Vest v. Exxon Corp.
| Decision Date | 16 January 1985 |
| Docket Number | No. 84-1246,84-1246 |
| Citation | 752 F.2d 959 |
| Parties | Sam VEST and Rex Pigmon, Plaintiffs-Appellees, v. EXXON CORPORATION, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
James R. Stevens, Jr., Houston, Tex., for defendant-appellant.
John Lee, Michael L. Fostel, Alan L. Castetter, Kermit, Tex., for plaintiff-appellees.
Appeal from the United States District Court for the Western District of Texas.
Before GEE, REAVLEY and RANDALL, Circuit Judges.
This appellate record is an interesting, even fascinating, one to read. Not that it presents a challenging legal puzzle, but it does display a predicament and frustration of surface-only landowners when the mineral lessees interfere with the surface use in order to pursue their opportunities and obligations in the extraction of minerals. From the viewpoint of the surface owner when mineral operations are conducted all across his land, interfering constantly with his ranching or farming, the mineral use becomes unreasonable. But the mineral operator who employs the usual and customary methods of the industry views the matter differently; it would be unreasonable for him to give way to grazing animals by not developing the underlying minerals, i.e., by not drilling wells and building roads and power lines and flow lines and tank batteries. The viewpoint of these parties on reasonableness is quite different. Sadly for the surface owner, Texas law, which governs in the present case, implies that a mineral lease gives a large measure of deference to the lessee's view of reasonableness.
Sam Vest and Rex Pigmon, the plaintiffs, are West Texas ranchers, operating on vast acreage that includes the 1440 acres (2 1/4 sections) of present concern; the mineral working interest is owned by defendant Exxon Corporation. Fortunately for everyone except the plaintiffs, this 1440 acres is very rich in oil deposits. Prior to August of 1981 a number of wells were producing from this land, and at that time Exxon decided to undertake this new drilling program.
Plaintiffs and their neighbors have been able to recoup some of their loss due to oil operations on the land by obtaining payment from the operator. Oil companies apparently appreciate the viewpoint of the surface owners and, in order to avoid lawsuits as well as to obtain the cooperation of landowners, often make these payments--whether or not there is any legal obligation to do so. These plaintiffs had their own "Price Schedule For Right Of Way And Damages," which set a certain price for each wellsite, per rod of roadway and flow line for tank batteries, etc. Plaintiffs had negotiated with Exxon in the past from a basis of a similar demand or schedule, but in 1981 they demanded strict payment on the basis of the schedule. When Exxon refused to comply, the plaintiffs sued. The plaintiff Vest, who had not discussed the matter with the Exxon representative, testified that he expected payment according to that schedule or he would not have allowed the wells to be drilled. He explained which well locations on the map were in the Exxon drilling program and had "not been paid for." (R. 1-98) Plaintiff Pigmon explained that the drilling of the last 21 wells by Exxon, together with previous wells, was what eliminated the use of this land, because the wells then saturated the land. Therefore, it became impossible to run cows there. (R. 1-1-177 to 179)
There is a large difficulty with the schedule of the plaintiffs, their view of their entitlement reflected by their testimony, the largess of the jury, and the charge and judgment of the district court. That difficulty is the Texas law. In the absence of an express provision to the contrary, the Texas courts imply a dominant estate and right of a mineral lessee under a lease agreement to use as much of the surface estate, and in such manner, as is consistent with the extraction of the minerals in accordance with the purposes of the lease. The Texas courts do speak of a restriction upon the lessee to that use of the surface as is "reasonably necessary," but that is simply a limit on the manner in which the mineral operation is done, and it does not limit the right of the lessee to develop and extract minerals in accordance with the lease. Humble Oil & Refining Co. v. Williams, 420 S.W.2d 133 (Tex.1967). This right carries with it the legal privilege to use the surface of the land and to interfere with the surface owner's use of it. The surface estate is servient in this respect to the dominant mineral estate.
Texas law (legislative, judicial, and administrative) has often favored the oil and gas operator over the royalty or surface owners. To this point in the present case, however, the table has been turned. The plaintiffs enjoy a judgment for $288,000 for a growth of grass on this West Texas land plus $332,800 for injury to the land, the same land that had a market value (according to the only evidence on the issue in the record) of only $216,000. This judgment was predicated upon a verdict without support in the evidence. And if the jury paid any attention to the court's instruction on the law, which is doubtful, the learned judge there erred.
The jury verdict first.
The jury found that 1360 acres were permanently damaged, that the market value of the land was $230 an acre before the damage was done and was worthless thereafter. There is in this record no evidence of either of those before and after market values, and there is no evidence here that 1360 acres have been permanently damaged by Exxon. The plaintiffs, being the surface landowners, would be permitted under Texas law to testify to their opinion of the market value of the land. They did testify about the value of the land to them, but they did not purport to testify about its market value. See Porras v. Craig, 675 S.W.2d 503 (Tex.1984). The attorneys for plaintiffs insist that the jury could have found a market value somewhere between $150 an acre and $3,333 an acre. The latter figure is derived from a statement by plaintiff Pigmon to the effect that the surface was...
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