Crawford v. XTO Energy, Inc.

• Decision Date: 03 February 2017
• Docket Number: No. 15–0142,15–0142
• Citation: 509 S.W.3d 906
• Parties: Richard D. CRAWFORD, Petitioner, v. XTO ENERGY, INC., Respondent
• Court: Texas Supreme Court

509 S.W.3d 906

Richard D. CRAWFORD, Petitioner,

v.XTO ENERGY, INC., Respondent

No. 15–0142

Supreme Court of Texas.

Argued September 15, 2016

OPINION DELIVERED: February 3, 2017

Brian W. Farabough, Joe L. Lovell, Lovell Lovell Newsom & Isern, L.L.P., Amarillo TX, for Petitioner.

Christopher Alan Brown, David F. Johnson, Jamie Lavergne Bryan, Jeffrey C. King, Winstead PC, Fort Worth TX, for Respondent.

Justice Lehrmann delivered the opinion of the Court.

In this case, in which an oil-and-gas lessor sued the lessee for failure to pay royalties, we consider whether Texas Rule of Civil Procedure 39 required joinder of the lessor's neighboring landowners as parties to the suit. The trial court concluded that the neighboring landowners were necessary parties and dismissed the case without prejudice when the plaintiff failed to join them. The court of appeals affirmed. We hold that the trial court abused its discretion in requiring joinder under Rule 39 and dismissing the case. Accordingly, we reverse the court of appeals' judgment and remand the case to the trial court for further proceedings.

I. Background

Mary Ruth Crawford owned approximately 146 acres of land in Tarrant County, Texas. In 1964, she conveyed the surface estate of 8.235 of those acres in fee simple to Texas Electric Service Company, which operates an electric-transmission line on the property. In the deed conveying that acreage, Mary Ruth expressly reserved the oil and gas under the tract (the Crawford tract), along with a conditional right of ingress and egress for exploration and development.¹ Twenty years later, in 1984, Mary Ruth conveyed the property immediately north and south of the Crawford tract without reserving the oil and gas under those parcels. Much of that property was subsequently subdivided into residential lots.

In 2007, Mary Ruth executed an oil-and-gas lease (Crawford lease) on the Crawford tract with XTO Energy, Inc.'s predecessor in interest. The lease included a provision for royalty payments on gas and casinghead gas produced from the leased premises. The lease also contained a pooling provision.

Mary Ruth died in November 2007, and her son Richard Crawford inherited her estate. In April 2009, Crawford executed and recorded a ratification of the Crawford lease. Shortly thereafter, XTO pooled the Crawford lease with hundreds of other leases, designating the Eden Southwest Unit. Forty-four of those pooled leases encompassed lands adjacent to the Crawford tract. Each lease covered a particularly described tract, as well as "all land owned or claimed by Lessor adjacent or contiguous to the land particularly described [in the lease], although not included within the boundaries of the leased premises."

XTO completed a well on the Eden Southwest Unit that began producing in 2010. Crawford executed a division order and returned it to XTO. However, XTO obtained a title opinion concluding that the share of royalties attributable to the Crawford tract should be credited to the forty-four adjacent landowners rather than Crawford. Specifically, the opinion concluded that, pursuant to the common-law strip-and-gore doctrine, Mary Ruth's 1984 conveyance of the land immediately north and south of the Crawford tract effectively also conveyed the minerals under that tract, even though the deed does not describe it. The strip-and-gore doctrine generally provides:

Where it appears that a grantor has conveyed all land owned by him adjoining a narrow strip of land that has ceased to be of any benefit or importance to him, the presumption is that the grantor intended to include such strip in such conveyance; unless it clearly appears in the deed, by plain and specific language, that the grantor intended to reserve the strip.

Cantley v. Gulf Prod. Co. , 135 Tex. 339, 143 S.W.2d 912, 915 (1940). The title opinion led XTO to take the position that the Crawford-tract minerals were included in the 1984 conveyance because the deed contained no language reserving them.

The record does not reflect whether XTO considered filing an interpleader action after receiving the title opinion to resolve any issues or potential disputes regarding entitlement to the Crawford-tract royalties.² The record also does not reflect any conduct or statements by any of the adjacent landowners indicating their position on ownership of the Crawford tract. In any event, after obtaining the title opinion, XTO began crediting the Crawford-tract royalties to the adjacent landowners and has never made any royalty payments to Crawford.

