Ballard Exploration gets court victory in royalties case

By David Hutton | Dec 21, 2017

HOUSTON – A U.S. Court of Appeals judge has sided with Ballard Exploration Co. for interest and attorney’s fees in a case that claimed the company wrongfully withheld royalties.

HOUSTON – A U.S. Court of Appeals judge has sided with Ballard Exploration Co. for interest and attorney’s fees in a case that claimed the company wrongfully withheld royalties.

“As Ballard argues in its brief, its withholding of the disputed royalty was authorized by statute and it paid the proceeds to the trust once the dispute was resolved,” Justice Evelyn V. Keyes wrote.

The case was heard in the Court of Appeals for the 1st District of Texas on Dec. 7. Keyes wrote the unanimous opinion of the panel, which also included Chief Justice Sherry Radack and Justice Michael Massengale

The case wound up before the court of appeals after a long and winding road of litigation that spanned more than a decade and was sparked from a disagreement over royalties from a gas unit in Liberty County.

The appeal was filed by Michael I. Leavitt, testamentary trustee of the Bert Earl Gassaway Testamentary Trust and the estate of Marie Anderson Gassaway.

According to the order, the trust traces its royalty interest back more than half a century to a 1966 deed "conveying a 100-acre tract of land in Liberty County from Marie Anderson Gassaway and her brother, Allie Anderson, to A. Chester Holbrook."

According to the court's opinion, the deed reserved a one-sixteenth nonparticipating royalty interest (NPRI) to the siblings.

Upon her death, Marie Gassaway passed her half through her will to the Bert Earl Gassaway Testamentary Trust, which was created for the benefit of Bert Gassaway, Marie's son.

Leavitt filed a suit to collect statutory prejudgment interest and attorney’s fees against Ballard based on a claim that Ballard wrongfully withheld royalties.

In its defense, Ballard claimed that while a company like it might have to pay statutory prejudgment interest when it fails to make timely payment of royalties, it also is subject to a “safe harbor” provision in the Texas Natural Resources Code that would allow it to withhold payments without interest when there is a dispute over a title that would affect payments.   

The trust contends that the trial court erred in rendering summary judgment in favor of Ballard.

In the order, Keyes cited Frost Nat'l Bank v. Fernandez, noting that a defendant who strikes "at least one key element of a plaintiff’s cause of action is entitled to summary judgment on that claim," the order states.

“When a trial court's order granting summary judgment does not specify the grounds relied upon for its ruling, we will affirm the summary judgment on appeal if any of the theories presented to the trial court and preserved for appellate review are meritorious,” Keyes wrote.

According to evidence presented by Ballard, the company reached valid lease agreements with the primary owners of the oil and gas interest.

Ultimately, there was a dispute between the trust and the executive owners of the oil and gas interest.

The trust, however, maintained that there was no legitimate title dispute because its title to the NRPI itself was not disputed.

The court upheld the trial court’s ruling.

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