Steger v. Muenster Drilling Co., Inc.

• Decision Date: 11 December 2003
• Docket Number: No. 2-02-228-CV.,2-02-228-CV.
• Citation: 134 S.W.3d 359
• Parties: Marjorie Maddox STEGER, William L. ("Bill") Steger, Jr., and John Marshal Steger, Appellants, v. MUENSTER DRILLING COMPANY, INC., David Keith Miller, Wayne Porter, Chris A. Hess, Doyle E. Hess, Frank F. Hess, Angelo B. Nasche, and Randy Wimmer and Wife, Linda Wimmer, Appellees.
• Court: Texas Court of Appeals

134 S.W.3d 359

Marjorie Maddox STEGER, William L. ("Bill") Steger, Jr., and John Marshal Steger, Appellants, v. MUENSTER DRILLING COMPANY, INC., David Keith Miller, Wayne Porter, Chris A. Hess, Doyle E. Hess, Frank F. Hess, Angelo B. Nasche, and Randy Wimmer and Wife, Linda Wimmer, Appellees.

No. 2-02-228-CV.

Court of Appeals of Texas, Fort Worth.

December 11, 2003.

Rehearing Overruled March 18, 2004.

W.T. Skip Leake, Arlington, TX, for Appellants.

Gary P. Patton, Addison, TX, Law, Snakard & Gambill and Dabney D. Bassel, Fort Worth, TX, Gibson, Hotchkiss, Roach & Davenport and Marvin H. Brown, Wichita Falls, TX, Jack A. McGaughey, Nacona, TX, for Appellees.

Panel A: CAYCE, C.J.; HOLMAN and GARDNER, JJ.

OPINION

JOHN CAYCE, Chief Justice.

I. Introduction

In this will construction case, Marjorie Maddox Steger (Mrs. Steger) and her two sons, William L. ("Bill") Steger, Jr. and John Marshal Steger (the Steger sons), appeal the trial court's judgment that appellees¹ are the owners of the working interests in certain oil and gas leases in Montague County, Texas. Because we conclude that the trial court properly construed the will at issue with respect to Mrs. Steger's claims and that the Steger sons' claims are barred by res judicata, we will affirm the trial court's judgment.

II. Background Facts and Procedural History

The facts of this case are largely undisputed. Mrs. Steger is the last surviving child of John W. (J.W.) and Carrie T. Maddox, and the Steger sons are her only children. From the 1920s until his death in 1933, J.W. Maddox and his wife, Carrie T. Maddox, owned as their community property approximately 10,646 acres of ranch lands in Montague and Clay Counties, Texas. The Maddoxes' property included the following lands in Montague County:

• 334 acres out of the John Chambliss Survey, A-123, subject to an undivided one-half mineral interest in 50 acres of this tract held by Aaron Cohen (Tract 1);

• All of the C.W. Thompson Survey, A-741, containing 480 acres, more or less, save and except 160 acres of land in the form of a square out of the northwest corner of the survey (Tract 2);

• All of the H.S. Arnold Survey, A-5, containing 320 acres, more or less, subject to an undivided one-half mineral interest in 100 acres of this tract, more or less, held by N.R. Beal (exclusive of the right to receive cash bonuses and delay rentals) (Tract 3);

• 45 acres, more or less, out of the S. Little Survey, A-417, and the W.P. Zuber Survey, A-887 (Tract 4).

In the mid-1920s, the North Nocona Oil Field was discovered and extensively developed. The North Nocona Oil Field has been prolific and is still producing today. Tracts 1-3 of the Maddoxes' land are in the middle of this oil field.

During his lifetime, J.W. Maddox leased all of Tracts 1-3 and other lands for oil and gas purposes. He made, as lessor, at least twenty-six oil and gas leases covering various parts of these lands, all of which contained a fixed primary term of years or months and a secondary term of as long as oil or gas is produced in paying quantities. Carrie Maddox was also a lessor on most of these leases, and she had personal knowledge of their terms and provisions.

In 1931, J.W. Maddox hired an attorney to prepare his will. By that time, approximately 175 oil or gas wells had been drilled on the Maddoxes' lands in the North Nocona Oil Field, including more than 150 producing wells. In 1931, the producing wells produced approximately 33,075 barrels of oil per month. The royalties J.W. and Carrie Maddox received in 1930 were between $2,460 and $4,920 per month.

When J.W. Maddox executed his will in July 1931, he was seventy-one years old, and Carrie was fifty-five. J.W. and Carrie had ten children, the youngest of whom— Marjorie (now Mrs. Steger) and Martha Lou—were sixteen and thirteen years old, respectively.

