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BP Am. Prod. Co. v. Laddex, Ltd.

Supreme Court of Texas

October 11, 2016, Argued; March 3, 2017, Opinion Delivered

No. 15-0248

Opinion

 [*477]  In this oil-and-gas case, we are asked to apply the rule against perpetuities to a top lease and to review the trial court's judgment terminating a bottom lease based on jury findings that the lease failed to produce in paying quantities over a specified period. The court of appeals held that the rule did not invalidate the top [**2]  lease at issue and that the trial court erroneously charged the jury on the production-in-paying-quantities question, necessitating a new trial. We agree and affirm the court of appeals' judgment.

I. Background

BP America Production Company acquired by assignment a 1971 oil-and-gas  [*478]  lease (the BP lease) covering property in Roberts County, Texas. The lease had a primary term of five years and continued "as long thereafter as oil or gas is produced from said land hereunder." During the relevant time period, the BP lease had one producing well, the Mahler D-2. Beginning in August 2005, production from the Mahler D-2 slowed significantly for approximately fifteen months. In November 2006, the well resumed producing in quantities comparable to those before the slowdown.

During the period of slowed production, an attorney for the lessors, Ron Nickum, believed that there had been a total cessation of production from the well. In April 2006, he sent BP a letter stating, "[i]t appears that [the BP] lease has terminated by reason of failure to produce in paying quantities and cessation of production." The letter went on to warn:

Any farmout or assignment in the terminated lease, or any additional drilling, [**3]  reworking, or other development under the terminated lease, is taken at your own risk.

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513 S.W.3d 476 *; 2017 Tex. LEXIS 232 **; 60 Tex. Sup. J. 542; 2017 WL 889920

BP AMERICA PRODUCTION COMPANY, PETITIONER, v. LADDEX, LTD., RESPONDENT

Prior History:  [**1] ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE SEVENTH DISTRICT OF TEXAS.

BP Am. Prod. Co. v. Laddex, Ltd., 458 S.W.3d 683, 2015 Tex. App. LEXIS 1521 (Tex. App. Amarillo, 2015)

CORE TERMS

lease, paying quantities, vest, lessors', top, terminated, possibility of reverter, conveyed, argues, paying, reasonable time period, court of appeals, trial court, expiration, costs, cessation, mineral, producing, expenses, slowed, fail to produce, lessee, void, reversionary interest, primary term, slowdown, royalty, deed, oil, rule against perpetuities

Civil Procedure, Preliminary Considerations, Justiciability, Standing, Jurisdiction, Subject Matter Jurisdiction, Constitutional Law, State Constitutional Operation, Real Property Law, Deeds, Construction & Interpretation, Governments, Courts, Common Law, Estates, Future Interests, Invalid Restraints & Rule Against Perpetuities, Energy & Utilities Law, Oil, Gas & Mineral Interests, Nonpossessory & Possessory Interests, Present Estates, Fee Simple Estates, Reversions & Reverter, Leases & Licenses, Trials, Jury Trials, Province of Court & Jury, Oil, Gas & Mineral Interests