Recording Agreement Net Profits

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					                                    No.




                                        IN THE
                                SUPREME COURT OF TEXAS



              CAROLINE BERTHELOT, INDIVIDUALLY AND AS
        TRUSTEE OF THE CAROLINE BETH BERTHELOT LIVING TRUST,

                                           Petitioners,


                                                v.



                                  J. BAXTER BRINKMANN,

                                           Respondent.



                         Petition for Review from the Court of Appeals
                                  for the Fifth Judicial District,
                                           Dallas, Texas



                                   PETITION FOR REVIEW




TO THE HONORABLE SUPREME COURT OF TEXAS:

            Petitioners, Caroline Berthelot, Individually and as Trustee of the Caroline Beth

Berthelot Living Trust, ("Petitioners" or "Defendants") submit this Petition for Review.

Respondent, J. Baxter Brinkmann, will be referred to herein as "Respondent" or "Plaintiff."




#128215.1
                             IDENTITY OF PARTIES AND COUNSEL


            The following is a complete list of all parties to the Trial Court's final judgment, as

well as the names and addresses of all trial and appellate counsel:


                   Parties                               Counsel

            Petitioners                                  W. D. Masterson
            Caroline Berthelot, Individually             SBN 13184000
            and as Trustee of the Caroline               Theodore C. Anderson
            Beth Berthelot Living Trust                  SBN 01215700
                                                         John H. Crouch, IV
                                                         SBN 00783906


                                                         Kilgore & Kilgore, PLLC
                                                         3109 Carlisle
                                                         Dallas, TX 75204
                                                         (214) 969-9099 - Telephone
                                                         (214) 953-0133-Fax
                                                         (Trial and Appellate Counsel)



            Respondent                                  Mr. Michael G. Brown
            J. Baxter Brinkmann                         SBN 03153800
                                                        FIGARI & DAVENPORT, L.L.P.
                                                         3400 Bank of America Plaza
                                                        901 Main Street, LB 125
                                                        Dallas, Texas 75202-3796
                                                        214-939-2000-Telephone
                                                        214-939-2090-Fax
                                                        (Trial and Appellate Counsel)




#128215.1
                                   TABLE OF CONTENTS



 Identity of Parties and Counsel                                            iii

Table of Contents                                                           iv


Index of Authorities                                                        vi

Statement of the Case                                                       vii


Statement of Jurisdiction                                                   ix


Issues Presented                                                             x


Statement of Facts                                                           1


Summary of the Argument                                                      2

Argument                                                                     3


ISSUE 1: THE COURT OF APPEALS IMPROPERLY ENTERED
A SUMMARY JUDGMENT DECLARING TITLE TO THE 2.934%
NET PROFITS INTEREST IN THE SNYDER GAS PLANT TO BE
VESTED IN BAXTER BRINKMANN                                                   4


            A.   A Description Of The Net Profits Interest And Each
                 Party's Chain Of Title                                      4


            B.   The Net Profits Interest Is An Interest In Real Estate
                 Which Required Recording                                    7


            C.   The Net Profits Interest Expressly States It is A Lien
                 On Real Estate Which Requires Recording                    10

            D.   The 1987 Conveyance To Plaintiff Baxter Brinkmann
                 Is Fatally Defective For Failure To Provide A Sufficient
                 Legal Description Of The Net Profits Interest              11

            E.   Defendants Are Good Faith Purchasers For Value Who
                 Cut Off Any Claims Of Plaintiff Baxter Brinkmann And
                 Are Entitled To Have Their Title Quieted As a Matter
                 Of Law                                                     12

#128215.1                                       JV
ISSUE 2: DEFENDANTS ARE ENTITLED TO ALL SUMS
WHICH ACCRUED PRIOR TO MRS. BRINKMANN'S DEATH
AND PRIOR TO PLAINTIFF'S NOTICE OF CLAIM UNDER
THE DOCTRINE OF DELAYED INCOME RECEIPT           13

Prayer                                           15


Certificate of Service                           15




#128215.1                      V
                              INDEX OF AUTHORITIES


STATE CASES


Morrow v. Shotwell, All S.W.2d 538, 539 (Tex. 1972)                             5, 12


San Antonio Area Foundation v. Lang, 35 S.W.3d 636 (Tex. 2000)                   1,9


