557 S.W.3d 794
Tex. App.2018Background
- In 1986 Aikman Oil assigned mineral leases to Jay Haber reserving an overriding royalty interest (ORI) defined as the difference up to 21% less existing burdens; the assignment contained an "anti-washout" clause declaring the ORI should "attach" to any extension, renewal, or new lease if the subject leases terminated.
- Upland (successor to Aikman leases) faced suit from Amarillo Production Company (APC) in 2007 asserting termination for cessation of production; the parties settled, Upland released its underlying leases, and APC assigned top leases (retaining a 5% ORI) which later passed to Granite/Apache.
- The Yowell Group (successors to Aikman’s reserved ORI) sued in 2013 claiming the reserved ORI attached to APC’s top leases and defendants refused to pay proceeds; Granite/Apache and others brought third‑party claims and crossclaims, leading to multiple summary‑judgment motions.
- Trial court granted summary judgment for Granite/Apache and co‑defendants, holding the anti‑washout clause cannot extend the ORI to "new leases" because that attempt violates the Rule against Perpetuities, and denied reformation and indemnity claims asserted by Granite/Apache against the Peyton sellers.
- The court also awarded the Peyton Group attorneys’ fees after prevailing on summary judgment; Granite/Apache appealed both indemnity and fee rulings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the anti‑washout clause preserved/attached the 1986 ORI to APC’s 2007 top leases ("new leases") | Yowell: clause explicitly attaches ORI to extensions, renewals, or new leases after termination, so ORI vested in those top leases | Granite/Apache & PAC: the clause’s extension to "new leases" creates a future interest that may vest outside perpetuities period and is void | Held: "new lease" extension violates Rule against Perpetuities; ORI did not attach to top leases; summary judgment for defendants affirmed |
| Whether the top leases are extensions/renewals or new, independent leases | Yowell: top leases should be treated as within clause’s scope | Defendants: top leases differ in parties, terms, consideration and are separate "new leases" not renewals/extensions | Held: top leases are new leases (not extensions/renewals); that factual/legal characterization supports application of the Rule analysis |
| Whether the anti‑washout clause (if void) should be reformed under Tex. Prop. Code §5.043 to effect parties’ intent | Yowell: court should reform clause to conform to Rule and effect parties’ intent | Defendants: §5.043 inapplicable to this commercial corporate assignment and claims are time‑barred | Held: §5.043 does not apply to the corporate, commercial assignment here; alternatively Yowell’s reformation claim is barred by limitations; reformation denied |
| Whether Peyton sellers must indemnify Granite/Apache for Yowell’s 2013 suit under the 2007 SPSA indemnity | Granite/Apache: Yowell’s suit arose from APC’s 2007 litigation and settlement, triggering indemnity for "any Adverse Consequence arising from or in connection with" the APC litigation | Peyton Group: indemnity limited to adverse consequences "arising from" the pending/threatened claims asserted against Upland in APC litigation, which did not include Yowell’s independent claim to attach ORI to APC top leases | Held: indemnity clause construed narrowly; Yowell’s claims did not "arise from" APC’s asserted claims against Upland; no duty to indemnify; summary judgment for Peyton affirmed |
Key Cases Cited
- Sunac Petro. Corp. v. Parkes, 416 S.W.2d 798 (Tex. 1967) (analysis of anti‑washout/evergreen clauses and limits on extending ORIs)
- BP Am. Prod. Co. v. Laddex, Ltd., 513 S.W.3d 476 (Tex. 2017) (Rule against Perpetuities invalidates interests contingent on expiration of an existing lease that may vest too remotely)
- Peveto v. Starkey, 645 S.W.2d 770 (Tex. 1982) (springing executory interests contingent on termination of a prior estate can violate the Rule)
- Gruss v. Cummins, 329 S.W.2d 496 (Tex. Civ. App. El Paso 1959) (an ORI is derived from and limited by the lease from which it is carved)