Union Pac. R.R. Co. v. Seeco, Inc. , 504 S.W.3d 614 ( 2016 )

Cite as 2016 Ark. App. 466
ARKANSAS COURT OF APPEALS
DIVISION III
No.CV-16-28
Opinion Delivered: OCTOBER 5, 2016
UNION PACIFIC RAILROAD
COMPANY APPEAL FROM THE FAULKNER
APPELLANT COUNTY CIRCUIT COURT
[NO. 23CV-11-653]
V.
HONORABLE TROY B. BRASWELL,
JR., JUDGE
SEECO, INC., AND CORNELIUS TYUS,
ET AL.
APPELLEES AFFIRMED
KENNETH S. HIXSON, Judge
Appellant Union Pacific Railroad Company (Union Pacific) appeals from the
Faulkner County Circuit Court’s judgment and order filed on September 18, 2015, and
agreed final order filed on November 5, 2015, finding that the mineral rights in question
were owned in fee simple by separate appellees, individual members of the Tyus family
(collectively the Tyus family). On appeal, Union Pacific contends that the circuit court
erred in granting appellee SEECO, Inc.’s motion for summary judgment and that this court
should reverse and remand for the circuit court to enter a judgment confirming that it is the
rightful owner of the mineral rights on the property at issue. We disagree and affirm.
Appellee SEECO, Inc. (SEECO), filed a complaint for interpleader and declaratory
judgment. In its complaint, SEECO sought to interplead royalties from the production of
natural gas on certain real property in Faulkner County, Arkansas, and for the circuit court
Cite as 2016 Ark. App. 466
to determine the rightful owner of the mineral rights and the royalty proceeds. 1 Both the
Tyus family and Union Pacific filed answers asserting respective ownership of the mineral
rights. 2 SEECO subsequently filed a motion for summary judgment, alleging that the
material facts were undisputed and that the Tyus family was entitled to the mineral rights.
Union Pacific responded to the motion for summary judgment and also filed a cross-motion
for summary judgment, alleging that Union Pacific was the owner of the mineral rights.
The Tyus family filed a response to SEECO’s motion for summary judgment, stating that it
concurred with SEECO’s motion that the Tyus family was entitled to the mineral rights
and attached the affidavit of Wes Tyus in support thereof.
The undisputed facts presented by the parties are as follows. The property description
of the mineral interest in question is NW/4 of the NE/4 of Section 19, Township 8, Range
13 West in Faulkner County, Arkansas. The entire property was initially transferred by a
1
SEECO subsequently filed a first amended complaint on August 31, 2011, and a
second amended complaint on October 4, 2011, naming additional parties with a potential
interest in the property. SEECO’s second amended complaint named Missouri Pacific
Railroad Company; Anadarko E&P Company, LP; Anadarko Land Corp.; Upland
Industrial Development Company; Union Pacific Railroad Company; Cornelius Tyus;
Lillie Tyus; Robert Lee Tyus; Johnny B. Lyons; Odella Tyus Dillard; Gertha Tyus; Lurlia
Simmons; Bonita Tyus; Tamara C. Tyus; Karlna M. Tyus; Xavier C. Tyus; Mae H. Lyons;
Zalmenta Lyons; John Wesley Tyus; Ruby Tyus; Telitha Ealy; Wesley Tyus; Azerlean
Westley; Mary Tyus; Glenn Tyus; Della Water; Rita Glover; Derrick Tyus; Alton Tyus;
Wefus Tyus Sr.; Eva J. Tyus; John Tyus; Evelyn Toney; Vargean Graham; Melissa Bowman
Tyus; Wefus Tyus, Jr.; Fred Simmons, Jr.; Anna Rue Simmons Gray; Ida Mae Nesbit;
Willie Nesbitt; Loretta Burks; and Savannah Vaughn.
2
Missouri Pacific Railroad Company (Missouri Pacific) was originally a named party
to this action. However, the circuit court granted Missouri Pacific’s motion to dismiss on
September 28, 2011. The order found that Missouri Pacific was no longer an existing entity
and that any interest that the company might have had would have been transferred to
Union Pacific as part of a merger.
