L.C. NEELY DRILLING, INC. and MAVERICK, ENERGY, INC., Appellants - Defendants,
HOOSIER ENERGY RURAL ELECTRICAL COOPERATIVE, INC., Appellee - Plaintiff
APPEAL FROM THE MARION SUPERIOR COURT. The Honorable Heather A. Welch, Judge. Cause No. 49D12-1202-MI-7392.
ATTORNEY FOR APPELLANTS: BRYAN H. BABB, Bose McKinney & Evans LLP, Indianapolis, Indiana.
ATTORNEY FOR APPELLEE: THOMAS E. MIXDORF, Ice Miller LLP, Indianapolis, Indiana.
FRIEDLANDER, Judge. MATHIAS, J., and PYLE, J., concur.
L.C. Neely Drilling, Inc. and Maverick Energy, Inc. (collectively, Maverick) appeal from the trial court's ruling in favor of Hoosier Energy Rural Electrical Cooperative, Inc. (Hoosier Energy) upon the parties' cross-motions for partial summary judgment. On appeal, Maverick argues that it was entitled to summary judgment or, alternatively, that a genuine issue of material fact precluded summary judgment in Hoosier Energy's favor.
In 2003, the owners of a large tract of land in Sullivan County entered into an oil and gas lease with one of Maverick's predecessors as lessee (the Original Lease). The Original Lease provided for a three-month option period ending on January 3, 2004. Paragraph 25 of the Original Lease provided that " if actual royalties are not being paid to lessor 36 months after the exercise of this option, lessee shall pay lessor $5.00 per acre advanced royalties per year until royalty is actually received." Appellant's Appendix at 103. Paragraph 15 (the Demand Clause) required the lessor to demand payment prior to termination of the lease due to the lessee's failure to promptly pay " any amount due" under the lease. Id. at 101.
In 2008, Maverick and the then-lessor entered into a " Ratification, Clarification and Amendment to Lease" (the Lease Amendment). Id. at 112. The Lease Amendment provided that the lease would remain in force for a primary term of five years from its January 3, 2004 commencement date, and continue thereafter for " as long . . . as gas is produced and sold from the Lands or from lands pooled therewith or advance royalties are paid pursuant to Paragraph 25 of the Lease[.]" Id. at 113. Additionally, Paragraph 25 of the Original Lease was amended as follows:
If neither royalties for actual production nor shut-in gas royalties are being paid or accruing at the expiration of thirty-six (36) months from the Commencement Date, the Lease shall be continued in force and effect from year to year and gas shall be considered as being produced in paying quantities for all purposes under the Lease, upon payment or tender to the Lessor of Advance Royalties payable at the rate of Five Dollars ($5.00) per net mineral acre per year, with the first payment to be made on or before thirty (30) days following expiration of said 36 months and upon similar payments being made annually thereafter on or before the anniversary date of the expiration of said 36 month period. However, in no event shall the payment of such Advance Royalties operate to extend the term of this Lease beyond ten (10) years following the Commencement Date of the Lease.
Id. at 113-14 (the Advance Royalties Clause). The Demand Clause was not amended.
As of January 2012, no actual or shut-in royalties had been paid. Thus, the Advance Royalties Clause was still in effect. By that time, Hoosier Energy had acquired fee simple title to the leased property. Maverick did not pay advance royalties for 2012 by the January 3, 2012 deadline. On or about January 27, 2012, Maverick sent a check to ...