City of Alvin v. Sallie Zindle ( 2009 )

Affirmed as Modified and Memorandum Opinion filed December 8, 2009.

In The

Fourteenth Court of Appeals

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NO. 14-08-00458-CV

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CITY OF ALVIN, Appellant

V.

SALLIE ZINDLE, Appellee

On Appeal from the 239th District Court

Brazoria County, Texas

Trial Court Cause No. 32714

M E M O R A N D U M  O P I N I O N

The City of Alvin (“the City”) appeals the trial court’s order granting Sallie Zindle’s motion for summary judgment.  Following on our recent opinion, Pounds v. Jurgens, No. 14-07-00830-CV, 2009 WL 2232070 (Tex. App.—Houston [14th Dist.] June 18, 2009, no pet. h.), we modify the trial court’s judgment and affirm as modified.^[1]

I.   Factual and Procedural Background

On September 1, 1931, J. L. Lemmer, then owner of the land containing the subject property,^[2] entered into an oil and gas lease with K. H. Smith.  In the lease, Lemmer expressly reserved one-eighth oil and gas royalties.

In 1989, the City filed suit seeking foreclosure of its tax lien on the subject property, then owned by Zindle.  In 1991, the trial court signed a default judgment authorizing the City to foreclose.  An order of sale was also issued, commanding the sheriff or constables of Brazoria County to seize and sell the property.^[3]

The City contends it owns the mineral estate of the subject property following foreclosure and sale, or at least the royalty interest and reversionary interest (possibility of reverter) in the mineral estate.  Conversely, Zindle seeks a declaratory judgment that the mineral estate was not the subject of foreclosure and the royalty interest remains her property.  The record includes the parties’ first amended stipulation of facts, in pertinent part:

Defendant City of Alvin’s claim to mineral rights is from a Sheriff’s Deed executed pursuant to the delinquent tax foreclosure of the surface of property. . . .

At the time of the tax foreclosure, the property was burdened by a valid and subsisting oil and gas lease, and [Zindle] is a successor to the lessor.

The oil and gas lease is the only known severance of a mineral interest in the property.

[Zindle’s] royalty interest was taxed separately from the surface estate.

Both parties filed motions for summary judgment.  The trial court granted Zindle’s motion and the City appealed to this Court.  City of Alvin v. Zindle, No. 14-06-01147-CV, 2007 WL 3071999 (Tex. App.—Houston [14th Dist.] Oct. 23, 2007, no pet.).  Because the record contained neither the judgment of foreclosure nor the order of sale, we could not identify or determine what property interests were actually conveyed at the foreclosure sale—neither party presented conclusive proof of title to the property.  Id. at *2.  Consequently, we reversed the summary judgment and remanded to the trial court for further proceedings.  Id. at *3.  

Both parties filed supplements to their respective motions for summary judgment. Now, the appellate record includes the judgment of foreclosure and order of sale.^[4]  On March 7, 2008, the trial court granted Zindle’s motion, holding in relevant part:

That the mineral estate underlying the foreclosed property has been severed from the surface [since execution of the 1931 oil and gas lease]^[5];

That such estate is not subject to any order of foreclosure arising from Defendant’s claims concerning delinquency of taxes on the surface estate [; and]

That Plaintiff’s royalty interest and reversionary interest in the mineral estate remain her property.

II.   Issues Presented and Standard of Review

On appeal, the City presents three principal arguments in support of its contention that the trial court erred in denying its motion and granting Zindle’s: (1) the trial court erred in determining the mineral estate was severed from the surface estate since execution of the 1931 oil and gas lease; (2) the trial court erred in holding the mineral estate was not subject to the tax-delinquency sale of the surface estate; (3) the trial court erred in concluding Zindle’s royalty and reversionary interests are her property subsequent to the tax-delinquency sale.

Under well-established standards governing traditional motions for summary judgment, the movant must show there is no genuine issue of material fact and he is entitled to judgment as a matter of law.  Tex. R. Civ. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985).  We review a summary judgment de novo.  Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).  We take as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant’s favor.  Id. When, as in this case, both parties move for summary judgment on the same issues and the trial court grants one motion and denies the other, we review the summary judgment evidence presented by both parties, determine all questions presented, and render the judgment the trial court should have rendered.  Id.

III.   Analysis

We begin with the City’s contention the trial court erred in holding that the mineral estate was severed from the surface estate.  Our holding in Pounds is dispositive.

