Co-author: David Pruitt

Gringita, Ltd v. Ineos USA Oil and Gas, LLC et al is in a way a typical Texas royalty dispute in which the lessor’s royalty is “free of post-production costs” (PPCs) according to one provision of the lease, but maybe isn’t so free if one considers another provision.

The facts

Gringita owns 1,015+ acres in Dimmit County and signed a mineral lease providing for a 25% royalty. Original lessee Chesapeake assigned the lease to Ineos. Gringita alleged that Defendants were deducting PPCs from its royalty payments in violation of the lease’s terms.

The royalty clause

Here are the significant subsections:

3.A: Gringita’s “Royalty Share” was measured by “all sums and amounts of money, including but not limited to any reimbursement for [PPCs], bonuses, premiums, and all other benefits in cash, kind or otherwise, derived, received or realized by, or to inure to the benefit of, Lessee, directly or indirectly.”

3.C and 3.E: The definition of “Gross Proceeds” required that if any sales contract provided for deduction for PPCs, “such deduction shall be added to the price received by Lessee … so that Lessor’s Royalty Share shall not be charged directly or indirectly with any such expenses.”

3.I, first sentence: “[t]he royalties provided herein shall be determined and delivered to Lessor free of any development, production, post-production, gathering … transportation, manufacturing, processing, treating … marketing … or like costs, except as specifically provided for in this Lease.”

3.I, second sentence: addressed costs for “construction, operation or depreciation of any plants or other facilities or equipment for processing or treating” minerals,

3.I, third sentence: “Notwithstanding anything to the contrary, any such costs which result in enhancing the value of the marketable oil, gas or other products to receive a better price may be deducted from Lessor’s share of production so long as they are based on Lessee’s actual cost of such enhancements.”

The lease is long and complex. This summary is not the entire clause.

Lessee’s gambit

Defendants argued that “such costs” in the third sentence of 3.I referred to all costs in Section 3.I, effectively converting the royalty into a modified net-proceeds interest subject to dedduction of most PPCs.

The Court decides

Gringita’s reading was the better of the dueling interpretations. “Such costs” in 3.I referred to the immediately preceding sentence, not to the entire litany of costs listed earlier. Under Defendants’ reading one sentence would undo everything the lease otherwise accomplished, rendering the “Royalty – Free of Cost” heading and the surrounding provisions meaningless. A court construes contractual provisions to harmonize them, not render them useless.

Horror of horrors for the lessees. The Court also held that the lease required Defendants to add back any PPC deductions to the royalty base before calculating Gringita’s share (see Devon v. Sheppard and the “proceeds plus” lease model). This wording means that the lessor could be paid more for its share of proceeds than the lessees received for their share.

Takeaway

Gringita’s motion for summary judgment was granted in part, and Defendants’ cross-motion was denied. A royalty clause that is based on the price actually received by the lessee, buttressed by “free of cost” language and add-back provisions, means what it says. One sentence, even beginning with “notwithstanding”, will not be read to swallow the rest of the agreement rendering it meaningless.

Caveat

We said that “in a way” Gringita is a typical PPC dispute. But we’ve warned that highly- negotiated royalty clauses are not “standard”. It is best to consider the principles underlying the result in one decision rather than expecting the language in that decision to match the language in another.

Your musical interlude.

In Ankor Energy, LLC et al v. Merit Management Partners I, L.P. et al a Louisiana federal district court addressed a situation commonly encountered by assignors of oil and gas operating interests: You’ve given up the cheese. How do you get out of the JOA trap?

The facts

The Ankor parties sued the Merit parties to recover unpaid lease operating expenses incurred while Ankor served as operator of two federal offshore oil and gas leases The motions addressed whether a separate claim for day-to-day operating expenses was properly before the Court and whether Merit owed those expenses.

The facts

In 2002 Merit acquired record title and rights in two Joint Operating Agreements in two federal Outer Continental Shelf oil and gas leases (South Pelto 8 and South Pelto 13) located off the coast of Louisiana. Merit assigned those interests to Black Elk effective in 2011.

Ankor acquired interests in the leases and became the operator in 2012. The leases terminated in 2018. During its time as operator Ankor incurred day-to-day lease operating expenses totaling $1,493,418.29. Merit refused to pay. 

