Lead Opinion
OPINION
This appeal arises from a suit filed in county court seeking damages for breach of a lease agreement. The county court rendered judgment in favor of the Plaintiff/Appellee Walter D. Noelke as general partner of the NF5 Family Limited Partnership. The issue presented is whether the county court had jurisdiction to render the judgment. Defendants/Appellants Merit Management Partners I, L.P., Merit Energy Partners III, L.P., and Merit Energy Partners D-III, L.P. (collectively, “Merit”) assert that while they have a real property lease with the NF5 Family Limited Partnership, they are not bound by the particular document or provisions at issue. They argue that rendering judgment based on the document and provisions in question necessarily involves adjudicating title to real property in the form of determining the nature and extent of their leasehold. We agree and hold that the county court was without jurisdiction over the lawsuit because the suit involves an adjudication of title to real property.
Factual and Procedural Background
This case involves the lease of a one-acre tract used as a pipe and equipment storage yard for servicing oil and gas properties. The pipe yard was originally leased by NF5’s predecessors in interest to a predecessor in interest of Merit under the terms of a document titled “Pipe Yard Lease” dated June 1, 1978. The Pipe Yard Lease was for a term of twenty years and provided for annual rental payments. Under the Pipe Yard Lease, the lessee’s rights were not assignable “without the express written consent of Lessor.” After the Pipe Yard Lease’s twenty-year term expired, NF5 entered into a two-page letter agreement (the “Letter Agreement”) with its tenant at the time, Devon Energy Corporation (“Devon”). The Letter Agreement required compliance with the Pipe Yard Lease as modified by the Letter Agreement’s additional terms, which include an increased lease rate adjustable according to future increases in the consumer price index, and a reimbursement provision for certain expenses incurred in connection with the Letter Agreement. Two years later, Devon assigned the lease to its affiliate Devon Energy Production Company (“Devon Production”). NF5 consented to this assignment in writing.
In 2002, Devon Production sold Merit various oil and gas property interests, including an oil and gas lease obtained from the Noelke family estate covering thousands of acres in Irion County. As part of this transaction, Devon Production was to assign to Merit its interest in the Pipe Yard Lease and Letter Agreement. On May 2, 2002, Devon Production requested NF5’s consent to the assignment. NF5 requested financial and other information relating to Merit, which Merit provided. NF5 provided no further response to the request for consent to assignment for over a year.
In April 2003, not having heard from NF5 regarding the consent to assignment, Merit calculated the amount of rent due under the terms of the Letter Agreement at $3,108.79 and sent a check for that amount to NF5. By letter dated May 19, 2003, Noelke informed Merit that the amount due was actually $3,079.65 and re
While the exchange relating to the rent cheeks was occurring, NF5 (Noelke) sent another letter to Merit, dated May 20, 2003, stating that Devon Production had not obtained the required consent to assignment and “therefore Merit has no right to use of the Lessor’s property.”
Yet another year later, on May 26, 2004, NF5 (Noelke) sent Merit a demand for payment of $8,526.95 for legal fees, time, and expenses incurred in connection with preparing the 2003 Consent to Assignment. The contract provision Noelke relied on in making the demand for the $8,526.95 associated with the creation of the Consent to Assignment was, itself, a provision in the Consent to Assignment. The relevant provision states:
Lessee shall reimburse Lessor for all of Lessor’s attorney’s fees and expenses, recording and abstracting fees, time, travel, and all other expenses, and all*641 costs, losses, expenses, interest (including CPI adjustments), incurred incident to the negotiation, preparation, implementation, enforcement, interpretation, ratification, consent to assignment of, and/or litigation concerning this agreement and all other negotiations or agreements between NF5 and its predecessors and successors and Merit and its predecessors and successors, regardless of what party ultimately prevails in the event of litigation.
Merit refused to pay the $8,526.95, and on March 29, 2005, Noelke filed a breach of contract action on behalf of NF5 to recover this amount in the County Court at Law No. 2 of Tom Green County.
Noelke argues that Merit ratified the Consent to Assignment by its conduct, in accordance with the document’s terms. Merit takes the position that it never agreed to the terms of the unilateral Consent to Assignment and, consequently, is not bound by any of its terms including those relating to “deemed acceptance.” According to Merit, NF5’s acceptance of Merit’s $8,079.65 payment — which was made pursuant to the terms of the Letter Agreement attached to Noelke’s May 19, 2003 letter — confirms that the Letter Agreement is the operative agreement between the parties. Merit likewise asserts that it paid its 2004 and 2005 rental payments pursuant to the terms of the Letter Agreement rather than the Consent to Assignment, and NF5 consented to the assignment of the Pipe Yard Lease and Letter Agreement without amendment by accepting the payments without objection.
