Co-Tenants
OWNERSHIP IN COMMON
Defined – where owners of undivided
fractional interest own shares and have
unity of possession. The common right of
several different owners to possess and
use the same property. Not an estate in
land, but a relationship between persons.
Starr v. Dunbar, 69 S.W. 2d 86,
(Tex.Civ.App.—Texarkana 1934, writ ref’d)
Example – Owner dies leaving three
children: A, B, and C. A, B, and C each
own a one-third undivided interest. If 100
acre tract, their ownership extends to every
portion of the property, but it is not a
“divided” ownership
1/3
1/3
1/3
YES
1/3
1/3
NO
1/3
ORIGINATES
•Intestate succession
•Last Will and Testament
•Two or more grantees at the same time
(presumption of equal ownership)
•Lessee of co-tenant becomes a co-tenant
•Life tenant/remainderman are not cotenants
•Conveyance of co-tenant of west third of
100 acre tract from A to E.
•What does this mean? A conveys his
one-third interest in 100 acres. Does
not bind B or C’s rights.
POWERS
•Sell or mortgage interest without
knowledge or consent of other cotenants
•Possession of entire tract (without rent)
•Can rent land out to third party (must
account to other co-tenants for
income)
•All have duty to preserve the common
property (not to commit waste)
•Right to seek partition
ADVERSE POSSESSION
Possession by one co-tenant is not adverse
to another co-tenant absent some
repudiation, notice of adverse claim or
ouster. This is because each co-tenant
has unlimited right of possession
Evans v. Covington, 795 S.W.2d 806,
(Tex.Civ.App.-Texarkana 1990).
Repudiation is any declaration or act
clearly hostile to other co-tenants and
inconsistent with their rights.
Condra v. Grogan Mfg., Co.,
233 S.W.2d 565, (Tex. 1950).
Repudiation by a co-tenant in possession
constitutes a trespass against the other
co-tenants from which a cause of action
for trespass to try title arises and
recovery may include judgment for the
right of possession.
Ouster is a notorious and unequivocal act by
which one co-tenant deprives another of
common and equal possession and
enjoyment of property.
Sadler v. Duvall, 815 S.W.2d 285, (Tex.App.-Texarkana
1992).
When a party acquires title which purports to
convey the entire title to common land, such
a conveyance constitutes ouster.
Ouster requires more than simply
possessing the land; it must be a hostile act
and unequivocal so that the co-tenants
become aware one co-tenant is claiming
their interest.
WASTE
A co-tenant in possession who fails to
properly protect the common property
commits waste. Each co-tenant has a duty
not to commit waste and is liable to his or
her co-tenants for loss resulting from a
breach of this duty.
The failure of a co-tenant in possession to
properly protect the common property
amounts to an act of waste.
Guffey v. Stroud, 16 S.W.2d 527, (Tex.Comm.App.
1929 Opinion Adopted)
TIMBER RIGHTS
Any co-tenant can sell or convey timber
growing on the commonly held property and
thereby pass good title to the timber.
Green v. Crawford, 662 S.W.2d 123, (Tex.App.-Tyler
1984, writ ref’d n.r.e.)
The seller has no duty to first acquire
the consent of the other co-tenants
because if consent were required, the
seller would be denied the benefit of
his/her use of the timber and would be
required to have the property
partitioned before exercising individual
control over his/her interest.
MINERAL CO-TENANT
(TEXAS)
General – State recognizes right of co-tenant to
lease his undivided interest in, or to prospect and
produce minerals from the common property
without the consent of his co-tenants, and the
production of oil and gas does not constitute
waste.
Burnham v. Hardy Oil Co., 147 S.W. 330
(Tex.Civ.App.-San Antonio 1912), aff’d 195 S.W.
1139 (Tex. 1917).
Tynes v. Mauro, 860 S.W.2d 168, 176 (Tex.App.-El
Paso 1993 writ denied).
Hamman v. Ritchie, 547 SW2d 698 (Tex. App. –
Fort Worth 1977, writ ref’d n.r.e.)
Any co-tenant can lease his undivided
interest. The lessee receives the estate
from the lessor and takes the place of
the lessor as the co-tenant. Does not
owe non-joining co-tenants a fiduciary
duty.
Donnan v. Atlantic Richfield, 732 S.W.2d
715, 715 (Tex.App.-Corpus Christi 1987,
writ denied).
Reasoning
“fugitive” nature of oil and gas
permits development even though all cotenants have not been located
owner of small interest cannot veto mining
or drilling
each co-tenant can fully exercise the
incidents attached to his fractional share
State of Texas encourages exploration of
natural resources
DRILLING ISSUES
The non-leasing co-tenants have no right
to oust the lessee or prevent the drilling
although they can demand an accounting
for their share of the net profits from the
lessee, just as they can from an original cotenant.
Garcia v. Sun Oil Co., 300 S.W.2d (Tex.Civ.App.Beaumont 1957)
EXAMPLE NO. 1
A – 1/3
B – 1/3
C – 1/3
A and B lease to X Oil Company
C is unleased
X Oil Company can drill without C’s
consent. X must initially pay all costs in
connection with drilling and producing and
must account to the other co-tenant (C) for
the value of C’s respective interest in
production. If dry hole, X is not entitled to
reimbursement from C; even if production
does result, non-participating co-tenant has
no personal duty to pay his share of costs;
drilling co-tenant may recoup only out of
production.
