Til Death Do Us Part: Joint Tenancy by Quasi-Estoppel and Revisiting the Wagenschein Decision

January 13, 2022 — In Wagenschein v. Ehlinger, 581 S.W.3d 851 (Tex. App.—Corpus Christi 2019, pet. denied) the Corpus Christi Court of Appeals interpreted a royalty reservation in a warranty deed.  The disagreement turned on whether the reservation created a joint tenancy or a tenancy in common.  The Court held that all but one of the plaintiffs were quasi-estopped from arguing that the deed created a tenancy in common. This was because those plaintiffs had previously “accepted the benefits” of a joint tenancy.  Further, the Court determined that the deed’s language was unambiguous and that the parties had intended to create a joint tenancy.  Importantly, the Court held that various “words of survival” used in the deed reservation were determinative when concluding that the parties intended to create a joint tenancy rather than a tenancy in common.

Texas recognizes two types of co-tenancies: a joint tenancy and a tenancy in common.  A joint tenancy is distinguished by the “right of survivorship.” Thus, upon the death of one joint tenant, his interest will automatically vest in the remaining joint tenants (as opposed to passing through inheritance).  Under a tenancy in common, a decedent’s interest will instead pass to the heirs and beneficiaries of the decedent (as opposed to passing to the remaining co-tenants).

In Wagenschein, the defendants were the surviving members of a group of seven siblings (the “Heirs”) who inherited a 241.69-acre tract of land from their parents.  In 1989, the Heirs executed a warranty deed (the “Deed”) conveying the surface and mineral estates to Harvey and Jane Mueller (the “Muellers”).  The Deed included the following reservation (emphasis added):

THERE IS HEREBY RESERVED AND EXCEPTED from this conveyance for Grantors and the survivor of Grantors, a reservation until the survivor’s death, of an undivided one-half (1/2) of the royalty interest in all the oil, gas and other minerals that are in and under the property and that may be produced from it.  Grantors and Grantors’ successors will not participate in the making of any oil, gas and mineral lease covering the property, but will be entitled to one-half (1/2) of any bonus paid for any such lease and one-half (1/2) of any royalty, rental or shut-in gas well royalty paid under any such lease.  The reservation contained in this paragraph will continue until the death of the last survivor of the seven (7) individuals referred to as Grantors in this deed.

In 2006, the Muellers executed an oil, gas and mineral lease with Trinity Energy Services, who subsequently assigned the lease to Pioneer Natural Resources (“Pioneer”).  Clara, one of the original seven Heirs, died in 2009, leaving Carol Edwards (one of the plaintiffs) as one of her heirs.  In 2010, Pioneer obtained production from its first well on the property and each of the surviving Heirs signed a division order “accepting and receiving their respective shares of what would have been Clara’s interest.” Id. at *853.  Essentially, by executing the division order the Heirs implicitly “accepted” a benefit of the right of survivorship inherent in a joint tenancy.  Over the next five years, several more of the original seven Heirs died.  “After each death, Pioneer [similarly] distributed the decedent’s interest by signed division orders to the then-surviving Wagenschein Heirs.”  Id. at *853.  Thus, in each instance the surviving heirs executed a division order in which their interest was increased consistent with joint ownership.

In 2015, the children of some of the original seven Heirs petitioned the Court to declare that the 1989 Deed created a tenancy in common.  These plaintiffs argued that the interests in question should have passed to them through inheritance instead of being divided among the surviving Heirs.  The plaintiffs relied on the Deed’s use of the word “successor” in claiming that the Deed created a tenancy in common and that they were the intended recipients of their deceased parents’ interests.  The defendants argued that the 1989 Deed unambiguously created a joint tenancy, and alternatively that the plaintiffs were estopped from bringing their claims because the plaintiffs’ parents received the benefits of the deed reservation as joint tenants.  Id. at *854.

Under the theory of quasi-estoppel, a party is precluded “from asserting, to another’s disadvantage, a right inconsistent with a position previously taken.”  Id. at *856.  In order to prevail on a defense of quasi-estoppel, the party must prove that (1) the opposing party acquiesced to or benefited from a position inconsistent with the opposing party’s present position; (2) it would be unconscionable to allow the opposing party to assert their present position; and (3) the opposing party had knowledge of all material facts at the time of the conduct on which the estoppel is based.

Here, the Court found that all three factors of quasi-estoppel were satisfied.  Upon the death of each presumed joint tenant the surviving Heirs received an increase in their respective interest and executed a corresponding division order.  To allow the plaintiffs to argue now that the 1989 Deed created a tenancy in common would be to allow plaintiffs to assert a right that was inconsistent with the position taken by their parents.  Further, a finding that the Deed created a tenancy in common would certainly be to the detriment of defendants, who would lose a significant portion of their interest if plaintiffs were allowed to assert the rights of a tenancy in common.  Such a finding would thus be unconscionable.  Finally, because the surviving Heirs signed a division order each time, there is no evidence that plaintiff’s parents lacked knowledge of the material facts.

Because the Court determined that defendants were successful in claiming the defense of quasi-estoppel, the Court held that all of the plaintiffs except for Carol, the daughter of Clara, were barred from making their claims.  Because Clara was the first of the original Heirs to die, Clara (and Clara’s daughter Carol as her heir) did not receive the benefits of a joint tenancy.  As such, the Court held that Carol was not barred from claiming that the Deed created a tenancy in common and thus considered her claim.

In interpreting a deed, a court will ascertain the intent of the parties from all of the language within the four corners of the instrument, examining and harmonizing the entire instrument to give effect to all provisions so that none will be rendered meaningless.  Though plaintiff Carol argued that the Deed’s use of the word “successor” indicated the original Heirs’ intent to make the interests inheritable, the Court found that such an interpretation would render meaningless the reservation provision of the Deed.  The opening and closing statements indicated that the interest was reserved “for Grantors and the survivor of Grantors” and that the reservation would continue “until the death of the last survivor of the seven (7) [original Heirs].”  Id. at *858.  The Court found that the reservation’s language implied that the survivors of the original seven Heirs were the intended beneficiaries of the reservation – not the heirs of the original seven Heirs. Because the Court determined that “successor” and “survivor” could be read as synonymous, a finding that the 1989 Deed created a joint tenancy would allow all of the provisions of the Deed to be harmonized.

Wagenschein was ultimately another study in deed interpretation. It underscored the notion that although there are no magic words that will create a joint tenancy with rights of survivorship, once such joint ownership is established it can have a profound impact on the later disposition of interests.  Of greater import was the Court’s finding of a joint tenancy by quasi-estoppel. In so finding, the Court necessarily took certain surrounding circumstances under consideration such as the execution of division orders consistent with a joint tenancy.  A petition for review of the Appellate Court’s decision was denied by the Texas Supreme Court.

 

 

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