Texas SC reverses award to heirs of Padre Island after decades of legal disputes

Marilyn Tennissen Sep. 4, 2008, 10:39am

A statue of Padre Nicolas Balli stands in Padre Island, Texas.

A recent decision by the Texas Supreme Court may have finally put an end to the decades of legal disputes involving the heirs of the original settler of Padre Island.

On Aug. 29, the court ruled that almost 300 relatives of Padre Nicolas Balli waited too long to try to recover oil and gas royalties from a New York attorney they claim defrauded them for more than 60 years. The decision reversed a victory the Balli family won in 2005.

"In 1829, the State of Tamaulipas, Mexico, recognized the claims of Padre Nicolas Balli and his nephew, Juan Jose Balli, to Padre Island," Justice Harriet O'Neill wrote for the court. "Since then, the island's ownership has been the subject of numerous legal disputes, including the present one."

In this case argued before the state Supreme Court in April, more than 275 descendants of Juan Jose Balli sued Gilbert Kerlin, individually and as trustee, as well as his wholly owned companies, Windward Oil & Gas Corp. and PI Corp., asserting that Kerlin had defrauded them of oil and gas royalties and other interests in Padre Island.

"We hold that the Ballis' claims were not subject to statutory tolling and, accordingly, are time-barred," O'Neill wrote. "We therefore reverse and render judgment for the defendants."

The disputes over the ownership and rights began almost as soon as Padre Balli – a Roman Catholic priest who brought in settlers, built a church and raised cattle and horses on the 130-mile long island on the Texas Gulf coast – died in 1829.

After his death, interests passed to his seven nieces and nephews, including Juan Jose Balli. The heirs partitioned the island in 1830, leaving Juan Jose with most of the northern section of the island, and the rest with the southern portion.

The same day, Juan Jose conveyed his interest to Santiago Morales. However several months later, Balli and Morales rescinded the agreement -- a fact that was lost for more than 100 years. The rescission agreement meant that Juan Jose's heirs still had an interest in Padre Island.

"The court of appeals' opinion sets out in some detail the history of the Ballis' claims and the various suits over title to Padre Island. (See 164 S.W.3d 892.)," O'Neill wrote. "For purposes of our discussion, however, suffice it to say that by the early 1900s the Ballis' interests in the island under Juan Jose Balli's title had largely disappeared, either through conveyances or adverse judgments, and a federal court had resolved various title disputes by awarding possession of the island to a number of parties."

In 1923, a lawsuit was filed by a Balli relative in which a district court granted title and possession of the island – with the exception of the southernmost 7,500 acres – to the defendants.

However, Havre vs. Dunn remained pending in review for more than a decade.

According to the court documents, in 1937 a man named Frederick Gilbert was contacted by several people who had discovered evidence of the agreement to rescind the 1830 sale between Morales and Juan Jose Balli.

Frederick Gilbert formed a partnership with them to pursue a claim to Juan Jose's interests in the island. Gilbert sent his nephew Gilbert Kerlin, a New York attorney, to Brownsville to locate Juan Jose's heirs and purchase their interests.

The Balli heirs allege Kerlin told them he was obtaining the deeds to clear their title to Padre Island and assured them they would receive some compensation if he received anything through the deeds, the court wrote.

Then Kerlin tried to get a new trial and pursue a cross-action in Havre v. Dunn, and his attorney filed the motion in the name of Kerlin, the heirs of Juan Jose and two other Havre v. Dunn defendants.

"However the Ballis were not informed of the pending cross-action, and (Kerlin's attorney) never communicated with them about it," the court wrote.

The parties eventually reached a settlement and a hearing on the motion for new trial was set for Nov. 9, 1942. At the hearing, a stipulation was filed that would give Kerlin fee simple title to 20,000 acres in the southern division of the island and mineral interests in 1,000 acres of the island located in Nueces County.

Kerlin was on a three-day pass from the army, and executed reconveyance deeds while he was in Texas.

"The Ballis were never informed of the deeds, nor were the deeds ever recorded or delivered," O'Neill wrote. "Kerlin also visited one of the Ballis, but he did not mention the Havre v. Dunn settlement."

When the patriarch of the Balli family wrote to Kerlin in 1953 requesting documents that showed his interest in Padre Island, the New Yorker wrote back that he had received no title under the Ballis' deeds -- and never mentioned the reconveyance deeds or the Havre settlement.

Kerlin also wrote that he had been unable to establish that Juan Jose kept any of his acreage which meant that his heirs had no basis to claim any interest.

Kerlin sold the 20,000-acre surface tract for more than $3.4 million and conveyed his mineral rights to PI Corp. and Windward Oil & Gas Corp., his wholly owned companies, in 1961.

In 1985, Connie Saucedo, a descendant of one of the Ballis, contacted Kerlin to inquire about the mineral interests reserved in the Balli deeds.

"Kerlin told her that the deeds were invalid, and that she would have the burden of proof in an expensive, time-consuming lawsuit to prove otherwise," the court's opinion states.

In 1993, a suit was filed by some of the Ballis against Kerlin, Windward and PI Corp. Eventually more than 275 other Balli heirs joined the suit.

The Ballis alleged claims for breach of contract, breach of fiduciary duty, fraud, conspiracy to commit fraud and conspiracy to commit fiduciary duty. They sought damages, declaratory relief, attorneys' fees and imposition of a constructive trust.

After a two-month trial, the jury found in favor of the Ballis in 2005. Kerlin, then 90 years old, was to pay the family at least $11 million.

In media reports at the time, some claimed the verdict was a victory for all Hispanics that had been exploited by Anglos in the past.

During the trial, Kerlin had argued that the Ballis' claims were time barred by the statute of limitations. The Ballis claimed that because Kerlin had been absent from the state the statute was tolled, meaning the limitations clock was legally stopped. Tolling usually applies when a party is not present in the state.

The jurors agreed that Kerlin was not physically present in the state when the wrongdoing occurred.

The 13th District Court of Appeals in Corpus Christi later affirmed the verdict.

But the Texas Supreme Court has now found that the tolling did not apply because Kerlin was "present" in the state by doing business in the state.

The justices also agreed that Kerlin was right when he argued that the Ballis could have timely discovered the existence of their claims "through the exercise of reasonable diligence."

"A defendant's fraudulent concealment of wrongdoing may toll the running of limitations," O'Neill wrote. "Fraudulent concealment will not however, bar limitations when the plaintiff discovers the wrong or could have discovered it through the exercise of reasonable diligence."

The court found that the Havre vs. Dunn settlement and Kerlin's receipt of acreage and mineral rights were matters of public record for more than 40 years before the Ballis filed the lawsuit.

"The record conclusively establishes that the Ballis could have discovered Kerlin's wrongful conduct through the exercise of reasonable diligence," O'Neill wrote. "In addition, the statute of limitations was not tolled because, under the general longarm statute, Kerlin was present in the state. Accordingly the statute of limitations bars the Ballis' claims. We reverse the court of appeals' judgment and render judgment for Kerlin."

Justice O'Neill delivered the opinion of the court, in which Chief Justice Wallace Jefferson, Justice Dale Wainwright, Justice David Medina and Justice Paul Green joined. Justice Scott Brister filed a concurring opinion, in which Justice Nathan Hecht, Justice Medina and Justice Don Willett joined.

Case No. 05-0653

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