Lone Star Gas Co. v. Stine

• Decision Date: 22 July 1931
• Docket Number: No. 1463-5700.,1463-5700.
• Citation: 41 S.W.2d 48
• Parties: LONE STAR GAS CO. v. STINE et al.
• Court: Texas Supreme Court

Page 48

41 S.W.2d 48

LONE STAR GAS CO. v. STINE et al.

No. 1463-5700.

Commission of Appeals of Texas, Section A.

July 22, 1931.

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

Action by J. H. Stine and others against the Lone Star Gas Company. Judgment for defendant was reversed and rendered by the Court of Civil Appeals [23 S.W.(2d) 752], and defendant brings error.

Judgment of Court of Civil Appeals reversed, and that of district court affirmed.

Ben H. Powell, of Austin, Karl F. Griffith and Roy C. Coffee, both of Dallas, and Taylor, Muse & Taylor, of Wichita Falls, for plaintiff in error.

Kay & Akin and C. C. McDonald, all of Wichita Falls, and G. B. Smedley, of Fort Worth, for defendants in error.

CRITZ, J.

During the years 1911 and 1912, the defendants in error, J. H. Stine et al., were the owners of certain land in Clay county, aggregating more than 750 acres. On November 23, 1911, and December 5, 1911, Stine et al. for a cash consideration of $24,738 executed and delivered to the gas company certain gas deeds conveying to the gas company: "All our rights, title and interest, ownership and claim, both present and prospective, in all natural gas in and under the following tract and parcels of land," (here follows description of land).

These conveyances were duly acknowledged, delivered, and recorded.

At the same time the above gas deeds were executed and delivered, the parties entered into an "operating agreement." The pertinent parts of this agreement are set out in the opinion of the Court of Civil Appeals, and in the interest of brevity will not be repeated here.

On the trial of the case in the district court, it was shown that the gas company drilled a number of wells on the land in question, and now have about eight such wells producing gas. Prior to 1916, this gas was conveyed by the gas company to a compressor near the wells where it was compressed in order to increase the pressure in the mains, and thus facilitate its transportation through the pipe line. The gas was run from the compressor into the pipe line, which conveyed it to where it was sold for fuel purposes. During this time, when the weather was cold, and because of such low temperature and high pressure, gasoline, which was a part of the gas, and was in gaseous form when it came from the wells, would sometimes accumulate in the drips along the line in such quantities that it could be taken and used as motor fuel.

We here quote and adopt the following facts found by the Court of Civil Appeals: "In the year 1916 the appellee built its absorption plant, and after the completion of that plant the gas from the appellants' land was conveyed from the wells to the compressor station, and from the compressor station to the absorption plant, where it was run through a certain kind of crude oil. This crude oil absorbed from the gas the gasoline which was carried along with the gas in the form of vapor, and the dry gas, after the gasoline had thus been absorbed from it, went into the main lines of appellee, and was transported to various cities for fuel purposes. One of appellee's witnesses described the process of extracting the gasoline as being a method by which gas was run through a certain kind of oil so that the oil became saturated with the hydrocarbons that go to make gasoline. The testimony is that this gasoline vapor may be converted into gasoline either by the absorption method used by the appellee, or by compression and cooling. That is, that by compression and lowering of temperature, the gas or vapor will be changed from its vaporous form into liquid, and this is the method which is ordinarily used in changing casinghead gas into gasoline."

This suit was instituted in the district court of Clay county, Tex., by Stine et al. against the gas company for an accounting, and for a one-eighth royalty on all gasoline that was produced by the gas company by the process shown above.

The case was tried in the district court with a jury, but at the close of the testimony the trial judge directed a verdict for the gas company. The verdict was returned as directed and judgment entered accordingly. On appeal by Stine et al., the Court of Civil Appeals reversed the judgment of the district court and rendered judgment for Stine et al. 23 S.W.(2d) 752. The case is in the Supreme Court on writ of error granted on application of the gas company.

As we understand the opinion of the Court of Civil Appeals, it holds that as a matter of law the gasoline manufactured from the natural gas which flowed from the gas company's wells was oil within the meaning of the deeds and "operating agreement," supra. We think this holding is error. Humble Oil & Refining Co. v. Poe (Tex. Com. App.) 29 S. W.(2d) 1019, 1020; Magnolia Petroleum Co. v. Connellee (Tex. Com. App.) 11 S.W.(2d) 158.

A careful reading of the gas deeds and "operating agreement" clearly discloses that the "operating agreement" does not and was not intended to in any way subtract from the estate conveyed by the gas deeds, but was intended merely to provide a method by which the owner of the gas estate and the owners of the oil estate could work...