Tregellas v. Archer

• Decision Date: 20 December 2016
• Docket Number: Nos. 07–14–00421–CV,07–16–00461–CV,s. 07–14–00421–CV
• Citation: 507 S.W.3d 423
• Parties: Ronald Ralph TREGELLAS and Wife, Donnita Tregellas, Appellants v. Carl M. ARCHER Trust No. Three and Mary Frances G. Archer Trust No. Three, Mary Archer Dixon and Carla Archer Johnson, Trustees Appellees
• Court: Texas Court of Appeals

507 S.W.3d 423

Ronald Ralph TREGELLAS and Wife, Donnita Tregellas, Appellants

v.Carl M. ARCHER Trust No. Three and Mary Frances G. Archer Trust No. Three, Mary Archer Dixon and Carla Archer Johnson, Trustees Appellees

Nos. 07–14–00421–CV

07–16–00461–CV

Court of Appeals of Texas, Amarillo.

December 20, 2016

Joe W. Hayes, John Smithee, Billy Britt Jarvis, for Carl M. Archer Trust No. Three and Mary Frances G. Archer Trust No. Three, Mary Archer Dixon and Carla Archer Johnson.

Claire Walsh, Matthew D. Bartosiewicz, for Ronald Ralph Tregellas and Wife, Donnita Tregellas.

Before CAMPBELL and HANCOCK and PIRTLE, JJ.

OPINION ON REHEARING

James T. Campbell, Justice

The motion for rehearing filed by appellants Ronald Ralph Tregellas and wife Donnita Tregellas (hereafter, "Tregellas") is overruled in part and granted in part. The motion for rehearing filed by appellees Mary Archer Dixon and Carla Archer Johnson as trustees of the Carl M. Archer Trust No. Three and the Mary Frances G. Archer Trust No. Three¹ is overruled. We withdraw our opinion and judgment of August 26, 2016, and substitute the following opinion and corresponding judgment in their place.

The Archer trustees brought suit against Tregellas, seeking specific performance of a right of first refusal of a mineral interest. After a bench trial the court rendered judgment in favor of the trustees. We will reverse and render in part, reverse and remand in part, and otherwise affirm the judgment of the trial court.

Background

By a warranty deed of June 16, 2003, members of the Cook family² conveyed the surface only of the west half of Section 85, Block 4–T, T & NO Ry. Co. Survey in Hansford County, Texas, to the trustees of the Archer trusts. The Cooks also owned the minerals under that half section. As part of the same transaction but by a separate document entitled "Right of First Refusal" (the "ROFR"), the Cooks granted the trustees a right of first refusal to purchase the minerals. The ROFR stated in part:

[The Cooks] ... have sold and granted, and by these presence (sic) do hereby SELL and GRANT unto [the Archer trustees] the Right of First Refusal to purchase the following land described as follows, to-wit:

...

Tract 4: All of the oil, gas, and other minerals in, on or under W/2 of Section 85, Block 4–T, T & NO Ry. Co. Survey, Ochiltree County, Texas.

...This right of first refusal shall be construed to mean that in the event that [the Cooks], and/or their successors and/or assigns, desire to sell any or all of the above described property, [the trustees], their heirs and assigns, shall have the right to purchase the property, at the same price and on the same terms and conditions as offered by any other bona fide buyer.

[The trustees] shall have sixty (60) days after receipt of said offer to either accept or reject said offer. In the event [the trustees do] not elect to accept said offer, and the property is purchased by the bona fide buyer, set forth above, at the offered price, then this agreement shall be null and void and of no further force and effect, only as to the property so purchased ....

This Right of First Refusal shall be subordinate to and [the Cooks] or their successors or assigns ... shall have the right to execute, to mortgage or otherwise encumber the above described land .... (underlining in original).

Later in 2003 the Archer trustees' attorney discovered that the property description of Tract 4 in the ROFR, while otherwise correct, erroneously listed the county of its location as Ochiltree County rather than Hansford County.³ He prepared a correction right of first refusal and sent it to the Cook grantors. Two of the grantors, Lacie Tidwell and Trent Tidwell, signed the correction instrument in February 2004 and returned it for filing. None of the other grantors responded. The instrument signed by the Tidwells was recorded in Hansford County in September 2004.

By mineral deed executed on March 28, 2007, and recorded on March 30, 2007, Sharon Sue Farber and Rodney Farber sold their undivided interest in the minerals underlying the west half of Section 85 to Tregellas. It is undisputed the Farbers did not notify the Archer trustees of their intended sale or give them opportunity to purchase the undivided mineral interest under the terms of the ROFR.

