# Dimock Operating Company, and Joe W. Dimock, D/B/A Dimock Petroleum v. Sutherland Energy Co., LLC > Texas Supreme Court · October 19, 2015 URL: https://www.frixlaw.com/law-library/cases/4057038 ## Case - **Court:** Texas Supreme Court - **Decided:** October 19, 2015 - **Precedential status:** Published - **Opinion:** Opinion - **Cited by:** 0 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4057038 ## Opinion text ACCEPTED 07-15-00297-cv SEVENTH COURT OF APPEALS AMARILLO, TEXAS 10/19/2015 10:03:21 PM Vivian Long, Clerk No. 07-15-00297-CV FILED IN COURT OF APPEALS 7th COURT OF APPEALS AMARILLO, TEXAS SEVENTH DISTRICT OF TEXAS 10/19/2015 10:03:21 PM ________________________ VIVIAN LONG CLERK DIMOCK OPERATING COMPANY, and JOE W. DIMOCK, D/BA DIMOCK PETROLEUM, Appellants, v. SUTHERLAND ENERGY CO., LLC Appellee. ________________________ On appeal from Cause No. 11,098 th 46 District Court, Hardeman County, Texas Hon. Dan Mike Bird, Judge Presiding BRIEF OF APPELLANT Respectfully submitted, Lovell, Lovell, Newsom & Isern, L.L.P. John H. Lovell, SBN 12609300 (john@lovell-law.net) Barbara A. Bauernfeind, SBN 08190500 (barbara@lovell-law.net) 112 West 8th Avenue, Suite 1000 Amarillo, Texas 79101-2314 Telephone: (806) 373-1515 Facsimile: (806) 379-7176 ATTORNEYS FOR APPELLANT ORAL ARGUMENT REQUESTED (TEX.R.APP.P. 39.1) i IDENTITY OF PARTIES AND COUNSEL The following is a list of parties and counsel to the trial court’s judgment, as required by Rule 38.1(a), of the Texas Rules of Appellate Procedure. TRIAL JUDGE: Honorable Dan Mike Bird 46th Judicial District - Hardeman County 1700 Wilbarger Street, Room 34A Vernon, Texas 76384 Telephone: (940) 552-7051 Facsimile: (940) 552-0305 APPELLANT (DEFENDANT): Dimock Operating Company, and Joe W. Dimock, d/b/a Dimock Petroleum. TRIAL COUNSEL: Lovell, Lovell, Newsom & Isern, L.L.P. John H. Lovell, SBN 12609300 (john@lovell-law.net) Barbara A. Bauernfeind, SBN 08190500 (barbara@lovell-law.net) 112 West 8th Avenue, Suite 1000 Amarillo, Texas 79101-2314 Telephone: (806) 373-1515 Facsimile: (806) 379-7176 Cornell D. Curtis, P.C. Cornell Curtis, SBN 24007069 (vernonlaw@sbcglobal.net) 1716 Main Street Vernon, Texas 76384 Telephone: (940) 552-9100 Facsimile: (940) 552-2655 ii APPELLATE COUNSEL: Lovell, Lovell, Newsom & Isern, L.L.P. John H. Lovell, SBN 12609300 (john@lovell-law.net) Barbara A. Bauernfeind, SBN 08190500 (barbara@lovell-law.net) 112 West 8th Avenue, Suite 1000 Amarillo, Texas 79101-2314 Telephone: (806) 373-1515 Facsimile: (806) 379-7176 Cornell D. Curtis, P.C. Cornell Curtis, SBN 24007069 (vernonlaw@sbcglobal.net) 1716 Main Street Vernon, Texas 76384 Telephone: (940) 552-9100 Facsimile: (940) 552-2655 APPELLEE (PLAINTIFF): Sutherland Energy Co., LLC TRIAL COUNSEL: Malone Law Firm Chris Lehman, SBN 24046286 (clehman@malonelawtx.com) 1901 Lamar Street P.O. Box 953 Vernon, Texas 76385 Telephone: (940) 552-9946 Facsimile: (940) 552-9925 Walters, Balido & Crain, L.L.P. Jerry L. Ewing, Jr., SBN 06755470 Nathan R. Cash, SBN 24072026 Meadow Park Tower, 15th Floor 10440 North Central Expressway Dallas, Texas 75231 Telephone: (214) 749-4805 Facsimile: (214) 760-1670 iii APPELLATE COUNSEL: Malone Law Firm Chris Lehman, SBN 24046286 (clehman@malonelawtx.com) 1901 Lamar Street P.O. Box 953 Vernon, Texas 76385 Telephone: (940) 552-9946 Facsimile: (940) 552-9925 Walters, Balido & Crain, L.L.P. Jerry L. Ewing, Jr., SBN 06755470 Nathan R. Cash, SBN 24072026 Meadow Park Tower, 15th Floor 10440 North Central Expressway Dallas, Texas 75231 Telephone: (214) 749-4805 Facsimile: (214) 760-1670 iv TABLE OF CONTENTS IDENTITY OF PARTIES AND COUNSEL ........................................................... II TABLE OF CONTENTS .......................................................................................... V TABLE OF AUTHORITIES ................................................................................ VIII STATEMENT OF THE CASE .................................................................................. 1 STATEMENT REGARDING ORAL ARGUMENT ............................................... 2 ISSUES PRESENTED...............................................................................................2 A. ISSUES AS TO JULY 7, 2015 TEMPORARY INJUNCTION ....................... 2 B. ISSUES AS TO JULY 9, 2015 ORDER............................................................ 6 STATEMENT OF FACTS ........................................................................................6 SUMMARY OF THE ARGUMENT ......................................................................22 ARGUMENT ...........................................................................................................23 A. Standard of Review ..........................................................................................23 B. Rules of Construction and Contract Interpretation ..........................................24 C. Sutherland “Interpretation” Not Consistent With Texas Law .........................26 D. After Trial Court Erroneously Authorized Unlimited Spending, Injunction Now Authorizes Unlimited Time to Drill ....................................28 E. Trial Court Action Constitutes an Erroneous Pretrial Forfeiture of Leasehold .......................................................................................................30 F. Contract Construction Harmonizing and Giving Effect to All Provisions ......................................................................................................31 G. Limits on Project Costs Common in Operating Agreements...........................32 H. Partial Assignment of Oil, Gas and Mineral Lease Was Subject to Parties’ November 20, 2012 Agreement including the Operating Agreement.....................................................................................36 I. Trial Court Erroneously Rewrote Contract ......................................................37 v J. Lack of Probable Right to Recover ..................................................................38 K. Mandatory Provisions Are Abuse of Discretion ..............................................39 L. Injunction Erroneously Compels Assignment Even If Well Is Not Drilled and Completed Within Contract Deadline ........................................40 M. Lack of Imminent Harm ...................................................................................41 N. Injunction Erroneously Has No Provision Requiring Compliance with Contract by Sutherland ..........................................................................41 O. Injunction Order Erroneously Provided Investment Assurance ......................42 P. Pending Suit and Lis Pendens Already Made Drilling Additional Wells a Risk for Sutherland, and is Privileged, So There Is No Imminent Harm..............................................................................................42 Q. Appellant Entitled to Maintain that Sutherland has Breached Contract and to File Lis Pendens ...................................................................46 R. Destroyed Status Quo .......................................................................................47 S. Violated Statute of Frauds ................................................................................49 T. Violated Statute of Conveyances .....................................................................49 U. Erroneous Order of Specific Performance of Non-Existent Contract..........................................................................................................50 V. Illegal Prior Restraint on Speech......................................................................51 W. Prior Breaches of Contract Bar Injunctive Relief ............................................53 X. Injunctive Relief Not Available to Party Guilty of Inequitable Conduct, Laches, and Unclean Hands ...........................................................60 Y. No “Repudiation” by Dimock ..........................................................................60 Z. Injunction Improperly Restrains Right to Relief for Future Breaches of Contract......................................................................................62 vi AA. Injunction Erroneously Granted Without Joinder of Necessary Parties.............................................................................................................63 BB. Inadequate Bond ...............................................................................................63 CC. Error to Deny Dimock Injunctive Relief..........................................................65 CONCLUSION AND PRAYER .............................................................................66 CERTIFICATE OF COMPLIANCE .......................................................................68 CERTIFICATE OF SERVICE ................................................................................69 vii TABLE OF AUTHORITIES Federal Cases Alexander v. U.S., 509 U.S. 544, 113 S.Ct. 2766 (1993) ........................................52 Ashcroft v. Mattis, 431 U.S. 171 (1977) ..................................................................39 Grace Holdings, L.P. v. Sunshine Mining and Refining, 901 F. Supp. 853 (D.Del.1995) ...........................................................................................42 Near v. Minnesota ex rel. Olson, 283 U.S. 697, 51 S.Ct. 625 (1930) .....................51 Organization for a Better Austin v. Keefe, 402 U.S. 415, 91 S.Ct. 1575 (1971) .............................................................................................................51 Texas Cases Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236 (Tex.App.-Corpus Christi 1994, writ denied) ..............................................................................61 Atlantic Richfield Co. v. W.O. Hilton, 437 S.W.2d 347 (Tex.Civ.App.- Tyler 1969, no writ) .................................................................................60, 61 Aurora Petroleum, Inc. v. Cholla Petroleum, Inc., 2011 WL 652843 (Tex. App.—Amarillo 2011, no pet.) ............................................................37 Beaumont Bank, NA v. Buller, 806 S.W.2d 223 (Tex. 1991) ..................................24 Blaschke v. Wiede, 649 S.W.2d 749 (Tex.App.—Texarkana 1983, writ ref’d n.r.e.) ...............................................................................................40, 41 Borders v. KRLB, Inc., 727 S.W.2d 357 (Tex.App.-Amarillo 1987, writ ref’d n.r.e.) ........................................................................................24, 25 Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999) .........................................................58 Butnaru v. Ford Motor Co., 84 S.W.3d. 198 (Tex.2002) ........................................23 Casanova v. Falstaff Beer, Inc., 304 S.W.2d 207 (Tex.Civ.App.‒ Eastland, 1957, writ ref’d n.r.e.) ....................................................................53 viii Computek Computer & Office Supply v. Walton, 156 S.W.3d 217 (Tex. App.–Dallas 2005, no pet.) ..................................................................51 Cone v. Fagadau Energy Corp., 68 S.W.3d 147 (Tex. App. – Eastland, 2001, pet. den.) ..................................................................................32, 33, 58 Cox v. Davison, 397 S.W.2d 200, 203 (Tex. 1965) .................................................32 Cross Timbers Oil Co. v. Exxon Corp., 22 S.W.3d 24 (Tex.App.- Amarillo, 2000, no pet.).....................................................................25, 30, 35 Cundiff v. McLean & Miller, 8 S.W. 43 (Tex. 1888) ..............................................46 Eberts v. Businesspeople Pers., 620 S.W.2d 861 (Tex.Civ.App.-Dallas 1981, no writ)...........................................................................................50, 55 El Paso Dev. Co. v. Berryman, 729 S.W.2d 883 (Tex.App.-Corpus Christi 1987, no writ).....................................................................................64 Emmer v. Petroleum Co., 668 S.W.2d 487 (Tex.App.-Amarillo 1984, no writ)...........................................................................................................25 Griffin v. Rowden, 702 S.W.2d 692 (Tex.App.-Dallas 1986, writ ref’d n.r.e.) ..............................................................................................................47 Guffey v. Utex Exploration Co., 376 S.W.2d 1 (Tex.Civ.App.-San Antonio 1964, writ ref’d n.r.e.) .....................................................................50 Halbert v. Standley, 488 S.W.2d 887, 889 (Tex.Civ.App.-Waco 1972, writ ref’d n.r.e.) ..............................................................................................53 Hammonds v. Hammonds, 313 S.W.2d 603 (Tex.1958) .........................................55 HECI Explor. Co. v. Neel, 982 S.W.2d 881 (Tex.1998) .........................................25 Hill v. Heritage Resources, Inc., 964 S.W.2d 89 (Tex. App. – El Paso, 1997, pet. den.) ..................................................................................27, 28, 33 IMCO Oil & Gas Co. v. Mitchell Energy Corp., 911 S.W.2d 916 (Tex. App. – Fort Worth 1995, no writ)..................................................................35 King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003) ..................................60 ix Kropp v. Prather, 526 S.W.2d 283 (Tex.Civ.App.-Tyler 1975, writ ref’d n.r.e.) .....................................................................................................47 Ladner v. Reliance Corp., 293 S.W.2d 758 (Tex. 1956) .........................................63 Landry’s Seafood Inn & Oyster Bar - Kemah, Inc. v. Wiggins, 919 S.W.2d 924 (Tex. App.–Houston [14th Dist.] 1996, no writ) ........................60 Langdon v. Progress Laundry Cleaning Co., 105 S.W.2d 346 (Tex.Civ.App.-Dallas 1937, writ ref’d) .........................................................53 LeFaucheur v. Williams, 807 S.W.2d 20 (Tex.App.—Austin 1991, no writ)................................................................................................................40 Liles v. Thompson, 85 S.W.2d 784 (Tex. Civ.App.-El Paso 1935, writ dismissed) ......................................................................................................64 Marketshare Telecom, LLC v. Ericson, Inc., 198 S.W.3d 908 (Tex.App.