Court Opinion

ID: 9661812
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:51:28.917582+00
Date Added: 2024-06-11T18:14:33.874123
License: Public Domain

PRESLAR, Justice
(dissenting).
I respectfully dissent and would reverse and remand this cause to the trial Court. It is my opinion that by the language used the parties have expressed the intention that time lost due to acts of Government shall not count against the term time. They agreed that the full term of “as much longer thereafter as oil or gas * * * are produced” would be modified or limited to fifty years, but the limitation of fifty years would not be reduced by delays resulting from impossibility of performance. My position is that the intent of the parties can be determined by the words they used and there is no need to resort to arbitrary rules of construction; and secondly, to reach the conclusion of the majority, certain language of the contract must be disregarded, nothing in their opinion “to the contrary notwithstanding.”
As noted by the majority, there is no contention that the instrument is ambiguous. That would seem to eliminate any need for construction or interpretation by a Court, but I agree that there is a need to construe this agreement, but only under the most basic or elementary rules — to determine the intent of the parties from the words used. The majority has set forth the authorities for these basic rules and there is no need to repeat them here. A rule of law, most important here, is that Courts cannot disregard words used by the parties. 17 Am.Jur.2d, Contracts, Sec. 242, p. 629; Harrison v. Fortlage, 161 U.S. 57, 16 S.Ct. 488, 40 L.Ed. 616; Haltom Oil Company v. Phillips Petroleum Company (CA5 Tex.) 304 F.2d 95.
Viewing the instrument in its entirety, we find it divided into twelve numbered sections with numbered paragraphs under each. The section is capitalized and centered on the page, i. e., “SECTION 1,” with the subsections then listed as “Paragraph 1, Par. 2,” etc. The term clause is Par. 2, under SECTION I, and is one of six such paragraphs under that section. The provision concerning the event of impossibility of performance due to acts of God, government, war, rebellion, riots, etc., is in a separate section, in fact it is the whole of “SECTION 7.” This is mentioned because the majority cites and relies on authority that the term clause is not to be extended by “indirect, ambiguous, and negative language in the development clause.” The development clauses in this lease are not in Section 7, but are found among the six paragraphs of Section 1; and they provide their own forfeiture terms. The other authority cited by the majority is that the term, or habendum, clause dominates the period for which an oil and gas lease shall run, “unless it is properly modified by other provisions.” Section 7 modifies this lease to the extent that it eliminates delays or periods of time where there is an impossibility of performance due to the causes specifically named. It does not conflict with the term of years, but deals with a possibility that could arise and cut short the term. One of those causes is “the result of some order, requisi*592tion or necessity of the Government.” Stripped of the other named causes, SECTION 7 reads:
“When .... operations are delayed or interrupted by . . . ., or as the result of some order, requisition or necessity of the Government, .... the time of such delay or interruption shall not be counted against the Lessee, anything in this lease to the contrary notwithstanding.”
These are the words of the contract. They cannot be disregarded. They specifically apply to an “order” of the Government. By orders of the State of Texas, the Lessee was prohibited during the term of the contract from carrying on operations for specific periods of time. The fact that proration has existed in Texas since January of 1938 is a matter of common knowledge, and the specific orders of the State implementing it are a part of the record in this case. The first such order took the form of ordering that each and every well must be shut down for six successive Sundays. Thereafter, the Railroad Commission of Texas set the allowable amount of production each month and issued its order as to certain wells being shut down for a prescribed number of days each month or produce only the total of the daily allowa-bles for the number of days allowed. This method of limiting production by ordering shut-downs for a specified number of days or production measured in days was used until June of 1967 when a more sophisticated method was put into effect, and under which no claim is made in this suit. By these orders the production curtailment was measured in days and they were specific that wells would be shut down — prorated wells were denied the right to produce for the number of days specified for the particular month. For instance, the Railroad Commission’s order of January, 1957, said: “each well shall be shut down 13 days, giving to each well 15 producing days of the 28 days in February.” By virtue of the contract (lease) Lessee was entitled to produce every day of February, yet here is an “order” of the Government which shut down wells, denied Lessee the contract-given right, for nearly one-half the month. The same was true of all other months, except for the varying number of days of prohibition. Because of this fragmentary stoppage by days per month throughout the years the issue is not as clear-cut as it would be if the order of the Government were for a total stoppage for a term of months or years, but is just as real. It flies in the face of the contractual provision just as clearly as would an order of the Government decreeing a total shut down for a calendar year or years. Suppose the Government had determined to effect proration or limit production by closing various oil fields of the State at different times and had decreed that the area covered by the lease should be shut down for a period of five calendar years. The term of the lease is for fifty years with a provision that “when operations are delayed as the result of some order of the Government, the time of such delay shall not be counted against the Lessee.” Can there be any doubt that the five years would not count against the fifty year term? Or stated more accurately, from a Court’s standpoint — does a reasonable common sense “construction” or “interpretation” of the contractual provision show the intention of the parties to be that such five year period of time shall not count. The shut down here was just as real as ore for a period of calendar years, it totals either 4,286 or 4,661 days that various wells were shut down by Government order. The majority finds the intention of the parties to be that the fifty year provision is absolute, that they intended that it not be affected by the shut down orders of the Government. ■ It seems to the writer that such an intention cannot be found without disregarding the quoted express words of the contract. Those words must have some purpose, they must have been put there by the parties for some reason, yet as the contract has been interpreted, Section 7 has been struck from the contract.
