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XTO Energy, Inc. v. Eog Resources, Inc.

Court of Appeals of Texas, Fourth District, San Antonio

April 4, 2018

XTO ENERGY, INC. and Mobil Producing Texas and New Mexico, Inc., Appellants
v.
EOG RESOURCES, INC. and Reilly McNeel Dillon, et al., Appellees

          From the 81st Judicial District Court, Atascosa County, Texas Trial Court No. 14-08-0645-CVA Honorable Russell Wilson, Judge Presiding

          Sitting: Marialyn Barnard, Justice Rebeca C. Martinez, Justice Irene Rios, Justice

          OPINION

          Rebeca C. Martinez, Justice

         This case involves a title dispute over the mineral estate underlying a 1, 653-acre tract of land located in Atascosa and McMullen Counties, Texas (the "Mineral Estate"). XTO Energy, Inc. and Mobil Producing Texas and New Mexico, Inc. (collectively, "XTO") sued the McNeel Heirs[1] and their lessee EOG Resources, Inc.[2] seeking a declaration that XTO holds title to the Mineral Estate and seeking recovery of its share of production. The trial court granted summary judgment holding that the McNeel Heirs own the entire Mineral Estate and XTO owns no interest in the Mineral Estate. XTO appealed. We affirm the portion of the trial court's judgment holding the McNeel Heirs own all of the Mineral Estate, and vacate and remand the portion of the judgment pertaining to EOG pursuant to its settlement with XTO.

         Background

         The following is a chronological rendition of the relevant portion of the chain of title to the Mineral Estate; the rest of the chain of title is not in dispute. On December 15, 1928, Simona B. Wofford, individually and as attorney in fact for her father and brother, along with her husband Henry R. Wofford, executed a deed (the "Wofford Deed") conveying all of the described 1, 653 acres of land in Atascosa and McMullen Counties (the "Property") to Thomas Hetherington in exchange for consideration in the amount of $16, 530. The Wofford Deed did not exclude the minerals, and it is undisputed that the Property included both the surface and mineral estates. Hetherington paid $3, 000 in cash and executed five promissory notes with sequential terms for the remainder of the purchase price (the "Notes"). To secure the debt, the Wofford Deed retained a vendor's lien against the Property (the "Vendor's Lien") until Hetherington fully paid all the Notes, providing that at such time "this deed shall become absolute." On the same date, Hetherington also executed a deed of trust conveying the Property in trust to O.F. Heinen, as trustee, to secure payment of the Notes (the "Deed of Trust"). The description of the Property in the Deed of Trust was identical to the description in the Wofford Deed. Both the Wofford Deed and the Deed of Trust provided that Hetherington's failure to pay any of the Notes would result in acceleration of all the Notes and default, at the holder's election, and upon such default the Vendor's Lien would become subject to foreclosure. The Wofford Deed and Deed of Trust were filed in the public records of both counties where the Property was located.

         The Wofford Deed and the Deed of Trust both contained the exact same provision authorizing disposition of a designated mineral interest:

It is further agreed and stipulated that grantee may make such disposition of seven-eights [sic] (7/8) of the mineral rights as he may deem fit, however, it further provides [sic] that the usual one-eighth (1/8) royalty will be retained against the land for the protection of the holder or holders of the notes, until the entire balance against the land shall have been fully paid, with all interest thereon.

         The gist of the current dispute is whether this provision (the "Disposition Clause") authorized Hetherington to convey title to the 7/8ths mineral interest free and clear of the Vendor's Lien and Deed of Trust lien securing Hetherington's debt to Wofford.

         Two days after the execution of the Wofford Deed and Deed of Trust, Hetherington signed a deed conveying the following to Magnolia Petroleum Company:

An undivided seven-eights [sic] (7/8ths)
All the oil and gas and oil and gas rights and other minerals and mineral rights in and under and that may be produced from the following described lands, situated in the Counties of Atascosa & McMullen and State of Texas [i.e., the Property] . . . .

         The Hetherington-Magnolia Deed described the "Property" using the exact same language as in the Wofford Deed and Deed of Trust. The Hetherington-Magnolia Deed further stated that Magnolia had the right to "enter upon, explore, develop, operate and occupy said lands for the production of oil, gas and other minerals . . . ." It is clear from reading the deed as a whole that Hetherington intended to convey a mineral interest to Magnolia. The parties do not dispute the nature of the interest, i.e., mineral, not surface. They do dispute the type of title or right acquired by Magnolia and the legal effect of the foreclosure sale on Magnolia's interest. XTO is the successor-in-interest to Magnolia and claims it owns clear title to the Mineral Estate.

