Michael Cade and Billie Cade v. Barbara D. Cosgrove, Individually, and as the Trustee of the Charles and Barbara Cosgrove Family Revocable Living Trust

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH

NO. 02-11-00424-CV

MICHAEL CADE AND BILLIE CADE APPELLANTS AND APPELLES

V.

BARBARA D. COSGROVE, APPELLEE AND APPELLANT
INDIVIDUALLY, AND AS THE
TRUSTEE OF THE CHARLES AND
BARBARA COSGROVE FAMILY
REVOCABLE LIVING TRUST

----------

FROM THE 17TH DISTRICT COURT OF TARRANT COUNTY

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OPINION

----------

Appellants Michael Cade and Billie Cade appeal from the trial court’s

denial of their motion for summary judgment on their claims against Appellee

Barbara Cosgrove, individually, and as trustee of the Charles and Barbara

Cosgrove Family Revocable Living Trust, and the granting of Cosgrove’s motion

for summary judgment. Cosgrove appeals from the trial court’s denial of her
motion for partial summary judgment for attorney’s fees. The Cades conveyed

property to a revocable trust created by Cosgrove and her husband, now

deceased, under a deed that conveyed the mineral estate in contravention of the

sales contract, and they sued Cosgrove when she refused to execute a

correction deed. Because we hold that neither the Cades nor Cosgrove

established a right to summary judgment, we reverse.

Background Facts and Procedural History

On September 21, 2006, the Cades and the Cosgroves executed a

contract for the sale of the Cades’ property in Arlington, Texas. The property

was subject to an oil, gas, and mineral lease between the Cades and Dale

Resources, LLC. The sales contract stated that the Cades were to retain all

mineral rights. The warranty deed, however, failed to include the mineral

reservation. The deed was signed by the Cades at closing on October 10, 2006,

and was recorded on October 16, 2006.

After the sale, the Cades and the lessee under the mineral lease took acts

consistent with an understanding that the Cades still owned the minerals. The

Cades sent Chesapeake Energy a letter notifying the company of their address

change on December 11, 2008. 1 Chesapeake sent the Cades two shut-in

checks dated January 7, 2009 and January 21, 2010. On October 25, 2010,

1
We assume in this appeal that Chesapeake had acquired the lease with
Dale Resources.

2
Chesapeake mailed the Cades a letter informing them of their rights as royalty

owners.

In December 2010, however, Michael called Chesapeake to ask about the

status of the Cades’ bank deposit forms for royalties, and he learned that the

company had sent the royalty deposit forms to Cosgrove. In this conversation,

Michael learned that there was a “problem” with the deed with respect to the

mineral reservation. The Cades asked Cosgrove to execute a correction deed,

but she refused.

The Cades filed this suit on February 24, 2011, asserting claims for a

declaratory judgment that the Cades owned the minerals, breach of an

agreement with the title company that the parties signed at closing, fee

forfeiture, 2 tortious interference with contractual relationship, and civil theft. The

Cades filed a motion for partial summary judgment, and Cosgrove filed a motion

for summary judgment asserting limitations and the merger doctrine. Cosgrove

asked the trial court to dismiss the Cades’ claims “subject to Cosgrove’s right to

pursue attorney’s fees.”

The trial court signed an order granting Cosgrove’s motion for summary

judgment, denying the Cades’ motion, and dismissing the Cades’ claims.

Cosgrove then filed a motion for partial summary judgment seeking attorney’s

fees under the Declaratory Judgment Act. The trial court signed a final judgment

2
The Cades do not raise any argument on appeal regarding the summary
judgment as to this claim.

3
denying Cosgrove’s motion, stating that “it would be inequitable and unjust to

award attorney’s fees based on the facts in this lawsuit.” Both sides now appeal.

Standard of Review

We review a summary judgment de novo. 3 We consider the evidence

presented in the light most favorable to the nonmovant, crediting evidence

favorable to the nonmovant if reasonable jurors could and disregarding evidence

contrary to the nonmovant unless reasonable jurors could not. 4 We indulge

every reasonable inference and resolve any doubts in the nonmovant’s favor. 5 A

plaintiff is entitled to summary judgment on a cause of action if it conclusively

proves all essential elements of the claim. 6 A defendant who conclusively

negates at least one essential element of a cause of action is entitled to

summary judgment on that claim. 7

When both parties move for summary judgment and the trial court grants

one motion and denies the other, the reviewing court should review both parties’

3
Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010).
4
Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844,
848 (Tex. 2009).
5
20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008).
6
See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones, 710 S.W.2d 59, 60
(Tex. 1986).
7
Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010); see
Tex. R. Civ. P. 166a(b), (c).

4
summary judgment evidence and determine all questions presented. 8 The

reviewing court should render the judgment that the trial court should have

rendered. 9

Analysis

1. Cosgrove’s Motion for Summary Judgment

In the Cades’ first issue, they argue that the trial court erred by granting

Cosgrove’s motion for summary judgment. Cosgrove moved for summary

judgment on all of the Cades’ claims. Cosgrove’s summary judgment motion

asserted two grounds for judgment: the merger doctrine and the statute of

limitations.

1.1. Merger Doctrine

Cosgrove argued that the doctrine of merger prohibited the Cades from

using the terms of the sales contract to contradict the terms of the deed.

Generally, the terms of a sales contract are merged into the deed, and the deed

is considered the final expression of the parties’ agreement. 10

8
Mann Frankfort, 289 S.W.3d at 848; see Myrad Props., Inc. v. Lasalle
Bank Nat’l Ass’n, 300 S.W.3d 746, 753 (Tex. 2009).
9
Mann Frankfort, 289 S.W.3d at 848.
10
Harris v. Rowe, 593 S.W.2d 303, 306 (Tex. 1979); Munawar v. Cadle
Co., 2 S.W.3d 12, 16–17 (Tex. App.—Corpus Christi 1999, pet. denied) (citation
omitted).

