Opinion
14-20-00412-CV
09-29-2022
ARMOUR PIPE LINE COMPANY, MARY PATRICIA CASHMAN, JOANCASHMAN, NOREEN CASHMAN, CATHLEEN CASHMAN, ANDCAROLINE DECHANT, Appellants v. SANDEL ENERGY, INC., DOUBLE H INVESTMENTS, L.P., LAURASANDEL GILBREATH, KERCO ASSET MANAGEMENT, LLC, SUCCESSOR IN INTEREST TO KERRI A. COLEMAN D/B/A KERCO, EDDIE THOMPSON AND EDNA ANN TEPE THOMPSON, CO-TRUSTEES OF THE EDGAR CARMEN THOMPSON FAMILY TRUST B, BILL AND LYNN MIZELL, JOE B. SANDEL, RICKY W. SLEDGE, AND CML EXPLORATION, LLC, Appellees
Opinion on Rehearing filed May 16, 2023.
On Appeal from the 12th District Court Grimes County, Texas Trial Court Cause No. 32962
Panel consists of Justices Wise, Poissant, and Wilson.
OPINION ON REHEARING
Randy Wilson Justice
We grant appellants' Motion for Rehearing as to the first issue on rehearing, deny the remainder of the motion, withdraw the opinion issued in this case on September 29, 2022, and issue this Opinion on Rehearing. In an assignment conveying interests in oil and gas leases, the assignors purported to reserve an overriding royalty interest in some of the leases in favor of one assignor. A dispute arose as to the validity of that reservation. The trial court granted a summary-judgment motion filed by the assignee and related parties, impliedly determining that the assignor was a "stranger to title" with respect to the subject leases and therefore the attempted reservation of the overriding royalty interest in favor of the assignor was void and of no force and effect. We conclude that under the binding precedent of Greene v. White, 153 S.W.2d 575 (Tex. 1941) and the unambiguous language of assignment, as between the assignor and the assignee and their successors, the reservation of the overriding royalty interest was binding and effective under the estoppel-by-deed doctrine, even if the assignor held no title in the leases in question when the assignor executed the assignment. After distinguishing between the stranger to title rule and the stranger to deed rule, we conclude that the Greene precedent precludes us from applying the stranger to title rule in this case, and that the stranger to deed rule does not apply either. We conclude that the trial court erred in failing to apply the estoppel-by-deed doctrine to determine that the assignor is entitled as a matter of law to a declaration that as between the assignor and the assignee and their successors, the assignor owns the disputed overriding royalty interest. After addressing various other issues raised by the parties, we affirm in part, reverse and render in part, and reverse and remand in part.
I. Factual and Procedural Background
Effective July 1, 1999, appellant Armour Pipe Line Company ("Armour"), Cashco L.L.C., Cashco Oil Company, Thomas J. Cashman, Individually and as Trustee under Eugene C. Cashman Children's Grimes County, Texas Irrevocable Trusts dated September 30, 1976, Eugene C. Cashman, Eugene C. Cashman d/b/a Cashman Oil & Gas and d/b/a Cashman Oil & Gas Company, and Eloc Oil & Gas Company, Inc. (collectively the "Assignors") executed an assignment (the "First Assignment") in which they:
(1) conveyed and assigned to appellee Sandel Energy, Inc. "any and all of Assignors' right, title and interest in and to [99 Oil, Gas, and Mineral Leases described in Exhibits A and A-1 to the First Assignment],
(2) conveyed and assigned to Sandel "any and all of Assignors' right, title and interest in [13 wells described in Exhibit B to the First Assignment],"
(3) excepted and reserved unto Eugene C. Cashman and his respective heirs, administrators, successors, and assigns a specified overriding royalty interest in 23 of the Leases-those listed in Exhibit A to the First Assignment, and
(4) purported to except and reserve unto Armour and its respective heirs, administrators, successors, and assigns a specified overriding royalty interest in the oil, gas, and other minerals produced and saved from the 76 leases listed in Exhibit A-1 to the First Assignment (hereinafter the "Royalty").
In this opinion, we refer to the 76 leases listed in Exhibit A-1 to the First Assignment collectively as the "Subject Leases." The Assignors did not make any general warranty of title, but they did make a special warranty of title against any person claiming title by, through, or under the Assignors, and limited to "the purchase price of said lease and said wells, herein." Sandel Energy signed the First Assignment.
Summary-judgment evidence showed that in 1992 Armour purchased certain non-recourse mortgage notes, becoming a lienholder in the Subject Leases. The documents evidencing the transfer of the liens were not filed in the Grimes County real property records. There is no evidence that Armour ever foreclosed on any lien in the Subject Leases or ever held title to the Subject Leases. For the purposes of this opinion, we presume that, at the time of the First Assignment, Armour was a lienholder in the Subject Leases who had not foreclosed any of those liens and did not hold title to any of the Subject Leases. As part of this transaction, Armour released all liens it held in any of the leases involved in the First Assignment, including the Subject Leases (the "Release").
In a second assignment, effective July 1, 2000, Armour conveyed and assigned the Royalty to Sandel Energy to the extent it applied to existing wells, but Armour did not assign the Royalty as to any well drilled in the future (the "Second Assignment"). Sandel Energy signed the Second Assignment.
In May 2011, Sandel Energy, Inc. executed a farmout agreement with appellee CML Exploration, LLC pertaining to thirteen oil, gas, and mineral leases that under the terms of the First Assignment were assigned to Sandel Energy subject to the Royalty ("Farmout Leases"). Under the farmout agreement, (1) if CML timely commenced and completed a test well as a commercial well, CML had the right to form a pooled unit including the Farmout Leases and also acreage not covered by the Farmout Leases; and (2) if CML drilled the test well into a specified formation and completed it as a well capable of producing oil or gas in paying quantities, CML would earn all of the interest of appellees/plaintiffs Sandel Energy, Inc., Double H Investments, L.P., Laura Sandel Gilbreath, Kerco Asset Management, LLC, Successor in Interest to Kerri A. Coleman d/b/a KERCO, Eddie Thompson and Edna Ann Tepe Thompson, Co-Trustees of the Edgar Carmen Thompson Family Trust B, Bill and Lynn Mizell, Joe B. Sandel, and Ricky W. Sledge (collectively the "Sandel Parties") in the Farmout Leases to the extent the leases are included in a pooled unit for the well, subject to the reservation of a 12.5% interest in the Farmout Leases in favor of the Sandel Parties, as described in the farmout agreement. CML successfully drilled producing wells pursuant to the farmout agreement.
In 2013 after consulting with legal counsel, CML concluded that the purported exception and reservation of the Royalty unto Armour in the First Assignment was "ineffective" and that Armour did not own any part of the Royalty because Armour was a stranger to title as to the Subject Leases. After CML reached this conclusion, the Sandel Parties agreed with CML's position and began asserting that the purported exception and reservation of the Royalty unto Armour in the First Assignment was void. The Sandel Parties had previously assumed that Armour owned the part of the Royalty not assigned to the Sandel Parties in the Second Assignment (the "Remaining Royalty"). Recognizing that a dispute likely would arise as to the validity of the Remaining Royalty, CML held in suspense the funds that would be subject to this royalty if it were valid.
The Sandel Parties filed suit against Armour and CML. The Sandel Parties sought a declaratory judgment that any purported reservation in the First Assignment in favor of Armour is of no legal force or effect and is void. In the alternative, the Sandel Parties sought a declaratory judgment that to the extent Armour had a valid claim to the Royalty, all such rights were extinguished and the Royalty is of no further legal force or effect, resulting in Armour having no claim to the Royalty. The Sandel Parties sought the alternative declaration based on Armour's forfeiture, in February 2003, of Armour's certificate of authority to do business in Texas. In the alternative, the Sandel Parties asserted a trespass to try title action in which they sought judgment for title to and possession of the Royalty.
Armour answered and asserted the following counterclaims or crossclaims: (1) a claim for a declaration that Armour is the rightful owner of the Remaining Royalty based on the estoppel-by-deed doctrine; (2) a claim for breach of contract against Sandel Energy based on its alleged breaches of the First Assignment and of the Second Assignment; and (3) money-had-and-received claims against the Sandel Parties and CML. CML asserted claims seeking interpleader relief and attorney's fees.
Appellants/intervenors Mary Patricia Cashman, Joan Cashman, Noreen Cashman, Cathleen Cashman, and Caroline DeChant (collectively the "Cashman Sisters") filed a petition in intervention as counterplaintiffs against the Sandel Parties and CML. The Cashman Sisters' primary claim was a claim for a declaration that Armour is the rightful owner of the Remaining Royalty based on the estoppel-by-deed doctrine. This claim was substantially similar to Armour's declaratory-judgment claims and requested a declaration that Armour, not the Cashman Sisters, was the rightful owner of the Remaining Royalty. In the alternative, the Cashman Sisters asserted that if the First Assignment did not effectively convey and reserve the Royalty unto Armour, then the Cashman Sisters would be entitled to a declaratory judgment that they are entitled to equal shares of the Royalty as successors in interest to all of the Assignors and as Armour's shareholders. The Cashman Sisters also asserted money-had-and-received claims against the Sandel Parties and CML.
