Court Opinion

ID: 2952421
Source: CourtListenerOpinion
Date Created: 2015-09-16 22:04:18.407166+00
Date Added: 2024-06-11T15:01:33.794136
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                        NO. 03-06-00707-CV

  Appellants, M. P. McCammon; McCammon Oil, Inc.; Nosivad Oil, Inc.; Van Davison;
  Dawn Davison; Tejon Exploration; Doralex Energy, Inc.; Mansefelt Investment Corp.;
               Fred Harendt; et al.// Cross-Appellants, Noel D. Ischy and
                         NOW Development Company, Inc.

                                                   v.

   Appellees, Noel D. Ischy and NOW Development Company, Inc.// Cross-Appellees,
M. P. McCammon; McCammon Oil, Inc.; Nosivad Oil, Inc.; Van Davison; Dawn Davison;
        Tejon Exploration; Doralex Energy, Inc.; Mansefelt Investment Corp.;
                                 Fred Harendt; et al.

    FROM THE DISTRICT COURT OF CONCHO COUNTY, 119TH JUDICIAL DISTRICT
           NO. 3750, HONORABLE BEN WOODWARD, JUDGE PRESIDING

                             MEMORANDUM OPINION

                Appellants/cross-appellees—M. P. McCammon, McCammon Oil, Inc., Nosivad Oil,

Inc., Van Davison, Dawn Davison, Tejon Exploration, Doralex Energy, Inc., Mansefelt Investment

Corp., Fred Harendt, et al.—and appellees/cross-appellants Noel D. Ischy and NOW Development

Company, Inc.1 appeal from a district court judgment in favor of Ischy in a trespass to try title action

concerning an oil and gas lease on a 169.1-acre tract of land in Concho County. We conclude that

Ischy cannot prevail on his trespass to try title claim, as he proved neither a complete chain of title

       1
          For clarity, we refer to appellants/cross-appellees collectively as McCammon, and to
appellees/cross-appellants collectively as Ischy, except where necessary to distinguish among
appellants in reciting historical facts.
nor actual possession of the minerals. We reverse the judgment of the district court and render

judgment in favor of McCammon.

Factual and Procedural Background

               Through his company NOW Development Co., Noel D. Ischy, an oil and gas well

operator, purchases underproductive leasehold estates and works to increase their production. In

2000, Ischy acquired oil and gas leases on two wells in Concho County, the Millar-Loveless well and

the Millar-A well, along with surrounding tracts of land. The surrounding tracts of land include the

169.1-acre tract at issue here.

               Mike McCammon is an independent oil producer operating out of the San Angelo

area through his company, McCammon Oil & Gas, Inc. Phil Davison, a geologist, operates Nosivad

Oil, Inc. In July 2003, McCammon and Davison purchased a lease on the 169.1-acre tract of land

at issue here, described as:

       Being 169.1 acres out of the Northeast part of the Chris Funck Survey No. 2124,
       A-182, and being a part of the same lands as described in that certain Deed dated
       March 15, 1951, from W.R. Loveless, et al., to Nannie Millar Malloy, recorded in
       Volume 71, Page 531, Deed Records, Concho County, Texas.

               Before purchasing the lease, McCammon had hired Cary Headstream to investigate

tracts open for lease in the area. Headstream’s investigation revealed that, in 1989, the Millar and

Cocke families had executed leases on various tracts of land, two of which included the 169.1-acre

tract at issue here. However, a review of the oil roll tax records showed no property taxes being paid

on abstract number 1558, the number listed on both leases, indicating that there was no production

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holding the leases.2 Relying on this information, McCammon instructed Headstream to purchase

the lease on the 169.1-acre tract. Headstream negotiated the purchase of the lease with members

of the Millar family, the property owners. Five members of the Millar family signed the lease and

provided a warranty of title. Headstream recorded the lease in the Concho County deed records.

               In late April or May of 2004, McCammon obtained a drilling permit from the

railroad commission and requested a title opinion from attorney Terry Sterling. On June 4, 2004,

McCammon received Sterling’s title opinion. Sterling had also discovered the two 1989 leases

that Headstream had found. Unlike Headstream, however, Sterling noted potential problems

with the title to the 169.1-acre tract. According to Sterling, McCammon needed to obtain affidavits

of nonproduction for the land covered by the two 1989 leases or to obtain releases of the owner’s

interest. Sterling also opined that McCammon needed ratifications from the custodians of minors

Abram C. Millar and Amy Millar, who had been conveyed part of the mineral estate by their

grandparents, Abram Millar and Zelma Millar, under the Texas Uniform Transfer to Minors Act

(TUTMA). McCammon referred the matter to Headstream, who began working to clear the title.