5
 A party may avoid the application of this doctrine, however, by alleging and

proving a mistake in the execution of the deed. 11 The Cades asserted in their

petition that the deed should be reformed because the deed’s omission of their

reservation of their mineral interest was a mutual mistake. A deed may be

reformed on the ground of mutual mistake. 12 Unilateral mistake by one party,

and knowledge of that mistake by the other party, is equivalent to mutual

mistake. 13 Thus, the merger doctrine does not prevent the Cades from seeking

reformation of the deed based on mutual mistake. The contract reflected an

agreement that the Cades would retain the property’s mineral rights, Cosgrove

does not argue to the contrary, and she offered no evidence to contradict the

contract. Because summary judgment should not have been granted for

Cosgrove on this ground, we sustain this part of the Cades’ first issue.

1.2. Statute of Limitations

Cosgrove also asserted the statute of limitations to defeat the Cades’

claims. We first consider the statute of limitations as to the Cades’ deed

reformation claim. The Cades do not dispute that the four-year statute of

limitations applies to claims for deed reformation or that they brought their claim

more than four years after they executed the deed.

11
Harris, 593 S.W.2d at 306; Turberville v. Upper Valley Farms, Inc., 616
S.W.2d 676, 678 (Tex. Civ. App.—Corpus Christi 1981).
12
Davis v. Grammer, 750 S.W.2d 766, 768 (Tex. 1988).
13
Id.

6
 Before discussing deed reformation claims, we must clarify the nature of

the claim asserted and acknowledge that what the Cades stated in their petition

was that they wanted a declaration “that the mineral interest of the Property was

not conveyed by them to [Cosgrove] . . . and that they still hold clear legal title to

these mineral interests.” But they do not deny that the deed did convey the

mineral interests, and that conveyance of the minerals is the basis of their suit. It

is clear from reading their pleadings in their entirety that what they sought was a

declaration reforming of the deed. 14

1.2.1. General rule regarding accrual of a claim to reform a deed

Generally, a cause of action accrues, and therefore the limitation period

begins to run, “when a wrongful act causes a legal injury.” 15 But when

determining how long a grantor has to bring an action to reform a deed, we must

take into consideration the presumption of the grantor’s immediate knowledge

(the presumption): a grantor is presumed to know the contents of the deed

immediately upon executing it. 16 Application of the presumption means that the

limitation period on a claim to reform an incorrect deed begins to run as soon as

the deed is executed because, as soon as the deed is executed, the grantor has

14
See Simpson v. Curtis, 351 S.W.3d 374, 377, 381 (Tex. App.—Tyler
2010, no pet.) (reviewing a trial court’s granting of a declaratory judgment
reforming a deed to reserve a mineral interest and affirming as modified).
15
Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620, 623 (Tex. 2011).
16
Sullivan v. Barnett, 471 S.W.2d 39, 45 (Tex. 1971).

7
actual knowledge that the deed is incorrect. 17 This rule has not been strictly

applied in the past, however, and courts have noted numerous exceptions over

the years. 18 We address here (1) how courts have (inconsistently) treated the

presumption in the past, (2) the modern incarnation of the discovery rule, and (3)

questions on how the earlier presumption case law applies today.

1.2.2. The presumption has been held to be rebuttable—but in what

circumstances?

The Texas Supreme Court has said that the presumption can be rebutted,

and “there are various circumstances, such as subsequent conduct of the parties

as though the deed had not contained the error, which will excuse a delay in

discovery of the mutual mistake.” 19 In 1959, in Miles v. Martin, the Supreme

Court considered whether to allow a grantor to move forward with a suit to reform

a deed that had mistakenly omitted the grantor’s mineral reservation. 20 The

grantor Martin and the grantees had intended that Martin would reserve a royalty

interest. 21 The prior grantor who had conveyed the property to Martin had also

17
Id.
18
See, e.g., id. at 45–46; Broyles v. Lawrence, 632 S.W.2d 184, 187–88
(Tex. App.—Austin 1982, no writ).
19
Sullivan, 471 S.W.2d at 45.
20
159 Tex. 336, 343, 321 S.W.2d 62, 67 (1959).
21
Id. at 67.

8
reserved a mineral interest. 22 The deed from Martin included the prior grantor’s

reservation but did not include Martin’s intended royalty interest. 23 Martin filed

suit for reformation almost six years after the deed’s execution. 24

The Supreme Court concluded that the testimony showed that Martin may

not have actually discovered the mistake more than four years before the suit

was filed. 25 As to when Martin should have discovered the mistake, the court

stated that the evidence that he had been receiving delay rentals “indicate[d] that

there may be an issue of fact” about whether he should have known of the

mistake. 26 Though the court did not hold that the deed language was

ambiguous, the court stated that the parties to the deed “may have been mutually

mistaken as to the legal effect of its provisions and believed that the instrument

effectively reserved to [Martin] a one-fourth mineral interest in addition to that

already owned by [the previous grantor].” 27 The court remanded the case for a

new trial to determine Martin’s right to equitable relief. 28 In summary, although

22
Id. at 64, 67.
23
Id. at 64.
24
Id. at 69.
25
Id. at 70.
26
Id.
27
Id. at 67.
28
Id. at 70.

9
the reservation language in the deed was not ambiguous, Martin nevertheless

may have been mistaken about the legal effect of the deed, and the fact that he

had been receiving delay rentals raised a question about whether he should have

known of the mistake.

Nearly ten years later, in McClung v. Lawrence, the Supreme Court once

again considered whether the grantors were bound by the presumption. 29 As in

Martin, the deed in McClung contained a reservation of royalty interest in the

grantors but made no mention of the reservations of prior grantors. 30 The

McClungs sought a reformation of the deed sixteen years after the deed was

executed and filed of record. 31 There was no allegation that the language used

to reserve the McClungs’ interest was itself ambiguous, the Supreme Court did

not hold that it was ambiguous, and the deed clearly did not include any mention

of the prior reservations. 32 But the court held that rule from Martin—that the

equitable remedy of reformation is available when parties to a deed are mistaken

as to the legal effect of deed language—controlled, and it remanded the case for

a trial on when the mistake in the deed was or should have been discovered. 33

29
430 S.W.2d 179, 181–82 (Tex. 1968).
30
Id. at 180–81.
31
Id. at 181.
32
Id. at 180.
33
Id. at 181–82.

