Mesa Southern CWS Acquisitions, LP v. Deep Energy Exploration Partners, LLC, No. 14-18-00708-CV, 2019 Tex. App. LEXIS 10107 (Tex. App.—Houston [14th Dist.] November 21, 2019, no pet.).
The Fourteenth Court of Appeals in Houston held that provisions within a master service agreement, stating that a subcontractor could only seek payment or damages exclusively from the contractor, were effective to preclude that subcontractor from enforcing a mineral lien against the mineral property owner. In effect, some have interpreted this case as allowing a de facto lien waiver for Chapter 56 mineral liens, despite the prohibition on lien waivers under §53.286 of the Property Code. While Chapter 56 (providing for mineral liens) does not expressly address lien waivers, §56.041 does expressly provide that “A claimant must enforce the lien within the same time and in the same manner” as a Chapter 53 lien. For this reason, the subcontractor argued that this provision in the master service agreement was a de-facto mineral lien waiver, unenforceable and void as against public policy pursuant to §53.286. The appellate court disagreed, dismissed its claims, and ordered it to release its liens.
Mesa Southern CWS acquisition, LP (“Mesa”) entered into a Master Services Agreement (“MSA”) with Deep Operating, LLC (“Deep Operating”), an oil and gas operator. The MSA called for Mesa to perform certain labor and material in connection with Deep Operating’s wells in Milam County, Texas. Deep Operating failed to pay Mesa for its services and ultimately filed bankruptcy. After Deep Operating’s bankruptcy filing, Mesa recorded a lien affidavit against each of the three wells for which it provided services.
While Deep Operating’s bankruptcy case was proceeding, Mesa filed suit against Deep Operating’s parent company, Deep Energy Exploration Partners, LLC (“Deep Energy”). In its lawsuit, Mesa sought to foreclose on three mineral liens and demanded payment from Deep Energy under Chapter 162 of the Texas Property Code. The trial court entered a take nothing judgment against Mesa based on certain waivers contained in the MSA. The appellate court affirmed.
The MSA between Mesa and Deep Operating contained several waivers and limitations on liability. For instance, the MSA expressly provided that Mesa “irrevocably waives any and all rights to lien, sequester, attach, seize or assert a privilege over the Work performed [by Mesa], the real property upon which the Work is located and any hydrocarbon produced associated with the Work.” Furthermore, in the MSA, Mesa represented that it was “relying on the creditworthiness” of Deep Operating and would “look solely and exclusively to [Deep Operating] for payment” and would not “lien or otherwise encumber the real property of [Deep Operating] … or any hydrocarbon associated therewith.” Based on this language, Deep Energy moved for summary judgment against Mesa, arguing that Mesa was contractually prohibited from asserting liens against the property and waived the right to seek payment from any party other than Deep Operating. Although Deep Energy asserted counterclaim for breach of contract and fraudulent lien, it nonsuited those claims after obtaining summary judgment on Mesa’s claims. Mesa appealed.
The court of appeals held that the provisions in the MSA were unambiguous and enforceable. In reaching this decision, the appellate court relied on cases from other appellate jurisdictions and the Texas Supreme Court. The court ultimately concluded that “[i]n contractually limiting its recourse for payment solely to Deep Operating, Mesa cannot obtain satisfaction of the alleged debt from Deep Energy either by direct money judgment or through foreclosure and sale based on purported lien rights.” Mesa’s claims were dismissed and Mesa was ordered to release its liens.