*593The express words of the lease being, “When drilling or other operations are delayed or interrupted .... the time of such delay or interruption shall not be counted . . . . ,” the argument is made that the phrase “drilling or other operations” does not cover and include producing operations and thus affect the term. This would seem to be the only way that the express words could be avoided, but I cannot agree with it. The majority is uncertain about it, but concludes that “other operations” refers to exploration and development rather than to production. Again, I must disagree. It must be remembered that we are construing a provision covering the event of impossibility of performance as a cause of termination of the lease — -forfeiture. The lease begins with the stated purpose that the Lessors demise and let unto the Lessee, Gulf, the described land, “with the exclusive right of exploiting the same for and producing oil and gas therefrom, and to that end also grant the exclusive right of drilling and operating thereon for oil and gas, .” The very physical form of the printed document belies any intention that Section 7 applies only to drilling operations. As noted, it is divided into twelve main or subject “Sections,” with each such section subdivided into numbered paragraphs under it. Drilling operations, when forfeiture could occur for failure to drill or pay delay rentals within certain periods of time, are covered within the six subpar-agraphs under Section 1. That portion of the contract here involved is not under Section 1 with drilling provisions. Rather, it is a separate, complete, and entire section — number 7 of the 12 sections. Section 7 must apply to delays occurring during the entire term of the lease. It says “the time of such delay or interruption shall not be counted against the Lessee — anything in this lease to the contrary notwithstanding.” To me, the “anything to the contrary notwithstanding” statement makes certain, absolute, the intention' that the time of delays shall not be counted. It also shows that the provision is to apply to the entire lease, not just to drilling and exploration, for it says anything “in this lease,” and that can only mean the entire lease. Again, here are words of the contract which cannot be disregarded. There is nothing to indicate that -it was intended to apply only to drilling operations, and the reasonable meaning of the contract as a whole points to a contrary intention. The subject of the contract, its entire purpose, is to obtain, produce, oil and gas. It is not a drilling contract. By far the greater time and quantum of activity concerns producing oil and gas under the lease. Forfeiture for delays in drilling activities could only occur prior to obtaining initial production. Such forfeiture is specifically covered in Section 1. Once production is obtained, the lease is kept in force by the “as much longer thereafter” provision. The drilling of a well could take anywhere from thirty days to a year, and if production were had, there would be no further concern with forfeiture for delays in drilling, but “other operations” would continue “as much longer thereafter” for fifty years. These other operations have in fact involved the drilling, completing, and producing of over 900 wells and the transporting and marketing of their production over a period of 46 years. Section 7 applies to something. How can a Court say it applies to “drilling,” but does not apply to “other operations?” Especially when the subject is forfeiture and that can only occur prior to initial production so far as related to drilling. To say that the parties intended Section 7 to so apply is to emphasize a very minor part of the activities and time covered by the lease. It also requires that the express words “other operations” be disregarded. The language used by the parties should be given its plain grammatical meaning unless it definitely appears that the intention of the parties would thereby be defeated. Fox et al. v. Thoreson, 398 S.W.2d 88 (Tex.Sup.Ct.1966). What, may I ask of the majority, is before this Court that makes it definitely appear that the intention of the parties would be defeated if “other operations” were left in the con*594tract. A Court is required to presume that parties to an instrument intended every word in it to have some meaning. Masterson et al. v. Gulf Oil Corporation et al., 301 S.W.2d 486 (Galveston, Tex.Civ.App., 1957, ref. n. r. e.); Smith et al. v. Davis, 453 S.W.2d 340 (Ft. Worth, Tex.Civ.App., 1970, ref. n. r. e.). The conclusion of the majority is that “other operations” refers to “exploration and development rather than to production.” Exploration and development have gone on throughout the entire term — over 900 wells over an area exceeding 45,000 acres — and were still going on to date of trial. Yet, any delays in these operations throughout the years following initial production would not affect the term. It must be held that the parties have done a useless and vain thing by their Section 7 agreement. To this writer, who has lived most of his life in the oil fields, it is poppycock to hear the argument that “operations” does not include producing the oil and gas. Producing operations are the very purpose of the oil and gas lease, and such operations arise from and are carried on only by virtue of the lease. Next to the oil and gas lease, the instrument probably most common to the oil industry is the “Operating Agreement” which covers production operations of joint owners. One who is in control of the producing operations is called the “operator.” The man in the field actually producing the oil is called a “lease operator.” The lease before us has other provisions which seem to apply during the entire term, one being that the Lessee should have free use of gas, oil, wood, and water to “operate and drill any wellsanother provided that the Lessee agreed to pay for destruction of growing crops caused by “operations hereunder.” Would this apply only during drilling? Texas cases allowing recovery under such wording during the entire period of production are legend. It must be concluded: A Lessee who produces oil and gas is engaged in an operation under his lease.
