Verde Minerals, LLC v. Burlington Res. Oil & Gas Co.
| Citation | 360 F.Supp.3d 600 |
| Decision Date | 09 January 2019 |
| Docket Number | Civil Action No. 2:16-CV-463 |
| Parties | VERDE MINERALS, LLC, Plaintiff, v. BURLINGTON RESOURCES OIL AND GAS COMPANY, LP, et al, Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Walter James Scott, Jr., George Theodore Scott, Scott Law Group LLP, Southlake, TX, Douglas E Chaves, Chaves Resendez et al, Corpus Christi, TX, for Plaintiff.
Charles W. Gordon, IV, Porter Rogers et al, Corpus Christi, TX, Laura H. Burney, One Camino Santa Maria, Richard Glenn Foster, Porter Rogers Dahlman & Gordon, P.C., Fred Riley Jones, Goode Casseb et al, San Antonio, TX, for Defendants.
ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT AND MOTION FOR LEAVE TO AMEND
Plaintiff Verde Minerals, LLC (Verde) brings this putative class action on behalf of an alleged class of holders of oil and gas interests in approximately 2,092 acres (the Property) located in Live Oak County, Texas. Verde claims that Defendants 1893 Oil & Gas, Ltd. (1893) and ELP2 Minerals, Ltd. (ELP2) have violated obligations that their predecessor-in-interest assumed nearly a century ago when he agreed to pay a portion of any oil and gas proceeds derived from the Property to the predecessors-in-interest of Verde and other similarly situated parties.
The parties have filed cross-motions for summary judgment.1 For the reasons that follow, Defendants' motion for summary judgment (D.E. 58) is DENIED . Verde's motion for partial summary judgment (D.E. 57) is GRANTED IN PART AND DENIED IN PART .
Verde also seeks leave under Rule 15(a)(2) to amend its complaint. That motion (D.E. 67) is GRANTED .
Verde alleges that its interest stems from a series of grants by Edward Mattison (the Mattison Deeds), executed between 1919 and 1921 and filed in the Live Oak County records.2 To determine the interest therein conveyed, however, it is necessary to review the series of transfers that preceded those from which Verde's claims arise.
The story begins in 1906 with the sale of approximately 47,000 acres, including the Property, from The Live Oak Company to four Texans, William Green, R.S. Dilworth, S.V. Houston, and Philip Welhausen (together, the Green Owners). This land was formerly known as the Fant Ranch.
Six years later, the Green Owners conveyed approximately 16,000 acres from their purchase, including the Property, to Ethel L. Plympton of Minneapolis, Minnesota. The sale was memorialized in a 1912 deed (the Plympton Deed), in which Ms. Plympton agreed to pay for the property with a cash down payment and "thirty-five (35) promissory Vendor's Lien Notes," of varying principal amounts and maturities. D.E. 58-3.
Rather than treating each note as an encumbrance on a particular portion of the property, the Plympton Deed provided that "[s]aid notes are secured by a Vendor's Lien on all of the land herein conveyed," with the noteholders free to accelerate the debt upon default. D.E. 58-3, p. 1–2 (emphasis added). However, a provision of the Plympton Deed (the Lien Release Clause) also gave Ms. Plympton and her successors an open-ended option to pay cash to the Green Owners in exchange for the release of Ms. Plympton's selected portions of the property from the vendors' lien. As will be seen, Ms. Plympton and/or her successors appear to have taken advantage of the Lien Release Clause, as the record reflects that portions of the 16,000-acre estate were later released from the vendors' lien.
In 1914, Ms. Plympton sold the entirety of her 16,000 acres to the United States Installment Realty Company (USIR) of Minneapolis and its trustee, C.W. Reynolds.3 D.E. 58-5. That deed expressly authorized USIR and Reynolds to subdivide the land, construct roads, and sell or encumber the land however Reynolds saw fit.
As reflected in subsequent conveyances, USIR subdivided the property into numbered tracts, most of which contained around twenty acres. Thus, where the Plympton Deed had described the property that Ms. Plympton bought by reference to the land's physical features (e.g., "a Mesquite, 8 inches in diameter, marked X"), the next series of relevant conveyances would describe the conveyed estate by reference to USIR's tract-numbering system.
One such conveyance was the 1917 deed in which USIR "obligate[d] itself to convey or have conveyed" the 2,092-acre Property to Mattison (the USIR-Mattison Deed). D.E. 58-9. That instrument identified the subject property as 102 tracts, numbered between Tract # 48 and # 248, non-inclusive, located within "Block Sixteen (16) Live Bee Land Subdivision Number Four (4)." Id.
