Preview
FILED
9/10/2021 4:06 PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Lafonda Sims DEPUTY
CAUSE NO. DC-13-13886
ORCA ASSETS, G.P., L.L.C. IN THE DISTRICT COURT
Plaintiff,
Vv. 44" JUDICIAL DISTRICT
JPMORGAN CHASE BANK, N.A., et al
Defendants. DALLAS COUNTY, TEXAS
PLAINTIFF ORCA ASSETS, G.P., L.L.C’S RESPONSE TO
DEFENDANT CHASE BANK, N.A.’S MOTION FOR SUMMARY JUDGMENT
Orca Assets GP, LLC (“Orca” or “Plaintiff”) files this Response to Defendant JPMorgan
Chase Bank, N.A.’s (“Chase” or “JPMorgan” or “Defendant”) Motion for Summary Judgment.
I SUMMARY
1 Chase’s Motion should be denied. Chase’s only claim in this case is a claim for
attorneys’ fees under the Trust Code and the Uniform Declaratory Judgments Act. Chase’s claim
was severed from Case No. DC-12-05303, which is the underlying litigation in which Orca sued
Chase for knowingly leasing the same property to multiple parties. But Chase non-suited its
claims prior to the severance. Moreover, Chase’s claim for attorneys’ fees cannot be severed
from the underlying action, and since there is a final non-appealable judgment in the underlying
action the Court has lost plenary power to rule on Chase’s claim for attorneys’ fees.
2. If, however, Chase still has a claim for attorneys’ fees, Orca is allowed to present
its defenses and counterclaims to Chase’s claim.
IL. FACTUAL BACKGROUND
3 This case is the result of claims being severed from a prior case regarding Chase
knowingly leasing the same property to multiple parties. JPMorgan Chase Bank, N.A. v. Orca
Assets, GP, LLC, 546 S.W.3d 648 (Tex. 2018);! see also Orca Assets, GP, LLC v. Burlington Oil
& Gas Co., LP, 464 S.W.3d 403 (Tex. App.—Corpus Christi 2015, pet. denied).?
4 The Red Crest Trust owned about 40,000 acres of non-contiguous mineral interests
throughout the Eagle Ford Shale. JPMorgan, 546 S.W.3d at 650. JPMorgan Chase Bank, N.A.
acts as the trustee for the Red Crest Trust. /d. Phillip Mettham was the Chase employee responsible
for leasing the trust’s Eagle Ford interests. /d.
5 In 2010, Mettham leased fifteen of the trust’s Eagle Ford tracts in DeWitt and
Gonzales counties, comprising more than 1,800 acres, to GeoSouthern Energy Corporation. /d. It
was one of the largest deals Mettham negotiated for the trust. Jd. GeoSouthern did not record its
leases in the counties’ property records until six months after closing the deal. /d.
6 On November 11, 2010, Orca representatives met with Mettham in Fort Worth to
discuss leasing some of the trust’s tracts. /d. At that meeting, the Orca representatives brought
maps and asked about certain tracts it desired to lease. Jd. Mettham stated the property was
available to lease (or arguably stated that he thought it was open but would have to check). /d.
Shortly after the meeting, Mettham notified Orca that any lease deal it made would not employ the
standard negation-of-warranty language provision that Orca was familiar with, but it would require
new language expressly shifting the risk of title failure to the lessee. /d.
7
On December 6, 2010, Orca entered into an agreement acknowledging the trust’s
agreement to lease the tracts to Orca (“RCT Agreement”). /d. at 651. The RCT Agreement
“provided that Orca had ‘caused a search to be made of the records of Karnes and DeWitt
[c]ounties and has preliminarily determined that Red Crest Trust is the owner and holder of the
mineral estate underlying’ the tracts at issue.” Jd. The RCT Agreement also quoted the new
‘Ex. A, The opinion is attached hereto
? Ex. B, The opinion is attached hereto.
negation-of-warranty clause and noted that Orca had requested and received a thirty-day option
period in exchange for accepting the new language:
8 ORCA has accepted the counteroffer of RED CREST TRUST proposing to modify
paragraph 18[,] ... but, in light of such requested modification to the lease form[, Orca] has
requested, and RED CREST TRUST has agreed to, a delay of up to 30 calendar days in the closing
of the proposed transaction to allow ORCA the opportunity to re-examine its title work upon
which its determination of ownership is based ..../d. (emphasis added). The RCT Agreement
also precluded Chase from leasing the tracts or granting an option to acquire a lease to any third
patties. Id.
9 Orca did not search the property records after the RCT Agreement was signed
because: (1) its earlier searches revealed no title issues; (2) Mettham had represented that the
acreage was unleased; and (3) the RCT Agreement precluded Chase from leasing any of the tracts
during the option period. /d. The purpose of the 30-day option period was to “re-examine” or “re-
evaluate” the title review it had already performed; “Orca feared defects in title going backward
in time, not forward” since Mettham had indicated the property had not been leased and the RCT
Agreement precluded any leasing of the properties to third parties. /d. Orca simply wanted to be
sure that good title to the Property was properly vested in the trust, and Orca already knew that
there were no other leases based on (1) its review of courthouse records, and (2) Mettham’s
representations.
10. Ultimately, Orca decided to move forward on the tracts in DeWitt County,
consisting of 919 acres at $3500 per acre. /d. As the Orca representative handed Mettham the
checks for more than $3.2 million, she asked Mettham again if he was “sure these are all open.”
Id. Mettham responded, “Let me check” then looked at something below his desk and at his
computer, and the maps, and said, ““We’re good to go. They’re open.” /d. Orca recorded the leases
in the DeWitt County property records the next day. /d.
11. Just three days after Orca and Chase had entered into the RCT Agreement and after
Chase had assured Orca that the property had not been leased, GeoSouthern recorded its leases
that it had obtained six months earlier from Chase, unknown to Orca. /d. at 651-52.
12 Later, after it had accepted the bonus payments, Chase was approached by
GeoSouthern, who had learned of the Orca leases because Orca had promptly filed them. /d. Only
after Chase’s fraud was discovered and GeoSouthern raised legal objections to the Orca leases did
Chase reveal its fraud to Orca and claim that the GeoSouthern Lease pre-dated and nullified the
Orca Leases; Chase sent Orca a check refunding the $3.2 million bonus payments, but Orca
rejected the tender and sued Chase and Mettham for causes of action including breach of contract,
fraud and negligent misrepresentation. /d. at 652.
13. Just before trial, the Court entered a Rule 166 Order essentially dismissing Orca’s
claims except for Orca’s claim for a declaratory judgment in the event Orca recovered the property.
Id. Orca and Chase ultimately agreed to sever Orca’s claim for a declaratory judgment and Chase’s
claim for attorneys’ fees so that the remainder of the case could be appealed.>
14. The Dallas Court of Appeals affirmed the trial court’s ruling as to the breach of
contract claim but reversed the trial court’s ruling as to the fraud and negligent misrepresentation
claim. The court of appeals held that there was no clear and unequivocal language in the negation
of warranty paragraph in the lease disclaiming reliance, and so it was a fact issue as to whether
Orca reasonably relied on Chase’s misrepresentations that the leases were open. Orca Assets G.P.,
L.L.C. v. JP Morgan Chase Bank, N.A., 542 8.W.3d 591, 602-04 (Tex. App.—Dallas 2015), rev'd
> Ex. C, Agreed Order of Severance and Abatement.
546 S.W.3d 648. The Dallas Court of Appeals also held that the disclaimer of warranty provision
did not directly contradict Chase’s misrepresentations, leaving any alleged red flags to be fact
issues for the jury to consider in determining whether Orca justifiably relied on Chase’s
misrepresentations. /d. at 604-06.
15. The Dallas Court of Appeals stated in conclusion: “Even if [Orca expressly
assumed the responsibility to ensure that the properties were available to be leased], JPMorgan
was not free to affirmatively misrepresent that the properties were open in order to induce Orca
into a contractual relationship, as Orca claims it did.” /d. at 606.
16. The Texas Supreme Court, however, disagreed with the Dallas Court of Appeals,
stating: “Viewed in context with the numerous ‘red flags,’ Orca’s sophistication in the oil-and-gas
industry, and the direct contradiction between the representation and the letter of intent, Orca
cannot maintain its claim of justifiable reliance.” JPMorgan Chase, N.A. v. Orca Assets G.P.,
L.L.C., 546 S.W.3d at 660 (Tex. 2018). Orca sought a rehearing, which was denied on June 15,
2018.
Hi. ARGUMENT
A. Chase Nonsuited Its Claims Prior to Severance and the Court Has Lost Plenary
Power
17. In order for the underlying case to proceed to the court of appeals, the parties agreed
to sever (1) Plaintiffs claim for a declaratory judgment and (2) Defendants’ claims for attorneys’
fees.’ But Chase had non-suited its claims prior to the Final Judgment and purported severance.
