Advantages of a small Indian shopkeeper — The Kirana store Exhibit:
Samson case is one of the most important recent decisions handed down by the Texas Supreme Court January with regard to oil and gas policy issues. Industry professionals are abuzz about its ramifications and it will be in the business literature for a while.
The basis of the discussion is not only what the mineral owners knew, but also what they should or could have known if they had conducted a certain measure of due diligence.
The Supremes have been tough in prior holdings barring suits, based on fraud or mistake, by mineral owners trying to extend the statute of limitations. Samson case arose from a dispute over oil and gas leases in Jefferson County and Hardin County, Texas.
The lease contained a buffer-zone provision requiring Samson to prevent drainage from adjacent lands. If a gas well were completed within 1, feet from the leased tract, Samson was required to either: Although the drillsite Case study partnership outside the buffer zone, the well was directionally drilled so that the bottom was within 1, feet from the leased property.
Hooks, apparently was not aware of this fact. The landman sent Hooks a copy of the reconfigured plat that was filed with the Texas Railroad Commission in December The plat contained notations about the bottom-hole location of BSM1 that conflicted with other information of record. Hooks agreed to the pooling, executed the required documents, and was sent royalty checks.
At trial, the Jury found that Hooks could not have discovered the true facts within the statute of limitations. Therefore, Hooks had additional time to file the suit. The Appeals Court reversed. This knowledge started the running of the statute of limitations, so Hooks filed the suit too late.
If a lessor fails to take these steps, then it has failed in exercising reasonable diligence to protect its mineral interests within the period covered by the statute of limitations. Hooks appealed to the Texas Supreme Court. The Supreme Court upheld the lower court ruling and asserted that as a matter of law, reasonable due diligence may have been exercised.
It was up to the Jury to decide if that was so. The failure to examine older records, when determining whether reasonable diligence was exercised is part of the factual situation to be decided by the Jury.
The Court asserted that, when the fraudulent documents are actually in the public record, a mineral owner is entitled to rely on them, even if other public records contradict those fraudulent documents considering all facts.
The Houston court had not addressed the issues of the offset provisions and the entire-acreage clause due to the bar by the statute of limitations. The case was sent back to them for that consideration due to the reversal of the decision that the statute had run out.
To read the full opinion from the Texas Supreme Court, Click Here Until Hooks, the Texas Supreme Court has strictly tapered the circumstances under which plaintiffs may invoke the discovery rule or claim fraudulent misrepresentation to toll the statute of limitations. For further research see: Texas Supreme Court overruled a verdict in favor of mineral owners, holding that their claim was barred by the statute of limitations, even though the lower court jury had found that the lessee had fraudulently hidden the facts, and the lessors had no reason to discover the true facts until less than two years prior to filling suit.
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