Pan Am. Petroleum Corp. v. Cain

• Court: Texas Supreme Court
• Writing for the Court: WALKER; SMITH
• Citation: Pan Am. Petroleum Corp. v. Cain, 163 Tex. 323, 355 S.W.2d 506 (Tex. 1962)
• Decision Date: 17 January 1962
• Docket Number: No. A-8154,A-8154
• Parties: PAN AMERICAN PETROLEUM CORP. et al., Petitioners, v. H. L. CAIN, Respondent.

Page 506

355 S.W.2d 506

163 Tex. 323

PAN AMERICAN PETROLEUM CORP. et al., Petitioners, v. H. L. CAIN, Respondent.

No. A-8154.

Supreme Court of Texas.

Jan. 17, 1962.

Rehearing Denied March 28, 1962.

Turner, Rodgers, Winn., Scurlock & Terry, Dallas, L. A. Thompson, Tulsa, Okl., J K. Smith, Forth Worth, for Pan American Petroleum Corp.

Morehead, Sharp & Boyd, Plainview, for Mary Jarman et al.

William B. Neely, Midland, for William B. Neely, Trustee, et al.

Fulton, Hancock & McClain, Gilmer, for Leland Fikes.

Klett, Evans, Trout & Jones, Lubbock, for respondent.

WALKER, Justice.

The controlling question presented by this appeal is whether the power to lease as reserved in a certain deed conveying an undivided mineral interest may be exercised by the heirs of the grantor after the latter's death. By deed dated May 17, 1937, James Kiser conveyed to Mrs. Mae Johnston an undivided one-fourth interest in the minerals in the Northeast Quarter of Section 640, Block D, John H. Gibson Surveys in Yoakum County. Although a printed form was used, the instrument contains the following typewritten paragraph:

'It is also agreed and understood that the Grantor herein reserves the right to lease said land without the joinder of the grantee, he at all times using his best efforts to obtain the highest lease possible and shall never execute a lease wherein less than the regular one-eighth ( 1/8) royalty is reserved.'

At the time this deed was executed Skelly Oil Company held an oil and gas lease on the land which expired by its own terms on December 24, 1937. While such lease was in force, Mrs. Mae Johnston conveyed an undivided one-eighth interest in the minerals to H. L. Cain, respondent. James Kiser died intestate on February 19, 1948, and was survived by four daughters who are his sole heirs. An additional undivided 90-acre interest in the minerals of the 160 acres, which was owned by James Kiser when he conveyed to Mrs. Mae Johnston, vested in such heirs upon his death and was owned by them when they executed four oil and gas leases on the land to Leland Fikes on May 24, 1955.

Petitioners are: (1) Pan American Petroleum Corporation and Leland Fikes, the present owners of the four leases; (2) certain individuals who claim overriding royalties in part of the land; and (3) the four daughters of James Kiser. They contend that the four leases cover the undivided one-eighth mineral interest owned by respondent, while the latter insists that his interest in the minerals is not under lease. All parties moved for summary judgment in the trial court, and the motion of respondent was granted. The Court of Civil Appeals affirmed on the basis of its conclusion that the power to lease reserved by James Kiser terminated at his death. 340 S.W.2d 93. We approve that holding and affirm the judgment of the Court of Civil Appeals.

The parties as well as the Court of Civil Appeals say that the power to lease, referred to by some writers as the executive right, reserved in the deed from James Kiser to Mrs. Mae Johnston is a power coupled with an interest. It has been so denominated by at least one other Texas court, Superior Oil, Co. v. Stanolind Oil & Gas Co., Tex.Civ.App., 230 S.W.2d 346 (aff. 150 Tex. 317, 240 S.W.2d 281); Odstricil v. McGlaun, Tex.Civ.App., 230 S.W.2d 353 (no writ); Allison v. Smith, Tex.Civ.App., 278 S.W.2d 940, wr. ref. n. r. e.; and there can be no doubt that an interest in land and a power with respect to another interest in the same land were vested in James Kiser. It is equally clear, however, that the interest owned by him was not so related to the power that the latter would, in other types of transactions, ordinarily be preserved after the death of the donor or principal. '(T)he interest which can protect a power after the death of a person who creates it, must be an interest in the thing itself. In other words, the power must be engrafted on an estate in the thing.' Hunt v. Rousmanier's Adm'rs, 8 Wheat. 174, 5 L.Ed. 589. See also Daugherty v. Moon, 59 Tex. 397. As pointed out by a number of eminent legal writers, the executive right reserved to the grantor in a conveyance of an undivided mineral fee interest is not a power coupled with an interest in that sense, because the grantor has no interest or estate in the subject or thing on which the power is to be exercised, i. e. the undivided mineral interest conveyed to the grantee. Walker, Developments in the Law of Oil and Gas in Texas During the War Years-A Resume, 25 Tex.Law Rev. 1, 19; Jones, Problems Presented by the Separation of the Exclusive Leasing Power from the Ownership of Land, Minerals, or Royalty, Second Annual Institute on Oil and Gas Law and Taxation, 271. See also Meyers, The Effect of the Rule Against Perpetuties on Perpetual Non-Participating Royalty and Kindred Interests, 32 Tex.Law Rev. 369, 395.

