Norman v. Giles

• Decision Date: 02 March 1949
• Docket Number: No. A-1952.,A-1952.
• Citation: 219 S.W.2d 678
• Parties: NORMAN et al. v. GILES.
• Court: Texas Supreme Court

Page 678

219 S.W.2d 678

NORMAN et al. v. GILES.

No. A-1952.

Supreme Court of Texas.

March 2, 1949.

Rehearing Denied May 4, 1949.

Original mandamus proceedings by Curtis E. Norman and others against Bascom Giles, Commissioner of the General Land Office, to compel respondent to receive, file and recognize as valid an oil and gas lease to Cities Service Oil Company covering a tract of what was formerly surveyed public free school land in Crane County and purportedly executed by relators as agents for the State under terms of the so-called Relinquishment Act, Vernon's Ann.Civ.St. art. 5367 et seq.

Writ refused.

Small & Small, and C. C. Small, Jr., all of Austin, for relators.

Price Daniel, Atty. Gen., and Robert W. Spence, Asst. Atty. Gen., for respondent.

GARWOOD, Justice.

This is an original mandamus proceeding by relators, as surface owners of a 140-acre tract of what was formerly surveyed public free school land in Crane County, against respondent, Commissioner of the General Land Office, to compel the latter to receive, file, and recognize as valid an oil and gas lease to Cities Service Oil Company (hereafter referred to as Cities Service lease) covering the tract mentioned and purportedly executed by relators as agents for the state under the terms of the so-called "Relinquishment Act", Chap. 81, Acts 2nd Called Session, 36th Legislature, 1919, as amended by Chap. 38, Acts First Called Session, 37th Legislature, 1921; art. 5367 et seq., R.C.S. 1925, hereafter generally referred to as the Act.

In general the position of the respondent Commissioner is that the authority of relators to act as leasing agents for the state had terminated under particular provisions of the Act, arts. 5369, 5370, R.C.S., well over a year prior to the execution of the tendered lease, because of the admitted fact that oil had then been discovered in paying quantities on land "not included in this law, and within one thousand feet of" the tract in question, and no well on the latter had been commenced "within one hundred days after" the discovery well or for that matter at any time.

At the time the land was patented to relators, the minerals were reserved to the state pursuant to the applicable statutes, but admittedly the "Relinquishment Act" applies to the premises, so as to entitle relators, at least under ordinary conditions, to make leases of the oil and gas on behalf of the state as its agents. Greene v. Robison, 117 Tex. 516, 8 S.W.2d 655. In March 1941, several years prior to the date of the tendered Cities Service lease, relators had thus executed a lease to one Billingsley which was shortly thereafter assigned to Stanolind Oil and Gas Company and will be hereafter referred to as the Stanolind lease. This lease and assignment were duly filed with and accepted by the Commissioner of the General Land Office, and who was also duly paid the state's share of the bonus money under the terms of the Act. Stanolind Oil and Gas Company thereafter duly paid delay rentals each year up to and including the year 1948, the General Land Office currently receiving and accepting its statutory portion thereof. On some undisclosed day during December 1946 the above mentioned discovery of oil in paying quantities within one thousand feet of relators' tract was made by means of a well known as Texas American Syndicate No. 1 Nellie Tucker, but notwithstanding this discovery, neither Stanolind, which then held the lease, nor any one else ever commenced drilling operations. To the contrary, on September 9, 1948, or well over a year after expiration of the one-hundred-day offset period following the No. 1 Nellie Tucker discovery, Stanolind Oil and Gas Company formally surrendered all its interest in the lease which, at least on its face, had still several months to run without further payment of delay rentals. Thereafter, on September 23, 1948, relators, again purporting to act as agents of the state, executed the Cities Service lease here in question. Somewhere about this latter date the facts in connection with the No. 1 Nellie Tucker well evidently became known to the General Land Office and thereafter, on October 5, 1948, the respondent Commissioner made an endorsement on the General Land Office file covering relators' tract, stating that "Relinquishment Rights granted by Article 5367 R.C.S., of 1925 are terminated for failure to drill offset well in accordance with Article 5370 R.C.S. of 1925." A substantially similar endorsement was made by the Commissioner on the same date upon the General Land Office file covering the Stanolind lease, though as stated the latter had been surrendered some time previously.

