*1 Head, Head, Hayden Kendrick & W. al., Petitioners, George et SAMANO Kendrick, Jr., Corpus Head and Michael Christi, petitioners. for al., et COMPANY OIL SUN Respondents. Weil, & Lev Dyer, Redford Kleberg, B-9969. Hoover, Corpus No. Clayton Hunt J. Texas. Supreme Court of Christi, respondents. for Sept. 1981. POPE, Justice. 21, 1981.
Rehearing Denied Oct. (hereafter
George and others Samano Samano), called as lessors of an oil and lease, Tanya sued Oil Sun Oil Sun), lessees, Company (hereafter called declaratory judgment for a because, expired; had there was neither nor reworking operations for a con- seventy-three days. The tinuous presented by a question the case is whether sixty-day limitation applicable was secondary term of the lease. The trial Samano, lessor, granted summary judgment, holding that the lease had termi- appeals, nated. The court of civil with a court, judgment, divided reversed that 46, holding re- quirement applied only term. We re- judgment civil verse the of the court of judgment appeals and affirm the trial court.
Paragraph 2 of the lease is an early habendum clause which also includes clause. a continuous Paragraph provides: 2 of the lease other this lease shall remain force years for a term of ten from this pro- after as duced from said thereaft- er as Lessee shall conduct or re- working operations thereon with no ces- than sation of more results, any such min- produced. eral *2 4,1977 (May day produc- lease on was last of executed the Sun 29, 1934, tion) ten-year primary March so the
term ended March
1944. Production
paying quantities
lease be-
extended the
(3)
yond
May
until
term and
as
long
THEREAFTER
Lessee
production stopped.
when
Sun did
re-working oper-
drilling
shall conduct
July
nothing
to restore
until
more
ations thereon with no cessation of
days.
seventy-three
a continuous
produc-
than
urges
that the cessation of
Sun
such mineral is
tion
seventy-three
for the
3, 1977,
produced. (July
was the end of
temporary
was a
cessation.
period).
that,
This
an ex
court has held
absent
majority
and the
of the court of civil
Sun
press time limitation in the lease for contin
appeals
ignored this division and more
have
drilling operations,
temporary
uous
cessa
particularly, they
ignored
have
the word
tion of
after the
once,
“thereafter”
was used not
does not
when the
terminate the estate
twice,
meaning
with a
and a
each time
production stops
of some mechani
because
gone
reference to what had
before.
equipment.
cal breakdown in the
Amoco
Braslau,
Production Co. v.
The
three distinct
draftsman stated
(Tex.1978).
negative
That rule was a
corol
things
prolong
which would
the term of the
lary
upon
rule that a lease terminates
provided
first
lease. The habendum clause
a cessation of
for an extended
“Thereafter,”
ten-year primary
for a
of time after the
that,”
meaning
“after
or after
duration
Rochmill,
Watson v.
the lease would contin-
(1941).
question
S.W.2d 783
is a
Ours
ue in
force
as there was
clause,
above,
construing
quoted
We are now into the
when
express sixty-day
to determine whether the
provision.
provi-
we reach the third
That
See,
time limitation controls this case.
reworking
sion is the continuous
Pruett,
Woodson Oil Co.
“thereafter (1) inseparable part tions.” An of this clause was that there could be shall remain in force for a term of ten reworking opera- no cessation years from this sixty days tions for more than seven- term) (March —not 1944 was end of ty-three days. quotes of textbooks on Sun a number gas English grammar support of its conten- THEREAFTER as to refer to from said tion that modifiers are intended parenthetical 1. The notes are added. mar,
the words closest to them in
the sentence.2
That,
course,
ir-mediately
the correct rule.
It was
is next to and
appeals.
concerning
not observed
the court of civil
of the habendum clause
concerning
secondary period by production.
The rule
is:
modifiers
erroneously leaps
of civil
over
naturally
reader
assumes
that clause to
the second “thereafter”
parts
placed
of a
are
sentence which
next
*3
exclusively
primary
to the
term clause.
logically
to each other are
related to each
guide you
other....
The rule which will
decided,
This
already
court has
and cor-
may
parts: (1)
be
in
place
stated
two
all
so,
rectly
drilling
reworking
that
the
or
modifiers,
words, phrases,
whether
or
clause, including
express
by
limitations
clauses,
possible
as
close
to the words
time, applies
operations
progress
to
in
at
they
modify;
placing
avoid
these ele-
the
primary
end of the
term. While rules
they might
ments near other words
be
good English
always controlling,
are not
modify.3
taken to
stronger
under those rules there is
reason
holding
reworking
that the
or
gram-
Another statement of the rule of
days applies
clause within
in-
to the
they
mar is: “Place modifiers so that
will
production during
stance of cessation of
the
immediately
be connected
with the words
holding
than there is for
they modify.”
