Co-author Ethan Wood

In Texas losing a title dispute doesn’t mean you committed myriad heinous torts by asserting your rights in the first place. The test: Were you reasonable in bringing your colorable but not correct claim? So says Dorfman v. J P Morgan Chase Bank, NA.

The title dispute

In 1929, the Moravitses conveyed mineral interests in Karnes County to McMullen. McMullen conveyed the executive right to McMullen Oil & Royalty Company but retained the royalties. McMullen’s royalty interest passed to his wife when he died and then to the Langille Trust.

The Moravits sons sued to cancel the 1929 deed. McMullen Oil disclaimed any interest in the tract. A 1944 judgment (not recorded until 1991) canceled the 1929 deed. The interests of McMullen Oil and the Langille Trust ended up in the Red Crest Trust, JP Morgan as trustee.

In 2010, Orca approached JP Morgan to lease the tract in question and other tracts that might have already been leased. The Orca landman mentioned to JP Morgan that “there seems to be a problem with the title” but as far as JP Morgan was concerned, “nothing in [their] records [showed] that the Red Crest Trust did not own that acreage.” JP Morgan leased to Orca, and refused to execute a quitclaim demanded by the Moravits sucessors. Litigation ensued.

The tort claims

The Moravits successors won on their trespass to try title, to quiet title, and declaratory judgment claims. They also made several tort claims—slander of title; negligence, gross negligence and negligent hiring, retention, or supervision; and tortious interference with property rights and existing and prospective contractual relationships. The trial court granted summary judgment to JP Morgan and Orca on those claims and the Fort Worth Court of Appeals agreed. Here’s why:

Slander of title

Slander of title requires evidence that:

(1) the plaintiff possesses an interest in the property slandered,

(2) the defendant published a false statement about title to the property,

(3) the statement was published with legal malice, and

(4) the publication caused the loss of a specific sale.

Elements 1 and 2 were established, but the court concluded that element 3—legal malice—was not present. JP Morgan and Orca had a reasonable belief that Red Crest Trust’s title was good. Although they were aware that there might be “a problem with the title,” there was no evidence that they acted deliberately without belief that JP Morgan had a reasonable claim to title. Item 4 failed as well. The Moravits successors also could not establish that they lost a specific sale.

Negligence                             

The negligence claims turned in large part on whether JP Morgan and Orca owed any duty to the plaintiffs. Because they had a reasonable basis for their claim to title, they owed no duty to the plaintiffs to not cloud their title or to quitclaim their possible interests.

Tortious interference

Tortious interference with property rights requires interference with one’s property rights without just cause or legal excuse. JP Morgan and Orca had “just cause” because they had a reasonable belief that JP Morgan’s title was good.

Interference with existing contractual relationships requires a willful and intentional act of interference with an existing contract. Again, because JP Morgan and Orca believed the Red Crest Trust had good title, they could not have willfully and intentionally interfered with an existing contract.

Interference with prospective contractual relationships requires an independently tortious act to prevent a relationship from occurring. Because the Moravits successors’ other tort claims failed, there was no independently tortious act.

With the lopsided rejection of Colorado Proposition 112, oil and gas workers in that state can return to work happy.  Had it passed, there were other options, one in the cosmos and one in Montana.


Co-author Chance Decker

In Murphy Exploration & Production Co. — USA v. Adams the Texas Supreme Court held that an offset well clause in an oil and gas lease did not require the lessee to drill wells calculated to protect against drainage. Four dissenting justices believed the majority disregarded the well-established meaning of “offset well” used in the oilfield for decades. Continue Reading Texas Supreme Court Redefines an Offset Well Clause

Scenes from the trial lawyer’s conference room:

Client: “Lookee here! This paragraph says we win!”

Lawyer: Yes, but what about all the other paragraphs?”

“Those don’t matter.”

Why is that?”

“Because they don’t help us. Did you graduate from law school?”

But the court will harmonize all the provisions in the document.”

“If I want harmony I’ll go with the Everlys. If you’re afraid of a fight, I’ll find me a lawyer with a backbone. I’m thinking the tough, smart lawyer. That one that’s always on TV.”

and:

Client: “@*^& the words. I’ll tell ’em what the deal really was.”

(Repeat client disappointment)

In XTO Energy v. EOG Resources, a title dispute over the mineral estate in 1,653 acres in Atascosa and McMullen counties, Texas, the loser tried both, to no avail. Continue Reading Foreclosure Included the Minerals Because the Documents Said So

Co-author Chance Decker

The ruling from the Supreme Court of Texas in JP Morgan Chase Bank, N.A., et al v. Orca Assets, G.P., L.L.C. was foreseeable. Experienced energy professionals who pass on the opportunity to examine title for themselves are not sympathetic plaintiffs in a suit claiming reliance on oral statements of the lessor.

How did this happen?  Continue Reading Fraud Claim Rejected for Unreasonable Reliance

Let’s get right to the takeaway: Despite the humble hourly rate operators are typically willing to fork over for title examination, the job isn’t easy and you’d better put your trust in a practitioner with expertise, patience, and an eye for detail.

It took a court of appeal two tries to get this one right, after being enlightened by an aggrieved party. These errors are typically discovered in the real life of a producer when an aggrieved royalty owner says you’ve overpaid somebody else. Let’s hope the well is still producing when they bring the matter to your attention. Continue Reading Mineral Title Examination – It’s Not Easy  

Chauvin v. Shell Oil Company et al is the pot full of legal unpleasantness that can be stirred up by landmen trying to buy easements, leases, and the like.

A number of plaintiffs – descendants of grantors of two parcels of land in St. Charles Parish, Louisiana – were contacted by pipeline companies seeking servitudes. Apparently believing that betting on litigation offered a better return than the trifecta at the Fairgrounds, the descendants sued Shell and several pipeline companies holding servitudes from Shell for trespass. In the end, the court denied the plaintiff’s claims; they couldn’t carry their burden to prove their ownership of the property. Continue Reading Trespass Plaintiff: First, Prove Your Ownership

Co-author Chance Decker

Gloria’s Ranch v. Tauren et al – the Louisiana lenders’ bad dream

Anyone seeking stability in the law governing E&P activities in Louisiana will view the lower court decision as a grave error that must be corrected. Virtually every mortgage provides safeguards to protect collateral and manage lenders’ risk. The court of appeal reasoned that because of those provisions, the lender controlled the ability of the borrower to execute a release of a mineral lease, resulting in solidary liability when the borrower-lessee failed to release its lease. Continue Reading An Oil and Gas Case to Expect From Louisiana, and Another From Texas

To begin, choose from these candidates for the all-world spendthrift hall of fame:

  • Imelda Marcos.
  • Every Congress since you and I were little babies.
  • Any MLB team that would trade for Giancarlo Stanton.
  • All Power Five football schools not named Vanderbilt.
  • The eventual winner of the Amazon HQ2 sweepstakes.
  • Robert Baratheon, Lord of the Seven Kingdoms.

In Bradley v. Shaffer, Darrell, a beneficiary of a mineral trust established by his grandparents, purported to convey to Bradley his mineral interests that were subject to the trust and any interest held in trust that he might acquire in the future. The trustees sued, alleging that Darrell had no authority to convey his beneficial interest. Bradley argued that an extension of the trust violated the Rule Against Perpetuities.  Spoiler: It didn’t.

A primer on Texas trust law … who owns what and other rules:

Continue Reading Mineral Conveyance Thwarted by a Spendthrift Provision