The Sandel Parties filed a summary-judgment motion and asserted various grounds allegedly entitling them to a declaration as a matter of law regarding the Royalty (the "First Motion"). The trial court signed an interlocutory order granting the First Motion and declaring that the Royalty "is of no legal force nor effect, resulting in [Armour], its successors and assigns having no claim to any rights otherwise evidenced by [the Royalty]." On the same day, the trial court also granted CML's request for interpleader relief as to the funds attributable to the Remaining Royalty. The trial court ordered CML to pay into the court's registry the disputed funds, which exceeded $1,500,000, and the trial court ordered CML to continue to pay into the court's registry every month any funds attributable to the disputed interest. The trial court released and discharged CML from further liability to the Sandel Parties and Armour for payments made in compliance with the court's order, and the trial court awarded CML $41,437.50 in reasonable attorney's fees to be paid out of the funds in the registry of the court prior to payment of these funds to the prevailing party.
CML later filed a summary-judgment motion asserting the sole ground that the claims against CML by Armour and the Cashman Sisters fail as a matter of law based on the trial court's summary-judgment order in which the court granted the First Motion ("CML's Motion"). The trial court granted CML's Motion and ordered that Armour and the Cashman Sisters take nothing by their claims against CML.
Armour and the Cashman Sisters (collectively the "Cashman Parties") filed a joint motion for partial summary judgment, seeking to have the trial court reconsider its order granting the First Motion and grant declaratory relief in Armour's favor. The Cashman Parties also requested (1) certain declaratory relief if Armour was not entitled to the Royalty because of the temporary absence of Armour's certificate of authority to do business in Texas, and (2) other declaratory relief if the First Assignment did not effectively convey and reserve the Royalty unto Armour. The Sandel Parties filed a second motion seeking summary judgment as to the Cashman Sisters' claims (the "Second Motion"). The trial court denied the Cashman Parties' motion, granted the Second Motion, and reaffirmed the court's prior order granting the First Motion.
The Sandel Parties filed a third summary-judgment motion seeking judgment as a matter of law on their request for attorney's fees under the Declaratory Judgments Act. The trial court granted this motion, awarding the Sandel Parties recovery against the Cashman Parties jointly and severally for trial attorney's fees as well as making conditional awards of appellate attorney's fees. The trial court rendered a final judgment, in which the court incorporated and attached its prior summary-judgment orders.
The Cashman Parties appealed the trial court's final judgment to this court. On appeal, the Sandel Parties argued that this court should uphold the order granting the First Motion based on the "stranger to title" rule, under which, an exception or reservation in favor of a purported assignor of real property who, in fact, is a "stranger to title" owning no title to the property conveyed, conveys no title to this stranger. See Armour Pipe Line Co. v. Sandel Energy, Inc., 546 S.W.3d 455, 465 (Tex. App.-Houston [14th Dist.] 2018, pet. denied). This court concluded that it could not properly affirm the trial court's granting of the First Motion on the stranger-to-title ground because the Sandel Parties did not expressly present that ground in the First Motion. See id. at 466. This court determined that the trial court erred in granting the First Motion on each of the grounds the Sandel Parties expressly presented in the First Motion and therefore the trial court erred in declaring that the Royalty "is of no legal force nor effect, resulting in [Armour], its successors and assigns having no claim to any rights otherwise evidenced by [the Royalty]." See id. This court concluded that the trial court erred in granting CML's Motion and in ordering that the Cashman Parties take nothing as to their claims against CML. See id. at 466-67. This court also determined that the trial court did not err in denying the Cashman Parties' cross-motion to the extent they sought declaratory relief as a matter of law in favor of Armour and that this court did not need to address whether the Cashman Sisters were entitled to the alternative relief they requested in the cross-motion or whether the trial court erred in granting the Second Motion. See id. at 467-68. This court reversed all of the attorney's-fee awards in the trial court's judgment, as well as the trial court's orders granting the First Motion and granting CML's Motion, and remanded the case to the trial court for further proceedings. See id. at 469.
On remand, Armour amended its counterclaims and crossclaims to assert the following: (1) a claim for declaratory relief as to the parties' rights and obligations under the First Assignment and the Second Assignment, including a request for a declaration based on the doctrine of estoppel by deed that the Sandel Parties and CML have no interest in the Remaining Royalty and that the suspended or withheld royalty payments should be paid to Armour, and a request for attorney's fees under the Declaratory Judgments Act; (2) a claim for breach of contract against the Sandel Parties and CML based on Sandel Energy's alleged breaches of the First Assignment and of the Second Assignment, including a claim for treble, punitive damages provided for in the First Assignment based on the alleged unreasonable withholding of the Remaining Royalty payments; (3) in the event that Armour's breach-of-contract claims fail, an alternative promissory-estoppel claim; and (4) money-had-and-received claims against the Sandel Parties and CML.
The Sandel Parties filed a fourth summary-judgment motion ("Fourth Motion") in which they asserted traditional and no-evidence grounds seeking summary judgment as to all of the Cashman Parties' claims. The Sandel Parties did not seek summary judgment on any of their claims. CML filed a motion for a traditional summary judgment challenging the Cashman Parties' claims against CML ("CML's Second Motion"). The Cashman Parties opposed the Fourth Motion and CML's Second Motion, and they filed a traditional motion seeking (1) summary judgment against the Sandel Parties' two claims (for declaratory relief and trespass to try title) and (2) summary judgment in favor of Armour on its claims for declaratory relief, breach of contract, and money had and received (the "Cross Motion"). The Sandel Parties opposed the Cross Motion.
The trial court held a hearing on the Fourth Motion and then a hearing on the Cross Motion. The trial court signed an interlocutory order granting the Fourth Motion. The trial court later signed a final judgment in which the court: (1) incorporated by reference its 2014 order granting CML's request for interpleader relief, (2) incorporated by reference its order granting the Fourth Motion, (3) granted CML's Second Motion, (4) denied the Cross Motion to the extent the Cashman Parties sought summary judgment on their claims for affirmative relief, (5) dismissed as moot and without prejudice the Sandel Parties' claims, (6) denied the Cross Motion to the extent the Cashman Parties sought summary judgment as to the Sandel Parties' claims in light of the court's dismissal without prejudice of the Sandel Parties' claims, (7) denied all parties' requests for attorney's fees under the Declaratory Judgments Act, (8) awarded to the Sandel Parties all of the funds deposited in the registry of the court by CML, except the $41,437.50 in attorney's fees that the trial court ordered to be paid to CML out of the deposited funds in the December 1, 2014 interpleader order, and (9) awarded the Sandel Parties their taxable court costs.
II. Issues and Analysis
Armour and the Cashman Sisters timely perfected appeal and have filed separate appellant's briefs and reply briefs. The Sandel Parties have filed separate appellees' briefs in response to the two appellant's briefs. In a traditional motion for summary judgment, if the movant's motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment. M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). In reviewing a no-evidence summary judgment, we ascertain whether the nonmovant presented summary-judgment evidence raising a genuine fact issue as to the essential elements attacked in the no-evidence motion. Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 206-08 (Tex. 2002). In our de novo review of a trial court's summary judgment, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine fact issue if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007).
A. Did the trial court err in failing to apply estoppel by deed to conclude that Armour is entitled as a matter of law to a declaration that as between Armour and Sandel and their successors, Armour owns the Remaining Royalty?
In the Fourth Motion, the Sandel Parties sought summary judgment in their favor as to all of Armour's claims based on the following grounds:
(1) Armour did not possess title in and to the Subject Leases at the time of the First Assignment, and thus Armour is a "stranger to title" with respect to the Subject Leases. As a "stranger to title" the attempted reservation of the Royalty in favor of Armour is void and of no force and effect;
(2) All of Armour's claims require Armour to show that it possessed title in and to the Subject Leases at the time of the First Assignment. Absent such title interest, Armour is a "stranger to title," and any purported reservation in the First Assignment in favor of Armour is void. Armour has no competent evidence of such title. One may only establish this title through the title documents themselves; Armour may not establish such title by assertion of the estoppel-by-deed doctrine.
(3) Because Armour is a stranger to title, Armour may not rely on the estoppel-by-deed doctrine.
In its order granting the Fourth Motion, the trial court did not specify the grounds upon which the trial court relied, and therefore the trial court impliedly granted summary judgment on each of the grounds in the Fourth Motion. See FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).
Relying on the estoppel-by-deed doctrine and the unambiguous language of the First Assignment and the Second Assignment, Armour sought in the Cross Motion declaratory relief as a matter of law as to the construction of the assignments, the validity of the Royalty, and Armour's rights and status under the assignments. See Tex. Civ. Prac. & Rem. Code Ann. §§37.003(a), 37.004(a) (West, Westlaw through 2021 R.S.). By granting the Fourth Motion, the trial court ruled as a matter of law that Armour's declaratory-judgment claims lacked merit based on an implied determination that Armour is a "stranger to title" with respect to the Subject Leases and therefore the attempted reservation of the Royalty in favor of Armour in the First assignment was void and of no force and effect. By denying the Cross Motion, the trial court ruled that Armour was not entitled to summary judgment on its declaratory-judgment claims.