18. Chase had filed its Original Counterclaim on August 2, 2013, requesting a
declaratory judgment and asserting claims for attorneys’ fees under Tex. Prop. Code § 114.064,
+Ex. C, Agreed Order of Severance and Abatement.
Tex. Civ. Prac. & Rem. Code § 37.009, and Tex. R. Civ. P. 131.° On August 16, 2013, Chase filed
its Second Amended Answer, Subject to their Motion to Transfer Venue, wherein Chase asserted
a duplicative claim for attorneys’ fees under Tex. Prop. Code § 114.064, as well as a claim for
attorneys’ fees under Tex. Civ. Prac. & Rem. Code § 38.001 (but no claim for attorneys’ fees under
Tex. Civ. Prac. & Rem. Code § 37.009).° A few months later, Chase filed a “Non-Suit of its
Original Counterclaim” on October 10, 2013.7 The trial court entered the Order of Dismissal of
Non-Suit of Original Counterclaim Without Prejudice the next day on October 11, 2013, ordering
that the Original Counterclaim filed on August 2, 2013 against Orca Assets, G.P., L.L.C. is
8
dismissed without prejudice.
10% Therefore, Chase non-suited its claim for attorneys’ fees under Tex. Prop. Code §
114.064, Tex. Civ. Prac. & Rem. Code § 37.009, and Tex. R. Civ. P. 131 and when it nonsuited
its Original Counterclaim which included those claims for attorneys’ fees.
20. After the non-suit, the trial court eventually entered the Rule 166 Order on
November 1, 2013,° and the Final Judgment!® and Order of Severance!! both on November 25,
2013.
21. Years after the non-suit, Final Judgment, and Order of Severance, on October 6,
2020, Chase filed its Amended Counterclaim wherein it asserted “causes of action” for attorneys’
fees under Tex. Prop. Code § 114.064 and Tex. Civ. Prac. & Rem. Code § 37.009.'? If Chase’s
argument is correct — that the only claim left is Chase’s counterclaim for attorneys’ fees and
S Ex . D, Original Counterclaim, pp.6-7.
° Ex. . E, Chase’s Second Amended Answer, Subject to their Motion to Transfer Venue, {[ 31.
TEx . F, Notice of Non-Suit of Counterclaim Without Prejudice.
SEx. . G, Order of Dismissal of Non-Suit of Original Counterclaim Without Prejudice.
° Ex. . H, Rule 166 Order.
10 Ex, I, Final Judgment.
'l Ex. C, Agreed Order of Severance and Abatement.
! Ex, J, Chase’s Amended Counterclaim, § 13.
13
expenses under the Texas Trust Code and Uniform Declaratory Judgment Ac’ — then there was
no need to file the Amended Counterclaim. The Amended Counterclaim could not add anything
since it would be barred by res judicata or collateral estoppel. Indeed, since Chase nonsuited its
counterclaim, and the trial court entered a Final Judgment which was ultimately affirmed by the
Texas Supreme Court, then Chase’s Amended Counterclaim is barred by res judicata and collateral
estoppel for the same reasons that Chase argues that Orca’s claims and defenses are barred. Orca
has pled the defense that Chase’s claims are barred by res judicata and collateral estoppel.'* 22.
22. Moreover, the attorneys’ fee claim cannot be split from the underlying cause of
action and tried as a separate case. Since the claim for attorneys’ fees cannot be split, and the Court
has lost plenary jurisdiction over the prior case, Case No. DC-12-05303, the Court is without power
to consider Chase’s attorneys’ fee claim. This was recently recognized by the Beaumont Court of
Appeals in Barclay v. Richey, No. 09-17-00026-CV, 2019 WL 302661, at *9-10 (Tex. App.—
Beaumont Jan. 24, 2019, pet. denied):
In her third issue, Barclay contends the trial court should have awarded her
reasonable and necessary attorney's fees required to obtain the pretrial declaratory
judgment regarding the deeds Richey filed for record. Both the trial court and
Richey maintain the lower court no longer maintained plenary power to award
attorney's fees, and thus any claim for attorney's fees is barred. We agree.
On June 13, 2014, in addition to numerous rulings in an interlocutory order, the
trial court granted Barclay's motion for summary judgment on her declaratory
judgment claims. Then, on May 1, 2015, the trial court granted Richey's motion
requesting the trial court sever the claims for which it granted motions for partial
summary judgment on June 13, 2014, including Barclay's declaratory judgment
claim, from the remaining claims into a separate cause. The severance order
specifically proclaimed it did not dispose of Barclay's claim for attorney's fees on
her declaratory judgment claim, but rather continued the attorney's fees request with
the remainder of the case. No further action was taken regarding the severance
order. Despite the trial court's notification to Barclay she was not entitled to
attorney's fees for her declaratory judgment claim following the jury trial, she
'3 Chase’s Motion for Summary Judgment, p. 1.
4 Ex. K, Orca’s Second Supplement to its Claims and Answer to JP Morgan Chase Bank, N.A.’s First
Amended Counterclaim, {J 22-23.
presented her evidence regarding the fees to the trial court in a hearing to the bench.
After presenting her evidence, the trial court again rejected her claim reiterating it
lacked jurisdiction to award Barclay attorney's fees as the prevailing party on her
declaratory judgment claim, because the trial court previously severed that portion
of the claim.
Rule 41 of the Texas Rules of Civil Procedure states “[a]ny claim against a party
may be severed and proceeded with separately.” Tex. R. Civ. P. 41. Generally, a
trial court has broad discretion in the severance of cases, and its decision will not
be disturbed absent an abuse of discretion. Guar. Fed. Sav. Bank v. Horseshoe
Operating Co., 793 S.W.2d 652, 658 (Tex. 1990) (citations omitted); In re Henry,
388 S.W.3d 719, 726 (Tex. App—Houston [1st Dist.] 2012, orig. proceeding). “The
controlling reasons for a severance are to do justice, avoid prejudice, and further
convenience.” Guar. Fed. Sav. Bank, 793 S.W.2d at 658 (citing St. Paul Ins. Co. v.
McPeak, 641 S.W.2d 284 (Tex. App.—Houston [1st Dist.] 1982, writ ref'd n.r.e.)).
A trial court properly exercises its discretion in severing claims if (1) the
controversy involves more than one cause of action, (2) the severed claim is one
that could be asserted independently in a separate lawsuit, and (3) the severed claim
is not so interwoven with the remaining action that they involve the same facts and
issues. Jn re Henry, 388 S.W.3d at 726 (citing Jn re Liu, 290 S.W.3d 515, 520 (Tex.
App.—Texarkana 2009, orig. proceeding)).
Regardless of the broad discretion in severing cases, such discretion should not be
exercised contrary to legal rules and principles applicable in the particular case. See
Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998) (discussing trial court's broad.
discretion when considering attorney's fees). “Severance of a single cause of action
into two parts is never proper and should not be granted for the purpose of enabling
the litigants to obtain an early appellate ruling on the trial court's determination of
one phase of the case.” Pierce v. Reynolds, 329 S.W.2d 76, 79 n.1 (Tex. 1959).
The trial court's severance necessarily implies a conclusion that Barclay's claim for
declaratory relief under section 37.003 of the Declaratory Judgments Act and her
claim for attorney's fees under section 37.009 of the Act can be adjudged in
independent lawsuits culminating in separate and distinct judgments. See Tex. Civ.
Prac, & Rem. Code Ann. §§ 37.003, 37.009 (West 2015). As the Austin Court of
Appeals explained, and we agree, these two claims are merely different phases of a
single cause of action, as even section 37.009 prescribes a single proceeding under
Chapter 37 of the Act. Dalisa, Inc. v. Bradford, 81 S.W.3d 876, 880 (Tex. App.—
Austin 2002, no pet.); see also Town of Flower Mound v. Upper Trinity Reg'l Water
Dist., 178 S.W.3d 841, 843 (Tex. App.—Fort Worth 2005, no pet.) (agreeing with
the reasoning in Dalisa that a severance of a claim for declaratory relief under
section 37.003 of the Act from a claim for attorney's fees under section 37.009 is
improper “because the two claims are merely different phases of a single cause of
action”). Thus, like the Dalisa Court, we conclude the trial court erred when it
severed Barclay's claim for declaratory relief from her claim for attorney's fees
under the Act. See Dalisa, 81 S.W.3d at 881.
Barclay did not appeal the final judgment entered by the trial court in the severed
cause. Rather, she continued the case prosecuting her attorney's fees claim in this
cause. Except in limited circumstances not applicable here, a party must raise its
complaint about improper severance at the time of the alleged improper severance,
not later. See Nicor Expl. Co. v. Fla. Gas Transmission Co., 911 S.W.2d 479, 482—
83 (Tex. App.—Corpus Christi 1995, writ denied) (explaining the finality of
severance judgments if alleged error is not valid on the face of the severance). As
Barclay neither appealed from the severed cause, nor objected to the trial court's
tuling severing her claim for attorney's fees from the final judgment in the severed
cause, she waived her right to complain in the cause associated with this appeal
about the trial court's decision that effectively severed her claim for attorney's fees
into the cause in which she did not appeal. Thus, the trial court correctly ruled that
it no longer retained jurisdiction of the severed cause because its plenary power
expired thirty days after it rendered judgment in the severed cause. See Tex. R. Civ.
