Trial

A trial generally means a judicial investigation and determination of the issues between the parties to an action before a competent tribunal.  In a trial, the issue in controversy will be heard on the merits after granting the opportunity for preliminary proceedings.

Generally, a court shall determine the following question of fact upon trial:

  • whether an oil and gas lessee has performed its duties under expressed or implied covenants;
  • whether an oil and gas lessee’s development and operation of the leased property is reasonable and prudent;
  • whether an implied covenant in an oil and gas lease has been breached;
  • whether an oil and gas lessee breached its duty to protect the lease from drainage;
  • whether a producer-lessee discharged its duty under the implied covenant to market natural gas;
  • whether the natural gas was marketable, in connection with the allocation of costs and the calculation of royalty payments under the implied covenant to market in an oil and gas lease;
  • whether the oil and gas lessee breached the lease by underpaying the royalties owed, and improperly charging the lessor for compression and the treating of gas; or
  • whether an oil and gas lease was “producing,” within the meaning of a clause extending the lease term as long as the lease was producing.

In a trial concerning oil and gas litigation, the court generally adopts a different rule of construction as to oil and gas leases from that applied to ordinary leases, or to other mining leases.  Owing to the peculiar nature of the mineral, and the danger of loss to the owner from drainage by surrounding wells, such leases are construed most strongly against the lessee and in favor of the lessor.  The object of the rule is to promote development and prevent delay and unproductiveness[i].

Therefore, oil and gas leases are strictly construed against the lessee in favor of the lessor[ii].  Similarly, the court while determining  whether a lessee has met the obligations imposed by the implied duty to market, will look into the nature of the lessee’s duty to market and the determination of marketability.

In Horizon Resources v. Putnam, 976 S.W.2d 268 (Tex. App. Corpus Christi 1998), the court observed that “an oil and gas lease should be interpreted like any other contract.  In construing an unambiguous contract, the court should give effect to the intention of the parties as expressed, or as is apparent in the writing.  The language of a contract shall be given its plain grammatical meaning if possible, and the court should avoid any construction of a contract which is unreasonable, inequitable, and oppressive.  When interpreting a contract, the court must seek the intention of the parties as such intention is expressed in the lease by considering all provisions of the lease and harmonizing, if possible, those provisions which appear to be in conflict.”

In most cases a trial judge may enter a judgment, notwithstanding the verdict of jury, only if there is no substantial evidence to support the verdict, and the moving party is entitled to judgment as a matter of law[iii].

While reviewing a motion for judgment, notwithstanding the verdict of a jury, the reviewing court will not try the issues of fact.  Instead the reviewing court simply examines the record to determine whether there is substantial evidence to support the jury verdict.  The reason being that it is a well established principle that a reviewing court starts with the presumption that the record contains evidence to sustain every finding of fact.  And, if in any particular case, the issue of fact is not sustained, then they are required to set forth in their brief all the material evidence on the point, and not merely their own evidence.  Unless this is done the error is deemed to be waived.

[i] Bortz v. Norris, 248 Mich. 247 (Mich. 1929).

[ii] Rawlings v. Armel, 70 Kan. 778 (Kan. 1905).

[iii] Conagra, Inc. v. Strother, 340 Ark. 672 (Ark. 2000).


Inside Trial