Court Opinion

ID: 4123444
Source: CourtListenerOpinion
Date Created: 2017-02-06 08:12:17.949689+00
Date Added: 2024-06-11T07:46:23.499835
License: Public Domain

IN THE SUPREME COURT OF TEXAS
                                         ══════════
                                           No. 15-0142
                                         ══════════

                            RICHARD D. CRAWFORD, PETITIONER,

                                                  v.

                              XTO ENERGY, INC., RESPONDENT
            ══════════════════════════════════════════
                          ON PETITION FOR REVIEW FROM THE
                 COURT OF APPEALS FOR THE SEVENTH DISTRICT OF TEXAS
            ══════════════════════════════════════════

                                   Argued September 15, 2016

       JUSTICE LEHRMANN delivered the opinion of the Court.

       In this case, in which an oil-and-gas lessor sued the lessee for failure to pay royalties, we

consider whether Texas Rule of Civil Procedure 39 required joinder of the lessor’s neighboring

landowners as parties to the suit. The trial court concluded that the neighboring landowners were

necessary parties and dismissed the case without prejudice when the plaintiff failed to join them.

The court of appeals affirmed. We hold that the trial court abused its discretion in requiring joinder

under Rule 39 and dismissing the case. Accordingly, we reverse the court of appeals’ judgment

and remand the case to the trial court for further proceedings.

                                          I. Background

       Mary Ruth Crawford owned approximately 146 acres of land in Tarrant County, Texas. In

1964, she conveyed the surface estate of 8.235 of those acres in fee simple to Texas Electric
Service Company, which operates an electric-transmission line on the property. In the deed

conveying that acreage, Mary Ruth expressly reserved the oil and gas under the tract (the Crawford

tract), along with a conditional right of ingress and egress for exploration and development.1

Twenty years later, in 1984, Mary Ruth conveyed the property immediately north and south of the

Crawford tract without reserving the oil and gas under those parcels. Much of that property was

subsequently subdivided into residential lots.

         In 2007, Mary Ruth executed an oil-and-gas lease (Crawford lease) on the Crawford tract

with XTO Energy, Inc.’s predecessor in interest. The lease included a provision for royalty

payments on gas and casinghead gas produced from the leased premises. The lease also contained

a pooling provision.

         Mary Ruth died in November 2007, and her son Richard Crawford inherited her estate. In

April 2009, Crawford executed and recorded a ratification of the Crawford lease. Shortly

thereafter, XTO pooled the Crawford lease with hundreds of other leases, designating the Eden

Southwest Unit. Forty-four of those pooled leases encompassed lands adjacent to the Crawford

tract. Each lease covered a particularly described tract, as well as “all land owned or claimed by

Lessor adjacent or contiguous to the land particularly described [in the lease], although not

included within the boundaries of the leased premises.”

         XTO completed a well on the Eden Southwest Unit that began producing in 2010.

Crawford executed a division order and returned it to XTO. However, XTO obtained a title

         1
          The deed states: “Grantors reserve unto themselves, their heirs and assigns, the right to all oil and gas in
and under the lands herein conveyed but expressly waive all rights of ingress and egress for the purpose of drilling for
or producing oil and/or gas from the surface of the lands herein conveyed, provided that wells opened on other lands
may be bottomed on these lands.”

                                                           2
opinion concluding that the share of royalties attributable to the Crawford tract should be credited

to the forty-four adjacent landowners rather than Crawford. Specifically, the opinion concluded

that, pursuant to the common-law strip-and-gore doctrine, Mary Ruth’s 1984 conveyance of the

land immediately north and south of the Crawford tract effectively also conveyed the minerals

under that tract, even though the deed does not describe it. The strip-and-gore doctrine generally

provides:

        Where it appears that a grantor has conveyed all land owned by him adjoining a
        narrow strip of land that has ceased to be of any benefit or importance to him, the
        presumption is that the grantor intended to include such strip in such conveyance;
        unless it clearly appears in the deed, by plain and specific language, that the grantor
        intended to reserve the strip.

Cantley v. Gulf Prod. Co., 143 S.W.2d 912, 915 (Tex. 1940). The title opinion led XTO to take

the position that the Crawford-tract minerals were included in the 1984 conveyance because the

deed contained no language reserving them.

        The record does not reflect whether XTO considered filing an interpleader action after

receiving the title opinion to resolve any issues or potential disputes regarding entitlement to the

Crawford-tract royalties.2 The record also does not reflect any conduct or statements by any of

the adjacent landowners indicating their position on ownership of the Crawford tract. In any event,

after obtaining the title opinion, XTO began crediting the Crawford-tract royalties to the adjacent

landowners and has never made any royalty payments to Crawford.

