Texaco, Inc. v. Pigott

• Decision Date: 30 September 1964
• Docket Number: Civ. A. No. 1759.
• Parties: TEXACO, INC. v. Junior PIGOTT et al.
• Court: U.S. District Court — Southern District of Mississippi

235 F. Supp. 458

TEXACO, INC. v. Junior PIGOTT et al.

Civ. A. No. 1759.

United States District Court S. D. Mississippi, Hattiesburg Division.

September 30, 1964.

COPYRIGHT MATERIAL OMITTED

Bernard Callender, of Hall, Callender & Dantin, Columbia, Miss., for plaintiff.

Garner W. Green, of Green, Green & Cheney, Jackson, Miss., Breed O. Mounger, Tylertown, Miss., Lemuel O. Smith, Jr., Forrest B. Jackson, Jackson, Miss., for defendants.

MIZE, District Judge.

This intricate action grows out of an interpleader suit filed pursuant to 28 U.S.C.A. § 1335 presenting the question of who is entitled to an overriding royalty of 1/8 of 8/8 paid into the Court by Texaco Inc.

The parties are Mary Crawford Swearingen Enochs, Martha Anne Enochs Williams, Mary Crawford Enochs Horne, J. L. Enochs, Sr., Sarah H. Enochs, Harriet L. Enochs, J. L. Enochs, Jr., George H. Enochs, Edgar L. Enochs, Katye E. Leggett, Jean L. Enochs, Iddo Lampton Enochs, Mary Jane Enochs Howell, P. H. Enochs, Jr., Edgar Earle Enochs, Isabelle Thompson Flowers, Margaret Flowers Smith, Edwina Flowers Vauclain, Edith Hill Enochs Hamilton, Ann Enochs Godwin, Dorothy Enochs Hardy, Edith Enochs Jones, Emma Enochs Stockett, Lucy Enochs Robinson, Lucy Robinson Hovious, Ida Mitchell Robinson Wickham, John W. Robinson, Jr., Fielding B. Robinson, Margaret Catching Robinson, Frances Wortman Mann, Lamar Enochs Ramsay, Mildred Ramsay Kind, and Wesley Merel Mann, Jr., hereinafter referred to as the "Fernwood Claimants" and Junior Pigott, Viola Pigott and W. H. Watkins, hereinafter referred to as the "Walthall Claimants."

The case is here on a Motion for Summary Judgment on behalf of the Fernwood Claimants and on a Cross Motion for Summary Judgment on behalf of the Walthall Claimants. Both claimants allege in their respective motions that there is no issue of fact.

On November 30, 1927, the Fernwood Lumber Company executed a standard oil and gas lease covering the SE¼ of SE¼ S8, T2n, R12E, Walthall County, Mississippi and other lands to P. H. Enochs, Trustee, who executed a declaration of trust in favor of the Fernwood Claimants. The basic lease made no provisions as to either shut-in gas or pooling. Thereunder the Company reserved the standard royalty of 1/8 of the gas (gas alone is being produced).¹ At the time of this oil and gas lease, the Fernwood Lumber Company was the owner in fee. The Company was a Mississippi Corporation and the stock therein was divided among the I. C. Enochs family — Enochs and Flowers, Limited, who held 57.21%, originally owned by I. C. Enochs; the J. L. Enochs family (he originally owned 17.54%); and P. H. Enochs family, who owned 25.25% so that 100% of the stock was held in the Enochs families.

On November 30, 1939, Fernwood Lumber Company by P. H. Enochs, Vice

President, executed and delivered to Collie Pigott, a warranty deed conveying the SE¼ of SE¼ of S8, T2N, R12W, Walthall County, Mississippi.²

On January 25, 1946, Collie Pigott and wife, Onida Pigott conveyed to their son, Junior Pigott, by a warranty deed the same land Fernwood Lumber Company some six years earlier had conveyed to Collie Pigott.³

On July 4, 1960, Junior Pigott and wife, Viola Pigott conveyed to W. H. Watkins an undivided 1/16 of 1/8 overriding royalty interest.

The oil and gas lease Fernwood Lumber Company executed to P. H. Enochs, Trustee, in 1927 had a primary term of 25 years.⁴ On its expiration date of November 30th, 1952, if no producing well had been obtained, the lessee, under the provisions could perpetually keep said lease in force by paying the lessor, or its heirs or assigns a certain sum.⁵

Prior to the expiration date, the delay rentals were paid in order that the lease would be continued in effect. Delay rentals have been paid in accordance with the provisions of the lease for every year from 1953 to 1961 when a well was actually produced.

