Opinion
NO. 03-17-00152-CV
01-11-2018
Mustang Minerals, LLC, Appellant v. Houston Trust Company, as Trustee of the Fredricka H. Crain Trust Amended and Restated, Appellee
FROM THE DISTRICT COURT OF STERLING COUNTY, 51ST JUDICIAL DISTRICT
NO. 2526, HONORABLE BARBARA WALTHER, JUDGE PRESIDING MEMORANDUM OPINION
Mustang Minerals, LLC, appeals from the district court's summary judgment in favor of appellee Houston Trust Company, as Trustee of the Fredricka H. Crain Trust (HTC). HTC sued Mustang Minerals to quiet title on ownership of certain mineral royalty interests held in community. On appeal, Mustang complains the district court erred because the mineral interest at issue had been validly conveyed in 1982 and, thus, HTC has no claim of ownership. For the reasons explained below, we will reverse the district court's summary judgment and render judgment that HTC take nothing.
Background
The underlying facts of this case are undisputed. Flavy Davis was married to Willie Fred Davis from 1940 until their divorce in 1985. They had two daughters together. Flavy owned the mineral estate of a ranch in Sterling County. The parties do not dispute that the property was community in character, or that it was held in Flavy's name and subject to Flavy's sole management and control. In 1963, Flavy conveyed the mineral estate to an oil company, but reserved for himself a nonparticipating royalty interest (the NPRI), which is the mineral interest at issue here.
In 1982, Flavy executed a deed conveying the NPRI to Dianne and Carolyn Davis, his and Willie's two daughters. The deed reads in relevant part:
"I, Flavy E. Davis, . . . do bargain, grant, sell, convey, assign, set over and deliver unto Dianne Davis . . . and Carolyn Davis . . . all of those properties described in Exhibit 'A' attached hereto . . . being intended to cover and include all of my undivided interest in each of said properties and title thereto . . . ."(Emphasis added.).
Flavy died in 1993. Willie, who had changed her name to Fredricka Hodges Crain in 1991, died in 2009. Willie's/Fredricka's validly probated will left all of her propertyto HTC, as trustee of the Fredricka H. Crain Trust. Mustang Minerals, LLC, claims ownership of the NPRI through a series of transactions traceable back to Dianne Davis.
Sometime in 2013, HTC asserted a claim to the royalty payments being made to Mustang. In response, the operating entity suspended the royalty payments pending resolution. In November 2013, Mustang wrote to HTC demanding it retract its claim of ownership.
In June 2014, HTC filed the underlying suit to quiet title against Mustang. Both parties moved for summary judgment. After a hearing on the parties' cross-motions, the trial court granted HTC's motion, impliedly denying Mustang's motion. The trial court subsequently granted Mustang's motion for new trial, but when both parties again moved for summary judgment, the trial court again granted HTC's motion, this time expressly denying Mustang's motion. The trial court gave no basis for its decision. It is from this summary judgment that Mustang appeals.
We review the district court's summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). Summary judgment is proper when there are no disputed issues of material fact and the movant is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Shell Oil Co. v. Khan, 138 S.W.3d 288, 291 (Tex. 2004).
Discussion
In its sole issue on appeal, Mustang asserts that the trial court erred in granting summary judgment in HTC's flavor because, as a matter of law, Flavy's 1982 deed conveyed the entire community interest in the mineral estate to Dianne and Carolyn Davis—Mustang's predecessor in title—leaving no interest to pass under Willie's will and rendering invalid HTC's claim to the royalties. We agree.
There is no dispute that in 1982 the NPRI was community property held solely in Flavy's name and subject to his sole management and control. See Tex. Fam. Code § 3.104(a) ("During marriage, property is presumed to be subject to the sole management, control, and disposition of a spouse if it is held in that spouse's name . . . ."). As such, Flavy had the authority to convey all or part of the NPRI to a third party, including his daughters, without Willie's joinder. See id. § 3.104(b) (providing, in part, that "third person dealing with a spouse is entitled to rely, as against the other spouse or anyone claiming from that spouse, on that spouse's authority to deal with the property"); Thomas v. Rhodes, 701 S.W.2d 943, 944-45 (Tex. App. —Fort Worth 1986, writ ref'd n.r.e.) (holding that, under predecessor to section 3.104, grantor had authority to convey community property without wife's joinder); see also Audish v. Clajon Gas Co., 731 S.W.2d 665, 669 (Tex. App.—Houston [14th Dist.] 1987, writ ref'd n.r.e.) (noting that where title was in husband's name only, and thus presumed to be subject to his sole management, control, and disposition, husband had authority to convey property to a third party without joinder of spouse).
