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State v. Signal Drilling, LLC

Court of Appeals of Texas, Seventh District, Amarillo

October 30, 2019

THE STATE OF TEXAS; TEXAS GENERAL LAND OFFICE; AND GEORGE P. BUSH, IN HIS OFFICIAL CAPACITY AS TEXAS LAND COMMISSIONER, APPELLANTS
v.
SIGNAL DRILLING, LLC; JATEN OIL COMPANY; AND RIPARIA, LC, APPELLEES

          On Appeal from the 84th District Court Hutchinson County, Texas Trial Court No. 41, 971; Honorable William D. Smith, Presiding

          Before QUINN, C.J., and PIRTLE and PARKER, JJ.

          MEMORANDUM OPINION

          Per Curiam

         This is an interlocutory appeal from the trial court's order denying a plea to the jurisdiction based upon an assertion of sovereign immunity by Appellants, the State of Texas, the Texas General Land Office, and George P. Bush, in his official capacity as the Texas Land Commissioner. Relying on two contracts to which the State of Texas, was a party, Appellees, Signal Drilling, LLC, Jaten Oil Company, and Riparia, LC, contend they are entitled to certain mineral interests located within the riverbed of the Canadian River in Hutchinson County, Texas. After originally bringing a straight contract construction claim against other parties, Appellees amended their pleadings to allege a third-party takings claim against the State of Texas and the Texas General Land Office, and a trespass-to-try-title claim against George P. Bush, in his capacity as the Texas Land Commissioner. Appellants, as third-party defendants, originally filed a general denial in response to Appellees' amended pleadings. After Appellees amended their pleadings to seek injunctive relief and the appointment of a receiver, they filed a plea to the jurisdiction contending the trial court lacked subject matter jurisdiction due to sovereign immunity as to the State of Texas and the Texas General Land Office and official immunity as to Bush, in his capacity as the Texas Land Commissioner.

         On October 12, 2017, the trial court denied Appellants' plea to the jurisdiction. On appeal, they contend the trial court erred by (1) misconstruing Appellees' claims as anything other than what they are-contract claims, (2) finding that Appellees' claims come within the narrow exception to immunity established in Texas A&M University- Kingsville v. Lawson, 87 S.W.3d 518 (Tex. 2002), (3) finding that Appellant, Bush, acted in an ultra vires manner by interpreting and applying the Canadian River Boundary Agreement and the Amended State Lease in such a manner as to deprive Appellees of certain property interests, and (4) finding that Appellants, the State of Texas and the Texas General Land Office had the requisite intent to effect a takings claim. We affirm the trial court's decision to deny the plea to the jurisdiction filed by Appellants.

         Background

         The Canadian River, a tributary of the Arkansas River, has its genesis in the Sangre de Cristo Mountains in south eastern Colorado. The river "flows" south and southeasterly across the New Mexico plains before it enters the Texas Panhandle about the midpoint of the western boundary of Oldham County. From there, the river crosses the approximate 190 miles of the Texas Panhandle, flowing eastward and northeastward through Oldham, Potter, Moore, Hutchinson, Roberts, and Hemphill Counties. About midway across the Texas Panhandle, the river is dammed by the Sanford Dam, completed in 1965, creating Lake Meredith as a source of municipal water for eleven cities located in the Texas Panhandle, and serving the secondary purpose of flood control, soil conservation, recreation, and the promotion of wildlife.

         Because the Canadian River has, in the past, been considered to be a "navigable" stream, despite the fact that for many miles its average depth is far better measured in inches rather than feet, the State of Texas has laid claim to the oil, gas, and other minerals beneath the riverbed. See Brainard v. State, 12 S.W.3d 6, 11 (Tex. 1999) (resolving a dispute between the State of Texas and thirty owners of land adjacent to the Canadian River as to the methodology to be employed in determining the "gradient boundary" as defined by the United States Supreme Court in a series of cases entitled Oklahoma v. Texas, 260 U.S. 606, 43 S.Ct. 221, 67 L.Ed. 428 (1923)).

