Sun Oil Co. (Delaware) v. Madeley
Decision Date | 20 November 1980 |
Docket Number | No. 8585,8585 |
Citation | 610 S.W.2d 798 |
Parties | SUN OIL COMPANY (DELAWARE), Appellant, v. Martha Foster MADELEY et al, Appellees. |
Court | Texas Court of Appeals |
Robert C. McGinnis, Austin, for appellant.
William R. Choate, Houston, for appellees.
Plaintiffs below are successors in title to W. N. Foster and Keystone Mills Company, who as lessors entered into an oil, gas, and mineral lease and operating agreement with Sun Oil Company, as lessee, and defendant below, covering 640 acres of land in the Bricker Survey of Montgomery County, Texas. Plaintiffs brought suit for a declaratory judgment praying that such agreement required defendant to account to plaintiffs (as derivative lessors) for the royalties therein provided, and also for one-half of the seven-eighths working interest in oil, condensate, and gas (including casinghead gas).
Both sides filed motions for summary judgment; the trial court granted plaintiffs a partial summary judgment, from which order defendant perfects this appeal. In this opinion, the parties will be referred to as appellant and appellees.
At issue is the interpretation of Paragraph V of the 1932 lease which reads as follows:
"In addition to the royalty provided for in the preceding paragraph, Lessee shall deliver to Lessors in the proportions set out above, one-half of the oil accruing to the seven-eights working interests from that produced and saved from said land...."
From the date of the lease until August 1977, appellant paid to appellees not only one-half royalty of the working interest in oil (after deducting certain costs) but also one-half of the working interests on gas, casinghead gas, and condensate.
In 1977 appellant drilled deeper to new "horizons" on the leased land, discovered additional gas, and then sent the following letter (dated August 31, 1977) to appellees:
Appellant contends the agreement clearly limits appellees' working interest to "oil"; appellees say when you consider the entire instrument, how the parties themselves interpreted it, and the amendments thereto, the court's interpretation was correct. Appellant said in the trial court that its prior (over forty years) payments were a "gratuity," or "mistake."
Recently our Supreme Court said in Harris v. Rowe, 593 S.W.2d 303, 306 (Tex.1979):
The same decision, Harris v. Rowe, supra at 306, wrote:
And in Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 157 (1951), Judge Calvert in writing for the Court said:
See also Woods v. Sims, 154 Tex. 59, 273 S.W.2d 617 (1954); McMahon v. Christmann, 157 Tex. 403, 303 S.W.2d 341 (1957); City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515 (Tex.1968); 2 C. McCormick & R. Ray, Texas Law of Evidence § 1681 (3rd ed. 1980); Zeppa v. Houston Oil Co. of Texas, 113 S.W.2d 612, 615 (Tex.Civ.App. Texarkana 1938, writ ref'd). With these principles in focus, we shall try to construe this agreement.
Surrounding Circumstances : The land leased by appellant in this agreement was adjacent to a proven field, the Montgomery field. This somewhat unusual and generous agreement was negotiated by W. N. Foster, a Conroe attorney, with awareness of its value. At the time of the original agreement, condensate and gas (including casinghead gas) had only a fraction of modern values. See Exxon Corporation v. Jefferson Land Co., Inc., 573 S.W.2d 829 (Tex.Civ.App. Beaumont), writ ref'd per curiam, --- S.W.2d ---- (Tex.1980) ( ).
Interpretation by and Conduct of the Parties : As previously stated in this opinion, from the time of execution of the original lease in 1932, until the letter of August In December 1932, a memo from its general agent to one of Sun's lawyers was consistent with the trial court's interpretation of the agreement, and more importantly a title opinion of another of Sun's attorneys in its legal department, dated August 8, 1935, reflected ownership of casinghead gas as follows:
1977, set forth above, appellant paid appellees one-half (1/2) royalty of the seven-eighths (7/8) working interest in not only the oil produced, but also the condensate and gas, including casinghead gas.
"Sun Oil Company, 21/48 W.I W.N. Foster, 14/48 W.I Keystone Mills, 7/48 W.I W.N. Foster, 1/12 R.I Keystone Mills, 1/24 R.I."
On December 26, 1962, another attorney in Sun's legal department wrote an inter-office memorandum to the manager, Gulf Coast Division of Sun, as follows:
Entire writing : Paragraph VIII provides, inter alia, that the costs of drilling were to be borne solely by appellant and that the cost and expense of producing and lifting the oil, including a six percent overhead factor, was to be charged to a joint account of lessor and lessees. The following clause is present in this paragraph:
"... and said account shall also reflect all receipts and revenues for oil, gas and other minerals produced and saved hereunder." (Emphasis supplied.)
Paragraph XVI, dealing with ad valorem taxes, provides:
(Emphasis supplied.)
And perhaps most important of all in construing the entire writing to find the intent of the parties, in 1935 the parties amended the agreement. Paragraph IV of the instrument was amended to read:
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