               Viewing these title issues as mere formalities that would be resolved,

McCammon began drilling activities in June 2004. The well was started or “spudded” on July 2.

Drilling occurred from July 5 through July 16, and the completion phase ran through mid-August.

It is undisputed that McCammon’s drilling operations were open and obvious.

       2
           Generally, a lease payment holds the lease on oil and gas property until drilling and
production occur. Once production is established on any tract covered by the lease, the entire lease
is held by production until production ceases. See, e.g., Mathews v. Sun Oil Co., 425 S.W.2d 330,
333 (Tex. 1968); Moore v. Jet Stream Invs., Ltd., 261 S.W.3d 412, 422-25 (Tex. App.—Texarkana
2008, pet. denied).

                                                 3
                In August, Headstream reported to McCammon that one of the two 1989 leases

that included the 169.1-acre tract at issue also included a different tract on which there was a

producing well, the Millar-Loveless. Headstream had not discovered the production under one of

the 1989 leases during his investigation because of an error in the abstract number on the relevant

1989 lease. Although the correct abstract number for the lease in question is 1588, both of the

1989 leases listed 1558 as the abstract number. The oil roll showed no production on the incorrect

abstract number—1558—but showed active production on the correct abstract number—1588.

                When McCammon learned of the production issue and the numbering error, he

contacted Ischy, and the two met to discuss a possible solution. McCammon and Ischy were unable

to agree upon a solution, and McCammon filed a claim for relief in district court, asking the court

to declare that Ischy had impliedly consented to McCammon’s entry, drilling, and production of the

McCammon well and that Ischy was estopped from withdrawing his consent. Ischy answered and

asserted a counterclaim for trespass to try title.

                Ischy moved for summary judgment on McCammon’s estoppel theory and on

McCammon’s defense of good-faith trespass. The district court granted summary judgment on

estoppel, but denied summary judgment on good-faith trespass. Before trial, the district court

realigned the parties, making Ischy the plaintiff and McCammon the defendant. At trial, the

district court excluded all evidence of Ischy’s knowledge and conduct and evidence of the reasons

why McCammon continued to operate the well.

                A jury found that Ischy lawfully possessed his property and that McCammon had

not acted in good faith in drilling, completing, and equipping the well. The district court entered

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judgment consistent with the jury verdict. The district court determined that Ischy has superior title

and right to possession of the 169.1-acre tract. The court ordered McCammon to turn over

operations on and possession of the property to Ischy and to release the almost $1 million dollars

being held in suspense to Ischy.

                Both McCammon and Ischy appeal. McCammon argues that Ischy failed to prove

superior title under the rules of trespass to try title and, in the alternative, that the district court

improperly granted summary judgment on estoppel and excluded all evidence of McCammon’s

claims and defenses, that insufficient evidence supports the jury findings, and that the district court’s

judgment was overly broad in awarding Ischy possession of McCammon’s oilfield equipment. Ischy

challenges the district court’s refusal to award attorneys’ fees.

Trespass to Try Title

                A trespass to try title action is the method for determining title to real property

in Texas. See Tex. Prop. Code Ann. §§ 22.001-.045 (West 2000). To prevail in a trespass to try

title action, a plaintiff must do one of the following: (1) prove a regular chain of conveyances from

the sovereign, (2) establish superior title out of a common source, (3) prove title by limitations,

or (4) prove title by prior possession coupled with proof that possession was not abandoned. Land

v. Turner, 377 S.W.2d 181, 183 (Tex. 1964). A plaintiff may prevail only on the superiority of

his title, not on the weakness of the defendant’s title. Id. If the plaintiff fails to establish his title,

the effect of a take nothing judgment against him is to vest title in the defendant. Hejl v. Wirth,

343 S.W.2d 226, 227 (Tex. 1961).

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        Superior Title from a Common Source

                Ischy claims to have established a prima facie case of superior title from the

common sources through which McCammon claims title. To prevail by this means, Ischy had to

connect his title and McCammon’s title through complete chains of title to a common source. See

Rogers v. Ricane Enters., 884 S.W.2d 763, 768 (Tex. 1994). Ischy had to then show that his title

is superior to McCammon’s. See id.

