Adams v. Cannan

• Citation: 253 S.W.2d 948
• Decision Date: 19 November 1952
• Docket Number: No. 12461,12461
• Parties: ADAMS v. CANNAN et al.
• Court: Texas Court of Appeals

Page 948

253 S.W.2d 948

ADAMS v. CANNAN et al.

No. 12461.

Court of Civil Appeals of Texas, San Antonio.

Nov. 19, 1952.

Rehearing Denied Dec. 31, 1952.

Lloyd & Lloyd, Alice, for appellant.

Perkins, Floyd & Davis, Alice, for appellees.

NORVELL, Justice.

Appellant, O. S. Adams, as plaintiff below, brought this suit against Morris Cannan and others for the purpose of having it judicially determined that an oil and gas lease upon his property had terminated. The lease was dated January 21, 1949. Adams was the lessor and I. K. Howeth, the lessee. Appellees are Howeth's assignees. Judgment was rendered after trial to a jury denying Adams the relief which he sought, except as to Howeth, who filed a disclaimer.

The controlling issue of this case relates to the effect which should be given to a letter written by Adams to the appellees. The theory upon which the judgment rests is that this letter excused the appellees' performance of certain matters specified in a clause of the lease contract. The primary term of the lease had expired, production had been obtained and then ceased. The habendum clause of the lease provided that:

'It is agreed that this lease shall remain in force for a term of one (1) year from this date, said term being hereinafter called 'Primary Term,' and as long thereafter as oil or gas, or either of them is produced from said land by the lessee.'

The lease further provided that:

'It is specially agreed that in the event that oil or gas is being produced or is obtained from said premises after the expiration of the primary term hereof and said production shall for any reason cease or terminate, lessee shall have the right at any time within ninety (90) days from the cessation of such production to resume drilling operations in the effort to make said leased premises again produce oil or gas, in which event this lease shall remain in force so long as such operations are continuously prosecuted, as defined in the preceding paragraph, and if they result in production of oil or gas, so long thereafter as oil or gas is produced from the premises.'

The preceding paragraph referred to stated that 'drilling operations shall be considered to be continuously prosecuted if not more than sixty (60) days shall elapse between the completion or abandonment of one well and the beginning of operations for the drilling of a subsequent well.'

The issues submitted and the jury's answers thereto are as follows:

'Special Issue No. One: Do you find from a preponderance of the evidence that the Morris Cannan O. S. Adams well ceased production of oil or gas in paying quanties for a period of 90 consecutive days prior to June 27, 1950? Answer: No.

'Special Issue No. Two: Do you find from a preponderance of the evidence that the defendants, their servants, agents or employees failed to conduct drilling operations on the lease in question for a period of ninety consecutive days during the latter part of March, and the months of April, May, June and July of 1950? Answer: Yes.

'Special Issue No. Three: Do you find from a preponderance of the evidence that the defendants, their servants, agents, or employees failed to conduct drilling operations on the lease in question for a period of 90 consecutive days prior to June 27, 1950? Answer: Yes.'

It is undisputed that oil production terminated during the latter part of March, 1950, and was not resumed until some time in August of said year. The well ceased to flow some time early in March and thereafter, in order to secure production, it became necessary to procure gas from an outside source in order to start and maintain the flow of oil. The jury found that there was a ninety-day period during the latter part of March and the months of April, May, June and July, 1950, during which no drilling operations were being conducted and that there was a period of ninety days in which drilling operations were not conducted prior to June 27, 1950, the date Cannan received the letter hereinafter discussed. The jury evidently believed that the date upon which the well ceased to produce was a few days short of the ninety-day period immediately prior to June 27, 1950. The trial court took the position that for Adams to recover it was essential that he establish that the well ceased producing ninety days before the receipt of the letter, on June 27, 1950, and that the jury's answer to Special Issue No. 1 was fatal to appellant's claim.

It appears that on March 1, 1950, appellant's attorney sent the following letter to appellee Morris Cannan, viz.:

'Dear Mr. Cannan:

'Mr. O. S. Adams, Alice, Texas, tells us that about a year ago he executed an oil, gas and mineral lease in favor of Mr. I. K. Howeth, San Antonio, Texas, on 250 acres of land owned by Mr. Adams near Alfred, with the understanding that a well was to be commenced within 120 days. Mr. Adams is informed that a well was drilled but no royalty has been paid to him since the well was drilled.

'Mr. Adams tells us that it is his information the well is not producing oil in paying quantities and that for a period of some months, the exact time he could not definitely state today, the well failed to produce any oil, gas or other minerals.

'Mr. Adams feels that something ought to be done with the lease and asked us to take the matter up with you. Frankly, he believes the lease has terminated but would like to be reasonable about the matter if some adjustment can be made. Will you please write us at your early convenience? * * *'

On March 7, 1950, Cannan answered the attorney and stated that the Adams well had been producing continuously since it had been drilled except when remedial work was necessary; that the Sinclair Oil & Gas Company, the purchaser of the oil, was notoriously slow in making its payments and he had written a letter to the Sinclair Company, a copy of which was enclosed. The copy of the letter to Sinclair indicated that Mr. Adams and other owners of royalty interests were concerned over nonpayment for the oil runs, and that Adams had suggested terminating the lease for that reason. It was said that this delay might be due to some dissatisfaction with the title to the working interest of the lease but there was 'probably no question relative to the royalty owners' interest and that these people could possible now be paid.'

Apparently nothing further was done or said with reference to the matter until June 26, 1950, when Adams' attorney again wrote to Mr. Cannan. This letter is relied upon by appellees as excusing their failure to resume operations to make the leased premises again produce oil or gas within the specified ninety-day period. The letter reads as follows:

'Dear Mr. Cannan:

'We have had some previous correspondence about the lease executed in January, 1949, by Mr. O. S. Adams, Alice, Texas, in favor of Mr. I. K. Howeth, covering 250 acres out of 700 acres owned by Mr. Adams in Jim Wells County. It is Mr. Adams' understanding that the lease has been assigned to you and his information is that no oil has been run to the pipeline from the well drilled on the land since the latter part of March, 1950, and that no oil has been produced from the land since the latter part of the same month. It is his information also that there has been no drilling or reworking operations on the land since the production ceased.

'Under the circumstances, and since the primary term of one year has expired, it would seem that the lease has terminated for...