Curry v. Texas Co.

8 S.W.2d 206

• Court: Court of Appeals of Texas
• Decided: January 13, 1928
• Docket: No. 386.
• Status: Published

Opinions

PANNILL, C. J.

The parties to this suit occupy in this court the same position as in the trial court, and will ¾⅜ designated in the same manner. The appellant Curry brought this suit against the Texas Company, Hanlon Gasolime Company, G. <⅜ Bateman, Mike Scott, and A. York; the purpose and object of the suit being to recover the royalties provided in the following contract between the plaintiff and the defendant the Texas Company :

“The Texas Company agrees with the roy. alty owner to keef> account of the casing-head gas as saved and utilized, or sold as aforesaid, rendering monthly statements if requested, and to pay to the royalty owner ⅜ of ⅝ of .08 cents per one-thousand cubic feet, corrected to atmospheric pressure and 60 deg. F. temperature, for all casing-head gas from the above-described land so saved and utilized or sold by the company not including any quantity used in its operations on said land, the company being free to use casing-head gas for such purposes without charge. Payments will be made quarterly, and the company at any and all rea sonable times will allow the royalty owner to inspect its meters.”

The petition averred that the Texas Company had caused to be drilled on said lease a certain well, and that from said well large quantities of casing-head gas had been produced, which had been run to the plant of the defendant Hanlon Gasoline Company. The petition alleged, by way of explanation, that the said contract was executed under an agreement between the plaintiff and the Texas Company, whereby the latter agreed and bound itself to pay to the plaintiff as a royalty owner ⅛ of ⅛ of eight cents per thousand cubic feet for all casing-head gas made and produced' from said lease, and that by inadvertence and mutual mistake it was written in said contract in figures as hereinabove set out, that it was the intention of all the contracting parties at the time that the Texas Company was to pay the plaintiff at the rate of ½ of ⅛ of eight cents per thousand cubic feet, and that said construction had been given the said agreement by the parties at ail times .thereafter, and that the Texas 'Company had under said contract paid the plaintiff at the rate of ½ of ⅛ of eight cents per thousand cubic feet for gas saved and produced from other wells on said leased premises. The allegations attempting to fix liability upon the Hanlon Gasoline Company, were that said company had at all times used the gas produced from said well and converted same to its own use and benefit, with, actual and constructive knowledge of plaintiff’s said contract, and that, in taking said gas, it was operating with the Texas Company. As to the other defendants, Bateman, Scott, and York, the allegations are that they are claiming some interest in said well and the gas and oil produced therefrom, which interest-is. being-claimed through their eodefend-ant the Texas Company; that plaintiff is unable to state the interest of said defendants, inasmuch as no contract or assignment appears of record, but,- if said defendants have any interest in said oil, gas, and other minerals produced from said well, they acquired the same from the defendant the Texas Company.

Separate answers were filed by the defendants the Texas Company and Hanlon Gasoline Company, and a joint answer by Bate-man, Scott, and York.' It will be unnecessary to notice the various defenses set up by the several defendants, except that the Texas Company filed a cross-action in which it was specifically alleged that the defendant Bateman drilled said well under, an assignment to him from the Texas Company of 40 acres of the leasehold held by the Texas Company under the plaintiff, and that in said assignment said Bateman bound himself as assignee to pay to- said Curry any and all royalties accruing from said land, and that thereafter the plaintiff, Curry, having made claims for royalties from the well, the defendants Bateman, Roberts, and Mike Scott executed and delivered to the Texas Company a bond of indemnity for the claims and demands of the plaintiff, and specifically agreeing to pay off and satisfy any judgment which was rendered against the Texas Company.

The several defendants demurred to the plaintiff’s petition, all of which were overruled except the special exceptions of the Hanlon Gasoline Company, which were sustained, and, the plaintiff declining to amend, that company was dismissed from the suit.

There was a trial to a jury as to the remaining defendants, and the plaintiff introduced the .contract sued on, together with proof that a well had been drilled by the defendant Bateman, which produced large amounts of gas, and that this gas was being taken and used by the Hanlon Gasoline Company. Betters were introduced from the Han-lon Gasoline Company to the plaintiff, showing the production of gas by the well in question and the delivery of said gas to said Han-lon Gasoline Company, amounting to 2,696,-947,060 cubic feet. No objection was made to these letters by either of the defendants. Other testimony was introduced by plaintiff to the effect that the contract when negotiated was, in fact, that the Texas Company should pay the plaintiff at the rate of ½ of ⅛ of eight cents per thousand cubic feet, and that this contract was made about the first of April, 1919, and that thereafter the Texas Company drilled and produced oil and gas from said lands and paid the plaintiff at the rate which was agreed upon; that is, at the rate of eight cents per thousand cubic feet. A letter from the Texas Company was introduced, stating plainly that the agreement was for payment for royalty on gas on the basis of ⅜ of eight cents. Plaintiff testified he did not know of any other claim being made until Bateman, after the well was drilled by him, told the plaintiff that he could not recover under the contract more than ½ of ⅛ of eight one-hundredths of one cent and that no amount had been paid to plaintiff for royalty on gas produced from said well called the Bateman well, although a demand had been made-therefor.

