Co-author Brittany Blakey
The question in litigation is usually “WHAT”: what happened, what contract was breached, what did someone do or fail to do, and so on. In Hughes v. CJM Resources, LP, the question was, “WHO” had the right to file the suit in the first place? The Eastland Court of Appeals affirmed the trial court’s holding that the plaintiff no longer owned the causes of action he pursued after he conveyed his mineral and royalty interests to a third party.
The timeline and the suit
- September 2017: Hughes, as lessor, enters into a paid-up oil and gas lease with CJM.
- February 2018: Hughes assigns the minerals to Decatur Mineral Partners conveying all “claims and interests in and to the [“… well(s), land(s) and/or unit(s)”].
- November 2018: Decatur executes a Mineral Deed to Universal Royalty & Mineral Fund purporting to convey all of Decatur’s interest that it received from Hughes.
- September 2018: Hughes sues CJM; dismissed for lack of standing.
- 2019 but effective 1/1/2018: Decatur reconveys the claims to Hughes (without success, it turns out).
- August 2019: Hughes again sues CJM alleging false representations, fraud and negligent misrepresentation in the lease negotiations.
CJM responded with a plea to the jurisdiction asserting that Hughes did not have standing, specifically that he conveyed any causes of actions he had under the lease when he assigned the minerals to Decatur. Hughes countered by contending Decatur’s deed to Universal excepted (or reserved) the causes of action that Hughes now asserts.
The trial court granted CJM’s plea to the jurisdiction, concluding that Decatur’s Mineral Deed to Universal conveyed everything that Decatur received from Hughes in the original conveyance, including any causes of action.
On appeal, the court analyzed the Mineral Deed from Decatur to Universal to determine if Decatur retained the causes of action after the conveyance—because Decatur purportedly conveyed the claims back to Hughes after the conveyance to Universal.
The greatest estate doctrine
In Texas, deeds are generally construed to confer upon the grantee the greatest estate that the terms of the instrument will allow. In other words, a deed will pass whatever interest the grantor has in the land, unless it contains language showing a clear intention to grant a lesser estate.
Decatur’s deed to Universal stated that Decatur “does hereby grant, bargain, … to [Universal] all of [Decatur’s] interest in [the subject lands]… [.]” The conveyance also identified the interest Decatur conveyed to Universal as the interest Decatur received from Hughes. Therefore, the court concluded that the parties’ objective intent in the Decatur-to-Universal conveyance was for Decatur to convey all interests it obtained from Hughes. These interests included the causes of action that Hughes conveyed to Decatur.
The “subject to” clause
The Decatur-to-Universal deed was was “subject to” rights in valid oil and gas leases, and purported to grant to Universal “… benefits which may accrue after the date of this Mineral Deed”. The court construed that clause as purporting to except property from the conveyance, but the clause did not identify the causes of action with sufficient specificity and therefore did not except the causes of action from the deed.
Lessons learned?
Make your exceptions and reservations specific, especially if you know exactly what you are trying to carve out. Otherwise you might have regrets, like Lake Street Dive, or only left with Darius Rucker to console you.