         Approximately one year after execution of the Wofford Deed, Hetherington defaulted on the first Note. As holder of the Notes, Simona Wofford exercised the option to accelerate the Notes and foreclosed on the Property through the trustee.[3] At the April 1, 1930 foreclosure sale, Simona Wofford bought back the Property for $2, 000. The deed executed by the substitute trustee (the "Trustee's Deed") recites that the Property was sold to Wofford in fee simple at foreclosure pursuant to the Deed of Trust securing the Notes. The Trustee's Deed describes the Property sold to Wofford using the same description as in the Wofford Deed, to wit: "1, 653 acres of land in Atascosa and McMullen Counties, Texas, on the San Miguel Creek about fifty miles S. of San Antonio, " and expressly references the metes and bounds contained in the Wofford Deed "for more complete description."

         In 2009, Simona Wofford's successors-in-interest, the McNeel Heirs, leased the Mineral Estate to EOG, which subsequently drilled two producing wells and began paying royalties to the McNeel Heirs. In 2014, XTO filed a trespass-to-try title suit against the McNeel Heirs and EOG claiming that it owns the full mineral interest pursuant to the Hetherington-Magnolia Deed. The McNeel Heirs and EOG filed a competing title claim, along with various other counterclaims. The parties filed competing summary judgment motions on their title claims. The trial court granted a partial summary judgment on the issue of title to the Mineral Estate in favor of the McNeel Heirs and EOG. After the McNeel Heirs nonsuited their remaining counterclaims, the trial court entered a final judgment on December 9, 2016 decreeing that, "[a]ll right, title, and interest in the Mineral Estate is vested and has been vested in the McNeel Heirs and their predecessors-in-interest since April 1, 1930, when Lucian L. Morrison, substitute trustee, conveyed the Property, including the Mineral Estate, back to Simona Wofford under a substitute trustee's deed . . ." and that XTO "own[s] no interest in the Mineral Estate." XTO appealed, asserting the McNeel Heirs failed to carry their summary judgment burden to establish superior title to the Mineral Estate and that it (XTO) conclusively established its ownership of the Mineral Estate.

         Discussion

         Trespass to try title is the method for determining title to real property. Tex. Prop. Code Ann. § 22.001(a) (West 2014); Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004) (trespass to try title is typical method used to "clear problems in chains of title"); Longoria v. Lasater, 292 S.W.3d 156, 165 (Tex. App.-San Antonio 2009, pet. denied). A plaintiff may recover on a trespass to try title claim by proving (1) a regular chain of conveyances from the sovereign, (2) a superior title out of a common source, (3) title by limitations, or (4) prior possession that has not been abandoned. Rogers v. Ricane Enterps., Inc., 884 S.W.2d 763, 768 (Tex. 1994); Longoria, 292 S.W.3d at 165. "A plaintiff[']s right to recover depends on the strength of his or her own title, not the weaknesses of the title of his or her adversary." Ramsey v. Grizzle, 313 S.W.3d 498, 505 (Tex. App.-Texarkana 2010, no pet.); Longoria, 292 S.W.3d at 165. When, as here, the parties agree that their claimed title stems from a common source, i.e., Simona Wofford, "it is incumbent on the plaintiff to discharge the burden of proof resting on him to establish a superior title." Great N. Energy, Inc. v. Circle Ridge Production, Inc., 528 S.W.3d 644, 669 (Tex. App.-Texarkana 2017, pet. denied) (quoting Davis v. Gale, 160 Tex. 309, 330 S.W.2d 610, 612 (1960)). A plaintiff asserting superior title out of a common source may meet its burden by connecting its title through a complete chain of title to the common source and then by showing that its title is superior. Great N. Energy, 528 S.W.3d at 670 (citing Rogers, 884 S.W.2d at 768); Longoria, 292 S.W.3d at 165 (proof of a common source of title may be achieved through certified copies of the deeds in the chain of title leading to the claimant). When a plaintiff fails to establish superior title in a trespass to try title suit, the proper procedure is for the trial court to enter a "take-nothing" judgment, which divests the plaintiff of all its interest in the land in controversy and vests the same in the defendant. Great N. Energy, 528 S.W.3d at 670.

         Summary Judgment Standard of Review

         We review the trial court's grant of a summary judgment de novo, regardless of whether the summary judgment motion was a traditional motion or a no-evidence motion. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). To prevail on a traditional motion for summary judgment, the movant must show that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex. 2003). In reviewing a summary judgment, we take as true all evidence favorable to the non-movant, indulging every reasonable inference and resolving any doubts in the non-movant's favor. Knott, 128 S.W.3d at 215. Where, as here, the parties filed competing motions for summary judgment, and the trial court granted one motion and denied the other, we review both sides' summary judgment evidence and determine all questions presented and, if the trial court erred, render the judgment that the trial court should have rendered. Valence, 164 S.W.3d at 661; Sw. Bell Tel., L.P. v. Emmett, 459 S.W.3d 578, 583 (Tex. 2015).

