The Eastland Court of Appeals has affirmed a judgment in favor of the producer in a royalty dispute with a family group of property owners in Midland County.
Evans Resources, L.P.; Evans I, Ltd.; Evans I Development, Ltd.; Michael Scott Evans and Rose Elaine Evans Shock, as Independent Co-Executor and Co-Executrix of the Estate of Gloria A. Evans, Deceased; Jonathan J. Evans; and Mockingbird Oil & Gas L.P. v. Diamondback E&P, LLC and Diamondback O&G, LLC (No. 11-24-00107-CV; October 23, 2025) arose from a royalty dispute under an oil and gas lease. The property at issue is a 651-acre section in Midland County that is governed by (1) an oil and gas lease between Evans Resources and Diamondback, (2) a surface use agreement involving Diamondback and the Evans Entities, and (3) a net profits interest agreement between Mockingbird and Diamondback (NPI agreement). The Evans Entities made the initial deals with Bluestem Energy, assigned them to Diamondback. The Evans Entities retained a 1/4 royalty interest and permitted pooling with other sections with the consent of Evans Resources. The surface agreement designated the part of the land Bluestem would use to develop the minerals (Section 8). The parties later amended the lease and the surface agreement to grant Bluestem the right to drill and produce wells from four horizontal well pads on the land. When Bluestem sought to assign the agreements to Diamondback, the Evans entities sought and allegedly received assurances that Diamondback would drill the horizontal wells. In the event, Diamondback did not do that immediately, but instead drilled vertical to keep the tract lease active. Eventually Diamondback drilled the horizontal wells but on a different tract north of Section 8, but the wellbores ran horizontally through Section 8. Diamondback also notified Evans Resources that it pooled Section 8 with the neighboring tract, beginning in December 2015.
The Evans entities sought declaratory relief in January 2016, requesting a declaration that location damages for each horizontal well were due and owing. They also alleged breach of contract for Diamondback’s refusal to pay location damages and refusing requests for variances, as well as for its refusal to grant a reasonable reduction in the setback around each well and failure to downsize other vertical well pads once drilled. Diamondback moved for partial summary judgment on the Evans entities’ claim or breach of contract, arguing that it did not owe damage for pads that had not been constructed. The trial court granted this motion and severed the claim, which the Evans entities unsuccessfully appealed.
At trial, the Evans entities filed five amended petition asserting claims for fraud, breach of the lease, bad faith pooling, accounting of profits and payment for cotenant wells, breach of the surface agreement, and declaratory judgment seeking a declaration that Diamondback’s claimed “perpetual option” to use the four horizontal well pads on Section 8 violated the rule against perpetuities. The trial court granted Diamondback’s motion to exclude expert testimony regarding damages for the breach of the surface agreement. The court also granted Diamondback’s motions for partial summary judgment on several of the Evans’ entities claims, including Mockingbird’s fraud claim, two declaratory judgement claims, breach of the surface agreement, and the NPI claims. Diamondback filed for summary judgment and sought a pretrial determination of the Evans entities’ remaining fraud claim under TRCP 166. Eventually, the Evans entities’ fraud, royalty underpayment, pooling without consent, bad faith pooling, and co-tenant accounting claims went to trial.
Trial proceedings ensued, and the Evans’ entities expert testimony was excluded. The jury answered affirmatively to the question asking whether Diamondback had “failed to account to Evans Resources as a mineral co-tenant,” but should receive “$0” for compensation of this failure to account. The trial court thus entered a take-nothing judgment. The the trial court denied the Evans entities’ motion for new trial, and an appeal followed.
In an opinion by Justice Williams, the court of appeals affirmed. In their first issue, the Evans entities argued that the trial court erred by granting for Diamondback on their fraud claim. The court determined that the Evans entities could not have justifiably relied on the Diamondback’s oral promise to drill the horizontal wells if the entities agreed to assign Bluestem’s interest in the agreements “because the parties’ agreements contradict those promises.” The lease merely gave Diamondback the discretion to drill additional wells at a future time. In their second issue, the Evans entities argued that the trial court erred when it excluded portions of their experts’ affidavits made in response to Diamondback’s MSJ on the breach of the surface contract. Those affidavits estimated damages based on whether the City of Midland would grant setback variances for Diamondback’s potential wells, but since the variance requests were never applied for or otherwise considered by the City (not to mention that the entities didn’t even ask for Diamondback’s consent to them), their opinions were irrelevant. The trial court thus did not err when it excluded them.
