Court Opinion

ID: 3082949
Source: CourtListenerOpinion
Date Created: 2015-10-16 02:15:22.808804+00
Date Added: 2024-06-11T09:51:02.539404
License: Public Domain

Opinion filed November 30,
2012
 
                                                                       In The
                                                                              
  Eleventh
Court of Appeals
                                                                   __________
 
                                                         No. 11-11-00128-CV 
                                                    __________
 
                 NEIL EDWARD RICHMOND, MARY RICHMOND
                  CLARK,
AND JAMES B. RICHMOND, Appellants
 
                                                             V.
 
                        T.N.
WELLS AND VICKI WELLS, Appellees

 
                                   On
Appeal from the 118th District Court
 
                                                           Martin
County, Texas
 
                                                       Trial
Court Cause No. 6182
 

 
O
P I N I O N
            Because,
in this declaratory judgment action, there was a genuine issue of material fact
as to whether T.N. Wells and Vicki Wells were bona fide purchasers of a mineral
interest, the trial court erred when it granted the Wellses’ motion for summary
judgment.  For reasons stated in this opinion, the trial court did not err when
it denied the motion for summary judgment filed by Neil Edward Richmond, Mary
Richmond Clark, and James B. Richmond.  We affirm in part, reverse in part, and
remand.  
The
Richmonds, by warranty deed, conveyed certain property to John D. Zugg III and
Stacy M. Zugg.  The Zuggs, by warranty deed, subsequently conveyed that
property to the Wellses.  A dispute later arose as to whether the Richmonds or
the Wellses owned the mineral interest connected with the property described in
the two deeds.
            On
November 6, 2008, the Wellses sued the Richmonds and claimed that they were the
owners not only of the surface but also of the minerals connected with the
property described in the two deeds.  After the Richmonds answered with a
general denial, they filed a third-party lawsuit against the Zuggs only and sought
reformation of the deed that they had given to the Zuggs.  They sought to
reform the Richmond-to-Zugg deed so that it would reflect that they retained
the mineral interest.  The Richmonds asserted that the error was the result of
a scrivener’s mistake.  
            The
Zuggs answered the third-party lawsuit and, in their answer, agreed with the
Richmonds’ assertions that the deed from the Richmonds to them should have been
to the surface only; it was not to be a conveyance of any of the mineral
interest.  In connection with their reformation claim, the Richmonds asserted
that they had a contract with the Zuggs that the conveyance was to be of the
surface only.  That contract is handwritten and is a part of the summary
judgment evidence and reads in its entirety as follows:  
April 12, 2001
 
            John
and Shelly Zugg agree to seek financing of the 160 acre property, more or less,
located at the Northwest Quarter of Section 43, Block 36, Township 1 North in
Martin County.  Mr. Neil Richmond agrees not to enter into a contract with any
other party for a period of 30 days.  We agree there will be $60,000 net paid
to the seller.  Buyers will pay all closing costs including title insurance,
survey.  The seller will keep his mineral rights.  The CRP will be
transferrable through the Soil Conservation Office.  The CRP government payment
for this last season will go to seller.  The buyer agrees to pay $200.00 in
escrow to be held by the seller.
 