San Antonio Loan & Trust Co. v. Hamilton, 283 S.W.2d 19 (Tex. 1955)               14


T-Vestco Litt-Vada, et al. v. Lu-Cal One Oil Co. et al,
651 S.W.2d 284 (Austin Civ. App. - 1983 err. ref. n.r.e.)                 ix, 1, 8, 9


Tennant v. Dunn, 130 Tex. 285, 110 S.W.2d 53, 56 - 57, (Tex. 1937)                 ix



STATE STATUTES


§26.01 of the Tex. Bus. & Com. Code                                               11

§13.001 of the Texas Property Code                                    2, 7, 8, 10, 13


§5.004 of the Texas Property Code                                             12, 13



TREATISES


2 Williams & Meyers Oil & Gas Law § 424.1                                        2, 8


2 Williams & Meyers Oil & Gas Law § 514.2                                         14




#128215.1                                   VI
                                  STATEMENT OF THE CASE

Nature Of The Case


            By Plaintiffs First Amended Petition Plaintiff sued Defendants in County Court

seeking a Declaratory Judgment against Defendants that Plaintiff s alleged remainder interest

in a net profits interest in a West Texas gas processing plant had ripened into full ownership.

CR26.


            Defendants filed a general denial, affirmative defenses, and counterclaims for title.

Because the suit involved a trust, only a District Court had jurisdiction pursuant to § 115.001

of the Texas Property Code, so the suit was transferred from the County Court to the 160th

District Court. CR11.

Trial Court:


            Honorable Jim Jordan ofthe 160th Judicial District, Dallas County, entered a Summary

Judgment for Respondent (the Trial Court Judgment is attached under App. Tab 1).

Parties in the Court of Appeals:


            Caroline Berthelot, Individually and as
            Trustee of the Caroline Beth Berthelot Living Trust.
                   (Defendants/Appellants)

            J. Baxter Brinkmann
                  (Plaintiff/Appellees)

Court of Appeals:


            Fifth Judicial District, Dallas, Texas. The court of appeals issued a decision on

August 17, 2010.         The opinion was written by Justice Moseley joined by Justices

FitzGerald and Fillmore. The current online citation for the opinion is: No. 2010 Tex. App.


#128215.1                                        VN
LEXIS 6629 (Tex. App. - Dallas) (The Court of Appeals' opinion, order and judgment are

attached under App. Tab 2.)


Disposition of the Case by the Court of Appeals:


            The opinion by the Court of Appeals affirmed the Trial Court's summary judgment

in favor of Respondent.




#128215.1                                     VIII
                               STATEMENT OF JURISDICTION

            First, jurisdiction is warranted under Section 22.001(a)(2) of the Texas Government

 Code because the Dallas Court of Appeals' decision is in conflict with the decision of the

Austin Court of Civil Appeals in T-Vestco Litt-Vada, et al. v. Lu-Cal One Oil Co. et al, 651

 S.W.2d 284 (Austin Civ. App. - 1983 err. ref. n.r.e.) (holding that a net profits interest is an

interest in land, citing Tennantv. Dunn, 130 Tex. 285,110 S.W.2d 53, 56 - 57, (Tex. 1937))

(App. Tab 5).


            Second, jurisdiction is warranted under Section 22.001 (a)(6) ofthe Texas Government

Code because the Court of Appeals committed errors of law that are of such importance to

the oil and gas jurisprudence of the state that they must be corrected.




#128215.1                                        IX
                       ISSUES PRESENTED FOR REVIEW


ISSUE 1:
            THE TRIAL COURT IMPROPERLY ENTERED A SUMMARY
            JUDGMENT DECLARING TITLE TO THE 2.934% NET PROFITS
            INTEREST IN THE SNYDER GAS PLANT TO BE VESTED IN
            BAXTER BRINKMANN


ISSUE 2:


            DEFENDANTS ARE ENTITLED TO ALL SUMS WHICH ACCRUED
            PRIOR TO MRS. BRINKMANN'S DEATH AND PRIOR TO
            PLAINTIFF'S NOTICE OF CLAIM UNDER THE DOCTRINE OF
            DELAYED INCOME RECEIPT




#128215.1
                                     STATEMENT OF FACTS


A.          Factual Background.


            The Court of Appeals correctly stated the nature of the case except that the Court of

Appeals failed to recognize that an interest in the profits of a large gas plant affixed to real

estate that extracts liquid hydrocarbons from natural gas produced from wells and lands

dedicated to the plant is necessarily derived from, related to, and an interest in, land and real

estate.


