Norris v. Cox

131 S.W.2d 1028

• Court: Court of Appeals of Texas
• Decided: July 6, 1939
• Docket: No. 3795.
• Status: Published

Opinions

This suit was brought by Dr. F. A. Norris and others, appellants here, against appellees, Gulf Production Company and others, to recover certain undivided interests in six oil and gas mineral leasehold estates in Victoria County, Texas. The suit is brought in trespass to try title; the several leasehold estates are fully described in the petition, stating the acreage in each. Appellants also seek to recover of appellees a proportionate part of the oils and gas alleged to have been produced and converted by appellees from the leaseholds in the years 1934 and 1935.

We will not undertake to discuss the various propositions presented in appellants' brief, but will state and undertake to review the matters of contract which are necessarily the basis of the matters in controversy in the suit between the parties.

The record shows that during the years 1928 and 1929, appellee, Gulf Production Company, secured a block of 4,075 acres of land in Victoria County, Texas, on which the mineral leaseholds involved in this suit are located. The Company paid a valuable consideration for the 4,075 acres and thereby owned the leasehold interests involved here and of which the Company thereafter, on September 30, 1932, by an assignment, conveyed twenty-one mineral leases, including the leases in question, to William A. Stone. We copy here the contract of conveyance, with the exception of the description of the twenty-one mineral leases, appellants' Exhibit No. 17:

"The State of Texas,

"County of Victoria.

"Subject to the terms and conditions hereinafter set out, Gulf Production Company hereby transfers and assigns to William A. Stone the oil and gas rights now owned by it under the terms of the following mineral leases covering lands in Victoria County, Texas:

* * * * * * to all of which leases and the record thereof reference is here made for all purposes. "1. Stone binds and obligates himself to begin operations for the drilling of a well upon said block within 90 days from date and to prosecute the drilling of said well with reasonable diligence to a depth of 5100 feet unless oil or gas in paying quantities is produced at a lesser depth. Should said well be abandoned as a dry hole, then Stone shall within fifteen (15) days from date of abandonment of said well notify Gulf Production Company that he will, within 45 days from date of abandonment of said well, either begin operations for the drilling of a second well upon said land and continue his operations on said second well to the same depth as above set out, or will upon demand retransfer and reassign all rights hereby transferred, to the Gulf Production Company. If as a result of operations conducted under the terms hereof oil or gas is produced in paying quantities, then and thereafter Stone shall conduct such operations on the land described in said leases as may be necessary to develop said leases in a reasonable manner.

"II. All costs and expenses incurred by Stone in his operations on said land shall be paid by him. If as a result of his operations on said land oil or gas shall be produced in paying quantities, then, after paying all costs and expenses incurred in drilling, equipping, and operating said leases, Stone shall account to the Gulf Production Company for one-fourth of the net profits of said operations. The costs and expenses referred to herein are defined as follows:

"(a) All drilling costs and expenses as well as the cost, repair, upkeep, and maintenance of all material, equipment, and property of every kind devoted exclusively to the development of and used upon this property (except purchase of drilling rigs), including employers' liability and derrick insurance.

"(b) The cost of all labor, whether clerical, common labor or executive services devoted exclusively to and performed upon the property.

"(c) The cost of properly disposing of salt water.

"(d) A charge for overhead equal to five percent of the amount of money spent every month by Stone under subdivision (b), said charge not to exceed Five Hundred Dollars ($500.00) per month.

"(e) All State, County and District taxes, the gross production tax, and other taxes, if any.

"(f) All royalties and all other charges against the net proceeds from the production from said land.

"III. Accounting hereunder shall be made at the end of each calendar month. Losses and arrears may be brought forward from month to month. Within one month after the close of each calendar month Stone shall furnish Gulf a statement showing all costs and expenses incurred and all credits and receipts during such calendar month, and if such statement shall show a profit, then payment of 1/4 of such profit shall promptly be made to Gulf. Any objections and exceptions to the statement as rendered shall be made by Gulf within 60 days from receipt of same, and if no exception is made within such time, then such statement shall be considered as correct. If, within said 60 day period, it should develop that such statement should have included charges which through error were not incorporated therein and if such charges are agreed to by Gulf, then Gulf shall reimburse Stone to the extent of 1/4 of said charges, provided that such reimbursement by Gulf shall never exceed the amount which it received at the time such statement was rendered. If, within said 60 days period, it should develop that incorrect charges have been made by Stone, then full adjustment shall be promptly made by Stone, and all money due Gulf by reason of such adjustment shall be promptly paid to it.

