Orca Assets, G.P., L. L.C. v. Dorfman

• Decision Date: 16 July 2015
• Docket Number: NO. 02–14–00057–CV,NO. 02–14–00056–CV,02–14–00056–CV
• Citation: 470 S.W.3d 153
• Parties: Orca Assets, G.P., L.L.C.; Orca/ICI Development; Orca Petroleum, Ltd.; and Allen Berry, Appellants v. Louis Dorfman; K.I. Holdings, Ltd.; Sam Myers; J.M.D. Resources, Inc.; Billy Cogdell Bowden; Barbara Standfield; Stacey Dorfman–Kivowitz; Julia Dorfman; Mark Dorfman; David Phillip Cook; Cheryl King Cook; Sam Y. Dorfman, Jr.; Frank Moravits, Individually and as Trustee of the Moravits Children Trust No. 1 and Moravits Children Trust No. 2; Shelby Moravits; and Jerry Kortz, Appellees and JPMorgan Chase Bank, N.A., as Trustee of the Red Crest Trust, Appellant v. Louis Dorfman; K.I. Holdings, Ltd.; Sam Myers; J.M.D. Resources, Inc.; Billy Cogdell Bowden; Barbara Standfield; Stacey Dorfman–Kivowitz; Julia Dorfman; Mark Dorfman; David Phillip Cook; Cheryl King Cook; Sam Y. Dorfman, Jr.; Frank Moravits, Individually and as Trustee of the Moravits Children Trust No. 1 and Moravits Children Trust No. 2; Shelby Moravits; and Jerry Kortz, Appellees
• Court: Texas Court of Appeals

470 S.W.3d 153

Orca Assets, G.P., L.L.C.;

Orca/ICI Development;

Orca Petroleum, Ltd.; and Allen Berry, Appellantsv.Louis Dorfman;

K.I. Holdings, Ltd.;

Sam Myers;

J.M.D. Resources, Inc.;

Billy Cogdell Bowden;

Barbara Standfield;

Stacey Dorfman–Kivowitz;

Julia Dorfman;

Mark Dorfman;

David Phillip Cook;

Cheryl King Cook;

Sam Y. Dorfman, Jr.;

Frank Moravits, Individually and as Trustee of the Moravits Children Trust No. 1 and Moravits Children Trust No. 2;

Shelby Moravits; and Jerry Kortz, AppelleesandJPMorgan Chase Bank, N.A., as Trustee of the Red Crest Trust, Appellantv.Louis Dorfman;

K.I. Holdings, Ltd.;

Sam Myers;

J.M.D. Resources, Inc.;

Billy Cogdell Bowden;

Barbara Standfield;

Stacey Dorfman–Kivowitz;

Julia Dorfman;

Mark Dorfman;

David Phillip Cook;

Cheryl King Cook;

Sam Y. Dorfman, Jr.;

Frank Moravits, Individually and as Trustee of the Moravits Children Trust No. 1 and Moravits Children Trust No. 2;

Shelby Moravits;

and Jerry Kortz, Appellees

NO. 02–14–00056–CV

NO. 02–14–00057–CV

Court of Appeals of Texas, Fort Worth.

DELIVERED: July 16, 2015

Rehearing Overruled September 10, 2015

Attorneys for Appellants Orca Assets, G.P., L.L.C.; Orca/ICI Development; Orca Petroleum, Ltd.; and Allen Berry: Don Jackson, Jeffrey W. Chambers & Wesley A. Jackson Ware, Jackson, Lee & Chambers, L.L.P. Houston, Texas

Attorneys for Appellees Louis Dorfman; K.I. Holdings, Ltd.; Sam Myers; J.M.D. Resources, Inc.; Billy Cogdell Bowden; Barbara Standfield; Stacey Dorfman-Kivowitz; Julia Dorfman; Mark Dorfman; David Phillip Cook ; Cheryl King Cook; Sam Y. Dorfman, Jr.: G. Michael Gruber, Michael J. Lang & William S. Richmond Gruber Hurst Johansen Hail Shank LLP Dallas, Texas

