Superior Oil Co. v. Beery, 38528

• Decision Date: 23 February 1953
• Docket Number: No. 38528,38528
• Parties: SUPERIOR OIL CO. v. BEERY.
• Court: Mississippi Supreme Court

Page 115

63 So.2d 115

216 Miss. 664

SUPERIOR OIL CO. v. BEERY.

No. 38528.

Supreme Court of Mississippi.

Feb. 23, 1953.

Suggestion of Error Overruled April 27, 1953.

See 64 So.2d 357.

Wells, Thomas, Wells & Smith, Jackson, Murray Christian, W. B. Wagner, Houston, Tex., for appellant.

Hall & Callender, Columbia, Livingston & Livingston, Prentiss, for appellee.

Green, Green & Cheney, Jackson, amicus curiae.

McGEHEE, Chief Justice.

This is a suit in equity wherein the complainant, Roy Beery, obtained a decree for the cancellation of an oil, gas and mineral lease held by the defendant, Superior Oil Company, as a cloud upon his title to a 15/50th mineral interest in a 50-acre tract of land included in the 320-acre gas drilling Unit No. 39 of the Gwinville Gas Field in Jefferson Davis and Simpson Counties. The principal basis of the suit is that the ten-year primary term of the lease thereon had expired by its terms on December 29, 1949, and it is contended that there had been no production from said 50-acre tract of land thereunder. The decree also awarded unto the complainant the sum of $6,120.87, which represents 8/8ths instead of 1/8th of 15/320ths of the market value of the gas produced from Superior's Dale Well No. 1 on adjacent land in said Gas Drilling Unit No. 39, from the date of the first commercial production from the unit well on February 1, 1947, through November 30, 1950, less taxes and less 15/320ths of the cost of drilling, completing, equipping and operating said well during such period, as located on the adjacent tract of land belonging to I. F. Dale in the 320-acre gas drilling unit.

The oil, gas and mineral lease in question was executed on December 29, 1939, by Bruce Walker and wife to John D. Gholson on this 50-acre tract in which the appellee Roy Beery now owns the 15/50th mineral interest, and the lease was transferred and assigned by Gholson during the year 1940 to the appellant, Superior Oil Company. Thereafter, on June 26, 1944, Bruce Walker and wife conveyed unto the appellee the said 15/50ths mineral interest in their 50-acre tract of land, subject to the outstanding oil, gas and mineral lease then held by the appellant.

The appellant's lease provides that 'This lease shall be for a term of ten years from this date (called 'primary term') and as long thereafter as oil, gas or other mineral is produced from said land hereunder.'

It will be observed from a reading of the foregoing provision in the lease that there is no ambiguity therein. The primary term of the lease is stated in plain and unequivocal language. It therefore becomes unnecessary for the Court to resort to any contemporaneous construction thereof by the parties and to their subsequent conduct in regard to this provision of the contract or to the conduct of the lessee in its subsequent dealings with the appellee Beery. In the absence of ambiguity, we must apply the language of the provision in the contract as written and as agreed upon by the parties thereto, subject to the applicable statutes for the conservation of oil and gas and the orders, rules and regulations of the State Oil & Gas Board, promulgated and adopted pursuant to such statutes.

The appellant's lease itself did not contain a pooling or force majeure clause. It was obtained of course subject to the police powers conferred upon the State Oil & Gas Board by Chapters 117, Laws of 1932, and 305, Laws of 1936, as was likewise the mineral deed from Bruce Walker and wife to the appellee, the lease having been executed during the year 1939 and the mineral deed in 1944, prior to the passage of Chapter 256, Laws of 1948.

The appellee sued specifically for the value of 1/8th of 15/320ths of the gas produced from the Dale well from the time it came into commercial production on February 1, 1947, until December 29, 1949, the date on which the lease was to expire by its terms, and for 8/8ths of the gas produced by said well thereafter prior to the trial. However, the amended bill of complaint contained a general prayer for the award of such damages as the court should find the complainant was entitled to recover. The trial court, however, awarded to the complainant 8/8ths of 15/320ths of the market value of the gas produced by the unit well on Dale's land on the basis that the 15/50ths of the 50-acre tract bears to the area of the 320-acre gas drilling unit from the time commercial production began therefrom, upon the theory that the law of co-tenancy was applicable to the situation since it was alleged that the gas had been produced from the unit well on the Dale tract under and by virtue of the authority of the pooling agreement signed by the co-tenants of the appellee in the 50-acre tract, who owned the remaining 35/50ths mineral interest therein, executed on January 28, 1948, and March 25, 1948, subsequent to the granting of the permit to drill the Dale well, the filing and approval of the plat or map of the 320-acre gas drilling Unit No. 39, the pooling of the leases by the owners thereof pursuant to the orders of the Board of August 11, 1947, and September 11, 1947, and the granting and allocation of the allowables on December 9, 1947, effective December 26, 1947.

