Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-14-00170-CV
ANDERSON ENERGY CORPORATION and Ellersly, Inc.,
Appellants/Cross-Appellees
v.
Dominion Oklahoma Texas Exploration /s
DOMINION OKLAHOMA TEXAS EXPLORATION & PRODUCTION, INC.
and HighMount Exploration & Production Texas, LLC,
Appellees/Cross-Appellants
From the 112th Judicial District Court, Sutton County, Texas
Trial Court No. 0005419
Honorable Pedro Gomez, Judge Presiding
Opinion by: Rebeca C. Martinez, Justice
Sitting: Rebeca C. Martinez, Justice
Patricia O. Alvarez, Justice
Luz Elena D. Chapa, Justice
Delivered and Filed: June 30, 2015
REVERSED AND RENDERED IN PART; REVERSED AND REMANDED IN PART;
AFFIRMED IN PART
Anderson Energy Corporation and Ellersly, Inc. (collectively, “Anderson”) appeal the
summary judgment entered in favor of Dominion Oklahoma Texas Exploration & Production, Inc.
and HighMount Exploration & Production Texas, LLC (collectively, “HighMount”). Anderson’s
appeal presents two issues: (1) whether as a matter of law the term “Contract Area” in the joint
operating agreement is limited to the “lands, oil and gas leasehold interests, and oil and gas
interests” owned by the original parties on April 1, 1980 when they executed the joint operating
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agreement; and (2) if the agreement applies to interests acquired after 1980, whether the joint
operating agreement is terminable at will due to the absence of a specific duration. HighMount
also brings a cross-appeal, conditioned on reversal of the summary judgment, asserting that the
trial court erred in denying summary judgment on its affirmative defenses to Anderson’s lawsuit.
We reverse the portion of the trial court’s judgment as to the meaning of the Contract Area and
render judgment declaring that the Contract Area includes interests acquired by the parties and
their successors after the execution date of the joint operating agreement. We reverse the portion
of the judgment as to the duration of the joint operating agreement, and render judgment that the
agreement is effective for a reasonable time; we remand to the trial court for a determination of
the factual issue of what period constitutes a reasonable term. Finally, we affirm the trial court’s
denial of summary judgment on HighMount’s affirmative defenses, and remand to the trial court
for further proceedings consistent with our opinion.
FACTUAL AND PROCEDURAL BACKGROUND
On March 7, 1980, William Perlman and Sun Gas Company entered into a letter agreement
(the “Letter Agreement”) pursuant to which Perlman agreed to sell Sun Gas an undivided 50%
interest in certain oil, gas, and mineral leases and wells located in Edwards, Crockett, Sutton, and
Terrell Counties, Texas. Specifically, in exchange for its payment of $6,000,000, Sun Gas
purchased an undivided one-half of Perlman’s right, title, and interest in 37 existing wells, together
with the leasehold estates attributable to such wells, and the right to participate in the drilling
program outlined in the Letter Agreement. As to the latter, the Letter Agreement provided, “[b]y
participating in the drilling program Sun will earn an undivided fifty percent (50%) interest in the
wells and fifty percent (50%) of your [Perlman’s] leasehold interests lying within the areas
outlined on the attached plats, hereinafter collectively referred to as ‘Such Properties . . . .’” Sun
Gas agreed to invest an additional $1.7 million over time under the drilling plan. Section 6 of the
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Letter Agreement stated in part, “[t]his proposal extends to the whole of your interests in Such
Properties . . . .” In Section 2, the Letter Agreement stated that Perlman would deliver the
assignments of a one-half interest in the 37 wells, their equipment, and their leasehold estates at
closing, but that “[a]ssignments of the balance of the leasehold interests to be acquired hereunder
shall be made from time to time as earned and required.” In section 5 of the Letter Agreement,
Perlman represented that he “own[s] leasehold interests within the outlined areas on the attached
plats covering at least 62,000 net acres . . . .” The Letter Agreement stated that all operations were
to be conducted under the terms of an operating agreement which would govern the rights and
obligations of the parties.
The joint operating agreement between the operator Perlman and Sun Gas referenced by
and incorporated in the Letter Agreement became effective on April 1, 1980 (the “JOA”). It
governs the exploration, development, and operation of mineral interests within the “Contract
Area.” The Contract Area is defined in Article I as “all of the lands, oil and gas leasehold interests,
and oil and gas interests intended to be developed and operated” under the agreement as described
in Exhibit A attached to the JOA. Exhibit A identifies the “land and leases subject to [the]
Agreement” as “all interest of [the] parties in the land located within the areas outlined on the
attached plats marked Exhibits A-1 through A-8.” Eight maps, or plats, are attached to Exhibit A.
Each map shows an area outlined with hash marks, as well as smaller areas identified by dots both
inside and outside the hash-marked area; each map also contains the notation “AMI” and the name
of the area, e.g., “Marjorie Canon Brown Area, A.M.I.” The JOA also contains a preprinted
preferential right to purchase (“PRP”) provision governing any sales of the parties’ interests
subject to the JOA, and a typewritten area of mutual interest (“AMI”) provision added under
Article XV(B) governing future acquisitions of interests subject to the JOA. Article XIII of the
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JOA contains two preprinted options designating the term of the agreement, but the parties did not
select either option.
Following several assignments during the ensuing years, Anderson 1 became the successor
in interest to Sun Gas’s original interest, while Dominion Oklahoma Texas Exploration &
Production, Inc. (“DOTEPI”) became the successor in interest to Perlman’s original interest.
DOTEPI sold all of its interest to HighMount on July 31, 2007.
In July 2007, before the sale from DOTEPI to HighMount was completed, Anderson filed
a breach of contract suit against DOTEPI and other Dominion entities in the chain of title.
Anderson alleged that DOTEPI and the other Dominion entities 2 breached the JOA during the
preceding years by acquiring lease, mineral, or fee interests in land included within the Contract
Area and drilling more than one hundred gas wells within the AMI, without notifying Anderson
and providing it the opportunity to purchase a proportional interest. Anderson added HighMount
as a defendant in the lawsuit after it purchased DOTEPI’s interest, asserting that the sale
constituted a breach of the PRP provision of the JOA. Anderson also alleged that HighMount
violated the AMI provision after its purchase by acquiring additional oil and gas interests subject
to the JOA and drilling wells within the AMI without providing Anderson notice and an
opportunity to purchase a proportionate interest. Anderson’s causes of action in its live petition 3
are breach of contract, specific performance, tortious interference with a contract, and a request
for an accounting of its share of the proceeds from the interests to which it claims to be entitled
under the JOA. Each of Anderson’s claims arises out of the PRP and AMI provisions of the JOA.
