IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Richmond Division

IN RE: ALPHA NATURAL RESOURCES, Case No. 15-33896-KRH

INC., et al., Chapter 11

(Jointly Administered)

Debtors.

MEMORANDUM OPINION

The Court has before it the motion of the Debtors (the “Motion”) seeking authority to 

reject under § 365 of the Bankruptcy Code1 an agreement between and John and Eunice Organ 

(the “Organs”) and Ayrshire Collieries Corporation (“Ayrshire”), a predecessor in interest to one 

of the Debtors (the “Agreement”). Successors in interest to the Organs (the “Objectors”)2 filed

an objection to the Motion claiming the Agreement conveyed to the Organs an interest in 

property which was not subject to termination under § 365 of the Bankruptcy Code (the 

“Objection”). On June 28, 2016, the Court conducted a hearing on the Objection to the Motion;

at the conclusion of which, the Court took the matter under advisement.

After considering the applicable statutory authority, the case law, the pleadings, and the 

arguments of counsel, the Court now concludes that the Debtors can reject the Agreement under 

§ 365 of the Bankruptcy Code. This Memorandum Opinion sets forth the Court’s findings of 

fact and conclusion of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy 

Procedure.3

 

1 All further references to the Bankruptcy Code are to the Bankruptcy Code as codified at 11 U.S.C. §§ 101 et seq.

2 The Objectors are Mary Evelyn Amstutz, Anne E Franklin, Mary Evelyn Amstutz Testamentary Trust, Nancy P. 

Gettinger, John Paul Organ, Judith Lynn Organ, and David J. Pierce Trust U/A dated February 23, 2011.

3 Federal Rule of Bankruptcy Procedure 7052 is made applicable to this contested matter by Federal Rule of 

Bankruptcy Procedure 9014. See Fed. R. Bankr. P. 9014. Findings of fact shall be construed as conclusions of law 

and conclusions of law shall be construed as findings of fact when appropriate. See Fed. R. Bankr. P. 7052.

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 1 of 11
2

Jurisdiction and Venue

The Court has subject matter jurisdiction over this contested matter pursuant to 28 U.S.C. 

§§ 157 and 1334 and the General Order of Reference from the United States District Court for 

the Eastern District of Virginia dated August 15, 1984. This is a core proceeding under 28 U.S.C. 

§ 157(b)(2)(A). Venue is appropriate in this Court pursuant to 28 U.S.C. § 1408.

Factual Background

The Organs and Ayrshire entered into the Agreement titled “Letter of Proposed 

Settlement” on January 22, 1969 (the “Acceptance Date”). The settlement addressed “certain 

differences between Ayrshire Collieries Corporation and [the Organs] respecting certain coal 

interests” involving coal seams in three areas.4 The Agreement, as drafted by John Organ, states 

that “Mrs. Organ and I will accept the interests set out hereinafter as full settlement of our 

claims.” The Agreement obligated Ayrshire to pay the Organs an amount calculated based upon 

a percentage of the coal mined and subsequently sold from each of the three separate areas. At 

issue in the case at bar is the area comprised of North and South Gillette in the state of Wyoming 

(the “North and South Gillette Areas”). Ayrshire was obligated to make monthly installment 

payments at the rate of one-half of one percent of the net realization (as defined in the 

Agreement) from coal mined and sold from the North and South Gillette Areas until December 

31, 2019 (the “Payment Obligation”).5 John Organ agreed to assist Ayrshire in the use of coal 

across the three separate areas, and the Organs agreed to waive all claims against Ayrshire. 

 

4 The first area identified in the Agreement was the Illinois No. II coal seam in the state of Vermont, the second area 

was the Illinois No. VI coal seam in the state of Illinois, and the third area consisted of the Smith and Roland coal 

seams in North and South Gillette, Wyoming.

5 The Agreement initially set a periodic payment amount for which Ayrshire was obligated for all three areas at a

fixed rate of $30,000 per year payable in monthly installments until June 1, 1977, at which time the yearly 

obligation decreased to $18,000 payable in monthly installments until January 1, 1988.

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 2 of 11
3

Ayrshire also agreed to cancel an outstanding note made by John Organ, which note had an 

unpaid balance of $22,692.38. 

