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Click here for the full text of this decision FACTS: In 1963, J. Frank Graham Sr., J. Frank Graham Jr., Robert S. Graham, Betty Jo Graham Finn and Mary Jane Graham Robertson (Grahams) assigned 100 percent of their interest in certain oil and gas leases located in Cochran County, Texas to Pan American Petroleum Corp. (Pan American). The assignment provided for an immediate payment of $100,000 by Pan American to the Grahams, the receipt of which was acknowledged. In 1967, the leases involved herein were unitized as part of the Whiteface unit. The Grahams ratified the formation of the unit. The production payment called for in Paragraph 2 of the assignment was paid out in 1975. Subsequently, there were a series of assignments of the interest initially held by Pan American. Ultimately, First Permian LLC (First Permian), obtained the interests. Notice of each of these assignments was given to the Grahams pursuant to the preferential right they retained in Paragraph 5 of the original assignment. First Permian offered its assets for sale to prospective bidders in 2002. The assets contained the leases originally held by the Grahams. Notices were sent to all holders of preferential rights in all of the First Permian’s assets, including the Grahams. Appellee, James P. Graham (James), is the son of Robert S. Graham. After receiving First Permian’s notice of proposed sale of the leases, James sent a letter to First Permian on April 2, 2002, informing First Permian that he was considering exercising his preferential right, but needed additional information from First Permian. Ultimately, the bid of Energen Resources Company (Energen) was determined to be the winning bid. Energen’s purchase of First Permian’s assets was completed on April 8, 2002. On April 10, 2002, Energen’s title attorney sent a letter to James advising him that he had concluded that the preferential right held by the Grahams, resulting from the assignment of 1963, had expired with the final payout of the production payment in 1975. On this basis the letter purported to revoke any notice of preferential right to purchase previously sent to him. James filed suit against both First Permian and Energen. As to First Permian, James alleged breach of contract, specifically alleging that First Permian failed to abide by the terms of the preferential right paragraph of the 1963 assignment. As to Energen, James alleged that they tortiously-interfered with James’s preferential right and were, therefore, liable for damages. James requested relief by specific performance enforcing his preferential right to purchase the leases involved and for damages for the oil removed from the lease properties since the sale to Energen. First Permian and Energen counterclaimed seeking a declaratory judgment that the Grahams’ preferential right expired when the production payment was paid out. First Permian and Energen also moved for summary judgment claiming that the preferential right ceased, as a matter of law, when the production payment was completed. The trial court denied the motion. The case proceeded to trial. At the close of James’s case in chief, the trial court granted Energen’s directed verdict as to James’s tortious-interference claim. At the close of trial, the jury answered all submitted fact questions adverse to James. James filed a motion for judgment notwithstanding the verdict alleging, that as a matter of law, First Permian had breached the preferential right provision of the assignment. The trial court granted James’s motion and entered judgment against both First Permian and Energen, ordering that they convey the leases in question to James. Further, the court ordered that James recover the profits realized from the property since the sale to Energen, pre and post judgment interest, attorneys fees and cost of court. It is from this judgment that First Permian and Energen appeal. First Permian and Energen present five issues on appeal. Four of the five deal with the preferential right contained in Paragraph 5 of the 1963 assignment. The fifth issue deals with the award of damages and equitable relief, against Energen, after the directed verdict against James on his tortious-interference claim. The first issue, as presented by First Permian and Energen in their motions for summary judgment and directed verdict, claims that the preferential right involved herein was a covenant that ran with the land and, as such, the right terminated when the Grahams’ interest in the land ceased. HOLDING: Reversed and rendered that James take nothing by his suit. As a real covenant, the preferential right is subject to Texas law governing real covenants. First, a real covenant endures only so long as the interest in land to which it is appended. Second, a real covenant can only be enforced by the owners of the land the covenant was intended to benefit. James contends that McMillan v. Dooley, 144 S.W.3d 159 (Tex.App. Eastland 2004, pet. denied), has changed this requirement. The court does not find McMillan controlling. James did not have a current interest in the estate to which the preferential right would have appended. The rights his predecessors in interest, the Grahams, held were terminated with the payment of the final production payment in 1975. As a matter of law, James had no preferential rights to the property subject to the 1963 assignment of lease. OPINION: Hancock, J.; Reavis, Campbell and Hancock, J.J.

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