The writing is
dated April 12, 2001, contains the signatures of two witnesses, and is signed
by Neil Richmond and “Shelly” Zugg only.[1]
            After
the Richmonds filed their third-party action for reformation, the Wellses filed
their first amended original petition.  In that pleading, the Wellses sought
declaratory relief under Chapter 37 of the Texas Civil Practice and Remedies
Code.  
            The
Richmonds and the Wellses filed competing motions for summary judgment.  After
a hearing, the trial court denied, without stating its reasons, the Richmonds’
motion for summary judgment and granted the one filed by the Wellses.  When it
granted the Wellses’ motion, the trial court declared that both of the deeds at
issue conveyed the mineral estate as well as the surface estate in the
described property, that the Richmonds reserved no interest in the mineral
estate in the property, that the Richmonds were not entitled to any proceeds
from the mineral estate, and that the Richmonds were not entitled to
reformation of the Richmond-to-Zugg deed.
            Both
of the motions for summary judgment filed in this case are traditional ones. 
In our review, we will apply the well-known and accepted standards of review
applicable to summary judgments.  We review a summary judgment de novo.  Smith
v. Deneve, 285 S.W.3d 904, 909 (Tex. App.—Dallas 2009, no pet.).  When, as
here, both parties move for summary judgment and the trial court grants one of
the motions and denies the other motion, we review the summary judgment
evidence presented by both parties and determine all of the issues presented.  FM
Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).  We
are then to render the judgment that the trial court should have rendered.  Id.
 To prevail on a traditional motion for summary judgment, the movant must
prove that there is no genuine issue regarding any material fact and that he is
entitled to a judgment as a matter of law.  Little v. Tex. Dep’t of Criminal
Justice, 148 S.W.3d 374, 381 (Tex. 2004).  The summary judgment evidence
raises a fact issue if reasonable and fair-minded jurors could differ in their
conclusions in light of all the summary judgment evidence.  Goodyear Tire
& Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007).  A matter is
conclusively established if reasonable people could not differ as to the
conclusion to be drawn from the evidence.  See City of Keller v. Wilson,
168 S.W.3d 802, 816 (Tex. 2005).
The
summary judgment evidence is undisputed that, by warranty deed executed on May 10,
2001, and May 11, 2001, the Richmonds conveyed to John and Stacy Zugg real
property described as “ALL OF THE NW/4 OF SURVEY NO. 43, BLOCK 36, T-I-N,
T&P RR. CO. SURVEY, MARTIN COUNTY, TEXAS.”  The summary judgment evidence
is likewise undisputed that the deed contained the following provision: “SAVE
AND EXCEPT all oil, gas and other minerals in, on or under said land reserved
by prior grantors; and SUBJECT TO any and all oil and gas leases, easements,
rights-of-way, and covenants and restrictions of record in the office of the
County Clerk of Martin County, Texas.”   
            The
parties do not dispute that, by warranty deed dated January 7, 2003, the Zuggs
conveyed the property to the Wellses.  The deed contained exactly the same
language as that contained in the Richmond-to-Zugg deed as quoted above.
            The
summary judgment evidence is without contradiction that, just prior to the time
that the Richmond-to-Zugg transaction was completed, an operator, Endeavor
Energy Resources, L.P., had completed and placed the Richmond No. 43 into
production; the well was located on the property described above and was still
producing at the time of the summary judgment hearing in this case.  Endeavor
made royalty payments on that production to the Richmonds from June 2001 to
March 2008.  Endeavor then began to pay the royalty into a suspense account
because the Wellses notified Endeavor that the royalty payments should be made
to them, not to the Richmonds.
            On
appeal, the Richmonds present us with two points of error.  In their first point
of error, they assert that the trial court erred when it granted the Wellses’
motion for summary judgment because the appropriate cause of action was one in
trespass to try title and the Wellses did not meet their burden in such a cause
of action.  See Tex. Prop. Code
Ann. ch. 22 (West 2000).  Further, the Richmonds claim in their first
point that the Wellses did not meet their burden to prove that they were bona
fide purchasers.  In their second point of error, the Richmonds insist that the
trial court erred when it denied their motion for summary judgment because they
proved their right to reformation as a matter of law.
            In
support of their argument that this suit should have been brought in trespass
to try title, the Richmonds make several record references to the Wellses’
claims in their original petition.  However, whatever might be said of those
claims, they were superseded when the Wellses filed their first amended
original petition.  Tex. R. Civ. P.
65; In re S.C.S., 201 S.W.3d 882, 885 (Tex. App.—Eastland 2006, no pet.). 
In that amended petition, their claims are clearly stated as ones for
declaratory relief.  They asked the trial court to declare that the Richmond-to-Zugg
deed did not reserve to the Richmonds any interest in the mineral estate, that
the Richmonds were not entitled to any proceeds from any mineral interest in the
property, and that the Richmonds were not entitled to reformation of the deed
from them to the Zuggs.
            We
begin our analysis with the acknowledgment that the lessor in a typical oil and
gas lease conveys the title to the minerals to the lessee as a fee simple
determinable.  Natural Gas Pipeline Co. of Am. v. Pool, 124 S.W.3d 188,
192 (Tex. 2003).  Normally, the lessor retains a possibility of reverter and a
royalty interest.  Id.  Both a royalty interest and a possibility of
reverter are non-possessory interests.  Id.; Jupiter Oil Co. v. Snow,
819 S.W.2d 466, 468 (Tex. 1991).  Generally, non-possessory interests are not
proper subjects of a trespass-to-try-title action.  T-Vestco Litt-Vada v.
Lu-cal One Oil Co., 651 S.W.2d 284, 289–90 (Tex. App.—Austin 1983, writ ref’d
n.r.e.) (plaintiffs may not maintain an action in trespass to try title when