-Dallas 2006, no pet.) ........................................................23, 39, 52 Mattern v. Herzog, 367 S.W.2d 312 (Tex. 1963) ....................................................28 McCharen v. Bailey, 87 S.W.2d 284 (Tex. App. - Eastland 1935, no writ)................................................................................................................63 Mengden v. Penisula Prod. Co., 544 S.W.2d 643 (Tex. 1976) ...............................32 Michelin North America, Inc. v. First Industrial NLF 12 JV, LLC, 2014 WL 586228 (Tex. App. – Houston (1st Dist.) 2014, no pet. history) ...........................................................................................................29 Myers v. Gulf Coast Minerals Mgmt. Corp., 361 S.W.2d 193 (Tex. 1962) ..............................................................................................................25 Paint Rock Operating, LLC v. Chisholm Exploration, Inc., 339 S.W.3d 771 (Tex.App.—Eastland 2011, no pet.)....................................32, 34 Petro Pro, Ltd. v. Upland Resources, Inc., 279 S.W.3d 743 (Tex. App. – Amarillo 2007, pet. den.) ......................................................................25, 36 Phillips Pet. Co. v. American Trading and Prod. Corp., 361 S.W.2d 942 (Tex. Civ. App. – El Paso, 1962, writ ref’d n.r.e.) .................................43 x Phillips Petroleum Co. v. Gillman, 593 S.W.2d 152 (Tex.Civ.App.- Amarillo 1980, writ ref’d n.r.e.) ....................................................................24 Phillips v. Latham, 523 S.W.2d 19 (Tex.Civ.App.-Dallas 1975, writ ref’d n.r.e.) .....................................................................................................55 Pirmantgen v. Feminelli, 745 S.W.2d 576 (Tex.App.-Corpus Christi, no writ)...........................................................................................................46 Questa Energy Corp. v. Vantage Point Energy, Inc., 887 S.W.2d 217 (Tex.App.-Amarillo 1994, writ denied) ........................................................24 Rhodia, Inc. v. Harris County, 470 S.W.2d 415 (Tex.Civ.App.- Houston [1st Dist.] 1971, no writ) ..................................................................40 Ross v. McLelland, 281 S.W.2d 773 (Tex.Civ. App. - Fort Worth, 1955, writ ref’d n.r.e.)....................................................................................46 Royal Indem. Co. v. Marshall, 388 S.W.2d 176 (Tex.1965) ...................................38 Sakowitz, Inc. v. Steck, 669 S.W.2d 105 (Tex. 1984) ..............................................47 Schmidt v. Richardson, 420 S.W.3d 442 (Tex.App.-Dallas 2014, no writ)................................................................................................................41 Shadow Dance Ranch Partnership v. Weiner, 2005 WL 3295664 (Tex. App. – San Antonio, 2005, no pet.) .....................................................27 Springer Ranch, Ltd. v. Jones, 421 S.W.3d 273 (Tex. App. – San Antonio 2013, no pet.) ...................................................................................26 Sun Operating, Ltd. v. Holt, 984 S.W.2d 277 (Tex.App.-Amarillo 1998, pet. denied) ..........................................................................................24 T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218 (Tex. 1992) ....................................................................................................37 Tanebaum Textile Co., Inc. v. Sidran, 423 S.W.2d 635 (Tex. Civ. App. – Dallas 1967, writ ref’d n.r.e.) ............................................................28 Texas Independent Exploration, Ltd. v. Peoples Energy Petroleum- Texas, L.P., 2009 WL 2767037 (Tex. App. – San Antonio, 2009, no. pet.) ................................................................................................36 xi Texstar North America, Inc. v. Ladd Petroleum Corp., 809 S.W. 672 (Tex. App. – Corpus Christi 1991, writ den.)................................................32 Tri-Star Petroleum Co. v. Tipperary Corp., 101 S.W.3d 583 (Tex.App.-El Paso, 2003, pet. denied) ..........................................................48 Valance Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (concurring opinion) ......................................................................................33 Walling v. Metcalfe, 863 S.W.2d 56 (Tex.1993) ...............................................23, 24 Webb v. Glenbrook Owners Ass’n., Inc., 298 S.W.3d 374 (Tex.App.- Dallas 2009, no pet.) ......................................................................................24 Texas Rules and Statutes TEX. BUS. & COM. CODE §26.01(b)(4) ....................................................... 49, 50 TEX. BUS. & COM. CODE §26.01(b)(6) ....................................................... 49, 50 TEX. PROP. CODE §5.002 .....................................................................................50 TEX. PROP. CODE §5.021 .....................................................................................50 TEX. PROP. CODE ANN. §12.007 (Vernon 1984) ...............................................47 TEX. R. APP. P. 38.1(e) ...............................................................................................2 Tex. R. App. P. 39.1(c) ..............................................................................................2 Tex. R. App. P. 39.1(d) ..............................................................................................2 Tex. R. Civ. P. 39 .....................................................................................................16 Tex. R. Civ. P. 682 ...................................................................................................23 Tex. R. Civ. P. 684 ............................................................................................ 23, 63 Tex. R. Civ. P. 76a(1) ..............................................................................................46 Secondary Authorities The Chicago Manual of Style R. 5.57 (14th Ed. 1993) ..............................................9 xii TO THE HONORABLE SEVENTH COURT OF APPEALS: Appellants/Defendants, Dimock Operating Company, and Joe W. Dimock, d/b/a Dimock Petroleum, will be referred to as “Dimock”. Appellee/Plaintiff, Sutherland Energy Co., LLC will be referred to as “Sutherland”. This is an appeal of an order granting a temporary injunction to Sutherland, and of an order denying a temporary injunction to Dimock. CR 1590, 1599. STATEMENT OF THE CASE This suit arises from a disputed oil and gas farmout agreement, with an incorporated operating agreement. CR 12-62. Dimock first sought injunctive relief by Application for Temporary Injunction on August 1, 2014. CR 126. Sutherland sought injunctive relief by Application for Temporary Injunction, and then an Amended Application, filed on June 11, 2015 and June 29, 2015, respectively. CR 1296, 1361. Dimock’s Application was initially set for hearing for September 22, 2014, CR 167, but, at the hearing, the Trial Court deferred action on such Application. RR 2:4, 62. The Trial Court granted a Partial Summary Judgment in favor of Sutherland on October 21, 2014, based on its erroneous legal interpretation of the farmout agreement, but that order was vacated in December, 2014 and replaced by a December 19, 2014 order. CR 1268, 1282, 1285, 1286, 1613. Dimock filed a Motion for Permissive Appeal of the Partial Summary Judgment, but the Trial Court denied the Motion. CR 1269, 1284. The 1 Trial Court finally heard Dimock’s Application for Temporary Injunction along with Sutherland’s Amended Application for Temporary Injunction on July 2, 2015. RR 3:7. At the hearing, the Trial Court granted Sutherland’s Amended Application for Temporary Injunction and denied Dimock’s Application for Temporary Injunction, signing the order granting an injunction on July 7, 2015. RR 4:131, 140, CR 1590. The order denying Dimock’s Application for Temporary Injunction was signed on July 9, 2015. CR 1599. A Writ of Injunction was issued July 7, 2015, CR 1595, and Sutherland’s Bond was filed on July 7, 2015. CR 1593. Dimock filed his Notice of Appeal on July 21, 2015. CR 1609. The trial court judge is Judge Dan Mike Bird, 46th Judicial District Court, Hardeman County, Texas. STATEMENT REGARDING ORAL ARGUMENT The Court should grant oral argument because it will give the Court a more complete understanding of the facts, will allow the Court to better analyze the legal issues, and will significantly aid the Court in deciding this case. See TEX. R. APP. P. 38.1(e), Tex. R. App. P. 39.1(c), and Tex. R. App. P. 39.1(d). ISSUES PRESENTED A. ISSUES AS TO JULY 7, 2015 TEMPORARY INJUNCTION ISSUE NO. 1: The Trial Court erred in entering the Temporary Injunction Order. 2 ISSUE NO. 2: The Trial Court erred because there is no evidence, or insufficient evidence, of a cause of action against Dimock for the injunctive relief sought. ISSUE NO. 3: The Trial Court erred because there is no evidence, or insufficient evidence, of the existence of a wrongful act by Dimock. ISSUE NO. 4: The Trial Court erred because there is no evidence, or insufficient evidence, of imminent harm to Sutherland. ISSUE NO. 5: The Trial Court erred because there is no evidence, or insufficient evidence, of irreparable injury to Sutherland. ISSUE NO. 6: The Trial Court erred because there is no evidence, or insufficient evidence, of the absence of an adequate remedy at law. ISSUE NO. 7: The Trial Court erred because there is no pleading by Sutherland of repudiation of the Seismic Exploration and Farmout Agreement by Dimock. ISSUE NO. 8: The Trial Court erred in finding repudiation because there is no evidence, or insufficient evidence, of repudiation of the Seismic Exploration and Farmout Agreement. ISSUE NO. 9: The Trial Court erred because there is no evidence, or insufficient evidence, that Dimock has interfered with drilling operations that are underway, or has withheld any required assignment of drilling unit acreage after Sutherland has drilled and completed an additional well. ISSUE NO. 10: The Trial Court erred because there is no evidence Sutherland has drilled and completed an additional well under the Agreement, or has requested an 3 assignment of acreage from Dimock after drilling an additional well. ISSUE NO. 11: The Trial Court erred because it destroyed the status quo rather than preserving the status quo. ISSUE NO. 12: The Trial Court erred because the trial court rewrote the term of the Agreement. ISSUE NO. 13: The Trial Court erred because the Temporary Injunction Order violates the Statute of Frauds and/or the Statute of Conveyances. ISSUE NO. 14: The Trial Court erred because it failed to require Sutherland to comply with the Agreement, and to preserve Dimock’s remedies for breach of the Agreement. ISSUE NO. 15: The Trial Court erred because it commanded and prohibited actions of Dimock after November 19, 2015 (the end of the 3 year term of the contract). ISSUE NO. 16: The Trial Court erred because the Temporary Injunction Order prevents Dimock from drilling wells on its own leases after November 19, 2015, and it prevents Dimock from stopping Sutherland from drilling a new well or conducting new operations on a Dimock leasehold after November 19, 2015. ISSUE NO. 17: The Trial Court erred because it enjoins Dimock from withholding a lease acreage assignment after November 19, 2015 and/or from withholding a lease acreage assignment as to a well drilled and completed after November 19, 2015. ISSUE NO. 18: The Trial Court erred because the Temporary Injunction Order is an unconstitutional illegal prior restraint on free speech and does not satisfy the 4 requirements of Davenport v. Garcia, 834 S.W.2d 4 (Tex.1992). ISSUE NO. 19: The Trial Court erred because a party who has breached a contract provision favorable to the other party cannot secure by injunction the enforcement of another contract provision favorable to it. ISSUE NO. 20: The Trial Court erred in entering the Temporary Injunction Order after evidence was presented of Sutherland breaching the Agreement by charging its own lawsuit expenses to “operating expense” of the Hamrick #3. ISSUE NO. 21: The Trial Court erred in entering the Temporary Injunction Order after evidence was presented of Sutherland breaching the Agreement by spending and charging to the Hamrick #3 $2.4 million on land and seismic expenses, none of which was for the Hamrick #3. ISSUE NO. 22: The Trial Court erred because the Agreement is ambiguous, and there are fact issues as to whether land and seismic costs are limited to $25,000.00, whether the land and seismic costs charged by Sutherland were reasonable or necessary for the Hamrick #3, and whether the Hamrick #3 paid out in 2014. ISSUE NO. 23: The Trial Court erred because Sutherland failed to join and give notice to all parties whose rights are affected by the writ of injunction. ISSUE NO. 24: The Trial Court erred in ordering an inadequate bond in the Temporary Injunction Order. 5 B. ISSUES AS TO JULY 9, 2015 ORDER ISSUE NO. 25: The Trial Court erred in denying Dimock’s Application for Temporary Injunction. ISSUE NO. 26: The Trial Court erred because the requested injunction would have preserved 51% of working interest proceeds of the Hamrick #3 for the rightful owner of the proceeds until final judgment. ISSUE NO. 27: The Trial Court erred because, as a matter of law, the Seismic Exploration and Farmout Agreement does not authorize unlimited spending on land and seismic costs to be charged to Dimock and/or payout of the Hamrick #3. ISSUE NO. 28: The Trial Court erred, as a matter of law, because the Seismic Exploration and Farmout Agreement limits expenditures for land and seismic costs to $25,000.00 unless Dimock authorizes further expenditures. ISSUE NO. 29: The Trial Court erred because, as a matter of law, the Hamrick #3 reached payout in March 2014. STATEMENT OF FACTS 1. On November 20, 2012, Dimock and Sutherland executed a Seismic Exploration and Farmout Agreement (“Agreement”), including Exhibit C, an Operating Agreement (“Operating Agreement”). CR 12-62. Pursuant to Section 3.1, Sutherland was obligated to drill the Initial Earning Well. CR 13. The Hamrick #3 was drilled and completed as a producing oil well in June, 2013. CR 70. On Nov. 11, 2013, Dimock executed a Partial Assignment of Oil, Gas, and Mineral Lease to Sutherland including the Hamrick #3. CR 320. 6 2. In the Operating Agreement, the parties agreed in Article VI, D, as follows: Operator shall not undertake any single project reasonably estimated to require an expenditure in excess of twenty-five thousand Dollars ($25,000.00) except in connection with the drilling, Sidetracking, Reworking, Deepening, Completing, Recompleting, or Plugging Back of a well that has been previously authorized by or pursuant to this agreement, provided, however, that, in the case of explosion, fire, flood or other sudden emergency, whether of the same or different nature, Operator may take such steps and incur such expenses as in its opinion are required to deal with the emergency to safeguard life and property but Operator, as promptly as possible, shall report the emergency to the other parties. CR 36, emphasis added. Paragraph 2.1 of Exhibit A of the Agreement states that “All operations conducted by Farmee regarding the Initial Earning Well, until such time as “project payout” is reached … shall be at Farmee’s sole cost and risk.” CR 17. Paragraph 6.1 of the Agreement states: “The Operating Agreement shall apply to all Earned Wells”. CR 14, emphasis added. 