Case Name: MORGAN et ux. v. HOUSTON OIL CO. OF TEXAS et al.
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1935-04-10
Citations: 84 S.W.2d 312
Docket Number: No. 9553
Parties: MORGAN et ux. v. HOUSTON OIL CO. OF TEXAS et al.
Judges: BICKETT, C. J., did not participate in the decision of this case.
Reporter: South Western Reporter Second Series
Volume: 84
Pages: 312–315

Head Matter:
MORGAN et ux. v. HOUSTON OIL CO. OF TEXAS et al.
No. 9553.
Court of Civil Appeals of Texas. San Antonio.
April 10, 1935.
On Rehearing June 26, 1935.
I. W. Keys, of Corpus Christi, Charles C. Huff and G. H. Penland, both of Dallas, and Ñaman, Howell & Brooks, of Waco, for appellants.
Williams, Lee, Sears & Kennedy, Geo. D. Sears, and W. H. Blades, all of Houston, and Henry, Bickett & Bickett, of San Antonio, for appellees.

Opinion:
SMITH, Justice.
The parties will be designated as plaintiffs and defendants, respectively, as in the trial court.
The action was brought by plaintiffs against defendants to cancel an oil and gas lease, alleged to have been forfeited by reason of the failure of defendants to diligently perform their obligation to market gas which is admittedly being produced from the lease in paying quantities. The cause was tried to the court without a jury, and resulted in a judgment denying relief to the plaintiffs, who have appealed.
The trial judge made no findings or conclusions, none having been requested by either party. In this situation this court must be controlled by the familiar rule that every fact necessary to sustain the judgment will be implied, if supported by pleadings and any material evidence. This application of this rule is decisive here, since the case made is essentially one of fact, rather than of law.
The lease in controversy was, substantially, in the usual and familiar form of a Texas oil and gas lease, in which it was provided that it should run for a period of five years, conditioned that defendants should begin the drilling of a well by August 15, 1930, and requiring defendants to thereafter diligently develop the premises by drilling wells and marketing the products therefrom. It being conceded by all parties that defendants timely drilled a first and a second well, from which gas in paying quantities was, and is still being, produced, the case was narrowed to plaintiffs' contentions that defendants failed to exercise reasonable diligence to market the product. In this connection, it appears that defendants have marketed none of the gas from the second well brought in, and but a negligible quantity of that produced from the first well, when compared to its capacity, and to its actual performance.
The lease is in the "heart" of the productive Saxet gas field, near the city of Corpus Christi, embracing numerous gas-producing wells. Gas, in varying quantities, is being sold from some of those wells, under contracts obtained by the producers. It is obvious from the record, however, that most of the vast product of the field is wasting into the air for lack of a market therefor, so that the fortunate few who are profiting by the exploitation are but exceptions to the general rule. This appears to be true as to the relative quantity marketed out of the field production, if not as to the number actually sharing in the paying distribution. This prodigal and profitless waste of the natural resource seems to flow from a variety of causes, some of which ought to be obvious to the most casual observer of contemporaneous history, while others are shown to have come out of specific conditions appearing from the record. The trial judge impliedly found these causes to be sufficient to acquit the defendants of the charge of negligent failure to perform their obligation, not only to plaintiffs, but to themselves in particular (since they would profit most therefrom), to market the product of these wells. It appears from the evidence, for example, that producers from numerous other wells in that field were unable to sell their product, for the simple reason that there was no market therefor; that the production from the field was wholly beyond the demand for the product; that defendants drilled these wells in anticipation of an early and growing demand for their product, particularly in the promised great industrial future for the city of Corpus Christi, which did not develop; that defendants' wells came in as the country was precipitated into the economic debacle which has practically destroyed the business, and halted the development, of the nation; that as a result the consumption of gas was "tremendously decreased," and defendant oil company's pipe line distribution for industrial and domestic consumption dropped from 100,000,000 feet to 50,- 000,000 feet per day; that gas production was greatly increased in other fields, as well as in the Saxet and another nearby field, which resulted in a "market glut of gas — -a very small demand and big supply"; that these conditions affected defendants and other companies in that area alike. Defendants, further showed the futile efforts made by them to find a market for the gas from these wells, while the testimony of plaintiffs' witnesses showed the product of many other wells in the same field was wasting' for want of a market. It would be a bootless task to go further into the testimony, or discuss its effect. It is sufficient that the evidence amply, if not overwhelmingly, supports the implied findings of the trial court that defendants exercised reasonable diligence in their efforts to meet the obligations assumed by them in the contract of lease, which is all that the law required of them. Those findings are therefore binding upon this court, and are conclusive of the appeal, for, while other questions are raised by plaintiffs, they are collateral to and do npt affect the controlling conclusion.
Perhaps it should be added here that, long before the institution of this action to cancel, plaintiffs evidenced their intention to terminate the lease, afterwards gave defendants formal notice of such termination, and prosecuted that purpose by bringing this suit. It is well settled that when a lessor determines to forfeit or cancel an oil and gas lease, and puts the lessee on notice thereof, he cannot complain if the latter suspends operations under the contract, pending the determination of the asserted right of the lessor to forfeit or cancel. Lane v. Urbahn (Tex. Civ. App. writ ref.) 265 S. W. 1063, par. 3; Edgar v. Bost (Tex. Civ. App.) 14 S.W.(2d) 364; Johnson v. Montgomery (Tex. Civ. App. writ ref.) 31 S.W.(2d) 160. Under this self-imposed restriction of plaintiffs' right, the trial court was doubly warranted in the judgment appealed from, which is now affirmed.
BICKETT, C. J., did not participate in the decision of this case.