Court Opinion

ID: 4110977
Source: CourtListenerOpinion
Date Created: 2016-12-26 08:14:56.67583+00
Date Added: 2024-06-11T14:08:19.738927
License: Public Domain

Opinion issued December 22, 2016

                                     In The

                              Court of Appeals
                                    For The

                          First District of Texas
                           ————————————
                              NO. 01-15-00044-CV
                           ———————————
    TANYA L. MCCABE TRUST, MCCABE FAMILY TRUST, AND THE
              ROCHFORD LIVING TRUST, Appellants
                                        V.
                      RANGER ENERGY LLC, Appellee

                   On Appeal from the 356th District Court
                          Hardin County, Texas1
                        Trial Court Case No. 54138

1
      Pursuant to its docket equalization authority, the Supreme Court of Texas
      transferred the appeal to this Court. See Misc. Docket No. 14-9246 (Tex. Dec.
      15, 2014); see also TEX. GOV’T CODE § 73.001 (authorizing transfer of cases).
                                    OPINION

      In its 2009 opinion in Myrad Properties, Inc. v. LaSalle Bank National Ass’n,2

the 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.3 This 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. Appellee Ranger Energy LLC later

acquired some Hardin County leases at a foreclosure auction. Contending that it had

2
      300 S.W.3d 746 (Tex. 2009).
3
      See Act of May 13, 2011, 82nd Leg., R.S., Ch. 194, § 1, 2011 Tex. Gen. Laws
      747, 748 (codified at TEX. PROP. CODE §§ 5.027–.031); see also Act of May
      8, 2013, 83rd Leg., R.S., Ch. 158, § 3, 2013 Tex. Gen. Laws 597, 597
      (codified at TEX. PROP. CODE § 5.028(a) & (a-1)).

                                           2
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

                                          3
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

4
      The March 2004 assignment and bill of sale contains the word “Saratoga” on
      the upper-right corner of the first page of the document, but there is no
      reference to all or part of the leases as the “Saratoga Leases.” In “Exhibit ‘A’”
      to the March 2004 assignment, the McShane Fee and Brice leases were
      identified as follows:

             LEASE               NRI WI              ACRES        RRC NO.
             ...
             McShane Fee         1.000 100[%]        4.58         03637
             ...
             Brice               .730 100[%]         .31          19052
             ...

                                          4
Field that had been acquired by Shamrock Energy. Leases identified as “McShane

Fee” and “Brice” were included.5

5
      Like the March 2004 documents, the June 8, 2005 assignment and bill of sale
      contains the word “Saratoga” on the upper-right corner of the first page of the
      document, but there is no reference to all or part of the leases as the “Saratoga
      Leases.” In “Exhibit ‘A’” to the June 8, 2005 assignment, the McShane Fee
      and Brice leases were identified, with a change to the description of Brice, as
      follows:

            LEASE                NRI WI              ACRES        RRC NO.
            ...
            McShane Fee          1.000 100[%]        4.58         03637
            ...
            Brice                .780 100[%]         .31          19052
            ...

      Unlike the March 2004 “Exhibit ‘A’,” the June 8, 2005 “Exhibit ‘A’” added
      more descriptive identifications of eight of the nine assigned leases, including
      the following descriptions of the McShane Fee and Brice leases:

            Property Name:       McShane Fee
            Operator:            Arrowhead Operating Inc.
            County:              Hardin
            State:               Texas
            Legal:               4.58 acres being out of the C.F.S. Jordit 320
                                 acre Survey.

            Property Name:       Brice
            Operator:            Arrowhead Operating Inc.
            County:              Hardin
            State:               Texas
            Legal:               All lands described in the following Oil, Gas
                                 and Mineral Leases and amendments thereto
                                 covering 5/16 of an acre located in the C.F.S.
                                 Jordit Survey, A-783, Hardin County, Texas.
                                 Said leases and amendments recorded as

                                          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

                                 shown in Deed Records of Hardin County,
                                 Texas.
                                 1. Oil, Gas & Mineral Lease from Brice
                                    Exploration Company to Bryan Lloyd,
                                    dated August 16, 1983, recorded in
                                    Volume 779, Page 110.
                                 2. Amendment to Oil, Gas & Mineral Lease,
                                    from Brice Exploration Company to
                                    Bryan M. Lloyd, dated August 16, 1983,
                                    recorded in Volume 818, Page 714.
                                 3. Oil, Gas & Mineral Lease, from Warren
                                    K. Hendriks to Bryan M. Lloyd, dated
                                    August 16, 1983, recorded in Volume
                                    779, Page 112.
                                 4. Amendment to Oil, Gas & Mineral Lease,
                                    from Warren K. Hendriks to Bryan M.
                                    Lloyd, dated August 10, 1985, recorded in
                                    Volume 818, Page 7.
6
      Like the March 2004 and June 8, 2005 documents, the June 29, 2005
      assignment and bill of sale contains the word “Saratoga” on the upper-right
      corner of the first page of the document, but there is no reference to all or part
      of the leases as the “Saratoga Leases.”

