Valentina Williston, LLC v. Gadeco, LLC
2016 ND 84
| N.D. | 2016Background
- In 2007 Leroy and Norma Seaton leased several sections to Gadeco with a five-year primary term and a continuing-operations clause allowing extension when not more than 90 days elapsed between completion/abandonment and drilling of a subsequent well.
- Two wells (Barney 18-1H and Gene 8-1H) were involved; Gene 8-1H was spud within the primary term but completed after the primary term; another well (SC-Norma 154-98-0706H-1) was spud on disputed Sections 6 and 7 within 55 days after the primary term.
- On March 5, 2012 a Gadeco land manager sent the Seatons a letter summarizing status and stating that, per the lease, Sections 6 and 7 would terminate if no wells were spud by May 4, 2012; a shut-in royalty payment was tendered.
- The Seatons (through Valentina, via a top lease and assignment) contested and demanded a formal release; Gadeco did not execute a release. Valentina sued for declaratory relief and quiet title.
- The district court granted Gadeco summary judgment, finding the continuing-operations clause extended the lease (no more than 90 days elapsed) and that the land manager’s letter did not modify the lease or establish promissory estoppel. Valentina appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the March 5, 2012 land manager letter modified the written lease and terminated Sections 6 and 7 | The letter’s statement that Sections 6 and 7 would terminate if no wells were spud by May 4, 2012 showed intent to modify and bind Gadeco | Letter was merely a (inaccurate) summary of the existing lease, not a written contract modification | Letter did not satisfy contract-formation elements (offer, acceptance, consideration); no written modification under N.D.C.C. § 9-09-06 |
| Whether the Seatons accepted any alleged written offer in the letter | Acceptance occurred (or should be inferred) such that the letter bound Gadeco | No signed acceptance, silence/inaction is not acceptance | No acceptance; silence does not constitute acceptance |
| Whether promissory estoppel prevents Gadeco from extending the lease beyond May 4, 2012 | The letter was a clear promise on which Seatons (and Valentina) relied, so estoppel applies | Letter contains no clear, definite promise and is internally inconsistent; no promissory estoppel | Promissory estoppel inapplicable: letter not a clear, unambiguous promise and Gadeco retained discretion to perform |
| Whether the lease continued in force by virtue of continuing drilling operations | N/A (Plaintiff did not dispute drilling activity) | Continued operations (within 90 days) preserved the lease beyond primary term | Lease extended: not more than 90 days elapsed between completion/abandonment and next operations; summary judgment for Gadeco affirmed |
Key Cases Cited
- Sandvick v. LaCrosse, 747 N.W.2d 519 (N.D. 2008) (defines a top lease)
- Dusterhoft Oil, Inc. v. University Hotel Dev., 715 N.W.2d 153 (N.D. 2006) (elements of promissory estoppel)
- Lohse v. Atlantic Richfield Co., 389 N.W.2d 352 (N.D. 1986) (promise must be definite for estoppel)
- Lund v. Lund, 848 N.W.2d 266 (N.D. 2014) (elements of a valid contract)
- Cooke v. Blood Systems, Inc., 320 N.W.2d 124 (N.D. 1982) (promissory estoppel requires a promise)
- Lario Oil & Gas Co. v. EOG Resources, Inc., 832 N.W.2d 49 (N.D. 2013) (summary judgment standard in oil & gas disputes)