3. Despite the $25,000 limit for any “project” that is not drilling, etc., beginning in 2014 Sutherland sent lease operating statements to Dimock showing that Sutherland was charging leasehold acquisition costs for other property (bonuses, etc.), charging seismic option costs for other property, and charging his own and his employee time obtaining leases and seismic options on other property, in sums far in excess of $25,000, to “land” costs and “seismic” costs of the 7 Hamrick #3, even though the Hamrick #3 had been completed in June, 2013. CR 229, 276-277, 324-325. 4. Land costs (in house, or for leasehold acquisitions) and seismic option costs for other properties are not “drilling, Sidetracking, Reworking, Deepening, Completing, Recompleting, or Plugging Back” expenses and are, therefore, subject to the $25,000 limit on expenses for any project in Exhibit C. Sutherland has admitted in Response to Request for Admissions that seismic costs and land costs are not Sidetracking, Reworking, Deepening, Completing, Recompleting, or Plugging Back costs. CR 343. In his Affidavit, Dimock, an operator, stated that land and seismic costs are not drilling costs. CR 324. No evidence was presented at any hearing that land and seismic costs are “drilling” costs. 5. Pursuant to Section 4.1 of the Agreement, “upon “project payout” of the Initial Earning Well, Farmee shall deliver to Farmor possession and operations of the Initial Earning Well and a fifty-one percent (51%) working interest, at Farmor’s election, in the appropriate Earned Assignment defined in Paragraph 3.2 above.” CR 13. 6. Paragraph 4.2 of Exhibit A, the Agreement states: Project Payout and Monthly Statements. Beginning within six (6) months of completion of Initial Earning Well Farmee shall provide a monthly statement to Farmor reflecting the “project payout” status. 8 (a) The Farmee’s capital cost is defined as cost incurred by Farmee for land and seismic for the Hamrick Area 3D Shoot (a 15 square mile area defined in Exhibit B), a fifty thousand dollar ($50,000) prospect fee, and cost for drilling, testing, completing, and equipping, the Initial Earning Well 1. (b) The Farmee’s revenue, which is the gross value of production as defined in Paragraph 4.1 above, less (i) applicable production or severance taxes, and any federal excise taxes; (ii) all royalties, overriding royalties, and other payments out of production which, as of the effective date of this Agreement, burden the interest assigned to Farmee; and, (iii) the cumulative monthly operating cost of the well, including ad valorem taxes. (c) When the Farmee’s cumulative revenue equals two (2) times the Farmee’s capital cost the Initial Earning Well will have reached “project payout”. At that time, as stated in Paragraph 4.1 of this Agreement, the Farmee will turnover operations of the Initial Earning Well and assign fifty-one percent (51%) working interest, at Farmor’s election, in the Initial Earning Well and drilling unit to the Farmor. (d) Concurrent to the “project payout” in Paragraph 4.2(c) above the Farmee will also assign the remaining forty-nine percent (49%) working interest to one or more 501(c)(3) nonprofit organizations of its choice subject to the Operating Agreement described in 6.1 of the Agreement. CR 19-20, emphasis added. 7. Accordingly, when Sutherland’s cumulative revenue from the Hamrick #3 (the “Initial Earning Well”) equaled two (2) times Sutherland’s capital costs, the Hamrick #3 reached project payout. With its Application for Temporary Injunction, Dimock presented to the trial court documents produced by Sutherland demonstrating that the drilling and completion cost of the Hamrick No. 3 well was 1 One of the ambiguities in the Agreement is whether or not the phrase, “…, the Initial Earning Well” was intended to qualify or describe all the items in that sentence (i.e., land and seismic costs). In construing this sentence, this comma may, or may not, be determined by a jury to have been intended as an “oxford comma.” The Chicago Manual of Style R. 5.57 (14th Ed. 1993). 9 $1,004,521. CR 142-146. After the initial well was spudded, the prospect fee (referenced in Section 4.2 (a) of Exhibit A of the Agreement) of $50,000 was refunded to Sutherland by Dimock on August 28, 2013. CR 326; CR 1533. Using the $25,000 limit in Exhibit C, Para. VI (D) for any project that is not drilling, etc., when the Hamrick #3 gross working interest revenue (less the specified items in Section 4.2(b) of Exhibit A, like taxes, royalties, and monthly operating expenses) is two times $1,029,521, or $2,059,042, the Hamrick #3 reached “project payout”. CR 13, 20. 8. Through March, 2014, the cumulative net working interest income of the Hamrick #3 was $2,195,166.75, well in excess of the $2,059,042 amount for project payout of the Hamrick #3. CR 140, 141. The March, 2014 Lease Operating Statements (LOS), and Drilling and Completion Costs statements, prepared by Sutherland, were attached as Exhibit A to Defendant’s Application for Temporary Injunction. CR 126-146. 9. Dimock objected in writing to the land and seismic costs, and demanded that no further capital costs for the initial earning well be incurred. CR 63-66, 327. By letter dated April 21, 2014, Dimock notified Sutherland that the Hamrick #3 had reached project payout, as per the March LOS of the Hamrick #3, 10 and Dimock made the election, and demanded 2, that Sutherland deliver operations and possession of the Hamrick #3, and assign a 51% working interest in the Hamrick #3 and drilling unit to Dimock. CR 65. 10. Instead of complying with the Agreement, Sutherland refused to assign the working interest to Dimock and the charities, refused to turnover possession and operations, and has wrongfully converted all the post March, 2014 working interest proceeds of the Hamrick #3. Sutherland continued to incur land costs (none of which were to acquire an oil or gas lease to drill the Initial Earning Well, because Dimock already owned that leasehold), and huge seismic expenses for a 15 square mile seismic shoot. See CR 488-1255, an Affidavit of Greggory D. Morgan, CPA, with his spreadsheet of these unrelated costs [CR 488-489 is the Affidavit; CR 491-498 is the spreadsheet outlining these unrelated costs]. The unrelated “land costs” were $951,176.99, and the unrelated seismic costs were $102,899.80, as of the time of the Affidavit was prepared. Following the Affidavit and spreadsheet are copies presented to the trial court of the dozens of Sutherland- obtained oil and gas leases, top leases, and seismic options, for itself only, of nearby sections of land not leased by Dimock. CR 499-1255. Sutherland used the working interest proceeds of the initial earning well to lease 9 other sections of land for itself only and obtain seismic options as to such other land, and “charged” 2 At that point, the Christian charities were also entitled to receive an assignment of a 49% working interest. 11 that “land cost” and “seismic cost” for additional earning wells to the Initial Earning Well (Hamrick #3) to “extend” payout of the Hamrick #3 for over a year, all in breach of the Agreement. The only seismic was shot in the summer of 2014, approximately one year after the Hamrick #3 was drilled. RR 6:Def Exh. 4, P. 39. 11. Rod Sutherland, is the sole owner of Appellee, and admits that as of July, 2015, Sutherland had spent $2.4 million for such land costs and seismic costs, and has charged that amount to “payout” of the Hamrick #3. RR 5: Pl. Exh. 2; RR 4:83-84; RR 3: 41-42; CR 1471. 12. By its Original Answer and Counterclaim, Dimock alleged Breach of Contract, sought Declaratory Judgment, alleged a suit for debt, and alleged Breach of Fiduciary Duty. CR 69. Dimock filed its Application for Temporary Injunction on August 1, 2014 (CR 126). Refusing to rule on Defendant’s 2014 request for injunctive relief, the trial court entered an erroneous Partial Summary Judgment in favor of Sutherland. CR 1268, 1285, 1286. 13. In its Responses to Request for Admissions, Sutherland admitted that throught payments received in July, 2014, Sutherland had received a totoal amount of $3,173,162.13 in working interest revenue from the Hamrick #3. CR 343. 14. As demonstrated in Sutherland’s own documents, the Hamrick #3 reached project payout in March 2014. In March, 2014, Dimock and the Christian Charities were entitled to receive assignments. Dimock was then equitable owner 12 of 51% of the working interest in the Hamrick #3 and drilling unit, and the Christian Charities 49%. And as of March, 2014, Sutherland had no legal right to possess or use any of the working interest proceeds from the Hamrick #3, or to charge any well operations fees to the Hamrick #3 payout. Instead, an additional $2.4 million in land costs and seismic costs were charged by Sutherland to the Initial Earning Well payout by the time of the July, 2015 injunction hearing, and Sutherland retained an additional $2.4 million under Sutherland’s 2 x costs payout theory. 15. In the trial court, Sutherland chose to totally ignore and/or disregard the Operating Agreement that Sutherland admits it signed, and under which Sutherland is operating the subject well. In its pleadings, Sutherland offered no reading of the Operating Agreement “other operations” provision that would authorize unlimited expenditures for “land costs” and “seismic costs” to be charged to Dimock, and claimed the Agreement is not ambiguous. Sutherland obtained a partial summary judgment without citing any legal authority in support of Sutherland’s interpretation of the contract. Dimock’s responses (with all exhibits) to Sutherland’s partial summary judgment motion are incorporated herein by reference. CR 232, 368, 1256. 16. In addition to the ambiguities, there is a fact and/or legal issue whether the $25,000 limit in Exhibit C applies to land costs and seismic costs, 13 which would preclude awarding injunctive relief in favor of Sutherland. Further, given Dimock’s ambiguity pleading, there are fact issues about Hamrick #3 “payout”. CR 1348-1350. Both at the summary judgment hearing in September, 2014 and the injunction hearing in July, 2015, Sutherland had the burden of proof as to its factual and legal claims. 17. In addition, in April, 2014, shortly after filing the lawsuit, Sutherland began breaching the Agreement by charging to the initial well as “operating” expenses, its own attorney’s fees and expenses and personal expenses incurred in this lawsuit, including charging $800 per day for Rod Sutherland’s own time spent on this lawsuit. RR 4:74-76; See also CR 1493, 1580-1587. See also CR 141, the LOS Statement for April, 2014 when Sutherland began charging his lawsuit expenses, his attorney’s $5000 retainer (CR 444), to “miscellaneous expense” on the LOS. Sutherland has never cited in the trial court any authority to charge his lawsuit expenses to operating expenses of the Hamrick #3. Sutherland admits that every dollar he spends on these “capital costs” [all of which are for some potential well other than the Initial Earning Well], the Initial Earning Well payout jumps by two dollars; and, when he charges to “operating expense” his own company time, expenses and attorney’s fees for this lawsuit, he is reducing the working interest revenue of the initial earning well by another dollar, which also extends payout of the Initial Earning Well. RR 4:84. 14 18. Sutherland’s continuing wrongful conduct irreparably harms Dimock, the Christian Charities, and their property rights. 19. As a direct and proximate result of Sutherland’s wrongful actions, Dimock has suffered, and has continued to suffer, imminent and on-going injury in sums now in excess of $1,500,000, that is irreparable, and for which no adequate remedy at law exists, without the protection of a temporary injunction to preserve 51% of the working interest proceeds until final trial of the case. Such injunctive relief would have preserved the status quo, and preserved the disputed working interest proceeds, but the trial court delayed until July, 2015 to rule on Plaintiff’s Application for Temporary Injunction (filed in August, 2014) and then erroneously denied it. CR 1599. Dimock also unsuccessfully sought a jury trial in 2015. CR 1291, 1295. 20. Dimock’s requested injunction would have prevented Sutherland from using litigation to delay payment of well proceeds and using litigation as an excuse to charge his attorney’s fees, and internal time spent on this lawsuit to “operating expense” of the Hamrick #3, all delaying payout of the Hamrick #3. 21. As shown in Dimock’s (a) Application for Temporary Injunction, (b) Answer and Counterclaim; and, in (c) Dimock’s pleadings and evidence incorporated into its responses to Sutherland’s applications for injunctive relief, Dimock has a cause of action against Sutherland for breach of contract and for 15 conversion, a probable right to the relief sought, and is incurring probable, imminent, and irreparable injury in the interim, now in excess of $1,500,000. 22. In the alternative, Dimock requested that the trial court appoint a receiver to protect the working interest owners and to take charge of and hold the subject well, and working interest proceeds, subject to the final disposition of this litigation. That request was denied when the Dimock’s temporary injunction request was denied. CR 126, 1599. 23. Dimock’s well was depleted by Sutherland’s production of the subject well with no revenue from that production being paid to Dimock or the Christian Charities. Dimock’s and the Christian Charities’ damages for their real property interests cannot be adequately measured by a certain pecuniary standard and cannot be adequately compensated for in damages. 24. In the summer of 2015, about 4 months before the end of the three year term of the Agreement, which ends on November 19, 2015, Appellee filed an Application for Temporary Injunction. CR 1296. 25. Appellants specially excepted and objected to Plaintiff's Application for Temporary Injunction because Appellee failed to join all indispensable parties. Tex. R. Civ. P. 39. CR 1304. Sutherland has granted interests in the Hamrick #3 and drilling unit to other parties, his employee Wade Tidmore, and his wife’s relatives, Woody and Judy Thompson, and Joe and Vivian Revese. 