Archer v. Tregellas
| Citation | 566 S.W.3d 281 |
| Decision Date | 16 November 2018 |
| Docket Number | No. 17-0093 consolidated for oral argument with, No. 17-0094,17-0093 consolidated for oral argument with |
| Parties | Carl M. ARCHER Trust No. Three, Mary Frances G. Archer Trust No. Three, and Mary Archer Dixon and Carla Archer Johnson, Trustees, Petitioners, v. Ronald Ralph TREGELLAS and Donnita Tregellas, Respondents Carl M. Archer Trust No. Three, Mary Frances G. Archer Trust No. Three, and Mary Archer Dixon and Carla Archer Johnson, Trustees, Petitioners, v. Ronald Ralph Tregellas and Donnita Tregellas, Respondents |
| Court | Supreme Court of Texas |
John T. Smithee, Joe W. Hayes, Templeton, Smithee, Hayes Heinrich & Russell, LLP, Amarillo TX, Billy B. Jarvis, Billy Britt Jarvis, Attorney at Law, Spearman TX, for Petitioners.
Claire Y. Walsh, Matthew D. Bartosiewicz, Lemon, Shearer, Phillips & Good, P.C., Booker TX, for Respondents.
This case concerns whether the statute of limitations bars a claim for breach of a recorded right of first refusal to purchase a mineral interest. The grantors of the right conveyed the mineral interest to a third party without notifying the holders. More than four years later, the rightholders learned of the conveyance and sued the third party for breach, seeking specific performance. The trial court rendered judgment for the holders, but the court of appeals reversed, holding that the statute of limitations bars the claim. Specifically, the court of appeals held that the rightholders' cause of action accrued when the grantors conveyed the property without notice and that the discovery rule does not apply to defer accrual. We agree with the court of appeals' first conclusion but disagree with the second. Accordingly, we reverse the court of appeals' judgment in part and reinstate the trial court's judgment.
On June 12, 2003, members of the Cook family executed a warranty deed conveying the surface estate of a tract of land in Hansford County, Texas,1 to the trustees of the Carl M. Archer Trust No. Three and the Mary Frances G. Archer Trust No. 3 (Trustees).2 The sellers retained ownership of the mineral estate but separately granted Trustees a right of first refusal (ROFR) to purchase the minerals. The ROFR stated in relevant part:
The warranty deed and ROFR were filed in the Hansford County property records on June 16, 2003.
Trustees' attorney subsequently discovered that the ROFR erroneously described the property as being in Ochiltree County rather than Hansford County. The attorney drafted a Right of First Refusal Correction accurately describing the county. That document was signed by some of the original ROFR grantors and filed in the Hansford County property records in September 2004.
On March 28, 2007, Sharon Sue Cook Farber and Rodney Farber—two of the ROFR grantors—executed a mineral deed conveying their interest in the Tract 4 minerals to Ronald Ralph Tregellas and Donnita Tregellas. The deed was recorded on March 30, 2007. Before conveying the interest, the Farbers did not notify Trustees of the Farbers' intent to sell or of the price, terms, and conditions of the Tregellases' offer. Nor were Trustees notified about the sale after the fact.
Trustees learned of the conveyance over four years later, on May 4, 2011, when they were advised of it by a prospective oil and gas lessee. The next day, Trustees sued the Farbers and the Tregellases for breach of the ROFR and tortious interference, alleging that Trustees had the right to purchase the conveyed interest, that they had not been given notice of the sale, and that they "desire to exercise their right to purchase the [conveyed] interest."3 Trustees sought damages as well as specific performance, asking the trial court to order the "transfer of the property" from the Tregellases to Trustees. They also requested attorney's fees.
