9th District Court of Appeals affirms oil company can’t claim declaratory relief in suit over leases

By Elizabeth Alt | Nov 21, 2018

BEAUMONT – In an opinion issued Nov. 15, the 9th District Court of Appeals at Beaumont affirmed the 172nd District Court's order that found a company can’t file a claim for declaratory relief in a lawsuit over who owns oil and gas leases in Jefferson County.

“Here, because the underlying dispute involves ownership of the possessory interest in the mineral estates at issue, we conclude the proper and mandatory vehicle for resolving those claims is a trespass to try title action,” Justice Charles Kreger wrote in the court opinion.

"We conclude the trial court did not abuse its discretion in sustaining DSTJ’s special exceptions and striking those portions of M & M’s pleading seeking declaratory relief and attorney’s fees,” he wrote.

Justices Steve McKeithen and Don Burgess concurred.

The ruling states DSTJ LLP hired Energy Land Resources (ELR) in 2001 to negotiate with landowners to lease mineral properties in the Bennett Blackman and Gilleland Surveys in Jefferson County. ELR allegedly assigned the leases it acquired to M & M Resources, another company it owned, instead of assigning the leases to DSTJ. M & M implemented an assignment of oil, gas and mineral leases to assign the 21 leases to DSTJ. 

DSTJ claimed that M & M recorded the assignment before allowing DSTJ to review it, and the owner of M & M and ELR “admitted in his testimony that he never gave DSTJ an opportunity to sign and convey its acceptance of the assignment,” the ruling states.

M & M filed a petition for declaratory judgment against DSTJ, claiming it did not make royalty payments, terminating any rights DSTJ had to the leases, and reverting ownership of the leases back to M & M. M & M also sought attorney’s fees.  

The 9th District Court remanded the case for a new trial in 2012 after a jury awarded M & M more than $500,000 in attorney’s fees but found that ELR breached its fiduciary duty to DSTJ.

The trial court sustained DSTJ’s special exceptions and struck the portion of M & M’s claims that sought declaratory relief and attorney’s fees. DSTJ argued that M & M must file a claim as a trespass to try title suit and that M & M filed for declaratory relief simply to obtain attorney’s fees. 

M & M sought judgment declaring that it “is the owner of the mineral interests” and awarding it title to all personal property and fixtures “located on, or held in connection with the twenty-one (21) leases[.],” the ruling states.

M & M appealed, claiming the trial court erred in sustaining DSTJ’s special exceptions. DSTJ claimed paragraphs in M & M’s sixth amended original petition were “an improper attempt to couch a trespass to try title action as a claim for declaratory relief under the Uniform Declaratory Judgments Act,” and that “any claim for attorney’s fees was improper in a suit to quiet title,” the ruling states.

M & M added a claim for trespass to try title as well as fraudulent lien, but still requested declaratory relief under the Uniform Declaratory Judgments Act.

Kreger noted that although there has been some confusion whether a claimant should file a trespass to try title action or seek relief under the Uniform Declaratory Judgments Act when seeking relief related to property interests, Texas law provides that a “trespass to try title action is the method of determining title to lands, tenements, or other real property,” and that the Court of Appeals has held that “when the trespass-to-try-title statute governs the parties’ substantive claims . . . [a party] may not proceed alternatively under the Declaratory Judgments Act to recover their attorney’s fees.”

“The law is well-settled in a trespass to try title case, a plaintiff may not alternatively pursue a declaratory judgment action to seek recovery of attorney’s fees…M & M and ELR’s claims in this case seek a determination of superior title to the mineral estates at issue and as such, must be pursued as a trespass to try title action,” Kreger wrote.

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