Dorchester Gas Producing Co. v. Harlow Corp.

• Decision Date: 23 July 1987
• Docket Number: No. 07-86-0024-CV,07-86-0024-CV
• Citation: 743 S.W.2d 243
• Parties: DORCHESTER GAS PRODUCING COMPANY, Appellant, v. The HARLOW CORPORATION, et al., Appellees.
• Court: Texas Court of Appeals

Page 243

743 S.W.2d 243

DORCHESTER GAS PRODUCING COMPANY, Appellant, v. The HARLOW CORPORATION, et al., Appellees.

No. 07-86-0024-CV.

Court of Appeals of Texas Amarillo.

July 23, 1987.

Rehearing Denied Sept. 3, 1987.

Broadus A. Spivey and Paul E. Knisely, Spivey, Grigg, Kelly & Knisely, Austin, William J. Lowe and Jerry D. Courtney, Lowe and Courtney, Clarendon, David Martindale, Martindale, Martindale & Harris, Pampa, for Harlow Corp.

Frank Douglass, Tom W. Reavley and Ray N. Donley, Scott, Douglass & Luton, Austin, Hubert D. Johnson, Johnson & Cravens, Dallas, Robert L. Templeton and Robert E. Garner, Templeton & Garner, Amarillo, for Dorchester Gas Producing.

Charles R. Watson, Jr. and D. Patrick Long, Culton, Morgan, Britain & White, Amarillo, Donald M. Hunt, Carr, Evans, Fouts & Hunt, Lubbock, for Hagy.

Leo J. Hoffman, Strasburger & Price, Dallas, for Harrington.

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

DODSON, Justice.

This action presents a title dispute and other controversies between the phase owner of the "gas and gas rights" and the phase owners of the "oil and oil rights" under an oil and gas lease on a section of land located in Gray County. Dorchester Gas Producing Company (hereinafter called "Dorchester") owns the "gas and gas rights" phase. The Harlow Corporation, W.V. Harlow, Jr., individually, and as trustee of the W. Van Harlow, III, Trust Estate, H.G. Cambern, Kenneth Cambern, Eagle Investment Corporation, Rick J. and Cindy Harris, David L. Martindale, Noel Bruce, J.W. Adams, individually and as independent executor of the R.W. and James Adams Estate, Joyce and C.A. Scott, Lynn O'Brien and Fred Vanderburn (hereinafter called "Harlow") own the "oil and oil rights" phase. Lawrence R. Hagy (hereinafter called "Hagy") and Sybil B. Harrington and the Don and Sybil B. Harrington Foundation (hereinafter called "the Harringtons") own overriding royalty interests in the "oil and oil rights" phase. The trial court construed the title document in question, submitted the remaining matters to a jury and rendered judgment resolving all matters in dispute. By a limited appeal, Dorchester challenges certain adverse portions of the judgment. Also, Harlow challenges adverse portions of the judgment and Hagy brings two cross-points of error. We affirm.

Dorchester brought this action against Harlow seeking declaratory relief to establish its title to all of the gas, including casinghead gas, in all formations in and under the property in question and damages for the alleged conversion of its gas. However, Harlow claims that their ownership of the oil and oil rights include casinghead gas. Harlow maintains that casinghead gas is any gas produced with oil and that they have the right to produce gas from any formation so long as the production has a gas/oil ratio of 100,000 cubic feet or less of gas per barrel of oil. Dorchester also joined Hagy and the Harringtons in the case claiming that those parties aided Harlow in the alleged conversion of Dorchester's gas.

The record shows that Dorchester and its predecessors in interest have been producing gas from the Brown Dolomite formation in and under the property since the late 1940's. After 1979, Harlow drilled and produced oil and casinghead gas from four wells on the land from formations other than the Brown Dolomite formation. However, Harlow perforated their No. 1 and 2 wells in the Brown Dolomite formation (a gas-indigenous formation) and mixed the gas from that formation with the oil and casinghead gas from the other producing formations.

The trial court construed the documents in question and tried the other causes of action raised by the parties' pleadings before a jury. In response to special issues, with corresponding numbers, the jury determined that: (1) Harlow had produced "Dorchester gas" from the property in question; ¹ (2) Harlow had produced 187,125 MCF of Dorchester gas from the property in question; (3) Harlow had received $462,152 from the sale of such gas; (4) Hagy and the Harringtons did not aid or assist Harlow in the production of Dorchester gas from the property in question; and (5) the Brown Dolomite formation as it is found in Harlow's Beavers No. 1 and 2 wells is not productive of native oil under normal operating conditions.