1
Anderson sold half its interest to Ellersly, Inc. in 1996.
2
Anderson ultimately nonsuited all the Dominion entities except DOTEPI.
3
The parties agree that Anderson’s Fourth Amended Petition is the live petition.
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The parties filed summary judgment motions on various issues in the case. Anderson
obtained a partial summary judgment ruling that the PRP and AMI provisions of the JOA are real
covenants that run with the land and thus bind the real property interests held by Anderson and
HighMount as successors of Sun Gas and Perlman. See Westland Oil Dev. Corp. v. Gulf Oil Corp.,
637 S.W.2d 903, 910-11 (Tex. 1982).
Defendant HighMount obtained a summary judgment ruling that, as a matter of law, the
scope of the Contract Area subject to the JOA is limited to the original interests owned by Perlman
and Sun Gas on April 1, 1980, and that the JOA is terminable at will because no specific term was
selected by the parties. In the trial court’s order granting HighMount’s summary judgment motion
as to the duration of the JOA, the court expressly stated that “the issue of if and when the Joint
Operating Agreement . . . terminated is hereby RESERVED FOR TRIAL.” HighMount also
moved for summary judgment on its affirmative defenses of Statute of Frauds, waiver, and laches,
but did not prevail.
In view of the trial court’s summary judgment order concerning the meaning of the term
Contract Area, the parties entered into an agreed stipulation that Anderson “do[es] not have a claim
to damages based upon the Contract Area as determined by the Court . . . because there are no
leases or wells under the Court’s definition of the Contract Area that are subject to any of the
Plaintiffs’ claims for damages.” The trial court subsequently entered a final judgment
incorporating its prior summary judgment orders and ruling that Anderson take nothing. Anderson
now appeals.
MAIN APPEAL
As noted above, Anderson challenges the trial court’s summary judgment conclusions that,
as a matter of law: (1) the Contract Area subject to the JOA covers only the parties’ interests owned
on the April 1, 1980 execution date, and thus does not include interests subsequently acquired by
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the parties and their successors; and (2) the JOA is terminable at will because no duration was
selected by the parties. We review the grant or denial of a summary judgment de novo. Provident
Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). A traditional summary
judgment is proper only when the movant establishes that there is no genuine issue of material fact
and that the movant is entitled to judgment as a matter of law on the issues expressly set out in the
motion. TEX. R. CIV. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985).
In reviewing a summary judgment, we consider all the evidence in the light most favorable to the
non-movant, indulging every reasonable inference in favor of the non-movant and resolving any
doubts against the motion. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 756 (Tex.
2007).
It is undisputed that HighMount and its predecessors acquired additional oil and gas
interests/leases and subsequently drilled wells within the area of land outlined on the Exhibit A
maps without first notifying Anderson or offering it the opportunity to participate. It is also
undisputed that Anderson did not receive notice or an opportunity to purchase DOTEPI’s interest
under the JOA before DOTEPI sold all its interest to HighMount. Therefore, the dispute between
the parties turns on the scope of the Contract Area and, to a lesser extent, whether the JOA was
still in effect when these post-1980 acquisitions and sales occurred.
(1) Meaning of “Contract Area” Subject to the JOA
The parties present various arguments in favor of their two competing interpretations of
the term “Contract Area” in the JOA—with the crux of the dispute being whether its scope extends
to future acquisitions of interests as Anderson contends, or is limited to the original interests owned
by the parties’ predecessors on April 1, 1980, as the trial court ruled and HighMount asserts.
Anderson bases its argument that future acquisitions are covered within the broad language used
in the “Contract Area” definition referring to “all of the lands” described in Exhibit A, and on
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Exhibit A’s equally broad description of such lands by referring to “all interest of the parties in the
land located within the areas outlined” on the eight maps. Anderson also stresses the importance
of the parties’ addition of a typewritten AMI provision which Anderson asserts proves a clear
intent that the JOA would apply to interests acquired after 1980. HighMount bases its argument
that the Contract Area is limited to the predecessors’ original interests on the present tense
language used in the JOA’s “WHEREAS” recital and the definitions of “oil and gas leases” and
“oil and gas interests” stating that the parties “are owners” of the oil and gas leases and interests
intended to be developed under the JOA. HighMount contends the AMI provision does not show
the parties intended the JOA to cover future acquisitions because the parties did not use the phrase
“area of mutual interest” and did not expressly refer to any future acquisitions in Exhibit A.
Applicable Law. The construction of an unambiguous contract is a question of law,
which we review de novo. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-
51 (Tex. 1999); PNP Petroleum I, LP v. Taylor, 438 S.W.3d 723, 735 (Tex. App.—San Antonio
2014, pet. denied). If a contract as worded can be given a clear and definite legal meaning, then it
is not ambiguous and the court will construe the contract as a matter of law. Gilbert Tex. Contr.,
L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 133 (Tex. 2010); see also Columbia Gas
Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996) (“[A]mbiguity does
not arise simply because the parties advance conflicting interpretations of the contract.”). In
conducting a de novo review, we exercise our own judgment and give no deference to the trial
court’s decision. Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1998). Our primary duty when
construing an unambiguous contract is to ascertain the parties’ true intent as expressed within the
“four corners” of the contract. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994).
In applying the “four corners” rule, we do not look at isolated terms out of context, but consider
the plain language of the entire agreement, the interaction between each of its provisions, and seek
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to harmonize and give effect to all its provisions. Valence Operating Co. v. Dorsett, 164 S.W.3d
656, 662 (Tex. 2005); Plainsman Trading Co. v. Crews, 898 S.W.2d 786, 789 (Tex. 1995). “We
give the language its plain, grammatical meaning unless doing so would clearly defeat the parties’
intentions.” Tana Oil & Gas Corp. v. Cernosek, 188 S.W.3d 354, 359 (Tex. App.—Austin 2006,
pet. denied).
Here, neither party argues that the JOA is ambiguous, and we independently conclude that
it is unambiguous. Therefore, we will construe the meaning of the term Contract Area as a matter
of law by looking to the plain language used by the parties within the “four corners” of the JOA,
attempting to harmonize and give effect to all of its parts in order to ascertain the parties’ true
intention. See Valence, 164 S.W.3d at 662; Forbau, 876 S.W.2d at 133.
