CHIEF JUSTICE HECHT delivered the opinion of the Court. The central issue in this case iswhether a mineral-lease provision calls for simple or compound interest on unpaid royalties. Because the lessee has previously litigated the identical lease language with a different lessor and lost, we must also consider whether it is collaterally estopped to relitigate the same issue here. We hold that because Texas law disfavors compound interest, an agreement for interest on unpaid amounts is an agreement for simple interest absent an express, clear, and specific provision for compound interest. We also hold that the lessee’s prior litigation of the issue does not collaterally estop it from asserting its claims here. Accordingly, we reverse the judgment of the court of appeals[1] and remand the case to the trial court for further proceedings. I Petitioner Samson Exploration, LLC holds oil-and-gas leases on properties in Jefferson and Hardin Counties from several families, including the Klorers, the Hookses, and the Bordages.[2] The three families sued Samson for unpaid royalties owed under those leases. Their claims were severed into three different suits, and only the Bordages’ case remains unresolved.[3] Samson has paid the Bordages all royalties due plus late charges as per its calculations. The remaining issue, now before us, is whether the Bordages are entitled to late charges on the late charges. The leases between Samson and the Bordages provide that royalty payments are due by the first day of the calendar month following some sixty days after production.[4] If not timely paid, a late charge is imposed the next day “based on the amount due” and “at the maximum rate allowed by law”. That charge is payable on the last day of the month.[5] If no payment is made by that date, the Bordages argue that another late-charge calculation is triggered, which includes not only past-due royalties as of the first day of the month, but also accrued late charges as of the last day of the preceding month. Put differently, the Bordages believe that the leases’ Late Charge Provision imposes late charges on late charges, compounding them each month. The parties agree that the late charges constitute a form of interest and that the rate is 18%. Samson disagrees that the late charges are compounded. II The Bordages argue that Samson is collaterally estopped from litigating the meaning of the Late Charge Provision. The Hookses had leases with Samson that were separate from, but identical to, those between Samson and the Bordages. In the Hooks case, a jury found Samson liable for fraud and awarded the Hookses over $20 million in fraud damages—including about $13 million in late charges, calculated at a rate of 18% per annum, compounded monthly.[6] That award equaled an estimate by the Hookses’ damages expert based on his reading of a provision identical to the Late Charge Provision. In the present case, the trial court found Samson liable for breach of contract and awarded the Bordages $12,955,919 in contract damages. That award is based on the same interpretation of the Late Charge Provision in Hooks and comprises mostly compound interest. The Bordages argue that collateral estoppel prevents this Court from reaching the issue of whether the Late Charge Provision calls for simple or compound interest because that very issue was previously resolved in Hooks. Samson disagrees because the construction of the lease’s text is an issue of law, and “[c]ourts disfavor applying collateral estoppel in the context of a pure question of law.”[7] An oil-and-gas lease is a contract, and its terms are interpreted as such.[8] The construction of an unambiguous contractual provision— meaning that the provision has only one reasonable construction—is an issue of law we review de novo using well-settled contract-construction principles.[9] A contract is not ambiguous merely because the parties disagree about its meaning.[10] As discussed below, the Late Charge Provision’s meaning is unambiguous because the only reasonable construction requires the late charge to be calculated using simple rather than compound interest. The provision’s construction is therefore an issue of law. This Court has spoken sparingly on the overlap between collateral estoppel and issues of law. But in Getty Oil Co. v. Insurance Co. of North America, we noted that collateral estoppel could apply to “essential issues of law that were litigated and determined in a prior action.”[11] However, Getty‘s application of collateral estoppel to issues of law is not limitless. The Restatement (Second) of Judgments, on which Getty relied to justify its statement, provides some exceptions— including some in the nonmutual context as is relevant here.[12] Nonmutual collateral estoppel is implicated in two situations. First, when a nonparty to an earlier action seeks to prevent an opposing party from relitigating an issue that the opposing party litigated in the prior action.[13] Second, when a party to a prior action seeks to prevent a party in a later action who was a nonparty to the prior action from contesting an issue that was litigated in the prior action.[14] Section 29 of the Restatement includes an exception that applies when treating an issue of law “as conclusively determined would inappropriately foreclose opportunity for obtaining reconsideration of the legal rule upon which it was based”.[15] Comment i to Section 29 elaborates, noting that nonmutual collateral estoppel cannot foreclose a reviewing court from performing its function of developing the law.[16] That consideration is especially pertinent “when the issue is of general interest and has not been resolved by the highest appellate court that can resolve it.”