On the Acceptance Date of the Agreement, Ayrshire mined coal in the North and South 

Gillette Areas as a tenant under two federal leases between Ayrshire and the United States 

Department of Interior Bureau of Land Management (the “Federal Leases”). The Federal Leases 

are nowhere referenced in the Agreement. More than five years after the Acceptance Date, the 

Organs unilaterally recorded a document titled “Memorandum of Understanding” in the 

Campbell County, Wyoming, clerk’s office (the “Memorandum). 6 The Memorandum 

summarizes pertinent terms of the Agreement between Ayrshire and the Organs, including the 

Payment Obligation. The Memorandum also includes a description of the underlying real 

property. The Memorandum notes that the described property is subject to “U.S. Government 

coal leases,” but it does not identify the Federal Leases. Both of the Federal Leases were 

readjusted effective September 1, 2015. Alpha Wyoming Land Company LLC is the current 

lessee under the Federal Leases (“Alpha Wyoming Land Company”). The readjusted Federal 

Leases do not contain any reference to the Agreement between Ayrshire and the Organs.

On August 3, 2015, Alpha Natural Resources, Inc., and 1497 of its direct and indirect 

subsidiaries, including Alpha Wyoming Land Company, (the “Debtors”) commenced bankruptcy 

cases by each filing a separate voluntary petition for relief under chapter 11 of the Bankruptcy 

Code in the United States Bankruptcy Court for the Eastern District of Virginia. As the current 

lessee under the Federal Leases, and as successor in interest to Ayrshire, Alpha Wyoming Land 

 

6 The Memorandum is not executed by either Ayrshire or the United States Department of Interior Bureau of Land 

Management, but rather is endorsed solely by the Organs. 

7 The chapter 11 petition for one of the Debtors’ subsidiaries, Grey Hawk, has since been withdrawn. Order 

Dismissing Case, In re Alpha Natural Resources, Inc., No. 15-33896 (Bankr. E.D. Va. Oct. 8, 2015) (ECF No. 638).

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 3 of 11
4

Company seeks to assume and assign the Federal Leases in connection with the Debtors’

reorganization. See 11 U.S.C. § 365(a). In connection with that transaction, the Debtors want to 

reject the Agreement with the Organs.

The Objectors argue that the Agreement cannot be rejected as an executory contract

under § 365 of the Bankruptcy Code. The Objectors maintain that the Payment Obligation due 

under the Agreement is not a contractual obligation owed by Ayrshire, but instead constitutes an 

interest in real property to which they have become seized. The Objectors argue that the 

Agreement must be assumed and assigned as part of the Federal Leases.

Analysis

Section 365 of the Bankruptcy Code allows a debtor in possession to assume, assign, or 

reject any lease or executory contract.8 11 U.S.C. § 365(a). The Debtors seek to reject the 

Agreement under § 365 of the Bankruptcy Code in exercise of their business judgment as a 

burdensome executory contract that provides no value to the Debtors’ estate. See Id. The 

rejection of an executory contract under § 365 of the Bankruptcy Code results in a breach. 11 

U.S.C. § 365(g).

 

8 The Supreme Court has observed that Congress intended the term “executory” to apply to contracts “on which 

performance remains due to some extent on both sides.” NLRB v. Bildisco & Bildisco, 465 U.S. 513, 522-23 n.6 

(1984) (quoting H.R. Rep. No. 95–595 p. 347 (1977)). The Fourth Circuit has expanded on this definition and 

adopted the test first articulated by Professor Vern Countryman. Gloria Mfg. Corp. v. Int'l Ladies' Garment 

Workers' Union, 734 F.2d 1020, 1021-22 (4th Cir.1984); In re RoomStore, Inc., 473 B.R. 107, 110-11 (Bankr. E.D. 

Va. 2012). Under the Countryman Test, an executory contract is one “under which the obligations of both the 

bankrupt and the other party to the contract are so far unperformed that the failure of either to complete the 

performance would constitute a material breach excusing the performance of the other.” Gloria Mfg. Corp., 734

F.2d at 1022 (quoting Vern Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn. L. Rev. at 460). The 

Court finds that the Agreement was executory as each party owed a material obligation to the other party. Id. Under 

the Agreement, the Debtors have a material obligation to tender the Payment Obligation to the Organs until 

December 31, 2019. Both parties also have a material obligation to refrain from bringing the underlying claims that 

the Agreement purported to resolve. See Everex Sys. v. Cadtrak Corp. (In re CFLC, Inc.), 89 F.3d 673, 677 (9th Cir. 

