438 Wade v. XTO Energy Inc.

CASE NOTE

Richard F. Brown

 
The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.
 
Wade v. XTO Energy Inc. held that a mineral lease did not satisfy the statute of frauds because the writing was unsigned and did not furnish a proper legal description.  XTO retained a third party (“Holland”) to assist XTO in leasing mineral interests from homeowners in Tarrant County, Texas.  In November 2007, Holland sent Glenn and Karen Wade a letter proposing to lease their mineral interest for a $10,000 per net acre bonus payment and a 25% royalty.  The Wades did not accept the offer.  In July 2008, Holland sent the Wades another offer letter proposing a $21,000 per net acre bonus and a 26% royalty.  The Wades took the lease form included in the offer letter to the bank and signed it in front of a notary but did not send it back to XTO or Holland.  In September 2008, Holland sent the Wades a new offer letter proposing a $25,000 per net acre bonus and a 25% royalty.  The Wades contacted Holland and told them that they wanted to accept the offer.  Holland informed them of an upcoming signing party where the Wades could exchange the executed lease for a bonus check.  The Wades never executed the September 2008 lease.  Karen did not go to the signing party.  At the signing party, Glenn Wade was informed that they needed to execute a new lease because their documents were out of date.  A Holland employee took a new lease form, incorporated the Wades information in the blanks, and attached the July 2008 notarized signature page to the new lease.  Glenn collected the bonus check and left the signing party.  Thereafter, the Holland employees discovered they did not have a signed lease from the Wades and stopped payment on the bonus check.  After the payment was stopped, the Wades contacted Holland for a new bonus check but were informed that XTO was making no further leasing offers.  The Wades filed suit claiming that a mineral lease was executed and demanding damages in the amount of the bonus check and for attorney’s fees.
 
“The statute of frauds requires that all contracts for the sale of real estate be in writing and signed by the person to be charged.”  “To satisfy the statue of frauds, a writing conveying an interest in property must furnish, either within itself or by reference to some other existing document, the means or date by which the real estate at issue may be identified.”  “Parol evidence may be used to explain or clarify the written agreement, but not to supply the essential terms.”
 
Here, the court stated, “there is legally insufficient evidence of a fully executed lease that complies with the statute of frauds . . . .”  The Wades did not accept any of the lease offers from XTO that they received in the mail prior to September 2008.  Instead, the Wades were attempting to enforce the September 2008 lease that they never signed.  “The July 2008 lease that the Wades executed contains different material terms than the September 2008 lease that they are attempting to enforce, and even the July 2008 lease’s signature page—where the Wades and the notary signed—contains provisions that conflict with those of the September 2008 lease.”
 
Further, the form lease the Holland employee used at the signing party included blanks for the lessors’ names and address and contained an Exhibit “A” with blanks for the block and lot, and acreage of the leased premises.  The Wades “never testified that the leasing agent or anyone else ever filled out Exhibit ‘A’ to describe the lease premises, and,” as the court stated, “the record is devoid of any evidence raising a material fact issue that the lease that the Wades are attempting to enforce—the September 2008 lease—provided a property description for the leased premises.”  “[T]he lease had to furnish within itself or by reference to another writing the means to identify the leased premises with reasonable certainty.”  The court explained, “we cannot look to the bonus check stub, offer letters, or other extrinsic documents not referenced in the lease to supply the necessary legal description.”
 
The significance of this case is that, notwithstanding signing parties, any agreement affecting real property interests will be subject to the requirements of the statute of frauds that the writing must be signed and must furnish within itself, or by reference to some other existing writing, an adequate legal description.