Gulf Production Co. v. Continental Oil Co.

• Decision Date: 25 February 1942
• Docket Number: No. 6641.,6641.
• Citation: 164 S.W.2d 488
• Parties: GULF PRODUCTION CO. et al. v. CONTINENTAL OIL CO. et al.
• Court: Texas Supreme Court

Page 488

164 S.W.2d 488

GULF PRODUCTION CO. et al. v. CONTINENTAL OIL CO. et al.

No. 6641.

Supreme Court of Texas.

February 25, 1942.

Rehearing Denied June 10, 1942.

Error from Court of Civil Appeals for the Sixth Supreme Judicial District.

Suit by the Continental Oil Company and others against the Gulf Production Company and others to recover the oil and gas leasehold estate in certain land. A judgment for plaintiffs was affirmed by the Court of Civil Appeals, 61 S.W.2d 185, and defendants bring error.

Affirmed.

Superseding opinion of Supreme Court in 132 S.W.2d 553.

Black, Graves & Stayton, C. L. Black and A. W. Walker, Jr., all of Austin, Williams, Neethe & Williams and F. A. Williams, all of Galveston, John E. Green, Jr., of Houston, Wm. L. Wise and Peveril O. Settle, both of Ft. Worth, H. L. Stone, of Pittsburg, Pa., C. L. Stone, of Henderson, R. L. Batts, of Austin, and Claude McCaleb, of Houston, for Gulf Production Co.

Brachfield & Wolfe, of Henderson, McKinney & Berry, of Cooper, Ben H. Powell, of Austin, Hiner & Pannill, of Ft. Worth, and Wm. Pannill, of Houston, for Turner and wife.

Lloyd Price, of Ft. Worth, Phillips & Phillips, of Dallas, Burney Braly, G. R. Pate, and Phillips, Trammell, Chizum, Price & Estes, all of Ft. Worth, Eugene Lary, of Dallas, McEntire, James & Clower, of Tyler, G. B. Smedley, of Austin, T. S. Christopher, Clayton L. Orn, Joe Estes, and John A. Braly, all of Ft. Worth, W. H. Francis and Walace Hawkins, both of Dallas, Dan Moody, of Austin, W. L. Summers, of Urbana, Ill., Chizum, Estes & Ludlum and Phillips, Trammell, Estes, Edwards & Orn, all of Ft. Worth, and Chas. B. Wallace, Ralph B. Shank, and Sidney Latham, all of Dallas, for defendants in error.

Baker, Botts, Andrews & Wharton, of Houston, Charles B. Ellard and Bromberg, Leftwich, Carrington & Gowan, all of Dallas, A. H. Britain, of Wichita Falls, Will E. Orgain, of Beaumont, William Jarrel Smith, of Pampa, J. B. Dooley, of Amarillo, Crenshaw, Dupree & Milam, of Lubbock, Hughes, Hardeman & Wilson, of San Angelo, L. J. Wardlaw, of Ft. Worth, John E. Kilgore and Guy Rogers, both of Wichita Falls, John Perkins, of Midland, Adkins, Pipkin, Madden & Keffer and Morgan, Culton, Morgan & Britain, all of Amarillo, Katherine R. Fortenberry, of Beaumont, Dallas Ivey, of Center, Jesse J. Lee and Fred L. Williams, both of Houston, Ike D. White and H. Grady Chandler, both of Austin, John B. Atkinson, of Waco, Montague & Fannin, Sidney L. Samuels, and Mark McGee, all of Ft. Worth, R. Wayne Lawler, of Houston, Klapproth & Hamilton, of Midland, Robert T. Neill, on San Angelo, Carrigan, Hoffman & Carrigan, of Wichita Falls, McDonald Meachum, of Houston, Ballinger Mills, of Galveston, John B. McNamara, of Waco, Allan Shivers, of Port Arthur, and H. E. Jackson, of San Angelo, amici curiae.

SHARP, Justice.

This case is before us on motion for rehearing. The original opinion is reported in 132 S.W.2d 553. After a careful consideration of the motion and the many able briefs filed by counsel for the litigants as well as by amici curiae, we have reached the conclusion to withdraw the original opinion and substitute the following:

The Continental Oil Company, the East Texas Refining Company, H. L. Hunt, and P. G. Lake filed this suit against G. G. Turner and wife, Sina A. Turner, and the Gulf Production Company, to recover the oil and gas leasehold estate in a certain tract of 311.72 acres of land, more or less, in Rusk County, Texas. Plaintiffs claimed title under an oil and gas lease from G. G. Turner and wife to C. M. Joiner, trustee, dated April 7, 1927. The Gulf Production Company claimed title under a lease executed by G. G. Turner and wife to J. W. Pevey, dated July 25, 1930. The case was brought in the form of an action in trespass to try title, but plaintiffs specially pleaded the Turner lease of April 7, 1927, and compliance with its terms, as the source of their title. The case was tried before a jury, and in response to findings of the jury the trial court entered judgment in favor of the plaintiffs. The Court of Civil Appeals affirmed that judgment. 61 S.W.2d 185. This court granted a writ of error.

