Mooers v. Richardson Petroleum Co., A-1142.

• Citation: 204 S.W.2d 606
• Decision Date: 16 July 1947
• Docket Number: No. A-1142.,A-1142.
• Parties: MOOERS v. RICHARDSON PETROLEUM CO.
• Court: Texas Supreme Court

Page 606

204 S.W.2d 606

MOOERS v. RICHARDSON PETROLEUM CO.

No. A-1142.

Supreme Court of Texas.

July 16, 1947.

Rehearing Denied October 29, 1947.

Error to Court of Civil Appeals of Fourth Supreme Judicial District.

Suit by Clifford Mooers against the Richardson Petroleum Company and others for damages, an accounting, and cancellation of a lease. Judgment in favor of plaintiff against the named defendant for damages only was amended by the Court of Civil Appeals to increase amount of damages, 201 S.W.2d 134, and affirmed as amended, and each party brings error.

Judgments of the trial court and of the Court of Civil Appeals reversed, and cause remanded to trial court.

Carl Wright Johnson, of San Antonio, Cantey, Hanger, McMahon, McKnight & Johnson, Gillis A. Johnson, Warren Scarborough and Jack C. Wessler, all of Fort Worth, and Black & Stayton and Charles L. Black, all of Austin, for Mooers.

Tarlton & Koch, of Corpus Christi, Small, Arney & Small and C. C. Small, all of Austin, and Lloyd & Lloyd, of Alice, for Richardson Petroleum Co.

Vinson, Elkins, Weems & Francis and Tarlton Morrow, all of Houston, for First Nat. Bank of Chicago.

HICKMAN, Justice.

Shasta Drilling Company and James G. McCarrick formerly owned in equal parts oil and gas leases covering two tracts of land in Nueces County, one tract, known as the Erigan tract containing 10.46 acres, and the other, known as the Quiroz tract, containing a little more than 80 acres. On November 1, 1935, Shasta assigned its 1/2 interest in these leases to McCarrick and W. A. Richardson, in consideration of $30,000 to be paid out of 1/8 of 7/8 of the first oil produced from the leased premises.

Clifford Mooers, successor to all of the rights of Shasta Drilling Company, brought this suit against Richardson Petroleum Company, successor to all the rights acquired by McCarrick and Richardson under the assignment, and other parties, for actual and exemplary damages on account of the illegal running of oil by Richardson Petroleum Company and its predecessor from the leased premises, for an accounting, for a termination of the Erigan lease and for a cancellation of the assignment by Shasta of a 1/2 interest in both leases. The First National Bank of Chicago and the Republic Supply Company, original parties defendant, have been dismissed from the case by consent of the parties. In a trial before the court, without the assistance of a jury, judgment was rendered in favor of Mooers against Richardson Petroleum Company for $32,002.38 actual and $10,000 exemplary damages, but denying all other relief sought by him. The Court of Civil Appeals increased the amount of the actual damages from $32,002.38 to $91,320.21 and rendered judgment in favor of Mooers for that amount. In all other respects the trial court's judgment was affirmed. Tex.Civ.App., 201 S.W.2d 134. Each party filed an application for a writ of error and both applications were granted.

We consider first the contention of Richardson Petroleum Company that the Court of Civil Appeals erred in increasing the amount of the actual damages from $32,002.38 to $91,320.21. The relevant facts upon which this contention is based may be stated generally as follows: When the assignment of the 1/2 interest in the leases was made by Shasta to McCarrick and Richardson there was one well on the Erigan (Erigan No. 1) and one well on the Quiroz (Quiroz No. 2) each producing a small amount of oil. Quiroz No. 1 was a dry hole. The assignment required that the Erigan No. 1 and Quiroz No. 2 be reworked. This was done promptly with the result that Erigan No. 1 came in as a large producer and Quiroz No. 2 came in as a gas well. Just how much oil, if any, the Quiroz No. 2 produced along with the gas is not made clear by the record, but that fact is not material to the question now being considered. It is made clear that for many months Quiroz No. 2 did not produce its allowable as fixed by the Railroad Commission. W. A. Richardson, as head of the company, concealed that fact by running a secret underground pipe from Erigan No. 1 to Quiroz No. 2, through which oil was passed, and in that manner caused Quiroz No. 2 to produce its allowable. His company also owned other leases in the vicinity, notably the Harrell and the Sedwick leases, and secret underground pipes were run from Erigan No. 1 to those leases and the allowables of deficient wells thereon were made up from the production of Erigan No. 1. Later, after producing wells had been brought in on the Quiroz lease, oil was secretly run from those wells, and also from Erigan Nos. 2 and 3, for the same fraudulent purpose. This scheme was carried on over a total period of five years. During all of this time Mooers was the owner of 1/2 of the mineral estate in the Erigan tract, subject to the Richardson Petroleum Company's lease, and as such owner was entitled to receive 1/2 the royalty on all oil produced and saved therefrom. He did not own any royalty in the Quiroz. He was paid his royalty on the reported production from the Erigan, but none at all on the oil produced from the Erigan and secretly piped to other leases. He sues in this case for damages, actual and exemplary, on that account.

The trial court made a general finding that the value of 1/16 of the oil illegally piped from the Erigan to other leases, based on the highest intermediary market value during such time, amounted to $32,002.38, and that said amount, together with $10,000 exemplary damages, would fully compensate petitioner for all damages sustained on that account. The Court of Civil Appeals on original hearing approved that conclusion and affirmed the case. On first motion for rehearing, it decided that "It is now impossible to unscramble the commingled mass caused entirely by the willful misconduct of the defendant and its predecessors", and the case was accordingly remanded with the instruction that it was a case calling for the application of the equitable rule of commingled assets. The trial court was instructed that, since Richardson Petroleum Company fraudulently commingled and confused the oil from the Erigan lease with oil from other leases and was unable to establish clearly and distinctly the amount of oil which was run from the Erigan lease, Mooers was entitled to recover his 1/16 royalty from all oil produced from wells connected by secret pipes with the Erigan lease during the entire period of the commingling.

We agree with those conclusions. The case is a proper one for the application of the commingling rule and the instructions of the Court of Civil Appeals correctly embody its elements. Eaton v. Husted, 141 Tex. 349, 172 S.W.2d 493; Andrews v. Brown, Tex.Com.App., 10 S.W.2d 707.

On second motion for rehearing the Court of Civil Appeals decided that the schedule furnished by Mooers, showing the reported production from the various wells to which secret pipes had been connected, enabled it to render judgment without the necessity of remanding the case to the trial court, and based upon that schedule it increased the amount of actual damages to $91,320.21, as stated above. In this we think that court fell into error.

The opinion itemizes the damages as follows:

(1) 1/16 of the value of the oil run to pipe lines from tanks connected to Quiroz No. 2, from December 1935 to September 1936.

(2) 1/16 value of oil run from tanks connected to Harrell No. 1 from March 1936 to January 1937.

(3) 1/16 value of oil from tanks connected to all Sedwick low gravity wells from April 1935 (1936?) to January 1937.

(4) 1/16 value of all oil from tanks connected to Harrell No. 1 from February 1937 to March 1941.

(5) 1/16 value of oil from tanks connected to Sedwick No. 7 from June 1938 to May 1939.

(6) 1/16 value of oil from tanks connected to all Sedwick low gravity oil wells from February 1937 to March 1941.

As to Item 3, the...