B.          Procedural Appellate Background.

            The Court of Appeals elected at pages 7 - 9 of its opinion to disregard the holding in

T-Vestco Litt-Vada, supra, an oil and gas case, and the authority of the leading treatise of

Williams and Meyers, Oil & Gas Law, that an interest in mineral production and profits in

Texas is an interest in land, in favor ofSan Antonio Area Foundation v. Lang, 35 S. W.3d 636

(Tex. 2000) holding that an interest in non-mineral net profits from real estate development

failed to pass under the devise of "real property" in a will, applying definitions in the Probate

Code. The Court of Appeals relied upon the deposition testimony of a gas plant manager,

a non-lawyer, for this conclusion, which denies the oil and gas industry the benefit of Texas

recording statutes.

                                SUMMARY OF THE ARGUMENT

            Failure to Record Defeats Plaintiffs Claims


            This case presents the issue of whether the oil and gas industry in Texas is entitled to

protection of the recording statutes with respect to a net profits interest, which is common

in the industry.




#128215.1
            The Snyder Gas Plant Net Profits Interest is an interest in land subject to the

requirement to record in §13.001 of the Texas Property Code. T-Vestco Litt-Vada, et al. v.

Lu-Cal One Oil Co., et al, 651 S.W.2d 284 (Austin Civ. App. - 1983 err. ref., n.r.e) at page

291. See also 2 Williams & Meyers Oil & Gas Law § 424.1.

            The net profits interest consists of the net profits realized by a natural gas processing

plant located in Scurry County, Texas, from processing casinghead gas produced by oil wells

located in Texas. Plaintiff contends that the net profits interest is personal property so that

the conveyance to Plaintiff did not have to be recorded to protect Plaintiffs remainder

interest from extinguishment by Defendants' cash purchase at a Sheriffs execution sale

under a judgment lien. Sheriffs Deed CR 91 attached to Plaintiffs Petition. Plaintiffs

position is squarely contradicted by the fact that the Assignment from J. R. Butler and the

Certificate of E. A. Neukom attached as Exhibits B and C to Plaintiffs Petition and relied

upon by Plaintiff as establishing Plaintiffs claim of title are both recorded in oil and gas

records of Scurry County, Texas.           CR 44 - 69.    Only the 1987 Assignment from Mrs.

Brinkmann to Plaintiff, her son, reserving a life estate interest, attached as Exhibit D to

Plaintiffs Petition has not been recorded. CR 70.

            Under these circumstances, the purchase by Defendants as bona fide purchasers for

value extinguished the unrecorded 1987 Assignment to Plaintiff pursuant to §13.001 of the

Texas Property Code.


Defendants Are Entitled To Sums Which Relate To Time Periods Prior To
Mrs. Brinkmann's Death


            Certain payments relate to periods oftime prior to Mrs. Brinkmann's death on August

13,1006, but are the result of accounting adjustments made after August 13,2006. CR 388 -



#128215.1
 392. These sums thus relate to the period of time when it is uncontested that Defendants

 were entitled to receive all the runs.

            Defendants are entitled to the pre-August 13, 1006, runs under the delayed income

 receipt doctrine recognized in Texas.

            Further, Defendants are entitled to receive runs paid to Defendants by the plant

 operator prior to the time Plaintiff made demand for payment on January 25,2007, (CR 394)

because Defendants had no knowledge of Plaintiff s claims, received such funds under a

 claim of right and spent the funds in reliance upon the absence of any adverse claim by

Plaintiff.




