Delta Drilling Co. v. Simmons

• Decision Date: 06 July 1960
• Docket Number: Nos. A-7451,A-7452,s. A-7451
• Citation: 338 S.W.2d 143,161 Tex. 122
• Parties: DELTA DRILLING COMPANY, Petitioner, v. Maxwell D. SIMMONS et al., Respondents.
• Court: Texas Supreme Court

Page 143

338 S.W.2d 143

161 Tex. 122

DELTA DRILLING COMPANY, Petitioner, v. Maxwell D. SIMMONS et al., Respondents.

Nos. A-7451, A-7452.

Supreme Court of Texas.

July 6, 1960.

Rehearing Denied Oct. 5, 1960.

Kliewer & Roach, Dallas, for petitioner.

Spruiell, Lowry, Potter, Lasater & Guinn, Tyler, for Maxwell D. Simmons & L. E. Ostrom.

Ramey, Calhoun, Brelsford, Hull & Flock, Tyler, for Citizens First Nat. Bank of Tyler.

Shank, Dedman & Coggan, Dallas, for J. A. Goodson Trustee, Caroline Hunt Trust Estate.

Smead & Harbour, Longview, for Longview Nat. Bank, Longview, Texas.

Wilson & Spivey, Tyler, for all other respondents.

GREENHILL, Justice.

This oil and gas case involves the construction of an instrument, a printed form, which is self-styled a 'Mineral Deed, Texas Standard Form.' The problems arise because of the words typed into some of the blanks in the form.

The land in question was subject to an oil and gas lease reserving to the lessor a royalty of one-eighth. The lessor then executed this instrument which, in the granting clause, conveyed to the grantees an undivided one-fourth interest in all the minerals. The instrument also provided in part (with the inserted typewritten words here italicized) that it was understood that in the event the existing lease terminated, 'an undivided none of the lease interest and all future rentals * * * and other mineral privileges shall be owned by said Grantee, owning one-fourth (1/4) of all oil, gas and other minerals in and under said lands, together with no interests in all future rents.'

The existing lease terminated, and the lessor executed another lease which provided for a royalty of one-eighth and an overriding royalty of 1/16 of 7/8. The questions are whether the grantees in the 'mineral deed' acquired the right to execute leases on the interests acquired in the 'mineral deed', and the extent of the interests acquired by the grantees in the 'mineral deed.' The trial court held that because the grantor had reserved the right to lease the mineral estate, the grantees in the 'mineral deed' did not have the right to execute leases, and that the grantees were entitled to participate in the 'usual' one-eighth royalty but not in the overriding royalty. That judgment was affirmed by the Court of Civil Appeals. 325 S.W.2d 222. We agree that the grantees did not acquire the right to execute leases, but we further hold that the grantees are entitled to their proportionate part of the royalty reserved in the subsequent lease, including the overriding royalty.

W. P. Langham, treated here as lessor of the oil and gas leases as well as the grantor in the 'mineral deed,' executed an oil and gas lease to Sanders. It reserved a royalty of one-eighth. Thereafter, in 1934, Langham executed the 'mineral deed' to 'Nivla Oil Corporation and J. C. Hawkins-each owning one-half.' The petitioner, Delta Drilling Company, herein called Delta, now owns the 1/8th mineral interest which Hawkins acquired as grantee in the conveyance. Nivla Oil Company and the rights acquired by it in the other 1/8th mineral interest are not involved here. The respondents Simmons et al. have succeeded to the rights of the lessor and grantor, Langham. Simmons brought this suit, which we shall regard as one for a declaratory judgment, to determine the rights of Delta (as Hawkins' successor) in the 'mineral deed.'

In the pertinent portions of the 'mineral deed' which are next set out, the words which are italicized are those which were typed into the printed form:

Langham, for $10 cash paid by Nivla and Hawkins 'each owning one-half' and called 'grantee,' granted, sold and conveyed to Nivla and Hawkins 'an undivided one-fourth (1/4) interest in and to all the oil, gas and other minerals in and under, and that may be produced from the following described land * * *'

After the description, the instrument continues:

'Together with the right of ingress and egress at all times for the purpose of mining, drilling and exploring said land for oil, gas and other minerals, and removing the same therefrom.

'Said land being now under an oil and gas lease executed in favor of R. B. Sanders, it is understood and agreed that this sale is made subject to the terms of said lease, but covers and includes one-fourth (1/4) of all of the oil royalty, and gas royalty due to be paid under the terms of said lease.

'It is understood and agreed that None of the money rentals which may be paid to extend the term within which a well may be begun under the terms of said lease is to be paid to the said Grantee and in event that the above described lease for any reason becomes cancelled or forfeited, then and in that event an undivided None of the lease interest and all future rentals on said land for oil, gas and other mineral privileges shall be owned by said Grantee, owning one-fourth (1/4) of all oil, gas and other minerals in and under said lands, together with No interests in all future rents.'

The instrument concludes with the usual habendum clause and a covenant of general warranty.

As stated, the lease to Sanders did become 'cancelled or forfeited,' and Langham thereafter executed another lease providing for an overriding royalty of 1/16 of 7/8 as well as the usual 1/8 royalty.

1. The right to execute leases.

Delta, as successor to Hawkins, contends that because the granting clause conveys an undivided 1/4th mineral interest, it is entitled to execute leases on its interest, which is half of the 1/4th granted, or an 1/8th mineral interest. Simmons contends, and the Court of Civil Appeals held, that the grant of the mineral interest was limited by the provision of the 'mineral deed' wherein it is stated that, 'It is understood and agreed that * * * in event the above described lease (to Sanders) for any reason becomes cancelled or forfeited, then * * * an undivided none of the lease interest * * * and other mineral privileges shall shall be owned by said grantee * * *'

We agree with the Court of Civil Appeals in this regard. In construing the words 'lease interest,' this Court in Garrett v. Dils Company, 1957, 157 Tex. 92, 299 S.W.2d 904, held that the words meant the right to lease. ¹ Under that holding, and under the facts of this case, the words 'lease interest' mean the right to execute oil and gas leases. The effect of the instrument in providing that none of the rights to execute leases passed to, or would be owned by the grantee, was to limit the grant and to retain in the grantor the right to execute leases upon the mineral interests which were conveyed. We therefore hold that Delta, as Hawkins' successor, did not obtain the right to execute leases on its mineral interests and that such rights were reserved by the grantor Langham and his successors.

2. The right to a free royalty of 1/8 of the total production.

Delta next contends that because the 'mineral deed' conveyed to Hawkins an undivided 1/8th of the minerals, it (as Hawkins' successor) is entitled to 1/8th of the total production as a free royalty. We overrule that contention. The mineral interests which Delta acquired in the 'mineral deed' were subject to being leased, as they were by Langham. When these interests were leased, Delta was and is entitled to 1/8th of the royalty reserved in the instrument leasing the mineral interests of Delta.

3. Participation in the overriding royalty.

Since Delta, as successor to Hawkins, is the owner of 1/8 of the mineral estate, Simmons concedes that it is entitled to 1/8 of the 1/8 royalty provided for in the lease now in effect. But Simmons contends that Delta is not entitled to...