Court Opinion

ID: 9563879
Source: CourtListenerOpinion
Date Created: 2023-08-21 18:49:06.391588+00
Date Added: 2024-06-11T09:18:06.853856
License: Public Domain

BLACKBIRD, Vice Chief Justice
(dissenting) .
I cannot concur in the majority opinion.
I do not subscribe to the “executive rights” rule for which it cites Texas cases. I think both the “rule”, and the reason for it, formulated in Veal v. Thomason, 138 Tex. 341, 159 S.W.2d 472, are unsound; that this is indicated in the more recent Texas decisions of Williamson v. Federal *1021Land Bank of Houston, Tex.Civ.App., 326 S.W.2d 560, and Archer v. Webb, 161 Tex. 210, 338 S.W.2d 435, 441, 442; and that the rule is inapplicable here.
One who has reserved the so-called “executive” right to execute future oil and gas leases covering a certain interest in the minerals lying in and under a particular tract of land, and the right to receive the bonus and delay rental money paid for such leases (as did Maddie Gaines Harrison, in the “Oil and Gas Grant”, or mineral deed, she, with her then husband, executed and delivered to T. F. Chrystal, on February 8, 1927, describing the W½ NE}4 of Sec. 34, Twp. 17 N., Rge. 1 E), certainly is a “lessor” within the unquestioned definition of that term. And the rule followed in both Oklahoma and Texas, is that when the (rightful) lessor of two adjoining tracts covers them with one, and the same, lease, he or she agrees, in effect, that the lessee may treat them as one leasehold — not only for the purpose of development (so that the drilling of a well on either of the tracts will continue the lease in effect past its primary term) — but for all purposes. See Southland Royalty Co. v. Humble Oil & Refining Co. (Tex.), 151 Tex. 324, 249 S.W.2d 914, 916, 917. If this be true, then the lessee, not only has the right to pay the landowner’s ⅛⅛ share of the production to each of the owners of the minerals under both tracts (that have thus been merged, or fused, into one leasehold) in the ratio, or proportion, which his or her interest bears to the total acreage in said leasehold — -but he must do this; othewise, some owners may never receive any consideration, or compensation, for the advantages of joint development thus given the lessee, and for the depletion of their mineral estate by such development. The Majority recognizes Maddie’s lease, as unitizing for development the acreage it covers, but refuses to recognize its concommitant unitizing effect upon distribution of the royalty accruing thereunder. The gravity of this situation may be readily demonstrated by supposing that, in the present case, the only well on either of the 40-acre subdivisions of the 80 acres described in the Van-Grisso lease, had been drilled in Section Thirty-four’s northeast quarter’s southwest quarter, only a few feet west of said quarter section's eastern boundary. If the same rules, and line of reasoning, that the majority opinion has employed in awarding Maddie Gaines Harrison’s heirs the entire ⅛⅛ of all of the oil that has been produced from the southeast quarter section (which 40 acres I will hereafter refer to as “Tract I”) were applied to such a hypothetical case, then Maddie’s heirs would get no part of that well’s production, even though a large part of it was naturally and necessarily drained from under the southeast 40 acres, or Tract- I, in which they own the entire mineral estate. Surely, Maddie never intended such a result to accrue from her inclusion of said quarter section’s southwest quarter, (hereinafter referred to as “Tract II”), in the same lease, with her Tract I. Nor do I think T. F. Chrystal, when he accepted the oil and gas “grant”, or mineral deed, from Maddie, with her reservation of the executive rights over future leasing written into it, ever intended to subject himself to the detriment that could befall him by the drilling of a well immediately east of Tract II, on Maddie’s Tract I. In respect to such considerations, see the discussion pertaining to Galt v. Metscher, 103 Okl. 271, 229 P. 522, in the Annotation at 64 A.L.R. 634.
While there may be an historic reason for fabricating a theory, or fiction, of “cross-conveyancing” to sustain the apportionment of royalty rule in States like Texas and Arkansas, which subscribe to the ownership of oil in place doctrine (see Osborn v. Arkansas Territorial Oil & Gas Development Co., 103 Ark. 175, 146 S.W. 122), I do not think it is necessary to find such a theory on which to sustain it in Oklahoma, where the “recovery” right to natural oil and gas deposits has been referred to as a profit a prendre, connoting only qualified (as distinguished from absolute) ownership of an incorporeal (rather than a corporeal) *1022hereditament (Rich v. Doneghey, 71 Okl. 204, 177 P. 86, 89, 3 A.L.R. 352). Many of this court’s early decisions, and all of ottr later ones, deal in an enlightened manner with, and are attuned to, the recognized fugitive nature of oil and gas, and the cprrelative rights of adjoining owners in a common source of oil and gas supply. See Panhandle Eastern Pipe Line Co. v. Corp. Comm., Okl., 285 P.2d 847, 853.
