Court Opinion

ID: 9626456
Source: CourtListenerOpinion
Date Created: 2023-08-22 08:12:46.452781+00
Date Added: 2024-06-11T15:01:49.545755
License: Public Domain

MARKS, J., Concurring.
This case was tried upon the theory that the provisions of the oil lease governing the royalty to be paid by respondent on the manufacture of gasoline from casinghead gas were uncertain and ambiguous and the introduction of parol evidence was permitted to aid the trial court in interpreting them. If these provisions be so regarded, the foregoing opinion effectually disposes of the contention of appellant that the evidence does not support the views of the trial judge on this question as disclosed in the findings and judgment.
My interpretation of the terms of the lease, in regard to their being uncertain and ambiguous, is somewhat different from that put upon them by counsel for both parties during the trial. In my opinion the language of this paragraph pertaining to the royalty to be paid on the manufacture of gasoline, when read in connection with the balance of the lease of which it is a part, is sufficiently clear and certain and should be interpreted from that language without the need of evidence bearing upon the intention of the parties using it.
In the first place, under this paragraph, the right to extract casinghead gasoline from the gas is permissive and no duty is placed upon appellant to produce it. If appellant avails itself of the right to produce gasoline from casinghead gas, either one of two conditions governing the method of determining the royalty due respondent is contemplated; first, when manufactured by the lessee either on or off the leased premises, and, second, when extracted by a third party. If the lessee elects to extract the casing-head gasoline itself it is clear that it must pay to the *115lessor one-eighth of the proceeds derived from the sale of such gasoline less “the entire cost of gathering, manufacturing,' handling and selling the same”. This cost is arbitrarily fixed at sixty-five per cent of the gasoline so extracted from the gas. The lessee is given the right, which it is not required to exercise, of contracting with a third party to extract this gasoline. If it elects to take advantage of this right, it is given the further privilege of paying to the party with which it contracts, sixty-five per cent of the gasoline so manufactured as the cost of manufacture. The right to so pay this sixty-five per cent is permissive only and no duty is cast upon the lessee to pay such a percentage of the gasoline to the manufacturer. The lessee availed itself of the right, given it in the lease, to contract with a third party to extract the gasoline but did not exercise the right to pay it sixty-five per cent of the gasoline manufactured as the cost of manufacture. It is therefore evident that while the quoted paragraph clearly provides for respondent’s share of the gasoline in the instances (1) where appellant manufactured the gasoline itself, and (2) where it contracted with a third party and agreed to give the manufacturer sixty-five per cent of the gasoline as the cost of manufacture, neither of these contingencies arose as it contracted with a third party for the manufacture of the gasoline and agreed to pay it, not sixty-five, but fifty per cent of the gasoline manufactured, as the cost of manufacture. Therefore, I must examine the other paragraphs of the lease in order to determine if any of the other provisions are applicable to this situation which evidently is not covered by the paragraph specifically pertaining to the manufacture of gasoline.
The lease gave the right to “the Lessee of exploiting and drilling for, developing, producing, extracting, bringing to the surface, obtaining, taking, storing, removing and carrying away petroleum, oil, natural gas, naphtha, and other mineral oil, and hydrocarbon substances in, upon and from said land, . . . ” It also required the lessee to pay to the lessor “a royalty of one eighth (l/8th) of the net amount of all petroleum, oil naphtha and other hydrocarbon substances which may be produced and saved from the demised premises, ...”
*116I understand that gasoline is included within the term “other hydrocarbon substances” as that expression is generally used in oil leases. Therefore, if the royalty to be paid to respondent on the gasoline manufactured is not covered by the paragraph specifically dealing with the subject, it should be determined by the general royalty provisions of the lease just quoted. The term “net” is in common use and means the clear profit remaining after deducting all expenses. The expense to appellant of producing the gasoline was the fifty per cent paid to the manufacturing company which left fifty per cent of the gasoline manufactured as the “net amount of . . . other hydrocarbon substances . . . produced and saved from the demised premises”. It therefore seems clear to me that, under the clearly expressed language of the lease, respondent is entitled to one-eighth of the fifty per cent of the gasoline received by appellant, or, as this gasoline had been sold, to the one-eighth of the proceeds of the sale of this fifty per cent which the judgment gave it.