10
 In reaching its holding, the Supreme Court briefly discussed two earlier

courts of appeals cases, Kennedy v. Brown 34 and Kahanek v. Kahanek. 35 The

court of appeals in McClung had relied on these cases in holding that reformation

was unavailable to the grantors. 36 The Supreme Court distinguished both cases

on the ground that in those two cases, the grantors were not entitled to

reformation because the reservations of mineral rights “had been entirely omitted

from the deeds, a fact plainly evident.” 37 Thus, unlike the McClungs’s requested

relief, the relief sought in Kennedy and Kahanek was not based on “a mistake of

the parties as to the legal effect of the instruments.” 38 This distinguishing of

Kennedy and Kahanek suggested that the rule for reformation after limitations

had run was that if no reservation of a mineral interest is reserved in the deed,

the grantor has notice of the mistake, but if some mineral interest is reserved, the

parties could be mistaken as to the legal effect of the reservation and therefore

about whether the deed conforms to the parties’ agreement.

34
113 S.W.2d 1018 (Tex. Civ. App.—Amarillo 1938, writ dism’d).
35
192 S.W.2d 174 (Tex. Civ. App.—Galveston 1946, no writ).
36
430 S.W.2d at 181.
37
Id. at 181.
38
Id. at 181 (emphasis added).

11
 Three years later, however, in Sullivan v. Barnett, 39 the Supreme Court

again addressed the issue, but this time it did not expressly rely on a “mistaken

as to the legal effect of the language used” theory to reach its decision. Unlike

Martin and McClung, the Sullivan case did not deal with the failure to include a

reservation of a mineral interest. When the Sullivans conveyed to the grantees a

half interest in some property, the deed mistakenly included an additional forty

acres. 40 The Sullivans lived on that forty acres and continued to do so after the

deed’s execution. 41 The same mistake was repeated in a deed of trust from the

Sullivans and the grantees in favor of Barnett. 42

The Supreme Court stated that there were numerous exceptions to the

rule that grantors are charged with knowledge, including “subsequent conduct of

the parties as though the deed had not contained the error.” 43 Thus, when the

actions of both parties after execution of the deed show that the parties believed

and behaved as though there was no error in the deed, the limitation period

begins when the mistake was or should have been discovered. 44

39
471 S.W.2d at 45 (emphasis added).
40
Id. at 41–42.
41
Id. at 42–43.
42
Id. at 41.
43
Id. at 45.
44
See id.

12
 In a footnote, the court discussed its previous apparent acceptance of

Kennedy and Kahanek, saying it had

distinguished the McClung facts from those in Kahanek and
Kennedy, and we find no decision by this Court citing either of those
cases with approval or following the rule stated by them on this
point. The holding in Kahanek was dicta, since in that case there
was a finding of actual knowledge of the mutual mistake by grantor
more than four years prior to suit. The Kennedy decision clearly
recognizes an exception to the rule when the grantor is lulled into a
sense of security by subsequent acts of the grantee. 45

The court thus appeared to step away from allowing Kahanek and

Kennedy to stand for a bright-line rule. The court then cited multiple cases in

which a grantor who had accidentally conveyed more property than was intended

was allowed to seek reformation of the deed after limitations had run. 46 The

court thus indicated that whether the deed had language that could cause the

grantor to be unsure about the legal effect of the deed was not the determining

factor in rebutting the presumption. 47 That is, reformation after the limitation

period might still be available even when the deed did not contain language that

could cause the grantor to believe the deed was correct.

Toward the end of the Sullivan opinion, the Supreme Court stated that its

holding was “supported by an established rule of law applicable to grantors who

remain in possession of land which was inadvertently included in a deed by

45
Id. at 46 n.3 (emphasis added).
46
Id. at 45–46.
47
See id.

13
mutual mistake,” and “[a]s long as no rights of bona fide innocent purchasers

have intervened, actions or defenses by such persons in peaceable possession

based upon mutual mistakes in deeds and removal of clouds from title are not

barred by the four-year statute of limitation.” 48 In this case, the Cades did not

continue to have physical possession of the property after the sale. They did,

however, continue to receive royalty payments.

The Sullivan court cited with approval the opinion in Luginbyhl v.

Thompson, 49 a case from the same court that later issued Kennedy. In

Luginbyhl, the deed omitted the grantor’s intended mineral reservation, the suit

for reformation was filed six years after the deed’s date, and reformation was

allowed. 50 The contract between the parties in the case called for the grantor to

reserve the mineral rights on half of the property. 51 Before executing the deed,

the grantor leased the mineral rights on the half of the property that he intended

to reserve. 52 He continued to receive payments under the lease after the

execution of the deed. 53 The grantee leased the mineral rights to the other half

48
Id. at 47.
49
11 S.W.2d 380 (Tex. Civ. App.—Amarillo 1928, writ dism’d).
50
Id. at 381–82.
51
Id. at 383.
52
Id.
53
Id.

14
of the property “but stated [after the deed’s execution] that the mineral rights on

the north half of the section belonged to” the grantor. 54 The grantor learned of

the mistake when he tried to sign a new mineral lease. 55 The court of appeals

upheld the trial court’s judgment reforming the deed to reflect the parties’

agreement, noting that “there was no fact nor circumstance to arouse [the

grantor’s] suspicion relative to the omission from the deed, and, in order to set in

operation the statute of limitation, there must be some fact or circumstance to put

him on inquiry.” 56

The later Kennedy court distinguished Luginbyhl on the ground that in

Luginbyhl, the grantee had “permitted the grantor to collect the proceeds of the

lease and, although having full knowledge that he was doing so, made no

objection” and by doing so had “lulled the grantor into a sense of security which,

under the law, excused him from exercising any effort to ascertain the fact that

his rights under the contract had been omitted from the deed.” 57 In this case, the

Cades continued to collect royalty checks from Chesapeake, and the summary

judgment evidence does not show that Cosgrove took any action to assert her

right to the minerals until after the limitation period had passed.

