*1 al., TEXAS OIL GAS CORPORATION et
Petitioners-Respondents, al.,
Juan M. VELA et Respondents- Petitioners. A-11666.
No.
Supreme of Texas.
April 1968. July 2, Rehearing 1968.
On July
Rehearing Denied *2 Barron, Lewis,
Geary, Brice & S.W. Dallas, Mann, Laredo, Jr., Robert G. C. Kerrville, Barton, R. for Texas Oil Corp. Gas and others. Delhi-Taylor Corpora- Carlton, spondents, are Oil Carl- Meer, Dean & Chandler tion, Group, and Texas Delhi-Taylor Corp. Oil
ton, Dallas,
the American-Texas
respondents
Corporation. These
&Oil Gas
Mclnerney,
Turner,-
Hitchins,
Webb
the working
interest
were owners
Dallas, for
Hartnett,
Hartnett,
James J.
four-year period.
during the
different times
Delhi-Taylor.
Oil and Gas
Texas
*3
Group
member
the American-Texas
One
of
Gaines,
a
is Mrs. Hannah D.
who owns
Fansler,
Fansler,
Jr.,
N.
Fansler &
C.
royalty
non-participating
three-sixteenths
Laredo,
vir.
for
D.
et
Hannah
Gaines
interest in the land. The named defendants
Mann,
Mann,
Mann,
E.
Cronfel &
John
Nordan,
a
A.
owns
also include L.
who
Allen,
Brite,
Laredo, Bobbitt,
Bobbitt &
royalty in-
non-participating
one-fourth
Antonio,
Bobbitt,
for
Jr.,
Lee
San
Robert
Gaines,
terest.
who will
Nordan and
M.
others.
Vela and
Juan
be
name
petitioners,
referred to
or as
any
sought
recovery
of
answered and
Antonio,
A.L.
for
Camp,
PatW.
San
royalties
they might
additional
to which
Nordan.
compro-
They
be
and the Velas
.entitled.
against
mised and
their
settled
claims
WALKER, Justice.
several defendants
as the
referred to
Ven-
ture Group. Under and
accordance with
and
an oil
case involves
This
the
agreement,
terms of the settlement
1,500
covering
of
acres
executed
judgment
against
was rendered
the Venture
County.
terms
Zapata
Under its
land
Group
royalty payments
for deficiencies in
lessor,
“pay
obligated
to
to
the lessee
with the understanding that no execution
each well where
royalty
for
from
as
would issue thereon.
being
found,
the same is
gas only is
while
premises, one-
the
sold or used off of
After
non-jury
trial the district court
eighth
the market
the wells
of
the
judgment:
(1)
awarding
rendered
has
of the amount
sold or used.”
so
Gas
Velas,
a total of
Nordan
Mrs. Gaines
been
from the leased
and sold
$55,750.13
in-
unpaid
for
that
premises
year
since
;
denying recovery
damages
terest
(2)
of
interest entered
working
owners
past
for
drainage;
(3)
declaring
life
lease”
into contracts “for the
operators
working
obligated to
interest
by the terms
sold
of which
one-eighth
as
market
Royalties
2.3¾ n
at a
mcf.
wells,
produced,
at the
at the
time
basis,
been
on that
but more recent
after
premises
used off
sold or
contracts for
the sale of
1964;
1,
directing Texas
February
(4)
provide
same field
substantially higher
Corporation,
present
Oil &
owner
Gas
prices.
interest,
certain
working
drill
to
additional wells or suffer cancellation
Subject
roy-
to certain non-participating
Appeals:
the lease. The Court of Civil
interests,
alty
original
title of
lessors
money
in favor
(a) affirmed
award
al,
et
owned
M.
herein-
Vela
Juan
judgment
but modified the
Velas
after referred
in-
They
to as the Velas.
recovery
provide
the trial
court to
alleged
stituted suit to recover
deficiencies
against
the members
the American-
in royalty payments
gas sold from the
Group
Texas
should be several and
premises
period
leased
during
joint;
upheld
damages
(b)
denial
February
31, 1964,
January
to
past drainage;
(c)
ren-
reversed
for additional
theory
relief on
judgment
dered
and Mrs.
Nordan
being
were
drained and had
nothing by
Gaines take
their
for ad-
suit
developed.
not been properly
The principal
royalties; (d)
ditional
the declar-
defendants,
modified
will be referred
indi-
who
atory portion
the judgment
provide
vidually by
collectively
name and
amount
proportion
defendants
obligated
be
operators
would
their
the basis of
awarded
Velas on
pay royalties
the basis of
As we
original petition.
amended
and second
judgment;
and after the date of
far
pleadings
so
construe
(e)
owners could
held
questions
be decided
affect
compensated by an award
adequately
here,
seek-
and Mrs.
