Empire Gas & Fuel Co. v. Railroad Commission of Texas

• Decision Date: 13 May 1936
• Docket Number: No. 8469.,8469.
• Citation: 94 S.W.2d 1240
• Parties: EMPIRE GAS & FUEL CO. v. RAILROAD COMMISSION OF TEXAS et al.
• Court: Texas Court of Appeals

94 S.W.2d 1240

EMPIRE GAS & FUEL CO. v. RAILROAD COMMISSION OF TEXAS et al.

No. 8469.

Court of Civil Appeals of Texas. Austin.

May 13, 1936.

Rehearing Denied June 3, 1936.

Appeal from District Court, Travis County; W. F. Robertson, Judge.

Suit by the Empire Gas & Fuel Company against the Railroad Commission of Texas and others, wherein the Gulf Production Company intervened. From an adverse judgment, the plaintiff and the intervener appeal.

Reversed and remanded.

Jas. W. Finley and Hayes McCoy, both of Bartlesville, Okl., Harry O. Cowing, Jr., of Longview, and Clayton L. Orn, and Phillips, Trammell, Chizum, Estes & Edwards, all of Fort Worth, for appellant Empire Gas & Fuel Co.

Joe S. Brown, of Houston, and Carl R. McLynn, of Beaumont, for appellant Gulf Production Co.

Wynne & Wynne and W. A. Wade, all of Longview, for appellees Shilo Oil Co., A. L. Brin, and K. W. Griffin.

William McCraw, Atty. Gen., and Harry S. Pollard, Asst. Atty. Gen., for Railroad Commission of Texas.

BAUGH, Justice.

This is a rule 37 case. The Railroad Commission granted to the Shilo Oil Company, on July 9, 1935, as an exception to said rule, a permit to drill a second well on 2.75 acres of land in Gregg county. The spacing provisions then applicable in said area were 660 feet between wells and 330 feet from property lines. The applicant already had one well in the center of said tract. The examiner for the Railroad Commission recommended, after hearing, that the permit be not granted. Adjacent leaseholders protested the granting of the permit. Appellant, an adjacent leaseholder, brought this suit to set aside such order of the commission, on the ground that it would increase the waste already occurring in that area because of density of drilling, etc., as being unreasonable, arbitrary, and capricious. At the close of appellant's evidence, the trial court rendered judgment against it; hence this appeal.

The following facts appear: The Empire Gas & Fuel Company held a lease in said field on 40 acres of land, square in dimensions. In a suit brought by E. M. Myers against numerous parties, in which others intervened, the exact nature and grounds of which do not appear in the record, there was entered an agreed judgment on March 29, 1934, vesting in A. A. Lockhart and others, who apparently as owners executed the original lease on said lands, all surface rights, and setting aside to four other parties a leasehold estate in 6¾ acres of said tract. Just when and how these parties acquired such leasehold interest is not shown. This 6¾ acres was carved out of the 40-acre tract adjacent to its west boundary, the north line of such 6¾ acres being 170 feet south of the north line of the 40-acre tract; and the south line of said 6¾ acres being 430 feet north of the south boundary line of said 40-acre tract. This 6¾-acre tract was 393 feet wide east to west and 748 feet long north to south. Said agreed judgment also subdivided the leasehold estate in said 6¾ acres as follows: To E. M. Myers was set aside a leasehold estate in 2 acres out of the south end of said 6¾-acre tract, 221.7 feet wide north to south by 393 long, east to west; to K. W. Griffin 2¾ acres immediately north of and adjacent to the Myers tract, 304.7 feet wide by 393 feet long; to F. E. Lumpkin, a 1-acre tract immediately north of and adjacent to the Griffin tract, 110.8 feet wide and 393 feet long; and to Maurice Prothro, a minor, the remainder of said 6¾-acre tract, being a 1-acre tract immediately north of and adjacent to the Lumpkin tract and having the same dimensions. Permits were granted as exceptions to rule 37 for one well in the center of each of these four small tracts without protest from the adjacent lease owners. Thereupon the owners of leases surrounding these small tracts were granted, without protest from the leaseholders of the small tracts, equidistant offset wells surrounding the 6¾ acres. Up to the time the permit here involved was applied for, the Railroad Commission had apparently granted the numerous permits applied for in this vicinity on the ground that same were necessary to protect vested rights and because no protests were filed. A density of drilling in this immediate area was thereby accomplished at much less spacing distance between wells than permitted under rule 37, and greatly out of proportion to the surrounding area generally. We do not understand appellee Shilo Oil Company to deny that the situation thus presented causes waste; nor that the drilling and operation of well No. 2 on the 2¾-acre tract, 55 feet from its north boundary line, and 110 feet from the well on the adjoining 1-acre tract, will increase such waste. The only ground on which such permit can be sustained, therefore, is that it was necessary to protect vested rights or to prevent confiscation through drainage.

On this issue the Shilo Oil Company's rights are referable to two questions: (1) The efficacy of the agreed judgment of partition subdividing the 6¾-acre tract into small tracts; and (2) if such judgment be conclusive on that issue, whether the one well drilled in the center of the 2¾-acre tract will enable the owner a fair opportunity to recover his fair share of the oil in place beneath it. It is not controverted that the partition judgment was entered by agreement. The judgment itself so shows. It is now settled that such a judgment will be construed as a contract and the rights of the parties thereunder governed by the rules applicable to contracts in general. Tyner v. City of Port Arthur, 115 Tex. 310, 280 S.W. 523; Frazier v. Hanlon Gasoline Co. (Tex.Civ.App.) 29 S.W.(2d) 461, 470 (writ ref.); 25 Tex.Jur. 387. It follows, therefore, that Griffin, through whom Shilo Oil Company deraigns its rights, acquired no greater rights under the agreed judgment entered on March 29, 1934, than if such partition had been effected by contract. And, if Griffin acquired his interest in the larger tract of land, obviously capable of development as a whole under the spacing provisions of rule 37, subsequent to the promulgation and effective date of such rule in this field, he could not, under the now settled line of decisions, create a condition by subdivision of said lands into small tracts which would necessitate an exception to such rule 37, and acquire a vested right to such exception. Sun Oil Co. v. Railroad Commission (Tex.Civ. App.) 68 S.W.(2d) 609; Brown v. Humble Oil & Ref. Co. (Tex.Sup.) 83 S.W.(2d) 935, 99 A.L.R. 1107. In any event, Griffin agreed to the judgment, and,...