                Ischy claims record title to the leasehold on the disputed tract through the two

1989 leases, assigned to him in 2000 by Petro-West Corp. By virtue of his production on one of

the tracts covered by one of the two 1989 leases, Ischy claims to hold title to the 169.1-acre tract at

issue here. The 1989 leases and the McCammon lease refer to a common source—a 1951 deed from

W.R. Loveless, et al. to Nannie Millar Malloy. The 1951 deed is the common source from which

Ischy must derive his title through a complete chain of title.

                McCammon argues that although the 1951 deed was offered and admitted at trial,

nothing connects Nannie Millar Malloy’s interest with anyone after her in the chain. In addition, no

legal instrument shows that the property interest conveyed by Abram and Zelma Millar to their minor

grandchildren under the TUTMA were conveyed to Ischy’s predecessor, Petro-West. According to

McCammon, there is a gap in the chain of title between Malloy and the lessors under whom Ischy

claims title, and there is a gap in the chain of title between the Millar minors and Ischy’s predecessor,

Petro-West. While Ischy recognizes that the gaps exist, he asserts that the gaps are not fatal to his

claim. Ischy argues that the testimony of attorney Terry Sterling conclusively establishes that Ischy

had older and superior title, and that the missing ratification document necessary to convey the

                                                   6
TUTMA interests exists and is recorded. McCammon disagrees, arguing that expert testimony is

not admissible to fill a gap in record title in a trespass to try title action.

                McCammon relies chiefly on City of Mission v. Popplewell, 294 S.W.2d 712

(Tex. 1956), and on Ramsey v. Jones Enterprises, 810 S.W.2d 902 (Tex. App.—Beaumont 1991,

writ denied). In Popplewell, the City of Mission had the burden of proving its title to a disputed

alley. Although the supreme court recognized that testimony of the expert engineer could potentially

bridge the gap in the chain of title, it held that the city was required to proved its legal title by valid

written instruments, not by oral evidence:

        Parol evidence in the form of opinions and conclusions without documentary basis
        is inadmissible to establish such title, and even if admitted without objection is of no
        probative force.
294 S.W.2d at 277.

                In Ramsey, the appellee attempted to prove superior title to the disputed tract based

solely upon the expert testimony of an attorney. 810 S.W.2d at 903. In holding that the trial court

erred in allowing the appellee to prove title in a trespass to try title action with nothing more than

the oral expert testimony of an attorney, the court explained:

        Legal history as well as public policy requires that proof in trespass to try title actions
        be as certain as available documentary evidence will allow. Establishing legal or
        equitable interest or title to real property demands far more than a swearing match
        among witnesses, whether expert or otherwise. It demands strict proof based in
        records and documents.

Id.

                                                     7
                Ischy attempts to distinguish Popplewell and Ramsey, arguing that Popplewell

is limited to cases in which the parol evidence rule applies and that Ramsey applies only in cases

in which the defendant objects under the best evidence rule. In Popplewell, however, the issue was

not whether extrinsic evidence could be used to prove the contents of an unambiguous document.

See In re H. E. Butt Grocery Co., 17 S.W.3d 360, 369 (Tex. App.—Houston [14th Dist.] 2000,

orig. proceeding) (“The parol evidence rule precludes consideration of extrinsic evidence to

contradict, vary or add to the terms of an unambiguous written agreement absent fraud, accident

or mistake.”). Rather, the issue was whether testimonial evidence, in the form of opinions

and conclusions, could—standing alone—establish record title in a trespass to try title action.

Popplewell, 294 S.W.2d at 277. The court held that it could not. Id. Likewise, although the court

in Ramsey discussed the best evidence rule, its decision turned on the substantive requirements of

a trespass to try title action, not on the applicability of the best evidence rule. 810 S.W.2d at 905.

Moreover, even if the Ramsey decision had been based solely on the best evidence rule, its holding

would still act to exclude the expert testimony offered here, as Ischy, the party offering the evidence,

has not shown that the documentary evidence was unavailable through no fault or failure on his part.

See id.

                To support his contention that courts have relaxed the rule that only documentary

evidence can prove title in a trespass to try title action, Ischy relies on Bacon v. Jordan, 763 S.W.2d
395, 397 (Tex. 1988), on King v. Grisbee, No. 09-05-00100-CV, 2006 Tex. App. LEXIS 8124, at *9-

10 (Tex. App.—Beaumont Sept. 14, 2006, no pet.) (mem. op.), and on Exploracio de la Estrella

Soloataria Incorporacion v. Birdwell, 858 S.W.2d 549, 553-54 (Tex. App.—Eastland 1993, no writ).