"IV. It is expressly understood that only the oil and gas rights given and created by said leases are transferred hereby, and that Gulf Production Company hereby specifically reserves all sulphur rights given and created by the terms of said leases, together with the superior right at any and all times to enter upon said land and conduct such operations as it may desire for the production of sulphur therefrom.

"V. Stone may, if he elects, transfer and assign all of the interests, rights and privileges acquired by him under this assignment and contract to a corporation organized by him for the purpose of developing the leases hereinbefore described and of taking over operations to be conducted upon said leases as contemplated by the terms hereof, otherwise no sale, transfer, or assignment shall be made of said leases as a whole or in entirety prior to the discovery of oil, gas or other minerals in paying quantities on land covered by one or more of the above described leases, except under the circumstances hereinafter provided; however, sales may be made by said Stone or said corporation of undivided interests in said leases throughout the entirety thereof or throughout the entirety of all the right, title, and interest hereby assigned unto said Stone, but not otherwise. The several owners of such undivided interests, their successors and assigns, may sell and assign their respective undivided interests in said leases, but the same limitations imposed upon Stone and/or said corporation with reference to the sale of said leases, as a whole or in entirety, shall likewise apply to the owners in the aggregate of undivided interests in said leases.

"Should Stone and/or said corporation and/or the owners in the aggregate of undivided interests in said leases, desire to sell said leases as a whole or in entirety, after discovery of oil, gas or other minerals in paying quantities on land covered by one or more of the above described leases, then the owners of said leases as to all and the whole and entire right, title, and interest therein which is hereby conveyed, or the duly authorized legal representatives of such owners, shall notify Gulf in writing at least three (3) days in advance of accepting any bona fide offer that may be made therefor, and Gulf shall have the right within said time to purchase said leases at the best price offered therefor. No offer shall be considered from other than one able and capable of complying with such offer. Should Gulf, after being so notified, decide not to so purchase said property, the foregoing limitations imposed upon said Stone and upon said corporation and owners of undivided interests in said leases shall be of no further effect.

"The purchaser at any sale made by said Stone or said corporation and owners of undivided interests in said leases shall succeed to all the rights and privileges granted to Stone hereunder.

"VI. Gulf Production Company shall have the right to purchase the oil produced from said land by paying therefor the average posted price for oil of like grade or gravity in the Gulf Coast Area at the time of production. The right to purchase shall be exercised in writing within ten days after Stone notifies Gulf Production Company that production in paying quantities has been secured and when exercised shall cover the next succeeding six calendar months; thereafter, Gulf Production Company shall continue to purchase said oil for like six months periods until it gives Stone at least thirty days notice before the end of any such period of its intention to cease doing so. Stone shall thereupon make such sale of said oil as he may desire, but no sale shall be made by him for less than the average posted price in the Gulf Coast Area at the time of production. No contract shall be made by him for the sale of said oil for a longer period than one year. Sixty days before the expiration of any contract that he may make for the sale of said oil, Stone shall notify Gulf Production Company, and unless it shall notify Stone within thirty days of its desire to purchase said oil as above provided, then Stone shall have the right to contract for the sale of said oil as above set out. This plan shall be pursued so long as said leases are owned by Stone. Should Stone sell his interest in said leases to a third party (after Gulf Production Company refuses to purchase as provided in the preceding paragraph), such purchaser shall be obligated to make known in writing to Gulf Production Company at the time of sale of its intention to accept and run the oil produced from said leases from the time of purchase, and failing to give such written notice, Gulf Production Company shall thereafter have the right to purchase and run the oil produced from said leases, as provided above.

"VII. Should Stone secure the extention or renewal of any or all of said leases, then all the terms and conditions of this agreement shall thereafter apply to such leases as may be extended or renewed.

"VIII. Stone binds and obligates himself to comply strictly with all the terms and conditions of said lease. In the event he is unable so to do, he obligates himself to notify Gulf Production Company thirty (30) days before the maturity of any obligation of any of said leases of his inability to comply with such obligation and agrees that he will, upon demand, retransfer and reassign to Gulf Production Company, free of all encumbrances, all rights herein transferred and assigned in so far as they relate to the particular lease or leases the obligations of which he is unable to fulfill, and thereafter such lease or leases shall be held by Gulf Production Company free and clear of the terms of this agreement.