P. 329b.
We conclude the trial court properly denied Barclay's claim for attorney's fees. We
overrule her third issue.
Barclay v. Richey, No. 09-17-00026-CV, 2019 WL 302661, at *9-10 (Tex. App. Jan. 24, 2019,
pet. denied (Jan. 17, 2020).
23. As the Barclay court recognized, it is an abuse of discretion to sever a statutory
claim for attorney’s fees because it cannot be severed. Compliance for severance under Texas
Rule of Civil Procedure 41 “requires the following: (1) a controversy involving more than one
cause of action; (2) a severed claim that is the proper subject of a lawsuit if asserted independently
of the other claims; and (3) a severed claim that is not so interwoven with the remaining actions
as to involve the same facts and issues.” Dalisa, Inc. v. Bradford, 81 S.W.3d 876, 879 (Tex.
App.—Austin 2002), writ granted, appeal dism’d, No. 03-03-00230-CV, 2003 WL 21940024
(Tex. App.—Austin Aug. 14, 2003).
24. In Dalisa, Inc. v. Bradford, the court determined that a claim for attorneys’ fees
under Tex. Civ. Prac. & Rem. Code § 37.009 was not a severable claim, and it was an abuse of
discretion to sever it:
Section 37.009 is headed “Costs” and states as follows: “In any proceeding
under this chapter, the court may award costs and reasonable attorney's fees as
2
are equitable and just.” Tex. Civ. Prac. & Rem.Code Ann. § 37.009 (emphasis
added). “That a suit for the statutory attorney's fees as a separate action could
not be maintained is evident from the wording of the statute... The attorney's
fees, while not costs, partake of the nature of the costs of suit and are assessed
in accordance with the judgment ” reached in the proceeding. Huff v. Fidelity
Life Ins. Co., 158 Tex. 433, 312 S.W.2d 493, 501 (1958) (emphasis added).
While the opinion in Huff referred to the statutory predecessor of the attorney's-
fee provisions now found in section 38.001 of the Texas Civil Practice and
Remedies Code, the reasoning applies all the more, in our view, to section
37.009 of the Act which prescribes a single “proceeding” and measures the fees
awarded by the equities and justice revealed in that particular proceeding.
Id. at 880. Similarly, a claim for attorneys’ fees under Tex. Prop. Code § 114.064 also
“prescribes a single ‘proceeding’ and measures the fees awarded by the equities and justice
revealed in that particular proceeding.” /d. Section 114.064 only applies to proceedings under
the Trust Code. Tex. Prop. Code § 114.064 (“In a proceeding under this code....”). In other
words, a claim for attorneys’ fees under § 114.064 cannot exist independent of a proceeding
under the Trust Code. Since Chase did not object to the severance of its attorneys’ fees claim,
it waived any error of the severance. The Court has lost plenary power to determine Chase’s
request for attorneys’ fees.
B If Chase Can Pursue Its Attorneys’ Fees Claims, then Orca Should Be Allowed to
Counter and Defend
25. If Chase can pursue attorneys’ fees claims despite non-suiting them and
improper severance, Orca should also be allowed to make a counterclaim for attorneys’ fees
and raise defenses to Orca’s claims.
26. If, however, Chase somehow has a claim for attorneys’ fees that has survived its
non-suit of them, then Orca should be allowed to present its defenses to the extent that the
specific claim has not been foreclosed by the Texas Supreme Court. The Texas Supreme Court
did not consider the claims of Unjust Enrichment, Conversion and Money Had and Received,
and Orca did not agree to waive its defenses to Chase’s claims in this proceeding.
27. Additionally, Orca may not be able to sue for the cause of action of “fraud”
because the Texas Supreme Court held that Orca’s reliance on Chase’s misrepresentations was
not justifiable, Orca should still be able to argue that Chase’s misrepresentations should not
provide it with a windfall of $3.2 million plus attorneys’ fees of over $2 million. Such a result
would constitute unjust enrichment to Chase.
28. Chase argues that Orca’s claim for attorneys’ fees claims are also barred. Yet,
both the Texas Trust Code and the Uniform Declaratory Judgments Act give the trial court
discretion to award reasonable and necessary attorney's fees as are “equitable and just.” Tex.
Civ. Prac. & Rem. Code Ann. § 37.009; Tex. Prop. Code § 114.064. The initial case did not
address attorneys’ fees at all. The issue was not before the court and it was not fully and fairly
litigated.
29. The initial action did not adjudicate the claims of unjust enrichment, conversion,
money had and received. There is no reason why they cannot be adjudicated here. In the event
that Chase retains a counterclaim for attorneys’ fees, Orca should be allowed to present defenses
to the claim. The initial action did not decide whether Orca’s claims for attorneys’ fees were
barred because it would result in Orca being unjustly enriched, for example.
30. Chase’s cause of action for attorneys’ fees does not exist in a vacuum. The
Agreed Order of Severance and Abatement ordered that a duplicate copy of the file from Case
No. DC-12-0503 be filed in this case. Indeed, for the Court must look to Case No. DC-12-0503
to determine whether the award of fees would be equitable and just.
Iv. PRAYER
Bie Orca respectfully requests that the Court deny Chase’s Motion for Summary
Judgment, dismiss Chase’s claim for attorneys’ fees and expenses with prejudice and grant
1
Orca all other relief to which it is justly entitled.
Respectfully submitted,
BUTCH BOYD LAW FIRM
/s/ Jeremy R. Stone
ERNEST W. “BUTCH” BOYD
State Bar No. 00783694
butchboyd@pbutchboydlawfirm.com
JEREMY R. STONE
State Bar No. 24013577
jeremystone@butchboydlawfirm.com
MICHAEL J. BLANCHARD
State Bar No. 24036231
mikeblanchard@pbutchboydlawfirm.com
2905 Sackett Street
Houston, TX 77098
Phone: (713) 589-8477
Fax:(713) 589-8563
Attorneys for Plaintiff, Orca Assets, G.P., L.L.C.
CERTIFICATE
OF SERVICE
I hereby certified that a true and correct of the above and foregoing has been forwarded
to all counsel of record in accordance with T.R.C.P. by method indicated below on this 10" day
of September, 2021.
Via Email & Eserve
Mr. David Jed Williams
jwilliams@hfgtx.com
Ms. Stephanie L. Curette
curette@hfgtx.com
Hornberger Fuller & Garza Incorporated
The Quarry Heights Building
7373 Broadway, Suite 300
San Antonio, Texas 78209-3266
Telephone: (210) 271-1700
Facsimile: (210) 271-1730
Attorneys for Defendants, JPMorgan Chase Bank, N.A.,
and JPMorgan Chase Bank, N.A., As Trustee of the Red Crest Trust
/s/ Jeremy R. Ston
JEREMY R. STONE
13
JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (2018)
61 Tex. Sup. Ct. J. 522
The rule of civil procedure governing pre-
trial conferences authorizes trial courts to
KeyCite Yellow Flag - Negative Treatment decide matters that, though ordinarily fact
Distinguished by Pleasant Grove Independent School District v. FieldTurf
questions, have become questions of law because
USA, Ine., Tex.App.-Texarkana, April 3, 2020
reasonable minds cannot differ on the outcome.
546 S.W.3d 648
Tex. R. Civ. P. 166, Subsection (g).
Supreme Court of Texas.
3 Cases that cite this headnote
JPMORGAN CHASE BANK,
N.A., et al., Petitioners,
[2] Appeal and Error @ Conferences and
v. scheduling orders
ORCA ASSETS G.P., L.L.C., Respondent When a pre-trial conference order disposes of
claims, the order is akin to a summary judgment
No. 15-0712 or directed verdict, and review is de novo. Tex.
| R. Civ. P. 166. Subsection (g).
Argued November 7, 2017
4 Cases that cite this headnote
|
OPINION DELIVERED: March 23, 2018
| BI Appeal and Error @ Review for factual or
Rehearing Denied June 15, 2018 legal sufficiency: no evidence" review
When reviewing for legal sufficiency, the
Synopsis
Background: Lessee under oil and gas lease filed suit evidence is considered in the light most
favorable to the nonmovant, crediting evidence
against lessor and lessor's representative for breach of lease
and letter of intent, fraudulent inducement, and negligent
a reasonable jury could credit and disregarding
misrepresentation, arising out of execution of lease of contrary evidence and inferences unless a
reasonable jury could not.
property to lessee when lessor had already leased subject
property to third party. The 44th Judicial District Court,
3 Cases that cite this headnote
2013 WL 11103945, Carlos Cortez, J., entered judgment for
lessor as matter of law on all claims. Lessee appealed. The
Dallas Court of Appeals, 2015 WL 4736786, affirmed in part, [4] Judgment @ Propriety of judgment in
reversed in part, and remanded. Lessor and representative general
filed petition for review, which was granted. Trial @ Insufficiency to support other verdict;
conclusive evidence
Trial @ Nature and Grounds
[Holding:] The Supreme Court, Brown, J., held that lessee Judgment without or against a jury verdict is
did not justifiably rely on misrepresentation by lessor's agent proper at any course of the proceedings only
that acreage lessee sought to lease was “open.” when the law does not allow reasonable jurors to
decide otherwise.