In its first issue, Armour asserts that the trial court erred in failing to apply the estoppel-by-deed doctrine to conclude that Armour is entitled as a matter of law to a declaration that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty. Liberally construing Armour's brief, Armour also argues that the trial court erred in granting the Fourth Motion as to Armour's declaratory-judgment claims because Armour was entitled as a matter of law to declaratory relief in its favor under the estoppel-by-deed doctrine.
1. Estoppel by Deed
Under the estoppel-by-deed doctrine, a person is bound by the recitals in a deed in which the person was a party or in which the person's predecessor in title was a party if the party claims title through the deed. Trial v. Dragon, 593 S.W.3d 313, 318, 320 (Tex. 2019). This court has defined a "recital" as "[t]he formal statement or setting forth of some matter of fact, in any deed or writing, in order to explain the reasons upon which the transaction is founded." McMahan v. Greenwood, 108 S.W.3d 467, 484 (Tex. App.-Houston [14th Dist.] 2003, pet. denied). We presume for the sake of argument that neither the purported reservation nor the purported exception of the Royalty is a recital. See id. Nonetheless, the Supreme Court of Texas has determined that under the estoppel-by-deed doctrine, each party to a deed is bound by the reservations in a deed in which the party or its predecessor in title was a party if the party claims title through the deed. See Newsom v. Newsom, 378 S.W.2d 842, 844 (Tex. 1964); Greene v. White, 153 S.W.2d 575, 583 (Tex. 1941); Angell v. Bailey, 225 S.W.3d 834, 841-42 (Tex. App.-El Paso 2007, no pet.). Although estoppel by deed operates most commonly against a grantor, this doctrine also operates against a grantee who accepts a deed. See Newsom, 378 S.W.2d at 844; Greene, 153 S.W.2d at 583; Angell, 225 S.W.3d at 841-42. Under the estoppel-by-deed doctrine, a grantee who accepts a deed is a party to the deed, and as between the grantor and the grantee and those in privity with them, the reservations in the deed are binding and effective, even if the grantor did not have good title to the property in question when the deed was executed. See Greene, 153 S.W.2d at 584-85.
2. Rules for Interpreting the Assignments
The construction of an unambiguous deed presents a question of law that we review de novo. See Jordan v. Parker, 659 S.W.3d 680, 684 (Tex. 2022). No party in this case asserts an ambiguity in either the First Assignment or the Second Assignment, and we conclude that the language in these documents is unambiguous. See U.S. Shale Energy II, LLC v. Laborde Properties, L.P., 551 S.W.3d 148, 151 (Tex. 2018). When construing an unambiguous deed, this court's primary duty is to ascertain the intent of the parties from all of the language within the four corners of the deed. Id. The Supreme Court of Texas has reaffirmed its "commitment to a holistic approach aimed at ascertaining intent from all words and all parts" of the deed. Id. In interpreting either the First Assignment or the Second Assignment, we examine the entire instrument and seek to harmonize and give effect to all of its provisions so that none will be meaningless. Id.
3. The Unambiguous Text of the Assignments
Under the unambiguous language of the First Assignment and the Second Assignment, Armour and Sandel Energy are parties to each of the assignments and each of the assignments is a deed. See Green v. Canon, 33 S.W.3d 855, 858 (Tex. App.-Houston [14th Dist.] 2000, pet. denied) (stating that "[i]f from the whole instrument a grantor and grantee can be ascertained, and there are operative words or words of grant showing an intention by the grantor to convey title to a real property interest (which is sufficiently described) to the grantee, and [the instrument] is signed and acknowledged by the grantor[,] it is a deed which accomplishes a legally effective conveyance"); accord Cohen v. Tour Partners, Ltd., No. 01-15-00705-CV, 2017 WL 1528776, at *6 (Tex. App.-Houston [1st Dist.] Apr. 27, 2017, no pet.) (mem. op.).
Under the unambiguous language of the First Assignment, the Assignors reserved unto Armour the Royalty:
ASSIGNORS, hereby EXCEPT AND RESERVE unto ARMOUR PIPE LINE COMPANY and its respective heirs, administrators, successors, and assigns an overriding royalty interest equal to the difference between existing leasehold burdens of record (i.e.,
landowners' royalties and other overriding royalties) and twenty percent (20%) of 8/8ths of all oil, gas and other minerals produced and saved from the Oil, Gas and Mineral Leases described in Exhibit "A-1" under the terms and provisions of said leases, said overriding royalty interest to be free of all costs and expenses for drilling, testing, completion, equipping, operations, production, marketing or otherwise, except for severance, production and other taxes lawfully levied against said interest. The overriding royalty interest reserved herein shall continue in full force and effect during the term of said leases and shall extend to each and every renewal or extension of any of said leases, or any new lease taken or acquired by Assignee in lieu thereof within one (1) year after the expiration of said lease(s).
The First Assignment also stated the parties' agreement that "[t]he provisions hereof shall be covenants running with the lands and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, devisees, executors, administrators, successors and assigns."
4. The Supreme Court Precedent of Greene v. White
In support of its arguments based on estoppel by deed, Armour relies on Greene v. White, a precedent from the Supreme Court of Texas. See 153 S.W.2d at 583-89. Because this precedent plays a crucial role in our disposition of this appeal, we discuss it in detail. The Greene court stated that one of the important questions that the court had to answer was: "what effect is to be given to a deed executed by F. M. Greene to Alex Garrett on March 2, 1910 [(the "Deed")], conveying the land in controversy but reserving all minerals to Greene[?]" Id. at 578. The Deed from Greene to Alex Garrett contained a reservation stating that Greene reserved all minerals on and under the land conveyed and that these minerals remained Greene's property (the "Reservation"). See id. at 583. Defendant in error Mandy Garrett White, Alex's wife when the Deed was executed, and others (the "Garrett Parties") asserted various arguments in support of the proposition that the Reservation had no effect or was not binding on them. See id. at 586-87. The Garrett Parties asserted that Alex and Mandy Garrett had adversely possessed the land in question before the execution of the Deed, but the high court concluded that the evidence did not conclusively prove this point. See id. at 578-83, 586-87.
The Greene court analyzed the Deed to determine if it was binding based on estoppel by deed. See id. at 583-86. The high court stated that "[t]he general rule is that the grantee in a deed accepted by him is a party to the deed, even though he does not sign it, and that he is concluded by recitals in the deed and by reservations contained therein in favor of the grantor." Id. at 583. According to the Greene court, "obligations undertaken by the parties to a deed are binding contractually; and where the conveyance is by way of deed poll-that is, one executed by the grantor alone-obligations are enforceable against the grantee by virtue of his acceptance of the deed." Id. (internal quotations omitted). The high court concluded that the statements in the Deed giving the surface estate to Garrett and reserving the mineral estate to Greene were contractual and defined the character and extent of the ownership and interests of the parties in the land affected by the Deed. Id.
The Greene court stated that a grantee generally is "concluded" by the recitals and reservations in a deed accepted by the grantee. See Greene, 153 S.W.2d at 583. The high court addressed whether the Deed and the Reservation were "effective and binding on Alex Garrett and Mandy Garrett and those claiming under them." Id. at 586. The Greene court cited and discussed estoppel-by-deed precedent, and the Supreme Court of Texas has cited Greene as an estoppel-by-deed precedent. See Republic Nat'l Bank of Dallas v. Stetson, 390 S.W.2d 257, 261 (Tex. 1965); Newsom, 378 S.W.2d at 844; Greene, 153 S.W.2d at 583-85. Though the Greene court did not explicitly use the term "estoppel by deed," the plain meaning of the language used by the Greene court shows that the court applied the estoppel-by-deed doctrine. See Greene, 153 S.W.2d at 583-87.
In response to an argument that the Deed neither conveyed the surface to Garrett nor reserved the minerals to Greene, because Greene had no title either to the land or to the minerals, the Greene court determined that even if Greene held no title to the surface or the minerals, "the question presented is not whether Greene had good title and conveyed good title to the surface to Garrett and reserved or excepted to himself good title to the minerals. It is: Are the parties to the deed and those claiming under them bound, as between themselves, by the recitals and provisions of the deed?" Id. at 583. The Greene court concluded that because the parties to the Deed are bound by the terms of their contract, to make the Reservation effective in favor of Greene and those holding under him and against Garrett and those holding under him, it was not necessary that good title to the land be shown in Greene when he executed the Deed as grantor. Id. at 585.
The high court determined that, as to Mandy Garrett White, Harvey Garrett (the son of Alex and Mandy), Fannie Baugus (the daughter of Alex and Mandy), and Jesse Baugus (the son-in-law of Alex and Mandy), but not as to any interest that Fannie may have acquired by inheritance from Fred Garrett (the son of Alex and Mandy), whether or not Alex and Mandy Garrett on the Deed's execution date had perfected title to the land in question by adverse possession, the following was true: as between the parties to the Deed and those claiming under them, the Reservation was binding and effective so that the Deed worked a severance of the mineral estate from the surface estate. See Greene, 153 S.W.2d at 585-89. The Greene court also concluded that as to so much of Alex Garrett's interest as vested at his death in his heirs other than Harvey Garrett and Fannie Baugus, including any interest that Fannie may have acquired by inheritance from Fred Garrett ("Alex's Interest"), (1) if Alex and Mandy Garrett on the Deed's execution date had not perfected title to the land in question by adverse possession, the following was true as to Alex's Interest: as between the parties to the Deed and those claiming under them, the Reservation was binding and effective so that the Deed worked a severance of the mineral estate from the surface estate; and (2) if Alex and Mandy Garrett on the Deed's execution date had perfected title to the land in question by adverse possession, the Deed and the Reservation were not binding, and as to Alex's Interest, the Deed did not have the effect of reserving the minerals to Greene. See Greene, 153 S.W.2d at 585-89.
