Masterson v. Gulf Oil Corp., 13087

• Decision Date: 18 April 1957
• Docket Number: No. 13087,13087
• Citation: 301 S.W.2d 486
• Parties: W. D. MASTERSON, Independent Executor of the Estate of Branch T. Masterson, Deceased, et al., Appellants, v. GULF OIL CORPORATION et al., Appellees.
• Court: Texas Court of Appeals

Page 486

301 S.W.2d 486

W. D. MASTERSON, Independent Executor of the Estate of Branch T. Masterson, Deceased, et al Appellants, v. GULF OIL CORPORATION et al., Appellees.

No. 13087.

Court of Civil Appeals of Texas, Galveston.

April 18, 1957.

Rehearing Denied May 9, 1957.

Lewis D. Fisher, Houston, Kilgore & Kilgore, Wilmer D. Masterson, III, Dallas, for appellant.

Eastham & Williams, Willard C. Williams, Houston, for appellees J. H. Tigner and others.

Robert F. Carter, William C. Spence, Houston, for appellee Gulf Oil Corp.

Walter C. Clemons, Houston, of counsel, for appellees.

GANNON, Justice.

On Movember 19, 1929, the Independent Executors of Branch T. Masterson, Deceased, conveyed to George H. Bingham by general warranty deed certain lands in Brazoria County, Texas. However, the deed contained the following exception and reservation:

'It being expressly agreed and understood, however, that there is reserved by the Grantors herein and excepted from this conveyance, an undivided one-sixteenth (1/16) royalty interest of any oil, gas or minerals that may hereafter be produced on said land and one-half (1/2) of any bonus or rental paid in lieu of such royalty interest; * * *.'

On January 25, 1949, the grantee, George H. Bingham, having died intestate his administrator, J. H. Tigner, executed an oil and gas lease on the subject land to Gulf Oil Corporation. The lease is in the usual from and for a primary term of five years. It provided for annual delay rentals of $2,554.80. Gulf Oil Corporation paid a $12,774 cash bonus for the execution of the lease, and has subsequently paid annual delay rentals totaling $8,934.30. The cash bonus and all delay rentals have been paid to Bingham's administrator. No part of said cash bonus or of said delay rentals has been paid to Masterson's executor, his heirs or devisees. The Mastersons claim they are entitled to one-half of all bonus and delay rentals paid under the lease, and seek a money judgment therefor.

With all interested parties before it, the trial court ruled that the foregoing reservation did not entitle the Mastersons to any part of the cash bonus or delay rental involved and denied recovery therefor. The Mastersons appeal, claiming that under the reservation they are entitled to receive one-half of the cash bonus paid for the execution of the lease as well as one-half of all delay rentals paid thereunder.

In support of their position, the Mastersons say that when effect is given to the plain unambiguous language of the reservation it is clear that they are entitled to one-half of the ordinary cash bonus and ordinary delay rentals involved. Their position is stated variously, as follows: Bonus, rental and royalty are, in a sense, alternative payments and each is paid instead of or in place of the other. Cash bonus and delay rental payment are by their 'very nature' in lieu of royalty which would be required in the event of production. The grantors in the deed of November 19, 1929, simply reserved one-half of all money payments made for the exclusive right to explore or utilize the mineral estate. This is true because bonuses and rentals came into existence as substitutes for or as payments in lieu of royalties, having evolved to replace what would otherwise be immediate and continuous drilling obligations. Differently put, the Mastersons argue that ordinary cash bonus and delay rentals paid for and under an oil lease are actually and in essence royalty, so that as a matter of law such payments necessarily represent royalty and are paid in lieu or in place thereof. They say: 'It seems * * * inescapable that * * * in every ordinary oil and gas lease the bonus paid is * * * a payment in lieu of royalty; [that] rental paid is * * * payment made in lieu of royalty; [and] that when royalty is paid such payment is in lieu of any further need either for bonus payment or rental payment so long as the royalty payment continues.'

We are not impressed with these contentions. They prove too much. Given logical effect they would establish in the ownership of a mere royalty interest ipso facto a right to a proportionate share of all ordinary bonus and delay rents. Nor would it be necessary to sustain such right that there be express provision for a proportionate share of bonus and rental 'paid in lieu of such royalty interest.' The right would follow in law as appurtenant to the royalty. Our decisions are to the contrary. A royalty interest as distinguished from a mineral interest is not entitled to share in bonus or rental, but only in production, actual or constructive. State National Bank of Corpus Christi v. Morgan, 135 Tex. 509, 143 S.W.2d 757; Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543.

The Mastersons construe their deed just as if, in respect to the minerals, they had reserved a one-half interest therein though irrevocably delegating and appointing their grantee, his executors, administrators and assigns, executive agent of the leasing power which would otherwise remain in the ownership of the minerals. In our opinion, this is a strained and unnatural construction, and in the face of the clear intent of the instrument which we consider to be plain and unambiguous.

The words 'Royalty,' 'Bonus,' and 'Rentals,' each and all have a separate, distinct and well established meaning in the oil and gas business. See Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543, 544, where it was said, 'The words 'royalty,' 'bonus,' and 'rentals' have a well-understood meaning in the oil and gas business. * * * it is well settled that a grantor may reserve minerals or mineral rights and he may also reserve royalties, bonuses, and rentals, either one, more or all.' In that case the reservation was...