16 CR 1457. Additionally, according to the testimony of Rod Sutherland, each of the following are intended beneficiaries of the Agreement, because they are the entities to whom the 49% working interest in the Hamrick #3 is to be conveyed on project payout, namely, Focus on the Family (Jim Dobson), Insight for Living (Chuck Swindell), Dallas Leadership Foundation, First United Methodist Church, and National Christian Foundation. CR 1466-1467. None of these persons or entities were joined, or given notice of the injunction hearing. 26. The term of the Agreement is stated in Section 9 of Exhibit A to the Agreement, as follows: The Agreement shall be in effect for three (3) years from the effective date or until such time as: (i) Farmee's rights to earn as assignment of interest have expired without Farmee having earned as assignment; (ii) Farmee has earned an assignment of interest and neither Farmee nor Farmor have any further rights or obligations under the Agreement; or (iii) this Agreement terminates pursuant to Paragraph 3.4 above as a consequence of Farmee's default. CR 22, emphasis added. 27. The "term" of the Agreement is clearly defined. Under (ii), if an Initial Well is drilled and completed as a producer, and an assignment of the working interest in the acreage including the drilling unit around that Initial Well is made, which occurred in this case, the Agreement as to any other acreage of the Dimock leaseholds ends if Farmee does not drill and complete additional producing well(s) within 3 years of November 20, 2012, because Farmee had no 17 contractual obligation to drill any other wells and had a limited option time (3 years from November 20, 2012) to drill additional well(s) on that other acreage, if it chose to do so. CR 13 [Section 5.1 of the Agreement], 22. 28. As of the date of the injunction hearing and orders, Sutherland had drilled no additional wells. 3 RR4:92, CR 1464. As Rod Sutherland admitted at his deposition, S u t h e r l a n d had no obligation to drill any more wells and only had an option to drill other wells during the term of the Agreement. CR 1463, 1464. 29. Contrary to the stated term of the Agreement, Sutherland requested injunctive relief that the term of the Agreement be rewritten by the Court from 3 years to an indefinite period of years; i.e. "until Dimock’s allegations in this lawsuit have been finally adjudicated and all applicable deadlines have expired.” CR 1364. Dimock objected to the proposed injunction because it creates a new, indefinite term of the Agreement, it does not preserve the status quo, it does not enforce the term of the Agreement as written, and it rewrites the term of the Agreement directly contrary to the express term agreed to by the parties. CR 1439. 30. When Rod Sutherland signed the Agreement, he knew that his exclusive right to drill new wells ended on November 19, 2015. Nowhere in the 3 After the injunction was entered, Sutherland drilled three additional wells on the property. Sutherland has already decided to plug one of the new wells. 18 Agreement is there a right of the Farmee to extend the term of Agreement, and possibly earn a right to an Assignment of any additional acreage from the Dimock leaseholds beyond November 19, 2015 (the end of the three year term) unless a new well is drilled and completed as a producer in paying quantities during the stated 3 year term. Because Sutherland failed to show it had a probable right to recover on the claim asserted, or that it was entitled to rewrite the contract to extend the term of the Agreement indefinitely, the Plaintiff’s Amended Application for Temporary Injunction should h a v e b e e n denied. 31. In Paragraph 1.14 of the Amended Application for Temporary Injunction, Sutherland further claimed “Dimock is deliberately obstructing additional development of the Subject Leases and attempting to deprive Sutherland of the right to timely drill additional wells.” CR 1363. Contrary to the assertion, the evidence at the hearing showed Dimock had not stopped Sutherland from drilling any well. RR 4: 97-99. Sutherland had not then drilled or completed any additional well as a producer in paying quantities. Sutherland has made no request for an assignment of any additional acreage from Dimock after drilling and completing an additional well. Dimock had taken no action whatsoever to “deliberately obstruct” any development. No gate had been locked. No one had been physically restricted from any property. Id. The only “wrong” Dimock had 19 committed was to take a contractual position in a judicial proceeding, which Sutherland did not like. 32. Sutherland, a start-up company owned solely by Rod Sutherland, has done no internal suspense on behalf of Mr. Dimock or the Christian Charities from any of the income from the Hamrick # 3 well, and doubts it has sufficient funds available to pay Mr. Dimock or the Christian Charities back if the eventual legal decision in this case is that payout occurred in March of 2014. CR 1472, 1511. 33. Dimock tried to have this matter adjudicated by permissive appeal of the erroneous Partial Summary Judgment order to the Amarillo Court of Appeals, but Sutherland opposed the motion for permissive appeal. CR 1269. The legal issues at the heart of this dispute could have been resolved but for the opposition of, and delays caused by, Sutherland and the trial court to resolve this case. 34. The delay in obtaining a final appellate decision about the proper calculation of "project payout" is a dilemma of Sutherland’s own making. It is Sutherland who objected to an interlocutory appeal of the trial court's ruling on the parties' motions for summary judgment. CR 1273. It is Sutherland who obtained a continuance of the trial setting. CR 1288, 1294. 35. The judicially extended option of Sutherland's right to drill wells enjoins Dimock from drilling wells on his own leaseholds after November 19, 20 2015. Dimock did not contract to give up the right to drill a well on his own leaseholds after November 19, 2015. The injunction directly and irreparably damages Dimock because it prevents him from drilling wells on his own leaseholds after November 19, 2015. And, what does Sutherland pay Dimock for the privilege to extend the term of the exclusive option to drill additional wells? Nothing, if this Court upholds the erroneous trial court injunction. 38. Dimock also incorporated into its Response to Amended Application for Temporary Injunction [CR 1439], excerpts from the May 21, 2015 Deposition of Rod Sutherland [CR 1452-1499]. Significant portions of such Sutherland testimony are included as Exhibit J in the Appendix to this Brief. In summary, as is evident from the noted portions of the deposition of Rod Sutherland, Sutherland admits it has charged at least $2.4 million in claimed “land” and “seismic” expenses to payout of the Hamrick #3, none of which was used to acquire acreage, locate, or drill the Hamrick #3. Sutherland planned to continue the spending spree indefinitely. In addition, Sutherland further delayed payout of the Hamrick #3 by charging his own and his various employees’ time and expenses as to this lawsuit (at salary rates for petroleum engineers, and landmen) to “miscellaneous” expenses in the operating expenses for the Hamrick #3, which expenses are deducted from well proceeds (to further delay payout of the Hamrick #3), all in breach of the Agreement. 21 39. Since March 2014, when the Hamrick #3 paid out, Sutherland has spent over $2 million more for nothing benefitting the subject well, and has put an additional $2 million in his pocket. After doing all these admitted actions, Sutherland obtained a trial court injunction to enjoin Dimock’s speech and conduct after his option period had expired, possibly indefinitely, and continue the unlimited spending spree with Hamrick #3 proceeds. The trial court erroneously granted such injunction. 40. The trial court injunction destroyed the status quo. The status quo was the right to drill additional wells as stated in the term of the Agreement. 41. The trial court’s order rewriting the term of the Agreement indefinitely until this case is finally resolved, was an action it was not authorized to do, and is an abuse of discretion. A court is to construe contracts, not rewrite them. And, in this case, the party who drafted the contract (See CR 1477) got the trial court to rewrite the term of his own farmout agreement to favor the author, all to the detriment and irreparable damage of Dimock. SUMMARY OF THE ARGUMENT The trial court erred in denying Dimock’s temporary injunction because it would have preserved 51% of the working interest proceeds of the Hamrick #3 until a final legal determination of payout of the subject well could be made. And, 22 the trial court erred in entering the Temporary Injunction Order in favor of Sutherland because it rewrote the term of the farmout agreement, enjoining Dimock’s speech and conduct beyond the end of the contractually determined option period effectively extending the time to drill and complete additional wells beyond the stated term of the Agreement. The order prohibits Dimock from drilling wells on its own leases after November 19, 2015. And, because the order prohibits Dimock’s speech, it violates Dimock’s right to free speech under the Texas Constitution. ARGUMENT A. Standard of Review 1. The trial court’s grant or denial of a temporary injunction is reviewed on an abuse of discretion standard. Butnaru v. Ford Motor Co., 84 S.W.3d. 198, 204 (Tex.2002); Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex.1993). The Court is to review de novo any determinations on questions of law that the trial court made in support of an injunction order. Marketshare Telecom, LLC v. Ericson, Inc., 198 S.W.3d 908, 916 (Tex.App.-Dallas 2006, no pet.). 2. To obtain a temporary injunction, the applicant must plead and prove: a) a cause of action against the defendants; b) a probable right to the relief sought; and, c) a probable, imminent, and irreparable injury in the interim. Id; Walling, 863 S.W.2d at 57; Tex. R. Civ. P. 682, 684. 23 3. A trial court's clear failure to analyze and apply the law correctly constitutes an abuse of discretion. Webb v. Glenbrook Owners Ass’n., Inc., 298 S.W.3d 374, 380 (Tex.App.-Dallas 2009, no pet.). Further, sufficiency of the evidence is a relevant factor in determining whether the trial court had sufficient evidence to exercise its discretion in the manner it did. Beaumont Bank, NA v. Buller, 806 S.W.2d 223, 226 (Tex. 1991). 4. A temporary injunction’s purpose is to preserve the status quo pending a trial on the merits. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex.1993). B. Rules of Construction and Contract Interpretation 5. When a dispute involves the interpretation of oil and gas contracts, and the contract is not ambiguous [which is what Sutherland contends], this Honorable Court applies “settled rules of law”, including the following: The first mandates that construing an unambiguous contract involves a question of law. Borders v. KRLB, Inc., 727 S.W.2d 357, 359 (Tex.App.- Amarillo 1987, writ ref’d n.r.e.). Thus, we need not defer to any interpretation afforded by the trial court. Second, when interpreting an instrument, we strive to give effect to its parties’ intent. Id. Furthermore, that intent is garnered from the language of the contract, which language is considered in its entirety. Id. That is, we peruse the complete document to understand, harmonize, and effectuate all its provisions. Questa Energy Corp. v. Vantage Point Energy, Inc., 887 S.W.2d 217, 221 (Tex.App.- Amarillo 1994, writ denied). So too must we afford the words contained in the agreement their plain, ordinary, and generally accepted meaning, unless the instrument requires otherwise. Sun Operating, Ltd. v. Holt, 984 S.W.2d 277, 285 (Tex.App.-Amarillo 1998, pet. denied); Phillips Petroleum Co. v. Gillman, 593 S.W.2d 152, 154 (Tex.Civ.App.-Amarillo 1980, writ ref’d n.r.e.). 24 Finally, in applying the foregoing rules we may not rewrite the agreement to mean something it did not. Borders v. KRLB, Inc., 727 S.W.2d at 359. Simply put, we cannot change the contract merely because we or one of the parties comes to dislike its provisions or thinks that something else is needed in it. HECI Explor. Co. v. Neel, 982 S.W.2d 881, 888-89 (Tex.1998). This is so because parties to the contract are considered masters of their own choices. They are entitled to select what terms and provisions to include in a contract before executing it. And, in so choosing, each is entitled to rely upon the words selected to demarcate their respective obligations and rights. In short, the parties strike the deal they choose to strike and, thus, voluntarily bind themselves in the manner they choose. And, that is why parties are bound by their agreement as written. Emmer v. Petroleum Co., 668 S.W.2d 487, 490 (Tex.App.-Amarillo 1984, no writ). For a court to change the parties’ agreement merely because the Court did not like the agreement, or because one of the parties subsequently found it distasteful, would be to undermine not only the sanctity afforded the contract but also the expectations of those who created and relied upon it.” Cross Timbers Oil Co. v. Exxon Corp., 22 S.W.3d 24, 26-27 (Tex.App.-Amarillo, 2000, no pet.), emphasis added. 8. The court is to “analyze the entire instrument to understand and harmonize all parts of the instrument so as to give effect to all of its provisions.” Petro Pro, Ltd. v. Upland Resources, Inc., 279 S.W.3d 743, 748 (Tex. App. – Amarillo 2007, pet. den.). “No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument.” Myers v. Gulf Coast Minerals Mgmt. Corp., 361 S.W.2d 193, 196 (Tex. 1962). 25 C. Sutherland “Interpretation” Not Consistent With Texas Law 9. Sutherland’s “interpretation” that he can run up unlimited sums in land and seismic costs on lands other than Section 168 [where the Hamrick No. 3 well is located], and thereby forever delay payout of the Hamrick No. 3 well, is not consistent with the Operating Agreement to which Sutherland agreed on November 20, 2012. Sutherland’s interpretation renders meaningless the operating agreement limitation on expenses for a non-drilling, etc. project. Sutherland’s interpretation also does not “avoid when possible and proper a construction which is unreasonable, inequitable, and oppressive.” Springer Ranch, Ltd. v. Jones, 421 S.W.3d 273, 280 (Tex. App. – San Antonio 2013, no pet.), emphasis added. The way to construe the subject contract which harmonizes and gives effect to all the provisions so that none is rendered meaningless, and which avoids an unreasonable, inequitable, and oppressive construction, was for the court to enforce the $25,000 limit on land costs and seismic costs. In Springer Ranch, the court referred to a case wherein a party’s construction of a partnership agreement “taken to its logical conclusion, would allow [the party] to ignore [partnership] dissolution notices indefinitely and continue to demand capital until [the other party’s] ownership interest is eliminated . . . thus produc[ing] an unjust, unreasonable, and oppressive result.” Springer Ranch, 421 S.W.3d at 288, citing Shadow Dance Ranch Partnership v. Weiner, 2005 WL 3295664, at P. 4 (Tex. App. – San 26 Antonio, 2005, no pet.). Sutherland’s “unlimited” land and seismic costs interpretation, taken to its logical conclusion, has allowed Sutherland to: 1) ignore the dollar limitation on such expenses in the Operating Agreement indefinitely and charge over $2.4 million in land and seismic costs, 2) keep an additional $5 million of Hamrick #3 revenue, and 3) effectively eliminate Dimock and the non- profit entities’ ownership interest in the subject 160 acre drilling unit. Dimock and the Christian Charities have not benefitted from the land or seismic spending spree. So, under Sutherland’s interpretation, he obtained all the rights he obtained in this contract without any consideration retained by Dimock. No reasonable person would assign all his interest in existing oil and gas leases on 3 sections of land for a payment he immediately has to return, with no realistic chance to ever regain any interest in the oil and gas leaseholds. 