Analysis. Perlman and Sun Gas used the 1977 AAPL Model Form Operating Agreement
as the basis for the JOA they signed on April 1, 1980. The JOA form begins with the following
preprinted recital,
WHEREAS, the parties to this agreement are owners of oil and gas leases and/or
oil and gas interests in the land identified in Exhibit “A”, and the parties hereto
have reached an agreement to explore and develop these leases and or oil and gas
interests for the production of oil and gas to the extent and as hereinafter provided
...
Article I of the JOA contains several preprinted form definitions. It defines the “Contract
Area” as “all of the lands, oil and gas leasehold interests and oil and gas interests intended to be
developed and operated for oil and gas purposes under this agreement” and states that “such lands,
oil and gas leasehold interests and oil and gas interests are described in Exhibit A.” The terms “oil
and gas lease,” “lease,” and “leasehold” are defined as “the oil and gas leases covering tracts of
land lying within the Contract Area which are owned by the parties to this agreement.” The term
“oil and gas interests” is defined as “unleased fee and mineral interests in tracts of land lying with
the Contract Area which are owned by parties to this agreement.”
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Article II of the JOA states that Exhibit A shall include, among other information, the “(1)
Identification of lands subject to agreement,” “(3) Percentages or fractional interests of parties to
this agreement,” and “(4) Oil and gas leases and or oil and gas interests subject to this agreement.”
Article II also provides that if any part of an exhibit (except the unrelated Exhibit G) is inconsistent
with any part of the body of the agreement, the provisions in the body of the agreement control.
Exhibit A is a typewritten document prepared by the parties and attached to the JOA. It
provides as follows:
(Contract Area)
Land and Leases Subject to Agreement
All interest of parties in the land located within the areas outlined on the
attached plats marked Exhibits A-1 through A-8.
Interest of the Parties
William Perlman ½
Sun Gas Company ½
Provided; however, the costs and expenses of the initial wells shall be
borne in accordance with the letter agreement dated March 7, 1980 to which this
Operating Agreement is attached.
…
Initial wells:
To be mutually agreed to by the parties on or before April 1, 1980.
The eight maps attached to Exhibit A appear in the form shown below:
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The body of the JOA makes separate references under Article VI, titled “Drilling and
Development,” to “initial wells” (section A) whose development is governed by the Letter
Agreement’s drilling plan and Exhibit A, and to “subsequent operations” (section B) for which
notice of the proposed operation and an opportunity to elect to participate must be given to the
other parties. Article VII, titled “Expenditures and Liability of Parties,” also makes distinctions
between “initial wells” and “all other wells” under section D concerning limitation of the parties’
expenditures.
As previously noted, the JOA also contains a preprinted preferential right to purchase
provision (“PRP”) under Article VIII(G) which requires any party desiring to sell all or part of its
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interest in the Contract Area to first provide the other parties with notice and the option to purchase
it on the same terms. The parties also added a typewritten “area of mutual interest” provision
(“AMI”) 4 under Article XV(B) of the form, titled “Other Provisions,” which states in relevant part,
In the event any party to this contract shall, during the life of this agreement, acquire
any leasehold, mineral or fee interest in any of the land included within the Contract
Area, the party acquiring such interest shall give notice of such acquisition to the
other parties . . . and the parties so notified shall have a period of thirty (30) days .
. . within which to elect to purchase an undivided interest in the interest so acquired
in the same proportion as such parties’ interest is set out herein.
We construe the Contract Area subject to the JOA not by isolating individual words but by
considering the language used in the context of the JOA as a whole—including the AMI provision.
The most telling indicator of the parties’ intent with regard to future acquisitions is their insertion
of a typewritten “area of mutual interest,” or AMI, provision under Article XV of the model form
agreement; the parties agree that the model form does not include an AMI as a standard provision.
The Texas Supreme Court has explained that, “[i]n an area of mutual interest agreement,
the parties attempt to describe a geographic area within which they agree to share certain additional
leases acquired by any of them in the future.” Westland, 637 S.W.2d at 905 (explaining that “[t]his
necessarily contemplates that oil and gas leasehold interests will be conveyed” in the future). A
joint operating agreement by its nature is intended to govern the parties’ acquisitions, development
and operation of mineral interests beyond the date of its execution. See Seagull Energy E&P, Inc.
v. Eland Energy, Inc., 207 S.W.3d 342, 344 n.1 (Tex. 2006) (discussing function of an oil and gas
operating agreement). HighMount argues the AMI provision does not include the phrase “area of
mutual interest” or the notation “AMI,” and is not a “typical” AMI provision. Although it does
not bear the title AMI or use the magic words, the substance of the provision does constitute an
4
Even though HighMount questions whether this section actually constitutes an area of mutual interest provision, the
parties refer to the provision as an AMI in their briefs and we do the same for the sake of convenience.
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“area of mutual interest” obligation agreed to by the original parties to the JOA. Cf. Westland, 637
S.W.2d at 905 (quoting the AMI language which made any party’s or assign’s future acquisition
of leasehold interests affecting “any of the lands covered by said farmout agreement” subject to
the terms and provisions of the agreement). Further, the notation “AMI” is present on each of the
eight maps attached to Exhibit A. The parties’ addition of the AMI provision shows they
contemplated future acquisitions of “leasehold, mineral or fee interest[s] in any of the land
included within the Contract Area . . . .”
As quoted above, the preprinted language used to define the Contract Area states that it
shall include all of (1) the lands, (2) oil and gas leasehold interests, and (3) oil and gas interests
which are intended to be developed and operated under the agreement. The inclusion of “the
lands,” along with the terms “oil and gas leasehold interests” and “oil and gas interests,” suggests
that the Contract Area includes “lands . . . intended to be developed” as well as oil and gas leases
and mineral interests. We disagree that the present tense form language “are owners” in the
WHEREAS recital and “are owned” in the definitions of “oil and gas leasehold interests” and “oil
and gas interests” limits the JOA’s scope to only those leases and mineral interests owned by the
original parties on April 1, 1980. Such an interpretation of the preprinted language ignores and
gives no effect to the typewritten AMI provision which the parties expressly inserted into the
model form agreement. The present tense language may therefore be reasonably read as inclusive
of the interests that the parties subsequently acquire, which then become interests that “are owned”
by the parties under the JOA.