54
Id.
55
Id. at 381.
56
Id. at 382.
57
Kennedy, 113 S.W.2d at 1021.

15
 To review, in Luginbyhl, where a mineral reservation was entirely omitted

from a deed, the Amarillo court of appeals held that the limitation period on the

grantor’s claim for reformation began to run when the grantor discovered the

mistake or when he should have discovered it by the exercise of reasonable

diligence, not from the time that the grantor executed the deed. 58 The same

court then held in Kennedy that when a deed omitted entirely the grantor’s

mineral reservation, the grantor was charged with knowledge at the time of the

deed’s execution that the deed did not reserve his mineral rights. 59 But Kennedy

also distinguished Luginbyhl on the ground that the grantee in that case had

acted in a manner that lulled the grantor into a false sense of security about what

was in his deed, thereby exercising any effort to confirm his rights under the

deed. 60 Thus, the Kennedy court recognized that even when the deed entirely

omits a reservation and does not contain ambiguous language, in some

circumstances the grantor may assert a claim for reformation after the limitation

period would have otherwise run. 61 And we note that the Kennedy court also

58
11 S.W.2d at 382.
59
113 S.W.2d at 1021.
60
Id.
61
See id.

16
found important that the grantor in that case had hired his own attorney to

prepare the deed and had signed the deed in the attorney’s office. 62

Then the Supreme Court saw the need to distinguish Kennedy in reaching

its holding in McClung, thus giving Kennedy tacit approval. But then it later

appeared to reject the part of Kennedy about plain omissions from a deed when

it (1) cited Luginbyhl with approval, (2) stated that it had never approved

Kennedy or had followed that part of Kennedy, and (3) pointed out that Kennedy

had acknowledged the exception of when a grantee’s actions lead the grantor to

believe the deed is correct (suggesting that it did still approve of that part of

Kennedy). In other words, case law on what circumstances allow rebuttal of the

presumption has not followed a straight line. And at least as of Sullivan, the

Supreme Court was unwilling to hold unequivocally that a grantor may never

rebut the presumption when the mistake in the deed is that the deed omits a

reservation entirely.

1.2.3. Brown v. Havard

Almost a decade after Sullivan, the Texas Supreme Court issued Brown v.

Havard. 63 Brown involved a deed with an incorrect mineral reservation, but it

was the grantees who wanted to reform the deed, not the grantors. 64 The court

62
Id. at 1020.
63
593 S.W.2d 939 (Tex. 1980).
64
Id. at 940.

17
held that the reservation clause in the deed was ambiguous. 65 And the court

held that the mistake in the deed was not “so plainly evident as to charge King

[the grantee] with the legal effect of the words used.” 66 The court pointed out that

even the justices on that court disagreed about the meaning of the clause used in

the deed, and “[c]ertainly King, who was not a lawyer, cannot be charged as a

matter of law with knowledge of the meaning of the reservation.” 67

The court did not state that reformation after limitations have run is

available only when a deed contains some reservation that could cause a party

to the deed to not understand the deed’s legal effect. But the opinion did note

that “[p]rior to the Browns’ rejection of the division order, King [the grantee] and

his assignees were in possession of the land[,] and there was nothing in the deed

to King or the Browns’ conduct to place them on notice as a matter of law” that

the grantors claimed the one-half interest they later asserted. 68 This language

could be read to mean that language in the deed can put a party on notice as a

matter of law such that the party would not be permitted to show that he or she

65
Id. at 942.
66
Id. at 944.
67
Id.
68
Id. (emphasis added).

18
did not actually have knowledge of the deed’s contents. But the court did not

disavow or distinguish Sullivan and in fact cited it with approval. 69

1.2.4. More Recent Discovery Rule Case Law

Between 1980 (the year that Brown was issued) and the most recent

Texas Supreme Court case on the presumption (Lesley, 70 discussed below), the

Texas Supreme Court issued opinions refining the body of law on the discovery

rule. In its 1996 Altai and S.V. opinions, the court distilled its broad line of cases

justifying deferred accrual of claims into the application of the discovery rule that

we use today: that application of the rule should be permitted when the nature of

the injury is inherently undiscoverable and the evidence of injury is objectively

verifiable. 71 When the type of injury is one to which the discovery rule applies,

then a court looks at when the plaintiff knew or with the exercise of reasonable

diligence should have known of the injury. 72 The court stated that in deciding

whether a claim is inherently undiscoverable, a court looks at whether the injury

69
Id.
70
Lesley v. Veterans Land Bd. of Tex., 352 S.W.3d 479 (Tex. 2011).
71
Computer Assocs. Int’l, Inc. v. Altai, 918 S.W.2d 453, 456 (Tex. 1996);
S.V. v. R.V., 933 S.W.2d 1, 3–8 (Tex. 1996).
72
Altai, 918 S.W.2d at 455.

19
is the type of injury that is undiscoverable, not whether the particular injury in the

case at hand was undiscoverable. 73

The holdings in Martin, McClung, Sullivan, and Brown were fact-based

rather than category-based. They did not address whether a mistake in a deed is

a type of injury that is inherently undiscoverable and went straight to an analysis

of whether the party wanting to avoid the presumption actually knew or should

have known of the error in the deed, that is, whether some circumstance excused

the failure to discover it. These courts, then, appeared to accept that a mistake

in a deed is the type of injury for which accrual of a claim based on the injury may

be deferred. Since Altai, the Texas Supreme Court has not addressed how the

rebuttable presumption fits with the discovery rule. But in Lesley, its most recent

case involving deed reformation after limitations had run, it held that the grantor’s

claim for reformation was not barred by the statute of limitation.

1.2.5. Lesley v. Veterans Land Bd.

The Texas Supreme Court issued Lesley v. Veterans Land Board of the

State of Texas in 2011. This case dealt with a mineral reservation in a deed. 74

The court said the reservation was “not as opaque as the one in Brown,” but it

contained provisions that made it unclear about what was being reserved, and a

subsequent grantee appeared to share the grantor’s understanding of what had

73
Id. at 456; see also Via Net v. TIG Ins. Co., 211 S.W.3d 310, 314 (Tex.
2006).
74
Lesley, 352 S.W.3d at 484–86.

20
been reserved. 75 The court said that “[i]n these circumstances, it cannot be said

that, as a matter of law, Lesley [the grantor] knew or should have known of the

mistake in her deed when she executed it. Whether the claim for reformation is

barred by limitations involves disputed facts.” 76 The court remanded the claim to

the trial court for further proceedings. 77

Because the Lesley case also involved confusing mineral reservation

language, the court did not address other circumstances where reformation might

be sought and whether other deed problems are the type of which the grantor

has knowledge as a matter of law at the time of the deed’s execution. The court

thought it was worth noting that the grantee shared the grantor’s understanding

of the deed’s language. 78 This notation could be the court’s recognizing that

mutual mistake is enough to rebut the presumption, or it could be the court’s

simply recognizing that if the grantee shares the grantor’s understanding of a

deed’s language, then the language is not so clear as to give the grantor

knowledge as a matter of law.

