Tanya L. McCabe Trust, McCabe Family Trust, and the Rochford Living Trust v. Ranger Energy LLC
531 S.W.3d 783
| Tex. App. | 2016Background
- Mark III acquired eight "Saratoga" oil-and-gas leases (including McShane Fee and Brice) via a chain of assignments dating to 2004–2008; two leases were inadvertently omitted from Exhibit A to Tomco→Mark III assignment and from the 2008 mortgage/deed of trust.
- In 2011 Mark III and Tomco filed corrected assignments that added McShane Fee and Brice; several overriding-royalty assignments to the Trusts (2011–2012) recorded using corrected descriptions that included those two leases.
- Mark III later renewed/modified its loan with Peoples Bank in December 2012; the renewal deed/mortgage as recorded again omitted McShane Fee and Brice.
- In January 2013 Peoples Bank filed revised ("corrected") versions of the 2008 mortgage and 2012 deed of trust that added McShane Fee and Brice by substituting a new Exhibit A; Peoples Bank did not obtain new signatures from Mark III or the bank on those revised instruments.
- Peoples Bank assigned rights to Ranger Energy, which foreclosed in March 2013; Ranger sued to quiet title claiming the foreclosure extinguished the Trusts’ overriding royalty interests in McShane Fee and Brice.
- The trial court entered summary judgment for Ranger; the Trusts appealed, raising whether the 2013 correction instruments validly added the two leases under the Texas Property Code.
Issues
| Issue | Plaintiff's Argument (Ranger) | Defendant's Argument (Trusts) | Held |
|---|---|---|---|
| Whether the 2013 revised mortgage/deed of trust validly corrected the recorded instruments under the Texas Property Code | The revisions were nonmaterial corrections (inadvertent legal-description omissions) and thus valid; correction instruments operate to include the two leases and support foreclosure | The revisions were material (they added land to a conveyance) and were not executed by each party as §5.029 requires, so they are invalid | The court held the additions were material corrections and the 2013 instruments were invalid because they were not executed by the original parties; reversed trial judgment in favor of Trusts |
| Whether an attempted ratification or settlement by Mark III/Peoples Bank made the corrections retroactively effective | Ratification/settlement established bank’s claim and foreclosing rights over the Saratoga Leases including the two omitted leases | Ratification cannot substitute for the statutory execution requirement for material corrections under §5.029 | The court held ratification/settlement did not cure the statutory defect; correction instruments still invalid for retrospective effect |
| Whether Ranger (as foreclosure purchaser) obtained McShane Fee and Brice despite invalid corrections because Trusts were not bona fide purchasers without notice | Trusts had notice or duty to inquire; §5.030 protects a bona fide purchaser relying on a valid correction instrument | Because the corrections were invalid, §5.030 does not apply and Ranger did not acquire interests in the two leases at foreclosure | Court declined to decide bona fide purchaser status because corrections were invalid; foreclosure did not extinguish Trusts’ interests |
| Proper summary-judgment disposition on cross-motions | Ranger sought judgment that foreclosure extinguished Trusts’ interests; relied on correction instruments and foreclosure sale | Trusts sought partial summary judgment that the two leases were not encumbered by the original mortgage and thus not foreclosed | Court reversed trial court, rendered partial summary judgment for the Trusts, and remanded for further proceedings (including attorney’s fees) |
Key Cases Cited
- Myrad Props. v. LaSalle Bank Nat’l Ass’n, 300 S.W.3d 746 (Tex. 2009) (a correction deed cannot be used to convey an additional separate parcel; allowing substantive additions undermines record notice)
- Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009) (standard of review for summary judgment is de novo)
- Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010) (when parties file cross-motions, appellate court reviews both records and may render judgment the trial court should have entered)
- Edwards Aquifer Auth. v. Chemical Lime, Ltd., 291 S.W.3d 392 (Tex. 2009) (discussion of "substantial compliance" concept as compliance with essential statutory requirements)
- Conversion Props., L.L.C. v. Kessler, 994 S.W.2d 810 (Tex. App.—Dallas 1999) (foreclosure-sale purchaser takes only the interest the trustee had authority to sell)