Harris v. Lone Star Gas Co.

On motion for rehearing, the appellant, John G. Harris, concedes that in reversing and remanding this cause a correct result was reached; but he requests the court to amplify its expressions and conclusions on the controlling propositions presented by the appeal. We grant this request, and, although in no respect altering the legal effect of the original opinion, we re-express and amplify the same, withdrawing the original and substituting this one therefor.

The plaintiff's first amended petition in this cause was filed in the lower court January 6, 1925. Trial was had December 17,. 1926, and the court having sustained a general demurrer to plaintiff's petition and entered a judgment accordingly, the appellant, plaintiff below, appealed, filing the record in this court February 10, 1927. The cause was submitted June 24, 1927, but final disposition thereof has been postponed from time to time, awaiting the action of our Supreme Court on appeals taken in the case of Reynolds v. McMan Oil Gas Co. (Tex.Civ.App.)279 S.W. 939, 11 S.W.2d 778, 14 S.W.2d 819, and the case of Connellee v. Magnolia Petroleum Co. (Tex.Civ.App.) 279 S.W. 597, 11 S.W.2d 158, both of which were appealed from this court, and involving, substantially, the same controverted issues that appear in this record. Such a course has been pursued in the interest of economy in cost to litigants, as well, as economy of time and labor to this court, and especially because we have felt the need of an authoritative expression from our Supreme Court upon the points involved and already before that court, as indicated.

The instant litigation grows out of the rights claimed by the lessor and the lessee and its assigns, under and by virtue of the terms of a certain oil and gas lease, which by comparison we find to be substantially the same as the lease involved in the case first mentioned above. The consideration in the lease here involved, in so far as royalties and rentals are concerned, is as follows:

"In consideration of the premises the said lessee covenants and agrees:

"1st. To deliver to the credit of lessor, free of cost, in the pipeline to which it may connect its wells, the equal one-eighth part of all oil produced and saved from the leased premises.

"2nd. To pay the lessor $300.00 each year in advance for the gas from each well where gas only is found, while the same is being used off the premises, and lessor to have gas free of cost from any such well for all stoves and all inside lights in the principal dwelling house on said land during the time by making his own connections with the well at his own risk and expense.

"3rd. To pay lessor for gas produced from any oil well and used off the premises at the rate of $50.00 per year for the time during which such gas shall be used, said payments to be made each three months in advance."

By reference to the opinion in the Reynolds Case (Tex.Com.App.) 11 S.W.2d 778, 780, it will be seen that the two leases contain similar covenants in the above respect. In the first paragraph of said opinion this language is used: "This case presents the question whether or not a lessor under the mineral lease in common use in this state may recover from the lessee for gasoline manufactured from casing-head gas under the stipulation for the usual royalty on oil produced and saved." The identical question arises in the instant case.

While there are several counts in the plaintiff's petition, we will here specifically notice the one (third count for gasoline) wherein the plaintiff, under the "one-eighth oil royalty provision," seeks to recover one-eighth of the gasoline manufactured from the casinghead gas, which was alleged to be oil, and which, as we interpret the opinion in the Reynolds Case, is held to be such, and so contemplated by the parties in the execution and delivery of the lease. If such product alleged to have been converted by the defendants and each of them be oil, it is not believed that it be material by what term or name the well from which it is taken be designated; that is, whether it be a gas well, gas from an oil well, or an oil well. The allegations in the plaintiff's petition set forth that large quantities of gasoline have been produced by the said defendants on lands covered by said lease, and that the share or portion thereof to which plaintiff was entitled under the lease has been converted. Such being the case made by the pleadings, unquestionably the trial court, in view of the opinion in the Reynolds Case, committed an error in sustaining the defendants' exceptions to plaintiff's petition, and it becomes our duty to reverse the Judgment of the trial court and remand the cause for a trial on the facts.

As to the "proportion of the gasoline which the plaintiff is entitled" to recover, under his pleadings and upon the specific theory here under consideration, we believe the opinion in the Reynolds Case sufficiently specific. On this proposition the oil royalty provision of the lease is held to be controlling, and this would appear to be a sufficient answer to the question suggested by the appellant's contention. However, this would be subject, of course, to the qualification contained in the third paragraph of that opinion (Tex.Com.App.) 14 S.W.2d 819, 820, which is as follows: "The plaintiff in error likewise seeks a rehearing, and insists that defendants in error are liable for the gross value of one-eighth of the gasoline recovered not charged with the cost of reduction, upon the theory they are trespassers; the argument being that since in law plaintiffs in error were entitled to one-eighth part of the casing-head gas as it was delivered from the ground, the defendants in error, knowing of this right, as they must have known, are not good-faith trespassers to entitle them to their expenditures in treating the gas and recovering the gasoline. It is true the rights of the parties are to be determined by the terms of the lease, which, in turn, presents a question of law; but it does not follow that defendants in error have not acted in good faith. Indeed, the particular right is of such a nature as to challenge the best thought of all the courts through which the case has passed, and defendants in error should not be mulcted in damages for claiming a right to the gas under such circumstances."

