Bond, $100,000 Bond …

In re Rusk Energy (Published): Trial court allowed a gas well to be drilled, but required a $100,000 bond to compensate the surface owner for damages from unreasonable use.  There certainly had been use of the surface — at the time of the hearing, the driller had prepared the well site but had not completed the well.  Even so, it was error to require a bond because there was no evidence that the driller made unreasonable use of the surface.

The arguments against mandamus are noteworthy.

The trial court’s order was something of a split decision for Rusk Energy, the majority working interest owner.  Yes, they could continue operations, but only if they posted a $100,000 bond.  Having sunk so much time and money into the well, the only sensible thing Rusk Energy could do was post the bond and get on with it.  So that’s what they did.

The surface owner contended Rusk Energy’s actions waived their right to seek mandamus relief.

First, the surface owner contended that the controversy became moot once Rusk Energy posted the bond.  True enough, there are situations when a party’s payment of a judgment destroys their right of appeal.  But this isn’t one of them.  The key is that Rusk Energy’s payment wasn’t free and voluntary.  A free and voluntary payment can rightly be construed as a decision to put an end to the litigation.  But, economically speaking, the trial court’s order put a gun to Rusk Energy’s head.  Their payment wasn’t voluntary.  No one could reasonably believe such payment was free choice to end the matter.

Next, the surface owner contended that Rusk Energy’s continued operations constituted acceptance of the judgment.  As before, there are cases saying you can’t cherry-pick judgments — you’ve got to take the bad with the good.  This is called the “acceptance of benefits” doctrine.  But, again, the acceptance has to be voluntary.  Under these circumstances, Rusk Energy’s actions weren’t voluntary.

Question: Who has the burden to show economic duress/lack of voluntary choice?  The opinion doesn’t spell it out, but it looks like the burden is on the party claiming it.  Rusk Energy put on such evidence in this case, and their evidence was cited extensively by the Tyler court.

As a third reason to avoid the merits of the mandamus, the surface owner objected that Rusk Energy had delayed filing its mandamus for six months.  If there were no good reason for that delay, the mandamus would have gotten tossed.  But there were good reasons.  The trial court ordered the parties to mediation, and was reconsidering its ruling.  The mandamus was filed within a month after the ruling on reconsideration.  Under the facts of this case, that’s reasonably timely.

The surface owner failed to show that the use was unreasonable.  There was nothing in the lease that limited the use of the surface or required the payment of damages on a per-acre basis.  So the mineral estate dominates.  The surface owner has to show that the use of the surface is unreasonable.  The surface owner here put on no such evidence.

The Tyler court doesn’t rule out bonds in appropriate cases.  What if the surface owner had shown that Rusk Energy’s use was unreasonable?  The Tyler court leaves open the possibility that they could have gotten a bond with proper pleadings and proof.

Rusk Energy could not have gotten this mandamus relief before 2004.  Just a few years ago, Rusk Energy would have had to show that the bond was so large that it precluded Rusk Energy’s development of the merits of its case or placed it in danger of permanently losing substantial rights.  Neither was the case.  Rusk Energy had the wherewithal to continue the case.  And they could have won it, thereby getting the bond dissolved at the trial level.  So, under that standard, no mandamus would have issued.

But in 2004 the Texas Supreme Court issued In re Prudential, holding that flexibility is the “principle virtue” of mandamus, and that “rigid rules” are at odds with that virtue.  Accordingly, “significant rulings in exceptional cases may be essential to preserve important substantive and procedural rights from impairment or loss, allow the appellate courts to give needed and helpful direction to the courts that would otherwise prove elusive in appeals from final judgments, and spare private parties and the public the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings.”  Hence the relief for Rusk Energy in this 2008 case.

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