Duffy v. Callaway

• Decision Date: 24 January 1958
• Docket Number: No. 3348,3348
• Citation: 309 S.W.2d 853
• Parties: B. A. DUFFY et al., Appellants, v. Gib CALLAWAY, Appellee.
• Court: Texas Court of Appeals

Page 853

309 S.W.2d 853

B. A. DUFFY et al., Appellants, v. Gib CALLAWAY, Appellee.

No. 3348.

Court of Civil Appeals of Texas, Eastland.

Jan. 24, 1958.

Rehearing Denied Feb. 14, 1958.

McMahon, Smart, Sprain & Wilson, King & Willoughby, Abilene, for appellants.

Gib Callaway, Brownwood, Scarborough, Black & Tarpley, Abilene, for appellee.

GRISSOM, Chief Justice.

In 1942 Callaway purchased 9,624 acres of land in Stonewall County. B. A. Duffy, A. S. Goodloe and E. W. Moutray then jointly owned 721 acres of minerals scattered throughout that ranch. Amon G. Carter owned 984 mineral acres therein. In March, 1945, Callaway and Duffy, Goodloe and Moutray executed one oil and gas lease, for a primary term of ten years, on all of their separately owned interests in said ranch to F. L. Hawk. Carter executed a separate lease. In 1945 Hawk assigned approximately half of the lease to Honolulu Oil Corporation and the other half to George Livermore. On March 2, 1947, Livermore released all that was assigned to him. The Hawk lease did not contain a provision granting the lessee the right to surrender part of the leased premises and retain part. Approximately half of the entire tract covered by the community lease to Hawk was released to said lessors by Livermore. Callaway and Duffy, Goodloe and Moutray each accepted the release of his minerals and thereafter independently executed leases thereon to new lessees without the joinder of the other. Thereafter, neither claimed any of the bonuses or rentals paid on said new leases of the released minerals. At the time of the execution of said release there had been no development under the Hawk lease and there was no production on any of the land originally covered by said community lease until about eight years thereafter.

The Hawk lease contained no pooling agreement. It did not contain an entirety clause. See Eighth Annual Institute on Oil and Gas Law and Taxation, pages 153, 156 and Superior Oil Co. v. Dabney, 147 Tex. 51, 211 S.W.2d 563. It did not grant the lessee the right to release part of the leased minerals. It appears to have been written upon an ordinary printed lease form and no clauses were added except a provision that drilling should not stop payment of rentals on any land except the section upon which a well was being drilled. Callaway contends that this is a provision against pooling. We do not think so.

The first production was obtained on June 10, 1955, more than ten years after execution of the Hawk lease and eight years after the release by Livermore. There are now eight producing wells on land originally covered by the Hawk lease. Six of them are on land released by Livermore. Said six wells were drilled under new leases executed after said release by only the owner of that particular tract.

Callaway instituted this suit against Duffy, Goodloe and Moutray, or their successors, seeking a judgment declaring that their royalty interests were not pooled by the Hawk lease. Duffy, Goodloe and Moutray answered by seeking a judgment declaring they were pooled and that defendants are entitled to participate in production on all land originally covered by the Hawk lease, regardless of the release by Livermore, the acceptance by each of his own released minerals, the separate execution of new leases and collection and retention by each during all said time of bonuses and rentals paid thereon. The court held that the royalties were not pooled by the Hawk lease and that each was entitled to all the royalties paid on oil produced from his own land. Duffy, Goodloe and Moutray, or their successors in interest, have appealed.

Since the decision in French v. George, Tex.Civ.App., 159 S.W.2d 566 (Writ Ref.), our Supreme Court has consistently held under the facts not materially different from those in this case that the execution of a single lease by several owners of adjoining tracts, without expression of a contrary intention, has the effect of pooling the land covered by the lease, as a matter of law. See Ward v. Gohlke, Tex.Civ.App., 279 S.W.2d 422, 427 (Writ Ref.). The statement by Judge Calvert in Southland Royalty Co. v. Humble Oil & Refining Co., 151 Tex. 324, 249 S.W.2d 914, 916, seems to be conclusive of the proposition:

'It may be noted here that respondents suggest a re-examination of the Parker and George cases on the theory that the courts should not attribute to lessors jointly executing a general form lease, without more, and intent to pool or unitize their properties; that the language of the general form lease was never intended to effect or to operate a pooling agreement. This argument is not entirely unappealing. The Texas rule in this respect is not of universal application. See 116 A.L.R. 1267 et seq. On the other hand, the law of the Parker and George cases has now become a rule or property in this state and 'should not be changed in the absence of other controlling circumstances, even though good reason might be given for a different holding.' Tanton v. State National Bank of El Paso, 125 Tex. 16, 79 S.W.2d 833, 834 . No doubt many such leases have been executed and delivered by lessors and accepted by lessees in reliance on the holding in the Parker and George cases that they effectively unitize the land included therein. It must therefore be held that when the parties executed the lease in 1932 they intended to create a unitized lease with all of the usual incidents and legal consequences thereof.'

Hon. Leo Hoffman in the Seventh Annual Institute on Oil and Gas Law and Taxation, at pages 221, 222, said:

'It has been established in Texas as a matter of law and as a rule of property that when several individual owners of separate tracts unite in a single lease to a third party for oil and gas under the usual lease form, with no contrary provision, their royalty interests under the lease are pooled, and the royalties on production anywhere on the lease must be divided or shared among the lessors in the proportion that the acreage...