Bishop v. Sanford

• Decision Date: 04 February 1931
• Docket Number: No. 3541.,3541.
• Citation: 35 S.W.2d 800
• Parties: BISHOP et al. v. SANFORD.
• Court: Texas Court of Appeals

Page 800

35 S.W.2d 800

BISHOP et al. v. SANFORD.

No. 3541.

Court of Civil Appeals of Texas. Amarillo.

February 4, 1931.

Rehearing Denied March 4, 1931.

Appeal from District Court, Carson County; W. E. Gee, Judge.

Suit by J. M. Sanford against Grover C. Bishop and others. From the judgment, defendants appeal.

Reversed and remanded.

Cooper & Lumpkin and Morgan, Culton, Morgan & Britain, all of Amarillo, for appellants.

Underwood, Johnson, Dooley & Simpson, of Amarillo, for appellee.

HALL, C. J.

On September 13, 1918, the appellee, Sanford, executed to appellant Grover C. Bishop an oil and gas lease upon 8,640 acres of land in Carson county. The lease provides for the payment of 30 cents per acre annual rental and permits the postponement of drilling operations by the annual payment of said rental for a period of five years. The lease recites that it is executed "for the sole and only purpose of mining and operating for oil and gas, the laying of pipe lines and the building of tanks and power stations and structures thereon to produce, save and take care of said products." It further contains the usual stipulation that the lease shall remain in force for a term of five years from its date "and as long thereafter as oil or gas or either of them is produced from said lease by the lessee." It is further stipulated that, if the first well drilled proves to be a dry hole and a second well is not commenced within twelve months, the lease should terminate as to both parties unless payment of rentals be resumed. It is declared that the estate of either party may be assignable in whole or in part, that the lessee is to deliver to lessor in tanks or pipe lines one-eighth of the gas from each well where gas only is found while the same is used off of the premises. It is specially provided that the lessor may have gas free for all stoves, inside lights for his dwelling, and the lessee shall pay $50 per year for gas produced from any oil well. The last paragraph of the lease is: "This lease shall terminate as to both parties hereto on Sept. 16, 1923, unless oil or gas is being produced in paying quantities."

The lessee, Bishop, sublet and assigned to numerous parties and corporations smaller tracts of the lands covered by his lease; 1,800 acres included in his lease reverted to the lessor, Sanford, by reason of the failure of certain assignees and sublessees to pay the annual rentals. None of this 1,800 acres is involved in this suit.

In 1922 the Humphreys Oil Company acquired from Bishop and other lease holders one-half of the acreage held by them, amounting to approximately 3,000 acres; the consideration for said transfers being the agreement by the Humphreys Oil Company to drill a well. It was stipulated that this lease was in force on August 14, 1923. In July or August of 1923 the Humphreys Oil Company drilled a well on the N. E. 1/4 of Sec. 11, block 3, which was included in its lease, and found gas in enormous quantities, estimated at about 140,000,000 cubic feet per day. The lessor, Sanford, being desirous of having the well deepened in an effort to secure oil, agreed with the Humphreys Oil Company that the latter should undertake to drill deeper, and, in order to secure a deeper test, Sanford stipulated that he would not assert any forfeiture of the lease on the forfeiture day if the well was ruined in an effort to secure oil. Acting under this contract, the Humphreys Oil Company endeavored to drill deeper, but, after having its drilling tools blown out of the hole on several occasions, it gave up the effort, capped the well, and a few weeks after the expiration of the primary term removed its derrick, bunkhouses, and all drilling equipment from the leased premises. The well was capped and abandoned in the latter part of 1923 or early in 1924, and was in that condition at the time of the trial about 2½ years thereafter.

About the 1st of March, 1924, the portion of the premises leased to the Humphreys Oil Company, including the capped gas well, was conveyed to the Pure Oil Company, and this latter company, in February, 1926, pursuant to notice from plaintiff, Sanford, entered into a written agreement with Sanford relinquishing its interest in the premises, and at the same time Sanford executed and delivered to the said company a new and separate lease covering the same property for a consideration of $15,200 in cash, certain reserved rights in the gas well, and $5 per acre contingent payment out of oil.