Attorneys for Appellees Frank Moravits, Individually and as Trustee of the Moravits Children Trust No. 1 and Moravits Children Trust No. 2; Shelby Moravits; and Jerry Kortz: John F. Carroll, Jon Christian Amberson & Larissa Janee Hood Jon Christian Amberson, P.C. San Antonio, Texas

Attorneys for Appellant JPMorgan Chase Bank, N.A., As Trustee of the Red Crest Trust: Patrick K. Sheehan, David Jed Williams & Eduardo L. Morales Hornberger Sheehan Fuller & Garza Incorporated San Antonio, Texas, Kevin M. Beiter McGinnis Lochridge & Kilgore, LLP Austin, Texas

PANEL: LIVINGSTON, C.J.; WALKER and MEIER, JJ.

OPINION

TERRIE LIVINGSTON, CHIEF JUSTICE

In these permissive interlocutory appeals¹ that hinge on the effects of a 1929 deed and a 1944 judgment by a district court in Karnes County, appellants Orca Assets, G.P., L.L.C.; Orca/ICI Development; Orca Petroleum, Ltd.; and Allen Berry (collectively Orca), along with appellant JPMorgan Chase Bank, N.A., as Trustee of the Red Crest Trust (JPMorgan), appeal the trial court's February 5, 2014 “Rule 166 Order on Legal Matters Decided by the Court.” We affirm.

Background Facts

These appeals concern ownership and development rights to a 200.1–acre tract in Karnes County. In 1901, William Mayfield conveyed the tract to Mary Moravitz.² In 1929, along with her husband J.W., Mary purportedly conveyed an undivided fifteen-sixteenths interest in all minerals within that tract to H.J. McMullen.³ The same year, H.J. conveyed the executive right to the tract,⁴ along with the rights to receive delay rentals and bonus payments, to McMullen Oil & Royalty Co., Inc. (McMullen Oil). H.J. retained for himself the right to receive royalty payments from production on the tract.

H.J. died in 1934; his wife, Susie, survived him. Through H.J.'s will, any of his interest in the tract passed to Susie, the will's executrix. Susie later remarried and took the last name of Langille. She acted as McMullen Oil's president before dying in 1938. Her will created a trust (the Langille Trust) that designated the Fort Worth National Bank (FWNB) as trustee and named her surviving children as beneficiaries.⁵ Susie's will made some specific bequests to her husband and others but placed the general residue of her property, including any interest in the 200.1–acre tract that had been reserved by H.J., into the trust.

In 1943, Mary and her sons, who had leased the property for the development of minerals, filed a lawsuit in Karnes County against McMullen Oil to cancel Mary's purported 1929 deed to H.J. They claimed that the deed had been forged and had been procured by fraud. In the last paragraph of the petition, the Moravitzes prayed that “the instrument ... conveying an undivided fifteen-sixteenths ... mineral interest in and under the 200.1 acres ... be cancelled ... and held for naught.”

McMullen Oil filed a document disclaiming its interest in the tract. The disclaimer stated,

This defendant denies the allegations in plaintiffs' petition, but states in open court that it asserts no right, title, interest[,] or right of possession in and to the premises described in plaintiffs' petition aforesaid, and says as far as it is concerned the plaintiffs herein have all right, title, interest [,] and right of possession thereto. [Emphasis added.]

The Karnes County district court signed a judgment in 1944 that “cancelled and held for naught” the 1929 deed. The court, while reciting that McMullen Oil had filed a disclaimer, also declared that “title to the ... oil, gas[,] and other minerals” belonged to Mary and her sons. The judgment stated that the court had considered “evidence and argument of counsel,” and it recited that the Moravitzes had signed the 1929 deed.

