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.
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