Gulf Oil Corporation v. Marathon Oil Co.

• Decision Date: 30 April 1941
• Docket Number: No. 7648.,7648.
• Citation: 152 S.W.2d 711
• Parties: GULF OIL CORPORATION et al. v. MARATHON OIL CO. et al.
• Court: Texas Supreme Court

Page 711

152 S.W.2d 711

GULF OIL CORPORATION et al. v. MARATHON OIL CO. et al.

No. 7648.

Supreme Court of Texas.

April 30, 1941.

Error from Court of Civil Appeals for Eighth Supreme Judicial District.

Suit by the Marathon Oil Company and another against the Gulf Oil Corporation and others for an accounting, for judgment quieting title, and for the value of a seven-eighths interest in oil produced by defendants. R. Wilbur Brown and other owners of mineral and royalty interests under the lease under which plaintiffs claimed joined in the suit to recover their alleged share of royalties, and defendants filed a cross-action. Judgment in favor of the owners of the royalty interests, and in favor of the defendants with respect to the leasehold estate, was reversed in part and modified in part, 130 S.W.2d 365, and defendants bring error.

Affirmed in part; reversed in part.

H. L. Stone, of Pittsburg, Pa., John E. Green, Jr., of Houston, Robert T. Neill, of San Angelo, and Wm. L. Wise and P. O. Settle, both of Fort Worth, for plaintiff in error Gulf Oil Co.

F. H. DeGroat, of Duluth, Minn., and John M. Davenport and Charles Gibbs, both of San Angelo, for plaintiff in error Douglas Oil Co.

Richard F. Burges and Walter S. Howe, both of El Paso, A. M. Gee, of Findlay, Ohio, R. C. Gwilliam and William Pannill, both of Houston, Johnson & Crumpton, of Ft. Stockton, and Myron A. Smith and Smith & Smith, all of Fort Worth, for defendants in error Wilbur Brown & Co.

C. R. Wharton, of Houston, and Mark McGee, of Fort Worth, amici curiæ.

SMEDLEY, Commissioner.

Marathon Oil Company (formerly named Mid-Kansas Oil & Gas Company) and the Ohio Oil Company sued Gulf Oil Corporation, Gulf Production Company and Gulf Refining Company for the title and possession of the oil and gas leasehold estate in a tract of land 1930 varas in length north and south and 1100 feet in width east and west, alleged to be a part of Section 33, Block 194, G. C. & S. F. Ry. Co. in Pecos County, and for the value of 7/8 of the oil produced and taken by the Gulf Companies from nine wells on said tract. The Marathon and Ohio Companies were joined in the suit by a number of other persons and corporations owning royalty interests in said Section 33, who sued to recover the value of their proportionate parts of the royalty oil.

At the time the nine oil wells were drilled by it on the area in controversy, Gulf Production Company was the owner of the oil and gas leasehold estate in Section 28 in Block 194, which section lies immediately west of Section 33, the oil and gas leasehold estate in which was owned one-half by Mid-Kansas Oil & Gas Company and one-half by Transcontinental Oil Company and wholly operated by the Mid-Kansas Company. The area in controversy is within Section 33 under this court's decisions in Turner v. Smith, 122 Tex. 338, 61 S.W.2d 792; Douglas Oil Company v. State (California Case), 122 Tex. 377, 61 S.W.2d 807; Douglas Oil Company v. State (Whiteside Case), 122 Tex. 369, 61 S.W. 2d 804; and Federal Royalty Company v. State (Whiteside Case), 128 Tex. 324, 98 S.W.2d 993. The Turner-Smith suit, the first of said cases, was filed in district court on July 27, 1927, and was decided by this court on May 13, 1933. Eight of the nine oil wells on the area in controversy herein were drilled and completed in the years 1927 and 1928 and the ninth well was drilled and completed in 1929.

The Gulf Companies in defense of the suit rely upon agreed boundary and estoppel. They alleged in their answer that the boundary lien between Section 28 and Section 33 had not been marked on the ground and that there was doubt and uncertainty as to the location of said dividing line between said sections; that in order to settle upon a dividing line for the drilling of wells along the east side of Section 28 and the west side of Section 33, the engineers of Gulf Production Company and of Mid-Kansas Oil & Gas Company met and agreed upon the said dividing line, agreeing that the same would be located where the engineers of the Mid-Kansas Company contended that it should be located, that is, approximately 200 feet east of the Gulf Production Company's well No. 1 location and approximately 50 feet farther west than the location of the division line as it had been determined by the engineers of Gulf Production Company; that it was further agreed that the wells of the lessees of Sections 28 and 33 should be located and drilled with respect to said line; that in reliance upon said agreement Gulf Production Company drilled its wells along the east side of Section 28 in reference to said line; that Mid-Kansas located and drilled its wells along the west side of Section 33 with respect to said agreed division line; and that the agreement was adopted, ratified and acted upon by the two corporations.

