Court Opinion

ID: 6880389
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:14:32.725285+00
Date Added: 2024-06-11T16:05:34.607477
License: Public Domain

HUTCHESON, Circuit Judge
(dissenting)-
I agree with the majority that if appel-lees stand in Houston’s shoes, that is, if they are Houston’s assignees as to the gas covenant Alkali made with Houston, Southern having failed to exercise its option, cannot lay claim to the well or its product and the judgment must be affirmed. I do not agree with them that appellees so stand. The controlling terms of Houston’s assignment to appellees made on January 6, 1938, six years after Houston had assigned its gas and gas rights to Southern Alkali, are these: “Whereas first party is the owner of the oil' rights under an oil and gas lease from Harrell and wife, to Kelly * * * ; and whereas first party is the owner of the oil rights under am oil and gas lease from Lawrence and wife to *338Harrell and Harrell to Kelly; * * * and whereas it is the intention of this instrument for first part to assign to second parties the oil rights under said existing leases insofar as they cover a portion of the above described lots, in consideration of the drilling of certain wells and the payment of the overriding royalty as herein provided. * * Houston Oil Company * * * does hereby bargain, sell, transfer and assign, subject to the performance of the obligations herein imposed, unto Jay Simmons and J. E. Webb, their heirs and assigns, all of its rights under said existing leases insofar as same cover a 1?ie working interest in the oil rights in and to, lots 23, 24 and 27, except the East 20 thereof, lot 20 and part of lot 13; * * * it is understood that it is the intention of first party that this assignment of the oil rights shall assign to second parties all of the rights under the original oil and gas leases, except the rights of the Southern Alkali Corporation and/or the Southern Minerals Corporation, as evidenced by the contract and assignment of gas rights of April 5,1932 * * * to which instrument and all of the terms thereof, reference is hereby made as if same were fully copied herein. Second parties by the acceptance hereof agree for themselves, to commence within 10 days of such acceptance, drilling operations * * * and continue drilling the premises herein assigned with no more than 30 days elapsing in the completion of one and commencing of another well, until the premises are completely drilled, upon penalty of forfeiture for failure to drill as agreed.” It was further provided: “As further consideration for this assignment, the Houston Oil Company reserves an overriding royalty of % in oil, that is % of % of the value or proceeds of the oil which shall be actually produced." (Emphasis mine).
Not only in the granting clause of this assignment but throughout, the thing assigned is declared to be, the oil rights under the Harrell lease. Nowhere in the assignment is there a reference to gas rights of any kind. It is quite plain, therefore, that the parties had in mind, transferring not gas but oil rights, and that if appellees took any gas rights by Houston’s assignment to them, it must be because the assignment in addition to transferring the oil rights Houston had under its leases, must be construed as transferring Houston’s rights in and to Alkali’s gas covenant with it. I think it plain that, read the instrument of assignment as you will, there may not be found in it any language having this effect. It first declares: that Houston is the owner of oil rights and that the purpose of the instrument is to assign the oil rights; then the granting clause provides that Houston bargains, sells, transfers and assigns all of its rights under existing leases insofar as same cover a 13/io working interest in the oil rights, in and to, five lots out of the Harrell leases; and finally in the last clause on which appellees put their main reliance it is stated: It is understood that it is the intention of first party that this assignment of the oil rights, shall assign to second parties, all of the rights under the original oil and gas leases except the rights of the Southern Alkali Corporation as evidenced by the contract and assignment of gas rights of April 5, 1932, and that instrument is referred to as if the same were fully copied. (Emphasis mine).
It is appellees’ position that the reference in this clause to the contract between Houston and Southern has the effect to extend the assignment beyond its intention and granting clauses, and, in addition to transferring all the oil rights Houston Oil Company had under its oil and gas leases, it transferred to Simmons and Webb, the gas rights granted it by Southern’s covenant that it might complete and own five gas wells, unless Southern pay the cost of their drilling and equipping. The argument here is that from the assignment of gas and gas rights to Southern Alkali, Houston Oil reserved the gas rights in and to the gas from five wells, if and when completed as the covenant provides; that Southern’s rights in such gas are derived not from the assignment but from its payment of the well costs within the forty days the covenant provided for; and that these gas rights, being reserved by the Houston Oil Company from the assignment, passed to appellees, as to the particular tract conveyed, under this language in the final clause of intent, “all of the rights under the original oil and gas leases except the rights of Southern Alkali,” notwithstanding that the granting clause and the instrument as a whole shows an intention to convey and conveys only Houston’s rights in oil.
