ILNews

Lessor entitled to judgment that oil and gas lease expired

Back to TopCommentsE-mailPrintBookmark and Share

Partial summary judgment for the lessor was affirmed Wednesday by the Indiana Court of Appeals in a contract dispute involving an oil and gas lease of land in Sullivan County.

Owners of the land entered into the agreement with Maverick Energy Inc.’s predecessors as lessee. The original lease contained a Demand Clause and Advance Royalties Clause. Under the lease, Maverick had the option to either renew the lease each year by timely paying advance royalties or allow the lease to expire – considered an “unless” clause.

Maverick did not pay advance royalties for 2012 by the Jan. 3, 2012, deadline. Hoosier Energy informed Maverick in February that the lease had terminated because those royalties were not timely paid. Both sides sought judicial review of Maverick’s plans to begin drilling on the property. The trial court granted Hoosier Energy’s motion for partial summary judgment.

“Unless” clauses provide a lease will terminate automatically after the expiration of a specified term unless the lessee either drills or pays advance royalties by a prescribed date. But Maverick argued the Advance Royalties Clause in its contract is not a standard “unless” clause because it does not contain the words “terminate” or “unless.”

“Here, it is clear that the parties intended for the lease to continue year-to-year upon timely payment of advance royalties. The only reasonable interpretation of the Advance Royalties Clause is that if advance royalties were not timely paid, the lease would not continue, i.e., it would terminate,” Judge Ezra Friedlander wrote.

Maverick also argued that the Demand Clause required the lessor to issue a demand prior to terminating the lease for failure to timely pay advance royalties. But the language in the Demand Clause contemplates the existence of separate termination provisions set forth in the lease and unambiguously states that it does not supersede them, Friedlander pointed out.

“We conclude that the lease clearly and unambiguously provided that if Maverick had not begun paying production or shut-in gas royalties by the end of the initial term, the lease would continue year-to-year upon the timely payment of advance royalties. Because Maverick failed to timely pay advance royalties, the lease expired by its own terms and without the need for Hoosier Energy to issue a demand,” the court held in L.C. Neely Drilling, Inc. and Maverick Energy, Inc. v. Hoosier Energy Rural Electrical Cooperative, Inc., 49A02-1305-MI-457.  

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Excellent initiative on the part of the AG. Thankfully someone takes action against predators taking advantage of people who have already been through the wringer. Well done!

  2. Conour will never turn these funds over to his defrauded clients. He tearfully told the court, and his daughters dutifully pledged in interviews, that his first priority is to repay every dime of the money he stole from his clients. Judge Young bought it, much to the chagrin of Conour’s victims. Why would Conour need the $2,262 anyway? Taxpayers are now supporting him, paying for his housing, utilities, food, healthcare, and clothing. If Conour puts the money anywhere but in the restitution fund, he’s proved, once again, what a con artist he continues to be and that he has never had any intention of repaying his clients. Judge Young will be proven wrong... again; Conour has no remorse and the Judge is one of the many conned.

  3. Pass Legislation to require guilty defendants to pay for the costs of lab work, etc as part of court costs...

  4. The fee increase would be livable except for the 11% increase in spending at the Disciplinary Commission. The Commission should be focused on true public harm rather than going on witch hunts against lawyers who dare to criticize judges.

  5. Marijuana is safer than alcohol. AT the time the 1937 Marijuana Tax Act was enacted all major pharmaceutical companies in the US sold marijuana products. 11 Presidents of the US have smoked marijuana. Smoking it does not increase the likelihood that you will get lung cancer. There are numerous reports of canabis oil killing many kinds of incurable cancer. (See Rick Simpson's Oil on the internet or facebook).

ADVERTISEMENT