In re: Mte Holdings LLC v. Mdc Reeves Energy, LLC

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 23-1916
____________
IN RE: MTE HOLDINGS LLC, et al.,
Debtors
CHENAULT-VAUGHAN FAMILY PARTNERSHIP,
LTD,
Appellant
v.
MDC REEVES ENERGY, LLC; CENTENNIAL
RESOURCE DEVELOPMENT, INC.; CENTENNIAL
RESOURCE PRODUCTION, LLC
____________
On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1:21-cv-01846)
Magistrate Judge: Honorable Sherry R. Fallon
____________

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Argued on December 10, 2024
Before: BIBAS, FREEMAN, and ROTH, Circuit Judges
(Opinion filed: May 7, 2025)
Jana Yocom Rine [ARGUED]
YOCOM RINE
2150 South Central Expressway
McKinney, Texas 75070
Counsel for Appellant
Robert P. Crumpler, Jr. [ARGUED]
DAVIS, GERALD & CREMER
400 W. Illinois, Suite 1400
Midland, Texas 79701
William A. Hazeltine
SULLIVAN, HAZELTINE, ALLINSON
919 N Market Street, Suite 420
Wilmington, Delaware 19801
Lisa A. Paulson
DAVIS, GERALD & CREMER
515 Congress Avenue, Suite 1510
Austin, Texas 78701
Counsel for Appellees

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David R. Kuney [ARGUED]
9200 Cambridge Manor Court
Potomac, Maryland 20854
Court Appointed Amicus Curiae
_______________
OPINION OF THE COURT
_______________
FREEMAN, Circuit Judge.
This appeal arises from a dispute between participants
in Texas’s oil and gas industry. Chenault-Vaughan Family
Partnership (“Chenault”), a royalty interest holder in a mineral
estate, sued Centennial Resources Operating, LLC
(“Centennial”), the operator of the site, for wrongly
withholding royalties. The Bankruptcy Court exercised
jurisdiction over the adversary proceeding and awarded
summary judgment to Centennial. Chenault appealed to the
District Court, where the parties consented to proceed before a
Magistrate Judge for all proceedings, including final judgment.
The Magistrate Judge affirmed the Bankruptcy Court’s
judgment, and Chenault appealed to us.
Before proceeding to the merits, we must determine
whether the Magistrate Judge—who presided with the consent
of the parties and a referral by the District Court—had
jurisdiction to enter final judgment in this bankruptcy appeal.
In the forty years since we last opined on this issue, Congress
has repealed the statutory provision that expressly prohibited
district courts from referring bankruptcy appeals to magistrate

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judges. Congress also has imbued magistrate judges with
broad authority in civil cases when the parties consent. For
these reasons, we conclude that the Magistrate Judge properly
exercised jurisdiction here.
On the merits, Chenault appeals the Magistrate Judge’s
order affirming the Bankruptcy Court’s summary judgment as
to two claims. We will affirm the Magistrate Judge’s order in
part and vacate it in part. We will affirm the order insofar as it
affirms the summary judgment for Centennial on Chenault’s
trespass-to-try-title claim. However, we will reverse the order
insofar as it affirms the summary judgment for Centennial on
Chenault’s Texas Natural Resource Code (“TNRC”) claim.
We will remand to the Magistrate Judge with instructions to
remand to the Bankruptcy Court for further proceedings on the
TNRC claim.
I.
Chenault owns a one-sixth mineral interest in a certain
tract of Texas land. Chenault conveyed a working interest to a
company called 84 Exploration Partners (“84 Exploration”)
through an oil and gas lease (the “Lease”). As relevant here,
that working interest provided 84 Exploration the right to
exploit certain minerals (oil and gas) in the land. In exchange,
84 Exploration promised to pay Chenault a royalty: one-fourth
of the minerals or the value of the minerals that 84 Exploration
produced. Thus began a series of transactions in which 84
Exploration assigned its rights to other companies, who in turn
assigned them to others. When the dust settled, MDC Reeves
Energy, LLC (“MDC”) owned about 80% of the working

