Morrison v. Swaim, 2714.

• Decision Date: 22 April 1949
• Docket Number: No. 2714.,2714.
• Citation: 220 S.W.2d 493
• Parties: MORRISON et ux. v. SWAIM et al.
• Court: Texas Court of Appeals

Page 493

220 S.W.2d 493

MORRISON et ux. v. SWAIM et al.

No. 2714.

Court of Civil Appeals of Texas. Eastland.

April 22, 1949.

Rehearing Denied May 13, 1949.

Appeal from District Court, Throckmorton County; Ben Charlie Chapman, Judge.

Suit by Tom Morrison and wife against A. B. Swaim and others seeking to terminate an oil and gas lease. From the judgment, plaintiffs appeal.

Affirmed.

Lyndsay D. Hawkins, of Breckenridge, and Tom M. Miller, of Graham, for appellants.

John H. Banks and Tom Davis, both of Haskell, and Aubrey G. Alexander, of Fort Worth, for appellees.

COLLINGS, Justice.

This suit was filed in the trial court by appellants, Tom Morrison and wife, against A. B. Swaim and others, appellees herein, seeking to declare an oil and gas lease terminated by its own limitations for non production after the expiration of the primary term and to remove the cloud from appellants' title cast thereon by said lease. Upon a jury finding to the effect that there had been no cessation of production of oil from a well drilled upon the premises in question, a judgment was entered against appellants perpetuating the lease. From such judgment this appeal is brought.

Appellants alleged the execution of an oil and gas lease dated April 25, 1941, providing for a primary term of five years from the date thereof. The habendum clause of the lease is as follows: "To have and to hold the same for a term of five years from this date, hereinafter referred to as primary term, and as long thereafter as oil or gas or casinghead gas, or either or any of them, is produced therefrom, or as much longer thereafter as the lessee in good faith shall conduct drilling operations thereon and should production result from such operations, this lease shall remain in full force and effect as long as oil or gas or casinghead gas shall be produced therefrom."

Appellants alleged that on April 16, 1946, before expiration of the primary term on April 25, 1946, an oil well was drilled in as a producer of oil on said lease. It was further alleged by appellants that from the date of completion of the well on April 16th until the middle or latter part of August, 1946, no oil or gas or casinghead gas was produced from said lease and that no drilling operations were conducted thereon. Appellants here contend that such alleged failure to produce oil automatically lapsed and terminated the lease, and that such lapsation and termination took place on or about April 25, 1946.

Special Issue No. 1 of the court's charge and the answer of the jury thereto was as follows: "Do you find from a preponderance of the evidence that the Morrison well No. 2 involved herein between April 25, 1946 and in August, 1946, when Gratex took oil from such well, did not produce oil without cessation? Answer: It did produce oil without cessation."

It is contended by appellants in Point 1 that the evidence established conclusively and as a matter of law that after the expiration of the primary term of the lease involved herein, there was no such production as, under the provisions of the lease, was necessary to the continuation of the term thereof, and that according to the terms of the lease, as provided in the habendum clause hereinabove set out, the lease automatically terminated on or about April 25, 1946. It seems to be well settled in this State that where an oil and gas lease provides for a primary term and "as long thereafter as oil or gas is produced therefrom" the production of oil or gas at the time of the expiration of the fixed term is regarded as a condition precedent to the continuation of the lease, and that upon cessation of such production after termination of the primary term, the lease automatically terminates. Watson v. Rochmill, 137 Tex. 565, 155 S.W.2d 783, 137 A.L.R. 1032; W. T. Waggoner Estate v. Sigler Oil Company, 118 Tex. 509, 19 S.W.2d 27. The strictness of this rule has been relaxed in several cases where there was only temporary cessation.

In effect, the answer to special issue No. 1 above finds that oil was being produced from the lease at the expiration of the primary term and then continued without cessation until some time in August, after which it is admitted that oil was produced from the well in question in paying quantities. The first question confronting us in connection with appellants' point 1 is, was the evidence herein sufficient to support such jury finding that there was production of oil as contemplated by the lease at the time of the expiration of the primary term on April 25, 1946. The evidence, in our opinion, is conclusive that there was not such production. According to the testimony, oil was discovered on April 16th but it has been held in this State that the words "discovered" and "production" are not synonymous. Texas Pacific Coal & Oil Co. v. Bratton, Tex.Civ.App., 239 S.W. 688. Production to extend a lease beyond its primary term, must be in paying quantities. Bouldin v. Gulf Production Co., Tex.Civ App., 5 S.W.2d 1019; Heard v. Nichols, Tex.Com.App., 293 S.W. 805; Leon v. Gulf Production Co., Tex.Civ.App., 35 S. W.2d 1101; Ryan v. Kent, Tex.Com.App., 36 S.W.2d 1007. The well in question did not occupy the status of a producing oil well at the time of the expiration of the primary term. No oil had been produced from the well on that date. A little oil was produced from the well between April 26th and May 11th, but the first oil in any appreciable amount to be taken from the well was on May 14th and 15th when under a potential test taken by the Railroad Commission, the well made thirty-one barrels in twenty-four hours. This was about twenty days after the expiration of the primary term and was too late to effect an extension of the lease. The judgment, therefore, cannot stand upon the jury verdict and if upheld, it must be on some other ground.

Appellees contend that the judgment should be upheld regardless of the sufficiency of the evidence to support the jury finding that there was production without cessation.

They insist that the lease was continued in effect by drilling operations conducted in good faith which were in progress at the end of the primary term and resulted in production of oil. As we interpret the lease there were two ways in which it might be extended. The first is set out in the language "and as long thereafter as oil * * * is produced therefrom," and the second is contained in the words immediately following those just quoted, to wit: "or as much longer thereafter as the lessee in good faith shall conduct drilling operations thereon." The lease further provides: "and should production result from such operations, this lease shall remain in full force and effect as long as oil * * * shall be produced therefrom." (Italics ours). In its usual meaning, the word "or" is a disjunctive participle that indicates a choice between two alternatives generally corresponding to "either" or "either this or that." That is the meaning which we think was here intended. Either production in paying quantities or drilling operations...