Because the South Pelto leases are located on the Outer Continental Shelf off Louisiana’s coast, the Court applied the Outer Continental Shelf Lands Act. Under OCSLA, the law of the adjacent state – Louisiana – applied as surrogate federal law. The Court therefore analyzed the parties’ obligations under Louisiana contract law and the two Joint Operating Agreements. 

Merit’s procedural defense

The Court’s first order of business was to determine whether Ankor properly pleaded a claim for operating costs. The Court had already ruled in Ankor’s favor on its claim for decommissioning expenses. Repeated references in the complaint to expenses to “operate and decommission” the leases, read liberally as required by the Federal Rules of Civil Procedure, encompassed both types of expenses. The prior summary judgment order addressed only decommissioning costs; the operating expenses claim was still alive.

The substantive issue

The question before the Court was Merit’s obligation – or not – to pay the operating expenses. Merit argued that it was released from ongoing obligations under the Operating Agreements by virtue of the 2011 assignment of its working interests to Black Elk.  Merit was not released, said the Court. Under Louisiana law, a mere assignment of an interest is not sufficient to release an assignor from obligations owed to a third party without the obligee’s (Ankor’s) express consent. The unreleased obligor remains solidarily liable with the assignee. The Court found no express release language in the relevant provisions of the Operating Agreements (Articles IV, V and XXVI). The Court found express release language in a different context (relating to well-specific assignments), so the parties knew how to effectuate a release if they had intended to.

Damages: No double recovery

The Court rejected Merit’s contention that because Ankor had recouped the operating expenses from other non-operators, it suffered no actual damages. The Operating Agreements expressly permitted the operator to look to other non-operators to cover a delinquent non-operator’s portion and also required the operator to redistribute any recovered funds to the contributing non-operators. There would be no double recovery. Ankor was abiding by the mechanism established in the Operating Agreements and would be required to distribute Merit’s payment to the non-operators who had previously paid Merit’s share. 

Other defenses

Alleged “industry practice” not to charge non-operators after assignment of their interests did not abrogate Louisiana law. An affirmative defense of waiver (by sending certain invoices for decommissioning but not operating costs) also failed.

The Court granted plaintiffs’ partial summary judgment and denied defendants’ cross-motion. Merit was solidarily liable for $1,493,418.29 in unpaid lease operating expenses. 

 Your musical interlude

Co-author: Gunner West

The words of an instrument conveying real property in Texas mean something, of course. But so does the placement of those words … which leads to the result in SRO Land & Minerals, LP v. BNSF Railway Co. A 1901 deed to The Pecos River Rail Road Company conveyed fee simple title to a 100-foot strip, not a railway easement. Because the railroad was abandoned long ago, an easement would have expired, but the fee did not. Surrounding property owners lost their claim to the minerals under the 100-foot strip.

The deed

The granting clause of the deed conveyed “all and singular the right, title, and interest” of Thomas White in “certain pieces or parcels of land” for operating the railroad on “a way and right of way one hundred (100) feet in width” fifty feet on each side of the main track. A later recital stated that the instrument’s “object and intention” was to convey a strip fifty feet on each side of the centerline “and no more.”

Mineral owners along the corridor sued BNSF, contending that the deed conveyed a right of way. The court of appeals affirmed the trial court’s decree of fee simple title in BNSF “insofar and only insofar as said deed conveyed property within the boundaries of the properties owned by” the plaintiffs.

The deed language supports fee title

Under the Texas Property Code, a conveyance passes fee simple title unless express words limit the estate or a lesser estate arises by construction or operation of law. Texas decisions supply two rules for railroad deeds:

  • a grant of a “right of way” in or over a tract conveys an easement,
  •  a grant of a tract or strip of land conveys a fee simple even if a later clause calls the grant a right of way.

The placement of the right-of-way language favored BNSF. The granting clause conveyed White’s entire interest in “pieces or parcels of land”; the right-of-way language followed as a statement of use. The court found nothing in the granting clause creating an easement or otherwise limiting the estate.

The warranty and recitals confirm fee title

The court rejected the mineral owners’ three remaining arguments.

  • The warranty clause required the grantor to defend “said premises,” and the habendum grants the railroad “the premises above mentioned and described . . . forever.” The mineral owners construed “premises” as an easement. No. The court held that the term applies to either a fee or an easement. Warranting the premises, rather than a right to cross them, supported fee title. `
  • A purpose declaration in a later clause neither conditions title nor reduces a fee to an easement. The “object and intention . . . and no more” recital limited the strip’s physical extent —not the estate conveyed.
  •  “Over” showed an intent not to convey the entire strip. No. The word used elsewhere meant from one side or extremity of the grantor’s land to the other and had the same meaning here.

