Hutchings v. Chevron U.S.A., Inc.

862 S.W.2d 752, 1993 Tex. App. LEXIS 2518, 1993 WL 338600
CourtCourt of Appeals of Texas
DecidedSeptember 8, 1993
Docket08-91-00404-CV
StatusPublished
Cited by42 cases

This text of 862 S.W.2d 752 (Hutchings v. Chevron U.S.A., 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
Hutchings v. Chevron U.S.A., Inc., 862 S.W.2d 752, 1993 Tex. App. LEXIS 2518, 1993 WL 338600 (Tex. Ct. App. 1993).

Opinion

OPINION

KOEHLER, Justice.

This is an oil and gas case in which Chevron U.S.A sought a declaratory judgment defining its royalty obligations under a long term lease. The royalty owners, represented here by two groups (the Abel Appellants and Mobil-OXY), counterclaimed for underpaid royalties. By partial summary judgment, the trial court interpreted the casinghead gas royalty clause of the lease to provide for a ⅜ of four cents per mcf royalty on casinghead gas Chevron sold. At trial, the jury found that Chevron had not underpaid royalties. From a judgment on the verdict and the summary judgment, the two groups of Appellants bring this appeal. We affirm.

RELEVANT FACTS

On August 4, 1925, the Hutchings Joint Stock Association executed an oil and gas lease with Gulf Production Co. (“HSA Lease”). The HSA Lease covers 30,450 acres of land in Ward County, Texas, south of Monahans. Chevron U.S.A., Inc. (“Chevron”) is Gulfs successor in interest. The Appellants (the “Abel Appellants” and Mobil-OXY or “Mobil”) are some of the present royalty owners under the HSA Lease.

The lease contains different royalty provisions relating to oil, natural gas, and casing-head gas. Chevron filed this suit for a de-elaratory judgment interpreting the royalty provisions. Chevron claims that the casing-head gas sold by it is and should be controlled by the royalty provision relating to casinghead gas. The royalty owners counterclaimed for underpaid royalties. They contend that casinghead gas sold by Chevron is governed by the royalty clause for natural gas “used off the premises or marketed,” which requires the royalty payment to be based on net proceeds. The trial judge granted partial summary judgment declaring that the lease required royalties on casing-head gas sold by Chevron to be paid only in accordance with the casinghead gas “save[d] and utilize[d]” royalty provision, which provides a royalty of ½ of four cents per mcf. The suit then went to trial, the jury finding that Chevron had not underpaid royalties. The court rendered a take-nothing judgment against the royalty owners, and they appeal.

ISSUES PRESENTED

The royalty owners argue 1 that the trial court erred both in granting Chevron’s motion, and in denying their motion, for partial summary judgment and in rendering judgment for Chevron based on the jury’s answer to Question No. 1. They assert that, as a matter of law under terms of the lease, they were entitled to ⅜ of Chevron’s net proceeds from the sale of the casinghead gas, not just ⅜ of four cents per mcf. The royalty owners also contend that they proved as a matter of law or by the great weight and preponderance of the evidence that Chevron had underpaid royalties, contrary to the jury’s finding. The Abel Appellants further contest the admission of one expert witness’s testimony. Appellant Mobil also appeals from the trial court’s refusal to order an accounting of royalties due and paid. By a conditional cross-point, Chevron argues that the trial court should have ruled that limitations barred any claims for royalties underpaid more than four years before the royalty owners filed' their claims.

*756 SUMMARY JUDGMENT

In a summary judgment appeal, we must determine whether the successful mov-ant in the trial court carried its burden of showing that there is no genuine issue of a material fact and that it is entitled to judgment as a matter of law. Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548 (Tex.1985). In deciding whether or not there is a disputed fact issue precluding summary judgment, evidence favorable to the non-movant is to be taken as true, and in that connection, every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in his favor. Nixon, 690 S.W.2d at 548-49.

LEASE CONSTRUCTION

Because the partial summary judgment was based on a question of law, the first issue is whether the court correctly determined the construction of the royalty provisions of the HSA Lease. The parties agree that the lease was unambiguous. When parties disagree over the meaning of an unambiguous contract, the court must determine the intent of the parties. This determination must be based upon the objective intent of the parties as expressed in the agreement, and not their present interpretation. The construction of an unambiguous contract is a question of law for the court. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); First City Nat’l Bank of Midland v. Concord Oil Co., 808 S.W.2d 133, 137 (Tex.App.—El Paso 1991, no writ). To determine the objective intent of the parties, a court should examine the entire instrument in an effort to harmonize and give effect to all provisions of the contract so that none will be rendered meaningless. Coker, 650 S.W.2d at 393.

The royalty provisions of the lease provided as follows:

If oil shall be found on said premises, Lessee shall deliver as royalty to Lessor, free of expense, an [sic] one eighth (⅛) part of the oil saved from that produced after deducting such part as maybe used for drilling and operating on the landand [sic] treating the oil or gas as to make it merchantable; _ [2] If Lessee shall operate so as to save and utilize casing head gas from said premises, then Lessee shall pay as royalty to Lessor, one eighth (⅜) part of the value of such gas, calculated at the rate of four cents (4) per one thousand (1000) cubic feet of the casing head gas, .... [3] If any well on said premises shall produce natural gas in paying quantities, andssuch [sic] natural gas is used off the premises or marketed by Lessee, then Lessor shall bepaid [sic] at the rate of one-eighth (⅛) of the net proceeds of the sale of such gas at the mouth of the well. [Emphasis added].

The lease was signed on August 4,1925. We are faced with the question of whether the lease required Chevron to pay royalties on casinghead gas it sold in accordance with the second or the third provision.

Casinghead gas is “[g]as produced with oil in oil wells, the gas being taken from the well through the casinghead at the top of the well, as distinguished from gas produced from a gas well.” Williams and Meyers, MaNual of Oil and Gas Terms, (8th ed. 1991). It has been judicially noticed that until about 1918, casinghead gas was a by-product of oil production that was “more often than not permitted to go to waste.” Gulf Prod. Co. v. Taylor, 28 S.W.2d 914, 917 (Tex.Civ.App.—Eastland 1930, writ dism’d). Chevron has sold casinghead gas drawn from its oil wells on this tract since 1937. As previously noted, Chevron maintains that the second royalty term of the lease applies, requiring it to pay royalties on the casinghead gas it sold at the rate of ⅝ of four cents per mcf. Appellants argue that casinghead gas sold by Chevron was governed by the third royalty clause, and Chevron should have paid royalties at the rate of ⅛ of the net proceeds from the sale of the gas.

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Cite This Page — Counsel Stack

Bluebook (online)
862 S.W.2d 752, 1993 Tex. App. LEXIS 2518, 1993 WL 338600, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hutchings-v-chevron-usa-inc-texapp-1993.