Texas Co. v. State
| Decision Date | 30 March 1955 |
| Docket Number | No. A-4724,A-4724 |
| Citation | 281 S.W.2d 83,154 Tex. 494 |
| Parties | The TEXAS COMPANY, Petitioner, v. The STATE of Texas and Duval County Ranch Company, Respondents. |
| Court | Texas Supreme Court |
William E. Loose, Houston, Black & Stayton, John W. Stayton, Austin, and A. W. Walker, Jr., Dallas, for petitioner, The Texas Co.
Jacob S. Floyd and E. G. Lloyd, Jr., Alice, and Fouts, Amerman & Moore, Joseph W. Moore, Houston, for petitioner Duval County Ranch Co.
John Ben Shepperd, Atty. Gen., Phillip Robinson, formerly Asst. Atty. Gen., and Charles D. Mathews, Sp. Asst. Atty. Gen., and John Peace, Sp. Asst. Atty. Gen., for respondent.
The parties to this suit are The State of Texas, The Texas Company, and Duval County Ranch Company. They will be referred to as The State, Texas Company, and Duval.
The instruments out of which this controversy grew were executed by Duval, as grantor, to R. E. Breeding, as grantee, on May 23, 1922, and by Breeding to Texas Company on May 25, 1922. Both instruments conveyed a mineral estate in 16,000 acres of land, 12,000 privately owned in fee and 4,000 in which the minerals were owned by the Public Free School Fund. The instruments were identical except in unimportant particulars. Since it is admitted that Breeding was acting as agent of Texas Company in the transaction we need notice only the material provisions of the Duval-Breeding instrument. It reads:
'Know All Men By These Presents:
'That the Duval County Ranch Company * * * acting herein for itself and as agent and representative of the State of Texas, as provided in Article 59040-16 et seq., of the Complete Texas Statutes of 1920, * * * for and in consideration of the sum of Twenty-eight Thousand and No/100 ($28,000) Dollars cash in hand paid by R. E. Breeding * * * hereby Grants, Bargains, Sells and Conveys, and by these presents does Grant, Sell, Bargain and Convey unto the said R. E. Breeding * * * all the oil, gas and other mineral (whether similar or dissimilar) in and under the following described tracts of land, * * *:
'The following tracts are included in this instrument: (here follows a description of the 16,000 acres of land.)
'And the Grantee shall have the exclusive right to prospect, drill and mine on said land and remove said products therefrom; * * *.
'In the event the Grantee shall produce oil or gas or any other minerals from said tracts of land in paying quantities, then there shall be paid to Grantor, its successors and assigns, a royalty of one-eighth (1/8) of all the oil, gas and other minerals so produced and saved, except as to sulphur the royalty shall be fifty cents (50cents) per ton for each ton mined and marketed. Any royalties due the State hereunder shall be deducted from grantor's royalties.
'It shall be optional with the Grantee to drill or mine or carry on other operations on said tracts of land, or to refrain from doing so wholly or partially at any or all times, both before and after production; it being expressly agreed by the Grantor that the down cash payment recited in this instrument, receipt of which is hereby acknowledged, to Grantor is adequate to compensate and does compensate the Grantor for this right and privilege of Grantee.
'If the estate of either party hereto be assigned the covenants hereof shall extend to the assigns and successive assigns; * * *.
'To Have and To Hold the above described oil, gas and other minerals, and the rights herein granted, all and singular, unto said grantee, his heirs and assigns forever; and the Grantor hereby binds itself its successors and assigns, to warrant and forever defend the same unto said Grantee, his heirs and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof.
'It is expressly understood and agreed that this instrument is to be construed as a conveyance in fee of all the oil, gas and other minerals in and under the above described tracts of land. * * *' 1 Texas Company first obtained production of oil and gas from the public school lands described in the instrument in 1934, and from that date until December 31, 1951, according to an agreed accounting based on Texas Company records, had received gross proceeds from the sale of oil and gas from such lands in the sum of $2,760,467.61. Total expenditures by Texas Company including production costs of $1,740,684.79, a 1/16th royalty of $172,400.50 paid to The State, a net royalty of $162,225.95 paid to Duval and certain bonuses and rentals paid, amounted to $2,093,679.86, leaving a net balance of $666,787.75.
