Rippy Interests, LLC v. William L. Nash, John D. Nash, Charles Nash and US KingKing, LLC , 475 S.W.3d 353 ( 2014 )

IN THE
TENTH COURT OF APPEALS
No. 10-12-00233-CV
RIPPY INTERESTS, LLC,
Appellant
v.
WILLIAM L. NASH, JOHN D. NASH,
CHARLES NASH, AND US KINGKING, LLC,
Appellees
From the 12th District Court
Leon County, Texas
Trial Court No. 0-11-44
OPINION
This is a summary-judgment appeal. The trial court granted the amended
motion for summary judgment of Appellee US KingKing, LLC (KingKing) and denied
the cross-motion for summary judgment of Appellant Rippy Interests, LLC (Rippy).1
Rippy appeals, complaining that the trial court erred in granting KingKing’s amended
motion and in denying Rippy’s cross-motion. We agree; we will reverse the summary
1
Appellees William L. Nash, John Donald Nash, and Charles Nash (the Nashes) had joined KingKing’s
original motion for summary judgment, but they did not join KingKing’s amended motion.
judgment in favor of KingKing (and the Nashes), render judgment in part for Rippy,
and remand the case in part for further proceedings.
Factual Background
On January 18, 2006, William L. Nash, John Donald Nash, and Charles Nash
granted Range Production I, L.P. an oil, gas, and mineral lease (the Range Lease) on
approximately 1,888 acres of land in Leon County. The Range Lease had a primary
term of three years with an option to extend the term for two years. The option was
exercised.
The Range Lease provides in pertinent part:
2. Unless sooner terminated or longer kept in force under other
provisions hereof, this lease shall remain in force for a term of three (3)
years from the date hereof, hereinafter called “primary term,” and as long
thereafter as operations, as hereinafter defined, are conducted upon said land
with no cessation for more than ninety (90) consecutive days.
….
6. Whenever used in this lease the word “operations” shall mean
operations for and any of the following drilling, testing, completing,
reworking, recompleting, deepening, plugging back or repairing of a well
in search for or in an endeavor to obtain production of oil, gas, sulphur or
other minerals, excavating a mine, production of oil, gas, sulphur or other
mineral, whether or not in paying quantities. [Emphases added.]
In September 2009, Range Production assigned the Range Lease to Rippy, and in
September 2010, Rippy received a drilling permit for a well on the Range Lease. Also in
September 2010, the Nashes granted a “top lease”2 to KingKing (the KingKing lease) on
the 1,888 acres. The KingKing lease was expressly subordinate to the Range Lease and
2
“A top lease is a lease granted by a landowner during the existence of a recorded mineral lease which
will become effective if and when the existing lease expires or is terminated.” Shown v. Getty Oil Co., 645
S.W.2d 555, 561 (Tex. App.—San Antonio 1982, writ ref’d) (citing WILLIAMS AND MEYERS Oil and Gas Law
Manual of Terms 1981 at 606); see also BLACK’S LAW DICTIONARY 972 (9th ed. 2009) (“A lease granted on
property already subject to an oil-and-gas lease.”).
Rippy Interests v. Nash Page 2
was to become effective only upon the expiration of the Range Lease. The payment
terms of the KingKing Lease were $325 per acre, with $25 per acre payable at signing
and $300 per acre payable if the Range Lease expired and the KingKing Lease took
effect, plus a 25% royalty.
In his deposition, Charles Nash said that in “probably” October 2010, he spoke
with who he thought was Rippy’s landman, who told Charles that a surveying crew
would be on the lease to survey for a well site. Charles was aware of Rippy’s drilling
permit and spoke with Diane of KingKing about the two leases “coming together”
“close to the time frame issue on January 18.”
Around January 1, 2011, Charles called KingKing to tell them that Rippy was
starting to work. He told Diane: “Hey, you know, we might have a problem here;
they’re starting to work here, and I don’t know who’s right or wrong here.” Charles
knew that if the Range Lease expired and the KingKing Lease became effective, the
Nashes would be paid $300 per acre.
On January 7, Charles signed a damage release and acknowledged payment for
wellsite-pad construction and access road use. The surface-damage payment later
made by Rippy was $28,650. Rippy points to the release and payment documents to
show that it was constructing a 2.88-acre well site and a 2.92-acre road to the well site.
As for the construction that Charles observed in early January, he testified that it
was:
Just general construction of the building of an oil well pad, the road
construction, pad preparation, hauling of clay to the road and pad,
Rippy Interests v. Nash Page 3
eventually rocking it, their water wells, setting the conductor pipe,
moving the rig in.
Charles said that, by January 17, the pad was started, but nothing was complete.
He testified that the conductor pipe had been installed on either January 12 or 13.
Charles assumed that Rippy was “going to eventually drill a well there if they were
doing the dirt work to prepare the pad site.”
On January 18, Charles placed a lock on the gate to the site. His explanation for
doing that was that he wanted Rippy and KingKing to communicate because he did not
know which lease was valid. He had spoken with KingKing, and Diane told him that
she did not think that “starting a road site, well site, was valid to hold the lease beyond
the expiration of the term.” Also, around January 18, Charles spoke with Nick
McDonough, a lawyer for KingKing, and he told Charles that he did not think that
“starting preparation of the road or well pad was sufficient to hold the lease.”