On the 20th day of July, 1926, Sanford filed this suit in the district court of Carson county. The first count is a formal action in trespass to try title. The second count is in three subdivisions wherein the plaintiff seeks to cancel the lease and have the leasehold interests terminated, because: First. There has been a cessation of user and of production after the expiration of the primary term. It is insisted in this part of the petition that there has been no production within the meaning or sense of the lease after the expiration of the primary term, and has therefore been a complete cessation of the uses and purposes of the lease. Second. That there has been an abandonment of the lease and of the leasehold estate by the defendants. In the third subdivision plaintiff seeks a forfeiture of the lease because of the alleged breach of implied covenants to market the gas, after the discovery well, and to further prospect and develop the lease for oil.

The original lease to Bishop covered all of surveys 12 and 14 in block 3, as well as the remaining sections going to make up the 8,640 acres of the original lease. On October 10, 1925, the plaintiff, Sanford, executed and delivered to Sue Stevens, Perry Stevens, Sam B. Vaughn, A. A. Lumpkin, and S. B. Tarkington, a royalty deed which recites a consideration of $100 cash and other valuable considerations, the granting clause of which is as follows: "Have granted, sold, conveyed, assigned and delivered, and by these presents do grant, sell, assign and deliver unto said grantees an undivided one-fourth interest in and to all of the oil, gas and other minerals, in, on and under and that may be produced from the following described land situated in Carson County, Texas, to-wit: First tract: The N. W. 1/4 of Sec. No. 12, Block No. 3, original grantee Adams, Beaty & Moulton, and containing 160 acres of land; Second tract: The N. E. 1/4 of Sec. No. 14 in Block No. 3, original grantee Adams, Beaty & Moulton, and containing 160 acres of land; together with the right of ingress and egress at all times for the purpose of mining, drilling and exploring said lands for oil, gas and other minerals and removing same therefrom."

The deed contains this further recitation: "The above mentioned and described lands are now under an oil, gas and mineral lease executed by the grantor herein and it is understood and agreed that this sale is made subject to the terms of said lease or leases, but covers and includes one-fourth of all the oil royalty and gas rental or royalty due and to be paid under the terms of said lease or leases. It is understood and agreed that one-fourth of the money rentals which may be paid to extend the term or terms within which a well may be begun under the term of said lease or leases is to be paid to the grantees herein and in the event the above described lease or leases for any reason become cancelled or forfeited, then and in that event an undivided one-fourth of the lease interests and all future rentals on said land for oil, gas and other minerals in, on and under the above described lands, together with an undivided one-fourth interest in all future funds." This recitation is followed by the usual habendum et tenendum and warranty clauses. The instrument was filed for record and duly recorded in the clerk's office of Carson county on the 13th day of October, 1925.

This instrument was introduced in evidence upon the trial, and the appellants insist that it shows that the grantees, Stevens et al., are necessary and indispensable parties to this suit. The issue was not raised in the trial court, but is urged here as fundamental error. The appellees insist that the contention is without merit under the general rules governing the making of parties defendant and for the further reason that the parties had entered into a written stipulation on the 16th day of April, 1930, which was introduced during the trial, the material portions of which are as follows:

"1st. That on or about September 16, 1918, the plaintiff J. M. Sanford as lessor executed and delivered to the defendant Grover C. Bishop as lessee, that certain oil and gas lease set out in plaintiff's petition herein, which is recorded in the deed records of Carson County, Texas, in Vol. 20, at page 183, et seq., and at the time plaintiff executed and delivered said lease he was the fee simple owner of all the lands and premises described in said lease, including all of the lands now involved in this suit.

"2nd. That plaintiff has remained and is still the fee simple owner of said land involved in this suit, subject to said lease, if the same is now subsisting and in force, and if said lease has terminated upon said land, then the plaintiff owns the reversion thereof and all of said former leasehold estate therein has become reinvested in the plaintiff.

"3rd. That if said lease is still subsisting and in force upon the lands in controversy, but legal ground and cause exists to cancel same, then the plaintiff is entitled to claim and enforce such cancellation."

"11th. That any party hereto many introduce this stipulation in evidence upon the trial of this cause to establish the facts herein stated and no further proof shall be required upon any fact herein stipulated. However, at the option of any party additional proof upon any subject herein may be offered consistent herewith."

In its final analysis, this is a case in which the plaintiff, Sanford, seeks to enforce equitable rights...