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interest, while a company called Luxe owned 20%.1 (MDC is
a debtor in the jointly administered bankruptcy cases to which
this adversary proceeding relates.) Because Chenault retained
its royalty interest, MDC and Luxe each owed Chenault a one-
fourth royalty for their respective shares. In 2017 and 2019,
Centennial created two pooled units that contained MDC’s and
Luxe’s working interests, Iron Eagle Unit A and Unit B.2 The
relevant transactions are summarized in the below schematic:
1 Luxe is not involved in this appeal.
2 A pooled unit is created when “tracts from two or more leases
are combined for the purpose of drilling a single well” and
“production and operations anywhere on the pooled unit are
treated as if they have taken place on each tract within the
unit.” 1 Texas Law of Oil and Gas 4.8.

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Centennial signed a joint operating agreement for Unit
A (“Unit A JOA”) with MDC and Luxe, under which
Centennial became the operator of the Luxe and MDC shares
of the Lease. The Unit A JOA provided that Centennial would
pay expenses for development, including the royalties that
MDC and Luxe owed to Chenault, and would charge each
party its proportionate share of those expenses. Centennial and
Luxe signed a similar joint operating agreement for Unit B (the
“Unit B JOA”), and they anticipated that MDC would sign it
as well, but MDC never did.3
Nonetheless, Centennial paid royalties to Chenault for
both MDC’s and Luxe’s Unit B shares from March 2019 until
February 2020. The Bankruptcy Court found that Centennial
paid $137,276.73 in royalties on MDC’s behalf based on the
mistaken assumption that MDC had become party to the Unit
B JOA.
On November 8, 2019, MDC filed for Chapter 11
bankruptcy. On November 19, 2019, Centennial rescinded a
well proposal for Unit B on the basis that MDC had not signed
the Unit B JOA, but it continued to pay MDC’s share of Unit
B royalties to Chenault until February 2020.
Centennial asserts that “[a]round February 2020” it
learned that MDC was not a party to the Unit B JOA. App.
360. It then took steps to recoup what it concluded were
wrongful Unit B overpayments to Chenault by setting off Unit
A royalty payments. By the end of February 2021, Centennial
fully recouped the $137,276.73 in Unit B royalties that
3 Luxe signed the Unit B JOA on June 4, 2019. Centennial
signed on August 12, 2019.

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Centennial maintains it had mistakenly overpaid Chenault. In
March 2021, Centennial resumed sending Unit A royalties to
Chenault.
In November 2020, Chenault filed a complaint (the
“Adversary Proceeding”) in the United States Bankruptcy
Court for the District of Delaware against MDC, Centennial,
and Centennial’s parent company. It brought several claims
arising from Centennial’s alleged underpayment or failure to
pay Unit B royalties.
In January 2021, the Bankruptcy Court presiding over
the Chapter 11 proceeding permitted debtor MDC to abandon
the Unit B Lease.
In the Adversary Proceeding, Chenault and Centennial
both moved for summary judgment. In December 2021, the
Bankruptcy Court granted partial summary judgment in favor
of Centennial. It held that, based on Centennial’s mistaken
belief that MDC signed the Unit B JOA, Centennial was
entitled to deduct $137,276.73 in pre-abandonment Unit B
royalties from pre-abandonment royalties owed on Unit A.
The Bankruptcy Court granted full summary judgment to
Centennial one month later.4
4 In January 2022, the Bankruptcy Court held in the Adversary
Proceeding that Chenault is not owed any royalties for the
period after MDC abandoned the Lease. Although cotenants
are owed their share of the value of production, Centennial and
Chenault agreed that no Unit B wells reached payout (when the
value of the production exceeds costs). Thus, no royalties

