Day & Co., Inc. v. Texland Petroleum, Inc.

• Decision Date: 29 August 1986
• Docket Number: No. 07-85-0268-CV,07-85-0268-CV
• Citation: 718 S.W.2d 384
• Parties: DAY & CO., INC. and Bobby G. Day, Individually, Appellants, v. TEXLAND PETROLEUM, INC., Appellee.
• Court: Texas Court of Appeals

Page 384

718 S.W.2d 384

DAY & CO., INC. and Bobby G. Day, Individually, Appellants, v. TEXLAND PETROLEUM, INC., Appellee.

No. 07-85-0268-CV.

Court of Appeals of Texas Amarillo.

Aug. 29, 1986.

Rehearing Denied Oct. 15, 1986.

Second Rehearing Denied Nov. 5, 1986.

Thomas J. Griffith, Ralph H. Brock, Lubbock, for appellants.

Scott, Douglass & Luton, Frank Douglass and Carroll Martin, Austin, for appellee.

Before REYNOLDS, C.J., and COUNTISS and BOYD, JJ.

BOYD, Justice.

Appellants Day & Co., Inc. and Bobby G. Day appeal from the trial court's order granting summary judgment in favor of appellee Texland Petroleum, Inc. and John Shoaf and his wife Genelda Shoaf. John Shoaf and his wife Genelda Shoaf have not participated in this appeal. Appellants originally filed suit seeking a declaratory judgment as to the ownership by Day & Co., Inc. of the leasing or executory rights under a certain deed. Upon joint motions for summary judgment, the trial court overruled appellants' motion for summary judgment and granted appellee's motion. We affirm the judgment of the trial court.

The material facts in this case are undisputed. By warranty deed dated January 22, 1974, Mildred Williams Keaton and Francell Williams Young conveyed to Day & Co., Inc. approximately eighty acres of land in the south part of the southwest quarter of Section 17, Block D-2, Lubbock County, Texas. The parties do not contest that, by way of this deed, the grantors reserved to themselves an undivided one-half interest in the minerals under that land and conveyed to Day & Co., Inc. "the power to execute any and all future leases for the development of said lands or any portion thereof, for oil, gas or other minerals, without the joinder of Grantors, their successors and assigns." The only limitation on this right to lease was that no lease was to be executed which provided for a royalty of less than one-eighth of the value of oil, gas, and other minerals covered by said lease or leases.

By a subsequent warranty deed dated March 11, 1974, Day & Co., Inc. conveyed the eastern ten acres of that tract to John F. Shoaf and his wife Genelda Shoaf. The deed "expressly excepted from this conveyance and reserved unto the Grantor herein, its successors and assigns forever, an undivided 1/4 interest in and to all oil, gas and other minerals in, on, under and that may be produced from the herein conveyed property, an undivided 1/2 interest in and to said oil, gas and other minerals having been heretofore reserved."

On February 9, 1978, Day & Co., Inc. leased all eighty acres to John R. Stringer for a primary term of five years. On January 27, 1981, John and Genelda Shoaf, as lessors, executed an oil and gas lease covering their ten-acre tract to John R. Stringer. On February 10, 1981, Day & Co., Inc. executed an oil and gas lease on the property previously covered by the February 9, 1978 lease to Bobby G. Day. Day & Co., Inc. contended it had the right to execute a new lease because the Stringer lease had terminated as to Keaton's and Young's undivided interest for failure to pay delay rentals to Mrs. Keaton and Mrs. Young until February 1981. The leases to John Stringer were ultimately assigned to Texland Petroleum, Inc. ("Texland") who drilled and completed the Texland-Rector & Shumacher John R. Shoaf Unit No. 1 well on February 23, 1983.

In five points of error, appellants contend that the trial court erred in granting appellee's motion for summary judgment and in overruling appellants' motion because (1) the Stringer lease conveying the Keaton and Young interest had expired by its own terms, and Day & Co., Inc. acquired the Keaton and Young interest by lease before there was any ratification of the expired Stringer lease; (2) the Shoafs "conveyed only their 1/4 undivided mineral interest in the Shoaf tract," the Stringer lease covering the Keaton and Young interest had expired by its own terms, and "Day & Co., Inc. held the Keaton and Young mineral interest in the Shoaf tract by virtue of the Day lease;" (3) Day & Co., Inc. owned an undivided three-fourths interest in the executive rights of the Shoaf tract, so that Texland has no leasehold interest in three-fourths of the minerals under that tract; (4) Day & Co., Inc. owned or held by lease an undivided three-fourths interest in the mineral rights of the Shoaf tract, so that Texland has no leasehold interest in three-quarters of the minerals under that tract; and (5) alternatively, Day & Co., Inc., as owner of the executive rights to Keaton's and Young's interest, had a right to re-lease the Keaton and Young interest when it was forfeited under the Stringer lease or to lease that interest not covered by the Shoaf lease.

