Thornburgh v. Cole

1949 OK 167, 207 P.2d 1096, 201 Okla. 609, 1949 Okla. LEXIS 369
CourtSupreme Court of Oklahoma
DecidedJuly 12, 1949
DocketNo. 33382
StatusPublished
Cited by25 cases

This text of 1949 OK 167 (Thornburgh v. Cole) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Thornburgh v. Cole, 1949 OK 167, 207 P.2d 1096, 201 Okla. 609, 1949 Okla. LEXIS 369 (Okla. 1949).

Opinion

HALLEY, J.

On April 24, 1945, Mary Thornburgh King and Mac Thornburgh instituted this action in the district court of Okmulgee county against Ben Hur Coal Company, a corporation, and John T. Cole and wife, Adelaide M. Cole, seeking to cancel certain coal mining leases and an overriding royalty contract between defendants, and for damages ■ alleged to have been suffered by them by reason of the overriding royalty contract between the defendants.

Judgment was rendered for the defendants, except that it provided that the coal mining leases would be canceled unless the defendant, Ben Hur Coal Company, began the production of coal on the leases within ninety days from the date of the judgment. This condition appears to have been complied with and the Ben Hur Coal Company has abandoned its appeal, and the plaintiffs have abandoned their claim for damages. This leaves for determination by this court the question of whether or not the trial court erred in refusing to cancel the overriding royalty contract between Ben Hur Coal Company and John T. Cole and Adelaide M. Cole. The plaintiffs were not parties to this contract, but claim that it seriously affects their interest and is in violation of the agreement made by them when, in 1928, they assigned an interest in and to the royalties due and to be paid under any oil, gas or mineral lease'now on or hereafter placed on said land, covered by the assignment, to Thomas G. Thorn-burgh, the remote assignor of the defendants. The parties will be referred to as they appeared in the trial court.

In order to clearly understand the issues presented, it will be necessary to review briefly the history of the transactions which preceded the filing of this suit.

In 1929, the plaintiffs, as lessors, executed to Crowe Coal Company, as lessee, a coal mining lease covering some 1,200 acres of land, for a primary term of 15 years, and as long thereafter as coal was mined, providing for a royalty of eight cents per ton. Thereafter, the Crowe Coal Company assigned part of the lease to Girdwood Coal Company, which assigned some portions to Ben Hur Coal Company, and, in 1938, other portions to John T. Cole, who assigned certain portions to Ben Hur Coal Company. The assignments from Cole to Ben Hur Coal Company reserved to the assignor an overriding royalty of two cents per ton.

In 1942, John T. Cole purchased from Helen Thornburgh O’Brian, grantee of Thomas George Thornburgh, a one-third “non-participating” royalty interest in several tracts of land, some of which Cole had acquired by assignment in 1938, and which were covered by the coal lease above mentioned. In these tracts Cole reserved to himself a two cents overriding royalty interest at the time he assigned to Ben Hur Coal Company. The “non-participating” royalty interest acquired by Cole in 1942 originated by royalty deeds executed originally by plaintiffs to Thomas George Thornburgh, who assigned to Cole. Each of the royalty deeds executed by the plaintiffs, conveying what is referred to as “non-participating” royalty, contained the following restrictive provision:

“It being expressly understood that the grantors herein have the exclusive right to execute any leases of oil, gas, or other minerals in and under said land, under such terms and conditions as they desire, and said grantors shall retain all of any bonus received by them for the execution of any lease thereon. . .

In 1944, Ben Hur Coal Company desired a coal mining lease on certain land owned by John T. Cole, and not involved herein, and in which plaintiffs had no interest. As a part of the consideration for this lease on lands not involved herein, John T. Cole required that the Ben Hur Coal Company protect his overriding royalty interest in [611]*611the lands involved herein, which might be lost to him should Ben Hur Coal Company cancel the old lease and take a new lease from plaintiffs, who owned the exclusive leasing rights, thus wiping out the two cents per ton overriding royalty interest provided for in the assignment by Cole to the Ben Hur Coal Company of leases covering the Thorn-burgh land.

For the apparent purpose of protecting his overriding royalty interest, on September 1, 1944, John T. Cole entered into a written agreement with Ben Hur Coal Company, which provided that his two cents per ton overriding royalty interest would continue under existing leases, and also under any extension, renewal or modification of existing leases. This is the agreement complained of by the plaintiffs. A witness for the Ben Hur Coal Company testified that to comply with this agreement in taking a lease from plaintiffs on unmined land, and paying the customary ten cents per ton royalty, the lessee would be compelled to pay two cents per ton more than the usual royalty.

The term “overriding royalty” has .been defined many times in oil and gas leases. In Knight v. Chicago Corporation (Tex. Civ. App.), 183 S.W. 2d 666, reaffirmed in 1945, 188 S. W. 2d 564, it is defined as follows:

“ . . . An overriding royalty is a certain percentage of the working interest which as between the lessee and assignee is not charged with the cost of development or production . . . .”

In La Laguna Rance Co. v. Dodge, 114 P. 2d 351, 135 A.L.R. 546, the Supreme Court of California said:

“ . . . The term ‘over-riding royalty’ is applied generally in the industry to such fractional interests in the production of oil and gas as are created from the lessee’s estate. This is true whether the overriding royalty is created by reservation when the original lessee transfers his interest by a sublease or whether it is created by grant when the original lessee conveys a fractional share to a third person, as in the instant case.”

These definitions are fully applicable to the term “overriding royalty” when used with respect to a coal mining lease, and illustrate the fact that such an interest “overrides” or is in addition to the royalty reserved to the landowner or lessor, and generally arises through contracts between the lessee and a third person, whereby the owner and holder of the 7/8ths working interest provided to the lessee, contracts and agrees that some specified portion of his interest in production shall be paid to a third party, for such consideration as is agreed upon. The lessor, or party receiving the usual royalty provided for in the lease contract, having generally no interest in the working interest, is not a party to such contracts.

The applicable portion of the September 1, 1944, agreement between Ben Hur Coal Company and John T. Cole, and complained of by the plaintiffs, is as follows:

“It is agreed and hereby stipulated, the two cents (2c) per ton override royalty, required to be paid under the terms of the sublease on all coal mined from the herein described property, shall be paid to John T. Cole, his heirs and assigns, regardless of the cancellation of the original Thornburgh lease, provided the coal is marketed, mined, or in some manner handled by the Ben Hur Coal Company, or its assigns, or some person or company associated with or affiliated with it.

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Bluebook (online)
1949 OK 167, 207 P.2d 1096, 201 Okla. 609, 1949 Okla. LEXIS 369, Counsel Stack Legal Research, https://law.counselstack.com/opinion/thornburgh-v-cole-okla-1949.