After Rippy’s workers cut the lock and entered the property, Charles called the
police. His explanation for doing so was “to have some documented proof that they
entered the property when they may not have had a valid lease.” When the deputy
arrived, Charles told him that there was a dispute between two oil companies and that
the Nashes were in the middle of it. The deputy concluded that it was a civil dispute,
and no arrests were made.
In his affidavit, Charles Rippy, the managing partner of Rippy Interests, stated:
In January 2011 I hired Wayne Davis to serve as general contractor
for the drilling of the Nash 1H well on the premises of the Nash lease.
I received bids and hired Fluid Disposal Specialties, Inc., Zoch
Rippy Interests v. Nash Page 4
Construction, Inc., and Pipe Maintenance, Inc. to prepare a well pad,
construct an access road, and to install conductor pipe at the well location
for the Nash 1H lease. The work commenced on January 7, 2011 and
continued up to and after January 18, 2011.
On January 10, 2011 I called Energy Drilling Company to solicit a
bid for a drilling rig to be provided to the Nash 1H well site. I received a
bid for a drilling rig on January 18, 2011.
On January 18, 2011, the gate constructed on the site was locked by
the owner Charles Nash. Our contractors gained access to the site and
continued construction. On January 19, 2011, the police had been called to
arrest our contractors for criminal trespass. No arrest occurred and our
contractors then continued working.
On February 12, 2011 I signed a contract with Energy Drilling
Services for the provision of a drilling rig and drilling of a well. The rig
was provided and drilling commenced between February 25, 2011 and
March 1, 2011.
As of March of 2011, Rippy Interests had expended $849,404.00 in
pursuit of drilling the Nash 1H well.
Mr. Rippy testified that they drilled a vertical well to 7,900 feet as a pilot hole.
Rippy’s plan was to then evaluate the well bore and set cement plugs (which they did),
and then bring in a bigger drilling rig to drill horizontally 3,500 feet. Mr. Rippy said
that, after the pilot hole was completed, they did not complete the horizontal well
because of the challenge to Rippy’s title. Rippy last conducted work on the Nash
property in March of 2011.
In his deposition, when asked how there was a challenge to title, Mr. Rippy said
that it was when Charles Nash put a lock on the gate and then called the sheriff’s
department. He also said that his brother Reed Rippy had conversations with Charles
Rippy Interests v. Nash Page 5
Nash in January and February of 2011 and that Charles Nash “indicated he felt like the
lease was expired.”
Procedural Background
On January 24, 2011, Rippy sued the Nashes for injunctive relief, alleging that
Charles Nash had made attempts to prevent Rippy from conducting operations on the
Nash land by locking the gate and attempting to have workers arrested for criminal
trespass. The Nashes filed a general denial on February 11, 2011.
In June 2011, Rippy filed an amended petition that added KingKing as a
defendant and added a claim for declaratory relief. Rippy sought declarations that the
Range Lease had been extended by Rippy’s operations and was in full force and effect
and that the KingKing Lease was not the controlling lease. KingKing filed a
counterclaim that sought a declaratory judgment that the Range Lease expired and that
the KingKing Lease was the only valid lease. KingKing also asserted claims for trespass
to try title, to quiet title and remove cloud from title, and for slander of title. Rippy later
asserted wrongful repudiation of the Range Lease as an affirmative defense to the
counterclaim.
KingKing filed a combined no-evidence and traditional motion for summary
judgment. It asserted that KingKing was entitled to judgment as a matter of law on
Rippy’s declaratory-judgment claim because there was no evidence that the Range
Lease was extended by agreement, no evidence that operations were being conducted
on the lease before expiration, and no evidence that a well or equipment capable of
drilling a well existed on the lease. KingKing also sought traditional summary
Rippy Interests v. Nash Page 6
judgment on its counterclaims based on its alleged superior title because of the Range
Lease’s expiration.
The Nashes filed a motion for joinder in KingKing’s motion for summary
judgment on February 2, 2012. It states:
The claims for relief put forth by US KingKing, LLC in its No
Evidence and Traditional Motions for Summary Judgment against Rippy
Interests, LLC are hereby adopted by the Nash Defendants. The motions
by US KingKing LLC request relief on the controlling questions in this
case which will be dispositive of the claims by Rippy Interests, LLC
against the Nash Defendants.
The Nash Defendants pray that the Court grant the Motions for
Summary Judgment by US KingKing, LLC and order that all interests and
all rights claimed by Rippy Interests, LLC in and under any leases of the
real property of the Nash Defendants have expired and are terminated.
Rippy filed a response to KingKing’s motion for summary judgment and a cross-
motion for summary judgment. Based on its summary-judgment evidence, Rippy
moved for traditional summary judgment on the ground that its title was superior to
KingKing’s alleged title. Rippy asserted that it was entitled to prevail on its claims for
trespass to try title, suit to quiet title, and to have the Range Lease declared to be in full
force and effect because the summary-judgment evidence established that Rippy was
conducting operations for drilling at the time of the Range Lease’s expiration and thus,
as a matter of law under the terms of the Range Lease, the operations for drilling held
the lease for Rippy beyond its expiration and Rippy retained title under the Range
Lease.