2
Cite as 2016 Ark. App. 466
recorded document dated on November 17, 1857, from the United States Secretary of the
Interior to the State of Arkansas for the benefit of the Little Rock & Fort Smith Railroad.
Union Pacific explained that it had become the successor in interest to Little Rock & Fort
Smith Railroad after a series of various mergers over the years. 3 Clearly, Union Pacific was
the record title owner of the property commencing in 1857.
The first recorded deed that mentions the Tyus family is a warranty deed that
purports to convey the property in its entirety from R.B. and C.E. Tyus to J.L. and Girtha
Tyus in 1941. Subsequent to 1941, there are several deeds purporting to transfer ownership
of the property among the various Tyus family members. The Tyus family’s subsequent
purported chain of title from 1941 to the present was uninterrupted. It is undisputed that
there is not an executed, filed deed transferring ownership from Union Pacific to the Tyus
family. However, Union Pacific did concede the following in its summary-judgment
response brief concerning the 1941 deed: “[t]he Tyus family may have begun living on the
Property and acquired some record title interest to the surface through their actual use.”
While there were no executed and filed deeds between 1857 and 1941, there was
some evidence concerning activity to the property records between 1936 and 1941. Prior
to 1936, the property in its entirety was assessed to Union Pacific by the Faulkner County
Real Estate Assessor. In 1936, the county-assessment records show a line marking through
the name “Union Pacific” as owner and the name “R.B. Tyus” handwritten onto the
3
Union Pacific specifically explained that the Little Rock & Fort Smith Railroad was
acquired by St. Louis, Iron Mountain and Southern Railway in 1906. In 1917, the
St. Louis, Iron Mountain and Southern Railway was merged with Missouri Pacific, and
Missouri Pacific was merged into Union Pacific in 1997.
3
Cite as 2016 Ark. App. 466
assessment record for the property. There were no other notes, additions, or deletions to
the assessment records for 1936. The Faulkner County assessment records from 1937 to
1958 were not included in our record.
The next pertinent assessment in the county records is from 1958. In 1958, the Oil,
Gas, Mineral Royalty Interest book from Faulkner County indicates that “Union Pacific”
was the owner of the mineral interest on the property. No other notes, additions, or
deletions are found in the 1958 book. Our record does not reflect any other assessments
between 1959 and 1967. The next pertinent record is found in the 1968 Oil, Gas, Mineral
Royalty Interest book, which again indicates that Union Pacific was the owner of the
mineral rights. There are no assessment records between 1969 and 1990. In 1990, the Oil,
Gas, Mineral Royalty Interest book again indicates that Union Pacific was the owner of the
mineral rights, and a similar entry appears eight years later in 1998. In short, from 1936
through 2014, a period of seventy-eight years, the assessment records from Faulkner County
indicate that Union Pacific was the owner of the mineral interest for four separate and
indiscriminate years.
Again, while there were no executed and recorded deeds from Union Pacific to the
Tyus family, Union Pacific argued that in 1938, there was a lost deed between Union Pacific
and the Tyus family. Union Pacific contends that this 1938 lost deed transferred ownership
of the surface rights to the Tyus family but specifically reserved the mineral rights to Union
Pacific, and therefore, Union Pacific remains the owner of the severed mineral interests. As
support, Union Pacific submitted an affidavit of Matthew G. Kozisek, an employee of
Union Pacific. Kozisek explained that in his research he had uncovered some documents
4
Cite as 2016 Ark. App. 466
from January 1938 and found a blank, unsigned, and unrecorded deed transferring the
surface rights of the property to R.B. and C.E. Tyus and reserving the mineral rights to
Union Pacific. 4 In his affidavit, Kozisek further explained that it was standard procedure
for the railroad to sell land through a purchase contract that included several installment
payments. Once the buyer had paid the required installment payments, the land
commissioner would then execute a deed granting the surface property to the purchaser,
retaining the mineral interest with the railroad, and the purchaser would be responsible to
file the executed deed with the circuit clerk. It is undisputed by the parties that this 1938
prepared deed (i.e. the “lost deed”) was unsigned by the parties and not filed of record in
the real estate records of Faulkner County.