The State sued Texas Company and Duval for title to and possession of the minerals in the four thousand acres of public school land, for cancellation of the mineral conveyances to Breeding and to Texas Company and for recovery of the value of all oil and gas that had been produced and sold from the land, less certain payments theretofore made. Texas Company defended the validity of the conveyances, pleaded estoppel against The State to assert their invalidity, pleaded its good faith development of the property, and by cross-action sought a recovery against Duval for breach of warranty. Duval prayed that it be allowed to retain the 1/16th royalty paid to it by Texas Company, and defended against Texas Company's cross-action.
In a non-jury trial, judgment was entered holding void and cancelling the conveyances to Breeding and Texas Company and vesting title to and right of possession in the minerals in The State, subject to the right to Duval to continue to receive 1/16th of production as damages to its surface estate and subject to Duval's right to continue as agent of The State in executing future leases, awarding The State a recovery against Texas Company of $666,787.75; decreeing to Texas Company a recovery against Duval of $9,940, representing Duval's one-half of the amoung of the cash consideration paid for the conveyance by Texas Company, plus interest, but denying it a recovery of the proceeds of the 1/16th royalty paid Duval, and decreeing that The State should not recover but Duval should retain the proceeds of the 1/16th royalty paid it by Texas Company as damages to its surface estate. The State's motion for recovery from Texas Company of interest on the $666,787.75 in the sum of $278,073.48 was denied. Pursuant to request therefor the trial judge filed findings of fact and conclusions of law. All parties appealed.
The Court of Civil Appeals at San Antonio affirmed the judgment in so far as it cancelled the conveyances and awarded The State a recovery of title to and possession of the mineral estate and a recovery against Texas Company of $666,787.75, and in so far as it awarded Texas Company a recovery of $9,940 against Duval. It reversed the judgment in so far as it denied The State a recovery of interest, before judgment, and rendered judgment therefor against Texas Company in the sum of $278,073.48. It reversed the judgment also in so far as it allowed Duval to retain the proceeds of the 1/16th royalty as damages to its surface estate, severing and remanding this phase of the case for trial to ascertain the actual damages to the surface, not to exceed the value of the 1/16th royalty, such damages, if less than the value of the 1/16th, to be offset against recovery by The State of such 1/16th theretofore paid to and retained by Duval. Chief Justice Murray dissented from this last phase of the judgment. 267 S.W.2d 456.
The position of The State is that the instruments are invalid because they effected a conveyance by deed of an estate in fee simple absolute in the minerals in lands owned by the Public Free School Fund rather than a conveyance by an 'ordinary' oil and gas lease of a determinable fee estate as authorized by the Relinquishment Act. The position of Texas Company is that the court is required to read the provisions and requirements of the Relinquishment Act, Acts 36th Leg., 2nd C.S., ch. 81, p. 249; Art. 5367 et seq., V.A.C.S., into the instrument, and, when read in, the estate conveyed is not a fee simple absolute but a determinable fee.
In determining the validity of the instruments we cannot permit ourselves to be controlled by what appears to us at this hour to be the 'equities' of the case. Inasmuch as the land involved was unproven or 'wild-cat' territory at the time the instruments were executed, we may assume, without doing violence to the record before us, that The State has received substantially the same amount of money it would have received if the instruments had been in the form of an 'ordinary' oil and gas lease, 2 and that a recovery of the value of all oil and gas produced, less the cost of production, may well be in the nature of a 'windfall' for The State. On the other hand, the record clearly reflects that Texas Company knew the instruments were of doubtful validity long before it entered upon development of the land but nevertheless rejected the substitution by Duval of a ten-year paid up lease, preferring to take a chance. Irrespective of the 'equities' the instruments were either valid or invalid when they were executed and their validity must be adjudicated as of that time.
The instrument set out above has all the legal attributes of a deed conveying to the grantee an estate in fee simple absolute in the minerals. See cases cited in the opinion of the Court of Civil Appeals: 267 S.W.2d 460. It is plain and unambiguous on its face. More than that, the parties made certain that, if ambiguous, courts would need search no further than the face of the instrument to find that the parties intended it to be a conveyance of an estate in fee simple absolute by declaring in the closing paragraph that it was expressly understood and agreed that it should be construed to be 'a conveyance in fee of all the oil, gas and other minerals'. And if that expression left the slightest doubt as to the kind of 'fee...
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