Pennzoil v. Socony Mobil Oil Co.

• Decision Date: 18 October 1967
• Docket Number: No. 5853,5853
• Citation: 421 S.W.2d 416
• Parties: PENNZOIL, Appellant, v. SOCONY MOBIL OIL COMPANY, Inc., et al., Appellees. . El Paso
• Court: Texas Court of Appeals

Page 416

421 S.W.2d 416

PENNZOIL, Appellant, v. SOCONY MOBIL OIL COMPANY, Inc., et al., Appellees.

No. 5853.

Court of Civil Appeals of Texas.

El Paso.

Oct. 18, 1967.

Rehearing Denied Nov. 29, 1967.

William L. Kerr, Kerr, Fitz-Gerald & Kerr, Midland, Baker, Botts, Shepherd & Coates, J. C. Hutcheson, III, James P. Lee, Bill Henry, Houston, for appellant.

Jack T. Akin, P. Joseph Trimble, Maurice R. Bullock, Midland, Charles F. Heidrick, E. M. Cage, Hobert Price, Jr., Donald G. Canuteson, Dallas, Walter B. Morgan, Dillard Baker, Houston, for appellee.

OPINION

PRESLAR, Justice.

This is an appeal from an order granting the defendants' motion for summary judgment. Involved are questions of whether appellant, as plaintiff below, was barred by the doctrines of estoppel, waiver and ratification from obtaining the relief which it sought. We reverse and remand.

All of the parties hereto are parties to two agreements to unitize their interests in some sixteen sections of land in the Coyanosa Wolfcamp Field of Pecos County, Texas, for the production of oil, gas and associated minerals. Under the terms of the agreements, the parties were to share on the production from the unit for an initial period (Phase I) on the basis of surface acreage, but would change at a later date to allocating production on the basis of the calculated minerals in place (reserves) underlying the land of each, called 'Phase II'. The subject matter of this suit is the date that change could be effected from allocated production under Phase I to Phase II. The agreements were effective as of August 1, 1964, for commencement under Phase I, provided:

'Phase II Tract Participation shall become effective as of 7:00 a.m., June 1, 1968, or at 7:00 a.m. on the first day of the sixth calendar month following the date Working Interest Owners agree that the Unitized Formation is fully developed, whichever date is earlier .'

Defendant Mobil, as the operator of the Unit, in the early part of 1965 commenced efforts to change the basis of participation from Phase I to Phase II. Pursuant to these efforts, Mobil circularized the Working Interest Owners and requested them to agree that development was complete. 96.5% Responded affirmatively, and a program was carried out toward effecting such change, and the date for such change was set for December 1, 1965. In late November, Pennzoil protested such change by letter to Mobil and the other Working Interest Owners, and followed such protest by this suit seeking declaratory judgment construing the agreements. Pennzoil, as a Working Interest Owner, brought this suit against all of the other Working Interest Owners asserting that it did not agree that the unitized formation was fully developed and asking the court to determine and declare that Phase II participation under the agreements cannot be instituted prior to June 1, 1968 in the absence of the agreement of all working interest owners. Pennzoil moved for summary judgment for such a construction of the agreements. Defendants, all of the other Working Interest Owners, opposed such motion on the basis that there was an absence of necessary parties, viz., owners of royalty and other mineral interests, who would be affected by a construction of the agreements. The court sustained this contention of the defendants and made no determination of Pennzoil's motion for summary judgment. Defendants also moved for summary judgment against Pennzoil, alleging that by both its action and inaction in regard to certain events leading up to the declaration that Phase II would be initiated, it was barred by the doctrines of estoppel, waiver, and ratification from questioning the interpretation placed on the agreements by them. The granting of the defendants' motion for summary judgment is what is before us on this appeal.

Pennzoil, as appellant, by its Point of Error No. 1, urges a construction of the agreements to mean that all owners, 100%, must agree that the unitized formation is fully developed as a prerequisite to the institution of Phase II prior to June 1, 1968. We are unable to pass on this point, for it was not presented to the trial court and, as indicated, it was specifically not passed on for lack of necessary parties. We are unable to make any construction of the agreements which would affect the absent parties, even as the trial court's construction would have affected them. The record before us is conclusive on this court of the fact that there are absent necessary parties. Therefore, we do not pass on appellant's Point of Error No. 1.