Mechem suggests that a new nomenclature is needed, because the one now used by the courts in this field is sadly ambiguous. He states that the interest of an agent in the execution of a power may be one of three kinds:

(1) 'An interest, not in the thing concerning which the power is to be exercised, or in the results to flow from its exercise, but merely an interest in being permitted to exercise it in order to earn his commissions.' This is a mere naked power, and is revocable at the will of the principal even though such revocation involves the breach of an agreement not to revoke it.

(2) 'An interest, not amounting to a property or estate in the thing itself, but still an interest in the existence of the power or authority to act with reference to it, not for the purpose of earning a commission by the exercise of the power, but because the agent has parted with value, or incurred liability, or assumed obligations, at the principal's request or with his consent, looking to the exercise of the power as the means of reimbursement, indemnity or protection.' Although this has been referred to by the courts as a power coupled with an interest and is not revocable by act of the principal, it is ordinarily deemed to be revoked by his death. For purposes of his classification, Mechem designates the same as a power given as security.

(3) 'An interest or estate in the thing itself, concerning which the power is to be exercised, arising from an assignment, pledge or lien created by the principal, coupled with which is the power to deal with the thing itself in order to make the assignment, pledge or lien effectual.' This is the orthodox power coupled with an interest which is generally held to be irrevocable by the act of the principal or by his death or disability. See Mechem, Law of Agency, 2nd ed. 1914, Vol. I, § 570 et seq., § 588.

It is clear that James Kiser had more than a mere naked power. Although on which the executive right was to operate, one which the executive rights was to operate, the power was reserved to facilitate the leasing of his interest in the minerals. It was for the protection or security of such interest that he stipulated for the power. On the basis of Mechem's classification, such power might be regarded as one given by way of security but it is not coupled with an interest.

We do not mean to suggest that the death of one to whom an undivided mineral interest is conveyed will necessarily revoke the executive right reserved to the grantor in the conveyance. That question is not presented here, and it perhaps should not be held that a power given by way of security will always terminate at the principal's death. See Mechem, Law of Agency, 2nd ed. 1914, Vol. I, § 653 et seq. The instrument involved in Drake v. O'Brien, 99 W. Va. 582, 130 S.E. 276, was said to create a power coupled with an interest which was, in effect, a grant or lease for mining purposes, and it was held that the power did not terminate at the death of Mary Gale, one of the grantors. See also Bonzo v. Nowlin (Ky.1955), 285 S.W.2d 153. Moreover, as pointed out by Professor Meyers in his article cited above, it is well to recognize the strains produced by attempting to force modern commercial transactions into moulds that are hundreds of years old.

Our question is whether the reserved leasing power may be exercised by the heirs of the grantor after his death. Petitioners cite the decisions holding that a power coupled with an interest does not necessarily terminate with the death of the agent. Collins v. Hopkins, 7 Iowa 463; Scott v. Cain, 77 Ga.App. 826, 50 S.E.2d 99; Todd v. Guffin, 55 Ind.App. 605, 104 N.E. 519; Lightner's Appeal, 82 Pa. 301; Boatmen's Bank v. Vandiver, Mo.App., 281 S.W. 144. In each of these cases the beneficiary or holder of the power owned an interest in the thing on which the power was to be exercised, and the courts were concerned only with whether the power should remain in existence for a relatively short period after the death of the holder in order that his estate or the beneficiary might have, recover or enforce such interest.

In our opinion the executive right terminates with the death of the original holder unless there is something to indicate that the parties intended that the power should survive and be exercised by others. This conclusion finds support in the reasoning and holdings of courts of other jurisdictions where the precise question has been considered. In Howard v. Dillard, 198 Okl. 116, 176 P.2d 500, the instrument provided that the grantor 'shall retain management and control of the minerals and privileges hereinbefore mentioned, and that he shall have the sole and exclusive right to lease said lands to any person to whom he may choose and upon such terms and conditions suitable to him * * *.' It was held that the reserved leasing power was personal to the grantor and terminated at his death. A number of years later the same court considered a conveyance in which the reservation was in favor of the grantor, his heirs, executors, administrators and assigns. In support of its holding that the ...