Crawford sued XTO for breach of contract, declaratory judgment, and related claims arising out of XTO's failure to make royalty payments, asserting that XTO's "acts and omissions have resulted in a cloud on [Crawford's] title to the Property." XTO filed a motion to abate and compel joinder of the forty-four adjacent landowners, arguing that they "have or claim interests in the [Crawford tract] that would be affected by the relief Crawford seeks and are, therefore, needed for the just adjudication of Crawford's claims under Rule 39." The trial court granted the motion, ordering Crawford to join the adjacent landowners or risk dismissal. The trial court also denied Crawford's motion for reconsideration. Crawford did not join the landowners, leading XTO to file a motion to dismiss and a motion for sanctions. The trial court denied the latter but granted the former and dismissed the case without prejudice.

A divided court of appeals affirmed, holding that the trial court did not abuse its discretion in requiring joinder. 455 S.W.3d 245 (Tex. App.–Amarillo 2015). Noting that the adjacent landowners are being paid royalties on the Crawford tract, the court concluded that the owners "have a pecuniary interest in the outcome of this litigation" and could "file their own suit" following a judgment in Crawford's favor, subjecting XTO to the possibility of inconsistent obligations. Id. at 248–49.

II. Discussion

A. Waiver Issues

Before turning to the merits, we address XTO's contentions regarding Crawford's purported waiver of various issues and arguments. First, XTO argues that Crawford has waived his entire appeal because the appellate record contains no reporter's record of the hearings on XTO's joinder and dismissal motions, and that we must therefore presume evidence was presented at those hearings that supports the trial court's orders. See Piotrowski v. Minns , 873 S.W.2d 368, 370–71 (Tex. 1993) ("A litigant who fails to request that the reporter record pretrial proceedings risks waiver of any complaint with respect to error occurring during those proceedings."). The court of appeals rejected this argument, as do we.

A reporter's record is necessary only for evidentiary hearings; "for nonevidentiary hearings, it is superfluous." Michiana Easy Livin' Country, Inc. v. Holten , 168 S.W.3d 777, 782 (Tex. 2005). Further, we generally presume that pretrial hearings are nonevidentiary unless "the proceeding's nature, the trial court's order, the party's briefs, or other indications show that an evidentiary hearing took place in open court." Id. at 783. The clerk's record in this case contains the motions and responses relating to the joinder issue, and the parties submitted a considerable amount of evidence with those filings. In the order granting XTO's motion to compel joinder, the trial court stated that it had considered the motion, response, and reply, along with "the arguments of counsel at the hearing on the Motion, the documents on file with the Clerk of the Court, and the applicable law." Similarly, in its order dismissing the case, the trial court stated that it had considered the motion to dismiss, the response, applicable law, and "the relevant evidence and documents on file with the clerk of the court." Nothing in those orders indicates that the trial court took evidence at the pertinent hearings or relied on any such evidence in ruling on the motions.

XTO asserts in its briefing that "there was documentary evidence that was marked as an exhibit and admitted into evidence at a hearing." XTO does not describe that evidence or clarify the specific hearing at which it was admitted. In light of the volume of evidence filed with the clerk and the absence of any indication that the trial court relied on any evidence submitted at a hearing, XTO's summary assertion that a single, undescribed piece of evidence was admitted as an exhibit at an unidentified hearing does not overcome the presumption that the pertinent hearings were nonevidentiary. Accordingly, we hold that Crawford brought forward an adequate appellate record.

XTO next argues that Crawford waived his appeal by failing to include a statement of issues in his brief on the merits in this Court, as Texas Rule of Appellate Procedure 55.2 requires. Guitar Holding Co. v. Hudspeth Cty. Underground Water Conservation Dist. No. 1 , 263 S.W.3d 910, 918 (Tex. 2008) ("[I]ssues not presented in the petition for review and brief on the merits are waived."). However, Crawford included an issues statement in his petition for review in accordance with the rules, and so long as his brief does not "raise additional issues or points or change the substance of the issues or points presented in the petition," TEX. R. APP. P. 55.2(f), we decline to apply Rule 55.2 so strictly as to deny Crawford our consideration of the merits.

B. Joinder Analysis

We review a trial court's rulings on issues concerning joinder of parties for an abuse of discretion. See Royal Petroleum Corp. v. Dennis , 160 Tex. 392, 332 S.W.2d 313, 317 (1960). "A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner without reference to any guiding rules or principles." Bowie Mem'l Hosp. v. Wright , 79 S.W.3d 48, 52 (Tex. 2002). Texas Rule of Civil Procedure 39 provides the framework for determining when joinder of a party is mandatory and states in pertinent part:

A person who is subject to service of process shall be joined as a party in the

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