Atmos Energy Corp. v. Paul

598 S.W.3d 431

ATMOS ENERGY CORPORATION, Appellant

v.Charles L. PAUL, Appellee

No. 02-19-00042-CV

Court of Appeals of Texas, Fort Worth.

Delivered: March 5, 2020

ATTORNEYS FOR APPELLANT: C. MATTHEW TERRELL, PHELPS DUNBAR LLP, SOUTHLAKE, TEXAS, KEVIN MAGUIRE, SPENCER FANE, LLP, DALLAS, TEXAS, BRETT KUTNICK, JACKSON WALKER LLP, DALLAS, TEXAS.

ATTORNEYS FOR APPELLEE: CHRISTOPHER S. JOHNS & CHRISTEN MASON HEBERT, JOHNS & COUNSEL PLLC, AUSTIN, TEXAS.

Before Bassel and Wallach, JJ., and Gonzalez, J.¹

OPINION

Opinion by Justice Bassel

I. INTRODUCTION

This appeal involves a dispute over the interpretation of a 1960 easement agreement that grants a right-of-way for the grantee to construct, maintain, and operate pipelines over and through 137 acres of property. Appellee Charles L. Paul currently owns a portion of this property. Atmos Energy Corporation, the current owner of the easement, sued Paul for violating the easement agreement after he denied Atmos access to construct a new pipeline.

In a single issue, Atmos appeals the probate court's granting of summary judgment in Paul's favor and rendering judgment that Atmos take nothing. Atmos argues that the probate court erred because (1) under standard principles of contract interpretation, the unambiguous easement is a blanket easement that permitted Atmos to construct a new pipeline anywhere on the property, subject to the requirement that the use of the right does not unreasonably interfere with the property rights of the owner of the servient estate, and (2) Paul did not conclusively prove that the new line unreasonably burdened Paul's property. We agree and reverse and remand.

II. BACKGROUND ²

A. The 1960 Easement Agreement granted Atmos, as successor-in-interest to Lone Star Gas Company, a right-of-way and easement to lay multiple pipelines over and through 137 acres of land in Denton County.

In 1960, Atmos's predecessor-in-interest, Lone Star Gas Company, entered into a right-of-way and easement agreement (the Easement Agreement) with Paul's predecessors-in-interest. In exchange for ninety dollars, the predecessors granted, sold, and conveyed to Lone Star Gas and its successors and assigns,

the right of way and easement to construct, maintain and operate pipe lines and appurtenances thereto ... over and through the following described lands situated in Denton County, State of Texas, to-wit:

[137 acres.]

TO HAVE AND TO HOLD unto said Grantee, its successors and assigns, so long as such lines and appurtenances thereto shall be maintained, with ingress to and egress from the premises, for the purposes of constructing, inspecting, maintaining, and replacing the property of Grantee above described, and the removal of such at will, in whole or in part.

The said Grantor is to fully use and enjoy the said premises, except for the purposes hereinbefore granted to the said Grantee, which hereby agrees to bury all pipes to a sufficient depth so as not to interfere with cultivation of soil, and to pay any damages which may arise to growing crops or fences from the construction, maintenance and operation of said pipe.... Should more than one pipe line be laid under this grant at any time, the sum of one dollar per lineal rod for each additional line shall be paid, besides the damages above provided for.

B. Lone Star Gas laid Line W in 1960 along the southern border of Paul's property, and then in 2017, Paul denied Atmos access to install a new Line WD diagonally across his property.

The summary-judgment record reflects that in 1960, pursuant to the Easement Agreement, Lone Star Gas installed Line W, a twenty-four-inch diameter gas pipeline, along the southern boundary of Paul's property.

At some point, the 137 acres burdened by the Easement Agreement were subdivided. According to the summary-judgment evidence, in 2001, Paul purchased 64 acres of this subdivided property. Atmos, as successor-in-interest to Lone Star Gas, currently owns the right-of-way and easement rights granted by the Easement Agreement.

Atmos alleged that in January 2017, it met with Paul about installing a new pipeline on Paul's property. The summary-judgment evidence reflects that the new pipeline (Line WD) would enter Paul's property approximately 950 feet north of Line W on his western boundary line and run diagonally southeast to approximately 575 feet north of Line W on his eastern boundary line. The cropped image below depicts the boundaries of Paul's property in green, Line W in red, and Line WD in white.³

The Easement Agreement requires the payment of one dollar per lineal rod for any additional lines laid under that agreement. The summary-judgment record evidences that Atmos tendered Paul payment in the amount of $70.31 as payment for Line WD, which Paul rejected.