This, we think, indicates the extent of appellant's possible recovery, except as the peculiar facts, if any, in this cause and which may be disclosed in the pleadings upon which he elects to go to trial, may present a situation calling for a different measure of damages or a different application of the principles announced in that portion of said opinion above quoted. Under the Reynolds Case, the authority upon which this opinion is specially based, we are of the opinion that the plaintiff's right to recover for gasoline as oil rests upon the theory presented in the count for gasoline here considered.

A further contention of the appellant is that this court erred "in failing to pass upon and construe and give some expression disposing of the first count of plaintiff's petition, which is a count for the recovery of the value of all the natural gas appropriated by the defendant, it being clearly pleaded that the plaintiff, by the terms of his lease, which is quoted in said pleading, and which is also attached as exhibit, did not sell any part of his gas, but only permitted, by the terms of his lease, the use thereof, both on the premises and off the premises, and pleaded that the word ``use' as employed in the lease, did not constitute a sale of his gas, and wherefore he sued for same, or the value thereof." In dealing with this contention it must be borne in mind that the question of appellant's right to a portion of the gasoline is not involved. That matter having received a separate and distinct consideration in the preceding paragraphs of this opinion, we here deal strictly with the appellant's right in what he designates "natural gas" as stripped of the product known as "gasoline" or containing none. In discussing the third clause of the lease dealing with the considerations involved in the Reynolds Case — a similar clause being contained in the lease involved in the instant case — the Commission of Appeals used this language: "The third clause of the so-called royalty provision stipulates for the lessee to pay to the lessor ``for gas produced from any oil well and used off the premises at the rate of $100.00 per year for the time during which such gas shall be used, said payment to be made each three months in advance.' This does not purport to be, nor is it within itself, a grant, an exception, or a reservation. It is not a grant, for it is an obligation of the lessee. It is not an exception, for it is not an estate of a kind with the grant, and it is not a reservation, for it is not an estate or fee of any kind in real property. It is a personal obligation imposed upon the lessee by way of consideration, to be sure, but no more than the ordinary promise of rentals. It is the agreed compensation for a thing — gas — already granted.

"We have said that the stipulation with respect to gas produced from an oil well does not evidence a grant of such gas. This does not imply there was no such grant, for clearly there was. But the grant arises from the granting clause proper, precisely in the same manner and to the same extent that the oil was granted; the grant being for the ``sole and only purpose of mining and operating for oil and gas.'"

On motion for rehearing in the Reynolds Case (Tex.Com.App.)14 S.W.2d 820, the court in its opinion used this language: "Clause (2) of the royalty covenant applies only to gas used from a well ``where gas only is found,' while clause (3) provides a similar rental for gas produced from an oil well. The clear intention of the instrument as a whole is to except from the grant ``one-eighth part of all oil produced and saved from the leased premises,' and to pay and accept a rental per well per annum for gas produced and used off the premises. The ``gas' mentioned in both sections, as we have shown in our original opinion, means gas, and not oil. The lease therefore in legal effect grants seven-eighths of the oil in place and all of the gas."

The granting clause in the lease involved in this case is as follows: "That the said lessor, * * * in consideration of $10.00 * * * and of the covenants and agreements * * * on the part of lessee * * * has granted, demised, leased and let, and by these presents does grant, lease, and let unto the said lessee for the sole and only purpose of mining and operating for oil and gas * * * all that certain tract of land," etc.

It thus appears that, under said lease contract, the lessor parted with his title to all the minerals (oil and gas) in place (modified byexception for one-eighth oil royalty), and obtained a money consideration therefor, and, in addition, the usual one-eighth royalty for oil produced, together with $300 each year for gas from a well where gas only is found, while the same is being used off the premises, and $50 per year for gas produced from an oil well and used off the premises while same is so used. It is well understood, and is apparently recognized by the authorities generally, that the above language of the contract means plainly that an actual estate in the land, to wit, the mineral estate, was conveyed, without reservation as to any part of it Authorities need not be cited upon this construction of such language, but the views of our Supreme Court upon the question are recorded in the following authorities: Stephens County v. Mid-Kansas Oil Gas Co., 113 Tex. 160,254 S.W. 290, 29 A.L.R. 566; Thomason v. Reed (Tex.Civ.App.) 263 S.W. 1069; Summers on Oil Gas, 197, 198; Ehlinger v. Clark (Tex.Sup.) 8 S.W.2d 667.

Under the above authorities, and especially the opinion in the Reynolds Case, it occurs to us that there is but one conclusion to be reached from the decisions, and that is that under the terms of the appellant's lease in the instant case, and for the considerations noted, the granting clause of the lease placed title to the "natural gas" in the lessee, and clothed it and its assigns with full and complete authority to sell or dispose of the same without incurring obligations other than may be found in the personal obligation of the lessee to pay the lessor $300 and $50 per year, respectively, under the provisions of sections 2 and 3, setting forth the considerations for the lease.

The record before us does not present a case wherein the lessee or its assigns has failed or refused to pay $300 per year or $50 per year, respectively, for gas from either character of well specified.

The petition of plaintiff alleging as against each and all of the defendants a case of conversion of his interest in oil, the judgment will necessarily have to be reversed and remanded as to all the defendants.

The judgment of the trial court will therefore be reversed, and the cause remanded, and all motions for rehearing are overruled.