White v. Smyth, 214 S.W.2d 967, 975 (Tex. 1948).
Can C get production in kind? Texas courts
have not addressed that issue. Courts
however have consistently indicated a nonjoining co-tenant can share in proceeds, but
not production itself.
Cox v. Davison, 397 S.W.2d 200 (Tex. 1965).
The distinction is significant because the
language seems to imply that the operating
co-tenant must market the non-consenting
co-tenant’s share along with its own mineral
production.
White v. Smyth, 214 S.W.2d 967
It is therefore doubtful the operating cotenant can refuse to market the non-joining
co-tenants’ minerals.
WHAT ARE C’S OPTIONS?
C can choose to ratify A and B’s lease, assuming their
lease purports to lease full interest. If C ratifies A and B’s
lease, he gives up his right to share in net profits, but is
entitled to share in the benefits provided in the oil and gas
lease. Whether it is to a co-tenant’s benefit to ratify such a
lease depends on the profitability of the well in question
and the terms of the lease in question. It is unclear how
long a co-tenant may wait before deciding to ratify the
lease. Likely the courts will require the decision to be
within a reasonable time period and will not allow the cotenant to wait to determine whether a well will be
unprofitable before opting to ratify the lease.
Nugent v. Freeman, 306 S.W.2d 167 (Tex.Civ.App.-Eastland 1957, writ ref’d
n.r.e.).
If C on the other hand chooses to accept
his fractional share of the net production, is
he affected by the lessee’s joinder of other
tracts to form a pooled unit? NO. The
lessee cannot dilute the non-joining cotenant’s interest by pooling with other
tracts.
Wagner & Brown v. Sheppard, 198 S.W.3d 369
(Tex.App.-Texarkana 2006).
EXAMPLE NO. 2
Blackacre
100 acres
A – 1/3
B – 1/3
C – 1/3
A and B lease to X Oil Company
C is unleased
Well drilled on Blackacre. X pools/unitizes
Blackacre into 600 acre gas unit. C’s share
of production remains at one-third.
Accounting for Oil/Gas Production
General – The drilling co-tenant must
account to non-joining co-tenant for
proportionate share of net profits from sale of
production. Byron v. Pendley, 717 S.W.2d 602, 605
(Tex. 1986).
Non-joining co-tenants are not personally
responsible for the costs of drilling and
producing. The developing party has the
right to deduct the co-owner’s proportionate
share of expenses from their proportionate
share of production.
Allowed Expenses
The lessee can deduct only those expenses
which are reasonable and necessary. Some
costs are rarely challenged, such as drilling,
casing, labor. Specific expenses that may be
challenged are the following:
•Depreciation
•Operator’s machinery/equipment
These are probably allowed, even if contested.
As to those costs which are
questionable, they are:
oOperating co-tenant’s personal services
oSupervisory/managerial costs
Those are probably defendable, if they
would be incurred otherwise by another
service provider. Expenses only allowed
on a well-by-well basis.
Expenses Generally Not Allowed
Overhead charges for other wells
Costs of money used (interest)
Field offices
Warehouse charges
Any other charges not attributable to that
well
Any costs associated with drilling dry holes
or otherwise non-productive wells, even if
there is other production by the operating
co-tenant
Is payout determined on a lease basis or a
per well basis?
Courts have not decided this issue
specifically, but language in several cases
indicate the better rationale is development
and production expenses will be considered
on a per well basis, not on a lease basis.
Burnham v. Hardy Oil Co., 147 S.W. 330
(Tex.Civ.App.-San Antonio 1912)
Pipelines/Easements
The well-settled general rule is that each
owner in a co-tenancy acts for himself, and
no one is an agent for the others or has any
authority to bind other co-tenants merely
because of co-tenancy relationship. Absent
consent or subsequent ratification by the
other co-tenants, the general rule is that one
co-tenant cannot impose an easement upon
the common property in favor of a third
party.
Elliott v. Elliott, 597 S.W.2d 795, 802, (Tex.Civ.App.-Corpus
Christi 1980, no writ).
Lee v. Phillips Petroleum, 329 F.Supp. 579
(S.D.Tex. 1971) held as a matter of law that a
pipeline company that obtained a pipeline
right of way easement from only a portion of
the owners was a trespasser as a matter of
law. Texas courts have routinely held
granting a pipeline easement by a co-tenant
constitutes waste.
Seismic Development
In almost every state, all co-owners
of minerals own the right to explore,
and any co-tenant may explore and
develop the minerals without the
consent of the other co-tenants,
subject to an obligation to account to
the other co-tenants for net profits.
Burnham v. Hardy Oil Co., 147 S.W.2d 330,
(Tex.1912).
Presumably then, a single co-tenant
may grant the necessary consent to
conduct geophysical operations
regardless of how small the co-tenants
fractional interest might be. The cases
dealing with the rights of co-tenants
generally are in the context of drilling
and production activities. The issue has
not been directly addressed in the
context of geophysical operations by
Texas courts.
The two exceptions, Louisiana and
Oklahoma both required a consent of all
co-owners of the minerals, but both
states have far different laws regarding
the rights of oil and gas operators than
does Texas. The better rules seems to
be consent from any of the co-tenants
would be sufficient to conduct
geophysical operations.