The only other pertinent evidence proffered by Union Pacific concerning title to the
property was that Union Pacific offered two redemption deeds that were conveyed in 2004
to Union Pacific 5 as a direct result of its payment of delinquent ad valorem taxes for 2000–
2002 for the mineral rights to the property.
In its motion for summary judgment, SEECO argued that the Tyus family had been
in uninterrupted and continuous possession of the property for over seventy years and that
there was no evidence of a mineral severance in favor of Union Pacific or its predecessor.
4
The unsigned and unrecorded deed actually purported to reserve the mineral interest
to Missouri Pacific, Union Pacific’s predecessor. For the sake of clarity, we referred to the
grantor as “Union Pacific” instead of “Missouri Pacific.”
5
Although the redemption deeds were actually conveyed to Missouri Pacific, Union
Pacific’s predecessor, we again referred to “Union Pacific” instead of “Missouri Pacific” for
the sake of clarity.
5
Cite as 2016 Ark. App. 466
Additionally, SEECO contended that although redemption deeds had been issued, the deeds
were only evidence of a tax payment and did not vest title.
The Tyus family attached an affidavit to its response to SEECO’s motion for
summary judgment to support their contention that they owned the mineral rights. In the
affidavit, Wes Tyus stated that he was familiar with the property and that his family had
been in exclusive possession of the property “well in excess of the seven-year adverse
possession period . . . and in fact, the Tyus family has owned this property for many
decades.” Additionally, he stated that members of his family had paid the real-estate taxes
associated with the property for more than seven years.
In its response to SEECO’s motion for summary judgment, and in its own cross-
motion for summary judgment, Union Pacific argued that it held record title to the property
by virtue of the 1857 grant from the United States Department of Interior and that the Tyus
family was not the owner of the mineral rights either through record title or through adverse
possession. In the alternative, Union Pacific contended that if the Tyus family owned the
surface rights, the mineral rights had been severed and that Union Pacific was the owner of
the severed mineral rights. However, we note that Union Pacific did not contest that the
Tyus family ultimately owned the surface rights to the property at the summary-judgment
hearing.
At the beginning of the summary-judgment hearing and on the record, the parties
agreed that although each party had filed cross-motions for summary judgment, there were
no additional facts that were not presented in the pleadings submitted to the circuit court.
The circuit court inquired whether this was a type of case where both parties would agree
6
Cite as 2016 Ark. App. 466
that one party would win on summary judgment or one where there might be a genuine
issue of fact. Pointedly, counsel for Union Pacific stated that he did not “know of any other
facts that would come out that are not presented in these pleadings,” and further agreed that
either “one side wins on these facts or the other does.” After further discussion, counsel for
SEECO indicated that the circuit court would need to apply different burdens of proof in
analyzing the case. Counsel explained that adverse possession would have cured any
deficiencies in the Tyus family’s ownership, which required a burden of preponderance of
the evidence. However, Union Pacific’s claim of a lost deed indicating a severance of the
mineral rights required a clear-and-convincing burden of proof. Finally, we note that
counsel for Union Pacific stated on numerous occasions that it was “not trying to claim any
right in the surface” interest. All issues were well argued before the circuit court, including
but not limited to, the adverse-possession claim by the Tyus family, the “lost deed,” and the
severed-mineral-rights claim by Union Pacific.
After the hearing, the circuit court entered a detailed order granting SEECO’s
motion for summary judgment and denying Union Pacific’s cross-motion for summary
judgment. The circuit court found that the Tyus family owned the mineral rights in fee
simple along with the surface rights. The circuit court specifically found that Union Pacific
failed to present evidence sufficient to meet the requisite burden to show that the 1938 lost
deed was duly executed or its contents proved in the same manner. It further found that
there was insufficient proof to show that a severance of the mineral rights had occurred and
that in the absence of a severance, the Tyus family adversely possessed the mineral rights
when it adversely possessed the surface rights to the property. Subsequently, in an agreed
7
Cite as 2016 Ark. App. 466
final order, the circuit court dismissed all other claims, counterclaims, or cross-claims to the
extent anything was left pending. This appeal followed.
