Atkinson Gas Co. v. Albrecht

• Decision Date: 12 May 1994
• Docket Number: No. 13-92-687-CV,13-92-687-CV
• Citation: 878 S.W.2d 236
• Parties: 129 Oil & Gas Rep. 243 ATKINSON GAS COMPANY and Clifford Atkinson, III, Appellants, v. Emmett ALBRECHT & Wife, Dorothy Albrecht, and, Clarence Albrecht & Wife, Sandra Albrecht, Appellees.
• Court: Texas Court of Appeals

Page 236

878 S.W.2d 236

129 Oil & Gas Rep. 243

ATKINSON GAS COMPANY and Clifford Atkinson, III, Appellants, v. Emmett ALBRECHT & Wife, Dorothy Albrecht, and, Clarence

Albrecht & Wife, Sandra Albrecht, Appellees.

No. 13-92-687-CV.

Court of Appeals of Texas,

Corpus Christi.

May 12, 1994.

Rehearing Overruled June 9, 1994.

Mayo Galindo, Stewart J. Alexander, San Antonio, for appellants.

Thomas Barry, Yorktown, for appellees.

Before KENNEDY, GILBERTO HINOJOSA and FEDERICO HINOJOSA, Jr., JJ.

OPINION

KENNEDY, Justice.

Atkinson Gas Company and Clifford Atkinson III (Atkinson) appeal from a judgment in favor of Emmett and Dorothy Albrecht and Clarence and Sandra Albrecht, declaring that Atkinson's oil and gas lease from the Albrechts had terminated due to cessation of production. Atkinson raises nine points of error contending that production was excused due to the Albrechts' interference with the well, the force majeure provision of the lease, and the payment of shut-in royalties, and challenging the sufficiency of the evidence to support a damage award to the Albrechts. We affirm.

In February 1985, the Albrechts leased to Atkinson the mineral rights to 187.1 acres of land under an oil and gas lease that provided for a one-year primary term "and as long thereafter as oil, gas or other mineral is produced from said land" without cessation of production for a period of more than sixty consecutive days. Atkinson drilled a single gas well on the property from which production continued under the terms of the lease until December 1991.

By that time, Atkinson had grown lax in his business practices due to a lack of administrative assistance and was past due on his payments both to the Albrechts and to his own employee, Lucas Kreitz, a well gauger that he had hired to check the well regularly. Emmett Albrecht and Kreitz therefore determined to get Atkinson's attention by turning off the valve to the gas well and leaving it "shut-in" as of December 9, 1991. ¹ They informed Atkinson that the well had thus been shut-in, and Albrecht specifically sent a letter to Atkinson with a notation dated December 9, 1991, indicating that, "the well was shut in today. No Pay--No Gas!" However, Atkinson disregarded this note and assumed that production was continuing at a reduced rate because the pipeline company which purchased the gas erroneously continued to report that it was flowing and to pay for the quantities that it erroneously believed to have been produced from the well.

In the meantime, because Atkinson had for several months fallen behind on his reports of production to the Texas Railroad Commission, due to his asserted lack of administrative help, the Commission issued an order and sealed the gas well in question on January 22, 1992, such that production after that date was physically prevented. See 16 Tex.Admin.Code § 3.68 (West 1993) (Tex.R.R.Comm'n, Pipeline Connection and Severance).

Albrecht had begun negotiation for a new lease of the well, and, on March 18, 1992, he requested a release from Atkinson on the ground that the prior lease had terminated by nonproduction for a period in excess of sixty days. Nevertheless, when the Railroad Commission seal was lifted and the well was turned back on as of March 20, 1992, Atkinson continued his attempt to operate the well and to receive the proceeds from production, against Albrecht's protest that the lease had terminated.

Atkinson initially sued the Albrechts for injunctive relief and damages for their refusal to allow him to enter the lease and for shutting in the well. The Albrechts answered, contending that the lease expired according to its own terms because production had ceased for more than sixty days. They also counterclaimed for trespass, slander of title and breach of contract in connection with their loss of a prospective lessee after the termination of Atkinson's lease. The trial court rendered judgment that the lease had terminated, held Atkinson to be a trespasser, and awarded the Albrechts $29,761.53 in damages on their counterclaims.

Repudiation

By his first point of error, Atkinson contends that the evidence conclusively showed that Albrecht actively interfered with production and prevented him from operating the well by shutting it in.

As a general rule, performance is excused when a party to a contract prevents the other party from performing and thereby repudiates the contract. See Sage Street Associates v. Northdale Construction Co., 809 S.W.2d 775, 777 (Tex.App.--Houston [14th Dist.] 1991, no writ); O'Shea v. International Business Machines Corp., 578 S.W.2d 844, 846 (Tex.Civ.App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.).

