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Energy & the Law

Avoid the Oral Agreement

Posted in operations

Cresson SWD Services, L.P. vs. Basic Energy Services, L.P. is a warning about the perils of an oral agreement for a risky downhole procedure. Cresson hired Basic to make improvements on a saltwater disposal well by deepening the injection zone, inserting a liner, and cleaning out the hole to 8,600 feet.

The Claims

Cresson’s claim: Basic did not complete the well to 8,600 feet as promised and did not offer to complete the work.

Basic’s response: The agreement did not include a guarantee of success and Basic worked on the well until Cresson decided not to spend any more money on the project.

Let the Swearing Match Begin

The testimony came down to the word of Lack, Cresson’s “company man”, and Thomas and Wild, Basic’s rig manager and “head fishing rental tool guy”.  Lack understood that the well was a straight hole, with no deviation from vertical. In communicating with Basic, Lack did not share any of the specifics with the workover other than they were going to clean the bottom of the well and attempt to run a liner. Obstructions were encountered downhole.  Several unsuccessful fishing operations were conducted. It turned out that one surprise obstruction was a whipstock – the tool that kicks off the wellbore and changes the angle from vertical to deviated or directional.

Lack testified about a  meeting at which he told Cresson their options were to continue to spend money fishing without knowing whether it would be successful, or set another whipstock and go in another direction. He testified that it was Cresson’s financial decision to decide what to do.

Basic’s witnesses testified that no decision was made at the meeting.  Basic then rigged down the equipment, moved off the location, and demanded payment. Litigation ensued when Crossen would not pay Basic’s invoice.

The jury decided that the decision not to continue with the operation was Cresson’s and not Basic’s.  Basic recovered a judgment for its invoices.  The appellate court found that this finding by the jury was supported by the evidence.

The Takeaways

  • If essential terms of the transaction had been reduced to writing, perhaps this dispute could have been avoided.
  • With more effort up front, even more detail could be incorporated into the agreement, further reducing the chances of misunderstandings leading to conflict.
  • The trial revolved around a bunch of oral communications. Reducing communications, alternatives, options, and questions to writing brings clarity.
  • The more clarity, the more likely litigation can be avoided altogether.
  • Clarity adds certainty to the litigation calculation, which enhances early resolution, … which eliminates  trial and appeal, … which saves you time, money, and the agony of tedious, seemingly endless, cross-examination under oath.
  • Diogenes would have liked Lack. He was the company man, yet his testimony seems to have helped Basic. either Lack was an honest man or the court  cherry-picked his testimony to find support for the jury finding. That is likely. The appellate court’s job was to look for evidence supporting the jury verdict.

Bobby Keys RIP (his greatness begins at about 3:10)

The Fat Lady Who Hasn’t Sung, Oil Field Technology, and a Lizard

Posted in Contract Disputes, Regulations

Today is a grab-bag of topics, a pastiche if your college tuition was higher than mine.

When Will the Fat Lady Sing?

El Paso Marketing, LP v. Wolf Hollow I, L.P., involving a gas plant Supply Agreement, continues its tortured journey through the Texas civil justice system. Chance Decker and I reported on this case in July 2012.

El Paso provides natural gas for a power plant owned by Wolf Hollow. El Paso has a Transportation Agreement with Enterprise. Interruptions in gas delivery required purchase of replacement power. Wolf Hollow claims Enterprise delivered gas contaminated with liquids that damaged the plant, requiring plant upgrades and the purchase of replacement power.

I won’t delve into the complicated procedural history, except to say that the Supreme Court refers to Wolf Hollow I, III and II (no doubt this will be IV). The court of appeals misunderstood it to say it held on the merits that Wolf Hollow was entitled to recover on its claim for replacement power damages resulting from poor quality gas.  The Supreme Court says it didn’t rule on that and remanded the case for proceedings “consistent with this opinion.”

The opinions case (but not necessarily this one) are worth following in that they address a number of legal issues:  The force majeure provision of the Supply Agreement; waiver of consequential damages; default and remedy provisions, including how a contract treats gas quality and gas quantity (to interpret:  use your words carefully); and cover damages.