        Crawford sued XTO for breach of contract, declaratory judgment, and related claims

arising out of XTO’s failure to make royalty payments, asserting that XTO’s “acts and omissions

        2
           “Persons having claims against the plaintiff may be joined as defendants and required to interplead when
their claims are such that the plaintiff is or may be exposed to double or multiple liability.” TEX. R. CIV. P. 43.

                                                        3
have resulted in a cloud on [Crawford’s] title to the Property.” XTO filed a motion to abate and

compel joinder of the forty-four adjacent landowners, arguing that they “have or claim interests in

the [Crawford tract] that would be affected by the relief Crawford seeks and are, therefore, needed

for the just adjudication of Crawford’s claims under Rule 39.” The trial court granted the motion,

ordering Crawford to join the adjacent landowners or risk dismissal. The trial court also denied

Crawford’s motion for reconsideration. Crawford did not join the landowners, leading XTO to

file a motion to dismiss and a motion for sanctions. The trial court denied the latter but granted

the former and dismissed the case without prejudice.

       A divided court of appeals affirmed, holding that the trial court did not abuse its discretion

in requiring joinder. 455 S.W.3d 245 (Tex. App.—Amarillo 2015). Noting that the adjacent

landowners are being paid royalties on the Crawford tract, the court concluded that the owners

“have a pecuniary interest in the outcome of this litigation” and could “file their own suit”

following a judgment in Crawford’s favor, subjecting XTO to the possibility of inconsistent

obligations. Id. at 248–49.

                                          II. Discussion

                                        A. Waiver Issues

       Before turning to the merits, we address XTO’s contentions regarding Crawford’s

purported waiver of various issues and arguments. First, XTO argues that Crawford has waived

his entire appeal because the appellate record contains no reporter’s record of the hearings on

XTO’s joinder and dismissal motions, and that we must therefore presume evidence was presented

at those hearings that supports the trial court’s orders. See Piotrowski v. Minns, 873 S.W.2d 368,

370–71 (Tex. 1993) (“A litigant who fails to request that the reporter record pretrial proceedings

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risks waiver of any complaint with respect to error occurring during those proceedings.”). The

court of appeals rejected this argument, as do we.

       A reporter’s record is necessary only for evidentiary hearings; “for nonevidentiary

hearings, it is superfluous.” Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 782

(Tex. 2005). Further, we generally presume that pretrial hearings are nonevidentiary unless “the

proceeding’s nature, the trial court’s order, the party’s briefs, or other indications show that an

evidentiary hearing took place in open court.” Id. at 783. The clerk’s record in this case contains

the motions and responses relating to the joinder issue, and the parties submitted a considerable

amount of evidence with those filings. In the order granting XTO’s motion to compel joinder, the

trial court stated that it had considered the motion, response, and reply, along with “the arguments

of counsel at the hearing on the Motion, the documents on file with the Clerk of the Court, and the

applicable law.” Similarly, in its order dismissing the case, the trial court stated that it had

considered the motion to dismiss, the response, applicable law, and “the relevant evidence and

documents on file with the clerk of the court.” Nothing in those orders indicates that the trial court

took evidence at the pertinent hearings or relied on any such evidence in ruling on the motions.

       XTO asserts in its briefing that “there was documentary evidence that was marked as an

exhibit and admitted into evidence at a hearing.” XTO does not describe that evidence or clarify

the specific hearing at which it was admitted. In light of the volume of evidence filed with the

clerk and the absence of any indication that the trial court relied on any evidence submitted at a

hearing, XTO’s summary assertion that a single, undescribed piece of evidence was admitted as

an exhibit at an unidentified hearing does not overcome the presumption that the pertinent hearings

                                                  5
were nonevidentiary. Accordingly, we hold that Crawford brought forward an adequate appellate

record.

          XTO next argues that Crawford waived his appeal by failing to include a statement of

issues in his brief on the merits in this Court, as Texas Rule of Appellate Procedure 55.2 requires.

Guitar Holding Co. v. Hudspeth Cty. Underground Water Conservation Dist. No. 1, 263 S.W.3d
910, 918 (Tex. 2008) (“[I]ssues not presented in the petition for review and brief on the merits are

waived.”).     However, Crawford included an issues statement in his petition for review in

accordance with the rules, and so long as his brief does not “raise additional issues or points or

change the substance of the issues or points presented in the petition,” TEX. R. APP. P. 55.2(f), we

decline to apply Rule 55.2 so strictly as to deny Crawford our consideration of the merits.