Gaines
damages
drainage
and failure to
substantially
in the trial
develop
operator
ing
notified
after
They brought
same relief as the
implied
Velas.
comply
of its failure
error to
points
forward a number of
covenants of the lease.
adopted
court,
Appeals
Court of Civil
also
the trial
in so far as it directed
brief filed there
Corporation
Texas
the Velas.
Oil &
Gas
drill
additional wells or suffer cancellation of
Appeals up-
of Civil
Although
*4
lease,
reversed,
the
accordingly
was
and
to
additional
the award of
held
of
case was severed and
and
Velas,
that Nordan
concluded
remanded to the district court for a de-
estopped from
equitably
are
Mrs. Gaines
termination of the
damages.
amount of
recovery.
right
a similar
asserting their
tensions thereof. price to that fixes the contract pressure mcf, 3½ nn at a computed base found The trial court term. throughout its an pounds per square inch above two made case were in this that the contracts pressure 14.4 atmospheric assumed finding has not faith, good pounds per square inch.1 argue that Petitioners attacked. been Nordan & Morris then entered into circumstances, the market these operators purchase contracts with various the lease meaning of within the working field. All owners of good faith contracted question ex- interest lease now in duty to pursuance its lessee in contracts, agreeing ecuted sell the *5 premises. do gas market gas produced premises in from the leased agree. their There are accordance with terms. contracts, three of these two of which were been have may well Mrs. Gaines executed in 1935 and third 1937. with sell accordance obligated gas They provide for an rate of effective she owned the terms of contracts while 2.3¡Sper measurement, mcf at standard interest,2 none part working but for a during term the life of the leases ac agreed to has ever royalty owners thereby. covered All contracts were royalties the basis of cept consummated, and all gas sold from the royalties The stipulated contracts. leased as well as from the sur- be deter they are entitled must to which rounding pursuant land has been marketed the oil provisions of mined from the to their terms. prior lease, executed gas which was gas sales independent wholly and is only producing formations in the royalty gas- contracts. In addition Lopeno Field from the time of its dis- above, the lease binds quoted clause covery Queen until City 1960 were lessee: sands. In 1950 production Wilcox was area, discovered in the the Wilcox forma- lessor, the credit To deliver to “1st. tion being a deep depths sand found at which cost, pipe line to free of 6,500 below feet. pipelines Additional wells, the its or his may connect lessee were then area, built into the and there produced part all oil one-eighth equal are now companies three purchasing gas premises. the leased and saved from from the Lopeno Field. They are Delhi United, Gas Pipeline Tennessee Gas Transmission Com- Corporation, the successor to [******] “3rd. To pay to lessor royalty and used pany, any oil well gas produced Supply Company. Alamo Gas gaso- The net for the manufacture prices by lessee paid by the last two com- 17.24$ n value panies line, the market one-eighth of range 13 n mcf. Lo Texas v. prior Oil Co. 1. 2. See Standard contract with United made Cir., peno F.2d 5th Gas to the enactment of the Standard Gas Law, 6066b, Measurement Article Ver non’s Ann.Tex.Giv.Stat. lessee, gas. gas price prevailing If such is sold market at the time roy- agrees pay lessor, delivery destroy then lessee does not the lease alty, proceeds one-eighth obligation. of the net de- casinghead rived from the sale of said
gas at the wells.” contract, “When it made the sales Atlantic took calculated risk It is clear then satisfactory producing royalties contract provide and did knew how to in- to the lease The fact that terms. kind, upon payable in based market prices market creases in have made value, upon pro (cid:127)or market and based obligations financially lease burdensome by the ceeds derived lessee from sale is no defense. They roy gas. might agreed that the alty from a well would realized be a fractional of the amount argues only “Atlantic by the lessee from its sale. Instead of do quired diligence to use reasonable in sell- so, however, ing stipulated plain ing Foster pay one-eighth terms that the lessee would improvident. 1950 contract was not of the market at the well of all beg These arguments question. clearly premises. sold or used off the This royalty provision Granting is clear. prevailing means the at the provident the 1950 contract was when time of the sale or use. The made, roy- change fact does not marketed con long-term under the alty provisions. tracts at “being in this case was not sold” “Stripped trimmings Atlan- the time the contracts made but position simply: tic’s We cannot com- delivery purchaser. time of to the ply. This is no calls answer. Amis, Tex.Com.App., See Martin based on the market agree S.W. 433. We *6 prevailing for the field where therefore, Appeals,