The statement of facts shows that, during the introduction of plaintiff’s testimony and prior to the time plaintiff closed his case, the following occurred:

“Mr. Allison: The defendants G. O. Bate-man, Mike Scott, and Jack B. Robert agree, if any judgment is rendered in- this case against the defendant the Texas Company, judgment shall be rendered in favor of the Texas Company against said defendants Jack B. Robert, Mike Scott, and G. O. Bateman, for the amount of thei judgment against the Texas Company.

“Mr. Garrett: We believe the court should instruct a verdict for the plaintiff for the amount of the alleged royalty as per the written contract, the actual amount is simply a matter of mathematical figures, one-half of one-eighth of eight-hundredths cents per thousand cubic feet.”

At the conclusion of the testimony the defendants presented a request for an instructed verdict in their favor, and, if that was denied, in the alternative, the defendants requested the court to instruct a verdict for the amount of alleged royalty as per the written contract, ⅛ of ⅝ of eight-hundredths of one cent per thousand cubic feet, the Texas Company to have its recovery over and against the defendants sued by it.

In response to this motion, the court instructed a verdict for plaintiff fcrr the sum of $153.06 on the basis of ½ of ⅛ of eight one-hundredths of a cent per thousand cubic feet. Under plaintiff’s contention as noted above, he would have been entitled to approximately $14,000. The difference is therefore material.

In plaintiff’s appeal, it is loudly and emphatically asserted that the court was in error in construing the contract as contended for by the defendants to be for the payment of ½ of ⅜ of eight one-hundredths of a cent per thousand cubic feet, but claimed that the contract should have been construed to provide for the payment at the rate of ½ of ⅛ of eight cents per thousand cubic feet, both on its face and because of the construction to that effect given to the contract by the parties, the plaintiff and the Texas Company, over a period of years from 1919, to and including the trial of the case, and that, if mistaken in that, plaintiff was entitled to reform the contract so as to make it express the true agreement of the parties.

All of these contentions are aggressively opposed by the defendants on the ground that the contract is on its face unambiguous; that the petition failed to allege any ambiguity therein, and therefore evidence as to its construction by the parties cannot be given any effect; that the reformation is barred by the four years’ statute of limitation, which was duly pleaded; and that the court could only take the contract as written, which the defendants insist plainly provides for payment at the rate of ½ of ⅛ of eight one-hundredths of a cent. In addition, if mistaken as to these matters, the defendants claim that no evidence whatever, was introduced by the plaintiff as to the amount of gas produced from said well, and that the .letters of the Hanlon Gasoline Company were hearsay and not admissible against any of the defendants, and, though admitted without objection, cannot be given any effect on appeal; that, disregarding said letters, there is no evidence in the record upon- which a judgment could be entered for the plaintiff for any amount.

We will attempt to state .our conclusions as to the legal points presented. We have concluded that the defendants’ plea of limitation as against the allegation of mutual mistake was well taken. While plaintiff shows by his testimony a valid excuse for not bringing his suit for reformation sooner, he made none in his pleadings. The contract having been in existence for more than four years at the time suit was filed, it was necessary for him to plead the facts showing his lack of knowledge of the mistake in the-contract, his discovery thereof within a period of time not barred when the suit was filed, and that he was not negligent. The authorities in regard to this matter have been reviewed at length in an opinion by Associate Justice Leslie of this court in the case of Hardin v. Hardin, 1 S.W.(2d) 708. But we believe that the allegations, the substance of which are stated above, are sufficient to show an ambiguity in the contract so as to admit evidence of 'the true contract between the parties and the construction placed thereon by them. San Antonio Machine & Supply Co. v. Allen (Tex. Civ. App.) 268 S. W. 533.

It is true that plaintiff did not directly allege that the contract was ambiguous, but the contract itself, taken in connection with the allegation as to what was the real intention of the parties and the construction placed thereon by them, state such facts as show an ambiguous contract. The words and figures used, “½ of ⅛ of .08 cents per thousand cubic feet,” when taken literally, do not mean anything, and must be construed to arrive at the true intent thereof. Use of the plural “cents” renders it uncertain as to how many cents were meant. If the pleadings were sufficient, the evidence detailed, which was uncontradicted, shows that the parties intended by this contract to provide for royalty at the rate of ½ of ⅛ of eight cents per thousand cubic feet. It is too well settled to even require the citation of authority that, where there is any doubt about the interpretation of a contract, that construction which has been given to it by the parties in its execution will be adopted by the court. As stated by the Supreme Court of the United States in the case of Cavazos v. Trevino, 6 Wall. (U. S.) 773, 18 L. Ed. 813, in referring to the rule, “Safer testimony can hardly be presented in relation to any transaction occurring in human affairs.”

See R. C. L., vol. 6, p. 852, § 241, and 13 C. J. p. 456, where the authorities are collated, including many from our own jurisdiction.