The Greene Court did not determine that the Reservation was binding and effective as to those other than the parties to the Deed, their privies, and those claiming under one of them. See Greene, 153 S.W.2d at 585-89.
The different outcomes were based on the Greene court's determination that if on the Deed's execution date Alex and Mandy Garrett had perfected title to the land in question by adverse possession, then the land in question was Alex and Mandy's homestead. See Greene, 153 S.W.2d at 586-89. There is no homestead issue in today's case.
The Sandel Parties assert that the Greene precedent does not support the proposition that a stranger to title may invoke estoppel by deed. The Sandel Parties rely upon the part of the Greene opinion in which the high court determines that if Alex and Mandy Garrett on the Deed's execution date had perfected title to the land in question by adverse possession, the Deed and the Reservation were not binding, and as to Alex's Interest, the Deed did not have the effect of reserving the minerals to Greene (the "Determination"). See Greene, 153 S.W.2d at 585-89. According to the Sandel Parties, the basis for the Determination was that if Greene had lost title to the land in question by adverse possession, then Greene was a stranger to the title and had no title in the land to convey in the Deed and no ability to make the Reservation. But the Greene court based the Determination on the protections under Texas law for homestead property because if on the Deed's execution date Alex and Many Garrett had perfected title to the land in question by adverse possession, then the land in question would have been their homestead. See Greene, 153 S.W.2d at 586-89. The Greene court did not base the Determination on Greene's lack of title to the land. See id. Indeed, the Greene court concluded that because the parties to the Deed were bound by the terms of their contract, to make the Reservation effective in favor of Greene and those holding under him and against Garrett and those holding under him, it was not necessary that good title to the land be shown in Greene when he executed the Deed as grantor. See id. at 585.
5. Application of the Greene Precedent
Sandel Energy was a party to the First Assignment and the Second Assignment as the Assignee, and Sandel Energy signed and accepted each of the assignments. See id. at 583. Under the Greene precedent, the reservation of the Royalty was contractual, and the terms, provisions, and obligations of the assignments, including this reservation, are binding upon Armour, Sandel Energy, and their successors. See id. Under the Greene precedent and the unambiguous language of the First Assignment, as between the parties to the First Assignment, Armour and Sandel Energy, and their successors, the reservation of the Royalty was binding and effective under the estoppel-by-deed doctrine, even if Armour held no title in the Subject Leases when Armour executed the First Assignment. See Greene, 153 S.W.2d at 583-86; Angell, 225 S.W.3d at 841-42. The Sandel Parties assert that for Armour to prove that the reservation of the Royalty had any effect, Armour had to establish by competent summary-judgment evidence that when Armour executed the First Assignment, Armour had title in and to each of the Subject Leases. But, under Greene, Armour need not prove that it had title to any of the Subject Leases when it executed the First Assignment for Armour to prove under the estoppel-by-deed doctrine that as between Armour and Sandel Energy and their successors, the reservation of the Royalty was binding and effective. See Greene, 153 S.W.2d at 583-86; Angell, 225 S.W.3d at 841-42. Under the Greene precedent and the unambiguous language of First Assignment, as between Armour and Sandel Energy and their successors, including CML and the Sandel Parties other than Sandel Energy, Armour owns the Remaining Royalty. See Greene, 153 S.W.2d at 583-86; Angell, 225 S.W.3d at 841-42.
6. The Stranger to Title Rule and The Stranger to Deed Rule
The Sandel Parties argue that Armour is a "stranger to title" with respect to the Subject Leases and therefore the attempted reservation of the Royalty in favor of Armour in the First Assignment was void and of no force and effect. To analyze this argument, we start by examining the stranger to title rule, the stranger to deed rule, and the differences between these rules. Under the stranger to title rule, if a grantor in a deed owns no title to the property conveyed in the deed and thus is a "stranger to title," then any exception or reservation of real property in favor of the grantor is ineffective, inoperative, and conveys no title to this grantor (the "Stranger to Title Rule"). Under the stranger to deed rule, if a grantor in a deed makes a reservation or exception of real property in favor of a person not a party to the deed and thus a "stranger to the deed," then this exception or reservation in favor of the stranger to the deed is ineffective, inoperative, and conveys no title to the stranger (the "Stranger to Deed Rule"). The Sandel Parties do not assert the Stranger to Deed Rule, and that rule would not benefit them because Armour, as the assignor/grantor in both the First Assignment and the Second Assignment, is not a stranger to either deed. Nonetheless, almost all of the cases that the Sandel Parties cite in favor of their argument under the Stranger to Title Rule are Stranger to Deed Rule cases. It will aid our analysis to first consider the Stranger to Deed Rule and then compare it to the Stranger to Title Rule.
The Stranger to Deed Rule developed long ago under English common law. See Shirley v. Shirley, 525 S.E.2d 274, 276 (Va. 2000); Willard v. First Church of Christ, Scientist, 498 P.2d 987, 989 (Cal. 1972); Wickham v. Hawker, 151 Eng. Rep. 679, 683 (1840). The rule derived from the common law notions of reservations from a grant and was based on feudal considerations. See Willard, 498 P.2d at 989. Though a reservation arguably could vest an interest in a stranger to the deed, the early common law courts vigorously rejected this possibility, apparently because they mistrusted and wished to limit conveyance by deed as a substitute for livery by seisin. See Willard, 498 P.2d at 989. Commentators have attacked the Stranger to Deed Rule as a groundless, hyper-technical, and arbitrary rule that violates the unambiguous intent of the parties to the deed. See Shirley, 525 S.E.2d at 275-76; Willard, 498 P.2d at 989-90. The United Kingdom abolished the Stranger to Deed Rule in 1925 by means of the Law of Property Act, and some American states also have abrogated this rule. See Law of Property Act 1925, §65; Shirley, 525 S.E.2d at 276 n.4; Aszmus v. Nelson, 743 P.2d 377, 379-80 (Alaska 1987) (abrogating the Stranger to Deed Rule); Simpson v. Kistler Inv. Co., 713 P.2d 751, 756 (Wyo. 1986) (abrogating the Stranger to Deed Rule); Willard, 498 P.2d at 989-91(abrogating the Stranger to Deed Rule); Garza v. Grayson, 467 P.2d 960, 961-62 (Or. 1970) (abrogating the Stranger to Deed Rule); Townsend v. Cable, 378 S.W.2d 806, 807-08 (Ky.1964) (abrogating the Stranger to Deed Rule).
Despite these developments, the Stranger to Deed Rule still appears to be the majority rule among the states, and under binding precedent from the Supreme Court of Texas, the Stranger to Deed Rule applies under Texas law. See Joiner v. Sullivan, 260 S.W.2d 439, 439-40 (Tex. Civ. App.-Texarkana 1953, writ ref'd) (adopting the Stranger to Deed Rule in a "writ refused" case and holding that a reservation of oil, gas and mineral rights was inoperative and conveyed no title to the extent the reservation was made in favor of the grantors' seven children, none of whom was a party to the deed). The Stranger To Deed Rule does not conflict with the estoppel-by-deed doctrine because estoppel by deed binds the parties to the deed and those claiming under them, but does not bind strangers to the deed. See Trial, 593 S.W.3d at 318; Angell, 225 S.W.3d at 840. Though the Supreme Court of Texas's opinion in Greene does not expressly address the Stranger to Deed Rule, the Greene opinion does not conflict with this rule because the Greene court determined whether the Reservation was binding and effective as between the parties to the Deed and those claiming under them, not as to strangers to the deed. See Greene, 153 S.W.2d at 585-89.