         Since construction of the Sanford Dam was complete, the restricted water flow of the river has drastically changed the character of the riverbed east of the dam in Hutchinson, Roberts, and Hemphill Counties. The general width of the riverbed has decreased, and the reduced flow of water has encouraged the growth of vegetation in the river channel which "caused confusion and uncertainty about the location of the boundary between the State's riverbed and the [adjacent] Landowners' riparian tracts." Brainard, 12 S.W.3d at 11. It is this change in the character of the riverbed that has spawned some of the longest pending, most legally-complex real estate ownership disputes in the State of Texas-disputes that have been complicated and bogged down by the State's claims of sovereign immunity and the lack of a qualified "gradient boundary line survey" for the entire length of the Canadian River. Tremendous amounts of judicial resources, surveying fees, and legal fees have been expended trying to untangle the complex web of competing claims.

         The Brainard decision established, for the first time, that changes in the waterflow of the Canadian River had effected changes in the actual "riverbed," and as a result thereof, changes in the riparian boundaries had occurred. In order to avoid the cost and uncertainty of additional litigation following Brainard, the Texas Land Commissioner began entering into settlement agreements with various landowners and stakeholders holding property interests along the Canadian River. As it is relevant to this litigation, effective January 1, 2002, the State of Texas, acting through the Texas Land Commissioner, entered into an agreement with various parties, including J.M. Huber Corporation and Jaten, known as the Canadian River Mineral Boundary Agreement (the "Boundary Agreement") affecting the property in dispute.

         The Boundary Agreement was entered into in order to resolve numerous disputes regarding the boundary line between the riverbed of the Canadian River and the lands adjacent to that river, the "riparian tracts." Of the utmost significance to this litigation was the fact that determination of the disputed boundary lines would resolve issues regarding the ownership of the underlying mineral estates. Specifically, the parties to the Boundary Agreement agreed to compromise and settle all "rights or actions which any party hereto may have or allege to have against any party hereto . . . pertaining or relating to the boundary of their mineral estates between the bed of the [Canadian] River and the lands adjacent to the River." As a part of their comprehensive settlement, the parties to the Boundary Agreement agreed to establish the location of the boundary line between the riverbed (all properties claimed by the State) and the riparian properties (all properties claimed by the adjacent property owners). The agreement resulted in the State relinquishing its claim to certain properties (referred to as the "Released Tracts") that were no longer considered part of the official riverbed of the Canadian River, while at the same time confirming the State's claims to certain properties defined as being within the banks of the riverbed.

         Prior to entry of the Boundary Agreement, the State had historically leased the minerals in the Canadian River riverbed abutting the Jaten and Riparia properties to Huber. As a part of the Boundary Agreement, the State and Huber agreed to release the mineral leases then in effect and to replace them with a new lease, known as the Amended State Lease, having a fixed term of ten years, commencing January 1, 2002, and expiring on December 31, 2011. This lease agreement did not contain a standard "and as long thereafter" clause found in a typical mineral lease, or any other language that would permit the lease to be extended beyond its fixed ten-year term.[1] The State further agreed to convey to Jaten and other ratifying riparian owners its possibility of reverter in the minerals covered by the Amended Lease Agreement so that upon termination of that lease, the riparian owners would own, in fee, the minerals underlying the riverbed adjacent to their respective properties, subject to a 3.5 percent non-participating royalty interest to be retained by the State. The boundaries of any released riverbed property were to be determined by a projection of the boundaries of the riparian tract adjacent to the agreed river bank (parallel to the original north-south survey lines of the riparian section) to the centerline of the property originally covered by the Amended State Lease.

         The Boundary Agreement was appropriately acknowledged and filed of record at Volume 1236, Page 135-222 of the property records of Hutchinson County. The Boundary Agreement also provided that other property owners with an interest contiguous to the property covered by the Amended State Lease could join in the agreement by executing and delivering a ratification of the Pool Administrator prior to January 1, 2006. Riparia ratified the Boundary Agreement on December 30, 2004, in accordance with its terms, and thus became a party to the agreement.

         In June 2015, Signal Drilling, LLC filed this lawsuit claiming an interest in the mineral acreage at issue by virtue of an assignment of a top lease from Jaten. Signal's cause of action was based on a claim of trespass and conversion. By an amended petition filed in September 2015, Signal added the Texas General Land Office and the Commissioner as defendants. In December 2015, Signal added Jaten as a necessary "involuntary plaintiff" and in April 2016, Riparia intervened as a plaintiff. Among other claims alleged in their petitions, Jaten and Riparia asserted a trespass-to-try-title ...


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