                                          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.”7 Later, 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

7
      Like the preceding assignments, the April 2007 assignment and bill of sale
      contains the word “Saratoga” on the upper-right corner of the first page of the
      document, but there is no reference to all or part of the leases as the “Saratoga
      Leases.”

                                          7
eight. The descriptions for all eight leases were revised from the previous

documentation.8

8
     Unlike the preceding assignments, the December 2007 corrected assignment
     and bill of sale does not contain the word “Saratoga” on the upper-right corner
     of the first page of the document. Like the preceding documents, there is no
     reference to all or part of the leases as the “Saratoga Leases.” In “Exhibit ‘A’”
     to the December 2007 corrected assignment, the McShane Fee and Brice
     leases were identified as follows:

           Property Name: McShane Fee (RRC Identifier 03637)
           Operator: BHB Operating, Inc.
           Description: 4.58 acres o/o the C.F.S. Jordit Survey, A-783,
           Hardin County, Texas, all or a portion of which is more fully
           described in Deed dated March 7, 1916 from Creighton-
           McShane Oil Company to Paggi Brothers Oil Company,
           recorded in Vol. 70, Page 129 of the Deed Records of Hardin
           County, Texas.

           ....

           Property Name: Brice (RRC Identifier 19052)
           Operator: BHB Operating, Inc.
           Description: All lands described in the following Oil, Gas and
           Mineral Leases and Amendments thereto covering 5/16 of an
           acre located in the C.F.S. Jordit Survey, A-783, Hardin, County,
           Texas:

           1. Oil, Gas and Mineral Lease dated August 16, 1983 from Brice
              Exploration Company to Bryan M. Lloyd, recorded in Vol.
              779, Page 110 of the Deed Records of Hardin County, Texas,
              as amended by instrument dated August 19, 1985, recorded
              in Vol. 818, Page 714 of said Deed Records.
           2. Oil, Gas and mineral Lease dated August 16, 1983 from
              Warren K. Kendricks to Bryan M. Lloyd, recorded in Vol.
              779, Page 12 of the Deed Records of Hardin County, Texas,

                                         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

                as amended by instrument dated August 10, 1985, recorded
                in Vol. 818, Page 7 of said Deed Records.

                                           9
      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.10 The second assignment, in July 2011, conveyed

9
      Like the (uncorrected) April 2007 assignment and bill of sale, “Exhibit ‘A’”
      to the 2008 mortgage contains the word “Saratoga” on the upper-right corner
      of the first page of the document, but there is no reference to all or part of the
      leases as the “Saratoga Leases.”
10
      The original first assignment to the Tanya L. McCabe Trust conveyed “an
      overriding royalty interest in and to the oil, gas and mineral leases in Hardin
      County, Texas described on Exhibit ‘A’, attached hereto and made a part
      hereof for all purposes.” The nine leases identified in “Exhibit ‘A’” were: Sun
      McShane, Sun Weldon, Coline Oil Corporation, Gulf Herrington, D.G. Petty
      Estate, Producers Weiss, Queen City, Queen City 1 Acre, and Queen City 5

                                           10
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.11 The 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.12 While 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

      Acre. The assignment of overriding royalty interest does not contain the word
      “Saratoga” on the upper-right corner of the first page of the document, and
      there is no reference to all or part of the leases as the “Saratoga Leases.”
11
      The original second assignment to the Tanya L. McCabe Trust conveyed “an
      overriding royalty interest in and to the oil, gas and mineral leases in Hardin
      County, Texas described on Exhibit ‘A’, attached hereto and made a part
      hereof for all purposes.” The seven leases identified in “Exhibit ‘A’” were:
      Sun Weldon, Coline Oil Corporation, Gulf Herrington, D.G. Petty Estate,
      Producers Weiss, McShane Fee, and Brice. The assignment of overriding
      royalty interest does not contain the word “Saratoga” on the upper-right corner
      of the first page of the document, and there is no reference to all or part of the
      leases as the “Saratoga Leases.”
12
      The original third assignment to the Tanya L. McCabe Trust conveyed “an
      overriding royalty interest in and to the oil, gas and mineral leases in Hardin
      County, Texas described on Exhibit ‘A’, attached hereto and made a part
      hereof for all purposes.” The eight leases identified in “Exhibit ‘A’” were:
      Gulf-Herrington, McShane Fee, D.G. Petty Estate, Producers Weiss, Sun
      McShane, Coline Oil Corporation, Sun Weldon, and Brice. The assignment
      of overriding royalty interest does not contain the word “Saratoga” on the
      upper-right corner of the first page of the document, and there is no reference
      to all or part of the leases as the “Saratoga Leases.”