One of the reasons given by the majority is that some twelve other leases to which Gulf was a party contained a paragraph identical to Section 7 but were not for a term of years. This, they say, is “mute evidence” of intention that this lease would differ. Such evidence is so “mute” that it should not be heard above the roar of the express words used in this lease. It is analogous to saying that because A bought land from B with a house on it, it was intended that the land he buys from C would have a house on it (even though the deed says in express words there is no house). If there is need to look to the surrounding circumstances to determine the intent of the parties, this would seem to be a misapplication of the evidence admitted under the rule of looking to surrounding circumstances. As this Court said in Gruss v. Cummins et al., 329 S.W.2d 496 (1959), writ ref’d n. r. e.:
“The most important class of facts which are excluded on the ground of irrelevancy are the acts and declarations, either of strangers, or of one of the parties to the action in his dealings with strangers. Such facts are denominated ‘res inter alia acta.’ ”
And as we said in Davis v. Zapata Petroleum Corporation, 351 S.W.2d 916 (1961), writ ref’d n. r. e., quoting from Stuart v. Kohlberg, Tex.Civ.App., 53 S.W. 596, 597:
“ ‘ * * * it would be manifestly unjust to admit, since the conduct of one man under certain circumstances, or towards certain individuals, varying, as it will necessarily do according to the motives which influence him, the qualities he possesses, and his knowledge of the character of those with whom he is dealing, can never afford a safe criterion by which to judge of the behavior of another man similarly situated, or of the same man towards other persons.’ ”
This evidence is before us, but I would give it little weight as to the intent of these parties to this lease contract.
Another weakness in the position of the majority is the attempt to explain away *595Section 7 by giving it a name, “force ma-jeure” or “excuse clause,” and then reciting the interpretation and effect commonly given to clauses of such name. The parties to this lease gave their words no name, and the majority is interpreting those words by adding a name and construing it instead of the actual words used. Even if we call it a force majeure or excuse clause, it serves the very purpose alluded to by the majority — it is an agreement as to what happens in the event of impossibility of performance. That’s what this case is all about. The parties recognized that impossibility of performance would not excuse performance, so they took care of such contingency by agreement — Section 7. The problem is to determine the effect of such agreement on the term. Obviously, it does not extend the fifty year term; rather, it prevents such term from being shortened by impossibility of performance.
The majority notes that Section 7 contains some fourteen specifically enumerated matters which would excuse performance and to uphold the one before us as to orders of the Government would require that the others would also have to be upheld ; this, they speculate could possibly cause this lease to run in perpetuity, a construction they term to be “most drastic and far-reaching.” In the first place, the other matters are not before us for interpretation, and if we are to base our construction on speculation, we should speculate they are not likely to come before us in the few remaining years of the term. We should be sure that we are not running from one issue because it might lead to others. As to the possibility of war, riots, or the other matters, we will cross that bridge when we come to it. Secondly, the argument cuts both ways, for the other matters have been placed in the agreement by the parties, yet they are wiped out by this decision without ever being called into play. As to the suggestion of perpetuity, the lease can last only as much longer thereafter as there is production, which is the more common term of oil and gas leases and is neither drastic nor far-reaching. That is also the term of this lease, except as modified by the fifty year term, which I find the parties intended to be in fact fifty years and not a lesser number due to impossibility of performance. Such a finding is necessary if we are to harmonize the provisions of the contract and say that fifty years is in fact fifty years of operations thereunder and this does not include such times as there are no operations due to impossibility. Had the parties not intended fifty years of operations, it would have been simple to say, Provided, that this lease shall expire on July 14, 1975 (50 years from date of making). Instead, even the habendum clause guards against forfeiture, the full provision following “as much longer thereafter” is:
“Provided, that this lease shall not remain in force longer than fifty (50) years from this date, and provided further, that a temporary cessation of production due to cleaning out, working over or drilling deeper of any well, or similar causes occurring after production secured, shall not terminate this lease.”