We should note that in Lesley, the Texas Supreme Court did not articulate

that the discovery rule was the basis for its holding that reformation was

75
Id. at 486.
76
Id.
77
Id. at 492.
78
Id. at 486.

21
available. It mentioned the discovery rule in deciding a different issue in the

case—whether the holder of the right to execute a mineral lease on property

owes a fiduciary duty to nonparticipating royalty owners. 79 But in the discussion

of whether Lesley was entitled to reformation of the deed after the limitation

period has passed, the court did not discuss whether the injury alleged by Lesley

was the type to which the discovery rule should apply. 80

1.2.6. Recent cases from this court: Kidwell v. Black and Poag v. Flories

This court has also addressed the issue, 81 and two relatively recent

opinions must be acknowledged. The 2003 case of Kidwell v. Black involved an

incorrect block number in a series of deeds and lien instruments. 82 In this

opinion, we cited Brown for the proposition that the statute of limitation begins to

run on a claim to reform a deed based on mutual mistake when the mistake is

discovered or, in the exercise of reasonable diligence, should have been

79
Id. at 488–89.
80
Id. at 484–86.
81
See, e.g., Mason v. Univ. of the S., 212 S.W.2d 854, 857 (Tex. Civ.
App.—Fort Worth 1948, writ ref’d n.r.e.) (noting the presumption “in the absence
of proof to the contrary, that the parties were familiar with the contents and
meaning of the instrument from the date of its execution,” holding that the
evidence supported the trial court’s finding of mutual mistake in the execution of
a deed of trust, and affirming the trial court’s reformation of the deed of trust
sixteen years after its execution).
82
104 S.W.3d 686, 686–87 (Tex. App.—Fort Worth 2003, pet. denied).

22
discovered. 83 We noted that when the mistake should have been discovered

was a question of fact, and we upheld the trial court’s implied ruling that the claim

was not barred. 84 In that case, however, limitations were asserted against the

grantee, not the grantor.

The second case, Poag v. Flories, is cited by Cosgrove and so should be

discussed here. 85 Poag was a probate case involving a subsequent grantee

(Poag) under an administrator’s deed. 86 The administrator’s deed conveyed the

“surface estate only.” 87 The grantee in that deed then conveyed its interest in the

property to Poag under a deed that did not state that it conveyed the “surface

estate only” but did state that it was subject to any and all reservations affecting

the property. 88 Poag sued for reformation, not of the deed conveying the

property to him, but of the prior administrator’s deed. 89 The administrator’s deed

had been recorded, and we held that the recording put Poag, a third party to the

deed, on notice of the deed’s contents, and, thus, the discovery rule did not

83
Id. at 689–90.
84
Id. at 690.
85
317 S.W.3d 820, 825 (Tex. App.—Fort Worth 2010, pet. denied).
86
Id. at 823–24, 826.
87
Id. at 826–27.
88
Id.
89
Id. at 823–24.

23
prevent limitations from running. 90 We stated in a footnote that the original

grantee might not be able to argue mutual mistake, either, because the deed

expressly stated that it conveyed the “surface estate only.” 91 But that language

was dicta, and we cited for that proposition the court of appeal opinion in

Lesley—which the Texas Supreme Court subsequently overruled. 92

This court has therefore indicated that a recording of a deed puts a third

party to the deed on notice of the deed’s contents, and if the deed is recorded

and does not contain ambiguous language, the discovery rule will not apply to

the claim. 93 But in that opinion, we did not directly address whether the

discovery rule could apply to a reformation claim as between the original parties

to the deed when the deed is recorded. And we did not discuss whether a

mistake in a deed is the type of injury for which the discovery rule is or is not

available but instead went directly to the analysis of whether the grantee should

90
Id. at 827; see also Cox v. Clay, 237 S.W.2d 798, 804 (Tex. Civ. App.—
Amarillo 1950, writ ref’d n.r.e.) (op. on reh’g) (stating that “[t]he object of the
recording acts is to protect innocent purchasers . . . against previous deeds” and
that the recording of an instrument “carries notice of its contents only to those
who are bound to search for it, such as subsequent purchasers under the grantor
in such an instrument,” and holding that limitations did not bar the grantor’s claim
for reformation).
91
Poag, 317 S.W.3d at 827 n.1.
92
Id.
93
See also HECI Exploration Co. v. Neel, 982 S.W.2d 881, 887 (Tex. 1998)
(stating that when constructive notice applies, it creates an irrebuttable
presumption of actual notice). But see Brown, 593 S.W.2d at 944 (allowing a
subsequent grantee to reform a deed).

24
have known of the mistake. Thus, like the Texas Supreme Court in Lesley, we

implicitly accepted that deed reformation is the type of claim for which the

discovery rule is available under the right facts.

1.2.7. Applying the Law to this Case

In summary, the discovery rule defers accrual of a cause of action until the

diligent plaintiff knew or should have known of the alleged injury. 94 Likewise, in

rebuttable presumption cases, the courts have said that the claim for reformation

does not accrue until the grantor actually knew or, in the exercise of reasonable

diligence, should have known of the mistake. In both discovery rule cases and

cases involving the presumption, the same rule applies for the running of

limitations. Courts have thus appeared to accept the application of the discovery

rule to deed reformation claims. We will now state explicitly what we have

previously only implied: a mutual mistake in a deed is a type of injury for which

the discovery rule is available.

