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First Tennessee Bank N.A. v. Pathfinder Exploration, LLC

United States Court of Appeals, Eighth Circuit

May 14, 2014

First Tennessee Bank National Association, in its capacity as Trustee under agreement with Russell C. Gregg for Mary Loeb and Frances Petersmeyer; Trustee under will of Irene C. Gregg for Mary Loeb and Fances Petersmeyer; Charles Kelley Lewis; Rufie Hard Lewis; Ralph Emerson Lewis; Henry Lincoln Gregg Lewis; Michael Pritchard; Irene Calhoun Pritchard; Thomas L. Brown; Vol Walker Pritchard; Fereshteh Richard; Ross J. Pritchard; Rebecca Pritchard; Mehran Gregg Pritchard, Plaintiffs - Appellants
v.
Pathfinder Exploration, LLC; CEP Equity I, LLC; CEU Fayetteville, LLC; XTO Energy, Inc., a subsidiary of Exxon Mobil Corporation, Defendants - Appellees

Submitted April 17, 2014

Appeal from United States District Court for the Eastern District of Arkansas - Little Rock.

For First Tennessee Bank National Association, in its capacity as Trustee under agreement with Russell C. Gregg for Mary Loeb and Frances Petersmeyer; Trustee under will of Irene C. Gregg for Mary Loeb and Fances Petersmeyer, Charles Kelley Lewis, Rufie Hard Lewis, Ralph Emerson Lewis, Henry Lincoln Gregg Lewis, Michael Pritchard, Irene Calhoun Pritchard, Thomas L. Brown, Vol Walker Pritchard, Fereshteh Richard, Ross J. Pritchard, Rebecca Pritchard, Mehran Gregg Pritchard, Plaintiffs - Appellants: Martin Wayne Bowen, Bowen Law Firm, PLLC, Little Rock, AR.

For Pathfinder Exploration, LLC, CEP Equity I, LLC, CEU Fayetteville, LLC, XTO Energy, Inc., a subsidiary of Exxon Mobil Corporation, Defendants - Appellees: Robert M. Honea, Hardin & Jesson, Fort Smith, AR.

Before RILEY, Chief Judge, BENTON and KELLY, Circuit Judges.

OPINION

Page 490

BENTON, Circuit Judge.

First Tennessee Bank National Association is a trustee of Gregg family trusts. First Tennessee (and members of the Gregg family) sued Pathfinder Exploration, LLC (and its assignees) for breaching an oil and gas lease. The district court[1] granted Pathfinder summary judgment. First Tennessee appeals. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

The trusts own mineral rights to land in White and Prairie counties, Arkansas. The trusts leased the rights to Pathfinder.[2] The lease has a form contract and an addendum. The contract says that Pathfinder " may at any time and from time to time surrender this lease as to any part or parts of the leased premises . . . ." The addendum says:

2. The bonus consideration paid to Lessor for this lease includes consideration of $350.00 per net mineral acre which is due and payable on or before 45 days after Lessee's execution of this lease. This lease is a " Paid Up" lease with the initial bonus paid in lieu of any delay rental provision. The obligation to pay the bonus consideration is absolute and shall not be abrogated by the unilateral release of this lease by Lessee . . . .
3. During the primary term hereof [five years] or any extensions as provided for herein, Lessee shall have the obligation to drill or cause to be drilled five (5) oil & gas wells on the leased premises . . . . In the event that Lessee fails to drill the obligated wells during the primary term hereof or any extension thereof, Lessee will pay to Lessor the sum of $100,000 per well not commenced, due immediately upon the expiration of the primary term or any extension as provided for herein. . . .

Pathfinder paid $2,300,433.49 as up-front bonus consideration under Section 2. It surrendered the lease before the primary term expired, and before drilling any wells. It did not pay the amount in Section 3, arguing that it surrendered the lease before the primary term expired. First Tennessee sued Pathfinder for the amount in Section 3. The district court granted summary judgment to Pathfinder, finding the case analogous to Frein v. Windsor Weeping Mary, LP, 2009 Ark.App. 774, 366 S.W.3d 367 (Ark.App. 2009).

Summary judgment is appropriate when, construing the evidence favorably to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56; Hutson v. McDonnell Douglas Corp ., 63 F.3d 771, 775 (8th Cir. 1995). Summary judgment is subject to de novo review, drawing all reasonable inferences in favor of the nonmoving party. Wenzel v. Missouri-American Water Co., 404 F.3d 1038, 1039 (8th Cir. 2005). " Although federal courts ...


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