Although the appellee sued specifically for the market value of 1/8th of the royalty on the basis of his mineral acreage in the 320-acre unit, prior to the expiration of the primary term of the lease and for 8/8ths of such value thereafter, he predicates his right to recovery upon one of three stated grounds: (1) that he was entitled to recover on the ground that the appellant, as lessee of the 50-acre tract, had violated its duty under its lease not to impair the value thereof, in that it had drained, and is still draining, gas from the 50-acre tract through the unit well on the Dale tract; (2) that the lessee falsely, fraudulently, wrongfully and unlawfully represented to the State Oil & Gas Board that all of the lands proposed to be included in gas drilling Unit No. 39 had been lawfully pooled, and that the lessee thus obtained a full gas allowable on the 320 acres, including the 50-acre tract in question; and (3) that he is entitled to the recovery sued for under the law of co-tenancy for the reason that Bruce Walker and his several vendees (other than his vendee Beery) of mineral interests in the 50-acre tract had executed the amendments to the lease of the appellant hereinbefore mentioned, on January 28, 1948, and March 25, 1948, whereby they authorized the said lessee to pool this lease with the other lessees in the 320-acre unit and to pool their undivided 35/50ths of the minerals under the 50-acre tract with those of other mineral owners and lessees in the drilling unit, and that it was pursuant to this authority that the appellant operated the unit well, obtained the allowables therefor and converted to its own use the appellee's rightful portion of the production of gas from the unit well.

As to the first contention, the only assumed obligation found in the lease whereby the lessee expressly agreed to protect the rights of the appellee and his co-tenants in the leased premises, that is to say the 50-acre tract, from drainage, is in the following words: 'In the event a well or wells producing oil or gas in paying quantities should be brought in on adjacent land and within 150 feet of and draining the leased premises, Lessee agrees to drill such offset wells as a reasonably prudent operator would drill under the same or similar circumstances.'

The Dale well was drilled at a distance of approximately 1,000 feet from the 50-acre tract in question which is situated in the SW 1/4 of Section 28, and it would seem that no obligation implied by law to protect the leased premises from drainage was violated where the same lessee also held a lease on the Dale tract and drilled the well thereon under the express authority of the Dale lease, and where under the conservation laws of the State, subject to which the appellee had purchased his mineral interest, the lessee of the 50-acre tract was prohibited from drilling an offset well thereon. In other words, since no express provision of the lease from Walker to Gholson was violated, it would seem that there would be no liability on the first theory of the amended bill of complaint, since the obligation implied by law to protect against drainage is inapplicable where the lawful rules and regulations of the State Oil & Gas Board for the conservation of oil and gas are complied with.

As to the second theory of liability relied on, it was necessary that the lessee who drilled the unit well should obtain an allowable for the entire 320 acres embraced in the unit since the lessee would become liable to all of the owners of the respective tracts therein for their portion of the gas produced, on the basis of the allowable for all of the land in the unit on an acreage basis. Then, too, the issue of fraud and misrepresentation in regard to the establishment of the unit became foreclosed and res judicata under the decision of Superior Oil Company v. Beery decided on June 9, 1952, and reported in 59 So.2d 689, which involved an appeal to this Court from the Circuit Court of Jefferson Davis County, wherein the validity of the establishment of the gas drilling Unit No. 39 was challenged. Moreover, the appellant asserts, and the record shows that as an oil and gas lessee it is one of the three 'owners' who procured the unitization of the unit area, and then owned the gas under the 50-acre tract subject to the right of the appellee as a mineral vendee of the lessor to collect annual rental under the lease prior to production, to collect a 1/8th royalty from the production of gas from the land on the basis of his 15 mineral acres, and subject to his right to the reversionary interest in fee of the minerals in the event there had been no production from the land under the lease during the primary term thereof.

We shall discuss the third theory of...