The Stranger to Title Rule is in a significantly different posture under Texas law. Though the Sandal Parties cite many cases in support of their arguments under the Stranger to Title Rule, all but one of those cases applies the Stranger to Deed Rule, not the Stranger to Title Rule. Because Armour is an assignor and a party to the First Assignment and thus not a stranger to the deed, the Stranger to Deed Rule does not apply and these cases applying the Stranger to Deed Rule are not on point. See Springob v. Farrar, 514 S.E.2d 135, 139 (S.C. Ct. App. 1999) (holding that the Stranger to Deed Rule did not apply because the challenged reservation was made in favor of the grantor). The only case that the Sandel Parties cite that applies the Stranger to Title Rule is a case from the Twelfth Court of Appeals-Little v. Linder. See 651 S.W.2d 895, 900-01 (Tex. App.-Tyler 1983, writ ref'd n.r.e.). In that case Adeline Linder's husband joined her as a grantor in a deed conveying Adeline's separate property because that joinder was required under a then-existing Texas statute for a conveyance of a wife's separate property to be effective. See id. The Linder court concluded that the reservation in the deed in favor of the grantors was ineffective as to the husband because he was a stranger to the ownership of the real property in question. See id. No party raised estoppel by deed in the Little case, and the Little court did not address estoppel by deed or the Greene case. See id. As to the Stranger to Title Rule, the parties have not cited and research has not revealed any binding precedent applying this rule. Unlike the Stranger to Deed Rule, the Stranger To Title Rule conflicts with the estoppel-by-deed doctrine because estoppel by deed binds the parties to the deed and those claiming under them, and the Stranger To Title Rule applies to these parties. See id. The parties have not cited and research has not revealed any case in which a stranger to title who was a grantor in a deed asserted the estoppel-by-deed doctrine and another party in the case asserted that the Stranger to Title Rule barred the grantor from asserting the estoppel-by-deed doctrine. Though the Supreme Court's opinion in Greene does not expressly address the Stranger to Title Rule, the Greene court held that because the parties to the Deed are bound by the terms of their contract, to make the reservation in the Deed effective in favor of Greene and those holding under him and against Garrett and those holding under him, it was not necessary that good title to the land be shown in Greene when he executed the Deed as grantor. See Greene, 153 S.W.2d at 585. Thus, no binding precedent compels us to adopt the Stranger To Title Rule, and if we were to adopt this rule, our opinion would conflict with the binding precedent in Greene. See Greene, 153 S.W.2d at 585-89. The parties have not cited and research has not revealed a decision from the United States Supreme Court or the Supreme Court of Texas or an applicable statute abrogating the Greene precedent. In this context, we conclude that under vertical stare decisis, we must apply the Greene precedent and not apply the Stranger To Title Rule to this case. See Mitschke v. Borromeo, 645 S.W.3d 251, 256 (Tex. 2022); Greene, 153 S.W.2d at 585-89; Angell, 225 S.W.3d at 841-42 & n.16.
The Sandel Parties rely upon the following cases that apply the Stranger to Deed Rule rather than the Stranger to Title Rule: See Joiner v. Sullivan, 260 S.W.2d 439, 439-40 (Tex. Civ. App.-Texarkana 1953, writ ref'd); United States Invention Corp. v. Betts, 495 S.W.3d 20, 25 (Tex. App.-Waco 2016, pet. denied); Patton Children's Trust v. Hamlin, No. 07-07-0488-CV, 2008 WL 3863475, at *4 (Tex. App.-Amarillo Aug. 20, 2008, no pet.) (mem. op.); Mercer v. Bludworth, 715 S.W.2d 693, 701 (Tex. Civ. App.-Houston [1st Dist.] 1986, writ ref'd n.r.e.), disapproved on other grounds by, Shumway v. Horizon Credit Corp., 801 S.W.2d 890 (Tex. 1991); Jackson v. McKenney, 602 S.W.2d 124, 126 (Tex. Civ. App.-Eastland 1980, writ ref'd n.r.e.); Canter v. Lindsey, 575 S.W.2d 331, 333-35 (Tex. Civ. App.-El Paso 1978, writ ref'd n.r.e.); MGJ Corp. v. City of Houston, 544 S.W.2d 171, 174-75 (Tex. Civ. App.-Houston [1st Dist.] 1976, writ ref'd n.r.e.); Dickason v. Mathews, 335 S.W.2d 658, 662 (Tex. Civ. App.- Amarillo 1960, writ ref'd n.r.e); Cone v. Cone, 266 S.W.2d 480, 482 (Tex. Civ. App.-Amarillo 1953, writ dism'd w.o.j.); Woldert v. Skelly Oil Co., 202 S.W.2d 706, 709 (Tex. Civ. App.- Texarkana 1947, writ ref'd n.r.e.).
7. Armour's Ability to Assert Estoppel by Deed
The Sandel Parties argue that a stranger to title like Armour may not assert the estoppel-by-deed doctrine. However, all of the cases that the Sandel Parties cite in support of this argument are cases involving a stranger to the deed rather than a stranger to title who was a party to the deed. See Mercer v. Bludworth, 715 S.W.2d 693, 701 (Tex. Civ. App.-Houston [1st Dist.] 1986, writ ref'd n.r.e.), disapproved on other grounds by, Shumway v. Horizon Credit Corp., 801 S.W.2d 890 (Tex. 1991); Jackson v. McKenney, 602 S.W.2d 124, 126 (Tex. Civ. App.-Eastland 1980, writ ref'd n.r.e.); Dickason v. Mathews, 335 S.W.2d 658, 662 (Tex. Civ. App.-Amarillo 1960, writ ref'd n.r.e); Woldert v. Skelly Oil Co., 202 S.W.2d 706, 709 (Tex. Civ. App.-Texarkana 1947, writ ref'd n.r.e.). As a party to the First Assignment and Second Assignment, Armour may rely upon the estoppel-by-deed doctrine. See Greene, 153 S.W.2d at 583-86; Angell, 225 S.W.3d at 841-42.
8. The Sandel Parties' Law of the Case Argument
The Sandel Parties assert that the law-of-the-case doctrine precludes Armour from establishing title by the estoppel-by-deed doctrine or by conclusory affidavit testimony. This argument lacks merit because in its first issue Armour does not seek to establish title to any part of the Royalty. Instead, Armour asserts that the trial court erred in failing to apply the estoppel-by-deed doctrine to conclude that Armour is entitled as a matter of law to a declaration that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty. A declaration that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty is not a determination that Armour has title to any part of the Royalty, nor is it based on any such determination. Instead, this declaration is based on a determination that, under estoppel by deed, Sandel Energy and its successors are estopped from denying that Armour owns the Remaining Royalty. See Greene, 153 S.W.2d at 583-86; Angell, 225 S.W.3d at 841-42.
In addition, the law-of-the-case doctrine only applies to questions of law and does not necessarily apply if either the issues or the facts presented in the later appeal are not substantially the same as those involved in the first appeal. See Texas Law Shield LLP v. Crowley, No. 14-18-00986-CV, 2020 WL 4873250, at *3 (Tex. App.-Houston [14th Dist.] Aug. 20, 2020, pet. denied) (mem. op.). The part of the Armour I opinion on which the Sandel Parties rely in their law-of-the-case argument addressed a different summary-judgment motion and did not address whether as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty. See Armour Pipe Line Co., 546 S.W.3d at 467. The law-of-the-case doctrine does not control the outcome here. See Texas Law Shield LLP, 2020 WL 4873250, at *3; Armour Pipe Line Co., 546 S.W.3d at 467.
9. Whether a Trespass to Try Title Action is Necessary
The Sandel Parties assert that Armour may not obtain declaratory relief because a trespass to try title action is the sole method by which a party may determine title to a mineral interest, including the Royalty. The Sandel Parties contend that Armour may not establish its title to the Royalty by way of a declaratory judgment, and that this matter must be resolved by means of a trespass to try title action. First, even if a trespass to try title action were necessary for Armour to establish title to any part of the Royalty, a declaration that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty is not a determination that Armour has title to any part of the Royalty, nor is it based on any such determination. See Greene, 153 S.W.2d at 583-86; Angell, 225 S.W.3d at 841-42. Thus, as to this declaration, the Sandel Parties' argument lacks merit because the declaration does not establish that Armour has title to any part of the Royalty.
In addition, a royalty is a non-possessory interest. See Natural Gas Pipeline Co. v. Pool of Am., 124 S.W.3d 188, 192 (Tex. 2003). As to non-possessory interests, such as the Royalty, a party is not required to pursue a trespass to try title action and may seek declaratory relief. See Lance v. Robinson, 543 S.W.3d 723, 735-37 (Tex. 2018); Dougherty v. Humphrey, 424 S.W.2d 617, 620-21 (Tex. 1968); iStick Capital Management, LLC v. Arena Ltd. SPV, LLC, No. 7:20-CV-00134-O, 2021 WL 3427327, at *5 (N.D. Tex. Aug. 5, 2021); Richmond v. Wells, 395 S.W.3d 262, 266-67 (Tex. App.-Eastland 2012, no pet.); Glover v. Union Pac. R.R., 187 S.W.3d 201, 210-11 (Tex. App.-Texarkana 2006, pet. denied); T- Vestco Litt-Vada v. Lu-Cal One Oil Co., 651 S.W.2d 284, 291 (Tex. App.- Austin 1983, writ ref'd n.r.e); Grasty v. Wood, 230 S.W.2d 568, 571 (Tex. Civ. App.-Galveston 1950, writ ref'd n.r.e.).
10. The Sandel Parties' Argument that They Need Not Rely on the Second Assignment
The Sandel Parties argue that Armour may not rely upon the Second Assignment because the Sandel Parties claim title to the Royalty through the First Assignment and independently of the Second Assignment. See Trial, 593 S.W.3d at 320. We presume that this is so, and we do not rely on the Second Assignment in this section of the analysis. The fact that Armour does not seek a declaration as to the part of the Royalty allegedly assigned to Sandel Energy in the Second Assignment does not mean that the estoppel-by-deed analysis is based on the Second Assignment.
11. Conclusion
Under the applicable standard of review, we conclude that the trial court erred in granting the Fourth Motion as to Armour's claims and in failing to apply the estoppel-by-deed doctrine to conclude that Armour is entitled as a matter of law to a declaration that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty. See Greene, 153 S.W.2d at 583- 86; Angell, 225 S.W.3d at 841-42.
