Gulf Oil Corp. v. Southland Royalty Co.
| Decision Date | 30 May 1973 |
| Docket Number | No. B--3385,B--3385 |
| Citation | 496 S.W.2d 547 |
| Parties | GULF OIL CORPORATION et al., Petitioners, v. SOUTHLAND ROYALTY COMPANY et al., Respondents. |
| Court | Texas Supreme Court |
Ira Butler, Fort Worth, Jackson, Walker, Winstead, Cantwell & Miller, A. W. Walker, Jr., Dallas, Jesse P. Luton, Jr., Morgan
L. Copeland, and K. C. Keener, Houston, Mullinax, Wells, Mauzy & Babb, Otto B. Mullinax, Dallas, Simon & Simon, Henry Simon, Sr., Fort Worth, Arthur E. Moers, Jr., Houston, Royce H. Savage, Edwin S. Hurst, Tulsa, Okl., Williams L. Kerr, Midland, Ken G. Spencer, Crane, for petitioners.
Hudson, Keltner, Smith & Cunningham, Luther M. Hudson, and J. B. Cunningham, Fort Worth, Stubbeman, McRae, Sealy, Laughlin & Browder, Tom Sealy, W. B. Browder, Jr., and F. H. Pannill, Midland, Walter B. Morgan, J. Lamar Hart, and Dillard W. Baker, Houston, C. Bennett, Crane, Joseph A. Beyer, Spur, Stroud & Smith, John R. Feather, Dallas, G. Bert Smith, Jr., Andrews, Hopkins, Sutter, Owen, Mulroy & Davis, William P. Sutter, Chicago, Ill., for respondents.
This is a suit for declaratory judgment to determine the longevity of an oil and gas lease. Gulf Oil Corporation and six others filed the suit against Southland Royalty Company and eighty-seven others to resolve this controversy: Southland and other owners of the reversionary mineral interest contend that Gulf's leasehold estate expires on July 14, 1975, which is fifty years after the date of its execution, while Gulf contends that delays of its production due to proration orders of the Railroad Commission should not be counted in the fifty years to which it is entitled and that termination of the lease should not occur until 1987. When Gulf rested its presentation in the trial court, the judge withdrew the case from the jury and entered judgment for defendants (Southland). The Court of Civil Appeals affirmed, holding that the terms of the lease fix its termination date at July 14, 1975. 478 S.W.2d 583.
The lease was executed on July 14, 1925 by W. N. Waddell et al., lessors, and Gulf Production Company (corporate predecessor of Gulf Oil Corporation), lessee. It leased to Gulf 45,771 acres of land in Crane County 'with the exclusive right of exploiting the same for and producing oil and gas therefrom.' Gulf commenced drilling operation on the land and has conducted operations thereupon continuously to the present. At the time of the trial Gulf was operating 925 producing oil and gas wells there.
The original lease is almost entirely a printed document. The name of the lessee, Gulf Production Company, and all of the words of the lease provisions set forth below, except for the dollar amount of delay rental and the name of the depository bank, were in the printed form that was used. The argument centers upon Section 1, Paragraph 2, which can be referred to as the habendum or term clause, and Section 7, which Southland refers to as a force majeure or excuse clause but to which Gulf gives overriding effect. The full text of these of other relevant lease provisions are here set forth.
Par. 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 tempo rary 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.
Par. 3. Lessee agrees to begin operations for the drilling of a well on the premises within twelve (12) months from the date hereof, or, failing so to do, Lessee agrees to pay in the manner below stated for each six (6) months' period for which such drilling is delayed, not to exceed eighteen (18) such periods, the sum of $5,721.37 Dollars, such payment to be made on or before the beginning of each such period and shall be made by paying the same to the Lessor in person or to the First National Bank of Ft. Worth, Texas, or Lessee may mail Lessee's check to Lessor in said sum in care of said Bank, payable to Lessor, said Bank being hereby constituted Lessor's agent to receive said funds for Lessor or to receive and deliver said check to said Lessor, as the case may be; in either of the three methods of making such payment Lessee may use Lessee's check and the mailing of said check shall be deemed making payment; if Lessee shall fail to make such payment in advance as above provided, and such failure or default shall continue for thirty (30) days after the due date of such payment, Lessor shall have the right to forfeit this lease.
Par. 5. If while this lease is in force as herein provided, Lessee shall have begun operations in attempt to find oil or gas, then, without making any further payments Lessee may continue such attempt, and may make as many attempts as Lessee pleases; but if Lessee shall abandon such attempts for ninety (90) days without finding oil or gas in paying quantities, Lessee shall resume payment of the rentals falling due after the completion or abandonment of such well, at the next ensuing rental period beginning after such completion or abandonment; provided Lessee shall have at least ninety (90) days from the date of such abandonment of operations in which to make such payment and on resuming payment of rentals Lessee shall have the right to continue making the same or of beginning operations for the drilling of a well and to alternate such rights.
Par. 6. If operations shall not be begun on or before the expiration of ten (10) years from this date, this lease shall wholly terminate, but if, prior to the termination of such ten (10) years, Lessee shall have begun operations in attempt to find oil or gas and is engaged in such operations at the end of the ten-year period, then Lessee shall have the right to continue such operations and also to make as many additional attempts to find oil or gas as Lessee desires beyond the expiration of said ten-year period; provided, however, that these attempts so extending such rights beyond such ten years must be successive in the sense that, until oil or gas be found in paying quantities, not more than sixty (60) days shall elapse between the abandonment of work on one well and the beginning of operations on another, and provided further that this right to make attempts before the discovery of oil or gas shall not continue in any event longer than twelve (12) years from the date hereof.
Paragraph I. 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.
Under paragraphs 3 and 5 of section 1 the lessee is required to begin operations for the drilling of a well within twelve months or to pay rental (for each six months in advance). If operations have begun in the attempt to find oil and gas no delay rentals need be paid while the attempt continues or a new operation is begun. Lessee is allowed ninety days after the abandonment of one well in which to begin operations for the drilling of a new well or to pay delay rentals.
Under paragraph 7 of section 1 the lease terminates if no operations are begun within ten years. If the lessee has begun operations in the attempt to find oil and gas and is engaged in such operations at the end of ten years, the lessee may continue and may make new attempts following the ten year period, but no more than sixty days may...
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