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Click here for the full text of this decision FACTS:Beginning in 1978, Robert M. Griffin, Robert M. Griffin Jr., Charles W. Conrad, and Marvin and Marie Ogilvie (the Griffins) entered into various letter agreements with the Long Trusts (the trusts) whereby they participated with the trusts in drilling certain gas wells on leases situated in several counties in East Texas. The letter agreements provided that the investors would pay certain proportions of the costs of drilling, completing and operating the wells, and if the wells were producers, the trusts would assign or credit to the investors a specified undivided interest in the working interest the trusts had in the wells. Most of the wells were producers, and for many years, the trusts operated the wells under the terms of their standard joint operating agreement that was referred to in the letter agreements. Eventually, various disputes arose between the Griffins and the trusts as to whether and when the investors would receive assignments of their interests, the billing practices between the parties, the provisions of the assignments and whether and on what terms the Griffins would share in an $11 million settlement of a “take or pay” suit the trusts had filed against Tejas Gas Co., which was purchasing the gas produced from the wells in question. Ultimately, the Griffins filed suit against the trusts. In a bench trial, the trial court rendered judgment declaring that the letter agreements were valid and the Griffins were entitled to assignments of their interests. It also ordered the trusts to assign the Griffins their interests and ordered that the assignments conform to the terms of the letter agreements. Finally, the trial court ordered specific performance of the letter agreements, confirmed the Griffins’ share of the Tejas settlement and adjudicated several other disputes between the parties that will be addressed later in this opinion. The 6th Court of Appeals modified the judgment in several respects and otherwise affirmed it. The Texas Supreme Court granted discretionary review to decide two issues. The court summarized the first issue as follows: The Long Trusts agreed to bill the Griffins monthly for their share of litigation expenses, but failed to do so and later presented a bill for 20 months of accumulated expenses. The Griffins refused to pay, but later demanded their share when the case settled some two years later. Could the Griffins could refuse performance under the agreement and still insist on the full benefits of the contract? The court summarized the second issue as follows: The Griffins agreed to pay part of the Long Trusts’ drilling and operating costs in exchange for part of the working interest in producing wells. Could the Long Trusts invoke a statute of frauds defense to avoid future performance under the agreement? HOLDING:Reversed in part and remanded. When the trusts failed to bill each month, the court stated that the Griffins could have sued to enforce the agreement, but they chose not to do so. Assuming the trusts’ breach of their monthly billing obligation was material, the court stated, the Griffins were excused from any further obligation to perform. They were entitled to terminate the agreement and sue for breach, the court further stated, but not cease to share in the expenses and still insist in sharing in the recovery. The court of appeals, the Texas Supreme Court held, erred in affirming this part of the judgment for the Griffins. Addressing the second issue, the court held that the statute of frauds prevented enforcement of the 1978 and 1982 agreements in which the Griffins agreed to pay part of the drilling and operating costs in exchange for an assignment of part of the working interest in producing wells. The 6th Court of Appeals, the Texas Supreme Court noted, held that the trusts could not use the statute of frauds to avoid enforcement of the agreements when they had knowingly accepted the benefits of the agreement. Whether or not this is a correct application of the law, the court stated, the trusts do not seek to avoid their agreements with respect to wells already drilled. But the 1978 and 1982 agreements expressly provided that respondents’ right to participate in future leases existed on a project by project or well by well basis. The court drew a distinction from the Griffins’ past acquisition of interests and future transactions. Past practices between the trusts and the Griffins did not insulate the agreements from the statute of frauds for wells not drilled. It was fair, the court found, to permit the trusts to assert a statute of frauds defense in regard to future transactions toward which the Griffins have so far paid nothing. As a result, the court held that 6th Court erred in enforcing the 1978 and 1982 agreements for future wells. OPINION:Per curiam.

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