“Thereafter” is an adverbi-
only applies
that the clause
the
to
modifier,
al
ignores
entirely.
but Sun
it
progress
tions in
at the
end
The first
“thereafter” refers to the
term.
term clause that is nearest to and is the
only thing
better,
gone
consistent,
that has
before. The
and more worka-
second “thereafter”
also refers to what has ble rule would be to
the same
to
rule
gone
is,
parts
before
both
and is nearest. That is the
the habendum clause—that
operations
by produc-
clause which
to
at
extends the lease
the end of the
thing
accomplish
tion.
and also the cessation of
that will
the
the
both of which
extension of the lease “thereafter” and be-
immediately
by
sixty-day
are followed
the
yond
production period
or
reworking
clause.
reworking operations with no cessation of
sixty days.
more than
Consistent with
grammatical
This
construction of the
good English, the first “thereafter” refers
compound
good
sentence is also
common
term;
to the
extension of the
sense. All
reworking
reasonably
second “thereafter”
to
refers
applied,
applied
clause must be
if
to
it is
just
prior
both—not
one—of the
statements
at all. This includes the
limit
about duration of the lease.
integral
which is
part
an
of that clause. It
right
means that when there is the
to drill
If,
urged by
Sun and held
rework,
operation
that
done in
must be
majority
appeals,
of the court of civil
right
that stated time.
It means that the
requiring drilling
reworking
clause
with-
to drill or rework was not intended to be
sixty days applies only
operations
in
to
in
within the
time in
stated
one instance but
term;
progress
at the end of the
within a reasonable time in the other. The
books,
according
grammar
to the
the drill-
right
exercise of the
and the time limit to
ing
clause would have fol-
necessary parts
do it are both
of the whole.
lowed
immediately
next and
stating
clause
ten-year primary
The habendum has two events which
Instead,
gram-
force,
consistent with the rules
ten-year
maintain the
Watkins,
Martin,
Dillingham,
Kierzek,
English
2.F.
W.
E.
Practi-
3.
The MacMillan Handbook of
English
(4th
1974);
(3d
1954).
cal
Handbook 65
ed.
G.
ed.
Mead,
Charvat,
Leggett, C. D.
W.
Prentice Hall
(7th
1978);
Handbook for Writers
ed.
W.
Scott,
Wooley
College
Handbook of Com-
Herman,
English
Portable
Handbook
position
1944).
ed.
Fear,
Schiffhors,
English
D.
S.
Short
Handbook 151
reworking oper
Both
ic time limit for
after that term.
terminating
ations,
factors.
of those events are also
as a
of the habendum
stated
alive,
hold that
the lessor
It is not reasonable to
required
keep
to
a lease
clause and
intended,
says and the
and lessee
as Sun
applies exclusively
at the
to
held,
the two
court of civil
has
applica
primary term and has no
end of the
habendum
terminating events stated in the
required
keep a lease
tion
differently with
clause should be treated
upon
alive
cessation of
respect
reworking clause.
to the
Precedents about leas
says
drilling or
Sun
drilling or rework
es that state no time for
applies
helpful.
In those
ing operations are not
but it is not
course,
cases,
tem
the rule of reasonable
event,
applicable
terminating
other
See, Amoco Pro
porary
applies.
production during
the sec-
Braslau,
duction Co. v.
*4
ondary
says
sixty-day
that
term.
It
Winsauer,
1978);
Corp. v.
159
Midwest Oil
drilling
reworking
requirement
for
or
to
560,
(Tex.1959);
944
Wat
Tex.
keep
applies
operations at
a lease alive
to
Bochmill,
565,
son v.