The Letter Agreement between NF5 and Merit’s predecessor Devon contained the following language, which Noelke claims binds Merit to the terms of the Consent to Assignment regardless of the “deemed acceptance” provisions of the Consent to Assignment:
Devon will be bound by the Agreements and this Letter Agreement as long as Devon’s equipment, facilities, or operations affect Lessor’s interests, and Devon is bound by all terms benefitting Lessor’s interests in all documents affecting Lessor’s interests of legal record or that may hereafter be executed by Lessor.
The Consent to Assignment certainly affects and benefits NF5’s interests of legal record and was executed by NF5. Thus, according to Noelke, it is binding on Merit pursuant to the terms of the Letter Agreement in addition to the “deemed acceptance” provisions of the Consent to Assignment. Merit counters that to the extent the Letter Agreement provision purports to give NF5 the right to unilaterally change or revoke existing agreements, the provision is invalid and unenforceable. Merit also argues that a more reasonable interpretation of the provision is that the term “documents” refers not to any document that Noelke chooses to unilaterally file in the county deed records, but rather to any agreements between NF5 and a third party that might impact the pipe yard incidentally.
The Letter Agreement — which, together with the original Pipe Yard Lease, Merit asserts is the applicable lease agreement— also requires reimbursement for legal fees, time, and expenses, but contains less expansive language:
Devon will reimburse Lessor for all of Lessor’s (1) attorney’s fees and expenses, (2) surveyor’s fees, and (3) time, travel and all other costs, losses, expenses, interest (including CPI adjustments), incurred incident to the negotiation, preparation, implementation, enforcing, and/or interpreting of this Agreement.
Merit argues that this provision does not require reimbursement of expenses in
In addition to the breach of contract claim, Noelke amended his pleadings in the trial court to add a claim for liquidated damages. The Consent to Assignment provided for NF5’s recovery of $100 per day for violation of its reimbursement provision. According to the Consent to Assignment:
The parties agree that it would be difficult — if not impossible — to determine the actual costs to Lessor of the specific breaches of this agreement identified above. The parties have, therefore, agreed to this provision for liquidated damages to compensate Lessor, and not as a penalty. Each party agrees that the amounts of liquidated damages specified above are a reasonable forecast of just compensation. Lessee agrees that it will not dispute the reasonableness of those liquidated amounts, will not claim that those amounts are punitive in nature or unconscionable or against public policy.
In response, Merit argued that it was not subject to the Consent to Assignment at all and, alternatively, that the liquidated damages provision was an unenforceable penalty.
In his amended pleadings, Noelke also asserted an alternative claim for trespass in the event that the Consent to Assignment was found to not be binding on Merit. Under this alternative claim, Noelke took the position that if the Consent to Assignment was not binding on Merit, then NF5 never consented to Devon Production’s assignment to Merit, and Merit was a malicious trespasser with no right of possession.
Prior to trial, Merit filed a motion to dismiss for lack of subject-matter jurisdiction on the basis that a suit in which title to real property is at issue may not be tried in county court. This motion was denied. Noelke filed and the court granted a motion for partial summary judgment in favor of NF5. The trial court found as a matter of law that Merit was bound by the Consent to Assignment, that Merit was required to pay for all legal fees, time, and expenses due under the terms of the Consent to Assignment, and that until such expenses were reimbursed Merit owed liquidated damages of $100 per day under the terms of the Consent to Assignment. The case then proceeded to a jury trial on the issues of damages and attorneys’ fees. The jury found that Merit owed $4,860.69 for pre-suit legal fees, $23,577.77 for Noelke’s time and expenses, $114,029.73 for attorneys’ fees relating to the trial, $45,000 in attorneys’ fees for an appeal to this Court, and $85,000 in the event of an appeal to the Texas Supreme Court. In its judgment, the county court reduced the jury’s damage award for time and expenses by $280, but otherwise awarded the full damages found by the jury and added an award of $86,000 in liquidated damages to NF5, along with pre- and post-judgment interest and costs.