Court of Appeals judgment reversed; trial court judgment 1 Cases that cite this headnote
reinstated.
15] Fraud @ Reliance on Representations and
Inducement to Act
West Headnotes (16) Oi and gas lessee did not justifiably rely
on misrepresentation by lessor's agent that
acreage lessee sought to lease was “open,” and
i) Pretrial Procedure @ Determination of
therefore lessee could not maintain
issues; judgment; dismissal (>.Glihe
WESTLAW
JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (2018)
oe
61 Tex. Sup. Ct. J. 522
negligent misrepresentation claims against lessor others in their business; (3) the defendant did
and agent stemming from oil and gas lease not exercise reasonable care or competence in
oncerning property that had already been leased obtaining or communicating the information;
to a third party; agent also said he “would and (4) the plaintiff suffers pecuniary loss by
have to check” whether property was open for justifiably relying on the representation.
lease, lessor insisted on stricter negotiation-
of-warranty provision, lessor refused to accept 21 Cases that cite this headnote
responsibility for verifying title, agent made
statement that other lessees were not doing 19] Fraud @ Reliance on representations and
careful title work, lessee was aware of delays inducement to act
in recording of leases, lessee ceased checking
Justifiable reliance usually presents a question of
property records after signing letter of intent,
fact in a fraud action.
and lessee expressed doubts at closing about
availability. 9 Cases that cite this headnote
1 Cases that cite this headnote
[10] Fraud @ Reliance on Representations and
Inducement to Act
[6] Fraud @ Elements of Actual Fraud
The justifiable reliance element of a fraud
To prevail on a fraud claim, a plaintiff must
claim can be negated as a matter of law when
show: (1) the defendant made a material
circumstances exist under which reliance cannot
representation that was false; (2) the defendant
be justified.
knew the representation was false or made
it recklessly as a positive assertion without 20 Cases that cite this headnote
any knowledge of its truth; (3) the defendant
intended to induce the plaintiff to act upon the
representation; and (4) the plaintiff actually and (1) Fraud @ Relations and means of knowledge
of parties
justifiably relied upon the representation and
suffered injury as a result. In determining whether justifiable reliance is
negated as a matter of law when considering a
61 Cases that cite this headnote fraud claim, courts must consider the nature of
the parties’ relationship and the contract.
71 Fraud @ Reliance on Representations and
10 Cases that cite this headnote
Inducement to Act
The reliance element of a fraud claim has two
requirements: the plaintiff must show that it [12] Fraud @ Duty to Investigate
ctually relied on the defendant's representation In an arm's-length transaction, the defrauded
and, also, that such reliance was justifiable. party must exercise ordinary care for the
protection of his own interests in order to
49 Cases that cite this headnote show justifiable reliance; a failure to exercise
reasonable diligence is not excused by mere
confidence in the honesty and integrity of the
[8] Fraud @ Statements recklessly made:
negligent misrepresentation other party.
To prevail on a cause of action for negligent 4 Cases that cite this headnote
misrepresentation, a plaintiff must show: (1) a
representation made by a defendant in the course
of its business or in a transaction in which it [13] Fraud @ Duty to Investigate
has a pecuniary interest; (2) the representation A failure of a contracting party to exercise
conveyed false information for the guidance of reasonable diligence is not excused by mere
WESTLAW
JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (2018)
_
61 Tex. Sup. Ct. J. 522
confidence in the honesty and integrity of the Houston TX, H. Allen Pennington Jr, James G. Bennett,
other party. Pennington Hill LP, Fort Worth TX, Patricia D. Chamblin,
Mehaffy & Weber P.C., Beaumont TX, for Orca Assets G.P.,
L.L.C.
[14] Fraud @ Duty to Investigate
Opinion
A contracting plaintiff cannot blindly rely
on a representation by a defendant where Justice Brown delivered the opinion of the Court.
the plaintiff's knowledge, experience, and
background warrant investigation into any *650 In this case, we must determine whether the lessee of
representations before the plaintiff acts in certain mineral interests justifiably relied on extra-contractual
reliance upon those representations. representations by the lessor's agent despite “red flags” and a
negation-of-warranty clause in the sales documents explicitly
36 Cases that cite this headnote placing the risk of title failure on the lessee. Because we hold,
as a matter of law, that the lessee could not so justifiably rely,
we reverse the court of appeals and reinstate the trial court's
[15] Fraud ¢ Reliance on Representations and
judgment in favor of the petitioners.
Inducement to Act
A party to a written contract cannot justifiably
rely on oral misrepresentations regarding the
contract's unambiguous terms.
9 Cases that cite this headnote The Red Crest Trust owns about 40,000 acres of non-
contiguous mineral interests throughout the Eagle Ford Shale.
JPMorgan Chase Bank, N.A., acts as its trustee. Phillip
[16] Fraud ¢ Relations and means of knowledge
Mettham, an employee of JPMorgan, was responsible for
of parties
leasing the trust's Eagle Ford interests.
Either “red flags” alone or direct contradiction
alone can negate justifiable reliance as a matter In 2010, Mettham leased fifteen of the trust's Eagle Ford
of law. tracts in DeWitt and Gonzales counties to GeoSouthern
Energy Corporation. Comprising more than 1,800 acres, the
5 Cases that cite this headnote
GeoSouthern deal was one of the largest Mettham negotiated
for the trust. Notably, GeoSouthern did not record its leases
in the counties’ property records until six months after closing
the deal.
*649 On Petition for Review From the Court of Appeals for
the Fifth District of Texas, David J. Schenck, J. Also in 2010, Lawrence Berry, an experienced oil-and-gas
businessman, formed Orca Assets, G.P., L.L.C. The specific
Attorneys and Law Firms
purpose of establishing Orca was to acquire promising
Evan A. Young, Stephanie F. Cagniart, Thomas R. Phillips, unleased acreage in the Eagle Ford Shale. And it quickly
Baker Botts L.L.P. Kevin M. Beiter, McGinnis Lochridge & set its sights on the trust's holdings in Karnes and DeWitt
Kilgore LLP, Austin TX, David Jed Williams, Hornberger counties. Orca's team included Berry; its vice president,
Fuller & Garza Incorporated, San Antonio TX, Jessica B. John Ellis; landmen Tony Villalon and Joan Stewart, and a
Pulliam, Baker Botts L.L.P., Dallas TX, for JPMorgan Chase collection of additional landmen. All were experienced in
Bank, N.A. leasing oil-and-gas properties.
David B. Gaultney, Elana S. Einhorn, Mehaffy Weber, P.C., On November 11, 2010, Mettham met with Ellis and Stewart
Austin TX, Deborah G. Hankinson, Stephanie D. Nelson, to discuss Orca leasing some of the trust's tracts. Berry
Hankinson LLP, Dallas TX, Ernest W. Boyd, Butch Boyd Law also attended part but not all of the meeting. Orca's team
Firm, Michelle R. Meriam, Timothy F. Lee, Wendy Marcia brought maps showing the tracts it desired to lease. Ellis
Bishop, Ware, Jackson, Lee, O'Neill Smith & Barrow, LLP, asked Mettham whether the indicated acreage “was open and
WESTLAW ©
JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (2018)
61 Tex. Sup. Ct. J. 522
not leased.” Each of Orca's representatives at the meeting purchase only “whatever it was that the Red Crest Trust had to
remembered Mettham's reply somewhat differently. Ellis sell,” which “might be nothing at all.” He also acknowledged
believes Mettham answered, “[Y ]es, but I'll have to—I'll have that if the trust's properties had already been leased, it could
to check.” Stewart remembers him saying, “I'm not sure of not conyey those minerals to Orca. In general, he did not find
that. I'll have to check.” Berry recalls Mettham unequivocally a disclaimer of warranty out of the ordinary. But he regarded
representing that the acreage was “open,” meaning unleased. the wording of this particular provision as unusually explicit.
However, Berry also concedes that he was in the meeting for So he advised Ellis: “I think we need to accept the language,
only a brief time. but we also need to give the title another review before we
close.”
