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Texas Court of Appeals Hands Down Important Decision for Operators Defending Against Title Disputes

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On December 23, 2015, in West 17th Resources, LLC v. Pawelek, the San Antonio Court of Appeals issued an important title decision in a case turning on whether a trustee’s failure to identify her capacity in a deed was fatal to the conveyance.1   The court’s rulings on the capacity question and a related defense of adverse possession will likely have implications for a number of ongoing title disputes throughout Texas.   

Three Plaintiffs, West 17th Resources, LLC, Pamela Mika Wolf, and Thomas Mika, sued Lucian and Carleen Pawelek for trespass to try title. The property at issue was a 1/10 interest in a 260.69-acre tract previously owned by several members of the Mika family. Irene Mika, Thomas and Pamela’s mother, owned interests in the property both individually and as trustee. Upon her death, the trust’s 1/10 interest would vest in Thomas and Pamela in equal shares. However, Irene was authorized, at her sole and absolute discretion, to disburse from the corpus of the trust estate anything deemed necessary for her support, even to the point of completely exhausting the trust estate. 

In 1994, Irene joined the other Mikas in conveying the entirety of the 260.69-acre tract to the Paweleks. Irene signed her name to the deed but did not designate the capacity in which she signed—individually, as trustee, or both. The Paweleks took possession of the property in 1995 and, in 2009, leased the mineral rights to Murphy Exploration & Production Co. On February 23, 2012, the Paweleks’ attorney requested a deed from Pamela to correct Irene’s failure to identify her capacity. No deed was given. Instead, on January 13, 2013, Pamela and Thomas leased their alleged mineral estate interest to West 17th. 

Three months later, Plaintiffs filed suit against the Paweleks, alleging that the 1994 deed executed by Irene did not convey the trust’s 1/10 interest to the Paweleks because Irene failed to explicitly designate her capacity when signing the deed.2   The Paweleks asserted, inter alia, adverse possession as a defense.3   The parties filed cross motions for summary judgment, and the trial court ruled in favor of the Paweleks, holding, in part, that Irene conveyed the trust’s 1/10 interest, despite her failure to disclose her capacity. Plaintiffs then appealed. 

The San Antonio Court of Appeals unanimously determined that Plaintiffs had “cited no authority and [it] ha[d] found none that a grantor’s failure to specify her capacity either ‘individually’ or ‘as trustee’ nullifies a deed’s purported conveyance of property that the grantor holds in trust.”4   Instead, the Court viewed the case as one of deed construction and found that Irene’s clear intent from the plain language of the 1994 deed—which conveyed “all” of the Mika’s 260.69-acre tract, necessarily including the trust’s interest—was to convey both her individual interest and the trust’s interest.5   The Court also held that, even if the deed did not convey the trust’s interest, the Paweleks would still prevail under adverse possession. Under this theory, because the 1994 deed effectively conveyed the entire property to the Paweleks—including the trust’s interest—the Mikas were on notice from that point forward that the Paweleks claimed the interest and therefore the Paweleks had adversely possessed the trust’s interest.6

The Court’s holding on adverse possession is notable. While the Court does not precisely label the parties’ interests, it appears that, in considering the Plaintiffs’ adverse possession argument, the Court assumed the parties were cotenants. In Texas, a higher bar applies to the adverse possession of a cotenant’s interest, including the need for a clear “ouster” that begins the statute of limitations. The Court bootstrapped the adverse possession decision onto the deed construction issue, holding that because the 1994 deed purported to convey the trust’s interest, Thomas and Pamela were on notice that the Paweleks claimed title to their interest—“ousting” Thomas and Pamela—from the point their interest vested. 

This case explicitly holds that a trustee’s failure to identify her capacity is not fatal to a mineral conveyance, and appears to expand the scope of what constitutes “ouster” of cotenants. This is especially important for operators defending against a myriad of similar disputes raised by companies who mine the courthouse by identifying potential title defects, taking a lease from the divergent, unleased chain of title, and then either suing the lessor or attempting to sell the competing lease to the first lessor. 

1West 17th Resources, LLC v. Pawelek, No. 04-14-00668-CV, 2015 WL 9434392 (Tex. App.—San Antonio Dec. 23, 2015, no pet. h.).
2Id. at *1.
4Id. at *3.
5Id. at *3–4.
6Id. at *4.

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