An Amarillo, Texas appellate court recently reversed the decision of a trial court by declaring the overriding royalty interests on Houston-based Apache Corporation oil and gas leases can be reformed to comply with the state’s rule against perpetuities. It also tasked the trial court with determining an appropriate way to do so based on the intentions of the creator of the agreement.
The plaintiffs, Tommy Yowell, et al., initially sued Granite Operating Company and Apache Corporation in September of 2013 seeking a judicial declaration of their ownership of an overriding royalty interest (ORRI) in a 2007 mineral lease. The plaintiffs claimed that their ORRI in a 1986 lease continued or attached to the 2007 lease. The defendants, Granite Operating Company and Apache Corporation, then sued the Peyton Group and the PAC Group, both owners of ORRIs in the 2007 lease, seeking indemnity under a previously executed sales agreement. Granite and Apache further alleged that if the Yowells prevailed on their claims against Granite and Apache, then Peyton Royalties must proportionately reduce its ORRI payments and should be returned under a theory of unjust enrichment, and that the Peyton Group should be required to pay the Yowells directly for these amounts.
To review the court’s opinion, click here.
