Co-author Caleb White
In a recurring theme, harmony and the four-corners rule were front and center in Citation 2002 Inv. LLC et al v. Occidental Permian, Ltd. et al, a case of competing claims over the granting language in an assignment of oil and gas leases. Occidental (Oxy) claimed assignor Shell Western reserved mineral interests at certain depths from a conveyance to previous assignee, Citation, and that those reserved interests were later assigned by Shell Western to Oxy. Citation, on the other hand, claimed there was no reservation of deep rights.
- 1987: Shell Western sells a large acreage position to Citation for $75 million. To effectuate the transaction the parties execute a purchase and sale agreement, incorporated into which are two other documents, a Shell-to-Citation Assignment, and an attached Exhibit A. The Assignment includes two key phrases. First: the conveyance is of all of Shell Western’s interests described in Exhibit A. Second: a subject-to clause stating the intent of Shell Western to convey all its rights and interests, regardless of whether the interest is accurately described in Exhibit A. Exhibit A describes the properties to be conveyed; some descriptions include references to depth, some do not.
- 1997: Shell Western purports to transfer to Altura (n/k/a Oxy) the deep rights in some of the properties previously conveyed to Citation.
- 2006 Citation assigns to Endeavor some of the properties acquired from Shell Western.
- 2019: Oxy assigns some of the interests from the Shell-Altura assignment to Rodeo.
These conveyances led to competing trespass-to-try-title claims over the deep rights in two consolidated suits. The trial court agreed with Oxy and found that the original Shell-to-Citation Assignment was depth limited and as a result Oxy had acquired the deep rights.
Harmony and the four corners rule
The Court of Appeals’ task was to determine whether the Shell-to-Citation Assignment was depth-limited, conveying only certain shallow rights to Citation, or if the Assignment was an unlimited grant of all depths. The Court determined that the Assignment was unambiguous despite the competing interpretations, and limited the scope of its analysis to ascertaining the intent of the parties from the four corners of the instrument.
When analyzing multiple documents in one instrument, the Court will examine the entire instrument, seeking to harmonize and give effect to each provision. In harmonizing the Assignment and Exhibit A, the Court focused on the granting clause, the subject-to clause, and the lack of limiting language. Because Exhibit A contained only references to depths and had no limiting language, the Court determined that Exhibit A provided relevant information but was not intended to preclude Shell Western from transferring all its interests to Citation. Further, when Exhibit A was combined with the subject-to clause, the express intent of parties was for Shell Western to convey all its interests to Citation. In the words of the Court, “all means all.”
The Court reversed the trial court’s summary judgment, vacated the declaration that the Assignment conveyed only certain shallow rights to Citation, and remanded the case for further proceedings.
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