Appeal from the 32nd District Court, Nolan County, Texas
Trial Court Cause No. 19, 360
consists of: Willson, J., Bailey, J., and Wright, S.C.J.
M Ranch, Ltd. (Double M) filed suit, including a declaratory
judgment action, against MCG Drilling Investments, LLC, and
others. MCG Drilling answered, filed
counterclaims, and also filed suit as a third-party plaintiff
against Double M Ranch Management, LLC and John Mark
McLaughlin. Double M asked the trial court to declare that
MCG Drilling had no right to claim the right to purchase oil
and gas leases and no current or future rights under a 2012
Lease Option Agreement (2012 LOA) because that agreement had
expired or, alternatively, any extension of the deadline to
pay the bonus payment had expired. After a bench trial, the
trial court entered a declaratory judgment in favor of Double
M and awarded Double M attorneys' fees and court
costs. The trial court also rendered judgment
against MCG Drilling on its counterclaims and third-party
claims. On appeal, MCG Drilling asserts five issues. We
reverse in part and affirm in part.
M Ranch (the Ranch), a 27, 000-acre ranch located in Nolan
County, is owned by Double M Ranch, Ltd., a family-owned
limited partnership; its general partner is Double M Ranch
Management, LLC. John Mark McLaughlin is the managing member
of the limited partnership; he is a rancher and has been a
practicing lawyer for more than sixty years, with experience
in real estate and oil and gas law. In 2005, McLaughlin
executed a lease option agreement on the Ranch with Gary
McCaslin, a petroleum landman. This first lease option
agreementprovided McCaslin the right, but not the
obligation, to purchase one or more oil and gas leases on the
Ranch. The parties entered into two more lease option
agreements-one in 2010 and another in 2012. McLaughlin always
drafted the option agreements and the leases. The 2012 LOA is
the subject of the parties' disputes in this case.
The 2012 LOA and Assignments
the 2012 LOA, McCaslin, as the operator, could exercise the
option at any time. However, the 2012 LOA expired if the
operator did not execute it at least one time on or before
January 10, 2013. After the 2012 LOA was executed, McCaslin
assigned all of his rights in the 2012 LOA to CraRuth,
subject to an Assignment of Overriding Royalty between
CraRuth and McCaslin. McCaslin was to receive an overriding
royalty in any leases acquired under the 2012
The dispute over the extension of the 2012 LOA
the terms of the 2012 LOA outlined that, if the operator paid
the option fee and purchased additional leases on or before
January 10, 2013, then the 2012 LOA would continue for one
year. On January 7, 2013, McCaslin told McLaughlin that he
was exercising the option, and that same day, McCaslin sent
an e-mail with the selected acreage. McLaughlin prepared two
oil and gas leases and forwarded them to McCaslin at the end
of the day on January 10, 2013.
e-mail on January 11, 2013, McCaslin told McLaughlin of
errors in the leases. McLaughlin corrected the leases and
sent them to McCaslin, who noted additional errors.
McLaughlin corrected those errors shortly thereafter and then
sent copies of the signature pages to McCaslin on January 11,
2013, as an attachment in an e-mail. McLaughlin told McCaslin
over the phone on January 10 that the option deadline was
January 10 and that he was leaving his office at noon on
January 11. However, nothing in McLaughlin's prior e-mail
on January 10 referred to a noon deadline. McLaughlin
asserted that he had not changed the deadline to noon on
January 11, 2013. Rebecca Bell Cash, an employee at Texas
State Bank, testified that she notarized one lease for
McLaughlin, on Friday, January 11, 2013, around 9:00 or 10:00
a.m. and could not recall, but may have notarized a second
lease for him.
McLaughlin sent his e-mail with the signature pages, he was
aware that a courier from the escrow agent in Ballinger was
en route to San Angelo with the certified cashier's check
for the bonus payment. When the courier arrived at
McLaughlin's office, McLaughlin had already left for the
Ranch. Because McLaughlin and his secretary were not present
at his San Angelo office when the courier, with the bonus
payment check in hand, arrived around 1:00 p.m. on January
11, the courier went across the hall to the bank. The courier
spoke to Cash, the notary at the bank where McLaughlin had
the documents notarized. Cash called McLaughlin, and
McLaughlin told Cash that he was gone for the day and was not
coming back to the office. McLaughlin said, "Tell them I
will talk to them on Monday." McLaughlin met with Craig
the following Monday, January 14, at McLaughlin's office
in San Angelo. McLaughlin refused the bonus check.
Drilling specially excepted to Double M's second amended
petition in which Double M sought a declaratory judgment
because, MCG Drilling argued, the proper cause of action was
a trespass to try title action. The trial court carried MCG
Drilling's special exceptions; after trial, the trial
court took the case under advisement. Later, the trial court
granted a judgment on liability in Double M's favor and
ordered that Double M was entitled to recover attorneys'
fees and costs. On the same day, the trial court overruled
MCG Drilling's special exceptions. The trial court later
entered a judgment awarding Double M $230, 910.58 in
attorneys' fees and $13, 490.54 in court costs and
expenses. MCG Drilling appealed and requested findings of
fact and conclusion of law. See Tex. R. Civ. P. 296.
MCG Drilling also requested additional findings and
conclusions, but no additional findings and conclusions were
Drilling presents five issues for our review. MCG Drilling
first argues that Double M's claim cannot be brought as a
declaratory judgment action. Second, it argues that the trial
court's findings of fact failed to support a judgment on
trespass to try title or suit to quiet title. Third, MCG
Drilling asserts that the trial court improperly awarded
attorneys' fees. In MCG Drilling's final two issues,
it asserts that the trial court erred when it entered adverse
findings on MCG Drilling's waiver and estoppel defenses
because MCG Drilling proved those defenses as a matter of law
or that the evidence it adduced demonstrated that the trial
court's findings were against the great weight and
preponderance of the evidence. We will address MCG
Drilling's first issue and third issues, then address its
second issue, followed by a collective analysis of its fourth
and fifth issues.
