Monday, August 19, 2019
Looking for a quick little case demonstrating the ongoing importance of the Statute of Frauds? Look no further: Back v. Cheasepake Applachia, L.L.C. provides one (773 Fed.Appx. 294 (2019).
In 1940, Thomas Back’s family entered into an oil-and-gas-lease with the Inland Gas Corporation, Chesapeake’s predecessor. This called for a flat-rate royalty of 12 cents per thousand cubic feet of gas to be extracted from the Back property. However, the oil corporations started paying 12.5% of the market price instead. In 2016, no less, Back filed suit alleging, among other things, breach of contract and fraud for underpayment by deducting too many expenses from the royalty payments and by basing these payments on false market prices.
The district court held, sua sponte, that the statute of frauds barred Back from claiming that his agreement differed from the original 1940 lease. The court of appeals disagreed, pointing out that “all that was needed was one or more writings which together identify the parties to the lease, the property, and the modified royalty amount. At least one of those writings must also bear Back’s signature as the lessor” (as the party against whom the agreement could be held). Because Back had signed the royalty checks that came with the statements over time, the Statute was satisfied.
The court did not point out why the lease fell under the Statute of Frauds to begin with. (As oil and gas leases neither fall under Articles 2 or 2A, this was presumably because of land recording statutes in Kentucky, but this is subject to further research for which I currently do not have the time. Let me know if you know.)