Everyone knows that land title records create constructive notice which prevents limitations from being tolled until a plaintiff receives actual notice, right? Not always. It depends on what the public records say. If the records are inconclusive, whether a plaintiff was diligent in discovering the information in them is a question of fact for the jury. That was the holding of Hooks v. Samson Lone Star Limited Partnership, No. 12–0920, 2015 Tex. LEXIS 56 (Jan. 30, 2015).
In several recent cases, the Texas Supreme Court has held that land title records and probate proceedings create an irrebuttable presumption of actual notice, which prevents the accrual of a claim from being delayed for purpose of limitations. In BP America Production Co. v. Marshall, 342 S.W.3d 59 (Tex. 2011), the court held that the statute limitations was not tolled when BP fraudulently represented that it was maintaining continuous operations on a lease because Railroad Commission records disclosed that BP was not conducting good faith continuous operations. The plaintiff was charged with constructive notice of the content of the records.
Similarly, in Shell Oil Co. v. Ross, 356 S.W.3d 924 (Tex. 2011), the court held untimely claims made by Ross that Shell had underpaid royalties despite Shell's allegedly fraudulent representations because a publicly available price index illuminated the underpayments, as did General Land Office records demonstrating that Shell paid higher royalties to the State even though it owed the Rosses the same royalty. In both cases the court held that the plaintiffs did not exercise reasonable diligence as a matter of law.
So one might have expected the same result in Hooks. There, Hooks executed a lease with Samson Lone Star Limited Partnership. The lease included "offset obligations" providing that if a gas well were completed within 1,320 feet of Hooks' lease line but was not unitized with Hooks' acreage, then Samson would either drill an offset well, pay Hooks compensatory royalties, or release the offset acreage. In 2000, Samson drilled a well that bottomed within the 1,320–foot protected zone. But, instead of complying with the lease, Samson asked Hooks to amend the lease to pool into a unit associated with the new well. In connection with this request, Samson provided Hooks with a plat that incorrectly placed the well's bottom hole outside the protected zone. A plat with the same false information had already been filed with the Railroad Commission. Older Railroad Commission records, however, contained a directional survey and attached plat that correctly placed the bottom hole within the protected zone.
Hooks sued Samson for compensatory royalties alleging Samson misrepresented the well's bottom hole location and fraudulently induced Hooks to amend the lease and pool. The jury found Sampson committed fraud and awarded more than $20 million in damages. The court of appeals reversed, holding that the four-year statute of limitations for fraud barred the claims.
On appeal in the Supreme Court, Samson cited Marshall and Ross, arguing that Hooks' claim was barred as a matter of law because reasonable diligence required sophisticated lessors like Hooks to acquaint themselves with publicly available information from Railroad Commission records.
The Supreme Court disagreed, refusing to say as a matter of law that Hooks should have discovered the accurate information in Railroad Commission records when the more recent filing falsely conveyed that the well had been completed outside the protected zone. The court held that "when the defendant's fraudulent misrepresentations extend to the Railroad Commission record itself, earlier inconsistent filings cannot be used to establish, as a matter of law, that reasonable diligence was not exercised. Under these circumstances, reasonable diligence remains a fact question."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
