Cox v. Miller

• Decision Date: 20 October 1944
• Docket Number: No. 2474.,2474.
• Citation: 184 S.W.2d 323
• Parties: COX et al. v. MILLER.
• Court: Texas Court of Appeals

184 S.W.2d 323

COX et al. v. MILLER.

No. 2474.

Court of Civil Appeals of Texas. Eastland.

October 20, 1944.

Rehearing Denied November 24, 1944.

Appeal from District Court, Brown County; A. O. Newman, Judge.

Action by Mitchell M. Cox and others against Walter Miller and another to restrain defendant pulling casing from a gas well. The defendant not named filed a disclaimer and was dismissed from the suit and defendant named filed a cross-action. From a judgment for defendant named, plaintiffs appeal.

Affirmed.

Baker & Baker, of Coleman, for appellants.

Dibrell, South & Snodgrass, of Coleman, for appellee.

GRISSOM, Justice.

On September 13, 1937, Mitchell M. Cox and others executed an oil and gas lease to R. M. Ragsdale. It recited that for a consideration of $10 paid and "the covenants and agreements hereinafter contained on the part of the lessee to be paid, kept and performed," the lessors had leased 179 acres for the purpose of mining and operating for oil and gas. The lease contained the following provisions material to a decision of the case (1) "It is agreed that this lease shall remain in force for a term of five years from this date, and as long thereafter as oil or gas, or either of them, is produced from said land by the lessee." (2) That lessee agreed to pay lessor 1/8 of the proceeds derived from the sale of gas; and (3) "If no well be commenced on said land on or before the 13th day of September, 1938 this lease shall terminate as to both parties, unless the lessee on or before that date shall pay * * * One Dollar per acre, which shall operate as rental and cover the privilege of deferring the commencement of a well for twelve months from said date. In like manner and upon like payments * * * commencement of a well may be further deferred for like periods of the same number of months successively."

(4) "Should the first well drilled on the above described land be a dry hole, then and in that event, if a second well is not commenced on said land within twelve months thereafter, from the expiration of the last rental period for which rental has been paid, the lease shall terminate as to both parties, unless the lessee on or before the expiration of said twelve months shall resume the payment of rentals in the same amount and in the same manner as hereinbefore provided. And it is agreed that upon the resumption of the payments of rentals, as before provided, that the last preceding paragraph hereof, governing the payment of rentals and the effect thereof, shall continue in force just as though there had been no interruption in the rental payments."

(5) "Lessee shall have the right at any time to remove all machinery and fixtures placed on said premises, including the right to draw and remove casing."

(6) "Lessee agrees, as part of the consideration for the execution and delivery of this lease, to commence the drilling of a well upon the above described 179 acre tract on or before the expiration of sixty (60) days from the date of the execution of this lease by all the lessors above named, and in any event not later than the 1st day of December, 1937; said well to be drilled so as to test the Ranger Lime at an approximate depth of 2500 feet, unless oil or gas should be found in paying quantities at a lesser depth. In the event lessee should fail to commence the drilling of said well within the time and in the manner hereinabove stated, this lease shall be of no further force and effect, and neither party thereto shall be under any further liability to the other."

On March 21, 1938, Ragsdale assigned the lease to Dr. J. H. Harvey. April 1, 1938, Dr. Harvey began drilling a well. On or before September 13, 1938, Dr. Harvey completed the well. Gas was discovered with a daily potential production of 1,000,000 cubic feet with 390 pounds pressure. There was no oil. Dr. Harvey decided to save the well as a paying producer of gas and informed plaintiffs of his intention and that he was going to attempt to market the gas. Whereupon, Dr. Harvey capped the well, shutting in the gas and leaving 1087 feet of 8½ inch casing and 2410 feet of 5¾ inch casing in the well. He then, according to his testimony, diligently sought a market for the gas and tried to get a pipe line built to the well; these efforts continued from September 1938 until the spring of 1943; he was never able to sell any gas. He, therefore, decided to plug the well and salvage the casing. Miller drilled the well for Dr. Harvey and owned some part of the casing in the well. As a part of the consideration for drilling the well, Miller was entitled to an additional $2500 to be paid out of gas or oil produced and sold from the well. Miller was instructed by Dr. Harvey in April, 1943 to draw the casing and plug the well. When Miller attempted to draw the casing plaintiffs, on April 20, 1943, obtained an injunction preventing him from doing so. Dr. Harvey then sold or gave his interest in the casing to Miller.

