Face Challenges Confidently

288 Sun-Key Oil Co. v. Cannon

Thursday, September 3rd, 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.
Sun-Key Oil  Co.  v.  Cannon,  No.  11-07-00025-CV,  2009  WL 626071  (Tex.  App.—
Eastland Mar. 12, 2009, no pet.) (mem. op.), suggested that a lease which has terminated due to a total cessation of production may be reacquired by a lessee through adverse possession under the three- and five-year statutes of limitations. Sun-Key acquired a lease which had terminated by a total cessation of production. When the landowner sued Sun-Key for lease termination, Sun-Key moved for traditional summary judgment against the landowner on claims of adverse possession under both the three- and five-year statutes of limitations. The three-year statute of limitations provides, “[a] person must bring suit to recover real property held by another in peaceable and adverse possession under title or color of title not later than three years after the day the cause of action accrues.” The five-year statute of limitations provides:

  • A person must bring suit not later than five years after the day the cause of action accrues to recover real property held in peaceable and adverse possession by another who:
    • cultivates, uses, or enjoys the property;
    • pays applicable taxes on the property; and
    • claims the property under a duly registered deed

To prevail under either the three- or five-year statute, Sun-Key was required to prove as a matter of law its “actual and visible appropriation of [the lease], commenced and continued under a claim of right that [was] inconsistent with and [was] hostile to the claim of another person.”
Sun-Key filed an affidavit by its president in support of its claims of adverse possession asserting that (1) Sun-Key had continuously conducted operations on the tract since acquiring its interest in 1998; (2) Sun-Key conducted operations on the tract almost daily; (3) Sun-Key’s operations were “open, notorious, and exclusive”;(4) no cessation of production had occurred since 1998; (5) Sun-Key had posted all required signs on the tract; and (6) no other entity had conducted operations on the premises. The court reasoned that although Sun-Key presented some evidence of adverse possession, it did not meet its summary judgment burden because “some of the statements in [Sun-Key’s] affidavit were conclusory in nature and were not supported by factual detail.” The court distinguished Sun-Key’s evidence from that presented in Natural Gas Pipeline Co. of Am. v. Pool, where “the adverse possession claimants presented detailed evidence establishing the nature of their use of the property and the elements of their adverse possession claims.” Because Sun-Key’s evidence was not sufficiently detailed to discharge its summary judgment burden, the court of appeals upheld the trial court’s denial of Sun-Key’s motion for partial summary judgment on its claims of adverse possession.
A lease which has terminated by cessation of production is simply terminated – the end of a fee simple determinable. Nevertheless, Pool is the leading Texas case for the principle that a lessee can effectively reacquire the same leasehold interest by adverse possession. However, Pool was generally decided under the ten-year statute of limitations – although the requirements under the three- and five- year statute were also met. Pool holds that there is no requirement of some long-continued possession after lease termination to put the landowner on notice of the adverse claim, before the applicable statute of limitations starts to run. In Pool, the facts were that the last cessation occurred four years before the ten-year period of possession prior to suit, which was sufficient for lessee to prevail, without considering the three- and five-year statutes. Because the Texas Supreme Court held in Pool that the acts of a lessee continuing to produce after lease termination “are by their nature hostile to the lessor’s ownership of all the minerals in place once the lease expires and the mineral estate reverts to the lessor in its entirety,” limitations for adverse possession apparently begins to run at the very moment of lease termination.
The significance of the Sun-Key opinion is that the Eastland Court of Appeals assumes without deciding that proof of adverse possession under either the three- or five-year statute of limitations would be sufficient, without any evidence of earlier, long-continued possession.