1996) (holding the obligation not to sue under a patent license agreement is a material obligation); In re W.B. Care 

Center, LLC, 419 62, 73 (Bankr. S.D. Fla. 2009) (“[A] waiver of the right to sue is a covenant not to sue . . . that . . . 

is an ongoing obligation.”); In re Access Beyond Tech., Inc., 237 B.R. 32, 43 (Bankr. D. Del. 1999) (finding the duty 

to refrain from suing to be a material obligation); see also Lubrizol Enters. Inc. v. Richmond Metal Finishers, Inc.,

756 F.2d 1043, 1045-46 (finding a breach of a “duty of forbearance” to be material beach); RoomStore Inc., 473 B.R. 

at 112-13.

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 4 of 11
5

The Objectors claim that the Payment Obligation set forth in the Agreement constitutes

an overriding royalty interest in the Federal Leases that Ayrshire conveyed to the Organs. The 

Debtors disagree. They characterize the Payment Obligation as contractual in nature. The 

Debtors argue that the periodic amount that Ayrshire was obligated to pay was calculated based 

upon the amount of coal mined and sold from the coal seams in the three areas referenced in the 

Agreement but did not convey a property interest in the land or minerals. The Court finds that 

the Agreement did not convey an overriding royalty interest or any other interest to the Organs in 

the North and South Gillette Areas. The Payment Obligation Agreement is a contractual one that 

can be rejected under § 365 of the Bankruptcy Code.

Whether the Agreement conveyed an interest in real property or whether it constitutes a

contractual right to periodic payments is a question of state law. “Property interests are created 

and defined by state law. Unless some federal interest requires a different result, there is no 

reason why such interests should be analyzed differently simply because an interested party is 

involved in a bankruptcy proceeding.” Butner v. United States, 440 U.S. 48, 55 (1979); see 

Tidewater Fin. Co. v. Kenney, 531 F.3d 312, 318-19 (4th Cir. 2008). This Court should apply 

the underlying substantive law that gave rise to the obligation in question. Raleigh v. Illinois 

Dept. of Rev., 530 U.S. 15, 20 (2000) (“Creditors' entitlements in bankruptcy arise in the first 

instance from the underlying substantive law creating the debtor's obligation, subject to any 

qualifying or contrary provisions of the Bankruptcy Code.”). The Court will look to Wyoming 

law to determine the nature of the obligation in the Agreement.9

Under Wyoming law, the intent of the parties is the “prime focus in interpreting or 

construing a contract.” Boley v. Greenough, 22 P.3d 854, 858 (Wyo. 2001). “If an agreement is 

 

9 The Court notes that the Agreement, which contains no choice of law provision, purports to have been drafted in 

Arizona and appears to have been accepted in Indiana. The real property interests at issue, however, involve areas 

within the state of Wyoming. See Restatement (Second) of Conflicts § 223.

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 5 of 11
6

in writing and its language is clear and unambiguous, the parties' intention is to be secured from 

the words of the agreement.” Id. Deeds in Wyoming are interpreted according to principles

similar to those applicable to contracts. Gilstrap v. June Eisele Warren Tr., 106 P.3d 858, 862 

(Wyo. 2005). “The ultimate goal of . . . interpretation of any contract, including a deed, is to 

discern the intention of the parties to the document.” Mullinnix LLC v. HKB Royalty Tr., 126 

P.3d 909, 919 (Wyo. 2006); Caballo Coal Co. v. Fid. Exploration & Prod. Co., 84 P.3d 311, 314 

(Wyo. 2004). Even when interpreting unambiguous mineral contracts, Wyoming courts are 

permitted to look to the “surrounding circumstances, facts showing the relations of the parties, 

the subject matter of the contract, and the apparent purpose of making the contract.” Id.; see 

Mathisen v. Thunder Basin Coal Co., LLC, 169 P.3d 61, 67 (2007). “The language of the parties 

expressed in their contract must be given effect in accordance with the meaning which that 

language would convey to reasonable persons at the time and place of its use.” Sawyer v. 

