Marathon Oil Co. v. Gulf Oil Corporation

• Decision Date: 20 April 1939
• Docket Number: No. 3767.,3767.
• Citation: 130 S.W.2d 365
• Parties: MARATHON OIL CO. et al. v. GULF OIL CORPORATION et al.
• Court: Texas Court of Appeals

130 S.W.2d 365

MARATHON OIL CO. et al. v. GULF OIL CORPORATION et al.

No. 3767.

Court of Civil Appeals of Texas. El Paso.

April 20, 1939.

Rehearing Denied in part May 25, 1939.

Rehearing Denied June 8, 1939.

Appeal from District Court, Pecos County; J. G. Montague, Judge.

Suit by the Marathon Oil Company and another against the Gulf Oil Corporation and others for an accounting, for judgment quieting title, and for the value of a seven-eighths interest in oil produced by defendants. R. Wilbur Brown and other owners of mineral and royalty interests under the lease under which plaintiffs claimed joined in the suit to recover their alleged share of royalties, and defendants filed a cross-action. From the judgment, plaintiffs and defendants appeal, and certain of the claimants of royalty interests bring a cross-assignment challenging part of the judgment.

Judgment reversed and rendered in part, judgment modified and, as modified, affirmed in part, and cross-assignment overruled.

R. F. Burges and Walter S. Howe, both of El Paso, Johnson & Crumpton, of Fort Stockton, A. M. Gee, of Findlay, Ohio, and R. C. Gwilliam and William Pannill, both of Houston, for plaintiffs.

H. L. Stone, of Pittsburg, Pa., P. O. Settle and Wm. L. Wise, both of Fort Worth, John E. Green, Jr., of Houston, Robt. T. Neill, Geo. T. Wilson, H. E. Jackson, John M. Davenport, and Charles Gibbs, all of San Angelo, and F. H. DeGroat, of Duluth, Minn., for defendants.

NEALON, Chief Justice.

Marathon Oil Company (which formerly had the corporate name of Mid-Kansas Oil & Gas Company) and Ohio Oil Company, the owners of a seven-eighths working interest in and to the oil and gas under Section 33, Block 194, G. C. & S. F. Railway Company Survey, in Pecos County, Texas, brought this suit against appellees Gulf Production Company, Gulf Oil Corporation and Gulf Refining Company to recover a portion of said Section 33, described as follows:

"Beginning at a stone mound on the south slope of ridge, marked `SE 28-NE 23-Line 33-Lea,' and set by A. N. Lea for the southeast corner of Section 28, Block 194, and being southeast corner of Section 28, for the southwest corner of this tract;

"Thence north to the northeast corner of Survey 28, stone mound marked `NE 28,' set by A. N. Lea for the northwest corner of this tract;

"Thence east 1100 feet to a point for the northeast corner of this tract;

"Thence south parallel with the west line of Survey 33, Block 194, to a point 1100 feet east of the southeast corner of Section 28, located as above stated;

"Thence west 1100 feet to said southeast corner of said Section 28, the place of beginning."

The appellants also sought to recover the value of seven-eighths of the oil produced by said appellees from said tract of land. R. Wilbur Brown and other owners of mineral and royalty interests under the lease under which appellants claim joined in the suit in order to recover their alleged share of royalties. The lease under which appellants Marathon Oil Company and Ohio Oil Company claim was executed by Mrs. Bobbie I. Taylor and Mrs. M. A. Smith and husband and conveyed seven-eighths of the oil and gas under said land to the Transcontinental Oil Company, which thereafter assigned its interest to Mid-Kansas Oil and Gas Company. The Ohio Oil Company succeeded to the rights of the Marathon Oil Company. The named appellees will be hereinafter referred to as the "Gulf." The Marathon Oil Company, the Mid-Kansas Oil and Gas Company, the Transcontinental Oil Company and the Ohio Oil Company will be referred to, respectively, as the "Marathon," "Mid-Kansas," "Transcontinental" and the "Ohio," as may be necessary to identify them.

Appellants alleged that appellees entered upon the tract of land described about August 1, 1927, and drilled nine oil wells, designated as Numbers 1, 2, 3, 4, 6, 7, 8, 9 and 21, and up to January 1, 1937, produced large quantities of oil therefrom, and that the aggregate value of the seven-eighths working interest of oil so produced up to January 1, 1937, was $1,781,073.00. They prayed for an accounting, for judgment quieting their title, and for the value of said seven-eighths interest.

