Hoover v. General Crude Oil Co.

• Decision Date: 26 May 1948
• Docket Number: No. A-1543.,A-1543.
• Citation: 212 S.W.2d 140
• Parties: HOOVER et al. v. GENERAL CRUDE OIL CO.
• Court: Texas Supreme Court

212 S.W.2d 140

HOOVER et al. v. GENERAL CRUDE OIL CO.

No. A-1543.

Supreme Court of Texas.

May 26, 1948.

Rehearing Denied July 7, 1948.

Error to Court of Civil Appeals of First Supreme Judicial District.

Action by Mrs. Mildred Hoover and others against General Crude Oil Company for a declaratory judgment as to validity of an oil and gas lease. Judgment for defendant was affirmed by the Court of Civil Appeals, 206 S.W.2d 139, and plaintiffs bring error.

Judgments of Court of Civil Appeals and District Court reversed and cause remanded to District Court.

Ewing Werlein, Vinson, Elkins, Weems & Francis, C. E. Bryson and W. H. Francis, Jr., all of Houston, for petitioners.

Andrews, Kurth, Campbell & Bradley, T. A. Slack, Raymond A. Cook and W. M. Streetman, all of Houston, for respondent.

HICKMAN, Chief Justice.

This is an action instituted by petitioners against respondent for a declaratory judgment under Article 2524 — 1, Vernon's Annotated Civil Statutes, to determine the validity of an oil and gas lease executed by the substituted trustees under the will of Thomas E. Davis to John S. Hoover. At the close of petitioners' evidence the respondent's motion for an instructed verdict was granted, the jury discharged, and judgment rendered that all relief sought by petitioners be denied. The Court of Civil Appeals, one justice dissenting, affirmed the trial court's judgment. 206 S.W.2d 139. In view of the fact of a peremptory instruction we shall state the facts as testified to by petitioners' witnesses, just as though they had been found by the trial court.

The lease was dated November 22, 1928, and amended by agreement of the parties on May 29, 1929. It covered the whole of the Kokernot League of approximately 4400 acres of land situated in Harris and Liberty Counties. In November, 1928, the original lessee, John S. Hoover, assigned the lease in so far as it covered 805.9 acres out of the southeast corner of the Kokernot League to Union Exploration Company. By mesne conveyances the lease in so far as it covered that portion of the land passed to respondent, General Crude Oil Company, which company complied with a drilling obligation contained in the lease by the drilling of an exploratory well on the 805.9-acre tract. That well was completed as a producer on December 9, 1929, and thereafter the respondent conducted drilling operations on the 805.9-acre tract, and by July of 1943 had drilled in all thirty wells on that tract. The majority of those wells are still producing oil and gas in paying quantities.

Only two wells have been drilled on that portion of the lease retained by Hoover. One of these wells was drilled in 1936 by the Crown Central Petroleum Company to a depth of 6359 feet and was abandoned as a dry hole. A second well was drilled in 1943 by the Atlantic Oil and Refining Company to a depth of 10,505 feet and was likewise abandoned as a dry hole. The provisions of the lease with respect to development and forfeiture deemed material under the view which we entertain of this case are as follows:

"Third. — In the event that oil or gas are found in paying quantities on the said premises and Lessee shall and will thereafter prosecute continuously the drilling of wells with due diligence so as to produce and take from the said premises as promptly as possible the greatest amount of oil and gas possible. All such wells and all operations hereunder to be drilled, sunk, operated, prosecuted and carried on according to the approved methods to produce and sell promptly and continuously the greatest amount of oil and gas and so conducted as not to unnecessarily injure or impair the value of any minerals or interests not covered hereby, the right to develop and explore the premises for any minerals other than oil and gas in the usual and proper manner without unnecessarily interfering with the operations of Lessee is hereby specifically reserved to the Lessors; * * *"

Paragraph Fifth of said lease reads as follows:

"Fifth. — In the event that Lessee shall fail or omit to commence the drilling of a well on or before June 1, 1929, as herein provided or shall fail or omit to diligently prosecute drilling operations within the time or times herein mentioned or to comply with all or any of the provisions hereof and the expiration of ninety days thereafter then, and in such case, or cases, or any of them, all rights of the Lessee hereunder shall at the option of the Lessor cease and determine and these presents be deemed terminated without releasing the Lessee from liability for damages or otherwise by reason of the breakage by the Lessee of all or any of the provisions hereof, excepting only that the Lessee shall retain the right to operate on the royalty basis above referred to any well or wells then producing oil or gas in paying quantities so long as oil or gas in paying quantities is produced therefrom by the Lessee."

On December 12, 1944, respondent purchased from the trustees of the Davis estate all of the oil and gas in and under the whole Kokernot League, subject to any and all valid leases. Petitioners were not notified of this purchase, and respondent asserted no right of forfeiture at that time. Early in 1945 petitioners entered into a tentative contract with Phillips Petroleum Company under the terms of which that company agreed to drill a deep test well on that part of the lease owned by them or on an adjoining tract. There is testimony to the effect that had the contract been consummated, Phillips Petroleum Company would...