Case: 13-20345      Document: 00512615072         Page: 1    Date Filed: 05/01/2014




           IN THE UNITED STATES COURT OF APPEALS
                   FOR THE FIFTH CIRCUIT    United States Court of Appeals
                                                                                Fifth Circuit

                                                                               FILED
                                                                             May 1, 2014
                                      No. 13-20345
                                                                            Lyle W. Cayce
                                                                                 Clerk
PRESTON EXPLORATION COMPANY, L.P.; PEC PARTNERSHIP; T.S.C.
OIL & GAS, INCORPORATED; FRANK WILLIS, III,

                                                 Plaintiffs – Appellees
v.

G.S.F., L.L.C.; CHESAPEAKE ENERGY CORPORATION,

                                                 Defendants – Appellants



                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:08-cv-03341




Before SMITH, CLEMENT, and HIGGINSON, Circuit Judges.
PER CURIAM: *
       Appellant Chesapeake Energy Corporation (“Chesapeake”) executed
three purchase and sale agreements (“PSAs”) for over 500 Texas oil-and-gas
leases with the appellees Preston Exploration Company, L.P. (“PEX”), its
wholly-owned tax purpose entity PEC Partnership (“PEC”), and two of its
investors (T.S.C. Oil & Gas, Inc. and Frank Willis, III) (collectively, “Preston”).
Chesapeake failed to attend Closing, and Preston sued for specific


       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                       No. 13-20345
performance. 1 On remand from this court, the district court found: (1) Preston
had reasonably cured Chesapeake’s alleged title defects (or would do so within
six months of the Closing); (2) Preston was ready, willing, and able to perform
on the Closing date; and (3) Chesapeake breached the PSAs by failing to close.
Preston Exploration Co., LP. v. GSP, LLC, No. H-08-3341, 

,
at *8 (S.D. Tex. Dec. 5, 2012). The district court ordered specific performance
of the PSAs in favor of Preston for “all the leases for which it has recording
information.” 

Chesapeake timely appealed.
                              STANDARD OF REVIEW
       We review a district court’s findings of fact for clear error. Black v.
SettlePou, P.C., 

, 496 (5th Cir. 2013).                  We review de novo
conclusions of law, including the district court’s interpretations of a contract.
Gonzalez v. Denning, 

, 392 (5th Cir. 2004).
                                     DISCUSSION
       Chesapeake first argues that Preston failed to satisfy the “Conditions
Precedent to the Obligations of the Buyer” found at § 9(a)(i)-(iii) of the PSAs,
hence Chesapeake was not obligated to close.                   Specifically, Chesapeake
maintains that PEC lacked title to almost $9 million of leases (“No Title
Leases”), and therefore could not convey the leases; PEC did not hold record
title to any of the leases it promised to convey (“Purchase Price Defect”); and
Preston threatened litigation in violation of § 9(a)(iii).
       We find Chesapeake’s arguments unconvincing and hold that Preston
satisfied all conditions precedent outlined in the PSAs. After Chesapeake
noticed the Purchase Price Defect, Preston replied that “you will be given a



       1 We provided a summary of the factual and procedural history of this case when it
was before us in Preston Exploration Co. v. GSF, L.L.C., 

, 519-22 (5th Cir. 2012).
We address here only the subsequent proceedings on remand, referring the reader to our
prior opinion as needed for further background.
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                                 No. 13-20345
copy of the Assignment from [PEX] into [PEC] at Closing on November 7,
2008.” We affirm the district court’s conclusion that “PEC’s statement that
Chesapeake would be given title at closing was clearly an acknowledgment of
the defect.” Preston, 

, at *8. Notably, Chesapeake did not
object to Preston’s response until litigation and at no time did Chesapeake give
notice of an intention to terminate alleging nonsatisfaction of a condition
precedent pursuant to § 9(a).      We additionally affirm that Preston was
prepared to cure the Purchase Price Defect by conveying marketable title to
Chesapeake at Closing as “a reasonable and prudent person” in the industry
would accept unrecorded title when accompanied with Preston’s guarantees,
especially as the prior assignment from PEX to its wholly-owned, tax purpose
entity PEC was to be recorded upon Closing. Likewise, PEC’s lack of title to
the “No Title” leases prior to Closing did not violate any of the PSA’s covenants
and agreements. These leases were not to be included in the November 7
Closing but postponed until subsequent mini-closings, and PEC now has
marketable title to the leases in question. Finally, that Preston began to
prepare litigation seeking specific performance of the PSAs after Chesapeake
signaled its intention to be absent from the Closing does not contravene §
9(a)(iii); nor does it excuse Chesapeake’s non-attendance, especially because
Chesapeake only became aware of the preparations after the Closing.
      Preston’s satisfaction of all conditions precedent outlined in the PSAs
triggered Chesapeake’s obligation to close.     Because it is undisputed that
Chesapeake neither attended Closing nor transferred the purchase price, we
affirm that Chesapeake breached the PSAs. Preston is entitled to specific
performance because it complied with the PSAs, including tender of
performance, and was ready, willing and able to perform on November 7, 2008,
and at all relevant times.     See Preston, 

, at *8 (citing
DiGiuseppe v. Lawler, 

, 593 (Tex. 2008)).
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                                 No. 13-20345
      Chesapeake alternatively argues that, even if specific performance
properly issued, the judgment should be reduced by the price of 45 other leases
it noticed as defective. We accept the testimony and evidence demonstrating
that Preston has properly cured any noticed defects as well as properly
disputed false defects. We therefore affirm the district court’s judgment in the
full amount.
                               CONCLUSION
      Accordingly, we AFFIRM the district court’s decision.




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