57–61.
71 ECF No. 131 at 17–18.
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additional ORRI are payable.” Read naturally, the term “additional”
refers to ORRIs that would otherwise become payable after the
Consultant’s death. That is, interests in Prospects that come into
production later. An ORRI that was earned, entered into the Debtor’s
records and paid for months or years before the Consultant died is not
an “additional” ORRI. The Debtor’s construction gives the word no
function, and their brief does not address it.
The second is the phrase “already assigned to Consultant of
record.” The Debtor reads “of record” to mean the county real property
records, so that only an ORRI conveyed by a recorded assignment
survives the Consultant’s death.72 However, the Record Title Provision
keeps record title in the Debtor “at all times” while it operates the
property. Applying the Debtor’s construction would then mean that no
ORRI could ever be “assigned of record” at any time, and that the
exception in the Death Provision could never apply to anyone. A
construction that reads a provision out of the contract is not a
permissible one. Seagull, 207 S.W.3d at 345. Read together with the
Record Title Provision, “assigned to Consultant of record” can refer only
to the record the agreement contemplates the Debtor keeping. That is,
the interests Mr. Shaver allocated to a Consultant, entered in the
Debtor’s Division of Interest Listings and pay decks, and reported to the
taxing authorities in the Consultant’s name. Those are the interests
“already assigned to Consultant of record,” and the provision states that
they “pass to the beneficiaries of the Estate of Consultant.”
The Debtor’s construction would also constitute a forfeiture. It
would strip a Consultant’s estate of years of earned and paid interests
because the Debtor never executed assignments that the agreement
itself deferred until a sale of the property or the Consultant’s
dissociation. Texas courts do not construe a contract to effect a forfeiture
unless its language provides for no other reading. Aquaplex, Inc. v.
Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009) (per curiam)
(“Forfeitures are not favored in Texas, and contracts are construed to
72 ECF No. 130 ¶¶ 60–61.
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avoid them.”); Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320
S.W.3d 829, 842 (Tex. 2010). That is not the case here.
The Debtor’s invocation of the canon that specific provisions
control general ones does not offer much support.73 The canon resolves
conflicts between provisions, and there is no conflict here. The Plaintiffs
do not argue that death is a form of “other disassociation,” and both
Parties agree the two provisions address different events.74 The
Retirement Provision governs a living Consultant’s separation from the
Debtor. It requires assignment of earned producing ORRIs, provides for
continued participation in later producing wells, and imposes a duty on
the Consultant to characterize and list all wells, which only a living
person can perform. The Death Provision governs the accrual of
interests after a Consultant dies. Read in this way, each provision has
its own field of operation, and neither renders the other superfluous.
Isbell v. DM Records, Inc. (In re Isbell Records, Inc.), 586 F.3d 334,337
(5th. Cir. 2009).
B. Mr. Turner’s Earned ORRIs Vested Under the
Retirement Provision Before His Death.
In any event, the Death Provision is not the provision that
governs the interests Mr. Turner earned. The record establishes that
Mr. Turner retired from his employment with the Debtor in July 2023,
around 8 months before he passed.75 His retirement triggered the
Retirement Provision, which requires that “the earned producing ORRI
will be assigned to Consultant.” From that moment, Mr. Turner held a
vested contractual right to the assignment of every earned producing
ORRI, meaning the right to legal title that the Opinion held would vest
upon the Consultant’s disassociation with the Debtor.76 The Debtor’s
failure to execute the assignments did not extinguish this right. Equity
73 ECF No. 130 ¶ 59.
74 ECF No. 131 at 17.
75 ECF No. 110-14 at 21.
76 ECF No. 121 at 33.
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regards as done that which ought to be done. In re Unger & Assocs.,
Inc., 292 B.R. 545,554 (Bankr. E.D. Tex. 2003).
That entitlement had two components. The first sentence of the
Retirement Provision assigned to Mr. Turner “the earned producing
ORRI . . .on all owned and drilled wells” as of his retirement. The second
gave him a continuing participation, at one-half the percentage
otherwise payable, in “any pending projects or well(s)” as of that date.
This participation ripened well by well as each pending well came into
production. The Death Provision then could only perform one function,
which was to stop further accrual. Interests that ripened before Mr.
Turner’s death on March 31, 2024, including the full ORRI on wells
producing at his retirement as well as the one-half ORRI on pending
wells that began producing between his retirement and his death, were
not “additional” ORRIs when Mr. Turner died. They were interests that
the agreement had already required to be “assigned to Consultant,” and
the same defined term describes the interests the Death Provision
preserves for the decedent’s estate, which are those “already assigned to
Consultant.” A one-half ORRI on a pending well that first produced
after Mr. Turner’s death, by contrast, is an “additional” ORRI within the
meaning of the Death Provision, and the Plaintiffs do not contend
otherwise.77 Read together, the Retirement Provision fixed the scope of
Mr. Turner’s participation when he left the Debtor, and the Death
Provision closed it off when he died.
Therefore, the Court finds, only as to Paid ORRIs per Part I of
this opinion, that Mr. Turner’s estate holds (i) the full ORRI on every
well that was producing and that he worked on as of his retirement, and
(ii) one-half of the ORRI percentage otherwise payable on each project
or well that was pending as of his retirement and that first produced
before March 31, 2024. It holds no interest in a well that first produced
77 ECF No. 131 at 18 (“[T]he potential for a one-half ORRI on properties
which became productive after his death terminates”).
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after that date or in a project that was neither producing nor pending as
of his retirement.
C. Alternatively, the Parties’ Course of Conduct
Compels the Same Construction.
