XTO Energy, Inc. v. EOG Res., Inc.

• Decision Date: 04 April 2018
• Docket Number: No. 04–17–00046–CV,04–17–00046–CV
• Citation: 554 S.W.3d 127
• Parties: XTO ENERGY, INC. and Mobil Producing Texas and New Mexico, Inc., Appellants v. EOG RESOURCES, INC. and Reilly McNeel Dillon, et al., Appellees
• Court: Texas Court of Appeals

554 S.W.3d 127

XTO ENERGY, INC. and Mobil Producing Texas and New Mexico, Inc., Appellants

v.EOG RESOURCES, INC. and Reilly McNeel Dillon, et al., Appellees

No. 04–17–00046–CV

Court of Appeals of Texas, San Antonio.

Delivered and Filed: April 4, 2018

APPELLANT ATTORNEY: John Matthew Sjoberg, Marc O. Knisely, Jackson, Sjoberg & Townsend, LLP, 711 West 7th Street, Austin, TX 78701.

APPELLEE ATTORNEY: Jane M.N. Webre, Douglas J. Dashiell, Scott, Douglass & McConnico, LLP, 303 Colorado Street, Suite 2400, Austin, TX 78701-2589, Baldemar Garcia, Jr., Ricardo E. Morales, Person, Whitworth, Borchers & Morales, 602 East Calton Road, 2nd Floor, P.O. Drawer 6668, Laredo, TX 78041-3656.

Sitting: Marialyn Barnard, Justice, Rebeca C. Martinez, Justice, Irene Rios, Justice

Rebeca C. Martinez, Justice

This case involves a title dispute over the mineral estate underlying a 1,653–acre tract of land located in Atascosa and McMullen Counties, Texas (the "Mineral Estate"). XTO Energy, Inc. and Mobil Producing Texas and New Mexico, Inc. (collectively, "XTO") sued the McNeel Heirs¹ and their lessee EOG Resources, Inc.² seeking a declaration that XTO holds title to the Mineral Estate and seeking recovery of its share of production. The trial court granted summary judgment holding that the McNeel Heirs own the entire Mineral Estate and XTO owns no interest in the Mineral Estate. XTO appealed. We affirm the portion of the trial court's judgment holding the McNeel Heirs own all of the Mineral Estate, and vacate and remand the portion of the judgment pertaining to EOG pursuant to its settlement with XTO.

BACKGROUND

The following is a chronological rendition of the relevant portion of the chain of title to the Mineral Estate; the rest of the chain of title is not in dispute. On December 15, 1928, Simona B. Wofford, individually and as attorney in fact for her father and brother, along with her husband Henry R. Wofford, executed a deed (the "Wofford Deed") conveying all of the described 1,653 acres of land in Atascosa and McMullen Counties (the "Property") to Thomas Hetherington in exchange for consideration in the amount of $16,530. The Wofford Deed did not exclude the minerals, and it is undisputed that the Property included both the surface and mineral estates. Hetherington paid $3,000 in cash and executed five promissory notes with sequential terms for the remainder of the purchase price (the "Notes"). To secure the debt, the Wofford Deed retained a vendor's lien against the Property (the "Vendor's Lien") until Hetherington fully paid all the Notes, providing that at such time "this deed shall become absolute." On the same date, Hetherington also executed a deed of trust conveying the Property in trust to O.F. Heinen, as trustee, to secure payment of the Notes (the "Deed of Trust"). The description of the Property in the Deed of Trust was identical to the description in the Wofford Deed. Both the Wofford Deed and the Deed of Trust provided that Hetherington's failure to pay any of the Notes would result in acceleration of all the Notes and default, at the holder's election, and upon such default the Vendor's Lien would become subject to foreclosure. The Wofford Deed and Deed of Trust were filed in the public records of both counties where the Property was located.

The Wofford Deed and the Deed of Trust both contained the exact same provision authorizing disposition of a designated mineral interest:

It is further agreed and stipulated that grantee may make such disposition of seven-eights [sic] (7/8) of the mineral rights as he may deem fit, however, it further provides [sic] that the usual one-eighth (1/8) royalty will be retained against the land for the protection of the holder or holders of the notes, until the entire balance against the land shall have been fully paid, with all interest thereon.

The gist of the current dispute is whether this provision (the "Disposition Clause") authorized Hetherington to convey title to the 7/8ths mineral interest free and clear of the Vendor's Lien and Deed of Trust lien securing Hetherington's debt to Wofford.

Two days after the execution of the Wofford Deed and Deed of Trust, Hetherington signed a deed conveying the following to Magnolia Petroleum Company:

An undivided seven-eights [sic] (7/8ths)

All the oil and gas and oil and gas rights and other minerals and mineral rights in and under and that may be produced from the following described lands, situated in the Counties of Atascosa & McMullen and State of Texas [i.e., the Property]....