Appellant’s argument against this is twofold: (1) that what is conveyed is determined and controlled by the granting clause, that mere expressions of intent *339will not enlarge the grant, and that if such expressions could do so, they are absent here, the assignment over and over reiterating its intention to convey oil rights. (2) The only purpose and effect of the reference to Southern’s contract was to call to Simmons and Webb’s notice that Houston Oil Company was assigning the oil rights subject to its covenant with Southern, that Southern might drill, complete, produce and own the oil from oil wells brought in by it unless, as provided in the covenant, the cost of drilling and equipping such wells was within the forty days provided therein, repaid to Southern. There was no occasion for a reference, there was no reference, to the gas rights granted Houston Oil by Southern, for the assignment to Simmons and Webb was limited to conveying oil rights. ' Besides the right to drill and own the gas was limited to five wells on the whole 1300 acres, more or less, and it could not be supposed that Houston was conveying to Simmons and Webb, the right to drill all the five wells provided for in the covenant. If, on the other hand, the contention is that the assignment was a partial one, giving Simmons and Webb a right to drill gas wells in the proportion that the acreage they took bore to the whole 1,300 acres, this contention must be rejected as not supported by any words appropriate to that purpose. In short, appellant insists that not only is the grant limited by express language to a grant of oil rights, and resort must be had to a forced construction to include in it, gas rights, but such a contention will not be permitted, for, derogating from Houston’s rights under the covenant, no intent to assign will be inferred in the absence of clear and definite language carrying that intent.
I agree with appellant. I think it plain that the assignment from Houston to Southern conveyed all Houston’s gas and gas rights under the leases, reserving none of it. The covenant with Southern for the gas in the five wells Houston might drill was a covenant for title upon condition. By it, Southern covenanted that Houston might complete up to five gas wells on the whole property and upon the condition that Southern did not pay for them within the forty days provided, Houston should own them and the gas they produced. The assignment to appellees neither refers to nor in. any manner affects this covenant. Kou :on still owns the rights under it; appellees are not Houston’s successors, they are strangers to it. This would be clear enough I think from the language of the instrument, even if Houston had sold to appellees its oil rights under all the land covered by the gas assignment to Southern. The fact that appellees’ assignment covers less than % of the whole land affected by the covenant and that the covenant is coupled with a limitation to five wells on the whole of the lands involved, makes it even clearer that Houston did not intend to and did not transfer its rights under the covenant as a whole, and there is not a word in the assignment to show an intent to treat the covenant as divisible. Cf. Cosden Oil Co. v. Scarborough, 5 Cir., 55 F.2d 634, and convey it in part.
With the covenant standing so limited, I think it quite plain that though Houston could have assigned it partially and Southern could not have complained because such an assignment neither increased nor diminished its rights, Houston will not be assumed to have done, it, and thus to have diminished its ozvn right in the absence of clear language shozving that it zeas its intention to do so. The rule of partial assignment is very simple and well settled as a reference to Standard Textbooks, 4 American Jurisprudence, p. 279, 281; American Law Institute, Re-Statement Contracts, Sec. 156; 6 C.J.S., Assignments, pages 1087, 1088, §§ 38, 39, 40, shows. This rule is, that a partial assignment was not valid at common law because, among other things, of the fact that it might subject the obligor to many actions. In equity, because of its more liberal procedure, a partial assignment was valid. Houston could therefore have made cither a complete or a partial assignment of this covenant. But the question is, did it? It is not even contended that it made a complete assignment and the authorities make it clea-r that a partial assignment will not be found absent a clear expression of intent to so assign, especially where such an assignment would be to the prejudice of the assignor.
It is perfectly plain here, that Houston would take nothing by an assignment of its gas covenant to Simmons, for Houston reserved no gas royalties upon any gas wells that Simmons might drill. The only royalties Houston reserved were overriding oil royalties. In these circumstances to imply an assignment against Houston is to take something from it, its right to drill *340and own gas wells, directly in the teeth of the language of the assignment, that oil rights were being conveyed, and give it nothing in return. I think it clear, therefore, that the conclusion that Houston transferred its interests in the gas contract under the gas covenant to Simmons and Webb, either in whole or in part, is in short, a strained and unreal one and without support in the evidence, and that our holding should be that Webb and Simmons have no rights in or to the gas because they took none by the assignment; that the gas belongs to Southern and ap-pellees must account for it. Such a holding will accord with the language of the assignment and with justice, by protecting Southern from the spoliation of its. gas and Houston from the loss of its gas rights which as I read the instrument, it did not at all intend to and it did not, convey.
If this view is correct and I think it is, it follows that appellees have and have had, no interest in or right to, gas produced from the well in question and that the judgment founded on the conclusion that they have, may not stand. Appellees are the owners of the oil rights, they are not the owners of the gas rights. Having no ownership or interest in them they must close off the gas sands from which they are producing, cease to operate the well as a gas well, and account to appellant for the gas they have taken.
I respectfully dissent.