475 S.W.3d 353
Tex. App.
2014
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Background

  • Range Production I, LP granted an oil, gas, and mineral lease (Range Lease) on 1,888 acres in Leon County; primary term three years with a two-year extension option, which was exercised.
  • In Sept 2010, Range assigned the Range Lease to Rippy; also in Sept 2010, the Nashes granted a top lease to US KingKing, LLC (KingKing) on the same land, subordinate to Range and to become effective if the Range Lease expired.
  • Rippy pursued drilling activities beginning January 2011; the Nashes observed site work and questioned lease validity as January 2011 approached expiration.
  • Charles Nash placed a lock on the gate around January 18, 2011, called police after contractors entered, and disputed whether Rippy's road and well-site work could hold the lease beyond expiration.
  • Rippy incurred substantial costs drilling Nash 1H and claimed the Range Lease remained in effect due to its pre-expiration operations; KingKing asserted the Range Lease expired if operations ceased within 90 days and disputed Rippy’s reliance on repudiation.
  • The trial court granted KingKing’s amended summary-judgment motion and voided the Range Lease, while deeming KingKing’s lease valid; Rippy appealed contending the lease was perpetuated by operations and that repudiation excused nonperformance.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether Rippy’s pre-expiration operations perpetuated the Range Lease. Rippy asserts operations for drilling before expiration kept the Range Lease in force. KingKing/Nashes contend no sufficient operations occurred to sustain the lease beyond term. Genuine fact issue; Rippy's pre-expiration operations could sustain the lease.
Whether the Range Lease expired due to cessation of operations for more than 90 days. Rippy maintains continuous operations; any cessation was due to title disputes, not expiration. KingKing argues cessation beyond 90 days caused expiration; repudiation not necessary to terminate. Summary judgment on expiration was improper; issues of cessation remain for trial.
Whether the Nashes’ repudiation of the Range Lease excused Rippy from continuing operations. repudiation released Rippy from performing to maintain the lease pending resolution. No clear repudiation; continued operations and lack of reliance defeat repudiation defense. There is a genuine fact issue on repudiation and reliance; summary judgment improper on this ground.
Whether Rippy's continued operations after an alleged repudiation negated reliance on repudiation. Continued operations do not defeat reliance if repudiation is proven; later cessation may reflect title dispute. Continued operations after repudiation negate reliance and do not support repudiation defense. Rippy’s reliance issue survives; summary judgment on no-reliance ground was improper.
Whether the Nashes’ joinder and declarations effectively repudiated Rippy’s title. Repudiation by Nashes should terminate Rippy’s rights. Joinder occurred after operations ceased; not dispositive on Rippy’s ongoing rights. Issue four discussed; not properly addressed on this appeal; overruled.

Key Cases Cited

  • Ridge Oil Co. v. Guinn Investments, Inc., 148 S.W.3d 143 (Tex. 2004) (lessors’ repudiation frees lessee from performance; need clear, unequivocal notice)
  • Whelan v. R. Lacy Inc., 251 S.W.2d 175 (Tex. Civ. App.—Texarkana 1952) (drilling operations commence before term end can sustain lease)
  • Utley v. Marathon Oil Co., 31 S.W.3d 274 (Tex. App.—Waco 2000) (activities satisfy commencement/operational requirement with no 90-day cessation)
  • Petersen v. Robinson Oil & Gas Co., 356 S.W.2d 217 (Tex. Civ. App.—Houston 1962) (detailed day-by-day operational evidence to sustain lease)
  • Morrison v. Swaim, 220 S.W.2d 493 (Tex. Civ. App.—Eastland 1949) (continued drilling after term may keep lease alive when in good faith)
  • Guleke v. Humble Oil & Ref. Co., 126 S.W.2d 38 (Tex. Civ. App.—Amarillo 1939) (premised on ongoing drilling/reworking with no long cessation)
  • Terry v. Tex. Co., 228 S.W. 1019 (Tex. Civ. App.—Fort Worth 1920) (requirement to commence drilling within time frame)
  • Gray v. Helmerich & Payne, Inc., 834 S.W.2d 579 (Tex. App.—Amarillo 1992) (commencement/road creation may satisfy commencement clause)
  • Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236 (Tex. App.—Corpus Christi 1994) (repudiation/continuing operations framework in lease disputes)
  • Exploracion De La Estrella Soloataria Inc. v. Birdwell, 858 S.W.2d 549 (Tex. App.—Eastland 1993) (illustrates operational requirements under certain leases)
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