Technology Marches On

According to Leon Rosen, with the Futurest (a publication of the World Future Society), NET Power is constructing the first natural gas power plant that will completely sequester carbon. The rationale (read it for yourself) is that rather than burning natural gas in ambient air, which produces nitrous oxide, the energy driver is compressed CO2.  It’s way more complicated than that but is good news for the gas industry and the environment.

Whither the Dunes Sagebrush Lizard? (or as his mother would say, “sceloporus arenicolus”)

Last month a federal district judge dismissed a suit by environmental groups over an agreement between the state of Texas and oil and gas producers in which the industry would promise to protect vast expanses of the lizard’s shinnery-oak habitat. The agreement was to avoid what was referred to as the “regulatory rigidity of the Endangered Species Act”. The suit had claimed that the U.S. Fish and Wildlife Service erred by allowing voluntary conservation agreements to eliminate threats to the dunes sagebrush lizard. Environmental groups said the pacts were not enforceable or verifiable. The original agreement was either a welcome respite from unnecessary regulation, smart policy,  or the end of the little fella’s time on this earth.

References to “the industry” are misleading; the players do not take their orders from Dick Cheney. But it seems to me this is “the industry’s” opportunity to prove that it can be a responsible steward of the environment.

Today’s musical interlude – having nothing to do with the topics – features dead white-boy blues guitar players who died too young – one from the ’60’s and one from the ’80’s.

More Seismic Rumbling in Louisiana

Posted in Contract Disputes

Co-author Brooke Sizer

In Olympia Minerals et al v. HS Resources, et althe Louisiana Supreme Court addressed a decision we discussed in a February entry by affirming in part, reversing in part, amending in part and remanding (because why do one thing when you can do four). The case involved the “North Starks Project Agreement” covering 42,000 acres in Beauregard and Calcasieu Parishes.

Affirmed

HS/Aspect breached its obligation to complete a seismic survey over all of the lands covered by the agreement.  The Supreme Court agreed with the lower courts that HS/Aspect was required to survey all the lands. HS/Aspect focused on limiting language, “shall not be obligated …”  The court considered this as a customary phrase recognizing that there may be obstacles that preclude undertaking seismic surveying in certain areas, eg., towns and cemeteries. the court ruled that a complete survey of both the northern half and the southern half was a benefit of the bargain and that El Paso was entitled to foreseeable damages.

Reversed

HS/Aspect was not obligated to sublease a minimum of 15% of El Paso’s mineral rights; instead, HS/Aspect had a non-binding option to sublease. Only after the company exercised the opinion was it obligated to sublease at least 15% of the leaseholder’s rights. Aspect never exercised that option, thus the damage award for breach of contract for failing to sublease at least 15% was reversed.

Reversal was based on Civil Code Art. 1933. The Court must interpret the word “option” according to civil law tradition, by beginning with legislative direction. Civil Code Art. 2047 requires that the words of a contract be given their generally prevailing meaning. According to Art. 1933: “[a]n option is a contract whereby the parties agree that the offeror is bound by his offer for a specified period of time and that the offeree may accept within that time.”

Amended

The damage award for HS/Aspect’s failure to conduct a complete survey was proper. The judgment had typos and was amended to reflect the correct amount: $4,125,00.00.

Remanded

The question was whether HS/Aspect’s use and sharing of its seismic data was proper. The lower courts reasoned that because HS/Aspect failed to fulfill the terms of the agreement, the agreement was dissolved and there was no restriction as to the use of seismic data by El Paso/Olympia. Because the Supreme Court found that the agreement did not require the sublease, the agreement was still active. Findings on the merits as to the use of the data must now be determined by the court of appeal.

There was a question about the kind or type of data HS/Aspect was required to deliver to El Paso/Olympia. The Supreme Court agreed that HS/Aspect should have turned over the raw data to El Paso/Olympia upon request, but because it was evident that El Paso/Olympia did not fulfill its agreement to keep the data confidential, there could be no malice by HS/Aspect.

This being a Louisiana case, and our purpose being to educate about meaningful topics, we bring to your attention two classic (and deceased, unfortunately) New Orleans musicians you might not be familiar with: a guitar player and a singer.

 

Election Scoreboard: Frackers 4, Anti’s 4

Posted in Hydraulic Fracturing

Hydraulic fracturing bans had eight at-bats last Tuesday. Here are the results.