                                                   8
In both Bacon and King, however, title was proved through documentary evidence. Bacon,
763 S.W.2d at 397; King, 2006 Tex. App. LEXIS 8124, at *3. Although witnesses may have also

testified in an attempt to explain the documents, there is no indication that there were gaps in the

documentary proof of title that were filled solely by testimony. Bacon and King are, therefore,

consistent with the rule in Popplewell that title in a trespass to try title action must be established by

documentary evidence. The other case on which Ischy relies—Birdwell—is inapplicable here, as

the plaintiff’s suit to cancel the lease in that case, described as a suit to quiet title, did not require

Birdwell to prove superior title to the property by tracing his title to a common source, as is required

in a trespass to try title action. 858 S.W.2d at 553-54; see also Babcock v. Brickell, No. 03-99-

00702-CV, 2000 Tex. App. LEXIS 3913, at *5-6 (Tex. App.—Austin June 15, 2000, no pet.)

(mem. op.) (although plaintiff in suit to quiet title must generally prevail on strength of his own

title, when parties trace their titles to common source, plaintiff need only prove superior title as

to defendant).

                 Our review of the trespass to try title cases shows that documentary evidence is

required to establish title. Here, gaps admittedly exist in the chain of title between Malloy and the

lessors under whom Ischy claims title, and in the chain of title between the Millar minors and Ischy’s

predecessor, Petro-West. Ischy attempts to fill these gaps with testimonial evidence. This does not

satisfy his burden of proof. Thus, Ischy has failed to establish superior title to McCammon from a

common source.

                                                    9
        Title by Prior Possession

                At trial, Ischy also sought to establish superior title through prior possession. When

asked, the jury determined that Ischy was “lawfully in possession of the subject property when

Defendants entered upon same.” McCammon challenges the sufficiency of the evidence to support

this finding.

                For a legal sufficiency challenge, we review the evidence in the light most favorable

to the judgment, crediting favorable evidence if reasonable jurors could and disregarding contrary

evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 807

(Tex. 2005). We will sustain McCammon’s legal sufficiency challenge if the record reveals: (1) the

complete absence of a vital fact; (2) the court is barred by rules of law or evidence from giving

weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact

is no more than a mere scintilla; or (4) the evidence conclusively establishes the opposite of the

vital fact. See id. at 810. More than a scintilla of evidence exists if the evidence rises to a level

that would enable reasonable and fair-minded people to differ in their conclusions. Ford Motor Co.

v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004).

                For a factual sufficiency challenge, we must consider and weigh all the evidence

in the record, both in support of and against the finding, to decide whether the finding should

be set aside. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001). We will sustain

McCammon’s factual sufficiency challenge only if the finding is so against the great weight and

preponderance of the evidence as to be clearly wrong and unjust. Id.; Cain v. Bain, 709 S.W.2d 175,

176 (Tex. 1986).

                                                   10
                The jury answered “yes” to the following question as to prior possession:

       Was Noel Ischy lawfully in possession of the subject property when Defendants
       entered upon same?

In Ischy’s view, McCammon’s complaint is essentially that the jury was given neither a definition

of prior possession nor instructions on how to answer the question, and as Ischy points out,

McCammon neither objected on these grounds nor submitted a proposed definition or instructions

that he considered proper. Although definitions or instructions would have assisted the jury in

determining whether Ischy was “in possession of the subject property,” the question submitted is not

inconsistent with the arguments or the evidence the jury was asked to consider, and the substance

of McCammon’s complaint on appeal is that the evidence does not support the court’s charge, even

as submitted.

                It is well-established that “it is the court’s charge, not some other unidentified law,

that measures the sufficiency of the evidence when the opposing party fails to object to the charge.”

See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). As presented at trial, the jury was asked to

consider whether Ischy possessed the “subject property,” which was defined earlier in the charge as:

       169.1 acres out of the Northeast part of the Chris Funck Survey No. 2124, A-182, and
       being a part of the same lands as described in that certain Deed dated March 15,
       1951, from W.R. Loveless, et al., to Nannie Millar Malloy, recorded in Volume 71,
       Page 531, Deed Records, Concho County, Texas.

