Oil and Gas Lease Void for Lack of Consideration
The mother and the trust filed an action against the brother seeking a permanent injunction to prohibit him from digging across the mother’s land. The brother claimed that the plaintiffs were interfering with his rights under the oil and gas lease. The trial court concluded that the oil and gas lease were “not what they purport to be” and were “void on their face.” The court granted injunctive relief in favor of the farming brother and mother.
The brother appealed and the Iowa Court of Appeals reversed the injunction, finding that the trial court’s rationale behind declaring the oil and gas lease void was invalid. The case went back to the trial court and the court beefed up their rationale, stating that the oil and gas lease failed for lack of consideration. There was no evidence showing that the brother and his parents exchanged any money or value for these leases.
The brother appealed yet again and, this time, the Iowa Court of Appeals agreed with the trial court’s analysis. According to the court, “a total failure of consideration occurs when a party has failed or refused to perform a substantial part of what the party agreed to do.” The mother testified that neither she nor her ex-husband received any consideration for the lease. The brother was unable to provide any “believable” testimony that he did, indeed, provide consideration for the lease. Thus, the appellate court ordered the forfeiture of the oil and gas lease and enjoined the brother from interfering with the agricultural purpose behind his sibling’s farm lease. In re Smith Revocable Trust, No. 0-0643/10-0234 (Iowa Ct. App. Oct. 6, 2010).