Appellant specifically argues on appeal that (1) the circuit court erred by requiring it
to prove its title to the mineral rights by clear and convincing evidence; (2) the circuit court
erred because record title to the mineral rights never passed from Union Pacific and because
the surface and mineral rights had been severed; (3) the circuit court erred when it
concluded that the 1941 wild deed conveyed the mineral rights; (4) the circuit court erred
when it determined that the Tyus family acquired the rights by adverse possession; and
(5) the circuit court impermissibly weighed the evidence at the summary-judgment stage.
We conclude that appellant’s arguments are without merit.
Summary judgment may be granted only when there are no genuine issues of
material fact to be litigated, and the moving party is entitled to judgment as a matter of law.
Nationwide Mut. Fire Ins. Co. v. Citizens Bank & Tr. Co., 2014 Ark. 20, 431 S.W.3d 292.
Ordinarily, in a summary-judgment appeal, when determining if there are genuine issues of
material fact in dispute, we would view the evidence in the light most favorable to the party
resisting the motion, and resolve any doubts and inferences against the moving party. Id.
However, in the present case, which does not involve the question of whether factual issues
exist but rather the application of legal rules, we simply determine whether appellees were
entitled to judgment as a matter of law. Barton Land Servs., Inc. v. SEECO, Inc., 2013 Ark.
231, 428 S.W.3d 430. When parties file cross-motions for summary judgment, as was done
in this case, they essentially agree that there are no material facts remaining, and summary
judgment may be an appropriate means of resolving the case. Cranfill v. Union Planters Bank,
8
Cite as 2016 Ark. App. 466
N.A., 86 Ark. App. 1, 158 S.W.3d 703 (2004). As to issues of law presented, our review is
de novo. State v. Cassell, 2013 Ark. 221, 427 S.W.3d 663.
Since there is no recorded deed conveying any interest from Union Pacific or its
predecessors to the Tyus family, and because “Union Pacific is not trying to claim any right
in the surface,” the remaining issues are whether Union Pacific provided proof that a
severance of the mineral rights had occurred and whether Union Pacific retained the
purported severed mineral interest. Union Pacific contends that a severance of the mineral
rights occurred either through the preparation of a 1938 lost deed and its accompanying
application, through four random mineral assessments in the Faulkner County Assessor’s
Office, or through two redemption deeds that had been conveyed in 2004, or through a
combination thereof.
Despite Union Pacific’s argument to the contrary, it had the burden to prove the
contents of the lost deed that it claimed severed the mineral rights by clear, satisfactory, and
convincing proof. Thompson v. Graves, 281 Ark. 492, 665 S.W.2d 268 (1984). However,
Union Pacific failed to provide parol evidence that would show that the deed was duly
executed as required by law and show substantially all its contents by clear, convincing, and
satisfactory evidence. See Witt v. Graves, 302 Ark. 160, 787 S.W.2d 681 (1990). Although
Kozisek’s affidavit indicated that he found a blank, unrecorded, and unsigned deed, Union
Pacific was unable to provide evidence that the deed had actually been executed as required
by law or that the contents included a reservation of the mineral rights as suggested in the
draft Kozisek found.
9
Cite as 2016 Ark. App. 466
Furthermore, the separate and sporadic mineral assessments in 1958, 1968, 1990, and
1998 did not show that Union Pacific had severed the mineral rights in this case. Prior to
a 2011 amendment, Arkansas Code Annotated § 26-26-1110(a) stated that when mineral
rights were owned separately from the surface, “it shall be the duty of the county assessor
when advised of the fact, either by personal notice or by recording of the deeds . . . to assess the
mineral rights in lands separate of the general property therein.” (Emphasis added.)
Assuming arguendo that a mineral assessment by the county assessor is evidence of a
severance, the separate, sporadic assessments here cannot serve as sufficient evidence of
severance because the first assessment did not take place until 1958, which was after the
Tyus family had adversely possessed the property. The 1958 assessment occurred seventeen
years after the 1941 deed had been recorded, twenty years after the 1938 purported lost
deed, and twenty-two years after the Tyus family was listed as the owner of the property on
the 1936 tax records. Additionally, unlike the evidence offered in Witt, Union Pacific failed
to offer any affidavits exhibiting the personal knowledge of a mineral severance from the
land or other evidence such as mineral deeds, mineral leases, or surface deeds to corroborate
the existence of a mineral severance. See Witt, supra. Union Pacific further failed to
introduce any evidence to explain why or how the county assessor was put on notice to
separately assess the mineral rights only in 1958, 1968, 1990, and 1998.
