Tanya L. McCabe Trust v. Ranger Energy LLC

• Decision Date: 22 December 2016
• Docket Number: NO. 01–15–00044–CV,01–15–00044–CV
• Citation: 531 S.W.3d 783
• Parties: TANYA L. MCCABE TRUST, McCabe Family Trust, and the Rochford Living Trust, Appellants v. RANGER ENERGY LLC, Appellee
• Court: Texas Court of Appeals

531 S.W.3d 783

TANYA L. MCCABE TRUST, McCabe Family Trust, and the Rochford Living Trust, Appellants

v.RANGER ENERGY LLC, Appellee

NO. 01–15–00044–CV

Court of Appeals of Texas, Houston (1st Dist.).

Opinion issued December 22, 2016

Review Denied June 23, 2017

Keith C. Thompson, for Tanya L. McCabe Trust, McCabe Family Trust, the Rochford Living Trust.

Mark Harmon, for Ranger Energy LLC.

Panel consists of Justices Keyes, Massengale, and Lloyd.

Michael Massengale, Justice

In its 2009 opinion in Myrad Properties, Inc. v. LaSalle Bank National Ass'n,²the Supreme Court of Texas held that a correction deed could not be used to substantively change an unambiguous conveyance of real property to include an additional parcel of land, as that would undermine the purpose of record notice.The Texas Legislature responded in 2011, and again in 2013, by enacting statutes to define the circumstances in which a correction deed can be used to change a recorded original instrument of conveyance to remedy nonmaterial clerical or inadvertent errors, or even to make a material correction to the deed.³This case requires us to apply these new statutes to a dispute about the validity of overriding royalty interests in two oil-and-gas leases.

The appellants, Tanya L. McCabe Trust, McCabe Family Trust, and Rochford Living Trust (collectively, the "Trusts"), acquired overriding royalty interests in eight oil-and-gas leases in Hardin County, Texas.The dispute is limited to two of those leases, called McShane Fee and Brice.AppelleeRanger Energy LLC later acquired some Hardin County leases at a foreclosure auction.Contending that it had acquired the McShane Fee and Brice leases, Ranger Energy filed suit to quiet title.The Trusts responded that the McShane Fee and Brice leases were not subject to the mortgage that was foreclosed, and therefore their overriding royalty interests had not been extinguished.

The parties filed competing motions for summary judgment that focused on the validity of purportedly "corrected" instruments that changed the original mortgage documentation which was recorded at the time the Trusts acquired their overriding royalty interests.The trial court granted summary judgment in favor of Ranger Energy, and the Trusts appealed.On appeal, the Trusts contend that the purported correction instruments, which added the McShane Fee and Brice leases to the description of the mortgaged property, were invalid as a matter of law.

We agree with the Trusts.The correction instruments were ineffective because they purported to make material changes, yet they were not correctly executed as specified by the Texas Property Code.We reverse the judgment of the trial court, and we remand this case for further proceedings.

Background

The dispute in this case involves two oil-and-gas leases that have been jointly owned and operated as part of a larger group of leases since at least 2004, which is the earliest information reflected in the appellate record.In March 2004, Shamrock Energy Corporation acquired leases pursuant to an assignment and bill of sale which referred to "undivided working interests in those oil and gas leases that are described on the Exhibit 'A' that is attached hereto and made a part hereof for all purposes."The March 2004 assignment's "Exhibit 'A' " included one tract identified as the "T.Conzelman Lease," and it also included twelve leases identified by name and located in the Saratoga Oil Field in Hardin County, Texas, including leases identified as "McShane Fee" and "Brice."⁴

On June 8, 2005, Shamrock Energy conveyed to L & H Family Partnership, Ltd some but not all of its interests acquired in the March 2004 transaction.The conveyance assigned to L & H "undivided working interests in those oil and gas leases that are described on the Exhibit 'A' that is attached hereto and made a part hereof for all purposes."The June 8, 2005 assignment's "Exhibit 'A' " excluded the T. Conzelman Lease, but it included nine of the twelve leases in the Saratoga Oil Field that had been acquired by Shamrock Energy.Leases identified as "McShane Fee" and "Brice" were included.⁵

L & H quickly flipped the interests it acquired from Shamrock Energy, conveying them to Rex Chambers on June 29, 2005.The transaction assigned to Chambers "undivided working interests in those oil and gas leases that are described on the Exhibit 'A' that is attached hereto and made a part hereof for all purposes."The "Exhibit 'A' " attached to the June 29, 2005 assignment is substantively identical to the "Exhibit 'A' " describing the royalty interests assigned by Shamrock Energy to L & H.⁶