#128215.1
                                            ARGUMENT

ISSUE 1:           THE TRIAL COURT IMPROPERLY ENTERED A SUMMARY
                   JUDGMENT DECLARING TITLE TO THE 2.934% NET PROFITS
                   INTEREST IN THE SNYDER GAS PLANT TO BE VESTED IN
                   BAXTER BRINKMANN


A.          A Description Of The Net Profits Interest And Each Party's Chain Of Title

            The net profits interest at issue in this case was reserved on page 213 of the August

 14, 1950, Assignment from J. R. Butler as Grantor to Scurry Natural Gasoline Corporation

as Grantee. CR 466. The reservation language was as follows:

            Assignor expressly reserves from the terms of this Assignment for the benefit
            of himself, his heirs and assigns, an undivided twenty-five percent (25%) of
            the "net cash gain [net profit] of Scurry Natural Gasoline Corporation" derived
            by said corporation as Assignee of said gas contract with Pan American
            Production Company and which shall exist so long as this contract exists and
            be binding upon Assignee, and successors and assigns.

            A 7.5% interest in the net profits interest passed down from J. R. Butler to Virginia

Brinkmann. Virginia Brinkmann attempted to convey a remainder interest in the 7.5% net

profits interest to Baxter Brinkmann, the Plaintiff in this case, through conveyance contained

in a Settlement Agreement dated July 1987 by and between Virginia H. Brinkmann and John

Baxter Brinkmann. The conveyance language in the Settlement Agreement refers to the net

profits interest as described in Exhibit D to the Settlement Agreement.

            The J. R. Butler, August 14, 1950, Assignment is included in Exhibit D for purposes

of describing the net profits interest conveyed, but is fatally defective because page 213

containing the actual reservation is omitted from the Settlement Agreement.              Plaintiff

attempted to solve this defect by supplementing the record with a certified copy of the

assignment filed in the oil and gas records of Scurry County, Texas (CR 467 - 676), but this

did nothing to cure the defect in Exhibit D to the 1987 settlement agreement. The recorded

#128215.1                                         4
assignment shows that the parties who created the net profits interest considered it an interest

in real property and properly filed the assignment which created the interest in the oil and gas

records of Scurry County, Texas.

            Moreover, the certified copy tendered by Plaintiff highlights a defect in the certified

copy, since the Exhibit D has a Schedule A which does not appear in the certified copy. It

appears that Schedule A may have been added to the Settlement Agreement to provide a legal

description of the real estate which is the subject of the net profits interest.

            The statute of frauds, Tex. Bus. & Com. Code §26.01, requires that all conveyances

be in writing and signed by the party to be charged. An additional requirement that the

description of the property conveyed must be sufficiently certain, so as to enable a party

familiar with the locality to identify the premises to be conveyed to the exclusion of others,

has been imposed by the courts. See Morrow v. Shotwell, All S.W.2d 538, 539 (Tex. 1972).

            The deposition ofRobert Pugh, the lawyer in Shreveport, Louisiana, who represented

Mrs. Brinkmann in connection with the 1987 Settlement Agreement and Conveyance was

taken in another case at which the lawyers representing the parties herein were present. A

copy ofthe deposition appears in the record at CR 548. At the deposition Mr. Pugh produced

his files on the 1987 Settlement Agreement and Conveyance, which included a letter from

Baxter Brinkmann's lawyer (CR 564), stating that Baxter Brinkmann saw that the 1987

Agreement was missing pages, but that he signed it anyway.

            The J. R. Butler Assignment contained in Exhibit D to the Settlement Agreement

includes a Schedule "A" entitled "Snyder Gasoline Plant Interest" (CR 89) which is not

attached to the recorded copy of the August 14, 1950, Assignment, so that the certified copy

ofthe J. R. Butler Assignment tendered by Plaintiffherein also appears to be incomplete and

defective.


#128215.1
            The Schedule "A" is important with respect to the issues in this case because Schedule

 "A" describes the tracts of land upon which the Snyder Gasoline Plant is situated, being Tract

Twenty (20) of section Thirty-Nine (39) and Section Forty (40) of the Kirkland and Fields

 Survey, Scurry County, Texas.         Schedule "A" was obviously added to the J. R. Butler

Assignment to provide a description of the real estate, together with the descriptions of the

other assets assigned, including the plant and casinghead gas contracts. It is apparent from

the terms of the J. R. Butler Assignment, including Schedule "A", that the reserved net

profits interest constitutes an interest in land.

            The parties' chains of title can be presented schematically as follows:

                               THE PARTIES' CHAIN OF TITLE


  J. R. Butler Reserves 25%                         Conveys interest in gas contracts, plant
  Net Profits Interest                              and real estate to Scurry Natural Gasoline
                                                    Corporation, reserving lien in event of
                                                    nonpayment, recorded in Scurry County
                                                    Oil and Gas Records.