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Chenault timely appealed the Bankruptcy Court’s
summary-judgment decision to the District Court. The parties
consented to proceed before Magistrate Judge Sherry R. Fallon
for all proceedings, including the entry of final judgment. The
District Court then referred the case to Magistrate Judge Fallon
pursuant to 28 U.S.C. § 636(c) and Rule 73 of the Federal
Rules of Civil Procedure.
The Magistrate Judge sua sponte raised the question of
her own jurisdiction, noting the uncertainty about whether
magistrate judges have authority to issue final judgments in
bankruptcy appeals. As a hedge against this uncertainty, the
Magistrate Judge crafted her opinion so that “in the event that
the Third Circuit determines that a Magistrate Judge lacks
authority to issue a final judgment on a bankruptcy appeal,
even where the parties consented, then this Memorandum
Opinion contains sufficient detail so that it can be treated,
alternatively, as a Report and Recommendation pursuant to 28
U.S.C. § 636(b).” App. 14–15. On the merits, the Magistrate
Judge agreed with the Bankruptcy Court in essentially all
respects, and she entered a final order affirming the
Bankruptcy Court’s judgment. Chenault timely appealed to us.
II.
Our jurisdiction to hear this appeal turns on whether the
Magistrate Judge had jurisdiction to enter a final judgment in
accrued after MDC abandoned the Lease. The Bankruptcy
Court also entered judgment in favor of MDC based on
Chenault’s representation that it did not seek to recover against
MDC’s bankruptcy estate.

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the bankruptcy appeal.5 See Prater v. Dep’t of Corr., 76 F.4th
184, 190 (3d Cir. 2023) (“When a magistrate judge lacks
jurisdiction, so do we.”). “We review de novo whether a
magistrate judge had jurisdiction to issue a final order. And
we review our own jurisdiction de novo.” Id. at 193 (citations
omitted).
The Magistrate Judge entered final judgment pursuant
to 28 U.S.C. § 636(c), which provides, in relevant part:
Notwithstanding any provision of law to the
contrary[,] . . . [u]pon the consent of the parties,
a full-time United States magistrate judge or a
part-time United States magistrate judge who
serves as a full-time judicial officer may conduct
any or all proceedings in a jury or nonjury civil
matter and order the entry of judgment in the
case, when specially designated to exercise such
jurisdiction by the district court or courts he
serves.
28 U.S.C. § 636(c)(1). Over forty years ago, we held that a
magistrate judge lacked jurisdiction under section 636(c)(1) to
issue a final order in a bankruptcy appeal, notwithstanding the
consent of the parties. In re Morrissey, 717 F.2d 100, 101 (3d
Cir. 1983). In that decision, we addressed the Bankruptcy
Reform Act of 1978 (the “BRA”)—the predecessor to the
current bankruptcy statutory scheme. The BRA “contain[ed]
5 We appointed David R. Kuney, Esq. as Amicus Curiae to
argue the position that a magistrate judge lacks jurisdiction to
issue a final judgment in a bankruptcy appeal. We thank
Amicus for his service to the Court.

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specific provisions for appeals from bankruptcy courts to the
district courts.” Id. at 102. As relevant here, it provided that
“[a] district court may not refer an appeal under that section to
a magistrate or to a special master.” Id. at 103 (emphasis
added) (quoting 28 U.S.C. § 1334(c) as it then existed). Based
on this provision (hereafter, “the Express Prohibition”), we
“read the unambiguous congressional command contained in
§ 1334(c) to mean exactly what it says,” and we held that
Congress had “prohibited a district court from referring a
bankruptcy appeal to a magistrate.” Id.
The year after Congress enacted the BRA, it enacted the
Federal Magistrate Act of 1979 (the “FMA”), Pub. L. No. 96-
82, 93 Stat. 643. The FMA enacted extensive additions to the
original Federal Magistrates Act of 1968, Pub. L. No. 90-578,
82 Stat. 1107. See Minerex Erdoel, Inc. v. Sina, Inc., 838 F.2d
781, 784 (5th Cir. 1988). One such addition was the FMA’s
broad consent provision, section 636(c)(1), which expanded
the authority of magistrate judges, “[n]otwithstanding any
provision of law to the contrary,” to encompass “any or all
proceedings in a jury or nonjury civil matter.” Id. at 782 n.1,
784 (quoting 28 U.S.C. § 636(c)).
While the consent authority of magistrate judges has
remained intact since 1979, the BRA has not. In 1982, the
Supreme Court declared parts of the BRA unconstitutional.
See Wellness Int’l Network, Ltd. v. Sharif, 575 U.S. 665, 669–
70 (2015) (citing N. Pipeline Constr. Co. v. Marathon Pipe
Line Co., 458 U.S. 50 (1982) (plurality opinion)). As a result,
Congress enacted the Bankruptcy Amendments and Federal
Judgeship Act of 1984 (“BAFJA”). See id at 670.

