Eland Energy, Inc. v. Rowden Oil & Gas, Inc.

914 S.W.2d 179, 1995 WL 752680
CourtCourt of Appeals of Texas
DecidedJanuary 11, 1996
Docket04-93-00550-CV
StatusPublished
Cited by35 cases

This text of 914 S.W.2d 179 (Eland Energy, Inc. v. Rowden Oil & Gas, Inc.) 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
Eland Energy, Inc. v. Rowden Oil & Gas, Inc., 914 S.W.2d 179, 1995 WL 752680 (Tex. Ct. App. 1996).

Opinion

OPINION

GREEN, Justice.

The appellee, Rowden Oil & Gas, Inc. (Rowden, Inc.) sued the appellant, Eland Energy, Inc. (Eland) for declaratory judgment and other relief to clear its title to an oil and gas lease covering approximately 770 acres of land situated in Webb County known as “the Perez Lease.” Eland claims an undivided one-third interest in the Perez Lease and the wells situated thereon. The remaining ap-pellees, Tri-C Resources, Inc., Cometra Oil & Gas, Inc., and American Cometra, Inc., were third-party defendants and intervenors. All parties filed motions for summary judg *182 ment. The trial court granted summary judgment in favor of appellees against Eland. In ten points of error, Eland contends the trial court erred in granting the appellees’ motions and in denying its own motion. We affirm.

FACTUAL BACKGROUND

1. The Cox Farmout

On September 15, 1971, Ralph Row-den and Edwin L. Cox, Sr., executed a letter farmout agreement 1 covering the Perez Lease (the Cox Farmout). The Cox Farm-out provided that if Cox commenced drilling within ten days and drilled to a specified depth, he would have the right to continue drilling under the agreement. The Cox Farmout also provided that Rowden would assign Cox “40 acres in the form of a square as nearly as possible” in a restricted depth around each producing well Cox completed, reserving a one-eighth royalty and other rights.

When Cox gave notice he was ready to plug and abandon a well, Rowden had the right to take over the well. In that event, Rowden would pay the reasonable salvage value of the materials in the hole and Cox’s rights in the tract upon which the well was located would terminate. Cox would then reassign the terminated tract back to Row-den.

The Cox Farmout also provided that it was binding on the parties and their heirs, successors, and assigns, but that the contract was not to be assigned without the owner’s written consent.

2. The Lease Assignment

After Cox timely completed the first well under the Cox Farmout, he suggested to Rowden that, rather than execute a series of assignments of forty-acre production units as each producing well was completed, it would be easier if Rowden would assign the entire Perez Lease to Cox. Under this plan, the undeveloped portions of the Perez Lease would be assigned back to Rowden when all drilling ceased. The new arrangement would remain subject to Cox’s continuous drilling obligation. Rowden agreed, and this modification of the Cox Farmout was accomplished when Rowden signed the November 1, 1971 “Assignment of Oil, Gas, and Mineral Lease” (the Lease Assignment). The Lease Assignment was thereupon duly recorded in the real property records for the county.

Significantly, the Lease Assignment provided that:

[tjhis Assignment is made subject to the terms and provisions of that certain Letter Agreement dated September 15, 1971, between Assignor and Assignee and in particular to the continuous drilling obligation imposed on Assignee by such Agreement and to all the terms and provisions of the above described Oil, Gas and Mineral Lease, the Assignments thereof, and to all instruments of record affecting said lease.

(Emphasis added). Apparently, the parties entered into the Lease Assignment to modify the Cox Farmout only in the mechanics of transferring earned interests in the Perez Lease from Rowden to Cox. 2

*183 3. The Origin of Eland’s Interest

By 1979 Cox had drilled a total of fourteen wells. That year, he quitclaimed to each of his three children an undivided one-third 3 interest in the Perez Lease, “subject to any reservations, limitations or burdens effecting [sic] said leases.” In 1987, Cox’s son, Edwin L. Cox, Jr., assigned his undivided one-third interest in the Perez Lease to Lakeview Partners, L.P.; Cox’s other two children assigned their interests in the Perez Lease to Prudential-Bache. Prudential-Bache then entered into an operating agreement with Graham Royalty, Ltd. concerning its interest in the Perez Lease. 4

In 1989 Eland acquired the interest of Lakeview Partners, relying on Lakeview Partners’ record title to an undivided one-third interest in the Perez Lease. Eland then joined Prudential-Bache in the operating agreement with Graham Royalty, specifically making its participation retroactive to the inception of that agreement.

Also in 1989, Graham Royalty, acting on behalf of Prudential-Bache, quitclaimed back to Rowden, Inc. (Rowden’s successor) all of Prudential-B ache’s remaining interest in the Perez Lease outside of designated forty-acre tracts around four producing wells. The remainder of the fourteen drilled wells had either already been assigned back to Rowden by this time, or had been plugged and abandoned. Eland declined to follow suit and did not assign back to Rowden, Inc. its interest in the undeveloped areas of the Perez Lease. Instead, Eland now claims an undivided one-third interest both in the designated forty-acre tracts and the undeveloped acreage in the entire Perez Lease.

Rowden, Inc. subsequently farmed out 164.94 acres in the northwest portion of the Perez Lease to appellee Tri-C Resources, Inc. Tri-C drilled a producing well and assigned rights to appellee American Cometra, Inc. Appellee American Cometra, Inc. assigned its rights in the lease to appellee Cometra Oil & Gas, Inc. Because Eland claims to own a one-third interest in the entire Perez Lease, it also claims a one-third interest in the Cometra lease. On May 3, 1991, Rowden, Inc., joined later by Cometra, filed this suit against Eland to clear Rowden, Inc.’s claimed title in the Perez Lease.

THE SUMMARY JUDGMENT

1. The Motions for Summary Judgment

Rowden moved for summary judgment to clear its title in the Perez Lease alleging: (1) that Eland was charged with constructive notice of the terms and provisions of the Cox Farmout and was bound thereby; (2) that Eland, by joining the operating agreement with Graham Royalty, was estopped as a matter of law from claiming title to any portion of the Perez Lease lying outside of the forty-acre proration units identified in the operating agreement; (3) that Eland, by joining the operating agreement with Graham Royalty, ratified and confirmed the relinquishment to Rowden of the abandoned wells and their forty-acre proration units, together with all of the undeveloped acreage within the Perez Lease; and (4) that the November 15, 1971 Lease Assignment from Rowden to Cox was expressly limited to convey only the wells completed by Cox as commercial producers, together with forty-acre spacing units around each well, and that such assignment is incapable of a construction that it conveyed any interest in undeveloped acreage lying outside of any forty-acre spacing unit.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

May v. INEOS USA Oil & Gas
2026 Tex. Bus. 14 (Texas Business Court, 2026)
Dayston, LLC v. Jonathan D. Brooke
Court of Appeals of Texas, 2020
John James Harkins v. North Shore Energy, L. L. C.
505 S.W.3d 1 (Court of Appeals of Texas, 2014)
Harding Co. v. Sendero Resources, Inc.
365 S.W.3d 732 (Court of Appeals of Texas, 2012)
in Re: Scott D. Martin
Court of Appeals of Texas, 2012
in Re Michael Joseph Kearns
Court of Appeals of Texas, 2008
Exxonmobil Corp. v. Valence Operating Co.
174 S.W.3d 302 (Court of Appeals of Texas, 2005)

Cite This Page — Counsel Stack

Bluebook (online)
914 S.W.2d 179, 1995 WL 752680, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eland-energy-inc-v-rowden-oil-gas-inc-texapp-1996.