In upholding the contention of the defendants that Pennzoil is barred by the doctrines of estoppel, ratification and waiver from maintaining its present position, the trial court necessarily found that all of the elements of at least one of those doctrines was established as a matter of law so that summary judgment was proper. With that we are unable to agree, for which each element is viewed in the light required for the granting of summary judgments, there are questions of fact as to some.

Basic rules governing the disposition of cases under 166--A, Texas Rules of Civil Procedure, are set out in Great American R. Ins. Co. v. San Antonio Pl. Sup. Co., 391 S.W.2d 41 (Tex.1965), as follows:

'Rule 166--A, Texas Rules of Civil Procedure, provides that summary judgment shall be rendered if it is shown that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. The burden of proof is on the movant, and all doubts as to the existence of a genuine issue as to a material fact are resolved against him. Tigner v. First Nat'l. Bank, 153 Tex. 69, 264 S.W.2d 85 (1954); Gulbenkian v. Penn, 151 Tex . 412, 252 S.W.2d 929 (1952). In other words, the evidence must be viewed in the light most favorable to the party opposing the motion. Valley Stockyards Co. v. Kinsel, 369 S.W.2d 19 (Tex.Sup.1963); Smith v. Bolin, 153 Tex. 486, 271 S.W.2d 93 (1954). If the motion involves the credibility of affiants or deponents, or the weight of the showings or a mere ground of inference, the motion should not be granted. All conflicts in the evidence are disregarded, and the evidence which tends to support the position of the party opposing the motion is accepted as true. Cowden v. Bell, 157 Tex. 44, 300 S.W.2d 286 (1957).'

And for a full discussion of the summary judgment procedure, see 'What the Heck in Two Respects', by Justice Zollie Steakley of the Supreme Court, in Vol. 30, No. 8, p. 697, Texas Bar Journal (Sept. 22, 1967).

By its suit Pennzoil, as plaintiff, sought to have the court construe the agreements of the parties, to settle the question of whether or not unanimous agreement of the Working Interest Owners was required to institute Phase II. The effect of the trial court's judgment is that the right to have the contracts construed has been lost because of the course of conduct of the one seeking the construction prior to the time such construction is sought. The judgment does not specify the basis of denying the relief sought, other than the granting of the defendants' motion for summary judgment, and the gist of such motion was that plaintiff had 'ratified the procedure used' by defendants, and by its laches and unreasonable delay 'waived' any right to complain, and 'is now estopped as a matter of law from questioning the interpretation placed on the Unit Agreement and Unit Operating Agreement by all other Working Interest Owners.'

Prior to institution of Phase II, whenever it was to be accomplished, certain preliminary things had to be done--selection of consulting engineers, a determination by them of the minerals in place under the various tracts of the Unit, and an allocation to each tract of its proportionate part, etc. These matters were set out in the agreements, and it is alleged that as these steps were taken toward institution of Phase II, Pennzoil remained silent, and that on two occasions it took an active part. The affidavit and exhibits attached to defendants' motion for summary judgment (affidavit made by F. S. Wright, of Mobil) sets out that on June 2, 1965 Mobil sent a telegram to all Working Interest Owners requesting them to formally agree that the unitized formation was fully developed, and that by letter of June 7, 1965, Mobil wrote all Working Interest Owners:

'In reply to our telegram of June 2, 1965, this will advise that Working Interest Owners having a participation of 96.5% In the Coyanosa Wolfcamp Unit have agreed as of June 4, 1965, that the Unitized Formation is fully developed and that determination of Phase II Participation should start immediaely.

'Under the terms of Section 6.2.4 of the Coyanosa Wolfcamp Unit Agreement, Phase II Participation will become effective as of 7:00 a .m., December 1, 1965.

'The two consultants (H. J. Gruy and D. R. McCord) have commenced their work on the determination of Phase II Participation.'

The affidavit also sets out that a meeting was held to select consultants, which Pennzoil did not attend, but that by letter dated May 11, 1965, it proposed the names of three such consultants, and that representatives of Pennzoil attended and participated in two meetings of Working Interest Owners held on September 7 and September 21, 1965, at which the reports of two of the consultants were discussed and instructions were given to them; that on November 22, 1965, the final report of the consultants was received and forwarded the same day to all Working Interest Owners, and that on November 26, 1965, Pennzoil's letter was received stating that any effort, at the present time, to institute Phase II Participation would be contrary to the terms of the Unit Agreement; and the affidavit states: 'It was in reliance upon the agreement of the Working Interest Owners that the Unitized Formation was fully developed that prompted the charge to the aforementioned consultants to make their studies for the purpose of determining...