On Feb. 3, 2017, the Supreme Court of Texas held that adjacent landowners were not mandatory parties to a lessor’s suit against the lessee for failure to make royalty payments if the adjacent landowners had not claimed any interest relating to the lawsuit. In short, “Rule 39 does not require joinder of persons who potentially could claim an interest in the subject of the action [pursuant to the strip-and-gore doctrine]; it requires joinder, in certain circumstances, of persons who actually claim such an interest.” Crawford v. XTO Energy, Inc., No. 15–0142, 2017 WL 461361, *5 (Tex. Feb. 3, 2017) (emphasis added).
The lessor, Crawford, owned approximately 146 acres of land in Tarrant County, Texas. In 1964, she conveyed the surface estate of about eight acres in fee simple, expressly reserving the oil and gas under the tract (Crawford Tract). In 1984, Crawford conveyed the property immediately north and south of the Crawford Tract without reserving the oil and gas, and most of that property was subdivided into residential lots.
In 2007, Crawford executed an oil-and-gas lease (Crawford Lease) on the Crawford Tract with XTO Energy Inc.’s (XTO) predecessor in interest, which included a provision for royalty payments and pooling.
In 2009, XTO pooled the Crawford Lease with hundreds of other leases. Forty-four of those pooled leases encompassed lands adjacent to the Crawford Tract. Each lease covered a particular described tract, as well as “all land owned or claimed by Lessor adjacent or contiguous to the land particularly described [in the lease], although not included within the boundaries of the leased premises.”
XTO’s well began producing in 2010. Crawford executed a division order and returned it to XTO. XTO, however, obtained a title opinion concluding that the Crawford Tract royalties should be credited to the 44 adjacent landowners rather than to Crawford. Specifically, the opinion concluded that pursuant to the common-law strip-and-gore doctrine, Crawford’s 1984 conveyance of the land immediately north and south of the Crawford Tract also conveyed the minerals under that tract, even though the deed did not describe the mineral rights.
Generally, the strip-and-gore doctrine provides that when a grantor conveys all land owned by him or her adjoining a narrow strip of land that has ceased to be of any benefit or importance to the grantor, here, the Crawford Tract, the presumption is that the grantor intended to include such strip in such conveyance unless it clearly appears in the deed, by plain and specific language, that the grantor intended to reserve the strip. The title opinion led XTO to take the position that the Crawford Tract minerals were included in the 1984 conveyance, and Crawford sued XTO.
The trial court granted XTO’s motion to compel the joinder of the 44 adjacent landowners, which argued the adjacent landowners “have or claim interests in the [Crawford Tract] that would be affected by the relief Crawford seeks and are, therefore, needed for the just adjudication of Crawford’s claims under Rule 39.” Crawford did not join the adjacent landowners as ordered, and the trial court dismissed the case without prejudice. A divided court of appeals affirmed.
In the Supreme Court of Texas, XTO argued that adjacent landowners were mandatory parties because (1) they have a claim to the Crawford Tract minerals as a matter of law by virtue of the strip-and-gore doctrine; (2) a judgment in Crawford’s favor, which would require a determination that the plaintiff owns the Crawford Tract despite the 1984 conveyance, would directly impact their interests; and (3) to the extent such a judgment would not bind the adjacent landowners, they could reasonably be expected to file their own claims against XTO, subjecting it to a substantial risk of multiple inconsistent obligations.
Avoiding the ultimate issue of the strip-and-gore’s effect on the Crawford Tract, the court held Rule 39 requires joinder only of persons who actually claim such an interest in the property – not parties that potentially could claim an interest. Given there was no evidence the adjacent landowners had claimed any interest beyond XTO’s unilateral payment of royalties, they were not mandatory parties. The trial court, therefore, abused its discretion in ordering their joinder. The court of appeals’ judgment was reversed, and the case remanded to the trial court.