It was admitted that said wells were located upon Section 33 as constructed by the decisions of the Supreme Court in Turner v. Smith, 122 Tex. 338, 61 S.W. 2d 792; Douglas Oil Company v. State, 122 Tex. 377, 61 S.W.2d 807, and Federal Royalty Company v. State, 128 Tex. 324, 98 S.W.2d 993, which held that the various sections of land constituting said Block 194 were to be located on the ground by running course and distance from the east line of Block Z, T. C. Ry. Co. Surveys. The Gulf owns, and has owned at all times involved in this litigation, an oil and gas lease covering Section 28 in said block. Reference is here made to Map No. 1 shown on page 797 of 61 S.W.2d, and to the texts of the Supreme Court's opinions in said case and other cases hereinbefore mentioned, to illustrate the relative locations of the lands involved and for an understanding of the issues involved and theories entertained as to the exterior and interior lines of Block 194 prior to said decisions.

In addition to filing a plea of not guilty, the Gulf pleaded specially that a short time after July 1st of 1927, Gulf and Mid-Kansas, both being uncertain as to the location of the true dividing line between Sections 28 and 33, entered into an agreement as to the location of the line; and that all of the wells the production of which is involved in this controversy are located within Section 28, as fixed by said agreed line; that said agreement was made with the knowledge and consent of the Transcontinental Oil Company, which at that time owned an undivided one-half interest in the seven-eighths originally conveyed to it by the owners of Section 33; and that both parties accepted said alleged agreed line and acted upon said agreement in developing their respective properties. The contention of the Gulf is that the line agreed upon was shown upon a map prepared by the Mid-Kansas and that said line was located by U. P. Kennedy, a surveyor for the Mid-Kansas, and was located about fifty feet west of the line which the executives of the two corporations involved had accepted as the common line between the two leases; that the two companies acquiesced in said line as a dividing line between the two leases and acted upon the assumption that it was so accepted for several years; and that the Mid-Kansas, in locating wells, in various applications filed with the Railroad Commission, designated said line as the west line of Section 33.

Gulf further alleged that the Mid-Kansas and its successor in title were estopped from now claiming that the west boundary line of the Smith-Taylor lease of Section 33 should be moved 1100 feet to the west as attempted in this suit, because in reliance upon the Kennedy line, which it alleged was designated by the Mid-Kansas as the west boundary line of Section 33, the Gulf had expended $389,409, in drilling and operating wells upon the land in controversy, and because the Mid-Kansas persuaded the Railroad Commission to allow it six full units on account of the reduced acreage in Section 33 effected by the Smith-Turner decision, thereby securing from the common pool all of the oil belonging to the Smith-Taylor lease as covering Section 33; and because the Mid-Kansas had accepted royalties from the Gulf Production Company from oil produced from the wells involved and executed transfer orders and indemnity bonds certifying and guaranteeing that it was the owner of said royalties, and acknowledging that said royalties were produced from Section 28.

Gulf also pleaded the three and four years statutes of limitations as to the alleged cause of action for the leasehold interest and the two and four years statutes of limitations as against appellants' suit to recover the value of oil produced from the disputed area.

Upon the conclusion of the evidence the Gulf, the Marathon and the Ohio each moved for an instructed verdict. A similar motion was made by such plaintiffs as were suing as owners of the royalty interests held in Section 33. The court denied the Marathon and Ohio's motion for an instructed verdict, but granted the motion presented by the plaintiffs suing as royalty owners for the value of their alleged proportionate parts of one-eighth of the oil produced from the wells involved. It also granted the motion of the Gulf Production Company, Gulf Oil Corporation and Gulf Refining Company for an instructed verdict as against the appellants for the seven-eighths mineral leasehold working interest. Judgment was rendered in conformity to the verdict. From said judgment respecting the seven-eighths working interest the Marathon Oil Company and the Ohio Oil Company now prosecute this appeal. The Gulf Production Company, Gulf Oil Corporation and Gulf Refining Company appealed from so much of the judgment as was rendered against them and in favor of royalty owners. Douglas Oil Company, joined by V. C. Hogan, J. L. Donahoe, Leo C. Donahoe and Irene Donahoe, claimants of royalty interests in Section 28, by cross assignment challenge so much of the judgment as was favorable to owners of royalty interests in Section 33.

All of Section 33, including the tract sued for, was leased by its owners, holding a regular chain of title under the sovereignty of the soil, in 1923, to the Transcontinental Oil Company. Later the Transcontinental Oil Company assigned a one-half interest to the Mid-Kansas Oil and Gas Company. The name of the Mid-Kansas was changed, by charter amendment, to Marathon Oil Company. On August 14, 1930, the remaining one-half of the lease in question was assigned by the Transcontinental Oil Company to the Mid-Kansas Oil and Gas Company; and subsequently the lease was assigned by Marathon Oil Company (being the Mid-Kansas with a change of name) to appellant, the Ohio Oil Company. In this lease Section 33 was...