                                          11
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 appellate record, the

parties stipulated that in December 2011, Tomco Energy executed a corrected

assignment and bill of sale which added McShane Fee and Brice to the property

description accompanying its 2008 assignment to Mark III. With this correction, the

assignment from Tomco Energy to Mark III was brought into conformity with the

property descriptions attached to the 2007 corrected assignment from Chambers to

Tomco II and with the three 2011 assignments to Tanya L. McCabe Trust (as

corrected in November 2011). The parties to this appeal do not dispute the validity

of this correction instrument.

                                        12
      In April 2012, Mark III made two additional assignments, each of an

undivided 2.5% overriding royalty interest: one to McCabe Family Trust and the

other to Rochford Living Trust. Like the 2011 assignments to Tanya L. McCabe

Trust (as corrected), these assignments referenced a property description that was

substantively identical to that attached to the 2007 corrected assignment from

Chambers to Tomco II, including the McShane Fee and Brice leases. These

assignments were filed in the Hardin County records.

      Mark III fell behind in its loan payments, and Peoples Bank filed a foreclosure

suit and a suit to quiet title. In December 2012, to resolve their disputes and in lieu

of foreclosure, Mark III paid the bank $750,000 and executed a renewed and

modified deed of trust, security agreement, and assignment of production (the “2012

deed of trust”). The 2012 deed of trust identified, as part of the “Mortgaged

Property” subject to that agreement, Mark III’s interests in leases “in, on or under

and covering the real property described in Exhibit A and made a part hereof for all

purposes.” The “Exhibit ‘A’” attached to the 2012 deed of trust was substantively

identical to the “Exhibit ‘A’” that described the property subject to the bank’s

security interest under the original 2008 mortgage—it listed six leases, and the

                                          13
McShane Fee and Brice leases were not referenced.13 The 2012 deed of trust

specifically provided that it would not “merge with the security interest” that the

bank held in the collateral that was subject to the liens. This was done for purposes

of priority as between “intervening or inferior liens and encumbrances, if any, on or

against the collateral,” and the bank retained the right to exercise its remedy of

foreclosure.

      Soon after Peoples Bank recorded the 2012 deed of trust, it realized that the

McShane Fee and Brice leases had been omitted, and the bank recorded a revised

version (the “2013 revised deed of trust”). That document added the word

“Corrected” to the front page, it added an explanation of the changes to the front

page,14 and it added descriptions of the McShane Fee and Brice leases to the end of

“Exhibit A.”15 In addition, Peoples Bank also filed a revised version of its mortgage

13
      Similar the original 2008 mortgage, “Exhibit ‘A’” to the 2012 deed of trust
      contains the word “Saratoga” near the top of the document, but there is no
      reference to all or part of the leases as the “Saratoga Leases.”
14
      The explanation stated: “This document was originally filed under County
      Clerk Instrument No. 2012-33676, Official Public Records of Hardin County,
      Texas and is being refiled to correct the Exhibit A attached at the time of the
      original filing.”
15
      Unlike any of the previously described documents, “Exhibit A” to the 2013
      revised deed of trust references the described property as “Saratoga Leases.”
      The McShane Fee and Brice leases were identified similarly to the recorded
      December 2007 corrected assignment from Chambers to Tomco II (with the
      identification of the operator removed), as follows:

                                         14
Property Name:   McShane Fee

County:          Hardin
State:           Texas
Legal:           4.58 acres being out of the C.F.S. Jordit 320
                 acre Survey.

Property Name:   Brice

County:          Hardin
State:           Texas
Legal:           All lands described in the following Oil, Gas
                 and Mineral Leases and amendments thereto
                 covering 5/16 of an acre located in the C.F.S.
                 Jordit Survey, A-783, Hardin County, Texas.
                 Said leases and amendments recorded as
                 shown in Deed Records of Hardin County,
                 Texas.
                 1. Oil, Gas & Mineral Lease from Brice
                    Exploration Company to Bryan Lloyd,
                    dated August 16, 1983, recorded in
                    Volume 779, Page 110.
                 2. Amendment to Oil, Gas & Mineral Lease,
                    from Brice Exploration Company to
                    Bryan M. Lloyd, dated August 16, 1983,
                    recorded in Volume 818, Page 714.
                 3. Oil, Gas & Mineral Lease, from Warren
                    K. Hendriks to Bryan M. Lloyd, dated
                    August 16, 1983, recorded in Volume
                    779, Page 112.
                 4. Amendment to Oil, Gas & Mineral Lease,
                    from Warren K. Hendriks to Bryan M.
                    Lloyd, dated August 10, 1985, recorded in
                    Volume 818, Page 7.

                         15
documentation (the “2013 revised mortgage”), which changed the exhibit to the

original 2008 mortgage by substituting the same “Exhibit A” document that was

attached to the 2013 revised deed of trust.