Denton, Texas

See the Ballot Question in a recent entry.

YES 58.64%

NO 41.36%

Athens, Ohio

“To establish a community bill of rights for residents and natural communities of Athens and to protect those rights by prohibiting shale gas and oil extraction and related activities; and by elevating the rights and governance of the people of Athens over those privileges bestowed on certain extraction corporations.”

YES 78.28%

NO 21.72%

Gates Mills, Ohio

“Shall Article II of the Charter of the Village of Gates Mills be amended to add Section 4, Gates Mills Community Bill of Rights?”

The amendment itself  was described as a “poorly drafted populist-like approach to changing all manner of laws in our village charter”. The proposition included additional rights such as the “right to pure water”, “right to be free from toxic trespass.”

30.7% Yes

69.3% No

Kent, Ohio

“Shall the proposed amendment to the Charter of the City of Kent adding Section 4 et seq. to Article I, Incorporation; Form of Government; Powers, under the heading titled Community Bill of Rights be adopted?”

YES 46.31%

NO 53.69%

Youngstown, Ohio

The effect of the “Community Bill of Rights Fracking” would be to:

  • Prohibit “unconventional natural gas extraction using horizontal hydraulic fracturing”
  •  Ban “the establishment of infrastructures supporting gas production”
  • Ban “the storage, transportation or depositing of gas drilling waste products” in Youngstown.

YES 42%

NO 58%

Santa Barbara County, California

“Initiative to Ban ‘High-Intensity Petroleum Operations’ including but not limited to Well Stimulation Treatments and Secondary and Enhanced Recovery Operations such as Hydraulic Fracturing, Steam Injection and Acid Well Stimulation Treatment on all Lands within Santa Barbara County’s Unincorporated Area.”

YES 37.35%

NO 62.65%

San Benito County, California

“Shall San Benito County’s General Plan be amended to ban High-Intensity Petroleum Operations (such as hydraulic fracturing, also known as fracking, acid well stimulation, and cyclic steam injection, but not Low-Intensity Petroleum Operations) throughout all unincorporated areas, and all Petroleum Operations in residential general plan designations of Rural, Rural Transitional, Rural Residential, Rural/Urban, and Sphere of Influence Rural/Urban, with related zoning changes to implement the new General Plan policies?”

YES 57.3%

NO 42.64%

Mendocino County, California

“An Initiative to Assert the Rights of Residents of Mendocino County in Order to Secure Clean Water, Air and Soil and Freedom From Chemical Trespass. Which Would Ban Hydraulic Fracturing, Directional and Horizontal Drilling, and Waste Injection Wells in the County of Mendocino and Invalidates Any and All Laws Contrary to this Purpose to the Extent They Effect the County of Mendocino.”

YES 67.18%

NO: 37.82%

What does it mean?

  • We are in the middle innings of the debate. More of these votes are sure to come as reserves are discovered in places where people live.
  • There is a home field advantage.  Drivers of the Denton vote were lackadaisical local regulation leading to wells in places where voters thought they shouldn’t be, and vocal and organized proponents.
  • As nasty as a Randy Johnson fastball on the inside edge of the plate, citizens without mineral rights and the royalty checks that come with them, get cranky when noisy, ugly industrial activities jam and ruin their roads and otherwise interfere with their lifestyle. They vote in large numbers.
  • The industry whiffs on the hanging curveball.  The perceived risks – groundwater contamination, air pollution, earthquake damage – are fears, not well grounded in science.  The industry can’t convince some voters otherwise.
  • As with the Yankees, it’s not about the money. Industry outspent the opposition by substantial amounts, sometimes with success, sometimes not.
  • Like a spring-training game, there are times when the outcome doesn’t matter.  There is no fracking (and for all I know, no oil and gas activity) in San Benito County.
  • Sometimes the player off the bench makes the winning play. Results appear not to be based on predictable factors. Denton is heavily Republican and banned fracking. Athens votes Democratic and refused a ban. (The labor unions were against it).
  • Don’t underestimate the stolen base. They say it’s only about “fracking”. But without fracking it’s really about drilling.

New players in different places will be called on to participate.

