2024 OK 3
KAYE FRANCES BASE and ARLYN JOE JUSTICE, as Trustees of THE EUNICE S. JUSTICE AMENDED, REVISED AND RESTATED 1990 REVOCABLE TRUST AGREEMENT EXECUTED ON THE 31ST DAY OF JANUARY, 2011, Plaintiffs/Appellants/Petitioners,
v.
DEVON ENERGY PRODUCTION COMPANY, L.P., a domestic limited partnership, Defendant/Appellee/Respondent.
No. 119366
Supreme Court of Oklahoma
February 6, 2024
ON CERTIORARI FROM THE COURT OF CIVIL APPEALS, DIVISION II
Kraettli Q. Epperson, NASH, COHENOUR & GIESSMANN, P.C., Oklahoma City, Oklahoma, for Plaintiffs/Appellants/Petitioners.
Timothy J. Bomhoff and Laura J. Long, MCAFEE & TAFT, A PROFESSIONAL CORPORATION, Oklahoma City, Oklahoma, for Defendant/Appellee/Respondent.
COMBS, J.
¶ 0 This oil and gas case involves a dispute over the amount of royalties that Defendant/Appellee/Respondent Devon Energy Production Company, L.P. (hereinafter "Devon") has paid to The Eunice S. Justice Amended, Revised, and Restated 1990 Revocable Trust Agreement Executed on the 31st Day of January 2011 (hereinafter "the Trust") since production commenced in 2017 at nine wells collectively called the Bernhardt Wells. The trustees of the Trust, Plaintiffs/Appellants/Petitioners Kaye Frances Base and Arlyn Joe Justice (hereinafter "Trustees"), allege that the Trust is entitled to recover a 3/16 royalty under a 1978 Lease executed between everyone's predecessors-in-interest; but Devon alleges its interest arises from an earlier 1973 Lease under which the Trust is only entitled to receive the 1/8 royalty that it has paid. The Trustees filed suit against Devon in May of 2019, seeking to quiet title in favor of the 1978 Lease and to obtain pursuant to the Production Revenue Standards Act, 52 O.S.2021, §§ 570.1 et seq, both an accounting and a recovery of the 1/16 difference in royalties that Devon has allegedly underpaid. Nearly a year later, Devon sought summary judgment based on the 15-year statute of limitation found in 12 O.S.2021, § 93 (4), arguing that Trustees' quiet title action would have accrued by 1979 and been barred after 1994. The trial court granted Devon's motion for summary judgment and denied Trustees' subsequent motion for new trial. Trustees appealed, and the Court of Civil Appeals (COCA) affirmed by a 2-1 vote. Trustees then sought review on certiorari, arguing COCA failed to follow both this Court's numerous precedents holding there is no statute of limitation on an equitable quiet title claim and this Court's precedent in Claude C. Arnold Non-Operated Royalty Interest Properties v. Cabot Oil & Gas Corp., 2021 OK 4, 485 P.3d 817, regarding when their claims accrued. We previously issued a writ of certiorari and now vacate COCA's opinion, affirm the trial court's summary judgment, and remand the case for further proceedings not inconsistent with this opinion.
I. FACTUAL AND PROCEDURAL BACKGROUND
¶ 1 Plaintiffs/Appellants/Petitioners Kaye Frances Base and Arlyn Joe Justice are co-trustees of a revocable living trust that their mother, Eunice (née Shawver) Justice, originally settled in 1990 but that she amended in 2011 both to add them as her co-trustees and to name them as successor trustees. The name of the trust is The Eunice S. Justice Amended, Revised, and Restated 1990 Revocable Trust Agreement Executed on the 31st Day of January 2011. Eunice died March 30, 2015, at which point Trustees succeeded. [1]
¶2 This Trust is a successor-in-interest to certain mineral interests in the 80-acre lot contained in the northern half of the northeast quarter of Section 8, Township 15 North, Range 9 West of the Indian Meridian (i.e., N/2 NE/4 of Section 8-15N-9W in abbreviated form) in Kingfisher County, Oklahoma. [2] Back in 1973, those interests were owned by Eunice's mother, Lena Shawver, as life tenant and by Eunice herself as remainderman. On June 16, 1977, Mrs. Shawver conveyed her interests in the land and minerals of the N/2 NE/4 of Section 8-15N-9W to Eunice, thus reuniting the life estate and the remainder. [3]
¶3 On December 4, 1973, Lena Shawver and Eunice Justice executed an oil and gas lease in favor of the Rodman Corporation, a Texas corporation, concerning those mineral interests in the N/2 NE/4 of Section 8-15N-9W (hereinafter "the 1973 Lease"). [4] Under its habendum clause, the 1973 Lease would remain valid for a primary term lasting 5 years and then for a secondary term lasting "as long thereafter as oil, gas, casinghead gas, casinghead gasoline, or any of the products covered by this lease is or can be produced" by a well drilled during the primary term. [5] The 1973 Lease also provided for payment of a one-eighth (1/8 ) royalty to the lessors. [6] Consequently, the Rodman Corporation had until December 4, 1978, to drill a producing well. But on August 1, 1977, the Rodman Corporation assigned its interests as lessee to Partnership Properties Co., a Colorado general partnership. [7] Thus, Partnership Properties Co. had a little over one year left to drill a producing well and thereby hold the 1973 Lease into its secondary term.