                          7.5% of Net Profits Interest


 Virginia Brinkmann                                 Attempts to convey remainder interest
                                                    after life estate to Baxter Brinkmann but
                                                    description omits page 213 describing net
                                                    profits interest and is therefore
                                                    DEFECTIVE, so attempted conveyance
                                                    fails — ALSO NEVER RECORDED IN
                                                    TEXAS, SO IS VOID AS TO
                                                    DEFENDANTS AS BONA FIDE
                                                    PURCHASERS FOR VALUE


                         Sheriffs Deed After Levy


 Caroline Berthelot, Trustee



#128215.1
            It is apparent from the chains of title that when the attempted conveyance from

Virginia Brinkmann of a remainder interest to Baxter Brinkmann in the 1987 Settlement

Agreement failed for lack of an adequate property description of the net profits interest in

Exhibit D, Virginia Brinkmann was left owning fee simple title to the 7.5% net profits

interest, which was then levied on by Defendants and conveyed in a Sheriffs sale free of the

claimed remainder interest.

            The interest levied upon by Defendants has been reduced by other conveyances to a

2.934% net profits interest, which is the interest in controversy in this case. See CR 388.

            B.    The Net Profits Interest Is An
                  Interest In Real Estate Which Required Recording.


            Plaintiff Baxter Brinkmann claims title to Defendants' interest in the Snyder Net

Profits Interest under a conveyance from his mother, Virginia Brinkmann, in a 1987

agreement settling Louisiana litigation attached as Exhibit D to Plaintiffs Petition.


            This conveyance was never filed of record in Texas and is therefore void as to

Defendants, who purchased all right, title and interest of Virginia Brinkmann at an execution

sale for cash under a judgment lien and received a Sheriffs Deed dated February 1, 1994,

attached as Exhibit E to Plaintiffs Petition. CR 91. Thereafter, Defendants duly received

their share of all net profit revenues until Plaintiff gave notice of his spurious claim on

January 25, 2007, to the plant operator. CR 394.


            §13.001 of the Texas Property Code reads in pertinent part as follows:

                  §13.001.      Validity of Unrecorded Instrument

                  (a)    A conveyance of real property or an interest in real property or
                  mortgage or deed of trust is void as to a creditor or to a subsequent purchaser
                  for a valuable consideration without notice unless the instrument has been
                  acknowledged, sworn to, or proved and filed for record as required by law.
                  (Emphasis added)



#128215.1                                        7
            The settlement agreement does not have a valid Texas acknowledgment and could not

have been filed in Texas in compliance with the statute.

            Plaintiffknew that recording the conveyance was necessary to protect his rights since

Robert Pugh, Virginia Brinkmann's lawyer, instructed Plaintiffs lawyer to record the

settlement agreement in Texas at the time. CR 307. The deposition of Robert Pugh, taken

in another case, but with Plaintiffs counsel present and participating, appears at CR 310.

            Even the plant operator had no notice of Plaintiff s claim until the January 25, 2007,

letter from Plaintiffs lawyer. Watkins Depo. Exh. 3, p. 19,11. 3 - 12. CR 282.

            Plaintiff attempts to defend against Defendants' claim of title on the ground that the

net profits interest is not an interest in real property. The interest is derived from processing

casinghead gas from oil wells, real property, at a gasoline plant in Scurry County, also real

estate.


            Plaintiff s pleaded claim oftitle is under instruments attached as Exhibit B and C (CR

41 and 53) to Plaintiffs Petition, which are recorded in the oil and gas lease records of

Scurry County, Texas. Plaintiff is thus judicially estopped to claim that the 1987 conveyance

was not required to be recorded.

            The Snyder Gas Plant Net Profits Interest is an interest in land subject to the

requirement to record in §13.001 of the Texas Property Code.             The Snyder Net Profits

Interest constitutes an interest in land subject to § 13.001 of the Texas Property Code. T-

Vestco Litt - Vada, et al v. Lu-Cal One Oil Co., et al, 651 S.W.2d 284 (Austin Civ. App. -

1983 err. ref, n.r.e) at page 291. See also 2 Williams & Meyers, Oil & Gas Law § 424.1.

