Fisher v. Walker

683 S.W.2d 885, 84 Oil & Gas Rep. 378, 1985 Tex. App. LEXIS 6046
CourtCourt of Appeals of Texas
DecidedJanuary 16, 1985
DocketNo. 08-84-00146-CV
StatusPublished
Cited by3 cases

This text of 683 S.W.2d 885 (Fisher v. Walker) 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
Fisher v. Walker, 683 S.W.2d 885, 84 Oil & Gas Rep. 378, 1985 Tex. App. LEXIS 6046 (Tex. Ct. App. 1985).

Opinion

OPINION

STEPHEN F. PRESLAR, Chief Justice.

This is a suit for declaratory judgment to determine the effect of the termination provisions in an oil and gas lease. The trial court entered judgment in favor of the lessees on the basis of stipulated facts. The court found that all obligations imposed upon lessees had been fully performed and that the lease remained in full force and effect as to the entire parcel of land covered by the lease. We reverse and remand for entry of judgment in favor of the lessor.

The dispute in this case revolves around an interpretation of a clause in an oil and gas lease entered into between Appellant, as lessor, and Charles L. Walker, et al., as lessees, on April 27, 1978. The agreement consisted of one document which set up ten separate leases, each controlling one-quarter section of land for a primary term of three years. With the exception of Paragraph 24 and Paragraph 25, the other terms of the lease agreement can be called standard in the industry. The dispute centers upon the interpretation of Paragraph 24, and involves Paragraphs 2 and 25.

24. Anything herein contained to the contrary notwithstanding, if this lease is not sooner terminated under other provisions hereof, from and after the expiration of the primary term, as the same may be extended under the provisions of Paragraph 2 hereof, this lease shall terminate insofar as it covers and pertains to all lands covered hereby and all geological formations in and underlying the lands covered hereby which are not contained in a producing proration unit that is specified and approved by the Railroad Commission of Texas, and from which geological formation and producing pro-ration unit oil, gas, or other liquid hydrocarbons are being produced in commercial quantities, or with respect to which geological formation and producing pro-ration unit there is a shut-in gas well, as defined and referred to in Paragraph 21 hereof, for which shut-in gas royalty payments have been made currently, if and as authorized in Paragraph 21 hereof.
.2. Subject to the other provisions herein contained, this lease shall be for a term of three (3) years from date, (called primary term) and as long thereafter as oil, gas or other hydrocarbons or any of them are produced in commercial quantities from said land or from lands with which said land is properly pooled under the provisions of this lease.
[887]*88725. The lands covered by this lease and described herein are a number of separate tracts, with each separate tract being designated as such. It is intended that this lease shall be considered as a separate lease for each separate tract. Anything contained herein to the contrary, or apparently to the contrary, notwithstanding, production, production from or drilling or other operations on and for the exclusive benefit of any one particular tract, shall serve to continue this lease in force beyond the primary term hereof, with respect only to such particular tract, and further, shall serve to continue this lease in force during the primary term hereof without payment of delay rental with respect only to such particular tract. Should this lease terminate as to less than all of the separate tracts, covered hereby, the rental shall thereafter be reduced in the proportion that the acreage covered hereby is reduced by such termination.

The parties stipulated that there was at least one well drilled on each of the ten tracts during the primary term. However, the Appellant argues that Paragraph 24 terminated the lease as to each proration unit which did not have a completed well within its confines. All oil wells were producing from the San Andres formation for which the Railroad Commission of Texas has provided forty-acre proration units. A single gas well is in a 160-acre RRC spacing in the Yates formation and is a part of land not in dispute. Since there are four proration units per tract there is a total of forty proration units covered by the lease. It was stipulated which proration units had producing wells, and they total seventeen in number. Thus, the Appellant contends that since there were only seventeen forty-acre proration units that had producing wells at the end of the primary term, the lease would terminate as to the remaining twenty-three non-producing proration units and all formations other than the San Andres and Yates.

Appellees urge that the lease remains in full force and effect as to the entire 1,600 acres since, as lessees, they have complied with all the terms of the lease agreement by drilling at least one well on each of the ten 160-acre tracts and all were still producing at the end of the three year primary term. In effect, Appellees focus on the literal language of Paragraph 24 which states that the Paragraph terminates the lease “from and after the expiration of the primary term, as the same may be extended under the provisions of Paragraph 2,” and they argue that this provision restricts the termination provision of Paragraph 24 to the period of time after an extended primary term. Appellees urge that Paragraph 2 (the habendum clause) defines the “primary term” of their lease as not being merely the stated number of years given in this clause, but as also including the period of time which may be extended by production. Therefore, Appellees contend that since they are still operating in an extended primary term, Paragraph 24 has not yet become operable. They recognize that Paragraph 24 limits the duration of the leasehold estate but say that it has not been triggered.

The rules of construction here applicable are clearly stated in Ogden v. Dickinson State Bank, 662 S.W.2d 330, 332 (Tex.1983):

When the provisions of a contract appear to conflict, they should be harmonized if possible to reflect the intentions of the parties. Harris v. Rowe, 593 S.W.2d 303 (Tex.1979). Generally, the parties to a contract intend every clause to have some effect and the Court will not strike down any portion of the contract unless there is an irreconcilable conflict. Woods v. Sims, 154 Tex. 59, 273 S.W.2d 617 (1954).

We cannot then ignore Paragraph 24 — in effect strike it down — for the parties put it there with the intent that it have some effect. The law of contracts requires that the court examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. [888]*8881983); R & P Enterprises v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517 (Tex. 1980). The construction urged by Appel-lees renders Paragraph 24 meaningless. The urged construction is that Paragraph 24 only applies after the primary term as the same may be extended by Paragraph 2, which paragraph provides that the “primary term” may be extended “as long thereafter as oil and gas are produced in commercial quantities.” That construction means that the lease must terminate before Paragraph 24 becomes effective.

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683 S.W.2d 885, 84 Oil & Gas Rep. 378, 1985 Tex. App. LEXIS 6046, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fisher-v-walker-texapp-1985.