The line within the granting clause

The Deed’s purpose language follows “pieces or parcels of land” in the same sentence. The court nevertheless treated it as following “the granting clause’s description of the property conveyed,” drawing the line within the sentence rather than at its end.

The words of conveyance and description establish the grant, while “for the purpose of” describes use. For abandoned-corridor title, the critical question is whether right-of-way language appears after the deed has identified the estate. Where the sentence breaks may matter less than where the granting language ends.

Your musical interlude.

Co-author David Pruitt

A question, not hypothetical: Can one provision in a comprehensive water purchase agreement lock a mineral lessee into a single alternative for every purpose under the sun? In Davenport v. EOG Resources, Inc., a court of appeals said “no”, affirming a $14.9 million jury verdict and judgment against Webb County, Texas, landowners who attempted to enforce one sentence of the agreement in isolation without considering the rest of the document. The agreement was sui-generis, but the court’s approach has broader implications.

The Facts

In 1967, the parties’ predecessors signed the Garner Lease, granting the lessee broad surface rights but restricting free use of water from the lessor’s wells. The Davenports acquired tracts burdened by that lease. Mineral lessee EOG and the Davenports signed a water purchase agreement in January 2022. In March 2023, against the Davenports’ wishes, EOG built a new access gate and caliche road. In response the Davenports sued.

Section 9 of the agreement: EOG “shall enter and exit” the ranch “through the Krueger Rd. gate”. If read alone, this appears to be an all-purpose restriction. But read on. The remainder of the clause tied the ingress and egress requirement to obtaining water “from Grantor’s Frac Pond … and/or designated water wells”.

Interpreting the contract

The trial court granted EOG summary judgment on the competing contract interpretations and on the Davenports’ fraud claims. A jury found the Davenports – not EOG – breached the agreement and awarded damages to EOG.

Texas courts take “a holistic approach” when analyzing the intent behind contractual language. Elsewhere in the agreement the parties used broader language, such as “oil and gas operations,” and “all operations”. The parties knew how to draft broadly when they meant to. Courts “do not interpret contracts as if to insert provisions the parties could have included”. Thus, the Krueger Road restriction applied only when EOG travels to or from the frac pond and designated wells – not for every purpose.

No free pass for oral promises

The Davenports claimed EOG orally promised to limit all access to Krueger Road, inducing them to sign. Dean Davenport was an oil-and-gas veteran, represented by counsel, who admittedly demanded that exact restriction during negotiations, but the final, signed agreement said otherwise. A sophisticated party “cannot justifiably rely on oral misrepresentations regarding the contract’s unambiguous terms.”, precluding Davenports’ fraud claims as a matter of law.

The verdict

Of two alleged breach dates, Dean Davenport himself disclaimed the first. On the second, EOG’s contractor drove through Rancho Derecho – not Krueger Road – but Dean Davenport never saw EOG reach the frac pond or designated water wells, and gate logs showed only fuel, light-tower, and trash deliveries by EOG. Without proof that EOG actually traveled to the frac pond or water wells via the wrong gate, the evidence supported the jury’s finding that EOG did not breach the agreement.

Dominant estate wins again

The Davenport’s accommodation-doctrine trespass claim about a new road, mulching, and powerlines fared no better. As the dominant mineral estate owner, EOG had the right to use as much of the surface as reasonably necessary to produce hydrocarbons. The Davenports offered no evidence their existing use was completely precluded or substantially impaired with no reasonable alternative, an essential element of an accommodation-doctrine claim.

Takeaways

  • In a dispute over the meaning of a contract, isolated sentences lose to holistic contract construction, especially when other clauses show the parties knew how to draft in a way that conflicts with the isolated sentence.
  • A sophisticated party with counsel cannot claim reliance on oral promises that contradict a signed contract.
  • Accommodation-doctrine claims require proof of impairment, not mere inconvenience.

Your musical interlude.

“Better the end of a thing than the beginning thereof … .” Ecclesiastes 7:8. The writer was probably prophesying about Texas’ never-ending double-fraction mineral disputes.

