Court of Appeals of Texas, Sixth District, Texarkana
Submitted Date: June 4, 2018
Appeal from the County Court at Law No. 2 Gregg County, Texas
Trial Court No. 2016-1054-CCL2
Morriss, C.J., Moseley and Burgess, JJ.
C. Moseley Justice
dispute is about a right of first refusal (ROFR) in certain
oil and gas leases on various properties located in Gregg and
Rusk Counties. It is undisputed that a ROFR in favor of MJR
Oil & Gas 2001 LLC (MJR) is contained in a May 2002,
unrecorded Settlement and Release Agreement (the Settlement
Agreement) between two groups of owners of an oil company,
including MJR and Energy 2000, Inc. (Energy). At issue in
this case is whether MJR's ROFR is a covenant running
with the land, and therefore enforceable against the
assignees and successors in interest to Energy: AriesOne, LP
(AriesOne), GFP Texas, Inc. (GFP), Miken Oil, Inc. (Miken),
and SND Energy Company, Inc. (SND) (collectively, Appellees).
The trial court held that it was not a covenant running with
the land and entered summary judgments in favor Appellees on
that basis. The trial court also denied MJR's
motion for partial summary judgment against AriesOne, which
asked for summary judgment against AriesOne on liability and
contended that the ROFR was a covenant running with the land.
After the parties agreed to non-suit all other claims and
counterclaims, the trial court entered a final judgment in
favor of Appellees.
appeal, MJR contends that the trial court erred in holding
that the ROFR was not a covenant running with the land and
asks us to reverse the trial court's rulings. We agree
that the trial court erred in granting the motion for summary
judgment in favor of Appellees.
Standard of Review
review the trial court's summary judgment de novo."
Provident Life & Accident Ins. Co. v. Knott, 128
S.W.3d 211, 215 (Tex. 2003) (citing FM Props. Operating
Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000)).
In our review, all evidence favorable to the non-movant is
deemed true, and every reasonable inference and any doubts
are resolved in the non-movant's favor. Valence
Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.
2005). To be entitled to traditional summary judgment, a
movant must establish that there is no genuine issue of
material fact so that the movant is entitled to judgment as a
matter of law. Tex.R.Civ.P. 166a(c); Mann Frankfort Stein
& Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844,
848 (Tex. 2009). Once the movant produces evidence entitling
it to summary judgment, the burden shifts to the non-movant
to present evidence raising a genuine issue of material fact.
Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996). A
defendant is entitled to summary judgment on a claim only
when it conclusively negates a single essential element of a
cause of action or conclusively establishes an affirmative
defense. Frost Nat'l Bank v. Fernandez, 315
S.W.3d 494, 508-09 (Tex. 2010).
as in the case of AriesOne, both sides file motions for
summary judgment and the trial court grants one motion and
denies the other, we consider both sides' summary
judgment evidence and determine all questions presented, and
if the trial court erred, we render the judgment the trial
court should have rendered. Mann Frankfort, 289
S.W.3d at 848 (citing Comm 'rs Court of Titus Cty. v.
Agan, 940 S.W.2d 77, 81 (Tex. 1997)).
II. The Summary Judgment
ROFR appears in the Settlement Agreement, which was executed
May 5, 2002. The Settlement Agreement arose out of a lawsuit
filed in the County Court at Law No. 3 of Dallas County
between MJR and others (referred to collectively in the
Settlement Agreement as the Ryan Parties), Energy and others
(referred to collectively in the Settlement Agreement as the
Dickerson Parties), and Ascend Oil & Gas, L.L.C.
(Ascend), over the ownership and operation of Ascend and
certain oil and gas properties. Under the Settlement
Agreement, the various parties agreed to convey all of their
interest in the oil and gas properties to Energy, and Energy
agreed to convey varying overriding royalty interests (ORRI)
in certain oil and gas properties to MJR. The Settlement
Agreement also contained a section that set forth the
continuing obligations of Energy to MJR. These obligations
included the actions Energy would take to insure the proper
and prompt payment of the overriding royalties for any
production from the oil and gas properties to MJR, and also
included a ROFR that provided:
[Energy] shall advise MJR within ten business (10) days of
any assignment, farmout, sale or transfer of any property,
lease, or well in which MJR has any interest and shall give
MJR a [ROFR] to purchase such interest upon the same terms as
offered to [Energy] by a bona fide third party. If MJR does
not agree to purchase such interest within ten (10) days,
[Energy] shall advise the new operator and/or transferee of
MJR's overriding royalty interest. As a condition
precedent to the transfer, any transferee shall be required
to agree to be bound by the obligations to MJR contained in
this agreement as it pertains to any interest transferred and
give MJR evidence of same.
