McDaniel v. Newton

• Decision Date: 06 April 1945
• Docket Number: No. 14682.,14682.
• Citation: 187 S.W.2d 139
• Parties: McDANIEL et al. v. NEWTON et al.
• Court: Texas Court of Appeals

187 S.W.2d 139

McDANIEL et al. v. NEWTON et al.

No. 14682.

Court of Civil Appeals of Texas. Fort Worth.

April 6, 1945.

Rehearing Denied April 27, 1945.

Appeal from District Court, Cooke County; B. W. Boyd, Judge.

Suit by Jim McDaniel and others against Earl B. Newton and others to remove cloud cast on plaintiffs' title by instruments conveying oil royalty interest for purpose of forming a royalty pool. Judgment for defendants, and plaintiffs appeal.

Affirmed.

Ben D. Clower, J. A. Lantz, and Thos. Y. Banks, all of Dallas, for appellants.

Cecil Murphy, of Gainesville, for appellees.

McDONALD, Chief Justice.

During the year of 1938 the owners of twenty-eight tracts of land in Cooke County executed instruments in writing conveying the royalty interests therein set out to J. D. Howeth and E. C. Mead as trustees. The instruments were printed, with certain blank spaces, which were filled in with typewriting. In said blank spaces were written the names of the respective grantors, the names of the trustees, the fractional interest of the royalty interest being conveyed, the name of the holder of the outstanding oil and gas lease, and certain other items not necessary to describe. The owner or owners of each tract executed a separate instrument, there being twenty-eight of such instruments. The grantors named in six of said instruments are the plaintiffs in this suit. They brought suit to remove the cloud cast on their titles by said instruments, naming as parties defendant the trustees, the owners of the other twenty-two tracts, and other interested parties.

The purpose of the conveyances was to form what might be termed a royalty pool, in order that the owner of each tract might become entitled to a pro rata share of the royalties received from production of oil, gas and other minerals from all lands in the pool.

It is clear that the only interest conveyed is an interest in oil royalty and gas rentals or other royalty due to be paid under such leases. Expressly exempted from the conveyances are delay rentals, or bonuses on future leases.

Following the granting and habendum clauses are the following recitals:

"The foregoing conveyance is in trust for the following uses and purposes, to-wit:

"Section 1. Purpose. The grantors desire to combine the royalty interest hereby conveyed with like royalty interest conveyed and to be conveyed to the Trustee by other grantors in the territory described in Schedule A hereto, upon the same form of contract. It is contemplated that by thus pooling a fractional part of their royalties the grantors will be benefitted in the event oil or gas is found on pool property, regardless of whether oil is found on their property.

"Section 2. Term. If oil or gas is not found on some tract in which royalty has been conveyed to the Trustee, in the territory covered by Schedule A, within five years from the date hereof, all rights conveyed hereby shall revert to the grantors, their heirs or assigns; but, in the event oil or gas is produced on any such tract during the said five year period, the rights granted hereby shall continue so long as oil or gas is produced on any of the pooled tracts. Unless royalty interest in 2000 acres or more have been pooled with the Trustee by similar instruments, on or before Oct. 1st, 1938, this instrument, and all rights thereunder, shall automatically terminate and be of no further effect.

"Section 3. Beneficial Ownership of Pool Property. The Trustee shall, and he hereby agrees to hold the royalty interests heretofore or hereafter conveyed to him by similar conveyances, in trust as follows: (1) An undivided three-fourths of the royalty interests so conveyed, for the use and benefit of the several grantors of royalty interests in said territory, in the proportion which the royalty interest conveyed by them to the Trustee bears to all the royalty interests pooled. (2) An undivided one-fourth of the royalty interest hereby conveyed, for the use and benefit of Earl B. Newton of Pontiac, Michigan, hereinafter called the third party."

Section 4 provides that the trustee shall not collect the proceeds of such royalty, but shall, after production is obtained, execute division orders and other contracts so that payment may be made direct to the grantors named in said instruments or their assigns, for their respective interests in such production. It is not necessary to discuss other sections of the instrument.

On the reverse side of the printed form appears Schedule A, referred to in Section 1. Said schedule names a large number of surveys in Cooke County, and shows the number of acres in each.

The case was tried to the court without a jury. The judgment being for the defendants, the plaintiffs have appealed, presenting four points of error in their brief.

The contention made under the first point is based upon the language contained in Section 2, above quoted, and particularly upon the last sentence in said section, which reads as follows: "Unless royalty interest in 2000 acres or more have been pooled with the Trustee by similar instruments, on or before Oct. 1st, 1938, this instrument, and all rights thereunder, shall automatically terminate and be of no further effect."

Appellants' argument is to the effect that the expression "royalty interest in 2000 acres" means such an aggregation of royalty interests as would be the equivalent of the full one-eighth royalty in 2000 acres. To illustrate, most of the conveyances assigned only one-fourth of the royalty. If all had assigned one-fourth, then, under appellants' theory, the conveyances would have terminated unless the trustees had received, by the named date, conveyances of...