Dimock v. Kadane

100 S.W.3d 622, 157 Oil & Gas Rep. 123, 2003 Tex. App. LEXIS 1977, 2003 WL 756058
CourtCourt of Appeals of Texas
DecidedMarch 6, 2003
DocketNo. 11-01-00354-CV
StatusPublished
Cited by1 cases

This text of 100 S.W.3d 622 (Dimock v. Kadane) 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
Dimock v. Kadane, 100 S.W.3d 622, 157 Oil & Gas Rep. 123, 2003 Tex. App. LEXIS 1977, 2003 WL 756058 (Tex. Ct. App. 2003).

Opinion

OPINION

W.G. ARNOT, III, Chief Justice.

Joe W. Dimock (Dimoek) and E.W. Moran Drilling Company (Moran) brought this partition action against Louise Kadane, Michael L. Gustafson, and Carr Staley as Co-Trustees of the Louise Trust and Ka-dane II, L.L.C. (the Kadane Defendants); Mark W. Gray; and Michael L. Gustaf-son.1 Dimock, Moran, and the Defendants are tenants in common in oil and gas leases. In the trial court, Dimock and Moran sought a partition by sale of the parties’ undivided interests in the leases. The Ka-dane Defendants filed a counterclaim for declaratory judgment. They asserted that the prior owners of the undivided interests in the leases impliedly waived the right to partition under the terms of Letter Agreements and an Operating Agreement and that, therefore, Dimock and Moran were not entitled to partition. The trial court granted summary judgment and rendered judgment in favor of the Kadane Defendants on their declaratory judgment action and awarded them attorney’s fees.2 Because the prior owners of the oil and gas leases impliedly agreed not to partition their interests in the leases, the trial court properly granted summary judgment to the Kadane Defendants. Dimock and Moran appeal from the trial court’s judgment denying them partition. We affirm the judgment of the trial court.

This suit involves 53 oil and gas leases that cover acreage in 3 areas in Palo Pinto County, Texas: the Tennyson Area; the Harmon-Constantine Area; and the Brazos River Authority Area. Kadane Oil Company (Kadane) acquired the leases during the years 1974 through 1976. On September 1, 1976, Kadane entered into Letter Agreements with Texas Utilities Fuel Company (TUFCO), Moran, Robert E. Miller, V.I.M. Co., and G.L. Vinson. Under the Letter Agreements, TUFCO, Moran, Miller, V.I.M. Co., and Vinson purchased undivided interests in the leases from Kadane. On September 3, 1976, the parties to the Letter Agreements entered into an Operating Agreement. The parties entered into the Letter Agreements and the Operating Agreement for the purposes of exploring and developing the leases. In 1996, Dimock purchased his interest in the leases from TUFCO and Kadane. Dimoek, Moran and the Kadane Defendants agree that the leases are subject to the Letter Agreements and the Operating Agreement.

In their first five points of error, Dimock and Moran assert that the trial court erred in granting summary judgment to the Ka-dane Defendants. In its judgment, the trial court made a finding that:

Having examined the particular terms, provisions and conditions of The Agreements, the Court finds that as a matter of law the parties impliedly waived the right to a compulsory partition of The Subject Lands and Plaintiff may not compel a partition of The Subject Lands either in kind or by sale.

Joint owners of undivided mineral interests have the statutory right to compel partition under TEX. PROP. CODE ANN. § 23.001 (Vernon 2000). See MCEN 1996 Partnership v. Glassell, 42 S.W.3d 262, 263 (Tex.App.-Corpus Christi [625]*6252001, pet’n den’d). However, joint owners may expressly or impliedly agree not to partition. MCEN 1996 Partnership v. Glassell, supra at 263; Long v. Hitzelberger, 602 S.W.2d 321, 324 (Tex.Civ.App.-Eastland 1980, no writ); Lichtenstein v. Lichtenstein Building Corporation, 442 S.W.2d 765, 769 (Tex.Civ.App.-Corpus Christi 1969, no writ). There is no express agreement not to partition in the Letter Agreements or the Operating Agreement. Therefore, the issue is whether Kadane, TUFCO, Moran, and the other parties to the Letter Agreements and the Operating Agreement impliedly agreed not to partition the mineral interests.

In order to determine whether the parties impliedly agreed not to partition, the courts “examine the particular contract involved and from the provisions thereof determine whether or not the parties impliedly contracted against partition.” See Warner v. Winn, 191 S.W.2d 747, 751 (Tex.Civ.App.-San Antonio 1945, writ refd n.r.e.). In this context, courts have considered various types of contractual provisions in drilling contracts. For example, if a joint owner of a mineral interest contracts to pay his proportionate part of expenses of drilling and development of the premises for oil and gas, that owner “cannot demand a partition of the mineral estate so as to work a cancellation of the drilling contract, and thereby relieve himself of his proportionate part of the expenses of developing the lease.” Sibley v. Hill, 331 S.W.2d 227, 229 (Tex.Civ.App.-E1 Paso 1960, no writ); Elrod v. Foster, 37 S.W.2d 339, 342 (Tex.Civ.App.-Austin 1931, writ refd). Additionally, “when parties contract for the drilling of wells, and such drilling is either made the consideration for the transfer of a mineral estate or is necessary to extend or perpetuate a lease, it must be inferred that the parties to the drilling agreement did not intend for the estate to be partitioned.” Long v. Hitzelberger, supra at 323; Warner v. Winn, supra at 751. In Sibley, the court determined that a provision in an operating agreement giving the parties a preferential right of purchase coupled with a provision that the agreement was to be in force for so long as oil, gas, or other minerals were produced indicated a “clear implication that the absolute right of partition had been contracted away.” Sibley v. Hill, supra at 229. However, “it can hardly be said that each and every covenant or provision relating to property held in common carries with it the implication that no partition shall be had.” Warner v. Winn, supra at 751. For example, in Warner, the court held that an agreement to manage and operate the properties after the completion of the drilling program, without more, was not sufficient to imply an agreement against partition. Warner v. Winn, supra at 751.

We, therefore, examine the provisions of the Letter Agreements and the Operating Agreement. In the Letter Agreements, Kadane, as the operator, agreed to drill the wells, and the other parties agreed to share the costs and expenses of drilling the wells to casingpoint or plugging and abandoning the wells as dry holes. The Letter Agreements governed operations until the wells reached casingpoint. Kadane agreed to notify the other parties when each of the test wells reached casingpoint. At that time, Ka-dane would recommend: (1) attempting to complete the well, (2) plugging and abandoning the well as a dry hole, or (3) drilling the well to a depth sufficient to test the Mississippian formation. The other parties would then elect whether to follow Kadane’s recommendation. If Kadane recommended attempted completion of the well, the other parties would elect whether or not to consent to the attempted comple[626]*626tion. In Paragraph No. VI of the Letter Agreements, the parties agreed that:

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Bluebook (online)
100 S.W.3d 622, 157 Oil & Gas Rep. 123, 2003 Tex. App. LEXIS 1977, 2003 WL 756058, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dimock-v-kadane-texapp-2003.