Shamrock Oil & Gas Co. v. Williams

• Decision Date: 20 September 1933
• Docket Number: No. 4069.,4069.
• Citation: Shamrock Oil & Gas Co. v. Williams, 63 S.W.2d 570 (Tex. App. 1933)
• Parties: SHAMROCK OIL & GAS CO. v. WILLIAMS et al.
• Court: Texas Court of Appeals

63 S.W.2d 570

SHAMROCK OIL & GAS CO. v.WILLIAMS et al.

No. 4069.

Court of Civil Appeals of Texas. Amarillo.

September 20, 1933.

Rehearing Denied October 18, 1933.

Appeal from District Court, Potter County; W. E. Gee, Judge.

Suit by Otis L. Williams and another against the Shamrock Oil & Gas Company and another.From a judgment in favor of the plaintiffs, the defendant named appeals.

Affirmed in part, reversed in part, and judgment rendered in accordance with opinion.

Underwood, Johnson, Dooley & Huff, of Amarillo, for appellant.

Madden, Adkins, Pipkin & Keffer, of Amarillo, for appellees.

HALL, Chief Justice.

Otis L. Williams and the Kelly Petroleum Company, Inc., instituted this suit against the Shamrock Oil & Gas Company and the Amarillo National Bank to recover $4,000 which had been deposited in said bank by the Shamrock Oil & Gas Company to secure the performance of a contract entered into between the Shamrock Oil & Gas Company and the plaintiffs.The plaintiffs are named as parties of the first part and the Shamrock Oil & Gas Company is styled party of the second part.The contract, omitting the formal parts, is as follows:

"That, whereas, parties of the first part are now the owners of an oil and gas mining lease upon and covering the following described land situated in Hutchinson County, to-wit: TheE. 1/2 of the northwest 1/4 of Sec. 30, Block Y, A. & B., and have agreed to sell to party of the second part, and party of the second part has agreed to buy from parties of the first part, an undivided one-half interest in and to said oil and gas mining lease on the above described tract of land, the terms and conditions of the sale being as follows, to-wit:

"1.The oil and gas mining lease above referred to is dated the 4th day of November, 1925, executed by E. B. Johnson and others as lessors, and running to All American Oil & Gas Co. as lessee, said lease being recorded in Vol. 30, page 348 of the deed records of Hutchinson County, Texas, and party of the second part has examined the original lease and is familiar with the contents thereof, and said original lease is here referred to and made a part of this agreement.

"2.The consideration paid and to be paid by party of the second part for the undivided one-half interest in and to said oil and gas mining lease is as follows: $10.00 cash in hand paid by party of the second part to parties of the first part, receipt of which is hereby acknowledged, and the drilling and completion of a well as hereinafter provided.

"3.Party of the second part shall, within sixty days from the date hereof, commence upon said land the actual spudding in of a well to be drilled for the procuring of oil and/or gas and once commenced said well is to be thereafter drilled with reasonable care and speed to sea level or to oil in paying quantities, and to be completed prior to the 4th day of November, 1930.It is expressly understood and agreed in this connection that the primary term of the lease on this tract terminates on November 4, 1930, and that time is the essence of this agreement, and that said well must at least be drilled into `the big gas' before said date, and thereafter completed as herein provided.

"4.Party of the second part is to furnish all labor and materials at its own cost and expense for the drilling of said well, and hereby binds itself that upon completion of said well all material, equipment and other property shall be fully paid for, and party of the second part shall not have suffered any person, firm or corporation to in any manner incumber any of such property or to file mechanic's or materialmen's lien on account of any unpaid labor or material bills arising out of or in connection with the drilling of said well.

"5.It is understood and agreed that the well is to be drilled and completed `to the tanks' in the time and manner above specified, and if oil or gas is encountered in paying quantities that it shall be the duty and obligation of the party of the second part to complete said well in such manner that the same is ready and capable of producing oil and/or gas without further cost or the necessity of furnishing further materials, except that parties of the first part shall pay one-half of the cost of the separator and tanks.And party of the second part is to complete said well, in the event the same produces oil in paying quantities, with at least a six inch oil casing and an eight inch casing and the surface pipe necessary to produce the oil in a first class manner.If the well is completed as a gas well, it shall be completed with the production string of casing and all necessary shut-off and surface strings of casing, and shall be fully equipped with the necessary gate valves and other equipment commonly and customarily used in the field in producing gas wells.The derricks and necessary equipment for the operation of said well shall remain on the lease and be the property of the parties hereto.