The Well Operator Should Have Listened To My Mother

Posted in Royalty Disputes, Title Issues

My mother used to give us good advice.  For example:  Don’t lie … do your homework.  Sabella v. Appalachian Development Corporation agrees with my mother.

Sabella bought minerals in 1997 under 66 acres in Warren County, Pennsylvania, on which the Haners had two producing wells (under a 144-acre lease from the Harveys). They weren’t paying royalties to Sabella. When given the chance in a 2008 meeting, Mr. Haner did not tell Sabella that his wells produced Sabella’s minerals. Haner then went “all in”, elected not to conduct a title search, drilled more wells, and never paid Sabella.

Limitations and the Discovery Rule

Sabella sued in 2010 for ejectment, conversion and trespass. The Haners asserted that the suit was barred by a two-year limitations statute. Sabella pled the discovery rule: The statute of limitations may be delayed by the plaintiff’s ignorance of his injury and its cause until such time as he could or should have discovered it by the exercise of reasonable diligence.

The court determined that Sabella had used reasonable diligence by taking reasonable efforts to examine the property for oil and gas production. A witness who resided on the secluded, wooded property testified that it was virtually impossible to see wells from the road. For his part, Sabella believed that he did not have the right to trespass on the property to investigate, so he did little else other than investigate from the road.

Does the Objective Test Allow For a Subjective Factor?

Reasonable diligence is determined by an objective standard. Sabella became legally blind between his acquisition of the property and his suit. The Haners argued that such a party-specific consideration could never play into the inquiry. The court disagreed, citing the flexibility of the rule. His impairment was a factor in whether or not he exercised reasonable diligence.

Trespass – Good Faith or Bad Faith? 

As in most states, a Pennsylvania good-faith trespasser owes to the injured party, in effect, the trespasser’s net profits. The bad-faith trespasser is liable for all monies derived from the trespass without offset for the cost of generating those monies here, drilling costs and operating expenses.

The court of appeal determined that when Sabella recorded his mineral deed in official public records the Haners were put on constructive notice of his ownership. Pennsylvania’s constructive notice statute imputes knowledge of a fact to a person if he knows the fact or has reason to know it.  This includes notice by recording in the public record. The Haners were bad-faith trespassers.  The court determined that oil and gas lessees, such as the Haners, are purchasers for purposes of the recordation statute because, upon discovery and production of oil, the lease conveys a potential and definite fee simple determinable.  It appears from the discussion that this issue is a new one for Pennsylvania courts.

About That Homework …

The Haners were required to exercise due diligence in their acquisition of their lease from the Harveys. If they had done so, they would have learned of Sabella’s ownership of the minerals under the 66 acres. Because constructive notice of Sabella’s ownership was imputed to the Haners by statute, they lost their claim to bona fide purchaser status.

Mr. Haner should have listened to my mother.

Hydrocarbon Exposure Reconsidered

Posted in Litigation, Pollution

Co-author Maryann Zaki

You might recall previous entries (here is one) discussing the $2.9 million Dallas County verdict and judgment in Parr v. Aruba. Not all similar suits have the same result.

Michael and Myra Cerny sued Marathon Oil Corp. and Plains Exploration & Production Company, alleging, as in Parr,  private nuisance, negligence, and negligence per se. As in Parr, among  the allegations were:

  • continuous release of “ … strong odors and noxious chemicals into the environment, including the plaintiffs’ property, causing injury and harm to the plaintiffs’ property and to their persons;” and
  • health problems, including headaches, rashes, chest pain, “strange nerve sensations,” high blood pressure, nausea, difficulty breathing, and nosebleeds.

Plains’ defense was that in order to prevail, the Cernys had to prove exposure specifically to Plains’ hydrocarbons, not just hydrocarbons in general.

The trial court observed that proving causation – that Plains’ operations and not something else – caused injury was a “high hurdle that has to be jumped”, and dismissed all defendants. Gray Reed attorneys, led by Jim Ormiston, represented Plains.

Parr and Cerny are on appeal to different courts. The question for those courts is likely to be: What evidence is necessary to prove causation in a hydrocarbon exposure case?

What Does the Texas Supreme Court Say?

