Whitson Company v. Bluff Creek Oil Company

278 S.W.2d 339, 4 Oil & Gas Rep. 1417, 1955 Tex. App. LEXIS 2631
CourtCourt of Appeals of Texas
DecidedMarch 18, 1955
Docket15600
StatusPublished
Cited by26 cases

This text of 278 S.W.2d 339 (Whitson Company v. Bluff Creek Oil 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
Whitson Company v. Bluff Creek Oil Company, 278 S.W.2d 339, 4 Oil & Gas Rep. 1417, 1955 Tex. App. LEXIS 2631 (Tex. Ct. App. 1955).

Opinions

MASSEY, Chief Justice,

From' a judgment entered in behalf of the owner of an “overriding” royalty interest in one lease, and in behalf of the owner of the leasehold estate" in- it and another' lease, for damages because of the-destruction of the value of. the . leasehold estate and royalty interest, for-conversion of property- and equipment. from said leases, including in part the restoration of property and in part for the value of property converted, and for injunctive and other relief, the defendants appealed.

Judgment affirmed in part and reversed and remanded in part.

Suit in the court below actually involved several 'causes of action, some of which did not have as parties plaintiff and defendant the same persons as in others. It is believed that the following explanation would be helpful.

R. H. Rucker, Jr., was- an individual who occasionally dealt in oil and gas leases. He was an officer in a corporation called the Bluff Creek Oil Company, which cor[341]*341poration also dealt in oil and gas leases," and operated leases.

L. R. Whitson was an officer of O. W. R. Oil Company, a corporation, which owned and operated oil and gas leases, producing and selling oil and gas. L. R. Whitson, though having no official 'connection with another similar corporation, the Whitson Company, was personally interested in its welfare. The Whitson Company was primarily owned, operated and managed by the sons of L. R. Whitson, whom he was inclined to aid and guide toward successful and profitable business activities.

There were two parcels of real property in Montague County, Texas, which were under oil and gas leases to the Bluff Creek Oil Company. The first will be hereinafter termed the Fenoglio Lease, and the second, the Nabours Lease. These leases were neighboring, though not adjacent. The Nabpurs Lease vyas a full %ths lease, but-the Fenoglio Lease was a- %ths lease, being burdened with a ⅛, “overriding” royalty interest in R. H. Rucker, Jr., who retained such interest as a part of the compensation for the original transfer by him of the %ths leasehold interest to Bluff Creek Oil Company.

Procedure was begun toward drilling an oil well on each of these: leases. Whitson' Company became interestéd in both proj ects and entered into negotiation of contracts whereby it acquired certain rights to the oil produced, saved and sold from any well or wells on" them, and also acquired certain rights in the leasehold estates held by Bluff Creek Oil Company.

The Fenoglio Lease.

Bluff Creek Oil Company and Whitson Company entered into a contract on August 31, 1949, the material provisions of which" included the following language:

“Now, Therefore, for and in consideration of the sum of one dollar ($1.00) and other good and valuable considerations, the receipt of which is hereby acknowledged, Bluff Creek Oil Co. does hereby bargain, sell, transfer, and assign and convey unto Whitson Company, Inc., its successors and assigns, an undivided fifteen-sixteenths (1%sths) of six-eighths (%ths) interest in the proceeds from all oil, gas, casing-head gas and other minerals produced, saved and sold under the terms of the above described oil and gas lease.
. “This assignment is made subject"to the following terms and conditions:
“1. Assignee * * * shall be entitled to receive fifteen-sixteenths (1%cths) of six-eighths (%ths) of the proceeds of the oil, gas, casinghead gas and other minerals produced, saved and sold from the above described land until such time as it has been reimbursed, for all sums expended by it in drilling and completing the well now located upon the above described premises, including sums advanced by it for the excess cost of seven-inch casing used in said well, and all sums expended by it in the operation of said well, * * *.
“2. At such time as said Whitson Company, Inc. shall have been reimbursed for all sums expended and advanced by it, as set out in paragraph No. 1, it shall be entitled to receive ’the full six-eighths (%ths) of the oil, gas, casinghead gas and other minerals produced, saved and sold from the above described land until it has re-céived a sum equal to the sums received by Bluff Creek Oil Co.' from the one-sixteenth (¼6⅛) of six-eighths (%ths) interest retained by it in this . assignment.
“3. - When the net returns to the parties hereto have been equalized, as above provided, then and thereafter Whitson Company, Inc. shall be entitled to receive one-half of six-eighths (1/2 of %ths) of the oil, gas and other minerals produced, .saved and sold from the above described premises, and the excess interest herein assigned to said Whitson Company, Inc. * * * and Bluff Creek Oil Co. shall thereafter be entitled to receive one-half of six-[342]*342eighths (½ of %ths) of the oil, gas and other minerals produced, saved and sold from the above described land, and the parties hereto- shall thereafter own the leasehold estate in equal one-half (½) shares, subject to the overriding royalty interest reserved by R. H. Rucker, Jr. * * *
“4-, Assignor, Bluff Creek Oil Co., reserves the right, at any time, to rer imhurse, Assignee for all sums expended or, advanced by it, as hereinabove provided, and thereupon to become vested with an undivided one-half (½) interest in the oil' and gas leasehold estate, subject to the overriding royalty interest referred to above.
“To Have and To Hold the rights and interests herein assigned unto the said Assignee, its successors and assigns, pursuant to the terms and conditions of the oil and gas lease above described and of the prior assignment hereof.” '

Pursuant to this contract, drilling was either begun or completed at Whitson Company’s expense, and upon the completion of the! well, operations incident to the production of, oil were conducted, — the expense of which Whitson Company paid according to the provisions of the contract.

Our view of this transaction between the Bluff Creek Oil Company and Whitson Company in regard to the Fenoglio Lease is that Whitson acquired thereby a right, analogous to that of an option, to acquire an undivided one-half interest in and to the six-eighths title of Bluff Creek Oil Company to the oil and gas in place under the ' lease, and an undivided one-half interest in and to all the interests Bluff Creek Oil Company might otherwise be considered to own, such as its rights- to use the surface in the search for arid production of oil, etc. An option passes no title but ds an executory contract prescribing conditions upon the occurrence of which an optionee'may become entitled to demand passage of- title. '37 Tex.Dig., Vendor and Purchaser, Of- course, in the present instance, by express agreement, title was prescribed to automatically pass upon the performance of the conditions precedent.

Of course, whether from the production of the well in question, or from it along with, other wells -which might have been drilled through Bluff Creek Oil Company’s right, .to do so, under the terms of its leasehold interest acquired from-R. H. Rucker, Jr., the Whitson Company had the right to take into its possession all the oil produced and saved, subject to the right of Rucker and the primary royalty owner, and-to sell it on the market.

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278 S.W.2d 339, 4 Oil & Gas Rep. 1417, 1955 Tex. App. LEXIS 2631, Counsel Stack Legal Research, https://law.counselstack.com/opinion/whitson-company-v-bluff-creek-oil-company-texapp-1955.