Settlement Agreement also provided, "This Agreement
shall be binding upon and inure to the benefit of the
parties, and all of their respective assigns, successors,
agents, servants, employees, insurers, and legal
same day, Energy executed an Assignment of Overriding Royalty
Interest, effective as of May 1, 2002 (the ORRI Assignment)
to MJR that conveyed varying ORRI in certain oil and gas
properties, including some, but not all,  of the oil and
gas leases in dispute in this case. After setting forth the
varying ORRI and their definition, the ORRI Assignment
ASSIGNOR (Energy) further hereby irrevocably consents to,
allows and directs any and all current and future purchasers
of production from these properties and leases to issue
Division Orders to ASSIGNEE (MJR) or ASSIGNEE's designee
covering this overriding royalty interest and to pay ASSIGNEE
or ASSIGNEE's designee directly for its royalty interest.
ASSIGNOR agrees that this obligation is a covenant running
with the land and any transfer by ASSIGNOR, its successors or
assigns must include this right of direct payment as well as
all the accounting obligations set out in the Settlement and
Release Agreement executed this date by ASSIGNEE and ASSIGNOR
and any assignee or successor in interest must agree to be
bound by the terms of the Settlement and Release Agreement as
a condition precedent to the transfer of any of the
ORRI Assignment also provided, "The terms of this
Assignment will be binding upon the parties, and upon their
respective successors and assigns."
a few months, Energy conveyed its interests in the various
oil and gas properties, including some of the leases in
dispute in this case,  to Gaywood Oil & Gas, L.L.C.
(Gaywood), in an Assignment of Lease and Bill of Sale (the
Energy Assignment) on October 1, 2002. The Energy
Assignment does not contain any direct or indirect reference
to the ORRI Assignment or the Settlement Agreement.
Assignment and Bill of Sale effective December 10, 2010,
Gaywood conveyed its interests in certain oil and gas
properties in Gregg and Rusk Counties to GFP (the Gaywood
Assignment). The Gaywood Assignment included all of the oil
and gas leases in dispute in this case, except the Tuttle-A-
Lease, RRC 06167. Although it did not directly refer to the
ORRI Assignment or the Settlement Agreement, the Gaywood
Assignment provided that it was made by Gaywood and accepted
by GFP subject to the following terms, representations,
agreements, and provisions:
. . . .
(b) [GFP] shall at the Effective Date assume and be
responsible for and comply with all duties and obligations of
[Gaywood], express or implied, with respect to the Assets,
including without limitation, those arising under or by
virtue of any lease, contract, agreement, document . . . .
provided that "[t]he provisions of this Assignment shall
be binding on and inure to the benefit of [Gaywood] and [GFP]
and their respective . . . . successors and assigns and shall
constitute covenants running with the Lands and the
Assignment, Conveyance, and Bill of Sale executed March 14,
2013, GFP conveyed its interest in certain oil and gas
properties in Gregg and Rusk Counties to AriesOne (the GFP
Assignment). Prior to its assignment to AriesOne, GFP
notified MJR of the pending transfer by letter dated March
11, 2013. In pertinent part, the letter provided:
GFP . . . hereby notifies MJR . . . of the receipt of an
offer to purchase all of its oil and gas interests and assets
in Gregg & Rusk counties (the "Assets"). The
Assets and the transaction are described in a letter of
intent and assignment and bill of sale (the "LOI &
Assignment") signed with AriesOne  . . ., the relevant
pages of which are attached hereto, to close a transaction on
or about March 13, 2013[, ] but no later than March 31, 2013.
. . . .
To the extent that MRJ has a right of refusal to purchase the
[sic] some of these properties on the same terms as
[AriesOne], please let us know if you intend to exercise any
such rights at your earliest convenience. If it is not your
intention, kindly sign below and return to us by fax.
bottom of the page, Michael J. Ryan, Managing Member of MJR,
affirmed that "MJR . . . [would] not exercise
any [ROFRs] the [sic] purchase the Assets per the terms of
the LOI and Assignment signed with [AriesOne] if such
transaction would close prior to March 31, 2013."
Assignment conveyed all of GFP's interest in certain oil
and gas properties, including some of the leases in dispute
in this case. It does not contain any direct or indirect
reference to the ORRI Assignment or the Settlement Agreement.
their motions for summary judgment, SND acknowledged that it
was assigned an interest in five of the leases in dispute
that were formerly owned by Energy, and Miken acknowledged
that it received an assignment of two of the leases in
filed a motion for partial summary judgment on liability
against AriesOne only and argued that AriesOne was bound by
MJR's ROFR because it was a covenant running with the
land. AriesOne responded, arguing that it was not bound
because MJR's ROFR was not a covenant running with the
land, that it was an unreasonable restraint on alienation,
and that it violated the statute of frauds. AriesOne also
filed traditional and no-evidence motions for summary
judgment in which it adopted the arguments and evidence set
forth in its response to MJR's motion for partial summary
judgment in support of its traditional motion. The trial