In 1961, FWNB conveyed (while reserving a royalty) any mineral interests owned by it (as trustee) or the McMullens (before their deaths) to McMullen Oil. In 1966, McMullen Oil dissolved. As part of the dissolution, McMullen Oil conveyed to FWNB, as trustee under Susie's will, all of McMullen Oil's rights to any mineral interests that it owned. The 1966 document did not particularly describe (by metes and bounds, for example) the 200.1 acres or any other property that McMullen Oil may have had rights to at that time.

The Langille Trust terminated in 1984 upon the death of Susie's last-remaining child, and under the terms of Susie's will, the property in the trust was distributed to her grandchildren. In 1985, the grandchildren created the Red Crest Trust and transferred any oil, gas, and mineral interests that they owned into it. In 1991, the 1944 judgment was first recorded in Karnes County's deed records.

JPMorgan eventually became the trustee of the Red Crest Trust. In 2010, JPMorgan executed a lease of minerals underneath the 200.1 acres to Orca. Near the same time, other parties, including the Moravitz family, also leased the right to develop minerals on the property.⁶ The parties' existing leases and claims to the property are competing and irreconcilable.

Litigation ensued. Through their own pleadings and in response to appellants' pleadings, the appellees listed above⁷ brought causes of action in which they claimed ownership or development rights to the 200.1 acres through the effect of the 1944 judgment that cancelled the 1929 deed, along with a series of transfers following the 1944 judgment. Appellees also contended that appellants had wrongfully clouded and slandered appellees' title. Appellants claimed the rights by pleading that the 1944 judgment is void and unenforceable or that, if generally enforceable, the judgment still cannot extinguish appellants' rights to the property.

The parties sought summary judgment concerning their claims to the property. JPMorgan moved for summary judgment on traditional and no-evidence grounds; it contended, in part, that the 1944 judgment that purported to cancel the 1929 deed was void and that JPMorgan, which allegedly did not have actual or constructive notice of the judgment until 1991, qualified as a bona fide purchaser for value even if the judgment was not void. Among other arguments, Orca likewise contended that the 1944 judgment was void because necessary parties were not joined in that lawsuit, that the 1929 conveyance constituted a valid link in its chain of title regardless of whether the 1944 judgment was generally valid; that upon H.J.'s death in 1934, all of McMullen Oil's rights to the property passed to his estate (and thus, to Susie); and that, therefore, all rights relating to the property, including executive rights, passed from Susie to the Langille Trust and eventually to the Red Crest Trust.

Appellees contended, in part, that appellants' arguments about title depended upon the judicially-cancelled 1929 deed and that after the entry of the 1944 judgment, which bound appellants (who were allegedly all in privity with McMullen Oil), no purchaser could have relied on the 1929 deed to become a bona fide purchaser.

Appellees also argued that appellants' collateral attacks on the 1944 judgment impermissibly hinged on extrinsic evidence and on reliance upon overruled, inapplicable legal principles. Finally, appellees contended that they had established an unbroken chain of title dating back to Mayfield's conveyance to Mary.

After receiving the parties' extensive briefing and conducting two hearings for argument, the trial court entered a “Rule 166⁸ Order on Legal Matters Decided by the Court.” The trial court made three conclusions of law:

1. The judgment dated April 6, 1944, of the 81st District Court of Karnes County, Texas, in Cause No. 4602, Mary Moravitz et. al. v. McMullen Oil Royalty Company Inc., et. al., and recorded in Volume 623 at Page 361 of the Official Records of Karnes County (the “1944 Judgment”), is valid and enforceable against all parties in this cause;

2. The mineral deed dated September 11, 1929, from J.W. Moravits and Mary Moravits, as grantors, to H.J. McMullen, as grantee, and recorded in Volume 86 at Page 415 of the deed records of Karnes County (the “1929 Deed”), is void ab initio ; and

3. Neither the Defendants, Orca Assets G.P., L.L.C., JPMorgan Chase Bank, N.A., individually and as Trustee of the Red Crest Trust, and Phillip Mettham, nor their predecessors and successors in title to the 200.1 acres of property described in the 1944 Judgment (

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