Monsanto Co. v. Tyrrell, 1397
| Decision Date | 12 May 1976 |
| Docket Number | No. 1397,1397 |
| Citation | 537 S.W.2d 135 |
| Parties | MONSANTO COMPANY, Appellant, v. Harry F. TYRRELL et al., Appellees. (14th Dist.) |
| Court | Texas Court of Appeals |
Stan McLelland, Perry Barber, Baker & Botts, Houston, for appellant.
Clifford G. Campbell, R. F. Wheless, Jr., Houston, for appellees.
This case involves the determination of the effect of an advance payment for gas production. The action was initiated by appellant Monsanto Company (lessee) for a declaratory judgment to construe an oil and gas lease and gas purchase contract. A counterclaim was filed by the Tyrrells (lessors) both for a declaratory and a money judgment.
Monsanto and the Tyrrells have each entered into separate gas purchase contracts with Northern Natural Gas Company, the sole purchaser of gas from the leased property. Northern made an advance payment to Monsanto for gas to be delivered in the future under the gas purchase agreement between those two parties. The only question on this appeal is whether any portion of the advance payment can be considered as 'recovery from production' as of the date the payment was made.
Paragraph 12E of the lease provides:
At such time as Lessee has recovered from 70% Of total production, a sum net after severance, pipeline and production taxes, equal to (a) 100% Of all sums expended by it in drilling wells (whether producers, dry holes or junked holes) upon the above described land and completing and equipping the same into the tanks as to oil wells and into the pipeline as to gas wells, and in plugging and abandoning dry holes and abandoned wells, plus (b) 100% Of the total cost of operating said wells until the date of recovery of the sums described in (a), the royalties to be paid by Lessee under paragraph 3 paragraph D above, shall ipso facto increase from the percentage thirty per cent (30%) to the percentage fifty per cent (50%).
As permitted in the lease, appellant created a pooled unit, of which the Tyrrells' interest constitutes about 45%. Of this 45% Of the pooled unit, the Tyrrells are entitled to an initial royalty of 30%, which royalty is to increase to 50% When Monsanto has recovered its drilling and completion costs, plus its operating costs until the date of payout.
On June 18, 1971, before the Tyrrell well was completed, Monsanto entered into a gas purchase contract with Northern under which Monsanto agreed to sell to Northern all of Monsanto's gas produced from the pooled unit. On March 24, 1972, the Tyrrells entered into a separate purchase agreement with Northern. On January 31, 1972, after the Tyrrell well was completed, Northern made an advance payment to Monsanto of $1,272,275 as partial payment for the gas committed to Northern out of Monsanto's share of the production. The gas purchase agreement provided that Northern was to recoup this advance payment by
deducting from payments otherwise due (Monsanto) Seller hereunder Thirty Percent (30%) of the amount determined by multiplying the volumes of gas produced from Seller's interest in all Gas Production Units hereunder by the price per Mcf which is effective at the time such gas is received by Northern. . . .
The trial court found that by the term 'recovery from production' the parties to the lease intended that the Tyrrells' royalty would shift to 50% When Monsanto had recovered its well costs from 'the...
To continue reading
Request your trial
-
Chesapeake Exploration, L.L.C. v. Hyder
...("Production means actual physical extraction of the mineral from the land." (citing Monsanto Co. v. Tyrrell, 537 S.W.2d 135 (Tex.Civ.App.–Houston [14th Dist.] 1976, writ ref'd n.r.e.) )); Blackmon, 276 S.W.3d at 604 ("Historically, ‘production’ ceases once the lessee extracts oil or gas fr......
-
State v. Pennzoil Co., 86-211
...and accepted meaning unless it is clear that the parties intended some contrary meaning. Snow v. Duxstad, supra; Monsanto Company v. Tyrrell, Tex.Civ.App., 537 S.W.2d 135 (1976). The Board argues that both words, "produced" and "sold," are ambiguous in this lease and the Board's intent was ......
-
TransAmerican Natural Gas Corp. v. Finkelstein
...of the gas, rather than the amount realized. Middleton, 613 S.W.2d at 242. The issue in Monsanto Co. v. Tyrrell, 537 S.W.2d 135, 136 (Tex.Civ.App.--Houston [14th Dist.] 1976, writ ref'd n.r.e.), was whether an advance payment for future production was "recovery from production." The court h......
-
Mesa Petroleum Co. v. US Dept. of Interior
...of California v. Touchet, 229 La. 316, 86 So.2d 50, 53 (1956); Gulf Oil Corp. v. Reid, 337 S.W.2d 267 (Tex.1960); Monsanto Co. v. Tyrrell, 537 S.W.2d 135 (Tex.Civ.App.1976). In the present case the royalty interest of the United States entitles it to a royalty of 162/3% percent of productio......
-
CHAPTER 9 STRATEGIES AND PROCEDURAL ISSUES IN ROYALTY CASES
...later. [13] 329 F.2d 485, 489 (5th Cir. 1964). [14] 429 S.W.2d at 871 (quoting Foster v. Atlantic Refining Co., 329 F.2d at 490). [15] 537 S.W.2d 135 (Tex. Civ. App.—Houston [14th Dist.] 1976, writ ref'd n.r.e.). [16] Id. at 137. The court relied on Gulf Oil Corp. v. Reid, 161 Tex. 51, 337 ......
-
CHAPTER 1 ROYALTY INTERESTS IN THE UNITED STATES: NOT CUT FROM THE SAME CLOTH
...— San Antonio 1991, writ denied). [114] See e.g., Exxon Corp. v. Middleton, 613 S.W.2d 240 (Tex. 1981); Monsanto Co. v. Tyrrell, 537 S.W.2d 135 (Tex.Civ.App. — Houston[14th Dist.] 1976, writ ref'd n.r.e.). [115] See also, Diamond Shamrock Exploration Corp. v. Hodel, 853 F.2d 1159 (5th Cir. ......
-
CHAPTER 4 INTERPRETING THE ROYALTY OBLIGATION BY LOOKING AT THE EXPRESS LANGUAGE: WHAT A NOVEL IDEA?
...and Related Consideration Accruing to Producers, 27 Houston L.Rev. 105 (1990). [38] Williams & Meyers, note 1 supra at § 643.6. [39] 537 S.W.2d 135, 55 O.&G.R. 219 (Tex.Civ.App. 1976). [40] Id at 136. [41] Under the terms of the gas purchase agreement, the purchase is to recoup this payment......