The trust requires that all leases of its tracts contain a
clause negating any warranty of title. The standard lease On December 6, the parties signed a letter of intent
form that JPMorgan usually uses when dealing with the acknowledging the trust's agreement to lease the tracts to
trust's properties includes such a clause: “This Lease is made Orca. In the letter, neither the trust nor JPMorgan made any
without warranties of any kind, either express or implied.” representation about the trust's title or whether the acreage
Orca was familiar with that language as it had twice before was available to lease. Instead, the letter provided that Orca
leased acreage from the trust using the standard lease form. had “caused a search to be made of the records of Karnes
and DeWitt [c]ounties and has preliminarily determined that
But shortly after the parties' initial meeting, Mettham notified Red Crest Trust is the owner and holder of the mineral estate
Orca that any lease deal it made with the trust would not
Preview
FILED 9/10/2021 4:06 PM FELICIA PITRE DISTRICT CLERK DALLAS CO., TEXAS Lafonda Sims DEPUTY CAUSE NO. DC-13-13886 ORCA ASSETS, G.P., L.L.C. IN THE DISTRICT COURT Plaintiff, Vv. 44" JUDICIAL DISTRICT JPMORGAN CHASE BANK, N.A., et al Defendants. DALLAS COUNTY, TEXAS PLAINTIFF ORCA ASSETS, G.P., L.L.C’S RESPONSE TO DEFENDANT CHASE BANK, N.A.’S MOTION FOR SUMMARY JUDGMENT Orca Assets GP, LLC (“Orca” or “Plaintiff”) files this Response to Defendant JPMorgan Chase Bank, N.A.’s (“Chase” or “JPMorgan” or “Defendant”) Motion for Summary Judgment. I SUMMARY 1 Chase’s Motion should be denied. Chase’s only claim in this case is a claim for attorneys’ fees under the Trust Code and the Uniform Declaratory Judgments Act. Chase’s claim was severed from Case No. DC-12-05303, which is the underlying litigation in which Orca sued Chase for knowingly leasing the same property to multiple parties. But Chase non-suited its claims prior to the severance. Moreover, Chase’s claim for attorneys’ fees cannot be severed from the underlying action, and since there is a final non-appealable judgment in the underlying action the Court has lost plenary power to rule on Chase’s claim for attorneys’ fees. 2. If, however, Chase still has a claim for attorneys’ fees, Orca is allowed to present its defenses and counterclaims to Chase’s claim. IL. FACTUAL BACKGROUND 3 This case is the result of claims being severed from a prior case regarding Chase knowingly leasing the same property to multiple parties. JPMorgan Chase Bank, N.A. v. Orca Assets, GP, LLC, 546 S.W.3d 648 (Tex. 2018);! see also Orca Assets, GP, LLC v. Burlington Oil & Gas Co., LP, 464 S.W.3d 403 (Tex. App.—Corpus Christi 2015, pet. denied).? 4 The Red Crest Trust owned about 40,000 acres of non-contiguous mineral interests throughout the Eagle Ford Shale. JPMorgan, 546 S.W.3d at 650. JPMorgan Chase Bank, N.A. acts as the trustee for the Red Crest Trust. /d. Phillip Mettham was the Chase employee responsible for leasing the trust’s Eagle Ford interests. /d. 5 In 2010, Mettham leased fifteen of the trust’s Eagle Ford tracts in DeWitt and Gonzales counties, comprising more than 1,800 acres, to GeoSouthern Energy Corporation. /d. It was one of the largest deals Mettham negotiated for the trust. Jd. GeoSouthern did not record its leases in the counties’ property records until six months after closing the deal. /d. 6 On November 11, 2010, Orca representatives met with Mettham in Fort Worth to discuss leasing some of the trust’s tracts. /d. At that meeting, the Orca representatives brought maps and asked about certain tracts it desired to lease. Jd. Mettham stated the property was available to lease (or arguably stated that he thought it was open but would have to check). /d. Shortly after the meeting, Mettham notified Orca that any lease deal it made would not employ the standard negation-of-warranty language provision that Orca was familiar with, but it would require new language expressly shifting the risk of title failure to the lessee. /d. 7 On December 6, 2010, Orca entered into an agreement acknowledging the trust’s agreement to lease the tracts to Orca (“RCT Agreement”). /d. at 651. The RCT Agreement “provided that Orca had ‘caused a search to be made of the records of Karnes and DeWitt [c]ounties and has preliminarily determined that Red Crest Trust is the owner and holder of the mineral estate underlying’ the tracts at issue.” Jd. The RCT Agreement also quoted the new ‘Ex. A, The opinion is attached hereto ? Ex. B, The opinion is attached hereto. negation-of-warranty clause and noted that Orca had requested and received a thirty-day option period in exchange for accepting the new language: 8 ORCA has accepted the counteroffer of RED CREST TRUST proposing to modify paragraph 18[,] ... but, in light of such requested modification to the lease form[, Orca] has requested, and RED CREST TRUST has agreed to, a delay of up to 30 calendar days in the closing of the proposed transaction to allow ORCA the opportunity to re-examine its title work upon which its determination of ownership is based ..../d. (emphasis added). The RCT Agreement also precluded Chase from leasing the tracts or granting an option to acquire a lease to any third patties. Id. 9 Orca did not search the property records after the RCT Agreement was signed because: (1) its earlier searches revealed no title issues; (2) Mettham had represented that the acreage was unleased; and (3) the RCT Agreement precluded Chase from leasing any of the tracts during the option period. /d. The purpose of the 30-day option period was to “re-examine” or “re- evaluate” the title review it had already performed; “Orca feared defects in title going backward in time, not forward” since Mettham had indicated the property had not been leased and the RCT Agreement precluded any leasing of the properties to third parties. /d. Orca simply wanted to be sure that good title to the Property was properly vested in the trust, and Orca already knew that there were no other leases based on (1) its review of courthouse records, and (2) Mettham’s representations. 10. Ultimately, Orca decided to move forward on the tracts in DeWitt County, consisting of 919 acres at $3500 per acre. /d. As the Orca representative handed Mettham the checks for more than $3.2 million, she asked Mettham again if he was “sure these are all open.” Id. Mettham responded, “Let me check” then looked at something below his desk and at his computer, and the maps, and said, ““We’re good to go. They’re open.” /d. Orca recorded the leases in the DeWitt County property records the next day. /d. 11. Just three days after Orca and Chase had entered into the RCT Agreement and after Chase had assured Orca that the property had not been leased, GeoSouthern recorded its leases that it had obtained six months earlier from Chase, unknown to Orca. /d. at 651-52. 12 Later, after it had accepted the bonus payments, Chase was approached by GeoSouthern, who had learned of the Orca leases because Orca had promptly filed them. /d. Only after Chase’s fraud was discovered and GeoSouthern raised legal objections to the Orca leases did Chase reveal its fraud to Orca and claim that the GeoSouthern Lease pre-dated and nullified the Orca Leases; Chase sent Orca a check refunding the $3.2 million bonus payments, but Orca rejected the tender and sued Chase and Mettham for causes of action including breach of contract, fraud and negligent misrepresentation. /d. at 652. 13. Just before trial, the Court entered a Rule 166 Order essentially dismissing Orca’s claims except for Orca’s claim for a declaratory judgment in the event Orca recovered the property. Id. Orca and Chase ultimately agreed to sever Orca’s claim for a declaratory judgment and Chase’s claim for attorneys’ fees so that the remainder of the case could be appealed.> 14. The Dallas Court of Appeals affirmed the trial court’s ruling as to the breach of contract claim but reversed the trial court’s ruling as to the fraud and negligent misrepresentation claim. The court of appeals held that there was no clear and unequivocal language in the negation of warranty paragraph in the lease disclaiming reliance, and so it was a fact issue as to whether Orca reasonably relied on Chase’s misrepresentations that the leases were open. Orca Assets G.P., L.L.C. v. JP Morgan Chase Bank, N.A., 542 8.W.3d 591, 602-04 (Tex. App.—Dallas 2015), rev'd > Ex. C, Agreed Order of Severance and Abatement. 546 S.W.3d 648. The Dallas Court of Appeals also held that the disclaimer of warranty provision did not directly contradict Chase’s misrepresentations, leaving any alleged red flags to be fact issues for the jury to consider in determining whether Orca justifiably relied on Chase’s misrepresentations. /d. at 604-06. 15. The Dallas Court of Appeals stated in conclusion: “Even if [Orca expressly assumed the responsibility to ensure that the properties were available to be leased], JPMorgan was not free to affirmatively misrepresent that the properties were open in order to induce Orca into a contractual relationship, as Orca claims it did.” /d. at 606. 