KingKing then filed an amended no-evidence and traditional motion for
summary judgment that added the following ground: even if Rippy were conducting
Rippy Interests v. Nash Page 7
operations to hold the Range Lease, those operations were not conducted without
cessation for more than ninety days, and the Range Lease expired because Rippy failed
to maintain continuous operations. KingKing also added the following no-evidence
summary-judgment grounds: (1) there is no evidence that operations were conducted
without cessation for more than ninety days; and (2) there is no evidence of repudiation
“and/or” Rippy’s reliance on repudiation to excuse Rippy from performance under the
Range Lease. The Nashes did not file a joinder to KingKing’s amended motion.
Rippy filed a response to KingKing’s amended motion and filed as additional
summary-judgment evidence the depositions of Charles Rippy and Charles Nash. The
trial court dismissed Rippy’s claims with prejudice, granted KingKing’s amended
motion (in part3), and granted declaratory relief as follows:
It is therefore ORDERED, ADJUDGED, and DECREED that the oil
and gas lease between Range Production I, LP and the Nash defendants,
attached to this order as Exhibit A, is void/expired and is no longer
effective. Accordingly, it is therefore ORDERED, ADJUDGED, and
DECREED that the oil and gas leases between U.S. KingKing, LLC and the
Nash defendants, attached to this order as Exhibit B, are effective.
The trial court did not otherwise state the grounds or reasons for granting KingKing’s
amended motion for summary judgment.
Rippy asserts on appeal that the trial court erred in granting KingKing’s
amended motion for summary judgment and should have granted Rippy’s cross-
motion for summary judgment because Rippy perpetuated the Range Lease by
conducting “operations for drilling” and because the Nashes repudiated the Range
3
The trial court did not grant relief on KingKing’s other counterclaims, and its order denied “[a]ny relief
expressly requested by any party and not granted herein.”
Rippy Interests v. Nash Page 8
Lease, which excused Rippy’s performance under the ninety-day cessation-of-
operations clause until judicial resolution of the dispute.
Standard of Review
Rippy’s first issue is that the trial court erred in granting summary judgment for
KingKing. We review a trial court’s summary judgment de novo. Provident Life &
Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). In reviewing a traditional
motion for summary judgment, we must consider whether reasonable and fair-minded
jurors could differ in their conclusions in light of all of the evidence presented. See
Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007). We must consider
all the evidence in the light most favorable to the nonmovant, indulging every
reasonable inference in favor of the nonmovant and resolving any doubts against the
motion. See id. at 756. In our review, we take the nonmovant’s competent evidence as
true. Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005).
A no-evidence motion for summary judgment is essentially a motion for pretrial
directed verdict. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 581 (Tex. 2006); see also
Humphrey v. Pelican Isle Owners Ass’n, 238 S.W.3d 811, 813 (Tex. App.—Waco 2007, no
pet.). Once such a motion is filed, the burden shifts to the nonmoving party to present
evidence raising an issue of material fact as to the elements specified in the motion.
Tamez, 206 S.W.3d at 583. The nonmovant must produce “summary judgment evidence
raising a genuine issue of material fact.” TEX. R. CIV. P. 166a(i). When determining if
more than a scintilla of evidence has been produced, the evidence must be viewed in
Rippy Interests v. Nash Page 9
the light most favorable to the nonmovant. Ford Motor Co. v. Ridgway, 135 S.W.3d 598,
601 (Tex. 2004).
The party moving for summary judgment bears the burden of proof.
Roskey v. Tex. Health Facilities Comm’n, 639 S.W.2d 302, 303 (Tex. 1982).
Though these burdens vary for traditional and no-evidence motions, the
summary judgment motion here was a hybrid motion and both parties
brought forth summary judgment evidence; therefore, the differing
burdens are immaterial and the ultimate issue is whether a fact issue
exists. Buck v. Palmer, 381 S.W.3d 525, 527 & n.2 (Tex. 2012). A fact issue
exists if there is more than a scintilla of probative evidence. See id. at 527;
TEX. R. CIV. P. 166a(c), (i).
Neely v. Wilson, 418 S.W.3d 52, 59 (Tex. 2013).
When competing motions for summary judgment are filed and one is granted
and the other is denied, the general rule is that an appellate court should determine all
questions presented and render the judgment the trial court should have rendered if the
motions sought final judgment. Mid-Continent Cas. Co. v. Global Enercom Management,
Inc., 323 S.W.3d 151, 153-54 (Tex. 2010). In doing so, we first review the order granting
summary judgment, and if we determine the order was erroneous, we review the trial
court’s action in overruling the denied motion. Wolfe v. Devon Energy Prod. Co., LP, 382
S.W.3d 434, 443 (Tex. App.—Waco 2012, pet. denied). We should then render the
judgment that the trial court should have rendered, including one that denies both
motions. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000); Wolfe,
382 S.W.3d at 443.
“Operations for Drilling”
In its second issue, Rippy contends that summary judgment for KingKing was
improper because the Range Lease required that only “operations for drilling” be
Rippy Interests v. Nash Page 10
conducted before the lease expired and that the operations that Rippy had conducted
perpetuated the Range Lease as a matter of law.4 KingKing and the Nashes do not
contest Rippy’s initial construction of paragraph 6 of the Range Lease—that
“operations” to perpetuate the lease include “operations for drilling.” Where the
parties disagree is whether the operations for drilling that Rippy conducted before the
lease’s expiration were adequate under Texas law to perpetuate the lease.