10. Sutherland tries to ignore that express contractual non-drilling, etc. cost limitation, and, instead, inserted “all” or “unlimited” in front of “capital costs”, or in front of “costs incurred by Farmee for land and seismic”. But, the contract does not say all or unlimited “capital costs”, or all or unlimited “land and seismic costs”. “Basic to the purpose of the [joint operating agreement] is … what proportional obligations and interests are borne by the respective working interest owners ….” Hill v. Heritage Resources, Inc., 964 S.W.2d 89, 113 (Tex. App. – El Paso, 1997, pet. den.). Dimock had, and has, nothing to gain from Sutherland 27 spending Hamrick No. 3 well proceeds on lands or seismic as to lands outside of the preexisting Dimock leases. The trial court should have recognized that Sutherland “has failed to present sufficient evidence of a meeting of the minds of all parties...sufficient to “authorize it” to charge Dimock “unlimited” sums on land or seismic costs on other lands. Hill at 115. That was especially true when the Court was faced with an ambiguity pleading by Dimock. D. After Trial Court Erroneously Authorized Unlimited Spending, Injunction Now Authorizes Unlimited Time to Drill 11. First, the trial court erroneously authorized unlimited spending on land and seismic costs for unrelated wells to be charged to the Hamrick #3 payout. Then, in the subject Temporary Injunction Order, the trial court further gutted Dimock’s legal rights by ordering an indefinite term to the farmout agreement. Courts do not imply indefinite terms, or unlimited amounts, into terms used in a contract. A construction of a contract wherein a definite term is enforced is favored over an interpretation which includes the implication of an indefinite or unlimited term. Tanebaum Textile Co., Inc. v. Sidran, 423 S.W.2d 635, 637 (Tex. Civ. App. – Dallas 1967, writ ref’d n.r.e.). In this case, Sutherland argued and the trial court erroneously found that an unlimited amount can be spent by Sutherland on land costs and seismic costs. The idea that a court will not imply an unlimited term into a contract is also seen in court construction of option contracts and will provisions. Mattern v. Herzog, 367 S.W.2d 312, 219 (Tex. 1963). Unlimited 28 terms are not implied because doing so will “destroy the validity of the option provision”. Id. In this case, implying and/or finding that an unlimited amount of land costs and seismic costs can be incurred effectively has destroyed Dimock’s vested right of reverter as to the Hamrick #3 and leasehold. Then, by an injunction order “creating” an indefinite term for the drilling option in the farmout agreement, the trial court expanded the destruction of Dimock’s legal and property rights to the remainder of its leaseholds by expanding Sutherland’s option to drill and complete additional earning wells, and restrained Dimock’s right to drill on his own leases, beyond the stated three year term. 12. The trial court erred when it ignored the express three year term of the Agreement, and created an indefinite term of the Agreement. “Absurd, inequitable, or oppressive interpretations are to be eschewed unless they prove unavoidable.” Michelin North America, Inc. v. First Industrial NLF 12 JV, LLC, 2014 WL 586228, at P. 3 (Tex. App. – Houston (1st Dist.) 2014, no pet. history). The trial court’s interpretation of the Agreement is absurd, inequitable, and oppressive. There is no evidence, or legally insufficient evidence, that Sutherland was entitled to a determination that the term of the Agreement is for an indefinite period of years “until the allegations in this lawsuit are finally resolved.” The trial court erroneously found a probable right to such absurd injunctive relief. 29 13. In granting Sutherland’s Amended Application for Temporary Injunction, the trial court erroneously changed the written “term” of the subject Agreement just because Sutherland has now found that “term” distasteful. It should not be forgotten that Sutherland drafted the Agreement with the subject “term” in it. CR 1477. By rewriting the “term” of the Agreement, the trial court did exactly what it was not supposed to do, it took an action to favor one party that did “undermine not only the sanctity afforded the contract but also the expectations of those who created and relied upon it”. Cross Timbers, 22 S.W.3d at 27, emphasis added. E. Trial Court Action Constitutes an Erroneous Pretrial Forfeiture of Leasehold 15. “Courts will not [construe a contract to] declare a forfeiture unless they are compelled to do so by language which can be construed in no other way.” Reilly v. Rangers Management, Inc., 727 S.W.2d 527, 530 (Tex. 1987). In Reilly, a managing partner tried to dilute limited partners’ ownership shares by passing “amendments” to the partnership agreement. The court recognized that the managing partner’s interpretation of the contract would work “a practical forfeiture” to the limited partners’ interest. The trial court’s legal “interpretation” of the Agreement in this case works a practical forfeiture of Dimock’s property rights. At the least, there is a fact issue and legal issue whether land costs and seismic costs are expenses subject to the $25,000 limit agreed to by the parties. At 30 the least, there is a fact issue and a legal issue before any ruling should find the term of the drilling option, and the inability of Dimock to drill upon his own leases, extends beyond November 19, 2015 (the end of the three year stated term). Before Dimock’s property rights are, effectively, forfeited, a jury trial on the merits, as demanded, should be conducted. F. Contract Construction Harmonizing and Giving Effect to All Provisions 16. When all the contract interpretation rules cited above are applied to the Agreement with its attached, and immediately effective, Operating Agreement, the obligations of the parties are evident, and the limitations on Sutherland to incur costs chargeable to Dimock and to payout of the “initial earning well”, are evident. Sutherland could charge up to $25,000 of “land costs” and “seismic costs” to the initial well payout. And, assuming no breach of contract by Sutherland, Sutherland had the exclusive option to drill and complete additional wells as producers in paying quantities during an express 3 year term, but not afterwards. 17. After applying the appropriate contract interpretation rules, the trial court should have also determined that the Hamrick #3 reached payout in March of 2014, as pleaded by Dimock. When a court is making a farmout “payout” determination, the court is to review the subject contract and the subject well(s) production proceeds and relevant costs to determine the date when the farmor’s 31 reversionary interest takes effect. Mengden v. Penisula Prod. Co., 544 S.W.2d 643, 648 (Tex. 1976). G. Limits on Project Costs Common in Operating Agreements 18. An oil and gas operating agreement can prohibit undertaking certain operations unless consent of non-operators is obtained. Texstar North America, Inc. v. Ladd Petroleum Corp., 809 S.W. 672 (Tex. App. – Corpus Christi 1991, writ den.). In other cases, the operation can proceed, but, due to a dollar limit on the type of operation or project, no amounts for that operation or project above the specified limit can be charged to non-operators. Cone v. Fagadau Energy Corp., 68 S.W.3d 147 (Tex. App. – Eastland, 2001, pet. den.); Paint Rock Operating, LLC v. Chisholm Exploration, Inc., 339 S.W.3d 771 (Tex.App.—Eastland 2011, no pet.). 19. Texas courts have not ordered recoupment from well proceeds for other costs the drilling party might like to incur or charge against well production. Cox v. Davison, 397 S.W.2d 200, 203 (Tex. 1965). An “obligation” of another party to “pay” or “incur” an “expense” and to deduct it from oil or gas well production proceeds is not implied under Texas law. Id. The operator must prove that he is entitled to “charge” such specific expense under the terms of the Operating Agreement, or else such “expense” is not chargeable to the other party. Id. 32 20. The A.A.P.L. Form 610 Model Form Operating Agreement, which was used in this case, is a standard oil and gas agreement. Hill v. Heritage Resources Inc., 964 S.W.2d 89 (Tex. Civ. App. – El Paso 1997, no writ). It sets forth a procedure for the parties to decide whether or not to pay for “other operations”, or “projects” above a specified limit. Valance Operating Co. v. Dorsett, 164 S.W.3d 656, 666 (Tex. 2005) (concurring opinion). An operator may breach an operating agreement by improperly assessing charges above the specified limit to a non- operator. Cone v. Fagadau Energy Corp., 68 S.W.3d 147 (Tex. Civ. App. – Eastland 2002, pet. den.). 21. In Cone, the court found the $15,000 contract limitation on “other projects” was “a limitation on the non-operator’s exposure to liability for expenses incurred by the operator.” Cone, 68 S.W.3d at 157. In objecting to the excess expenses, the non-operator “is attempting to obtain the benefit of his bargain as provided by the operating agreement.” Id. at 161. If the limit is not enforced, the non-operator may never receive the benefit of his bargain. Id. Such is the case here where Sutherland continues to extravagantly incur seismic and land expenses (already in excess of $2,400,000) for other properties and other, undrilled, wells, and claims he can take all the Hamrick #3 production proceeds to pay for those expenses, take an additional equal amount for himself, (under the 2x payout formula) from well proceeds, and forever delay payout of the initial earning well. 33 22. In Paint Rock Operating, LLC v. Chisholm Exploration, Inc., 339 S.W.3d 771, 775-776 (Tex. App. – Eastland 2011, no. pet.), the Court held the operator was not entitled to be charged or reimbursed for the excess cost of the non-drilling, etc. operation. Id., see also footnote 3 on 777. The limitation on expenditures for non-drilling, etc. projects makes sense when viewed from the perspective of the non-operator. As to expenses from which he may, someday, benefit, like drilling expenses, Dimock’s right to a reassignment of the lease is delayed until two times such unlimited expense is recouped from working interest proceeds. But, as to “other expenditures”, like buying oil and gas leases in only Sutherland’s name (an alleged “land cost”) and from which Dimock receives no benefit now or in the future, the amount of those “expenditures” is limited to $25,000, so that the “expenditures” for such other “projects” do not, in effect, render his right of reverter worthless. 23. The limitation on expenditures for non-drilling, etc. projects is also consistent with the fact the parties did not agree to an area of mutual interest. There is no benefit to Dimock of Sutherland leasing 9 other sections of land for himself. 24. The Operating Agreement, is dated November 20, 2012, the same date as the Agreement. It expressly says (contrary to the trial court ruling) “this agreement shall be effective as of the 20th day of November 2012.” CR 45. When 34 the parties sign such an operating agreement, it is binding between whichever parties sign the agreement and is effective on the day therein indicated. IMCO Oil & Gas Co. v. Mitchell Energy Corp., 911 S.W.2d 916, 920 (Tex. App. – Fort Worth 1995, no writ). 25. Reinforcing such an integration of the Agreement that limits Sutherland to recouping up to $25,000 of non-drilling, etc. costs, is the contract provision that states “The Operating Agreement shall apply to all Earned Wells.” CR 14. 26. The operating agreement has a limited payment obligation as to non- drilling, etc. “projects”. A limited payment obligation is to be enforced by a court. American Manufacturers Mutual Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex.2003) (the payment obligation of the insuror was limited and it did not owe its insureds for diminished market value of their repaired vehicles). If the court disregards a payment obligation provision, it renders such provision meaningless. Id. at 159. The court’s ruling disregards the limited payment obligation signatory non-operator Dimock undertook. The subject limited payment obligation expressly itemizes the projects for which unlimited sums can be spent (drilling, etc.). The “itemization is telling for it provides evidence as to what was intended by the parties when the contracts were drawn.” Cross Timbers Oil Co., 22 S.W.3d at 27, emphasis added. 35 H. Partial Assignment of Oil, Gas and Mineral Lease Was Subject to Parties’ November 20, 2012 Agreement including the Operating Agreement 27. The Partial Assignment of Oil, Gas and Mineral Lease from Dimock to Sutherland for the Hamrick #3 [CR 320], stated in the granting clause, and in the “subject to” conditions, that the Partial Assignment was made subject to the terms and conditions of the prior Agreement between the parties. When such “subject to” language is inserted in an assignment, the limitations in the various provisions of the referenced documents are “inserted” into the assignment. Texas Independent Exploration, Ltd. v. Peoples Energy Petroleum-Texas, L.P., 2009 WL 2767037, at p. 4 (Tex. App. – San Antonio, 2009, no. pet.). “The phrase “subject to” is a limitation of grant, defining the nature, extent, and character of the estate conveyed.” Petro Pro, Ltd. v. Upland Res., Inc., 279 S.W.3d 743, 750 (Tex. App. – Amarillo 2007, pet. den.). 28. Further, the Agreement states: “Except as may be otherwise provided in this [Agreement], Farmee [Sutherland] shall be bound by any written and appropriately executed agreement which affects the subject leases at the time of assignment [of any leasehold interest] to [Sutherland].” CR 14 (Parag. 