of Civil con when run. The fact that the acertain- gas tract for which the sold ment price may of future market by necessarily the lessee the is not market troublesome the royalty provi- or that within of the lease. meaning improvident sions are and result in a Co., Refining See Foster v. Atlantic 5th financial loss to Atlantic ‘is not a web of Cir., 485; 329 F.2d Wall v. United Gas weaving.’ Court’s Atlantic cannot Public Service 178 La. 152 So. expect the court to rewrite the lease to Atlantic’s satisfaction.” obligation may prove The lease finan- general agreement are in with these cially burdensome to a lessee has made who respondents’ conclusions and turn now to long-term protecting a contract without second basic indicated contention. As against price. itself in increases market above, the trial court found that the market Foster, This was considered in where gas four-year during period court said: per was 13.047(5 finding, mcf. if it This any support evidence, “The make a has in inability of Atlantic to rest must gas provi- upon the testimony sales contract with escalation of Mr. K. Baumel. Jack obligation point.. sions is beside the The Our statement concerning the witness and testimony and pay of Atlantic to is fixed his largely is taken from the unambiguous. gas It made the con- Appeals. sales of the Court of Civil knowledge obliga- tract petroleum with full of this Baumel is a consultant nat- nothing protect gas engineer tion employed and did to itself ural who had been against price. The increases in fact Railroad Commission of Texas and purchaser agree governmental its would not to agencies. He had 872 in Lopeno producers. These made
been familiar Field contracts were many years, par- in 1960 before testifying before and 1961 the lines of production company were laid field. study he ticular into the this case made a They Queen City most gas gas, rec- some but and sales of from the field. The cover produce Comp- wells Wilcox ords of sales in the office of the com- The estimated reserves princi- formation. troller Public Accounts were the company mitted amount information, thereunder to each pal source of he also his but feet of approximately to 300 cubic billion gas considered contracts made sales gas, covers the Alamo producers contract various in the field. different located five counties. fields Mr. Baumel ascertained amounts enable latter contract was made gas during sold from in the each well field Alamo another to fulfill contract four-year period and the re- amount agreed supply public consumer pro- ceived for This same. included Antonio requirements City San of. sand, Upper Queen City duction from the twenty Tennessee period years. 2,700-foot sand, Queen City presented has five contracts which were By sand. mathematical calculation Wilcox package Commis- to the Federal Power average price he determined that the ap- sion, an apparently connection with during ceived for all period, sold its plication extend for authorization to except that marketed under pipeline Lopeno Field. was 16.047‡ contracts, Morris mcf. per Lopeno He stated that pursu- City the amounts received Queen sands ant depleted Nordan & Morris Field are about two-thirds disregarded remaining because such contracts were reserves of from 50 far the gas gas. original too out line. from billion feet Since cubic Upper Queen City sand low there- flowing pressure producing was of of wells pressure, compression charge he 1,000 per deducted a approximately pounds from was ¾ n per average price, mcf square inch, but the fallen same has now 13.047‡ testified that mcf mar- range was the an 150 to estimated of from ket gas. pres- pounds. Vela gas is sufficient Wilcox 1,000 pound enter line without
sure to
compression.
appears
Queen
It
also
parties agree
dry
City
extremely
Wilcox
be determined by
sales
distillate
it.
has some
comparable
time,
quality
*7
availability
marketing
outlets. See
by
pointed
As
out
the Court of Civil
Cir.,
Phillips
Bynum,
v.
Petroleum Co.
5th
de-
Appeals,
fully
these differences were
contend,
Respondents
We only tified that there differ- produce is no substantial leased wells Queen ence City gas between and that upper Queen City sand. The formation, by making cal- Wilcox prices used Baumel his deliverability that the of the Vela wells paid are Tennessee and culations those average is better than Queen under for the field. Alamo their contracts various by the City gas at the found Queen intermixed gas are City gas and Wilcox appear that court, it not and the trial does pipelines, in their purchasers lack of field shut in for from each well in the gas produced “end use” of and where In these circumstances also stated market. is the same. witness source purchasers amended their per mcf that after an was allowance City at Queen wells pressure additional to cover compression charges, made for in- fairly prices, may it be equal greater no or There is differential is not material. demand for there was a as a ferred that the amount allowed contention per mcf. gas at compression charge Vela is not reasonable. 13.0470 Phillips Petrole Respondents rely upon had not the BTU content Baumel tested supra; Bynum, Co. v. Arkansas Nat um gas. He reasoned that Wil- of Wilcox Sartor, supra; ural Gas Co. v. Shamrock Queen City gas are cox of similar Coffee, Cir., Corp. 5th Oil Gas v. type quality mixed because 409; F.2d Pub by purchasers pipeline Sartor v. United Gas the same lic do Service 186 La. 173 So. devoted to the same ultimate use. We distinguished These attempt cases to determine his con- whether valid, Bynum involved in respect entirely facts. clusion in that be- gasoline was for the extraction appears it used cause that since 1960at least 10 products. and other There market was no additional wells have been drilled to the companies for the same from dealt Queen City sands. These were dedicated fuel, heating producers and was under amendments paid by compa held that the existing amounts prices ranging contracts at net competent nies was not evidence market In the mcf. 13.0470 14.240 price. Certain inad