Midwest Oil Corp. v. Winsauer
| Decision Date | 15 April 1959 |
| Docket Number | No. A-7029,A-7029 |
| Citation | 159 Tex. 560,323 S.W.2d 944 |
| Parties | MIDWEST OIL CORPORATION et al., Petitioners, v. Weldon O. WINSAUER et al., Respondents. |
| Court | Texas Supreme Court |
W. Scott Clark, Fort Worth, for petitioner.
Perkins, Floyd & Davis, Alice, Wade & Wade, Beeville, W. B. Moss, Sinton, for respondent.
This suit was instituted by petitioners, R. F. Scheig, Sally Scheig Simons and husband, C. B. Simons, and Midwest Oil Corporation against Weldon O. Winsauer, J. P. Pruett and wife, Nellie F. Pruett, J. W. Crouch and wife, Mary Crouch, Crouch Dairies, Inc., Reese Wade, W. B. Moss, and the Gas Gathering Co., seeking a declaratory judgment that their 15-year term royalty had not expired.
The term royalty deed, dated March 16, 1940, contained a provision that the grant and the rights, title, and privileges granted should extend for a period of fifteen years from date and so long thereafter as oil, gas or other minerals, or either of them, was produced in paying or commercial quantities. The facts were stipulated. The parties will hereafter be designated as plaintiffs or defendants as in the trial court.
The trial court, without the aid of a jury, rendered a judgment (1) that plaintiffs take nothing by their suit; (2) that the royalty deed, under which the plaintiffs' claim, had 'lapsed and that said plaintiffs' rights thereunder have terminated and such conveyance is hereby adjudicated to be of no further force or effect and cancelled'; (3) that the title and possession of two tracts consisting of 124 acres and 143.66 acres, be divested out of plaintiffs, and awarded to defendants, J. P. Pruett and Nellie F. Pruett; (4) that the title and 'possession, formerly held by plaintiffs under and by virtue of such instrument in and to Third tract of s57.9 acres and 100.3 acres out of Fourth tract, described in such royalty deed, and being 258.2 acres * * * is hereby divested out of plaintiffs, and awarded to defendant Weldon O. Winsauer'; (5) that the title to a certain 50 acres described in a deed, dated September 28, 1951, be divested out of plaintiffs, and awarded to defendants, J. W. Crouch and wife, Mary Crouch, and Mary Crouch Dairies, Inc., (6) that all sums accruing from production from the Ross-Singleton No. 1 well and deposited in the registry of the court by defendant, Gas Gathering Company, or other purchasers, were the property of J. P. Pruett and such sum of money was ordered paid to Pruett, together with all sums accruing from such production; (7) that defendant, Winsauer, should receive all sums of money accrued and to accrue from the Winsauer No. 1 well and the Winsauer No. 2 well. The Court of Civil Appeals has affirmed the judgment of the trial court. 315 S.W.2d 608.
It was stipulated that there was continuous production in paying or commercial quantities from the Ross-Singleton No. 1 well up until December 23, 1955. The question we have for decision is whether the cessation of production from such well due to litigation and mechanical breakdowns terminated the term royalty deed. We have concluded that as a matter of law the stipulated facts are conclusive and permit of only one construction, which is that the cessation of production was temporary, and that such temporary cessation was due to the litigation in two lawsuits between the defendants and a lessee named Woodson, causing the shutdown of the Ross-Singleton No. 1 well, and mechanical breakdowns. This litigation ended in a judgment against Woodson. That judgment became final in December 1955 when this Court overruled Woodson's motion for rehearing of his application for writ of error. Woodson Oil Company v. Pruett, Tex.Civ,App., 281 S.W.2d 159, wr. ref. n. r. e. At the time Woodson's rights in the land ceased, the Woodson No. 1 well was producing in paying quantities. Woodson, however, shut the well down and filed a second suit immediately after his rights were terminated by court decree, and obtained an injunction restraining the defendant, Pruett, from using his (Woodson's) equipment to produce gas from the well. This second lawsuit between Pruett and Woodson terminated and Woodson was required to leave the casing in the hole. Woodson was awarded judgment for his other equipment. There was an ordinary foreseeable interruption as Woodson ceased to operate the well and Pruett took over. Pruett diligently went about securing other equipment. A new gas line was caused to be laid. An 'obstruction' was discovered in the gas line, and it was not until June 14, 1956 that production in paying or commercial quantities was restored. The parties stipulated that the Woodson-Pruett suit was prosecuted with diligence and that there was no lack of good faith on the part of any of the defendants in obtaining a final adjudicaton of said cause. The defendant, Pruett, was a fee owner and also an operator. The same is true as to the defendant, Winsauer. The evidence is clear that but for the fact that Woodson shut the well down and refused to allow Pruett to use the equipment, the Ross-Singleton No. 1 well would not have ceased producing. It was stipulated that there was no lack of diligence on the part of any of the parties.
No evidence was offered other than the stipulations of the parties. Other stipulated facts appear in the record, but we believe the facts recited above are the material facts so far as a determination of the question here involved is concerned.
It is the position of plaintiffs that whether or not the estate granted by the royalty deed for a term of fifteen years and as long thereafter as oil, gas, or other minerals is produced in paying or commercial quantities has terminated, depends upon the surrounding facts and circumstances in each case, and that the facts in this case clearly show as a matter of law that the temporary cessation of production in paying quantities from the Ross-Singleton Well No. 1 for a period of 174 days was such a cessation of production as was reasonably within the contemplation of the parties to the term royalty deed, and do not warrant a termination of the estate granted by the term royalty deed.
Although the royalty deed under consideration does not expressly provide that the term royalty will not terminate because of temporary interruptions, we hold that such a provision is necessarily implied. The purpose of the deed was to effect a conditional or term grant for a period of fifteen years, and as long thereafter as oil, gas or other minerals, or either of them, should be produced or mined from the lands in paying or commercial quantities. The respondents contend that the petitioners are bound by the express terms of the contract, and that when cessation of production has been established by the evidence to have been continuous for the period involved, the contract term expired by its own terms, and, that it matters not whether the Ross-Singleton No. 1 well was capable of producing during that time, where, as here, there was no lack of diligence or lack of good faith on the part of any of the respondents in obtaining or restoring production. Respondents contend that there is no provision expressed in the royalty contract nor is a provision to be implied which would allow for its continuation in view of the stipulated facts that production in paying or commercial quantities had in fact ceased on December 23, 1955. With this contention we do not agree.
The exact question we are called upon to answer has never been presented to an appellate court of this jurisdiction, but we believe that the reasoning contained in cases wherein oil and gas leases which were effective for a term certain and so long thereafter as oil, gas, or other minerals were involved, is applicable and leads to the conclusion that a temporary cessation of production in paying or commercial quantities will not cause the royalty deed to terminate. See Watson v. Rochmill, 137 Tex. 565, 155 S.W.2d 783, 137 A.L.R. 1032; Morrison v. Swaim, Tex.Civ.App., 220 S.W.2d 493, wr. ref., n. r. e.; Union Oil Company of California v. Ogden, Tex. Civ.App., 278 S.W.2d 246, wr. ref.,...
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