Watson v. Rochmill

• Decision Date: 05 November 1941
• Docket Number: No. 7690.,7690.
• Citation: 155 S.W.2d 783
• Parties: WATSON et al. v. ROCHMILL et al.
• Court: Texas Supreme Court

Page 783

155 S.W.2d 783

WATSON et al. v. ROCHMILL et al.

No. 7690.

Supreme Court of Texas.

November 5, 1941.

Error to Court of Civil Appeals of Eleventh Supreme Judicial District.

Action by George J. Watson and others against Henry Rochmill, the Farmers Mutual Royalty Syndicate, Incorporated, and others, for termination of an oil and gas lease and removal of a cloud from title thereto, in which Gordon Jones intervened and sought recovery of an interest in the minerals from defendant corporation. Judgment for defendants and for intervener against defendant corporation were affirmed by the Court of Civil Appeals, 134 S.W.2d 710, and plaintiffs and defendant corporation bring error.

Judgment for intervener affirmed, judgments reversed in other respects, judgment rendered for plaintiffs and intervener against all defendants, and cause remanded in other respects for a new trial.

Lyndsay D. Hawkins, of Breckenridge, and J. R. Creighton and Ritchie & Ritchie, both of Mineral Wells, for plaintiffs in error.

Slay & Simon, of Fort Worth, for Farmers Royalty Syndicate.

Gross & Gross, of Mineral Wells, for Rochmill.

ALEXANDER, Chief Justice.

This suit involves the question of the lapsation of an oil and gas mining lease after the expiration of the primary term because of the failure to produce oil from the leased premises. The lease provided in part as follows: "It is agreed that this lease shall remain in force for a term of three (3) years from May 25, 1925 and as long thereafter as oil or gas, or either of them is produced from said land by the lessee." A well was brought in on said land in 1925, which produced oil until May 21, 1932. The oil was of low gravity. The well produced about one barrel of oil to ten barrels of salt water. On this last date the tubing became stopped up and was not cleaned out. Oil could have been produced from the well, but due to the depression and the low gravity of the oil there was no market that would justify the operation of the well. As a result no oil was produced from the well from May 21, 1932, until January, 1935. However, during this interval the lessee kept a watchman on the premises and paid the taxes on the leasehold interest claimed by him. In December, 1933, he cleaned out and acidized and swabbed the well. The well was again acidized in July, 1934. At some time during this interval lessee erected a new derrick over the well and installed a pump. There was testimony to the effect that lessee expended over $8,000 in the above work and repairs. In January, 1935, a market was found for oil such as could be produced from this well, and production was resumed. This was continued until lessors filed this suit in April, 1937, for a judgment declaring the lease terminated and for removal of cloud from the title thereto. The trial court instructed a verdict in favor of defendant, and this judgment was affirmed by the Court of Civil Appeals. See 134 S.W.2d 710.

It appears to be very well settled that under the terms of the lease, upon cessation of production after termination of the primary term, the lease automatically terminated. W. T. Waggoner Estate v. Sigler Oil Co., 118 Tex. 509, 19 S.W. 2d 27. The strictness of the above rule has been modified where there is only a temporary cessation of production due to sudden stoppage of the well or some mechanical breakdown of the equipment used in connection therewith, or the like. Under such circumstances there are authorities which hold that the lessee is entitled to a reasonable time in which to remedy the defect and resume production. Scarborough v. New Domain Oil & Gas Co., Tex.Civ.App., 276 S.W. 331; Texas Pacific Coal & Oil Co. v. Bratton, Tex.Civ. App., 239 S.W. 688. In the case at bar, however, the cessation of production was not merely a temporary one. There was no production for a period of two years and seven months. The cessation of production for this long period of time was not brought about nor induced by any mechanical breakdown or other condition in connection with the well or the equipment used in connection therewith. The demoralized condition of the oil market and the low gravity of the oil in no wise prevented the operation of the well by the lessee for whatever oil it would produce. These conditions may have rendered it unprofitable to operate the well, but were not contracted against and consequently they did not prevent a lapsation of the lease when production ceased. Stanolind Oil & Gas. Co. v. Barnhill, Tex.Civ.App., 107 S.W.2d 746; Duff v. Du Bose, Tex.Com. App., 27 S.W.2d 122; Live Oak Basin Oil Ass'n v. Reagan, Tex.Civ.App., 289 S.W. 1052. Under the facts of this case we hold that there was such cessation of production as to terminate the lease as a matter of law.

As heretofore stated, lessee performed some work on the leased premises in 1933 and 1934, and production was resumed in January, 1935, and continued until this suit was filed in 1937. There is a dispute in the facts as to whether lessors had any knowledge of the work so carried on by lessee. Lessors did not own and were not in actual possession of the surface rights in the land, and for this reason they claim that they did not know that lessee had resumed operation of the well. Lessee left lessors' 1/8 royalty of the oil produced from the well from 1935 to 1937 with the refinery where the oil was sold, but for some reason same was not delivered nor tendered to lessors until shortly before this suit was filed. Lessors refused the tender of the royalties at that time. For the sake of this discussion we may assume that lessors did know of the work being performed by lessee on the leased premises. Lessee asserts that lessors by standing by and permitting...