Ortiz Oil Co. v. Geyer, 1874-7693.

• Decision Date: 04 February 1942
• Docket Number: No. 1874-7693.,1874-7693.
• Parties: ORTIZ OIL CO. v. GEYER et al.
• Court: Texas Supreme Court

Page 494

159 S.W.2d 494

ORTIZ OIL CO. v. GEYER et al.

No. 1874-7693.

Commission of Appeals of Texas, Section B.

February 4, 1942.

Rehearing Denied March 4, 1942.

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

Suit by Adolph A. Geyer and others, owners of oil and gas royalty interest under a leasehold estate, against the Ortiz Oil Company, holder of seven-eighths working interest in the leasehold estate, to recover the value of the plaintiffs' part of the oil produced from the lease in excess of the amount allowed by the Railroad Commission. From a judgment in favor of the defendant, the plaintiffs appealed to the Court of Civil Appeals. To review a judgment of the Court of Civil Appeals, 134 S.W.2d 814, reversing the trial court's judgment and rendering judgment in favor of the plaintiffs, the defendant brings error.

Judgment of Court of Civil Appeals affirmed.

T. R. Boone, John Davenport, Leslie Humphrey, J. E. Hall, and Arthur Tipps, all of Wichita Falls, for plaintiff in error.

Storey, Sanders, Sherrill & Armstrong, of Dallas, for defendant in error.

SLATTON, Commissioner.

This is a suit by royalty owners against the holder of the seven-eighths working interest in a certain leasehold estate to recover the value of their part of the oil produced from the lease in excess of the amount allowed by the rules of the Railroad Commission of Texas during December, 1933, through 1934 and April, 1935. Special issues were submitted to a jury and upon the verdict judgment was rendered by the trial court in favor of the oil company and against the royalty owners. The aggrieved parties appealed to the Court of Civil Appeals at Texarkana. That court reversed the judgment of the trial court and rendered judgment in favor of the royalty owners. 134 S.W.2d 814. The Ortiz Oil Company was granted the writ of error. We summarize the evidence taken from the opinion of the Court of Civil Appeals and the record.

The evidence shows that the oil company filed with the State Comptroller verified reports showing the amounts of allowable oil produced from the lease during the period and sold to the Century Refining Company at the market price of $1 per barrel, which company remitted by checks monthly to the royalty owners. The allowable oil is not in controversy in this suit. The verified reports reveal and an officer of the Ortiz Oil Company admitted, that said company during the same period produced 297,899 barrels of oil in excess of the amount allowed by the rules of the Railroad Commission.

May 2, 1934, the oil company filed its first production reports, which showed 82,352 barrels of excess oil to have been produced during December, 1933, and January, February and March, 1935. The first remittance received by the royalty owners other than checks for the allowable oil was in the form of cashier's checks, which was mailed from Shreveport on or about March 24, 1934. No information accompanied this remittance to disclose the sender or the purpose for which the check was sent. Reports were filed by the oil company in September, October and November showing the company to have produced 120,870 barrels of excess oil during July, August and September, 1934, and that the same was sold for the sum of $41,207.64. The Louisiana Brokerage Company sent checks to the royalty owners on or about October 27, 1934, aggregating the sum of $1,154.19. These checks do not represent the pro rata part of the royalty owners' share even at the price which the oil company claims to have sold the excess oil. The reports made by the oil company to the comptroller further show the production of 94,677 barrels of excess oil during October and December, 1934, and April 1935. The Louisiana Brokerage Company sent to the royalty owners the second check on November 20, 1934, and continued to send the small checks through January, May, June and September, 1935. The royalty owners were never furnished with any statement showing when the oil was produced or the price for which the oil was sold. The only checks received by the royalty owners which could be said to be in part payment for excess oil produced were either cashier's checks or from the Ocean Oil Company and the Louisiana Brokerage Company. No showing is made that other companies to which the Ortiz Oil Company reported excess oil to have been sold during the period ever remitted to the royalty owners for any amount. The checks of the Louisiana Brokerage Company contained a clause reading: "This check is in full settlement of account as shown hereon. Acceptance by endorsement constitutes receipt in full". The brokerage company accompanied the checks issued for September, October and December, 1935, with the following memorandum: "The enclosed check is in payment of your net royalty interest for oil purchased from the Tolliver lease for the (respective month)". Some of the royalty owners went to Shreveport to ascertain from the Ocean Oil Company and Louisiana Brokerage Company information concerning the early remittances which they had received. Neither company could be located. A lawyer promised to send statements showing the amount of oil sold and the price for which the oil was sold and whether the same was allowable oil, but this was not done. The checks were cashed by the royalty owners.

The oil company urges four contentions in this court, viz.: (1) That an issue of fact was presented with respect to the amounts the royalty owners received in part payment of the excess oil; (2) that the evidence raised an issue of fact with respect to the defense of accord and satisfaction; (3) that the suit was barred by the two-year statute of limitation; and (4) that the royalty owners were entitled to recover for the cash market value of excess oil which the jury found to be fifty cents per barrel and not the market price of $1 per barrel which was paid for allowable oil.

The suit of the royalty owners was a liquidated demand and their case was made when it was shown that the holder of the working interest in the leasehold estate had unlawfully produced oil in excess of the amounts allowed by the rules of the Railroad Commission of Texas. The verified reports showed the amount of such oil. The reports further disclosed the cash market price of allowable oil to be $1.00...