The Texas Supreme Court held in Bostic v. Georgia Pacific Corporation that where multiple sources of exposure exist, the plaintiffs must prove substantial factor causation. Proof of “some exposure” or “any exposure” will not establish causation. There must be defendant-specific evidence relating to the approximate dose of the defendant’s product to which the plaintiff was exposed, along with evidence that the dose was a substantial factor in causing the plaintiff’s disease. The dose must be quantified but need not be established with mathematical precision.

Also, under Merrell Dow Pharmaceuticals, Inc. v. Havner, to establish substantial factor causation plaintiffs must prove with scientifically reliable expert testimony that a plaintiff’s exposure to the defendant’s product more than doubled the plaintiff’s risk of contracting the disease.

Bostic involved exposure to asbestos, but the decision could be a factor in any multiple-exposure case, including claims alleging exposure to emissions from oil and gas operations.

In light of this precedent one thing remains clear: Texas plaintiffs asserting toxic tort claims must show that their injuries were caused by exposure to the defendant’s activities. Their success will depend on how well they present reliable epidemiological and scientific evidence.

Cerny, Parr and other Texas hydrocarbon injury cases have drawn attention. See Lawyers and Settlements.com (discussing these kinds of cases generally), the San Antonio Express News (discussing the ruling), Texas Lawyer (discussing inconsistent results in Texas courts) and Inside Climate News (misunderstanding the judicial system and the defendants’ legal position).

Keep watching. These issues, and the future of hydrocarbon exposure claims, are not going to be resolved soon.

What’s Going On in Denton, Texas?

Posted in Energy Policy, Hydraulic Fracturing

As you probably know, the Denton City Council denied a petition signed by several thousand citizens to ban hydraulic fracturing within the city limits. The denial sent the question to the November 4 general election ballot.  Here is the proposition, its legalese in full bloom:

SHALL AN ORDINANCE BE ENACTED PROHIBITING, WITHIN THE CORPORATE LIMITS OF THE CITY OF DENTON, TEXAS, HYDRAULIC FRACTURING, A WELL STIMULATION PROCESS INVOLVING THE USE OF WATER, SAND AND/OR CHEMICAL ADDITIVES PUMPED UNDER HIGH PRESSURE TO FRACTURE SUBSURFACE NON-POROUS ROCK FORMATIONS SUCH AS SHALE TO IMPROVE THE FLOW OF NATURAL GAS, OIL, OR OTHER HYDROCARBONS INTO THE WELL, WITH SUBSEQUENT HIGH RATE, EXTENDED FLOWBACK TO EXPEL FRACTURE FLUIDS AND SOLIDS

The players

Supporters and detractors of the ban are divided into two predictable groups: Local and national environmentalists on the one hand and producers and local royalty owners on the other. Who’s who and what they say can be seen from their websites:

In support of the ban you have FrackFree Denton.

Against the ban you have Denton Taxpayers for a Strong Economy.

Dig a little deeper, say into campaign finance filings, and you can see whose money is behind the campaigns.  Here is the local Denton Record Chronicle on where the bulk of the money is coming from on both sides.

In the news

Want news on the election? The Denton Record Chronicle evaluates the claims of both sides.

Here is a report from StateImpact, a publication of National Public Radio member stations.

And a comprehensive and pretty fair article from the New York Times.

There is no shortage of opinions

Here is one from the Dallas Morning News.

In another, Eagle Ridge Energy presents a forceful case for the benefits of hydraulic fracturing. They have every reason to have an opinion. Eagle Ridge has been the target of litigation by homeowners and opprobrium by bloggers for their operations in the city limits.

Here is one from Energy in Depth, a non-local group with an interest in fracking everywhere.

The Texas Railroad Commission also has an opinion.

In the spirit of open debate, on these web sites you can read about the “evils” of fracking. I’m not of this mindset, but it’s helpful to know what the uninitiated are hearing.

One from “Texas Sharon“.

And from the environmental group Earthworks, which is working hard in Denton and worldwide to pass the  ban. (Disclaimer:  The photo is Earthwork-like in its extremism, but it is not from Denton.)

Let’s have a live debate?

A debate is scheduled in Denton between FrackNation Producer Phelim McAleer and environmental activist Calvin Tillman on Monday, October 27. Here is the link.

