Snowden v. JRE Invs., Inc.

• Decision Date: 03 June 2010
• Docket Number: No. 09–1149.,09–1149.
• Citation: 370 S.W.3d 215,2010 Ark. 276
• Parties: Danny SNOWDEN and Shelia Snowden, Appellants, v. JRE INVESTMENTS, INC., Chesapeake Exploration, LLC, Chesapeake Exploration Limited Partnership, and Chesapeake Energy Corporation, Appellees.
• Court: Arkansas Supreme Court

2010 Ark. 276

370 S.W.3d 215

Danny SNOWDEN and Shelia Snowden, Appellants,

v.JRE INVESTMENTS, INC., Chesapeake Exploration, LLC, Chesapeake Exploration Limited Partnership, and Chesapeake Energy Corporation, Appellees.

No. 09–1149.

Supreme Court of Arkansas.

June 3, 2010.

M. Edward Morgan, Clinton, and J. Cody Hiland, Conway, for appellants.

Michelle Cullen, Oklahoma City, OK, and Daily & Woods, PLLC, by: Jerry L. Canfield, Fort Smith, for appellees.

JIM GUNTER, Justice.

This appeal involves an oil and gas lease that extends by production. Chesapeake Exploration, LLC; Chesapeake Exploration, Limited Partnership; and Chesapeake Energy Corp. (collectively hereinafter referred to as “Chesapeake”), as lessee, maintains that its lease with Shelia and Danny Snowden was extended pursuant to the terms of the lease itself and by the application of Ark.Code Ann. § 15–73–201 (Repl.2009). This issue was fully briefed in cross-motions for summary judgment and each side was presented at a hearing before the circuit judge. The circuit court ruled in Chesapeake's favor, and the Snowdens now appeal that decision. In addition, Chesapeake cross-appeals the circuit court's order denying it certain equitable relief. We assumed jurisdiction of this case pursuant to our authority in Rule 1–2(b)(1) and (6) of the Arkansas Rules of the Supreme Court to reassign any case involving an issue of first impression and a substantial question concerning the validity, construction, or interpretation of an act of the General Assembly.

On appeal, the Snowdens assert the following: (1) that the circuit court erred in interpreting Ark.Code Ann. § 15–73–201 as extending the term of the lease to all lands under the lease rather than just to the producing section of land; (2) that the statute should be interpreted so that all its terms are given effect; and (3) that if determined to be ambiguous, this court should construe the statute in accordance with legislative intent. On cross-appeal, Chesapeake maintains that the circuit court erred in not suspending its drilling obligations under the lease while the litigation was ongoing. We affirm the circuit court's decision on direct appeal, and we reverse its decision on cross-appeal.

On May 19, 2008, Shelia and Danny Snowden, as husband and wife, filed a complaint in Faulkner County Circuit Court against JRE Investments, Inc., and Chesapeake. The Snowdens owned mineral interests in approximately 1250 acres of land located in Faulkner County that they had leased to JRE by agreement on February 11, 2005, for three years. The lease contained an extension provision stating that the lease “shall remain in force for a primary term of three (3) years and as long thereafter as oil, gas or other hydrocarbons are produced from said leased premises or from lands pooled therewith.” A separate provision provided:

Notwithstanding anything contained in this Lease to the contrary, it is expressly agreed that if the Lessee shall commence operations as provided herein at any time while this Lease is in force, this Lease shall remain in force and its terms shall continue so long as such operations are prosecuted, and if production results therefrom, then as long as production is maintained.

The lease also provided a definition for the term “operations” that included, but was not limited to,

[c]ommencing, construction of roadways, preparation of drillsite, drilling, testing, completing, recompleting, deepening, plugging back[,] repressuring [,] pressuring[,] maintenance, cycling, secondary recovery operations, or the production of oil or gas, or the existence of a shut-in well capable of producing oil or gas.

The lease was assigned to Chesapeake on September 16, 2005. On February 2, 2008, during the primary term of the lease, Chesapeake commenced drilling the “Jimmy Roberts” 8–13 1–29H well in Section 29 of Township 8 North, Range 13 West, Faulkner County on the Snowdens' property. Section 29 included approximately 158 acres of the land owned by the Snowdens. On February 13, 2008, Chesapeake filed an Affidavit of Drilling Operations and Lease Extension, noting that drilling had commenced in Section 29, which extended the lease as to all lands pursuant to the lease terms and Ark.Code Ann. § 15–73–201. The Jimmy Roberts 8–13 1–29H well was completed on March 29, 2008. Two additional “Jimmy Roberts” wells in Section 29 were drilled subsequent to the completion of the first well, the last of which was completed on September 9, 2008.