Guthrie, 215 F. Supp. 2d 1254, 1260-61 (D. Wyo. 2002) (citing Klutznick v. Thulin, 814 P.2d 

1267, 1271 (Wyo. 1991)).

For an instrument to convey an interest in real property such as an overriding royalty, it

“must contain sufficient words to show an intention to convey.” DeWitt v. Balben, 718 P.2d 854, 

860-61 (Wyo. 1986) (quoting Whalon v. Northe Platte Canal & Colonization Co., 11 71 P. 995, 

999 (1903)). Operative words of conveyance, including such terms as transfer, sell, or assign, 

indicate an intent to transfer an interest of property. Id. (concluding an instrument that used the 

words “transfer” and “sell” demonstrated an intent to constitute a conveyance). Wyoming courts 

have held that “[a]lthough no particular words are required to convey real property, the language 

of the document must indicate a specific intention to convey the property.” Mullinnix, 126 P.3d 

at 922 (Wyo. 2006).

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 6 of 11
7

An overriding royalty under Wyoming law is “a share of production, free of the costs of 

production, carved out of the lessee’s interest under the oil gas lease.” Wy. Stat. § 30-5-304.

Although overriding royalties are more typically employed in connection with oil and gas leases, 

they are used with coal leases as well. See, e.g., ANR Western Coal Dev. Co. v. Basin Elec. 

Power Co-Op., 276 F.3d 957, 960-61 (8th Cir. 2002); Valley Camp of Utah Inc. v. Babbitt, 24 

F.3d 1263, 1270 (10th Cir. 1994). The term “overriding royalty” has developed a wellunderstood meaning in Wyoming. That meaning was well entrenched several years prior to the 

date of the Agreement. See Cities Serv. Oil Co. v. Pubco Petroleum Corp., 497 P.2d 1368, 1372 

(Wyo. 1972); Dame v. Wileski, 340 P.2d 205, 208 (Wyo. 1959). An overriding royalty is a nonpossessory interest in real property carved out of the lessee’s interest in a lease. See Connaghan 

v. Eighty-Eight Oil Co., 750 P.2d 1321, 1324 (Wyo. 1988). The royalty is deemed to be

“overriding” because it is paid in addition to the royalty a lessee normally pays to the lessor. See 

Boley, 22 P.3d at 860. An overriding royalty is entirely dependent on the underlying mineral 

lease, as it is a direct carve out of the lessee’s interest in a mineral lease. See, e.g., Piamco, Inc. v. 

Shell Oil Co., 799 F.2d 262, 264 (7th Cir. 1986) (“There can be no doubt that as a general matter 

overriding royalty obligations end with the termination of the estate from which the interests 

were carved.”); Meeker v. Ambassador Oil Co., 308 F.2d 875, 882 (10th Cir. 1962) rev’d on 

other grounds, 375 U.S. 160 (1963) (“It is an interest carved out of the lessee's share of the oil 

and gas, ordinarily called the working interest, as distinguished from the owner's reserved royalty 

interest.”).

Wyoming law recognizes that not all royalty conveyances involve the transfer of a 

separately identifiable real property interest with its own recognized incidents. An interest in the 

proceeds of coal production can also be “a contractual right that is personal to the parties.” See 

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 7 of 11
8

Ferguson v. Coronado Oil Co., 884 P2.d 971 976-977 (Wyo. 1994) (finding an interest in the net 

profits of oil produced was not real property). To determine the type of interest created, a court 

must look to the parties’ intent and to the instrument creating the interest. Id. at 976.

The Agreement does not show a clear intention to transfer a real property interest. 

Mullinnix LLC, 126 P.3d at 922 (citing Dewitt, 718 P.2d at 860). The Agreement is devoid of

any words of conveyance. There is no evidence that the parties intended to grant an overriding 

royalty. The words overriding royalty do not appear anywhere in the Agreement or the 

Memorandum. Words such as “grant,” “transfer,” “convey,” or “reserve” are notably absent 

from the Agreement and the Memorandum. The Agreement states only that Mr. Organ “will 

accept the interests set out hereinafter as full settlement of our claims.” The term “accept” does 

not evidence the clear intent to convey an interest in the lease or real property that Wyoming law 

requires. Mullinnix LLC, 126 P.3d at 922 (emphasizing the importance of words of 

conveyance).10

An overriding royalty is a carve out of a portion of a lessee’s interest in a real property 

lease in favor of another party. See Connaghan, 750 P.2d at 1324 (describing an overriding 

royalty as an interest “carved out of the lessee’s working interest in an oil and gas lease”). As an 

overriding royalty is an interest in an underlying mineral lease, the underlying lease should be 

described in the conveyance. Neither the Agreement nor the Memorandum identifies the Federal 

Leases. Ayrshire’s only interest in the real property was its interest under the Federal Leases.