While agreeing with counsel for the defendants that the letters of the Hanlon Gasoline Company could not ordinarily be here considered as evidence against the defendants, even though admitted without objection by the defendants, under the rule announced in Henry v. Phillips, 105 Tex. 459, 151 S. W. 533, which decision has been consistently followed since its rendition, and that without these letters there existed in the evidence no sufficient predicate for a judgment in favor of plaintiffs for any amount for gas, yet, in view of the admission made by defendants’ counsel during the trial, and which has been by agreement and consent incorporated in the statement of facts, we are unwilling to say that the trial court was not probably induced by the said statement of counsel to believe that the letters were entitled to be considered as against all the defendants, and to act thereon in instructing a verdict as he did. The course pursued by the counsel for defendants on the trial as reflected by the statement of facts was well calculated to induce both the court and opposing counsel to believe that the amount of gas produced from the well in question had been established b'y the testimony introduced and was not in question. It is our judgment that justice will not permit us to affirm the judgment rendered on the ground as urged that plaintiff was not entitled to a judgment for any amount, and that; having recovered more than he was entitled to in the trial. court, is therefore without just ground for complaint. In this case, under the record as presented, the defendants 'are in no position to urge here that the letters of the Hanlóh Gasoline Company cannot be considered against them, inasmuch as they clearly invited the trial court to act thereon in deciding the case.

It appears that the plaintiff would have a case against Bateman, Scott, York, and Hanlon Gasoline Company upon one of two theories only: The first, that they were assignees under the lease under the well-established rule that a provision’ in a mineral lease for the payment of royalty is a covenant which runs with the land,'and is binding upon the assignees (Pierce Fordyce Oil Co. v. Woodrum [Tex. Civ. App.] 188 S. W. 245); or that they were naked trespassers, .and, by converting the gas, had deprived plaintiff of his royalty. But the facts alleged negative both theories with respect to all the defendants just named. While the term “conversion” is used, it is distinctly alleged as a matter of fact that all of said parties were taking the gas under some sort of contract with the Texas Company, and sought to recover only under the contract and for the contract price. It was not alleged that they were assignees, of the Texas Company, nor that said defendants held under a sublease. The royalty provision quoted clearly gives to the Texas Company right and authority to sell the gas. Hager v. Stakes, 116 Tex. 453, 294 S. W. 835, loc. cit. 839, 841.

Having authorized the Texas Company to sell the gas, he could not recover against a purchaser from the latter unless that purchaser by contract bound himself to assume the obligation of the Texas Company for the payment of royalties under the contract. Potts v. Burkett (Tex. Civ. App.) 278 S. W. 471. Therefore, if the Texas Company sold the casing-head gas to Bateman et al., the plaintiff could not recover from them, because that is the very thing that the contract authorized. So it ⅛ considered that the plaintiff’s petition states no cause of action whatever against said defendants, and we believe that the Hanlon Gasoline Company was properly dismissed from the suit. But the trial court refused to sustain a demurrer as to Bateman, Scott, and York, and, having held that the plaintiff’s petition was sufficient as to them, and having on the trial committed a material error against the plaintiff in their favor, we cannot affirm the judgment on the ground that plaintiff’s petition as to them showed no cause of action. Jirou v. Jirou (Tex. Civ. App.) 136 S. W. 494. Neither can we reverse and render in favor of the plaintiff against Bateman, Scott, and York, for the reason that the petition is not sufficient to support the judgment.

It is unnecessary to decide what would be the rights of Bateman, Scott, and York as assignees under the contract in question, in view of the agreement contained in the record that the Texas Company is to have judgment against them for whatever judgment may be rendered against the Texas Company, and as a practical matter this removes any question as to their position as assignees Clearly, if the writing is ambiguous as between the plaintiff and the Texas Company, the former could show the real intention of the parties to their contract, and that the parties construed it according to the true agreement, and recover from the Texas Company on its contract as actually made and construed. The assignment by a lessee does not relieve him of a specific obligation to pay royalties, unless there is a provision to that effect in the contract Davis v. Vidal, 105 Tex. 444, 151 S. W. 290, 42 L. R. A. (N. S.) 1084; Mills and Willingham on Oil and Gas, p. 215; Western Sales Corporation v. Bliss & Wetherbee (Tex. Civ. App.) 299 S. W. 637.

We have concluded that the plaintiff’s petition is sufficient to admit proof of an ambiguity in the contract and of the construction placed thereon by the parties themselves, and to permit recovery thereon as construed by the parties, and, because of the court’s error in construing the contract to provide for a royalty on the basis of eight one-hundredths of one cent instead of eight cents per thousand cubic feet, the case must be reversed. In view of the matters heretofore discussed, we have decided that the just course to all parties except the Hanlon Gasoline Company would be" a remand.

Therefore the judgment of the trial court as to the defendants Texas Company, G. O. Bateman, Jack Robert, Mike Scott, and A. York should be reversed and remanded for a new trial,' and, as to the Hanlon Gasoline Company, the judgment of the trial court will be affirmed, and it is so ordered.

HICKMAN, J., disqualified and not sitting.