Issues One and Three: The trial court erred when it entered a
declaratory judgment and awarded attorneys' fees.
first and third issues, MCG Drilling asserts that the trial
court erred when it entered declaratory relief and awarded
attorneys' fees. MCG argues that "[t]he trial court
necessarily resolved a title dispute when it entered its
proper method to determine title to lands, tenements, or
other real property is a trespass to try title action. Tex.
Prop. Code Ann. § 22.001 (West 2014); see Teon
Mgmt., LLC v. Turquoise Bay Corp., 357 S.W.3d
719, 723 (Tex. App.-Eastland 2011, pet. denied). "Any
suit that involves a dispute over the title to land is, in
effect, an action in trespass to try title, whatever its
form." Hawk v. E.K. Arledge, Inc., 107
S.W.3d 79, 84 (Tex. App.-Eastland 2003, pet. denied).
"To prevail in a trespass-to-try-title action, a
plaintiff must usually (1) prove a regular chain of
conveyances from the sovereign, (2) establish superior title
out of a common source, (3) prove title by limitations, or
(4) prove title by prior possession coupled with proof that
possession was not abandoned." Lance v.
Robinson, No. 16-0323, 2018 WL 1440476, at *9 (Tex. Mar.
23, 2018) (quoting Martin v. Ammerman, 133 S.W.3d
262, 265 (Tex. 2004) (citing Plumb v. Stuessy, 617
S.W.2d 667, 668 (Tex. 1981))).
Texas Supreme Court recently addressed the propriety of
bringing a declaratory judgment action in a suit concerned
with an interest in real estate. In Lance, the court
Through the years, the issue of whether claimants were
required to seek relief through a trespass-to-try-title
action has been relevant to such questions as whether this
Court had jurisdiction on appeal, whether particular proof
was required to prevail, whether res judicata applied when
the claimant was involved in multiple suits, and whether the
parties could recover their attorney's fees.
Lance, 2018 WL 1440476, at *9 (citing
Martin, 133 S.W.3d at 264-67). When a claim for
declaratory relief is "merely incidental to . . . title
issues, " a declaratory judgment action may not supplant
a suit to trespass title and allow the recovery of
attorney's fees in those circumstances. Hawk,
107 S.W.3d at 84 (quoting John G. and Marie
Stella Kennedy Memorial Foundation v. Dewhurst, 90
S.W.3d 268, 289 (Tex. 2002)). Thus, a trespass to try title
action involves a dispute over the claimant's ownership
or possessory right in the interest at issue. See
Lance, 2018 WL 1440476, at *9.
M argues that since the bonus payment had never been timely
paid, no transfer of ownership occurred. MCG Drilling asserts
that McLaughlin waived the payment deadline, or is estopped
from enforcing it, so the selection and attempted tender of
payment, in effect, determined equitable title. Equitable
title is the present right to legal title. Carmichael v.
Delta Drilling Co., 243 S.W.2d 458, 460 (Tex. Civ.
App.-Texarkana 1951, writ ref'd). In its conclusions of
law, the trial court held that MCG Drilling had no right to
claim oil and gas leases and no current or future rights
under the 2012 LOA. In San Antonio Natural Developments,
Inc. v. Shield, plaintiffs brought an action in trespass
to try title, while San Antonio Natural Developments and
Centex, defendants, filed a cross-action in which they
alleged that plaintiffs breached a lease option agreement.
San Antonio Nat. Devs., Inc. v. Shield, 391 S.W.2d
769 (Tex. Civ. App.-Eastland 1965, writ ref'd n.r.e.)
This court resolved the trespass action. See id. at
M argues that, because the bonus payment was not timely
received, the leases were ineffective. Double M also cites as
additional authority a case that it argues supports its
position that a declaratory judgment action is proper.
See N. Shore Energy, L.L.C. v. Harkins, 501 S.W.3d
598, 606 (Tex. 2016). In North Shore, the Texas
Supreme Court concluded that a lease option agreement by
itself does not convey a possessory interest in minerals.
Id. Such an agreement has two components: the
covenant to hold open the opportunity for the optionee to
accept and the underlying contract, which is not binding
until accepted. Id. at 606. We note that an oil and
gas lease transfers a determinable fee. Cherokee Water
Co. v. Forderhause, 641 S.W.2d 522, 525 (Tex. 1982). We
also note that the lease "vests the lessee with title to
oil and gas in place. . . . It logically follows, and has
long been held . . ., that an oil and gas lease is a sale of
an interest in land." Id.
the facts in North Shore, where the court construed
an allegedly ambiguous contract, the essential question in
this case revolves around the parties'
conduct-evidentiary matters-and whether that conduct
transferred title to minerals. See In re Applied Chem.
Magnesias Corp., 206 S.W.3d 114, 118 (Tex. 2006)
(although a venue case, the Texas Supreme Court noted that it
disagreed with the assertion that suit for construction or
enforcement of an executory contract for the sale of land is
not a suit to recover land or quiet title). In this case,
Double M filed suit to assert that it owned the minerals and
to quiet title to its interest in the minerals that MCG
Drilling claimed it owned as a result of its selection of
acreage under the terms of the 2012 LOA and its proffer of
the bonus payment, which it alleged was improperly rejected.
Because the dispute between MCG Drilling and Double M was
over the ownership of minerals that arose from the 2012 LOA-
specifically, if the 2012 LOA had expired, the minerals
belonged to Double M, whereas if the 2012 LOA was effective,
the minerals belonged to MCG Drilling- the dispute was in
essence who ...