Amarillo Oil Co. v. Ranch Creek Oil & Gas Co.
| Decision Date | 18 February 1925 |
| Docket Number | (No. 2403.)<SMALL><SUP>*</SUP></SMALL> |
| Citation | 271 S.W. 145 |
| Parties | AMARILLO OIL CO. v. RANCH CREEK OIL & GAS CO. |
| Court | Texas Court of Appeals |
Appeal from District Court, Potter County; R. C. Joiner, Judge.
Action by the Ranch Creek Oil & Gas Company against the Amarillo Oil Company. Judgment for plaintiff, and defendant appeals. Reversed and remanded.
H. G. Hendricks and J. W. Crudgington, both of Amarillo, Sam G. Bratton, of Santa Fé, N. M., and Shell S. Bassett, of Tulsa, Okl., for appellant.
Stone & Guleke, of Amarillo, and Rowland & Bryant, of Fort Worth, for appellee.
In the fall of 1918, the Amarillo Oil Company, hereinafter called appellant, had drilled and was the owner of what is known as the Hapgood gas well. December 7, 1918, the appellant entered into a contract with P. A. Little, which, in substance, stipulates that if appellant established a gas field which produced as much as 25,000,000 cubic feet of natural gas per day, that the said Little or his assigns would build a pipe line from the field to the city of Amarillo for the purpose of marketing gas, and would pay the appellant the sum of 8 cents per 1,000 cubic feet at the well or wells for all gas so marketed. The contract conferred upon Little the preference right of purchasing all gas from the wells in the field, and further provided that, in order that Little or his assigns might be assured of sufficient territory producing as much gas as might be needed by the said Little or his assigns in supplying the market, the appellant, by a covenant running with the land, bound itself to lease to said Little 11 sections of land described in the contract, upon which the latter would have the right to prospect for gas in the event more gas was needed. It was further provided that Little should be reimbursed for all reasonable expenditures by him in future development, and, in the event further gas wells were obtained, Little should have the right to connect his pipe line with any and all wells so secured, and that neither the appellant nor any assignee could sell gas from any of said wells until Little had declined to exercise his preference right to take such gas under the terms of the contract. There is a stipulation that, in the event there is a deficiency of gas at any time, then if the appellant failed or refused to make further development, that Little or his assignees would have the right to purchase gas from other parties or to prospect for gas upon any of the sections owned by appellant in addition to the 11 sections described in the contract. It was further stipulated that, if Little, in developing the field under the contract, should discover oil in paying quantities, that such oil well should become the property of appellant upon payment by it of the reasonable expense incurred in drilling said well.
Early in the year 1919 Little and his associates, including the Union Petroleum Company, which they controlled, applied to the city commission of the city of Amarillo for the purpose of entering into an agreement for a rate to be charged for gas to be thereafter furnished, and if such rate could be agreed upon, then for the granting of a franchise authorizing them to transport, distribute, and sell natural gas in said city. Further, it appears that, at the time appellant was negotiating with the city commission of Amarillo, the Ranch Creek Oil & Gas Company, hereinafter referred to as appellee, was also the owner of a well which produced a considerable quantity of natural gas for which appellee was desirous of obtaining a market. Storm Bros., at that time operating under the name of Amarillo Gas Company, were the owners of a franchise to distribute artificial gas in the city limits, and, in connection with Little and his associates, were endeavoring to have their franchise amended in order to permit them to distribute and sell natural gas, and it was contemplated that Little and his associates would acquire and obtain control of the Amarillo Gas Company if the amendment to the franchise was secured. Pending the negotiations between Little, Storm Bros., and their associates and the city council, looking to the amendment of the franchise of the Amarillo Gas Company and the fixing of a rate to be charged for natural gas, the appellant and appellee, acting through the presidents of the respective companies, executed the following contract:
After this, appellant secured a franchise from the city. It appears that Little and his associates, in the interim, had organized and chartered a corporation known as Union Petroleum Pipe Line Company for the purpose, as may be inferred from the record, of owning and operating a pipe line from the gas field to the city limits of Amarillo. After the construction of the pipe line, the appellee proposed to appellant to connect its gas well with the pipe line. Upon refusal of appellant to permit this to be done, the appellee, as plaintiff, filed this suit in the court below, alleging that it was ready, able, and willing at all times to comply with the terms of the contract above set out, and the refusal of appellant to permit it to turn its gas into the pipe line, claiming as damages, one-fourth of all sums which the Amarillo Oil Company, as the owner of the gas field, had received from the Pipe Line Company for gas, at the rate of 8 cents per 1,000 cubic feet, to the date of the trial. It is alleged that the life of the gas wells of the two companies was not less than 25 years, and probably not more than 50 years, during which time both companies would be able to supply the Pipe Line Company with all the gas it would need for the Amarillo market.
The appellant, as defendant below, alleged that the contract of August 28, 1919, was executed by the respective presidents of the parties, and detailed the preliminary negotiations, setting out the accompanying circumstances relative to the execution of the contract as explaining the intention and meaning of the contract. It is specifically alleged that during the negotiations between Kritser, as president of appellee, and W. O'Brien, as one of its directors, on the one hand, and M. C. Nobles, defendant's president, on the other, that a few days prior to the execution of the contract Nobles presented a counter proposal to Kritser and O'Brien to the effect that if any contract was made, then the leases and property of the appellee company should bear the same burdens as were then borne by the appellant company under the latter's contract with Little and his associates, and that appellee should join with appellant in said contract with Little; that when the above set out contract between the parties was made by Nobles, he believed that Kritser had accepted said proposition for the appellee company, and would join with appellant in the contract with the Pipe Line Company, and that such understanding became a part of said contract and of the consideration for its execution; that when appellant company ratified said contract, it was upon the representations of its president, M. C. Nobles, that such was the meaning, intent, and obligation thereof, and that it would not have ratified the same unless it had so believed. It is further alleged that the words "this contract" in the writing above set out were intended to mean and did mean that appellee desired to enter with appellant into the pipe line contract, and assume its share of the burdens therein imposed upon the appellant company. Appellant pleaded in the alternative that if the parties executing the contract did not intend as above alleged, then that there was no mutuality, and their minds had never met.
By a trial amendment, the appellant pleaded, in substance, that a promise to withdraw objections by appellee to the application of the Union Petroleum Company for a franchise from the city commission of Amarillo for the distribution and sale of gas in said city, coupled with appellee's promise to support said application for a franchise, was a consideration moving appellant to make the contract, which also included a promise on the part of appellee to support the granting of a franchise in a city election to be held to determine that question; that such agreements, promises, and undertakings were in violation of public policy and rendered the contract void. The trial court sustained exceptions to this trial amendment.
The controversy was submitted to a jury upon special issues which, with the answers thereto, are as follows:
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