Riley v. Meriwether

• Decision Date: 22 November 1989
• Docket Number: No. 08-89-00164-CV,08-89-00164-CV
• Parties: Dan RILEY, Trustee, Appellant, v. Ralph H. MERIWETHER, et al., Appellees.
• Court: Texas Court of Appeals

Page 919

780 S.W.2d 919

Dan RILEY, Trustee, Appellant, v. Ralph H. MERIWETHER, et al., Appellees.

No. 08-89-00164-CV.

Court of Appeals of Texas El Paso.

Nov. 22, 1989.

Rehearing Overruled Dec. 27, 1989.

David G. Stubbeman, Abilene, for appellant.

Tom Scott, Gregg Owens, Shane R. Spear, Bullock, Scott, Neisig & Owens, Midland, for appellees.

Before OSBORN, C.J., and FULLER and KOEHLER, JJ.

OPINION

FULLER, Justice.

In a declaratory judgment action, the Appellees as assignors sought to have the Corrected Assignment of leasehold interest declared terminated. Trial was to a jury, and the trial court, after disregarding certain answers by the jury, entered judgment for the Appellees resulting in termination of the estate represented by the Corrected Assignment. We affirm.

The controversy involves an instrument titled "Corrected Assignment" dated February 17, 1980, in which Appellees assigned to Wiggins Oil Company certain oil and gas leasehold estates in Crockett County, Texas, representing some nine separate tracts of land. Appellant Dan Riley was sued in his capacity as Trustee for Crockett Gathering, Ltd., the successor assignee to the assignee named in the Corrected Assignment. Appellees are the assignors and successors in interest to the assignors named in the Corrected Assignment.

Two previous assignments, which did not have shut-in clauses, led up to the Corrected Assignment. In compliance with the terms of the Corrected Assignment, nine wells were drilled. The Corrected Assignment provided that it would terminate if either a new well was not commenced within ninety days after the cessation of the drilling program or in sixty days after the last well was completed under the program, one of the tracts was not producing gas. The evidence showed that no oil or gas was produced from the wells located on the tracts from December 1, 1985 through January 1, 1987, and that no oil or gas was sold during this same time period. No actual drilling operations were conducted on the land during this same time period, only maintenance and periodic checking. Therefore, the gas wells were shut-in for about thirteen months. While all the base leases contained shut-in royalty provisions, the Corrected Assignment did not have such a provision and, therefore, the assignors under the Corrected Assignment did not receive shut-in royalty payments.

At the close of the evidence, the trial court denied Appellees' and Appellant's motions for instructed verdict and submitted the charge to the jury. The jury findings were: (1) There had been neither production from nor operations for production on the nine tracts during the critical period stated in the Corrected Assignment; (2) that Appellees were not estopped to assert that the Corrected Assignment had terminated; (3) that Appellees had waived their right to complain that the Corrected Assignment had terminated; (4) and that during the time the wells were shut-in, it was possible to produce gas in paying quantities.

The jury also determined the amount of reasonable attorney's fees through the trial court and appeal for Appellant's and Appellees' attorneys.

The trial court set aside the jury's answer that Appellees had waived their complaint that the Corrected Assignment had terminated. He then entered judgment for the Appellees, the effect of which was to terminate the estate created by the Corrected Assignment. Appellant's Motion for New Trial was overruled by operation of law.

Appellant brings forward fifteen points of error challenging the trial court's actions as well as the jury's findings. We shall then discuss the points but not necessarily in the order presented by the Appellant.

As to the points of error that deal with no evidence or the legal insufficiency challenge, we must examine only that evidence and reasonable inferences therefrom, which when viewed in the most favorable light, support the verdict. If the favorable evidence amounts to more than a mere scintilla, which is more than a mere suspicion, then the legal sufficiency challenge must fail. Stafford v. Stafford, 726 S.W.2d 14 (Tex.1987); Kindred v. Con/Chem, Inc., 650 S.W.2d 61 (Tex.1983). If both legal and factual sufficiency points are raised, this Court should rule on the legal insufficiency points first. Glover v. Texas General Indemnity Company, 619 S.W.2d 400, 401 (Tex.1981). When a jury finding has support in the evidence, a trial court may not render a judgment n.o.v., even if the great weight and preponderance of the evidence may be to the contrary. Gulf, Colorado & Santa Fe Railway Company v. Deen, 158 Tex. 466, 312 S.W.2d 933 (1958), cert. denied, 358 U.S. 874, 79 S.Ct. 111, 3 L.Ed.2d 105 (1958).