In the 1982 deed to his daughters, Flavy conveyed "all of [his] undivided interest" in the NPRI. By doing so under the circumstances—i.e., where the community property was solely in his name and subject to his sole management and control—Flavy conveyed the entire community asset to his daughters, not just his one-half of the community asset. See Thomas, 701 S.W.2d at 945 (holding that husband's conveyance of "all the right, title and interest of" husband in community property at issue conveyed both husband's and wife's interest in community property); see also Dalton v. Don Jackson J. Jackson, Inc., 691 S.W.2d 765, 768 (Tex. App.—Austin 1985, no writ) (holding that community property may only be partitioned upon compliance with provisions of the Texas Constitution and the family code).
HTC argues that the language used in the 1982 deed—"all of my undivided interest"—partitioned the community interest in the royalties and conveyed only Flavy's share of the community property. In making this argument, HTC relies on Moss v. Helsley, 60 Tex. 426 (1883) and Williams v. Portland State Bank, 512 S.W.2d 124 (Tex. Civ. App.—Beaumont 1974, writ dism'd). In Moss, the supreme court held that the language at issue—"I will that my oldest daughter . . . have set apart to her . . . one-third of my interest in about one thousand six hundred acres of land . . . ."—had the effect of devising only the decedent's community-property interest, not the entire property:
This language imports no more than that he bequeathed one-third of his interest in the land. What then was his interest? As it was community property, the law vested·in his wife a right to one-half of the land that accrued to them from the location of the certificate . . . . It would seem that if he had intended to thus dispose not only of his own interest, but that of his wife also, that such intent would have been evidenced by clear and explicit language.Moss, 60 Tex. at 435. But the issue in Moss was whether the language in the deceased husband's will had triggered a widow's election, not whether the husband could convey during his lifetime only his half of the community interest to a third party, essentially effecting a partition. As such, Moss is inapplicable.
In Williams, the second case relied on by HTC, a husband and wife held title to real estate in both of their names. The real estate was non-homestead joint-management community property. The husband borrowed against the real estate, executing a note and deed of trust in which the wife refused to join. Thereafter, the parties were divorced. The husband defaulted on the note, and the bank instructed the trustee to conduct the sale. The court held that the husband had no authority to encumber the wife's interest in the real estate, but that the husband's execution of the note and deed of trust created a valid lien upon his interest in the real estate. See Williams, 514 S.W.2d at 126-27. We have since refused to follow Williams, holding instead that one spouse may not convey his or her interest in joint community property to a third party, so as to effectuate a partition by creating a tenancy-in-common between the remaining spouse and the third party. See Dalton, 691 S.W.2d at 768. Further, Williams is distinguishable because there the property was held in the names of both spouses, not the husband's alone as is the case here. As such, neither the holding nor the reasoning in Williams is applicable here.
In the alternative, HTC argues that even if the deed did convey the entire community interest, the conveyance was a fraud on the community—a breach of the fiduciary duty Flavy owed Willie—and any conveyance of Willie's share was invalid. HTC bases this argument in part on a protective order in place from a prior—and later abandoned—divorce petition. But even if the transfer amounted to fraud on the community, HTC cites no authority, and we are aware of none, holding that the remedy for fraud on the community is to render invalid an otherwise valid conveyance to a third party. Further, a claim of fraud on the community is not an independent cause of action with independent remedies. See Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998) (holding that a wronged spouse has an adequate remedy for fraud on the community through the "just and right" property division upon divorce). As such, a claim of fraud on the community would not invalidate the transfer of the community interest to a third party.
Willie first filed for divorce from Flavy in 1978. During the pendency of that proceeding, the court entered temporary orders restraining either party from "[s]elling, transferring, assigning, mortgaging, encumbering or in any other manner alienating any of the parties' property, whether personalty or realty or whether separate or community other than for necessary living expenses or in the ordinary course of business." This divorce proceeding was dismissed by agreement in late 1982. In December 1985, Flavy and Willie entered into a final divorce and property settlement agreement.
We sustain Mustang's issue.
Conclusion
Having sustained Mustang's sole issue, we reverse the district court's summary judgment in favor of HTC and render judgment in favor of Mustang. See Texas Workers' Comp. Comm'n v. Patient Advocates of Tex., 136 S.W.3d 643, 648 (Tex. 2004) (holding that where there are cross-motions for summary judgment, court must determine all questions presented and render the judgment that the district court should have rendered).
/s/_________
Jeff Rose, Chief Justice Before Chief Justice Rose, Justices Pemberton and Goodwin Reversed and Rendered Filed: January 11, 2018