Texas Supreme Court Update: Boundary Dispute Between Leasehold Owner and Lessees of Adjacent Tract

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Bringing to mind the infamous Hatfield-McCoy family feud, Concho Resources, Inc. v. Ellison is a classic boundary dispute between a leasehold owner and neighboring lessees with allegations of fraud and more than $1 million at stake.  See 2021 WL 1432222 (Tex. Apr. 16, 2021).  The plaintiff, Martha Ellison d/b/a Ellison Lease Operating, alleged that the defendant lessees, Samson Resources Company (“Samson”), COG Operating LLC (“Concho”), drilled and operated a well on her leasehold.  The defendants—relying on a boundary stipulation and a written acceptance of such stipulation signed by Jamie Ellison, Mrs. Ellison’s deceased husband—claimed that Mr. Ellison ratified the agreed boundary line before his passing, foreclosing any claims of trespass.  What ensued was a long legal battle with an ironic outcome.  The defendants won in the trial court; the court of appeals reversed.  The tables turned again at the Texas Supreme Court, which ultimately held that the boundary stipulation was valid and that the defendants conclusively established their ratification defense, but the case is still ongoing.

I. Factual and Procedural Background

Originally, the two adjacent sections of land at issue were owned together as one tract comprising 640 acres in Irion County.  This 640 acre tract known as Section 1 was split into two sections, a northwest section and a southeast section, and the northwest section was conveyed by deed to a separate owner in 1927. The 1927 deed described the conveyed land as follows: “All of [Section 1] lands located North and West of the public road which now runs across the corner of [Section 1], containing 147 acres, more or less.” However, the actual acreage of the portion of Section 1 located north and west of the public road referenced in the 1927 deed is 301 acres (not 147), and the actual acreage of the portion located south and east of the public road is 339 acres (not 493).

Nearly a hundred years later, in 2006, the mineral estate of the northwest tract was owned by the Richey family and was leased to Mr. Ellison d/b/a Ellison Lease Operating, whereas the mineral estate of the southeast tract was owned by the Farmar family and was leased to Samson. In the same year, Samson hired a surveyor who discovered the discrepancy between the stated acreage in the deed versus the actual acreage of the sections of land above and below the public road. The surveyor then prepared a preliminary survey plat that credited 493 acres to the southeast tract, including 154 acres of land north of the public road.

In 2008, Samson’s landman prepared a Boundary Stipulation of Ownership of Mineral Interest between the Farmars (owners of the southeast-tract mineral estate) and the Richeys (owners of the northwest-tract mineral estate). The stipulation stated that “a question has arisen among the Parties as to the physical location of the 147 acre tract and the ownership in the mineral estate in [Section 1]” and that the respective owners desired to “declare, stipulate, acknowledge, and establish of record the location of the 147 acre tract and the 493 acre tract in the mineral estate.” The stipulation went on to declare the boundary of the mineral estate in accordance with the boundary line contained in the Samson survey—that the disputed 154-acre tract was part of the southeast tract. The parties signed the stipulation in August and September 2008, and it was subsequently recorded in the county records.

Later in the same year, Samson sent a letter to Mr. Ellison enclosing the stipulation and requesting that Mr. Ellison “signify your acceptance of the description of the Richey 147 acre tract as set out in the Stipulation (your leasehold), by signing both copies of this letter.” Mr. Ellison signed the letter and Samson received it soon after.

Samson subsequently drilled a well on the disputed tract north of the public road. The Map depicted provides a helpful visual.

Mr. Ellison died in 2011, and his widow continued to maintain the northwest tract lease. In 2012, the southeast tract lease was assigned to Concho. A year later, Mrs. Ellison filed suit against Samson and Concho, alleging that the northwest tract lease covered all land in Section 1 located northwest of the public road and that the 2008 boundary stipulation and the 2008 letter signed by Mr. Ellison had no impact on Mrs. Ellison’s legal title under her lease. Mrs. Ellison sought a declaratory judgment to that effect and also brought claims for trespass to try title, trespass to real property, conversion, unlawful drainage, gross negligence, and nonpayment of oil and gas proceeds. Concho counterclaimed for breach of contract and a declaratory judgment premised on the signed 2008 letter.