On May 4, 2011, a prospective oil and gas lessee reported the Farber sale to the Archer trustees. The next day the trustees filed suit against the Farbers,⁴ Tregellas, and others. They stated in their original petition that they "desire to exercise their right to purchase the mineral interest" the Farbers conveyed to Tregellas. They sought specific performance requiring Tregellas to convey the mineral interest to the trustees on their payment of the price Tregellas paid the Farbers.

Brenda Cook Smith died in 2008. Tregellas negotiated with her husband Ed Smith and son Dalton Smith to buy Brenda Smith's undivided mineral interest in the property for $20,000. The Archer trustees again were not notified of the proposed sale. After the trustees filed suit Tregellas, relying on the ROFR's subordination of the first-refusal right to the grantors' right to mortgage the property, proposed to the Smiths that they structure their transaction as a loan secured by a deed of trust. The Smiths agreed, received the $20,000 and signed a promissory note to Tregellas in that amount, bearing interest at ten percent and secured by a deed of trust lien on the mineral interest. The note was payable in ninety days but the Smiths made no attempt to pay it. In August 2012, Tregellas purchased the Smith mineral interest at a nonjudicial foreclosure sale. In November, the Archer trustees learned that Tregellas had acquired the Smith interest. In an amended petition they alleged Tregellas obtained the Smith minerals by subterfuge, artifice, or device used to make a voluntary sale appear involuntary and remove it from the right of first refusal.

The trial court's September 2014 judgment granted specific performance for the Archer trustees as to both the Farber interest and the Smith interest.

Analysis

The Statute of Frauds

We initially address Tregellas's third issue, which asserts the legal description of the property in the ROFR violates the statute of frauds and is therefore ineffective because it misidentified Section 85's location as Ochiltree County rather than Hansford County. Among Tregellas's arguments is that the correction instrument signed by the Tidwells and recorded in Hansford County on September 14, 2004, was ineffective because it did not comply with the requirements of Texas Property Code section 5.031. TEX. PROP. CODE ANN. § 5.031 (West 2014). The trial court found the correction instrument substantially complied with the pertinent statutory section, and effectively corrected the erroneous county name in the ROFR.

Section 5.031 makes a correction instrument recorded before September 1, 2011, that substantially complies with Property Code section 5.028 or 5.029 and that purports to correct a recorded original instrument of conveyance effective to the same extent as provided in section 5.030 unless a court "renders a final judgment determining that the correction instrument does not substantially comply" with section 5.028 or 5.029. TEX. PROP. CODE ANN. § 5.031. The trial court's judgment makes no determination that the 2004 correction instrument lacks substantial compliance with section 5.028 or 5.029, and we agree with the Archer trustees that sufficient evidence supports the court's finding of substantial compliance.

The pertinent statutory section here is section 5.028, concerning instruments effecting nonmaterial corrections. Section 5.028 allows a person having personal knowledge of facts relevant to the correction of a recorded original instrument of conveyance to prepare or execute a correction instrument to make a nonmaterial change that results from a clerical error. The section's list of nonmaterial changes includes the correction of an incorrect county name. TEX. PROP. CODE ANN. § 5.028(a)(1) (West 2014). It is undisputed the incorrect reference to Ochiltree County in the original ROFR was a typographical error. The 2004 correction instrument was effective if it substantially complied with the requirements of section 5.028.

Substantial compliance with a statute requires that one perform its "essential requirements." Mo. Pac. R.R. Co. v. Dallas Cnty. Appraisal Dist. , 732 S.W.2d 717, 721 (Tex. App.–Dallas 1987, no writ). "The term has been applied to excuse those deviations from the performance required by statute which do not seriously hinder the legislature's purpose in imposing the requirement." Id .

Tregellas argues the correction instrument fails for three reasons: it does not disclose the basis for the Tidwells' personal knowledge of the facts relevant to the correction; no signed copy of the correction instrument was sent to the Farbers or the Smiths; and it was recorded only in Hansford County.

The correction instrument repeated all the ROFR's language describing the grant and terms of the right of first refusal, so the names of all the ROFR's grantors, including the Tidwells, are stated in the correction instrument. It recited the volume and page of the ROFR's recording in Ochiltree and Hansford counties. It clearly set out the original incorrect description of Tract 4 from the original ROFR, stated the description was an error or mistake, and set out the correct description for that tract, showing it to be in Hansford County. It provided for execution in counterparts, stating that it bound any party executing a counterpart despite the failure of other grantors to execute the instrument.

As to the absence of a statement of the basis for the Tidwells' knowledge, the trustees argue that the instrument's identification of the Tidwells as among the signers of the original ROFR permits a reasonable inference of their knowledge of the county in which their property was located. We agree the correction instrument...