¶4 But before a well could be drilled, Eunice and her husband, Herman O. Justice, executed a second oil and gas lease concerning the very same mineral interests on July 24, 1978 (hereinafter "the 1978 Lease") in favor of Petro-Lewis Funds, Inc., a Colorado corporation. [8] The habendum clause of the 1978 Lease specified that its three-year primary term would commence on December 4, 1978 (i.e., the date that the 1973 Lease's primary term was set to expire):
from December 4, 1978
2. This lease shall remain in force for a term of three (3) years / and as long thereafter as oil, gas casinghead gas, casinghead gasoline, or any of the products covered by this lease is or can be produced from said land or from land with which said land is pooled, or operations are being continued as hereinafter provided.
....
December 4, 1978
5. If operations for the drilling of a well for oil or gas are not commenced on said land or on acreage pooled therewith as herein provided on or before one year from this date, this lease shall terminate as to both parties, unless the lessee shall on or before one year from this date pay or tender to the lessor or for the lessor's credit in the Watonga State Bank Bank at Watonga, Oklahoma or its successors... the sum of Eighty Dollars & No/100's -------- Dollars ($ 80.00), which shall operate as a rental and cover the privilege of deferring the commencement of operations for drilling for a period of one year.... [9]
The 1978 Lease also provided for a higher royalty payment to Eunice and her husband at three-sixteenths (3/16 ). [10]
¶5 Prior to the expiration date in the 1973 Lease and the effective date in the 1978 Lease, a producing well was drilled. Petro-Lewis Corporation, a Colorado corporation, was the operator for the N/2 NE/4 of Section 8-15N-9W from at least June 1978 to May 1985. [11] Petro-Lewis Corporation filed a pooling application with the Oklahoma Corporation Commission on June 12, 1978--wherein it proposed drilling a well on Eunice's land into the Mississippian-Chester Lime common source and pooling the drilling rights to that formation for all of the operators with leaseholds in Section 8-15N-9W--which the Corporation Commission approved on July 21, 1978. [12] The Lena Shawver #1 well (hereinafter "the Shawver Well") was spud on Eunice's land on August 21, 1978, and drilling was completed into the Chester zone of the Mississippian formation on September 24th. [13] Production was first achieved on November 24, 1978. [14]
¶6 After production on the Shawver Well was achieved, all parties acted as if the terms of the 1973 Lease controlled, as demonstrated below.
¶ 7 On the lessor's side, Eunice acknowledged her right to a 1/8 royalty on production from the Shawver Well at least three times. First, on July 6, 1979, Eunice signed a Gas Division Order filed with the Corporation Commission, wherein she certified and guaranteed that she was entitled to a 1/8 royalty payment of half (N/2) of one-quarter (NE/4) of Section 8-15N-9W--i.e., a fractional interest of" 1/8 of 1/2 of 1/4 " or a decimal interest of 0.01562500:
TO: PETRO-LEWIS CORPORATION PROPERTY
BOX 2250 PAYMENT NO. OK-EC-77-800-01
DENVER, COLORADO 80201 July 6 19 79
Each of the undersigned certifies and guarantees that he is the legal owner of, and hereby warrants title to, his respective interest as set out below in the natural gas, including gas condensate, produced and saved from the Petro-Lewis Corp.-Lena Shawver #1 lease, located in Kingfisher County, State of Oklahoma, described as
All of Section 8, Township 15 North, Range 9 West, In Kingfisher County, Oklahoma, limited to the production of gas and condensate from the Mississippi -- Chester Lime Formation
Effective 7:00 A.M. first production
and until further written notice, you are authorized and directed, subject to all of the subsequent provisions hereof, to give credit as follows for such interest, and in compliance herewith shall relieve you of any further liability to the undersigned with respect to such production:
-
OWNER NO.
NAME, ADDRESS, AND SOCIAL SECURITY NO.
FRACTIONAL INTEREST
DECIMAL
Eunice S. Justice P.O. Box 95 Watonga, Oklahoma 73772 S.S. No.
1/8 of 1/2 of 1/4
-01562500 RI
SOCIAL SECURITY NUMBER:
Attest if owner is corporation, otherwise two witnesses:
_______ Eunice S. Justice
________
________
________
________ [15]
Then on November 6, 1980, Eunice signed another Gas Division Order filed with the Corporation Commission certifying the same decimal interest of 0.01562500. [16] Lastly, in August of 1985, Eunice signed a third Division Order wherein she "verif[ied] and guarantee[d]" that she was entitled to the same decimal interest of...
