Hoffman v. Magnolia Petroleum Co.

• Decision Date: 27 June 1925
• Docket Number: (No. 523-4202.)
• Citation: 273 S.W. 828
• Parties: HOFFMAN et al. v. MAGNOLIA PETROLEUM CO. et al.
• Court: Texas Supreme Court

273 S.W. 828

HOFFMAN et al. v. MAGNOLIA PETROLEUM CO. et al.

(No. 523-4202.)

Commission of Appeals of Texas, Section B.

June 27, 1925.

Error to Court of Civil Appeals of the Fourth Supreme Judicial District.

Suit by Peter L. Hoffman and others against the Magnolia Petroleum Company and others, in which defendant F. A. Weiser interposed a cross-action, From a judgment of the Court of Civil Appeals (260 S. W. 950)

affirming judgment sustaining general demurrer to petition and cross-action, plaintiffs bring error. Reversed and remanded.

Dedmon & Potter and Clay Cooke, all of Fort Worth, for plaintiffs in error.

Ernest May, of Fort Worth, A. S. Hardwicke and O. F. Wencker, both of Dallas, Goree, Odell & Allen, of Fort Worth, and C. C. Hampton, of De Leon, for defendants in error.

STAYTON, J.

Peter L. Hoffman, as plaintiff, brought this suit for the recovery of the proceeds of royalties that accrued under an oil lease on a half section of land, basing his right of action upon a deed from lessors to himself. The district court sustained general demurrers to his petition, and the parties who demurred aver as the basis of the decision, and as correct law, the point that the deed only conveyed the royalty earned by wells drilled upon a tract of 90 acres out of the larger leased tract, whereas the petition did not allege that any wells had been brought in upon this particular 90 acres. The Court of Civil Appeals was of the same opinion, 260 S. W. 950. The defendants give assurance that this was and is the only question in the case; and for that reason, without a critical examination of the petition in other respects, the disposition of the cause will be governed accordingly. The specific inquiry is whether the deed gave plaintiff a right to participate in any royalties under the lease, unless production were had from a well upon the 90 acres.

As is shown by the allegations of the petition, the lease was in ordinary form to one R. O. Harvey as lessee; covered and conveyed the oil and gas under 320 acres out of a section of land in Comanche county; provided for a one-eighth royalty on oil, money royalty on gas, and rentals of $330 every six months, as consideration for deferring the commencement of a well, up to five years; made the rights under it perpetual during production; and negatived all obligation upon lessee to drill upon any particular part of the premises.

The deed to plaintiff is averred to have passed from lessors, Duke and wife, before the completion of any well on the half section, in consideration of $10,000 paid by him. It was delivered nine months after the date of the lease, and granted:

"The following, to wit: One-half (1/2) interest in and to all of the oil, gas and other minerals in and under and that may be produced from the following described lands situated in Comanche county, Texas, to wit: A certain 90 acres" (giving metes and bounds and describing the tract as out of the section already mentioned) "together with the rights of ingress and egress at all times for the purpose of mining, drilling and exploring said lands for oil, gas, and other minerals and removing the same therefrom."

The instrument continued:

"Said above-described lands being now under an oil and gas lease originally executed in favor of R. O. Harvey and now held by ____. It is understood and agreed that this sale is made subject to said lease but covers and includes one-half of all the oil royalty and gas rental or royalty due to be paid under the terms of said lease. It is agreed and understood that one-half of the money rental which may be paid to extend the term within which a well may be begun under the terms of said lease is to be paid to the said Peter L. Hoffman and in the event that the said above-described lease for any reason becomes cancelled or forfeited then and in that event the lease interest and all further rentals on said land for gas and mineral privilege shall be owned jointly by Jas. N. Duke and wife, and ____ Hoffman, each owning one-half interest in all oil, gas and other minerals in and upon said land, together with one-half interest in all future rents. * * * To have and to hold the above-described property, together with all and singular the rights and appurtenances thereto in anywise belonging unto the said Peter L. Hoffman heirs and assigns, forever."

The plaintiff contends that the conveyance to him of "one-half of all of the oil royalty * * * due to be paid under the terms of said lease" is not confined to wells upon the smaller tract. The defendants reply that, since the smaller tract is the subject-matter of the deed, the quoted language should be construed as having reference to it alone, and that any other interpretation would be unreasonable.

Before deciding the question, the court would call to mind that, if the deed is capable of the meaning contended for by plaintiff, there would be nothing unreasonable in holding under the circumstances alleged that, for so substantial a cash consideration, the lessors, having previously conveyed to lessee all of the oil, gas, and minerals under the whole half section, and retained the surface for their own consistent uses, consented to part, not only with their possibility of a reverter in the oil, etc., of the 90 acres, but also with a full one-half of their right to royalties under the lease as an entirety, especially in view of the fact that the reverter was uncertain and the control over the placing of wells impossible. They may not have done that; but it would not have been wrong or inane upon its face if they had. Gypsy Oil Co. v. Schonwald (Okl. Sup.) 231 P. 864. And then again it could have been reasonable from their standpoint, and not unreasonable from that of grantee, if they had restricted their assignment of royalties to those from wells on the 90.

There are a number of rules of construction that will be noticed.

This deed, if its intention be ambiguous, is to be construed against grantors rather than against grantee; and yet, if what it purports to convey is distinctly pointed out in a manner and under circumstances showing that royalty as to wells located outside of the 90 acres was not in contemplation, although the contrary could be construed as within other language when considered separately,...