Therefore, we sustain Armour's first issue, and we reverse the parts of the trial court's judgment in which the trial court granted the Fourth Motion as to Armour's claims and in which the trial court adjudicated the merits of Armour's claims. We render a judgment declaring that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty, and we remand to the trial court for further proceedings.
In their opening brief, the Cashman Sisters adopt all of Armour's arguments under Texas Rule of Appellate Procedure 9.7. See Tex. R. App. P. 9.7. We conclude that the Cashman Sisters assert the same issues and arguments as Armour. Therefore, each time we rule on one of Armour's issues, we make the same ruling as to the Cashman Sister's assertion of that issue.
B. Did the trial court err in granting CML's Second Motion?
In CML's Second Motion, CML stated that it continued to take no position as to who owns the disputed royalty interest and that it filed CML's Second Motion simply to argue that if the trial court were to grant the Fourth Motion, then the trial court should also grant summary judgment in CML's favor as to the Cashman Parties' claims against CML. CML asserted that all of these claims require as a threshold matter that Armour own the disputed royalty interest. The trial court granted CML's Second Motion.
On appeal, Armour asserts that because CML's Second Motion was premised on the trial court's granting of the Fourth Motion, if this court reverses the trial court's judgment as to the Fourth Motion, then this court should likewise reverse the trial court's judgment as to CML's Second Motion. The Cashman Sisters adopt all of Armour's arguments in its opening brief under Texas Rule of Appellate Procedure 9.7. See Tex. R. App. P. 9.7; Hunter Buildings & Mfg., L.P. v. MBI Global, L.L.C., 436 S.W.3d 9, 14 (Tex. App.-Houston [14th Dist.] 2014, pet. denied). Thus, the Cashman Sisters have adopted Armour's challenge to the trial court's granting of CML's Second Motion. Because the trial court erred in granting the Fourth Motion at to Armour's claims and because the sole basis for CML's Second Motion was the trial court's granting the Fourth Motion, we conclude that the trial court erred in granting CML's Second Motion.
C. Should this court sustain the Sandel Parties' conditional cross-point?
In a conditional cross-point, the Sandel Parties assert that if this court reverses the trial court's judgment and remands for further proceedings, this court should consider and sustain the Sandel Parties' conditional cross-point. In this cross-point, the Sandel Parties argue that this court should reverse the part of the trial court's judgment in which the trial court determines that the Sandel Parties' claims for relief are moot and dismisses these claims without prejudice. The Sandel Parties assert that the trial court found that their claims were moot in light of the trial court's granting of the Fourth Motion and that if this court reverses this ruling, then the basis for the trial court's mootness ruling has been removed. The Sandel Parties assert that this court should sustain their conditional cross-point, reverse the part of the trial court's judgment that dismisses without prejudice the Sandel Parties' claims, and remand these claims to the trial court for further proceedings.
After the trial court granted the Fourth Motion but before the trial court signed the final judgment, counsel for the Sandel Parties submitted a proposed judgment to trial court. When counsel for the Sandel Parties submitted the proposed judgment, he also submitted a letter he had sent to counsel for Armour. Both in that letter and in a later filing with the trial court in response to the Cashman Parties' objections to the proposed judgment, counsel for the Sandel Parties reiterated that the Fourth Motion did not seek summary judgment as to the Sandel Parties' claims and explained that, according to the Sandel Parties, by granting the Fourth Motion and denying the Cashman Parties' claims on the merits, the trial court resolved the issue of the validity of the Royalty claimed by Armour, thus rendering moot the Sandel Parties' claims for affirmative relief.
In the trial court's final judgment, the trial court did not grant any declaratory relief, nor did the trial court render judgment for title to any property, as it would in a trespass to try title action. The trial court incorporated by reference its order granting the Fourth Motion and adjudicated all of the Cashman Parties' claims against them. We interpret the final judgment as dismissing without prejudice all of the Sandel Parties' claims because the trial court concluded that these claims were moot in light of the trial court's adjudication of the Cashman Parties' claims. The trial court then stated that in light of this dismissal without prejudice based on mootness, the trial court denied the Cross Motion as to the Sandel Parties' claims for affirmative relief. Under the trial court's judgment, the Sandel Parties received the relief they requested as to the Cashman Parties' claims, and the Sandel Parties had no issue with their claims being dismissed as moot. See Powell v. CIT Bank, N.A., No. 14-15-00949-CV, 2017 WL 4228893, at *5 (Tex. App.-Houston [14th Dist.] June 8, 2017, no pet.). Now that this court is reversing the parts of the trial court's judgment in which the court granted the Fourth Motion as to Armour's claims or adjudicated Armour's claims on the merits, the trial court's basis for dismissing the Sandel Parties' claims as moot has disappeared, and the Sandel Parties are free to assert in their conditional cross-point that this court should reverse the part of the trial court's judgment that dismisses without prejudice the Sandel Parties' claims. See id.
In light of our reversal of the parts of the trial court's judgment in which the court granted the Fourth Motion as to Armour's claims or adjudicated Armour's claims on the merits, the basis for the trial court's mootness determination as to the Sandel Parties' claims is no longer present. We thus conclude that we should reverse the trial court's judgment dismissing the Sandel Parties' claims as moot and remand these claims to the trial court for further proceedings. See id. at *5-6. Therefore, we sustain the Sandel Parties' conditional cross-point.
D. Should this court address the merits of the Cross Motion as to the Sandel Parties' claims?
In its third issue Armour asserts that the trial court erred in denying the part of the Cross Motion in which Armour asserted that quasi-estoppel and the statute of limitations bar both of the Sandel Parties' claims and the part in which Armour argued that as a matter of law a trespass to try title action is not available to determine title to an overriding royalty interest. The Sandel Parties asserted only two claims-claims for declaratory relief and trespass to try title actions. In the Fourth Motion, though the Sandel Parties sought summary judgment as to all the claims of the Cashman Parties, the Sandel Parties did not seek summary judgment on either of their claims for affirmative relief. Counsel for the Sandel Parties affirmed this point several times in the trial court as well as on appeal.
As discussed in section II.C. above, in its final judgment the trial court dismissed without prejudice all of the Sandel Parties' claims because the trial court concluded that these claims were moot in light of the trial court's adjudication of the Cashman Parties' claims. The trial court then stated that in light of this dismissal without prejudice based on mootness, the trial court denied the Cross Motion as to the Sandel Parties' claims for affirmative relief. We conclude that this denial of the Cross Motion was a denial based on mootness, rather than a denial on the merits of the Sandel Parties' claim. When claims are moot, a court lacks jurisdiction to rule on the merits of the claims. See NextEra Energy, Inc. v. Public Util. Comm'n of Texas, No. 14-18-00667-CV, 2020 WL 1150799, at *2, n.4 (Tex. App.-Houston [14th Dist.] Mar. 10, 2020, pet. denied) (mem. op.). Because the trial court did not rule on the merits of the Cross Motion to the extent that the motion addressed the Sandel Parties' claims, we do not address the third issue or the merits of this part of the Cross Motion. See id.
E. Did the trial court err in denying the Cross Motion as to Armour's breach-of-contract claims against the Sandel Parties and CML?
In its second issue, Armour asserts that the trial court erred in denying the Cross Motion as to Armour's breach-of-contract claims against the Sandel Parties and CML. Armour argues that the First Assignment and the Second Assignments were contracts between Armour and Sandel Energy and that the other Sandel Parties and CML are Sandel Energy's successors who are bound and liable under each agreement. According to Armour, the Sandel Parties and CML breached these two contracts by failing to pay Armour the amounts owed to Armour due to the Remaining Royalty.
Armour seeks payment based on the Remaining Royalty. The First Assignment contains the following provision:
HOWEVER, In the event that a bonafide claim or dispute arises pertaining to Assignors' interest in any of said wells, whether or not same be asserted by a landowner, working interest owner, lienholder, net profits royalty interest owners or otherwise, Assignee shall be entitled to withhold payment of Assignors' reserved overriding royalty, hereinabove, until said claim or dispute has been resolved in favor of Assignor. Assignee agrees not to unreasonab[l]y withhold said overriding royalty interest payments. Should Assignors be forced to sue Assignee for recovery of said overriding royalty payments and a court of law of competent jurisdiction should determine that Assignee has unreasonably withheld, or continued to unreasonably with[o]ld any such overriding royalty payments, that in addition to any monetary amounts awarded to Assignor by such court, the parties hereto stipulate that Assignors shall also be entitled to punitive damages equal to three times the amount of money which has been determined by the court to have been so unreasonably withheld.
The record reflects that in 2013 after consulting with legal counsel, CML concluded that the purported exception and reservation of the Royalty unto Armour in the First Assignment was "ineffective" and that Armour did not own any part of the Royalty because Armour was a stranger to title as to the Subject Lease. After CML reached this conclusion, the Sandel Parties agreed with CML's position and began asserting that the purported exception and reservation of the Royalty unto Armour in the First Assignment was void. Recognizing that a dispute likely would arise as to the validity of Remaining Royalty, CML held in suspense the funds that would be subject to the disputed royalty if it were valid. Pursuant to an order of the trial court, CML later interpleaded the disputed funds into the trial court's registry, and since then, CML has paid in the court's registry each month any funds attributable to the disputed interest.
