Hurbrough v. Cain

• Decision Date: 31 August 1978
• Docket Number: No. 1155,1155
• Parties: John H. HURBROUGH, Appellant, v. Pat H. CAIN et al., Appellees.
• Court: Texas Court of Appeals

Page 216

571 S.W.2d 216

John H. HURBROUGH, Appellant, v. Pat H. CAIN et al., Appellees.

No. 1155.

Court of Civil Appeals of Texas, Tyler.

Aug. 31, 1978.

Rehearing Denied Oct. 3, 1978.

J. S. Siskind, Byrnes, Myers, Adair, Campbell & Sinex, Houston, for appellant.

D. W. Garrett, Liddell, Sapp, Zivley & Brown, G. Irvin Terrell, Baker & Botts, Houston, for appellees.

ON MOTION FOR REHEARING

McKAY, Justice.

Our opinion delivered on July 27, 1978, is withdrawn and the following opinion substituted therefor.

This is a suit on a letter agreement filed by appellant against appellees Cain and Hankamer seeking an accounting and actual and punitive damages for breach of contract. Cain and Hankamer filed separate motions for summary judgment alleging appellant's cause of action was barred by the four year statute of limitation, and the trial court granted both motions and rendered judgment for Cain and Hankamer.

Appellant filed a sworn motion to strike portions of appellee Hankamer's brief on the ground that the deposition of appellant referred to in the brief was not before the trial court at the summary judgment hearing nor before judgment was rendered. There is no reply or counteraffidavit to the contrary; therefore, such motion is granted.

Appellant alleged that he entered into an agreement in writing with Cain and Hankamer for acquisition of certain overriding royalty interests in Anderson County; that Cain and Hankamer agreed that with respect to all leases acquired by either Cain or Hankamer within the defined geographical area within a five year period, and with respect to all acreage then owned by them within the defined area of interest, appellant would be assigned an overriding royalty of 3% Of 8/8Ths, as set out in the writing; that Cain and Hankamer owned at the time and acquired subsequently numerous leases and mineral interests within the defined geographical area of interest, all of which are subject to the rights of appellant; that oil and gas has been produced from said properties, and appellant is due royalties on past production; that appellant agreed to refrain from taking leases in the area of interest and to assign to Cain and Hankamer any leases he owned in such area, and Cain and Hankamer agreed that all operations of oil and gas properties in the area by or on account of the parties would be conducted in the name of Hankamer for the five-year period; that Cain and Hankamer permitted and caused oil and gas operations to be conducted in the name of Cain, and remain in his name, to appellant's damage; that had appellant not withdrawn from any ownership or leasing activities in the area he would have received income of at least $500,000 thereafter over and above the value of the 3% Royalty; that Cain and Hankamer each received substantial amounts of money from oil and gas operations to which appellant was entitled under the terms of the letter agreement.

Cain and Hankamer answered by general denial, and alleged that appellant's cause of action was barred by the statute of limitations and by equitable laches, and that the contract was void for failure of and lack of consideration; that if such contract did exist Cain and Hankamer each fully and completely performed all obligations under the contract.

The letter agreement follows:

"August 19, 1969

"Mr. Curtis Hankamer

714 Houston Bank and Trust Bldg.

Houston, Texas 77002

"Dear Curtis:

"In connection with the new test well proposed in the Boggy Creek Field, my brother and I hereby forfeit any rights in the area except for the agreements set forth as follows:

"1. The area of interest is South 2/3Rds of the David Roberts Survey, Abstract 662, East 3/4Ths of the D. Clark Survey, Abstract 181, East 3/4Ths of the John Trimmier Survey, Abstract 773, and West 3/4Ths of the A. B. Patton Survey, Abstract 649, all in Anderson County, Texas.

"2. I will make available all my files relating to the area.

"3. On all leases acquired by you and/or Pat H. Cain or anyone else connected with either of you, within the area of interest, within a 5 year period, and all acreage now owned by the same parties within the area of interest, I shall be assigned an overriding royalty of 3% Of 8/8Ths, free and clear of all cost and expenses. However, in the event another lease or mineral owner participates in a well, then my royalty will be proportionately reduced. For instance, if Burk Royalty participated on a 50-50 basis on the Cook Lease, then my overriding royalty would be reduced to one and one-half (1 1/2%) on that lease. Conversely, as long as you and your associates own 100% Of the working interest, regardless of the net amount then I am to receive the 3% Of 8/8Ths override.

"4. The operations are to be in the name of Curtis Hankamer.

"5. I shall be entitled to a copy of logs and other related data on all wells along with copies of access to the area at any time.