Defendants in error claim under a lease executed April 7, 1927, by G. G. Turner and wife to C. M. Joiner, trustee, and filed for record April 15, 1927. On October 18, 1930, the Turners reacknowledged this lease before a different notary public. Gulf Production Company claims under a lease executed by Turner and wife to J. W. Pevey, dated July 25, 1930, and filed for record August 5, 1930. Which of the two leases is superior, is the question here presented for decision.

The jury found: (1) That G. G. Turner and wife prior to April 7, 1928, accepted from Dan Cameron syndicate interest certificates purporting to cover the 80-acre Joiner Discovery Oil Well tract, in satisfaction of the rentals payable to G. G. Turner and wife on the C. M. Joiner, trustee, lease for the three succeeding years commencing April 7, 1928; (2) that G. G. Turner and wife prior to August 2, 1930, the date of the purported J. W. Pevey lease, moved away from the land in controversy in this suit, with no intention of returning and occupying same as their homestead; (3) that the Continental Oil Company, the East Texas Refining Company, H. L. Hunt, and P. G. Lake, at the time of the purchase of the interest claimed by them in the property in controversy, did not know, and could not have known by the exercise of ordinary inquiry, of any defect in the title to the land.

G. G. Turner and wife executed to C. M. Joiner, trustee, an oil and gas lease on 311.72 acres of land, above described. It was in the usual form, and was to run for five years, and as long thereafter as oil or gas might be produced. This lease was acknowledged by Turner and his wife in statutory form, was dated April 7, 1927, and was filed for record. The lease involved here is an ordinary oil and gas lease, and is classed an "unless clause" lease. The "drilling clause" of the lease reads: "If no well be commenced on said land on or before the 7 day of April 1928 this lease shall terminate as to both parties, unless the lessee on or before that date shall pay or tender to the lessor, or to the lessor's credit in the First State Bank at Overton, Texas, or its successors, which shall continue as the depository, regardless of changes in the ownership of said land, the sum of Seventy Seven and 25/100 Dollars, which shall operate as rental and cover the privilege of deferring the commencement of a well for Six (6) months from said date. In like manner and upon like payments or tenders the commencement of a well may be further deferred for like periods of the same number of months successively. And it is understood and agreed that the consideration first recited herein, the down payment, covers not only the privilege granted to the date when said first rental is payable as aforesaid, but also the lessee's option of extending that period as aforesaid, and any and all other rights conferred."

Plaintiffs in error contend that the foregoing clause of the lease was never complied with, and that the lease terminated by its own terms on April 7, 1928, long before Pevey, through whom the Gulf Company claims, obtained his lease from Turner and wife. Defendants in error allege in their pleadings that they claim under the Joiner lease, and that the delay rentals had been fully paid.

The testimony shows that Joiner, who was drilling an oil well in the vicinity of this land, was in hard financial straits, and that he was unable to pay the delay rentals on the lease in money; and he proposed that if the lessors would accept syndicate certificates in payment of the delay rentals, he could continue to drill the well. Defendants in error contend that Turner accepted, prior to April 7, 1928, the syndicate certificates as payment of the delay rentals, and the work continued on the well; and that the acceptance of such syndicate certificates continued the original terms of the lease. On the other hand, plaintiffs in error contend that the lease executed by Turner and wife to Joiner was on the Turners' homestead, and that Turner did not have the right to accept the syndicate certificates as payment, in lieu of the cash specified in the lease. The issue as to whether Turner and his wife accepted the syndicate certificates was raised; but that issue was decided against the Turners when the jury, in response to a special issue, answered that Turner and wife had accepted such syndicate certificates in payment of the delay rentals. Plaintiffs in error also contend that it should be held, as a matter of law, that Turner did not have the right to accept such syndicate certificates in payment of the delay rentals, and continue the lease in force, for the following reasons: (1) That it was an oral modification of the lease, and was in violation of the Statute of Frauds and the Statute of Conveyances; (2) that such transaction violated the homestead rights of Mrs. Turner; and (3) that the provisions of the "unless" clause providing that, in the absence of drilling operations, the lease would terminate unless $77.25 was paid by a certain time, constituted a limitation on the estate; and, therefore, unless $77.25 in money was paid, the lease terminated by its own terms.

The lessors had the right to accept or reject the syndicate certificates as payment of the delay rentals. If the delay rentals were not paid on or before April 7, 1928, as provided for in the lease, the lease terminated by its own terms. Prior to that date the lessors preferred that the lease should not terminate, and accepted the syndicate certificates in lieu of the money, as payment of the delay rentals. The original lease unquestionably satisfied the Statute of Frauds and the Statute of Conveyances (Articles 3995, 1288, and 1291, Vernon's Annotated Texas Civil Statutes), and we are here dealing with the method of payment. The lease itself provides...