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Sun Operating P'ship v. Holt

Court of Appeals of Texas, Seventh District, Amarillo

October 29, 1998, Decided

NO. 07-97-0010-CV

Opinion

 [*280]  Elizabeth Holt, Robert P. Holt, Comfort Holt Winders, Nick D. Holt, and Coy Miles Holt (collectively referred to as the Holts) sued Sun Operating Limited Partnership, Oryx Energy Company, its General Partner, Faulconer Energy Joint Venture--1988, Global Natural Resources Corporation of Nevada, and Chevron U.S.A., Inc. (collectively referred to as the Sun Parties) and others for a judgment declaring that two oil and gas leases had terminated and for damages arising from the acquisition of product from the lands after termination. The causes of action alleged sounded in equity and tort, that is, they included a demand for 1) an accounting and restitution and 2) damages for conversion and trespass. After conducting a bifurcated trial by jury, the court entered judgment declaring that the leases had terminated and awarding damages to Elizabeth and Robert Holt. Both the Sun Parties and Holts appealed. Though the Sun Parties alleged [**2]  seven points of error, and the Holts nine, we need only address the first three uttered by the Sun Parties. They are dispositive and involve 1) whether the cessation of production was temporary which, in turn, afforded the Sun Parties a reasonable time to resume production and 2) whether the cessation of production was excused via the force majeure clauses contained in the leases. We reverse and remand.

Background

The dispute involved two oil and gases leases (referred to as leases number one and two) affecting interests in property located in Hansford County. The Sun Parties were either the original lessees or succeeded to the interest of the original lessees under each agreement, while the Holts succeeded to the interests of the original lessors under lease number one and Elizabeth and Robert Holt succeeded to the interests of the original lessors under lease two. Each document was executed in December of 1947 and contained several provisions pertinent to this appeal. The first dealt with the lease term:

Subject to other provisions herein contained, this lease shall remain in force for a term of ten years from this date, called primary term, and as long thereafter as [**3]  oil, gas or other mineral is produced from said land, or as long thereafter as Lessee shall conduct drilling or re-working operations thereon with no cessation of more that sixty consecutive days until production results, and if production results, so long as any such mineral is produced.

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984 S.W.2d 277 *; 1998 Tex. App. LEXIS 6868 **; 142 Oil & Gas Rep. 392

SUN OPERATING LIMITED PARTNERSHIP, ORYX ENERGY COMPANY, ITS GENERAL PARTNER, FAULCONER ENERGY JOINT VENTURE--1988, GLOBAL NATURAL RESOURCES CORPORATION OF NEVADA, AND CHEVRON U.S.A., INC., Appellants v. ELIZABETH HOLT, ROBERT P. HOLT, COMFORT HOLT WINDERS, NICK D. HOLT, AND COY MILES HOLT, Appellees

Subsequent History:  [**1]  Appellee Vantage Point Energy, Inc.'s Second Motion for Rehearing Overruled January 7, 1999.

Prior History: FROM THE 84TH DISTRICT COURT OF HANSFORD COUNTY; NO. 3217; HONORABLE WILLIAM D. SMITH, PRESIDING.

Disposition: Judgment entered below reversed and cause remanded for further proceedings.

CORE TERMS

lease, force majeure, lessee, parties, drilling, transport, cessation, habendum clause, minerals, interruption, royalty, oil, shut-in, terminated, encompassed, reworking, reasonable control, words, carrier, provisions, invoke, circumstances, assigned, royalty clause, producing, temporary, modified, counted, delayed, due diligence

Contracts Law, Types of Contracts, Lease Agreements, General Overview, Energy & Utilities Law, Leases & Licenses, Habendum Clauses, Standards of Performance, Impossibility of Performance, Force Majeure Clauses, Civil Procedure, Trials, Judgment as Matter of Law, Contract Interpretation, Mining Industry, Mineral Leases, Oil, Gas & Mineral Interests, Implied Covenants, Administration & Marketing, Royalty Clauses, Royalties, Leasehold Royalty Clauses, Pipelines & Transportation, Pipelines, Tanker Transport, Federal Oil & Gas Leases, Extensions & Terminations, Shut In Royalty Clauses, Real Property Law, Landlord & Tenant, Assignments, Appeals, Standards of Review