Southland Royalty Co. v. Humble Oil & Refining Co.

• Decision Date: 14 May 1952
• Docket Number: No. A-3358,A-3358
• Citation: 151 Tex. 324,249 S.W.2d 914
• Parties: SOUTHLAND ROYALTY CO. et al. v. HUMBLE OIL & REFINING CO. et al.
• Court: Texas Supreme Court

Page 914

249 S.W.2d 914

151 Tex. 324

SOUTHLAND ROYALTY CO. et al. v. HUMBLE OIL & REFINING CO. et al.

No. A-3358.

Supreme Court of Texas.

May 14, 1952.

Rehearing Denied July 2, 1952.

R. M. Coleman and Ben G. Smith, Fort Worth, Robertson, Jackson, Payne, Lancaster & Walker, Dallas, for petitioners.

Felix A. Raymer, Houston, G. R. Pate, Fort Worth, Jones, Hardie, Grambling & Howell, El Paso, for respondents.

CALVERT, Justice.

Petitioners Southland Royalty Company and Earl Sneed prevailed in the trial court in their suit against Humble Oil & Refining Company and others in which they sought a declaratory judgment, an accounting and a money judgment. The El Paso Court of Civil Appeals reversed the judgment of the trial court and rendered judgment for the respondents. One of the Justices dissented. 244 S.W.2d 249.

The crucial question is involved in the controversy made the basis of the declaratory judgment phase of the case, petitioners' right to a money judgment hinging on a favorable determination of that question. The question arises out of the following undisputed factual background.

On April 2, 1925, L. P. Powell and wife, being then the owners of a section of land in the form of a square, conveyed one-half of the minerals in the South one-half (S 1/2) (320 acres) to one J. H. Youngmeyer. On August 13, 1925, the Powells conveyed to Southland one-half of the minerals in the Northwest quarter (NW 1/4) (160 acres) and in the Northeast quarter (NE 1/4) of the Southwest quarter (SW 1/4) (40 acres), the grant being limited to a period of twenty years from the date of the deed 'and as long thereafter as oil, gas or other minerals are produced from said land.' In 1926 Southland sold a 1/32nd interest in the minerals in these tracts and this interest came in due course to be owned by Sneed. On June 22, 1932, the Powells, Youngmeyer, Southland, Sneed's predecessor in title and others owning an interest therein through Youngmeyer jointly executed to Gulf Production Company a general mineral lease on the 160 and 40 acre tracts in which Southland owned a mineral interest and on the north 50 acres of the West one-half (W 1/2) of the Southwest quarter (SW 1/4).

On October 17, 1932, Powell and wife conveyed to Humble all mineral rights owned by them in the section, including all 'reversionary' rights, one-half of which thereafter were conveyed by Humble to Continental Oil Company. To simplify our discussion we shall treat the facts as though at the time of this lease and at the time of suit the minerals in the 160 acre tract were owned one-half by the Powells and one-half by Southland, the minerals in the 40 acre tract were owned one-half by Youngmeyer and one-half by Southland and the minerals in the 50 acre tract were owned one-half by the Powells and one-half by Youngmeyer. Gulf assigned its lease to a depth of 3000 feet to Garrett M. Smith who completed two producing wells on the 50 acre tract in 1941. No wells were drilled on either the 160 acre tract or the 40 acre tract in which Southland owned a mineral interest until after the expiration of twenty years from the date of the deed from the Powells to Southland. A plat of the land involved will be found in the opinion of the Court of Civil Appeals, 244 S.W.2d 251.

Respondents have admitted that if the decisions in Parker v. Parker, Tex.Civ.App., 144 S.W.2d 303 (writ refused) and French v. George, Tex.Civ.App., 159 S.W.2d 566 (writ refused) are to be followed the lease executed by the Powells, Southland and Youngmeyer had the effect of unitizing the land therein described for development and production purposes so that, at least for the twenty year period from the date of the Southland deed, Southland, Powell and Youngmeyer were entitled to share in the royalties derived from the two wells on the 50 acre tract in the proportion which their respective acreage interests bore to the total acreage leased. In accordance with this view Humble, as purchaser of the oil produced from the two wells, has paid to Southland its proportionate part of the royalties from the beginning of production to August 13, 1945. Humble contends, however, that the mineral estate owned by Southland terminated at the end of twenty years because there was no production of oil, gas or other minerals from a well located on the 200 acres in which Southland owned an interest; it denies that Southland is entitled to any further payments and contends that the portion of the royalties therefore paid to Southland belonged, after the expiration of the twenty year period, to the owner of the reversion. Southland, on the other hand, contends that the limitation in the mineral deed has been modified or satisfied and that production from the wells on the 50 acre tract operates to continue in force Southland's one-half mineral interest in the 160 and the 40 acre tracts with the right to a proportionate participation in all royalties from wells on any of said tracts during the life of the lease. These rival contentions form the basis of the controversy which the trial court was asked to resolve by declaratory judgment.

The trial court resolved the controversy in favor of Southland, concluding that as between the lessors the lease to Gulf operated as a modification of the mineral deed from...