Cleghorn v. Dallas Power & Light Co.

611 S.W.2d 893, 68 Oil & Gas Rep. 90, 1981 Tex. App. LEXIS 3194
CourtCourt of Appeals of Texas
DecidedJanuary 21, 1981
DocketA2496
StatusPublished
Cited by5 cases

This text of 611 S.W.2d 893 (Cleghorn v. Dallas Power & Light Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cleghorn v. Dallas Power & Light Co., 611 S.W.2d 893, 68 Oil & Gas Rep. 90, 1981 Tex. App. LEXIS 3194 (Tex. Ct. App. 1981).

Opinion

JUNELL, Justice.

This is an appeal from a summary judgment rendered in favor of defendants, lessees under thirteen coal and lignite leases, ordering that plaintiffs, lessors, take nothing by their suit. Plaintiffs filed suit for declaratory judgment and a decree cancel-ling the leases and/or an alternative decree requiring defendants to proceed in the exploration and development of plaintiffs’ leased lands in accordance with an alleged implied covenant to develop within the time specified by the court or jury or suffer cancellation of the leases. Defendants sought summary judgment contending, inter alia, that the express terms of the subject leases preclude the existence of any implied covenant to develop. We affirm as to two of the leases and reverse and remand as to the remaining eleven.

The thirteen leases the subject of this suit were executed in the 1950’s and early 1960’s by plaintiffs or their successors in interest and L. D. Cross, Trustee of Texas Power and Light Company. In 1969, Cross assigned the leases to defendants who are electric utility companies. Eleven of the leases provide for no primary term during which the lessees are required to explore and develop the property, but rather allow lessees to continue the leases in effect indefinitely with no exploration or development merely by payment of nominal annual rentals. The remaining two leases provide for a twenty-year primary term at the expiration of which the leases will terminate unless coal or lignite is being produced from the subject property in commercial quantities. They also provide for payment of annual rentals during the primary term on the anniversary date of the lease so long as mining operations have not commenced. All thirteen leases provide for payment of *895 royalties once mining operations have commenced.

The rentals required by the subject lesses were paid by defendants until 1976-77, when plaintiffs refused to accept further rentals, declared the leases terminated, and asked defendants for releases of the leases. In September, 1977, plaintiffs filed suit in trespass to try title and asked for a declaratory judgment to declare the validity of or cancel the leases and clear title to plaintiffs’ lands. On August 18,1978, plaintiffs made demand on defendants to begin mining operations on the leased lands within a reasonable time or suffer forfeiture of the leases for failure to develop within a reasonable time. Defendants filed their motion for summary judgment asserting that the existence of the following language within the subject leases precludes the operation of any implied covenant to develop coal and lignite on plaintiffs’ lands:

“It is understood between the parties hereto that this lease shall not be forfeited for any failure to prosecute mining operations on the lands herein described ... nor shall any forfeiture be claimed or enforced for the breach of any implied covenant, but the title to the minerals in the land hereby leased shall not revert to [Lessor] or his assigns so long as the annual rentals as herein provided are being paid to [Lessees] ... or so long as the lands covered hereby ... are being mined as herein provided.”

They also cited the following statement as being contained in other leases the subject of this litigation:

“Lessor acknowledges and agrees that development of coal or lignite reserves may not be practical for many years and therefore may be deferred for an extended period of time, and that the bonus paid for this lease covers all rights granted Lessee hereunder, including particularly the right to continue this lease in effect from year to year by the payment of the annual delay rental above provided, without exploratory or mining operations. There shall be no obligation on Lessee to begin or prosecute mining operations on the lands hereinabove described, nor to mine and remove all or any portion of the coal and lignite situated thereon, nor shall there be any implied covenant so to do.”

We have carefully examined each of the leases attached to defendants’ motion for summary judgment; and while the language first cited by defendants or language similar to it is found in each of the thirteen leases, the second provision cited by defendants is not to be found in any of the leases. Additionally, on appeal of the case, neither plaintiffs nor defendants referred to the second provision in either written brief or oral argument. Had such a provision been included in the leases, clearly it would constitute an express provision by the parties controlling on the issue of the lessees’ obligation to explore and develop the subject leases because the parties would have specifically contracted regarding the issue. However, such not being the case we must analyze the first provision and its implication with respect first to the eleven “no-term” leases and then as to the two leases containing twenty-year primary terms.

In their fifth amended petition on file at the time of the summary judgment hearing, and as their sole contention on appeal, plaintiffs assert the above-quoted language should not be enforced to preclude operation of an implied covenant to explore and develop each of the subject leases. They contend the granting of the summary judgment was improper because a genuine issue of fact was presented by the summary judgment proof as to the existence of an implied covenant to reasonably explore and develop the minerals upon their leased lands. The relief requested by plaintiffs included a conditional or alternative decree requiring defendants to fulfill their obligation under the implied covenant to explore and develop within a time specified by the Court or jury or suffer cancellation of the subject leases.

Defendants contend there can be no implied covenants of exploration and development when the express terms of the leases specifically exclude such implied covenants, *896 citing Freeport Sulphur Co. v. American Sulphur Royalty Co., 117 Tex. 439, 6 S.W.2d 1039 (1928); W. T. Waggoner Estate v. Sigler Oil Co., 118 Tex. 509, 19 S.W.2d 27 (1929); Gulf Production Co. v. Kishi, 129 Tex. 487, 103 S.W.2d 965 (1937) and others. We find those cases inapplicable for that proposition for the reason that the agreement in each of them specifically defines the lessees’ duty as regards development, whereas the leases here in issue do not speak specifically to the lessees’ obligation to develop, but rather merely provide that no forfeiture will result from the failure to prosecute mining operations or the breach of any implied covenants. Defendants contend the above-quoted language constitutes an express provision negativing any implied covenants and that they are under no obligation whatsoever at any time to undertake any steps to explore or develop under the subject leases. We cannot agree. We find support in these cases for plaintiffs’ argument to imply a covenant to explore and develop the subject leases.

The “no-term” provision found within eleven of the subject leases was originally developed for oil and gas leases and designed to get around the limited period of exploration of the short term leases previously used within the industry.

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Bluebook (online)
611 S.W.2d 893, 68 Oil & Gas Rep. 90, 1981 Tex. App. LEXIS 3194, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cleghorn-v-dallas-power-light-co-texapp-1981.