United States: Struggling To Produce: Heirs To Claimed Royalty Interest Acquired In Late 1800s In 9,200-Acre Tract In Texas Fail To Pass Procedural Hurdles To Asserting Their Claims For Superior Title And Unpaid Royalties Against Multiple Oil And Gas Companies

Last Updated: November 4 2016
Article by Cody T. Vasut

On Monday, Oct. 10, 2016, dozens of claimed heirs to a one-half mineral interest allegedly obtained in the late 1800s in a 9,200-acre tract of land in Brooks County, Texas, filed a Petition for Review with the Texas Supreme Court, claiming that the Fourth Court of Appeals in San Antonio erred in upholding the Brooks County District Court's ruling dismissing their claims for superior title and unpaid royalties from various oil companies with prejudice because the plaintiffs had not joined all necessary parties with an interest in the property.

The appeal is the latest in an almost 15-year saga by the plaintiffs to overcome procedural hurdles to their claims to superior title and for unpaid royalties.

The plaintiffs claimed that their ancestor, Jose M. Longoria, acquired an undivided one-half mineral interest in 9,200 acres of land in Brooks County, Texas, by adverse possession in the late 1800s by fencing the property, surveying it, and growing crops and grazing livestock on it for decades before the mineral estate was severed from the surface estate. The plaintiffs contend that a partition suit and judgment in 1924, which divided the entire tract, and succeeding partition judgments are void and are clouds on their title, since none of Mr. Longoria's heirs were made parties to the partition suits. The plaintiffs then sued 11 energy companies in March 2002, seeking a declaratory judgment and damages, and subsequently added the current record-title owners as defendants.

In December 2004, the defendants sought to dismiss the plaintiffs' claims pursuant to Rule 39(a) of the Texas Rules of Civil Procedure because the plaintiffs had failed to join all persons having record title to and royalty interests in the 9,200 acres, including all lessors, mineral interest owners in those portions of the tract not currently under oil and gas leases, and nonparticipating royalty interest owners. In March 2005, the trial court denied the motion, but the next month the energy company defendants re-urged the motion under Rules 39(a) and (b). After hearing the motion, the trial court abated the plaintiffs' claims for six months to give them time to amend their pleadings or join the absent parties.

After the abatement period passed, the plaintiffs filed an amended petition, asserting trespass-to-try-title and seeking declaratory judgment, among other claims. The plaintiffs expressly disclaimed that they were seeking to recover any portion of any royalty interest currently owned by a nonparty to the case, and stipulated that their interest would be burdened by an obligation to continue paying the current royalty owners an amount equal to the royalty paid by the energy company defendants so long as production continued. The plaintiffs claimed that these amended pleadings cured the defendants' complaints under Rule 39. In response, the defendants renewed their motions to dismiss.

The trial court then granted the defendants' motions to dismiss and dismissed the plaintiffs' claims without prejudice because the plaintiffs had failed to join the absent royalty and mineral interest owners. The plaintiffs appealed to the Fourth Court of Appeals, which upheld the trial court's dismissal in January 2008. Longoria v. Exxon Mobil Corp., 255 S.W.3d 174 (Tex. App.—San Antonio 2008, pet. denied).

The Fourth Court of Appeals found that the trial court did not abuse its broad discretion in holding that the missing interest owners were necessary parties because their claimed interests would, as a practical matter, be impaired or impeded by the plaintiffs' claims. Id. at 182 (citing Tex. R. Civ. P. 39(a)). The court of appeals reasoned in part that even if the plaintiffs' declaratory judgment claim would not be binding on the absent lessors, the trial court had discretion to find that such a judgment could impair the absent lessors' ability to convey their interests at a later date. Id. Further, in order to recover title, the plaintiffs would have to have the 1924 partition declared void, which is the same partition under which the absent mineral interest owners claimed title. Id. The court of appeals found that such a ruling would necessarily cloud the title of the missing mineral interest owners. Id. While the court of appeals found that the case could not be properly dismissed under Rule 39(b) because there was no evidence that the plaintiffs could not serve the missing mineral interest with process, the court of appeals upheld the trial court's dismissal of the plaintiffs' claims because the plaintiffs had failed to join the missing mineral interest owners after being given a reasonable opportunity – more than six months – to do so. Id. at 184.

The plaintiffs then filed a petition for review with the Texas Supreme Court, which was denied in July 2008.

Undeterred, the plaintiffs re-pled their claims against the defendants in a new case and named 64 missing mineral interest owners as nonaligned parties as soon as the trial court entered another order of abatement. The plaintiffs claimed that they successfully served 57 out of 64 nonaligned parties, but were unable to serve the last seven because the defendants gave them invalid addresses. The plaintiffs then sought substituted service on the last seven nonaligned parties. The defendants denied that the plaintiffs had been provided with invalid addresses and that the plaintiffs had exercised reasonable diligence in serving the nonaligned parties. The defendants then re-urged their motion to dismiss and opposed the plaintiffs' request for substituted service. In May 2015, the trial court denied the plaintiffs' request for substituted service and granted the defendants' renewed motions to dismiss, this time dismissing the plaintiffs' claims with prejudice.

The plaintiffs again appealed to the Fourth Court of Appeals, which upheld the trial court's dismissal with prejudice on July 27, 2016, No. 04-15-00536-CV. The Fourth Court of Appeals found that the plaintiffs' re-pled claims would still, as a practical matter, impair or impede the rights of the missing mineral interest owners and that the plaintiffs had failed to exercise reasonable diligence in serving the missing mineral interest owners with process. Particularly, the court of appeals held that the absent interest owners' claimed interests would be, as a practical matter, negatively impacted if the plaintiffs prevailed on voiding the 1924 partition under which the absent interest owners claimed title. The court also found that since the absent mineral interest owners would not be bound by a judgment, the energy company defendants may still have to pay 100 percent of the royalty on production to the missing interest owners even though the energy company defendants' interests had been cut in half. The court of appeals then found that the plaintiffs had failed to demonstrate that the case could proceed without the absent mineral interest owners pursuant to Rule 39(b) because there was no evidence that the absent mineral interest owners could not be served with process. "At most, the record shows that [the plaintiffs] made a single attempt to serve the absent interest owners by certified mail. This does not establish that the unserved interest owners were not subject to service of process . . . ." Id. at pg. 9. Finally, the court found that the trial court did not abuse its discretion in dismissing the case a second time with prejudice because the plaintiffs had been given ample opportunity to amend their pleadings and to join all the missing interest owners – which they failed to do.

On Oct. 10, 2016, the plaintiffs filed a second Petition for Review with the Texas Supreme Court. On Oct. 18, 2016, the defendants waived their response to the plaintiffs' Petition for Review, subject to any request by the Texas Supreme Court for the defendants to file a response. The case is currently pending before the Texas Supreme Court as case number 16-0808.

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