Circle X Land and Cattle Co. v. Cago Inc.--Appeal from 361st District Court of Brazos County

IN THE

TENTH COURT OF APPEALS

No. 10-03-00029-CV

CIRCLE X LAND AND CATTLE CO.,

Appellant

v.

CAGO INC.,

Appellee

From the 361st District Court

Brazos County, Texas

Trial Court # 53586

MEMORANDUM OPINION

This is a dispute between the surface owner of land and the operator of two wells. Because we find that the trial court erred in entering an order allowing the operator 120 days to remove equipment and plug the wells, we will reverse it and render an order denying the operator the relief requested.

Circle X Land and Cattle Co. Ltd. owns property in Brazos County, on which CAGO, Inc. was the operator of wells known as the Burkhart #1 and Burkhart B. Circle X sought a judicial determination that the oil and gas lease covering the property had expired. On September 10, 2002, the trial court signed an order granting Circle X s motion for a partial summary judgment, which declared that the lease had terminated on November 15, 2001, due to the non-payment of the minimum royalty required by the lease. CAGO then filed a motion for partial summary judgment seeking access to the property and the right to plug the two wells and remove its personal property. On January 10, 2003, the court signed an order granting that motion and allowing CAGO 120 days from the date of the order to remove the property and plug and abandon the wells. These matters were severed from other claims in the suit, and Circle X appealed from the latter order.

The order declaring the lease to have terminated is not in dispute. The dispute is centered on whether the court erred in allowing 120 days from the date of its order rather than 120 days from the date the lease terminated.

Paragraph 15 of the lease provides generally that within 120 days after abandonment of any well, the lessee shall remove its equipment, restore the land, and plug that well. Within 120 days after expiration of the lease, the lessee shall perform all those obligations that have not been performed previously.

Using general contract principles, Circle X says that the court should enforce the contract as written and not make a new or different contract for the parties. CAGO, on the other hand, points to authority allowing a suspension of operations until a determination of the controversy, when a lessor gives unqualified notice to the lessee that the lease has terminated. Repudiation of a lease by a lessor relieves the lessee from any obligation to conduct any operation on the land in order to maintain the lease in force while a judicial resolution of the controversy between the lessee and lessor over the validity of the lease is pending. Exploracion De La Estrella Soloataria Incorporacion v. Birdwell, 858 S.W.2d 549, 554 (Tex. App. Eastland 1993, no writ) (citing Kothmann v. Boley, 158 Tex. 56, 308 S.W.2d 1, 4 (1957), and Cheyenne Resources, Inc. v. Criswell, 714 S.W.2d 103, 105 (Tex. App. Eastland 1986, no writ)). The doctrine of repudiation is a variation of the doctrine of estoppel. Id. (citing Kothmann, 308 S.W.2d at 4). However, the Eastland Court also noted:

. . . , for the doctrine of repudiation to apply, the lease must be subsisting. Cheyenne Resources, Inc. v. Criswell, supra. We have previously held that there is sufficient evidence to support the trial court's findings that the leases terminated under their own terms 60 days after May 20, 1988, and September 14, 1989. The trial court found that both leases had terminated prior to June 18, 1990, the date appellants received appellees' demand letter. Because the leases had already terminated, an excuse of performance because of the repudiation on June 6, 1990, would not perpetuate the leases.

Id. Here, the lease provides for termination under the minimum royalty provision upon notice from the Lessor. Circle X notified CAGO on November 15, 2001, that the lease was terminated under that provision, and the trial court ultimately signed an order declaring that it had terminated on that date. We will follow the Eastland Court and hold that Circle X s notice of termination did not perpetuate the lease. CAGO also points to Cheyenne Resources as authority for allowing 120 days after the court s order, but there the jury found that the lease had not terminated. Cheyenne Resources, 714 S.W.2d at 105. Because the lease had not terminated, the court utilized a 60-day provision of the lease to allow the lessee to continue operations.

Because of the court s finding that the lease had terminated, we find ourselves in agreement with Circle X. No one claims that the language of the lease is ambiguous. Thus, the court should not have allowed 120 days from the date of its order for CAGO to remove its property and plug the wells, but should have enforced the lease as written. See Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996) (court will enforce the unambiguous document as written). We reverse the Order Granting Partial Summary Judgment to Defendant Cago, Inc. signed on January 10, 2003, // and render an order denying the relief requested in CAGO s motion for summary judgment filed on September 3, 2002. //

BILL VANCE

Justice

Before Chief Justice Gray,

Justice Vance, and

Justice Reyna

Reversed and order rendered

Opinion delivered and filed June 23, 2004

[CV06]