The Hetherington–Magnolia Deed described the "Property" using the exact same language as in the Wofford Deed and Deed of Trust. The Hetherington–Magnolia Deed further stated that Magnolia had the right to "enter upon, explore, develop, operate and occupy said lands for the production of oil, gas and other minerals...." It is clear from reading the deed as a whole that Hetherington intended to convey a mineral interest to Magnolia. The parties do not dispute the nature of the interest, i.e., mineral, not surface. They do dispute the type of title or right acquired by Magnolia and the legal effect of the foreclosure sale on Magnolia's interest. XTO is the successor-in-interest to Magnolia and claims it owns clear title to the Mineral Estate.

Approximately one year after execution of the Wofford Deed, Hetherington defaulted on the first Note. As holder of the Notes, Simona Wofford exercised the option to accelerate the Notes and foreclosed on the Property through the trustee.³ At the April 1, 1930 foreclosure sale, Simona Wofford bought back the Property for $2,000. The deed executed by the substitute trustee (the "Trustee's Deed") recites that the Property was sold to Wofford in fee simple at foreclosure pursuant to the Deed of Trust securing the Notes. The Trustee's Deed describes the Property sold to Wofford using the same description as in the Wofford Deed, to wit: "1,653 acres of land in Atascosa and McMullen Counties, Texas, on the San Miguel Creek about fifty miles S. of San Antonio," and expressly references the metes and bounds contained in the Wofford Deed "for more complete description."

In 2009, Simona Wofford's successors-in-interest, the McNeel Heirs, leased the Mineral Estate to EOG, which subsequently drilled two producing wells and began paying royalties to the McNeel Heirs. In 2014, XTO filed a trespass-to-try title suit against the McNeel Heirs and EOG claiming that it owns the full mineral interest pursuant to the Hetherington–Magnolia Deed. The McNeel Heirs and EOG filed a competing title claim, along with various other counterclaims. The parties filed competing summary judgment motions on their title claims. The trial court granted a partial summary judgment on the issue of title to the Mineral Estate in favor of the McNeel Heirs and EOG. After the McNeel Heirs nonsuited their remaining counterclaims, the trial court entered a final judgment on December 9, 2016 decreeing that, "[a]ll right, title, and interest in the Mineral Estate is vested and has been vested in the McNeel Heirs and their predecessors-in-interest since April 1, 1930, when Lucian L. Morrison, substitute trustee, conveyed the Property, including the Mineral Estate, back to Simona Wofford under a substitute trustee's deed ..." and that XTO "own[s] no interest in the Mineral Estate." XTO appealed, asserting the McNeel Heirs failed to carry their summary judgment burden to establish superior title to the Mineral Estate and that it (XTO) conclusively established its ownership of the Mineral Estate.

DISCUSSION

Trespass to try title is the method for determining title to real property. TEX. PROP. CODE ANN. § 22.001(a) (West 2014); Martin v. Amerman , 133 S.W.3d 262, 265 (Tex. 2004) (trespass to try title is typical method used to "clear problems in chains of title"); Longoria v. Lasater , 292 S.W.3d 156, 165 (Tex. App.—San Antonio 2009, pet. denied). A plaintiff may recover on a trespass to try title claim by proving (1) a regular chain of conveyances from the sovereign, (2) a superior title out of a common source, (3) title by limitations, or (4) prior possession that has not been abandoned. Rogers v. Ricane Enterps., Inc. , 884 S.W.2d 763, 768 (Tex. 1994) ; Longoria , 292 S.W.3d at 165. "A plaintiff[']s right to recover depends on the strength of his or her own title, not the weaknesses of the title of his or her adversary." Ramsey v. Grizzle , 313 S.W.3d 498, 505 (Tex. App.—Texarkana 2010, no pet.) ; Longoria , 292 S.W.3d at 165. When, as here, the parties agree that their claimed title stems from a common source, i.e., Simona Wofford, "it is incumbent on the plaintiff to discharge the burden of proof resting on him to establish a superior title." Great N. Energy, Inc. v. Circle Ridge Production, Inc. , 528 S.W.3d 644, 669 (Tex. App.—Texarkana 2017, pet. denied) (quoting Davis v. Gale , 160 Tex. 309, 330 S.W.2d 610, 612 (1960) ). A plaintiff asserting superior title out of a common source may meet its burden by connecting its title through a complete chain of title to the common source and then by showing that its title is superior. Great N. Energy , 528 S.W.3d at 670 (citing Rogers , 884 S.W.2d at 768 ); Longoria , 292 S.W.3d at 165 (proof of a common source of title may be achieved through certified copies of the deeds in the chain of title leading to the claimant). When a plaintiff fails to establish superior title in a trespass to try title suit, the proper procedure is for the trial court to enter a "take-nothing" judgment, which divests the plaintiff of all its interest in the land in controversy and vests the same in the defendant. Great N. Energy , 528 S.W.3d at 670.

Summary Judgment Standard of Review

We review the trial court's grant of a summary judgment de novo , regardless of whether the summary judgment motion was a traditional motion or a no-evidence motion. Valence Operating Co. v. Dorsett , 164 S.W.3d 656, 661 (Tex. 2005). To prevail on a traditional motion for summary...