 

10 The term “acceptance” is a contractual term used to demonstrate the offeree's assent, so that a binding contract can 

be formed. Acceptance, Black's Law Dictionary (10th ed. 2014).

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 8 of 11
9

The lack of any description of the Federal Leases leads the Court to conclude the Payment 

Obligation in favor of the Organs is contractual in nature.11

Consistent with the principle that an overriding royalty is a carve out from the underlying 

mineral lease, courts in Wyoming limit the duration of an overriding royalty to the lifetime of the 

underlying mineral lease. See Sawyer v Guthrie, 215 F. Supp. 2d 1254, 1257 n.1 (D. Wyo. 2002) 

(citing 2 Howard R. Williams & Charles J. Meyers, Oil & Gas Law § 418 (1991)); see also 

Torgeson v. Connelly, 348 P.2d 63, 69 (Wyo. 1959) (“[L]eases for a limited term of years had 

been held to be personalty.”). “[T]he fate of an overriding royalty is inextricably intertwined 

with that of the underlying lease.” In re Bronco Hazelton Co., No. 06-70378, at ¶2 (Bankr. S.D. 

Ind. Jan. 18, 2008) (ECF No. 724). Here, the Payment Obligation to the Organs under the 

Agreement lasted approximately forty-five years, terminating on December 31, 2019. The

Federal Leases, on the other hand, had an initial term only of twenty years. See 30 U.S.C. § 207.

The obligation in the Agreement was temporary and did not mirror the term of the Federal 

Leases. C.f. Torgeson, 348 P.2d at 68 (“[A] royalty interest in oil if of a permanent nature is 

ordinarily considered to be real and not personal property.”).

The Federal Leases require that the Bureau of Management approve “any assignment or 

transfer made of this lease whether by direct assignment, operating agreement, working or 

royalty interest or otherwise.” There is no evidence that the Bureau of Land Management 

 

11 In the cases where the Wyoming Supreme Court has found an obligation constituted an overriding interest in real 

property, the claimant was more intimately connected to the property. Many of these claimants had held title to the 

underlying real estate or were the predecessor lessee under a coal lease. There is no evidence the Organs ever had 

title to North and South Gillette Area. There is no evidence the Organs were ever lessees under the Federal Leases. 

In other cases finding an overriding interest in real property, a fee simple estate or the underlying mineral lease was 

involved. See, e.g., Torgeson v. Connelly, 348 P.2d 63, 68-69 (Wyo. 1959) (mineral interest arose when lessee

assigned its rights in a federal lease and reserved a royalty); Denver Joint Stock Land Bank of Denver v. Dixon, 122 

P.2d 843 (Wyo. 1942) (mineral interest arose from a reservation in a conveyance of the underlying real estate);

Matter of Sellens’ Estate, 637 P.2d 483, 484 (Kan. Ct. App. 1981) (mineral interest was granted directly in the oil 

and gas lease). Here, the obligation to the Organs arises solely from a settlement agreement that merely makes 

reference to coal production associated with separate areas in three states. There is no evidence the Organs ever 

possessed more than the contractual rights they acquired under the Agreement.

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 9 of 11
10

approved the assignment of any interest in the Federal Leases. See also 30 U.S.C. § 187 (giving 

the Secretary of Interior discretion in approving a lessee’s relinquishment of rights of a federal 

lease).