On appeal, Merit argues that: (1) the county court lacked jurisdiction because the case requires the resolution of an issue of title to real property; (2) the Consent to Assignment was not binding on Merit, and, therefore, Noelke was not entitled to the legal fees, time, and expenses incurred in preparing the Consent to Assignment; (3) the liquidated damages provision in the Consent to Assignment was an unenforcea
Subject-Matter Jurisdiction over Questions of Title to Real Property
Whether a trial court has subject-matter jurisdiction is a question of law subject to de novo review. Texas Natural Res. Conservation Comm’n v. IT-Davy,
County Court at Law No. 2 of Tom Green County is a statutory county court. See Tex. Gov’t Code Ann. § 25.2281 (West 2004). It does not have jurisdiction in “a suit for the recovery of land.” Id. § 26.043(8) (West 2004); see also id. § 25.0003(a) (West Supp.2008) (providing that statutory county courts have the same jurisdiction as prescribed by law for constitutional county courts). Compare id. § 25.2162(a) (West 2004) (granting a county court at law in Starr County jurisdiction over controversies involving title to real property), with id. § 25.2282 (West 2004) (not granting such jurisdiction to a county court at law in Tom Green County). Thus, if this lawsuit constitutes a suit for the recovery of land, the county court did not have subject-matter jurisdiction to adjudicate the claims.
A suit “for the recovery of land” is a suit that determines title. See, e.g., Doggett v. Nitschke,
Merit argues that the existence and extent of its leasehold rights are so involved in the case as to make Noelke’s claims a suit for the determination of the existence and extent of Merit’s leasehold and, thus, a determination of title to real property. Noelke argues that he is merely seeking monetary damages under a contract, not an adjudication of title to any real property, and the nature and extent of Merit’s leasehold comes into the case only incidentally.
History of Applicable Law
Case law on the question of what constitutes a claim to “recover land” that is beyond the jurisdiction of the county court has had an interesting history. According to an 1881 opinion of the Commission of Appeals, while it “may be very material for the party to prove his title” in order to obtain the relief sought, the county court retains jurisdiction where the plaintiff “does not sue for or recover the land” and the judgment would not “determine his right to the land, or in the least affect the title to it.” Owens v. Prather, 1 White & W. 640, 641 (Tex.Comm’n App. 1881) (not precedential). The following causes of action could, therefore, be determined in the county court: “suits for trespasses upon land, or cutting and removing timber from it, or for rent or use and occupation of it,” id. at 640-41; “causes of action ex contrac-tu relating to land, but not involving the right or ownership thereof,” Scripture v. Kent, 1 White & W. 592, 594 (Tex. Comm’n App. 1881) (not precedential); “torts or contracts involving simply the right to the possession of land, without affecting the rights of the parties to the land,” id.; and a cause of action for the breach of warranty of title to real estate, Patrick v. Laprelle,
This early case law introduced the concept that where a question of title arises only “incidentally,” the county court is not deprived of jurisdiction. In Hatch v. Allan & Swartz,
Conversely, courts during the same time period found that even where recovery of land was not sought in the plaintiffs pleadings or the judgment, the question of title could be too involved in the suit to be merely “incidental.” For instance, in a lawsuit involving a dispute over the defendant’s ability to add windows to a party wall (the defendant’s building had three stories, while the plaintiffs had only two), the Texas Supreme Court held that the district court had jurisdiction because title was “so far involved,” given “the nature of the suit, the injury complained of, and the relief sought.” Dauenhauer v. Devine,
A difficult question arises — one that is particularly relevant here — where recovery of tort or contract damages hinges upon a dispute as to who holds title to land. Noelke points to the Galveston Court of Appeals’ opinion in City of Victoria v. Schott,
In actions for a debt or damages, in amounts within the jurisdiction of the county courts, the right of recovery may depend upon the title to land.... Thus the question of title comes incidentally into the case, and must be decided before the court can render judgment settling the claims in dispute. But in doing so it does not adjudicate or settle the title to the land, nor the right to recover it, but simply determines that the plaintiff is or is not entitled to recover the thing sued for within the jurisdiction.
Id. The court appeared to rely on the idea that it was not adjudicating title for the purpose of awarding the property to one of the litigants, but simply determining a title issue as a sort of predicate to the claims at issue between the parties. Although a determination of title was essential in reaching the judgment, the court nonetheless held that title was merely incidental to the primary dispute — the action for damages.
Some courts have followed this approach, determining that the question of title could be merely incidental in a suit for damages even though the question of title was essential and determinative as to liability. See, e.g., Putty v. Putty,
The Texas Supreme Court’s holding in Coughran was followed later that same year in Kegans v. White,
While some of the early case law excluded from a county court’s subject-matter jurisdiction only those cases in which the court’s judgment would include an award of title to land, see, e.g., Schott,
But when the gist of a cause of action, whether in form of trespass to try title or in any other form, rests upon the proposition that the title to land asserted by the plaintiff is superior to that of the defendant, the district court alone has jurisdiction to adjudicate the matter.
