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NO. 07-06-0209-CV

IN THE COURT OF APPEALS

FOR THE SEVENTH DISTRICT OF TEXAS

AT AMARILLO

PANEL D

JANUARY 28, 2008

______________________________

SOUTH PLAINS LAMESA RAILROAD, LTD. AND

LARRY DALE WISENER, APPELLANTS

V.

THE KITTEN FAMILY LIVING TRUST AND

JERRY KITTEN, APPELLEES

_________________________________

FROM THE 99TH DISTRICT COURT,
LUBBOCK COUNTY;

NO. 2005-529,345; HONORABLE WILLIAM C.
SOWDER, JUDGE

_______________________________

Before QUINN, C.J., and CAMPBELL and
PIRTLE, JJ.

MEMORANDUM
OPINION

By
four issues, Appellants, South Plains Lamesa Railroad, Ltd. (SPLR) and
Larry Dale Wisener (Wisener), appeal the judgment of the trial court
entered in favor of Appellees, The Kitten Family Living Trust (the Trust)
and Jerry Kitten (Kitten), contending that the trial court erred in (1)
granting summary judgment in favor of the Trust and Kitten (2 and 3)
denying summary judgment in favor of SPLR and Wisener, and (4) awarding
attorney’s fees to the Trust and Kitten. We affirm in part and reverse and
remand in part.

Background

SPLR
owns a railroad right-of-way in Lubbock County, generally running
southwest from Slaton, Texas. On February 6, 1998, SPLR entered into a
contract, entitled Lease (hereinafter the lease agreement), with
the Trust, for the purpose of allowing the Trust to produce water from the
railroad right-of-way. The lease agreement provided for the drilling of “a
water well” on the property. Eleven days later, on February 17, 1998, SPLR
and the Trust entered into a second contract, entitled Water Well and
Pipeline Easement (hereinafter the easement agreement),
pertaining to the same property.

In addition to granting the Trust a right of first refusal to purchase
the property in the event SPLR should abandon the rail line, the easement
agreement contained language that gave the Trust an easement for the
purpose of drilling “water wells” on the property. After the Trust drilled
more than one well on the property, a dispute arose between SPLR and the
Trust concerning the interpretation and interrelation of these two
contracts, resulting in this litigation.

The
Trust and Kitten brought suit and sought a Temporary Restraining Order to
prohibit SPLR and Wisener from interfering with their production of water
from the land in question. After the entry of a Temporary Injunction, both
parties filed motions for summary judgment. On April 20, 2006, the trial
court entered a judgment granting the motion for summary judgment filed by
the Trust and Kitten, and denying the motion for summary judgment filed by
SPLR and Wisener. The judgment further enjoined SPLR and Wisener from
interfering with the Trust and Kitten’s use of irrigation wells and a
water line located on the property and awarded the Trust recovery of
attorney’s fees. SPLR and Wisener perfected this appeal.

Issues Presented

SPLR
and Wisener contend that the lease agreement and the easement agreement,
when construed together, are ambiguous, that summary judgment in favor of
the Trust and Kitten should be set aside (including the award of
attorney’s fees), and that a trial should determine the intent of the
parties. Alternatively, SPLR and Wisener contend the lease agreement sets
forth the existing agreement between the parties pertaining to the
extraction of water, and that the agreement has been breached. They
further contend the easement agreement pertains to the Trust’s right of
ingress and egress, and right of first refusal, and that the easement has
lapsed because the original lease was properly terminated. The Trust and
Kitten contend the doctrine of merger operates to allow the easement
agreement to supersede the lease agreement. The Trust and Kitten further
contend that because the lease agreement has been superseded by the
easement agreement, the trial court correctly construed the easement
agreement as an unambiguous document supporting the trial court’s granting
of summary judgment in favor of the Trust and Kitten.

Standard of Review

In
reviewing a summary judgment, this Court must apply well-established
standards which are: (1) the movant for summary judgment has the burden of
showing that there is no genuine issue of material fact and that it is
entitled to judgment as a matter of law; (2) in deciding whether there
is a disputed material fact issue precluding summary judgment, evidence
favorable to the non-movant will be taken as true; and (3) every reasonable
inference must be indulged in favor of the non-movant and any doubts
resolved in its favor. Am. Tobacco Co. v. Grinnell,
951 S.W.2d 420, 425 (Tex. 1997); Nixon v. Mr. Prop. Mgmt. Co.,
690 S.W.2d 546, 548-49 (Tex. 1985).

For
a party to prevail on a motion for summary judgment, he must conclusively
establish the absence of any genuine question of material fact and that he
is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c).
Once the movant has
established a right to summary judgment, the non-movant has the burden to
respond to the motion for summary judgment and present to the trial court
any issues that would preclude summary judgment. City of Houston v.
Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979); Barbouti
v. Hearst Corp., 927 S.W.2d 37, 64 (Tex.App.–Houston [1st Dist.] 1996,
writ denied). When both parties move for summary judgment, the reviewing
court should render the judgment the trial court should have rendered.
Dow Chemical Co. v. Bright, 89 S.W.3d 602, 605 (Tex. 2002).