Even if it were to be determined that the Death Provision is
ambiguous, the outcome would not be changed. Where a contract is
ambiguous, extrinsic evidence, including the parties’ conduct under the
contract before any dispute arose, is admissible to determine its
meaning. Nat’l Union, 907 S.W.2d at 520-21; Coker, 650 S.W.2d at 394.
The Parties’ conduct here is undisputed and points in one direction.
After Mr. Turner retired, the Debtor kept paying him. After he
died it kept paying Mrs. Turner, and it did not stop until it suspended
payments to both Plaintiffs in July 2024.78 The uncontradicted
testimony is that those payments were made at the full ORRI on wells
producing at retirement and at one-half on wells that began producing
between Mr. Turner’s retirement and his death, as outlined in the
Retirement Provision.79 However, what matters for present purposes is
not the percentage at which the Debtor paid, but rather the fact that it
paid at all. For months after Mr. Turner’s death, the Debtor treated his
earned interests as belonging to his estate. The Debtor offers no
testimony that these payments were made in error, no testimony from
Mr. Shaver or anyone else that understood a Consultant’s earned
interests to terminate at death, and no alternative explanation as to why
it paid a decedent’s widow for months if the contract entitled her to
nothing.
The Debtor cites Nustar Energy, L.P. v. Diamond Offshore Co.,
402 S.W.3d 461, 472 (Tex. App.—Houston [14th Dist.] 2013, pet. dism’d),
for the proposition that an ambiguous contract presents a question of
fact.80 That is the general rule, but it does not relieve a party opposing
78 ECF No. 130 ¶ 8; ECF No. 89-1.
79 ECF No. 89-1 at 60.
80 ECF No. 130 ¶ 56.
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summary judgment of its burden under Rule 56(c)(1) to identify evidence
from which a factfinder could adopt its construction. Anderson, 477 U.S.
at 249–52. The Debtor has not met this burden. Where the extrinsic
evidence is undisputed and supports only one meaning, that meaning
may be adopted as a matter of law, and the only meaning this evidence
supports is the Plaintiffs’.
The Debtor’s further response that “course of conduct and other
parol evidence cannot create property interests in land” answers a
question the Court did not ask.81 The cases the Debtor relies on hold
that parol evidence cannot supply a property description that the
operative instrument lacks. That is the question addressed and resolved
in Part I of this opinion. The present question is what the Parties meant
by the Death Provision’s survivorship terms, which is a question of
ordinary contract interpretation for which course of performance is
admissible.
Summary judgment on the construction of the Death Provision is
granted for the Plaintiffs and denied for the Debtor, and the Debtor’s
request for a ruling that all of Turner’s ORRI claims stop as of the date
of his death is denied.
III. ALL OTHER MATTERS ARE RESERVED.
The Complaint seeks a declaration as to working interests as well
as ORRIs.82 Neither the cross-motions nor the supplemental briefing
addresses working interests, and the Court expresses no view on them.
The Court likewise takes no position on whether the Consultants are
entitled to a cash bonus arising from the sale of the Debtor’s assets; on
the Debtor’s recovery claim under § 550, which is moot as to the Paid
ORRIs and not reached as to others; on the Debtor’s objection to the
Plaintiffs’ proofs of claim, its unjust enrichment claim, or either Party’s
81 ECF No. 130 ¶ 62–64 (citing Fears v. Tex. Bank, 247 S.W.3d 729, 736 (Tex.
App.—Texarkana 2008, pet. denied); Mayor v. Garcia, 104 S.W.3d 274, 278 (Tex.
App.—Texarkana 2003, dism’d w.o.j.); Olson v. Bayland Publ’g, Inc., 781 S.W.2d 659,
662 (Tex. App.—Houston [1st Dist.] 1989, writ denied).
82 ECF No. 1.
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request for attorney’s fees; or on the disposition of the production
revenues escrowed under the Court’s order issued on December 4,
2025.83 Each of these matters is reserved pending entry of judgment on
the ownership of the Paid ORRIs.
CONCLUSION84
For the foregoing reasons, the Court grants in part and denies in
part both parties’ motions for summary judgment.
Within 21 days after entry of this supplemental opinion, the
Parties shall confer and file a joint schedule of every ORRI claimed by
either Plaintiff. For each interest, the schedule shall state: (i) the well
or lease and the county in which it is located; (ii) the Consultant to whom
the interest was allocated; (iii) the percentage claimed; (iv) the date
production revenues were first paid on the interest, if any; (v) the
evidence that interest was reported to the county appraisal district in
the Plaintiff’s name; (vi) whether the well was producing, pending, or
neither as of Mr. Turner’s retirement, and whether it was producing as
of his death; (vii) for each interest claimed by Mr. Turner’s estate, the
decimal interest the Debtor carried for Mr. Turner on that well in its
ownership records and whether, in each Party’s view, that decimal
reflects the full participation or the one-half participation under the
Retirement Provision; and (viii) whether the Parties agree that the
interest is or is not a Paid ORRI and, if they disagree, each Party’s
position with citations to the record. The Debtor shall produce to the
Plaintiffs, within 14 days, the ownership spreadsheets and decimal
interest records from which the pay decks for the scheduled wells were
generated. The Plaintiffs may supplement the record with the complete
county tax records within the same period.
Disputed entries will be resolved at an evidentiary hearing to be
set by separate order. Following resolution of the schedule, the
83 ECF No. 80.
84 This Supplemental Memorandum Opinion, together with the Opinion,
constitutes the findings of fact and law required by Rule 7052 of the Federal Rules of
Bankruptcy Procedure.
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Plaintiffs shall submit a proposed form of judgment consistent with the
Opinion and this supplemental opinion.
SIGNED 10/14/2026
___________________________________
Alfredo R Pérez
United States Bankruptcy Judge
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