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In re Aztec Oil & Gas, Inc.

United States District Court, S.D. Texas

June 7, 2019

In re Aztec Oil & Gas, Inc., et al, Debtors.
v.
Short OG III, Ltd., et al., Appellees. Fort Apache Energy, Inc., et al, Appellants, Adversary No. 16-03173

          OPINION ON SUPERIOR TITLE

          Lynn N. Hughes, United States District Judge.

         1. Background.

         The property in dispute is 112.174 acres in Tyler County, Texas. In 1971, H.G. Hrivnatz, Sr. - as trustee - acquired an undivided one-half interest in the oil, gas, and minerals. No trust agreement nor known beneficiaries exist. In 1974, H.G.H. conveyed the land, including the mineral interests, to three men who executed a deed of trust for H.G.H.'s benefit. The deed of trust foreclosed in 1976, reverting the land to H.G.H.

         In May 1992, H.G.H. died. His will devised his estate: 50% to his wife, Vannie King Hrivantz, and 25% to each of his sons, Harry Hrivantz, Jr. and David A. Hrivantz "to be held in trust by my wife as long as she is alive."[1] This devised one-half of his % of the community property in the minerals to Vannie. Altogether, Vannie owned 75% of the minerals.

         Vannie executed two durable powers of attorney - in 2003 and 2007 -granting Harry Jr. the authority to act as her attorney-in-fact. Neither of these powers is recorded in Tyler County.

         2. Miller Lease.

         On January 1, 2009, Harry Jr. executed a lease to Miller Energy, Inc. He signed his name as "Harry G. Hrivnatz." The lease did not refer to the use or existence of powers of attorney. It also did not indicate that Harry Jr. was acting in anything other than his own individual capacity.

         Resaca Resources, Inc. - operator of the wells - relies on the two powers of attorney in arguing that the powers vested Harry Jr. with the authority to act as Vannie's attorney-in-fact.

         On January 1, 2009, when Harry Jr. signed the Miller lease, neither power had been recorded in Tyler County. Harry Jr. says that he was acting (a) individually and as trustee of the testamentary trust created by H.G.H.'s will; (b) as trustee of the Vannie revocable trust; and (c) as attorney-in-fact for both Vannie and David.

         Fort Apache Energy, Inc., says that Harry Jr. had questionable authority at best to convey an interest on behalf of Vannie or David in the Miller lease. It also argues that the Miller lease is invalid because it did not lease their interests; Harry Jr. signed it as "Harry G. Hrivnatz" and the lease did not refer to Vannie, David, trusts, or powers of attorney.

         3. Southern Star Lease.

         From November 2010 through early February 2011, Southern Star Exploration, IXC, and its agent, Fort Apache, searched property records preparing to lease a tract adjoining the Miller tract. They determined that the Miller lease was defective and that the mineral interest was not leased.

         On February 10, 2012, Harry Jr. - as trustee of the testamentary trust, as trustee for the Vannie revocable trust, and attorney-in-fact for Vannie and David - signed the Southern Star lease. Fort Apache says that the Southern Star lease is valid because it was leased "from the Hrivantz family in all relevant capacities."

         On that same day, Vannie executed a third power of attorney making Harry Jr. her attorney-in-fact. Southern Star promptly recorded the power of attorney.

         Southern Star (a) ratified the lease on March n, 2012; (b) assigned its leasehold to Fort Apache on April 12, 2012; and (c) recorded it on April 18, 2012. On May 12, 2014, and again on September 8, 2014, Fort Apache assigned working interests. All of Fort Apache's assignments are recorded.

         4. David Jacob "Jay" ...


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