Armour Pipe Line v. Sandel Energy, 2022 Tex.App.LEXIS 7265 (Houston [14th Dist.] 2022, no pet.
In this case, the 14th District Court of Appeals in Houston held that a purported reservation in favor of a stranger of title was void, and rejected the stranger’s argument that the reservation could be enforced under an “estoppel by deed” theory because the court held the there was no language in assignment or related release that would support an estoppel theory.
At issue was a 1999 assignment of seventy-six oil and gas leases and thirteen wells from Armour Pipe Line Co. and various affiliates of the Cashman family, in favor of Sandel Energy, Inc.
The assignment purported to except and reserve an overriding royalty unto Armour. However, at that time, Armour was a stranger of title. Armour did not possess any title to the leases. Instead, Armour had acquired a lien on the interests, but nothing was filed of record reflecting Armour’s acquisition of the liens, and there was no evidence that Armour owned any interest in the liens, or that Armour had attempted to foreclose on the liens.
At issue in this appeal was Armour’s argument that, even if its purported reservation was void as an invalid reservation to a “stranger to title,” it was nevertheless enforceable under the estoppel-by-deed doctrine.
The appellate court rejected Armour’s theory, holding that the assignments did not contain recitals that would support Armour’s claims.
For instance, the court held that granting clause was not a statement that Armour owned interests in the leases, because it only purported to assign “Assignors’ right, title and interest,” meaning it only conveyed “whatever right, title and interest the Assignors may have had.” The court held that the reservation clause did not support Armour’s claim, because it was not a statement that Armour owns an overriding royalty interest, but instead was a reservation that purported to create a new right in favor of the grantor.
Similarly, the court held that the “exception” clause in the assignment did not support Armour’s claim. That clause indicated that “Assignors hereby ... EXCEPT ... an overriding royalty interest....” The court held that this was not a statement that Sandel does not own an overriding royalty, but was instead an exception that operates to exclude some interest from the grant.
Armour also relied on alleged recitals from a second assignment. In that second assignment, executed about a year after the first assignment, Armour partially assigned its overriding royalty to Sandel, but only insofar as existing wells, and not as to future wells. The appellate court held that this assignment could not estop Sandel because Sandel only claimed its interest through the first assignment.
The court also examined a release that Armour executed along with the first assignment, under which Armour released all liens it held in any of the subject leases. The release recited that Armour owned a lien, and that it was being released as part of the first assignment. In the court’s view, those recitals did not support Armour’s theory, because they do not state that Armour owned an overriding royalty in the leases. Further, the court reasoned that Armour’s status as a lienholder did not mean that Armour owned title in the leases, and there was no evidence that Armour ever foreclosed the lien or otherwise held any title to the leases.
Finally, the court reviewed the Cashman’s claim that, if the purported exception and reservation in favor of Armour was ineffective, that mean the interest was then vested in the Cashmans, not in Sandel. The court rejected that argument, explaining that the Cashmans did not point to any authority indicating that property subject to an invalid reservation or exception remains with the grantor. Instead, in the court’s view, existing precedent on that issue indicates that title to the interests passes to the grantee.