16. The Texas Supreme Court, however, disagreed with the Dallas Court of Appeals, stating: “Viewed in context with the numerous ‘red flags,’ Orca’s sophistication in the oil-and-gas industry, and the direct contradiction between the representation and the letter of intent, Orca cannot maintain its claim of justifiable reliance.” JPMorgan Chase, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d at 660 (Tex. 2018). Orca sought a rehearing, which was denied on June 15, 2018. Hi. ARGUMENT A. Chase Nonsuited Its Claims Prior to Severance and the Court Has Lost Plenary Power 17. In order for the underlying case to proceed to the court of appeals, the parties agreed to sever (1) Plaintiffs claim for a declaratory judgment and (2) Defendants’ claims for attorneys’ fees.’ But Chase had non-suited its claims prior to the Final Judgment and purported severance. 18. Chase had filed its Original Counterclaim on August 2, 2013, requesting a declaratory judgment and asserting claims for attorneys’ fees under Tex. Prop. Code § 114.064, +Ex. C, Agreed Order of Severance and Abatement. Tex. Civ. Prac. & Rem. Code § 37.009, and Tex. R. Civ. P. 131.° On August 16, 2013, Chase filed its Second Amended Answer, Subject to their Motion to Transfer Venue, wherein Chase asserted a duplicative claim for attorneys’ fees under Tex. Prop. Code § 114.064, as well as a claim for attorneys’ fees under Tex. Civ. Prac. & Rem. Code § 38.001 (but no claim for attorneys’ fees under Tex. Civ. Prac. & Rem. Code § 37.009).° A few months later, Chase filed a “Non-Suit of its Original Counterclaim” on October 10, 2013.7 The trial court entered the Order of Dismissal of Non-Suit of Original Counterclaim Without Prejudice the next day on October 11, 2013, ordering that the Original Counterclaim filed on August 2, 2013 against Orca Assets, G.P., L.L.C. is 8 dismissed without prejudice. 10% Therefore, Chase non-suited its claim for attorneys’ fees under Tex. Prop. Code § 114.064, Tex. Civ. Prac. & Rem. Code § 37.009, and Tex. R. Civ. P. 131 and when it nonsuited its Original Counterclaim which included those claims for attorneys’ fees. 20. After the non-suit, the trial court eventually entered the Rule 166 Order on November 1, 2013,° and the Final Judgment!® and Order of Severance!! both on November 25, 2013. 21. Years after the non-suit, Final Judgment, and Order of Severance, on October 6, 2020, Chase filed its Amended Counterclaim wherein it asserted “causes of action” for attorneys’ fees under Tex. Prop. Code § 114.064 and Tex. Civ. Prac. & Rem. Code § 37.009.'? If Chase’s argument is correct — that the only claim left is Chase’s counterclaim for attorneys’ fees and S Ex . D, Original Counterclaim, pp.6-7. ° Ex. . E, Chase’s Second Amended Answer, Subject to their Motion to Transfer Venue, {[ 31. TEx . F, Notice of Non-Suit of Counterclaim Without Prejudice. SEx. . G, Order of Dismissal of Non-Suit of Original Counterclaim Without Prejudice. ° Ex. . H, Rule 166 Order. 10 Ex, I, Final Judgment. 'l Ex. C, Agreed Order of Severance and Abatement. ! Ex, J, Chase’s Amended Counterclaim, § 13. 13 expenses under the Texas Trust Code and Uniform Declaratory Judgment Ac’ — then there was no need to file the Amended Counterclaim. The Amended Counterclaim could not add anything since it would be barred by res judicata or collateral estoppel. Indeed, since Chase nonsuited its counterclaim, and the trial court entered a Final Judgment which was ultimately affirmed by the Texas Supreme Court, then Chase’s Amended Counterclaim is barred by res judicata and collateral estoppel for the same reasons that Chase argues that Orca’s claims and defenses are barred. Orca has pled the defense that Chase’s claims are barred by res judicata and collateral estoppel.'* 22. 22. Moreover, the attorneys’ fee claim cannot be split from the underlying cause of action and tried as a separate case. Since the claim for attorneys’ fees cannot be split, and the Court has lost plenary jurisdiction over the prior case, Case No. DC-12-05303, the Court is without power to consider Chase’s attorneys’ fee claim. This was recently recognized by the Beaumont Court of Appeals in Barclay v. Richey, No. 09-17-00026-CV, 2019 WL 302661, at *9-10 (Tex. App.— Beaumont Jan. 24, 2019, pet. denied): In her third issue, Barclay contends the trial court should have awarded her reasonable and necessary attorney's fees required to obtain the pretrial declaratory judgment regarding the deeds Richey filed for record. Both the trial court and Richey maintain the lower court no longer maintained plenary power to award attorney's fees, and thus any claim for attorney's fees is barred. We agree. On June 13, 2014, in addition to numerous rulings in an interlocutory order, the trial court granted Barclay's motion for summary judgment on her declaratory judgment claims. Then, on May 1, 2015, the trial court granted Richey's motion requesting the trial court sever the claims for which it granted motions for partial summary judgment on June 13, 2014, including Barclay's declaratory judgment claim, from the remaining claims into a separate cause. The severance order specifically proclaimed it did not dispose of Barclay's claim for attorney's fees on her declaratory judgment claim, but rather continued the attorney's fees request with the remainder of the case. No further action was taken regarding the severance order. Despite the trial court's notification to Barclay she was not entitled to attorney's fees for her declaratory judgment claim following the jury trial, she '3 Chase’s Motion for Summary Judgment, p. 1. 4 Ex. K, Orca’s Second Supplement to its Claims and Answer to JP Morgan Chase Bank, N.A.’s First Amended Counterclaim, {J 22-23. presented her evidence regarding the fees to the trial court in a hearing to the bench. After presenting her evidence, the trial court again rejected her claim reiterating it lacked jurisdiction to award Barclay attorney's fees as the prevailing party on her declaratory judgment claim, because the trial court previously severed that portion of the claim. Rule 41 of the Texas Rules of Civil Procedure states “[a]ny claim against a party may be severed and proceeded with separately.” Tex. R. Civ. P. 41. Generally, a trial court has broad discretion in the severance of cases, and its decision will not be disturbed absent an abuse of discretion. Guar. Fed. Sav. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 658 (Tex. 1990) (citations omitted); In re Henry, 388 S.W.3d 719, 726 (Tex. App—Houston [1st Dist.] 2012, orig. proceeding). “The controlling reasons for a severance are to do justice, avoid prejudice, and further convenience.” Guar. Fed. Sav. Bank, 793 S.W.2d at 658 (citing St. Paul Ins. Co. v. McPeak, 641 S.W.2d 284 (Tex. App.—Houston [1st Dist.] 1982, writ ref'd n.r.e.)). A trial court properly exercises its discretion in severing claims if (1) the controversy involves more than one cause of action, (2) the severed claim is one that could be asserted independently in a separate lawsuit, and (3) the severed claim is not so interwoven with the remaining action that they involve the same facts and issues. Jn re Henry, 388 S.W.3d at 726 (citing Jn re Liu, 290 S.W.3d 515, 520 (Tex. App.—Texarkana 2009, orig. proceeding)). Regardless of the broad discretion in severing cases, such discretion should not be exercised contrary to legal rules and principles applicable in the particular case. See Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998) (discussing trial court's broad. discretion when considering attorney's fees). “Severance of a single cause of action into two parts is never proper and should not be granted for the purpose of enabling the litigants to obtain an early appellate ruling on the trial court's determination of one phase of the case.” Pierce v. Reynolds, 329 S.W.2d 76, 79 n.1 (Tex. 1959). The trial court's severance necessarily implies a conclusion that Barclay's claim for declaratory relief under section 37.003 of the Declaratory Judgments Act and her claim for attorney's fees under section 37.009 of the Act can be adjudged in independent lawsuits culminating in separate and distinct judgments. See Tex. Civ. Prac, & Rem. Code Ann. §§ 37.003, 37.009 (West 2015). As the Austin Court of Appeals explained, and we agree, these two claims are merely different phases of a single cause of action, as even section 37.009 prescribes a single proceeding under Chapter 37 of the Act. Dalisa, Inc. v. Bradford, 81 S.W.3d 876, 880 (Tex. App.— Austin 2002, no pet.); see also Town of Flower Mound v. Upper Trinity Reg'l Water Dist., 178 S.W.3d 841, 843 (Tex. App.—Fort Worth 2005, no pet.) (agreeing with the reasoning in Dalisa that a severance of a claim for declaratory relief under section 37.003 of the Act from a claim for attorney's fees under section 37.009 is improper “because the two claims are merely different phases of a single cause of action”). Thus, like the Dalisa Court, we conclude the trial court erred when it severed Barclay's claim for declaratory relief from her claim for attorney's fees under the Act. See Dalisa, 81 S.W.3d at 881. Barclay did not appeal the final judgment entered by the trial court in the severed cause. Rather, she continued the case prosecuting her attorney's fees claim in this cause. Except in limited circumstances not applicable here, a party must raise its complaint about improper severance at the time of the alleged improper severance, not later. See Nicor Expl. Co. v. Fla. Gas Transmission Co., 911 S.W.2d 479, 482— 83 (Tex. App.