In 1955, P. H. Enochs, Trustee, died. On July 12, 1955, there was executed an assignment and Third Supplemental Power of Attorney wherein Garner W. Green, Trustee, and the heirs at law and devisees of P. H. Enochs, Trustee, then deceased, constituted the Mechanics-State Bank of McComb the trustee.⁶

On April 30, 1957, the Mechanics-State Bank, Trustee, assigned and leased to Homer Lynn and others the rights under the 1927 Fernwood Lumber Company-P. H. Enochs, Trustee, Lease, reserving 1/8 of 8/8 overriding royalties interest. Thereafter, this lease passed from Homer Lynn by mesne conveyances to Seaboard Oil Company. Seaboard approached Junior Pigott for a ratification and adoption, independently of the Fernwood Claimants and without their knowledge. On November 20, 1957, Junior Pigott and wife, Viola Pigott, executed a ratification to Seaboard.⁷ Seaboard later assigned the rights to Texaco. Texaco has been since February 1962, producing gas from said land by virtue of a 320 gas unit established pursuant to an amendment to said lease providing for pooling.

The Fernwood Claimants first contend that when the Fernwood Lumber Company in 1927 conveyed the mineral lease to Enochs, Trustee, the Trust owned the lease under a general warranty being obligated to pay the Company only 1/8 of 8/8 royalty interest. While being a determinable fee, the lease was held in trust for specific cestuis qui trustents, the Fernwood Claimants. Under this trust the Trustee could not convey the lease and even if he had, the grantee, or assignee, would have taken in trust for the Fernwood Claimants. Second, when Collie Pigott purchased from Fernwood Lumber Company, that Company owned the land subject to the Trust lease on oil and gas. The lessee, Enochs, Trustee, had the right to work the same to exhaustion upon payment of the 1/8 royalty and if the gas was exhausted, there could be no reverter of gas to anyone. Thirdly, the trust, being in possession of and owning the entire gas under the tract, subject to an obligation of development and of paying 1/8 royalty, had a plenary right to assign the lease and did so assign to Texaco. In consideration of this assignment, Texaco agreed that 1/8 of 8/8 had never passed but had remained the property of the Trust, Fernwood Claimants further contend, as a fourth point, that Pigott's ratification vouchsafed to Texaco, lessee-assignee, all the gas subject to the obligation to pay Pigott, as assignee, the gas royalty specifically reserved. Finally, the Fernwood Claimants argue that gas production having been completed and the 1/8 royalty therefrom being paid to Pigott, there was nothing possessed by Fernwood Lumber Company which could pass to the Walthalls until the lease expired.

In opposition the Walthall Claimants argue first that the warranty deed from the lumber company to Collie Pigott was prepared by the grantor and should be construed most strongly against the grantor and its successors in interest, the Fernwood Claimants, who are in privy of estate with the grantor. Secondly they contend that the 1/8 of 8/8 overriding royalty reserved in the assignment and lease from the Fernwood Claimants to Homer Lynn is a royalty interest as conveyed in the deed to Collie Pigott. The Walthall Claimants contend in conclusion that the 1/8 of 8/8 overriding royalty interest claimed by the Fernwood Claimants is an interest subsequently acquired by them as successors in interest to their predecessor in title, Fernwood Lumber Company, who had conveyed by warranty deed all royalties produced from the land conveyed. Thus the Fernwood Claimants are estopped from asserting this subsequently acquired adverse title to that which had been conveyed by their predecessor of title.

The validity of each contention depends on the effect of the following language in the deed from the Fernwood Lumber Company to Collie Pigott:

"Purchaser takes the property hereby conveyed subject to and charged with the Oil and Gas Lease thereon. Vendor assigns to Purchaser all royalties which may arise from production from said property hereby conveyed." (Emphasis added)

Although the Walthall Claimants' first contention is valid, it does not help their case.

While it is well settled that when a party in interest has drawn an instrument, such instrument must be construed most strongly against the drawer, it is likewise well settled that when the intention of the deed is plain and effect can be given to all the provisions, rules of construction cannot be involved.⁸ It is doubtlessly the court's duty to construe an instrument as it is written.⁹

The words "subject to" mean "subservient to" or "limited by" as the Walthall Claimants contend. However, this is as far as the court can follow the Walthall argument. An exception is always some part of the estate not granted at all. What does the sentence "Purchaser takes the property hereby conveyed subject to and charged with the Oil and Gas Lease thereon" mean? (emphasis added) Obviously, it means that the deed was subject not only to the estate granted by the lease but also to the exception retained by the lease.

"Subject to" as used in the deed referring to an earlier conveyance or lease means that title passed in the subsequent instrument was "subject to" to earlier lease. These words are words of qualification showing the grantor's intent not to grant an absolute title.¹⁰

The lease stated that the lessor, grantor here, had, as part of the consideration, bargained that the lessee would pay 1/8 of all the gas produced from said property. This 1/8 interest is a royalty interest, which is an interest in real property, entitling the royalty owner to a share in the production of oil, gas, or other minerals therefrom.¹¹ When the oil and/or gas is produced such interest is delivered to the land owner free of any cost but the term "royalty" does not include perpetual interest therein.

It has been held in Sykes v. Austin,¹² that such a conveyance merely conveyed the 1/8 royalty, if and when, and as produced, since clearly no conveyance of oil or gas in place was attempted, nor were any...