            The Court in T-Vestco held as follows:




#128215.1
                   We find that an "overriding royalty" is an interest in oil and gas produced at
            the surface, free of the expense of production, and carved from the working interest
            held under an oil and gas lease, rather than from the royalty reserved by a landowner
            on the severance of the mineral estate. Williams and Meyers, Manual of Oil & Gas
            Terms, 173-74 (1957). While an overriding royalty, like any royalty, is an interest in
            land, "it is clearly non-possessory, and hence the owner is not entitled to possessory
            remedies, e.g. trespass to try title in Texas ..." 2 Williams and Meyers, Oil and Gas
            Law §418.1 at 342 (1981).

            A similar interest which may be applicable to the case has been termed a "net profits
            interest," explained as being a fractional interest "in oil and gas property, usually the
            working interest, the holders ofwhich have no personal obligation for operating costs,
            which are to be paid by the owner or owners of the remaining fractional interests."
            Id, § 424 at 437. More particularly,


                   A net profits interest is a share of gross production from a property measured
                   by net profits from the operation of the property. Usually it is a share of the
                   working interest, created by grant (a carved out interest) or reservation (a
                   reserved interest), and, under at least some circumstances, it is an economic
                   interest in oil and gas for purposes of the federal income tax law. Under this
                   arrangement the operator pays all costs of exploration and development and,
                   after satisfying such costs of exploration and development and, after satisfying
                   such costs from the proceeds of production, shares the profits on an agreed
                   basis with the owner of the net profits interest.

            Id, §424.1 at 439. A net profits interest has been held to be only a mere contract
            interest, and not an interest in land. Le Bus v. Le Bus, 269 S. W.2d 506,511 (Tex. Civ.
            App. 1954, writ ref d n.r.e.). Williams and Meyers suggest, however, that a better
            view requires that "a net profits interest should be treated in much the same manner
            as an overriding royalty and that it should be classified as an interest in land." Id. at
            440.


            Plaintiff cites the case of San Antonio Area Foundation v. Lang, 355 S.W.3d 640

(Tex. 2000) as holding that a net profits interest is personal property, but the Lang decision

is not in point because the issue before the Court was the testamentary intent in a Will. The

Court based its decision on definitions of real and personal property in the Probate Code.

            In Lang the net profits interest did not relate to an oil and gas interest. In fact, the

testatrix dealt with her oil and gas interests as real estate by making a gift of "real property

and oil and gas real properties in my estate." Id. at 641.



#128215.1
            In this case the assignment in Exhibit D to the 1987 Settlement Agreement used to

describe the net profits interest has a Schedule "A" which contains a description of the gas

plant site where the net profits are generated as follows:

            Tract Twenty (20) of Section Thirty-Nine (39) and Section Forty (40) of the
            Kirkland and Fields Survey, Scurry County, Texas.


CR89.


            Plaintiff argued at length in the trial court that Virginia Brinkmann owned only a life

estate in the Snyder Net Profits Interest (ignoring the right of Defendants under the recording

statute to void the conveyance to Plaintiff) but judicially admitted that Mrs. Brinkmann did

not reserve a life estate. Exhibit 8, response to Request for Admission No. 12. CR 338.

            C.     The Net Profits Interest Expressly States
                   It Is A Lien On Real Estate Which Requires Recording.


            The August 14, 1950, Assignment from J. R. Butler as Grantor to Scurry Natural

Gasoline Corporation expressly reserved a lien with a right of foreclosure in the event of

non-payment of the net profits interest sums due, as follows:

            . . . There is expressly granted by Assignee to Assignor a lien to secure the
            payment of all amounts agreed to be paid to Assignor hereunder upon the
            contract herein assigned and the gas covered hereby and the interest of
            Assignees in said Snyder Gasoline Plant and facilities, and in the event of
            default in accounting to said Assignor for his portion of said net cash gain [net
            profit] the same may be foreclosed as other liens.


CR 85 - 86.

