Schwartzenberger v. Hunt Trust Estate

Matt and Ruth Schwartzenberger (plaintiffs) signed an oil and gas lease, leasing oil and gas rights on their property to the William Herbert Hunt Trust Estate (Trust Estate) (defendant). The lease provided that if drilling did not commence within one year of the lease’s execution, the lease would terminate, unless Trust Estate paid a per-acreage delay rental to the Schwartzenbergers. During negotiations, Mr. Schwartzenberger mistakenly told Trust Estate that the Schwartzenbergers owned—and thus the lease covered—less acreage than they actually did. The parties signed the lease under this false belief, as Trust Estate did not check the deed. Trust Estate did not commence drilling within one year of the lease being signed. Rather, Trust Estate paid the Schwartzenbergers a delay rental based on the acreage that the parties had discussed, rather than the actual acreage of the Schwartzenbergers’ property. The Schwartzenbergers informed Trust Estate of the mistake, but Trust Estate denied that it was required to pay the difference. The Schwartzenbergers gave notice of termination of the lease to Trust Estate. Despite this, Trust Estate did not file a release of the lease. The Schwartzenbergers filed suit, seeking a judgment that the lease was terminated. The trial court found that the lease should be reformed to correct the mutual mistake, and continue in effect as reformed so long as Trust Estate paid the Schwartzenbergers the deficient amount. The Schwartzenbergers appealed.