      Neither Peoples Bank nor Mark III signed the 2013 revised deed of trust or

the 2013 revised mortgage. Instead the bank used copies of the signature pages from

the 2012 deed of trust and the 2008 mortgage, which had been recorded previously,

and it notified Mark III of the filing of the new versions of the documents.

      Two months later, in March 2013, Peoples Bank and Mark III entered into a

second written settlement agreement, which asserted that the bank had the right to

foreclose on the lien against the “Saratoga Leases,” which were defined in that

agreement to embrace the property listed on an “Exhibit A” substantively identical

to the one attached to the 2013 revised deed of trust and the 2013 revised mortgage.

Peoples Bank also agreed to pay a third-party lienholder $150,000 to obtain release

of its lien against the McShane Fee and Brice leases.

      On the same date, Peoples Bank transferred its rights to an affiliate, Ranger

Energy, which foreclosed the mortgage. In May 2013, Ranger Energy filed a

declaratory judgment action against the Trusts. It asserted that because of the

foreclosure sale, the Trusts’ overriding royalty interests in the McShane Fee and

Brice leases had been extinguished.

                                         16
      The Trusts disagreed and sought partial summary judgment on the grounds

that the revised 2013 mortgage and deed of trust documents did not affect their

interests in the McShane Fee and Brice leases, which were not listed in or

encumbered by the original 2008 mortgage. Ranger Energy filed a competing motion

for summary judgment, which argued that the foreclosure sale extinguished the

Trusts’ interests in the McShane Fee and Brice leases. The trial court denied the

Trusts’ motion for partial summary judgment, granted summary judgment in favor

of Ranger, and issued a final declaratory judgment that the Trusts’ overriding royalty

interests were void and extinguished. The Trusts appealed.

                                      Analysis

      This appeal from rulings on cross-motions for summary judgment involves

the application of the correction-instrument statutes in the Texas Property Code.

Ranger Energy argues that the 2013 revisions to the 2008 mortgage and 2012 deed

of trust were valid and that the foreclosure extinguished the Trusts’ interests. As a

result, it contends that it obtained title to the McShane Fee and Brice leases at the

foreclosure auction.16

16
      Although Ranger Energy suggests that we lack jurisdiction over the
      interlocutory denial of the Trusts’ summary-judgment motion, in this case the
      trial court’s rulings on cross-motions for summary judgment resulted in an
      appealable final judgment. See Tex. Mun. Power Agency v. Pub. Util. Comm’n
      of Tex., 253 S.W.3d 184, 192 (Tex. 2007).

                                         17
      The Trusts contend that the revised documents prepared by Peoples Bank in

2013 did not comply with the correction-instrument statutes as a matter of law, and

therefore they did not validly correct the 2008 mortgage. They contend that the

foreclosure sale pertained only to the leases actually included in the 2008 mortgage,

but not the McShane Fee and Brice leases, which were omitted. Thus, the Trusts

argue that the foreclosure sale had no effect on their overriding royalty interests in

those leases.

      On appeal, the Trusts argue in two issues that the trial court erred by granting

summary judgment for Ranger Energy and by denying their motion for summary

judgment. We review de novo the trial court’s ruling on a motion for summary

judgment. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844,

848 (Tex. 2009). When both sides move for summary judgment, and the trial court

grants one motion and denies the other, a reviewing court considers both sides’

summary-judgment evidence, determines all questions presented, and renders the

judgment the trial court should have rendered. Gilbert Tex. Constr., L.P. v.

Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010). Each party

moving for traditional summary judgment bears the burden of showing that no

genuine issue of material fact exists and that it is entitled to judgment as a matter of

law. TEX. R. CIV. P. 166a(c); see Provident Life & Accident Ins. Co. v. Knott, 128
S.W.3d 211, 215–16 (Tex. 2003). When a plaintiff moves for summary judgment on

                                          18
its own claim, it must prove conclusively all essential elements of its cause of action.

See Rhone–Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999); City of Houston

v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). A defendant moving

for summary judgment must conclusively negate at least one essential element of

each of the plaintiff’s causes of action or conclusively establish each element of an

affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex.

1997).

      We review issues involving statutory interpretation de novo. Tex. Lottery

Comm’n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010). Our

primary objective is to give effect to the intent of the Legislature, as it has been

expressed by the plain meaning of the text, “unless a different meaning is supplied

by legislative definition or is apparent from the context, or the plain meaning leads

to absurd results.” Id. “When a statute’s language is clear and unambiguous, it is

inappropriate to resort to rules of construction or extrinsic aids to construe the

language.” City of Rockwall v. Hughes, 246 S.W.3d 621, 626 (Tex. 2008).