Next up: Ovintive USA, Inc. et al v. High Noon Resources, LLC et al in which the Eastland Court of Appeals found that a 1958 mineral deed reserved a fixed NPRI.

In 1958 Chandler and Childress owned half of the minerals under 25,000 acres in Martin County and conveyed a mineral deed to High Crest of 1/4th. Grantors would “receive” 1/4th of the cash bonus for any lease, 1/4th of delay rentals, and 1/4th ” … of the usual 1/8th royalty … (and Grantors shall be entitled to 1/4 of the 1/8 royalty irrespective of the amount of royalty actually provided for in any lease executed by Grantee, its successors or assigns) … .” (emphasis ours)

There were subsequent transactions but the operative language was in that deed. The court first determined ownership of a 1/8th collective interest conveyed in those later transactions.This discussion is not about that aspect of the decision.

Was the Van Dyke presumption rebutted by the text of the deed?  

Yes. The issue was the effect of the parenthetical phrase. The Court examined the entire instrument in order to harmonize and give effect to all provisions so that none would be meaningless. Because the parenthetical phrase was a part of the 1958 deed, the Court considered it in identifying the grantors’ reserved royalty interest. The phrase was significant to the Court in two respects.

First, it was an express acknowledgement that the parties to the deed were not laboring under the belief of a 1/8th standard royalty; they expressly acknowledged that a future lease may provide for a royalty other than 1/8th. The parenthetical phrase negated one of the foundational bases for the Van Dyke presumption—the concept of a “standard and customary” 1/8th royalty in all future leases (citing Hysaw v. Dawkins) and the “related issue”, the estate misconception theory.

Second, by the use of “irrespective of” the parenthetical phrase untethered the royalty interest withheld by the grantors from the amount of royalty in future leases, thereby indicating that the parties intended for the grantors to withhold a fixed royalty interest. Said the court, “Irrespective of” is simply defined as “regardless of”. Applying this definition, the 1958 deed provided that the royalty interest reserved by the grantors for future leases was “regardless of” “the amount of royalty actually provided for in any lease executed by Grantee.”

Did Rule 39 apply?

Texas Rule of Civil Procedure 39 requires a trial court to order joinder of persons who claim an interest in property that is the subject of litigation if certain factors are present. The decision is reviewed for an abuse of discretion, giving the trial court wide latitude to rule as it sees fit. Here, the court of appeals affirmed the trial court’s denial of a defendant’s request that all owners of interests that might be affected by the judgment be joined by the plaintiff. One basis for the ruling is that the non-joined owners did not actually assert a claim to the interests being litigated. Texas cases on this subject go both ways.

Your musical artifact, proving that for most of us “Dance like nobody’s watching” has a limited shelf life, if it even should be attempted in the first place. Destroy all photographs from those frat-house years.

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It’s often helpful when courts are asked to construe joint operating agreements. Not always, though. Courts sometimes don’t understand or fail to take into account industry custom and practice and the underlying purposes behind the JOA, especially the Model Form. Evans Resources LP v. Petroplex Energy Inc. appears, at first blush, not to be one of those cases on the facts considered by the trial and appellate courts.

The dispute

Evans granted an oil and gas lease to Diamondback for minerals over 651 acres in Midland County. Diamondback as operator and the Anwars (Petroplex) as non-operators entered into what appears to be an AAPL Model Form 610 Joint Operating Agreement to which Diamondback contributed the Evans acreage.

Diamondback released portions of the lease effective as of November 2018. Diamondback drilled horizontal wells that included the Evans expired acreage. Evans sued the Anwars seeking royalties that Diamondback allegedly paid to the Anwars on production from those wells. The claim was the Anwars owed a duty to pay received royalties to Evans because the JOA assigned Diamondback’s royalty obligation to the Anwars. Evans also asserted that it and Diamondback became co-tenants in the released acreage.

How the courts saw the claims.

Not favorably. The Court of Appeals affirmed summary judgment for Anwars on all claims. The basis for the ruling was the words of the JOA (Homework: retrieve a copy and follow along if you wish).

 Evans lacked standing to enforce the JOA’s royalty provisions because:

  • Evans had no privity of estate with the Anwars (Art. III.B disclaims cross-conveyances of contributed interests);
  • Evans was not a third-party beneficiary (Art. VII.A expressly disclaims third-party liability, and Texas law disfavors such claims anyway);
  • Evans had no privity of contract with the Anwars (Under Art. VII.A each party is responsible only for its obligations and no party is obligated to satisfy the default of any other party. Art. III.B requires each party to pay or deliver burdens on its share of production from the Contract Area).

