French v. Bank of Southwest National Association, Houston

• Decision Date: 30 November 1967
• Docket Number: No. 15120,15120
• Citation: 422 S.W.2d 1
• Parties: L. D. FRENCH et al., Appellants, v. BANK OF the SOUTHWEST NATIONAL ASSOCIATION, HOUSTON, Trustee et al ., Appellees. . Houston (1st Dist.)
• Court: Texas Court of Appeals

Page 1

422 S.W.2d 1

L. D. FRENCH et al., Appellants, v. BANK OF the SOUTHWEST NATIONAL ASSOCIATION, HOUSTON, Trustee et al ., Appellees.

No. 15120.

Court of Civil Appeals of Texas Houston (1st Dist.).

Nov. 30, 1967.

Rehearing Denied Dec. 21, 1967.

H. Cecil Baker, Rosenberg, W. G. Walley, Jr ., Beaumont, for appellants.

Fulbright, Crooker, Freeman, Bates & Jaworski, Alton F. Curry, Houston, for appellee Bank of the Southwest National Association, Houston, Trustee.

Pollan & Nicholson, John T. Nicholson, Rosenberg and Erwin, Wagner & Hodson, Fred W. Hodson, Jr., Houston, for appellees L. B. Rowsey & C. R. Whelchel.

COLEMAN, Justice.

This is a suit to recover the value of a fractional part of the oil produced by natural flow from a certain leasehold estate with an action over for damages against the warrantors of title.

Appellee, Bank of The Southwest National Association, Houston, Trustee, brought suit against appellant, L. D. French, and Gulf Oil Corporation, to recover the value of 1/8th of 7/8ths of the oil produced by natural flow from the Luscher Lease between October, 1958, and March 31, 1962, which was not delivered to Gulf for the account of the trustee, i.e., 1/16th of 7/8ths of all oil produced by natural flow, appellee having received payment of 1/16th of 7/8ths of all oil produced from said lease as royalty owner of 1/16th of 7/8ths of all oil produced by artificial lift from the lease.

L. D. French, Jr., an assignee of a portion of the interest of L. D. French, was made a party defendant and his posture in the case is the same as that of L. D. French.

Appellant French denied appellee's claim, pled estoppel and the two year statute of limitation, and filed a cross-action against his assignors of the working interest, Southern Oil Well Service Company and others (hereinafter referred to as cross-defendants), for recovery of damages for partial failure of title or breach of covenants.

The case was tried to a jury, and the trial court, after disregarding certain of the answers to the special issues, entered judgment on the remaining issues for the trustee against French and Gulf Oil, and for French against cross-defendants. Only French filed a motion for new trial, and appealed to this Court.

Appellant first contends that the trial court erred in granting judgment to the trustee for the reason that it failed to prove its ownership of the fractional overriding royalty interest in oil produced by natural flow, but on the contrary proved that this royalty was owned by Mills Bennett Production Company.

The undisputed proof established that the trustee's title to the royalty interest and appellant's title to the working interest in the Luscher Lease were derived from and originated out of the same common source by assignment from Mills Bennett to Cecil Hagen dated July 1, 1946. The Mills Bennett assignment expressly reserved to Mills Bennett a royalty of 1/16th of 7/8ths of all oil, gas or other minerals produced from wells on said lease by artificial lift, and a royalty of 1/8th of 7/8ths of all oil, gas or other minerals produced from wells on the lease by natural flow. In April, 1947, Mills Bennett assigned the reserved royalty interests by royalty deed to Cecil Hagen, who, thereafter, assigned to the Bank as trustee. The working interest in the lease was assigned by Cecil Hagen to other parties, and was acquired by cross-defendants in 1951 and 1952. Cross-defendants assigned to appellant in 1958. Each of the assignments of the working interest down through cross-defendants expressly was made subject to the royalty interest reserved in the Mills Bennett assignment to Cecil Hagen. All of the assignments in appellant's chain of title were duly recorded.

In addition to tracing the chain of title of both the trustee and appellant back to the common source, Mills Bennett, appellee introduced into evidence the original lease out of the landowners, i .e., the Luscher Lease, dated April, 1934, to Mills Bennett Production Company. This lease was referred to in each of the assignments in both appellee's and appellant's chain of title, down to and including the assignment to appellant, as the original lease covering the tract, or some similar phrase. This lease was introduced without limitation of purpose and constitutes the basis of appellant's argument that as a matter of law the evidence establishes that title to the lease is in the Mills Bennett Production Company, and not in either the Bank as trustee, in case of the overriding royalty, or in himself, in respect to the remainder of the working interest.