[17] This Court, and Texas courts more broadly, have looked to the Restatement when interpreting the law of collateral estoppel.[18] Application of the Restatement‘s highest-court exception makes particular sense for pure issues of law pending before this Court, whose mandate is to review issues of law important to the jurisprudence of this State.[19] We hold that nonmutual collateral estoppel will not prevent a party from relitigating an issue of law in this Court when we have not previously decided the issue and we deem the issue important to the jurisprudence of the State.[20] So, how does this rule apply here? First, we consider whether the interpretation of the Late Charge Provision is an issue previously decided by this Court. Our opinion in Hooks remanded to the court of appeals without construing the identical provision.[21] The appellate court issued a new opinion and judgment,[22] and we denied Samson’s subsequent petition for review. While attempts to read into the tea leaves are perhaps unavoidable,we reiterate that our denial ofa petition for review does not indicate our views on the merits of any particular issue.[23] Further, as the Bordages’ counsel conceded at oral argument, this Court did not previously decide how to interpret the Late Charge Provision. Second, we consider the importance of the underlying issues. At face value, this appeal is about the interpretation of a single provision in an oil-and-gas lease. But as described below, this case also involves two previously undecided issues important to the State’s jurisprudence. Therefore, nonmutual[24] collateral estoppel does not apply. III We turn to two questions about the interpretation of the Late Charge Provision. First, whether Texas favors simple or compound interest in the absence of a written agreement on the applicable rate of interest. Second, whether the Late Charge Provision contains an express stipulation to a compound rate of interest. We hold that the default rule in Texas is that simple interest applies in the absence of an express stipulation—with clear and specific language—to a compound rate of interest. We further hold that because the Late Charge Provision lacks clear and specific indicia of such an express stipulation, only simple interest is available. A In antiquity, the prohibition against usury went deeper than a surface-level distinction between simple and compound interest. The assessment of interest was outlawed altogether. From early civilization’s agrarian roots sprouted a principle that money, because of its sterility, “cannot beget money”.[25] For thousands of years, with a few exceptions,[26] this principle unwaveringly held true. During the medieval period, scholastics and natural-law philosophers laid the theoretical groundwork for legitimizing simple interest.[27] And between the late medieval period and renaissance, mathematical advances led to a clearer conceptual separation between simple and compound interest.[28] With growing recognition of that distinction came the realization that different regulatory treatment may be appropriate. Thus, in time, Britain came to permit simple interest, but it imposed stringent penalties for usurious rates.[29] B Those principles eventually migrated to our shores. In the nineteenth century, the states were almost unanimous in permitting only simple interest. There was one exception: California. In seeking to advance a regime of absolute freedom of commerce, California had “no penalty for usury.”[30] That experiment, however, lasted less than a century. It ended in 1918 with the adoption of the California Usury Law by ballot initiative.[31] Thereafter, California harmonized its laws with those of the other states, acquiescing to the general rule that compound interest is prohibited absent a clear and specific expression to the contrary in writing.[32] Around that time, the Supreme Court also had an opportunity to reconsider when compound interest is permitted. It chose to reinforce the general rule. In Cherokee Nation v. United States, the Court rejected a demand by the Cherokees for compound interest on four debts owed by the United States since 1819, the largest of which was a sum of $1.114 million.[33] The Solicitor General suggested that the Cherokees’ demand for compound interest on that sum “for near a century” would result in an amount “equal to the national debt.”[34] While not mathematically precise,[35] the Solicitor’s point about the inherent dangers of compound interest came through. Thus, the Supreme Court deemed that the language “shall bear interest at the rate of five per centum per annum, payable semiannually” is insufficient to authorize compounding.[36] Cherokee Nation‘s influence was felt beyond just contracts involving the United States. This was due to the Court’s reliance on the “general rule” that “even as between private persons . . . in the absence of a contract therefor or some statute, compound interest is not allowed to be computed upon a debt.”[37] Cherokee Nation cemented the disfavored status of compound interest and affirmed the propriety of longstanding state law presumptions against its assessment.[38] Today, compound interest remains disfavored. And where it is permitted, state laws echo Cherokee Nation in requiring clear and specific contractual or statutory authorization.[39] Even Delaware and Massachusetts law, upon which the Bordages rely so heavily, are consistent with the general rule.[40] And the few exceptions to the general rule—some of which are unique to other jurisdictions—are inapplicable here.[41] Thus, the Bordages’ arguments in favor of compound interest find little support.