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The BAFJA “prescribed the treatment of appeals from
the rulings of bankruptcy judges.” Minerex, 838 F.2d at 785.
It did so by “gathering together the several scattered provisions
of the BRA . . . and assembling them into a single
comprehensive scheme for such appeals,” which the BAFJA
codified at 28 U.S.C. § 158. Id. The BAFJA “completely
rewrote” 28 U.S.C. § 1334. Id. The Express Prohibition on
the referral of bankruptcy appeals to magistrate judges “was
repealed by simple omission.” Id.
Congress repealed the Express Prohibition after our
decision in Morrissey. Thus, this appeal presents a question of
first impression in this Circuit under the current statutory
regime. We hold that, upon consent of the parties and referral
by a district court, a magistrate judge may enter final judgment
in a bankruptcy appeal.
Several considerations support this conclusion. At the
outset, our conclusion follows from the breadth of a magistrate
judge’s authority under the FMA with party consent. In Prater
v. Department of Corrections, 76 F.4th 184 (3d Cir. 2023), we
addressed the consolidated appeals of three cases in which
magistrate judges sought to enter final orders. We determined
that “the magistrate judges’ jurisdiction to enter final orders in
each . . . case[] turn[ed] on the parties’ consent.” Id. at 190.
We explained that, absent party consent, a magistrate judge
lacks jurisdiction under the FMA to enter a final order. Id. at
194. By contrast, when all parties consent, section 636(c)(1)
grants a magistrate judge “jurisdiction [that] is coextensive
with the district court’s jurisdiction, extending to any or all
proceedings, including entry of final judgment.” Id. at 194–
95. In that scenario, the magistrate judge’s final judgment is
directly appealable to this Court “in the same manner as an

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appeal from any other judgment of a district court.” Id. at 197
(quoting 28 U.S.C. § 636(c)(3)).
Statutory changes post-Morrissey also support our
conclusion. In Morrissey, we held that the BMA’s Express
Prohibition trumped the broad consent authority granted to
magistrate judges under FMA section 636(c). We reasoned
that the Express Prohibition “was enacted subsequent to the
Magistrate’s Act [of 1968] and we read it as an attempt by
Congress to specifically limit its originally pervasive
applicability.” Morrissey, 717 F.2d at 103 n.4. (In Morrissey,
we were mistaken about the order of the relevant enactments.
Although the Magistrate’s Act was enacted in 1968, it was
amended to provide for the consent authority of magistrate
judges in 1979—the year after Congress enacted the BRA and
its Express Prohibition.) But Congress subsequently repealed
the Express Prohibition when it enacted the BAFJA in 1984.
Since that repeal, there has been no barrier to magistrate
judges’ authority to enter final judgments in bankruptcy
appeals pursuant to section 636(c) with the consent of the
parties. As we held in Prater, “when there is party consent, the
magistrate judge’s jurisdiction is coextensive with the district
court’s jurisdiction.” Prater, 76 F.4th at 194–95.
Two other circuits have held otherwise, and a third has
suggested otherwise in dicta. Despite Congress’s repeal of the
Express Prohibition, those courts reason that “if Congress had
wanted district courts to have the power to refer appeals to
magistrates, Congress would have specifically so provided.”
In re Elcona Homes Corp., 810 F.2d 136, 139 (7th Cir. 1987);
see also Minerex, 838 F.2d at 786 (“[H]ad Congress meant for
its [bankruptcy] appeals scheme to include the potential for
reference to a magistrate, Congress would have expressly so

