Reynolds v. McMan Oil & Gas Co.

• Decision Date: 12 December 1928
• Docket Number: (No. 887-4592.)
• Citation: 11 S.W.2d 778
• Parties: REYNOLDS et al. v. McMAN OIL & GAS CO. et al.
• Court: Texas Supreme Court

11 S.W.2d 778

REYNOLDS et al. v. McMAN OIL & GAS CO. et al.

(No. 887-4592.)

Commission of Appeals of Texas, Section B.

December 12, 1928.

COPYRIGHT MATERIAL OMITTED

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

Action by Mrs. S. E. Reynolds and others against the McMan Oil & Gas Company and others. Judgment for defendants was affirmed by the Court of Civil Appeals (279 S. W. 939), and plaintiffs bring error. Reversed and remanded for new trial.

Wm. J. Berne, of Fort Worth, and Kinder & Russell and Meade F. Griffin, all of Plainview, for plaintiffs in error.

H. P. Brelsford and Funderburk & Richardson, all of Eastland, Thompson & Barwise, of Fort Worth, and John Rogers, of Tulsa, Okl., and Ellis Douthit, of Abilene, for defendants in error.

SPEER, J.

This case presents the question whether or not a lessor under the mineral lease in common use in this state may recover from the lessee for gasoline manufactured from casing-head gas under the stipulation for the usual royalty on oil produced and saved.

The suit was instituted by plaintiffs in error, the lessors, against the defendants in error, as assignees of the original lessee, and upon the conclusion of the evidence the trial court instructed a verdict against the plaintiffs, and that judgment was affirmed by the Court of Civil Appeals. 279 S. W. 939.

Originally, the plaintiffs' pleadings were very voluminous, and presented several counts seeking a recovery upon different theories, but, as finally resolved, the contention of plaintiffs in error relies upon the right to recover one-eighth of the gasoline produced by defendant in error McMan Oil & Gas Company as for oil produced and saved under the terms of the lease; while the defendants in error contend that, under the terms of the lease, such recovery should be denied. At the threshold of the consideration, we are therefore required to examine and construe the contract. Much has been said in the submission of the case, and will need to be said in our disposition of it, as to whether or not gasoline is oil within the meaning of the contract. But this is only of secondary importance, and may or may not become material, depending upon the construction to be given to the lease. It was suggested by counsel for defendants in error upon the presentation that the liberty and sanctity of contract is of vastly more importance than all the oil in Texas; and this is obviously true. Since both parties rely upon the terms of the contract, a critical examination of the same becomes necessary.

The ordinary oil and gas lease in common use in this state, such as the one in controversy here, has been frequently before the Supreme Court for consideration, and has been construed to be a grant of the minerals (oil and gas) in place. Stephens County v. Mid-Kansas, etc., Co., 113 Tex. 160, 254 S. W. 290, 29 A. L. R. 566; Texas Co. v. Davis, 113 Tex. 321, 254 S. W. 304, 255 S. W. 601; Robinson v. Jacobs, 113 Tex. 231, 254 S. W. 309; Munsey v. Marnet Oil & Gas Co., 113 Tex. 212, 254 S. W. 311; Thomason v. Ham, 113 Tex. 239, 254 S. W. 316. Such being the holding with us, the decisions of those states which treat the lease as a mere option or privilege are of little value upon the questions involved here. These cases above referred to did not specifically decide (for it was unnecessary) the extent of the estate granted in such minerals, but the later cases of Waggoner v. Wichita County, 273 U. S. 113, 47 S. Ct. 271, 71 L. Ed. 566, and Hager v. Stakes, 116 Tex. 453, 294 S. W. 835, do affirmatively decide that the extent of the estate granted in such instruments is the oil and gas, less the exception contained in the royalty clause, which exception is real estate and remains the property of the lessor.

The construction of the particular lease being thus imperative, that instrument is here set out, in so far as necessary, as follows:

"Oil and Gas Lease.

