Eureka Producing Co. v. Colquitt

• Decision Date: 18 July 1931
• Docket Number: No. 12533.,12533.
• Citation: 45 S.W.2d 254
• Parties: EUREKA PRODUCING CO. et al. v. COLQUITT et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

45 S.W.2d 254

EUREKA PRODUCING CO. et al. v. COLQUITT et al.^*

No. 12533.

Court of Civil Appeals of Texas. Fort Worth.

July 18, 1931.

Rehearing Denied October 10, 1931.

Appeal from District Court, Young County; Allan D. Montgomery, Judge.

Action by O. B. Colquitt and J. N. Graves against the Eureka Producing Company and others. From a judgment for plaintiffs, defendants appeal.

Reversed and rendered.

Fred T. Arnold, of Graham, C. E. Cooper, of Tulsa, Okl., and Geo. L. Kelly, of Wichita Falls, for appellants.

Marshall & King, of Graham, and W. B. Hamilton and Marshall Newcomb, both of Dallas, for appellees.

DUNKLIN, J.

The Eureka Producing Company, the Turman Oil Company, and Joseph Glass and N. T. Gilbert, receivers for those two companies, have appealed from a judgment rendered against them in favor of O. B. Colquitt for the sum of $808, and J. N. Graves for $269.34, as royalties for gas taken by appellants from a certain oil and gas lease, which was a part of a larger lease originally acquired from the state by O. B. Colquitt and his associates, C. F. Colcord and J. N. Graves, on certain river bed lands situated in Young county. Appellants claimed the gas under certain assignments of a portion of that original lease, hereinafter termed the "lease in controversy," by Colquitt and his associates, and the controlling question presented on this appeal is whether those assignments conveyed the gas as well as oil which might be developed from the lease; or whether, as a consideration for those assignments, the appellants became bound to account to the assignors for a royalty of two-eighths of all the gas produced from the lease. On April 12, 1921, Colcord, Graves, and Colquitt, as parties of the first part, entered into a contract in writing with James R. Armstrong, as party of the second part, by the terms of which parties of the first part agreed to execute an assignment to Armstrong of a good and merchantable title to the lease in controversy, and in consideration of that contract, Armstrong agreed "to immediately begin the development of said tract for oil and gas purposes and to diligently prosecute the same by drilling well and otherwise producing oil in a workmanlike and diligent manner. As a further consideration for this contract and the assignment of the lease heretofore referred to, party of the second part, Armstrong, agrees to pay as royalty or rental the following proportionate part of the oil produced on said tract as follows: one-eighth to the State of Texas, as provided for in the original lease, one-eighth to C. F. Colcord, of Oklahoma City; one-sixteenth to J. N. Graves, of Oklahoma City; one-sixteenth to O. B. Colquitt, of Dallas, Texas."

Two days later and on April 14, 1921, Colcord, Graves, and Colquitt executed to Armstrong an assignment of the lease as they had agreed to do in the written contract. That assignment, after reciting that the assignors had acquired from the state, under permit, title to the lease, contained this provision: "Now, therefore, for and in consideration of One Dollar (and other good and valuable considerations), the receipt of which is hereby acknowledged, the undersigned, the present owners of the said lease and all rights thereunder or incident thereto, do hereby bargain, sell, transfer, assign and convey all rights, title and interest of the original lessee and present owners in and to said lease and rights thereunder in so far as it covers the area and portion of said oil and gas permit as above set forth and described, together with all personal property used or obtained in connection therewith, to James R. Armstrong and his heirs, successors and assigns."

On August 2, 1921, James R. Armstrong executed to the Eureka Producing Company an assignment of the same lease, reading in part as follows: "Know all men by these presents: That I, Jas. R. Armstrong, of Oklahoma City, Oklahoma, for and in consideration of the sum of Ten ($10.00) Dollars, cash in hand paid by Eureka Producing Company, a corporation, the receipt of which is hereby acknowledged, and of other good and valuable consideration, have sold, transferred, conveyed and assigned, and by these presents, do sell, transfer, convey and assign unto the said Eureka Producing Company, all and singular, my oil and gas lease and leasehold estate, right, title and interest in and to the following described tract of land, situated in Young County, State of Texas, which is an undivided five-eighths (5/8ths) interest therein, which said land is more particularly described as follows: * * *"

Then follows a description of the land, with recital of the acquisition from the state by Colquitt and his associates, and with the further recital that "on or about April 21st [12th?], 1921, the said J. N. Graves, O. B. Colquitt and C. F. Colcord assigned said oil and gas lease to James R. Armstrong, reserving a two-eighths (2/8ths) interest therein. * * *"