                                          B. Joinder Analysis

          We review a trial court’s rulings on issues concerning joinder of parties for an abuse of

discretion. See Royal Petroleum Corp. v. Dennis, 332 S.W.2d 313, 317 (Tex. 1960). “A trial court

abuses its discretion if it acts in an arbitrary or unreasonable manner without reference to any

guiding rules or principles.” Bowie Mem’l Hosp. v. Wright, 79 S.W.3d 48, 52 (Tex. 2002). Texas

Rule of Civil Procedure 39 provides the framework for determining when joinder of a party is

mandatory and states in pertinent part:

          A person who is subject to service of process shall be joined as a party in the action
          if

          (1) in his absence complete relief cannot be accorded among those already parties,
          or

          (2) he claims an interest relating to the subject of the action and is so situated that
          the disposition of the action in his absence may

                                                    6
                  (i) as a practical matter impair or impede his ability to protect that interest
                  or

                  (ii) leave any of the persons already parties subject to a substantial risk of
                  incurring double, multiple, or otherwise inconsistent obligations by reason
                  of his claimed interest.

         If he has not been so joined, the court shall order that he be made a party. . . .

TEX. R. CIV. P. 39(a) (formatting added).3

         XTO argues that Rule 39(a)(2) mandates joinder of the adjacent landowners because

(1) they have a claim to the Crawford-tract minerals as a matter of law by virtue of the strip-and-

gore doctrine, (2) a judgment in Crawford’s favor, which would require a determination that he

owns the Crawford tract despite Mary Ruth’s 1984 conveyance, would directly impact their

interests, and (3) to the extent such a judgment would not bind the adjacent landowners, they could

reasonably be expected to file their own claims against XTO, subjecting it to a substantial risk of

multiple, inconsistent obligations. Crawford responds that (1) the adjacent landowners have never

claimed an interest in the Crawford-tract minerals, (2) the adjacent landowners have no such

interest because the strip-and-gore doctrine does not apply in this case, and (3) the court of appeals

erred in holding XTO’s unilateral, improper royalty payments to the adjacent landowners created

such an interest.4

         3
           One of Crawford’s causes of action is brought under the Texas Declaratory Judgments Act, which states
that “[w]hen declaratory relief is sought, all persons who have or claim any interest that would be affected by the
declaration must be made parties.” TEX. CIV. PRAC. & REM. CODE § 37.006(a). The Act uses different language than
Rule 39 in describing who constitutes a necessary party and outlines different consequences for nonjoinder. While
the Act simply clarifies that a “declaration does not prejudice the rights of a person not a party to the proceeding,” id.,
Rule 39 states that “the court shall order that [the necessary party] be made a party,” TEX. R. CIV. P. 39(a).
Accordingly, Rule 39’s requirements govern when a party is seeking to compel joinder of persons in a declaratory-
judgment action. See Brooks v. Northglen Ass’n, 141 S.W.3d 158, 162 (Tex. 2004).
         4
           Crawford also argues that Rule 39(a)(1) does not require joinder because Crawford and XTO are the only
parties to the lease underlying XTO’s royalty obligations to Crawford, and thus complete relief may be accorded
among those already parties. See TEX. R. CIV. P. 39(a)(1) (requiring joinder of a person if “in his absence complete

                                                            7
        As an initial matter, we reject Crawford’s contention that the strip-and-gore doctrine’s

purported inapplicability to Mary Ruth’s 1984 conveyance forecloses the adjacent landowners’

necessary-party status. The crux of the argument is that, because Crawford should and will prevail

on the merits of his claims, the adjacent landowners necessarily have no interest in the Crawford

tract or this litigation. But this reasoning improperly hinges the necessary-party inquiry on the

result of the merits inquiry. The court of appeals correctly recognized that the question of whether

the adjacent landowners are necessary parties must be resolved before, not after, the merits of

Crawford’s claims. 455 S.W.3d at 249. The ultimate issue of the strip-and-gore doctrine’s effect

on the Crawford tract is an interesting one, but it is not before us and has no bearing on our Rule

39 analysis.