"6. I will refrain from taking leases in the area and any leases that I now own, if in effect, will be assigned to you and Pat Cain, subject to the overriding royalty in the amount as above provided.

"If the above is acceptable to you and Pat Cain, please sign in the space provided below and have Pat Cain execute, returning two completed copies for my and my brother's files.

"The production payment owned by A. D. Hurbrough, Jr. is not affected by this agreement.

"Yours very truly,

/s/ John H. Hurbrough

John H. Hurbrough

/s/ A. D. Hurbrough

A. D. Hurbrough Jr.

"Accepted And Agreed To this

28th day of August, 1969

/s/ Curtis Hankamer

Curtis Hankamer

/s/ Pat H. Cain

Pat H. Cain"

Appellant's original petition was filed on May 20, 1976.

In answer to interrogatories Cain stated that "at some point during the five-year period specified in the August 19, 1969 letter, I jointly operated the following wells on leases at the times indicated . . ." Then listed were (a) drilling of a dry hole on the Beard lease in September 1971; (b) drilling of another dry hole on the Beard lease in October 1971; (c) drilling of a dry hole on the Cook lease in May 1972; (d) the drilling but not the completion of the Daly No. 1 well in November 1973; and (e) the Todd A lease effective June 1, 1973, with two wells drilled between June 1, 1973, and the end of the five-year period, the Todd A. No. 4-dry hole and Todd A 5 completed as an oil well.

Cain further answered interrogatories that as of August 19, 1969, he did not own any working interest in the "area of interest," but that subsequent to that date he acquired a working interest in (a) 50% Of the working interest in the Daly lease by assignment dated March 12, 1970, which interest was later reduced to 1/4Th; (b) 50% Working interest in the Cook lease by assignment dated March 12, 1970, later reduced to 6/16Ths; (c) 50% Working interest in the Beard lease by assignment dated March 12, 1970, later reduced to 6/16Ths; (d) 50% Working interest in the Gouger lease by assignment dated March 12, 1970, which was later reduced to 6/16Ths; (e) 50% Working interest in the Todd B lease by assignment dated June 1, 1973; (f) 50% Working interest in the Todd A lease by assignment dated June 1, 1973, and (g) a working interest in a few short-term leases on the Peter Holloway, Comer Todd and W. T. Todd tracts acquired during the five-year period, which leases were allowed to expire through nonproduction. Cain stated he had not taken any oil or gas from any lease in the "area of interest" over the last ten years for his own account, but that "all oil production currently attributed to my account is being sold to Exxon Pipe Line Co.," and all casinghead gas is used for lease fuel and being flared.

Cain further said he had not personally made royalty payments, and that the value, to him, of oil and gas produced from the "area of interest" from August 19, 1969, to present (November 1976) "is a substantial net loss."

Cain's affidavit in support of his motion for summary judgment states that as of August 19, 1969, he did not own any lease or acreage within the "area of interest"; that during the five-year period specified by the letter agreement he acquired from persons other than Hankamer the following leases and acreage within the "area of interest" on dates indicated: (1) Peter Holloway lease originally obtained on December 30, 1969, and allowed to expire nine months thereafter; obtained again on October 8, 1970, expiring six months thereafter; (2) A. E. Todd Estate B lease originally acquired on March 10, 1970, expiring 90 days thereafter; obtained again on June 30, 1970, expiring 90 days thereafter; (3) W. T. Todd, et al., lease of 197 acres in the David Roberts Survey A-662 originally acquired March 10, 1970, expiring 90 days thereafter; acquired again on June 30, 1970, expiring 90 days thereafter; (4) W. T. Todd lease of 100 acres in the A. B. Patton Survey A-649 originally acquired on March 17, 1970, expiring 90 days thereafter; acquired again on June 30, 1970, expiring 90 days thereafter Cain further states in his affidavit that he first became an operator of a lease in the "area of interest" during the five-year period stated in the letter agreement with operations in his name during September 1971.

Hankamer's affidavit in support of his motion for summary judgment states that as of August 19, 1969, he owned leases and acreage within the "area of interest" specified in the letter agreement as follows: (1) the first Peter Holloway lease; (2) J. F. Roberts lease; (3) the first A. E. Todd "B" lease; (4) A. E. Todd Estate "A" lease; and (5) E. L. Daly lease; that on August 19, 1969, and for at least six months thereafter, (1) the J. F. Roberts lease and the (2) A. E. Todd Estate "A" lease were producing oil or gas on which revenues were being received.

The Hankamer affidavit further says that during the five-year period specified in the August 19, 1969, letter agreement...