137 Tex.
but has no
Pundt,
(1941);
783
v.
one-half of the habendum but in- Pruett, Company Woodson Oil v. 281 tended an uncertain of time which (Tex.Civ.App. S.W.2d can be for the determined a fact-finder n.r.e.), upon by writ ref’d relied Sama- other half of the habendum clause. no, controlling, is also not because the ha- held, The court of civil has clause and the continuous bendum decision, uphold Sun seeks to that that clauses are couched in different terms. reworking appended or clause to There have been some cases which hold applies exclusively the habendum to reworking or clause with at the end of the term. express applies opera an time limitation agree. S.W.2d 49. We do not That actively tions in at the end of require reading construction would our out See, primary term. Nat. Bank of Citizens lease, it, of this and those like the drill or Co., Emporia Socony Mobil Oil expressly rework clause which entitles Sun (Tex.Civ.App. — Amarillo entirely to drill new wells the sec- n.r.e.); Skelly Company v. writ ref’d Oil ondary ceased. has Harris, meaning The reasonable and common-sense Rudd, Phillips Petroleum Co. v. of the clause is that the whole (Tex.Civ.App. no clause, — Texarkana including writ), Company, 320 and Duke v. Sun Oil operations, applied limit for the must That, too, 1963). is not F.2d 853 Cir. the whole habendum clause. present problem. our many of the Both Samano and Sun cite however, decisions, so, There are some same cases. This is because this question. applied have the whole previously has not addressed this But, specif- the whole habendum this court has never held that a clause to
clause in the Quoting same manner that this court from Woodson Oil Co. v. applied Pruett, has it to that which related to supra, response the court held in at the end of the claim that the cessation of Texaco, Sunray Inc., DX Oil temporary: might was “This be true under (Tex.Civ.App. S.W.2d 424 Paso leases, the terms of some under the — El n.r.e.), very ref’d had these simi parties agreed stipulated lease here the lar in the habendum and the temporary what would constitute cessa “drilling reworking” clause: tion.” force, “3. This lease shall remain in prob- Professor Kuntz has discussed this provid- unless terminated as hereinafter agrees analysis: lem and with this ed, years (hereinafter for the term of five If type the clause is of the is ‘primary term’), called the and so combined with the habendum clause and oil, gas, casinghead gas, cas- provides “and so thereafter as oil inghead gasoline, them, any from the land or the paying quantities.” duced hereunder * * * premises being developed operated,” it “7. discovery if after the of oil apparently purpose pre- has an broad paying quantities serving during operations cause, thereof should cease from this during production regard well as without lease shall not if terminate the lessee operation began during to whether commences additional or rework- began expi- term or after its ing operations thirty days *5 ” Accordingly, ration. * * * such clause should preserve be construed to the lease while 23, 1951, The lease was dated October the lessee continues to conduct production beyond extended the lease the tions, regardless operation of when the 12,1962. primary term until December The began long began so itas while the lease lessee did not commence or rework- was in [Emphasis effect. added.] ing operations thirty within days. The Kuntz, 47.4, (1972). 4 Oil and Gas at 121 § held, present as we now hold this He provision would construe the lease case: permit drilling reworking operations or so Also, prevent the terms of the lease the effect, long as the lease inwas whether it application temporary cessation during during term or quoted doctrine in this case. The above secondary preserved term when the lease is being subject expressly habendum clause by production. That is the common-sense thirty-day drilling meaning protect of the contract that would clause, production ceased, having all the mutual interests of both the lessors and reworking operation having no sixty-day provision lessees. The is an inte- thirty-day been commenced within the gral part reworking provi- period, the lease terminated. affording sion a known time for commenc- McWilliams, Hall v. 606 S.W.2d ing drilling reworking operations, while 1966, Civ.App. n.r.e.), ref’d — Austin during the contract is in effect the second- was another case which held that a lease period. ary precedent Neither nor sound production during terminated when ceased striking agree- reason exists for down and the lessee failed to ment. reworking operations commence 4, 1977, production stopped May When sixty days. Wainwright within In v. Wain secondary period, Sun had an wright, (Tex.Civ.App. — Fort 1962, express sixty days to drill or rework the n.r.e.), Worth writ ref’d the court so, by well. When it failed to do temporary refused to automatically terminated. express rule its terms because there was a failure to resume a cor- judgment The of the trial court was after a well produce one. ceased rect judgment ap- relating The of the court of civil to extension of the lease into the peals is reversed and that of the phrase trial court The second sets is affirmed. years. forth the term of ten The phrase, long third “and as Dissenting DENTON, Opinion by J., in gas produced and other mineral is from said BARROW, JJ., join. McGEE and land,” relates to extension of the lease be yond by production. This DENTON, Justice, dissenting. case involves construction of the fourth I dissent. I majority am convinced the phrase, long “or as thereafter as lessee shall opinion correctly has not construed the ha- conduct bendum clause of the Samano oil and thereon with no cessation of more than lease. The habendum clause reads: sixty consecutive until re ” sults . . .. The word “or” in ordinary contained, this lease shall remain in force disjunctive. use is compelling Absent a (10) years for a term of ten from this apparent reason from the context of the term,” “primary instrument, disjunc “or” should be read as oil, gas thereafter tive, conjunctive. not Shell Petroleum from said Corp. Royal 12, Corp., v. Petroleum after as Lessee shall conduct Reynolds reworking operations thereon with no Park, 309 (Tex.Civ.App.