Shuttle Oil Corp. v. Hamon, 7311

• Decision Date: 24 February 1972
• Docket Number: No. 7311,7311
• Citation: 477 S.W.2d 701
• Parties: SHUTTLE OIL CORPORATION et al., Appellants, v. Jake L. HAMON et al., Appellees.
• Court: Texas Court of Appeals

Page 701

477 S.W.2d 701

SHUTTLE OIL CORPORATION et al., Appellants, v. Jake L. HAMON et al., Appellees.

No. 7311.

Court of Civil Appeals of Texas,

Beaumont.

Feb. 24, 1972.

Rehearing Denied March 16, 1972.

Underwood, Wilson, Sutton, Heare & Berry, Amarillo, for appellants.

Roach & Robertson, Dallas, for appellees.

STEPHENSON, Justice.

Shuttle Oil Corporation and Rip C. Underwood, as plaintiffs, brought this action against Jake L. Hamon, as defendant in trespass to try title to a certain oil, gas and mineral lease, and in the alternative, for a declaratory judgment holding such lease had terminated because of abandonment and for an accounting of the proceeds from the production of oil from such lease after the termination of the assignment. Trial was before the court and judgment was rendered for defendant. There are no findings of fact or conclusions of law. The parties will be referred to here as they were in the trial court.

The facts are somewhat involved and a review is necessary in order to understand the contentions made. Most of the facts are undisputed and are covered by a stipulation entered into by the parties. In 1932, two mineral leases were executed covering a section of land in Duval County, Texas. These two leases have been maintained in full force and effect at all times by production of oil from depths above 3,000 feet below the surface. Such leases, insofar as they cover formations below 3,000 feet from the surface, became vested in the Daube Interests.

This suit concerns the mineral leasehold estate below the 3,000 foot level. It is agreed that the Daube Interests are the common source of title to such estate. In 1952, the Daube Interests assigned such estate below the 3,000 foot level to two individuals and it is under this instrument that defendant makes his claim. A reservation of 1/16 of 7/8 overriding royalty was made in the assignment by the Daube Interests. Such assignment required the drilling of a well upon one of the quarter sections within 120 days to a depth of at least 8,250 feet. The instrument provided that upon failure to comply with this requirement, the assignment would immediately terminate. It further provided that if a second well was not commenced within six months after the completion of the first well, the assignment would terminate as to all of the sections except as to the first quarter section upon which the first well was drilled. Similar provisions were made as to a third and fourth well and the third and fourth quarter sections .

Defendant drilled a well to 9,006 feet within the 120 day period in 1952 upon the southwest quarter of the section and it was completed as a dry hole. Nothing further was done toward drilling other wells and it is agreed the assignment terminated as to the other three quarters. We have in issue before us only the southwest quarter section in which the dry hole was drilled.

In January 1970, plaintiffs acquired from the Daube Interests an assignment of whatever interest they owned in this quarter section. In February 1970, defendant reentered is old hole and completed it as a producer. Defendant did not physically do anything to the well after November 30, 1952 (dry hold completion date), until February 24, 1970 (reentry date).

Plaintiffs' first and primary point of error is that the trial court erred in not holding defendant's interest in the leasehold estate terminated by virtue of an implied limitation requiring use of such estate for the purpose for which it was granted. Plaintiffs argue that there is implied into the assignment under which defendant claims, a special limitation to the effect that the interest conveyed shall endure only so long as it is used for the purpose of exploring for or production of oil, gas and other minerals. This point is overruled.

It must be kept in mind when considering the problems involved in this case, that we have an assignment and not an original lease. There is no provision in this assignment for a fixed term or for a continuation of the assignment only so long as production continues. It expressly provides for termination only for failure to drill the well. It is admitted that the assignment in question contains no express provision requiring the well to be completed for production or that continued production or operation is necessary for perpetuation of the interest assigned.

We have concluded the language used in this assignment, considering the instrument as a whole, indicated the parties intended the defendant be required to do no more than drill a well to the prescribed depth within the prescribed time in order to earn the leasehold interest conveyed in such assignment. There is nothing in the assignment to indicate the express provisions as to drilling did not fully state the duty of the assignee. Gulf Production Co. v. Kishi, 129 Tex. 487, 103 S.W.2d 965 (1937). This conclusion is reached by considering the things said as well as the things not said.

The granting clause in the assignment reads as follows:

'. . . bargain, sell, transfer, assign and convey All of the rights, title and interest of the original lessees and present owners in and to said lease and leasehold estates and rights thereunder insofar as they cover the lands above described, but to depths only below 3,000 feet beneath the surface.' (emphasis added)

The assignment provides for the commencement of a second well within six months after the completion of the first well 'as a dry hole or producer.' If the second well is not so commenced and drilled, the assignment will terminate 'except as to the quarter section upon which the first well has...