Phillips Petroleum Co. v. Harnly

• Decision Date: 03 July 1961
• Docket Number: No. 7068,7068
• Citation: 348 S.W.2d 856
• Parties: PHILLIPS PETROLEUM COMPANY, Appellant, v. John Henry HARNLY et al., Appellees.
• Court: Texas Court of Appeals

Page 856

348 S.W.2d 856

PHILLIPS PETROLEUM COMPANY, Appellant, v. John Henry HARNLY et al., Appellees.

No. 7068.

Court of Civil Appeals of Texas, Amarillo.

July 3, 1961.

Rehearing Denied Sept. 5, 1961.

Simpson, Adkins, Fullingim & Hankins, C. J. Roberts and John R. Rebman, Amarillo, Smith, Teed, Wade & Waters, Pampa, R. L. Foster and Wm. J. Zeman, Bartlesville, Okl., for appellant.

Sanders, Scott, Saunders, Brian & Humphrey, Amarillo, for appellees.

DENTON, Chief Justice.

This is an action brought by appellees as lessors and mineral owners, to cancel and terminate certain oil and gas leases held by appellant on a half-section of land in Gray County, Texas. Both appellant and appellees filed motions for summary judgment. The trial court severed the phase of the case on appeal before us dealing with shut-in rental payments from the remainder of the case involving a purported consolidation of the leases in question and a lease covering the E 1/2 of the same section. The trial court granted lessors' motion for summary judgment and in so doing rendered judgment that Phillips' oil and gas lease from appellees had terminated.

The primary question presented here is whether the lessors' shut-in rental payments tendered after a well was capable of producing gas in paying quantities had been capped after producing gas some four months were sufficient to extend the term of the oil and gas leases beyond the primary term.

On November 7, 1951, Sarah W. Harnly, a feme sole, and her three children, John Henry Harnly, Paul Witmore Harnly and Mary Elizabeth Harnly Aroniss, each joined by their respective spouses, executed oil and gas liases to Phillips for a primary term of five years. Separate leases were executed by each of the named lessors on the NW 1/4 and the SW1/4 of Sec. 109. However, a subsequent instrument was executed which agreed the leases covering the NW 1/4 should be treated as one lease, and the leases covering the SW 1/4 should be treated as one lease. Delay rentals were tendered and accepted on the NW 1/4 on each anniversary date including the 1955 anniversary date. Phillips timely paid delay rentals which were accepted by the lessors on the SW 1/4 each year until the anniversary date of 1955. A well was commenced in July of ,1955 on this tract and drilling operations were continued until March, 1956, when the well was completed as a producer of gas with an open flow potential of 110 million cubic feet per day, with some condensate. Gas from this well was produced and marketed from April until July of 1956. The well was capped on or about July 30, 1956 for the lack of a market. Prior to the end of the primary term on November 9, 1956, Phillips tendered shut-in rental payments to the lessors, but these payments were rejected and refused by all lessors except Mr. and Mrs. aroniss, who failed to receive the tendered rentals before the expiration of the primary term due to the payment being mailed to her former address. This latter phase of the case will be discussed later in the opinion.

This suit was filed in August, 1957 by the lessors seeking to have the court terminate the oil and gas leases and for an accounting for money due for production from the gas well. The trial court granted the lessors' motion for summary judgment and denied Phillips' motion. All parties agree that there are no material issues of fact to be determined in the phase of the case presently before us dealing with the shut-in in rental payments.

We shall first consider appellees' first two points in which they complain that the appellant has failed to bring forward a complete record of the matters considered by the trial court in granting the summary judgment, and that therefore the trial court's judgment should be affirmed. They contend the record is not properly authenticated; that it does not included a statement of facts or admissions, arguments of counsel, and all depositions which were before the trial court. This court granted appellant's request to file a supplemental transcript under Rule 428, Texas Rules of Civil Procedure. The clerk of the trial court was thus ordered to bring forward all items in the supplemental transcript that were not included in the original transcript. This order was duly complied with. There is no statement of facts, but the record including a certificate of the trial judge, reveals that no testimony was taken. We are of the opinion the record before this court is complete and is properly authenticated. There being no indication that there was any evidence or filed instruments or exhibits before the trial court and considered by him which were not brought forward in the record, no presumptions are to be applied in favor of the summary judgment on the basis of an incomplete record or of the absence of a statement of facts. Toliver v. Bergmann, Tex.Civ.App., 297 S.W.2d 208 (no writ history); Box v. Bates, Tex., 346 S.W.2d 317. We therefore overrule appellees' points Nos. 1 and 2.

