Elick v. Champlin Petroleum Co.

• Decision Date: 25 April 1985
• Docket Number: No. C14-83-777CV,C14-83-777CV
• Citation: 697 S.W.2d 1
• Parties: J.J. ELICK, et ux., Appellants, v. CHAMPLIN PETROLEUM COMPANY, et al., Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 1

697 S.W.2d 1

J.J. ELICK, et ux., Appellants, v. CHAMPLIN PETROLEUM COMPANY, et al., Appellees.

No. C14-83-777CV.

Court of Appeals of Texas,

Houston (14th Dist.).

April 25, 1985.

Rehearing Denied July 18, 1985.

John V. Elick, Bellville, for appellants.

Charles J. Wilson, E.H. Thornton, Jr., Wheat, Thornton & Burnett, Houston, for appellees.

Before JUNELL, MURPHY and SEARS, JJ.

OPINION

MURPHY, Justice.

This is an appeal from a summary judgment rendered in a declaratory judgment action. The trial court construed a deed reservation as failing to reserve executive rights in appellants over an 89.38 acre tract of land and this appeal resulted. Reversed and Remanded.

On March 12, 1945, J.J. and Virginia Elick conveyed the surface and mineral estates in an 89.38 acre tract of land located in Burleson County, Texas, to J.A. Maddox. This deed contained the following reservation:

"SAVE AND EXCEPT an undivided 1/32 royalty interest in and to all of the oil, gas and other minerals in, to and under and that may be produced from the land herein conveyed to be paid or delivered unto said J.J. Elick, his heirs, or assigns, as his own property free of cost to him from oil, gas and/or other minerals forever, together with the right of ingress and egress at all times for the purpose of storing, treating, marketing and removing the same therefrom.

It is further expressly agreed and understood that the said J.J. Elick, his heirs or assigns shall participate in one-half of the bonus paid for any oil, gas or other lease covering said land, and shall participate in one-half of the money rentals which may be paid to extend the time within which a well may be begun under the terms of any lease covering said land and said J.J. Elick, his heirs or assigns shall join in the execution of any future oil, gas, or mineral lease."

Through mesne conveyances the surface and minerals in the 89.38 acre tract of land passed to appellee, Mabel D. Norman. Norman's interest was made subject to all prior reservations.

On April 26, 1976, Norman executed an oil, gas, and mineral lease, leasing the 89.38 acre tract along with a contiguous 67.52 acre tract, to Fred Prickett. This lease was subsequently assigned to appellees Champlin Petroleum Company, Columbia Gas Development Corporation, Trinity Resources, Inc., Charles W. Alcorn, Jr., Fred C. Alcorn, Fisher-Webb, Inc., and Edwin L. Cox, with certain working interests and overriding royalties retained.

Although the Norman Lease covered two separate tracts, it did not contain an "entirety clause" or provide for the apportionment of royalty payments. In fact, the lease contained a "separate tracts" clause which stated that no pooling or unitization of royalty interests was intended or implied from the inclusion of separate tracts within the lease.

Appellants brought suit against appellees seeking to cancel and release the 1976 oil, gas and mineral lease (Norman Lease) covering the two tracts of land containing 89.38 and 67.52 acres. Appellants are the owners of a 1/32 royalty interest along with a 1/2 interest in all bonuses and rentals accruing under all oil and gas leases covering the 89.38 acre tract of land, and appellees maintain surface, mineral royalty, overriding royalty and leasehold interests under the Norman Lease.

Both appellants and appellees filed motions for summary judgment and the motion filed by the appellees was granted. The trial court found as a matter of law that appellants' reservation of the right to "join in the execution of any future oil, gas and mineral lease" did not constitute the reservation of an executive right. In addition, the court found that a reservation of executive rights by a party other than a mineral owner was void as an unlawful restraint on the alienation of the mineral estate. Consequently, the court concluded that Mable Norman, the owner of one-hundred percent of the mineral estate, owned the exclusive executive rights and had the power to execute a valid oil, gas and mineral lease covering the 89.38 acre tract.

This appeal requires us to determine, under appellants' four points of error, whether, as a matter of law (1) appellants reserved executive rights in the 89.38 acre tract (Point of Error No. 1), (2) a reservation of executive rights by a royalty owner constitutes a restraint on the alienation of the mineral estate (Point of Error No. 2), (3) failure to obtain appellants' joinder in the execution of the Norman Lease rendered the lease void as to appellants' interest alone or the entire leasehold estate (Points of Error Nos. 3 and 4(1) ), and (4) the Norman Lease lapsed by its own terms (Points of Error Nos. 4(2), 4(3), 4(4) and 4(5) ).

