Whelan v. Shell Oil Co.

The dissent heretofore filed is withdrawn and the following substituted therefor:

I am unable to agree with the conclusions reached in this case by my associates. The case is fully and fairly stated in the opinion by Justice Williams concurred in by Justice Harvey.

The primary purpose and objective of the parties in executing the lease in question was the production of oil for their mutual profit, the extent of their respective benefit being measured by the extent of their interest in the oil produced or its value. 31-A Texas Jurisprudence, Sec. 63, p. 112; Texas Co. v. Davis, 113 Tex. 321, 331, 254 S.W. 304, on rehearing, 255 S.W. 601; Stephens County v. Mid-Kansas Oil Gas Co.,113 Tex. 160, 254 S.W. 290, 29 A.L.R. 566; Cheek v. Metzer, 116 Tex. 356,291 S.W. 860. The lease specifically provided that it was: "* * * for the purpose and with the exclusive right of exploring, drilling, mining, and operating for and producing and owning oil, gas, sulphur and all other minerals and of laying pipe lines and of building tanks, telephone lines, power stations and other structures thereon to produce, save, treat, and take care of said products and housing its employees."

It was through this provision that Shell Oil Company acquired its title. That title vested at the time of the execution of the lease and only for the purposes set forth in the lease. Thus the estate created and acquired by Shell was a qualified or determinable fee for the reason that after production was obtained, such production might continue forever, and for the further reason that there were various contingencies in the express terms of the lease, any of which, if it should happen, would determine the estate, but if none of them should happen, the estate might continue forever. Specifically, cessation of the use of the premises for the purposes enumerated was operative as a special limitation upon the estate so created and acquired by Shell, unless contracted against by the parties. This, the parties could have done but did not do so except in a special and limited way. These contractual provisions are found in paragraphs 5 and 6 of the lease.

It is sufficient to say here that these provisions are in no way applicable or pertinent to a determination of any of the rights of the parties herein for the simple reason that neither of them were complied with by Shell. The trial court, as well as this court, found that neither appellee nor any of its assignees, within contemplation of the purpose clause of the lease, used or occupied the premises from January 22, 1945, until July 1, 1945, a period of more than five months, and that no delay rentals were paid, as provided for in the lease.

Therefore, by reason of the very nature of the estate granted, absent any contractual provisions relieving the lessee against this special limitation when Shell ceased to use the premises for the purposes of prospecting for and producing oil, as they admittedly did, according to the finding of the trial court and the undisputed evidence, this special limitation became operative and the estate granted ipso facto determined and reverted to the Whelans, and this even though the cessation of use occurred within the primary or exploratory term of the lease. In the view of the writer, this is the settled law of Texas. Stephens County v. Mid-Kansas Oil Gas Co., supra; Texas Co. v. Davis, supra; Munsey v. Marnet Oil Gas Co., 113 Tex. 212, 220, 254 S.W. 311; Robinson v. Jacobs, 113 Tex. 231, 239, 254 S.W. 309; Thomason v. Ham, 113 Tex. 239, 246, 254 S.W. 316; Woods v. Bost, Tex. Civ. App. 26 S.W.2d 299; 7 Tex.L.Rev. 502; 3 Summers, Law of Oil and Gas, p. 78; Waggoner Estate v. Sigler Oil Co., 118 Tex. 509, 19 S.W.2d 27, 29; Cosden Oil Co. v. Scarborough, 5 Cir., 55 F.2d 634; Stanolind Oil Gas Co. v. Barnhill, Tex. Civ. App. 107 S.W.2d 746; Mon-Tex Corporation v. Poteet, 118 Tex. 546,19 S.W.2d 32.