In viewing the factual sufficiency challenge, this Court must review all of the evidence and the resulting inferences therefrom, and the challenge should be sustained only if the verdict is so contrary to the overwhelming weight of the evidence as to be clearly unjust and wrong. Cain v. Bain, 709 S.W.2d 175 (Tex.1986).

POINTS OF ERROR

Point of Error No. Three asserts the trial court erred in disregarding the jury's answer to Question No. Three concerning waiver.

Prior to trial, the court made a finding that the Corrected Assignment was unambiguous which in effect was a determination by the trial judge that the reference to prior leases in the Corrected Assignment did not preserve the assignment by payment of shut-in royalties. The Appellant contended that Appellees had waived any right to termination of the assignment. Question No. Three submitted to the jury and answered favorably for the Appellant was:

Do you find from a preponderance of the evidence that Plaintiffs waived their right, if any, to complain that the Corrected Assignment had terminated, if it did terminate.

You are instructed that a person "waives" a right or privilege when he intentionally abandons a known right or privilege or intentionally engages in conduct inconsistent with claiming such right or privilege.

Answer "Yes" or "No."

ANSWER: Yes.

The Appellant complains of the trial court's action in disregarding this answer of the jury.

Waiver can be inferred from intentional conduct which is inconsistent with claiming a known right. Munster Steel Company v. Travelers Indemnity Company, 620 S.W.2d 771, 772 (Tex.Civ.App.--Dallas 1981, no writ). The following elements must be met in order to find waiver: (1) A right must exist at the time of the waiver, (2) the party who is accused of waiver must have constructive or actual knowledge of the right in question, and (3) the party intended to relinquish its right. Pennzoil v. Socony Mobil Oil Company, 421 S.W.2d 416, 423 (Tex.Civ.App.--El Paso 1967, writ dism'd). We do not agree with Appellant that there was evidence of waiver. Appellant points to several factors including a letter from Appellees' lawyer to Appellant's predecessor in title, but a review of that letter does not support a waiver of any rights. The letter points to the fact that the wells were shut-in and states that the Corrected Assignment was for a fixed term ending November 15, 1980, and provided for a defeasible fee estate requiring production from each tract in order to remain intact. This letter was dated April 18, 1986, and the wells at that time had been shut-in approximately four and one-half months.

The Corrected Assignment provided:

Sixty days after the completion of the last well drilled under the drilling program ... this assignment shall terminate as to, and Assignee shall reassign to Assignor, all interest in the Land above described ... which are not then producing, and upon cessation of production and the plugging of any well on the land above described ... if said production cessation is for longer than sixty (60) consecutive days and if no drilling operations have been commenced on the land within such period.

The Corrected Assignment also provided "for a term ending November 15, 1980, and for so long thereafter, as to each of the respective tracts ... as oil or gas ... are produced...."

Production of a well involves actually taking oil or gas from the well in a captive state for either storing or marketing the product for sale. Williams, Shut-In Royalty Clause, 3 Oil and Gas Law, sec. 631 at 395 (1989). The words "so long as" are appropriate to express an automatic termination. The use of these words show the intent that the estate will automatically terminate upon the occurrence of a stated event. Restatement of Property, sec. 44 (1936).

The main purpose for entering into a mineral lease is to obtain production. The courts may generally be opposed to the construction which causes automatic termination, but the policy behind that rule does not apply to leases for oil and gas. Williams, Habendum Clause, 3 Oil and Gas Law, sec. 604 (1989). Thus, "a determinable fee estate ... granted upon a special limitation terminates automatically upon the occurrence of the event which constitutes the special limitation as expressed in the grant." Colby v. Sun Oil Company, 288 S.W.2d 221 (Tex.Civ.App.--Galveston 1956, writ ref'd n.r.e.).

In conclusion, it is well established in Texas that an oil and gas estate like the present one, which states that it should remain in force during the primary term and as long thereafter as minerals are produced and that it will terminate at the end of the primary term in the absence of production, creates a determinable fee in the land once the specified limiting events occur, Gulf Oil Corporation v. Reid, 161 Tex. 51, 337 S.W.2d 267, 269 (1960).

While generally forfeitures may not be favored in the law, this is not true when a lease terminates by its own provisions due to a cessation of production. Woodson Oil Company v. Pruett, 281 S.W.2d 159, 164 (Tex.Civ.App.--San Antonio 1955, writ ref'd n.r.e.). Appellant admitted there was no production because there was no market. However, the non-availability of a market is not an effective excuse for the failure to produce...