The key to the meaning of the Contract Area is Exhibit A, which was typewritten by the
parties. Exhibit A’s function is to specifically describe the “lands, oil and gas leasehold interests
and oil and gas interests” which the parties intended to develop and operate under the JOA for oil
and gas purposes. Article II of the JOA explains that one of the functions of Exhibit A is to identify
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the lands subject to the JOA, and another function is to identify the oil and gas leases and oil and
gas interests subject to the JOA. As set forth above, Exhibit A designates the “Contract Area” as
the “Land and Leases Subject to [the] Agreement” and the “Initial Wells.” The “Initial Wells” are
not listed, but are defined as “[t]o be mutually agreed to by the parties on or before April 1, 1980,”
with their costs and expenses to be borne in accordance with the Letter Agreement. The “Initial
Wells” are listed on Schedule A to the Letter Agreement. Exhibit A’s reference to “Land and
Leases” indicates the parties’ intention that the Contract Area include unleased land in addition to
the existing wells and leases. The “Land and Leases” subject to the JOA are further defined as all
of the parties’ interest in “the land located within the areas outlined on the attached plats marked
Exhibits A-1 through A-8.” As shown above, the eight maps each depict a named area of platted
land with a large irregular section outlined by hash marks and smaller square tracts marked by dots
or stippling; there are stippled tracts both inside and outside the large area outlined by hash marks.
Each map is also marked “A.M.I.” Viewing the images of these maps in the context of Exhibit
A’s language and the inclusion of an AMI provision, a reasonable construction is that the parties
depicted the “Land and Leases” subject to the JOA in geographic terms by using hash marks to
enclose the areas of land comprising the Contract Area.
The parties represent that no Texas case has addressed this precise issue, and we have found
none. In their briefs and at oral argument, the parties discussed three cases from other jurisdictions
that they contend are helpful. The three cases from Kansas, Colorado, and Louisiana interpret the
meaning of “Contract Area” under the model form joint operating agreement (the term “Unit Area”
is used in the 1956 form). However, none of the cases involved operating agreements with an
AMI provision—a significant difference from this case.
Although the Kansas, Colorado, and Louisiana cases are all distinguishable based on the
absence of an AMI provision inserted by the parties, the cases do contain some interesting points.
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For example, in Amoco Prod. Co. v. Wilson, 976 P.2d 941 (Kan. 1999), the Kansas Supreme Court
rejected the same argument made here by HighMount that the present tense language in the
“WHEREAS clause” stating the parties “are owners” of the leases and mineral interests identified
in Exhibit A limited the operating agreement to leases and interests owned when the agreement
was executed, reasoning that the WHEREAS recital itself refers to the more specific Exhibit A.
Id. at 953. In holding that the parties intended the operating agreement to cover future acquisitions
within the “Unit Area,” the court reasoned that because the meaning of the “Unit Area” was
defined by reference to the typewritten Exhibit A, the “wording of Exhibit A [is] of utmost
importance” and “compels the construction of the agreement” that the court found. Id. at 954.
Similarly, in Kincaid v. W. Operating Co., 890 P.2d 249 (Colo. App. 1994), the Colorado court
also held the parties intended the operating agreement to include all interests acquired within a
specific geographic area, including those interests acquired after the agreement was executed. Id.
at 252 (considering extrinsic evidence because Exhibit A was ambiguous). The Colorado court
also noted that it was standard practice in the oil and gas industry at the time for parties to enter
into operating agreements regarding leases to be acquired in the future. Id. at 253 (noting
“[t]herefore, there was no strong policy reason not to construe the contract as including later
acquired oil and gas interests and leases such as the Smith Interests.”). Finally, in Clovelly Oil
Co., LLC v. Midstates Petroleum Co., LLC, 112 So. 3d 187 (La. 2013), the Louisiana Supreme
Court held that the operating agreement’s preprinted language limited Exhibit A’s definition of the
Contract Area to only leases and unleased mineral interests owned by the parties at the time the
agreement was executed. Id. at 193-94. Although the court reasoned that the present tense “are
owners” language in the form’s preprinted WHEREAS recital and definition of “oil and gas
interests” would be disregarded by an interpretation of the agreement as extending to future
acquisitions, the court emphasized that “the parties could have expressly agreed that the JOA
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would apply to future leases by including an Area of Mutual Interest provision (“AMI”),” but did
not do so. Id. at 195 (defining an AMI provision as an agreement between parties to a joint
operating agreement “by which the parties attempt to describe a geographical area within which
they agree to share certain additional leases or other interests acquired by any of them in the
future”).
Harmonizing all of the above described provisions of the JOA in this case, and giving effect
to all its parts according to the plain meaning of the language used, we conclude that Perlman and
Sun Gas intended that interests acquired in the future by them, or by their successors, within the
lands outlined by the hash marks on Exhibit A’s eight maps, i.e., within the Contract Area, are
subject to the JOA. Based on this conclusion, we now turn to Anderson’s second issue on appeal
involving the duration of the JOA.
(2) Duration of the JOA
Having held that future interests acquired within the Contract Area are subject to the JOA,
we must reach the issue of whether the JOA is terminable at will, as the trial court ruled, or is
effective for a “reasonable time” as Anderson asserts. As noted, Article XIII of the JOA contains
two preprinted options to designate its duration, with Option No. 1 providing a term based on the
continuation of any lease, and Option No. 2 providing a term based on the continuation of
production. 5 The original parties did not select either of the term options, and the trial court ruled
that, as a matter of law, the JOA is terminable at will.
5
Option No. 1 provides a term based on, “So long as any of the oil and gas leases subject to this agreement remain or
are continued in force as to any part of the Contract Area, whether by production, extension, renewal or otherwise,
and or so long as oil and/or gas production continues from any lease or oil and gas interest.” Option No. 2 states, “In
the event the well described in Article VI.A., or any subsequent well drilled under any provision of this agreement,
results in production of oil and or gas in paying quantities, this agreement shall continue in force so long as any such
well or wells produce, or are capable of production, and for an additional period of ____ days from cessation of all
production; provided, however, if, prior to the expiration of such additional period, one or more of the parties hereto
are engaged in drilling or reworking a well or wells hereunder, this agreement shall continue in force until such
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HighMount argues in support of the court’s ruling that, generally, if a contract contemplates
continuing performance and lacks a specified duration it is considered to be terminable at will by
either party. See Clear Lake City Water Auth. v. Clear Lake Utils., Co., 549 S.W.2d 385, 390
(Tex. 1977). HighMount does not cite any case from Texas or any other state in which an oil and
gas operating agreement without a specified duration was held to be “terminable at will,” and we
have found none. Anderson argues that the JOA cannot be terminable at will because its
provisions, particularly the AMI and PRP provisions, convey real property interests and constitute
covenants running with the land which cannot be unilaterally terminated by one party. See
Westland, 637 S.W.2d at 910-11. Anderson also asserts that no Texas court has ever held a joint
operating agreement to be terminable at will, and that an “at will” duration is not practical, fair, or
customary in the oil and gas industry due to the millions of dollars expended in oil and gas
operations under joint operating agreements. Anderson asserts that a term extending for a
“reasonable time” must be implied into the JOA. See Hall v. Hall, 158 Tex. 95, 308 S.W.2d 12,
15 (1957) (“in contracts of the general type . . . a term of reasonable duration may be implied, with
the result that they are not void for lack of an essential provision and are not terminable at will”).