they have no present right of possession but only a reversionary right) (citing
Law v. Stanolind Oil & Gas Co., 209 S.W.2d 381, 384–85 (Tex. Civ. App.
1948, writ ref’d n.r.e.)); Shell Petroleum Corp. v. State, 86 S.W.2d
245, 249 (Tex. Civ. App.—Austin 1935, no writ) (a non-possessory royalty
interest is insufficient to maintain an action in trespass to try title).  The
Wellses’ claims to a royalty interest and the possibility of reverter involve
non-possessory interests and were not properly the subject of a
trespass-to-try-title cause of  action.  
            The
Richmonds rely upon Martin v. Amerman, 133 S.W.3d 262 (Tex. 2004), in
support of their claim that the Wellses’ claim should have been brought as a
trespass-to-try-title action.  Their reliance upon that case is misplaced
because the facts there involved a possessory interest. Furthermore, the Wellses
sought a construction of the two deeds.  Even though a construction of the
deeds could ultimately impact title and possessory rights to the interests
involved, as the court said in Florey, “we doubt that the legislature
intended for the trespass-to-try-title statute to displace or subsume every
statutory or common law claim . . . having such an impact.”  Florey v.
Estate of McConnell, 212 S.W.3d 439, 449 (Tex. App.—Austin 2006, no pet.). Teon
Management, LLC v. Turquoise Bay Corp., 357 S.W.3d 719 (Tex. App.—Eastland
2011, pet. denied), is distinguishable because the interest there was a
possessory one.
            The
Wellses’ claims, being non-possessory, were not the proper subject of a
trespass-to-try-title action, and the trial court did not err when it failed to
grant summary judgment that they were.
            Conversely,
the Texas Civil Practice and Remedies Code provides that “[a] person interested
under a deed . . . may have determined any question of construction or validity
arising under the instrument . . . and obtain a declaration of rights, status,
or other legal relations thereunder.”  Tex.
Civ. Prac. & Rem. Code Ann. § 37.004(a) (West 2008).  Here, after the Richmonds filed their
reformation action, the Wellses did just that in their first amended original
petition—they asked the trial court to declare the interests of the parties
under the Richmond-to-Zugg deed and the Zugg-to-Wells deed.  And, as we have
noted, even though the end result of the declaration might ultimately determine
ownership, it does not necessarily follow that the declaratory judgment action
is thereby either inappropriate or unavailable.  Florey, 212 S.W.3d at
449.
            That
portion of the Richmonds’ Point of Error One in which they claim that the Wellses’
suit should have been brought as a trespass-to-try-title action is overruled. 
            We
will discuss the Richmonds’ second point of error and part “C” of their first point
of error together.  The Richmonds argue that they proved their entitlement to
reformation of their deed to the Zuggs as a matter of law and that the Wellses
failed to prove that they were bona fide purchasers such as would defeat their
claim for reformation.    
            The
elements of a reformation claim are (1) an original agreement and (2) a mutual
mistake made after the original agreement when the original agreement was
reduced to writing.  Simpson v. Curtis, 351 S.W.3d 374, 378 (Tex.
App.—Tyler 2010, no pet.).   To correct a mutual mistake that is made in
connection with the preparation of a written instrument is the underlying
purpose of reformation.  Id.  Here, there is summary judgment evidence
to show that, as between the Richmonds and the Zuggs, a mutual mistake was made
and that it was made by the scrivener who prepared the deed.  The Zuggs agreed
to as much.  
            But
the Richmonds are not entitled to the equitable relief of reformation against
the Wellses, if the Wellses are bona fide purchasers.  Miles v. Martin,
321 S.W.2d 62, 67 (Tex. 1959); Newport Oil Co. v. Lamb, 352 S.W.2d 861,
863 (Tex. Civ. App.—Eastland 1962, no writ).  And, contrary to the Richmonds’
assertions, the burden was not upon the Wellses to prove that they were bona
fide purchasers; under the posture of this case, it was upon the Richmonds to
prove that the Wellses were not bona fide purchasers.  Miles, 321 S.W.2d
at 67.  
            The
Wellses are not bona fide purchasers if they did not purchase the property in
good faith, for valuable consideration, and without notice of the Richmonds’
claim.  Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001).  The only one
of those elements attacked in this case is the one that involves notice.  
            Notice
of an outstanding claim will defeat one’s status as a bona fide purchaser. 
Notice may be either constructive or actual.  Id.  Actual notice is
notice that is based on personal information or knowledge.  Id.  Constructive
notice is that which the law imputes in various circumstances to one who does
not have personal information or knowledge.  Id.  One such circumstance
of constructive notice arises when a purchaser is charged with notice of an
occupant or a possessor’s claims.  Id.  The Richmonds argue that the
presence of a pump jack and tank batteries at the Richmond No. 43 was
constructive notice to the Wellses.  But it was constructive notice only as to
the claims of Endeavor; it was the possessor or occupier.  See San Jacinto
Title Guar. Co. v. Lemmon, 417 S.W.2d 429, 430 (Tex. Civ. App.—Eastland
1967, writ ref’d n.r.e.); Hoover v. Redwine, 363 S.W.2d 485, 489 (Tex.
Civ. App.—Fort Worth 1962, no writ).  If the Wellses were to be charged with
knowledge of the rights of the occupier or possessor of the mineral estate,
those would be Endeavor’s rights.  If the Wellses had inquired about the rights
of Endeavor, the possessor, they simply would have discovered that Endeavor
possessed the property by virtue of their fee simple determinable ownership
interest.  That ownership interest was created when the Richmonds conveyed it
to Endeavor—a time prior to the date of the Richmond-to-Zugg deed when all
agree that the Richmonds owned the interest.  At the time of the Zugg-to-Wells
deed, the interests claimed by the Richmonds were non-possessory ones, and
Endeavor’s possession did not put the Wellses on notice of any interest claimed
by the Richmonds.  However, our inquiry does not end there.
               