The next conveyance relevant to the McShane Fee and Brice leases was an April 2007 assignment from Chambers to Tomco II LLC.The transaction assigned to Tomco II "undivided working interests in those oil and gas leases that are described on the Exhibit 'A' that is attached hereto and made a part hereof for all purposes."The April 2007 assignment's "Exhibit 'A' " excluded approximately two-thirds of a page of language that had appeared at the beginning of the "Exhibit 'A' " descriptions attached to the June 8 and June 29, 2005 assignments.The April 2007"Exhibit 'A' " also listed descriptions of only six of the nine leases in the Saratoga Oil Field that had been acquired by Chambers.The three excluded leases were "McShane Fee,""Brice," and "Booher."⁷Later, in December 2007, this assignment was corrected with a revised version of "Exhibit 'A'."The corrected December 2007 assignment specified that Chambers owned "an undivided fifty percent (50%) interest in those Oil, Gas and Mineral Leases, Deeds and Properties described on Exhibit 'A' attached hereto and made a part hereof for all purposes."The December 2007 corrected assignment added "McShane Fee" and "Brice"(but not "Booher") to the property listed on "Exhibit 'A'," bringing the total number of assigned leases to eight.The descriptions for all eight leases were revised from the previous documentation.⁸

Although the appellate record does not contain all of the underlying documents relating to the next relevant transaction, the parties to this appeal have stipulated that in August 2008 Tomco Energy, PLC and Mark III Energy Holdings, LLC executed an assignment and bill of sale, by which Tomco Energy conveyed title to "six of the eight oil and gas leases which are collectively known as the 'Saratoga Leases'."The parties have stipulated further that "[d]ue to an inadvertent error, two of the Saratoga Leases were omitted" from an "Exhibit A" attached to the August 2008 assignment, and the two omitted leases were known as the "McShane Fee Lease" and the "Brice Lease."

To finance its 2008 acquisition, Mark III borrowed $4 million from The Peoples Bank.A financing statement, security agreement, and mortgage of oil-and-gas property (the "2008 mortgage") was filed in the records of Hardin County in November 2008.Mark III granted to Peoples Bank a security interest in:

all of Mortgagor's right, title and interest in and to the oil and gas leases and in and to the oil and gas leasehold estate and other mineral interests, if any, (all as shown of record in the offices of the County Register of Deeds as applicable) in, under and covering the following described land to wit:

See attached Exhibit "A"

together with all and singular the tenements, hereditaments, and appurtenances now or hereafter in anywise belonging to or appertaining to the Mortgagor's present or future rights, title, interest or estate in and to all or any part of the mortgaged property above described ....

Like Tomco Energy's August 2008 assignment (as described in the parties' stipulation), the 2008 mortgage documentation identified the subject leases in an attachment which included only six leases, and which did not include the McShane Fee and Brice leases.The property description on "Exhibit 'A' " to the 2008 mortgage is substantively identical to the description contained in the (uncorrected)April 2007 assignment from Chambers to Tomco II.⁹

After obtaining the mortgage loan, Mark III sold overriding royalty interests in leases it acquired from Tomco Energy.Although Mark III had acquired only eight leases, the first such assignment, in May 2011, purported to convey to Tanya L. McCabe Trust "an undivided 10% in all oil, gas, associated hydrocarbons and minerals produced, saved and marketed from each of" nine different leases, not including McShane Fee and Brice.¹⁰The second assignment, in July 2011, conveyed to Tanya L. McCabe Trust "an undivided 5% in all oil, gas, associated hydrocarbons and minerals produced, saved and marketed from each of" seven different leases, including McShane Fee and Brice.¹¹The third assignment, in November 2011, conveyed to Tanya L. McCabe Trust "an undivided fifteen percent (15%) interest in all oil, gas, associated hydrocarbons and minerals produced, saved and marketed from each of" eight different leases, including McShane Fee and Brice.¹²While all three of these 2011 assignments contained different descriptions of the leases subject to the assigned overriding royalty interests, the description contained in the third assignment was substantively identical to the property description attached to the 2007 corrected assignment from Chambers to Tomco II.Each of these assignments was filed in the records of Hardin County.

The third assignment apparently reflected what the parties intended with respect to all three 2011 assignments, because Mark III and Tanya L. McCabe Trust corrected the first two assignments to include the same property description as the third assignment (thereby mirroring the property description in the 2007 corrected assignment from Chambers to Tomco II).The corrected versions of the first and second assignments to the Tanya L. McCabe Trust were executed by the parties in November 2011 and filed in the records of Hardin County in December 2011.

Although the actual documentation is not included in the...