8.1). The Operating Agreement applies to the Agreement and to the November, 2013 Partial Oil and Gas Lease Assignment to Sutherland of the interest in the Hamrick #3 and 36 drilling unit. Sutherland’s determinable fee is subject to the terms of the parties’ Operating Agreement. I. Trial Court Erroneously Rewrote Contract 29. To be enforceable, the parties must agree to the material terms of a contract. T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218 (Tex. 1992); Aurora Petroleum, Inc. v. Cholla Petroleum, Inc., 2011 WL 652843 at *2 (Tex. App.—Amarillo 2011, no pet.) When that “agreement” never occurs, the contract is not binding on the parties. Aurora, 2011 WL 652843 at *2. In this case, there is no “obligation” to drill any additional wells, only a stated 3 year option to drill such wells. 30. In Aurora, a farmout agreement was held unenforceable as a matter of law when a material term was not agreed. Id. The time within which to drill was found to be material, if not pivotal, to the “existence of the accord” and was more than an “incidental detail.” Aurora, 2011 WL 652843 at *2. The “contract” rewritten by the trial judge in the injunction order in this case is, as a matter of law, unenforceable because Dimock did not agree to such material and pivotal term, authorizing the drilling of additional wells on a Dimock leasehold beyond November 19, 2015. In Aurora, this Honorable Court also noted: “we may not rewrite the agreement of the parties.” Id. at *3, Footnote 2. The trial court 37 erroneously rewrote the term of the subject farmout agreement, and that is an abuse of discretion. 31. An important item not to be overlooked in the Agreement is the “Whereas” sentence. The “Whereas” sentence states as follows: Whereas, Farmor and Farmee desire to enter into an agreement pursuant to which Farmee shall have the right to earn certain of Farmor’s rights under the oil and gas leases described below, subject to all terms, reservations and conditions set forth herein. CR 12, emphasis added. The expressed primary purpose was to enter into a farmout agreement under which Sutherland might earn the right to an assignment of part of Dimock’s oil and gas leases subject to the terms, reservations and conditions stated. 32. A trial court is not authorized to “rewrite the parties’ contract nor add to its language.” American Manufacturers Mutual Ins. Co. v. Schaefer, 124 S.W.3d 154, 162 (Tex.2003); Royal Indem. Co. v. Marshall, 388 S.W.2d 176, 181 (Tex.1965). “Courts cannot make new contracts between the parties, but must enforce the contracts as written.” Royal Indem., 388 S.W.2d at 181. J. Lack of Probable Right to Recover 33. To have a probable right to recover, a party must plead and present proof to support at least one valid legal theory. Marketshare, 198 S.W.3d at 922. If that “theory” is breach of contract, the applicant must show: (1) the existence of a valid contract; (2) the Plaintiff’s performance or tendered performance, (3) the 38 Defendant’s breach of the contract; and, (4) damages as a result of the breach. Id. at 923. Sutherland presented no evidence, or insufficient evidence, of each of these elements of a breach of contract. Sutherland had then drilled no additional well. Dimock had not failed to make an assignment of a lease, nor refused to do so. Sutherland had never performed, nor tendered performance of, any of its obligations as to an additional well, a condition precedent to any right to an assignment of any additional acreage. Dimock had breached no duty as to any additional well; as that situation had not then arisen. Sutherland “jumped the gun” when it filed the Application for Temporary Injunction. As this court is well aware, courts generally refuse to declare rights between parties based on future, hypothetical, or speculative facts. A court is to adjudicate present rights upon established facts, not hypothetical facts. Ashcroft v. Mattis, 431 U.S. 171, 172 (1977), emphasis added. K. Mandatory Provisions Are Abuse of Discretion 34. The subject injunction prohibits Dimock from communicating with anyone other than Sutherland about Sutherland lacking authority to drill additional wells. It prohibits Dimock from “physically interfering” “with any drilling operations or other activities” on Dimock’s own leases indefinitely. It commands Dimock to sign lease assignments to Sutherland indefinitely, and the wording of those to-be-prepared documents is unknown. The issuance of a temporary 39 mandatory injunction is proper only if a mandatory order is necessary to prevent irreparable injury or extreme hardship. LeFaucheur v. Williams, 807 S.W.2d 20, 22 (Tex.App.—Austin 1991, no writ). A mandatory injunction should be denied absent a clear and compelling presentation of extreme necessity or hardship. Rhodia, Inc. v. Harris County, 470 S.W.2d 415, 419 (Tex.Civ.App.-Houston [1st Dist.] 1971, no writ). Sutherland failed to present evidence, and/or presented insufficient evidence, of “extreme necessity or hardship”. Sutherland had not spudded an additional well or presented an assignment when the trial court entered such mandatory injunction. L. Injunction Erroneously Compels Assignment Even If Well Is Not Drilled and Completed Within Contract Deadline 35. The injunction order compels Dimock to give Sutherland an assignment of leasehold acreage even if a well is drilled after November 19, 2015 (the end of the 3 year term). The injunction is an order to “specifically perform” a contract which Dimock did not sign. In Blaschke v. Wiede, 649 S.W.2d 749 (Tex.App.—Texarkana 1983, writ ref’d n.r.e.), the parties signed a one year lease with an option to buy property. After the one year expired, the court found the holdover tenant’s one year option to buy had expired and the tenant had no cause of action to compel the property owner to sell the property after the one year term. Id. In this case, the order allows Sutherland to holdover indefinitely and drill wells indefinitely, and compel Dimock to assign leasehold acreage indefinitely 40 beyond November 19, 2015, the end of the contract term. Like the holdover tenant in Blaschke, Sutherland has no cause of action for an unlimited option to acquire more leasehold acreage from Dimock, no cause of action to prohibit Dimock from drilling on his own leases after November 19, 2015, and no right to specific performance against Dimock as to any well drilled and completed on a Dimock leasehold after November 19, 2015. M. Lack of Imminent Harm 36. It is an abuse of discretion to grant a temporary injunction based upon alleged “imminent harm” arising from “the mere existence of unexercised contractual rights.” Schmidt v. Richardson, 420 S.W.3d 442, 446, 447 (Tex.App.- Dallas 2014, no writ). Numerous contractual prerequisites to Sutherland being entitled to an assignment of any additional acreage have not been met, but the trial court erroneously found “imminent harm”. As the Dallas Court of Appeals found in Schmidt, the trial court abused its discretion when it granted Sutherland a temporary injunction. N. Injunction Erroneously Has No Provision Requiring Compliance with Contract by Sutherland 37. Another glaring problem with the trial court injunction is it wrongly authorizes Sutherland to drill wells indefinitely whether or not Sutherland performs the contract provisions as agreed. Rewriting the term of the contract coupled with ordering the other party to, unconditionally, take certain actions, 41 effectively guts Sutherland’s obligations to comply with the contract. Under the erroneous order, Dimock cannot stop performing and assigning its leasehold acreage even in the face of blatant contract breaches by Sutherland. O. Injunction Order Erroneously Provided Investment Assurance 38. Why did the trial court take such drastic action in the temporary injunction order? Because Sutherland was “afraid” that if he drills another well, Dimock may not sign a lease assignment. RR 3:57. A trial court cannot and should not make that investment decision for Sutherland. When a party asks a court for investment advice, the court should decline to provide it. Grace Holdings, L.P. v. Sunshine Mining and Refining, 901 F. Supp. 853, 863 (D.Del.1995). P. Pending Suit and Lis Pendens Already Made Drilling Additional Wells a Risk for Sutherland, and is Privileged, So There Is No Imminent Harm 39. The only alleged “imminent harm” Sutherland presented at the hearing was a letter exchange between counsel for the opposing parties. First, Sutherland’s lawyer wrote a letter (and demanded a response) asking if Dimock contested Sutherland’s right to drill additional wells. RR 5: Pl. Exh. 7. In response to Appellee’s invitation and command to respond, Appellant’s counsel sent a letter to Appellee’s counsel dated June 3, 2015 (which is consistent with Appellant’s pleadings) wherein he stated his opinion that the Hamrick #3 paid out in the spring 42 of 2014, that Sutherland has breached the Agreement by retaining the Hamrick #3 and all its working interest proceeds, and stated that Sutherland drills additional wells on Dimock’s leases at its own risk. RR 5: Pl. Exh. 8. The June, 2015 correspondence exchange between counsel revealed no “imminent” harm. 40. Any well that Sutherland drills on a Dimock leasehold after the lis pendens was filed is, as a matter of law, subject to all legal claims of Dimock in this lawsuit. That is decades-old Texas law, not a new revelation in June, 2015. Further, even with the injunction improperly authorizing indefinite term drilling of wells, under Texas law, Sutherland would drill any new well at the risk of losing it if Dimock ultimately prevails in this lawsuit. See Phillips Pet. Co. v. American Trading and Prod. Corp., 361 S.W.2d 942 (Tex. Civ. App. – El Paso, 1962, writ ref’d n.r.e.). Such well would be drilled while the temporary injunction order is being appealed, during pending litigation over whether the underlying contract has been breached, and while a lis pendens is on file. 41. The trial court erroneously granted the Temporary Injunction Order even after Sutherland conceded at the hearing that the June, 2015 letter of Attorney Lovell did not matter. Rod Sutherland, the sole member of Appellee (See RR 3:100), admitted he wanted his lawyer to write the letter that led to Attorney Lovell’s June response. RR 4: 72. He further admitted he did not like the Lovell response, so he wanted an injunction. Id. He admitted there is a filed lis pendens 43 by Dimock as to the subject suit and acreage. RR 3: 66, 67. He admitted that anyone acquiring an interest while a lis pendens is on file, takes that interest subject to the outcome of the lawsuit. RR 3: 69-70. He further admitted that if the lis pendens refers to the 15 sections at issue [which the amended lis pendens does], then the Lovell letter in July 2015 would not matter. Id. Later, Rod Sutherland admitted the filed Amended Notice of Lis Pendens listed all 15 sections at issue. RR 4:78. The “harm” posed by the privileged Lovell letter is a red herring. 42. The Notice of Lis Pendens in this lawsuit was filed and recorded on July 31, 2014. RR 4:77; RR 6: Def. Exh. 1. The amended Notice of Lis Pendens, including all 15 sections at issue, was filed on September 19, 2014. RR 4:77-78; RR 6: Def. Exh. 2. The UCC Financing Statement was filed with the Texas Secretary of State on July 28, 2014. RR 6: Def. Exh. 3; RR 4:92. 43. Sutherland also tried to claim its “investors” might be scared off by the Lovell letter (which, of course, was only sent to Sutherland’s lawyer). The only “investors” who allegedly have refused to invest in Sutherland’s additional wells are Wade Tidmore, and Judy Thompson. RR 4:89. According to Rod Sutherland, Woody and Judy Thompson, Joe and Vivian Revesz, and Wade Tidmore and his wife are working interest owners, through Sutherland, in the Hamrick #3. Sutherland only has a separate Operating Agreement with them. RR 6: Def. Exh. 4, P. 22-23. Judy Thompson is Rod Sutherland’s wife’s cousin. RR 44 6: Def. Exh. 4, P. 25. Vivian Revesz is Rod Sutherland’s wife’s niece. Id. Wade Tidmore is an employee of Sutherland whose time spent on this lawsuit is being erroneously billed to “operating expense” of the Hamrick #3 (CR 1583), so as to delay the payout. Wade Tidmore helped Sutherland draft the subject Agreement. RR6:Def. Exh. 4, P. 104. Just because Rod Sutherland’s relatives and employees, are not enamored with the idea of giving Rod Sutherland money to drill a new well on a Dimock leasehold, is not “imminent harm” caused by any wrongful act of Dimock. 44. The trial judge also had before him the Defendant’s Second Amended Answer and Counterclaim. RR 4:113-114; CR 1336. As is apparent from that pleading (beginning at CR 1336), Dimock was alleging Sutherland was in breach of the Agreement, that Sutherland was converting Dimock’s and the Christian Charities’ working interest proceeds, and Dimock sought to foreclose its lien under the Operating Agreement. CR 1345. Dimock’s claims against Sutherland have been of record since Dimock filed its Original Answer and Counterclaim on June 13, 2014. CR 12. Attorney Lovell’s privileged comments as to Dimock’s legal position in July 2015 were neither new nor novel. 45. The bottom line is Sutherland wanted an injunction specifically “because [Rod Sutherland] didn’t like the content of the Lovell letter that Sutherland requested”. RR 4:72. A party’s unhappiness that the opposing party 45 disagrees with his legal interpretation of a contract, and that the opposing party asserts a contrary legal position which includes the consequences of his breach of a contract, is not a legal basis for a temporary injunction. “There is no power in courts to make one person speak only well of another.” Pirmantgen v. Feminelli, 745 S.W.2d 576, 578 (Tex.App.-Corpus Christi, no writ). Dimock’s counsel’s opinion letter re-iterating Dimock’s pleadings does not threaten Sutherland with any imminent danger, and may not be the subject of a temporary injunction. Id. at 578-579. Court records, including all Dimock’s pleadings “are presumed to be open to the general public.” Tex. R. Civ. P. 76a(1). 46. Further, the uncertainties caused by the continuation of this lawsuit, and the delay in obtaining a final appellate decision about the proper determination of “payout” of the Hamrick #3, is an uncertainty of Sutherland’s own making. It is Sutherland who objected to an interlocutory appeal. It is Sutherland who obtained a continuance of the trial setting. Q. Appellant Entitled to Maintain that Sutherland has Breached Contract and to File Lis Pendens 47. When a party has breached a contract, the other party is entitled to treat the contract as rescinded. Halbert v. Standley, 488 S.W.2d 887, 889 (Tex.Civ.App.