The summary judgment proof contains two stipulations by the parties agreeing that "Champlin Petroleum Company as operator for the holders of working interest under said lease has not drilled, and is not producing from the 89.38 acre tract, but has drilled a well and is producing from the 67.52 acre tract."

I. EXECUTIVE RIGHTS

The trial court incorrectly held that, as a matter of law, appellants failed to reserve executive rights in the 89.38 acre tract of land. Both parties agreed that the reservation was unambiguous and, thus, the primary concern of the court was to ascertain the true intention of the parties. Myers v. Gulf Coast Minerals Management Corp., 361 S.W.2d 193, 196 (Tex.1962). There being no allegation of fraud, accident or mistake, and no attempt to reform the reservation, the court must give effect to the intention of the parties expressed by the terms of the reservation. Woods v. Sims, 154 Tex. 59, 273 S.W.2d 617, 620 (1954). It is generally considered that parties intend every clause to have effect in evidencing their agreement, and their expression should not be thwarted except in the instance of plain and necessary repugnance. Thus, even if different parts of the reservation appear to be contradictory, the court will, when possible, harmonize the parts so that none of the provisions will be rendered meaningless. Woods, 273 S.W.2d at 620-21. See also R. & P. Enterprises v. LaGuarta, Gavrel & Kirk, 596 S.W.2d 517, 518-19 (Tex.1980).

In considering the reservation in the light of these principles, it must be noted that the owner of a mineral estate possesses a bundle of interests which can be separated, conveyed or reserved upon any terms as the mineral owner deems proper. Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543, 544 (1937); Martin v. Snuggs, 302 S.W.2d 676, 678 (Tex.Civ.App.--Fort Worth 1957, writ ref'd n.r.e.). These mineral rights consist of the rights to participate in bonuses, rentals and royalties; the exclusive right to enter the premises for the purpose of drilling; and the right to execute oil, gas and mineral leases. See 1 H. Williams & C. Meyers, Oil and Gas Law § 302 at 447 (1959). The mineral rights conveyed and those retained are disclosed by an analysis of the provisions of the reservation.

The first sentence of the 1945 deed, which reserved to the appellant grantors, their heirs and assigns, "an undivided 1/32 royalty interest in and to all of the oil, gas and other minerals" in the 89.38 acre tract, effects a reservation of a royalty interest. At this point, the reservation leaves the grantee Maddox with a full mineral estate, and its appurtenant mineral rights, burdened by a 1/32nd royalty interest.

However, the mineral estate conveyed is limited by the provisions of the second sentence. By those proscriptions, the grantee does not receive all of the bonuses paid for any lease of the mineral estate nor all of the rentals paid to perpetuate the lease. Consequently, appellants retained a 1/32nd royalty interest and 1/2 of all bonuses and rentals accruing under all future oil, gas and mineral leases.

The reservation of 1/2 of the bonus and rental is followed by a provision which states that the grantors "shall join in the execution of any future oil, gas or mineral lease." This language, considered in its proper context, is a further limitation on the mineral estate conveyed. Here the grantors have no right to enter and drill; their sole right is to join in the execution of all future oil, gas and mineral leases covering the 89.38 acre tract. In short, appellants have reserved an ordinary royalty interest plus the right to join Maddox, or his successors in title, in the execution of leases for the protection against unfair dealing. For example, appellants may have been able to contract for a larger bonus and rental payment under the Norman Lease or an entireties clause which would have entitled them to a royalty interest upon production had on the 67.52 acre tract.

Appellees contend that the executive right cannot be exercised by a non-mineral owner. We disagree. It has long been accepted that all appurtenant mineral rights, including the executive rights, are severable from the mineral estate. The Texas Supreme Court in Pan American Petroleum Corp. v. Cain, 163 Tex. 323, 355 S.W.2d 506, 510 (1962), stated:

The rights of the party whose mineral interest is subject to a leasing power held by another must also be considered, and it is well to remember that the executive right, even if held to be perpetually separated from ownership of the interest over which it is to be exercised, will not necessarily remain in the hands of a single person.

See also Superior Oil Co. v. Stanolind Oil & Gas Co., 150 Tex. 317, 240 S.W.2d 281, 285-86 (1951); Brown v. Smith, 141 Tex. 425, 174 S.W.2d 43, 46 (1943).

This analysis gives effect to and harmonizes every provision of the reservation clause, thereby clearly disclosing the intention of the parties. That meaning is that appellants conveyed the mineral estate and all of its appurtenant mineral rights save and except a 1/32nd royalty interest, 1/2 of all bonuses and rentals and the right to join in the execution of all oil, gas and mineral leases.

Appellants' first point of error is sustained.

II. RESTRAINT ON...