Cain v. Neumann

316 S.W.2d 915, 9 Oil & Gas Rep. 1173, 1958 Tex. App. LEXIS 2250
CourtCourt of Appeals of Texas
DecidedSeptember 10, 1958
Docket13325
StatusPublished
Cited by30 cases

This text of 316 S.W.2d 915 (Cain v. Neumann) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cain v. Neumann, 316 S.W.2d 915, 9 Oil & Gas Rep. 1173, 1958 Tex. App. LEXIS 2250 (Tex. Ct. App. 1958).

Opinions

POPE, Justice.

This is an action in trespass to try title and for the cancellation of an oil, gas and mineral lease. The questions presented are: (1) Whether an assignee of a lesser tract of land out of a larger tract covered by a base oil, gas and mineral lease, by releasing and surrendering the lesser part on which there is paying production and simultaneously taking back a new lease from the landowner, thereby effects a surrender and destruction of the entire base lease, though production in paying quantities continued without interruption; and (2) whether uranium is a mineral within the meaning of the particular base lease.

The trial court granted an instructed verdict in favor of the plaintiffs, whom we shall call the Schallerts. They are the [917]*917successors in title to the original lessors. Columbia Southern Chemical Corporation, another appellee, was the assignee of a tract out of the original base lease, and it surrendered its lease to Schallerts in exchange for a new lease. Cain and others are the appellants. They owned the oil, gas and minerals other than salt, and some overriding royalties in lands which were embraced within the original lease. Appellants urge that actual production anywhere on the 3,100-acre tract embraced within the original base lease maintained their lease in force, and that the surrender by Columbia Southern did not affect their rights.

Schallerts in 1918 leased 3,100 acres of land in Duval County to H. A. Speer. The lease was of “all of the oil, gas, coal and other minerals in and under” the described 3,100 acres of land. It granted “the right of ingress and egress at all times for the purpose of drilling, mining and operating for mineral.” The only clause with reference to surrender or release rights was, that lessee “shall have the right to remove all machinery, fixtures and implements placed thereon at any time after having given the party of the first part a written release on all rights held by them by virtue of this lease.” The lessor reserved as royalty, one-eighth of all oil, four cents per ton for coal, and one-tenth of the market value of gas or other minerals. The lease provided that it would become null and void if drilling operations did not commence within ninety days from the date of the lease, and then provided :

“In case party of the second part shall bore and discover either oil or other minerals in paying quantities, then and in that event, this grant, incumbrance, or conveyance shall be in full force and effect, for twenty-five (25) years, from the time of the discovery of said product and as much longer as oil, gas or other minerals can be produced in paying quantities thereon.”

The lease also provided that all conditions between the parties to the lease “shall extend to their heirs, executors, administrators and assigns.”

Prior to 1918, the presence of a salt deposit under a part of the'leased lands was known. After the 1918 lease, lessees commenced drilling operations and found some productive oil, which soon was exhausted. By continued drilling, a sulphur deposit was found in October, 1928, and sulphur was commercially produced until 1935.

Smith and Cain in 1921 assigned all of their right, title, interest and estate in 1,000 acres of land out of the southeast corner of the larger tract, to National Oil Company and they reserved a ⅜2nd override. This was an absolute assignment with no provision with reference to a surrender and release of the assigned portion of the lease. In 1931, National Oil Company and others assigned all the salt rights in the west 640 acres out of the 1,000-acre tract to Southern Alkali Corporation, now called Columbia Southern.

In 1933, Columbia Southern made an agreement with the Schallerts, the original lessors, to convert the royalty payments for salt under its 640-acre tract into monthly cash payments of $300 instead of a fractional royalty. Columbia’s interest was limited to salt only.

In 1934, before the sulphur production ceased, Columbia Southern commenced producing salt by injecting water into an apparently inexhaustible deposit, and piped the brine to its chemical plant in Corpus Christi. This salt production has continued since 1934. In 1951 Columbia Southern paid Cain and others $530,000 for all the salt rights in the rest of the 3,100-acre tract, and also for the ½2nd override reserved by Smith back in 1921, insofar as it applied to salt. At this point, Columbia Southern owned all the salt in the entire 3,100-acre tract. In 1950 Columbia Southern purchased from National Oil Company, R. L. Autrey and R. J. Barry, “all the rights, title and interest of the orig[918]*918inal lessee and present owner” in the 640 acres on which it had its original salt rights, but National retained the “oil” beneath 4,000 feet of the 520 acres described, and reserved an override on the “oil.”

From appellees’ brief it appears that there is no dispute about these facts, nor that the original lease continued in force at least for twenty-five years after the discovery of sulphur in October, 1928, or until October, 1953, by reason of the successive discoveries and production of oil, sulphur and salt on a part of the original 3,100-acre tract. It is conceded also, that in October, 1953, the only mineral being produced was the salt on the Columbia Southern 640-acre tract, and that at that time Columbia Southern owned all the salt in the entire tract. It is conceded further that profitable salt production has continued unabated since October, 1953.

We come now to the matters which resulted in this dispute. Plaintiffs, the Schallerts, owned the possibility of reversion to the entire 3,100 acres. On January 31, 1953, nine months before the expiration of the primary term of twenty-five years, Columbia Southern fully surrendered and released all of its salt and other mineral rights to Schallerts. It released, discharged and quitclaimed “all of its right, title and interest” in and to the Speer lease. Simultaneous with and as a condition to the delivery of the release, Schallerts delivered back to Columbia Southern a new lease covering salt only, which was to continue for ninety days, and as long thereafter as salt was produced or royalties in lieu of salt production were paid. The new salt royalty was fixed at $600 per month in cash for the entire 3,100 acres. The delivery of the release was conditioned upon the delivery of a new lease, and the simultaneous exchange of the two instruments was a single transaction. Veal v. Thomason, 138 Tex. 341, 348, 159 S.W.2d 472, 475; Guardian Trust Co. v. Bauereisen, 132 Tex. 396, 404, 121 S.W.2d 579, 583.

The true question in this case is whether Schallerts, who owned the possibility of reversion, and Columbia Southern, who owned the salt production, could by an agreement between themselves, release and destroy the rights of third persons who owned under the 1918 base lease. The 1918 lease granted a determinable fee. Texas Company v. Davis, 113 Tex. 321, 254 S.W. 304, 255 S.W. 601. The lease of the 3,100-acre tract provided that it would continue in force for twenty-five years from the discovery of minerals in paying quantities, and “as much longer as oil, gas or other minerals can be produced in paying quantities thereon.” This clause is the one which we must keep constantly in view. When we are ever aware that it states the event upon which the lease will determine, we avoid distracting features to the case and the case becomes simple.

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Bluebook (online)
316 S.W.2d 915, 9 Oil & Gas Rep. 1173, 1958 Tex. App. LEXIS 2250, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cain-v-neumann-texapp-1958.