[42] C The same principles hold true in Texas. From our earliest jurisprudence, the default rule has been that simple interest applies unless parties “expressly stipulate” to compound interest.[43] While early Texas cases properly invoked the general rule, our decision in Lewis v. Paschal’s Administrator sowed confusion by suggesting that the use of any temporal language—such as “per annum” or “annually”—could suffice for such an express stipulation.[44] The problem is that similar and identical temporal language appears in interest clauses for a wide variety of reasons. To provide but one example, simple interest is often described using “per annum” or “per month” language.[45] Paschal’s Administrator was built on sand.[46] It is thus unsurprising that its legacy has toppled. Even if pre-Cherokee Nation cases in Texas permitted compounding under such an illusory standard, we have long since reversed course.[47] Paschal’s Administrator and its progeny have not been cited or followed for almost a century. Instead, more recently, the majority of Texas courts that have squarely considered this issue have reoriented to the general rule.[48] As Cherokee Nation illustrates, the choice between simple and compound interest can have drastic consequences.[49] Accordingly, a court’s application of compound interest to a contract where compound interest was never intended can easily transform a venture that was beneficial to both sides into an oppressive relationship. In defiance of an extensive legal tradition, Paschal’s Administrator allowed choices of such gravity to be made with little more than a judicial coin flip, reaffirming the wisdom of the principle that one should not remove a fence until one understands why it was put there.[50] Today, we disapprove Paschal’s Administrator and its progeny to the extent that they are inconsistent with the following statement. The default rule in Texas accords with the general rule: absent clear and specific contractual or statutory authorization, compound interest[51] is prohibited, and only simple interest[52] is available. D The final question we must consider is what degree of clarity and specificity is required to expressly stipulate to a compound rate of interest. While we do not prescribe any particular formulas or magic words, we can certainly say what language falls short. In light of the harsh, commercially oppressive nature of compound interest, clauses imposing interest must be strictly construed in favor of simple interest.[53] The court of appeals relied heavily on the Late Charge Provision’s statement that interest becomes “due and payable on the last day of each month” (or stated differently, “due and payable [monthly]“). The Supreme Court deemed similar language insufficient in Cherokee Nation.[54] It should have been clear that such language falls short. As a general matter, mere temporal references (e.g., “per annum,” or “annually”) standing alone are insufficient to sustain the assessment of compound interest.[55] Almost every interest clause imposes interest on a “per annum” or “per month” basis.[56] And the most standard reading of a clause that demands payment “monthly” or “annually” is that it merely specifies the time for payment.[57] Further, while periodic rests are indeed a feature of agreements to compound rates of interest,[58] courts will not impose the harsh penalty of a compound rate by gleaning such periodic rests from ordinary or ambiguous temporal language that could also refer to a simple rate of interest.[59] The court of appeals also reasoned that because the last sentence of the Late Charge Provision states that interest is “due and payable . . . each month”, any unpaid interest must be blended “every month” with the “amount” of past due monthly royalties subject to late charges in the first sentence of the provision. It thus concluded that the contract contemplated late charges on late charges, or interest on interest. But courts are called to interpret a contract’s plain language. Here, a plain reading of the Late Charge Provision shows that it calls only for simple interest. It provides for a late charge “based on the amount due” of “past due royalties . . . including any compensatory royalties”. The late charge begins to accrue interest at the “maximum rate allowed by law”—a simple interest rate, absent an express stipulation, with clear and specific language, to the contrary—on the day after “such monthly royalty payment” was due. The late charge must be paid, i.e., becomes “due and payable”, on the last day of the month in which it is assessed. If the due date is missed, simple interest continues to accrue on the unpaid royalty “for every calendar month and/or fraction thereof from the due date until paid”. The court of appeals rejected this straightforward approach because it thought such a reading would render the Late Charge Provision’s final sentence meaningless. Not so. The parties’ agreement that any late charges become “due and payable” on a certain day achieves at least two things. First, it provides predictability about when the Bordages could expect late charges to be paid. Second, it creates a fixed point from which the Bordages could assess the maturation of their legal rights to collect any unpaid late charges and to seek other contractual remedies. We hold that the language of the Late Charge Provision is insufficiently clear and specific to constitute an express stipulation to compound interest. Thus, only simple interest is available, and the trial court’s assessment of compound interest against Samson was in error. * * * * * We reverse the court of appeals’ judgment and remand the case to the trial court for further proceedings consistent with this opinion. Nathan L. Hecht Chief Justice OPINION DELIVERED: June 7, 2024