light of contracts were held such facts and the circum- Gas, missible above, in Arkansas Natural because stances mentioned the trial court the undisputed testimony that the required was not showed as a matter of law to guaranty large ject opinion quantities to deliver Baumel’s that there is no sub- from another field constituted quality stantial difference in the market price paid consideration for the there Queen value of City gas. and Wilcox evidence that no would enable agree with the Court of Civil jury to determine to. what this amounted Appeals that the average mathematical say, however, went on to that: prices paid in the field is not a final apparent stipula- “It is also answer problem difficult of deter prices tion average as to con- under mining any particular time. substantially tracts the lease similar to But see Wall v. United Gas Public Service in suit improperly excluded. Co., supra, and Arkansas Natural Gas Co. respect testimony same is true in Sartor, Cir., 5th 78 F.2d this 924. In Hargrove wherein his as to instance, however, both the witness and the established market at the well the trial required court were figure to fix a *8 prices and the paid sales, in other under that would be used in determining the substantially conditions, similar amount that should have been the to sought to be elicited.” period years. owners over a of four constant, production If the rate of figure average would be the market it was held that market Coffee price period. price for the by Baumel’s conclusion is to be comparable determined price
as to the ques by market the in sales and opinions of not the of witnesses corroborated, moreover, by tion the as to the purchasers sales what could or should Queen City gas paid. of under to have amendments in contracts introduced United, existing respondents’ contracts. As for Gas Public imposed obliga Service upon contention that there tions producers is no demand for so different from by plaintiffs judgment. probably It the latter that those assumed declaratory did not constitute led to a court concluded the same modification of portion market judgment. evidence as to the of of the As we construe court, plaintiffs’ gas. judgment Here the record shows of trial does compa- purport prices paid by purchasers give prospective operation to to sales, finding finding price. rable and in evidence of a market our Such finding rights trial is not of the supports the court determinative of respect after price. produced to market to with 31, January 1964. the basis On of Although neither Alamo Tennessee nor construction, declaratory part we think the began taking gas part until the latter of af- trial court’s should be judgment 1960, ex- the Tennessee contracts were by precluded firmed. Petitioners are not 5, February It executed on or about 1960. recovering judgment in this case from prices also is clear that the mentioned payments in royalty deficiencies on There producer. were net Baumel to 1964, 31, upon January after respondents’ argument merit is no then proof prevailing at the market granting a the trial court erred in time was sold or used off recovery period prior December to premises. Ben Gammel- C. Co. v. Jones 1, 1960, failing gathering and in to deduct 320, Statesman Pub. 100 Tex. 99 S.W. charge. compression in addition costs 701, L.R.A.,N.S., awarding money recovery After royalty payments
deficiencies Appeals The Court of Civil also 1, 1960, period February January held that the royalty properly owners were 31, 1964, of the trial recovery denied damages for drain February declares that from and after age prior which occurred to the time holding those the lessee are under re gave written notice the lessee as obligated pay royalty one-eighth quired terms of lease. the market of all sold or used value following provisions: contains Ap- premises. off the of Civil Court “In the les- event lessor considers that peals held that there evidence since is no filing complied the date obliga- between see has not all its judgment, suit and the date the declara- hereunder, express and im- tions both pro- tory judgment should be modified to plied, production been secured before has operator required secured, vide production or after has been basis of market writing, notify lessor shall lessee in set- Petition- judgment. and after the date of ting specifically respects les- out what erroneous, say that because ers this was Lessee see has breached contract. this re- deprive any right them it will days after sixty (60) shall then have deficiency royalty payments cover a ceipt meet of said notice within which to filing and the date between the date of suit any or commence to meet judgment. alleged by The serv- the breaches lessor. precedent to
ice of said notice shall be
lessor
bringing
any
action
contended in the
Velas
any
on said lease for
cause and no such
Appeals
prop
of Civil
that the trial court
brought
lapse retrospec
action shall be
until the
erly gave prospective as well as
days
sixty (60)
after service of such
operation
finding
that the mar
tive
the service of
notice
lessee. Neither
ket
mcf.
was 13.0470
acts
nor the
said notice
*9
doing
for the reasons
This contention is unsound
any
by lessee aimed to meet all or
court, but
pointed
by the intermediate
out
ad-
alleged breaches shall be deemed an
an
implicit
argument
in the
advanced is
so
has
presumption
mission
lessee
or
the trial court’s
erroneous construction of
discovery
after the
the Velas in 1934
obligations here-
perform all its
failed
a well
but before
field
under.”
premises.
