Gulf Oil Corp. v. Southland Royalty Co.

• Decision Date: 15 March 1972
• Docket Number: No. 6187,6187
• Citation: 478 S.W.2d 583
• Parties: GULF OIL CORPORATION et al., Appellants, v. SOUTHLAND ROYALTY COMPANY et al., Appellees.
• Court: Texas Court of Appeals

Page 583

478 S.W.2d 583

GULF OIL CORPORATION et al., Appellants, v. SOUTHLAND ROYALTY COMPANY et al., Appellees.

No. 6187.

Court of Civil Appeals of Texas,

El Paso.

March 15, 1972.

Rehearing Denied April 12, 1972.

Morgan L. Copeland, Jesse P. Luton, Jr., Edwin S. Hurst, Kenneth C. Keener Houston, Jackson, Walker, Winstead, Cantwell & Miller, A. W. Walker, Jr., Dallas, Ira Butler, Fort Worth, Ken G. Spencer, Crane, Royce H. Savage, Tulsa, Okl., Mullinax, Wells, Mauzy & Collins, Otto B. Mullinax, Dallas, Arthur E. Moers, Jr., Houston, Kerr, Fitz-Gerald & Kerr, William L. Kerr, Midland, Simon & Simon, Henry W. Simon, Sr., Robert M. Doby, Jr., Fort Worth, for appellants.

Hudson, Keltner, Smith & Cunningham, Luther Hudson, Joe Bruce Cunningham, Fort Worth, Stubbeman, McRae, Sealy, Laughlin & Browder, W. B. Browder, Jr., Tom Sealy, Hamilton E. McRae, James Noland, F. H . Pannill, Midland, Walter B. Morgan, J. Lamar Hart, Dillard Baker, Houston, Stroud & Smith, John R. Feather, Cecil L. Smith, Ronald W. Kessler, Edward H. Forgotson, Dallas, G. Bert Smith, Jr., Andrews, C . Bennett, Crane, Hopkins, Sutter, Owen, Mulroy & Davis, Harry D. Orr, Jr., William P. Sutter, Chicago, Ill., Joseph A. Beyer, Spur, for appellees.

OPINION

RAMSEY, Chief Justice.

This is an appeal from a judgment of the District Court of Crane County wherein a declaratory judgment was sought to construe an oil and gas lease. Gulf Oil Corporation, Plaintiff-Appellant, and six other Plaintiffs-Appellants filed suit against Southland Royalty Company and eighty-seven other Defendants-Appellees, seeking judgment declaring, as a matter of law, that an oil and gas lease did not expire on the date specified in the lease. At the close of Plaintiffs' case, the Court granted Defendants' motion, withdrew the case from the jury, and entered judgment for Defendants. Plaintiffs have appealed. We affirm.

The lease involved was executed on July 14, 1925, between W. N. Waddell, et al., lessors, and Gulf Production Company (now Gulf Oil Corporation), as lessee. The lease involves 45,771 acres of land in Crane County on which there are 925 producing oil and gas wells. The only issue in the case is the time of the termination of the lease.

The lease is a printed form with the designated lessee, Gulf Production Company, printed in the form. It is undisputed that the lease provides that it is for a term of fifty (50) years. No ambiguity is claimed by either party. Plaintiffs contend, however, that by reason of Section 7 of the lease, that they are entitled to either 4,661 or 4,286 additional days of production beyond July 14, 1975, due to delays and interruptions arising out of their compliance with regulatory orders of the Texas Railroad Commission. Defendants contend that Section 7 is nothing more than a force majeure or excuse clause and not a provision whereby the expressed term should be extended.

The provisions of the lease forming the basis for the controverted construction are as follows:

Section 1, Paragraph 2:

'TO HAVE AND TO HOLD unto said Lessee and to Lessee's successors and assigns for the term of Twelve (12) years from the date hereof and as much longer thereafter as oil or gas (or other minerals, if produced hereunder) are produced from said land. Provided, that this lease shall not remain in force longer than fifty (50) years from this date, and provided further, that a temporary cessation of production due to cleaning out, working over or drilling deeper of any well, or similar causes occurring after production secured, shall not terminate this lease. And Lessor covenants that Lessor has good title to said land and will protect Lessee in the quiet and peaceable possession thereof.'

Section 7, Paragraph 1:

'When drilling or other operations are delayed or interrupted by storm, flood, or other act of God, by fire, war, rebellion, scarcity of water, insurrection riots, strikes, scarcity of labor, differences with employees, or failure of carriers to transport or furnish facilities for transportation, or as the result of some order, requisition or necessity of the Government, or as the result of any cause whatsoever beyond the control of the Lessee, the time of such delay or interruption shall not be counted against the Lessee--anything in this lease to the contrary notwithstanding.'