KingKing and the Nashes primarily rely on Ridge Oil Co. v. Guinn Investments,
Inc., 148 S.W.3d 143 (Tex. 2004) and assert that the lessee’s level of activity in that case
was similar to Rippy’s and did not satisfy the lease’s operations clause. In Ridge Oil, the
lessee obtained a drilling permit and attempted to pay surface damages, and the only
physical operation was driving a wooden stake into the ground to mark the well site.
Id. at 157-58. The court held that, as a matter of law, the lessee did not conduct
operations to maintain the lease. Id. at 160. In its analysis, the court discussed Whelan v.
R. Lacy Inc., 251 S.W.2d 175 (Tex. Civ. App.—Texarkana 1952, writ ref’d n.r.e.). Id. at
158. There the “drilling operations” clause was satisfied as a matter of law “when the
lessee went onto the property with a bulldozer nine days before the primary term
expired and there was ‘continuous work’ thereafter until a producing well was
completed.” Id. at 158 (citing Whelan, 251 S.W.2d at 176).
4
Both KingKing and the Nashes alternatively argue that Range’s assignment to Rippy required Rippy to
be “engaged in actual drilling operations” for the assignment to “remain in full force and effect.” The
assignment defined “actual drilling operations” “as the penetration of the surface with a drilling rig
capable of drilling to the anticipated total depth of the well.” But as Rippy notes, the assignment between
Range and Rippy did not, and could not, change the terms of the Range Lease with the Nashes.
KingKing and the Nashes cite no authority to support their reliance on the assignment, and Rippy notes
that, as third parties to the assignment, KingKing and the Nashes lack standing to enforce it. See Grinnell
v. Munson, 137 S.W.3d 706, 714 (Tex. App.—San Antonio 2004, no pet.).
Rippy Interests v. Nash Page 11
The court then summarized a collection of relevant cases (cases concluding “that
particular activities satisfied the particular lease provisions at issue”), as follows:
See Utley v. Marathon Oil Co., 31 S.W.3d 274, 275, 278-79 (Tex.
App.—Waco 2000, no pet.) (lease required operations for drilling, mining
or reworking or additional operations to be commenced or prosecuted
with no cessation of more than ninety consecutive days and pipeline
leading to the well was being constructed during disputed time and
“there were activities testing and trying to obtain production from ... a
‘wildcat’ well”); Petersen v. Robinson Oil & Gas Co., 356 S.W.2d 217, 219
(Tex. Civ. App.—Houston 1962, no writ) (court recounted activities each
day, including driving a stake and leveling with a maintainer one day,
more maintainer work the next two days, use of a caterpillar the following
day, constructing a road each of the next several days, and moving a drill
onto the location, continuing work on the rig and drilling without
interruption when lease required drilling or reworking operations with no
cessation of more than sixty consecutive days); Morrison v. Swaim, 220
S.W.2d 493, 494-96 (Tex. Civ. App.—Eastland 1949, writ ref’d n.r.e.)
(detailing work done each day after expiration of the primary term on
well drilled before end of primary term under a lease that remained in
effect after the primary term as long “as the lessee in good faith shall
conduct drilling operations thereon and should production result”);
Guleke v. Humble Oil & Ref. Co., 126 S.W.2d 38, 39, 41-42 (Tex. Civ. App.—
Amarillo 1939, no writ) (lease in effect so long as drilling or reworking
operations were prosecuted with no cessation of more than thirty days,
and lessee made a location for the well, the next day brought to the
location material for a steel tower and other material including cement
and pipe, dug a slush pit and well for water, later erected the steel derrick,
and did not cease work at any time until gas was produced); Terry v. Tex.
Co., 228 S.W. 1019, 1019-20 (Tex. Civ. App.—Fort Worth 1920, no writ)
(lease required that lessee “commence to drill a test well” within eight
months and within that time lessee brought timbers onto the property for
erection of a derrick, as well as machinery including a boiler, commenced
“rigging up” for a well the day before the eight months expired and
commenced actual drilling eight days after the eight months expired); see
also Gray v. Helmerich & Payne, Inc., 834 S.W.2d 579, 580 (Tex. App.—
Amarillo 1992, writ denied) (parties essentially agreed that performing the
first road construction and installing a cattleguard before the end of the
primary term satisfied a requirement of commencement of drilling or
reworking operations so that issue was not before the court).
Id. at 158 n.73; see also RICHARD HEMINGWAY, LAW OF OIL AND GAS 321 (West 2d. ed.