—Corpus Christi 1995, writ denied) (explaining the finality of severance judgments if alleged error is not valid on the face of the severance). As Barclay neither appealed from the severed cause, nor objected to the trial court's tuling severing her claim for attorney's fees from the final judgment in the severed cause, she waived her right to complain in the cause associated with this appeal about the trial court's decision that effectively severed her claim for attorney's fees into the cause in which she did not appeal. Thus, the trial court correctly ruled that it no longer retained jurisdiction of the severed cause because its plenary power expired thirty days after it rendered judgment in the severed cause. See Tex. R. Civ. P. 329b. We conclude the trial court properly denied Barclay's claim for attorney's fees. We overrule her third issue. Barclay v. Richey, No. 09-17-00026-CV, 2019 WL 302661, at *9-10 (Tex. App. Jan. 24, 2019, pet. denied (Jan. 17, 2020). 23. As the Barclay court recognized, it is an abuse of discretion to sever a statutory claim for attorney’s fees because it cannot be severed. Compliance for severance under Texas Rule of Civil Procedure 41 “requires the following: (1) a controversy involving more than one cause of action; (2) a severed claim that is the proper subject of a lawsuit if asserted independently of the other claims; and (3) a severed claim that is not so interwoven with the remaining actions as to involve the same facts and issues.” Dalisa, Inc. v. Bradford, 81 S.W.3d 876, 879 (Tex. App.—Austin 2002), writ granted, appeal dism’d, No. 03-03-00230-CV, 2003 WL 21940024 (Tex. App.—Austin Aug. 14, 2003). 24. In Dalisa, Inc. v. Bradford, the court determined that a claim for attorneys’ fees under Tex. Civ. Prac. & Rem. Code § 37.009 was not a severable claim, and it was an abuse of discretion to sever it: Section 37.009 is headed “Costs” and states as follows: “In any proceeding under this chapter, the court may award costs and reasonable attorney's fees as 2 are equitable and just.” Tex. Civ. Prac. & Rem.Code Ann. § 37.009 (emphasis added). “That a suit for the statutory attorney's fees as a separate action could not be maintained is evident from the wording of the statute... The attorney's fees, while not costs, partake of the nature of the costs of suit and are assessed in accordance with the judgment ” reached in the proceeding. Huff v. Fidelity Life Ins. Co., 158 Tex. 433, 312 S.W.2d 493, 501 (1958) (emphasis added). While the opinion in Huff referred to the statutory predecessor of the attorney's- fee provisions now found in section 38.001 of the Texas Civil Practice and Remedies Code, the reasoning applies all the more, in our view, to section 37.009 of the Act which prescribes a single “proceeding” and measures the fees awarded by the equities and justice revealed in that particular proceeding. Id. at 880. Similarly, a claim for attorneys’ fees under Tex. Prop. Code § 114.064 also “prescribes a single ‘proceeding’ and measures the fees awarded by the equities and justice revealed in that particular proceeding.” /d. Section 114.064 only applies to proceedings under the Trust Code. Tex. Prop. Code § 114.064 (“In a proceeding under this code....”). In other words, a claim for attorneys’ fees under § 114.064 cannot exist independent of a proceeding under the Trust Code. Since Chase did not object to the severance of its attorneys’ fees claim, it waived any error of the severance. The Court has lost plenary power to determine Chase’s request for attorneys’ fees. B If Chase Can Pursue Its Attorneys’ Fees Claims, then Orca Should Be Allowed to Counter and Defend 25. If Chase can pursue attorneys’ fees claims despite non-suiting them and improper severance, Orca should also be allowed to make a counterclaim for attorneys’ fees and raise defenses to Orca’s claims. 26. If, however, Chase somehow has a claim for attorneys’ fees that has survived its non-suit of them, then Orca should be allowed to present its defenses to the extent that the specific claim has not been foreclosed by the Texas Supreme Court. The Texas Supreme Court did not consider the claims of Unjust Enrichment, Conversion and Money Had and Received, and Orca did not agree to waive its defenses to Chase’s claims in this proceeding. 27. Additionally, Orca may not be able to sue for the cause of action of “fraud” because the Texas Supreme Court held that Orca’s reliance on Chase’s misrepresentations was not justifiable, Orca should still be able to argue that Chase’s misrepresentations should not provide it with a windfall of $3.2 million plus attorneys’ fees of over $2 million. Such a result would constitute unjust enrichment to Chase. 28. Chase argues that Orca’s claim for attorneys’ fees claims are also barred. Yet, both the Texas Trust Code and the Uniform Declaratory Judgments Act give the trial court discretion to award reasonable and necessary attorney's fees as are “equitable and just.” Tex. Civ. Prac. & Rem. Code Ann. § 37.009; Tex. Prop. Code § 114.064. The initial case did not address attorneys’ fees at all. The issue was not before the court and it was not fully and fairly litigated. 29. The initial action did not adjudicate the claims of unjust enrichment, conversion, money had and received. There is no reason why they cannot be adjudicated here. In the event that Chase retains a counterclaim for attorneys’ fees, Orca should be allowed to present defenses to the claim. The initial action did not decide whether Orca’s claims for attorneys’ fees were barred because it would result in Orca being unjustly enriched, for example. 30. Chase’s cause of action for attorneys’ fees does not exist in a vacuum. The Agreed Order of Severance and Abatement ordered that a duplicate copy of the file from Case No. DC-12-0503 be filed in this case. Indeed, for the Court must look to Case No. DC-12-0503 to determine whether the award of fees would be equitable and just. Iv. PRAYER Bie Orca respectfully requests that the Court deny Chase’s Motion for Summary Judgment, dismiss Chase’s claim for attorneys’ fees and expenses with prejudice and grant 1 Orca all other relief to which it is justly entitled. Respectfully submitted, BUTCH BOYD LAW FIRM /s/ Jeremy R. Stone ERNEST W. “BUTCH” BOYD State Bar No. 00783694 butchboyd@pbutchboydlawfirm.com JEREMY R. STONE State Bar No. 24013577 jeremystone@butchboydlawfirm.com MICHAEL J. BLANCHARD State Bar No. 24036231 mikeblanchard@pbutchboydlawfirm.com 2905 Sackett Street Houston, TX 77098 Phone: (713) 589-8477 Fax:(713) 589-8563 Attorneys for Plaintiff, Orca Assets, G.P., L.L.C. CERTIFICATE OF SERVICE I hereby certified that a true and correct of the above and foregoing has been forwarded to all counsel of record in accordance with T.R.C.P. by method indicated below on this 10" day of September, 2021. Via Email & Eserve Mr. David Jed Williams jwilliams@hfgtx.com Ms. Stephanie L. Curette curette@hfgtx.com Hornberger Fuller & Garza Incorporated The Quarry Heights Building 7373 Broadway, Suite 300 San Antonio, Texas 78209-3266 Telephone: (210) 271-1700 Facsimile: (210) 271-1730 Attorneys for Defendants, JPMorgan Chase Bank, N.A., and JPMorgan Chase Bank, N.A., As Trustee of the Red Crest Trust /s/ Jeremy R. Ston JEREMY R. STONE 13 JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (2018) 61 Tex. Sup. Ct. J. 522 The rule of civil procedure governing pre- trial conferences authorizes trial courts to KeyCite Yellow Flag - Negative Treatment decide matters that, though ordinarily fact Distinguished by Pleasant Grove Independent School District v. FieldTurf questions, have become questions of law because USA, Ine., Tex.App.-Texarkana, April 3, 2020 reasonable minds cannot differ on the outcome. 546 S.W.3d 648 Tex. R. Civ. P. 166, Subsection (g). Supreme Court of Texas. 3 Cases that cite this headnote JPMORGAN CHASE BANK, N.A., et al., Petitioners, [2] Appeal and Error @ Conferences and v. scheduling orders ORCA ASSETS G.P., L.L.C., Respondent When a pre-trial conference order disposes of claims, the order is akin to a summary judgment No. 15-0712 or directed verdict, and review is de novo. Tex. | R. Civ. P. 166. Subsection (g). Argued November 7, 2017 4 Cases that cite this headnote | OPINION DELIVERED: March 23, 2018 | BI Appeal and Error @ Review for factual or Rehearing Denied June 15, 2018 legal sufficiency: no evidence" review When reviewing for legal sufficiency, the Synopsis Background: Lessee under oil and gas lease filed suit evidence is considered in the light most favorable to the nonmovant, crediting evidence against lessor and lessor's representative for breach of lease and letter of intent, fraudulent inducement, and negligent a reasonable jury could credit and disregarding misrepresentation, arising out of execution of lease of contrary evidence and inferences unless a reasonable jury could not. property to lessee when lessor had already leased subject property to third party. The 44th Judicial District Court, 3 Cases that cite this headnote 2013 WL 11103945, Carlos Cortez, J., entered judgment for lessor as matter of law on all claims. Lessee appealed. The Dallas Court of Appeals, 2015 WL 4736786, affirmed in part, [4] Judgment @ Propriety of judgment in reversed in part, and remanded. Lessor and representative general filed petition for review, which was granted. Trial @ Insufficiency to support other verdict; conclusive evidence Trial @ Nature and Grounds [Holding:] The Supreme Court, Brown, J., held that lessee Judgment without or against a jury verdict is did not justifiably rely on misrepresentation by lessor's agent proper at any course of the proceedings only that acreage lessee sought to lease was “open.” when the law does not allow reasonable jurors to decide otherwise. Court of Appeals judgment reversed; trial court judgment 1 Cases that cite this headnote reinstated. 