In its live pleading, Armour alleges that (1) there is no bona fide claim or dispute pertaining to the Royalty; (2) Sandel Energy violated the terms of the parties' agreements by unreasonably withholding or causing to be withheld payments due Armour based on the Royalty; (3) Sandel Energy breached its contract by wrongfully and unreasonably causing a suspension or withholding of payments under the Royalty; (4) the other Sandel Parties and CML, as privies to Sandel Energy, are likewise bound to the contractual obligations which have been breached and are jointly and severally liable to Armour for damages Armour suffered as a result of Sandel Energy's breach; and (5) Armour is entitled to recover the amounts owed under the Remaining Royalty, as well as the treble, punitive damages provided for in the First Assignment based on the unreasonable withholding of the Royalty payments.
But, in the Cross Motion and on appeal, Armour does not address the withholding provision of the First Assignment. Instead, Armour asserts that the Sandel Parties and CML breached their contract by failing to pay to Armour the amounts attributable to the Remaining Royalty, without addressing the withholding provision. In the Cross Motion, Armour did not assert or prove as a matter of law any of the following points: (1) no bona fide claim or dispute arose pertaining to Armour's interest; (2) any bona fide claim or dispute pertaining to Armour's interest has been resolved in favor of Armour; or (3) the Sandel Parties or CML unreasonably withheld payments due as a result of the Remaining Royalty. On appeal, Armour does not assert that it proved any of these points as a matter of law. Armour has not shown that the summary-judgment evidence conclusively proved that any of the Sandel Parties or CML breached the First Assignment or the Second Assignment, nor has Armour shown that the trial court erred in denying the Cross Motion as to its breach-of-contract claims against the Sandel Parties and CML. See Marzo Club, LLC v. Columbia Lakes Homeowners Assoc., 325 S.W.3d 791, 800- 01 (Tex. App.-Houston [14th Dist.] 2010, no pet.).
F. Did the trial court abuse its discretion in granting CML interpleader relief?
Under its second issue, Armour challenges the trial court's December 1, 2014 order granting CML interpleader relief and awarding CML $41,437.50 in reasonable attorney's fees to be paid out of the funds in the registry of the court prior to payment of these funds to the prevailing party. In their appellate brief, the Cashman Sisters assert in their second issue that the trial court erred in awarding interpleader relief and attorney's fees to CML. The Cashman Sister adopt Armour's arguments in its opening brief under Texas Rule of Appellate Procedure 9.7. See Tex. R. App. P. 9.7. We conclude that the Cashman Sisters have adopted all of Armour's arguments as to interpleader relief and attorney's fees.
We review the trial court's grant of interpleader relief for an abuse of discretion. McCall v. AXA Equitable Life Ins. Co., No. 14-04-01111-CV, 2006 WL 17861, at *2 (Tex. App.-Houston [14th Dist.] Jan. 5, 2006, no pet.) (mem. op.). A trial court abuses its discretion when the court acts in an arbitrary or unreasonable manner, or without reference to guiding rules and principles. Downer v. Aquamarine Operators, 701 S.W.2d 238, 241-42 (Tex. 1985). Under the abuse-of-discretion standard of review, a challenge to the legal and factual sufficiency of the evidence is not an independent ground of error, but is merely a factor in assessing whether the trial court abused its discretion. See Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991). Any reasonable doubt as to a stakeholder's right to interpleader relief must be resolved in the stakeholder's favor. Bryant v. United Shortline Inc. Assurance Services, N. A., 972 S.W.2d 26, 31 (Tex. 1998); Atu v. Slaughter, No. 14-06-00771-CV, 2007 WL 2682198, at *2 (Tex. App.-Houston [14th Dist.] Sep. 13, 2007, no pet.) (mem. op.).
A party is entitled to interpleader relief if the party establishes three elements: (1) it is either subject to, or has reasonable grounds to anticipate, rival claims to the same funds; (2) it has not unreasonably delayed filing its action for interpleader; and (3) it has unconditionally tendered the funds into the registry of the court. Fort Worth Transportation Auth. v. Rodriguez, 547 S.W.3d 830, 850 (Tex. 2018); Olmos v. Pecan Grove Mun. Util. Dist., 857 S.W.2d 734, 741 (Tex. App.-Houston [14th Dist.] 1993, no writ). On appeal the Cashman Parties do not challenge the second or third element. As to the first element, the Cashman Parties assert that there was no real doubt or risk that CML might be liable to the Sandel Parties for the amounts attributable to the Remaining Royalty because the Sandel Parties are not entitled to these amounts under the estoppel-by-deed doctrine. The party seeking interpleader relief is not required to determine the merits of the rival claims. See McCall, 2006 WL 17861, at *2. Based the evidence before the trial court when it granted interpleader relief on December 1, 2014, the trial court did not abuse its discretion by finding that CML was subject to rival claims to the same funds. See id.
Armour also asserts that the trial court erred in granting interpleader relief because CML breached the First Assignment and Second Assignment. We presume for the sake of argument, that breaching the First Assignment or the Second Assignment would preclude CML from obtaining interpleader relief. The Cashman Parties argue that the First Assignment and the Second Assignment were contracts between Armour and Sandel Energy and that the other Sandel Parties and CML are Sandel Energy's successors who are bound and liable under each agreement. According to the Cashman Parties, CML breached these two contracts by failing to pay Armour the amounts owed to it due to the Remaining Royalty. As discussed in section II.E. above, the First Assignment provides that if a bona fide claim or dispute arises pertaining to Assignors' interest in any of said wells, the assignee may withhold payment of the Royalty to Armour until said claim or dispute has been resolved in Armour's favor. The Cashman Parties have not shown that the evidence conclusively proved that CML breached the First Assignment or the Second Assignment. See Marzo Club, LLC, 325 S.W.3d at 800-01. The Cashman Parties have not shown that because CML breached the First Assignment or Second Assignment, the trial court abused its discretion in granting interpleader relief. See McCall, 2006 WL 17861, at *2. The Cashman Parties have not shown that the trial court abused its discretion in granting interpleader relief. See McCall, 2006 WL 17861, at *2; Olmos, 857 S.W.2d at 741.
In addition to interpleader relief, an innocent, disinterested stakeholder in an interpleader may recover its reasonable attorney's fees, to be paid out of the interpleaded funds. Rodriguez, 547 S.W.3d 850-51. The Supreme Court of Texas has noted that although that court has not defined "innocent, disinterested stakeholder," Black's Law Dictionary defines "innocent" as "free from legal fault," "disinterested" as "not having a pecuniary interest in the matter at hand," and "stakeholder" as "[a] disinterested third party who holds money or property, the right to which is disputed between two or more other parties." Rodriguez, 547 S.W.3d at 852 (quoting Black's Law Dictionary (10th ed. 2014)).
An interpleading party may not recover attorney's fees if the interpleading party is responsible for the conflicting claims to the funds or property. Rodriguez, 547 S.W.3d at 851. The Cashman Parties assert that CML is responsible for the conflicting claims regarding the Remaining Royalty because CML had its landman "fabricate an utterly non-viable legal issue-that [the Sandel Parties] might own [the Remaining Royalty] notwithstanding two contracts that squarely foreclose this position" and because CML convinced Sandel Energy's Chairman that Armour did not own the Remaining Royalty. In support of this assertion the Cashman Parties cite evidence in documents filed with the trial court after the trial court made the challenged interpleader ruling on December 1, 2014. Our review of the merits of this ruling is limited to the record in the trial court when the trial court ruled. See Ginn v. Pierce, 595 S.W.3d 762, 766 (Tex. App.-Houston [14th Dist.] 2019, pet. denied). Based on the record before the trial court at that time, the trial court did not abuse its discretion by impliedly finding that CML was not responsible for the conflicting claims regarding the Royalty. See Olmos, 857 S.W.2d at 742.
The Cashman Parties also assert that CML cannot be a "third party" and thus cannot be a "stakeholder" because CML is in privity of contract with the Sandel Parties. See Rodriguez, 547 S.W.3d at 852 (quoting the definition of "stakeholder" as "[a] disinterested third party who holds money or property, the right to which is disputed between two or more other parties") (emphasis added). The Cashman Parties cite Union Gas Corporation v. Gisler for this proposition. See 129 S.W.3d 145, 153 (Tex. App.-Corpus Christi 2003, no pet.). In Gisler, an oil and gas lessee drafted a unit designation that conflicted with the lessee's obligations to the lessors, thus causing the dispute and making the lessee owe the same proceeds to the lessors and other royalty owners in the pooling unit. Gisler, 129 S.W.3d at 148-49, 153. The Gisler court concluded that the lessee was not an innocent stakeholder because the lessee breached its obligations to the lessors and was responsible for the conflicting claims to funds. See id. at 153. The Gisler court did not state that a party in privity of contract with one of the rival claimants is not a "third party" and therefore may not be a stakeholder in the interpleader context, nor does the Gisler opinion support this proposition. See id. at 148-49, 152-54. We conclude that CML being in privity of contract with one or more of the rival claimants does not preclude CML from being a stakeholder. See McCall, 2006 WL 17861, at *2; Olmos, 857 S.W.2d at 740-42.
