Gray v. Merritt

• Decision Date: 14 October 1925
• Docket Number: (No. 691-4244.)
• Parties: GRAY et al. v. MERRITT et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Supreme Court

Page 187

276 S.W. 187

GRAY et al. v. MERRITT et al.^*

(No. 691-4244.)

Commission of Appeals of Texas, Section A.

October 14, 1925.

Error to Court of Civil Appeals of Eighth Supreme Judicial District.

Action by C. F. Gray and another against C. F. Merritt and another. Judgment for plaintiffs was reversed by Court of Civil Appeals (262 S. W. 539), and plaintiffs bring error. Judgment of Court of Civil Appeals reversed, and judgment entered reforming and affirming judgment of trial court.

Grisham Bros., of Eastland, for plaintiffs in error.

J. L. Zumwalt, of Dallas, and R. R. Mizell, of Eastland, for defendants in error.

HARVEY, P. J.

This case is here on writ of error to the Court of Civil Appeals for the Eighth supreme judicial district, sued out by plaintiffs in error C. F. Gray and J. E. Spencer against defendants in error C. F. Merritt and J. W. Jewell for the purpose of having reviewed by this court a judgment entered herein by said Court of Civil Appeals reversing the judgment of the trial court herein and remanding said cause for another trial.

The facts forming the basis of suit and other relevant matters shown by the record are substantially as follows:

On May 6, 1922, said C. F. Merritt held an oil lease on a certain tract of five acres of land in Eastland county, in the vicinity of which tract a number of oil wells had been drilled by other operators, and a strata of oil sand found at a depth of approximately 2400 or 2500 feet. The said C. F. Merritt and J. W. Jewell, desiring, as partners in the enterprise, to drill a well on said tract of land for the purpose of finding and producing oil therefrom, entered into negotiations with said C. F. Gray and J. E. Spencer with the view of making a contract with said last named parties of the nature and effect of the contract that was thereafter entered into between said parties as hereinafter shown. During all such negotiations all the parties to such contract knew the depth at which oil had been found in such other wells that had been theretofore drilled by other operators in the vicinity of said five-acre tract of land, as above shown, and agreed, understood, and contemplated that, if oil were to be found and produced from said five-acre tract of land, it would be necessary to drill to the approximate depth of such other wells in that vicinity, to wit, approximately 2400 or 2500 feet, and that there was no probability or prospect of finding oil on said five-acre tract of land at a materially lesser depth.

All of said parties, having discussed the foregoing matters among themselves, and having same in contemplation at the time, made and entered into a joint contract on May 6, 1922, wherein and whereby the said Merritt and Jewell agreed and bound themselves "to drill an oil well" on said five-acre tract of land, and "to pay all expenses of drilling said well and to furnish all tools, pipe, etc., necessary for the drilling of same." Under and by the terms of said contract said Gray and Spencer agreed and were bound to furnish "all the material and labor necessary for the erection of a standard derrick to be located on said five acres of land" for the use of said Merritt and Jewell in drilling said oil well. And in consideration of such obligation on the part of said Gray and Spencer to furnish said derrick, as above stated, they were to be "entitled to a one-sixteenth interest in said well, or to receive one-sixteenth of the gross production thereof," etc.; and, as additional evidence of the rights of Gray and Spencer in the joint enterprise, said C. F. Merritt, as part and parcel of such contract, assigned to Gray and Spencer "an undivided one-sixteenth working interest in all oil, gas, and other minerals in and under that may be produced" from said tract of land. Such contract so made and entered into by and between said parties is evidenced by two instruments of writing executed contemporaneously with each other, and in the same transaction, on May 6, 1922; one of said instruments showing the obligations and contractual rights of the respective parties to the contract, as hereinabove stated, and the other showing the assignment of said one-sixteenth "working interest" to Gray and Spencer as above stated.

Within two weeks after the date of said contract said Gray and Spencer completed and delivered into the possession and control of Merritt and Jewell the derrick which they were obligated by said contract to furnish in said enterprise, and Merritt and Jewell thereupon took possession and control of said derrick, and began using same in the drilling of a well on said five-acre tract of land. The value of said derrick, when completed, as aforesaid, was found by the jury to be $3,000. When said derrick had been completed and furnished as above stated, the said Merritt and Jewell began the drilling of a well on said five acres of land, as above stated, and continued such drilling operations therewith until about the first part of August, A. D. 1922, when they ceased such drilling operations, and, without the fault or consent of Gray and Spencer, abandoned the further drilling of such well, and have not since such time conducted any drilling operations on said tract of land. The depth reached in the drilling of such well when same was abandoned by Merritt and Jewell, as above stated, was approximately 1000 or 1200 feet. The said Merritt...