15] Fraud @ Reliance on Representations and Inducement to Act West Headnotes (16) Oi and gas lessee did not justifiably rely on misrepresentation by lessor's agent that acreage lessee sought to lease was “open,” and i) Pretrial Procedure @ Determination of therefore lessee could not maintain issues; judgment; dismissal (>.Glihe WESTLAW JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (2018) oe 61 Tex. Sup. Ct. J. 522 negligent misrepresentation claims against lessor others in their business; (3) the defendant did and agent stemming from oil and gas lease not exercise reasonable care or competence in oncerning property that had already been leased obtaining or communicating the information; to a third party; agent also said he “would and (4) the plaintiff suffers pecuniary loss by have to check” whether property was open for justifiably relying on the representation. lease, lessor insisted on stricter negotiation- of-warranty provision, lessor refused to accept 21 Cases that cite this headnote responsibility for verifying title, agent made statement that other lessees were not doing 19] Fraud @ Reliance on representations and careful title work, lessee was aware of delays inducement to act in recording of leases, lessee ceased checking Justifiable reliance usually presents a question of property records after signing letter of intent, fact in a fraud action. and lessee expressed doubts at closing about availability. 9 Cases that cite this headnote 1 Cases that cite this headnote [10] Fraud @ Reliance on Representations and Inducement to Act [6] Fraud @ Elements of Actual Fraud The justifiable reliance element of a fraud To prevail on a fraud claim, a plaintiff must claim can be negated as a matter of law when show: (1) the defendant made a material circumstances exist under which reliance cannot representation that was false; (2) the defendant be justified. knew the representation was false or made it recklessly as a positive assertion without 20 Cases that cite this headnote any knowledge of its truth; (3) the defendant intended to induce the plaintiff to act upon the representation; and (4) the plaintiff actually and (1) Fraud @ Relations and means of knowledge of parties justifiably relied upon the representation and suffered injury as a result. In determining whether justifiable reliance is negated as a matter of law when considering a 61 Cases that cite this headnote fraud claim, courts must consider the nature of the parties’ relationship and the contract. 71 Fraud @ Reliance on Representations and 10 Cases that cite this headnote Inducement to Act The reliance element of a fraud claim has two requirements: the plaintiff must show that it [12] Fraud @ Duty to Investigate ctually relied on the defendant's representation In an arm's-length transaction, the defrauded and, also, that such reliance was justifiable. party must exercise ordinary care for the protection of his own interests in order to 49 Cases that cite this headnote show justifiable reliance; a failure to exercise reasonable diligence is not excused by mere confidence in the honesty and integrity of the [8] Fraud @ Statements recklessly made: negligent misrepresentation other party. To prevail on a cause of action for negligent 4 Cases that cite this headnote misrepresentation, a plaintiff must show: (1) a representation made by a defendant in the course of its business or in a transaction in which it [13] Fraud @ Duty to Investigate has a pecuniary interest; (2) the representation A failure of a contracting party to exercise conveyed false information for the guidance of reasonable diligence is not excused by mere WESTLAW JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (2018) _ 61 Tex. Sup. Ct. J. 522 confidence in the honesty and integrity of the Houston TX, H. Allen Pennington Jr, James G. Bennett, other party. Pennington Hill LP, Fort Worth TX, Patricia D. Chamblin, Mehaffy & Weber P.C., Beaumont TX, for Orca Assets G.P., L.L.C. [14] Fraud @ Duty to Investigate Opinion A contracting plaintiff cannot blindly rely on a representation by a defendant where Justice Brown delivered the opinion of the Court. the plaintiff's knowledge, experience, and background warrant investigation into any *650 In this case, we must determine whether the lessee of representations before the plaintiff acts in certain mineral interests justifiably relied on extra-contractual reliance upon those representations. representations by the lessor's agent despite “red flags” and a negation-of-warranty clause in the sales documents explicitly 36 Cases that cite this headnote placing the risk of title failure on the lessee. Because we hold, as a matter of law, that the lessee could not so justifiably rely, we reverse the court of appeals and reinstate the trial court's [15] Fraud ¢ Reliance on Representations and judgment in favor of the petitioners. Inducement to Act A party to a written contract cannot justifiably rely on oral misrepresentations regarding the contract's unambiguous terms. 9 Cases that cite this headnote The Red Crest Trust owns about 40,000 acres of non- contiguous mineral interests throughout the Eagle Ford Shale. JPMorgan Chase Bank, N.A., acts as its trustee. Phillip [16] Fraud ¢ Relations and means of knowledge Mettham, an employee of JPMorgan, was responsible for of parties leasing the trust's Eagle Ford interests. Either “red flags” alone or direct contradiction alone can negate justifiable reliance as a matter In 2010, Mettham leased fifteen of the trust's Eagle Ford of law. tracts in DeWitt and Gonzales counties to GeoSouthern Energy Corporation. Comprising more than 1,800 acres, the 5 Cases that cite this headnote GeoSouthern deal was one of the largest Mettham negotiated for the trust. Notably, GeoSouthern did not record its leases in the counties’ property records until six months after closing the deal. *649 On Petition for Review From the Court of Appeals for the Fifth District of Texas, David J. Schenck, J. Also in 2010, Lawrence Berry, an experienced oil-and-gas businessman, formed Orca Assets, G.P., L.L.C. The specific Attorneys and Law Firms purpose of establishing Orca was to acquire promising Evan A. Young, Stephanie F. Cagniart, Thomas R. Phillips, unleased acreage in the Eagle Ford Shale. And it quickly Baker Botts L.L.P. Kevin M. Beiter, McGinnis Lochridge & set its sights on the trust's holdings in Karnes and DeWitt Kilgore LLP, Austin TX, David Jed Williams, Hornberger counties. Orca's team included Berry; its vice president, Fuller & Garza Incorporated, San Antonio TX, Jessica B. John Ellis; landmen Tony Villalon and Joan Stewart, and a Pulliam, Baker Botts L.L.P., Dallas TX, for JPMorgan Chase collection of additional landmen. All were experienced in Bank, N.A. leasing oil-and-gas properties. David B. Gaultney, Elana S. Einhorn, Mehaffy Weber, P.C., On November 11, 2010, Mettham met with Ellis and Stewart Austin TX, Deborah G. Hankinson, Stephanie D. Nelson, to discuss Orca leasing some of the trust's tracts. Berry Hankinson LLP, Dallas TX, Ernest W. Boyd, Butch Boyd Law also attended part but not all of the meeting. Orca's team Firm, Michelle R. Meriam, Timothy F. Lee, Wendy Marcia brought maps showing the tracts it desired to lease. Ellis Bishop, Ware, Jackson, Lee, O'Neill Smith & Barrow, LLP, asked Mettham whether the indicated acreage “was open and WESTLAW © JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (2018) 61 Tex. Sup. Ct. J. 522 not leased.” Each of Orca's representatives at the meeting purchase only “whatever it was that the Red Crest Trust had to remembered Mettham's reply somewhat differently. Ellis sell,” which “might be nothing at all.” He also acknowledged believes Mettham answered, “[Y ]es, but I'll have to—I'll have that if the trust's properties had already been leased, it could to check.” Stewart remembers him saying, “I'm not sure of not conyey those minerals to Orca. In general, he did not find that. I'll have to check.” Berry recalls Mettham unequivocally a disclaimer of warranty out of the ordinary. But he regarded representing that the acreage was “open,” meaning unleased. the wording of this particular provision as unusually explicit. However, Berry also concedes that he was in the meeting for So he advised Ellis: “I think we need to accept the language, only a brief time. but we also need to give the title another review before we close.” The trust requires that all leases of its tracts contain a clause negating any warranty of title. The standard lease On December 6, the parties signed a letter of intent form that JPMorgan usually uses when dealing with the acknowledging the trust's agreement to lease the tracts to trust's properties includes such a clause: “This Lease is made Orca. In the letter, neither the trust nor JPMorgan made any without warranties of any kind, either express or implied.” representation about the trust's title or whether the acreage Orca was familiar with that language as it had twice before was available to lease. Instead, the letter provided that Orca leased acreage from the trust using the standard lease form. had “caused a search to be made of the records of Karnes and DeWitt [c]ounties and has preliminarily determined that But shortly after the parties' initial meeting, Mettham notified Red Crest Trust is the owner and holder of the mineral estate Orca that any lease deal it made with the trust would not