Specifically, in the context of an oil and gas lease, repudiation by a lessor relieves the lessee from any obligation to conduct any operation on the land in order to maintain the lease pending resolution of the controversy over the validity of the lease. Kothmann v. Boley, 158 Tex. 56, 308 S.W.2d 1, 4 (1957); Exploracion de la Estrella Soloataria Incorporacion v. Birdwell, 858 S.W.2d 549, 554 (Tex.App.--Eastland 1993, no writ); Humphrey v. Seale, 716 S.W.2d 620, 623 (Tex.App.--Corpus Christi 1986, no writ); Cheyenne Resources, Inc. v. Criswell, 714 S.W.2d 103, 105 (Tex.App.--Eastland 1986, no writ).

However, in order to establish such a repudiation, the lessor must have asserted a clear, unequivocal challenge to the lessee's title to, and interest in the lease. Cheyenne Resources, 714 S.W.2d at 105 (lessor posted a sign on the gate to leased premises notifying lessee that lease had expired); Fike v. Riddle, 677 S.W.2d 722, 726 (Tex.App.--Tyler 1984, no writ); Tar Heel Energy Corp. v. Menking, 621 S.W.2d 450, 451 (Tex.Civ.App.--Corpus Christi 1981, no writ); Adams v. Cannan, 253 S.W.2d 948, 951 (Tex.Civ.App.--San Antonio 1952, writ ref'd).

In the present case, Albrecht's participation in the December shut-in did not imply that the lease had then terminated. The dispute between the parties at that time did not concern title to the lease but merely the timely payment of royalties. Nor did Albrecht's actions amount to a "lock-out" situation in which Atkinson was physically prevented from entering the lease or obtaining production from the well. See Caddell v. Threshold Development Co., 609 S.W.2d 871, 873 (Tex.Civ.App.--Amarillo 1980, no writ). On the contrary, Atkinson was promptly informed of the shut-in and was generally free to turn the well back on at any time prior to the sealing of the well by the Texas Railroad Commission. Thus, the evidence at most shows merely that Albrecht and Kreitz caused an inconvenience to Atkinson by shutting in the well as a means to get his attention concerning their right to be paid, but such actions failed to rise to the level of preventing Atkinson from producing or repudiating the lease. We overrule Atkinson's first point of error.

Estoppel

By his second through fifth points of error, Atkinson generally contends that he properly tried and established his defense that Albrecht was estopped from claiming that the lease had terminated.

Atkinson argues that Albrecht's actions in shutting in the well and also in accepting erroneous royalty payments for the shut-in period invoked the doctrine of quasi estoppel. Quasi estoppel precludes a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken by him. The doctrine applies when it would be unconscionable to allow a person to maintain a position inconsistent with one in which he acquiesced, or of which he accepted a benefit. Vessels v. Anschutz Corp., 823 S.W.2d 762, 765-66 (Tex.App.--Texarkana 1992, writ denied); Steubner Realty 19, Ltd. v. Cravens Road 88, Ltd., 817 S.W.2d 160, 164 (Tex.App.--Houston [14th Dist.] 1991, no writ); El Paso National Bank v. Southwest Numismatic Investment Group, Ltd., 548 S.W.2d 942, 948 (Tex.Civ.App.--El Paso 1977, no writ). Thus, quasi estoppel forbids a party from accepting the benefits of a transaction or statute and then subsequently taking an inconsistent position to avoid corresponding obligations or effects. Mexico's Industries, Inc. v. Banco Mexico Somex, S.N.C., 858 S.W.2d 577, 581 n. 7 (Tex.App.--El Paso 1993, writ denied); Turcotte v. Trevino, 499 S.W.2d 705, 712-13 (Tex.Civ.App.--Corpus Christi 1973, writ ref'd n.r.e.). Moreover, unlike equitable estoppel, quasi estoppel requires no showing of misrepresentation or detrimental reliance. Vessels, 823 S.W.2d at 765; Steubner, 817 S.W.2d at 164; El Paso, 548 S.W.2d at 948.

In the present case, we fail to see how Albrecht's participation in the December shut-in amounted to an inconsistent position with regard to Albrecht's later contention that the lease terminated when Atkinson failed to turn the well back on for over sixty days. Although it may have been improper for Albrecht to inconvenience Atkinson in this manner, it was not inconsistent with Albrecht's subsequent claim that cessation of production for the requisite period terminated the lease. Such conduct does not amount to a ratification, election, acquiescence, or acceptance of benefits, as have traditionally been considered the type of conduct which may form the basis of a claim of quasi estoppel. See Steubner, 817 S.W.2d at 164. On the contrary, Albrecht made no indication by the December shut-in that he intended to relieve Atkinson of the obligation to produce in order to keep the lease, and Albrecht's communication to Atkinson that he had shut in the well showed no signs of leniency or acquiescence.

With regard to Albrecht's acceptance of royalty payments which partially covered the period of nonproduction, these payments were made and accepted by Albrecht after he had already made his position clear to Atkinson that he believed that the lease had terminated. Out of the amounts that he received from the pipeline, Atkinson paid royalties of one/fourth to the Albrechts. Accordingly, Albrecht admitted that in April 1992 he received...