J.W. Maddox died on May 26, 1933, and his will was admitted to probate in Montague County. Carrie served as the independent executrix of J.W.'s estate. Except for cash bequests that are not relevant to this case, J.W.'s will bequeathed to Carrie—as long as she remained unmarried—a life estate in all of his estate, i.e., his one-half interest in their community property (the J.W. Maddox community interest). In the fourth and sixth paragraphs of his will, J.W. gave Carrie the following powers and authority:

• the possession, management, control, and use of the residue of J.W.'s real and personal property during her life;

• full power and authority to manage, control, and lease for all purposes the real and personal property given during her lifetime;

• full power and authority to extract therefrom all oil, gas, and other minerals during her lifetime;

• power and authority to manage and control jointly with her estate all other property; and

• power and authority to collect and have the rents and revenues arising from the entire estate during her life.²

J.W.'s will also bequeathed to each of his ten children a secondary life estate, following Carrie's death, in specific parts of the J.W. Maddox community interest. To Martha Lou, he gave a secondary life estate in his community interest in Tracts 1-4 with a fee simple remainder interest to her bodily heirs, subject to a 3/4 royalty interest in favor of J.W.'s other nine children. If Martha Lou died without children, however, the fee simple interest passed to J.W.'s surviving children, share and share alike. Regarding Martha Lou's life estate, in the eighth and nineteenth paragraphs of his will, J.W. gave her the following powers and authority:

• to collect rents and revenues;

• to make leases of whatever nature on the real estate;

• to extract therefrom all oil, gas, and/or other minerals over which she had control during her lifetime.³

After J.W.'s death, Carrie, who remained unmarried, owned a life estate in the J.W. Maddox community interest in Tracts 1-4 and a fee estate in her one-half community property interest in these tracts. Also after J.W.'s death, Carrie leased various parts of Tracts 1-3 and other Maddox lands for oil and gas purposes. She made, as lessor, at least forty-two oil and gas leases, each of which—like J.W.'s leases—contained a fixed primary term of years or months and a secondary term of as long as oil or gas is produced in paying quantities. No other beneficiary under J.W.'s will joined Carrie as lessor or separately ratified these leases. However, no Maddox heir, including Mrs. Steger, ever questioned Carrie's authority as life tenant to make oil and gas leases. Instead, Mrs. Steger and her brothers and sisters "just let it alone," and "grabbed those checks and ran ... because it was okay."

By 1959, Martha Lou was married to Dan Hughes, Jr. In 1959, Carrie, as lessor, made two oil and gas leases, known as the J.W. Maddox No. 2 Lease and the J.W. Maddox No. 3 Lease, to Dan. The Maddox No. 2 Lease covered 50 acres out of Tract 1, and the Maddox No. 3 Lease covered 257 acres out of Tract 1, less the 50 acres in the Maddox No. 2 Lease. Both Leases were for a primary term of one year or more and a secondary term of as long thereafter as oil or gas was produced in paying quantities. Oil has been continuously produced in paying quantities from both Leases since 1959.

Carrie Maddox died in January 1960. After Carrie's death, no Maddox heir, including Martha Lou or Mrs. Steger, questioned the continuing validity of the Maddox No. 2 and No. 3 Leases until Mrs. Steger commenced the underlying litigation in 1996.

In her will, Carrie devised to Martha Lou in fee simple all of Carrie's undivided one-half community property interest in Tracts 1-4, subject to a devise of 9/10 of all the production bonuses and oil and gas royalties that Carrie owned at the time of her death to Martha Lou's siblings or their children. Carrie also devised to Martha Lou the exclusive right and power to execute oil and gas leases on Carrie's interest in Tracts 1-4.

In March 1977, Martha Lou, as lessor, made an oil and gas lease known as the J.W. Maddox No. 4 Lease to Dan Hughes, Jr. The Maddox No. 4 Lease covered 80 acres of land out of Tracts 2 and 3. None of J.W. Maddox's will beneficiaries joined this Lease as lessor or separately ratified the Lease; however, they did not question Martha Lou's authority, as life tenant under J.W.'s will, to make the Lease. The Lease's primary term was for twenty years, and its secondary term was for as long thereafter as oil or gas was produced in paying quantities. Oil has been continuously produced in paying quantities from the Maddox No. 4 Lease from October 1977 to the present.

Dan Hughes, Jr. owned, operated, and produced the Maddox No. 2 and 3 Leases from 1959, and the Maddox No. 4 Lease from 1977, until his death in May 1992. After his death, Dan's will was admitted to probate in Dallas County, Texas. In his will, Dan bequeathed to Martha Lou his undivided one-half community property interest in the J.W. Maddox No. 2-4 Leases. Martha Lou served as independent executor of Dan's estate until her death, at which time L. Durell Hughes began serving as independent executor.

Martha Lou died in May 1993, and her will was admitted to probate in Dallas County. No child was ever born to or adopted by Martha Lou. L. Durell Hughes and Betty Wilkins served as independent co-executors of Martha Lou's estate. In her will, Martha Lou directed that certain of her properties be sold and the proceeds used to pay her debts, expenses of estate administration, and federal and estate taxes, including "[a]ll oil interests that I own, except those oil interests that I inherited from my mother, Carrie T. Maddox, deceased." Martha Lou bequeathed all of the oil, gas, and mineral interests that she had inherited from Carrie to the Steger sons.

In September 1994, Muenster Drilling Company, Inc. purchased from the co-executors of Martha Lou's estate the J.W. Maddox No. 2-4 Leases—which cover only acreage from Tracts 1-3—and all personal property and...