Face Challenges Confidently

392 XTO Energy Inc. v. Nikolai

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.
XTO Energy Inc. v. Nikolai, 357 S.W.3d 47 (Tex. App.—Fort Worth 2011, pet. filed) held that the surface owner was estopped from challenging the original severance of the minerals by a recital in the surface owner’s chain of title that the mineral rights had been previously severed.  The Madewell Deed of 1904 (original instrument of severance) reserved the minerals to grantor and conveyed the surface to grantee.  The parties to the litigation were aligned as successors to the grantor (“Grantor”) and grantee (“Grantee”).  There were many subsequent assignments of the surface estate.  In 1922, an assignment of the surface estate by the Speer Deed recited that “‘[i]t is thoroughly understood that the Mineral Rights upon this tract of land are not transferred by this instrument, same having been retained by W. R. Madewell in deed to J. L. Goff said deed dated Oct. 5, 1904, recorded in . . . Deed Records of Denton County, Texas.’”  Grantee argued that the mineral reservation in the Madewell Deed was ineffective because it not comply with the Statute of Frauds and that the surface and mineral estates remained unsevered.  Grantor argued that Grantee’s claims attacking the Madewell Deed were barred by estoppel by deed, based on the Speer Deed.
“A ‘recital’ in a deed is a ‘statement . . . that is used to explain the reasons upon which the transaction is based.  The recital of facts binds both the parties to the deed and their privies.’”  “‘[A] purchaser is bound by every recital, reference and reservation contained in or fairly disclosed by any instrument which forms an essential link in the chain of title under which he claims.’”  “‘The doctrine of an estoppel by deed is . . . founded upon the theory that the parties have contracted upon the basis of the recited facts.’”  “Estoppel by deed precludes parties from alleging title ‘in derogation of the deed [or] deny[ing] the truth of any material fact asserted in it.’”
“‘It is held that the recital of one deed in another binds the parties to the deed containing the recital, and those who claim under them, and may take the place of a deed and thus form a muniment of title.’”  Grantee challenged the Madewell Deed based on the sufficiency of the property description in the Madewell Deed, but Grantee never challenged the Speer Deed.  The court held that regardless of the actual ownership of the minerals, and regardless of whether the Madewell Deed was or was not enforceable, the Grantee was bound by the recitation of the mineral reservation in the Speer Deed and was estopped from denying it.  Similarly, the Grantee could not establish adverse possession of the mineral estate, because when minerals have been severed, adverse possession of the minerals requires actual drilling and production.
The procedural issues are confused because the case was tried on the basis of claims for declaratory relief and for quiet title, rather than as a formal proceeding in trespass to try title.  Nevertheless, the significance of the case seems to be that a defendant in a trespass to try title case can effectively win without proving his own title by showing that the plaintiff’s claim is barred by estoppel by deed based on a recital somewhere in plaintiff’s chain of title.