C. Atmos sued Paul for breach of contract for denying it access to his property to install Line WD.

In July 2017, Atmos sued Paul for breach of contract, alleging that Paul had violated the Easement Agreement "[b]y denying [Atmos] access to the [p]roperty," "unlawfully interfer[ing] with [Atmos's] [e]asement rights," and threatening to delay the construction of the new pipeline. Atmos alleged that it was necessary for Atmos to construct a second pipeline because the demand for gas in Denton County and North Texas greatly increased such that Line W, by itself, could not continue to adequately provide natural gas to all areas that it was originally designed to serve. Atmos alleged that Paul had claimed that the new Line WD was in excess of the rights provided for under the Easement Agreement.

After Atmos filed suit, the parties entered into a "Right of Possession and Use Agreement" (PUA) that allowed Atmos to access Paul's property to install Line WD, conditioned on the probate court's ruling on Atmos's right to use the land.⁴ Pursuant to the PUA, Atmos has constructed Line WD on Paul's property.

D. Paul moved for a traditional summary judgment on Atmos's claim for breach of contract, arguing that he negated the breach element to the claim as a matter of law.

1. In seeking summary judgment, Paul argued that the laying of Line W set the location and width of a single easement envisioned by the Easement Agreement and that Line WD is outside that easement.

Paul filed a traditional summary-judgment motion on Atmos's breach-of-contract claim. He admitted that he had denied Atmos access to his property. But he argued that he did not breach the Easement Agreement in doing so because (under his interpretation of the agreement), as a matter of law, the Easement Agreement does not permit the installation of the new line, Line WD.

Under Paul's interpretation, the Easement Agreement is not ambiguous and created only "one ‘right of way and easement’ " that "allows for multiple pipelines, [but] not multiple easements." He acknowledged that the Easement Agreement "did not set [the easement's] location." But relying heavily on Houston Pipe Line Company v. Dwyer , 374 S.W.2d 662, 665–66 (Tex. 1964) (which we discuss in our analysis), Paul argued that Atmos's predecessor, Lone Star Gas, set the easement's location and the maximum pipeline diameter when it laid Line W in 1960. "Thus, when Atmos's predecessor installed its first pipeline (Line W) along the southern boundary of the Property, this act forever set both the location of the easement and the maximum diameter (24 inches) of any future-laid pipelines within it." He further argued that "[a]ny subsequent pipelines installed under the [Easement Agreement] must parallel the first pipeline and must be located within this easement."

In support of his motion, Paul filed an affidavit stating that at some point between 2002 and 2004, he began installing dog kennels south of his barn (where Line W is located) when an Atmos agent told him that he could not place a structure within Atmos's easement.⁵ The agent told him that Atmos's easement was fifty-feet wide. Paul further stated by affidavit that between 2003 and 2004, Atmos installed another pipeline (Line X) parallel to and approximately ten feet south of Line W, between Line W and his property's southern boundary line. Thus, he argued, Atmos knew that it had to build this Line X within the same right-of-way established by the placement of the original pipeline under the Easement Agreement.

As to the question whether Line WD unreasonably burdens his land, Paul stated in his affidavit that "[t]he location of [Line WD] severely impacts [his] ability to develop the [p]roperty to its highest and best use." He argued generally that if the Easement Agreement authorized Atmos to "lay any number and diameter of new pipelines in any location on the [p]roperty every time an increased demand for gas made it necessary, the extent of its easement would never become fixed or definitely ascertainable." Paul contended that "[n]o reasonable buyer would seriously consider buying land that could be spider-webbed with an unlimited number of new pipelines at the drop of a hat"; citing Dwyer , he argued that any interpretation that grants "Atmos such a boundless right [is] unreasonable."⁶

2. Atmos responded to Paul's summary-judgment motion by arguing that the Easement Agreement granted a "multiple pipeline blanket easement" that does not specifically designate where pipelines are to be constructed.

Atmos argued that under governing contract-interpretation principles, the Easement Agreement granted a "blanket easement containing multiple pipeline rights" with "no limitations on where future pipelines can be placed"; it is a "multiple pipeline blanket easement." In Atmos's view, requiring all future pipelines to be laid within an arbitrarily imposed fifty-foot-wide area or "single and narrow easement corridor" improperly limits the number of pipelines that could be laid on the property, in direct violation of the express terms of the Easement Agreement.⁷

Atmos argued that Paul misinterpreted Dwyer. Although Dwyer stands for the proposition that the location and size of an easement may become fixed...