Case Name: G. D. SPRADLEY et ux., Petitioners, v. C. S. FINLEY et al., Respondents
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1957-03-13
Citations: 302 S.W.2d 409
Docket Number: No. A-6096
Parties: G. D. SPRADLEY et ux., Petitioners, v. C. S. FINLEY et al., Respondents.
Judges: SMITH, J., joins in this dissent.
Reporter: South Western Reporter Second Series
Volume: 302
Pages: 409–414

Head Matter:
G. D. SPRADLEY et ux., Petitioners, v. C. S. FINLEY et al., Respondents.
No. A-6096.
Supreme Court of Texas.
March 13, 1957.
Rehearing Denied June 12, 1957.
Wardlow Lane, Center, for petitioners.
Turner & Bankhead, Carthage, for respondent.

Opinion:
CULVER, Justice.
The question posed here is whether or not a conveyance of an undivided mineral interest for a term of years is continued in force after the expiration -of the term by reason of production elsewhere on land unitized or pooled with this mineral interest.
The trial court concluded that the title to the mineral interest had not been postponed beyond the term expressly stated in the conveyance.- The Court of Civil Appeals held to the contrary and reversed and rendered. 294 S.W.2d 750. .We agree with the latter result.
In 1936 petitioners, Spradley and wife, conveyed to LaGrone and W. T. Bourn, trustee, by separate deeds, 14.43 and 15 acre undivided mineral interests, respectively, out of two tracts of land in the Gibbs Survey, Panola County, one being 97.3 acres, the other 20.4 acres, with the provision "that if oil, gas or other minerals is not being produced from said lands above described at the expiration of 15 years from date hereof, this instrument to be null and void and all titles conveyed hereby shall revert to the grantor, their heirs and assigns."
Thereafter, in 1945, the owners of these mineral interests executed oil and gas leases upon the property, each lease containing the usual pooling agreement. Contemporaneously with the execution of these two leases the Spradleys gave an oil and gas lease on the 97.3 and 20.4 acre tracts and two other tracts that comprised 119 acres and provided in their lease a similar pooling agreement. These three leases were thereafter regularly assigned to Shelly Oil Company. Shelly then, by declaration, pooled and unitized the lands covered by these three leases with eleven other leased tracts into one .unit for the production of gas, distillate and condensate and designated it as the Werner-Spradley unit. A producing well was completed on land embraced within this unit within the 15-year term (but not on the two tracts out of the Gibbs Survey) that has produced continuously up to the present time.
Shelly paid to .the respondents royalties in proportion to the acreage owned by them up to the end of the 15-year period and not thereafter. They then brought this suit praying that the Court construe the mineral deeds and leases and adjudicate the rights of the parties as to the ownership of the •undivided mineral interest conveyed by petitioners to respondents.
The lease above mentioned from Sprad-ley and wife contained the following provision :
"Less 14.43 acres sold out of above tract to C. R. LaGrone and less 15 acres sold out of said tract to Tom Bourne as shown by deed records Panola County, Texas, — Leaving herein a total of 216.7 acres of land conveyed in this lease.
"It being lessors intention herein to lease all of the lands owned by lessor on the E. W. Gibbs, Hampton Anderson and P. F. Gibbs Surveys, in Panola County, Texas, whether correctly described herein or not."
The petitioners, Spradley, contend that the Court of Civil Appeals erred in holding that production upon any portion of the unitized tract must be treated as production from the 20.4 and 97.3 acre tracts so as to. extend the term of respondents' estates, for the reason that petitioners did not include in the lease their reversionary interest but expressly excluded it and that, therefore, this right of reverter was not unitized or pooled with respondents' property.
We think it is immaterial to a decision in this case as to whether or not the Spradleys included or excluded the right of reverter from the terms of the lease granted by them.
The Spradley lease as well as the La Grone and Bourn leases contain the following provisions:
" 'Subject to the other provisions herein contained, this lease shall be for a term of ten years from this date . (called "primary term") and as long, thereafter as oil, gas or other min eral is produced from said land or land with which said land is pooled hereunder.'