We agree with Anderson. Based on the nature of a joint operating agreement, and
particularly the nature of AMI and PRP provisions as real property covenants running with the
land, 6 we conclude that a reasonable term should be implied into the JOA. See Seagull Energy,
207 S.W.3d at 344 n.1 (stating an operating agreement “is a contract typical to the oil and gas
industry whose function is to designate an ‘operator, describe the scope of the operator’s authority,
provide for the allocation of costs and production among the parties to the agreement, and provide
operations have been completed and if production results therefrom, this agreement shall continue in force as provided
herein.” Option No. 2 then contains a provision addressing the drilling of dry holes.
6
HighMount did not appeal this ruling by the trial court.
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for recourse among the parties if one or more default in their obligations’”); EOG Res., Inc. v.
Killam Oil Co., Ltd., 239 S.W.3d 293, 298 (Tex. App.—San Antonio 2007, pet. denied) (discussing
the function of an oil and gas operating agreement in connection with its term). We have
previously stated in a case construing an oil and gas operating agreement that, “[w]e construe
contracts ‘from a utilitarian standpoint bearing in mind the particular business activity sought to
be served’ and we avoid when possible a construction that is unreasonable, inequitable, and
oppressive.” EOG Res., 239 S.W.3d at 298 (quoting Reilly v. Rangers Mgmt., Inc., 727 S.W.2d
527, 530 (Tex. 1987)). In order to effectuate the purposes of the JOA as a whole, particularly the
AMI and PRP provisions, it is necessary and appropriate to imply a reasonable term as the duration
of the JOA. See HECI Exploration Co. v. Neel, 982 S.W.2d 881, 888 (Tex. 1998) (court may
imply a term into a contract when necessary to effectuate the purposes of the contract as a whole);
see also O’Farrill Avila v. Gonzalez, 974 S.W.2d 237, 244 (Tex. App.—San Antonio 1998, pet.
denied) (same). Further, it is undisputed that “hundreds of wells have been drilled” in the Contract
Area since the JOA became effective on April 1, 1980. Courts frequently imply a reasonable time
in a contract without an express duration where the agreement contemplates substantial
expenditures or other investments in accordance with performance. See O’Farrill Avila, 974
S.W.2d at 244-45.
HighMount argues in the alternative that, even if a reasonable term is implied into the JOA,
such reasonable time lasted only as long as the parties jointly owned or operated the property, and
any such joint operations have long since ended; therefore, the JOA has already terminated. We
disagree that the time period constituting a reasonable term has been resolved as a matter of law.
The period of time that is a “reasonable time” for performance of a contract without a specified
term is a question of fact to be determined by the circumstances of the parties and the subject
matter of the contract. Hall, 308 S.W.2d at 16-17; O’Farrill Avila, 974 S.W.2d at 245; see also
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WesternGeco, L.L.C. v. Input/Output, Inc., 246 S.W.3d 776, 784 n.6 (Tex. App.—Houston [14th
Dist.] 2008, no pet.) (if a court implies a “reasonable time” as the duration of an agreement, the
determination of the length of the “reasonable time” is a question of fact based on the
circumstances surrounding the making of the agreement, the parties’ situations when they entered
the agreement, and the subject matter of the agreement). Further, as HighMount acknowledges,
the trial court expressly reserved the issue of “if and when” the JOA terminated for trial and
HighMount did not appeal that ruling.
Therefore, we conclude the trial court erred in ruling that the JOA is terminable at will, and
we hold that a reasonable term must be implied as the duration of the JOA. We remand to the trial
court for a factual determination of what constitutes a reasonable term under the circumstances at
the time the JOA was executed.
Conclusion
Based on the foregoing analysis, we reverse the trial court’s judgment that Anderson take
nothing and render judgment as a matter of law that (1) the Contract Area includes interests
acquired by the parties and their successors after the execution date of the JOA, and (2) the JOA
is effective for a reasonable time period. We remand to the trial court for further proceedings
consistent with our opinion, including a determination of the fact question as to what length of
time constitutes a “reasonable time” for the JOA to be effective under the circumstances.
CROSS-APPEAL
Because we are reversing the trial court’s judgment, we must now consider HighMount’s
issues raised on cross-appeal. HighMount asserts the trial court erred in failing to grant summary
judgment on its affirmative defenses of Statute of Frauds, waiver, and laches. HighMount
contends these alternative defenses bar all of Anderson’s claims because each claim is based on
the AMI and/or PRP provision of the JOA.
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To obtain a summary judgment on an affirmative defense, a defendant must prove each
element of the affirmative defense as a matter of law. Ryland Group, Inc. v. Hood, 924 S.W.2d
120, 121 (Tex. 1996); see also TEX. R. CIV. P. 94 (listing statute of frauds, waiver, and laches as
affirmative defenses). If the defendant proves the affirmative defense, the burden shifts to the
plaintiff to produce evidence raising a genuine issue of material fact to avoid the summary
judgment. Id. In determining whether there is a disputed issue of material fact precluding
summary judgment, evidence favorable to the non-movant is taken as true, and every reasonable
inference is indulged in the non-movant’s favor. Nixon, 690 S.W.2d at 548-49.
(1) Statute of Frauds
HighMount asserts it was entitled to summary judgment because the JOA’s description of
the Contract Area by reference to Exhibit A’s eight maps fails to satisfy the Statute of Frauds
which requires a reasonably certain property description. HighMount contends the JOA does not
contain a sufficient property description within itself or by reference to other existing documents
because extrinsic evidence must be consulted to locate and define the boundaries of the acreage
shown on the maps. Anderson does not challenge the applicability of the Statute of Frauds to the
JOA, but contends the description of the Contract Area in the maps and other documents referenced
in the JOA is sufficient to identify the acreage with reasonable certainty, thereby satisfying the
Statute of Frauds. Accordingly, Anderson contends HighMount failed to prove its Statute of
Frauds defense as a matter of law.
The Statute of Frauds requires that contracts for the sale of real property be in writing and
signed by the person to be charged. TEX. BUS. & COM. CODE ANN. § 26.01(a), (b)(4) (West 2015);
see also TEX. PROP. CODE ANN. § 5.021 (West 2014) (statute of conveyances requires that a
conveyance of real property must be in writing and subscribed to and delivered by the conveyor).
