Opinion ID: 1568694
Heading Depth: 1
Heading Rank: 1

Heading: Automatic Termination

Text: As was noted previously, Western drilled and obtained production within thirty days of the assignment from Superior to Western. All parties agree that this satisfied the condition in paragraph 1 of the assignment. The instant dispute centers around the interpretation of paragraph 2 of the assignment. Specifically, the issue is whether paragraph 2 is a condition or a covenant. The court of appeals determined that paragraph 2 expressly conditioned the partial assignment of the base lease upon Western's performance of the underlying base lease obligations. The court of appeals held that because Western failed to conduct any drilling operations on the 329.3 acre tract for almost 23 years, Western's rights, and therefore the Rogers Group's rights, under the assignment had automatically terminated and had reverted to Superior. We disagree. In construing paragraph 2 of the assignment, we note that an important distinction exists between a condition and a covenant. See Freeman v. Magnolia Petroleum Co., 141 Tex. 274, 171 S.W.2d 339, 342 (1943); Shuttle Oil Corp. v. Hamon, 477 S.W.2d 701, 704 (Tex.Civ.App.Beaumont 1972, writ ref'd n.r.e.). The distinction between conditions and covenants lies in the appropriate remedy for their breach. Breach of a condition results in automatic termination of the leasehold estate upon the happening of stipulated events. Breach of a covenant does not automatically terminate the estate, but instead subjects the breaching party to liability for monetary damages, or in extraordinary circumstances, the remedy of a conditional decree of cancellation. W.T. Waggoner Estate v. Sigler Oil Co., 118 Tex. 509, 19 S.W.2d 27, 29-31 (1929). In paragraph 2 of the assignment, Western simply agreed to perform all the obligations of the base lease, express or implied. Since the parties obviously knew how to create a condition in paragraph 1, the dissimilar language in paragraph 2 indicates that the parties intended the latter paragraph to act as a covenant. We hold that paragraph 2 is a covenant, not a condition, and that the court of appeals erroneously read into paragraph 2 a condition on the estate conveyed. Our holding is supported by two general rules of contract and leasehold construction. First, a court should not, under the guise of contract construction, imply terms in opposition to the express language that the parties themselves have written into the contracts. Dallas Power & Light Co. v. Cleghorn, 623 S.W.2d 310, 311 (Tex.1981). Second, doubts should be resolved in favor of a covenant instead of a condition. See Henshaw v. Texas Natural Resources Found., 147 Tex. 436, 216 S.W.2d 566, 570-71 (1949). The language used by the parties to an oil and gas lease will not be held to impose a special limitation on the grant unless it is clear and precise and so unequivocal that it can reasonably be given no other meaning. Fox v. Thoreson, 398 S.W.2d 88, 92 (Tex.1966). Because we construe paragraph 2 as being a covenant rather than a condition, no automatic termination of Western's rights under the partial assignment occurred. Thus, summary judgment cannot be sustained on that ground. We will now determine whether any of the other theories advanced by the Ricane Group will support the summary judgment. When a trial court's order granting summary judgment does not specify the ground or grounds relied on for the ruling, summary judgment will be affirmed on appeal if any of the theories advanced are meritorious. Carr v. Brasher, (Tex.1989); Borg-Warner Acceptance Corp. v. C.I.T. Corp., 679 S.W.2d 140, 142 (Tex.App.Amarillo 1984, writ ref'd n.r.e.).