The Richmonds have brought forth summary judgment evidence by way of an
affidavit from Mrs. Zugg in which she states that she told the Wellses that
they were not getting any of the minerals.  She stated in that affidavit, in
part: “At the time of the sale [to the Zuggs], the Richmonds made it clear to
us that they intended to reserve any and all minerals owned by them on” the
property.  She said that she clearly understood that she and John would not be
getting any minerals.  She also avers that she is certain that she told “Mr. Wells
that we did not own any of the mineral rights to the property and that they
would not be getting any mineral rights with the property.”  She continued, “I
specifically recall that Mr. Wells and I discussed the fact that it was a shame
a person could not buy mineral rights anymore because people simply refused to
sell them.”  She told Mr. Wells that the Richmonds got the money from oil
production and “how it would be nice if we and he, as the surface owners, could
get the royalty.”  She also stated that she believed that, from their
conversation, “Mr. Wells knew that he was not receiving any of the mineral
rights to the property.”  If they had been selling the mineral rights to the
Wellses, they would “not have accepted the sum of money that we got for the
property.”
            On
the other hand, there is summary judgment evidence that the Wellses thought
they were getting the mineral interests in addition to the surface.  There was
also summary judgment evidence to the effect that Mr. Wells did not talk with
the Zuggs about the mineral interests.  The summary judgment record also
contains a copy of a July 11, 2008 signed statement from Mrs. Zugg in
which she stated: “When Mr. and Mrs. Wells bought the farm from my husband and
me, there was never a discussion of the mineral rights.  The mineral rights were
never ours to give.”
            Because
the burden of proof was upon the Richmonds to show that the Wellses were not
bona fide purchasers and because they did not conclusively establish that, we
hold that the above-quoted summary judgment evidence raises a genuine issue of
material fact as to whether the Wellses are not bona fide purchasers such as
would allow reformation of the Richmond-to-Zugg deed in this case.  In
accordance with the well-established standards of review that we have outlined
above, we hold that the trial court erred when it granted the Wellses’ motion
for summary judgment.  For the same reasons, the trial court did not err when
it denied the Richmonds’ motion for summary judgment that it was entitled to reformation
as a matter of law.  The Richmonds’ second point of error is overruled.
            The
judgment of the trial court insofar as it denied the Richmonds’ motion for
summary judgment is affirmed.  The judgment of the trial court insofar as it
granted the Wellses’ motion for summary judgment is reversed.  This cause is
remanded to the trial court for proceedings consistent with this opinion.
 
 
                                                                                    JIM
R. WRIGHT
                                                                                    CHIEF
JUSTICE
 
November 30,
2012
Panel consists of: Wright, C.J.,
McCall, J., and
Gray, C.J., 10th Court of Appeals.[2]
 
 

                [1]No argument has been presented to this court or to the
trial court that concerns the effect, if any, of the execution of the
handwritten contract by any of the Richmonds except for Neil Edward Richmond.  Nor
has any argument been presented concerning the effect, if any, of the contract
being signed only by “Shelly” Zugg, though the deed and other documents on file
reflect the name “Stacy” Zugg.  We express no opinion on either.

[2]Tom Gray, Chief Justice, Court of Appeals, 10th
District of Texas at Waco, sitting by assignment to the 11th Court of Appeals.