As a Texas oil and gas attorney, I often explain to clients how important it is to be smart and review oil and gas leases, contracts and other legal documents before signing anything. So many people sign documents without reading or understanding them first and come to me after the fact, when it is much harder and often impossible to do anything about it–money and peace of mind have already been lost. I recently read a case, Ayala and Chesapeake Exploration LLC v. Soto, that exemplifies exactly this situation.
Natividad Soto is a 75 year old man and land and mineral owner in LaSalle County, Texas. He cannot read or write in English. He was approached by Henry Gilbert Ayala, a prison guard and mayor pro tem of Cotulla, Texas who was an acquaintance of Soto’s niece. Mr. Ayala allegedly pressured Mr. Soto into signing what Mr. Soto thought was an oil and gas lease. Mr. Soto actually signed a durable power of attorney to Ayala, giving Ayala authority to sign oil and gas leases and certain other documents for Mr. Soto.. Mr. Soto claims no one explained what the document was and he did not seek assistance from anyone before he signed. Mr. Ayala filed the power of attorney in the county deed records and then signed two mineral leases with Chesapeake Exploration.
A few days later, Mr. Soto consulted an attorney. The attorney prepared and filed revocations of the power of attorney with the county clerk’s office. A few weeks later, Chesapeake sent a check of almost $239,000 as lease bonus to Ayala. Ayala kept the money and claimed that Soto agreed that Ayala could keep the bonus funds as his fee.
The trial court agreed with Mr. Soto and entered summary judgment on Soto’s claims to quiet title and cancel the lease. The court declared the lease and memorandum of the lease null and void. Chesapeake and Mr. Ayala appealed the judgment. The Fourth Court of Appeals in San Antonio, in a decision written by Justice Karen Angelini, reversed the trial court’s decision. The Court of Appeals found that the mineral lease with Chesapeake was valid, that Chesapeake was a bona fide purchaser and that Chesapeake never received actual notice of Mr. Soto’s revocation of the power of attorney.
What a sad result for Mr. Soto. Had he just sought out his attorney before he signed the power of attorney, all of this could have been avoided. The case has been appealed to the Texas Supreme Court, but no date for submission has been set yet.
See Our Related Blog Posts:
Tax Consequences of Bonus on Texas Oil & Gas Leases
Texas Supreme Court to Determine Royalties for Gas Recovered with CO2