Articles Posted in Recent Cases

Ridgefield Permian v. Diamondback is another case arising out of the same tax foreclosure suit that was addressed in Mitchell v. MAP Resources, decided earlier this year by the Texas Supreme Court. My discussion of Mitchell can be found here. Both Ridgefield and Mitchell were initially decided by the El Paso Court of Appeals. While Mitchell’s appeal to the Supreme Court was pending the El Paso Court handed down its opinion in Ridgefield, 2021 WL 1783260 (May 5, 2021). In Ridgefield, the El Paso Court held that the taxing authorities’ lien attached only to the royalty interest reserved in the lease; once the lease terminated, the purchaser of the royalty interest foreclosed upon owned no interest in the mineral estate. This week, the Texas Supreme Court declined to hear Ridgefield’s appeal of the El Paso Court’s judgment.

Alberta Griffith owned a 1/7^th interest in the surface and minerals in a section of land in Reeves County. When she died her interest passed to her two sons, Albert and David, subject to a life estate interest in her surviving husband. In 1975, the husband and sons signed an oil and gas lease to Billings, reserving a 1/8th royalty. A well, the Meriwether No. 1, was completed on the lease.

In 1998, there was a small tax debt owed by Mr. Griffith and Albert on their royalty in the Meriwether lease. That year the taxing districts filed suit to foreclose tax liens against several hundred defendants, including Mr. Griffith and Albert. In the suit their interests were each described as a .005952 decimal interest in the Meriwether lease (each owning a royalty of 1/3 of 1/7 of 1/8 royalty). Judgment was entered foreclosing the lien, the interests were sold at Sheriff’s sale, and the interests came to be owned by Magnolia, LLC.

Four interesting recent cases on oil and gas issues:

Energy Transfer Fuel v. 660 North Freeway, 2021 WL 1569702

Energy Transfer owns an easement across North Freeway’s property in Fort Worth. The easement provided that the owner “hereby reserves the right to use the land in any manner that will not prevent or interfere with the exercise by [the easement holder] of its rights, privileges and easements hereunder, provided, however, that OWNER shall not construct or permit to be constructed any house, building or structure of any kind whatsoever on the easement.”

The Texas Supreme Court handed down its opinion in Mitchell v. MAP Resources, Inc., setting aside a default judgment in a tax foreclosure suit granted more than 16 years ago, on the ground that the defendant’s due process rights were violated when she was served by posting notice on the courthouse door.

Mitchell is the result of one of many tax foreclosure cases brought by taxing districts to collect delinquent taxes on royalty interests. In the late 1990s an attorney and two mineral buyers got together and proposed to taxing districts that they would handle tax foreclosure suits for delinquent taxes on royalty interests for them. The tax foreclosure suits named hundreds of defendants in a single suit, who were all served by posting notice of the suit at the courthouse. Texas law allows notice of suit by posting or publication where the plaintiff has tried diligently to locate the defendant and has been unable to do so. The two mineral buyers, Joe Hughes and Duke Edwards, searched the tax records for owners with delinquent taxes, and the lawyer proposed to represent the taxing districts in foreclosing the tax liens on those owners’ interests. The lawyer’s fee was paid out of the proceeds from the sheriff sale of the royalty interests foreclosed on. Hughes and Edwards were hired to try to locate the delinquent royalty owners so they could be served with the tax suit. For those they could not locate, they provided testimony in the foreclosure suit that they diligently looked for the missing owners and were unable to find them, so the court could authorize service by posting. Hughes and Edwards received an “abstractor’s fee” for each “unlocateable” owner for whom they searched, also paid out the proceeds of the sheriff sale. At the sheriff sale, Duke and Edwards bid on and purchased some of the royalty interests sold.