leased
Short-
on the
was drilled
are
nature
included
of this
Provisions
interests,
ly
acquiring
after
such
protect
lessee
primarily to
the lease
entered into the
Morris
&
Nordan
ex
breach
some
a forfeiture for
against
mentioned
contracts
purchase and sale
parties
press
implied obligation. The
Morris,
the husband
was
above.
who
the lessor
have intended
could not
Gaines,
and left her
died in 1937
Mrs.
recovering
forever barred from
be
would
and Mrs. Gaines
his estate. Nordan
all of
giving
prior to the
damages sustained
under the
rights
their
retained
notice,
sen
and we hold that the first two
1950, when
until
operators
the lease
with
only
actions
quoted
apply
tences
above
C. Palmer.
they
the same to
sold
Joe
and not to suits for dam
to cancel
lease
portions
working interest
certain
The
Stansbury,
ages. See
Oil Co. v.
Shell
formerly owned
premises was
of the leased
Tex.Civ.App.,
ref.
(wr.
price of The trial interest in some land. royalty paid he on they are entitled to recovery a her full court awarded her 13.047 n not per mcf. do the basis of pay- deficiency royalty share agree. Group, against ments the American-Texas by upon relied According the doctrine Since she owned which includes herself. Appeals, sometimes Civil Court of interest, working part of of the this 25% ac- quasi estoppel, party called a who has been her fa- have should pre- cepted the of a transaction is benefits against vor members of the repudiating accompa- cluded later roy- Group deficiency 75% nying obligation. Theriot resulting or See alty paid by Group. on Smith, Tex.Civ.App., 181 263 v. S.W.2d Life (wr. dis.); Fidelity Ins. Co. United argued It the judgment is also Fowler, Tex.Civ.App., S.W.2d in favor of cannot Nordan Mrs. Gaines Estoppel and (wr. dis.); 28 Am.Jur.2d prove stand they because did not 59; Estoppel Waiver § § C.J.S. they during amount of royalty received attempt- Nordan and Mrs. Gaines not period involved in this suit. The record ing repudiate escape any obligation or paid shows that were on the Velas gas purchase light of the contracts. In the stipulated 2.3 nn basis subsequent these events terms of gas purchase There being contracts. no agreements royalty provisions make the contrary, evidence to the the trier fact financially the lease burdensome to the could reasonably royalty conclude that all operators, but affords no basis for de- this owners paid were on same basis. nying to and Mrs. Gaines Delhi-Taylor insists that the trial court right royalty to recover their share of the in denying erred jury a trial on the demand provided operators in the lease. The therefor by attorneys represent- filed acquired prem- their interests leased ing the point- Estate interest. As knowledge ises with constructive actual or Jamison Appeals, ed out the Court of Civil provisions of the contracts and the case was regularly called for trial on Feb- lease. purchase It also clear that the gas ruary jury 1965. A was available but good faith, contracts were made no demand therefor had been made at that previously royalty indicated the owners n time. The of the owners Estate agreed never should be Jamison interest continuance, moved for a paid price stipulated on the of the basis agreed was post- the case would be therein. opinion they pre- our are not poned until special non-jury a setting on cluded insisting upon rights their April 12th. demand for jury was under the fact that filed and the fee jury April was predecessors in their title 2nd. It an entered overruled order accepted of the benefits contracts. April 9th in trial court found position of Mrs. dif Gaines is that the request made a reason- ferent respect. from that of Nordan in one able time in advance date set for While latter has had no interest in the trial. The court grant- further found that leased since 1950 other than his ing request require that would royalty, nonparticipating Mrs. Gaines also case September, be continued until would owned working interest until interfere with handling of the court’s after present suit was That filed. cir business, prejudice and would the other not, however, cumstance deprive does her parties who had made arrangements for of the right paid royalty to be in accord the attendance of their witnesses. ance with the terms the lease. She party to thé suit in two different ca Rule Texas Rules Civil
pacities, Procedure, requires one as owner and the that the demand *11 and necessary and estates Michael E. be and the fee of jury made Jamison minors, Reiter, or, and day Jamison, there- C. A. appearance if “on or before Patrick other, Corporation, after, Delhi-Taylor set a before the date Oil reasonable time severed, and and as to all such claims non-jury dock- be for trial the cause on the of et, judgment ad- the trial days in of but not less than ten controversies dis- is set and the cause is agree Civil court aside vance.” with the Court of adjudi- in or Appeals days made missed as moot without that a demand ten merits; timely mat- a cation on the necessarily advance is not as law, cir- ter of and that in view of the the trial court judgment That the (2) did the trial cumstances mentioned court and denies in far as it L. A. so denying a in case. jury not err in trial this recovery for any Hannah D. Gaines Mrs. drainage recognize past failure Mrs. or future Nordan and Gaines di- reasonably develop premises, defi- leased they any entitled not to recover Corporation ciency payments prior Texas and accruing rects Oil Gas in 1, 1960, provides that filed wells and accordingly to October