MCG Drilling Invs., LLC v. Double M Ranch, Ltd.
| Decision Date | 30 April 2018 |
| Docket Number | No. 11-14-00299-CV,11-14-00299-CV |
| Parties | MCG DRILLING INVESTMENTS, LLC, ET AL., Appellants v. DOUBLE M RANCH, LTD., ET AL., Appellees |
| Court | Court of Appeals of Texas |
On Appeal from the 32nd District Court Nolan County, Texas
Double M Ranch, Ltd. (Double M) filed suit, including a declaratory judgment action, against MCG Drilling Investments, LLC, and others.1 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 rightto 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.2 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.
Double 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 agreement3 provided 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 20104 and another in 2012. McLaughlin always drafted theoption agreements and the leases. The 2012 LOA is the subject of the parties' disputes in this case.
Under 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,5 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 LOA.6
One of 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.
In an 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 pages7 to McCaslin on January 11, 2013, as an attachment inan 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.
When 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.
MCG 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 entered.
MCG 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.
In its 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 judgment."
The 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 titleto 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))).
The 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 noted:
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.
Double 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 attemptedtender 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...
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