      The correction-instrument statutes were added to the Property Code in 2011

in response to the Supreme Court’s decision in Myrad Properties, Inc. v. LaSalle

Bank National Ass’n, 300 S.W.3d 746 (Tex. 2009), which had addressed the scope

of correction instruments in the real-estate context. The Supreme Court observed

that “using a correction deed to convey an additional, separate parcel of land is

                                          19
beyond the appropriate scope of a correction deed.” Myrad Props., 300 S.W.3d at

750. It further noted that “[p]reserving the narrow circumstances for acceptable use

of a correction deed is important because a proper correction deed may relate back

to the date of the deed it corrects.” Id. “To allow correction deeds to convey

additional, separate properties not described in the original deed would introduce

unwarranted and unnecessary confusion, distrust, and expense into the Texas real

property records system.” Id. The Court held that a correction deed could not be used

to convey two parcels of land at a nonjudicial foreclosure sale after the original deed

unambiguously had conveyed only one of the mortgaged parcels. Id. at 751. The

Court explained that allowing substantive changes through correction deeds would

undermine the purpose of record notice. Id. at 750–51.

      Soon after the Myrad Properties decision, the Legislature codified the

circumstances under which a correction deed can be used to make both material and

nonmaterial corrections. This legislation effectively modified the Myrad Properties

rule by expressly allowing “material” changes to be made by a correction instrument.

See Act of May 13, 2011, 82nd Leg., R.S., Ch. 194, § 1, 2011 Tex. Gen. Laws 747,

748 (codified at TEX. PROP. CODE §§ 5.027–.031).

      Title 5, Subchapter B of the Property Code now authorizes the correction of

recorded instruments that transfer real property or an interest in real property. See

TEX. PROP. CODE § 5.027(a). “A correction instrument replaces and is a substitute

                                          20
for the original instrument.” Id. § 5.030(b). It is “(1) effective as of the effective date

of the recorded original instrument of conveyance; (2) prima facie evidence of the

facts stated in the correction instrument; (3) presumed to be true; (4) subject to

rebuttal; and (5) notice to a subsequent buyer of the facts stated in the correction

instrument.” Id. § 5.030(a). The Property Code permits “a nonmaterial change that

results from a clerical error,” id. § 5.028(a), “a nonmaterial change that results from

an inadvertent error,” id. § 5.028(a-1),17 and “a material correction” to a recorded

instrument of conveyance. Id. § 5.029.

      The statute allows correction of nonmaterial clerical errors that may be

corrected “by a person who has personal knowledge of facts relevant to the

correction,” including:

      (1)    a correction of an inaccurate or incorrect element in a legal
             description, such as a distance, angle, direction, bearing or chord,
             a reference to a plat or other plat information, a lot or block
             number, a unit, building designation, or section number, an
             appurtenant easement, a township name or number, a
             municipality, county, or state name, a range number or meridian,

17
      We include Section 5.028(a-1) for sake of completeness, and because the
      dissent places the entire weight of its analysis on this particular provision. We
      note, however, that it is actually inapplicable to the case before us. The statute
      was enacted in 2013, after all the relevant events giving rise to this dispute.
      The Legislature expressly made the statute effective September 1, 2013, so
      there is no plausible argument that the statute operates retrospectively to save
      the 2013 revised deed of trust and mortgage. See Act of May 8, 2013, 83rd
      Leg., R.S., ch. 158, 2013 Tex. Gen. Laws 598 (“This Act takes effect
      September 1, 2013.”).

                                            21
             a certified survey map number, or a subdivision or condominium
             name; or

      (2)    an addition, correction, or clarification of:

             (A)     a party’s name, including the spelling of a name, a first or
                     middle name or initial, a suffix, an alternate name by
                     which a party is known, or a description of an entity as a
                     corporation, company, or other type of organization;

             (B)     a party’s marital status;

             (C)     the date on which the conveyance was executed;

             (D)     the recording data for an instrument referenced in the
                     correction instrument; or

             (E)     a fact relating to the acknowledgment or authentication.

Id. § 5.028(a). Examples of nonmaterial inadvertent errors that may be

corrected include:

      (1)    a legal description prepared in connection with the preparation
             of the original instrument but inadvertently omitted from the
             original instrument; or

      (2)    an omitted call in a metes and bounds legal description in the
             original instrument that completes the description of the
             property.

Id. § 5.028(a-1).

      The code likewise authorizes material corrections that may be made by “the

parties to the original transaction or the parties’ heirs, successors, or assigns,”

including a correction to:

      (1)    add:

                                           22
             (A)   a buyer’s disclaimer of an interest in the real property that
                   is the subject of the original instrument of conveyance;

             (B)   a mortgagee’s consent or subordination to a recorded
                   document executed by the mortgagee or an heir, successor,
                   or assign of the mortgagee; or

             (C)   land to a conveyance that correctly conveys other land;

      (2)    remove land from a conveyance that correctly conveys other
             land; or

      (3)    accurately identify a lot or unit number or letter of property
             owned by the grantor that was inaccurately identified as another
             lot or unit number or letter of property owned by the grantor in
             the recorded original instrument of conveyance.