The USIR-Mattison Deed also marked the first time that the parties to the conveyance expressly addressed oil and gas rights on the Property, with USIR reserving to itself "one-fourth of any and all oil, gas, or minerals ... that may be in or upon said land." Id. at 2. Mattison was otherwise granted the right to develop the Property for purposes of oil and gas production.
By this time, the Green Owners had assigned seven of the 35 promissory notes referenced in the Plympton Deed to the Aetna Life Insurance Company (Aetna). D.E. 58-4. Through a series of releases, executed between 1912 and 1920, the Green Owners and Aetna jointly acknowledged the release from the vendors' lien of portions of the 16,000-acre estate. The record contains fifteen such instruments, which released from the vendors' lien 86 tracts within Block 16 of Live Bee Land Subdivision Number 4.4 See D.E. 64-1 through D.E. 64-15. Some of the tracts so released were among those purchased by Mattison. The tracts purchased by Mattison, then, were not all on equal footing: some had been released from the vendors' lien and some had not.
Mattison subdivided the tracts covered by the USIR-Mattison Deed into acre-sized plots for resale. Verde alleges that it is successor-in-interest to three Minnesotans, Ole P. Becken, Hans P. Becken, and O.O. West, who purchased land from Mattison's grant, either directly from Mattison or through an intermediary who bought from Mattison, one Richard Canning. Between them, Messrs. Becken and West purchased approximately 13 of Mattison's 2,092 acres, scattered over seven of Mattison's 102 tracts.5 These transfers were memorialized in the Mattison Deeds, which are substantially identical except with regard to the parties, date, and covered property.
The parties dispute whether the Mattison Deeds conveyed any legally recognized interest. By their terms, however, the Mattison Deeds contemplated a grant of both (1) a small surface estate, as identified by tract and acre number from the "Edward Mattison Survey"; and (2) a proportionate share of half of any oil and gas proceeds derived from anywhere within the 2,092 acres, with the proportion set by reference to the acreage purchased out of the whole.
For instance, the first sentence of the June 3, 1920 deed from Mattison to Ole P. Becken said that it conveyed:
[1] All that certain land and real estate situate[d] in the County of Live Oak, State of Texas, described as follows, to wit One Half Acre East One Half Number twenty nine Tract 48 being a part of the Edward Mattison Survey of 2,092.08 acres of land out of Block Sixteen (16), of Live Bee Land Subdivision No. 4, according to the map or plat of said Live Bee Land Subdivision No. 4 on file and of record in the officer of the Clerk of the County Court and Recorder of said Live Oak County, Texas, and original a part of the Festus Doyle Survey No. 4 in said County; and [2] such an undivided interest in an undivided one-half of any and all oil, gas or minerals that may be found to be in, under or upon any part of said tract of 2,092 acresdescribed in the Edward Mattison Survey of a portion of said Block 16 as the number of acres purchased by said Ole P. Becken bears to the entire number of acres in said tract.
D.E. 58-1 (emphasis added). Thus, in addition to granting surface rights to a specific half acre of land, this instrument purported to transfer an interest equivalent to 0.5 / 2,092 (i.e., the "portion of ... the number of acres purchased by said Ole P. Becken ... to the entire number of acres in said tract") of half of any future oil and gas proceeds Mattison received from the Property.6 There is no provision that restricts the right to a share of the proceeds to only those grantees whose acre- or partial acre-sized portions of the land actually produced the oil or gas. Instead, purchasers of any part of the Property could claim a share of any oil and gas proceeds, no matter where within the Property oil or gas might be found.
This series of transfers gave way to litigation in the early 1920s, as various parties holding interests in the development failed to meet their payment obligations. First, in 1921, USIR filed suit in Live Oak County against Mattison and one of his partners, alleging that Mattison failed to pay the balance due on the Property. D.E. 58-15. In its pleading, USIR listed the tracts Mattison had purchased and alleged that 51 of those tracts, which were also listed, remained subject to the vendors' lien. Notably, none of the seven tracts in which the approximately 13 acres conveyed by the Mattison Deeds were located—tracts 48, 68, 98, 133, 208, 214, and 231—was among those USIR identified as still subject to a vendor's lien. The implication from USIR's pleading, then, is that by that point, the vendors' lien had been extinguished from the seven tracts in which the acres covered by the Mattison Deeds were situated.
USIR's case against Mattison was ultimately dismissed for lack of prosecution. D.E. 58-15, p. 15. Meanwhile, in October 1923, the Green Owners sued Ms. Plympton, USIR, and USIR's trustee Reynolds in Live Oak County for the unpaid balance of the promissory notes from the 1912 conv...
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