Tommy Yowell, Gail Yowell, Harry Graff, El Terico, LLC and Casuarina Investments, LLC (d/B/A Lar Resources, LLC) v. Granite Operating Company and Apache Corporation, 620 S.W.3d 335

Background:

In 1986 Aikman (lessor/assignor) reserved a 2.25% overriding royalty interest (ORRI) in a mineral lease and included an anti‑washout clause purporting to extend that ORRI to any extension, renewal, or new lease obtained by the lessee or successors.
In 2007 a top lease was executed; after litigation the 2007 lease became effective and was assigned to Upland/Granite; the 2007 lease carried separate ORRIs for other parties (total 5%), and the Yowells claimed their 1986 ORRI attached to the 2007 lease under the anti‑washout language.
Granite ceased paying the Yowells under the 1986 reservation, asserting the Yowells’ claimed ORRI in the 2007 lease violated the rule against perpetuities (the Rule).
Multiple summary‑judgment motions were filed; the trial court granted judgment invalidating the Yowells’ ORRI under the Rule and denied reformation; Granite sued the Peyton Group for indemnity (Peyton had agreed to indemnify Granite in the asset sale), and the Peyton Group sought fees.
The court of appeals affirmed on the Rule issue and declined to apply Property Code §5.043 to reform the instrument; the Texas Supreme Court affirmed that the ORRI in new leases is a property interest that violates the Rule but held §5.043 requires courts to reform such interests when possible; it also affirmed the indemnity and attorneys’‑fees rulings for the Peyton Group.

Issues:

Issue	Plaintiff's Argument (Yowells)	Defendant's Argument (Granite/PAC/Peyton)	Held
1. Does the ORRI reservation that extends to future/new leases violate the Rule against perpetuities?	The reservation created one ORRI that vested at creation and automatically attached to future leases, so the Rule does not apply.	The ORRI in future/new leases is an unvested executory property interest contingent on remote events, so it violates the Rule.	Held: The ORRI as to new leases is a property (not merely contractual) executory interest that did not vest at creation and violates the Rule.
2. Does Tex. Prop. Code §5.043 require judicial reformation of an instrument that violates the Rule (including commercial/corporate inter vivos instruments)?	§5.043 allows courts to reform interests to effect the creator’s intent and should apply to this reservation.	The statute does not cover commercial instruments made by corporations as inter vivos instruments, and reformation is barred by the four‑year limitations period.	Held: §5.043 applies to commercial/corporate inter vivos instruments and is a mandatory remedial command (not subject to the four‑year residual limitations); remanded to consider whether reformation can make the ORRI comply with the Rule.
3. Does the Peyton Group’s indemnity obligation cover Granite’s liability to the Yowells?	Granite contends Peyton’s indemnity covers any adverse consequence arising from the lease litigation and thus covers Granite’s exposure to the Yowells.	Peyton argues the indemnity was limited to claims pending or threatened in the Amarillo Production litigation; the Yowells were not parties to that litigation and their claim is not within the defined scope.	Held: The indemnity is limited by its terms to claims pending or threatened in the Amarillo Production litigation; Peyton did not owe indemnity for the Yowells’ suit.
4. Was evidence sufficient to support the Peyton Group’s award of attorneys’ fees (including contingent appellate fees) under the UDJA?	Peyton produced uncontroverted attorney testimony projecting reasonable appellate services and rates; UDJA permits equitable fee awards in any proceeding.	Granite argued the contingent appellate fees lacked adequate proof and that fees for defending contingent claims were improper.	Held: Sufficient evidence supported the contingent appellate‑fee award; UDJA authorizes fee awards in proceedings even where related claims are contingent.

Key Cases Cited

ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858 (Tex. 2018) (discusses Rule and narrow circumstances in oil/gas context when an executory interest may be upheld)
Peveto v. Starkey, 645 S.W.2d 770 (Tex. 1982) (articulates vesting requirement and Rule’s 21‑years‑after‑a‑life‑in‑being framework)
BP Am. Prod. Co. v. Laddex, Ltd., 513 S.W.3d 476 (Tex. 2017) (distinguishes vested interests that are exempt from the Rule)
Luckel v. White, 819 S.W.2d 459 (Tex. 1991) (treats non‑participating royalty interests and their relation to future leases)
Sunac Petroleum Corp. v. Parkes, 416 S.W.2d 798 (Tex. 1967) (discusses lease renewals/extensions and survival of ORRIs)
State v. Quintana Petroleum Co., 133 S.W.2d 112 (Tex. 1939) (recognizes ORRIs as property interests)
Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469 (Tex. 2019) (lodestar proof required for trial court fee awards)
El Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012) (burden to provide sufficient evidence of reasonable fees)
Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417 (Tex. 2000) (rules for construing indemnity agreements)
Plains Exploration & Production Co. v. Torch Energy Advisors Inc., 473 S.W.3d 296 (Tex. 2015) (discusses meaning and scope of "arising out of" and causation in contract context)