In a fine example of how the permissive appeal process is supposed to work, the El Paso Court of Appeals decided a trespass to try title case involving the conveyance of mineral interests.
Citation 2002 Investment LLC and Endeavor Energy Resources, L.P. v. Occidental Permian, Ltd., Occidental Petroleum Corporation, Oxy USA Inc., Oxy USA WTP LP, and Rodeo Midland Basin, LLC (No. 08-21-00029-CV; decided December 22, 2022) arose from a dispute over the scope of an assignment of oil and gas interests in Reagan County. In 1987 Shell Western sold certain interests in Texas and New Mexico to Citation for $75 million. The assignment incorporated by reference an exhibit that described the interests subject to assignment, some of which include a property depth description (e.g., a tract of land “down to 8,393 feet.” In 1997 Shell assigned certain interests to Oxy’s predecessor, Altura. This assignment included some of the same tracts previously conveyed to Citation but at deeper depths. Both parties subsequently assigned some of the interests to third parties (Endeavor and Rodeo). These “deep rights” are the subject of dispute.
Both parties filed trespass to try title suits and motions for summary judgment on the interpretation of the 1987 assignment. Oxy argued that the exhibit in the 1987 assignment explicitly limited the depth of certain interests and that Oxy was free to assign them to another operator. Citation argued that the assignment conveyed all interests and that the language in the exhibit did not limit the grant. The trial court agreed with Oxy, granted Oxy’s motion, and denied Citation’s motion. The parties then filed an unopposed motion to appeal the interlocutory summary judgment order pursuant to § 51.014(d) and TRCP 168 (permissive appeals), which the trial court approved. The court of appeals accepted the appeal.
The court reversed and remanded. The controlling legal question in the case was whether the 1987 assignment conveyed the entirety of Shell’s interests, despite language in the incorporated exhibit that referred to property depths in some cases. Citation argued, and the court agreed, that the 1987 assignment unambiguously conveyed all of Shell’s interests based on language in the assignment stating Shell’s intention to transfer the interests “regardless of whether the same may be incorrectly described or omitted from [the exhibit], and regardless of whether Shell Western may have record title to the interests owned by it on the date hereof.” The exhibit’s descriptions of property depth as to some of the interests “serve to provide more information about third-party interests to which the interests being conveyed were subject to” (the exhibit also described whether an interest was leased to an operator). The court distinguished this case from a similar situation in Posse Energy, Ltd. v. Parsley Energy, LP, 632 S.W.3d 677 (Tex. App.—El Paso 2021, pet. denied), in which the court held that broad granting language in the assignment was limited by language in an exhibit. But in Posse Energy, the court noted, the exhibit specified “the grantor’s interest in a specific lease, but ‘INSOFAR AND ONLY INSOFAR’ as that lease covered certain proration units specifically identified.” Conversely, the exhibit to the 1987 assignment did not have any “subject to” or similar language limiting the broad grant and could thus be harmonized with the assignment.
This is an interesting case both on substantive and procedural law grounds. Oil and gas lawyers will be particularly interested in the court of appeals’ distinction between a case in which it held that an exhibit to an assignment limited the assignment’s scope and one in which it ruled otherwise. Trial and appellate lawyers, particularly in a commercial context, may view this case as promoting the use of permissive appeals to resolve a controlling question of law on an expedited basis. Too often we have seen intermediate appellate courts decline to take the opportunity to do that, and SCOTX has held that their decisions are not reviewable. This problem may well require a statutory fix, but in any event we applaud the El Paso court for following through in this case.
