Norris v. Vaughan

• Citation: 152 Tex. 491,260 S.W.2d 676
• Decision Date: 22 July 1953
• Docket Number: No. A-3977,A-3977
• Parties: NORRIS et al. v. VAUGHAN.
• Court: Supreme Court of Texas

Page 676

260 S.W.2d 676

152 Tex. 491

NORRIS et al. v. VAUGHAN.

No. A-3977.

Supreme Court of Texas.

July 22, 1953.

R. H. Cocke, Wellington, Richard H. Cocke, Dallas, for petitioners.

Reynolds & Hardin, Shamrock, Culton, Morgan, Britain & White, Amarillo, for respondent.

SMITH, Justice.

The respondent, Hal H. Vaughan and Beaulah Hunsaker were married on August 16, 1941, and they lived together as husband and wife until the death of Mrs. Vaughan on May 17, 1947. The petitioner, Mrs. Norris, is the daughter of Mrs. Vaughan by a former marriage. Mrs. Vaughan died intestate, and Mrs. Norris is her sole and only heir. Petitioner admits in her pleadings that respondent was the owner of certain properties in his own separate right, but contends that this property was natural gas producing and that the income, as the result of gas production, after the date of the marriage of her mother to Mr. Vaughan, was and is community property. It was further alleged by petitioner that all of the property involved was in the possession of the respondent, and that a full and complete accounting, which she requested be made by respondent, would disclose that she owned an interest in property acquired between the dates of August 16, 1941 and May 17, 1947.

Prior to his marriage to petitioner's mother, the respondent owned as his separate estate:

(a) A 7/8ths determinable fee, as lessee, in seven producing gas wells, known as the 'Pakan Wells';

(b) A 1/4th interest in the Shamrock Gas Co., a partnership;

(c) A 1/4th interest in the Vaughan Well Co., a partnership;

(d) A 1/2 interest in the partnership of Pendleton & Vaughan.

During the period of coverture the partnership of Pendleton & Vaughan drilled ten gas wells, seven of which were producers. These wells are known as the McDowell and Taylor wells. The Vaughan Well Co. drilled two producing gas wells, known as the Hill and Cantrell wells.

The respondent went to trial on his second amended original answer wherein he alleged that certain property was his separate property, and that certain other property was community property. A full discussion of the contention of the parties and the facts relating thereto will be given later in this opinion in disposing of the points presented to this Court for determination.

On March 21, 1950, the trial court, on its own motion, appointed an auditor, who prepared and filed a complete audit and inventory of all transactions enumerated in the order of the court, and the cause proceeded to trial on December 11, 1951. A jury was empaneled, but on the 13th day of December, 1951, by agreement of the parties, the jury was discharged, and the Court, after hearing the evidence, entered its judgment on March 10, 1952, awarding to the petitioner a community interest in the wells known as the McDowell and Taylor wells, and a house situated on Lots 11, 12 and 13, Block 50, of the Woodley Southside Addition to the town of Shamrock, Wheeler County, Texas. All other property involved was declared to be the separate property of the respondent and judgment was entered accordingly in his favor.

All parties excepted to the judgment and an appeal was duly perfected to the Court of Civil Appeals for the Seventh Supreme Judicial District of Texas, which court reversed and rendered the portion of the trial court's judgment which awarded to petitioner an interest in the McDowell and Taylor wells, and affirmed the judgment of the trial court as to the separate property. It also reversed and rendered judgment for petitioner for the title and possession of an undivided one-half interest in and to Lots 11, 12 and 13, Block 50, of the Woodley Southside Addition to the town of Shamrock. All parties agree that petitioner is entitled to this community interest.

Petitioner's second point attacks the judgment of the Court of Civil Appeals wherein it held that profits from gas wells owned by respondent prior to the marriage was not community property. Their first point urges that the dry gas rights and lease interests acquired by respondent during his marriage to petitioner's mother, as well as the wells drilled thereon, were community property, and that it was error for the Court of Civil Appeals to hold otherwise.