drill additional in terminate Appeals. shall be cancelled and of Civil remittitur Court concerning drilled complaint are not has been made the event additional wells No time therein Appeals Civil the manner and within the action of Court of respect parts These pro- provided, to the is reversed. with conditional decree severed, is as to them judgment, visions of the trial nor case are also court’s court; holding to the district there attack on that the lia- is remanded its cause bility of the American- the members of That (3) as to remainder Group royalties Texas sev- unpaid is cause: eral and joint. not The cause will parts preserve severed into three so as to judgment of the trial court (a) The dismiss, grant rulings, these the motion due L. A. Nordan for favor of give Nordan and Gaines the provide Mrs. unpaid is reformed lief to are entitled here. Delhi-Taylor Cor- Oil he recover from $1,411.76, from poration the sum Ap- The judgment of the Civil $4,077.39,from the sum Group Venture peals accordingly aside, set Corporation the Texas sum Oil & Gas ordered: $1,726.95, D. Gaines from Mrs. Hannah (1)That claims be- all and controversies Company $1,363.12, sum of from Nordan Vela, Vela, Ernes- tween M. Carlos Juan G. $1,363.12, the sum of Mrs. Leo from Vela, tina Emma de and hus- Vela Garcia $1,226.81, T. from C. Moss the sum of hand, band, Garcia, M. one Jesus $1,226.81, Estate sum of Jamison Corporation, and Texas Oil & Gas Claudia $272.62, A. the sum with from C. Reiter Eaves, husband, L. Eaves and R. Jack from interest on each of said amounts Sidney husband, Anita Nordan Lindsay and per April 12, 1965, at the of six cent rate Lindsay, A. Marian Nordan Hudson annum; per Hudson, husband, individually Harold W. trial (b) and as partnership members of the of Nor- royal- Hannah favor of Mrs. D. Gaines Company, dan & Hannah D. Gaines and provide unpaid husband, ties due and is reformed only in her (but Arthur Gaines Delhi-Taylor Oil that she recover from capacity defendant-operator and as a Corporation $1,058.83, the sum of from own- capacity plaintiff-royalty her $3,057.86, Group the sum from husband, Leo Venture er), Leo G. Moss and $1,022.34, Moss, Gibbs, Company Nordan & sum of Raymond administrator G. deceased, $920.11, from Moss sum of Mrs. Leo G. Jamison, C. estate of T. widow, the C. the sum Jamison, indi- T. Estate Faye Gibbs Jamison Jessie vidually $920.11, guardian persons A. sum C. Reiter and as equal wells, the his may connect its or Cor- $204.47, and Texas Oil & Gas one-eighth part of oil interest poration $1,295.21, sum premises. from the leased April saved amounts from on each of said annum; per at the six cent rate of lessor, “To *12 to found, only is gas from each well where off being the used while sold or as same so (c) of the trial premises one-eighth the of the is affirmed. reformed price at amount so sold the wells of the appeal are taxed one-sixth The costs of * * * used, or Velas, against against the one-sixth gas for pay royalty “To lessor as to Gaines, two-thirds jointly, by and used from oil well Corporation, and Gas against Texas Oil gasoline, lessee for the manufacture Delhi-Taylor Corporation, and the Oil one-eighth such market value of Group, jointly. American-Texas lessee, If gas. gas by is sold then HAMILTON, J., Dissenting by lessor, agrees royalty, lessee as GRIFFIN, in which and GREEN- SMITH one-eighth the net proceeds derived HILL, join. JJ., gas from the casinghead sale of said at wells.” GRIFFIN, by Dissenting opinion J. are provision we royalty
It second It will be here. primarily with concerned DISSENTING OPINION is to be by provision royalty noted being sold gas paid for “while same is HAMILTON, Justice. distinguished premises,” off used respectfully I dissent. by the gas used lessee gas used operational purposes, and holding I cannot agree with the Court’s For these purposes. lessor for domestic price” that the “market mentioned royalty provides no uses lease elsewhere royalty as of must be determined clause further, paid. says, provision be is to delivery the gas. date of While I one-eighth the royalty shall be that such agree holding with the Court’s con- price” No one at the wells. “market necessarily in the gas contracts is sales not price” es- a “market tends this means be, controlling, very depending it could well I the wells. by daily tablished sales at con- on the circumstances under which Appeals, quote Civil tract was determined. The burden is al., Corporation et v. Texas Oil & Gas royalty suing on those deficiencies to al., Tex.Civ.App., 68 et 405 S.W.2d Vela equiva- show such contract is not (1966). price” lent to the “market called for can- provision. burden That pre- gas “The average be discharged showing problem sents a difficult because of most long- gas for which is sold in other sales, has been gas nature of the sale, term contracts of unless subject litigation. of much otherwise) comparable (and in time recognized, the undis- Courts have Phillips Petro- the contracts under attack. confirms, puted evidence in this case 196, Company Bynum, leum F.2d 201 v. 155 industry practicalities (5th Cir.1946). quire long-term be sold under pipelines must because have question In the oil lease in supply source sufficient committed obligated lessees themselves: justify financing, op- construction Therefore, daily eration. lessor, free the rules “To deliver to credit of appli- daily quotations sales and cost, have no line lessee pipe
879
gas is
when
holding that
Co.,
This Court
Refining
Atlantic
Foster v.