Rippy Interests v. Nash Page 12
1983) (“the vast majority of well completion clauses have a condition that the lessee
must have commenced operations for the drilling of a well prior to the end of the
primary term. Such operative language has been generally interpreted to mean that
operations for the drilling of a well, and not the actual spudding in or drilling of the
hole, must have commenced prior to the end of the primary term.”); id. at 332 (“A
minimum of physical activities would seem to include the staking of the well site plus
some acts to the land itself such as leveling the site and digging slush pits.”).
In this case, it is undisputed that Rippy did the following before the Range
Lease’s expiration: Rippy obtained a drilling permit and a surface-damage release; it
hired a drilling contractor and solicited a bid for a drilling rig, which bid was received
on January 18; it hired contractors to prepare the well site; and through those
contractors, it began construction of a 2.88-acre well site and a 2.92-acre road to the well
site with heavy earth-moving equipment and set (installed) conductor pipe5 in the
ground. Furthermore, as a result of those operations, Rippy actually drilled the pilot
hole within the next two months. As a matter of law, Rippy conducted operations for
drilling before the Range Lease expired, and the trial court should have denied
5
“The conductor pipe is an essential component of a gas well. It is designed to prevent the hole from
caving-in and to support the great weight of the drill pipe. The conductor pipe consists of a large
diameter casing … placed … in the ground.” Exxon Corp. v. Crosby-Mississippi Resources, Ltd., 154 F.3d
202, 207 (5th Cir. 1998); see also MANUAL OF OIL AND GAS TERMS 131-32, 190 (13th ed. 2006) (“conductor
pipe” is casing pipe “used to seal off fluids from the hole or to keep the hole from caving in.”)
SCHLUMBERGER OILFIELD GLOSSARY, http://www.glossary.oilfield.slb.com/en/Terms/c/conductor_pipe.
aspx (“The casing string that is usually put into the well first, particularly on land wells, to prevent the
sides of the hole from caving into the wellbore. This casing, sometimes called drive pipe, is generally a
short length and is sometimes driven into the ground.”).
Rippy Interests v. Nash Page 13
KingKing’s amended motion in that respect.6 We thus sustain issue two, and to the
extent that the trial court granted summary judgment for KingKing on that basis, we
sustain issue one. The trial court should have granted Rippy’s cross-motion and
granted declaratory relief for Rippy that the Range Lease was perpetuated by Rippy’s
operations for drilling that it conducted before the primary term’s expiration.
Cessation and Repudiation
KingKing’s amended summary-judgment motion asserted that, even if Rippy
conducted operations to hold the Range Lease, those operations were not conducted
without cessation for more than ninety days, and the Range Lease expired because
Rippy failed to maintain continuous operations. It also asserted that the summary-
judgment evidence conclusively negated Rippy’s repudiation defense that was asserted
to excuse Rippy from performance under the Range Lease. Specifically, KingKing
asserted (1) that there was no “clear, unequivocal challenge” to Rippy’s title because
Rippy continued working on the leased premises after the alleged repudiation; and (2)
that there was no reliance on the alleged repudiation because Rippy continued working
for several months after the alleged repudiation and because there is evidence that
Rippy ceased work for reasons other than the alleged repudiation.
6
The Nashes and KingKing contend that the lease’s primary term expired on January 17, 2011, at 11:59
p.m.; they cite no supporting authority. Rippy disagrees, noting that the Range Lease’s primary term
(three years plus the two-year extension) ran “from the date hereof,” January 18, 2006. Rippy is correct
that the lease expired at the end of the day on January 18, not on January 17. See, e.g., Peterson, 356 S.W.2d
at 218-20 (lease dated March 27 was set to expire at midnight on March 27 but was extended by leveling
well location on March 27); Guleke, 126 S.W.2d at 39, 41 (discussing event on November 5, the day
following the last day of the “primary term of the lease” dated November 4); cf. Medina v. Lopez-Roman, 49
S.W.3d 393, 397-99 (Tex. App.—Austin 2000, pet. denied) (discussing computation of years for purpose of
statute of limitations period).
Rippy Interests v. Nash Page 14
KingKing also sought a no-evidence summary judgment on Rippy’s repudiation
defense. Specifically, KingKing asserted that there was no evidence that Rippy
conducted operations without cessation for more than ninety days and no evidence of
repudiation by the Nashes or of Rippy’s reliance on any repudiation.
In its third issue, Rippy complains about summary judgment on its repudiation
defense. Because KingKing’s amended motion was a “hybrid motion” and both parties
brought forth summary-judgment evidence, the differing burdens are immaterial and
the ultimate issue is whether a fact issue exists. Neely, 418 S.W.3d at 59.
It is undisputed that, after completing the pilot hole in March 2011, Rippy ceased
operations on the Range Lease for more than ninety days. Mr. Rippy so testified; but he
also said that Rippy ceased operations on the Range Lease at that time and did not
complete the well because of a “challenge to the title.” Rippy’s defense is that the
Nashes repudiated the Range Lease and that the repudiation excuses Rippy’s failure to
conduct operations without cessation for more than ninety days. Thus, we must
determine if summary judgment for KingKing was proper on Rippy’s repudiation
defense.