In Pounds, we addressed whether an oil and gas lease resulted in severance of any portion of the mineral estate from the surface estate.  Pounds, 2009 WL 2232070, at *4–5.  The original lessor in Pounds owned both the surface and mineral estate in a certain piece of property.  Id. at *1. In entering into an oil and gas lease, she reserved only a fractional royalty interest, which we explained meant the lessee acquired title to all the oil and gas in place, leaving the lessor as owner of a fractional royalty interest and possibility of reverter.  Id. at *4-5.^[6]  In short, only a partial severance of the mineral estate occurred,^[7] and “the fractional interest in the royalty and the possibility of reverter were never severed from the surface estate.”  Id. at *5; see also Sutton v. Green, No. 14-01-01043-CV, 2002 WL 1489347, at *3 (Tex. App.—Houston [14th Dist.] July 11, 2002, no pet.) (not designated for publication) (holding that an oil, gas, and mineral lease with only a royalty interest reserved to lessor effected a partial severance of the mineral estate). 

Applying this law, when the lessor of the oil and gas lease encumbering Zindle’s property reserved the one-eighth royalty interest, the lessee received a fee simple determinable in all the oil and gas in place, and the lessor owned a fractional royalty interest and possibility of reverter, both of which remained unsevered from the surface estate.  However, as in Pounds, this conclusion does not answer whether these interests were subject to a tax-delinquency foreclosure and sale where taxes were owed only on the surface estate.

The City argues that the non-delinquent status of taxes on Zindle’s mineral estate interests is completely separate from whether Zindle’s mineral estate interests were conveyed with the surface estate.  According to the City, if Zindle had voluntarily conveyed her surface estate without reserving a royalty interest, the grantee would acquire both; therefore, the purchaser of Zindle’s surface estate at the tax foreclosure sale should not be treated differently.  What this argument misses, however, is the concept of “authority to sell.”  Obviously, Zindle had the right to sell whatever interests she owned in the land.  The sheriff at a foreclosure sale, however, has limited authority to sell the interests the court ordered to be sold; any sale exceeding this authority is void.  Zindle, 2007 WL 3071999, at *1–2 (citing Clint ISD v. Cash Inv., Inc., 970 S.W.2d 535, 538 (Tex. 1998); Mills v. Pitts, 48 S.W.2d 941, 942, 121 Tex. 196, 199 (Tex. 1932); Sani v. Powell, 153 S.W.3d 736, 742 (Tex. App.—Dallas 2005, pet. denied)).  Consequently, the sheriff cannot legally convey property interests that are not foreclosed upon and ordered sold.  Id. at *2.

For mineral estate interests owned by the surface estate owner “to be taken in a tax foreclosure of the surface, those interests must have been taxed together with the surface and thus have been similarly delinquent and subject to the foreclosed tax lien.”  Pounds, 2009 WL 2232070, at *5.  Here, it is stipulated Zindle’s royalty interest was taxed separately from the surface estate.  Further, the City admitted in its summary judgment response that Zindle was not delinquent in payment of taxes on the royalty interest.  See Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001) (determining party’s agreement of certain fact in its response was a judicial admission of that fact).  There is no language in either the judgment of foreclosure or order of sale expressing that Zindle’s separate mineral interests were to be included in the sale.  Instead, there is a description of the surface estate and the lien that was filed because of Zindle’s tax delinquencies.  Because the trial court’s judgment of foreclosure and order of sale did not authorize the sale of the separately-taxed royalty interest, the royalty interest was necessarily excepted^[8] and severed from the surface estate, at the time of the tax- delinquency sale.  See Pounds, 2009 WL 2232070, at *5.

This result is supported by long-held tax policy: “The citizen always has the right to pay the amount of any one tax listed against him, or as held in some jurisdictions, to pay the tax on any one item or piece of property which has been separately assessed, without offering to pay the taxes on other parts.”  Richey v. Moor, 112 Tex. 493, 499, 249 S.W. 172, 174–75 (1923).  The citizen may not have sufficient funds to pay all of the taxes assessed against each of his properties, and thus, may choose to pay the taxes on some properties while allowing the lien on others to be foreclosed.  See State Mortgage Corp. v. Ludwig, 35 S.W.2d 267, 268 (Tex. Civ. App.—San Antonio 1931) (“Where there are several tracts of land, the citizen should be granted the privilege of paying the taxes on one or more of the tracts he wishes to retain and leaving the others to their fate.  It may be that he is unable to pay the entire tax, but there may be a tract peculiarly dear to him, the taxes against which he can pay, and justice will accord to him this privilege.”), rev’d on other grounds, 121 Tex. 268, 48 S.W.2d 950 (1932).