"IX. This transfer and assignment is made without warranty, express or implied.

"To have and to hold unto the said William A. Stone, his heirs and assigns.

"Executed in duplicate this the 30th day of September, 1932.

"Wm. A. Stone

"[Seal] Gulf Production Company,

"By L. P. Garrett, Vice President."

The contract of conveyance was duly acknowledged and recorded and offered in evidence by appellants for all purposes.

Subsequent to the assignment to Stone, Stone proceeded to organize a corporation, Stonleigh Oil Gas Company, for the purpose of developing these leases. Thereafter, Stonleigh Oil Gas Company sold to various parties, including appellants, certain units of undivided interests in these leases, their several interests evidenced by certificates. The certificates issued by Stonleigh Oil Gas Company to appellants evidencing their interests are the claims which appellants plead in this suit.

Among other things, each of these certificates provides:

"The State of Texas

"County of _______.

"Whereas, on, to-wit, the 30th day of September, A.D. 1932, Gulf Production Company made, executed and delivered unto William A. Stone, an assignment to twenty-one certain oil, gas and mineral leases, covering approximately four thousand and seventy-eight (4078) acres of land, situated in ________ in Victoria County, Texas, said assignment being duly recorded in Volume _______, Page _______, of the Deed Records of Victoria County, Texas; which said assignment and the record thereof is here referred to and made a part hereof for all the terms and conditions thereof, for dates and names of lessors and lessee, of and in said respective leases and volume and page numbers of the deed records of said County where said respective leases are recorded, said leases and the record thereof being also here referred to and made a part hereof for all the terms and conditions thereof and for particular description of the property thereby and which said assignment applies to renewals and extensions of said leases secured by William A. Stone and provides for certain drilling operations and provides, among other things, that Gulf Production Company shall receive one-fourth (1/4th) of the net profits derived from operations under and the performance of said contract and which said leases and extensions and renewals thereof, in addition to royalties payable to lessors thereunder, are subject to an outstanding one forty-eighth (1/48) overriding royalty on oil produced therefrom and thereunder; and

"Whereas, the said William A. Stone has transferred and assigned said leases into Stonleigh Oil Gas Company, a corporation, for the purpose of carrying out and performing the agreements contained in said assignment from Gulf Production Company to said Stone and for all other purposes; and

"Whereas, it is the desire of Stonleigh Oil Gas Company, the present owner of said leases, subject to the rights and powers herein reserved, to transfer and assign unto the Assignee hereinafter named, the fractional interest in said leases hereinafter specified:

"Now, therefore, know all men by these presents: That Stonleigh Oil Gas Company, hereinafter called Assignor (the term `Assignor' shall be deemed to include such substitutes as said Stonleigh Oil Gas Company may appoint to act for it hereunder) for and in consideration of the sum of _______ ($_______) Dollars cash to it in hand paid by the hereinafter named Assignee (the term `Assignee' shall be deemed to include Assignee and all subsequent owners of the interest here assigned) the receipt of which is hereby acknowledged and confessed, and for the further consideration and upon and subject to the terms, conditions and reservations herein contained (and subject to the terms and provisions of said leases and assignments thereof through and under which Assignor holds title thereto) do hereby bargain, sell, transfer and assign unto, etc."

Stonleigh Oil Gas Company proceeded to drill two of these leases. The first well drilled was dry. A second well was commenced and was abandoned at about 4,800 feet because of a blow-out. Apparently in neither well was oil or gas produced in paying quantities.

Following Stonleigh Oil Gas Company's unsuccessful attempt to drill these leases in accordance with the terms and provisions of the Gulf-Stone contracts, Stonleigh Oil Gas Company became involved in financial difficulties and was unable financially to proceed further in the development of the leases. Several of the leases were about to expire by their own terms, and would be lost. Stonleigh Oil Gas Company had not complied with the Gulf-Stone contract and was then unable financially to do so. None of appellants offered to do so or was able to do so. In the above financial situation, on March 8, 1934, Stonleigh Oil Gas Company, authorized by its Board of Directors, conveyed to appellee Rupert Cox eighteen of the original twenty-one leases, (the others having previously expired) for the following consideration: "for and in consideration of Ten Dollars ($10.00) cash to each of us in hand paid by Rupert Cox, of Houston, Texas, hereinafter called Grantee, receipt of which is hereby severally acknowledged, and the further sum of Four Hundred Eighty-six Thousand, Two Hundred and Eighty Dollars ($486,280.00) to be paid by grantee herein or his assigns to Sellers (as their interests appear) out of one-eighth (1/8) of sixty-seven percent (67%) of forty-one-forty-eighths (41/48ths) of the oil and/or gas, if, as and when produced and saved from the hereinafter described properties, (save and except that on and from certain properties described below there shall be no oil payments)."

