Face Challenges Confidently

656 Crawford v. XTO Energy, Inc., 509 S.W.3d 906 (Tex. 2017)

Tuesday, July 17th, 2018

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Crawford v. XTO Energy, Inc., 509 S.W.3d 906 (Tex. 2017) (Joinder of unit owners as necessary parties in lease dispute), held that Rule 39 does not require joinder of interested parties, if the only evidence of a dispute is a title opinion. Mary Ruth Crawford owned 146 acres of land in Tarrant County, Texas. In 1964, Mary Ruth conveyed 8.235 acres of the surface (“Crawford Tract”) reserving the oil and gas. In 1984, Mary Ruth conveyed property north and south of the Crawford Tract without reservation. Those tracts were eventually subdivided into 44 lots adjacent to the Crawford Tract. In 2007, Mary Ruth granted an oil-and-gas lease with a pooling clause on the Crawford Tract to XTO Energy, Inc. In 2009, XTO pooled the Crawford lease with leases on the forty-four lots adjacent to the Crawford Tract and other lands and leases. Each of the adjoining pooled lot leases included a Mother Hubbard clause. In 2010, XTO commenced production from a well on the pooled unit. XTO’s title opinion assumed the common law strip-and-gore doctrine applied, and therefore the minerals in the Crawford Tract were owned by the adjoining lot owners. XTO never paid Crawford, but paid the lot owners. There was nothing in the record to reflect any conduct or statements by any of the adjacent lot owners indicating their position on ownership of the Crawford Tract. Crawford sued for breach of contract for XTO’s failure to make royalty payments. XTO filed a motion to abate and compel joinder of the forty-four adjacent landowners, arguing that the adjacent landowners have or claim an interest in the Crawford Tract. The trial court granted the motion ordering joinder of the adjacent landowners and eventually dismissed the case when Crawford failed to join the missing parties.

The issue in this case was whether Texas Rule of Civil Procedure 39 requires joinder of parties that have a potential claim of interest. The court did not rule on the effect of the strip-and-gore doctrine, limiting the opinion to the joinder issue.

Texas Rule of Civil procedure 39(a)(2) states in part that:

A person who is subject to service of process shall be joined as a party in the action if . . . (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of this claimed interest.

The court held that “[t]he adjacent landowners are not necessary parties under Rule 39(a)(2) because they do not ‘claim [ ] an interest relating to the subject of the action.’” According to the court, nothing suggests or shows that the adjacent landowners had ever demanded or asserted ownership of or a royalty interest in the Crawford Tract minerals. Further, none of the language in any of the adjacent landowners’ deeds or leases indicate a claim of interest in the Crawford Tract minerals.

The court agreed that the adjacent landowners could claim that the strip-and-gore doctrine gives them an interest; however, only XTO has claimed that the adjacent owners have an interest. The court states that the landowners had never either directly or indirectly claimed an interest; in order for the landowners to claim an interest, they have to do “something,” but instead they did nothing.

The adjacent landowners did not claim an interest just because XTO was paying them the Crawford Tract royalties. XTO unilaterally decided to credit the royalties to the adjacent landowners and there was no showing that the adjacent landowners knew that they were receiving the royalties. Although Rule 39(a)(2) does require joinder of persons in whose absence complete relief cannot be accorded, the court agreed with Crawford that the only dispute was limited to the parties to the lease – Crawford and XTO. Therefore, this case is distinguishable from the line of cases holding that joinder of nonparty lessors is required in lease title disputes. The court noted that XTO could protect itself from the risk of inconsistent obligations and future lawsuits by using Rule 37 to bring in the adjacent landowners. Rule 37 allows the plaintiff or defendant to bring in proper parties to the suit.

The limited significance of this case is that a title opinion is neither a claim nor a dispute requiring joinder under Tex. R. Civ. P. 39. The practical significance may be limited to determining which party will have to bear the cost and expense of joining the interested parties, which may turn on evidence of claims, or strategies for provoking claims.