The Court also rejected Evans’s co-tenancy/money-had-and-received claim. There was no co-tenancy relationship between the Anwars and Evans that would create a duty to pay Evans profits from co-tenant operations. Further, the Anwars presented evidence via an affidavit from a Diamondback employee that they received no proceeds attributable to Evans. Rather, they received only revenue based on the leases they contributed to the JOA. Evans’ was not one of those leases.

Lagniappe

Evans knows the courthouse well. While maybe not a “vexatious litigant”, it (or them, or he, or her) is persistent. The Court noted that this is Evans’ third defeat in suits against Diamondback or related parties relating to the same 651 acres. The other opinions are here and here.

Your musical interlude.

Co-Author: Gunner West

In Equinor Energy LP v. Lindale Pipeline, LLC the Supreme Court reversed a jury award of $26 million that had been affirmed by a court of appeals, based on the meaning of one humble preposition. A supplier’s exclusive right to deliver fracking water “on the Pipeline” failed because water from another supplier never reached the operator’s wells.

The deal and the hose that killed it

Lindale built and operated an underground freshwater pipeline for operations on Equinor’s North Dakota wells. Equinor’s predecessor financed and owned the pipe; Lindale invested $1.2 million, maintained the system, and charged below-market rates. In exchange, Section 4 named Lindale “the sole and exclusive water provider and pumper on the Pipeline.”

The contract defined “Pipeline” through an itemized list: the freshwater pipeline, lateral lines, related facilities, well-site appurtenances, rights-of-way, easements, and permits Equinor owned at signing, plus the components shown on an attached map. No wells were identified. With the advent of cheaper lay-flat hoses Equinor began buying water from suppliers whose hoses never touched Lindale’s pipeline system. Lindale sued for breach and prevailed at the trial and appellate courts.

Were the wells “on the Pipeline”?

The Supreme Court deemed Section 4 to be unambiguous. Interpretation of an unambiguous contract is a question of law to be determined by the court. The Court assumed without deciding that Section 4 was a requirements contract. It didn’t matter. To prevail, Lindale still had to show that sales fell within Section 4’s scope. The case ultimately was reduced to one question: Were the wells “on the Pipeline”?

To the chagrin of those of us who were daydreaming in eighth grade, the Court turned to grammar, dissecting the varied meanings of “on”. “On the Pipeline” modified the nouns “provider” and “pumper.” It did not describe the wells. To reach Lindale’s reading the Court would have had to insert a noun the parties never wrote, so the clause would have read “exclusive water provider and pumper [for oil wells] on the Pipeline.” It declined that invitation to blue-pencil the bargain.

An exception allowed Equinor to use other sources “on the Pipeline” only if Lindale could not provide water “through the Pipeline.” A pumper “on the Pipeline” moves water through it, not into conduits alongside it.

The map showed the wells but didn’t list them

A map attached to the agreement showed the listed components and then-existing wells. Lindale argued the depiction pulled the wells into the definition by reference. The Court agreed that an exhibit can be enforceable, but the incorporation language fixes the exhibit’s reach. The definition in the contract invoked the map only to describe and show the enumerated components, not to expand the list, so it did not matter that the map reflected the wells.

Fallback arguments

With the text settled, the rest of Lindale’s case failed in the same way: each argument asked the Court to read past unambiguous words in the contract.

  • The stated purpose of supplying water “for drilling, completion and production operations” could not override Section 4 unless Section 4 were ambiguous, and it was not.
  • Course-of-performance evidence, including Equinor’s years of buying from Lindale, was off-limits for the same reason.
  • Equity: the amount of Lindale’s investment made Equinor’s reading unfair.

Lindale’s plea for equity was rejected. Courts ” … have no business rescuing parties from contracts that turned out to be bad deals in the name of utilitarianism or equity. Our job is to read the words chosen by the contracting parties.”

Your musical interlude, not quite too late for July 4.

Co-Author Gunner West

In B.H.C.H. Mineral, Ltd. v. Needmore Minerals, LLP, the San Antonio Court of appeals held that a reservation of “1/32 of all oil, gas and other minerals” coupled with attribute-stripping language and a minimum royalty requirement created a non-executive mineral interest with a floating royalty. The court also declined to apply the presumed-grant doctrine.