-Waco 1973, writ ref’d n.r.e.); Cundiff v. McLean & Miller, 8 S.W. 43 (Tex. 1888); Ross v. McLelland, 281 S.W.2d 773 (Tex.Civ. App. - Fort Worth, 1955, writ ref’d n.r.e.). Dimock’s attorney’s letter expressing an opinion 46 consistent with the above line of cases is neither improper, nor a basis for a temporary injunction. 48. Good faith litigants are assured access to the judicial system. Sakowitz, Inc. v. Steck, 669 S.W.2d 105, 107 (Tex. 1984). Whether or not Dimock prevails on its claims, Dimock is entitled to maintain its legal position until this case is resolved through the court system. Id. 49. Further, Dimock is privileged to file a notice of lis pendens. TEX. PROP. CODE ANN. §12.007 (Vernon 1984). The filing of a notice of lis pendens is part of a “judicial proceeding.” Kropp v. Prather, 526 S.W.2d 283, 287 (Tex.Civ.App.-Tyler 1975, writ ref’d n.r.e.). Further, any communications, oral or written, uttered or published in the due course of any judicial proceeding is absolutely privileged. Id. at 286; See also Griffin v. Rowden, 702 S.W.2d 692, 694 (Tex.App.-Dallas 1986, writ ref’d n.r.e.). All Dimock has done by filing a lis pendens, and Dimock’s counsel sending a letter to Sutherland’s counsel (which Sutherland’s counsel requested) indicating his opinions are all communications in a judicial proceeding that are privileged as a matter of law. None of such acts are “wrongful” conduct on which to base the granting of a temporary injunction. R. Destroyed Status Quo 50. “The status quo is defined as the last, actual, peaceable, non-contested status that preceded the controversy.” Tri-Star Petroleum Co. v. Tipperary Corp., 47 101 S.W.3d 583, 588 (Tex.App.-El Paso, 2003, pet. denied). The term of the option to drill additional wells under the Agreement is 3 years from November 20, 2012. The subject temporary injunction destroys that status quo. Under the temporary injunction, Sutherland can drill additional wells on Dimock leaseholds until further order of the court, and Dimock is enjoined from drilling on his own leases after November 19, 2015. The trial is not set until February 2016, over two months after the end of the 3 year contract term. Who knows if Sutherland will obtain another continuance? 51. Besides being a direct violation of the Agreement to authorize Sutherland to drill after November 19, 2015, the temporary injunction restrains Dimock from drilling on his own leases after November 19, 2015, another violation of the status quo. 52. The Temporary Injunction Order also destroys the status quo because it also authorizes Sutherland to drill additional wells on the “subject leases and any lands pooled therewith” for the same indefinite term into the future. CR 1597. The right to drill wells indefinitely into the future is not just on Dimock’s leaseholds, but also on any lands that Sutherland in the future might decide to pool with any part of a Dimock leasehold. 48 S. Violated Statute of Frauds 53. By eliminating the 3 year stated term of the Agreement, the trial court abused its discretion and created a “contract” which violates the Statute of Frauds. Such a “rewrite” violates the Statute of Frauds. No agreement which is not to be performed within one year is enforceable against a party unless that agreement is in writing and signed by the parties. TEX. BUS. & COM. CODE §26.01(b)(6). Further, the new, unsigned, “agreement” created by the trial court is a court- created, unenforceable, contract for the sale of real estate, an oil and gas leasehold, which also violates the Statute of Frauds. TEX. BUS. & COM. CODE §26.01(b)(4). Under the order, Sutherland could drill a well in January 2016 (after the 3 year signed contract term) and claim he is entitled to an assignment of acreage from Dimock’s oil and gas leasehold. If the appeal in this case extends into 2017 and Sutherland is still drilling new wells on a Dimock leasehold, Sutherland could claim he is entitled to a leasehold assignment in 2017 and compel Dimock to provide an assignment. Dimock signed no such agreement, and it is enforceable under the Statute of Frauds. T. Violated Statute of Conveyances 54. For the same reasons outlined above as to the Statute of Frauds, the temporary injunction order also violates the Statute of Conveyances because it is not signed by Dimock or any authorized agent of Dimock. TEX. PROP. CODE 49 §5.021. A conveyance of real property must be in writing and signed by the conveyor or his agent authorized in writing. Id. Judge Bird is not an authorized agent of Dimock. When an instrument purports to convey an interest in real estate, but fails to comply with the statute of conveyances, the instrument is unenforceable to convey the property or interest. TEX. PROP. CODE §5.002. The “contract” created by the injunction order that purports to authorize and compel the conveyance of an interest in Dimock’s oil and gas leasehold beyond November 19, 2015, is an abuse of discretion and is void. TEX. BUS. & COM. CODE §26.01(b)(4) and §26.01(b)(6) [Statute of Frauds]; TEX. PROP. CODE §5.021 [Statute of Conveyances]; Guffey v. Utex Exploration Co., 376 S.W.2d 1, 4-5 (Tex.Civ.App.-San Antonio 1964, writ ref’d n.r.e.). U. Erroneous Order of Specific Performance of Non-Existent Contract 55. The Temporary Injunction Order is also an erroneous order of specific performance. It compels Dimock to assign leasehold acreage for a well drilled after November 19, 2015. “[A]n injunction has the effect of a decree of specific performance.” Eberts v. Businesspeople Pers., 620 S.W.2d 861, 864 (Tex.Civ.App.-Dallas 1981, no writ). 56. Further, the Temporary Injunction Order is erroneous because it precludes Dimock from lawful activities that are a proper exercise of its rights. Computek Computer & Office Supply v. Walton, 156 S.W.3d 217, 220-21 (Tex. 50 App.–Dallas 2005, no pet.). Dimock is expressly precluded from stopping Sutherland from drilling new wells after November 19, 2015, or drilling his own, both lawful activities of Dimock that would be a proper exercise of its legal rights under the Agreement. V. Illegal Prior Restraint on Speech 57. The temporary injunction enjoins Defendants from “Communicating to investors, lenders, partners, mineral owners, surface owners, working interest owners, employees, contractors, service providers, purchasers of production, and other third parties not involved in the litigation that Plaintiff is a trespasser or lacks the authority to drill and produce additional wells on the Subject Leases, or on acreage pooled therewith.” CR 1591, emphasis added. 58. The injunction is an illegal prior restraint on speech. Near v. Minnesota ex rel. Olson, 283 U.S. 697, 51 S.Ct. 625 (1930); Organization for a Better Austin v. Keefe, 402 U.S. 415, 91 S.Ct. 1575 (1971). Further, such injunction violates Art. 1, Sec. 8, of the Texas Constitution, which provides: “Every person shall be at liberty to speak, write or publish his opinions on any subject, being responsible for the abuse of that privilege; no law shall ever be passed curtailing the liberty of speech or of the press.” The subject order 51 erroneously prohibits Dimock from communicating about this lawsuit and his contentions in the lawsuit. 59. A “judicial order that forbids certain communications before they occur constitutes a prior restraint.” Alexander v. U.S., 509 U.S. 544, 550, 113 S.Ct. 2766 (1993); Marketshare Telecom, LLC v. Ericson, Inc., 198 S.W.3d 908, 917 (Tex.App.-Dallas 2006, no pet.). Prior restraints on speech are presumptively unconstitutional. Davenport v. Garcia, 834 S.W.2d 4, 10 (Tex.1992). The trial court in this case failed to meet the requirements of Davenport before it issued the subject injunction. There is nothing in the record that the parties discussed or presented evidence concerning whether the injunction was the least restrictive means to prevent the alleged harm. Marketshare, 198 S.W.3d at 917; Davenport, 834 S.W.2d at 10. The subject injunction gag order does not satisfy the requirements of Davenport. 60. Communications by a litigant as to its beliefs and its position in a lawsuit, which are not false or misleading, cannot constitutionally be enjoined. Marketshare, 198 S.W.3d at 920. A prior restraint of a party’s statement of position in a lawsuit, does not justify imposition of a gag order by temporary injunction. Id. 52 W. Prior Breaches of Contract Bar Injunctive Relief 61. A party who breaches a contract provision favorable to the other party cannot secure, by injunction, the enforcement of another contract provision favorable to it. Langdon v. Progress Laundry Cleaning Co., 105 S.W.2d 346, 347 (Tex.Civ.App.-Dallas 1937, writ ref’d); Chapman Air Conditioning v. Franks, 732 S.W.2d 737, 740 (Tex.Civ.App.-Dallas 1987, no writ) The burden is on Sutherland to establish contract compliance before injunctive relief can be considered. Halbert v. Standley, 488 S.W.2d 887, 889 (Tex.Civ.App.-Waco 1972, writ ref’d n.r.e.); citing Casanova v. Falstaff Beer, Inc., 304 S.W.2d 207 (Tex.Civ.App.‒Eastland, 1957, writ ref’d n.r.e.). 62. Dimock has pleaded and presented proof, as outlined in this Brief, that Sutherland has breached the Agreement. Therefore, injunctive relief for Sutherland should have been denied. 63. The evidence shows Sutherland has violated the subject Agreement by charging over $2 million in unrelated “seismic” costs, and “land” costs to the Hamrick #3. The most recent “Hamrick Prospect Payout Estimation” [created by Sutherland] shows Sutherland’s claimed “cumulative expenditures” of $3,439,371.00. RR 5: P1. Exh. 2. That figure includes the erroneously charged $2.4 million in land and seismic costs for wells other than the Hamrick #3. See also RR 5: P1. Exh. 3. Sutherland admits none of the “seismic cost” was used to 53 locate the Hamrick #3. No seismic was even shot before that well was drilled and completed. RR 4:87; RR 6:Def Exh. 4, P. 38. Sutherland admits none of the “land cost” was used for pooling, drilling, or locating the Hamrick #3. RR 4:87. None of the seismic cost or land cost charged by Sutherland was a cost of “the Initial Earning Well” as required by the Agreement to be chargeable to such well. CR 19. 64. Further, the evidence shows Sutherland is charging his and his employee’s own time as “land” expenses, labeled as “company labor” to the Hamrick#3 well and its payout. RR 5: P1. Exh. 3. It is time Sutherland and his employees, allegedly spent getting leases on other land. RR3:45-46; RR4:87,90; RR6:Def. Exh. 4, P. 51-52. The Agreement does not authorize those in-house expenses be charged to the Hamrick #3 or its payout. 65. Further, Sutherland admits it is charging all of its attorney’s fees in this lawsuit to “operating expenses” of the Hamrick #3. RR 4:74-75. Sutherland has charged to “operating expenses” of the Hamrick #3 “this entire lawsuit basically.” RR 4:76. Also, Sutherland admitted he is billing out his time spent on the lawsuit at $800 per hour, and employee Wade Tidmore’s time at $400 per hour, to the Hamrick #3 “operating expense”. Id. Sutherland admits that every dollar he spends on this lawsuit he is reducing the revenue of the Hamrick #3 by one dollar in the payout calculation. RR 4:84. Sutherland cavalierly believes it has total “discretion on expenditures” it attributes to the Hamrick #3 payout. RR 4:85-86. 54 Through the end of May, 2015, Sutherland, had charged approximately $103,000.00 in lawsuit expenses and Sutherland employee time and expenses regarding the lawsuit to the initial earning well payout calculation. RR 4:88. No authority was presented to the trial court to justify such charges. Sutherland’s external and internal litigation expenses are being charged as part of the “miscellaneous” expense line item under well “operating expense.” RR5: P1. Exh. 4-6; RR6:Def. Exh. 4, P. 89-90. In months when that line item exceeds $80.00, litigation expenses are being charged as “operating expense” and delaying the Hamrick #3 payout. Id. Examples of such improper charges are in Exhibits 94-99, 101 to Sutherland’s deposition [“litigation” expense charge]. CR 1580-1585, 1587; RR6:Def. Exh. 94-99, 101. Showing how Sutherland decided (on a salary plus benefits basis) to charge his time, and his employees’ time shown in Exh. 100 to Sutherland’s deposition. CR 1586. 66. Expenses of litigation are not recoverable from an adverse party unless expressly provided by statute or contract. Eberts v. Businesspeople Pers., 620 S.W.2d 861, 864 (Tex.Civ.App.-Dallas 1981, no writ); Hammonds v. Hammonds, 313 S.W.2d 603, 605 (Tex.1958). “This rule applies to a litigant’s loss of time.” Eberts, 620 S.W.2d at 863; Phillips v. Latham, 523 S.W.2d 19, 27 (Tex.Civ.App.-Dallas 1975, writ ref’d n.r.e.). There is no contract provision that 55 authorizes Sutherland’s charging of external or internal litigation costs to the Hamrick #3 payout. 67. The “effect” of Sutherland’s above-cited breaches of contract are in evidence. Sutherland admitted the Hamrick #3 working interest well revenue exceeded the cost to drill and complete the well by early November, 2013. RR6:Def. Exh. 4, P. 141-142. He also admitted that two times payout would have been reached by April 2014, if Sutherland had not spend money on something else. Id; See also Exh. 77 to Sutherland’s Deposition, CR 1546; RR6:Def. Exh. 77. In creating “payout statements” beginning in early 2014, Sutherland improperly coached his employees how to attribute their “time” to the “Hamrick Prospect” and then charge it such well. Exhs. 80, 84, 85, 86 to Sutherland’s deposition, CR 1549, 1553, 1554, 1555. Rod Sutherland displayed his attitude when he said “in essence half the money we spend is being paid for by Mr. Dimock and the other half is being paid by some Christian charity.” Exh. 87 to Sutherland’s deposition, CR 1556. He further referred to it as “good return on the money we spend.” Id. He expressly sanctioned the unlimited spending spree with Hamrick #3 proceeds and delighted in pocketing another dollar for every dollar he spent. 68. Further, Sutherland admits it has duty to act in good faith as to Dimock (CR 1474), but proceeded to spend Dimock’s and the Christian Charities’ money and endlessly delay payout of the Hamrick #3. The nature of the needed 56 limited seismic represented by Sutherland to Dimock leading up to the 2012 Agreement is reflected in an email of Rod Sutherland which is Exh. 40 to Sutherland’s Deposition (CR 1501), which Deposition was attached to Defendants’ Response to Plaintiff’s Amended Application for Temporary Injunction (CR 1439). Limited seismic was represented as being needed to “determine an optimum location” for the Roy Hamrick #1 replacement well, which turned out to be the Hamrick #3. See also, Exhibits 41 and 42 to Sutherland’s deposition, CR 1503, CR 1505. Dimock’s position is that seismic and land costs were included in the initial earning well payout in case Sutherland had to pay some land or seismic costs for that initial earning well. RR 5:Pl. Exh. 11, P. 202. The evidence shows no such land expenses or seismic expenses were even needed for such Initial Earning Well. Sutherland’s unending spending spree for unrelated land and seismic costs is breach of the duty to act in good faith under the Operating Agreement and is also a breach of Sutherland’s fiduciary duties to Dimock as to the Hamrick #3 proceeds. 