What does it mean?

If the ban passes, litigation.

Failure would be a retreat from overreaction, and maybe a debate about whether Denton needs more neighborhood-friendly drilling oversight.

In the spirit of universal suffrage …

Today’s musical interlude has nothing to do with the topic, unless it’s divine guidance you are seeking (in which case, why are you reading this blog?).  We all get to vote. How do you like your Amazing Grace, … Celtic, …  African, … or Country?

Special thanks to Tricia Davis of the Texas Royalty Council for her help on this post.

Delay Strikes Down Another Plaintiff

Posted in Land Titles, Litigation

Another in our cavalcade of ugly college football uniforms

Why am I always reporting on plaintiffs who wait too long to file their lawsuit? See below for a few possible answers.

In the latest Texas case, Trahan v. Mettlen, the Trahans sued in 2010 on a 2006 warranty deed.

The earnest money contract for the sale of property from the Mettlens to the Trahans didn’t mention reservation of mineral rights. The warranty deed included a “clear and unequivocal” reservation. Mr. Trahan testified that he did not read the deed at the closing and a deed was not given to him at closing. More than four years later, when leasing activity began, the Trahans realized that the minerals had been reserved.

The clear and unequivocal reservation

The court’s first duty was to ask, When did the cause of action accrue? A mistake plainly evident or clearly disclosed on the face of a deed (such as this reservation of minerals) means that all parties are chargeable with knowledge of the contents of the deed. The court’s view was that a mutual mistake was plainly evident on the face of the deed. The statute began to run on the day the deed was executed by the grantor or on the date it was delivered to the grantee.

The discovery rule is sometimes available to the plaintiff. If the mutual mistake was not plainly evident but related instead to the legal effect of the material term, the statute will begin to run when the mistake was or in the exercise of due diligence should have been discovered. Subsequent conduct of the parties might rebut the presumption that all parties are chargable with immediate knowledge of the mistake. None of that happened in this case. The discovery rule was inapplicable.

What could have been

Game over, which is unfortunate for the Trahans because there might have been a legitimate claim to reform the deed for mutual mistake. A Texas court will find a mutual mistake when (1) there is a mistake of fact; (2) held mutually by the parties; (3) which materially affects the agreed upon exchange.

There is another way to go about it. A Texas court will consider a unilateral mistake by one party coupled with knowledge of that mistake by the other party as the equivalent of that mutual mistake.

Why do these things happen? 

I’m tempted to offer platitudes: Read and understand your contract, act if and when you need to. But the downfall of many unsuccessful plaintiffs is neglect. Your delay in acting is not forgiven if your mistake is about a term that isn’t important at the time. I suspect the Trahans didn’t act sooner because the didn’t think about the minerals until the landman came knocking on the door bearing bonus payments.

The second culprit is trust. Trust has two components: Integrity and competence. Your counterparty can be honest, but he also must be trusted to prepare a document correctly. Ronald Reagan had the right attitude on this subject.

A musical interlude. Don’t let this be you.

Faulty Property Description Haunts Louisiana Servitude

Posted in Land Titles, Royalty Disputes, Title Issues

Co-author Brooke Sizer

Halloween is approaching, so let’s talk poltergeists – troublesome spirits that haunt a specific location. Where do they come from? In Quality Environmental Processes, Inc. v I.P. Petroleum Company, Inc., it was from a faulty property description that lay dormant for 30 years before beginning its vexations.

The Demon is Spawned

A 1966 mineral deed conveyed rights in the oil and gas under certain tracts outlined in blue on Tobin maps. Another exhibit described known producing sands within the tracts by depth and geographical location. Accurate surveys of the areas outlined in blue would be made and, when approved by the parties, would become part of the agreement. The surveys were never obtained and the deed was never supplemented.

By a 1992 cash sale the St. Martins purchased a portion of the property. They later conveyed a 10% mineral interest to Quality.

The Demon Haunts

In 1994, I.P. Petroleum drilled and produced a well and began paying royalties to the St. Martins. I.P. then ceased those payments and began paying the current owners of the 1966 mineral servitude. The St. Martins and Quality sued. The question: Did the 1966 mineral deed create a mineral servitude, or did the 1992 cash sale grant the purchasers the surface and the minerals?

