Texas Gulf Sulphur Company v. Gladys City Company

506 S.W.2d 281
CourtCourt of Appeals of Texas
DecidedFebruary 28, 1974
Docket7536
StatusPublished
Cited by9 cases

This text of 506 S.W.2d 281 (Texas Gulf Sulphur Company v. Gladys City Company) 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
Texas Gulf Sulphur Company v. Gladys City Company, 506 S.W.2d 281 (Tex. Ct. App. 1974).

Opinion

KEITH, Justice.

Defendant below appeals from an adverse judgment rendered in a trial to a jury wherein plaintiffs sought damages for the breach of a sulphur lease. We will refer to the parties in the posture in which they appear in the trial court.

Defendant is engaged in mining 'sulphur underlying certain lands of plaintiffs situated upon Spindletop Dome in Jefferson County pursuant to the terms of a comprehensive written agreement fixing its rights, duties, and obligations. During 1968 a controversy arose between the parties as to the location of the development wells on plaintiffs’ lands.

In the suit which we review, plaintiffs contended that the defendant failed to perform its obligation to use due diligence in developing the sulphur production on their lands; that it failed to extract all the sul-phur from plaintiffs’ lands before drilling “line wells”; and it failed to protect plaintiffs’ lands from drainage. In addition to the general denial, defendant tendered the defense of accord and satisfaction.

• Upon findings favorable to the plaintiffs, the court entered judgment for plaintiffs in excess of $250,000 and defendant has duly appealed with twenty-six assignments of error, not all of which will be mentioned specifically.

I. BACKGROUND OF THE CONTROVERSY

A. The Mining Technique

Spindletop Dome is a salt piercement type dome with a layer of clay, soil, and unconsolidated sediments above a cap rock of porous limestone. Beneath the cap rock the sulphur is a solid in its natural state situated in the interstices of the rock formation. This sulphur bearing formation is located above an impervious formation of *283 gypsum or anhydrite rock. The sulphur is produced by the Frasch process. 1

The technique requires the drilling of a relatively large number of wells to produce all of the sulphur under a given tract of land since the formation is impervious to the hot water at great distances from the well bore. Additionally, production from any given well is of short duration.

B. The Contractual Provisions

The underlying contract between the parties is a comprehensive written agreement dated December 14, 1936; the premises clause, preceding the description of the land, reads:

“Has Bargained, Granted, Sold and Conveyed and by these presents does Bargain, Grant, Sell and Convey unto the said Grantee above named, his heirs and assigns, all of the sulphur .in, on and under the following described land (together with all reversionary rights in and to the sulphur within the metes and bounds of the land described in this grant and for its duration, to which the Grantor, its successors and assigns, may be entitled), subject to the reservations, terms and restrictions herein expressly set forth, to-wit: [here follows description of land].”

This instrument, twenty-one pages in length, contains several provisions necessary to be noted at this point:

1. Once defendant began mining sul-phur on the plaintiffs’ lands, the contract provided that:

“[S]uch production and mining shall be pursued with due diligence until all recoverable commercial sulphur under the premises which may be produced in paying quantities is mined and produced or until such time as Grantee [defendant] may elect to finally surrender [the rights] . .

2. There was a provision for the drilling of offset wells and a reference to “line wells”, these being the words of the parties :

“Offsets
“During the term that the Grantee is under obligation to produce sulphur from said lands under the terms of this agreement, or whenever Grantee or assigns has begun mining on adjoining lands (should Grantor elect) Grantee contracts to do whatever is legally required at any time to properly offset any sulphur mining operations upon any territory across the line and adjacent to this land and to promptly and properly offset such adjacent well or wells by promptly drilling for sulphur within this land and to do all things legally required of him to protect the land herein described from drainage; and should Grantee own the sulphur' on the adjacent lands, or operate the same under any right, grant or lease, Grantee especially contracts to fairly and in good faith protect the land in this grant from any drainage because of sulphur mining operations on such adjacent lands.
“Line Wells
“Except for the purposes of offsetting, as above stated, Grantee contracts to drill no line wells for the production of the sulphur hereunder until after all sul-phur has been recovered through wells drilled away from the boundary lines of others on said premises, and that line wells shall be drilled only as are necessary to protect this property from drainage.”

C. The Adjacent Lands

In due time, defendant acquired the right to mine sulphur from lands of others on the dome, including that adjacent to plain *284 tiffs, known as Spindletop Heights. All of the other sulphur leases, except that of plaintiffs, were pooled or unitized and the landowners received their royalties based upon the production of sulphur anywhere upon the dome, including the lands of plaintiffs. Plaintiffs, however, were not parties to any unitization or pooling agreement. Although it is almost impossible to understand precisely the niceties of the price differential in the royalties due plaintiffs and the other pooled landowners for production of sulphur, it seems uncontra-dicted in our record that sulphur credited to the adjacent Spindletop Heights lands was much less costly to defendant than that produced from plaintiffs’ lands. 2

Tract 41, the only one with which we are concerned, was known to contain a large deposit of sulphur capable of being commercially produced. Jefferson Lake Sulphur Company had drilled a well on the Spindletop Heights acreage in 1942 which confirmed the deposit but the well was not produced. Additionally, defendant had drilled a number of wells (the “300” series) on plaintiffs’ lands beginning in 1956 and produced sulphur in commercially feasible quantities. These 300 series wells were spaced from fifty to seventy-five feet apart but were no longer in production when the controversy arose. No commercial development had been undertaken on the Spindletop Heights lands within 600 feet of the dividing line.

D. The "1100” Series Wells

Without undertaking to develop the area approximately 200 feet in width lying between the 300 series wells and the property line between plaintiffs’ lands and those of Spindletop Heights, defendant began drilling the 1100 series wells. The first of this series, No. 1127, “steamed”, i. e., it had been drilled and the superheated water was injected into the well bore to melt the underlying sulphur, on January 12, 1968. This was a “line well” on the precise line between the two tracts. It was located approximately 200 feet due northeast of well No.

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Bluebook (online)
506 S.W.2d 281, Counsel Stack Legal Research, https://law.counselstack.com/opinion/texas-gulf-sulphur-company-v-gladys-city-company-texapp-1974.