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provided.”); Virginia Beach Fed. Sav. & Loan Ass’n v. Wood,
901 F.2d 849, 851 (10th Cir. 1990) (stating, without
discussion, that “magistrates are not permitted to enter final
decisions in bankruptcy appeals”—while noting that this issue
was not present in the case). We cannot agree. Our discussion
in Prater, the later-in-time logic of Morrissey, the repeal of the
Express Prohibition, and section 636(c)’s grant of consent
authority to magistrate judges “[n]otwithstanding any
provision of law to the contrary” all support our conclusion.
Our decision today also accords with the reality that
magistrate judges function as part of a district court. We
addressed the role of magistrate judges in Wharton-Thomas v.
United States, 721 F.2d 922 (3d Cir. 1983). There, we held
that entry of final judgment by a magistrate judge upon consent
of the parties, as a general matter, does not violate Article III
of the United States Constitution. Id. at 929–30. Unlike the
constitutional concerns that caused the Supreme Court to strike
down part of the BRA, see id. at 927 (observing that the
Supreme Court struck down portions of the BRA on the basis
that bankruptcy courts “operate[], not under the direction of the
district court, but in their own separate sphere and with their
own independently appointed personnel”), we explained that a
“magistrate [judge] is truly a part of the district court,
appointed by its judges, 28 U.S.C. § 631(a), and subject to
dismissal by them, id. § 631(i),” id. For instance, we noted:
A magistrate [judge] may not conduct any
proceeding in a civil matter unless “specifically
designated to exercise such jurisdiction by the
district court or courts he serves.” [28 U.S.C.]
§ 636(c)(1). Even consensual reference of a case
to a magistrate [judge] may be vacated by a

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district judge, either sua sponte or in some
circumstances on motion of the parties. Id.
§ 636(c)(6). As with matters handled by district
judges, the clerk of the district court manages the
records in cases referred to the magistrate
[judge]. Thus, the magistrate [judge] does not
function independently of the district court, but
as an integral part of it.
Id.6 Because magistrate judges are an integral part of the
district court, consensual referral of bankruptcy appeals to
magistrate judges is consistent with district courts’ authority
under section 158(a) to hear bankruptcy appeals.
Lastly, today’s decision comports with separation-of-
powers principles. The right to an Article III adjudicator is a
personal right that is subject to waiver. Commodity Futures
Trading Comm’n v. Schor, 478 U.S. 833, 848 (1986). But
Article III also “serves as an inseparable element of the
constitutional system of checks and balances.” Id. at 850
(cleaned up). It “safeguards the role of the Judicial Branch in
our tripartite system by barring congressional attempts to
transfer jurisdiction to non-Article III tribunals for the purpose
of emasculating constitutional courts, and thereby preventing
the encroachment or aggrandizement of one branch at the
expense of the other.” Id. (cleaned up). And “allowing
Article I adjudicators to decide claims submitted to them by
consent does not offend the separation of powers so long as
6 When we decided Wharton-Thomas, 28 U.S.C. § 636(c)(6)
permitted a district judge to vacate a consensual referral to a
magistrate judge. That provision is now codified at 28 U.S.C.
§ 636(c)(4).

