Division Orders: Effect

摘要

The parties, a lessee and a royalty owner, ask the court to interpret a provision in their division order, which was structured as a lease amendment, that reads: "It is understood that at this time [lessee] [is] subject to and [is] paying an occupation or production tax of two per cent (2%) of the market value of gas produced and saved. If hereafter there shall be any increase in amount of said tax, or there shall be levied any new occupation, production, severance or other excise tax, one-eighth (1/8) of such increase shall be deducted from the above agreed royalty value of the gas which is then applicable." Denson, a royalty interest owner, urges that the quoted language obligates Chesapeake to pay the first 2% of taxes resulting from gas production and sale. Chesapeake argues that a later-enacted statute that provides that interest owners should pay their pro rata share of taxes controls. In a declaratory judgment action the trial court finds in Denson's favor. Chesapeake appeals on two points: 1) the determination of tax liability and 2) the wording of the trial court's judgment. Held: affirmed. The court of appeals affirms the trial court's holding regarding the parties' tax liability. The court states that the terms of the amendment are unambiguous, and that the parties' intent is clear: the lessee pays the first 2% of taxes. The statute does not displace the parties' agreement. As the court says "changes cannot operate retroactively to deny individuals of previously vested rights." 201 S.W.3d at 372. Consequently, the amendment controls and the later statutory changes are immaterial. Chesapeake, however, prevails on its second point. The trial court's judgment did not conform to the parties' pleadings and included parties not subject to the court's jurisdiction. Accordingly, the court of appeals modifies the judgments to limit them to the litigants.