BASE v. DEVON ENERGY PRODUCTION

2024 OK 3
CourtSupreme Court of Oklahoma
DecidedFebruary 6, 2024
Docket2024 OK 3
StatusPublished
Cited by1 cases

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BASE v. DEVON ENERGY PRODUCTION, 2024 OK 3 (Okla. 2024).

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BASE v. DEVON ENERGY PRODUCTION
2024 OK 3
Case Number: 119366
Decided: 02/06/2024
THE SUPREME COURT OF THE STATE OF OKLAHOMA


Cite as: 2024 OK 3, __ P.3d __

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.


KAYE FRANCES BASE and ARLYN JOE JUSTICE, as Trustees of THE EUNICE S. JUSTICE AMENDED, REVISED AND RESTATED 1990 REVOCABLE TRUST AGREEMENT EXECUTED ON THE 31ST DAY OF JANUARY, 2011, Plaintiffs/Appellants/Petitioners,
v.
DEVON ENERGY PRODUCTION COMPANY, L.P., a domestic limited partnership, Defendant/Appellee/Respondent.

ON CERTIORARI FROM
THE COURT OF CIVIL APPEALS, DIVISION II

¶0 This oil and gas case involves a dispute over the amount of royalties that Defendant/Appellee/Respondent Devon Energy Production Company, L.P. (hereinafter "Devon") has paid to The Eunice S. Justice Amended, Revised, and Restated 1990 Revocable Trust Agreement Executed on the 31st Day of January 2011 (hereinafter "the Trust") since production commenced in 2017 at nine wells collectively called the Bernhardt Wells. The trustees of the Trust, Plaintiffs/Appellants/Petitioners Kaye Frances Base and Arlyn Joe Justice (hereinafter "Trustees"), allege that the Trust is entitled to recover a 3/16 royalty under a 1978 Lease executed between everyone's predecessors-in-interest; but Devon alleges its interest arises from an earlier 1973 Lease under which the Trust is only entitled to receive the 1/8 royalty that it has paid. The Trustees filed suit against Devon in May of 2019, seeking to quiet title in favor of the 1978 Lease and to obtain pursuant to the Production Revenue Standards Act, 52 O.S.2021, §§ 570.1 et seq, both an accounting and a recovery of the 1/16 difference in royalties that Devon has allegedly underpaid. Nearly a year later, Devon sought summary judgment based on the 15-year statute of limitation found in 12 O.S.2021, § 93(4), arguing that Trustees' quiet title action would have accrued by 1979 and been barred after 1994. The trial court granted Devon's motion for summary judgment and denied Trustees' subsequent motion for new trial. Trustees appealed, and the Court of Civil Appeals (COCA) affirmed by a 2-1 vote. Trustees then sought review on certiorari, arguing COCA failed to follow both this Court's numerous precedents holding there is no statute of limitation on an equitable quiet title claim and this Court's precedent in Claude C. Arnold Non-Operated Royalty Interest Properties v. Cabot Oil & Gas Corp., 2021 OK 4, 485 P.3d 817, regarding when their claims accrued. We previously issued a writ of certiorari and now vacate COCA's opinion, affirm the trial court's summary judgment, and remand the case for further proceedings not inconsistent with this opinion.

OPINION OF THE COURT OF CIVIL APPEALS VACATED;
JUDGMENT OF THE DISTRICT COURT AFFIRMED;
CASE REMANDED FOR FURTHER PROCEEDINGS
NOT INCONSISTENT WITH THIS OPINION.

Kraettli Q. Epperson, NASH, COHENOUR & GIESSMANN, P.C., Oklahoma City, Oklahoma, for Plaintiffs/Appellants/Petitioners.

Timothy J. Bomhoff and Laura J. Long, MCAFEE & TAFT, A PROFESSIONAL CORPORATION, Oklahoma City, Oklahoma, for Defendant/Appellee/Respondent.

COMBS, J.:

I. FACTUAL AND PROCEDURAL BACKGROUND

¶1 Plaintiffs/Appellants/Petitioners Kaye Frances Base and Arlyn Joe Justice are co-trustees of a revocable living trust that their mother, Eunice (née Shawver) Justice, originally settled in 1990 but that she amended in 2011 both to add them as her co-trustees and to name them as successor trustees. The name of the trust is The Eunice S. Justice Amended, Revised, and Restated 1990 Revocable Trust Agreement Executed on the 31st Day of January 2011. Eunice died March 30, 2015, at which point Trustees succeeded.1

¶2 This Trust is a successor-in-interest to certain mineral interests in the 80-acre lot contained in the northern half of the northeast quarter of Section 8, Township 15 North, Range 9 West of the Indian Meridian (i.e., N/2 NE/4 of Section 8-15N-9W in abbreviated form) in Kingfisher County, Oklahoma.2 Back in 1973, those interests were owned by Eunice's mother, Lena Shawver, as life tenant and by Eunice herself as remainderman. On June 16, 1977, Mrs. Shawver conveyed her interests in the land and minerals of the N/2 NE/4 of Section 8-15N-9W to Eunice, thus reuniting the life estate and the remainder.3

¶3 On December 4, 1973, Lena Shawver and Eunice Justice executed an oil and gas lease in favor of the Rodman Corporation, a Texas corporation, concerning those mineral interests in the N/2 NE/4 of Section 8-15N-9W (hereinafter "the 1973 Lease").4 Under its habendum clause, the 1973 Lease would remain valid for a primary term lasting 5 years and then for a secondary term lasting "as long thereafter as oil, gas, casinghead gas, casinghead gasoline, or any of the products covered by this lease is or can be produced" by a well drilled during the primary term.5 The 1973 Lease also provided for payment of a one-eighth (1/8) royalty to the lessors.6 Consequently, the Rodman Corporation had until December 4, 1978, to drill a producing well. But on August 1, 1977, the Rodman Corporation assigned its interests as lessee to Partnership Properties Co., a Colorado general partnership.7 Thus, Partnership Properties Co. had a little over one year left to drill a producing well and thereby hold the 1973 Lease into its secondary term.

¶4 But before a well could be drilled, Eunice and her husband, Herman O. Justice, executed a second oil and gas lease concerning the very same mineral interests on July 24, 1978 (hereinafter "the 1978 Lease") in favor of Petro-Lewis Funds, Inc., a Colorado corporation.8 The habendum clause of the 1978 Lease specified that its three-year primary term would commence on December 4, 1978 (i.e., the date that the 1973 Lease's primary term was set to expire):

from December 4, 1978
2. This lease shall remain in force for a term of     three (3)      years / and as long thereafter as oil, gas, casinghead gas, casinghead gasoline, or any of the products covered by this lease is or can be produced from said land, or from land with which said land is pooled, or operations are being continued as hereinafter provided.

. . . .

December 4, 1978
5. If operations for the drilling of a well for oil or gas are not commenced on said land or on acreage pooled therewith as herein provided on or before one year from this date, this lease shall terminate as to both parties, unless the lessee shall on or before one year from this date pay or tender to the lessor or for the lessor's credit in the

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