Id. § 5.029(a).

I.    Materiality of changes

      The Trusts contend that the revised mortgage documentation contained

material corrections that did not comply with Section 5.029 because it was not

executed by the proper parties. At trial as on appeal, Ranger Energy’s response has

been that the revised documents were nonmaterial corrections of the legal

description. Ranger Energy argued that an agreed stipulation of facts between it and

the Trusts conclusively established that the purpose was to correct an inadvertent

error. Thus, it reasoned that the corrections were nonmaterial. The distinction is

important because the Property Code imposes different procedural requirements for

material and nonmaterial corrections.

                                         23
      To determine whether this case involves material or nonmaterial corrections,

we compare the changes made by the 2013 revised mortgage and deed of trust to

Sections 5.028 and 5.029. Both the 2013 revised mortgage and deed of trust had the

primary effect of adding the McShane Fee and Brice leases to the exhibits that listed

the properties as security for the loan or as subject to the deed of trust. The original

exhibits recorded in 2008 and 2012 listed each individual lease by name, the name

of the oil-and-gas operator, the county and state in which the lease was located, and

a “legal description,” which described each lease by reference to a prior conveyance

or survey, and including in some cases the volume and page number of prior

recordation. The 2013 revised versions added the McShane Fee and Brice leases to

the lists, including their names, county and state of location, and legal descriptions

similar to the others. Thus, the revisions purported to add property interests in two

leases that previously were not listed.

      The addition of land to a conveyance that correctly conveys other land is a

material change. See id. § 5.029(a)(1)(C); cf. Myrad Props., 300 S.W.3d at 750. In

this case, the bank’s correction instruments purported to add the McShane Fee and

Brice leases to a mortgage and deed of trust that correctly conveyed an interest in

                                          24
other specifically identified leases.18 Pursuant to Section 5.029, such a change

indicates a material correction.

18
      Our dissenting colleague takes issue with this conclusion, stating that she
      would conclude instead that “the revisions in the correction instruments added
      the McShane Fee and Brice Leases to the legal description of the Saratoga
      Leases, the property interest conveyed by Tomco to Mark III in 2008 and
      mortgaged by Mark III to Peoples Bank in 2008.” Dissent at 21. That
      statement significantly distorts the operative facts. The bank’s correction
      instruments at issue in this appeal did not correct the 2008 conveyance from
      Tomco Energy to Mark III, they purported to correct the 2008 mortgage and
      the 2012 deed of trust. The 2008 mortgage and the 2012 deed of trust did not
      define the mortgaged property by reference to “a property interest conveyed
      by Tomco to Mark III,” nor was the security interest identified as property
      known as the “Saratoga Leases.” To the contrary, both the 2008 mortgage and
      the 2012 deed of trust defined the subject real property by reference to an
      attached “Exhibit A.” Exhibit A to the recorded 2008 mortgage and 2012 deed
      of trust defined the mortgaged property by providing the legal description of
      six specifically identified oil-and-gas leases. As such, a purported correction
      instrument substituting the previous Exhibit A with a new document adding
      two additional leases is a material correction, particularly with respect to the
      interests of any entity which, like the Trusts, may have acquired an interest in
      the added leases without any actual or constructive notice that bank later
      would claim they also were subject to the mortgage. Cf. TEX. PROP. CODE
      § 5.029(a)(1)(C); Myrad Props., 300 S.W.3d at 750. To the extent our
      dissenting colleague also suggests that the 2008 mortgage and the 2012 deed
      of trust merely “listed” the leases, and they were not actually “conveyed,”
      Dissent at 20, the only possible implication is that, contrary to the parties’
      shared assumption, the 2008 mortgage and the 2012 deed of trust do not
      qualify as “original instrument[s] of conveyance” subject to the correction-
      instrument provisions of the Property Code. We need not resolve that issue
      which has not been raised by the parties, other than to observe that if
      Sections 5.028 and 5.029 do not apply to these correction instruments, then
      logic of the Myrad Properties rule dictates that they were ineffective.

                                         25
      Further, a comparison of Section 5.028 to the changes made in the 2013

revised documentation shows that none of the corrections are of the types identified

as nonmaterial. For example, the correction instruments at issue did not change any

of the identifying information or descriptions that were in the original documents

(other than to delete the identification of the lease operators). They did not alter any

element in any of the existing legal descriptions, see TEX. PROP. CODE § 5.028(a)(1),

nor did they add, correct, or clarify a party’s name or marital status, the date of

execution of the conveyance, recording data for an instrument referenced in the

correction instrument, or a fact relating to acknowledgment or authentication. See

id. § 5.028(a)(2). Thus, the correction instruments at issue are not consistent with a

nonmaterial correction pursuant to Section 5.028(a).19

      The corrections at issue added two leases to a conveyance that correctly

conveyed interests in other specifically identified leases. The addition of “land to a

conveyance that correctly conveys other land” is a material change. Id.

