558 S.W.3d 692
Tex. App.2018Background
- MJR and Energy executed a May 1/5, 2002 Settlement Agreement (unrecorded) and a contemporaneous ORRI Assignment conveying overriding royalty interests (ORRI) to MJR and including a right of first refusal (ROFR) tied to Energy's properties. The ORRI Assignment was recorded in Gregg and Rusk Counties.
- The Settlement Agreement required any transferee of Energy’s leases to agree to be bound by the Agreement’s obligations and stated the Agreement would "inure to the benefit of" parties and their assigns and successors.
- Energy sold/assigned many of the disputed leases to Gaywood (Oct. 1, 2002), which later assigned many of them to GFP (Dec. 2010) and GFP later to AriesOne (Mar. 2013); other transfers reached Miken and SND.
- GFP notified MJR of the pending AriesOne transfer and MJR signed a form declining to exercise any ROFRs before March 31, 2013; MJR later sued asserting the ROFR is a covenant running with the land enforceable against successors/assignees.
- Trial court granted summary judgment for defendants (AriesOne, GFP, Miken, SND) on the ground the ROFR was not a covenant running with the land; MJR appealed.
Issues
| Issue | Plaintiff's Argument (MJR) | Defendant's Argument | Held |
|---|---|---|---|
| Whether MJR's ROFR is a covenant running with the land | ROFR and ORRI Assignment show intent the ROFR and related obligations run with the land and bind successors/assigns | ROFR appears only in Settlement Agreement, not a granting deed; lacks explicit "runs with the land" wording as to ROFR; therefore not enforceable against successors | Court: ROFR is a covenant running with the land (reversed summary judgment) |
| Privity / chain of title to bind successors | MJR: ORRI and Settlement created property interest (option/ROFR) and chain of assignments establishes privity and notice for successors | Defendants: gaps/inconsistencies in assignment records and some leases not included in ORRI Assignment mean no unbroken chain or privity as to all leases | Court: Privity and notice exist where an unbroken chain of title is shown; genuine fact issues remain for leases lacking record links, so summary judgment against MJR was improper |
| Whether ROFR is an unreasonable restraint on alienation | MJR: ROFR is tied to finite ORRI and lease durations; reasonable under circumstances | AriesOne: ROFR has unlimited duration, may hinder package sales, lacks allocation rules between burdened/non-burdened leases | Court: Duration tied to lease/ORRI life; no evidence ROFR is unreasonable as matter of law; restraint argument insufficient on summary judgment |
| Whether ROFR violates statute of frauds | MJR: ROFR is recorded/linked by ORRI Assignment; valid | AriesOne: package-sale ambiguity and lack of allocation between burdened/non-burdened leases violates statute of frauds | Court: No Texas authority established this as a statute-of-frauds defense here; not established as matter of law |
Key Cases Cited
- Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211 (Tex. 2003) (standard of review for summary judgment)
- FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868 (Tex. 2000) (de novo review and summary judgment principles)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (summary judgment inferences favor nonmovant)
- Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W.2d 903 (Tex. 1982) (elements for covenants running with the land; purchaser bound by instruments in chain of title)
- City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515 (Tex. 1968) (contract interpretation: objective intent controls)
- Dynegy Midstream Servs., Ltd. P'ship v. Apache Corp., 294 S.W.3d 164 (Tex. 2009) (ambiguity not shown merely by disagreement)
- Mattern v. Herzog, 367 S.W.2d 312 (Tex. 1963) (duration relevant to restraint-on-alienation analysis)
- Randolph v. Terrell, 768 S.W.2d 736 (Tex. App.-Tyler 1987) (unreasonable restraints analysis)
- Wasson Interests, Ltd. v. Adams, 405 S.W.3d 971 (Tex. App.-Tyler 2013) (covenant must be in a grant of land or property interest)
- Madera Prod. Co. v. Atl. Richfield Co., 107 S.W.3d 652 (Tex. App.-Texarkana 2003) (option to purchase creates an interest in land)