Texas Court Rules In Suit Over Minerals In Another State

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Gray Reed & McGraw LLP

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Scheming to find the most remote and inaccessible county in Texas (my vote is Yoakum but there is no paucity of candidates) in which to dish out Texas home-town...
United States Litigation, Mediation & Arbitration
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Scheming to find the most remote and inaccessible county in Texas (my vote is Yoakum but there is no paucity of candidates) in which to dish out Texas home-town justice to an out-of-state defendant? Consider Bauer and Braxton Minerals II v. Braxton Minerals III.

THE TAKEAWAY

Before paying your filing fee, be very sure the honorable court of your choice has subject matter jurisdiction. Texas courts have no jurisdiction to adjudicate title to real property, such as mineral interests, located in other jurisdictions. On the other hand, If a Texas court has personal jurisdiction over the parties it may enforce personal or contractual obligations that indirectly involve real property in another state. Simple to navigate? It's not.

THE FACTS

Braxton Minerals III (BM3) sued Bauer and Braxton Minerals II (BM2) in Tarrant County (certainly not remote, no offense intended) alleging that BM2 and Bauer failed to comply with representations and contractual obligations to transfer oil gas interests to BM3 in West Virginia. There were five causes of action and a request or declaratory and injunctive relief. Bauer and BM2 counterclaimed asserting four causes of action, including a declaratory judgment, and seeking damages.

The trial court entered judgment for BM3. On appeal Bauer and BM2 challenged the court's jurisdiction. The court of appeals reversed and dismissed BM3's suit for want of subject matter jurisdiction. The court dismissed Bauer and BM2's counterclaim for the same reason.

THE REASONING

To determine the extent to which title and possession are involved in a suit and thereby implicate jurisdiction, the court looks at the nature of the suit, the injury complained of, the relief sought, and the evidence. If ownership of foreign-jurisdiction real property is more than incidental or collateral to the claims and measure of recovery, the court lacks jurisdiction.

Said another way, if the gravamen of the suit is the determination of the parties' existing property interests located in another state, Texas courts have no jurisdiction. It doesn't matter how the parties dress up their claims.

The core of BM3's allegations revolved around its claim of ownership of the mineral interests, not only as to correction of deeds and specific performance, but also for recovery of improperly paid royalties and protection of royalties in the future. The gravamen of the suit was to obtain title to real property in a foreign jurisdiction and recover damages flowing from interference with those interests. Seeking a declaration of rights under a letter agreement to recover an interest in real property was subject to the Texas mandatory venue statute.

THE COUNTERCLAIM AND THE MANDATORY VENUE STATUTE

In Texas an action for recovery of an estate or interest in property must be brought in the county in which the property is located. In ruling on the Bauer and BM2's counterclaims the court referred to the Texas mandatory venue statute. The parties did not brief the topic and the court did not find cases on jurisdiction that addressed the counterclaims.

The court looked at the gist of the pleadings, not just labels the parties placed on their theories of recovery. In order to recover damages in the fraud counterclaim Bauer and BM2 had to prove their rightful ownership of the mineral interests. This would justify application of the mandatory venue statute. The test under that statute is similar for the jurisdiction question. The gravamen of the counterclaim was to determine ownership of interests in real property in a foreign jurisdiction. The trial court did not have subject matter jurisdiction over the counterclaim.

Your musical interlude.

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.

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