The deed and the dispute

Ninety years ago Esperanza Livestock & Land Company conveyed a 23,513-acre Webb County ranch to John Sinclair, reserving an undivided 1/32 of the minerals, giving the grantee exclusive leasing authority, and requiring any lease to retain at least a 1/8 royalty. Sinclair’s interest ran through John Nance Garner (Speaker of the U.S. House and, under FDR, the nation’s thirty-second vice president) and his successors, who leased in 1967 at a 1/6 royalty. (This well-traveled interest was even owned for a while by golden-throated, Poteet, Texas-born George Strait.)

The royalty floats

The Esperanza successors claimed a fixed 1/32 NPRI. The court considered the deed as a whole, harmonizing the reservation, the stripping lanuage, and the minimum royalty requirement. The words “in and under said land” are classic mineral-estate language, and stripping executive, bonus, and delay-rental rights left a non-executive mineral interest. It was not a royalty interest. According to the Court, the royalty floats because a fixed 1/32 of production would render the deed’s “at least 1/8” clause meaningless. The result left the Esperanza successors with 1/32 of the 1/6 lease royalty, 1/192 of production – quite modest, to say the least.

Presumed-grant does not apply

The Court deemed presumed-grant to be a cousin of adverse possession. In Clifton v. Johnson, the Supreme Court recently allowed that the doctrine might extend to a royalty but declined to decide whether it could do so on the facts of that case. This Court came down against extension, stating that the doctrine has never reached a royalty interest. The Court reasoned that a mineral estate, being possessory, can be adversely possessed, while a royalty is incorporeal and confers no right to possess.

The parties’ predecessors and their operators had a long history of treating the interest as fixed. But the Court believed that an underpayment may reflect a lessee’s breach or mistake, but cashing royalty checks is not the open, adverse claim the doctrine requires. The Court cited Sun Oil Company (Del) v. Madeley, where lessees corrected more than forty years of overpayments and the Supreme Court refused to let the royalty owners lock in the inflated rate. It did not help that the Court believed that the Esperanza successors presented no evidence of an open claim of their own.

Equitable defenses were unavailable

The equitable defenses failed too. Estoppel by deed binds only parties and their privies, and the Esperanza successors were strangers to Garner deeds. Quasi-estoppel, waiver, and ratification cannot manufacture rights the deed withheld, and division orders distribute proceeds, not title.

The dissent

Justice McCray would have applied presumed-grant to establish a 1/32 royalty; the doctrine reached incorporeal interests long before it reached land; Clifton and Boren Descendants v. Fasken signal it can fix a royalty; and five decades of consistent treatment, including a Garner successor’s testimony that his side always regarded the interest as a fixed 1/32, at least raised a fact issue for trial.

Your musical interlude … his exes and his minerals.

Co-author David Pruitt

Our Cornucopia post was a reminder that “subject to” is a phrase that punches well above its weight. In Brown et al v. Endeavor Energy Resources, L.P., those same two words undid a $2.3 million summary judgment and returned the case to the trial court for a do-over.

 The facts

Randy Brown earned overriding royalty interests while working as a geologist in the Permian Basin. In 1998 he assigned his overrides to ARCO, Endeavor’s predecessor. The assignment was “made subject to the terms and conditions” of an unrecorded letter agreement. After Randy died in 2018 and his sons inherited his estate, Endeavor sent division orders naming them as owners and over time paid $2.3 million in royalties. Each DO required the payee to refund amounts attributable to an interest he is paid on but does not own. After finding the ARCO assignment, Endeavor concluded it owned the overrides and demanded repayment. The Browns refused. Endeavor sued for breach of contract. The trial court ruled in Endeavor’s favor. The Browns appealed.

The question

Did Endeavor conclusively prove the Browns did not own the overrides, given that the assignment it relied on was expressly subject to a letter agreement Endeavor never produced. (Spoiler Alert: No.)

The “writing” problem (the Statute of Frauds)

An override is an interest in land, and it has long been Texas law that such interests live and die by the writing that creates them. The law’s insistence on a complete writing is what made the missing letter agreement so consequential.

Two threads illustrate the point. First, Endeavor argued that the deceased Randy could not have reserved any interest because the letter agreement predated the assignment, and a reservation must be made at the time of the conveyance. The court was unpersuaded because the assignment was expressly subordinate to the writing.

