ConocoPhillips Co. v. Koopmann
547 S.W.3d 858 (2018)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
The common law Rule Against Perpetuities does not invalidate an ascertainable grantee's future interest in a grantor's reserved non-participating royalty interest in the oil and gas context when the preceding estate is certain to terminate. Furthermore, a deed's savings clause using terms like 'other similar payments' in lieu of actual production can be ambiguous, creating a fact issue for a jury, and Section 91.402 of the Texas Natural Resources Code does not preclude a lessor's common law claim for breach of contract based on lease terms.
Facts:
- In 1996, Lois Strieber conveyed fee simple title to a 120-acre tract of land in Dewitt County to Lorene Koopmann and her late husband.
- Strieber's deed included a reservation of a fifteen-year, one-half non-participating royalty interest (NPRI), extendable "as long thereafter as there is production in paying or commercial quantities" under an oil and gas lease, and included a savings clause.
- Lorene Koopmann later executed a gift mineral deed conveying an undivided two-thirds of her mineral interest to her two children (together, the Koopmanns).
- In 2007, Lorene Koopmann entered a three-year lease of the tract with Hawke Enterprises, which was later assigned to Burlington Resources Oil & Gas Company, L.P.
- In 2009, Burlington tendered a $24,000 payment to the Koopmanns to extend the lease's primary term for an additional two years, until October 22, 2012; the tract was pooled with other leases known as "Lackey Unit A."
- As of August 2011, with four months remaining on Strieber's initial fifteen-year NPRI term and no production, Strieber conveyed a 60% interest in her NPRI to Burlington.
- On December 7, 2011, Burlington sent a letter to the Koopmanns informing them that a well was anticipated to begin producing in the first quarter of 2012 and included "shut-in royalty payments" to maintain interests.
- On December 27, 2011, the end of the NPRI's initial fifteen-year term, there was no actual production from the Koopmanns' land, and it was disputed whether a well capable of producing in paying or commercial quantities existed; actual production on Lackey Unit A began in February 2012.
Procedural Posture:
- The Koopmanns sought declaratory judgment against Burlington and Strieber in trial court to construe the deed, claiming sole ownership of the NPRI as of December 27, 2011, and asserted non-declaratory claims against Burlington (breach of contract, unjust enrichment, conversion, negligence, negligence per se).
- Burlington filed a motion to dismiss the Koopmanns' non-declaratory claims under Texas Rule of Civil Procedure 91a, arguing they were barred by Tex. Nat. Res. Code § 91.402(b) and the economic-loss rule.
- The trial court denied Burlington's Rule 91a motion to dismiss and awarded attorney's fees to the Koopmanns under Rule 91a.7.
- Burlington later filed a motion for summary judgment on the non-declaratory claims, which the trial court granted, ordering the Koopmanns take nothing as to those claims.
- On the declaratory action, the parties filed competing motions for summary judgment, and the trial court granted the Koopmanns' motion, concluding Strieber's NPRI expired on December 27, 2011, and the Koopmanns, as sole owners, were due royalty payments.
- Both parties appealed to the Court of Appeals: Burlington appealed the declaratory judgment, arguing the Koopmanns' future interest violated the RAP, the savings clause was not ambiguous and maintained its interest, and the Rule 91a attorney's fees were improper; the Koopmanns appealed the summary judgment dismissing their non-declaratory claims.
- The Court of Appeals affirmed in part, reversed in part, and remanded for further proceedings: it held the RAP did not bar the Koopmanns' future interest (applying the "two-grant theory"), found the reservation's savings clause ambiguous and remanded that issue for a jury, upheld the dismissal of Koopmanns' other non-declaratory claims under the economic-loss rule, but reversed the dismissal of the breach-of-contract claim, and upheld the trial court's award of attorney's fees against Burlington under Rule 91a.7.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the common law Rule Against Perpetuities invalidate a grantee's future interest in a grantor's reserved non-participating royalty interest in the oil and gas context when the interest holder is ascertainable and the preceding estate is certain to terminate?
Opinions:
Majority - Justice Green
No, the common law Rule Against Perpetuities does not invalidate the Koopmanns' future interest in the NPRI created by Strieber's deed. The Rule Against Perpetuities (RAP) aims to prevent property from being tied up indefinitely by remote contingencies, thereby hindering its alienability and development. In the oil and gas context, where a defeasible term interest is created by reservation, and the resulting executory interest is certain to vest in an ascertainable grantee, the purpose of the Rule is not violated. The Koopmanns' interest, while technically a springing executory interest typically subject to RAP, was deemed more akin to a vested remainder because Strieber's defeasible fee interest in the NPRI was certain to terminate (either by cessation of production or exhaustion of recoverable minerals), and the Koopmanns were ascertainable as the next interest holders. This approach promotes, rather than hinders, the alienability and productivity of mineral interests. The Court rejected the 'two-grant theory' previously applied by the court of appeals as a legal fiction that disregards traditional interest classifications and the grantor's likely intent. The Court clarified its prior decision in Peveto v. Starkey, noting it focused on specific "effective only on" language rather than the general "as long thereafter as" clause. Separately, the Court held that the savings clause in Strieber's deed, referring to "shut-in royalties or any other similar payments" to maintain the NPRI, is ambiguous as a matter of law. The phrase "other similar payments" is reasonably susceptible to multiple interpretations, including delay rentals/extension payments or payments specifically made in lieu of production during the secondary term, thus creating a fact issue for a jury. Further, the Court affirmed that Section 91.402 of the Texas Natural Resources Code, which allows a payor to suspend royalty payments during a title dispute, does not preclude a lessor's common law claim for breach of contract under their lease. Abrogating common law claims requires a clear legislative intent, which is not found in Section 91.402 or 91.404(c). While the statute provides a cause of action, it does not override or displace existing contractual rights or remedies. Finally, the Court declined Burlington's argument that it was the "prevailing party" under Texas Rule of Civil Procedure 91a.7 on its motion to dismiss and thus entitled to attorney's fees. Burlington's Rule 91a motion was denied, and Rule 91a.7 awards fees to the party prevailing on the motion, not necessarily on later successful summary judgment motions for the same claims.
Analysis:
This case significantly redefines the application of the Rule Against Perpetuities (RAP) in Texas property law, particularly within the oil and gas sector. By holding that an ascertainable grantee's future interest, following a defeasible term interest that is certain to terminate, does not violate RAP's purpose, the Supreme Court of Texas provides greater flexibility for structuring mineral transactions. This ruling aligns RAP with its underlying policy goals of promoting alienability rather than rigidly applying historical distinctions between future interests. Additionally, the clarification regarding Section 91.402 of the Natural Resources Code reinforces the strong public policy favoring freedom of contract, ensuring that statutory remedies do not automatically displace common law breach of contract claims unless clearly intended by the Legislature. The ruling on Rule 91a attorney's fees emphasizes the precise timing and success required to be deemed a "prevailing party" for fee recovery under that specific procedural rule.