During the spring and early summer of the year 1921, the Eureka Producing Company drilled three wells on the lease, which did not produce any gas but produced oil, and Colquitt and his associates received oil royalties from those wells in accordance with the terms of the contract. During the year 1927, a deeper oil sand, known as the Panhandle sand, was discovered on the adjoining lease in a well producing more than 500 barrels of oil a day, and after its discovery Colquitt threatened a forfeiture of the lease held by the Eureka Producing Company unless it drilled a well to that sand. Thereupon, negotiations between the parties followed, as a result of which another contract in writing, of date August 6, 1927, was entered into by and between Colquitt and J. N. Graves as parties of the first part (Colquitt having theretofore acquired the interest of Colcord), and the Eureka Producing Company as party of the second part, reading as follows:

"This contract made and entered into August 6, 1927, by and between O. B. Colquitt and J. N. Graves, both of Dallas, Texas, of the First Part, and Eureka Producing Company, a Delaware Corporation, of the Second Part.

"Witnesseth:

"Whereas, on February 19, 1921, the State of Texas, acting by and through J. T. Robison, Commissioner of the General Land Office in said State, under the laws of said State, did grant and lease unto O. B. Colquitt and J. N. Graves, the following described lands;

"Oil and gas permit No. 2825, granting them the right to prospect for oil and gas in 1822½ acres of land situated in Young County, Texas, said area embracing 250 acres of the Bed of Clear Fork of the Brazos River, the field notes of which are recorded in book A-2, page 160, of the Surveyor's Records of Young County; also 1412½ acres of the Brazos River Bed, the field notes of which survey are recorded in book A-2, page 149 of the Surveyor's Records of Young County; also section 10, Brazos River Indian Reservation, containing 160 acres, making a total of 1822½ acres, for a term of ten years, with the right of renewal or renewals, together with the right to enter upon said lands at all times during the life of said lease for the purpose of mining, drilling and operating for oil and gas. Said lease was filed for record February 24, 1921, and recorded in volume 87, page 257, of the Deed Records of Young County, Texas; and

"Whereas, pursuant to a certain contract made and entered into April 12, 1921, filed for record May 6, 1921, recorded in volume 85, page 190 of the Deed Records of Young County, Texas, by and between C. F. Colcord, J. N. Graves and O. B. Colquitt, First Parties, and James R. Armstrong, Second Party, said C. F. Colcord, J. N. Graves and O. B. Colquitt assigned all the right, title and interest of the original lessee and present owner in and to the above described lease, and all rights thereunder insofar as it covers the following area and portion of said oil and gas lease above described, towit:

"A certain sector of the Clear Fork of the Brazos River, a tributory of the Brazos River in Young County, Texas;

"Beginning at a point on the Clear Fork of the Brazos River, it being at a line projected across the rvier at a point where the south line of what is described as the Graham Oil Syndicate lease of the Graham land on the Tankersley Survey;

"Thence up the river, including the land described in a lease from the State of Texas to O. B. Colquitt and J. N. Graves for a distance from the point above described on the Clear Fork of the Brazos River up the river equal to the distance from the North line projected across the river of the Graham Oil Syndicate lease of the Tankersley survey up the river to a line projected across the river up to the south line of the Graham oil lease on the Tankersley survey.

"The original lease is described in permit No. 2825, of the General Land Office of the State of Texas, said permit being granted January 24, 1919, to O. B. Colquitt and J. N. Graves, said lease under said permit being dated February 19, 1921, which lease was subsequently assigned to the Seaboard Oil & Gas Company and by the Seaboard Oil & Gas Company to O. B. Colquitt, J. N. Graves and C. F. Colcord, and subsequently assigned by O. B. Colquitt, J. N. Graves and C. F. Colcord to J. M. Noble and E. E. Westervelt, who later assigned to O. B. Colquitt and J. N. Graves; and subsequently O. B. Colquitt and J. N. Graves assigned to O. B. Colquitt, J. N. Graves and C. F. Colcord: together with all personal property used or obtained in connection therewith, free and clear from all liens and encumbrances, to James R. Armstrong. Said assignment was executed April 14, 1921, and filed for record May 31, 1921, Volume 87, page 561 of the Deed Records of Young County, Texas; and,

"Whereas, in and by the terms and conditions of said contract made and entered into by and between said C. F. Colcord, J. N. Graves and O. B. Colquitt, First Parties, and James R. Armstrong, Second Party, under date of April 12th, 1921, it was agreed that said James...