Second, the contents of a lost writing cannot simply be assumed. The proponent must first prove the document was lost and account for its absence under Texas Rule of Evidence 1004 before offering secondary evidence of its terms. Endeavor did neither, so the writing that defined the transaction remained a mystery. And a party cannot carry that burden with its own interrogatory answer (that it could not find the letter agreement).

 Evidentiary issues

As is common in these title cases the trial court struck portions of an affidavit of an Endeavor landman on the basis that they constituted factual and legal conclusions.

The ruling

“Subject to” means “subordinate to, subservient to or limited by”. The assignment and the unproduced letter agreement had to be construed together, and Endeavor—bound by every recital and reference in its chain of title—took the assignment with a duty to inquire into the document it incorporated. Endeavor’s evidence painted an incomplete picture of title, supporting “multiple, equally probable inferences” about whether title ever passed.

The circumstantial evidence deepened the doubt: Endeavor kept paying the Browns, the tax rolls still showed Randy as owner, and ARCO never claimed title. There were genuine issues of material fact. The Court reversed and remanded.

 “Subject to” is not boilerplate

Those words fold the referenced writing into the purported owner’s title and charges the owner with notice and a duty to track the writing down. When the writing is missing the proponent must establish its loss under Rule 1004 and prove its whole case. An incomplete chain of title, propped up by the proponent’s own self-serving discovery responses, will not carry the day.

Your (little known) musical interludes:

Mon Rovia

Ladyva

Houndmouth

James Hunter Six

Co-author David Priutt

So says the Supreme Court of Texas in Braxton Minerals III, LLC v. Bauer. For many years there was doubt and confusion over whether a Texas court could assert its jurisdiction in a suit over mineral rights located in another state. In Braxton the Court answered with an emphatic yes, reversing the Fort Worth Court of Appeals and disapproving a line of intermediate appellate court decisions that had muddied the waters.

The facts

Robert Bauer is a Texan who buys and sells mineral rights across the country. In 2015, Bauer and an associate formed Braxton Minerals II (BM2) and partnered with EnerQuest Oil & Gas to create an Oklahoma company, Braxton Minerals III (BM3), to acquire mineral rights in Appalachia. EnerQuest put up $10 million for seventy-five percent of BM3. Through a series of draw requests, BM3 purchased mineral rights from BM2. The problem: 19 mineral deeds listed BM2, not BM3, as grantee – resulting in royalty payments to the wrong entity.

BM3 asked Bauer to fix the deeds. He refused. BM3 sued in Tarrant County seeking reformation, specific performance, declaratory relief and injunctive relief – all those claim you make when you want the property. The district court granted summary judgment for BM3 and ordered Bauer and BM2 to reform the deeds and convey the mineral rights. The court of appeals reversed. Because the minerals were in West Virginia, Texas courts lacked jurisdiction. The court applied the “gist” rule — if the crux of the suit involves adjudication of title to foreign real property, Texas courts cannot hear it. The analysis was not simple.

The new rule

The Supreme Court tossed the “gist” rule entirely, disapproving of Kelly Oil Co. v. Svetlik and its progeny. The new framework highlights the distinction between suits in personam (against the person) and in rem (against the thing). A Texas court cannot exercise in rem jurisdiction over land in another state, but it absolutely can issue an in-personam judgment compelling a party within its jurisdiction to honor contractual obligations regarding that out-of-state land.

The Court relied on precedent stretching back 130 years — Texas & Pacific Railway Co. v. Gay (1894), Holt v. Guerguin (1914), and McElreath v. McElreath (1961) — all standing for the same proposition: If a person has a contractual obligation to convey land, a court having jurisdiction over his person may compel the conveyance, no matter where the land sits. The decisive question is whether the property or the person is the object of the judgment.

The Court concluded that every category of relief BM3 received — specific performance, deed reformation, declaratory judgment, and injunction — operated in personam and was within the district court’s power. The judgment was reversed and remanded.

Practical implications

No longer will an aggrieved party to a contract involving out-of-state lands have to delve into the intricacies of the “gist rule”, hoping to get it right and knowing, as in Braxton before the clarification, that it would have to start all over in another jurisdiction if it guesses wrong.

Your musical interludes – New Orleans, son of New Orleans, New Orleans/cousin of son of New Orleans (all in one, Ziggy) and to round out the discussion, the beginning of New Orleans.