We recognize that the Texas Supreme Court has stated that the deferring

of the accrual of a claim based on fraudulent concealment is a distinct concept

from deferred accrual based on the discovery rule. 95 Thus, the discovery rule is

94
Kerlin v. Sauceda, 263 S.W.3d 920, 925 (Tex. 2008).
95
See Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 736 (Tex. 2001).
We refer to the delay in accrual of a claim rather than tolling of the limitations
period after limitations has begun. The Texas Supreme Court has used both
phrases in discussing the discovery rule. See id. (stating that the discovery rule
and fraudulent concealment can toll limitations); S.V., 933 S.W.2d at 4 (citing
Trinity River Auth. V. URS Consultants, Inc., 889 S.W.2d 259, 262 (Tex. 1994) as

25
not the only legal doctrine that allows a party to bring suit beyond the time at

which limitations appear to have run, and, therefore, we have considered

whether deferring accrual of a claim for reformation based on mutual mistake,

like fraudulent concealment, is a distinct legal basis for deferring accrual of a

claim from the discovery rule. But because the language used to discuss

deferral of a claim for reformation and language used to discuss the discovery

rule is essentially the same, because the Texas Supreme Court has discussed

the history of case law on deferred accrual of claims and divided them into only

the two categories of the discovery rule and fraudulent concealment, and

because courts have implicitly applied the discovery rule to these types of claims,

we decline to acknowledge a separate legal basis for deferring accrual of a claim

for reformation apart from the discovery rule or fraudulent concealment.

We now turn to whether the summary judgment evidence raises a fact

issue about whether the Cades knew or should have known of the omission in

the deed within the limitation period. Having held that the presumption may be

rebutted, we must start with the proposition that execution of the deed is not

enough to irrefutably establish a grantor’s knowledge as a matter of law so that a

grantor will always be prohibited from introducing evidence of when the grantor

distinguishing between deferring accrual of a claim, thereby delaying the start of
the limitations period, and tolling the running of limitations once the period has
begun, and stating that the discovery rule defers accrual of a claim). Because
we discuss here the delay in the accrual of the claim rather than some
circumstance that stopped the limitation period from running after it had begun,
we use the term “deferred accrual.”

26
actually learned of the deed’s true contents. Nor can execution of the deed

absolutely establish when the grantor should have known of the deed’s contents

such that the trial court would be prohibited from considering evidence of when

the grantor should have known. To hold that execution of a deed has that effect

in all cases as a matter of law, we would have to overrule all prior case law

holding that the presumption may in some circumstances be rebutted and hold

that the presumption is irrebutable. Because the presumption may be rebutted,

we must take the position that a grantor may introduce, and the factfinder may

consider, evidence disputing that the grantor actually knew of the deed’s

contents at the time of its execution and that the grantor should have known of

the deed’s contents within the limitation period.

In a letter brief, Cosgrove argues that property code section 13.002

dictates that the Cades had notice of the existence of the instrument because the

deed was recorded in the public records of the property county. 96 The recording

of an instrument does not work to create notice as a matter of law in every

circumstance. 97 The Cades are not third parties to the deed and are not a

person interested in an estate admitted to probate—persons charged with

96
Tex. Prop. Code Ann. § 13.002 (West 2004).
97
See HECI Exploration Co., 982 S.W.2d at 887 (“[W]hen the rationale for
imposing constructive notice is lacking, public records have not been held to
create an irrebuttable presumption of notice.”).

27
knowledge as a matter of law with instruments filed in the public records. 98 The

Cades were perfectly aware of the deed’s existence, and they had no reason

after conveying the property to search the public records to examine the deed,

absent some circumstance to put them on notice of a problem.

We must next consider the extent of this rule that the presumption may be

rebutted and determine whether the presumption may be rebutted to allow

correction of any mutual mistake in a deed or only those kinds of mistakes that

may not be plainly evident to parties when they read the deed. That is, we must

decide whether the Cades may be allowed to rebut the presumption when they

do not rely on ambiguous language in their deed to explain why they did not

realize sooner and should not have realized sooner that their deed contained a

mistake.

In Lesley and Brown, the Texas Supreme Court recognized that language

in a deed that could reasonably cause a party to be mistaken as to the deed’s

legal effect was an exception to the presumption. 99 Cosgrove argues in her brief

that this is the only circumstance by which a grantor may rebut the presumption.

But further back than that, in Sullivan, the Texas Supreme Court held that a party

should be allowed to rebut the presumption, and it did not reach that holding by

first holding that deed language could have caused the parties to misunderstand

98
See id.
99
Lesley, 352 S.W.3d at 485–86; Brown, 593 S.W.2d at 944.

28
the deed’s effect. 100 And that court cited cases allowing reformation for mistakes

that should have been plainly evident on the face of the deed. 101 Thus, we must

either (1) distinguish Sullivan or determine that it has been abrogated or (2) hold

that in some circumstances, even when the alleged error in the deed should be

apparent, a party to the deed may show that it did not know and had reason not

to know of its contents. We choose to follow the latter approach.

As stated above, the discovery rule applies to types of injuries that are

“inherently undiscoverable.” 102 As yet, we have no guidance from the Texas

Supreme Court on how to apply this standard to the body of law on deed

reformation. But the court has said that an injury is “inherently undiscoverable if

it is by nature unlikely to be discovered within the prescribed limitations period

despite due diligence.” 103 Harmonizing this language with the fact that case law

on deed reformation has not been rejected by the Texas Supreme Court, we

conclude that a mutual mistake in a deed is an injury that a grantor is unlikely to

discover within the prescribed limitations, despite due diligence, unless some

circumstance puts the grantor on notice of the mistake. And until the Texas

Supreme Court instructs us otherwise, we will continue to look to older cases on

100
471 S.W.2d at 45–46.
101
Id. at 45.
102
Altai, 918 S.W.2d at 456.
103
S.V., 933 S.W.2d at 7.

29
rebutting the presumption for guidance on what circumstances should have put

the grantor on notice and what kind of facts will suffice to rebut the presumption.

The court in Sullivan stated that it had “never permitted the rule [presuming

the grantor’s immediate knowledge] to blindfold it to the true facts concerning

actual discovery of the mutual mistake and subsequent conduct of the parties

with respect thereto.” 104 Applying this language, and noting that the rights of third

parties are not involved and would not be affected by reformation and that

reformation would, at most, put the parties in the position that they bargained for,

we hold that the presumption does not prevent the Cades from introducing

evidence to establish the true facts regarding when they knew or should have

known of the mistake in the deed.