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Article III courts retain supervisory authority over the
process.” Wellness Int’l, 575 U.S. at 678.
When magistrate judges decide bankruptcy appeals,
their “jurisdiction . . . is not based solely on the consent of the
parties, but derives from a proper designation by the district
court.” Morrissey, 717 F.2d at 102; 28 U.S.C. § 636(c)(1).
And the Article III judges of the district court retain
supervisory authority, including the ability to rescind a
designation to a magistrate judge. 28 U.S.C. § 636(c)(4); Fed.
R. Civ. P. 73(b)(3). Moreover, when a magistrate judge enters
a final order in a bankruptcy appeal, the non-prevailing party
can appeal as of right to a Court of Appeals and obtain review
there by Article III adjudicators. 28 U.S.C. § 158(c)(2). In
these ways, separation of powers is respected.7
Because a magistrate judge may enter final judgment in
a bankruptcy appeal with consent of the parties and a referral
by the district court, the Magistrate Judge here was authorized
to enter a final judgment in Chenault’s appeal.
III.
Chenault’s appeal concerns the Bankruptcy Court’s
summary judgment on two claims: its trespass to try title claim
(Count I) and its claim for royalties under Texas Natural
Resources Code § 91 (Count II). The Bankruptcy Court
exercised jurisdiction over the Adversary Proceeding under 28
7 The capacity of district court judges is also respected when
those Article III judges obtain assistance from their able
magistrate-judge colleagues. See Wellness Int’l, 575 U.S. at
680–81.

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U.S.C. § 157(c)(1).8 As discussed above, the Magistrate Judge
sat as the District Court and had jurisdiction to hear the
bankruptcy appeal under 28 U.S.C. § 158(a)(1). We have
jurisdiction under 28 U.S.C. §§ 158(d)(1) and 1291.
“We stand in the shoes of the District Court and exercise
plenary review of the Bankruptcy Court’s decision granting
summary judgment . . . .” In re Weinstein Co. Holdings LLC,
997 F.3d 497, 503 (3d Cir. 2021). Summary judgment is
8 On de novo review, In re Resorts Int’l, Inc., 372 F.3d 154,
160 (3d Cir. 2004), we reject Chenault’s frivolous challenge to
the Bankruptcy Court’s jurisdiction.
28 U.S.C. § 157(c)(1) authorizes a bankruptcy judge to
“hear a proceeding that is not a core proceeding but that is
otherwise related to a case under title 11.” A proceeding is
“related to” a case under title 11 when the outcome of the
proceeding “could conceivably have an[] effect on the estate
being administered in bankruptcy.” In re W.R. Grace & Co.,
900 F.3d 126, 139 (3d Cir. 2018) (quoting In re Combustion
Eng’g, Inc., 391 F.3d 190, 226 (3d Cir. 2004)). Courts make
this jurisdictional determination at the time of a case’s filing.
In re SemCrude L.P., 864 F.3d 280, 289 (3d Cir. 2017).
Chenault filed the Adversary Proceeding in the
Bankruptcy Court that was presiding over MDC’s then-
pending Chapter 11 case, and it named MDC as a defendant.
It also invoked the Bankruptcy Court’s related-to jurisdiction,
and alleged that Centennial or, alternatively, MDC is obligated
to royalties to Chenault. Thus, it was plain at the time of filing
that Chenault’s lawsuit could conceivably have affected
MDC’s bankruptcy estate.

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appropriate only if there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter
of law.9 Id.; Fed. R. Civ. P. 56(a). We view all facts in the
light most favorable to the non-moving party, and we draw all
reasonable inferences from the record in that party’s favor.
Weinstein Co., 997 F.3d at 503.
A.
“A trespass to try title action is the method of
determining title to lands, tenements, or other real property.”
Tex. Prop. Code § 22.001(a). To prevail on such a claim, a
plaintiff must prove (among other elements) that “the
defendant . . . unlawfully entered upon and dispossessed
[plaintiff] of such premises, stating the date, and withholds
from him the possession thereof.” Tex. R. Civ. P. 783. Here,
Centennial did not unlawfully enter the land and dispossess
Chenault. Even after MDC abandoned the Lease, Luxe was
still Chenault’s cotenant with a right to extract the minerals.
Luxe was also entitled to permit Centennial, its operator, to
enter the land and drill on it. Because the costs of development
9 The parties agree that Texas law controls in this case. We
accede to their choice of law. See In re Columbia Gas Sys.
Inc., 50 F.3d 233, 239 n.10 (3d Cir. 1995) (“Where, as here,
the parties do not make an issue of choice of law, we have no
obligation to make an independent determination of what rule
would apply if they had made an issue of the matter.” (cleaned
up)); Tehran-Berkeley Civ. & Env’t Eng’rs v. Tippetts-Abbett-
McCarthy-Stratton, 888 F.2d 239, 242 (2d Cir. 1989)
(applying the law the parties relied on in their briefs where the
contract at issue did not specify what law governs and the
parties did not brief or argue a choice-of-law issue).