"6.Parties of the first part agree to execute an assignment to party of the second part conveying to it by good and merchantable title, a copy of which assignment is hereto attached.It is agreed by the parties hereto that a copy of this contract with the assignment is to be placed in escrow in the Amarillo National Bank, at Amarillo Texas, and held by said bank under the terms of this agreement, the assignment to be delivered by the bank to the party of the second part upon the completion of the well as herein provided.With said copy of said contract and the assignment, party of the second part is to place in escrow in said bank the sum of $4,000.00, which shall guarantee the performance of this agreement upon its part, and if party of the second part fails to spud in the well herein contemplated, within the time provided, this agreement shall become of no further binding force or effect upon them, except that the said bank shall pay to the parties of the first part the said sum of $4,000.00 as liquidated damages, actual damages being uncertain.It is further agreed and understood that in the event party of the second part otherwise defaults in the performance of this agreement or fails to complete the well in the time and manner hereinabove provided, the said assignment is to be returned by said bank to parties of the first part, and said bank shall also pay over to parties of the first part the said sum of $4,000.00, and all hole, casing, derricks and oil well equipment, except drilling tools thereon situated at the time of the default shall then and there become the property of the parties of the first part as liquidated damages for the purchase of this agreement, the actual damages being uncertain.

"7.It is specifically understood and agreed between the parties hereto that the party of the second part does not by the execution of this agreement, nor by the furnishing of any of the material and the performance of any labor in the drilling of said well, acquire any interest in said leasehold estate until the completion of the well, and that this agreement does not and shall not create nor be construed to create a joint venture between the parties hereto until such time as the well has been completed, and all labor and material bills of every nature whatsoever paid, it being expressly agreed and understood that the consideration to be paid to parties of the first part by party of the second part, is the completion of said well as herein provided, clear of all liens and incumbrances of any nature whatsoever."

The controversy was submitted to the trial court on an agreed statement of facts, which disclosed that on or about May 5, 1930, plaintiffs Williams and the Petroleum Company entered into the foregoing contract.The petition alleged that the Shamrock Company had failed to drill the well within the time required and, in fact, had failed to drill at all, for which reason the sum of $4,000 which was placed in escrow as liquidated damages should be adjudged to them.

The Shamrock Company answered, alleging that the title placed in escrow by the plaintiffs did not convey good and merchantable title as required by the contract; that it was provided that time was of the essence of the contract, and immediately upon discovery of the defective title placed in escrow it treated the contract as terminated, because plaintiffs had first breached the contract for the sale of the mining lease in question by their failure to place in escrow a good and merchantable title, and prayed that the $4,000 earnest money theretofore placed in escrow be decreed to it.

The Amarillo National Bank answered, alleging that it was a mere stakeholder in the transaction and held the $4,000 as such, and was ready and willing to pay the same to whoever the court decided was entitled to the fund.It prayed that it be allowed reasonable attorney's fees for filing the answer.

A trial to the court without a jury resulted in a decree that the Shamrock Oil & Gas Company had no interest in the fund held by the bank; that the plaintiffs were entitled to recover said sum, less $100 as a reasonable attorney's fee.It was further adjudged that plaintiffs recover as against the Shamrock Oil & Gas Company said $100 and that said Oil & Gas Company pay all costs.

By its first propositionthe appellant insists that the trial court erred in rendering a judgment because the contract was executory and provided that time was of the essence of the contract and the vendor failed to plead and prove that a good and merchantable title was placed in escrow at the time and in the manner provided by the contract.

The case was prepared and tried under R. S., art. 2177.It is uniformly held that where there is an agreed statement of facts which is submitted to the court under art. 2177, that all issues with regard to the pleadings are immaterial.Scott v. Slaughter, 97 Tex. 244, 77 S. W. 949;Harde v. Germania Life Ins. Co.(Tex. Civ. App.)153 S. W. 666;Thaison v. Sanchez, ...