First, the doctrine of "cessation of use" is a special limitation which instantly severs the lessor-lessee relationship; it cannot constitute a covenant, since the relationship has ended. Secondly, no less eminent authority than Professor A. W. Walker, in his valuable article, "The Nature of the Property Interest Created by an Oil and Gas Lease in Texas," 8 Tex.L.Rev. p. 509, correctly states: "It (cessation of use) cannot possibly have any importance after the expiration of the exploratory term for the continuance of the estate then depends upon the continued production of oil and gas. So long as the premises produce oil or gas, the estate will endure, and as soon as it ceases to do so, the estate terminates by its own terms." Lastly, the conclusion of the majority that the "unless" form of the lease is controlling, is contrary to the holding in the Stephens County case, supra, wherein it is held that the various forms of oil and gas leases do not alter the nature of the estate created. Justice Greenwood said [113 Tex. 160, 254 S.W. 294]: "Why hold that instruments in different forms create different estates, where there is no difference in fact with respect to that of which each divests the grantor, his heirs or assigns, nor with respect to that with which each invests the grantee, his heirs or assigns?" In Texas Co. v. Davis, supra, on rehearing, the court held that the delay rental clause "was plainly not intended to defeat the dominant purpose of both contracting parties, which was the production of minerals for mutual profit."

It is not thought that the majority, in holding that the production of oil on August 5, 1944, the ninth and final rental-paying date, in lieu of the payment of delay rentals legally operated to extend the life of the lease until August 5, 1945, intended to construe the lease as a whole, but that such conclusion is based upon an implication from paragraph 6 alone. The intention of the parties is expressed in clear and unambiguous language in the granting clause. In such circumstances, rules of construction may not be resorted to in order to arrive at the intention of the parties. 31-A Tex.Jur., Sec. 109, p. 180; Magnolia Petroleum Co. v. Connellee, Tex.Com.App., 11 S.W.2d 158, and authorities cited therein. The implication made by the majority, in effect, amounts to a deletion of the purposes expressed by the parties in the granting clause, and that, in addition, an insertion of the following provision has been made: "If lessee is producing oil on August 5, 1944, the last rental date, such production shall be in lieu of the payment of rentals, and shall serve to extend the lease for a period of 12 months."

Courts are powerless to change solemn and binding agreements of parties in the process of determining what rights the parties have under such instruments. And, in view of the clear expression of the intention of the parties to the lease here in question, the following rule is controlling: "A court, in any event, may only imply a provision in a contract in order to arrive at and enforce the true intent of the parties; it cannot ever deduce a term in flagrant defiance of an intent clearly expressed. There is here no room for interpolating into the arrangement, by construction, a term not there, and whose existence there is expressly negatived."

Joseph v. Bostick, Tex.Com.App., 1925, 276 S.W. 672, 676; 12 Am.Jur., Contracts, Sec. 228. The holding of the majority, therefore, modifies, if it does not entirely change, the granting clause of the lease wherein the parties expressed the intention that the premises were to be used for specified purposes, and also alters the determinable fee character of the estate created therein.

In the last analysis, the provision implied by the majority, and upon which the decision is based, abrogates the intention which the parties themselves expressed in the granting clause, and substitutes therefor an intention that the production of oil on August 5, 1944, dispensed with any further use of the land for the tenth and final year of the lease. This is contrary to the rule announced in Texas Farm Bureau Cotton Ass'n v. Stovall, 113 Tex. 273, 253 S.W. 1101, by Chief Justice Cureton: "The primary test of the character of a contract is the parties' intention as manifested by its terms." The court, in construing any written instrument, cannot alter the instrument. 3 Williston on Contracts, Rev. Ed. 1936, Sec. 620, pp. 1786, 1788. This was succinctly said by this Court in Shell Oil Co. v. Goodroe, Tex. Civ. App. 197 S.W.2d 395, 399: "* * * it is not our duty to make contracts for the parties nor to determine the wisdom of their undertaking expressed in the contract, but to construe the contract the parties have made."

In view of what has been said, it becomes unnecessary to discuss the question of abandonment, or the holding of the majority thereon.

I think that the case should be reversed and judgment rendered for appellants.