Mrs. Ellison and Samson settled, but Concho filed a motion for summary judgment, arguing that, by virtue of the signed 2008 letter, Mr. Ellison relinquished any claim of ownership of the disputed 154-acre tract and ratified the boundary line established by the 2008 stipulation. Mrs. Ellison filed a cross-motion for summary judgment, arguing that she had superior title to the disputed tract and that Concho was a bad-faith trespasser.

The trial court granted Concho’s motion and denied Mrs. Ellison’s. The case then proceeded to trial on Concho’s counterclaims. The jury found in Concho’s favor, awarding almost $500,000 in lost profits and nearly $1,000,000 in attorney’s fees. However, the trial court rendered judgment notwithstanding the jury’s verdict on part of the damages award, ordering that Concho take nothing in lost profits and only about half of the attorney’s fees.  Mrs. Ellison appealed, and Concho cross-appealed the portions of the judgment that did not conform with the jury’s verdict.

The court of appeals reversed, holding that Mrs. Ellison established as a matter of law that she had superior title to the disputed tract. In coming to this conclusion, the court of appeals relied on the general rule that “a specific metes-and-bounds description controls over a conflicting general acreage call.” Applying this rule, the court found that the 1927 deed unambiguously conveyed “all” of the tract northwest of the public road (which includes the disputed tract), notwithstanding the inconsistent general acreage description. In light of this conclusion, the court also found that the 2008 stipulation was null and void because it was not itself a conveyance of the disputed acreage, it was “close in nature to a correction deed in which a party seeks to retroactively correct some ambiguity or error,” but the 1927 deed contained no “ambiguity or error” to correct.  Consequently, the court held that the 2008 letter could not ratify the null and void stipulation. The Supreme Court disagreed, and its analysis is provided as follows.

II. Analysis and Holding

Concho argued that Mr. Ellison ratified the stipulation by signing the 2008 letter signifying his acceptance thereof. The Supreme Court agreed, explaining that the boundary stipulation addressed a question that arose among the owners of the adjacent mineral estates as to the physical location of the northwest tract, and it answered that question by establishing the location of the boundary line between the two tracts. Importantly, the record mineral owners of both tracts agreed to resolve the identified boundary question in accordance with the stipulation. Such “settlements of boundary are common, approved, and encouraged by the courts, and ought not to be disturbed, regardless of whether it was afterwards shown that they had been erroneously settled.”

The Supreme Court acknowledged that, had the mineral owners gone to court to settle the boundary dispute, the court perhaps would have concluded, as the court of appeals held, that the 1927 deed is unambiguous, the inconsistent acreage calls are immaterial, and the public road is the boundary line.  But, the mineral owners chose to resolve the question about the boundary location informally by executing the stipulation. The Supreme Court could not see any reason to second-guess the owners’ decision to bind themselves in that manner without resorting to litigation.

The Supreme Court also found that the stipulation alone could not bind Mrs. Ellison because there was no constructive notice of the ownership of the disputed tract at the time Mr. Ellison acquired the lease. Nevertheless, the Supreme Court found that the 2008 letter that Mr. Ellison signed signified his acceptance of the boundary line agreed to in the stipulation as the leasehold boundary, even though he was not legally required to do so. Indeed, the letter expressly stated that Mr. Ellison’s signature would “signify [his] acceptance of the description of the Richey 147 acre tract as set out in the Stipulation.”

In a last ditch effort, Mrs. Ellison argued that the signed letter was not a valid ratification because Mr. Ellison was fraudulently induced into signing it by Samson’s misrepresentations. But the Supreme Court did not see any evidence of such misrepresentations in the record. The 2008 letter did not communicate that Mr. Ellison was required to accept the boundary line in the stipulation, nor did the letter contain any representations about the legal effect of the stipulation. The Supreme Court further disregarded all of Mrs. Ellison’s allegations of oral misrepresentations made to Mr. Ellison because the only living person present when such representations were allegedly made, a Samson employee, expressly denied any misrepresentations. Thus, the Court found there was no valid reason to overturn Mr. Ellison’s signed acceptance of the stipulation.

After determining that Concho had superior title to the disputed tract, the Supreme Court reversed the court of appeals and reinstated the trial court’s judgment. The Court then remanded the case back to the court of appeals to address Concho’s appeal of the trial court’s judgment reducing its damages.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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