During closing arguments, the jury was informed that a person can prove possession by

establishing record title to the property or by showing production from wells on the lease. However,

                                                  11
as McCammon’s counsel pointed out, the question actually submitted asked the jury “solely about

[the 169.1-acre] tract of land and none other.”

               McCammon now relies on Natural Gas Pipeline Co. v. Pool, 124 S.W.3d 188, 193

(Tex. 2003), to establish the legal meaning of possession in the context of oil and gas leases, arguing

that “[i]n the context of adverse possession of minerals, the Texas Supreme Court has plainly

determined that ‘actual possession’ of oil and gas means ‘drilling and production of oil or gas.’”

However, as we have noted, there was no definition or instruction on the meaning of possession in

the jury charge. The only instruction the jury was given at trial as to the meaning of possession is

that it can be established by establishing record title to the property or by showing production

from wells on the lease. We, therefore, examine the sufficiency of the evidence in this context. See

Osterberg, 12 S.W.3d at 55.

               As we discussed above, Ischy failed to prove record title to the property and,

therefore, cannot rely on record title to establish possession. Thus, as the case was submitted to the

jury, Ischy was required to present evidence that he had possession of the 169.1-acre tract through

production. He attempts to do so by pointing to his own producing well, the Millar-Loveless, located

on another tract of land. However, according to the charge submitted to the jury, the jury was only

to consider whether Ischy had a producing well on the 169.1-acre tract, not on other tracts that

might be covered by the same lease. To do so, Ischy points to evidence that, in 1994, a predecessor

produced gas from a plugged well on the 169.1-acre tract at issue. However, the undisputed

evidence is that the well on which Ischy relies to establish possession was plugged and abandoned

before Ischy bought the lease. Indeed, Ischy testified that “[t]here was a plugged well on that tract,

                                                  12
but not a producing well on that tract.” The undisputed evidence also shows that, when McCammon

bought his lease, there was no producing well on the 169.1-acre tract.

                Moreover, there was no evidence presented to the jury that Ischy ever possessed the

169.1-acre tract in any manner beyond his claim of record title. Neither of the signs indicating an

interest by Ischy, one for the 320-acre Millar-Loveless lease and one for the 318.44-acre Millar-A

lease, was located on the 169.1-acre tract. There was no evidence in the record that Ischy had been

to Concho County or had ever set foot on the property. It was undisputed at trial that McCammon’s

drilling operations were open and obvious and that no one ever questioned him or told him to stop.

Indeed, it was McCammon who initially contacted Ischy when McCammon eventually learned that

there was a possible problem with the title. Based on the jury charge submitted and our review of

the evidence and arguments presented to the jury at trial, we find no evidence to support the jury’s

finding that Ischy had possession of the 169.1-acre tract.3

                We have determined that Ischy did not establish his title either by proving record title

from a common source or by prior possession. Thus, under the strict rules of trespass to try title,

title in the leasehold at issue vests in McCammon. See Hejl, 343 S.W.2d at 227.

        Equitable Grounds

                Ischy also contends that this Court can affirm on equitable grounds. Ischy’s

counterclaim included only a trespass to try title action, not an equitable action to quiet title. A claim

to quiet title or to remove cloud on title, equitable actions, and a claim in trespass to try title are

        3
          Having so found, we need not address McCammon’s contention that the possession
question was immaterial.

                                                   13
distinct causes of action. Fricks v. Hancock, 45 S.W.3d 322, 327 (Tex. App.—Corpus Christi 2001,

no pet.); Katz v. Rodriguez, 563 S.W.2d 627, 629 (Tex. Civ. App.—Corpus Christi 1977, writ ref’d

n.r.e.). Ischy did not assert an action to quiet title in the trial court and obtained neither jury findings

nor a judgment on a quiet title action. He has not, therefore, preserved this argument for review.

See Tex. R. App. P. 33.1.

Conclusion

                We reverse the judgment of the district court and render judgment that Ischy take

nothing on his claims and that title and possession of the 169.1-acre mineral estate, including all

equipment and improvements, is vested in McCammon.4

                                                 __________________________________________

                                                 G. Alan Waldrop, Justice

Before Chief Justice Law, Justices Pemberton and Waldrop;
   Chief Justice Law not participating

Reversed and Rendered

Filed: May 12, 2010

        4
         Our resolution of the issues relating to trespass to try title and quieting title are dispositive
of Ischy’s issue regarding the trial court’s failure to award him attorneys’ fees. That issue is
overruled.

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