cation.
contract
long-term
marketed under
v.
485,
Co.
Phillips Pet.
Cir.,
F.2d
5
329
made
been
deemed to
sale is
Tex-
196; Gex v.
Cir.,
F.2d
Bynum,
purchaser,
delivery to
the time of
Tex.Civ.App.,
S.W.2d
Tex.Com.App.
Amis,
Martin
refers to
n.
hist.”
wr.
case
In this
288 S.W.
well”
contract
price at
a written
phrase “market
lessee executed
con-
less
gasoline plant
lessee
received
raw
means market
sell
processing
percent of
expense,
any,
twenty-five
if
necessary
sideration of
manufactured
the well
proceeds
gasoline
transporting
therefrom,
proceeds
Co. v.
Le
Oil
pipeline
purchaser.
Cuno
and one-half
*13
190,
that he
Smith, Tex.Civ.App., 306 S.W.2d
the
Lessor contended
gas.
residue
Producing
gasoline
all the
e.;
one-eighth r.
Hemler v. Union
was entitled to
n.
in
1941,
824,
all the
F.Supp.
manufactured,
one-eighth
affirmed
D.C.La.
part,
in
lessor
part
grounds
royalty,
the
gas
and reversed on
residue
because
(5th Cir.);
Creek Oil
gasoline
tract, specifically said lease, did in this reasons its price” pre- must be sold the “market that Atlantic the lessee is same bind vailing when the was run. The was, put itself unnecessarily and has into provision inis as follows: jacket compels strait it to which it feels compelled Sth hold as the Circuit felt was “The conventional problem hold in the Foster case. (a) gas, in- Lessee are: on Oil problem before us no means cluding hydro-carbons, one-eighth the Sth Circuit in the Foster case. ( nn ) had saved from of that case the itself to lessee bound land, said to be delivered to same price” “market prevailing the field when pipe credit line of the Lessor into us the case was delivered. In before *14 and to be at the sold therefor price” pay lessee bound itself to “market prevailing where for field long- (necessarily for sold * sold under * run; when contracts). term agree did not lessee pay royalty pro- price” prevailing It the “market in the will be noted under the delivery, field at time authority agreed but vision lessee did not even one-eighth ( nn ) sold; is, price” to sell “market that lessor’s interest in long-term sold it under at a until had been delivered to contract de- credit termined pipeline. of the lessor time the contract was in the parties made. If the against long- in effect contracted understand term to be sold under gas sales have no contracts. long-term limitation determined as lease Under had to before us. contract, of time making it not terms of is lessee owns all say gas, it reasonable contemplated by and was understood market-price parties, was to be that it determined as would be sold the usual the same time? customary manner, is, and long- under term contracts. Most legal commentators subject who have written on the before us obvious, It therefore, Foster presented favor the view here this dis- case persuasive should have force de- no Siefkin, sent. Rights Lessor and Lessee termining question before in the us Respect With and Sale of Gas as to Gas instant case. There is no intimation that Royalty Provisions, Fourth Annual Insti- the Sth Circuit would have reached the same tute on Taxation, Oil and pp. Gas Law and result if the contract made Atlantic had 181, 188-91; Bounds, Orders, Division contained the words “market when Fifth Annual Institute on Oil and Gas Law run,” thus, clearly unambiguously and ob- Taxation, 116-17; pp. 91, and Brown, The ligating pay royalties it to based market 6.09, Leases, Law Oil and Gas Section price existing on the date the was run or p. (1958); Analysis 118 Gregg, of Usual fact, delivered. In is submitted that Provisions, Oil and Lease Gas South Tex- there expressed clear intimation 14; Law Journal Tex.Jur.2d Court’s price” the “market Sec. 389. specified in sales (made contract good faith, and at the I prices best and terms would hold that the lessors recover available when lessee-producer nothing by was com- virtue of their suit for ad- accord- rehearing are The motions for in the Court’s royalties. I concur ditional judgment ingly granted, part, our former non- damages holding on their suit aside, rendered judgment is now cause to is set development remand and its as follows: trial court. Ap- Court of Civil GRIFFIN, SMITH GREENHILL aside, it is ordered: peals is set join JJ., in this dissent. be- (1) That all claims and controversies Vela, Vela, Ernestina tween M. Carlos Juan