Edwards v. Hefley,
Application
Applying the principles of this case law to this case, we first note that in determining whether a lawsuit involves the adjudication of title, we are not limited to the plaintiff’s framing of the causes of action in his pleadings. Regardless of the plaintiffs characterization of his claims, if the “gist” of a cause of action for damages is, in fact, an adjudication of title, a county court does not have jurisdiction over the cause of action. See Galley v. Hedrick,
In his pleadings, Noelke does not directly put in issue a question of title to real property. Instead, he is careful to allege a breach of contract to pay legal fees, time, and expenses, seek liquidated damages due under the terms of the Consent to Assignment, and assert an action for trespass in the event the Consent to Assignment is found unenforceable. While Noelke’s claims do not, on their face, put title to real property at issue, we look at “the basis of his right to recover judgment.” Coughran,
If the right of recovery in a suit depends, at least in part, upon the title to land, but there is no real dispute between the parties over the question of title, the question of title is incidental. See Gottschalk,
Here, there is a serious and very much contested dispute as to title to real property. In fact, it is the crux of the dispute. Noelke bases his breach of contract and liquidated damages claims on the validity of the Consent to Assignment as a binding lease agreement. Merit’s primary defense to these claims is that the Consent to Assignment is not binding and that the Letter Agreement, originally entered into between NF5 and Devon, is the operative and binding lease agreement. Noelke’s trespass claim is based on the proposition that if indeed the Consent to Assignment is not a binding lease agreement, then there was no lease between NF5 and Merit whatsoever and Merit is a trespasser. The entire dispute turns on the extent of Merit’s leasehold and the terms that govern that leasehold. The county court cannot adjudicate Noelke’s claims without resolving the contested issue of what is the extent and nature of Merit’s leasehold interest.
Noelke’s claim for legal fees, time, and expenses hinges on which lease provisions in which lease documents are applicable. While both the Consent to Assignment and the Letter Agreement contain reimbursement provisions, their terms differ. The Consent to Assignment expressly requires reimbursement for its own “negotiation, preparation, implementation, enforcement, interpretation, ratification, consent to assignment of, and/or litigation.” The Letter Agreement requires reimbursement only for the “negotiation, preparation, implementation, enforcing, and/or interpreting” of the Letter Agreement itself (al
Noelke’s argument, at its essence, is that because the damages he seeks are unrelated to the issue of possession, it is not necessary for the court to address the issue of possession, and thus the issue of which lease document is binding makes any title issue, at most, incidental. The most recent Texas Supreme Court opinion to consider a county court’s jurisdiction over title issues illustrates when adjudication of lease rights is incidental to the dispute. In Doggett v. Nitschke, the county court had to determine the nature of a leasehold (whether a lease of real property was a tenancy at will or an estate for years) in order to determine whether the plaintiff was entitled to the funds sought (the portion of the amount received from the property’s condemnation equal to the value of the leasehold interest). See Nitschke v. Doggett,
We disagree with Noelke’s reasoning. A county court does not have jurisdiction over a lawsuit if the gist of the suit is a title dispute. See Edwards,
The true nature of the dispute in this case can be illustrated by asking the question, “Could the judgment in this case have claim preclusive effect with respect to the validity and enforceability of the Consent to Assignment, a document that directly prescribes the nature and extent of a variety of interests in real property?” If so, title to real property is involved. While we do not express any opinion on the issue of claim preclusion, we note that, in a concurrent lawsuit filed in district court directly concerning the title issues, Noelke has argued that the county court judgment in this case is res judicata on the question of whether the Consent to Assignment is legally binding, including its provisions relating to leasehold interests. This comes very close to an admission by Noelke regarding the true nature of the dispute in this case. If the adjudication of the claims asserted in county court could arguably have claim preclusive effect on a question of title to real property, we think even the earliest case law reserved such claims for the district court’s jurisdiction. See Owens, 1 White & W. at 641 (not prece-dential) (basing county court jurisdiction on the fact that the judgment would not “determine [the plaintiffs] right to the land, or in the least affect the title to it”). The Texas Supreme Court has held that a county court does not have jurisdiction if assuming the plaintiff holds title “is to assume the whole case in his favor.” Coughran,