" 'Lessee, at its option, is hereby given the right and' power to pool or combine the acreage covered by this lease or any portion thereof with other land, lease or leases in the immediate vicinity thereof when in Lessee's judgment it is necessary or' advisable to do so in order properly to develop and operate said premises in compliance with the spacing rules of the Railroad Commission of Texas or other lawful authority, or when to do so would, in the judgment of Lessee, promote the conservation of the oil and gas in and under and that may' be produced from said premises.' :
" 'If production is found .on the pooled acreage it shall.'be 'treated as if production is had from this lease, whether the well . or wells be located on the premises covered by this lease or not.' "
Petitioners do not challenge the right of respondents to the royalties paid them according to their respective interests during the 15-yeár term. But the only right of the respondents to those royalties was by reason of the pooling agreement to treat production from any portion of the unit as the equivalent of production from the 97.3 and 20.4 acre tracts. It must be conceded that if production had been obtained from wells drilled upon these two tracts then the 15-year term would have, been extended so long as production continued. It would seem to follow, therefore, that if production from another part of the unit is treated as production from these two tracts so as to entitle respondents to royalty payments during the 15-year term, then equally so it would' be regarded as production from the twó tracts so as to extend the term. The interests owned by LaGrone and Bourn were undivided interests in the whole of .the two tracts.
In Southland Royalty Co. v. Humble Oil & Refining Co., 151 Tex. 324, 249 S.W.2d 914, the Court held that a general form lease executed by the various owners had the effect of unitizing the lands described for development and production purposes and followed the decisions in Parker v. Parker, Tex.Civ.App., 144 S. W.2d 303 (wr. ref.) and French v. George, Tex.Civ.App., 159 S.W.2d 566 (wr. ref.). Here we have unitization and pooling specifically provided for,
Petitioner seems not to deny the effect of the Southland decision, [151 Tex. 324, 249 S.W.2d 917] but he maintains that it does not govern our case because in the last paragraph the Court says: "We know of nothing in our holding to prevent reversionary owners — as there was nothing to prevent the Powells here— from protecting their estates by express stipulation." • Petitioner claims he did just that, when he inserted the clause in his lease, that he says had the effect of excluding from the lease his reversion-ary .interest. What the Court means in the above quotation is that an owner who joins in a lease could by stipulation except his estate whether it be reversionary" or not from an implied pooling agreement by express stipulation to that- effect. In other words a landowner .joining in a unitized lease may stipulate that production from one tract included therein, shall not be treated as production from any other tract for the purpose of determining rights under another instrument affecting the title to the latter tract or any part thereof or interest therein. The two mineral deeds now under consideration do not provide for the termination of the grantees' estates if minerals are not produced from the undivided interests thereby conveyed, and so it matters not whether the reversionary rights to such undivided interests were excepted from or included within the terms of the lease.
Each conveyance describes the 20.4 acre tract and the 97.3 acre tract by metes and bounds, or by reference to a prior deed containing that description, and provides for the termination of the estates conveyed if minerals are not produced "from said lands" within the 15-year term. "Said lands" clearly refers to the 20.4 acre tract and the 97.3 acre tract. Under the authorities of the pooling provisions in the leases, these two tracts have been unitized with other land and there was production from such other land during the crucial 15-year term. The case falls within the rule announced by the South-land Royalty case. By the execution of the leases the Spradleys and the owners of the interests conveyed by the deeds agreed that production of minerals from a tract included in a pool unit would be regarded during the life of the lease as production from all of the other tracts included in such unit. The condition upon which the grant in the mineral deed was to extend beyond the 15-year term was thus modified by agreement of the parties, and was fulfilled by production of minerals from the land with which the 20.4 and 97.3 acre tracts were unitized.
The judgment of the Court of Civil Appeals is accordingly affirmed.