When the Cades knew or should have known of the deed’s error is a fact-

based inquiry. 105 We look to see what evidence the parties introduced to show

whether the Cades actually knew or should have known of the deed’s contents

104
471 S.W.2d at 45.
105
See Lesley, 352 S.W.3d at 486 (determining that the question of
whether Lesley’s claim for reformation was barred by limitations involved
disputed facts); Brown, 593 S.W.2d at 944 (stating that the question of whether
the grantee should have known of the deed’s recitals by the exercise of
reasonable diligence is one of fact); see also Mason, 212 S.W.2d at 857 (stating
that it was “rather hard for us to see how [the parties to the instrument] could
have been mistaken about such an important matter” but that the court was “not
permitted to substitute our judgment on the facts for that of the trial court so long
as there is any evidence of probative value to support his findings”).

30
more than four years before they brought suit. In this case, the evidence

regarding the Cades’ knowledge is as follows:

• The parties executed the deed in October 2006, and the deed did

not contain language that restricted the conveyance to the surface

estate;

• The sales contract for the property stated, “Sellers to retain all

mineral rights”;

• The warranty deed states that the conveyance is “made subject to

any and all valid and subsisting restrictions, easements, rights of

way, reservations, maintenance charges together with any lien

securing said maintenance charges, zoning laws, ordinances of

municipal and/or other governmental authorities, conditions and

covenants, if any, applicable to and enforceable against the above-

described property,” but it does not state that it conveys only the

surface estate;

• On December 11, 2008, the Cades sent a letter to Chesapeake

informing it that their address had changed;

• In early January 2009, Chesapeake paid a shut-in royalty to the

Cades by check;

31
• In January 2010, Chesapeake sent the Cades another check for a

shut-in royalty payment, and this check had the Cades’ new address

on it;

• In October 2010, Chesapeake sent the Cades a letter informing

them of their right as royalty owners to request information about

deductions from their royalty payments;

• In connection with their closing, the parties signed a document titled

“Acceptance of Title and Closing Agreements” (closing agreement),

in which they stated that they “agree to comply with all provisions of

the real estate contract . . . or other documents executed in

connection with the closing of this transaction” and that they “agree

to fully cooperate, adjust, and correct any errors or omissions and to

execute any and all documents needed or necessary to comply with

all provisions of the above mentioned real estate contract”;

• The deed states that after recording, it is to be returned to “Ted L.

Tittsworth,” an attorney also named in the closing agreements and

apparently representing or connected with the title company;

• Michael stated in an affidavit that he and his wife never intended to

convey the mineral rights on the property;

32
 • Michael stated in his affidavit that he first learned of the mistake in

the deed in December 2010 when he spoke to someone with

Chesapeake;

• Billie stated in her affidavit that in December 2010, she called

Cosgrove to discuss what Michael had learned from his conversation

with Chesapeake and that Cosgrove told her that she [Cosgrove]

had executed the documents sent to her by Chesapeake, that the

title company had failed to put the reservation of mineral rights into

the warranty deed, and that Chesapeake’s delay in drilling had

caused the Cades to lose their mineral rights to the property;

• In Michael’s responses to Cosgrove’s request for admissions, he

denied that he and Billie delivered the deed to Cosgrove, stating that

he and Billie “executed the documents at closing, then a person from

the title company took all of the documents to another room, and she

gave us and the Cosgroves documents when she returned”;

• Billie’s response contained the same statement; and

• Cosgrove attached an affidavit to her motion for summary judgment,

and it contained no statements regarding the intentions of the parties

regarding the minerals or when she discovered that the deed did not

contain the reservation.

Michael also stated in his affidavit that the title company assured them that

the deed contained their reservation and that in December 2010, someone from

33
Chesapeake told him that Chesapeake had sent forms to Cosgrove, who told the

Chesapeake employee that she did not believe that she owned the mineral

rights, but the trial court sustained Cosgrove’s objections to these two

statements. But the evidence that the trial court considered included evidence

that the Cades did not know the deed contained the mistake at the time they

executed it and that they continued to receive royalty payments and

correspondence from Chesapeake after signing the deed. This is some evidence

that the Cades attempted to exercise reasonable diligence in protecting the

mineral interests they thought they owned by keeping in communication with

Chesapeake and by making sure that Chesapeake had their correct address. 106

There is no evidence that a copy of the deed was given to the Cades after they

had signed it. This evidence is sufficient to raise a fact issue about whether the

Cades actually knew of the deed’s contents within the limitations period.

This evidence is also sufficient to raise a fact issue about when the Cades

should have known of the deed’s contents. No evidence suggested that

Cosgrove disputed the Cades’ ownership of the mineral rights until she received

forms from Chesapeake or that she did anything to create a question about who

owned the minerals. Chesapeake continued to treat the Cades as the mineral

owners for years after execution of the deed, and no evidence shows that any

106
See Wagner & Brown, Ltd., 58 S.W.3d at 736 (Tex. 2001) (stating that
royalty owners have some obligation to exercise reasonable diligence in
protecting their interests).

34
circumstance that occurred before December 2010 should have put the Cades

on inquiry about whether they had retained the mineral rights. 107 We hold that

the trial court should not have granted summary judgment for Cosgrove on the

reformation claim based on limitation, and we sustain this part of the Cades’ first

issue.

1.2.8. Summary Judgment as to the Cades’ Remaining Claims

As to the Cades’ claims for tortious interference and civil theft, Cosgrove

sought summary judgment on the ground that the Cades knew or should have

known about any possible claim under these causes of action on the date of

closing—October 12, 2006. But the injury giving rise to both the tortious

interference claim and the theft claim did not arise until Cosgrove asserted

mineral rights to the property. That is, the mistake in the deed was an injury for

which the Cades could seek the remedy of reformation, but it did not give rise to

a tort claim. Under the evidence, the mistaken deed was not in itself a ground to

assert a tort claim against Cosgrove because it was not a wrongful act committed

by her, and if Cosgrove had never asserted a right to the payment from

Chesapeake, the Cades would not have had any reason to assert these

107
See Martin, 321 S.W.2d at 70 (including the grantor’s continuing to
receive delay rentals as a fact raising a fact issue about whether he should have
known of the mistake in his deed); Luginbyhl, 11 S.W.2d at 382 (“[T]here was no
fact nor circumstance to arouse [the grantor’s] suspicion relative to the omission
from the deed, and in order to set in operation the statute of limitation, there must
be some fact or circumstance to put him on inquiry.”).