Two additional factors support the conclusion that Noelke’s claims in this case involve a title dispute with respect to real property interests. First, in order to show that the Consent to Assignment was a binding agreement as a matter of law, Noelke relied on the Letter Agreement provision binding Merit to “all terms bene-fitting Lessor’s interests in all documents affecting Lessor’s interests of legal record ... that may hereafter be executed by Lessor.” To show that this provision applied, Noelke asserted that the Consent to Assignment was executed by NF5, was filed in the county deed records, and “clearly” benefitted NF5’s interests of legal record. Noelke then had to show that the Consent to Assignment impacted the nature of the pipe yard leasehold in order to claim Merit was bound by its terms. Thus, while Noelke may have reserved for the district court his argument that the Consent to Assignment impacts Merit’s leasehold interests because it is a binding agreement, in the county court he asserted that because the Consent to Assignment impacts Merit’s leasehold interests, it is a binding agreement. The adjudication of whether the Consent to Assignment im
Second, Noelke’s pleadings assert a trespass claim in the event that the court determined the Consent to Assignment is not a legally binding contract. Noelke’s argument that title is only incidentally involved becomes less credible when his petition includes a cause of action dependent on Merit’s lack of any leasehold interest in the pipe yard whatsoever. At oral argument, Noelke’s counsel asserted that the trespass claim did not in fact indicate any impact on Merit’s leasehold estate in the lawsuit because without the Consent to Assignment there was no leasehold estate. There is no greater impact to a leasehold estate than its complete elimination. See Gottschalk,
Conclusion
The issue of title to real property in Noelke’s claims is not incidental or collateral. The question of title lies at the heart of Noelke’s claims, and, therefore, the county court did not have jurisdiction over the lawsuit. “If the trial court lacks subject matter jurisdiction, the appellate court can make no order other than reversing the judgment of the court below and dismissing the cause.” Louton,
Dissenting Opinion by Justice HENSON.
Notes
. Interestingly, Noelke did not send or copy this letter to the same address that he had sent the other correspondence regarding the rent checks. Merit’s actual receipt of this letter was delayed until June 3, 2003.
. For example, the Consent to Assignment prohibited Merit, absent NF5’s written consent, from assigning the oil and gas lease, making certain connections with wells and pipelines on third party lands, and changing various features of its oil and gas operations.
.The timing and nature of the exchange of correspondence regarding the rent payment, the timing of Noelke’s filing of the Consent to Assignment, the fact that different addresses were used to transmit the different letters without copies to the known address, and the provisions of the Consent to Assignment relating to "deemed acceptance” raise some problematic questions.
. By statute a justice court has jurisdiction over a forcible entry and detainer action. See Tex. Prop.Code Ann. § 24.004 (West 2000). The justice court (or county court on appeal) cannot, however, resolve any questions of title beyond the immediate right to possession. See Bacon v. Jordan,
. We, therefore, decline to look for guidance from the two cases subsequent to Coughran that follow Schott’s approach regarding county court jurisdiction and yet fail to address Coughran or any cases decided thereafter. See Chitsey v. Lockshin, No. 03-00-00663-CV,
. It is also worth noting that the aspects of the Consent to Assignment that will ultimately be of the most value to NF5 and Noelke are the alterations to the nature of the various leasehold interests held by Merit.
Dissenting Opinion
dissenting.
Because I would hold that issues of title are merely incidental to the contract dispute presented in this case and therefore that the county court properly exercised its jurisdiction, I respectfully dissent.
The government code provides that a county court does not have jurisdiction in “a suit for the recovery of land.” Tex. Gov’t Code Ann. § 26.043(8) (West 2004); see also Doggett v. Nitschke,
In the present case, Noelke seeks relief based on a sole provision of the Consent to Assignment — the provision entitling Noelke to reimbursement for expenses, time, and attorney’s fees.
As the county court also observed at the hearing, the crux of this dispute is that Noelke and NF5 “wish to enforce a clause in the Consent to Agreement for damages fer attorney’s fees and rentals.” Because it is undisputed that Noelke has title to the surface estate in question, he is not obligated to establish title in order to recover the damages sought. Furthermore, it is undisputed that, at the time Noelke presented Merit with his demand letter under the Consent to Assignment, Merit had been using and paying rent on the property in question since 2003. As a result, the present case is distinguishable from past cases in which Texas courts have held that a county court lacks jurisdiction because the plaintiff could not obtain his requested relief without proving his ownership of real property. See Coughran,
Where, as here, “the question of title comes incidentally into the case,” the county court “does not adjudicate or settle the title to the land nor the right to recover it, but simply determines that the plaintiff is or is not entitled to recover the thing sued for, within the jurisdiction.” City of Victoria v. Schott,
Because I would overrule Merit’s first issue on appeal, hold that the county court properly exercised its jurisdiction over this suit, and address the merits of the three remaining issues, I respectfully dissent.
. While Merit initially brought a counterclaim seeking a declaratoiy judgment that the Consent to Assignment was invalid in its entirety, this counterclaim was nonsuited prior to trial.