Minchen v. Fields , 162 Tex. 73 ( 1961 )

MR. JUSTICE GRIFFIN

delivered the opinion of the Court.

Respondents, R. L. Fields, et al., filed suit for a declaratory judgment against petitioner and others to construe the rights of the defendants under their various muniments of title to their individual interests in and under 802.6 acres of land in Wharton County, Texas. As to petitioner, it was sought to determine whether or not he had any interest in an oil payment of $60, 195.00 out of l/32nd of 7/8ths of the oil and/or gas produced from wells located on the 802.6 acres.

The rights of all other defendants, except petitioner, have been adjudicated in the courts below and there has been no appeal to this Court from such adjudication.

Respondents were the owners of the land and the reversionary rights in the 802.6 acres, and also of certain mineral interests therein. There was only one oil and gas lease covering this land and the production therefrom and it was executed only by respondents, R. L. Fields and wife, and conveyed the 802.6 acres in three separately described tracts of land. Track No. 2 consisting of 39.30 acres is the track on which the production is located. Petitioner’s ownership is in a certain 284.74 acres out of the 802.6 acres, but not including Track No. 2. At the time the lease was executed petitioner’s predecessors in title owned an undivided l/4th royalty interest in Blocks Nos. 3, 4, 5 and 6 of Missouri-Lincoln Trust Company’s subdivision of the DDD Baker Survey comprising the 284.74 acres. Others owned various mineral interests in other parts of the 802.6 acres. The conveyance to petitioner’s predecessor in title was dated April 2, 1935, and was for a period of twenty (20) years from its date and as long thereafter as oil, gas, or other minerals were produced from the 284.74 acres of land in paying quantities. This conveyance reserved the executive rights in the Fields, as grantors, but gave to the grantee l/4th of all bonus, or bonuses, which grantor should receive for any future leases, as well as the same interest in all delay rental payments under future leases only. The lease under which production was had was dated February 28, 1947, and provided for a l/8th royalty on oil and gas, or if gas was sold at the well l/8th of the amount realized from the sale, and 50 cents per long ton on sulphur.

The cause was tried before the trial court without a jury. The trial court rendered judgment in favor of respondents that petitioner take nothing. Various defendants appealed to the Court of Civil Appeals where the judgment of the trial court was affirmed. 330 S.W. 2d 683. Only petitioner applied for a writ of error to this Court.

We affirm the Court of Civil Appeals in part and reverse and render in part as hereinafter set out. Petitioner’s first point is:

“The Court of Civil Appeals, while correct in holding that the oil payment provided for in the oil and gas lease constituted a bonus, erred in holding that the petitioner, Nathan Minchen, who had the right to receive a portion of the bonus as to any lease executed covering the 284.74 acres, was not entitled to receive his proportionate share of such bonus oil payment by virtue of production from such tract of 802.6 acres.”

We sustain this point. The provision for the oil payment contained in the lease is “as a further consideration for this lease, lessor is to receive Sixty Thousand One Hundred Ninety-Five Dollars ($60,195.00) out of l/32nd and 7/8th of the oil and/or gas and other minerals, if, as and when produced, saved and sold.” The Court of Civil Appeals correctly held this oil payment was a part of the bonus paid apart from and above the usual royalty.

In the case of State Nat. Bank of Corpus Christi v. Morgan, 135 Texas 509, 143 S.W. 2d 757 (1940), the Bank had sold the land covered by the lease, but in its deed to such land had reserved and excepted from the conveyance “an undivided 1/2 interest in and to all of the royalty in oil, gas, casinghead gas * * The executive rights were given to the grantee in the deed, and grantor “does not by this reservation and exception retain any right of participating * * * in the bonus or bonuses which shall be received from any future lease * * The lease executed provided for a $48,000 oil payment out of l/8th of 7/8ths of the oil, gas and other minerals, free of cost of production, marketing or handling. The Court, after discussing various cases and Summers’ Oil & Gas, Permanent Edition, Vol. 3, holds that the “* * * oil payment is bonus within the terms of the several definitions last discussed, for it is an additional consideration for the lease apart from or above the usual royalty.” Also see Griffith v. Taylor, 156 Texas 1, 291 S.W. 2nd 673 (1956), which follows the same definition of “bonus” and “royalty.”

All parties agree that the interest which petitioner has m the 284.74 acres included in the 802.6 acres is 67.98 mineral acres. A calculation shows that the oil payment is at the rate of $75.00 per acre for the total acreage of 802.6 acres. Petitioner would therefore be entitled to receive $5,098.50 (67.98 acres x $75.00) out of the total oil payment out of l/32nd of 7/8ths of the oil and/or gas and other minerals, if, as and when produced, saved and sold from the 802.6 acres. The oil payment is “further consideration” for the lease on the total acreage without any provision favoring one part of the 802.6 acres above any other part. To follow the holding of the Court of Civil Appeals would lead to one of two results, both of which are contrary to the provisions of the lease. First, only those owning acreage from which production was had would receive the total oil payment. In such event, those owning acreage developed later might not receive any oil payment. Secondly, should the production be only from a certain specified acreage, and the oil payment confined to $75.00 per acre for such acreage, then lessee would be relieved from a part of the consideration he agreed to pay for the lease on the whole of the 802.6 acres. Under our holding, all owners of mineral interests in the 802.6 acres would share in proportion to the mineral acres owned by them.

By his second point petitioner contends that the Court of Civil Appeals erred in not holding that the execution of the oil and gas lease by Fields and wife constituted a unitization or pooling of all the mineral interest under the 802.6 acres, and all owners of mineral interests share in the production from any part of the 802.6 acres in proportion to their ownership. We agree with the Court of Civil Appeals that the act of Fields in executing one lease covering the 802.6 acres did not unitize or pool all of the mineral interests in said land. Brown v. Smith, 141 Texas 425, 175 S.W. 2d 43, (1943) ; Nugent v. Freeman, 1957, Texas Civ., 306 S.W. 2d 167, wr. ref., n.r.e. As said by the Court of Civil Appeals, “the reason of the rule is that where mere executive rights are conferred or reserved, there is no intention evidenced to vest authority to convey a royalty interest reserved or the royalty interest attributable to the minerals leased and to hold that such holder can unitize or pool the interest would allow him to convey such royalty interest because a unitization of the royalty and minerals under different tracts effects a cross-conveyance to the owners of minerals under the various tracts of royalty or minerals so that they all own undivided interests under the unitized tract in the proportion their contribution bears to the unitized tract. Veal v. Thomason, 138 Texas, 341, 159 S.W. 2d 472.” (330 S.W. 2d 687). We overrule petitioner’s second point.

Petitioner, in his third, fourth and fifth points, complains of the holding of the Court of Civil Appeals that petitioner did not ratify the Fields’ lease thus unitizing and pooling his mineral interest and thus entitling petitioner to share in the production from any part of the 802.6 acres. Petitioner also claims there is no evidence to support the finding of the trial court that he had not ratified the lease. We overrule these points and agree with the holding of the Court of Civil Appeals. That Court has set out, in its opinion, the evidence material to these points, and we shall not lengthen this opinion by repeating the facts on which petitioner bases his contention. It is sufficient to say that these facts do not show a ratification of the Fields’ lease as a matter of law.

In so far as the Court of Civil Appeals denied petitioner a recovery of any part of the oil payment, its judgment is reversed, and judgment here rendered that petitioner have and recover $5,098.50 of the oil payment, if, as, and when produced, saved and sold.

As to all other points the judgment of the Court of Civil Appeals is in all things affirmed.

The costs of this cause are divided equally between petitioner and respondents.

Associate Justice Steakley not sitting.