Oil and gas interests constitute real property; therefore, an agreement for the transfer or assignment
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of a mineral interest must comply with the Statute of Frauds. Long Trusts v. Griffin, 222 S.W.3d
412, 416 (Tex. 2006) (per curiam); see also Westland, 637 S.W.2d at 910-11 (area of mutual
interest is a real property interest); Reiland v. Patrick Thomas Props., Inc., 213 S.W.3d 431, 434
(Tex. App.—Houston [1st Dist.] 2006, pet. denied) (applying Statute of Frauds to a right of first
refusal). To satisfy the Statute of Frauds, a contract “must furnish within itself, or by reference to
some other existing writing, the means or data by which the [property] to be conveyed may be
identified with reasonable certainty.” Long Trusts, 222 S.W.3d at 416; Templeton v. Dreiss, 961
S.W.2d 645, 658 (Tex. App.—San Antonio 1998, pet. denied). Even if the record is clear that the
parties to the contract knew and understood what property was intended to be conveyed, the
knowledge and intent of the parties will not make the contract valid. Morrow v. Shotwell, 477
S.W.2d 538, 540 (Tex. 1972). If the contract does not sufficiently describe the real property
interest to be conveyed, the conveyance is void under the Statute of Frauds and will not support
an action for specific performance or breach of contract. Pick v. Bartel, 659 S.W.2d 636, 637
(Tex. 1983); Wilson v. Fisher, 144 Tex. 53, 188 S.W.2d 150, 152 (1945).
The sufficiency of a legal description in any instrument transferring a property interest is a
question of law subject to de novo review. Dixon v. Amoco Prod. Co., 150 S.W.3d 191, 194 (Tex.
App.—Tyler 2004, pet. denied). The contract’s property description need not be mathematically
certain, but only “reasonably certain” so as to enable a person familiar with the area to identify the
property to be conveyed to the exclusion of other property. Gates v. Asher, 154 Tex. 538, 280
S.W.2d 247, 248 (1955); Templeton, 961 S.W.2d at 659. The purpose of the written description
is not to identify the land, but to provide a means of identification. Reiland, 213 S.W.3d at 437
(citing Jones v. Kelley, 614 S.W.2d 95, 99-100 (Tex. 1981)) (emphasis added). The property
description must furnish enough information to locate the general area “as in identifying it by tract
survey and county,” as well as to determine the “size, shape, and boundaries” of the property.
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Reiland, 213 S.W.3d at 437 (citing Morrow, 477 S.W.2d at 539). When the language in the
contract furnishes a “key or nucleus” description of the property, extrinsic evidence may then be
used merely as an aid to identify the property with reasonable certainty from the data contained in
the contract, not to supply a missing description. Long Trusts, 222 S.W.3d at 416; Templeton, 961
S.W.2d at 658-59.
Applying these principles to the description of the Contract Area, we begin with the JOA
itself. The JOA states that the AMI and PRP provisions at issue apply to the Contract Area. The
first page of the JOA states the physical location of the Contract Area as within four Texas
counties; Edwards, Crockett, Sutton, and Terrell. As set forth in detail earlier in this opinion, the
JOA defines the Contract Area by reference to the attached Exhibit A, which, in turn, describes
the Contract Area as “all interest of [the] parties in the land located within the areas outlined on
the attached plats marked Exhibits A-1 through A-8.” The parties agree that the eight maps are
Midland Maps, a standard map used in the oil and gas industry, which were reduced in size so they
could be attached to the JOA. As shown in the reproduction of one of the maps, supra, each map
depicts a large area of platted land, with an irregularly-shaped area outlined in hash marks and
smaller areas of stippling shown on some of the tracts, both inside and outside the hash-marked
areas. The maps also depict natural landmarks such as rivers. The maps each state the name of
the area depicted, e.g., “Marjorie Canon Brown Area,” and contain the notation “A.M.I.” Exhibit
A also refers to a list of “initial wells” to be mutually agreed to by the parties on or before the
closing date of April 1, 1980.
The JOA also references the parties’ Letter Agreement, and fully incorporates it through
Article XV(D). The Letter Agreement states that Sun Gas was purchasing an interest in Perlman’s
“wells and leases in various areas in Edwards, Crockett, Sutton and Terrell Counties, Texas,” and
refers to “Schedule A” as the list of the 37 wells and attributable leasehold estates. The Letter
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Agreement also provides the total acreage covered by the agreement, stating in section 5 that
Perlman “own[s] leasehold interests within the outlined areas on the attached plats covering at
least 62,000 net acres.” (emphasis added). Schedule A attached to the Letter Agreement lists the
wells and leases assigned by Perlman to Sun Gas, and identifies them by area names which
correspond to the area names on the eight maps. Schedule A provides more detailed information
than the maps, describing the physical location of each well and lease under an area name by field
name and coordinates, block and section numbers, survey names, and county. For example, the
“No. 1 Marjorie Canon Brown ‘5’” is described as “Loc: 1980 FSL, 1980 FEL, Sec 5, Blk 1,
T.C.R.R., Terrell County, Texas, SE 160 Acres Sec 5, Wildcat (Strawn-Atoka, Canyon Ss).”
Finally, the “Assignment of Leases” attached to the Letter Agreement lists the Perlman leases by
lessor name and states the volume and page number where each lease is recorded in the particular
county’s deed records.
Viewing the JOA and its Exhibit A maps along with the incorporated Letter Agreement
and its attached Schedule A, we conclude that the JOA contains enough information to provide at
least a nucleus description of the Contract Area with respect to its physical location and its size,
shape, and boundaries. See Reiland, 213 S.W.3d at 437.
As discussed at length in the parties’ briefs, extrinsic evidence was also presented in the
form of affidavits by three surveyors/geological engineers familiar with the area, with Anderson’s
two experts opining that they were able to locate the Contract Area on the ground with reasonable
certainty using the maps, and HighMount’s expert opining that he could not determine the Contract
Area with reasonable certainty without resorting to additional information outside the maps. As
noted, resort to extrinsic evidence is not for the purpose of supplying the location or description of
the property, but only for the purpose of identifying it with reasonable certainty from the
information in the contract. See Wilson, 188 S.W.2d at 152.