In further response to special issues, with corresponding numbers, the jury determined that: (6) Dorchester had not established title to the entire natural gas leasehold estate in the Brown Dolomite formation under the property in question by adverse possession under the five-year statute of limitations; (7) Dorchester had not established title to the entire natural gas leasehold estate in the Brown Dolomite formation under the property in question under the ten-year statute of limitations; (8) $234,923.53 was the amount of reasonable and necessary attorney's fees for Dorchester for the preparation and trial of this case; (9) the amount of Dorchester's costs for paralegal services was $7,778.33; (10) Harlow's Beavers No. 1 oil well was not producing casinghead gas from the Brown Dolomite formation; and (11) Harlow's Beavers No. 2 oil well was not producing casinghead gas from the Brown Dolomite formation. ²

The trial court disregarded the jury's answers to special issues numbered eight and nine (for attorney's fees and paralegal services) and rendered judgment on the jury's answers to the other special issues. Accordingly, the trial court rendered judgment that Dorchester take nothing against Hagy and the Harringtons, that Dorchester recover no attorney's fees or paralegal fees, and that Dorchester recover from Harlow the amount of $470,382.11. The trial court further permanently enjoined Harlow from producing any gas from the Brown Dolomite formation under the property in question.

By its limited appeal, Dorchester brings three points of error; Harlow brings thirty-six points of error; and, Hagy brings two cross-points as additional reason for affirming the take-nothing judgment rendered in Hagy's favor on Dorchester's action against him. This appeal presents challenges to: (1) the trial court's construction of the title documents; (2) the trial court's jurisdiction; (3) the trial court's change of venue to Lubbock County; (4) the legal and factual sufficiency of the evidence to support the jury's verdict; (5) the submission of certain issues; (6) the measure of damages (7) the trial court's exclusion of certain evidence; (8) the trial court's charge; (9) the joint and several liability rendered in the judgment; (10) the trial court's failure to award attorney's fees; and (11) the trial court's take-nothing judgment as to Hagy and the Harringtons.

The Title Matter

Dorchester's first point of error and Harlow's first, second, third, fourth, tenth, eleventh and thirty-sixth points of error present the dispute concerning the construction of the title document in question. The oil and gas interest in dispute in this action derives from an "Oil and Gas Mining Lease" dated 21 March 1941, between G.H. Beavers, Linnie D. Beavers, Doris Beavers Mulky, Francis P. Mulky, collectively as lessor, and D.D. Harrington, as lessee. This original "Beavers lease" covered all of Section 117, Block B-2, H & G N Railway Company Survey, Gray County, Texas, the property in question. The record shows that the Beavers lease property became owned one-third each by D.D. Harrington, Lawrence R. Hagy and Stanley Marsh. The Harrington, Hagy and Marsh partnership incorporated under the name of "Panoma Corporation."

On 1 October 1949, the partners (or their successors in interest) assigned the Beavers lease to the Panoma Corporation. On 29 May 1953, the Panoma Corporation made an "Assignment of Oil Rights" to Lawrence R. Hagy. In pertinent part, the assignment provides:

THAT PANOMA CORPORATION, a Delaware corporation, hereinafter called "Assignor", ... does hereby assign, transfer and convey unto LAWRENCE R. HAGY, of Amarillo, Texas, hereinafter called "Assignee", all of its right, title and interest in and to those certain oil, gas and mineral leases situated in Gray County, Texas, which said leases and leasehold estates, the respective interests owned by Assignor therein, and the lands covered thereby are set forth and fully identified in the schedule attached hereto and marked Exhibit "A", insofar as said leases and leasehold estates cover the oil and oil rights only in and to the producing horizons thereunder which are situated in whole or in part above sea level.

It is expressly understood that Assignor reserves, excepts and retains unto itself, its successors and assigns, the oil rights under said leaseholds and title to all oil in, under and that may be produced from said premises from all producing horizons which are situated in whole below sea level, and it is further understood that this assignment does not cover or include any right, title or interest with respect to the gas or gas rights in, to and under said leaseholds. [emphasis added]

The gas in dispute in this case is situated above sea level.

The trial court construed the document in question and found, as a matter of law, that: (1) the conveyances in question are unambiguous; (2) by the use of the term "oil and oil rights" in the 1953 assignment from Panoma Corporation to Lawrence R. Hagy, the parties intended to convey and did convey the ownership of and title to crude petroleum in its natural state in the ground and ownership of and title to and the right to produce casinghead gas; and (3) casinghead gas is defined as "gas and/or vapor indigenous to an oil stratum and produced from such stratum with oil." The trial court further decreed that under the 1953 assignment the ownership of and title to casinghead gas, as defined above, was vested in Lawrence R. Hagy. The record shows that Dorchester became the successor in interest to the Panoma Corporation and that Harlow became the successor in interest to Hagy.

Harlow claims that...