On October 20, 1948, the Cities Service lease, along with the state's portion of the bonus payable therefor, in the amount of $5,250, was tendered to the General Land Office pursuant to Article 5421c — 2, Vernon's Ann.Civ.St. On the same date the respondent Commissioner refused to file the lease or accept the payment and returned both with a letter stating as his reason, that he considered "the rights, which were granted to the surface owner by virtue of Article 5367, R.C.S., to be terminated for failure to drill an offset well in accordance with Article 5370, R.C.S." The Commissioner about the same time stated in writing that he considered the consideration and terms of the tendered lease to be fair.

Thereafter the Commissioner, purporting to act pursuant to Article 5371, R.C.S., which in his view authorizes him to sell to the highest bidder the oil and gas of a tract as to which there has been a forfeiture under Article 5370, joined with the School Land Board of the State of Texas in thus offering relators' tract for lease, and on December 7, 1948, bids were received from various oil companies on the basis of a three sixteenths royalty plus cash bonuses; the highest bonus offered being $101,315.11 and several others from well known oil producing companies ranging from $75,211 to $14,700, the majority being very much larger than the cash bonus tendered only a short time earlier in connection with the Cities Service lease which the Commissioner had refused to accept.

As it will be necessary to refer further to the above-mentioned statutes and certain others forming part of the Relinquishment Act, these are set out in full in a foot note¹, together with Article 5421c — 2, Vernon's Ann.Civ.St. relating to the matter of filing in the General Land Office certified copies of leases made by the surface owner as agent under the act.

In connection with Article 5370, it will be noted that the refusal of the respondent Commissioner is necessarily based on the premise that the forfeiture of rights under that article means not merely forfeiture of any mineral lease that might exist on the premises at the time of default but also forfeiture of the right of the surface owner to continue to act as the state's agent in leasing the property. The matter of a lease forfeiture is not directly involved here, because the Stanolind lease was voluntarily surrendered, and the Cities Service lease was not made until long after the alleged forfeiture event occurred. Relators' principal grounds of attack upon respondent Commissioner's decision are, that, at least as regards relators, Articles 5370 and 5371 are unconstitutional, and that even if constitutional, Article 5370 must be construed as not forfeiting relators' agency for the failure of the lessee or holder of the Stanolind lease to perform the offset obligation of Article 5369. Appreciation of relators' contentions requires some further explanation.

In 1919 when the Relinquishment Act was passed, it was and had been for some years the policy of the state to sell the free school and asylum lands with full reservation to the state of the minerals and to dispose of the mineral rights by separate transactions. Usually this policy resulted in placing the surface ownership and mineral leasehold rights of the same land in different parties, which fact, together with the relatively insignificant indemnity provided the surface owner for damage by mineral development, was thought to create serious conflict between the surface and mineral owners and also to be rather ineffective in promoting adequate development of the state's minerals. Evidently as a result of these considerations the Legislature found it desirable to connect the surface owner more closely and less unprofitably with the development of the minerals and passed the Relinquishment Act in order to accomplish this purpose through empowering the surface owners to lease the oil and gas. See Greene v. Robison, supra; Empire Gas & Fuel Co. v. State, 121 Tex. 138, 47 S.W.2d 265; Lewis v. Oates, 145 Tex. 77, 195 S.W.2d 123, 128.

It will be noted that Article 5367, and certain other parts of the Act heretofore quoted, contain language which, considered alone, might seem the rough equivalent of a mineral deed from the state to the surface owner, reserving only to the grantor what is called nowadays a "nonparticipating" royalty of one-sixteenth and involving no payment of consideration by the grantee. The words "relinquishes", "relinquishment" and similar terms were so used in connection with a reference to the mineral estate as to suggest a true grant or conveyance of a mineral estate. At the same time the Act in express terms described the surface owner as the agent of the state with power to lease the minerals. In Greene v. Robison, supra, a party who had applied directly to the General Land Office for a mineral lease on land to which the Act was applicable, instead of leasing through the surface owner, sought to compel the Commissioner by mandamus to make the lease despite the rights of the surface owner under the Act, claiming that the Act was unconstitutional on various grounds, especially in that it made a gift to the surface owner of minerals which Article VII, Sections 2 and following, of the Constitution, Vernon's Ann.St., had reserved to ...