Walls v. Humphries

2013 Ark. 286, 428 S.W.3d 517, 2013 WL 3239042, 2013 Ark. LEXIS 327
CourtSupreme Court of Arkansas
DecidedJune 27, 2013
DocketNo. CV-12-37
StatusPublished
Cited by17 cases

This text of 2013 Ark. 286 (Walls v. Humphries) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Walls v. Humphries, 2013 Ark. 286, 428 S.W.3d 517, 2013 WL 3239042, 2013 Ark. LEXIS 327 (Ark. 2013).

Opinion

COURTNEY HUDSON GOODSON, Associate Justice.

| ,This litigation concerns competing interests in oil-and-gas rights. Appellants Arlie and Zelda Walls and Jonathan and Ayesha Hernandez de la Lama appeal the order entered by the Circuit Court of Van Burén County granting summary judgment in favor of appellees New Century Production Company, LLC (New Century); Paraelifta Land and Minerals Limited Partnership (Paraelifta); James A. Claughton; and Southwestern Energy Production Company (SEECO). For reversal, appellants contend that the circuit court erred in concluding as a matter of law that appellees were bona fide purchasers for value without notice of appellants’ superior claim to the oil-and-gas rights in question. They also assert error in the circuit | {.court’s award of attorneys’ fees to appellees. We reverse and remand.

Factual Background

In February 1999, appellants Jonathan and Ayesha Hernandez de la Lama (collectively Hernandez), who are residents of Mexico, entered into a real-estate sales contract to buy 100 acres of land located in Van Burén County from Noble and Elsie Humphries (collectively Humphries). The transaction also included the purchase of two tractors and other equipment. By agreement of the parties, Humphries retained the right to use the tractors and equipment until Hernandez paid for the property in full. It is undisputed that the sales contract was not filed of record.

The sales contract included the mineral rights to the property. Nonetheless, in January 2004, Humphries leased the oil- and-gas rights to New Century, which in turn assigned the rights to SEECO.1 In December 2004, Humphries sold the oil- and-gas rights to Paraelifta and Claughton. In October 2008, Hernandez entered into a contract for the sale of the property to appellants Arlie and Zelda Walls (collectively Walls). That same month, Hum-phries executed a warranty deed of the property to Hernandez.

In February 2009, appellants Hernandez and Walls filed suit against appellees New Century, SEECO, Paraelifta, and Claugh-ton.2 In their complaint, they alleged that appellees |3were not innocent purchasers of the oil-and-gas rights, and they sought cancellation of the lease issued to New Century and the assignment to SEECO, as well as the deed conveying the rights to Paraelifta and Claughton. Subsequently, appellants filed a motion for summary judgment. In their brief, appellants acknowledged the general rule that an instrument in writing affecting real property is not valid against a subsequent purchaser unless it is filed of record in the county where the real estate is located. However, they argued that Hernandez was in possession of the property when the lease and the deed were executed and that his possession provided sufficient notice of a claim or interest in the property.

As proof of possession, appellants submitted the deposition testimony of Jonathan Hernandez. Mr. Hernandez testified that he initially visited the property five or six times a year and that his family spent a couple of Christmases at the ranch. He said that different members of his family visited on other occasions, particularly his uncle and his mother, who he said spent a great deal of time there. Mr. Hernandez testified that he sold hay and raised horses, chickens, and calves on the ranch and that caretakers lived on the property in his absence. He said that he erected a sign near the road bearing the name “Rancho La Providencia” in honor of his great-grandmother’s hacienda in Mexico. Mr. Hernandez stated that this name was also painted on the barn and stenciled onto a tractor. He said that he kept a truck on the property that had a license plate from Chihuahua, Mexico; that he paid for the utilities and insurance; that he reimbursed Humphries for the property taxes; and 14that he bought agricultural supplies for the ranch from a local store. Mr. Hernandez testified that “it was common knowledge that we lived” on the ranch. He denied that Humphries cared for the property after the sale, and he said that Hum-phries had permission to use the tractors for his own purposes but that the agreement did not include performing any work on the ranch.

Appellees responded to appellants’ motion for summary judgment and also filed summary-judgment motions of their own. Collectively, they took the position that they were bona fide purchasers without notice of Hernandez’s interest in the property. They maintained that subsequent purchasers are entitled to the protection of the recording statute unless there is actual notice of an unrecorded interest. Appel-lees argued that physical possession alone is not sufficient to impart actual notice or to override the Arkansas real-estate recording system. Alternatively, appellees asserted that Hernandez’s possession of the property was not exclusive because Hernandez did not reside at the ranch and because Humphries retained the right to enter the property to use the equipment. In support of their arguments, appellees presented the affidavit of Michael English, the project coordinator of New Century. He stated that New Century acts as a leasing agent for SEECO and that during the lease negotiations no one informed New Century of Hernandez’s interest in the property. English also averred that title to the property was confirmed by examining the real-estate records in the county and that no representatives of New Century or SEECO viewed the property in advance of obtaining the lease. Jim Williams, an employee of Paraclifta, stated in an affidavit that he searched the land records of Van Burén County and | Bthat he was never placed on either actual or constructive notice of appellants’ claim to the mineral interests in the property.

Judge Stephen Choate, sitting as special judge for the circuit court, heard the cross-motions for summary judgment. Following the hearing, he denied the parties’ motions, finding that questions of material fact remained for trial. Thereafter, appel-lees renewed their motions for summary judgment, essentially raising the same arguments as before. After a hearing, the circuit court granted appellees’ motions for summary judgment, ruling that no fact-questions remained and that appellees were entitled to judgment as a matter of law. Appellees subsequently filed motions for attorneys’ fees pursuant to Arkansas Code Annotated section 16-22-808 (Repl. 1999). Over appellants’ objections, the circuit court granted appellees’ request for fees. The court awarded $12,000 to the attorney representing New Century and SEECO and $12,000 to the attorney for Paraclifta and Claughton. Appellants filed timely notices of appeal from the circuit court’s orders.

Initially, this case was heard by the court of appeals, which affirmed the circuit court’s order of summary judgment but reversed the awards of attorneys’ fees. Walls v. Humphries, 2012 Ark. App. 4, 2012 WL 11458. Thereafter, this court accepted the appellants’ petition for review. When we grant a petition for review, we treat the appeal as if it had been originally filed in this court. Sullivan v. Coney, 2013 Ark. 222, 427 S.W.3d 682.

Bona Fide Purchasers for Value

On appeal, appellants first argue that the circuit court erred in concluding that appellees were entitled to judgment as a matter of law. They contend that Hernandez’s | r,possession of the property imparted actual knowledge of his interest such that appellees were not bona fide purchasers of the oil-and-gas rights.

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Bluebook (online)
2013 Ark. 286, 428 S.W.3d 517, 2013 WL 3239042, 2013 Ark. LEXIS 327, Counsel Stack Legal Research, https://law.counselstack.com/opinion/walls-v-humphries-ark-2013.