*1 Harry PHILLIPS, Appellant, S. COMPANY, INC.,
INEXCO OIL Appellee.
No. Appeals Court of Civil Tyler. July 29, 1976. Rehearing Sept. 2, Denied Jarrel, Jarrel,
Willis Tyler, Goodwin & appellant. for Benchoff, Edmund Guidry, P. Benchoff & Nacogdoches, McConn, Butler, L. John Bin- ion, Rice, Knapp, Cook & Fergu- Dillon J. son, Houston, appellee. for MOORE, Justice.
Appellant, Harry Phillips, plaintiff S. be- low, brings appeal from a summary appellee-de- rendered favor of fendant, Company. Inexco Oil
547 your option in drill- which to exercise Inexco, being purchase interested to all, more, as the known or or any well on tract one leases ing an oil County, Nacogdoches Douglas Prospect described in such notice. If you do not farmout entered into a your option exercise and consummate Refining Company & Humble Oil purchase day period, your within Douglas leases around whereby certain option and shall terminate you and Inexco. assigned to area were Prospect no any shall thereafter have claim of kind also en- well Inexco drilling to Prior upon any of the Inexco Leases described assignment into a written tered in said notice. appellant, whereby dated October 2. Inexco 11 oil Phillips, assigned to Harry S. assignment “In the mentioned above to Douglas in the area leases Inexco, you have reserved certain over- months, period Prospect tract for riding royalties. As to the Inexco Leases of the sum of $50 in consideration for and hereto, ‘A’ you described in Exhibit which overriding royal- acre, together with an may acquire pursuant your option, to assignment on the leases. ty interest overriding royalties Inexco shall retain subject to a letter leases was made to those which you identical have re- Phillips Inexco and executed assignment tained in to Inexco. your assignment of the leases. the time of the at parts parts and other Omitting its formal “Upon proper your option exercise of appeal, this the letter not material to pursuant foregoing provisions to the by Inexco and addressed ment written hereof, you shall tender to an as- follows: Phillips reads as * * * signment; October, 1970, dated 21 “By assignment assigned this you have transferred mineral leases in Company (Inexco) 11 correctly “If the sets forth the above addition, area. captioned
the above understanding reached leases more the 44 mineral Inexco owns Inexco, you please signify between so in Exhibit ‘A’ here- described particularly copies hereof in the by execution of two assign- in said The leases described to. returning space provided and said exe- hereto Exhibit ‘A’ the leases in ment and Inexco, whereupon copies cuted ‘Inexco collectively referred to as are binding shall be a valid and contract Leases.’ agreement.” Leases, with the Inexco “In connection foregoing Prior to the execution of the agreed follows: Inexco have you and parties, letter after some discussion, following agreed to add the as a of a Farm- provisions “Pursuant to the agreement, causing the same part of their Agreement out between respec- typed immediately to be below their Inex- Refining Company, Humble Oil and signatures: tive Douglass to drill a well in the co is soon however, “Subject, following: to the If said well Nacogdoches County. area in to drill a Harry S. desire Should hole, dry and abandoned plugged prior well in the area to either Inexco’s that, dropping its agrees prior to Phillips of its intent notification to Leases, have you shall of the Inexco any prior or any of Inexco leases drop all, or purchase the 15-month expiration more, for a considera- of them any one Inexco, Phillips may noti- from If acre. per net mineral tion $50.00 and be entitled to fy Inexco of his intent abandoned, Inex- plugged said well of notice of days within least notice at give you written co shall part thereof. any all of Inexco’s leases any of Inexco’s prior days per net mineral acre for pay He shall $50 Leases; period have a shall then you 44 mineral leases any part or a notice within receipt of such days from against suit ‘A’ and the 11 Inexco alleging described Exhibit miner- that under the conveyed by assignment leases al from however” clause of the contract he to Inexco. No is to entitled to a override leases, together by Inexco as to with the 44 the 11 mineral retained owned Inexco, except those by Phillips. leases transferred to Inexco which had become sub- *3 ject agreements agreed unitization by It is further that Inexco will have reason of production gas of oil or in lieu of Ap- as thereon. pellant sought specific performance to advise Phillips vided hereinabove letter agreement, and alternatively following: (1) Inexco will do