        Nevertheless, we agree with Crawford that the adjacent landowners are not necessary

parties under Rule 39(a)(2) because they do not “claim[] an interest relating to the subject of the

action.” TEX. R. CIV. P. 39(a)(2). The verb “claim” means “to demand recognition of (as a title,

distinction, possession, or power) esp. as a right”; “to demand delivery or possession of by or as if

by right”; “to assert or establish a right or privilege.” Claim, WEBSTER’S THIRD NEW INT’L

DICTIONARY (2002); see also Claim, THE AMERICAN HERITAGE DICTIONARY                            OF THE   ENGLISH

LANGUAGE (5th ed. 2016) (defining claim in pertinent part as “[t]o demand, ask for, or take as

one’s own or one’s due”; “[t]o state to be true, especially when open to question; assert or

maintain”). As discussed below, despite XTO’s contention that the forty-four adjacent landowners

claim an interest relating to the subject of this suit by virtue of their alleged ownership interest in

relief cannot be accorded among those already parties”). We agree and note that XTO does not contest the merits of
that argument. Instead, XTO contends that Crawford waived the argument on appeal by failing to challenge an implied
finding that the adjacent landowners are necessary parties under Rule 39(a)(1). We disagree. Crawford substantively
argued in both the court of appeals and this Court that Rule 39(a)(1) does not require joinder.

                                                        8
the Crawford-tract minerals,5 no record evidence shows or even suggests that a single one of the

adjacent landowners has ever demanded or asserted ownership of or a royalty interest in those

minerals.

         It is undisputed that the 1984 deed by which Mary Ruth Crawford conveyed the property

immediately north and south of the Crawford tract does not describe any portion of that tract. Nor

does XTO assert that any portion of the Crawford tract is described in the downstream deeds

ultimately conveying the subdivided lots to the adjacent landowners.6 XTO points out that the

adjacent landowners’ oil-and-gas leases cover not only the properties specifically described

therein—the descriptions presumably match those in the owners’ respective deeds—but also “all

land owned or claimed by Lessor adjacent or contiguous to the land particularly described.”

However, that language does not reflect an interest in any specific property; it merely ensures that

any such interest, to the extent it exists, is covered by the lease. Accordingly, the landowners do

not claim an interest in the Crawford-tract minerals solely by virtue of their deeds and leases.

         This is in stark contrast to cases involving oil-and-gas leases and title disputes in which

joinder of nonparty lessors was required. See, e.g., Veal v. Thomason, 159 S.W.2d 472, 477 (Tex.

1942) (holding that all landowners who executed leases on a unitized block were necessary parties

in a suit to cancel one of the leases); Kodiak Res., Inc. v. Smith, 361 S.W.3d 246, 251–52 (Tex.

App.—Beaumont 2012, no pet.) (holding that all lessors under a single mineral lease were

         5
          The pooled leases granted XTO a fee simple determinable interest in the minerals that make up the Eden
Southwest Unit, including the Crawford-tract minerals, with the lessors retaining only royalty interests. XTO therefore
owns the minerals, subject to a possibility of reverter in the lessors. See Nat. Gas Pipeline Co. of Am. v. Pool, 124
S.W.3d 188, 192 (Tex. 2003). XTO contends that the adjacent landowners, not Crawford, own the royalty interest
and possibility of reverter with respect to the Crawford-tract minerals.
         6
             Most of those deeds are not in the record.

                                                          9
necessary parties to a suit filed by some of the lessors against the operator lessees for a declaratory

judgment that the lease had terminated); Longoria v. Exxon Mobil Corp., 255 S.W.3d 174, 182

(Tex. App.—San Antonio 2008, pet. denied) (holding that, where the plaintiffs sued energy

companies seeking to establish title to an undivided one-half interest in a partially leased mineral

estate, the trial court did not abuse its discretion in ordering joinder of “the record owners of 100%

of the royalty interests and the possibility of reverter of the mineral estate”). In all of these cases,

the absent parties expressly claimed an interest in the subject of the litigation through their deeds

and leases. Here, the adjacent landowners’ deeds and leases by themselves reflect no interest in

the Crawford-tract minerals.

        XTO insists that the pertinent deeds’ failure to specifically describe the Crawford tract is

irrelevant because, if the strip-and-gore doctrine applies, a presumption arises that the tract was

nevertheless conveyed. See Stribling v. Millican DPC Partners, LP, 458 S.W.3d 17, 21 n.4 (Tex.

2015) (noting that “under certain circumstances [the strip-and-gore doctrine] allows for a

presumption that a relatively small and narrow strip of land omitted from the deed is still

conveyed”). We do not disagree that the adjacent landowners could claim that, under the

circumstances, the strip-and-gore doctrine gives them an interest in the Crawford-tract minerals.

