## Facts

- Mobil Oil Corporation held leases covering 29 sections in the Rojo Caballos Field in Pecos County, Texas; the dispute concerned Sections 19 and 30 (Block 48) and Sections 23, 24, 25, and 26 (Block 49).
- Mobil and Westland Oil Development Corporation entered a farmout agreement (Aug. 4, 1966) under which Westland could earn an assignment of one-half of Mobil’s interest in specified sections by meeting drilling obligations; the farmout described Sections 19, 23, and 24.
- Westland and Chambers & Kennedy (C & K) executed a letter agreement (Nov. 15, 1966) for C & K to assume Westland’s farmout obligations and included an “area of mutual interest” (AMI) clause requiring sharing of leasehold interests later acquired within the AMI.
- The Mobil/Westland farmout agreement was attached to the Nov. 15 letter agreement and supplied detailed legal descriptions for Sections 19, 23, and 24.
- An operating agreement (Mar. 1, 1968) referenced the Mobil/Westland farmout and the Nov. 15 letter agreement; later assignments in the chain of title were expressly made “subject to” the operating agreement.
- Gulf Oil Corporation and The Superior Oil Company acquired interests through Bernard Hanson by assignments expressly subject to the operating agreement that incorporated the earlier agreements by reference.
- Westland sought a declaratory judgment enforcing the AMI against Gulf and Superior, asserting they took with notice of Westland’s equitable rights; Gulf and Superior asserted bona fide purchaser status and raised the Statute of Frauds based on inadequate land descriptions, especially for Sections 25, 26, and 30.

## Issues

1. Whether Gulf and Superior were on notice, as a matter of law, of Westland’s equitable claim under the Nov. 15, 1966 AMI agreement, defeating bona fide purchaser status.
2. Whether the Nov. 15, 1966 letter agreement (including incorporated documents) satisfied the Statute of Frauds by providing a sufficient legal description for each of the six disputed sections.
3. Whether, given the “subject to” language and chain of title, AMI-based equitable obligations could bind Gulf and Superior as successors in interest.

## Decision

- The Texas Supreme Court reversed the court of appeals and rendered judgment.
- Gulf and Superior were on notice as a matter of law of the Nov. 15, 1966 letter agreement and Westland’s equitable claim.
- The AMI agreement was enforceable under the Statute of Frauds as to Section 19 (Block 48) and Sections 23 and 24 (Block 49) because those tracts were sufficiently described via attachment/incorporation of the farmout.
- The AMI agreement was unenforceable as to Sections 25 and 26 (Block 49) and Section 30 (Block 48) because references to “lands in the area of the farmout acreage” or the general field area were not a sufficient legal description.

## Legal Principles

- A purchaser is charged with constructive notice of instruments in the chain of title and of agreements referenced in those instruments; “subject to” language triggers a duty of inquiry and imputes notice of what reasonable inquiry would reveal.
- An AMI clause can create an equitable interest in future-acquired leases that may be enforced against later takers who acquire with notice.
- Under the Statute of Frauds, agreements affecting interests in land must contain a sufficient legal description, either on their face or through valid incorporation of a document supplying the description.
- General geographic references (e.g., “area,” field name, or “lands in the area”) do not satisfy the land-description requirement without a writing that identifies the affected tracts with reasonable certainty.

## Conclusion

The court held Gulf and Superior were charged with notice of Westland’s AMI-based equitable claim through “subject to” instruments in their chain of title, but enforced the AMI only for Sections 19, 23, and 24 because those tracts were adequately described through incorporation of the attached farmout; the AMI failed under the Statute of Frauds for Sections 25, 26, and 30 due to inadequate descriptions.


Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903 (Tex. 1982)