Likewise, the two redemption deeds conveyed in 2004 did not sever the mineral
rights. When one has no right, title, or interest in the land, he or she does not acquire title
from a redemption deed, but merely confers a benefit to the owner by extinguishing the
state’s tax lien. Ferguson v. Fields, 208 Ark. 839, 188 S.W.2d 302 (1945). A redemption
10
Cite as 2016 Ark. App. 466
deed from the state does not purport to convey title, but is a mere payment of taxes. Id;
Pyburn v. Campbell, 158 Ark. 321, 250 S.W. 15 (1908).
Union Pacific additionally contends on appeal that the Tyus family could not claim
title by adverse possession because the Tyus family failed to assert that their possession was
hostile. However, because Union Pacific did not contest that the Tyus family had met the
hostility element of adverse possession for ownership of the surface rights at the summary-
judgment hearing, it cannot argue otherwise for the first time now on appeal. 6 Unifirst Corp.
v. Ludwig Props., Inc., 2015 Ark. App. 694, 476 S.W.3d 852.
Union Pacific further contends on appeal that the Tyus family failed to show that
their adverse possession of the minerals was open and notorious. After reviewing the
evidence presented in this case and after acknowledging that Union Pacific did not contest
ownership of the surface rights, we conclude that the Tyus family took adverse possession
of the surface rights at least by 1948 (1941 plus the seven-year-adverse-possession period),
which was ten years before the first assessment of the mineral rights took place in 1958.
We agree with Union Pacific that our case law provides that when mineral rights
have been severed, adverse possession of the surface rights is ineffective against the owner
6
Although we note that SEECO’s complaint does not specifically state that the Tyus
family obtained its interest through adverse possession, adverse possession was clearly placed
at issue at the summary-judgment hearing. Rule 15(b) of the Arkansas Rules of Civil
Procedure (2015) allows for the amendment of the pleadings to conform to the evidence
introduced at trial. The rule is liberal in its allowance of amendments to conform pleadings
to proof and even contemplates an amendment after judgment. Barnett v. Gomance, 2010
Ark. App. 109, 377 S.W.3d 317. Even if no amendment is made, it does not affect the trial
of issues not raised in the pleadings, as permitting the introduction of proof on an issue not
raised in the pleadings constitutes an implied consent to trial on that issue. Id.
11
Cite as 2016 Ark. App. 466
of minerals unless the possessor actually invades the minerals by opening mines or drilling
wells and continues that action for the necessary period. Bonds v. Carter, 348 Ark. 591, 75
S.W.3d 192 (2002). However, because Union Pacific failed to show evidence that the
mineral rights were severed by at least 1948, the Tyus family adversely possessed the mineral
rights when the surface rights were adversely possessed, without providing any additional
proof.
Although Union Pacific argues that summary judgment was inappropriate, Union
Pacific is barred from raising on appeal the argument that an issue of fact remains to be
decided when it contended the contrary in circuit court. See Cranfill, supra. At the hearing,
counsel for Union Pacific stated that he did not “know of any other facts that would come
out that are not presented in these pleadings” and further explained that either “one side
wins on these facts or the other does.” Here, as in Cranfill, the parties agreed to proceed on
the same legal theory and the same material facts. Id. Therefore, although we do not believe
the circuit court was thereby bound to grant summary judgment to one side or the other,
under the circumstances presented here, Union Pacific may not argue that the circuit court
erred in deciding the issue as one of law. Id. Thus, we affirm.
Affirmed.
VAUGHT and BROWN, JJ., agree.
Friday, Eldredge & Clark, LLP, by: Bruce B. Tidwell and Jamie Huffman Jones, for
appellant.
Daily & Woods, P.L.L.C., by: Thomas A. Daily and C. Michael Daily, for appellee
Seeco, Inc.
Adkisson & Wilcox, LLP, by: Beau Wilcox, for appellees Cornelius Tyus, et al.
12