— cessation of more than n.r.e.); Amarillo writ ref’d Morrison results, Swaim, (Tex.Civ. such min- App. n.r.e.). writ ref’d — Eastland produced. eral is disjunctive A expresses an alternative. object purpose intended phrase parallels preceding “or” parties must be construing considered when phrase; it relates to and modifies the an oil and King, lease. Garcia v. phrase stating Thus, Tex. To there are ways two to extend the lease intent, provision determine each must be beyond 1) term— *6 reasonable, natural, accorded its probable 2) from the lease or of conduct meaning when considered in relation to the reworking operations at the pri- end of the entire Christmann, contract. McMahon v. mary term which production. result in Tex. urge The Sámanos that “cessation” refers Killingsworth, Jones v. production secondary in the term. The (Tex.Civ.App. Tyler), rev’d on other — word appears “cessation” in the grounds, (Tex.1964). The context, reworking clause. In cessation re- primary parties intent of the was to secure operations, fers production. not production and continue gas of oil and dur ing and after the primary term. Samano provides The habendum clause two meth- argues signed when the lease was par extending ods beyond the lease the ten production ties knew that would cease in year primary production, term. These are primary secondary term. He submits operations at the sixty day preserva clause is to assure primary end of the term which result in following pro tion of the lease cessation of production, provided there is no cessation of duction and is intended to limit the time operations sixty for more than when operations the lessee must start if days. sixty day language is not intend- production stops primary after the term. prescribe period ed the maximum of non- agree production secondary
I do not in the with Samano’s construc tion of the habendum clause. which the The first lessee must start or re- phrase, “subject working operations. to other I would hold the court contained,” does not bear on the issue of correctly be civil construed the ha- cause the lease contains no other terms bendum clause. rary it have entitled to a involving relies four cases six should been on
Samano production. time to resume ty day operations clauses. In Woodson Oil “reasonable” Pruett, appeals rejected civil this ar- The court of parties stipulated gument. It held the had Civ.App. writ ref’d n.r. temporary cessation e.), for a maximum of an oil and lease was executed because addi- years. five A well was and the lease had terminated primary term of operations were not commenced with- completed during term and the tional production. Id. lease was extended Produc of cessation sixty days during factually Although tion ceased for more than Woodson is at 164-165. brought case, present provi- term and the lessors similar to the alleging the lease had terminated. The lease materially suit differ. The Woodson sions provided: specifies lease maximum which in the production could cease provisions herein operations had to be term before additional this lease shall be for a term of provides (called lease (5) years ‘pri- this date commenced. five from operations term’) only for cessation of mary and is silent from gas or other mineral at hereunder, second- production or re- said land as to working operations ary are conducted there- term.
on. Reid, 161 Tex. Corporation In Gulf Oil expiration If at (1960), a well was conducting operations for Lessee is expiration of the begun days several before re-working an old new well or completed in the primary term. It was well, expiration or if after production was not production on this pipeline there was no commenced because cease, nevertheless shall shall this lease capped The well was and Gulf connection. as said con- continue as gas payments to the lessor tendered shut-in had, operations are tinue or additional rejected days The lessor thirty-two later. shall be additional claiming payments the lease terminated where not more than deemed to be had was no or tender because there elapse abandon- Sixty between expiration of the payments shut-in at the operations on one well and com- ment of sought to invoke two Gulf well, another mencement preserve the lease.1 clauses to is discovered this lease operative upon The first became shall continue as additional Id. had. tions are if, provides, at the end 269. The second *7 term, gas being is not primary oil or Company contend- of the at 162. Woodson Oil Id. drilling or re- tempo- produced, but the lessee is production was ed the cessation of duction, may attempts be made and successive provisions Subject herein con- 1. to the other sixty (60) days long are tained, (5) as not more than so Five be for a term of this lease shall completion elapse term) between the (called primary allowed to abandonment of one ment years from this date oil, gas well and the commence- long is as or other mineral thereafter production hereunder, operations long of on another until or as said land from expiration If, again being of the reworking operations at the is primary produced obtained. are as conducted on said land term, oil, gas provid- mineral is not or other as is hereinafter hereby, the land then covered from ed. engaged operations for is then in but Lessee drilling any production at time then of occurs If cessation operations some primary expiration the of hereunder, this lease shall not ter- the land Lessee, of minate if Lesseedoes if until not terminate this lease shall production sixty than not allowmore again procured, allow does not (60) elapse abandonment between the to sixty (60) days elapse to between than more of and the commencement of one well production and the commence- the cessation of pro- on another until reworking opera- ment of additional is obtained. again pro- duction obtain fide effort to tions in a bona
587
primary
not terminate if no
working, the lease will
sixty days elapse
gas
pro-
between aban-
more than
after as
begin-
doning operations
on one well
thereaft-
duced from said
ning operations
Id. This court
on another.