one of the for title ¡. n leases, and for an accounting for well, (2) joint Drill a test oil 100% drill a gas produced and therefrom, or in the alter- mutually well with on terms- damages native for for breach of agreed contract. upon.” general Inexco answered with a denial and assignment, whereby Phillips as- affirmatively alleged duty that no rested on signed his 11 mineral leases to Inexco, was assign it to reassign the leases because subject made to the letter Un- the well contemplated agreement by assignment, der terms of the had not “plugged been and abandoned as a reacquire had the the 11 leases he dry hole” completed but was producing upon sold to expiration of 15 and, therefore, well since the contract was months, provided they were not predicated upon a contingency which never producing time included in a Specifi- unit. had no to the leases. cally assignment provided: “Upon expi- Both moved for a summary judg- (15) ration of fifteen months from the date ment contending they were entitled to a hereof, assignment, rights this and all judgment as a matter of law under the assigned hereby, interests transferred and quoted terms of the above letter lapse shall and terminate as to each lease ment. hearing, After a the trial court de- hereto, in Exhibit ‘A’ which is described not motion, nied Phillips’ granted but the mo- productive. ‘productive’ In this context a defendant, tion Inexco, and rendered a upon one lease is either which a commer- nothing judgment take against Phillips, cially producing well, capable or a well perfected from which he this appeal. producing commercially located, or a We affirm. productive lease included which is within pool by Assignee.” or unit formed In his supplemental petition first appel- alleged lant that “the of October dispute It without that Inexco drilled 21, 1970, consisting assignment brought in a well the letter with the special provi- contract produce gas the well has continued to sions that were original added after paying quantities. Shortly after the well assignment letter and had prepared, been in, brought Phillips, by letter dated are ambiguous not suscepti- and same is not 31, 1971, May notified Inexco of his intent to more one interpretation.” Thus, ble than requested assignment to drill a well appellant elected to stand on the contract as re-assignment of fifteen of the leases it was written. acres, comprising approximately 640 offer- ing pay stipulated acre $50.00 allegations the absence of rais offering to drill a well ing an issue ambiguity, specified depth. having thereon to a Not Ayers will be enforced as written. v. days, Phillips from Inexco within 30 heard Hodges, 517 589 (Tex.Civ.App.-Tyler made written demand on Inexco for the 1974, writ); no v. Corporation, Sale Contran of the fifteen (Tex.Civ.App.-Dallas 1972, S.W.2d 161 leases. n.r.e.). primary writ ref’d concern of reassign any
When refused the courts is to give ascertain and effect to leases, Phillips present instituted the the true intention of To “Agreements object the courts will must receive achieve examine a reasonable interpretation, writing, seeking according the entire and consider intention of the parties at the time they give executing can to harmonize and effect best them, if that intention can provisions of the contract so be ascertained to all language. from their meaningless. will be rendered the transactions that none life, Daniel, sanity business of end Corp. Credit and aim is Universal C.I.T. at presumption, though least a (1951); a rebut- Tex. Citizens table one. A interpretation reasonable Bank in Abilene v. Texas & Pacif National will preferred one which is Ry. ic unrea- S.W.2d 1003 sonable.” Bearing (1941). foregoing in mind the rules we will now examine the interpretation, Upon considering the letter as written the parties. corners, from its four it is apparent to us *4 that what the parties intended to do was to the provisions paragraph Under define respective rights their and obliga-
