Energy Law

Texas Court of Appeals Affirms Lease Termination and Rejects Summary Judgment on Adverse Possession Claim

By Marie Carlisle

In Sun-Key Oil Co., Inc. v. Ernest Cannon & Moncrief Minerals P'ship, L.P., the Eleventh Court of Appeals in Eastland affirmed the District Court's judgment granting summary judgment in favor of a lessor's lease termination claim based on cessation of production and denying Sun-Key Oil Company's motion for summary judgment on its affirmative defense of adverse possession stating that Sun-Key had failed to present detailed evidence establishing its use of the property and the elements of its adverse possession claims. The Court of Appeals referenced the Texas Supreme Court's decision in Natural Gas Pipeline Co. of Am. V. Pool, 941 S.W.2d 910 (Tex. 1997), in stating the standard for summary judgment evidence regarding issues related to adverse possession.

Both Ernest Cannon and Moncrief Minerals Partnership held undivided mineral interests in a lease which, at the time this suit was filed, was operated by Sun-Key. In December of 2004, Cannon filed a declaratory action asking the court to find that the lease on the property had terminated due to the cessation of production. Moncrief intervened, asserting similar allegations as Cannon, also seeking a declaration that the lease had terminated.

The District Court granted Moncrief's motion for partial summary judgment, denied both Sun-Key's motions for summary judgment, and declared that the lease had terminated as to the lands at issue in this suit. Sun-Key appealed these decisions. As an initial matter, the Court of Appeals affirmed the District Court's decision granting partial summary judgment in favor of Montcrief that the lease terminated due to lack of production during a two-year period from 1995-1997 because Sun-Key failed to oppose this motion and present evidence in support of its affirmative defenses, including res judicata and collateral estoppel.

As to Sun-Key's motion for partial summary judgment based on its affirmative defense of adverse possession, the Court of Appeals noted that the only evidence Sun-Key provided to support the motion was an affidavit of its President which provided evidence which was conclusory in nature. The Court of Appeals distinguished the statements in the Sun-Key affidavit from the evidence which the Supreme Court found to have been sufficient to establish an open, notorious, and hostile use of the property at issue in Pool, supra. The Court of Appeals found that the record 'lacks the type of evidence' presented in Pool and noted that the affidavit merely provided statements which were 'conclusory in nature and were not supported by factual detail.' Further, the Court of Appeals found that Sun-Key failed to provide detailed evidence establishing the nature of their use of the property and the elements of their adverse possession claims.
 

Full post as published by The Energy Law Blog on March 16, 2009 (boomark / email).