510 S.W.3d 497
Tex. App.2014Background
- Baker Lease (McMullen County) and related JOA automatically terminated after >60-day cessation of production; termination occurred in Aug. 2001. Lessors included Bank of America (Trust) and the Rutherfords (each 25% mineral interest).
- Termination meant lessors were entitled to a 1/4 share of production (less costs) rather than 1/8 royalty under the lease. Production later resumed and operators continued development.
- In 2004–2005 Cliff Hoskins discovered the likely 2001 termination, sent demand letters, and filed suit to quiet title; Hoskins and BP executed a conditional option on BP’s interest.
- On Feb. 14, 2005 Prize and the Rutherfords induced the Bank to sign a written Ratification (for $106,637.50) stating the lease was in full force and waiving claims the lease had terminated.
- The Bank later sued to rescind the Ratification and for fraud, conversion, unjust enrichment, quiet title, and related relief; defendants moved for traditional and no-evidence summary judgment asserting ratification/waiver, quasi‑estoppel, and adverse possession.
- The trial court granted summary judgment for defendants; this appellate court reversed, holding genuine fact issues exist on knowledge of fraud, intent to waive, quasi‑estoppel, and adverse possession.
Issues
| Issue | Plaintiff's Argument (Bank) | Defendant's Argument (Prize/Rutherfords) | Held |
|---|---|---|---|
| Whether the Bank ratified the Ratification / waived right to rescind | Bank says it was fraudulently induced and lacked full knowledge when it signed; division orders disclaiming ratification raise fact issues | Defendants say Bank had actual knowledge, accepted consideration and royalties, and therefore ratified and waived rescission | Reversed: summary judgment improper — fact issues exist whether Bank had full knowledge and intended to waive fraud |
| Whether quasi‑estoppel bars Bank from rescinding | Bank says acceptance of royalties and division orders did not conclusively show acquiescence or unconscionability | Defendants say Bank accepted benefits and later asserted inconsistent position, so estoppel applies | Reversed: defendants did not conclusively prove elements of quasi‑estoppel; fact issues remain |
| Whether defendants acquired leasehold by adverse possession (3‑year statute) | Bank: no color of title shown; termination reverted interest to Bank; defendants’ acts may have been concealed, tolling limitations | Defendants: continuous development, drilling, production and royalty payments satisfy adverse possession | Reversed: defendants failed to conclusively show color of title or that limitations were not tolled by concealment; fact issues exist |
| Whether summary judgment should have disposed of related claims (conversion, unjust enrichment, Natural Resources Code violations) | Bank: those claims depend on whether Ratification was enforceable and whether defendants withheld payments; factual disputes remain | Defendants: if Ratification stands, Bank’s remedies are limited and claims fail | Reversed: factual disputes about Ratification and payments preclude summary judgment on these claims |
Key Cases Cited
- Prize Energy Resources, L.P. v. Cliff Hoskins, Inc., 345 S.W.3d 537 (Tex.App.—San Antonio 2011) (prior appellate opinion holding lease terminated and identifying fact issues re: inducement to sign ratification)
- Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000) (analysis of when continued performance after learning of fraud constitutes waiver or ratification)
- Lopez v. Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857 (Tex. 2000) (doctrine and elements of quasi‑estoppel)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (standard of review for traditional summary judgment)
- Nixon v. Mr. Property Management Co., 690 S.W.2d 546 (Tex. 1985) (summary judgment burden and appellate review standards)