of the letter it is clear that the tions in the event the prospective well was parties Phillips intend that was to have an plugged and dry abandoned as a hole and option repurchase upon to the the leases Inexco decided drop the leases. There is conditions, happening (1) of two to-wit: on nothing in the defining the obli- the condition that the well to be drilled gations rights or parties the in the event “plugged Inexco was and abandoned as a produced well oil gas although both dry (2) upon hole” determining Inexco parties, being experts in the field of oil and drop parties agree leases. The that gas production, knew of such possibility. interpretation such an is to be accorded in The why they reason failed to define their Paragraph controversy arises as to right obligations in the event proper interpretation to be accorded the duction was no doubt due to the fact that “subject to” clause which parties added parties both knew that Inexco owned the to the letter Appellant takes leases and would continue to own them so position that the latter “spe clause is a long as the produced oil or in provision” cial right confers on him a quantities commercial appel- as a result of the lant would have no to re-acquire leases under the circumstances delineated them. irrespective therein of whether the well was Contrary appellant’s contention, we do “plugged dry and abandoned as a hole.” In “subject not believe the to” clause had the words, appellant position other takes the effect of conferring on paragraph that the “subject para to” re-acquire the leases even though the well
graph are parts divisible was brought producer. in as a paragraph defining with the latter to,” “subject While the term as used in rights appellant regard without to the instruments of conveyance, has a well rec- success or failure of the initial well. Inex- ognized meaning, as used here merely it is co, hand, position on the other takes the an to contract on terms differ- any right Phillips might have to as ent from that which Inexco originally of- signment of the leases was fered. Originally offered, in the being plugged conditioned on the well event the plugged well was and abandoned a dry provided abandoned as hole as dry hole and the leases were to be paragraph contingency and since such dropped, that it would notify Phillips thirty never the summary judgment days before the leases and he was agree its favor must be sustained. We with given to be a thirty-day option re-acquire this contention. all 55 leases. “subject clause, Under the to” Superior In Portland Gasoline Co. v. Mar- in the event the well was abandoned as a keting Co., dry hole desired to drill a well (1951), leases, the court said: on the required he was not to wait
until notified him it to would be in a position intended to demand that Inex- drop co the leases or until the 15 continue to wells, month as- drill unless Inexco signment exercised its expired but instead could speed transfer the Inexco appellant. leases to up reacquisition Such the leases as as result well would be unreasonable and not in acquisition accordance by giving of Inexco’s leases with the intent the parties. provided the notice for Further, therein. parties agreed upon Inexco’s re- was specifi- ceipt of such notice Phillips, from cally conditioned on the abandonment of the option
had
to drill another “test” well
dry
well as a
hole and
Inexco’s
on
jointly
either alone or
or to
drop
determination to
the leases.
assign
Phillips. Apparent-
all the leases to
ly,
purpose
“subject
to” clause
promise
Where
is conditional, the
prevent Inexco,
towas
after
precedent
abandonment
condition
must be fulfilled before
original
well,
keeping
promise
Phillips’
from
can be enforced. Where a
leases in
for
contract is
assign-
effect
month
conditioned on a specified event,
period
happening
ment
thereof
development
without further
is essential
to the
duty to perform.
by Inexco.
17A C.J.S. Contracts
c;
456a and
Wheeler,
§
Harris v.
267 S.W.
The fact that
to” clause re-
465 (Tex.Com.App.1924, holding approved);
drilling
being
fers
of another
*5
Courreges
System Freight
v.
Service, Inc.,
a “test” well is
some
at least
indication that
152
841,
S.W.2d
(Tex.Civ.App.-El
Paso
they
“subject
intended the
to” clause to
1941, no writ); Young & Pratt v. Southwest
operative
become
only in the
event
first
Insulation
Packing Co.,
&
“However, appear where facts in the sum
mary justi evidence would which fy pleadings, an amendment of the prevented by
amendment should not en be try judgment, summary final judg in such regard
ment event should denied defects pleadings less of which exist in the opposite party.” Edmunds v. Hous Lighting ton & Power (Tex.Civ.App.-Houston [14th Dist.] e.), writ ref’d n. r. cases cited that, It has also held therein. been “[i]n ambiguity the event of in an instrument can be only by which resolved reference to *6 evidence, inconclusive extrinsic or if there is meaning as to the doubt true of an instru ment, ambiguous, if of a sum granting
mary improper.” Martin Bank, 208, Memphis, First State (Tex.Civ.App.-Amarillo h.), n. w. Massey and cases therein v. Az cited. See (Tex. tec Life Ins. h.). Civ.App.-Ft. Worth n. w. I would reverse and remand this case to the trial court for a determination of intent