Face Challenges Confidently

097 Santa Fe Energy Operating Partners, L.P. v. Carrillo

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.
Santa Fe Energy Operating Partners, L.P. v. Carrillo, 948 S.W.2d 780 (Tex. App. – San Antonio 1997, n.w.h.). supports the actions of a lessee in taking protection leases from other parties while holding a lease from the adverse possessor. Carrillo’s record title for various reasons was only partially good. As to portions of his land, he was dependent upon adverse possession to support his title. Carrillo leased to Santa Fe. Santa Fe took protection leases from some of the other claimants. The Carrillo/Santa Fe lease expired, and Carrillo refused to extend the lease. Negotiations with another prospective lessee broke down because of the Santa Fe protection leases with the record title holders. Carrillo sued Santa Fe and the record title holders for slander of title and tortious interference with prospective business relations. The record title holders settled by executing quit claims to Carrillo, but Santa Fe went to trial.
One of the defenses to a tortious interference claim is that the party interfering is justified. Santa Fe’s actions would be justified if it had a right to interfere with the prospective contract as a matter of law or if it had a colorable legal right it exercised in good faith. The court found the necessary legal justification in the Carrillo/Santa Fe lease, which contained a typical proportionate reduction clause, which clearly contemplated that Carrillo might own less than the entire undivided fee and provided for the consequences. Santa Fe had the right to protect itself by taking leases from adverse claimants, “actual or potential.” Santa Fe had protected itself as to one small tract by acquiring a quit claim deed, rather than a lease. The court reasoned that under these circumstances, a protection lease may take the form of a quit claim or an ordinary lease.
The related claim of slander of title also failed. This tort requires “malice,” which is defined as making false statements regarding title in absence of color of title or a reasonable belief that parties have title. Given that Santa Fe was entitled to execute the protection leases, as a matter of law, then, also as a matter of law, Santa Fe reasonably believed the record owners held title.
The case is significant in holding that a lessee obtaining protection leases from competing title claimants will not ordinarily be subjected to liability for tortious interference with contractual relations or for slander of title. Not resolved was whether an adverse possessor could even bring claims of tortious interference and slander of title. Santa Fe argued that, at the time of trial, Carrillo held an unperfected adverse possession claim and that such a claim could not be interfered with or slandered as a matter of law. The court cited conflicting authority from other jurisdictions as to whether such claims could be brought by the adverse possessor. Although Santa Fe urged this issue, the court assumed without deciding that Carrillo could bring such claims, because the court found Santa Fe’s actions were lawful. Whether an adverse possessor can bring such claims in Texas is still a question.