drilling or re-
er as Lessee shall conduct
pro-
lack of
held the lease terminated for
ces-
working operations thereon with no
pay-
tender shut-in
duction and failure to
sixty consecutive
sation of more than
timely.
held neither six-
ments
We further
results,
production
(1)
was
ty day
applied because
there
min-
such
never an
production and
there was
never
produced.
eral is
Again, the Reid lease made
abandonment.
drilling opera-
Skelly
In both
Duke
produc-
specific provision for cessation
progress during
tions were in
secondary
tion
but there was no
At
term
Harris,
Skelly
In
v.
163 Tex.
Oil
sixty day
end of the
term the
92,
(1962),
the facts are
S.W.2d
operated
clauses
to extend the lease into
similar to Reid but involved different
lease
secondary
involved
term. Neither case
provisions. Drilling operations were com-
production
cessation of
in the
and a well
menced
support
term. None of these cases
Sama-
completed
was
in the
term. The
language
argument
sixty day
no’s
capped awaiting pipeline
well was
connec-
operated
pre-
in the habendum clause
began forty-one days
tion. Production
la-
non-produc-
scribe the maximum
provides
ter. The lease
in the event oil or
tion in the
term before additional
gas
being produced
is not
at the end
drilling or
had to
engaged
but the lessee is
in
preserve
the lease.
commenced
order
reworking operations,
automatically
An oil and
termi
con-
will be extended if
were
upon permanent
produc
nates
ducted with no cessation of more than
expiration
tion after
days.2
Id. at
This court
950.
Braslau,
v.
Amoco Production Co.
by operations under
held the lease extended
Rochmill,
(Tex.1978);
v.
Watson
sixty day
v.
clause.
Id. at 954. Duke
137 Tex.
Company,
Sun Oil
1963), Skelly. When cessation of was similar to The Fifth Circuit, law, time to resume applying Texas oil and the lessee has a reasonable specifies unless the lease reached the same result as this court non-production con Skelly. sixty day It held the clause extend- maximum beyond temporary. ed the lease sidered Amoco Production Co. 808; Braslau, supra unless there is v. Roch v. Watson payments. mill, tempo Id. at 861. supra tender of shut-in What constitutes at 784. integral part sixty day g., clause is an rary question is a of fact. E. Winsauer, the habendum clause and is identical Corp. Midwest Oil lease. (1959) (174 days); habendum clause Pundt, Subject provisions other Stuart 2. ref’d) Civ.App. remain in force this lease shall (3-4 months); Scarborough Domain years this v. New
for a term of ten from completed herein con- thereon or shall have *8 tained, dry sixty (60) days prior ten shall be for a term of hole thereon this lease term’) years (called ‘primary from this date the lease shall the end of oil, gas prose- mineral is as produced thereafter as or other in force so are remain cuted with no cessation of more than with which from said land or land pooled days, they hereunder. said land result oil, mineral, term, oil, gas so produc- expiration or other duction If at the being produced or other mineral other mineral is not therewith, acreage pooled acreage pooled therewith. ed from said land said Lessee is then or on engaged Co., (Tex.Civ. Oil & Gas 276 S.W. (4
App. w.o.j.) Paso writ ref’d — El months). allowing a The cases reasonable following production,
time to resume a tem cessation,
porary leases that do not involved specific drilling
contain claus applicable
es ceases in the when
secondary term. The lease does specify non-pro
not the maximum regarded temporary during the sixty day language in term. The pertains only oper to cessation
ations in at the end of the I was entitled to would hold Sun Oil following cessa
a reasonable of time
tion of to commence
to restore ap- judgment the court of civil
peals should be affirmed. JJ., BARROW, join in the
McGEE and
dissenting opinion. HOUSTON, Petitioner,
CITY OF TORRES, Respondent.
Gerardo G.
No. B-9948.
Supreme Court of Texas.
Sept.