Gavenda v. Strata Energy, Inc.

683 S.W.2d 859, 88 Oil & Gas Rep. 559, 1984 Tex. App. LEXIS 4850
CourtCourt of Appeals of Texas
DecidedDecember 20, 1984
DocketNo. A14-83-817CV
StatusPublished
Cited by3 cases

This text of 683 S.W.2d 859 (Gavenda v. Strata Energy, Inc.) 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
Gavenda v. Strata Energy, Inc., 683 S.W.2d 859, 88 Oil & Gas Rep. 559, 1984 Tex. App. LEXIS 4850 (Tex. Ct. App. 1984).

Opinion

OPINION

DRAUGHN, Justice.

This appeal involves the potential liability of the owner of the working interest in an oil and gas lease for additional royalties after the working interest owner had made royalty payments in accordance with the terms and representations contained in division and transfer orders. Appellants: John David Gavenda, individually and as temporary administrator of the estate of Victor Gavenda, deceased; Steven Edward Gaven-da; Bonnie Gavenda Myers; Cynthia Ga-venda Olfers; James P. Gavenda; Woodrow W. Gavenda; Doris A. Gavenda; Agnes Gavenda; Mildred S. Hejl; and Doris Ann Gayeski; filed suit against Appel-lees alleging that Appellees had underpaid the royalties due to Appellants. Appellees, Strata Energy, Inc., and Northstar Resources, Inc., denied any liability to Appellants due to the effect of division and transfer orders executed by Appellees or their predecessors in interest. Both sides filed Motions for Summary Judgment. Ap-pellees’ motion was granted and Appellants’ motion was denied. Appellants appeal from the adverse summary judgment. We affirm the summary judgment in part and reverse and remand in part.

On October 1, 1967, Appellants or their predecessors in interest executed a general warranty deed to Dr. D.J. and Lilyan Fein-stein. This deed conveyed to the Fein-steins the surface and mineral estates to land located in Burleson County, Texas. However, the deed contained a reservation of a royalty interest. That reservation states:

PROVIDED, HOWEVER, the Grantors herein except from this conveyance and reserve unto themselves, their heirs and assigns, for a period of fifteen (15) years from the date of this conveyance, an undivided one-half (¾⅛) non-participating royalty of all of the oil and gas in, to and under (sic) that produced from the here-inabove described tract of land. Said interest hereby reserved is a non-participating royalty and shall not participate in the bonuses paid for any oil and/or gas lease covering said land, nor shall the Grantors participate in the rentals which may be paid under and pursuant to the terms of any lease with reference to said land.

The Feinsteins were given the executive right to lease the property for oil and gas purposes. The Feinsteins later conveyed the surface and mineral estates and the executive right to lease for oil and gas purposes to Billy Blaha. In 1976, Blaha leased the property to Marshall Harrell in return for a one-eighth (Vsth) royalty.

Through a series of conveyances, Appel-lees each acquired a leasehold working interest in the oil and gas lease. Strata and Northstar, as leasehold working interest owners, entered into a joint operating agreement whereby Strata was named operator of the lease. The joint operating agreement provided that Strata, as operator and agent for all the working interest owners, should pay all the royalties which accrued upon obtaining production from the lease. Under the Joint Operating Agreement, all actions by Strata were made on behalf of Strata, individually, and on behalf of Northstar.

After obtaining production of oil and gas from the lease, Strata hired an independent attorney, C.R. Ebersole, to perform a title examination on the property and issue title opinions as to the royalty interests burdening the property. Ebersole’s title opinion stated that Appellants or their predecessors in interest owned an overall one-sixteenth (½6⅛) royalty interest. Strata prepared division orders upon Ebersole’s title opinion designating the amount of royalty interest owned by Appellants or their [861]*861predecessors. These division orders were submitted to each royalty owner.

The division orders executed by Appellants or their predecessors in interest contained a warranty that the royalty interest was correctly stated therein as a fractional share of an overall one sixteenth (Vi6th) royalty interest. Strata, as operator, paid all proceeds from production based on the provisions and representations contained in the division orders. When there were changes in the ownership of the royalty, Strata sent the new royalty interest owner a transfer order to be executed. The transfer orders also contained representations and warranties that the royalty owner owned the royalty interest stated in the transfer order. The transfer orders also stated Appellants’ royalty was one sixteenth (¼6⅛). Strata paid royalties to Appellants based upon the representations and warranties contained in the division and transfer orders. There is no dispute that the Appellants received and accepted all the royalties which were due them according to the royalty interest stated in the division and transfer orders.

Appellants or their predecessors in interest did not attempt to revoke the division or transfer orders until September 29, 1982. On October 1, 1982, Appellants’ royalty interest terminated under the express provision of the reservation contained in the deed to the Peinsteins.

Appellants then filed suit alleging that the Appellees had paid substantially less than the royalties due under the reservation contained in the Feinstein deed. Each side filed a Motion for Summary Judgment. Appellants appeal from the trial court’s granting of Appellees’ Motion for Summary Judgment and the denial of Appellants’ motion.

Appellees’ motion listed four theories: Estoppel, Payment, Ratification, and Accord and Satisfaction, in support of Appel-lees’ right to a Summary Judgment. Each of these legal theories was based upon the effect to be given the division and transfer orders signed by Appellants or their predecessors in interest. Appellants predicated their motion Upon the reservation contained in the deed to the Feinsteins and the affidavit of a certified public accountant concerning the amount of the alleged underpayment of royalties.

Appellants raise two points of error. In the first point, Appellants argue that the trial court erred in granting Appellees’ Motion for Summary Judgment. The second point of error is that the trial court erred in denying Appellants’ Motion for Summary Judgment. The central issue is the effect of the execution of division and transfer orders upon Appellants’ suit to recover alleged deficiencies in royalty payments.

Texas law is that royalty payments made and accepted under the terms of division and transfer orders are effective until the orders are revoked. Chicago Cory. v. Wall, 156 Tex. 217, 293 S.W.2d 844 (1956); Exxon Corp. v. Middleton, 613 S.W.2d 240 (Tex.1981). This is true even if the division or transfer orders incorrectly state the interest of the royalty owner. In our case, Appellees paid royalties according to the interests stated in the division and transfer orders. Even if we assume that the division and transfer orders contain an erroneous measure of the Appellants’ royalty interest, an issue we do not decide, the orders, until withdrawn or modified, constitute the precise and definite basis for payments and payments made in accordance with the orders are final and binding. Middleton, 613 S.W.2d at 250.

In order to avoid the rule of Wall and Middleton, Appellants argue that: the rule is factually inapplicable; the signing of division orders does not constitute a conveyance of an interest in land; the rule, if applicable, only affects the cause of action against Strata; and the division and transfer orders are not binding upon the estate of Victor Gavenda.

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Related

Strata Energy, Inc. v. Gavenda
753 S.W.2d 789 (Court of Appeals of Texas, 1988)
Gavenda v. Strata Energy, Inc.
705 S.W.2d 690 (Texas Supreme Court, 1986)

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Bluebook (online)
683 S.W.2d 859, 88 Oil & Gas Rep. 559, 1984 Tex. App. LEXIS 4850, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gavenda-v-strata-energy-inc-texapp-1984.