As to the expert testimony of another expert, Jonathan Evans, Diamondback moved to strike because his affidavit in response to Diamondback’s MSJ was not timely and the Evans entities failed to designate him to address market value. The entities argued that under the property owner rule, Evans did not have to be disclosed. They also asserted that his testimony did not unfairly surprise or prejudice Diamondback because the entities timely disclosed that the failure to obtain variances prevented them from continuing to operate a winery and use Section 8 for residential lots. However, the court observed, the property owner rule merely allows a property owner to express an opinion about the value of land, not the amount and method of calculating economic damages. Furthermore, the Evans entities failed to demonstrate Johnathan Evan’s surprise testimony did not unfairly surprise or prejudice the Diamondback. Therefore, the trial court did not err by excluding Evans’s testimony and granting Diamondback’s no-evidence motion for summary judgment on the breach of the surface agreement claim.
In their third issue, the Evans entities argued the trial court erred in granting Diamondback’s MSJ regarding the option to drill horizontal well pads because the option violated the rule against perpetuities. But the lease specified a duration of three years, beyond which production in paying quantities would be necessary to extend it. The lease further vested Diamondback with an “immediate, fixed right to build and drill from the” horizontal well pads. Such a provision did not violate the rule, so the trial court properly granted summary judgment on this claim as well. Next, the court turned to the Evans entities’ claim that Diamondback failed to obtain their consent to pool. At a pretrial conference, however, the entities’ counsel stated that they weren’t pursuing a bad faith pooling claim based on commingling or confusion of goods. Despite the disclaimer, the Evans entities’ counsel stated two days later that they would pursue the bad faith pooling theory after all, though he provided no damages calculation for later submission to the jury. The court concluded that under this record, the entities abandoned their claim, and the trial court did not err in so concluding.
In their fifth issue, the Evans entities argued that the trial court erred by denying their motion for mistrial following the court’s mid-trial grant of partial summary judgment that disposed on their fraud claim. But the Evans entities cited no authority for “the proposition that a trial court’s summary disposition of a claim during trial constitutes an abuse of discretion and in turn warrants a mistrial. Rather, the court found it more likely that the trial court implicitly concluded that the Evans entities were not prejudiced and therefore a mistrial was unwarranted. Additionally, the disposition of the fraud claim seemed to have streamlined the proceedings significantly, and, in any event, the trial court could have cured any error by a suitable instruction to the jury at the entities’ request.
In their sixth issue, the Evans entities argued that the trial court erred by excluding expert testimony their claim for interest owed for nonpayment of royalties and attorney fees. Diamondback argued that the entities didn’t meet their burden of disclosure by merely referencing the interest rate set out in the lease. Instead, they should have disclosed the information Diamondback requested regarding the details of the expert’s analysis. As to the entities’ expert testimony regarding Diamondback’s alleged miscalculation of royalties, Diamondback objected that the entities’ experts doubled their damages calculations shortly before trial based on failure to timely disclose those changes. The entities countered that they had no duty to supplement the opinions of the experts and that the experts merely “refined” their previously disclosed opinions. But the court didn’t have to wade into the dispute because the entities failed to show that they were harmed by exclusion of that evidence. Since the jury determined that Diamondback didn’t breach the lease’s royalty provisions, it never reached the question of underpayment. Moreover, the court observed, although the jury found that Diamondback had failed to provide an accounting for cotenant wells, it determined that the entities didn’t suffer any damages, so the experts’ calculations wouldn’t have made any difference. Next, the entities contended that the trial court erred in excluding evidence of their attorney’s fees. The problem was, the entities informed the trial court that they didn’t intend to present evidence of attorney’s fees to the jury but preferred to seek a fee award from the trial court at another time. When they later tried to present undisclosed attorney’s fee evidence at trial, the trial court ruled it out because they didn’t produce it in discovery. In any event, the court concluded that it didn’t matter because the entities didn’t receive favorable jury findings, recovered no damages on their breach of contract claims, and weren’t entitled to attorney’s fees under Chapter 38, CPRC.
Finally (and this case really does go on forever), the court rejected the Evans entities’ factual and legal sufficiency issues. The parties disagreed about the “point of distribution” of oil and gas under the lease, upon which royalties were calculated. The jury determined that Diamondhead had it right when it offered evidence that the point of sale was in Midland County, not further downstream as the entities alleged. That constituted more than a mere scintilla of evidence that Diamondback correctly calculated the royalty payments. And the court could not conclude that the jury’s finding was so contrary to the overwhelming weight of the evidence as to be clearly wrong and manifestly unjust. The entities then argued that they were a contenant for purposes of Diamondback’s wells that ran through Section 8 and should have been paid revenue less expenses, not a royalty as a lessor of the minerals. But again, the entities failed to present any evidence of how they got to their number, i.e., “the proportionate market value of the product minus the proportionate necessary and reasonable costs of producting and marketing the product.” Diamondback’s expert also testified that Diamond back had overpaid royalties, so the jury could have determined that “an offset was just.” The court saw no reason to disturb the jury’s conclusions about the credibility of the witnesses or whether the entities proved up any damages or not. The court thus affirmed the trial court’s judgment in all respects.
TCJL Intern Satchel Williams researched and prepared the first draft of this article.