In its judgment, the trial court specifically held:

a. The executive rights in the easternmost ten acres of the S/2 of the SW/4 of Section 17, Block D-2, H.E. & W.T.R.R. Survey in Lubbock County, Texas ("the Shoaf tract") are owned as follows: a one-quarter ( 1/4) undivided interest is held by Day & Co., a three-quarter ( 3/4) undivided interest is held by John and Genelda Shoaf;

b. The lease from John and Genelda Shoaf ("Shoaf") to John R. Stringer dated January 27, 1981, recorded at Volume 49, Page 168 of the Oil, Gas and Mineral Lease Records of Lubbock County, Texas is valid and effective, and covers Shoaf's one-quarter ( 1/4) undivided interest, Mildred Keaton's one-quarter ( 1/4) undivided interest and Francell Young's one-quarter ( 1/4) undivided interest in the Shoaf tract;

c. The lease from Day & Co. to John R. Stringer on the S/2 of the SW/4 of Section 17, Block D-2, H.E. & W.T.R.R. Co. Survey in Lubbock County, Texas dated February 9, 1978, recorded in Volume 42, Page 270 of the Oil, Gas and Mineral Lease Records, currently held by Texland Petroleum, Inc., is valid and effective as to one hundred percent (100%) of the mineral interests covered thereby in the S/2 of the SW/4 of Section 17, Block D-2, H.E. & W.T.R.R. Co. Survey, Lubbock County, Texas, more specifically described in the warranty deed from Mildred Keaton and Francell Young to Day & Co., Inc. dated January 22, 1974 and recorded at Volume 1373, Page 839 of the Deed Records of Lubbock County, Texas;

d. The lease from Day & Co. to Bobby G. Day dated February 10, 1981, recorded in Volume 49, Page 173 of the Oil, Gas and Mineral Lease Records of Lubbock County, Texas is invalid and ineffective.

Logical continuity requires us to first determine the ownership of the executive rights in the eastern ten acres conveyed by warranty deed to the Shoafs. At the time Day & Co., Inc. executed the warranty deed to the ten acres to the Shoafs, it owned all the surface estate, one-half of the mineral interest, and all of the executive rights. With the execution of the deed, Day & Co., Inc. conveyed all the surface while excepting "an undivided 1/4 interest in and to all the oil, gas and other minerals in, on, under and that may be produced from the herein conveyed property, an undivided 1/2 interest in and to said oil, gas and other minerals having been heretofore reserved."

Executive rights are one of several rights inuring to the mineral interest. Elick v. Champlin Petroleum Co., 697 S.W.2d 1, 4 (Tex.App.--Houston [14th Dist.] 1985, writ ref'd n.r.e.). Thus, when a severance occurs in the surface and mineral estates, these rights, absent some express designation otherwise, are part of the mineral estate. Houston v. Moore Investment Co., 559 S.W.2d 850, 852 (Tex.Civ.App.--Houston [1st Dist.] 1977, no writ). Since the deed from Day & Co., Inc. to the Shoafs is silent as to the executive rights, those rights inured one-quarter to the quarter mineral interest retained by Day & Co., Inc. and one-quarter to the quarter interest granted to the Shoafs. Thus, the issue for our specific determination is whether the executive rights as to the Keaton and Young one-half mineral interest were granted with the surface to the Shoafs or were retained by Day & Co., Inc., absent any express designation in the deed.

The parties do not contend that the conveyance is ambiguous nor did they claim at the time of the summary judgment hearing that there were material issues of fact for resolution. Thus, we must follow the rule that the intent of the parties, as expressed in the language used in the deed, is to be ascertained and given effect and it is assumed that the parties intend every clause to have effect in evidencing their agreement. Alford v. Krum, 671 S.W.2d 870, 872 (Tex.1984). The intent of the parties must be determined from the four corners of the deed, Peveto v. Starkey, 645 S.W.2d 770, 772 (Tex.1982), and the court, when possible, will harmonize the parts so none of the provisions are rendered meaningless. Woods v. Sims, 154 Tex. 59, 273 S.W.2d 617, 620 (1954).

An owner of minerals has several distinct rights: (1) the right to participate in bonuses, rentals, and royalties, (2) the right to lease the land for oil and gas development, and (3) the exclusive right to enter the premises for the purposes of drilling. Elick v. Champlin Petroleum Co., 697 S.W.2d at 4. The owner of minerals may convey, or reserve in his conveyance, all or any part of his interest or rights in the minerals. Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543, 544 (Tex.1937).

In Allison v. Smith, 278 S.W.2d 940 (Tex.Civ.App.--Eastland 1955, writ ref'd n.r.e.), Bertha Clark had previously conveyed to Neely a one-half mineral interest in a certain tract of land and had retained the executive rights. She then conveyed half of the tract to Key. The mineral interest previously conveyed to Neely was subsequently assigned to other parties. Then Key, acting pursuant to the power reserved to Bertha Clark, executed an oil and gas lease. One of the assignees of the previously conveyed one-half mineral interest challenged Key's right to execute the lease on his behalf. The Court held that by the deed from Clark to Neely, Clark reserved the exclusive right to...