135 MCEN 1996 Partnership v. Glassell

Tuesday, September 1st, 2015

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
 
MCEN 1996 Partnership v. Glassell, 42 S.W.3d 262 (Tex. App.–Corpus Christi 2001, pet. denied), holds that the right to partition may be waived by executing a designation of unit. The opinion considered seven gas units, each created by a separate document. The opinion loosely uses the terms “unitized,” “pooling agreement” and “designation of unit,” but it appears that the operative document as to at least some of the units may have been only a designation of unit. In any event, the court analyzes the documents (pooling agreement? unitization agreement? designation of unit?) without making any distinction as to the type of document in its analysis.
 
The court first determined that the “pooled” mineral interests were an interest in real property and that a joint owner of an interest in real property may compel partition. However, parties can agree to waive the right to partition, and the court found a waiver in the language used in each pooling document. Three of the agreements included language that the unit would continue for as long as the pooled mineral was produced. Two of the designations included language that the unit would continue for so long as a well was located on the pooled area capable of producing. Two of the designations included language (very common in a typical designation of unit) that the leases were pooled in accordance with their terms. The court found a waiver of the right to partition in each agreement/designation for the term specified in the agreement/designation. The last form construed had no express term for the duration of the unit, but the court nevertheless construed the designation as an agreement to maintain the unit as a whole while the underlying leases were in effect.
 
The opinion does not mention any applicable operating agreement in its analysis of waiver. Typical form operating agreements contain express waivers of the right to partition and also contain a maintenance of uniform interest provision. These common provisions ordinarily preclude any attempt to partition oil and gas properties subject to an operating agreement, which would include most producing properties. In passing, the court notes that in the trial court it was alleged that the operating agreements contained a waiver, but the court then inexplicably fails to address what must have been an express waiver.