The defendants raised several affirmative defenses, including that the four-year statute of limitations barred the contract claims. Trustees ultimately amended their pleadings to nonsuit their claims against the Farbers and pursue relief against only the Tregellases.4 In their amended pleadings, Trustees alleged that upon their receipt of notice in 2011 of the Farbers' conveyance to the Tregellases, Trustees' right of first refusal "ripened into" an option to purchase the conveyed interest at the same price and on the same terms and conditions, and that Trustees timely exercised that option by filing suit. They further alleged that the Tregellases purchased the interest with actual or constructive notice of the ROFR and thus "st[oo]d in the shoes of the Farber[s]." Trustees sought "specific performance of the contract created by their exercise of the option to purchase." They also pled that the statute of limitations did not bar their contract claims because (1) the contract at issue was created when Trustees exercised their option to purchase the mineral interest, which occurred less than four years before suit was filed, and alternatively (2) the discovery rule and the doctrine of fraudulent concealment tolled the limitations period.
After a bench trial, the trial court rendered judgment for Trustees and granted specific performance, ordering the Tregellases to convey the pertinent mineral interest to Trustees upon their deposit of the purchase price—set at $9,000, the amount the Tregellases had paid—into the court's registry.5 The court also awarded Trustees their attorney's fees. In its findings of fact, the trial court concluded that by filing their original petition, Trustees "exercised their right of first refusal under the ROFR to purchase the Farber interest from the [Tregellases]." The trial court further found that the Farbers and the Tregellases did not disclose to Trustees that the Farbers were willing to sell their mineral interest, and that Trustees "did not know, nor in the exercise of reasonable care and diligence, should they have known that the Farbers were willing to sell their mineral interests ... until they were notified of same by a third party on May 4, 2011." Finally, the court found that, had Trustees been notified earlier of that fact, "they would have immediately filed suit to enforce their rights under the ROFR." In its conclusions of law, the court held that the Tregellases took the Farbers' mineral interest with notice of the ROFR and were not bona fide purchasers for value, that the statute of limitations did not bar Trustees' causes of action, and that Trustees were "entitled to specific performance of the ROFR."
The Tregellases appealed, arguing that the trial court erred in finding that the statute of limitations did not bar Trustees' claim.6 The court of appeals agreed and reversed, holding that Trustees' cause of action for breach of contract accrued when the minerals were conveyed without notice. 507 S.W.3d 423, 430 (Tex. App.—Amarillo 2016). The court of appeals also held that the discovery rule does not apply to delay accrual because Trustees' injury is "of the type that generally is discoverable by the exercise of reasonable diligence." Id. at 433. Finally, because the court's reversal on the merits impacted the propriety of the award of attorney's fees, the court severed the issue of entitlement to attorney's fees into a new cause, reversed the fee award, and remanded the severed cause to the trial court to redetermine that issue. Id. at 437.
Trustees filed petitions for review of both judgments. The petitions were consolidated for oral argument.
Because Trustees' right of first refusal is central to this dispute, we begin with a discussion of the legal principles governing this interest. "A right of first refusal, also known as a preemptive or preferential right, empowers its holder with a preferential right to purchase the subject property on the same terms offered by or to a bona fide purchaser." Tenneco Inc. v. Enter. Prods. Co. , 925 S.W.2d 640, 644 (Tex. 1996). Generally, a right of first refusal requires the grantor to notify the holder of his intent to sell and to first offer the property to the holder on the same terms and conditions offered by a third party. See id. ; Navasota Res., L.P. v. First Source Tex., Inc. , 249 S.W.3d 526, 532 (Tex. App.—Waco 2008, pet. denied). When the grantor communicates those terms to the holder, the right "ripens into an enforceable option." FWT, Inc. v. Haskin Wallace Mason Prop. Mgmt., LLP , 301 S.W.3d 787, 793 (Tex. App.—Fort Worth 2009, pet. denied) (quotation omitted); Durrett Dev., Inc. v. Gulf Coast Concrete, LLC , No. 14-07-01062-CV, 2009 WL 2620506, at *4 (Tex. App.—Houston [14th Dist.] Aug. 27, 2009, no. pet.) (mem. op.). The holder may then elect to purchase the property according to the terms of the instrument granting the first-refusal right and the third party's offer, or decline to purchase it and...
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