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HighMount presented the affidavit of Jeffrey D. Suiter, an experienced surveyor since 1987
who is familiar with the areas of Sutton, Crockett, Edwards, and Terrell Counties. Based on
Suiter’s affidavit, HighMount’s position is that the eight maps fail to provide sufficient information
to locate the lands comprising the Contract Area with sufficient certainty for three reasons: (1) the
maps contain two marked areas—one marked by hash marks and the other marked by stippling—
and the JOA does not identify which marking is intended to denote the Contract Area; (2) assuming
the hash marks are intended to identify the Contract Area, the hash marks themselves stretch across
hundreds of yards on the maps and it appears the boundary is situated on the outside of the hash
mark in some areas, on the inside of the hash mark in other areas, and in the middle of the hash
mark in still other areas; and (3) some of the hash marks run through the middle of surveys and do
not coincide with survey lines or established tract boundaries. Suiter’s affidavit states that
additional information not provided in the JOA or its attachments is required to understand the
meaning ascribed to the stippling and hash marks depicted on the eight maps; in his experience,
stippling on maps is not used in the oil and gas industry to designate leases. Suiter also noted
inconsistencies in the placement of the stippling, assuming it was meant to represent leases, noting
that the R. Cauthorn map has no stippling but Perlman owned leases in that area at the time. Suiter
further opined that, in his experience as a surveyor in the oil and gas industry, the outer border of
the hash mark always denotes the outer perimeter of the lands or interests identified. But, a
problem arises when significantly reduced scale maps are used, as here, because the hash mark
itself can be “a width spanning hundreds of yards (or even miles) across” which makes the
identification of lands to the exclusion of others “impracticable using this method.” Suiter also
stated that the hash marks do not follow the survey lines in many places on the maps, and that there
is nothing in the JOA to indicate that a straight line connecting two known points was intended to
be used in those places.
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In support of its position, Anderson presented an affidavit by Donald E. Henkel, the
geologist Perlman employed to prepare the eight maps in 1980. Henkel stated he had forty years’
experience in the oil and gas industry and was familiar with the region in and around the four
counties. Henkel stated that he used Midland Map Company maps which “have been the standard
product used for numerous purposes related to oil and gas practice in Sutton, Crockett, Edwards,
and Terrell Counties” and the maps “have proven consistently reliable in their scale and in
accurately reflecting major landmarks, survey names, abstract numbers, and property lines.” The
maps were “reduced in size from the standard scale of 1 inch per 4,000 feet” so they could be
attached to the JOA. Henkel stated he outlined the Contract Area on each map after they were
reduced in size by using hash marks to show the boundaries. He used stippling to indicate the oil
and gas leases owned by Perlman at the time, which was a practice used by Perlman. Henkel stated
he followed survey lines in mapping the Contract Area, but where it was not practical to do so, he
drew straight lines to connect two points. In his deposition, Henkel stated his intention was that
the inside of the hash marks be used to place the boundaries of the Contract Area. Henkel also
stated in the affidavit that the assignments of the Perlman wells and leases were filed of record in
the respective county deed records, and “[t]he location of the maps in Exhibit A corresponded to
the location of the leases and wells transferred from Perlman to Sun . . . and all of the wells and
leases transferred were within the Contract Area represented on the maps.” Finally, Henkel stated
that, upon reviewing the maps, he recognizes the “general location of the Contract Area” and
numerous markers such as the “Pecos River, Interstate 10 corridor, the city of Sonora, along with
numerous survey names and abstract numbers.” Henkel opined that, based on his review of the
maps, he “would have no difficulty in causing the areas in the maps to be located on the ground;”
“no difficulty in causing the boundaries of the Contract Area to be located;” and “the location of
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the Contract Area’s boundaries and the property that is included within the Contract Area are
identifiable to a reasonable certainty.”
Anderson also submitted the affidavit of another experienced surveyor familiar with the
region, Carr Benton Thomson, who opined that the boundaries of the property depicted on the
maps are identifiable to a reasonable certainty. Thomson explained that he considered all the maps
together, “especially where it appears that common lines were intended to be used as boundaries
on multiple maps.” He stated that the boundaries follow established survey lines, which are
“locatable on the ground without substantial challenge using basic surveying techniques.” In the
instances where the survey lines were not followed, Thomson stated a straight line between two
known points was used.
HighMount attacks Henkel’s affidavit as improper extrinsic evidence that is necessary to
supply the descriptive information missing from the maps themselves. We disagree. Henkel’s
affidavit shows he followed basic surveying principles in creating the boundaries of the Contract
Area by using Midland Maps which are accepted in the region for their accuracy, following
existing survey lines where possible, and using natural and artificial monuments such as the river
and highway. See King Ranch, Inc. v. Garcia, No. 04-13-00605-CV, 2014 WL 4627592, at *3-4
(Tex. App.—San Antonio Sept. 17, 2014, pet. denied) (mem. op.) (discussing accepted surveying
principles such as following in “the footsteps of the original surveyor” as closely as possible,
following existing survey lines and property lines, and using monuments to fix the actual location
of the line on the ground); see also Silver Oil & Gas, Inc. v. EOG Res., Inc., 246 S.W.3d 197, 204
(Tex. App.—San Antonio 2007, no pet.). The Henkel affidavit is not being used to supply missing
information but, rather, to explain the geographic maps used to form the “nucleus” of the property
description and to identify the land on the ground with reasonable certainty. See Gates, 280
S.W.2d at 248 (“While the accepted rule in this jurisdiction employs a rather strict application of
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the statutes of frauds and conveyances, yet the words of description are given a liberal construction
in order that the conveyance may be upheld. Parol evidence is admitted to explain the descriptive
words and to identify the land, where the instrument contains the ‘nucleus’ of description.”); see
also W. Beach Marina, Ltd. v. Erdeljac, 94 S.W.3d 248, 265 (Tex. App.—Austin 2002, no pet.)
(recognizing that where the contract description provides the “framework or skeleton,” parol
evidence may be used to fill in a detail such as the exact width of an easement).
While the sufficiency of a property description under the Statute of Frauds is a question of
law, the court may properly consider extrinsic evidence in determining whether a person familiar
with the area could locate the property with reasonable certainty. May v. Buck, 375 S.W.3d 568,
574 (Tex. App.—Dallas 2012, no pet.). In this case, the trial court was presented with evidence in
the form of expert testimony establishing that the boundaries of the Contract Area could be located
with reasonable certainty based on the maps. See Schuhardt Consulting Profit Sharing Plan v.
Double Knobs Mountain Ranch, Inc., 426 S.W.3d 800, 803-04 (Tex. App.—San Antonio 2014,
pet. denied) (holding easement did not violate Statute of Frauds based on surveyor’s testimony
that he could locate the easement with reasonable certainty using aerial photographs); see also W.