The Objectors focus on the terms “interest” and “earned royalty” in the Agreement. They 

argue that any royalty interest is an impediment to the real property as a matter of law.12 But the 

Wyoming Supreme Court rejected this ipso facto approach in favor of a factual approach in 

Coronado Oil. See Coronado Oil Co., 884 P.2d at 976. The Wyoming Supreme Court held that 

a royalty interest could be a contractual right or it could be an interest in personal property 

depending on the “instrument creating the interest.” See id. at 976-77 (discussing the nature of a 

net profit interest). The Court has examined the Agreement and determined that in light of (i) the 

lack of any granting clause or words of conveyance, (ii) the lack of any reference to the Federal 

Leases, and (iii) the lack of approval to any assignment or transfer by the Bureau of Land 

Management, the parties intended the Payment Obligation in the Agreement to be entirely 

contractual in nature.13

Under Wyoming law the Court finds that the intent of the Organs and Ayrshire in the 

Agreement was to create a contractual obligation that was defined by the amount of coal mined 

and sold. The Agreement contains no terms of conveyance, and does not otherwise evidence any 

intent to convey an overriding royalty or an interest in real property. Contrary to the Objectors’

 

12 If the Objecting Parties claim that “earned royalties” has a different trade usage and instead it was meant to 

convey a property interest or an overriding royalty, the burden of proof falls on them. The “party asserting a 

particular trade usage of a term has the burden of proving the existence of the trade usage.” Mullinnix LLC, 126 

P.3d at 917 (Wyo. 2006) (citing Mountain Fuel Supply Co. v. Central Eng’g & Equip. Co., 611 P.2d 863, 869 (Wyo. 

1980)).

13 The Wyoming Supreme Court in Coronado Oil indicates that a real property interest can only arise in favor of a 

grantee of a mineral interest when the grantee has “title to the mineral while they are in situs.” Coronado Oil Co.,

884 P.2d at 977. The Agreement in this case does not purport to give the Organs title to the minerals while they are 

in the ground, but rather a small percentage of earned royalties based on the amount mined and sold. The case at bar 

is analogous to Coronado Oil because it “involve[s] the disposition of the proceeds due to the royalty owner after 

the oil and gas has been removed from the ground and sold.” Coronado Oil Co., 884 P.2d at 976-77.

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 10 of 11
11

claim, the mere fact that the obligation to the Organs resembles a royalty does not necessarily 

result in an impediment to the real property. The Wyoming Supreme Court has recognized that 

interests in mineral proceeds can be “a contractual right that is personal to the parties.” 

Coronado Oil Co., 884 P.2d at 976.14

The Fourth Circuit has determined that a debtor’s decision to assume or reject a contract 

should be “accorded the deference mandated by the sound business judgment rule as generally 

applied by courts to discretionary actions or decisions of corporate directors.” Lubrizol Enters.

Inc., 756 F.2d at 1046. A court should not second-guess a debtor's business judgment 

concerning the assumption or rejection of an executory contract or unexpired lease unless there is 

a showing of bad faith or gross abuse of discretion. See id. at 1047.

The Court finds that the rejection of the Agreement is within the Debtors’ sound business 

judgment because the Agreement is not necessary to the Debtors’ ongoing restructuring efforts. 

The Debtors no longer receive any benefits from the Agreement, and the Agreement imposes an 

undue burden on the Debtors’ estate. Accordingly, in the sound exercise of their business 

judgment, the Debtors have determined that the rejection of the Agreement is in best interest of 

their estate and their creditors.

A separate order shall issue.

Entered: ____________________________

/s/ Kevin R. Huennekens

UNITED STATES BANKRUPTCY JUDGE

 

14 The Objectors also relied on In re Bronco Hazelton, an unpublished decision of the United States Bankruptcy 

Court for the Southern District of Indiana. In re Bronco Hazelton Co., No. 06-70378 (Bankr. S.D. Ind. Jan. 18, 

2008) (ECF No. 724). In Bronco Hazelton a lessee assigned its interest in certain coal leases to a third party. Part of 

the consideration for the assignment was that the lessee reserved an overriding royalty in favor of certain individuals. 

Later, the bankruptcy court found that the overriding royalty must be assumed with the underlying lease. Bronco 

Hazelton contains all the elements that are absent in the case at bar because (i) the assignment used the term 

“overriding royalty;” (ii) the overriding royalty directly referred to the underlying leases from which the overriding 

royalty was carved; and (iii) performance under the lease was subject to the payment of the overriding royalty.

Aug 11 2016

Entered on Docket: 8/11/16

Case 15-33896-KRH Doc 3250 Filed 08/11/16 Entered 08/11/16 08:55:56 Desc Main

 Document Page 11 of 11