Plaintiffs, Mitchell M. Cox and John McInnis, obtained the injunction restraining defendant from pulling the casing upon allegations to the effect that the lease had terminated long ago; that no producing oil or gas well was ever drilled by defendants; that defendants had abandoned the lease; that defendant's claim to the casing was barred by limitation and that pulling the pipe would injure plaintiff's land. Dr. Harvey filed a disclaimer and was dismissed from the suit.

Miller filed an amended answer and cross-action, wherein he alleged the execution, in September, 1937, of the lease by Cox and others to Ragsdale, alleged its terms and specifically (1) the fifth provision, giving lessee the right to remove his casing "at any time." Miller further alleged (2) that, in March 1938, lessee Ragsdale sold and assigned the lease to Dr. Harvey; that the assignment recited that plaintiffs should receive 3/64 of the proceeds from the sale of oil and gas credited to the 7/8 working interest in said lease to the extent of $3,000, if and when produced, saved and marketed. Defendant also alleged that "said sale, assignment and transfer was made with the acquiescence and approval of the said Mitchell M. Cox and John McInnis, who owned the surface estate and part of the royalty in said land and who received an additional cash consideration from the said Dr. J. H. Harvey for reinstatement of said lease, and all the lessors in said original lease recognized the validity of said lease, notwithstanding the failure of the lessee, R. M. Ragsdale, to comply with drilling obligations thereof, up to that time, the said J. H. Harvey was induced to accept said assignment and drill a test well for oil and gas on said lease to reliance upon the validity of said oil and gas lease." Defendant further alleged (3) that on April 1, 1938, Dr. Harvey, having contracted with Miller to drill the test well, the drilling of said well was duly commenced and thereafter diligently prosecuted by defendant Miller for Dr. Harvey and "gas was discovered at a depth of about 2510 feet, with daily potential production of 1,000,000 cubic feet and rock pressure of 390 pounds; that in drilling said well 710 feet of ten inch casing was run therein, 1890 feet of 8½" casing was run and set on top of the gas sand and cemented; that after discovery of said gas and failure to discover oil in paying quantities the said Dr. J. H. Harvey decided to save said gas well as a paying gasser and he informed the plaintiffs herein of his intention to save said gasser and to attempt to market the gas and left said well cased with 1087 feet of 8½" casing and 2410 feet of 5¾" casing and capped said well shutting in the gas pending the finding of a market therefor; that said well was completed as a gas well on or about the first day of September, 1938."

By supplemental petition plaintiffs admitted the foregoing allegations of the defendants' answer. Miller alleged the further facts (not admitted in plaintiffs' pleadings) that a gas well was discovered "in sufficient quantity and sufficient rock pressure to constitute the same a paying gas well, conditioned on available market therefor; that there was no immediate market for said gas and no gas pipeline in the vicinity to which connection could be made"; and that it was necessary to either sell the well and lease or find a market for the gas; that Dr. Harvey tried to find a purchaser for the well or a market for the gas, both before and after expiration of the five year term. Miller alleged that "because of the discovery of said gas and completion and equipping said well which was capable of producing gas in paying quantity whenever a market therefor could be obtained," Dr. Harvey had a valid lease on plaintiffs' land from September 13, 1937, to September 13, 1942, "without any obligation to drill or pay rentals"; that from the completion of the well until enjoined from pulling the casing Dr. Harvey tried to find a market for the gas "but without success." He alleged that Dr. Harvey had transferred his interest in the casing to Miller; that "there is no reasonable prospect of a market for the gas from said well notwithstanding its capacity to produce gas in paying quantities." Miller asked for dissolution of plaintiff's injunction and judgment for title to the casing and an adjudication of his right to pull the casing or for judgment against plaintiffs for converting it. He also sought judgment for damages caused by the injunction.

The jury found:

1. That the gas well at the time of completion was a producing gas well in paying quantities.

2. That from September 13, 1939 to April 13, 1943 was, under all the facts and circumstances in evidence, a reasonable time for Miller to pull the casing.

2a. That from September 13, 1942 to April 13, 1943 was, under all the facts and circumstances in evidence, a reasonable time for Miller to pull the casing.

3. That Harvey did not abandon the casing.

4. That Miller was not damaged by the injunction.

5....