         Here, since there were competing summary judgment motions on title, the ultimate issue in this appeal is who has superior title to the 1, 653-acre Mineral Estate. In resolving that question within the context of this appeal, we must review the summary judgment evidence to determine whether either XTO or the McNeel Heirs conclusively established as a matter of law that they hold superior title to the Mineral Estate, or whether there is a material fact issue concerning title which precludes summary judgment. As noted, the trial court found that the McNeel Heirs proved as a matter of law that they have superior title to the Mineral Estate, and that the evidence conclusively established that XTO owns no interest in the Mineral Estate. Because both sides rely on the same deeds and other documents to establish their claim of title, our summary judgment analysis turns on an interpretation of the documents and their legal effect.

         Analysis

         On appeal, XTO contends it owns the Mineral Estate because the Disposition Clause in the Wofford Deed and Deed of Trust authorized Hetherington to convey title to Magnolia "free and clear" of the Vendor's Lien and Deed of Trust lien, and replaced the liens with the 1/8th royalty as Wofford's security for payment of the Notes. Magnolia therefore acquired full legal title to the Mineral Estate from Hetherington, subject only to the 1/8th royalty. Under XTO's theory, the foreclosure sale had no effect on Magnolia's ownership of the Mineral Estate "free and clear, " except to extinguish the 1/8th royalty. XTO asserts that, per the Disposition Clause, the 1/8th royalty was to remain in effect only until the Notes were fully paid, at which point its function as security ended and the royalty expired according to its defined term. Therefore, XTO's position on appeal is that 1) Simona Wofford's purchase of the Property at the foreclosure sale was limited to only the surface estate, 2) XTO succeeded to Magnolia's clear legal title to the Mineral Estate, and 3) the 1/8th royalty was extinguished by the foreclosure.

         The McNeel Heirs disagree that the Disposition Clause "carved out" the Mineral Estate from the Vendor's Lien and Deed of Trust lien. The McNeel Heirs interpret the main function of the Disposition Clause as retaining the 1/8th royalty as a third layer of security for Wofford in the event of a mineral interest transfer; the clause also acknowledged Hetherington's ability to convey whatever rights he held in 7/8ths of the Mineral Estate. Under the McNeel Heirs' theory, the mineral interest that Magnolia acquired from Hetherington was encumbered by, and subject to, the Vendor's Lien and Deed of Trust lien securing Hetherington's purchase-money debt to Wofford. When Hetherington defaulted on the Notes and the substitute trustee foreclosed on the liens, Magnolia's equitable interest in the 7/8ths mineral interest was extinguished. Therefore, when Simona Wofford purchased the Property at the foreclosure sale, she obtained fee simple title to the full Mineral Estate, i.e., the 7/8ths mineral interest and the 1/8th mineral interest not conveyed by Hetherington.[4] She also obtained fee simple title to the surface estate of the Property. As noted, the trial court found the McNeel Heirs proved their superior title to both the mineral estate and the surface estate of the Property, subject only to the EOG lease.

         Although the parties present competing interpretations of the Disposition Clause, they agree the clause is not ambiguous. See Longoria, 292 S.W.3d at 166 (merely because parties ascribe different interpretations to a provision does not make it ambiguous). The construction of an unambiguous deed is a question of law for the court that we review de novo. Stribling v. Millican DPC Partners, LP, 458 S.W.3d 17, 20 (Tex. 2015) (per curiam); Luckel v. White, 819 S.W.2d 459, 461 (Tex. 1991). In construing an unambiguous deed, our primary duty is to determine the parties' intent as expressed by the language within the four corners of the document. Luckel, 819 S.W.2d at 461; Graham v. Prochaska, 429 S.W.3d 650, 655 (Tex. App.-San Antonio 2013, pet. denied). The deed's terms are given their plain, grammatical, and generally accepted meanings unless the deed itself shows the parties used them in a technical or different sense. Prochaska, 429 S.W.3d at 655. If parts of the deed seem to be contradictory or inconsistent, we strive to harmonize all the parts and construe the deed as a whole to give effect to every provision. Luckel, 819 S.W.2d at 462 ("[T]the parties to an instrument intend every clause to have some effect and in some measure to evidence their agreement."); Prochaska, 429 S.W.3d at 655. Even if the court could discern the parties' actual intent, that is not the controlling factor; rather, "the actual intent of the parties as expressed in the ...


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