"Agreement made and entered into on this the 2nd day of December, 1918, by and between S. E. Reynolds, surviving wife of J. W. Reynolds, deceased (and other parties), parties of the first part, hereinafter called lessors, and W. T. Garrett, party of the second part, hereinafter called lessee:

"Witnesseth: That the said lessors, for and in consideration of the sum of $29,544.00 cash in hand paid, the receipt of which is hereby acknowledged, and of the covenants and agreements hereinafter contained on the part of the lessee, to be paid, kept and performed, have granted, conveyed, demised, leased and let, and by these presents do grant, convey, demise, lease and let unto the said lessee for the sole and only purpose of mining and operating for oil and gas and laying pipe lines and of building tanks, powers, stations and structures thereon to produce, save and take care of said product, all that certain interest in and to three certain tracts of land and which adjoin each other and situated partly in Eastland and Erath Counties, States of Texas, and described as follows, towit: (Here follows description of land in controversy, amounting to 246.2 acres.)

"The interest of the lessors above named granted by this lease being an undivided interest of approximately four-fifths in and to said three tracts of land hereinabove described.

"It is agreed that this lease shall remain in force for a term of five years from this date and as long thereafter as oil or gas or either of them is produced from said land by the lessee.

"In consideration of the premises, lessee covenants and agrees:

"1st. To deliver to the credit of the lessors, free of cost in the tanks or pipe lines to which he may connect his well, the equal one-eighth part of all oil produced and saved from the leased premises.

"2nd. To pay to the lessor $100.00 each year in advance for the gas from each well where gas only is found, while the same is being used off the premises, and lessor to have gas free of cost from any such well for all stoves and all inside lights in the principal dwelling house on said land during the same time, by making his own connection with the well at his own risk and expense.

"3rd. To pay the lessor for gas produced from any oil well and used off the premises at the rate of $100.00 per year for the time during which such gas shall be used, said payment to be made each three months in advance. * * *

"Lessee shall have the right to use free of cost gas, oil, and water produced on said land for its operations thereon except water from wells of lessor. * * *"

The lease contained the usual stipulations for annual rentals in the event of failure to drill within the time stipulated therein and other stipulations not important in our consideration.

Another lease identical in form was executed by the guardian of the minors owning the remainder of the fee to the tracts involved.

First, of course, in construing a deed, like any other contract, the intention of the parties is of primary and controlling importance. Where the contract is unambiguous, this intention must be determined from the instrument itself, considering all its parts in their proper bearing. If the terms of the instrument give it a definite legal effect, the inquiry is concluded, and no intention, however discovered, can contradict or destroy the legal effect of the terms used. If the instrument as written does not really represent the contract as made, there may be a right in equity to relief by way of cancellation or reformation, but this does not pertain to construction, and the principle has no place in the present inquiry, for all parties are standing on the contract as written.

In determining the legal effect of a deed, whether as to grant, exception, reservation, consideration, or other feature, the inquiry is not to be determined alone from a single word, clause, or part but from every word, clause, and part that is pertinent. The relative positions of the different parts of the instrument are not necessarily controlling; the modern and sounder reason being to ignore the technical distinctions between the various parts of the deed, and to seek the grantor's intention from them all without undue preference to any, for the plain intention of the grantor as disclosed by the deed as a whole controls the construction. These rules are elementary.

The inquiry in the present case calls for a consideration of the rules of construction with reference to exceptions and reservations. The extent, and possibly nature, of an estate granted may be dependent upon an exception or reservation in the deed, and the construction and operation of both the grant and the exception or reservation must be determined from the entire instrument, taking into consideration the object and purposes of the instrument. The office of an exception is to take something out of the thing granted that would otherwise pass, and the exception, as an estate, is of a kind with that granted; whereas a reservation carves out of the grant a new thing or estate, and it therein differs from an exception which is ever a part of the thing granted and of a thing in esse at the time. 18 C. J. p. 337, § 337; Id. p. 340, § 339. Simply illustrated, a grant of block 5 except lot 1 is an exception; whereas a grant of block 5 with a life estate to the grantor is a reservation. For the purpose of determining the extent of the grant, however, the distinction between exceptions and reservations is of no practical importance, since whether the one or the other the property excepted or the estate reserved is never included in the grant.

Bearing in mind these general rules of construction, we will analyze the instrument lying at the foundation of plaintiffs' case and likewise defendants' defense.

1. The "lease," when construed as a whole, is undoubtedly a grant of a determinable fee to oil and gas in place on the land described.

While the letter of the instrument is to grant the described "tracts of land," nevertheless the instrument as a whole, considering...