But only XTO has actually claimed that the adjacent landowners have such an interest; the

landowners themselves have not, either directly or indirectly. That said, the court of appeals

correctly noted that the landowners did not need to actually “c[o]me to court to assert an interest”

in order to claim an interest under Rule 39. 455 S.W.3d at 248–49. But they needed to do

something, and the adjacent landowners have done nothing.

                                                  10
       The court of appeals found significant the undisputed fact that the adjacent landowners are

being paid royalties attributable to the Crawford tract and thus “have a pecuniary interest in the

outcome of this litigation.” Id. at 249. But the record reflects that XTO unilaterally made the

determination to credit the Crawford-tract royalties to the adjacent landowners. Indeed, nothing

in the record indicates whether the adjacent landowners are even aware that a portion of the

royalties XTO has been sending them is attributable to the Crawford tract, much less that they have

“demanded” or “asserted” a right to that portion. We decline to hold that the adjacent landowners

have claimed an interest in the Crawford-tract minerals merely because XTO has been sending

them royalties to which they never claimed entitlement. In sum, Rule 39 does not require joinder

of persons who potentially could claim an interest in the subject of the action; it requires joinder,

in certain circumstances, of persons who actually claim such an interest.

       XTO reasonably expresses concern that a judgment in Crawford’s favor in the absence of

the adjacent landowners would subject XTO to the risk of incurring multiple or otherwise

inconsistent obligations. TEX. R. CIV. P. 39(a)(2). Noting that a judgment for Crawford would

diminish the adjacent landowners’ future royalties, XTO claims “it can be reasonably expected

and anticipated” that the landowners will sue XTO and assert a right to royalties attributable to the

Crawford tract. While this concern is logical, it does not alter our conclusion.

       Again, Rule 39 requires joinder of a person who “claims an interest relating to the subject

of the action” and whose absence subjects a party to “a substantial risk of incurring double,

multiple, or otherwise inconsistent obligations by reason of [the absent person’s] claimed interest.”

Id. (emphasis added). XTO’s risk of incurring inconsistent obligations has arisen not “by reason

of” the adjacent landowners’ “claimed interest” in the Crawford-tract minerals—they have claimed

                                                 11
no such interest—but because XTO might reduce their royalty payments after unilaterally

determining that they should encompass the Crawford tract. That determination does not make

the adjacent landowners necessary parties under Rule 39(a).7

         Notably, the rules do not leave XTO powerless to alleviate its risk of being subjected to

inconsistent obligations. To that end, Rule 37 states: “Before a case is called for trial, additional

parties necessary or proper parties to the suit, may be brought in, either by the plaintiff or the

defendant, upon such terms as the court may prescribe; but not at a time nor in a manner to

unreasonably delay the trial of the case.” TEX. R. CIV. P. 37 (emphasis added). We see no

impediment to XTO’s utilizing Rule 37 to bring in the adjacent landowners itself in order to avoid

the risk of future lawsuits and inconsistent judgments. But it may not force Crawford to add the

adjacent landowners or face dismissal of his claims under Rule 39.8

                                                  III. Conclusion

         Rule 39(a) requires joinder of certain persons who “claim[] an interest relating to the

subject of the action.” The adjacent landowners do not claim an interest relating to the Crawford-

tract minerals that are the subject of Crawford’s suit against XTO. Accordingly, the trial court

abused its discretion in holding that the adjacent landowners are necessary parties under Rule 39

         7
           We note that Rule 39(b) is triggered when a person required to be joined under Rule 39(a) “cannot be made
a party.” TEX. R. CIV. P. 39(b). In that instance, the court “shall determine whether in equity and good conscience
the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded
as indispensable.” Id. The parties did not debate Rule 39(b)’s applicability in the trial court or the court of appeals,
and XTO argues that Crawford did not preserve the argument that dismissal was inappropriate under that rule. Our
disposition of the case under Rule 39(a) renders it unnecessary to reach the parties’ Rule 39(b) arguments.
         8
           XTO makes an additional waiver argument, contending that Crawford has failed to challenge all implied
findings of fact favoring the trial court’s judgment and all grounds upon which the judgment could have been based.
Because our ultimate holding—that the adjacent landowners are not necessary parties under Rule 39—is based on the
conclusion that the landowners have not claimed an interest in the subject of the action, and because Crawford has
consistently challenged the trial court’s judgment on that basis, we reject XTO’s waiver arguments.

                                                          12
and in dismissing Crawford’s suit for his failure to join them. We reverse the court of appeals’

judgment and remand the case to the trial court for further proceedings consistent with this opinion.

                                                          __________________________
                                                          Debra H. Lehrmann
                                                          Justice

OPINION DELIVERED: February 3, 2017

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