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and production were not yet recovered, Centennial did not
trespass on Chenault’s mineral interests by withholding
payment post-abandonment. See Wagner & Brown, Ltd. v.
Sheppard, 282 S.W.3d 419, 426 (Tex. 2008) (“It has long been
the rule in Texas that a cotenant has the right to extract minerals
from common property without first obtaining the consent of
his cotenants; however, he must account to them on the basis
of the value of any minerals taken, less the necessary and
reasonable costs of production and marketing.” (quoting
Byrom v. Pendley, 717 S.W.2d 602, 605 (Tex. 1986))). Thus,
Chenault’s trespass to try title claim fails.
B.
The TNRC provides that, after the first sale of
production from an oil and gas well, payments must be made
from a “payor” to a “payee” on “a timely basis according to the
frequency of payment specified in a lease or other written
agreement between payee and payor.” Tex. Nat. Res. Code §
91.402(a). The statute defines “payor” as “the party who
undertakes to distribute oil and gas proceeds to the payee,
whether as the purchaser of the production of oil or gas
generating such proceeds or as operator of the well from which
such production was obtained or as lessee under the lease on
which royalty is due.” Id. § 91.401(2). It defines “payee” as
“any person or persons legally entitled to payment from the
proceeds derived from the sale of oil or gas from an oil or gas
well located in this state.” Id. § 91.401(1). And it provides a
payee a cause of action against a payor for failure to make
timely payments. Id.
In its TNRC claim, Chenault asserts that it had a payor-
payee relationship with Centennial that required Centennial to

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pay Unit B royalties to Chenault. In support of Centennial
being its payor, Chenault points to the Unit B JOA, the
undisputed fact that Centennial paid Chenault pre-
abandonment royalties for Unit B, and a division order for
“Iron Eagle Unit B U21H” that Chenault signed in July 2019
and addressed to Centennial (“the Division Order”).10 The
Division Order lists Centennial as the “Operator” of the listed
property. App. 486. It also appears to designate Centennial as
“Payor” to Chenault for royalties on sales of oil, gas and related
liquid hydrocarbons since the date those minerals were first
produced on the property. And the same property description
on the Division Order (“Iron Eagle Unit B U21H”) is listed on
the accounting statement reflecting the royalties Centennial
paid to Chenault. App. 356 (showing that Centennial paid
$137,276.73 in royalties from March 2019 to February 2020
for “Iron Eagle Unit B U21H”).
Centennial argues that it has not obligated itself to be
Chenault’s payor for Unit B royalties. It first asserts that it
could not be a payor because MDC (not Centennial) was Unit
B’s lessee. But the TNRC does not require a payor to be a
lessee. By its plain terms, the statute considers “the party who
undertakes to distribute oil and gas proceeds to the payee” to
be the “payor,” whether that party is “the lessee,” “the
purchaser of the production of oil or gas generating such
proceeds,” or the “operator of the well from which such
10 A division order is “an agreement signed by the payee
directing the distribution of proceeds from the sale of oil, gas,
casinghead gas, or other related hydrocarbons. The order
directs and authorizes the payor to make payment for the
products taken in accordance with the division order.” TNRC
§ 91.401(3).

