Prize Energy Resources, L.P. v. Cliff Hoskins, Inc.
345 S.W.3d 537
| Tex. App. | 2011Background
- Baker Property title dispute in McMullen County, Texas involving four mineral-interest owners under a 1967 joint operating agreement (JOA).
- Leases (El Paso and Baker) contained continuous-production clauses; JOA Article 10 tied its term to the leases; ARCO contributed its unleased 25% to the JOA.
- In 1986 ARCO sold its rights to Petrus/Prize but retained a 25% reversionary and royalty interest; BP later assumed ARCO’s reversionary/royalty rights.
- A 71-day production cessation in mid-2001 triggered automatic termination of the Leases and the JOA, with BP’s 25% interest reverting to BP and later transferring to Hoskins with a retained BP royalty.
- 2004–2005: Ratifications sought to revive/extend Leases; BP and Hoskins later asserted title and damages claims; Prize and Rutherford challenged termination and title.
- Trial court issued an interlocutory judgment (Feb. 5, 2009) granting summary judgments on trespass and other claims, declaring termination and title allocations, and then held a bench trial on net revenues resulting in awards to Hoskins and BP; final judgment entered Sept. 11, 2009 with additional damages, interest, and proposed attorney’s fees, all of which were appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did BP and Hoskins have standing to challenge JOA termination and assert title? | BP/Hoskins had a reversionary fee interest and thus standing. | BP/Hoskins lack standing as nonparties to the JOA and as incidental beneficiaries. | BP/Hoskins have standing via reversionary interests; standing rejected would impair title relief. |
| Did the Leases and JOA terminate in 2001 so that BP’s 25% reverted and the JOA ended? | The Leases/JOA terminated only if production ceased; ratifications revived them. | Ratifications extended/continued the JOA; termination did not occur. | Leases terminated automatically in August 2001 due to >60 days non-production; JOA terminated with reversion to BP. |
| Were Prize and Rutherford bad-faith trespassers after termination? | Post-termination drilling by Prize/Rutherford was trespass without good faith. | Co-tenants/invitees had rights to explore and drill; permissible post-termination activity. | Prize and Rutherford were not trespassers; they were co-tenants/invitees after termination. |
| Are damages under the Texas Natural Resources Code recoverable and properly calculated? | Damages for unpaid proceeds/royalties should be awarded under TNRC; method contested (well-by-well vs aggregate). | Damages either not due or improperly calculated; pre-judgment interest disputes. | Damages awarded under TNRC are upheld as net revenues/royalties; final method/amount sustained with modifications on certain issues. |
| Is the Bank of America ratification analysis and related fraud/trespass relief proper? | Ratification revived leases; fraud claims were viable; costs/attorney’s fees appropriate. | Ratification invalid due to misrepresentations; fraud claims should fail; costs allocation proper. | Bank’s fraud-induced ratification claims reversed; case remanded on related issues; costs reassessed. |
Key Cases Cited
- Wagner & Brown, Ltd. v. Sheppard, 282 S.W.3d 419 (Tex. 2008) (lease termination and reimbursement principles for cotenants in oil and gas)
- Concord Oil Co. v. Pennzoil Exploration and Prod. Co., 966 S.W.2d 451 (Tex. 1998) (lessor rights and reversion concepts in oil and gas)
- Marshall, 288 S.W.3d 430 (Tex.App.-San Antonio 2008) (title/ownership outcomes in oil and gas disputes; district-level value)
- Sigler Oil, 19 S.W.2d 30 (Tex. 1929) (automatic reversion when leases terminate)
- Byrom v. Pendley, 717 S.W.2d 602 (Tex. 1986) (cotenant rights to extract minerals and duty to account)
- Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008) (standing and reversion interests in mineral estates)
- Luckel v. White, 819 S.W.2d 459 (Tex. 1991) (determinable fee and reversion concepts)
- Consolidated cases: Tittizer v. Union Gas Corp., 171 S.W.3d 857 (Tex. 2005) (oil and gas lease interpretation; secondary term ends with cessation)