In Mitchell, the lawyer, representing the Pecos-Barstow-Toyah Independent School District, Reeves County Hospital District, and Reeves County, sued some 500 owners of more than 1600 mineral interests totaling tens of thousands of acres in Pecos County, in a single suit to collect delinquent property taxes on those mineral interests. The lawyer later filed an affidavit seeking court permission to serve the defendants by posting on the courthouse door. He swore that the names or residences of the listed defendants were unknown and could not be ascertained after diligent inquiry. For those defendants who had an address listed with the appraisal district, he swore that citation was issued to those defendants at those addresses. The court authorized notice by posting; the notice required the named defendants to answer within 42 days. The court appointed an attorney ad litem to represent the interests of the defendants who were served by posting.

Foote v. Texcel Exploration, decided by the 11th Court of Appeals in Eastland, provides a lesson to surface owners.

Foote grazed cattle on land in Knox County under a lease with Styles. He put 650 head of cattle on the property, grazing winter wheat.

Texcel operated oil and gas wells on the property. Foote’s agent told Texcel it would be putting cattle on the property. Although the oil and gas lease did not require Texcel to fence its equipment, Texcel had a one-strand electric fence around its equipment. The cattle kept breaking through the fence, and Texcel’s pumper kept putting it back up. Finally, the cattle broke through again and knocked over a pipe coming out of a tank, resulting in an oil spill. The cattle ingested the oil, and 132 head of cattle died.

Wikipedia defines “lawfare” as “using legal systems and institutions to achieve a goal.” Some use the term to refer to the misuse of legal systems against an enemy, “such as by damaging or delegitimizing them, wasting their time and money, or winning a public relations victory.” The Fort Worth Court of Appeals used the term in an opinion that has caused quite a stir in legal circles.

The Fort Worth Court’s opinion, in City of San Francisco, et al. v. Exxon Mobil Corporation, et al., 2020 WL 3969558, describes a long-ongoing dispute between Exxon Mobil and California municipalities over lawsuits filed against Exxon and other oil companies in California related to climate change. The appeal is from a trial court decision in a suit brought by Exxon against these municipalities and others under Rule 202 of the Texas Rules of Civil Procedure. That rule allows a trial court to authorize a deposition either to perpetuate or obtain testimony for use in a potential suit, or to investigate a potential claim or suit. The defendants have pending claims in California state courts claiming that Exxon’s activities affect climate change and that its public announcements about climate change were intended to downplay its effects, and seeking damages for nuisance and other relief. Exxon’s Texas suit claims that the California lawsuits were brought to silence and delegitimize Exxon “as a political actor” and to coerce Exxon and other Texas-based energy companies into adopting “the climate change policies favored by special interests and their allies in municipal government.” In other words, lawfare. Exxon said it wants to investigate potential claims for violations of Exxon’s First Amendment rights, abuse of process and civil conspiracy.

The defendants moved to dismiss Exxon’s Rule 202 petition on the ground that the court had no personal jurisdiction over them. The suit could not proceed unless the defendants had sufficient contact with Texas to allow Texas courts to exercise personal jurisdiction. The trial court held that Exxon had established facts to show such personal jurisdiction. The Court of Appeals reversed, holding no such jurisdiction existed.

I wrote about this case before. Today the Texas Supreme Court agreed to hear the plaintiff’s appeal of a judgment of the El Paso Court of Appeals. The Supreme Court’s summary of issues in the case:

At issue in this case is whether courts are barred from considering deed records in a collateral attack on a default judgment. A second issue is whether a rule that bars such evidence shields a default judgment from an otherwise meritorious due process claim. Other issues raised are whether a property owner’s due process rights were violated in obtaining the default judgment and whether the doctrine of laches or provisions in the Tax Code bar a collateral attack on the judgment.

The default judgment was for foreclosure of a tax lien after service by publication. The case has significant due process issues. In a lengthy concurrence in the El Paso court’s judgment, Justice Alley voiced his dissatisfaction with the extrinsic evidence rule but concurred because the court was bound by the Texas Supreme Court precedent. He noted that Ms. Mitchell’s address was in eight warranty deeds that were recorded before the tax suit was filed and could have been easily found.