The Cashman Parties also contend that CML is not disinterested because CML has taken the position that the Remaining Royalty is not effective or valid because Armour is a stranger to title as to the Subject Lease. The Supreme Court of Texas has indicated that the meaning of "disinterested" is "not having a pecuniary interest in the matter at hand." See Rodriguez, 547 S.W.3d at 852 (quoting Black's Law Dictionary (10th ed. 2014)). The Cashman Parties do not assert that CML has a pecuniary interest in the matter at hand, and the evidence before the trial court showed that CML does not assert an interest in the Remaining Royalty and that CML had held the funds attributable to the Remaining Royalty in suspense, rather than paying them to Armour or the Sandel Parties. In this context, CML taking a position on the effectiveness or validity of the Royalty does not preclude CML from being "disinterested." See Pulkrabeck v. Griffith & Griffith, 179 S.W. 282, 283 (Tex. Civ. App.-Dallas 1915, no writ) (concluding that party should not be denied interpleader relief simply because it expressed an opinion in favor of one of the rival claimants).
Based on the evidence before it on December 1, 2014, the trial court did not abuse its discretion by impliedly determining that CML was an innocent, disinterested stakeholder that should recover its reasonable attorney's fees out of the interpleaded funds. See Rodriguez, 547 S.W.3d 850-51; McCall, 2006 WL 17861, at *2-3; Olmos, 857 S.W.2d at 740-42.
We overrule Armour's second issue.
G. Should this court reverse the trial court's denial of the requests for attorney's fees under the Declaratory Judgments Act?
In its fifth issue, Armour asserts that we should reverse the trial court's denial of all requests for attorney's fees by any party under Civil Practice and Remedies Code section 37.009. See Tex. Civ. Prac. & Rem. Code Ann. §37.009 (West, Westlaw through 2021 R.S.). The trial court may award reasonable and necessary attorney's fees as are equitable and just under the Declaratory Judgments Act. See id. The trial court impliedly determined that it would not be equitable and just to award attorney's fees to any party. See Kings River Trail Ass'n v. Pinehurst Trail Holdings, L.L.C., 447 S.W.3d 439, 451-52 (Tex. App.-Houston [14th Dist.] 2014, pet. denied). Armour argues that if our disposition on appeal substantially affects the trial court's judgment, then this disposition warrants reversal of the trial court's denial of all requests for attorney's fees under Civil Practice and Remedies Code section 37.009.
An award of attorney's fees under the Declaratory Judgments Act falls within the discretion of the trial court and does not depend on a finding that a party substantially prevailed. Barshop v. Medina Cty. Underground Water Conservation Dist., 925 S.W.2d 618, 637 (Tex. 1996). This court has determined that the trial court erred in failing to apply the estoppel-by-deed doctrine to conclude that Armour is entitled as a matter of law to a declaration that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty. This court has reversed the parts of the trial court's judgment in which the trial court granted the Fourth Motion and in which the trial court adjudicated the merits of Armour's claims. This court has rendered a judgment declaring that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty.
Our disposition on appeal substantially affects the trial court's judgment and so warrants reversal of the trial court's denial of the requests for attorney's fees under section 37.009 of the Civil Practice and Remedies Code, so that on remand the trial court may address what reasonable and necessary attorney's fees, if any, to award under the Declaratory Judgments Act in light of all the circumstances. See Barshop, 925 S.W.2d at 637; Chase Home Fin., L.L.C. v. Cal West. Reconveyance Corp., 309 S.W.3d 619, 634 (Tex. App.-Houston [14th Dist.] 2010, no pet.). Therefore, we reverse all parts of the judgment in which the trial court addresses attorney's fees under section 37.009 of the Civil Practice and Remedies Code, and we remand for further proceedings so that the trial court may rule on the requests for these fees in light of all the circumstances when the trial court renders its judgment on remand. See Chase Home Fin., L.L.C., 309 S.W.3d at 634.
H. Did the trial court err in awarding CML attorney's fees?
Under its fifth issue, Armour also asserts that the trial court erred in awarding CML its attorney's fees as an innocent, disinterested stakeholder. We conclude that the Cashman Sisters make this same argument under their second issue because they have adopted all of Armour's arguments under Texas Rule of Appellate Procedure 9.7. See Tex. R. App. P. 9.7. The Cashman Parties argue that the First Assignment and the Second Assignment were contracts between Armour and Sandel Energy and that the other Sandel Parties and CML are Sandel Energy's successors who are bound and liable under each agreement. According to the Cashman Parties, CML breached these two contracts by failing to pay Armour the amounts owed to it due to the Remaining Royalty, and therefore CML may not recover attorney's fees. As discussed in section II.E. above, the First Assignment provides that if a bona fide claim or dispute arises pertaining to Assignors' interest in any of said wells, the assignee may withhold payment of the Remaining Royalty to Armour until said claim or dispute has been resolved in Armour's favor. The Cashman Parties have not shown that the evidence conclusively proved that CML breached the First Assignment or the Second Assignment. See Marzo Club, LLC, 325 S.W.3d at 800-01. The Cashman Parties have not shown that because CML breached the First Assignment or Second Assignment, the trial court abused its discretion in awarding CML its attorney's fees. See McCall, 2006 WL 17861, at *2.
The Cashman Parties also assert that CML was responsible for the conflicting claims regarding the Royalty. In support of this assertion the Cashman Parties cite evidence in court filings after the trial court made the challenged interpleader ruling on December 1, 2014. Our review of the merits of this ruling is limited to the record in the trial court when the trial court ruled. See Ginn, 595 S.W.3d at 766. Based on the record before the trial court at that time, the trial court did not abuse its discretion by impliedly finding that CML was not responsible for the conflicting claims regarding the Royalty. See Olmos, 857 S.W.2d at 742.
We sustain Armour's fifth issue and the Cashman Sisters' second issue as to attorney's fees under section 37.009 of the Civil Practice and Remedies Code, and we overrule the remainder of Armour's fifth issue and the Cashman Sisters' second issue.
I. Should this court address the Cashman Sisters' First Issue?
In their first issue, the Cashman Sisters assert that the trial court erred in (1) declining to accept as true the Cashman Sisters' summary-judgment evidence showing them to be successors to all of the Assignors; and (2) granting the Fourth Motion as to the Cashman Sisters' claims. The Cashman Sisters have adopted all of Armour's appellate arguments, and they agree with Armour that this court should reverse the trial court's order granting the Fourth Motion as to Armour's claims and render a judgment declaring that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty. In their appellate briefing, the Cashman Sisters assert that if this court were to rule that the reservation of the Royalty is void or if this court were to preclude Armour from enforcing the Royalty based on the Stranger To Title Rule, then in the alternative, the Cashman Sisters assert their claims that the Royalty remained with the Assignors because the Royalty was specifically excepted from the grant to Sandel Energy. In their alternative claims, the Cashman Sisters assert that because they are the successors to the Assignors, the Cashman Sisters would own the Royalty. Because this court has sustained Armour's first issue and is rendering a declaration in Armour's favor based on the estoppel-by-deed doctrine, the predicate for the Cashman Sisters' alternative claims has not been satisfied. Therefore, we need not and do not address the Cashman Sisters' first issue.
III. Conclusion
The trial court erred in granting the Fourth Motion as to Armour's claims and in failing to apply the estoppel-by-deed doctrine to conclude that Armour is entitled as a matter of law to a declaration that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty. Therefore, we reverse the parts of the trial court's judgment in which the trial court granted the Fourth Motion as to Armour's claims or in which the trial court adjudicated the merits of Armour's claims. We render a judgment declaring that as between Armour and Sandel Energy and their successors, Armour owns the Remaining Royalty, and we remand to the trial court for further proceedings. Because the trial court erred in granting the Fourth Motion as to Armour's claims and because the sole basis for CML's Second Motion was the trial court's granting the Fourth Motion, we conclude that the trial court erred in granting CML's Second Motion. We reverse the parts of the trial court's judgment in which the trial court granted CML's Second Motion, and we remand to the trial court for further proceedings. We sustain the Sandel Parties' conditional cross-point, reverse the parts of the trial court's judgment in which the trial court dismissed as moot any claim of the Sandel Parties, and remand to the trial court for further proceedings.
Because our disposition on appeal substantially affects the trial court's judgment, we reverse all parts of the judgment in which the trial court addressed attorney's fees under section 37.009 of the Civil Practice and Remedies Code, and we remand for further proceedings so that the trial court may address what reasonable and necessary attorney's fees, if any, to award under the Declaratory Judgments Act in light of all the circumstances when the trial court renders a judgment on remand.
Armour has not shown that the trial court erred in denying the Cross Motion as to Armour's breach-of-contract claims against the Sandel Parties and CML; therefore, we affirm the part of the trial court's judgment in which the court denied this part of the Cross Motion. The Cashman Parties have not shown that the trial court abused its discretion in granting CML interpleader relief or in awarding CML reasonable attorney's fees. Therefore, we affirm the trial court's grant of interpleader relief to CML and its award to CML of $41,437.50 in reasonable attorney's fees to be paid out of the funds in the registry of the court prior to payment of these funds to the prevailing party.
We need not and do not address (1) Armour's third or fourth issue, (2) the merits of the part of the Cross Motion that addressed the Sandel Parties' claims, and (3) the Cashman Sisters' first issue.