its willingness to apply the following principles to oil and gas leases as well in the following dicta:
“Ownership of the equitable estate is the real ownership; the legal estate is no more than the “ shadow following the equitable estate .” In re Estate of Wright, 482 S.W.3d 650, 658 (Tex. App. - 2015), emphasis added. See also Smith v. Sumeer Homes, Inc. , No. 05-11-01632-CV, 2013 WL 2467252 (Tex.App.--Dallas June 6, 2013, pet. denied) (mem. op.) An equitable title can be separately conveyed from the legal title . Flag-Redfern Oil Co. v. Humble Exploration Co., Inc., 744 S.W.2d 6 (Tex. - 1987)
“Further, in the context of oil and gas leases that expressly define a duty, “we will not impose a more stringent obligation unless it is clear that the parties intended to [do so].” Id. at 108-09 (quoting Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 215 (Tex. 2011)). While this is a farmout agreement and not a lease, we see no reason why the same principle should not apply . As in the lease context, we decline to read into a farmout agreement more stringent obligations than the parties intended, as expressed by the negotiated, agreed-to language.” Barrow- Shaver Resources Company v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 492 (Tex. 2019) (emphasis added)
Consent
Consent, as that term is used within the context of the factual situation set forth above, is the express written consent of A, the lessor, to a proposed assignment of Said Lease by XYZ Oil Company to a third party. There are numerous permutations of the consent clause other than the clause set out above. In the author’s opinion, there are as many different consent clauses as there are drafters of same. A very good article on consent, to which the reader is referred, summarized what appears to be a large sampling of such clauses. The Enforceability of Consent-to-Assign Provisions in Texas Oil and Gas Leases by T. Ray Guy and Jason Wright (SMU Law Review, Volume 71, Issue 2 – 2018). This article is not focused on the interpretation of the consent clause or whether the consent clause is or is not a restraint on alienation. What this article is focused on are the rights of XYZ Oil Company and ABC Bank both before and after default under XYZ Oil Company’s mortgage/deed of trust granted to ABC Bank. Specifically: (i) whether A’s written consent was required for XYZ Oil Company to enter into the mortgage/deed of trust and (ii) whether A’s written consent was required when the trustee under the deed of trust issued its deed to Burns Oil Company pursuant to a foreclosure sale. Texas jurisprudence, on the issue of consent, in the context of oil and gas operations, has been, in part, defined and explained in the recent case of Barrow-Shaver Resources Company v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471 (Tex. 2019). The issue of consent was addressed in the context of a farmout agreement and not in an oil and gas lease situation. However, the court very clearly signaled
The consent provision in the initial farmout agreement provided in part as follows:
“The rights provided to [Barrow-Shaver] under this Letter Agreement may not be assigned, subleased or otherwise transferred in whole or in part, without the express written consent of Carrizo.” Barrow- Shaver Resources Company v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 476 (Tex. 2019)
The farmee thereafter wanted to assign its rights under the farmout agreement. Carrizo, the farmor, was approached and refused to consent to the assignment by the farmee unless it was paid five million dollars for the sale of its working interest to the farmee. The proposed assignment of rights by the farmee failed to materialize and the instant litigation resulted. The case answered, among other issues, the following: 1. Was the above provision to be read with reasonableness implied? That is, could Carrizo refuse to consent to the proposed assignment of the farmee’s rights for any reason (or no reason) or was there to be implied the necessity for a reasonable reason for refusing to consent to said assignment? The court clearly held, absent
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G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0
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