But, assuming that one, who has only the “executive” right to lease a mineral interest, cannot merge it with another such interest for the purpose of the apportionment of the producing royalty from the single leasehold created under his or her said lease, because he or she does not own said interest, or have the right to convey, or cross-convey, it in return for the same proportionate interest in the adjoining tract, or part, of said leasehold, such a theory would not apply to apportionment of the oil produced by the well on Tract I, because Maddie owned the entire mineral estate in that tract, mid, of course, could convey, or exchange, it at any time. When the owners of the Chrystal interest thereafter ratified Maddie’s lease, they in effect, agreed not only to the extension, over their interest in Tract II, of Maddie’s base lease past its primary term (in the event of the drilling of a well on her solely owned adjoining Tract I) — but they also bound her to share with them the landowners ⅛⅛ of any commercial production that might be obtained on Tract I, in return for sharing with her the production that might be obtained on Tract II. In other words, the previous bilateral agreement, or lease, between Mad-die, the lessor, and Van-Grisso, the lessee, had, because of Van-Grisso’s precaution of obtaining the ratifications, became a tripartite, or trilateral, agreement. All of the authorities recognize that it is not necessary for all of the owners to sign one and the same instrument in order to create a unitizing lease, or contract. See, for instance, Veal v. Thomason, 138 Tex. 341, 159 S.W.2d 472, 475, cited in the quotation from Minchen v. Fields (Tex.), 345 S.W.2d 282, 285, appearing in the Majority opinion, and Thomas v. Ley, 177 Okl. 150, 57 P.2d 1186, 1188, cited in the Veal case.
Furthermore, I think the majority opinion attaches undue and unwarranted significance to the word “hereafter” in the lease’s “entirety” provision. To my way of thinking, that word is the only word that needs to be used in such a lease provision to effect apportionment at any time after the lease is executed and delivered, and production is obtained thereunder. The word simply connotes the opposite of “heretofore” and the words “now are or”, if also inserted with “hereafter” in such a provision, could add nothing, because no provision of any lease ordinarily has a retroactive effect, or purports to become effective until “hereafter”-— meaning: After the .lease is executed and delivered and can then (for the first time) . affect the land in any way. I join Mr. Claud O’Quinn, author of the article, beginning at page 125 of the “Eighth Annual Institute on Oil and Gas Law and Taxation” in thinking that the addition of the words “now are or” to the expression: “If the leased premises * * * shall hereafter be owned severally or in separate tracts * * * ”, originated in a jurisdiction where the leasing of adjoining tracts does not have the automatic, or presumptive, effect of pooling, as it does in Oklahoma. In any event, the fact that such words have been added to the entirety provision of some leases has never had the effect of overcoming the presumption which has existed in this State as early as the 1924 case of Gypsy Oil Co. v. Schonwold, 107 Okl. 253, 231 P. 864, and later than the 1942 case of Peerless Oil & Gas Co. v. Tipken, 190 Okl. 396, 124 P.2d 418, that when two adjoining tracts are included in the same oil and gas lease, it is contemplated that they be mined and operated for the production of oil and gas in all respects as one unit or leasehold. In the Peerless case, this court adopted with approval, the reasoning of the West Virginia Supreme Court in Lynch v. Davis, 79 W.Va. 437, 92 S.E. 427, L.R.A.1917F, 566, that the presumption of this intention, or *1023contemplation, is based upon the presumed knowledge of the parties to the lease concerning both the rights of the lessee and the fugitive character of oil and gas in place. In the Gypsy Oil Company Case, supra, this court said:
“A small amount of practical knowledge of the oil and gas industry must be persuasive that in numerous cases a just and equitable division of the royalty, in the absence of such clause, is all but an impossibility. Many tracts of land, rich in the production of oil, are subdivided by their owners until the tracts become so small that it is improbable that any well will be drilled upon all the tracts, if indeed they are not so small that it is impossible to drill upon each tract.”
Here, by including in the same lease with her own solely-owned Tract I, and her undivided 10-acre interest in Tract II, the Chrystal undivided 20-acre interest in the latter tract, Maddie Gaines Harrison could not give Van-Grisso the right to drill on any particular geographical area, or subdivision except the SEJ4 NE}4 of Section 34 (Tract I), but she could authorize the owners of said undivided interests to share with her in the royalty from any well drilled on that tract. Since this has been the effect of such a lease in this State for so many years, I think it should be accorded the stability and weight of a rule of property, and should not be renounced in the absence of the most impelling reasons. To paraphrase language of the Texas Supreme Court in Southland Royalty Co. v. Humble Oil & Refining Co., supra, 151 Tex. 324, 249 S.W.2d 914, 916: No doubt many leases like the one Maddie Gaines Harrison then Smith and her husband executed and delivered to Van-Grisso Oil Company on January 12, 1952, have been executed and delivered by lessors, and accepted by lessees, in Oklahoma, in reliance on the applicability of the apportionment rule to them.
The trial court was correct in refusing plaintiffs claim of exclusive right to the royalty owners’ entire ⅛⅛ of the oil produced through the well on Tract I, but he fell into error in computing the fractional parts thereof. As Maddie’s successors, plaintiffs were entitled, because of the above-described pooling, or unitization, of that tract with Tract II, to 5%oths of that production, instead of only 6%oths, as the trial court held. This court should therefore reverse and remand the trial court’s judgment, and order the entering of a new one directing distribution of the oil production involved herein in the following manner :
To plaintiffs, 6%oths, and to the present owners of the T. F. Chrystal interest, 294oths —of ⅝⅛ of the Tract I well’s production; and to said parties collectively (or individually, in proportion to- their fractional interest in Tract II) 3%oths, or %ths, of ⅜⅛ of the Tract II well’s production;
To the present owners of the Slick interest, ¼⅛ of ⅛⅛ of the Tract II well’s production.
For the foregoing reasons, I respectfully dissent.