The law is well-settled in Texas that “[l]essors who ... wrongfully
repudiate the lessees’ title by unqualified notice that the leases are
forfeited or have terminated cannot complain if the latter suspend
operations under the contract pending a determination of the controversy
and will not be allowed to profit by their own wrong.” A lessor’s
repudiation of a lease relieves the lessee “from any obligation to conduct
any operations, drilling, re-working, or otherwise, on said land in order to
maintain the lease in force pending the judicial determination of the
controversy ... over the validity of the lease.”
Ridge Oil, 148 S.W.3d at 157 (citations in footnotes omitted).
Rippy Interests v. Nash Page 15
The elements of repudiation of an oil-and-gas lease are:
(1) A subsisting lease (i.e., a lease that has not expired). Chesapeake Exploration,
L.L.C. v. Valence Operating Co., No. H-07-2565, 2008 WL 4240486, at *4 (S.D.
Tex. Sept. 10, 2008); Exploracion De La Estrella Soloataria Incorporacion v.
Birdwell, 858 S.W.2d 549, 555 (Tex. App.—Eastland 1993, no writ).
(2) The lessor’s “unqualified notice” that the lease has been forfeited or
terminated. Ridge Oil, 148 S.W.3d at 157; see also Chesapeake, 2008 WL 4240486,
at *4 (a “clear, unequivocal challenge” by the lessor to the lessee’s title to, and
interest in the lease (quoting Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 239
(Tex. App.—Corpus Christi 1994, writ denied)).
Reliance (i.e., the lessee’s suspension of operations in reliance on, or as a result of,
the lessor’s alleged repudiation), while seemingly implicit in the doctrine of repudiation
of a lease, has also been stated to be part of the showing that the lessee must make to
establish the lessor’s repudiation. See BB Energy LP v. Devon Energy Prod. Co., LP, No.
3:07-CV-0723-O, 2008 WL 2164583, at *12 (N.D. Tex. May 23, 2008) (“When the lessee
shows it relied on the acts of the lessor and suspended operations pending a
determination of the validity of the lease, the doctrine of repudiation prevents the lease
from terminating while the lawsuit questioning the validity of a lease is pending.”);
Atlantic Richfield Co. v. Hilton, 437 S.W.2d 347, 355 (Tex. Civ. App.—Tyler 1969, writ
ref’d n.r.e.) (“Moreover, Atlantic failed to establish that as a result of any of the grounds
alleged to constitute repudiation of the lease, it suspended operations under the Hilton-
Atlantic Lease or that it acted thereon to its prejudice.”) (emphasis added).
Subsisting Lease
We held above that the Range Lease did not expire—that it was subsisting
Rippy Interests v. Nash Page 16
because Rippy conducted operations for drilling before the lease expired. To the extent
the trial court granted summary judgment for KingKing on that basis, it erred.
Unqualifid Notice
We thus turn to whether a fact issue exists on repudiation by the Nashes of
Rippy’s title under the Range Lease. Rippy asserts that Charles Nash’s placing a lock
on the gate to the well site and then calling police and alleging criminal trespass when
Rippy’s contractors cut off the lock and entered the premises is evidence of repudiation.
Rippy also asserts that, by filing their February 11, 2011 general denial to Rippy’s
January 24 original petition for injunctive relief, the Nashes challenged Rippy’s title.7
See TEX. R. CIV. P. 92 (general denial puts at issue everything in plaintiff’s pleading that
is not required to be denied under oath or specially denied); Shell Chem. Co. v. Lamb, 493
S.W.2d 742, 744 (Tex. 1973) (general denial joins issue “on all material facts asserted by
plaintiff”). In its petition, Rippy pleaded that it was conducting operations on the lease
and that continuing operations would extend the lease past the primary term, but that
Charles Nash was attempting to obstruct Rippy’s operations.
KingKing and the Nashes both argue that Charles Nash’s placing a lock on the
gate to the well site and then calling police were not clear, unequivocal challenges to
title because he testified that his motives were to try to get Rippy and KingKing to
communicate and to document that Rippy’s contractors had cut the lock and entered
7
Rippy further points to the Nashes’ joinder of KingKing’s original motion for summary judgment. In
that joinder, the Nashes requested that the trial court grant KingKing’s motion and order that all of
Rippy’s rights and interests in the Range Lease “have expired and are terminated.” But the joinder, while
plainly a repudiation of Rippy’s title, was filed on February 2, 2012, around ten months after Rippy had
stopped working on the lease, so Rippy could not have ceased operations as a result of the Nashes’
joinder.
Rippy Interests v. Nash Page 17
the premises. KingKing also argues on appeal that there is no evidence of alleged
repudiation by William Nash or John Nash, but they are parties to the general denial to
Rippy’s original petition.8
Rippy responds that a factfinder could disregard Charles Nash’s testimony about
his motives. See Young v. Qualls, 223 S.W.3d 312, 314 (Tex. 2007) (noting that
“unsubstantiated and self-serving” testimony is “evidence of the type a jury could
disregard”). And Rippy notes the Nashes’ financial incentive in KingKing’s defeating
Rippy’s repudiation defense and having the Range Lease declared expired—they would
be due $300 per acre from KingKing for their 1,888 acres.