§ 5.029(a)(1)(C). Having compared the plain and unambiguous language of the

19
      Ranger Energy additionally argued that because the omission of these leases
      was inadvertent, the corrections were nonmaterial pursuant to Section
      5.028(a-1). That provision did not take effect until September 1, 2013, after
      this litigation already had commenced. See Act of May 8, 2013, 83rd Leg.,
      R.S., ch. 158, 2013 Tex. Gen. Laws 598 (“This Act takes effect September 1,
      2013.”).

                                          26
statute with the attempted correction instruments in this case, we conclude that the

addition of two leases was a material change.

II.   Retrospective validity of correction instruments

      The requirements for a correction instrument differ for nonmaterial and

material changes. See id. §§ 5.028–.029. An instrument making a material change

must be “executed by each party to the recorded original instrument of conveyance

the correction instrument is executed to correct or, if applicable, a party’s heirs,

successors, or assigns.” Id. § 5.029(b)(1). An instrument making a nonmaterial

correction need not be so “executed,” but it must be prepared by someone with

personal knowledge of the facts relevant to the correction, and the instrument itself

must disclose the basis for such personal knowledge. Id. § 5.028(a), (c).20 Both

20
      Having incorrectly concluded that the expansion of the definition of the
      mortgaged property from six to eight leases was a nonmaterial correction, our
      dissenting colleague makes the conclusory assertion that the evidence “shows
      that all of the requirements of Section 5.028 were met.” Dissent at 21. Yet the
      dissent makes no effort to explain how the correction instrument satisfied the
      requirement that a “person who executes a correction instrument” under
      Section 5.028 “shall disclose in the instrument the basis for the person’s
      personal knowledge of the facts relevant to the correction of the recorded
      original instrument of conveyance.” TEX. PROP. CODE § 5.028(c). In fact, the
      correction instrument contains no such disclosure, nor was it “executed” by a
      person. Instead, the bank simply altered the first page to provide notice of the
      correction, it substituted a new version of “Exhibit ‘A’,” and it recorded the
      new document. Accordingly, even if the dissent were correct about the
      applicability of Section 5.028(a-1) to an “inadvertent error” on these facts, the
      instrument still was not correctly executed as specified by the Property Code.

                                         27
nonmaterial and material correction instruments must be recorded in each county in

which the original instrument was recorded. Id. §§ 5.028–.029.

       It is undisputed that the correction instruments were not executed by Peoples

Bank or Mark III—the parties to the original instruments—or by any of their

successors in interest. As such, the correction instruments did not comply with the

statute. See id. § 5.029. The correction instruments thus did not replace or substitute

for the original mortgage or deed of trust. See id. § 5.030(b). They were not

retrospectively valid as of the effective date of the recorded original instrument. See

id. § 5.030(a). They could not be construed as notice to a subsequent buyer of the

facts stated therein. See id.

III.   Ratification

       Ranger Energy also contends that Mark III ratified the correction instruments

by signing the second settlement agreement, which stated that Peoples Bank had the

right to foreclose on all “Saratoga Leases,” as that term was defined in the

agreement. We understand Ranger Energy’s argument to be that Mark III’s

ratification of the correction instrument caused it to have retrospective effect as of

the original conveyance date.

       The Property Code does not include any provision for any party’s unilateral

ratification of an invalid correction instrument used to make a material correction to

a prior recorded instrument of conveyance. See id. § 5.029. Instead it includes a

                                          28
mandatory requirement that the correction instrument itself be “executed” by “each

party to the recorded original instrument of conveyance” (or their successors in

interest) in order to be effective. See id. §§ 5.029–.030. Even if we were to agree

with Ranger Energy that “substantial compliance” is all that is required to satisfy the

correction statute,21 we still could not conclude that standard was met in this case.

To the extent “substantial compliance with a statute means compliance with its

essential requirements,” Edwards Aquifer Auth. v. Chem. Lime, Ltd., 291 S.W.3d
392, 403 (Tex. 2009), we have no basis upon which to conclude that the requirement

of execution “by each party to the recorded original instrument” is not “essential” to

fulfilling the Legislature’s standard for permitting a material correction as a

modification of the Myrad Properties rule that allowing substantive changes through

correction deeds would undermine the purpose of record notice. Cf. Myrad Props.,
300 S.W.3d at 750–51.