69. Sutherland violated Article VI, D, of the Operating Agreement by charging to the subject well, and Dimock, sums in excess of $25,000 (in fact, over $2.4 million) for a project that was not drilling, sidetracking, reworking, deepening, completing, recompleting, or plugging back of the Hamrick #3, the Initial Earning Well. 57 70. Further, Sutherland has violated Section 2.1 of Exhibit A to the Agreement, that “all operations conducted by Farmee regarding the Initial Earning Well, until such time as “project payout” is reached . . shall be at Farmee’s sole cost and risk.” CR 17. Sutherland has not borne the cost and risk of his land acquisitions outside the Dimock leasehold, and the cost and risk of his seismic expenses. Dimock and the charities have been erroneously charged all those expenses and have received zero benefit from them. 71. There is a fact issue every month of 2014 and 2015 whether Sutherland breached the Agreement with Dimock by charges which exceed the $25,000 limit on non-drilling, etc. expenses or projects. Cone v. Fagadau Energy Corp., 68 S.W.3d 147 (Tex. App. – Eastland 2001, pet. den.). 72. There is a fact issue each month, beginning in April 2014, whether Sutherland breached the Agreement by charging and/or recouping from the working interest proceeds of the Hamrick #3, Sutherland’s legal expenses and costs in this lawsuit, including “internal” lawsuit expenses and external legal expenses. 73. There is also a fact issue as to Hamrick #3 payout. An expert’s opinion testimony can defeat a summary judgment claim as a matter of law. Burrow v. Arce, 997 S.W.2d 229, 235 (Tex. 1999). Dimock attached to its summary judgment response, the Affidavit of Gregg Morgan, a CPA. CR 333. As 58 was stated in Mr. Morgan’s report, he reviewed the evidence in this case and he is of the opinion that the Hamrick #3 reached payout in March, 2014. Further, the Affidavit of Joe W. Dimock, raises fact issues as to breach of contract and breach of fiduciary duty by Sutherland. His Affidavit, which was attached to his summary judgment response, was later incorporated into Dimock’s injunction response. CR 324. As shown in that Affidavit, the intent was for the Agreement and Operating Agreement to constitute a single agreement. Part of the agreement was the parties agreed to a $25,000 non-drilling, etc. project limit. Further, Dimock, who is an oil and gas lease operator, confirmed that “land costs” and “seismic costs” are not costs that are “drilling, Sidetracking, Reworking, Deepening, Completing, Recompleting or Plugging Back” costs as those terms are used in the oil and gas industry. Further, Dimock expressed his opinion that payout of the Hamrick No. 3 well occurred in March, 2014. Such evidence raises fact issues which should have precluded the trial court from granting the erroneous partial summary judgment to Sutherland, and from granting the subject erroneous injunction when fact issues were present as to breach of contract. 74. No evidence was ever presented by Sutherland that land expenses or seismic expenses are Adrilling@ expenses. Sutherland admitted in Response to Requests for Admission that land expenses and seismic expenses are not any of the other 6 categories of expenses not subject to the $25,000 project limit. Therefore, 59 the subject disputed expenses (in sums already in excess of $2.4 million), are either judicially admitted not to be, or not proven to be, the types of expenses that are not subject to the $25,000 limit. All such charges in excess of the $25,000 limit are evidence of a breach of contract by Sutherland, and a breach of Sutherland’s fiduciary duty to Dimock as to Hamrick #3 proceeds. X. Injunctive Relief Not Available to Party Guilty of Inequitable Conduct, Laches, and Unclean Hands 75. The evidence outlined in this Brief also shows Sutherland is guilty of inequitable conduct, laches and unclean hands, which also precludes a grant of injunctive relief. Landry’s Seafood Inn & Oyster Bar - Kemah, Inc. v. Wiggins, 919 S.W.2d 924, 927 (Tex. App.–Houston [14th Dist.] 1996, no writ). Y. No “Repudiation” by Dimock 76. In the findings stated in the Temporary Injunction Order, the court found that Dimock has repudiated the Agreement. CR 1596. Repudiation is a question of fact. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 756 (Tex. 2003). To establish repudiation, first a party has to plead repudiation, and then the party has the “affirmative burden of establishing that they had actual notice of [the repudiation] and that, in reliance thereon, operations were suspended…” Atlantic Richfield Co. v. W.O. Hilton, 437 S.W.2d 347, 355 (Tex.Civ.App.-Tyler 1969, no writ). In this case, Appellee has not pled repudiation, and there is, at the very least, a fact issue whether there has been repudiation. Sutherland’s only presented 60 “proof” of unpleaded repudiation is the June, 2015 letter from Attorney Lovell discussed in detail in Section ___ of this Brief. That letter merely expresses counsel’s opinion that Sutherland has breached the parties’ contract and his client will continue to pursue its lawful remedies for such breaches. 77. Repudiation requires evidence that “the lessor must have asserted a clear, unequivocal challenge to the lessee’s title to, and interest in the lease.” Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 239 (Tex.App.-Corpus Christi 1994, writ denied). Texas courts have a narrow view of what constitutes unequivocal notice of forfeiture or a positive challenge to lessee’s title to the lease, refusing to find unequivocal notice in the recording of top-leases, the remittance of letters stating opinions about the status of leases, or the act of shutting in a well. Atkinson Gas, 878 S.W.2d at 239; Atlantic Richfield, 437 S.W.2d at 354-55. 78. In Atlantic Richfield, the court found that the statement by lessors’ attorney that the lessors were of the opinion that Atlantic did not have a lease was not a repudiation. Id. at 353. The lessors were merely informing the lessee of their subjective opinion regarding the status of lessee’s lease. The statements did not repudiate the lease. Id. 79. The court went further to find that Atlantic Richfield’s continued operations on the lease showed a lack of repudiation. Id. at 355. At the time of the injunction hearing, Sutherland had continued operating the Hamrick #3, and 61 retaining its the working interest proceeds, for over a year after Dimock alleged that Sutherland is in breach of the Agreement. There is no evidence, or insufficient evidence, of repudiation of the Agreement by Dimock. Z. Injunction Improperly Restrains Right to Relief for Future Breaches of Contract 80. The temporary injunction order fails to provide for the possibility that Sutherland may breach the agreement after the date of the injunction order, and fails to protect Dimock’s legal right to seek redress in court for such breach, including termination of the contract. B & A Pipeline Co. v. Dorney v. Enserch Corporation, 904 F.2d 996, 1002 (5th Cir.1990). The trial court wholly failed to consider that Dimock and Sutherland are still doing business and to protect Dimock from future breaches of contract by Sutherland. Future breaches could affect and/or eliminate any “option” of Sutherland to drill an additional well. 81. Further, the provisions compelling an assignment of acreage also violate this legal principle. Sutherland could drill a well after November 19, 2015 or a well that does not produce in paying quantities and still demand a lease assignment from Dimock (i.e. an assignment not available under the Agreement). If Sutherland breaches the Agreement or the Operating Agreement after the date of the order and before “final hearing and determination of this cause,” the order compels Dimock to still assign his leasehold acreage to a breaching party. And, 62 who knows what language Sutherland might insert into such as-of-yet, non-existent document? Such order is an abuse of discretion. AA. Injunction Erroneously Granted Without Joinder of Necessary Parties 82. All parties whose rights will be directly affected by the writ of injunction are to be included in any injunction proceeding. Ladner v. Reliance Corp., 293 S.W.2d 758, 764-65 (Tex. 1956). All parties to a contract are to be included in an injunction proceeding if the applicant is seeking to restrain enforcement of a contract. McCharen v. Bailey, 87 S.W.2d 284-85 (Tex. App. - Eastland 1935, no writ). Despite Dimock’s objection that Sutherland failed to join or even notify necessary parties (CR 1304), the trial court erroneously granted a Temporary Injunction without notification to the parties to whom Sutherland contracted to assign a working interest in the Hamrick #3, and without notification to the charities who own 49% of the working interest in the Hamrick #3 because the subject well paid out in 2014. BB. Inadequate Bond 83. The trial court erred in entering the Temporary Injunction Order with a bond of only $15,000.00. RR 4:138. Dimock had requested that the bond be at least $1,000,000.00. RR 4:136. The amount of the bond is subject to appellate court review. Tex. R. Civ. P. 684. To protect the adverse party, the amount of the bond must relate to the potential damages in the lawsuit. El Paso Dev. Co. v. 63 Berryman, 729 S.W.2d 883, 888-89 (Tex.App.-Corpus Christi 1987, no writ). At the time of the July, 2015 injunction hearing, Sutherland had already withheld from Dimock and the Christian Charities over $3,000,000.00 in working interest revenue from the Hamrick #3, and the trial court was authorizing unlimited drilling into the future (beyond the end of the stated term of the Agreement) on Dimock’s oil and gas leaseholds, over the express objection of Dimock. Further, Dimock showed Sutherland did not have assets to pay back the sums already withheld from Dimock if the case is reversed on appeal, much less the additional sums owed as to wells the trial court was “authorizing” Sutherland to drill into the indefinite future. The subject order authorizes unlimited drilling, unlimited charging of expenses for additional wells, and authorizes Sutherland to keep the working interest revenue from such future wells. When a well is drilled by a trespasser who has notice of the objection of the oil and gas leaseholder, the oil and gas leaseholder does not owe the drilling and completion costs of such a well. Liles v. Thompson, 85 S.W.2d 784 (Tex. Civ.App.-El Paso 1935, writ dismissed). There is no legal basis for Sutherland to recoup from Dimock any costs of new wells drilled on Dimock’s leaseholds after November 19, 2015, or to retain any well revenue from such wells, but the trial court erroneously authorized such extra-contractual drilling, without a sufficient bond to repay Dimock when such erroneous injunction is reversed. 64 84. A $15,000.00 bond is wholly inadequate to compensate Dimock as to new wells the court authorized Sutherland to drill outside the term of the Agreement, and to compensate Dimock for the loss of the right to drill wells on his own leases after November 19, 2015. CC. Error to Deny Dimock Injunctive Relief 85. As shown by the evidence outlined in this Brief, the trial court erred when it denied Dimock’s Application for Temporary Injunction. Such Injunction would have upheld the Agreement of the parties, and preserved the status quo by preventing Sutherland from obtaining and spending Dimock’s 51% and the Christian Charities’ 49% working interest revenue of the Hamrick #3. Such Injunction would have stopped Sutherland from charging Dimock for land and seismic costs in excess of $25,000 (which are now $2.4 million and still climbing). Dimock established that Sutherland, a start-up company, does not have the assets to repay Dimock and the Christian Charities when Dimock prevails on appeal as to the interpretation of the Agreement and as to Sutherland’s breaches of contract, and Sutherland has made no attempt whatsoever to do an internal suspense of Hamrick #3 revenue to repay Dimock, or the Christian Charities. Dimock established breaches of contract by Sutherland on a monthly basis from April 2014 until the date of the injunction hearing in July 2015. Damages to Dimock in excess of $1.5 million had already been caused by Sutherland, which has insufficient 65 assets to repay those damages. Further, as the evidence outlined above showed, if a receiver had been appointed to operate the well, as was requested by Dimock in its Application for Temporary Injunction, the improper charging of Sutherland’s legal expenses and internal “lawsuit expenses” (already in excess of $100,000) to “operating expenses” of the Hamrick #3 would be stopped. CONCLUSION AND PRAYER Dimock prays that, upon hearing, this Court reverse the Temporary Injunction Order of July 7, 2015, reverse the July 9, 2015 Order denying Dimock’s Application for Temporary Injunction and grant such injunction, and Dimock prays that this Court find that, as a matter of law, the $25,000 limit in the Agreement applies to land and seismic expenses, find that the Hamrick #3 paid out in March, 2014, and remand this cause for further proceedings consistent with such rulings. Dimock prays for such other and further relief to which Dimock may be entitled. DATED this 19th day of October, 2015. 66 Respectfully submitted, Lovell, Lovell, Newsom & Isern, L.L.P. John H. Lovell, SBN 12609300 (john@lovell-law.net) Barbara A. Bauernfeind, SBN 08190500 (barbara@lovell-law.net) 112 West 8th Avenue, Suite 1000 Amarillo, Texas 79101-2314 Telephone: (806) 373-1515 Facsimile: (806) 379-7176 By: /s/ John H. Lovell John H. Lovell ATTORNEYS FOR DIMOCK 67 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-volume limitation of Tex. R. App. P. 9.4 because it contains 14,590 words as determined by the computer software’s word-count function, excluding the parts of the brief exempted by Tex. R. App. P. 9.4(i)(2)(B). 2. This brief complies with the typeface requirements of Tex. R. App. P. 9.4(e) because it has been prepared in a proportionally spaced typeface using Microsoft Word 2007 in 14 point Times New Roman font. Dated: October 19, 2015. /s/ John H. Lovell John H. Lovell 68 CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing document was delivered, as certified be [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4057038. Public record. Not legal advice.