In the summary-judgment context, neither we nor the trial court weighs the
evidence or judges the credibility of either side’s version of events; the only issue is
whether a fact issue exists. See Huckabee v. Time Warner Entertainment Co. L.P., 19 S.W.3d
413, 422 (Tex. 2000) (“Texas law has always emphasized that trial courts must not weigh
the evidence at the summary judgment stage. Instead, a trial court’s only duty at the
summary judgment stage is to determine if a material question of fact exists.”); see also
Casso v. Brand, 776 S.W.2d 551, 558 (Tex. 1989) (“If the credibility of the affiant or
deponent is likely to be a dispositive factor in the resolution of the case, then summary
judgment is inappropriate.”). And in making that determination, we must consider all
the evidence in the light most favorable to Rippy, the nonmovant, and indulge every
reasonable inference in favor of Rippy and resolve any doubts against the motion.
8
To the extent that this argument is made as a summary-judgment ground, it was not made in
KingKing’s amended motion and cannot be a basis for summary judgment. See Johnson v. Brewer &
Pritchard, P.C., 73 S.W.3d 193, 204 (Tex. 2004) (noting that a “court cannot grant summary judgment on
grounds that were not presented”).
Rippy Interests v. Nash Page 18
Reasonable and fair-minded jurors could conclude that Charles Nash’s putting a
lock on the gate to the well site is “unqualified notice” to Rippy that the Nashes
considered the Range Lease to have expired and that Rippy no longer had a right to be
on the premises. And for Mr. Rippy’s affidavit testimony that the police were called to
arrest Rippy’s contractors for criminal trespass, reasonable and fair-minded jurors could
reasonably infer that Charles Nash called the police because the Nashes considered the
Range Lease to have expired and that Rippy no longer had a right to be on the
premises. Mr. Rippy testified that, in conversations with Reed Rippy, Charles Nash
“indicated he felt like the lease was expired.” Mr. Rippy also said several times that
there was a “challenge to the title.”
KingKing and the Nashes also both argue that, by continuing operations after
Charles Nash put a lock on the gate and called police, Rippy did not treat or accept
Charles Nash’s acts as a repudiation of the Range Lease. This argument is more
pertinent to KingKing’s no-reliance argument, but to the extent that it is relevant to the
issue of unqualified notice of a challenge to title by the Nashes, we cannot make that
inference against Rippy and must resolve any doubt in Rippy’s favor.
Because there is more than a scintilla of evidence on whether there was
unqualified notice by the Nashes to Rippy that the Range Lease was terminated, and
because there is conflicting summary-judgment evidence on that issue, a genuine issue
of material fact exists on whether the Nashes gave unqualified notice that the Range
Lease was terminated. Accordingly, summary judgment on this ground was erroneous,
and the trial court should have denied KingKing’s amended motion in this respect.
Rippy Interests v. Nash Page 19
Reliance
Mr. Rippy testified that, after the pilot hole was completed, Rippy did not
complete the horizontal portion of the well and stopped working on the Nash premises
because of “a challenge to the title.” This testimony is more than a scintilla of evidence
that Rippy ceased operations as a result of the Nashes’ repudiation.
KingKing also moved for summary judgment on the ground that there was no
reliance on the alleged repudiation because Rippy continued working for several
months after the alleged repudiation and because, when Rippy did eventually cease
operations, it did so for reasons other than the alleged repudiation. KingKing argues
that by continuing operations after the acts of alleged repudiation, Rippy did not rely
on the alleged repudiation or waived it. The Nashes similarly argue that Rippy did not
rely on the alleged repudiation because it did not “accept” it, which was required.9
In Chesapeake Exploration v. Valence Operating, the lessor (CP) argued that there
was no repudiation because the lessee’s (Chesapeake’s) actions after the alleged
repudiation did not comport with its repudiation argument. Chesapeake Exploration,
2008 WL 4240486, at *6. The federal court stated:
Essentially, CP is arguing that Chesapeake waived its right to use the
repudiation defense when it acted in a manner inconsistent with
repudiation. … However, the court has not located any Texas law
9
In arguing that the other party must accept the repudiation and not treat the contract as “alive,” the
Nashes cite cases involving repudiation of a contract, rather than an oil-and-gas lease. See, e.g., Griffith v.
Porter, 817 S.W.2d 131, 135 (Tex. App.—Tyler 1991, no writ) (“If the repudiation is not accepted by the
other party, the contract is kept alive for the benefit of both parties; the non-repudiating party, like the
repudiating party, remains subject to all obligations under the contract.”) (citing Vise v. Foster, 247 S.W.2d
274, 280-81 (Tex. Civ. App.—Waco 1952, writ ref’d n.r.e.)). But as next explained, acceptance and waiver
are not applicable to a repudiation defense involving continuing operations under an oil-and-gas lease
after an alleged repudiation.