35
claims. 108 The summary judgment evidence was that Cosgrove did not assert

rights to payments under the mineral lease until at least December 2010. The

Cades filed their claim on February 24, 2011. The Cades asserted these claims

within limitation period on those causes of action. 109 We sustain this part of the

Cades’ first issue.

Similarly, Cosgrove’s limitation argument also fails as to the Cades’ breach

of contract claim. There is no allegation that Cosgrove breached any contract

other than the closing agreement, in which she agreed to cooperate in correcting

any errors in any documents executed in connection with the transaction. The

summary judgment evidence is that acts alleged by Cosgrove in violation of this

agreement occurred in December 2010, and the Cades’ suit was therefore

brought within the limitations period. 110 We sustain the remainder of the Cades’

first issue.

108
See, e.g., Waxler v. Household Credit Servs., Inc., 106 S.W.3d 277, 281
(Tex. App.—Dallas 2003, no pet.) (holding that the issuing of a negative credit
report and the charging of an account off to bad debt were not themselves
unlawful acts and that the plaintiff’s negligence claim “could only accrue when
she sustained damages resulting from these actions”).
109
See Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a) (West Supp. 2013),
§ 16.051 (West 2008).
110
See Tex. Civ. Prac. & Rem. Code Ann. § 16.051; Stine v. Stewart, 80
S.W.3d 586, 592 (Tex. 2002) (“It is well-settled law that a breach of contract
claim accrues when the contract is breached.”).

36
 2. The Cades’ Motion for Summary Judgment

The Cades sought summary judgment on their reformation claim and on all

of the elements of their breach of contract claim except damages. In their

second issue, they argue that the trial court erred by denying their motion for

partial summary judgment.

2.1. The Cades’ Deed Reformation Claim

Although the evidence is enough to raise a fact issue on when the Cades

knew or should have known of the deed’s contents, we cannot say that it

establishes as a matter of law that they did not and should not have in the

exercise of reasonable diligence discovered the mistake sooner. There was no

summary judgment evidence considered by the trial court regarding whether the

Cades read the deed at closing (and if so, what they understood it to mean),

what the Cades were told about the deed at closing, or any other circumstance

explaining why they did not discover at closing that the deed did not comply with

the sales contract. Although Michael stated in his affidavit that he “specifically

was assured by the title company that the reservation” was included in the deed,

the trial court sustained Cosgrove’s hearsay and best-evidence rule objections to

this statement. There was also no evidence addressing whether the Cades had

ever seen the deed at any other time after closing, and if they had, why they

believed it did not convey the mineral rights. Because we hold that the Cades

have not established their right to judgment as matter of law on their claim, we

overrule this part of the Cades’ second issue.

37
2.2. The Cades’ Breach of Contract Claim

The Cades also argued that they established as a matter of law that

Cosgrove breached the “Acceptance of Title and Closing Agreements” and that

they are entitled to specific performance requiring Cosgrove to execute a

correction deed. Correction deeds have been used to change the conveyance of

the original deed. 111 Recently, however, the Texas Supreme Court has clarified

that the proper use of a correction deed is narrow in scope. 112 A correction deed

may be used only to correct facial imperfections, such as a defective description

of the grantor’s capacity. 113 To change the deed to eliminate the conveyance of

the mineral estate is more than a facial imperfection. 114 As such, the Cades

could not use a correction deed for the purpose they intended, and they therefore

were not entitled to specific performance. If what the Cades actually sought was

111
See, e.g., CenterPoint Energy Houston Elec., L.L.P. v. Old TJC Co., 177
S.W.3d 425, 433 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (holding that
the correction deed conveyed the grantor’s reversionary interest that had been
set out in the original deed); Rogers v. Carter, 385 S.W.2d 563, 566 (Tex. Civ.
App.—San Antonio 1964, writ ref’d n.r.e.) (reciting as background facts that 200
acres had been inadvertently omitted from a deed but that those acres had been
subsequently conveyed by correction deeds).
112
Myrad Props., 300 S.W.3d at 750.
113
Id.
114
See, e.g., Acker v. Guinn, 464 S.W.2d 348, 352 (Tex. 1971) (noting that
a reservation of mineral rights creates a distinct, separate estate that is dominant
to the surface estate).

38
not a correction of the 2006 deed but for Cosgrove to execute a new instrument

conveying the mineral back to them, their pleadings do not make that clear.

Cosgrove did not raise as a ground for summary judgment on this claim

that the Cades were not entitled to the correction deed that they sought as a

matter of law, and, accordingly, the trial court could not have granted summary

judgment for Cosgrove on the breach of contract claim on that ground. 115 But

because the Cades are not entitled to the relief that they seek on their breach of

contract claim, the trial court did not err by denying their motion for summary

judgment seeking specific performance. We overrule the remainder of the

Cades’ second issue.

3. Cosgrove’s Appeal

In her sole issue on appeal, Cosgrove argues that the trial court erred by

holding that it would be inequitable and unjust to award attorney’s fees based on

the facts of this lawsuit. Because we have held that the trial court erred by

granting summary judgment for Cosgrove, we overrule this issue as moot.

Conclusion

Having sustained the Cades’ first issue and having overruled the Cades’

second issue and Cosgrove’s sole issue, we reverse the trial court’s summary

judgment and remand this case for further proceedings.

115
See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339
(Tex. 1993) (stating that a summary judgment motion “must stand or fall on the
grounds expressly presented in the motion”).

39
 /s/ Lee Ann Dauphinot
LEE ANN DAUPHINOT
JUSTICE

PANEL: DAUPHINOT, WALKER, and GABRIEL, JJ.

WALKER and GABRIEL, JJ., concur without opinion.

DELIVERED: April 3, 2014

40