We next consider whether or not Phillips' tender of the shut-in rentals was sufficient to extend the oil and gas leases in question beyond the primary term. The pertinent parts of the material paragraphs of the identical leases read as follows:

'4. If operations for drilling are not commenced on said land on or before the 9th day of November, 1952, the lease shall then terminate as to both parties unless on or before such date Lessee shall pay or tender to Lessor or to the credit of Lessor in the Peoples State Bank at McPherson, Kansas (which bank and its successors shall continue as the depository for all rentals payable hereunder regardless of changes in ownership of said land or of the rentals) the sum of One Hundred Sixty and No/100 Dollars ($160.00) (herein called rentals), which shall cover the privilege of deferring commencement of operations for drilling for a period of twelve (12) months. In like manner and upon like payments or tenders annually the commencement of operations for drilling may be further deferred for successive periods of twelve (12) months each during the primary term. The payment or tender of rentals may be made by the check or draft of Lessee mailed or delivered to Lessor or to said bank or its successor on or before such date. * * *

'9. If for any period or periods of time after discovery of oil, gas or other mineral, no oil, gas or other mineral is produced from the leased premises but there is located thereon a gas well, a bradenhead well, or a condensate or a distillate well, from which the gas is not sold or used off the premises or in the manufacture of gasoline or other products, or there is located on said premises an oil well which is not produced on account of any of the causes stated in Paragraph 8 hereof, it shall be deemed, nevertheless, that oil or gas is being produced from the leased premises for the purpose of continuing this lease in effect as long as there remain upon the leased premises one or more wells capable or producing oil or gas, if Lessee shall commence or resume the payment of rentals (whether during or subsequent to the primary term hereof) in like amount and in like manner as is provided in Paragraph 4 hereof, and continue the payment of such rentals annually until production of oil, gas or other mineral is commenced or resumed, or this lease is surrendered; provided that the first rental under the provisions of this paragraph shall be payable on or before the anniversary of the rental paying date of this lease next ensuing after the expiration of sixty (60) days from cessation of all production on the leased premises, or from date of completion of a well which is not produced where there is no other production on the leased lands, and subsequent rentals shall be payable annually thereafter.

'11. If oil, gas or other mineral shall be discovered on the leased premises and if, in the judgment of Lessee, it shall become unprofitable or uneconomical to produce the same due to the low price obtainable for such products or due to the restricted allowable production under the laws of the state in which the land is situated, under any federal law, or under the orders or regulations of the appropriate governing bodies, and, if, in the judgment of Lessee, such unprofitable or uneconomical conditions are temporary, then Lessee may shut in and cease producing during the existence of such unprofitable or uneconomical conditions, for a period not in excess of two (2) years, during which time it shall be deemed that oil or gas is being produced and this lease shall continue in effect, if Lessee shall pay to Lessor annually during such period rentals in like amount and in like manner as provided in Paragraph 9 hereof. Nothing herein contained shall be construed to require the payment of rentals covering the same period for which rentals are paid under the provisions of Paragraph 9.'

Although all parties seem to agree there is no ambiguity in the provisions of the lease, their respective interpretations of the particular paragraphs of the lease reach a different conclusion. The fact two different conclusions are reached in an interpretation of a lease by opposing parties to the instrument does not in itself render the contract ambiguous. In our opinion, the provisions of the lease contracts are unambiguous. We must therefore look to the lease itself to determine the intentions of the parties. McMahon v. Christmann, 157 Tex. 403, 303 S.W.2d 341; Superior Oil Co. v. Stanolind Oil & Gas Co., 150 Tex. 317, 240 S.W.2d 281; 31-A Tex. Jur. 179, Oil and Gas, Sec. 109.

Appellant contends it complied with all provisions of the leases and in so doing perpetuated the leases beyond the end of the primary term. On the other hand, appellees take the position that the trial court correctly declared the leases terminated for several reasons: (a) that appellant, though timely making the tender, placed an improper period to be covered by the shut-in payment; (b) that the tenders were...