Beach Marina, 94 S.W.3d at 266 (holding description sufficient to locate easement with reasonable
certainty where evidence included affidavit testimony of surveyor concluding description was
sufficient even though evidence also included affidavit testimony of second surveyor with opposite
opinion); Dixon, 150 S.W.3d at 194-95 (description of property included in gas unit designation
was sufficient to comply with the Statute of Frauds, even if there were mistakes or discrepancies,
where property was described by list of leases and a map with bold outline of property and surveyor
testified he was able to locate the property with reasonable certainty).
Because the JOA, and the documents referenced in it, provide a sufficient nucleus of a
property description to enable a person familiar with the area to locate the land and boundaries of
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the Contract Area with reasonable certainty, summary judgment was not proper on the ground of
Statute of Frauds. See TEX. R. CIV. P. 166a(c).
(2) Waiver and Laches
HighMount next contends it was entitled to summary judgment on its affirmative defenses
of waiver and laches. HighMount asserts that Anderson waived its right to enforce the AMI and
PRP provisions through its conduct during the preceding twelve years—by failing to honor its own
obligations under those provisions and by failing to assert its rights under those provisions.
Specifically, HighMount argues Anderson engaged in acquisitions and transfers of its interest
within the Contract Area without notifying HighMount, or its predecessors, and offering them an
opportunity to participate under the AMI provision, and that Anderson failed to enforce the PRP
provision against HighMount and/or its predecessors. Waiver is an intentional relinquishment of
a known right or intentional conduct inconsistent with claiming the right. Jernigan v. Langley,
111 S.W.3d 153, 156 (Tex. 2003) (per curiam) (waiver is “largely a matter of intent”). To find an
implied waiver based on a party’s conduct, the party must say or do something inconsistent with
an intent to rely upon the right. Id. (intent to relinquish the right must be clearly demonstrated by
the surrounding facts and circumstances). Waiver is ordinarily a question of fact. Id. Only when
the surrounding facts and circumstances are undisputed does the issue become one of law. Id. at
156-57.
Here, Anderson presented evidence disputing its intent behind the challenged transactions.
Its principal, Steve Anderson, testified that he was in communication with HighMount’s
predecessors during the 1990’s and was informed that they had no interest in participating in the
small, non-operated working interests that Anderson was acquiring in the Contract Area. In
addition, Anderson testified that the challenged assignments were excluded from the JOA’s
provisions for different reasons, with some falling within the “related entities” exception, some
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constituting “trade” or barter transactions, some not involving interests inside the Contract Area,
etc. HighMount argues that such testimony amounts to mere excuses and is not credible or
persuasive, which are matters for a fact finder to resolve. In view of the conflicting evidence, we
conclude that a fact issue exists as to whether Anderson’s conduct was so inconsistent with an
intent to rely on the right to enforce the AMI and PRP provisions so as to amount to a waiver of
that right. Therefore, HighMount was not entitled to summary judgment on its waiver defense.
See TEX. R. CIV. P. 166a(c).
HighMount asserts that laches bars Anderson’s claims because Anderson knew of an
assignment of interests subject to the JOA between Parker & Parsley and Louis Dreyfus in 1993,
but did nothing about the violation for fourteen years, after millions of dollars were spent by
HighMount and its predecessors developing the acreage. Laches is an equitable defense that
prevents a plaintiff from asserting a claim due to delay—“not mere delay but delay that works a
disadvantage to another.” Culver v. Pickens, 142 Tex. 87, 176 S.W.2d 167, 170-71 (1943). Two
essential elements must exist for laches to bar a claim: (1) a party’s unreasonable delay in asserting
a legal or equitable right; and (2) a good faith change of position by another to his detriment
because of the delay. Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 80 (Tex. 1989).
As a general rule, laches is inappropriate when a statute of limitations applies to the cause
of action. See Lyle v. Jane Guinn Revocable Trust, 365 S.W.3d 341, 355 (Tex. App.—Houston
[1st Dist.] 2010, pet. denied); see also Garcia v. Garza, 311 S.W.3d 28, 40 (Tex. App.—San
Antonio 2010, pet. denied) (the application of laches is usually limited to cases arising out of
equity, or actions at law that are essentially equitable in character, and may not be invoked against
enforcement of a purely legal right such as a claim for breach of contract). In exceptional
circumstances, however, laches may bar a claim in a period shorter than the applicable statute of
limitations. Graves v. Diehl, 958 S.W.2d 468, 473 (Tex. App.—Houston [14th Dist.] 1997, no
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pet.). We find no such exceptional circumstances here, and hold laches does not apply to
Anderson’s claims for breach of contract and tortious interference with contract which were filed
within the applicable statutes of limitations. Lyle, 365 S.W.3d at 355; TEX. CIV. PRAC. & REM.
CODE ANN. § 16.004(a) (West 2002). To the extent Anderson asserts equitable claims for relief, 7
we conclude HighMount failed to present summary judgment proof conclusively establishing that,
acting in good faith, it changed its position based on the delay and that such change in position
was detrimental to HighMount. Therefore, summary judgment on the ground of laches was not
appropriate. See TEX. R. CIV. P. 166a(c).
CONCLUSION
Based on the foregoing reasons, we reverse the trial court’s judgment in part and render
judgment that the Contract Area includes interests acquired by the parties and by their successors
after the execution date of the JOA, and that the JOA is effective for a reasonable term. We affirm
the portion of the trial court’s judgment denying summary judgment for HighMount on its
affirmative defenses, and we remand to the trial court for further proceedings consistent with our
opinion, including a determination of what period of time constitutes a reasonable term for the
JOA.
Rebeca C. Martinez, Justice
7
Anderson seeks specific performance of the AMI and PRP provisions. Specific performance is an equitable remedy
that may be awarded for a breach of contract, as a substitute for money damages when such damages would not be
adequate. Davis v. Luby, No. 04-09-00662-CV, 2010 WL 3160000, at *3 (Tex. App.—San Antonio Aug. 11, 2010,
no pet.) (mem. op.) (specific performance is not a separate cause of action); Stafford v. S. Vanity Magazine, Inc., 231
S.W.3d 530, 535 (Tex. App.—Dallas 2007, pet. denied) (same). Anderson also pled for an accounting. A suit for an
accounting is generally founded in equity. Sw. Livestock & Trucking Co. v. Dooley, 884 S.W.2d 805, 809 (Tex.
App.—San Antonio 1994, writ denied) (citing Palmetto Lumber Co. v. Gibbs, 124 Tex. 615, 80 S.W.2d 742, 748
(1935)).
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