Rippy Interests v. Nash Page 20
stating that a party claiming repudiation of a lease with an operations
clause waives the repudiation defense by continuing operations. To the
contrary, the statements of law regarding repudiation of an oil and gas
lease speak in terms of the relief of an obligation to perform, not a bar to
further performance. See e.g., Ridge Oil Co. v. Guinn Invs., Inc., 148 S.W.3d
143, 157 (Tex. 2004) (lessors who repudiate may not complain if lessee
suspends operations); Mitchell, 80 F.3d at 982 (repudiation “relieves the
lessee from any obligation to conduct operations”); Atkinson, 878 S.W.2d at
239 (“[R]epudiation by a lessor relieves the lessee from any obligation to
conduct any operation on the land in order to maintain the lease.”);
Cheyenne, 714 S.W.2d at 105 (same); Kothmann, 308 S.W.2d at 4 (lessors
who repudiate “cannot complain if [the lessees] suspend operations under
the contract pending a determination”). Furthermore, it seems rather a
paradox to find that a lessee can lose his right to perform more
operations under the lease by performing operations under the lease.
Therefore, the fact that Chesapeake wanted to renew the lease and applied
for drilling permits does not affect its ability to bring the repudiation
defense.
Id. (emphases added).
We agree that the mere fact of a lessee’s continuing operations after an alleged
repudiation of the lease is not a waiver of a repudiation defense; it also does not negate
as a matter of law the lessee’s reliance on the alleged repudiation. Thus, summary
judgment was improper on the ground that Rippy’s continuing operations negated
Rippy’s reliance on the repudiation when it eventually did cease operations allegedly as
a result of the repudiation.
KingKing argues that the summary-judgment evidence negates Rippy’s reliance
because it conclusively establishes that, when Rippy eventually ceased operations, it did
so for reasons other than the alleged repudiation. KingKing first points to Mr. Rippy’s
testimony that the initial drilling rig was not adequate to drill the horizontal portion of
the well and argues that Rippy stopped drilling for that reason, not because of the
Rippy Interests v. Nash Page 21
alleged repudiation. But Mr. Rippy testified that Rippy’s original plan was to bring in a
bigger rig to drill the horizontal portion of the well, but that plan was changed in
March. At that point, Mr. Rippy was not asked why the plan was changed. Earlier in
his deposition, when he was asked why Rippy did not complete the well, Mr. Rippy
answered: “Because there was a challenge to the title.” When asked why Rippy
stopped working on the Nash lease, Mr. Rippy answered: “Because there was a
challenge to the title.” And later in the deposition, when he was asked if the challenge
to the title was the only reason that Rippy did not “get a rig out there since March
2011,” Mr. Rippy answered: “Yes.”
While it is undisputed that Rippy stopped drilling and ceased operations after
the pilot well was drilled with the initial rig, Mr. Rippy never said that the reason Rippy
stopped drilling or ceased operations was because the initial rig was inadequate to
complete the horizontal portion of the well. Mr. Rippy’s testimony that the initial rig
was not adequate to complete the well is thus not evidence that Rippy did not rely on
the alleged repudiation.
KingKing then points to Mr. Rippy’s testimony that Rippy had not drilled “any
additional wells since March 2011” because Rippy was “evaluating as to whether to
bring in a partner for further development” “primarily as a function of economics.”
From this, KingKing argues that Rippy ceased operations because it did not have the
money to complete the well.
As Rippy correctly points out, the question being answered referred to
“additional wells,” not to why it had not completed the pilot well. Moreover, Mr.
Rippy Interests v. Nash Page 22
Rippy had already testified that Rippy had a partner in the Range Lease. That Rippy
had not drilled additional wells on the Range Lease because it was considering another
partner is not evidence that Rippy did not rely on the alleged repudiation.
The summary-judgment evidence shows that there is a genuine issue of material
fact on why Rippy ceased operations in March 2011 after completing the pilot well.
Accordingly, summary judgment on KingKing’s no-reliance ground was erroneous,
and the trial court should have denied the amended motion in that respect. We sustain
issue three, and to the extent that the trial court granted summary judgment for
KingKing on Rippy’s repudiation defense, we further sustain issue one.
In its fourth issue, Rippy contends that the Range Lease was extended because
the Nashes repudiated the lease. But because Rippy did not move for summary
judgment on its repudiation defense in its cross-motion, we cannot address that
contention in this appeal. See Johnson, 73 S.W.3d at 204. Issue four is overruled.
Conclusion
The trial court erred in granting KingKing’s amended no-evidence and
traditional motion for summary judgment. In sustaining issues one and two, we
reverse the trial court’s order granting the amended motion and its decree that the oil-
and-gas lease between Range Production I, LP and William L. Nash, John D. Nash, and
Charles Nash is “void/expired and is no longer effective” and that the leases between
KingKing and the Nashes are effective. The trial court should have denied KingKing’s
amended motion for summary judgment and should have granted Rippy’s cross-
motion for summary judgment. We thus render judgment that the oil-and-gas lease
Rippy Interests v. Nash Page 23
between Range Production I, LP and William L. Nash, John D. Nash, and Charles Nash
is in effect, subject to further proceedings consistent with this opinion.
In sustaining issues one and three, we reverse the trial court’s order granting
KingKing’s amended motion for summary judgment on Rippy’s repudiation defense,
which should have been denied, and we remand this case for further proceedings
consistent with this opinion.
REX D. DAVIS
Justice
Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Reversed and rendered in part and remanded in part
Opinion delivered and filed August 21, 2014
[CV06]
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