A matter which concerns the writer is the waste of natural resources which may occur if this lease is cut short. Under the terms of the lease, the Lessee has the right to remove all of its property at termination. It has the right to draw casing from the wells and plug them. Common sense and judicial knowledge (if the two can exist together) tell us that the equipment for operation of over 900 wells is valuable and will be removed at termination. What happens then to natural resources in place? Will some of them be lost? In the time that it takes to drill new wells of this number will the formations remain the same or will they have lost their drive and the fugacious products migrated? What will happen to the wells which produce small amounts that merit continued production as equipped, but will not support the cost of drilling and equipping a new well? Since the obligations of a Lessee to continue to produce are different from those to *596drill and explore, will marginal production be lost? Will not cutting short this lease prevent or lessen the loss of oil and/or gas? If for no other reason, I think this case should be returned to the trial Court for development of the facts on the question of waste. This would seem to be a matter which should enter into this Court’s consideration of the case, since the prevention of waste of natural resources is the policy of the State as set forth in the Constitution and Statutes and orders of the Railroad Commission. If the choice is otherwise equal, should not the Courts favor a construction which prevents waste? Also, the majority has found that the lease contract was entered into in contemplation of the regulatory authority vested in the Railroad Commission and has held that the rights of the contracting parties to an oil and gas lease will be subordinated to the regulatory authority of the State even though the contractual right or obligations may be affected in so doing.
I agree with the majority in their finding that “the lease contract was entered into in contemplation of the regulatory authority vested in the Railroad Commission.” That answers any question as to the purpose of Section 7 with its provision as to time delays caused by orders of the Government. I strongly urge that we are not making a common sense construction of this contract when we find that the parties entered into it in contemplation of the regulatory authority of the Railroad Commission but did not intend that their agreement as to impossibility of performance included such orders. These are inconsistent findings. The only escape from them would be to adopt an argument of Appel-lees that if the parties intended their agreement to cover proration orders they could have said that. To so argue, is to admit that the agreement covers orders of the Government but is just not specific enough. Without attempting to look into the minds of the parties, suffice it to say they contracted as to “some order” of the Government. “Some order” includes these specific orders of the Railroad Commission. “Some” is defined in Funk & Wag-nalls New Standard Dictionary as certain particular ones not definitely known or not specifically designated. “Any” may be used as a synonym for “some.” Kayser v. Occidental Life Ins. Co. of California, 234 Iowa 310, 12 N.W.2d 582; “Some” is synonymous with “any.” Holtz v. Plumer, 133 Neb. 878, 277 N.W. 589. In Brown, The Law of Oil & Gas Leases, Sec. 15.01, at page 254, it is said:
“The laws of a state regulating activities which become the subjects of contract between private individuals are just as much a part of the contract as if they were expressed or referred to therein, for, as said in 17 CJS [Contracts § 330] 783: ‘ . . . it is presumed that the parties had such law in contemplation when the contract was made.
“Accordingly, conservation laws, rules and regulations in force in a particular state become a part of an oil and gas lease covering lands in that state.”
The conservation laws of the State of Texas, imposed by the Railroad Commission, have been a part of the lease before us since 1938. Neither party questions their validity and has never questioned them since their beginning, so far as the record shows. Is this “mute” evidence that they considered their effect to be governed by their agreement ? Aside from such speculation, I would hold that such laws and regulations are included in the term “some order” of the Government, as used by the parties. The parties contracted as to delays caused by orders of the Government, and orders there were. As men bind themselves, so must they stand bound. Menard v. Sydnor, 29 Tex. 257; Southland Royalty Company et al. v. Pan American Petroleum Corporation et al., 354 S.W.2d 184 (Tex.Civ.App.1962) reversed on other grounds, Tex., 378 S.W.2d 50; Whitaker et al. v. Formby et al., 469 S.W.2d 241 (Tex.Civ.App.1971) n. r. e.
The time of delay which shall not be counted against Lessee is the time lost by each well which was denied its full producing time. Lessee’s loss is not a delay in *597producing the entire leased premises for a day for each well prorated. Quite simply, each well is entitled to produce the total number of days which it has been prohibited from producing by orders of the Railroad Commission. When then does this lease terminate? Will it be when the last well with the maximum number of days lost has made up those lost days? I think not, for this would allow the Lessee to continue to produce other wells above their delay losses. As a practical matter, I see no reason why the days lost cannot be converted to oil and gas which would have been produced, and when the total of such production has been made up the lease will terminate. This would appear to be permissible under contract law, and would certainly be permissible under the ownership of oil and gas in place theory. Certainty as to the date of termination is thus achieved. The total production to be made up can be known as of July 14, 1975. This is as certain, or more certain, than the termination dates of the “so long thereafter” leases. The amount of production lost due to the delays is a matter of proof as to which the Appellant-Lessee has the burden.
I would reverse and remand this case to the trial Court.