The trial court instructed the jury to return a verdict in favor of the Gulf Companies as to the leasehold estate and a verdict in favor of the owners of royalty interests against the Gulf Companies, rendered judgment that Marathon Oil Company and the Ohio Oil Company take nothing as to the leasehold estate and take nothing in their suit for the value of 7/8 of the oil produced and taken, and rendered judgment in favor of the owners of the royalty interests for their proportionate parts of the value of 1/8 of the oil.

The trial court prepared and filed an elaborate summary of the case in which he expressed the conclusion that, while the Gulf Companies did not establish an express agreement locating the boundary line between the two sections, an agreement upon the common boundary line was proven by necessary implication from the acts and conduct of the two lessees, Mid-Kansas Oil & Gas Company and Gulf Production Company.

The Court of Civil Appeals reversed the trial court's judgment with respect to the leasehold estate and rendered judgment in favor of the Ohio Company and Marathon Oil Company against the Gulf Companies for the 7/8 leasehold estate and for $537,732.96 for oil produced and taken from the wells, and modified and affirmed the trial court's judgment with respect to the royalty interest, rendering judgment in favor of those who sued as owners of royalty against the Gulf Companies for the total sum of $207,174.39. 130 S.W.2d 365. The Court of Civil Appeals held that there was no evidence of an agreement between Gulf Production Company and Mid-Kansas Oil & Gas Company fixing the boundary line, that if it could be said that a parol agreement was made, it was unenforceable because it was based upon a mutual mistake of fact and that the Mid-Kansas Company and its successors in title, by acquiescing in the use of a line as a boundary line between the two sections and by so representing it and by drilling wells with reference to it, were not estopped from asserting ownership to the true west line of Section 33.

The rules with respect to the establishment of boundary by agreement are well settled by the decisions in this state and by other authorities. There is no real difference about them in the briefs of the parties to this suit. They may be stated generally and briefly as follows: When there is uncertainty, doubt or dispute as to where the true division line between the lands of the parties may be, they may fix it by parol agreement, which will be mutually binding upon them, even though they were mistaken as to the true location of the line. This is true whether the mistake be of a matter of fact or of law. The existence of uncertainty, doubt or dispute is essential to the validity of such agreement. Actual dispute, however, between the parties is not necessary. It is enough that the location of the line has not been definitely established and is doubtful or uncertain. It is generally held that such agreement to be effective and binding must be executed by the parties, that is, by the erection of physical monuments on the agreed line or by otherwise marking the line, by actual possession or use to the line or by the improvement or development of the property with reference to the line. Agreement fixing a boundary may be proven as well by acts and conduct of the parties as by express statement. In this state it is not necessary "in order to give the agreement vitality, that it should be supported by acquiescence or acts from which an estoppel may spring." Lecomte v. Toudouze, 82 Tex. 208, 214, 17 S.W. 1047, 1050, 27 Am.St.Rep. 870. Acquiescence in a line over a period of several years is evidence from which it may be inferred that the parties had agreed to the line, but it is not conclusive evidence of that fact. Mere acquiescence in another line than the true line will not support a judgment in favor of such other line, when there is no evidence, other than such acquiescence, of an agreement fixing the line and when it is affirmatively shown that the use of the line resulted not from agreement but from a mistaken belief of the parties that it was the true line. Hoxey v. Clay, 20 Tex. 582; Coleman v. Smith, 55 Tex. 254; Cooper v. Austin, 58 Tex. 494; Harn v. Smith, 79 Tex. 310, 15 S.W. 240, 23 Am.St.Rep. 340; Grawunder v. Gotoskey, Tex.Civ.App., 204 S.W. 705; Sammann v. Deitrich, Tex. Civ.App., 39 S.W.2d 647; Tide Water Oil Company v. Hale, Tex.Civ.App., 92 S.W.2d 1102; Shelor v. Humble Oil & Refining Company, Tex.Civ.App., 103 S. W.2d 207; Atlantic Oil Producing Co. v. Hughey, Tex.Civ.App., 107 S.W.2d 613; Bohny v. Petty, 81 Tex. 524, 17 S.W. 80; Schunior v. Russell, 83 Tex. 83, 18 S.W. 484; Lecomte v. Toudouze, 82 Tex. 208, 17 S.W. 1047, 27 Am.St.Rep. 870; 8 Texas Law Review, p. 610; Patrick v. Smith, 90 Tex. 267, 38 S.W. 17; Farmers' State Bank & Trust Company v. Gorman Home Refinery, Tex.Civ.App., 273 S.W. 694, affirmed in Tex.Com.App., 3 S.W.2d 65; Hefner and Lockhart v. Downing, 57 Tex. 576, 580; Kiefer Oil & Gas Company v. McDougal, 8 Cir., 229 F. 933, Ann.Cas.1916D, 343; High Gravity Oil Company v. Southwestern Petroleum Company, 6 Cir., 290 F. 370; ...