We will first consider the petitioner's contention that profit from the sale of natural gas produced from the respondent's separate gas wells is community property. Respondent owns, as lessee, seven wells producing natural gas in the 'Pakan' area. These wells were acquired in 1937 and a 'life of production' sales contract for all the gas produced by these wells was made with Lone Star Gas Co. in 1939. After the wells were connected to the Lone Star pipe line there was little or no effort required in their management or operation. It is well established in Texas that the lessee in the usual oil and gas lease obtains a determinable fee in the oil and gas in place, and thus an interest in realty. Stephens County v. Mid- Kansas Oil & Gas Co., 113 Tex. 160, 254 S.W. 290, 29 A.L.R. 566; Hager v. Stakes, Tax Collector, 116 Tex. 453, 294 S.W. 835; Stephens v. Stephens, Tex.Civ.App., 292 S.W. 290. The lessee's determinable fee interest will last only so long as oil or gas is produced, and it is a matter of judicial knowledge that oil and gas producing territory will become exhausted in time. U. S. v. Ludey, 274 U.S. 295, 47 S.Ct. 608, 71 L.Ed. 1054, 1055. Therefore, production of this natural gas will in time exhaust the gas reserves which comprise the separate estate. Production and sale of the natural gas in this instance is equivalent to a piecemeal sale of the separate corpus, and funds acquired through a sale of the separate corpus, if traced, will remain separate property. Love v. Robertson, 7 Tex. 6; Rose v. Houston, 11 Tex. 324; Gleich v. Bongio, 128 Tex. 606, 99 S.W.2d 881. When royalty is paid for oil or gas produced from the separate property of the lessor, the courts of this state have held that such royalty is payment for the extraction or waste of the separate estate and therefore remains separate property. Lessing v. Russek, Tex.Civ.App., 234 S.W.2d 891; Texas Co. v. Parks, Tex.Civ.App., 247 S.W.2d 179; Bantuelle v. Bantuelle, Tex.Civ.App., 195 S.W.2d 686. The theory advanced in these cases being that royalty is payment for the extraction or sale of the minerals that comprise the separate estate.

As said in the case of Kellett v. Trice, 95 Tex. 160, 66 S.W. 51, 53, 'Property of husband and wife in this state gets its character as belonging separately to one of them or in common to both from the statutes defining their separate and community estates'. See Articles 4613 and 4619, Vernon's Annotated Civil Statutes.

Petitioner relies on Article 4619, supra: 'Sec. 1. All property acquired by either the husband or wife during marriage, except that which is the separate property of either, shall be deemed the common property of the husband and wife; and all the effects which the husband and wife possess at the time the marriage may be dissolved shall be regarded as common effects or gains, unless the contrary be satisfactorily proved. * * *'

The petitioner admits that while the gas was in place it was separate property and an interest in land, but she advances the argument that when it was produced the profit on the sale was community income. It is petitioner's theory that if the gas had been sold in place it would have unquestionably remained the separate property of respondent and could not be considered in any sense as property acquired during the marriage, but that the production and selling of the gas changes the status of the property from separate to community, and that the proceeds should be classed as property acquired during marriage, and having assumed this to be true, she advances the further theory that the property thus classified is presumed to be community property, in the absence of a showing to the contrary.

The first question for us to determine so far as the 'Pakan' wells are concerned is this: Does oil and gas in place when it has been produced from separate property remain separate property and a part of the corpus, or should it be classed as community income? The second question which naturally follows is this: Does this record show any community effort on the part of either the husband or wife in connection with the production from the 'Pakan' wells?

The holding in the case of Stephens v. Stephens, supra, is to the effect that so long as separate property can be definitely traced and identified it remains separate property regardless of the fact that the separate property may undergo 'mutations and changes'. We are in accord with this view. The opinion quotes with approval the Supreme Court of Wyoming in the case of State v. Snyder, 29 Wyo. 163, 212 P. 758, 762. In that case the Court said in part:

'Oil and gas, while in situ, are part of the realty; part of the corpus of the land. When a portion of it is taken away, the proceeds necessarily arise out of the corpus, and it is humanly impossible to change that simple, plain, physical fact. The character of the proceeds can, obviously, at least as between the beneficiaries, in no possible manner be changed by the nature of the documentary authority pursuant to which the oil and gas is taken out of the ground. Documents do not possess the power of an alchemist; neither do they wield a magician's wand. Whether the oil be taken out of the ground pursuant to a license, lease, sale, or any other grant, or without any authority whatever, could not in the slightest degree affect the physical fact that it comes from the corpus of the land. If taken and disposed of at all, the effect is clearly a permanent disposition of that much of the corpus, the principal of the land, and, irrespective of the authority pursuant to which that is done, the proceeds must go to the beneficiaries according to the rights existing between them'.

The principle announced in the Stephens case,...