      The primary issue is the effect of these purported correction instruments on

the overriding royalty interests that previously had been assigned to the Trusts and

recorded in Hardin County. “The general rule is that in a contest over rights or

21
      The statute provides that “substantial compliance” is sufficient to effectuate a
      correction instrument made prior to the statute’s effective date of
      September 1, 2011. See TEX. PROP. CODE § 5.031. The statute is silent as to
      whether substantial compliance is adequate for instruments filed after the
      effective date, when parties to an attempted correction would be on notice of
      the statutory requirements.

                                          29
interests in property, the party that is first in time is first in right.” Nat’l City Bank v.

Tex. Capital Bank, N.A., 353 S.W.3d 581, 585 (Tex. App.—Dallas 2011, no pet.);

accord World Help v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 668 (Tex. App.—

Fort Worth 1998, pet. denied). Even to the extent Mark III ratified the attempted

correction instruments, that action did not cause the documents to relate back to the

original mortgage which predated the assignments to the Trusts, at least for purposes

of determining the validity of those assignments. Cf. TEX. PROP. CODE § 5.029.

       Because the 2013 revised deed of trust and mortgage did not satisfy the

correction statute, at the time of the foreclosure sale the only recorded security

interest enforceable against the Trusts was the mortgage executed and recorded in

2008, which did not include the McShane Fee and Brice leases. A trustee’s power to

sell property must be exercised in strict compliance with the deed of trust, and a

“foreclosure sale purchaser obtains only that title which the trustee has authority to

convey.” Conversion Props., L.L.C. v. Kessler, 994 S.W.2d 810, 813 (Tex. App.—

Dallas 1999, pet. denied). Therefore, Ranger Energy did not obtain any interest in

the McShane Fee and Brice leases. See id.

IV.    Bona fide purchaser status

       In its motion for summary judgment, Ranger Energy argued that the 2013

revised instruments substituted for the original 2008 mortgage and 2012 deed of trust

and that the Trusts could overcome the effect of this substitution only by showing

                                             30
that they were bona fide purchasers with regard to their interests in the McShane Fee

and Brice leases. Ranger Energy reiterates this argument on appeal, asserting under

Section 5.030 that the correction instruments have no impact on the Trusts unless

they “are bona fide purchasers with regard to their interests in the McShane Fee and

Brice Leases.” Ranger Energy’s argument asserts the Trusts do not qualify as bona

fide purchasers because they had notice of the mortgage of other leases in Hardin

County and had a duty to inquire of the bank as to whether it claimed an interest in

the McShane Fee and Brice leases.

      Section 5.030 states in relevant part:

      (b)    A correction instrument replaces and is a substitute for the
             original instrument. Except as provided by Subsection (c), a bona
             fide purchaser of property that is subject to a correction
             instrument may rely on the instrument against any person making
             an adverse or inconsistent claim.

      (c)    A correction instrument is subject to the property interest of a
             creditor or a subsequent purchaser for valuable consideration
             without notice acquired on or after the date the original
             instrument was acknowledged, sworn to, or proved and filed for
             record as required by law and before the correction instrument
             has been acknowledged, sworn to, or proved and filed for record
             as required by law.

TEX. PROP. CODE § 5.030(b), (c).

      These provisions apply only when there is a valid correction instrument. See

id. As we have concluded that the correction instruments in this case were invalid

and did not affect the Trusts’ interests in the McShane Fee and Brice Leases, we

                                         31
need not determine whether the Trusts were “bona fide purchasers” or whether their

interests were affected by Section 5.030.22

                                     Conclusion

      The 2013 revised mortgage documentation did not satisfy statutory

requirements to constitute material corrections. The McShane Fee and Brice leases

were not subject to the mortgage that was foreclosed by Peoples Bank. As such, the

foreclosure had no effect on the Trusts’ overriding royalty interests in the McShane

Fee and Brice leases. Ratification by Mark III and the bank did not divest the Trusts

of their overriding royalty interests in the McShane Fee and Brice leases. We

therefore hold that the trial court should have granted the Trusts’ partial summary-

judgment motion and denied Ranger Energy’s summary-judgment motion.

Accordingly, we sustain both issues raised by the Trusts.

      We reverse the judgment of the trial court, we render partial summary

judgment in favor of the Trusts, and we remand this case to the trial court for further

22
      See TEX. R. APP. P. 47.1. Although the issue is immaterial to our analysis, we
      note there is no factual basis in the record for the dissent’s conclusory
      assertion that when the Trusts acquired their interests in the McShane Fee and
      Brice leases in 2011 and 2012, they had knowledge that those leases were
      subject to the 2008 mortgage and 2012 deed of trust, even before the recording
      of the 2013 revised deed of trust and the 2013 revised mortgage. See Dissent
      at 24.

                                          32
proceedings consistent with this opinion, including consideration of attorney’s fees

as requested by the Trusts’ motion for partial summary judgment.

                                             Michael Massengale
                                             Justice

Panel consists of Justices Keyes, Massengale, and Lloyd.

Justice Keyes, dissenting.

                                        33