This oil and gas lease dispute between appellant NRG Exploration ("NRG") and Frank and Cleo Rauch, appellees, comes before us a second time. In NRG Exploration, Inc. v. Rauch, 671 S.W.2d 649 (Tex.App.-Austin 1984, writ ref'd n.r.e.) (" Rauch I "), this Court held that the Rauches wrongfully repudiated NRG's lease but denied declaratory relief to NRG at that time because the Rauches had granted a second lease that had been assigned to a bona fide purchaser. NRG subsequently filed the present lawsuit seeking legal and equitable relief against the Rauches.
The doctrine of repudiation is an equitable doctrine created by courts to prevent a lessor who wrongfully repudiates a lessee's lease from profiting from the wrong. Kothmann v. Boley, 308 S.W.2d 1, 4 (Tex. 1958); NRG Exploration, Inc. v. Rauch, 671 S.W.2d 649, 652 (Tex.App.-Austin 1984, writ ref'd n.r.e.). To establish the doctrine of repudiation applies there must be evidence that the lease was in effect, and that lessor's notice of termination was "a clear, unequivocal challenge to the lessee's title."
To qualify as a good faith purchaser, the party must demonstrate that the purchase was made (1) in good faith, (2) for valuable consideration, and (3) without actual or constructive knowledge of any outstanding claims of a third party. Richards v. Suckle, 871 S.W.2d 239, 242 (Tex.App.-Houston [14th Dist.] 1994, no writ) (citing NRG Exploration, Inc. v. Ranch, 671 S.W.2d 649, 653 (Tex.App.-Austin 1984, writ ref'd n.r.e.)). A party has constructive notice of instruments properly recorded in the proper county. TEX. PROP. CODE ANN. § 13.002 (Vernon 2004).
Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 239 (Tex. App.-Corpus Christi 1994). NRG Expl., Inc. v. Rauch, 671 S.W.2d 649, 652 (Tex. App.-Austin 1984).
The remedy for repudiation is to allow the lessee "a reasonable time after termination of the litigation in which to perform conditions required to extend the lease." NRG Exploration, Inc. v. Rauch, 671 S.W.2d 649, 652 (Tex.App.-Austin 1984, writ ref'd n.r.e.). In the instant case, CP repudiated the Chesapeake Lease on May 4, 2007. Dkt. 33. Ex. 7. The primary term of the Chesapeake Lease would have ended on October 1, 2007 absent production of oil and gas in paying quantities.
Accordingly, the purchasers' interest in the property prevailed over the mortgagee's claim of equitable subrogation. Just like the purchasers in Watts, Twentieth Century enjoys the status of a bona fide purchaser for value without notice as discussed above. FN31. AMC Mortgage Servs., Inc. v. Watts, 260 S.W.3d 582, 587 (Tex.App.-Dallas 2008)(quoting NRG Exploration, Inc. v. Rauch, 671 S.W.2d 649, 653 (Tex.App.-Austin 1984)). Additionally, the Court finds that HSBC is not entitled to equitable subrogation due to its own negligence in failing to ensure that its mortgage interest had been properly perfected.
Accordingly, the purchasers' interest in the property prevailed over the mortgagee's claim of equitable subrogation. Just like the purchasers in Watts, Twentieth Century enjoys the status of a bona fide purchaser for value without notice as discussed above. AMC Mortgage Servs., Inc. v. Watts, 260 S.W. 3d 582, 587 (Tex. App. — Dallas 2008)(quoting NRG Exploration, Inc. v. Rauch, 671 S.W. 2d 649, 653 (Tex. App. — Austin 1984)). Additionally, the Court finds that HSBC is not entitled to equitable subrogation due to its own negligence in failing to ensure that its mortgage interest had been properly perfected.
Accordingly, the purchasers' interest in the property prevailed over the mortgagee's claim of equitable subrogation. Just like the purchasers in Watts, Twentieth Century enjoys the status of a bona fide purchaser for value without notice as discussed above. AMC Mortgage Servs., Inc. v. Watts, 260 S.W.3d 582, 587 (Tex.App.-Dallas 2008)(quoting NRG Exploration, Inc. v. Rauch, 671 S.W.2d 649, 653 (Tex.App.-Austin 1984)). Additionally, the Court finds that HSBC is not entitled to equitable subrogation due to its own negligence in failing to ensure that its mortgage interest had been properly perfected.
See Ingersoll-Rand Co. v. Valero Energy Corp., 953 S.W.2d 861, 868 (Tex. App.-Corpus Christi-Edinburg 1997) (holding that appellee's act of filing suit against certain appellants was an "unequivocal repudiation" of a contract's indemnity provision), rev'd on other grounds, 997 S.W.2d 203 (Tex. 1999); cf. NRG Expl., Inc. v. Rauch, 671 S.W.2d 649, 652 (Tex. App.-Austin 1984, writ ref'd n.r.e.) ("A suit brought by a lessor to have the lease terminated constitutes a repudiation.").
As we stated in Watts, "A bona fide purchaser will prevail over the holder of a prior equitable title." Id. at 587 (quoting NRG Expl., Inc. v. Rauch, 671 S.W.2d 649, 653 (Tex. App.-Austin 1984, writ ref'd n.r.e.)).