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production was obtained.” Tex. Nat. Res. Code § 91.401(2).
Moreover, Centennial conceded at oral argument that it was a
payor to Chenault under the TNRC for Unit A royalties. And
Centennial was not the lessee for Unit A. (MDC was lessee for
Unit A and Unit B.) So Centennial could be Chenault’s payor
for Unit B without also being the lessee.
Next, Centennial argues there is no evidence that it
intended to be bound to pay Unit B royalties to Chenault. In
support, it points to the absence of MDC’s signature on the
Unit B JOA. Centennial acknowledges that it would have been
obligated to pay Unit B royalties to Chenault if MDC had
signed the Unit B JOA. It also asserts that it only paid pre-
abandonment Unit B royalties to Chenault based on its
mistaken belief that MDC had signed the Unit B JOA.
The Bankruptcy Court determined that “there is no
dispute in this record that Centennial was unaware of the fact
that MDC had not executed the Unit B joint operating
agreement at the time it made the royalty payments to
Chenault-Vaughan.” App. 82–83.11 But Centennial’s
awareness on this topic is in dispute. The record contains
evidence that Centennial knew MDC did not execute the Unit
B JOA and nonetheless paid Unit B royalties to Chenault.
First, Centennial started paying royalties to Chenault for
MDC’s share of Unit B in March 2019, before even Centennial
had signed the Unit B JOA. Second, when Centennial signed
11 The Magistrate Judge agreed with this view of the facts.
App. 26 (stating that Centennial paid Unit B royalties based on
a mistake of fact, and “Centennial promptly corrected those
actions once it learned that MDC did not sign the Unit B
JOA”).

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the Unit B JOA in August 2019 (over two months after Luxe
signed), the signature block for MDC remained blank. Third,
Centennial’s sworn statement that it first learned around
February 2020 that MDC had not signed the Unit B JOA is
contradicted by another document in the record.12 A
Centennial employee wrote a November 2019 letter stating that
“MDC has not signed a JOA” for Unit B. App. 497. Thus,
there is a genuine dispute as to whether Centennial knew MDC
had not signed the Unit B JOA when Centennial made royalty
payments to Chenault from March 2019 through February
2020.
Moreover, notwithstanding any questions about the
Unit B JOA, a reasonable jury could find that the Division
Order bound Centennial to pay Unit B royalties to Chenault.
Under Texas law, division orders are generally binding until
revoked. See Heritage Res., Inc. v. NationsBank, 939 S.W.2d
118, 123 (Tex. 1996); Cabot Corp. v. Brown, 754 S.W.2d 104,
107–08 (Tex. 1987); Gavenda v. Strata Energy, Inc., 705
S.W.2d 690, 692 (Tex. 1986). And a reasonable jury could
find that the Division Order created a payor-payee relationship
between Centennial and Chenault.
Material facts regarding the Division Order remain in
dispute. The Division Order bears Chenault’s signature, but
the single-page document ends with a request to “Please sign
and return” it. App. 486. However, it contains no signature
line (blank or otherwise) for the Payor. So it is unclear whether
12 At oral argument before us, Centennial acknowledged that
the sworn statement was inaccurate and said the declarant was
mistaken.

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the Division Order is a complete document or whether
Centennial intended to be bound by it.
These disputes of fact preclude summary judgment for
Centennial on Chenault’s TNRC claim. Accordingly, we will
vacate the Magistrate Judge’s order affirming the grant of
summary judgment.
* * *
For the foregoing reasons, we will affirm the Magistrate
Judge’s order insofar as it affirms the Bankruptcy Court’s grant
of summary judgment for Centennial on the trespass-to-try-
title claim. However, we will vacate the Magistrate Judge’s
order insofar as it affirms the grant of summary judgment for
Centennial on the Texas Natural Resources Code claim, and
we will remand to the Magistrate Judge with instructions to
remand to the Bankruptcy Court for further proceedings.

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