Thereafter, Gulf Production Company conveyed to Rupert Cox certain of these leases, and Rupert Cox conveyed to Gulf Production Company certain of said leases. Following the above transactions Gulf then conveyed those it had acquired in the conveyance from Cox in consideration of certain oil payments.

Of the leases originally obtained by Gulf from Cox, all had expired by their own terms with the exception of three, on which it retained oil payments. The present interest of the Gulf Production Company in the entire block at the time of the suit is an oil payment on three of the leases.

Subsequent to the assignment of the Stonleigh Oil Gas Company as above, to Cox, and the transfer from Cox, oil and gas were found and were being produced at the time of the trial from portions of six of these leases. Of the leases obtained by Gulf Production Company from Cox and subsequently assigned by it to others, retaining oil payments thereon, portions of three of these leases have proved productive, namely, a portion of the Etta Terrell (being that portion assigned by Gulf to Stone by the contract of date September 30, 1932), a portion of the Pribyl, and a portion of the Gaugler. Appellants also own oil payments on two of these leases, the Pribyl and Gaugler.

So far as we can discover the interests appellants have in the leases must be found in and stem from the assignments the Gulf Production Company had with Stone, or Stonleigh Oil Gas Company. After the incorporation of the Stonleigh Company, we have nothing in the record to indicate that the Gulf Production Company had anything to do with the direction or supervision of that Company nor with the sale of the units to appellants. It received none of the proceeds from the sales, did not solicit appellants or have knowledge that units were being sold to appellants; has never drilled any of the leases or run oil from any of them or purchased any of the oil so run.

As to appellees other than the Gulf Production Company, and including that Company, the record shows, we think, the appellants do not hold interests under deeds, but under instruments of an entirely different character. Appellants were never in possession of the leases nor entitled to possession. Nor were they in possession of the leaseholds or any portion of any of them, and were never ousted by any of appellees. It seems to us that every right appellants are entitled to under their pleadings was given to them by the trial court in the judgment, as follows:

"It is further considered by the court, and so ordered, adjudged and decreed, that this judgment is rendered and entered herein without prejudice to the oil and gas payment of the plaintiffs, and others similarily situated herein, including the intervener herein, B. H. Jenkins, the defendant and cross plaintiff, Stoneleigh Oil and Gas Company, and the defendants C. W. Boyer, J. A. Muhl, T. A. Muhl and T. T. Word, as fixed by that certain assignment executed by Stoneleigh Oil and Gas Company et al., as assignors, to Rupert Cox, as assignee, dated March 8th, 1934, and recorded in Volume 142, page 294, of the Deed Records of Victoria County, Texas, and by the ratification and amendment of said assignment dated April 11, 1934, and recorded in Volume 141, page 633, of the Deed Records of Victoria County, Texas, and it is further ordered, adjudged and decreed by the court that said oil and gas payment as fixed in said instruments shall be in no manner affected, disturbed or changed by this judgment, but said oil and gas payment shall remain in full force and effect as fixed and determined by and in said instruments; except as to the John Zimmer one hundred and twenty-five (125) acre tract the oil payment as to which tract shall be only one-half of that fixed by the contract and assignment of March 8, 1934, as provided and set out in that certain agreement between Stoneleigh Oil and Gas Company and Rupert Cox on the 5th day of October, 1934, recorded in Volume 146, at page 322, of the Deed Records of Victoria County, Texas."

What we have said as to other appellants likewise applies to the contentions of appellant Stonleigh Oil and Gas Company.

We have concluded that the trial court was not without power and jurisdiction to extend the special term of the court at which the suit was first tried until all matters connected therewith were disposed of. The order of extension was sufficiently definite. Brooks v. Morgan, Tex. Civ. App. 121 S.W.2d 398, writ refused.

The propositions submitted by appellants are too numerous to be severally discussed in an opinion. We have, however, considered each and have found no reversible error, and they are each overruled.

The case is affirmed.