Opinion ID: 1455975
Heading Depth: 1
Heading Rank: 2

Heading: cancellation of the top leases

Text: The trial court cancelled and set aside the top leases. A top lease is where the lease taken is subject to a pre-existing lease that has not expired when the second lease was taken. French Energy, Inc. v. Alexander, 818 P.2d 1234, 1238 n. 15 (Okla. 1991); Sohio Petroleum Co. v. Grynberg, 757 P.2d 1125, 1126 (Colo. App. 1988). The testimony included an opinion from one witness that top leases were a common and accepted industry practice: ... they are accepted, they are frequent, and they are simply considered to be a legitimate form of business competition in the oil business. Testimony also showed that in the oil and gas industry there are people who take top leases and fund litigation attacking the base lease. In Nantt v. Puckett Energy Co., 382 N.W.2d 655 (N.D. 1986) that court stated that while top leasing was once considered to be claim jumping it has become a useful and widespread business practice in the oil and gas industry in North Dakota, as well as in other regions. Id. 382 N.W.2d at 659. The top lease states that it vests in the top lessee the mineral owner's reversionary interest under the base lease. It further states that possession under the top lease shall vest upon release of the base lease or upon a final an unappealable judgment that the base lease has terminated. The top lease also states that if this possession does not vest then the reversionary interest and top lease granted would terminate within ten (10) years from the date of this Agreement. No party has argued that the top lease grants, or was intended to grant, a reversionary interest independent of the adjudication of the base leases in this proceeding. On appeal all parties, including Hugoton, have construed the validity and vesting of the top leases as dependent upon whether the base leases were held invalid in this proceeding. Hugoton states unequivocally that the top leases have never taken affect [sic]. We are asked in this case to construe the validity of top leases where all parties have interpreted those leases as contingent upon a judicial determination in this suit on the validity of the base leases. We are not called upon to construe the validity of the top leases in any other context. [4] The base leases are held to be valid, and the trial court's judgment in cancelling the top leases is final, no party having asked us on appeal to let the top leases survive our declaration of the base leases' vitality.