In their complaint, the Snowdens alleged that Chesapeake had violated Ark.Code Ann. § 15–73–204 by failing to release all sections of property except for the section containing the Jimmy Roberts well; that Chesapeake had violated Ark.Code Ann. § 5–37–226(a) by filing an Affidavit of Drilling Operations and Lease Extension clouding the Snowdens' title; and that Chesapeake had violated the “depth clause” provision contained in the lease. The Snowdens requested that the circuit court nullify the Affidavit of Drilling Operations and Lease Extension; that Chesapeake be ordered to pay double the damages the Snowdens sustained by the cloud on their title; that Chesapeake be ordered to pay treble and punitive damages pursuant to Ark.Code Ann. § 5–37–226(c); and that Chesapeake release all mineral interests below the depth of 100 feet under the stratigraphic equivalent of the deepest depth of all wells drilled.

Chesapeake filed an answer on June 16, 2008, denying all material allegations in the complaint. It asserted a counterclaim asking the circuit court for a declaratory judgment that by commencing the drilling of the Jimmy Roberts well within the primary term of the lease agreement, it had complied with the terms of the lease agreement. Furthermore, Chesapeake maintained that it was entitled to a declaratoryjudgment suspending its drilling operations during the pendency of the lawsuit.

On January 5, 2009, Chesapeake filed a motion for summary judgment, asserting that it was entitled to judgment as a matter of law based on the terms of the lease agreement and § 15–73–201.¹ Chesapeake further requested a suspension of its drilling obligation during the pendency of the lawsuit. The Snowdens filed a cross-motion for summary judgment on February 13, 2009, asserting that they were entitled to judgment as a matter of law on the issue of liability.

A hearing on the summary-judgment motions was held March 2, 2009. On July 20, [2010 Ark. 5]2009, the circuit court issued a final decree in the case. The court found that Ark.Code Ann. § 15–73–201 was not ambiguous; that the lease agreement between the Snowdens and JRE, which had been subsequently assigned to Chesapeake, was valid; that Chesapeake commenced drilling within Section 29 of the leased land within the primary term of the lease; that Chesapeake completed the Jimmy Roberts well in Section 29 on August 23, 2008, so that pursuant to Ark.Code Ann. § 15–73–201, the lease continued to be in effect as to all sections for one year subsequent to August 23, 2008; and that the Snowdens were not entitled to relief based on the “depth clause” referred to in the lease.² The court found that § 15–73–201(b) required a lessee to drill at least one well per year to avoid the effect of subsection (a). The court denied with prejudice the Snowdens request to nullify the lease and granted Chesapeake's summary-judgment motion. However, the circuit court denied Chesapeake's request for equitable relief as to suspending its drilling obligations during the pendency of the lawsuit. The Snowdens filed a timely notice of appeal from the order on July 30, 2009, and Chesapeake filed a timely notice of cross-appeal on August 19, 2009.

This case presents an issue of statutory interpretation within the context of a grant of summary judgment. This court has repeatedly held that summary judgment, although no longer viewed as a drastic remedy, is to be granted only when it is clear that there are no genuine issues of material fact to be litigated, and the party is entitled to judgment as a matter of law. Monday v. Canal Ins. Co., 348 Ark. 435, 73 S.W.3d 594 (2002). In this case, the parties filed cross-motions for summary judgment and did not dispute the facts. As such, the case was decided purely as a matter of statutory interpretation.

We review issues of statutory interpretation de novo, as it is for this court to decide what a statute means. Fewell v. Pickens, 346 Ark. 246, 57 S.W.3d 144 (2001). In this respect, we are not bound by the trial court's decision; however, in the absence of a showing that the trial court erred, its interpretation will be accepted as correct on appeal. Harris v. City of Little Rock, 344 Ark. 95, 40 S.W.3d 214 (2001). The first rule in considering the meaning and effect of a statute is to construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. Raley v. Wagner, 346 Ark. 234, 57 S.W.3d 683 (2001). When the language of a statute is plain and unambiguous, there is no need to resort to rules of statutory construction. Stephens v. Ark. Sch. for the Blind, 341 Ark. 939, 20 S.W.3d 397 (2000). When the meaning is not clear, we look to the language of the statute, the subject matter, the object to be accomplished, the purpose to be served, the remedy provided, the legislative history, and other appropriate means that shed light on the subject. Id. The basic rule of statutory construction is to give effect to the intent of the General Assembly. Ford v. Keith, 338 Ark. 487, 996 S.W.2d 20 (1999).

Although organized as multiple points on appeal, the Snowdens' argument is whether the circuit court erred in interpreting Ark.Code Ann. § 15–73–201 to grant summary judgment in favor of Chesapeake. The statute in question provides the following:

(a) The term of an oil and gas, or oil or gas, lease extended by production in quantities in lands in one (1) section or pooling unit in which there is production...