The Bank, as trustee, derives its title or claim to the royalty interest at issue from the reservation of royalty found in the assignment of the Luscher Lease from Mills Bennett to Cecil Hagen. Appellant's title, ownership and claim herein is by virtue of receiving a subsequent assignment of the working interest under Cecil Hagen. Therefore, the question presented is not whether Mills Bennett had good title and conveyed good title to Cecil Hagen and reserved or excepted to himself good title to the royalty interest, but, instead the question is whether the parties to the assignment and those claiming under them are bound, as between themselves, by the recitals and provisions of the assignment. The Bennett-Hagen assignment is contractual in nature, setting out the agreement of the assignor and assignee as to what the interests, rights and obligations of said parties shall thereafter be with respect to the mineral estate with which the instrument deals. The recitals in the assignment define the character and extent of the ownership and interests of the parties in the land affected by the instrument. The reservation of the overriding royalties is binding and effective as between Bennett and Hagen and those in privity with them, and it was not necessary to show that the title to Mills Bennett was good. The fact that the lease from the landowners to Mills Bennett Production Company was introduced into evidence without limitation did not constitute a bar to a recovery by appellee. Greene v. White, 137 Tex. 361, 153 S.W.2d 575, 136 A.L.R. 626 (1941); Bernard River Land Development Co . v. Sweeny, 216 S.W.2d 597 (Tex.Civ.App., Galveston, 1948, n.r.e.).

By the third and seventh points of error appellant questions the action of the trial court in failing to sustain its defense of the two year statute of limitation. It is appellant's contention that, properly construed, the petition of the trustee alleged an action against appellant for the conversion of personalty--oil severed from the soil. If such is the case, no recovery could be had for any conversion of such oil occurring prior to two years before the institution of this suit. Marathon Oil Co. v. Gulf Oil Corp., 130 S . W.2d 365 (Tex.Civ.App., El Paso, 1939, rev'd in part Gulf Oil Corp. v. Marathon Oil Co., 137 Tex. 59, 152 S.W.2d 711 (1941); Brooks v. Temple Lumber Co., 105 S.W.2d 386 (Tex.Civ.App., Beaumont, 1937, n.w .h.); Kirby v. Hayden, 125 S.W. 993 (Tex.Civ.App., 1910), aff'd Houston Oil Co. v. Hayden, 104 Tex. 175, 135 S.W. 1149.

Appellee pled that by the assignment from Mills Bennett to Cecil Hagen, Hagen agreed to deliver the reserved royalties to Bennett along with Hagen's production into any pipe line with which said wells were connected; that this covenant was binding on appellant as a subsequent assignee of Hagen; that oil was produced by natural flow and delivered to Gulf, who paid appellant the value thereof rather than appellee; that this conduct constituted a breach of the obligation imposed on appellant by the Bennett assignment by reason of which appellant is indebted to appellee for the reasonable market value of such oil. These allegations, as well as other allegations found in the petition of appellee on which the case was tried, show clearly that appellee was relying on the breach of a written contract as grounds for recovery. In such a case the four year statute of limitation was applicable. Ortiz Oil Co. v. Geyer, 138 Tex. 373, 159 S.W.2d 494 (1942, opinion adopted).

The trial court properly disregarded Special Issue No. 2 concerning the market value of the oil attributable to production and sales before two years prior to the institution of the suit and properly entered judgment based on Special Issue No. 1, in answer to which the jury found that the market value of 1/16th of 7/8ths of the oil produced by natural flow from the lease during the period October 1, 1958 through March 31, 1962, to be the sum of $9,587.00.

Appellant contends that the trial court erred in awarding interest on this sum from March 31, 1962, rather than from the date of judgment, December 20, 1966. On March 31, 1962, appellant had in his possession that sum of money, which the jury found to be $9,587.00, representing the proceeds of the sale of 1/16th of 7/8ths of all the oil produced from the lease by natural flow. The oil was sold to Gulf Oil Corporation as required by the contract, but the purchase price was paid to appellant. Appellee was made whole by the judgment for the value of the oil, plus interest for the period during which the money was withheld from appellee by appellant. The interest was awarded as damages in accordance with the prayer found in appellee's petition. While it may well be that properly the amount of interest awarded as damages should have been calculated and recited in the judgment as a lump sum, and then interest awarded on the total amount until paid, this is not the error of which complaint is made, and in this case the error, if any, is not harmful. Rule 434, Texas Rules of Civil Procedure; Simmons v. Wilson, 216 S.W.2d 847 (Tex.Civ.App., Waco, 1949, n.w.h.).

Appellant has presented certain points of error with reference to that portion of the judgment awarding him judgment over against the cross-defendants. A statement of part of the pleadings is necessary .

Upon being sued by the Bank, L. D. French (app...