            §13.001 of the Texas Property Code reads in pertinent part as follows:


                   §13.001.       Validity of Unrecorded Instrument


                   (a)    A conveyance of real property or an interest in real property or
                   mortgage or deed of trust is void as to a creditor or to a subsequent purchaser
                   for a valuable consideration without notice unless the instrument has been
                   acknowledged, sworn to, or proved and filed for record as required by law.
                   (Emphasis added)

#128215.1                                          10
            The lien with right of foreclosure reserved in the J. R. Butler Assignment as part of

the net profits interest is the equivalent of a mortgage or deed oftrust which § 13.001 requires

to be acknowledged and filed for record or else if it is void as to Defendants as purchasers

at the Sheriffs sale for valuable consideration without notice.

            Since the reserved lien and right of foreclosure are part of the net profits interest,

Plaintiff cannot claim under the net profits interest as against Defendants because Plaintiff


never filed the 1987 Settlement Agreement with the attempted conveyance of a remainder

interest to Plaintiff of record in Scurry County.

            D.     The 1987 Conveyance To Plaintiff Baxter
                   Brinkmann Is Fatally Defective For Failure To Provide
                  A Sufficient Legal Description Of The Net Profits Interest.


            The 1987 Settlement Agreement conveyance from Virginia Brinkmann to Baxter


Brinkmann relied upon the August 14, 1950, Assignment from J. R. Butler's Grantor to

Scurry Natural Gasoline Corporation as Grantee attached as part of Exhibit D for a

description of the remainder interest attempted to be conveyed. However, the copy of the

August 14,1950, Assignment included in Exhibit D is missing page 213, which contains the

reservation of the net profits interest. See CR 77 - 89.

            PlaintiffBaxter Brinkmann knew the 1987 Settlement Agreement was missing pages,

but signed it anyway. See CR 564.

            The 1987 Settlement Agreement conveyance is therefore fatally defective for failure

to provide a sufficient legal description of the net profits interest.


            The statute of frauds, Tex. Bus. & Com. Code §26.01, requires that all conveyances

be in writing and signed by the party to be charged.         An additional requirement that the

description of the property conveyed must be sufficiently certain, so as to enable a party

#128215.1                                         11
familiar with the locality to identify the premises to be conveyed to the exclusion of others,

has been imposed by the courts. See Morrow v. Shotwell, All S.W.2d 538, 539 (Tex. 1972).

            E.     Defendants Are Good Faith Purchasers For Value
                   Who Cut Off Any Claims Of Plaintiff Baxter Brinkmann
                   And Are Entitled To Have Their Title Quieted As A Matter Of Law.


            The Sheriffs Deed to Defendants of all interest of Virginia Brinkmann and the net

profits interest is attached to Plaintiff s Petition. CR 91. Because the attempted conveyance

of a remainder interest to Baxter Brinkmann in the 1987 Settlement Agreement was either

ineffective for an insufficient description or void for failure to record in Scurry County,

Texas, Virginia Brinkmann owned the entire fee-simple interest in the 7.5% net profits

interest at the time of sale.

            The Sheriffs Deed reflects that Defendant Caroline Berthelot, Trustee, purchased all

interest of Virginia Brinkmann for the cash sum of $430.00, making Defendant a purchaser

for a valuable consideration.


            §5.004 of the Property Code provides that the Sheriffs Deed to Defendants passed


"absolute title" to Defendants, as follows:


                  §5.004.        Conveyance by Authorized Officer

                  (a)     A conveyance of real property by an officer legally authorized
                  to sell the property under a judgment of a court within the state passes
                  absolute title to the property to the purchaser.

                  (b)   This section does not affect the rights of a person who is not or
                  who does not claim under a party to the conveyance or judgment.

            The Affidavit of Defendant Berthelot establishes that she had no knowledge of any

claim by Baxter Brinkmann to the net profit interest owned by Virginia Brinkmann at the

time of foreclosure, so that Defendant Caroline Berthelot, Trustee, was a bona fide purchaser

for value, who acquired a good foreclosure title at the Sheriffs sale. CR 300 - 301.


#128215.1                                        12
            Since the 1987 Settlement Agreement had never been recorded in Scurry County,

there was no constructive notice of any claim by Baxter Brinkmann, and his claim under the

1987 Settlement Agreement is void by the express terms of § § 13.001 and 5.004 of the Texas

Property Code.

