McKinnon v. Lane

• Decision Date: 09 December 1955
• Docket Number: No. 15665,15665
• Citation: 285 S.W.2d 269
• Parties: Carl L. McKINNON et al., Appellants, v. Loyce J. LANE et al., Appellees.
• Court: Texas Court of Appeals

Page 269

285 S.W.2d 269

Carl L. McKINNON et al., Appellants, v. Loyce J. LANE et al., Appellees.

No. 15665.

Court of Civil Appeals of Texas, Fort Worth.

Dec. 9, 1955.

Rehearing Denied Jan. 6, 1956.

Rogers & Eggers and Guy Rogers, Wichita Falls, for appellants.

John Murphree, Iowa Park, and Arch Dawson, Wichita Falls, for appellees.

BOYD, Justice.

Prior to January 1, 1944, the United States (hereinafter called the Government) became the owner of 1,902.613 acres of land in Wichita County and subdivided it into farm tracts with numbered Units for sale to farmers as a rural settlement project. Appellee Loyce J. Lane purchased Unit 62, containing 47.436 acres, and the North 18.182 acres of Unit 63 Several other tracts out of the original tract were sold by the Government, aggregating, with Lane's tract, 337.588 acres. In all such deeds the Government reserved 3/4 of the minerals. After these sales were made and effective on June 1, 1949, the Government executed an oil and gas lease to Gordon T. West covering its 3/4 interest in the entire 1,902.613 acres. On August 11, 1949, those who had acquired the 337.588 acres joined in executing a lease to West covering their combined tracts. In 1951 Congress authorized the sale by the Government of its 3/4 of the minerals, giving the surface owners preference, and Lane and his wife, Wilma G. Lane, as well as all the other Unit owners, by independent purchases at different times, bought from the Government its 3/4 of the minerals under the individual tracts, subject to the lease from the Government to West.

Loyce J. Lane filed this suit against Carl L. McKinnon, Carl L. McKinnon Jr., Floyd Kirk, Ky T. Hunter, Tollie E. Underwood, F. C. Baldwin, L. A. Wood, and Benjamin D. Steed, the other Unit owners, praying for a determination that the royalty under the Government lease is owned by the parties on whose land the wells may be located.

The other Unit owners filed a general denial and Joe L. Hale and The West Company, assignees of Gordon T. West, intervened. The defendants and intervenors filed a cross-action against Lane and his wife, asking that the court decree that the royalties payable under both leases are pooled and payable to the parties in proportion to the acreage owned by each; that if frim the record evidence the royalty interests are not now pooled, the leases be reformed so that all parties may participate in the royalties in proportion to the acreage owned by each; that it be decreed that the intervenors have the right to produce such leases in any manner they may that if from the record evidence the royalty without regard to any line or portion of the 337.588 acre tract, and to run the oil into a common battery or batteries of tanks as may be most economical, without obligation to drill offset wells; and that it be decreed that the lease of August 11, 1949, contains covenants of warranty and that any title thereafter acquired by any warrantor passed under and was made subject to such lease and cannot be set up adverse to the title against which the lessors warranted.

A jury was waived and the court found and held that the royalty under the 3/4 Government lease was not apportioned as between the individual tracts, and that the after-acquired title rule was not applicable in favor of the lessee under the oil and gas leases; that the royalties under the lease executed by the Unit owners are pooled; that intervenors have the right to drill wherever they may elect on the 337.588 acres, subject to valid regulations, without regard to interior lines and without obligation to drill offset wells; but the court declined to declare that the intervenors might commingle oil from the 337.588 acres in a common battery or batteries of tanks when in their opinion it would be economical to do so, holding that there was then no such controversy.

The Unit owners, other than the Lanes, and the intervenors have appealed. Appellants assign as error the holding that the 3/4 royalty under the Government lease is not apportioned; the holding that the after-acquired title rule is not applicable in favor of the lessee; and the court's declination to declare that intervenors might commingle the oil.

It is conceded that there was an apportionment of the royalty under the lease from the Unit owners to West. The principal controversy is whether the 3/4 royalty under the Government lease is apportioned among the Unit owners pro rata on an acreage basis or whether such royalty belongs to the owners of the tracts on which the wells may be located.

The Government lease provided:

'Sec. 2. * * * (b) Cooperative or unit plan. Within 30 days of demand, or if the land is within an approved unit plan, in the event such a plan is terminated prior to the expiration of this lease, within 30 days of demand made thereafter, to subscribe to and to operate under such reasonable cooperative or unit plan for the development and operation of the area, field, or pool, or part thereof, embracing the lands included herein as the Secretary of the Interior may determine to be practicable and necessary or advisable, which plan shall adequately protect the rights of all parties in interest, including the United States.

'Sec. 4. Undivided fractional intertest.-Where the interest of the United States in the oil and gas underlying any tract or tracts described in section 1 hereof is an undivided fractional interest, the following terms and conditions shall apply:

'(a) Rentals and royalties payable on account of each such tract shall be in the same proportion to the rentals and royalties provided for in the schedule attached to this lease as the undivided fractional interest of the United States in the oil and gas underlying such tract is to the full fee simple interest.

'Sec. 9. Heirs and successors in interest.-It is further covenanted and agreed that each obligation hereunder shall extend to and be binding upon, and every benefit hereof shall inure to, the heirs, executors, administrators, successors, or assigns of the respective parties hereto.'

The Unit owners' lease contained this provision:

'7. The rights of either party hereunder may be assigned in whole or in part and the provisions hereof shall extend to the heirs, successors and assigns, but no change or divisions in ownership of the land, rentals, or royalties, however accomplished, shall operate to enlarge the obligations or diminish the rights of Lessee. No sale or assignment by Lessor shall be binding on Lessee until Lessee shall be furnished with a certified copy of recorded instrument evidencing same. In event of assignment of this lease as to a segregated portion of said land, the rentals payable hereunder shall be apportionable as between the several leasehold owners ratably according to the surface area of each, and default in rental payment by one shall not affect the rights of other leasehold owners hereunder. * * *'

In its deed to the Lanes, the Government quitclaimed 'all of the right, title, interest, claim and demand of the Government in and to all of the oil, gas and other minerals in, on, under, or that may be produced from' the land described, and all of its 'rights, title and interest in, to, and under any leases, permits, contracts or other instruments to the extent that they cover said minerals and mineral interests hereby quitclaimed, * * *.'

We have carefully considered the record in the light of the able briefs and oral argument of all parties, and, while the question is not free from difficulty, we are of the opinion that the court correctly held that the royalty under the Government lease is not apportioned.

It may be said that nonapportionment is the general rule, and it ordinarily controls when there are no stipulations to the contrary when the lessor sells a part of a tract covered by an oil and gas lease.

In Garza v. De Montalvo, 147 Tex. 525, 217 S.W.2d 988, 993, the Supreme Court said: '* * * where a portion of the leased premises is subsequently conveyed by the...