In addition to the paragraphs above shown, Paragraph 3 of Section 1 of the lease provided that the Plaintiff agrees to begin operations for the drilling of a well within twelve (12) months and if it failed to do so, Plaintiff agreed to pay $5,721.37 each six (6) months, and not to exceed eighteen (18) such periods. Failure to make such payments would allow the Lessor to forfeit the lease. Also, paragraph 6, Section 1 of the lease, provided that if operations should not begin before the expiration of ten (10) years, the lease would then terminate; but if, prior to the termination of the ten (10) years, the Lessee shall have begun operations to find oil or gas and is actually engaged in such operations at the end of the ten (10) years, then such attempts could continue no longer than twelve (12) years provided such attempts were successive with no more than sixty (60) days elapsing between the abandonment of one well and the commencement of operations on another.

Plaintiffs contend that during the period of January 1, 1938, through June 30, 1967, the Railroad Commission of Texas denied them the right to produce the respective daily allowables on the wells drilled for the equivalent of 4,661 days, or in the alternative, for 4,286 days. Plaintiffs in their arguments contend that under the terms of the lease they are entitled to thirty-eight (38) years production time, and for the delays and interruptions occasioned by their compliance with the Railroad Commission orders, the Court should then construe the termination date of the lease in order that such time should not be 'counted against' them as provided in Section 7. Defendants contend that the lease is a fixed, definite term lease, and that Section 7 is nothing more nor less than a force majeure or excuse clause and not intended by the parties, nor to be construed by the Courts as a provision to extend the termination date of the lease.

The record submitted on appeal is voluminous. The parties have filed most comprehensive briefs in support of their respect contentions. Plaintiffs have assigned seven points of error committed by the trial Court. All points of error relate to the actions of the Court in withdrawing the case from the jury and refusing to construe the provisions of Section 7 of the lease to extend the termination date of the lease and in refusing to allow the Plaintiffs the additional producing days which they sought.

In construing contractual obligations, it is the duty of the Court to ascertain the intention of the parties. In so doing, the instrument must be considered in its entirety. Klein et al. v. Humble Oil & Refining Co. et al., 126 Tex. 450, 86 S.W.2d 1077 (1935); Smith v. Liddell et al.,367 S.W.2d 662 (Sup.Ct.1963); Leon v. Gulf Production Co., 35 S.W.2d 1101, (Tex.Civ.App., err. ref.). At the same time, the language used by the parties should be given its plain grammatical meaning unless it definitely appears that the intention of the parties would thereby be defeated. Fox et al. v. Thoreson, 398 S.W.2d 88 (Tex.Sup.Ct.1966). Neither party contends that there is any ambiguity in the instrument. The latest expression of the Supreme Court on this point is taken from City of Pinehurst v. Spooner Addition Water Company et al., 432 S.W.2d 515 (1968) when it held:

'It is elementary that if there is no ambiguity, the construction of the written instrument is a question of law for the Court. Myers v. Gulf Coast Minerals Management Corp., 361 S.W.2d 193 (Tex.Sup.1962). It is the general rule of the law of contracts that were an unambiguous writing has been entered into between the parties, the Courts will give effect to the intention of the parties as expressed or as is apparent in the writing. In the usual case, the instrument alone will be deemed to express the intention of the parties for it is objective, not subjective, intent that controls. Woods v. Sims, 154 Tex. 59, 273 S .W.2d 617, 620 (1954). See generally: 3 Williston on Contracts § 610 (1936); Restatement of the Laws of Contracts § 230 (1932).'

Additionally, surrounding facts and circumstances may be examined as an aid to construction or interpretation, in order to find out the intention with which the words are used. Gulf Production Co. et al. v. Spear, 125 Tex. 530, 84 S.W.2d 452 (op. ad.); City of Pinehurst v. Spooner Addition Water Company et al., supra; Spence & Howe Construction Company v. Gulf Oil Corporation, 365 S.W.2d 631 (Tex.Sup.Ct.1963).

To attempt to formulate rules for the construction of contractual obligations can be an exercise in futility. Case authority can be cited to substantiate almost any controverted interpretation. The ultimate end to be achieved is to effectuate the intentions of the parties based upon a reasonable and fair construction of the contractual instrument consistent with the usual and primary meaning of the words used, Spence & Howe Construction Company v. Gulf Oil Corporation, supra; 13 Tex.Jur.2d, Sec. 122, p. 287; 42 Tex.Jur.2d, Sec. 165, p. 349; 17 Am.Jur.2d, Sec. 247, p. 639; Phillips Petroleum Company v. Harnly et al., 348 S.W.2d 856 (Tex.Civ.App., n.r.e.). The problem is well stated by Chief Justice Calvert in Moore et al. v. Smith et al., 443 S.W.2d 552 (Tex.Sup.Ct.1969):

'It is nearly always possible to find some provision in a lengthy written instrument which seems to some extent to be out of harmony with the main thrust of the instrument, but such provision or provisions should not be permitted to obscure the otherwise clearly indicated intention of the parties to the instrument.'

The lease under examination provided that the Plaintiff, Gulf Production Company, would have the...