ISSUE 2:           DEFENDANTS ARE ENTITLED TO ALL SUMS WHICH ACCRUED
                   PRIOR     TO    MRS.     BRINKMANN'S          DEATH      AND     PRIOR     TO
                   PLAINTIFF'S NOTICE OF CLAIM UNDER THE DOCTRINE OF
                   DELAYED INCOME RECEIPT


            The plant operator suspended run payments after the death of Mrs. Brinkmann on

August 13, 2006, which relate to periods of time prior to August 13, 2006. CR 388 - 392.


$15,621.12 of the total suspended funds are in this category. Id.

            These post-August 13, 2006, payments are to correct accounting errors. Berthelot

Aff., Exhibit 4. CR 299. If all of the facts relevant to a correct accounting had been known

prior to August 13,2006, then the post-August 13 payments made with respect to pre-August

13 time periods would have been made pre-August 13 to Defendants.

            In addition to this $15,621.12 amount, payments were made to Defendants with

respect to time periods after August 13,2006, until Plaintiff gave notice of claim on January

25, 2007. CR 394. Plaintiff is clearly estopped and barred by laches from asserting these

claims for failure to give notice at a time when Defendants were receiving and spending the

payments without notice of Plaintiff s claims. See Defendant's Affirmative Defenses CR

126 - 129.

            Plaintiff argues that Defendants are entitled only to payments actually received prior

to August 13, 2006. However, Defendants are entitled to recover all sums paid after the

death of Virginia Brinkmann which accrued with respect to time periods prior to her death



#128215.1                                         13
under the doctrine of "delayed income" recognized in Texas in San Antonio Loan & Trust

Co. v. Hamilton, 283 S.W.2d 19 (Tex. 1955). The delayed income doctrine and the San

Antonio Loan case are referred to in 2 Williams & Meyers, Oil and Gas Law §514.2 at p.

661.


            In San Antonio Loan a $1,300 note was placed in trust in 1924.          The note was

defaulted in 1932 and in 1937 judgment was recovered for $2,557.83, of which $1,300 was

principal and $1,257.83 was interest.           The land securing the note was purchased at

foreclosure by the trust for $ 1,200. Thereafter two oil and gas lease bonuses totaling $9,770

were received.


            The remaindermen argued that the heirs of the life tenant, who had died, had no

interest in the note and should not share in the profits following the foreclosure. However,


the Supreme Court applied a doctrine of delayed receipt, and ratioed title to the land and

proceeds in the percentages in which the original judgment had been recovered, 51% to the

remaindermen, and 49% to the heirs of the life tenant, even though the life tenant had died

and the life estate had terminated when receipts were realized.

            The Bergin case and Property Code sections cited by Plaintiff are consistent with


treating the payments made to correct accounting errors as income due Defendants. Bergin

adopted the Massachusetts rule that stock dividends paid in cash are income and stock

dividends paid in stock are principal. Thus, a late cash stock dividend made to correct an

earlier cash dividend error would be income, and a stock dividend whenever received would

be principal.

            Similarly, the cash run payments made to correct errors in calculating earlier cash run

payments would also be income, not principal.


#128215.1                                         14
                                              PRAYER

            For the foregoing reasons, Petitioners ask this Court to grant this Petition for Review,

request briefs from the parties, set this case for oral argument, and after argument, sustain

Petitioners's issues presented for review, reverse the judgment of the Court of Appeals,

remand this case for trial, and grant Petitioners general relief.

            Dated: September 27, 2010.
                                                           Respectfully submitted,




                                                            '   W. D. Masterson
                                                                SBN 13184000
                                                                Theodore C. Anderson
                                                                SBN 01215700
                                                                John H. Crouch
                                                                SBN 00783906

                                                           KILGORE & KILGORE, PLLC
                                                           3109 Carlisle
                                                           Dallas, Texas 75204
                                                           (214) 969-9099 - Telephone
                                                           (214) 953-0133-Fax

                                                           ATTORNEYS FOR PETITIONER



                                  CERTIFICATE OF SERVICE


            This certifies that the undersigned served the foregoing document on counsel ofrecord
for Respondent on the 27th day of September, 2010, as follows:

            CERTIFIED MAIL. RRR
            #7010 0780 0000 0264 3804


            Mr. Michael G. Brown
            FIGARI & DAVENPORT, L.L.P.
            3400 Bank of America Plaza
            901 Main Street, LB 125
            Dallas, Texas 75202-3796




#128215.1                                          15

				
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