Doctrine of Merger

With
respect to the law of contracts, merger refers to the extinguishment of
one contract by its absorption into another contract and is largely a
matter of intention of the parties. Commercial Bank of Mason v.
Satterwhite, 413 S.W.2d 905, 909 (Tex. 1967); Hill v. Spencer &
Son, Inc., 973 S.W.2d 772, 775 (Tex.App.–Texarkana 1998, no pet.). As
a general principle, when two contracts are entered into by the same
parties, covering the same subject matter, but containing terms which are
so inconsistent that the terms of the two contracts cannot subsist
together, the legal effect of the subsequent contract is to rescind the
earlier contract. Willeke v. Baylor, 144. Tex. 157, 189
S.W.2d 477, 479 (1945). The subsequent contract then becomes a substitute
for the earlier contract and is the only agreement between the parties
upon that subject. A prior agreement is not, however, superseded or
invalidated by a subsequent agreement relating to the same subject matter
if the first agreement is one that might naturally be made as a separate
agreement or where the first agreement is not fully integrated into the
second agreement and merely modifies the first agreement in some respect.
Hubacek v. Ennis State Bank, 159 Tex. 166, 317 S.W.2d 30, 32
(1958); Boy Scouts of America v. Responsive Terminal Systems, Inc,,
790 S.W.2d 738, 745 (Tex.App.–Dallas 1990, writ denied). Whether one
contract executed in a series of contracts is intended by the parties to
become the sole agreement of the parties presents a question of fact under
the doctrine of merger. Sarte v. Dommert, 184 S.W.3d 893, 899
(Tex.App.–Beaumont 2006, no pet.).

Merger
is largely a matter of intention of the parties. Smith v. Smith,
794 S.W.2d 823, 827-28 (Tex.App.–Dallas 1990, no writ). Merger is
inapplicable when the parties manifest an intent to have any of the
original contract’s provisions survive. An agreement that merges an
original contract into a new contract is an agreement that is accepted in
satisfaction of the original contract and thereby completely discharges
it.

Ambiguity

Deciding
whether a contract is ambiguous is a question of law for the court to
determine. J. M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229
(Tex. 2003). Multiple contracts pertaining to the same transaction,
executed by the same parties, at the same time or contemporaneously with
one another, may be construed as if they were part of a single unified
instrument, even if the contracts do not expressly refer to each other.
Fort Worth Independent School Dist. v. City of Fort Worth, 22
S.W.3d 831, 840 (Tex. 2000). To determine whether the multiple contracts,
when construed together, are ambiguous, a court must examine and consider
the entire agreement in an effort to harmonize and give effect to all the
provisions of the contract so that none of the provisions will be rendered
meaningless. J. M. Davidson, Inc., 128 S.W.3d at 229. Upon
analysis, a contract is unambiguous if it can be given a definite and
certain legal meaning. Id. On the other hand, if the agreement
between the parties is subject to two or more reasonable interpretations,
after applying pertinent rules of construction, the contract is ambiguous,
creating a fact issue concerning the intent of the parties. Id.

Analysis

The
easement agreement did not contain a merger clause expressly merging the
lease agreement into the easement agreement. The easement agreement
included specific provisions pertaining to the Trust’s right of first
refusal to purchase the property in the event SPLR should abandon the
railway which were not mentioned in the lease agreement. A right of first
refusal is an agreement that might naturally be made as a separate
agreement in the context of leased property. Furthermore, the lease
agreement is not fully integrated into the easement agreement and the
easement agreement merely modifies the lease agreement in some respects.
Because the easement agreement did not expressly discharge the terms of
the lease agreement (e.g., the Trust continued to pay rent according to
the terms of the lease agreement), and because the easement agreement did
not encompass the entire agreement of the parties, we find that the
doctrine of merger is inapposite. Accordingly, we find the lease agreement
was not merged into the easement agreement. Because the two agreements
pertained to the same property

and to the same subject matter (i.e., the Trust’s right to extract water
from the property in controversy), to the extent that the two contracts
contained inconsistent terms, we find that the two agreements, when
construed together, created an ambiguity. The ambiguity created a fact
question as to the intent of the parties, and the existence of a fact
question precludes the granting of a summary judgment. Therefore, the
trial court correctly denied summary judgment in favor of SPLR and
Wisener, but erred in granting summary judgment in favor of the Trust and
Kitten.

Conclusion

Issues
one and four are sustained, and issues two and three are overruled.
Accordingly, we affirm that portion of the judgment of the trial court as
to the denial of the motion for summary judgment of South Plains Lamesa
Railroad, Ltd. and Larry Dale Wisener; we reverse that portion of the
judgment of the trial court granting the motion for summary judgment of
the Kitten Family Living Trust and Jerry Kitten, and awarding attorney’s
fees, and remand this cause to the trial court for further proceedings
consistent with this opinion.

Patrick
A. Pirtle

Justice