DISSENTING OPINION husband, Vela, Emma Vela de Garcia hand, Garcia, M. on the one Jesus GRIFFIN, L. Corporation, Justice. Texas Oil & Claudia Gas Eaves, husband, R. Anita Eaves and Jack Appeals in agree I the Court of Civil husband, Lindsay Sidney A. Nordan recovery disposition it made of Lindsay, Marian Nordan and hus- Hudson sought by Nordan and Mrs. Gaines. band, Hudson, individually and Harold W. pur- predecessor in title and Nordan Gaines’ partnership as members contract, original chased under the Company, and hus- Hannah D. Gaines out, at the therein set band, only in her (but Arthur Gaines owners of the and mineral various capacity defendant-operator aas and not interests under this contract. When capacity plaintiff-royalty in her as a own- corporation was dissolved in 1941 and its husband, er), Mrs. Leo Moss and Leo G. assets distributed to Mrs. and Nor- Gaines Moss, Gibbs, Raymond G. administrator dan, they expressly ratified and confirmed deceased, the estate of Jamison, C. T. Jessie original gas. contract of sale of the Faye widow, individually Jamison, a Gibbs my opinion, Mrs. Gaines cannot and Nordan *15 persons guardian as of and estates recover. Jamison, of Michael E. and Patrick Jamison minors, Reiter, Delhi-Taylor Oil C. A. ON MOTION FOR REHEARING severed, other, Corporation, on as claims and controversies to WALKER, Justice. judgment is set aside and of trial court their motions rehearing, respond- for opin- the cause is dismissed as moot without correctly point ents out: merits; adjudication ion or (1) That since L. A. Nordan did not to (2) That the action of L. A. Nordan give appeal notice of except to trial drainage may damages for recover judgment, position court’s he is not 1965, 12, prior April have occurred complain action of that court severed, trial, to this date of is and as denying him a recovery past drainage, the trial court judgment of the case the West Irvin, Texas Utilities Co. 161 Tex. v. affirmed; is 5, 609; 336 S.W.2d court of the trial (3) judgment That the (2) That neither Nordan nor Mrs. Gaines far it denies L. A. Nordan so complained in rehearing their motions for recovery for Mrs. Hannah D. Gaines in the Appeals Court of Civil of the modifi- reasonably drainage or failure future cation declaratory por- court of the denies Mrs. premises, develop the leased tion of the trial judgment; court’s past any recovery Hannah D. Gaines Cor- Texas & Gas (3) drainage, That directs Oil judgment of the trial pro- wells and poration additional includes interest money on the several drill be cancelled the lease shall 1, 1965, coveries to November vides rather than are wells additional April event terminated thought as we when our within in the manner and original opinion not drilled was handed down. provided, therein time is reversed. These severed, parts and as case also GONZALES, Jr., Appellant, Antonio them the to the dis- cause is remanded court; trict Texas, Appellee. The STATE of (4) That as to the remainder of the No. 41355. cause: Appeals of Criminal of Texas. (a) declaratory portion the trial 26, 1968. June provided judgment court’s is reformed Ap- judgment Civil the Court ;
peals
(b) judgment the trial court
favor L. A. due Nordan for unpaid provide that he reformed to Delhi-Taylor Corpora-
recover from Oil $1,411.76,
tion sum of from the Venture
Group $4,077.39, the sum of from Texas $1,726.95, Corporation
Oil Gas the sum Mrs. Hannah D. sum Gaines
$1,363.12, Company the from Nordan & $1,363.12, Moss
sum Leo G. $1,226.81, sum the C. T. Jami- $1,226.81, son Estate the sum and from $272.62, A. Reiter the with inter-
C. sum of on each
est from November said amounts
1, 1965, per at the cent rate of six ;
annum
(c) trial court in royal-
favor of Mrs. Hannah D. Gaines unpaid provide due and
ties reformed Delhi-Taylor she recover from Oil
Corporation $1,058.83, the sum from $3,057.86, Group the
Venture sum of $1,022.34, Company sum $920.11,
from Mrs. Leo G. Moss sum C. the sum of T. Estate Jamison
$920.11, from Reiter the sum of C. A.
$204.47, Corpo- and from Texas Oil Gas& $1,295.21,
ration sum of with interest
on each of from November amounts said
1, 1965, per cent the rate of six
annum; and
(d) The judgment of the trial court as reformed
so is affirmed. respects for re- motions
hearing are overruled. The will days within which to this date rehearing.
file motions for