This policy applies to the present situation involving separately taxed interests on a single property.  It is not inconceivable that a land owner, with limited funds, would pay those taxes assessed on productive royalty interests and not pay taxes on the non-income-producing surface estate.  Notwithstanding Zindle’s motivation, she could exercise the option to pay the taxes on her royalty interests and elect not to pay taxes assessed against the surface estate. Accordingly, we hold Zindle’s royalty interest was not subject to foreclosure.

The possibility of reverter presents a separate question.  Zindle’s possibility of reverter is a non-taxable interest.  See Pounds, 2009 WL 2232070, at *6.  Because the possibility of reverter was unsevered from the surface estate and not subject to taxation, there was no “impediment to foreclosure and sale of the possibility of reverter as an interest running with the surface estate.”  Id.  Consequently, the City acquired Zindle’s possibility of reverter in the mineral estate at the foreclosure.

IV.   Conclusion

In light of the foregoing, we sustain those portions of the City’s first and second issues in which it argues that the royalty interest and possibility of reverter remained unsevered from the surface estate following execution of the oil and gas lease.  We also sustain those portions of the City’s first and second issues in which it argues that Zindle’s possibility of reverter was conveyed to the City at foreclosure.  The City’s contention that Zindle’s royalty interest was transferred to the City at foreclosure is overruled.  Accordingly, we modify the trial court’s judgment to reflect that Zindle’s motion for summary judgment is granted in part and denied in part, and we substitute the following paragraphs for paragraphs 1 through 5 of the judgment:

1.      Plaintiff’s royalty interest in the mineral estate was not subject to foreclosure arising from Defendant’s claim of tax delinquency on the surface estate;

2. Plaintiff’s royalty interest in the mineral estate was severed from the surface estate when the surface estate was sold at the 1991 tax-delinquency sale;

3. Plaintiff retains her royalty interest in the mineral estate;

4. The City owns the reversionary interest in the mineral estate;

5. All relief not expressly granted herein is hereby denied; and

6. This is a final judgment disposing of all issues, parties, and claims.

We affirm the trial court’s judgment as modified.

                                                                        /s/        Charles W. Seymore

                                                                                    Justice

Panel consists of Chief Justice Hedges and Justices Seymore and Sullivan.

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^[1] Because the dispositive issues are clearly settled in law, we issue this memorandum opinion.  See Tex. R. App. P. 47.4.

^[2] “An undivided 1/27 interest in 5.56 acres, Lot 39, Abstract 366, T. Spraggins Survey, same property described in Volume 810, Page 418, Official Records, Brazoria County, Texas 366-1059-000.”

^[3] These documents name the defendant to the foreclosure action as “Sallie L. Spencer Hoffman.”  It is undisputed “Sallie Zindle” is the same person.

^[4] Zindle’s supplement contained only a portion of the judgment of foreclosure, whereas the City attached the entire judgment of foreclosure.  While a movant generally bears the burden of presenting evidence to establish conclusively its right to summary judgment, where both parties file motions for summary judgment, the court may consider both parties’ summary judgment evidence in determining whether to grant either motion.  See Knighton v. Int’l Bus. Machs. Corp., 856 S.W.2d 206, 208–09 (Tex. App.—Houston [1st Dist.] 1993, writ denied); River Oaks Shopping Ctr. v. Pagan, 712 S.W.2d 190, 193 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.).

^[5] The trial court’s order granting Zindle’s motion for summary judgment does not expressly state the severance occurred at the time of the 1931 oil and gas lease.  We infer such based on the arguments Zindle made in her motion.

^[6] See Natural Gas Pipeline Co. of Am. v. Pool, 124 S.W.3d 188, 192 (Tex. 2003) (explaining that oil and gas leases typically give the lessee a fee simple determinable, leaving the lessor with a possibility of reverter).

^[7] “A mineral estate consists of five interests: 1) the right to develop, 2) the right to lease, 3) the right to receive bonus payments, 4) the right to receive delay rentals, and 5) the right to receive royalty payments.”  French v. Chevron U.S.A. Inc., 896 S.W.2d 795, 797 (Tex. 1995).

^[8] “Necessarily” because the sale would violate Article VIII, section 15 of the Texas Constitution if the non-delinquent royalty interest were included in order of sale.  See Pounds, 2009 WL 2232070, at *5.