The trial court held that the 1966 mineral deed did not create a valid mineral servitude because it did not contain an accurate survey or map, nor any measurements, dimensions, bearings, angles, or distances which would accurately describe the mineral interests listed and conveyed. Thus, a third party would not be on notice of a conveyance.

The Spookiest Part

Unpaid royalties were $817,000. Judgment was rendered for plaintiffs against IP for $6.725 million for unpaid royalties, treble damages for violation of the Louisiana Unfair Trade Practices Act, double royalties due for violation of  the Mineral Code, interest, and attorney’s fees. Judgment against IP’s lawyers was for $4.5 million. Talk about a long drive home from the courthouse.

The Demon is Exorcized

The appeals court reversed. The 1992 cash sale expressly stated that no mineral rights were conveyed. The record was sufficient to give purchasers notice that they did not obtain ownership of any mineral rights by virtue of the 1992 cash sale. Even without a complete written description of the property the 1966 deed was susceptible of conveying the servitude, because the location could be ascertained with certainty with the aid of extrinsic evidence.

The Supreme Court affirmed. The 1966 deed was sufficiently specific to identify the property to be conveyed and, thus to create a valid mineral servitude and to place third parties on notice of its existence. The general rule is that the description in a deed must be such that the property intended to be conveyed can be located and identified. The description must fully appeae within the four corners of the instrument itself, or the deed should refer to some map, plat, or deed as a part of the description.  However, the description need not be with such particularity as to make extrinsic evidence unnecessary.

The Takeaways

Document drafters can control the demons that could vex future owners (the ones in your personal life are your own business).  Finish what you started. The parties should have followed through on their  agreement to supplement the descriptions.

Precisely what description is sufficient to place third parties on notice must be made on a case by case basis.  The good news for parties wanting to enforce a conveyance is that Louisiana courts tend to construe property descriptions so as to sustain, rather than defeat, a conveyance.

Caveat: The court reiterated that the liberal approach won’t work with misleading descriptions, but only faulty or inaccurate ones.

Today’s musical interlude.

Easements: Roads Traveled, Less Traveled, and Not Traveled

Posted in Land Titles, Title Issues

Why would anyone buy property without access to a public road? Because it seemed like a good idea at the time, I guess. And often it is, until things change, “things” often being new and unfriendly ownership of the surrounding property. The Texas Supreme Court has addressed this situation.  Hamrick v. Ward clarified the law for two different kinds of implied easements: the easement by way of necessity and the easement by prior use. Texas courts are now to use the standard for easements by necessity when deciding whether there should be a road easement over property surrounding a landlocked parcel. That was not always the case.

To establish an easement by necessity the plaintiff must prove:

1. Unity of ownership of the dominant and servient estates prior to severance;

2. Access is a necessity, not a convenience;

3. The necessity existed at the time the two estates were severed.

To prove a prior use easement:

1. Same unity of ownership as above;

2. Use of the claimed easement was open and apparent at the time of the severance;

3. Use was continuous, so the parties must have intended that its use pass by grant;

4. Use must be necessary to the use of a dominant estate.

What’s the difference?

• Prior use easements are easier to prove because of the requirement of necessity at all times.

• For a prior use easement the plaintiff will not have to demonstrate a “strict necessity” for the easement.

• The burden of proof for a necessity easement is the “less forgiving” requirement for strict and continuing necessity.

• Prior use easements will now be reserved for burdens such as cattle grazing, pipelines, sewer lines, drainage, and the like. The rationale is that these items are not as much of an encumbrance on the land as a road.

There is a better way

Get it in writing, even if it is from Grandma and Grandad, or Momma, and especially if its from the in-laws.

Having myself just completed a title case involving easements, here’s one I learned about that the court in Hamrick did not address:

Easement by reference to a map or plat

You don’t see this one often. Conveyance of land by reference to a map or plat showing abutting roads or streets can result in the purchaser (or one holding under him – very important) acquiring a private easement in the roads or streets showing on the plat. Reliance is required, although some cases hold that reliance can be inferred from the language in the deed itself.

Will the loser at the next trip to the trial court  feel bad, perhaps enough to regret their previous actions?