548 S.W.3d 458
Tex.2018Background
- TRO‑X leased mineral interests in 2007 from the Coopers; those leases required drilling an offset well or surrendering part of the leased acreage.
- TRO‑X assigned its interests to Eagle Oil but kept a contingent 5% "back‑in" working interest under a participation agreement; an anti‑washout clause preserved the back‑in for renewals, extensions, or top leases within one year of termination.
- Eagle (then Anadarko) completed a well on adjacent land in 2008, failed to drill the required offset, and the Coopers demanded surrender of acreage; Anadarko later concluded the 2007 leases had terminated as to that acreage.
- In June 2011 the Coopers and Anadarko executed new leases covering the same minerals (2011 Leases) with materially different terms, no reference to the 2007 Leases or TRO‑X, and no express reservation making them subject to the 2007 Leases; Anadarko recorded a separate written Release of the 2007 Leases several days after executing the 2011 Leases.
- TRO‑X sued Anadarko in 2014 seeking declaratory relief and breach of contract, arguing the 2011 Leases were top leases (becoming effective only on termination of the 2007 Leases) and therefore burdened by TRO‑X’s 5% back‑in; the trial court sided with TRO‑X, the court of appeals reversed, and this Court affirmed the court of appeals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2011 Leases are top leases subject to TRO‑X's back‑in | 2011 Leases lack release language and therefore could only convey the Coopers' possibility of reverter; so they are top leases and TRO‑X's back‑in survives | Execution of the 2011 Leases terminated the 2007 Leases because the parties intended the new leases to supplant the old ones; thus no back‑in survives | The 2011 Leases terminated the 2007 Leases; they are not top leases and TRO‑X's back‑in does not apply |
| Allocation of burden to prove whether the new leases terminated the old leases | Once TRO‑X showed a prior lease existed, Anadarko must prove the parties intended the 2011 Leases to terminate the 2007 Leases (an affirmative defense) | TRO‑X, as plaintiff, must prove all elements of its breach‑of‑contract claim, including that its back‑in burdened the 2011 Leases (i.e., that the 2011 Leases were top leases) | TRO‑X bears the burden to prove the 2011 Leases were top leases; absence of objective language showing survival means the 2007 Leases were terminated |
| Role of extrinsic evidence about parties' intent when leases are unambiguous | Release executed later and correspondence show parties intended 2007 Leases to continue until Release | Extrinsic evidence cannot be considered if the 2011 Leases are unambiguous | Court will not consider extrinsic evidence because the 2011 Leases are unambiguous; interpretation is from the leases' four corners |
| Standard for when a subsequent lease terminates a prior lease | A subsequent lease does not terminate the prior lease unless there is evidence both parties intended termination | Execution of a new lease covering the same interest terminates the prior lease unless the new lease objectively shows parties intended the prior lease to survive | When parties execute a new lease covering the same mineral interest, the prior lease is terminated unless the new lease objectively demonstrates both parties intended the prior lease to continue |
Key Cases Cited
- Ridge Oil Co. v. Guinn Invs., Inc., 148 S.W.3d 143 (Tex. 2004) (execution of a new lease covering the same mineral interests terminates the prior lease absent objective language preserving it)
- Sasser v. Dantex Oil & Gas, Inc., 906 S.W.2d 599 (Tex. App. San Antonio 1995) (writ denied) (parties may terminate a prior lease by signing a new lease with intent to release the prior lease)
- BP Am. Prod. Co. v. Laddex, Ltd., 513 S.W.3d 476 (Tex. 2017) (definition and effect of top leases)
- Samson Expl., LLC v. T.S. Reed Props., Inc., 521 S.W.3d 766 (Tex. 2017) (construction of unambiguous leases is a question of law)
- Tittizer v. Union Gas Corp., 171 S.W.3d 857 (Tex. 2005) (mineral leases are contracts and interpreted like other contracts)
- Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550 (Tex. 2002) (courts ascertain parties' intent from the lease's four corners when unambiguous)
- Vance v. My Apartment Steak House of San Antonio, Inc., 677 S.W.2d 480 (Tex. 1984) (plaintiff bears burden to prove every element of an affirmative claim)
- T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218 (Tex. 1992) (plaintiff must prove existence of a valid contract in a breach‑of‑contract claim)