Court Opinion

ID: 9660839
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:22:14.794858+00
Date Added: 2024-06-11T18:14:21.973609
License: Public Domain

HAMILTON, Justice
(dissenting).
I am in agreement with the original majority opinion and for that reason I dissent from that portion of the opinion on Motion for Rehearing which limits the period during which the petitioner may recover oil payments made, or to be made, pursuant to the terms of the lease contract as a “bonus” for such lease.
The lease in question was executed on February 28, 1947, between R. L. Fields and wife, Mary Frances Fields, as lessors (agents for petitioner) and Progress Petroleum, Incorporated, as lessee. Such lease, though describing three contiguous tracts, covered 802.60 acres for the purpose of delay rentals and bonus payments. The last clause of this lease provided that “As a further consideration for this lease, lessor is to receive Sixty Thousand One Hundred Ninety-Five Dollars ($60,195.00) out of Vs2tid of %ths of the oil and/or gas and other minerals, if, as and when produced, saved mid sold.” (Emphasis added.)
The above quoted clause created a presently vested determinable incorporeal interest in land in the petitioner to the extent of the amount of his term mineral fee ownership in the acreage leased — 67.98 acres interest in ⅜2 of ⅞ of the production from the 802.6 acres until the production equaled the amount of $5,098.50 (Minchen’s share). Petitioner’s interest is an “oil payment” and it constitutes part of the total consideration paid by the lessee for the lease. Petitioner’s rights to this “oil payment” arise out of the provisions of the lease contract and such “oil payment”, when and if paid, comes out of the working interest owned by the lessee. Since the oil payment is carved out of the working interest in the lease, it is a burden on the lease so long as the lease is in effect, and the present existence of the lease is not questioned. It is to be noted, however, that the lease as to Minchen’s interest did terminate at the end of’the five-year primary *289term on February 28, 1952, because there was no ratification of the lease by Minchen. Since there was no pooling of Minchen’s interest with the other lands, production on other lands covered by the lease did not extend the lease beyond its primary term as to Minchen’s interest. Consequently, at the expiration of Minchen’s term interest some three years later it reverted to respondent Fields free and unencumbered even as to the lease. The effect of this court’s decree is to give to Fields a part of the lease consideration for which he gave up absolutely nothing.
The majority opinion on Motion for Rehearing holds that the petitioner’s interest in the determinable “oil payment” ceased with the expiration of petitioner’s term mineral interest on April 3, 1955. The effect of such a holding is that the oil payment is attached to the mineral interest. Since all of the usual forms of oil payments are regarded as creating incorporeal interests in land in Texas, it would seem that the payee’s (petitioner’s) interest in the “oil payment” is an interest in gross. There appears to be no justification for regarding it as being attached to a royalty interest, surface estate or possibility of reversion so as to pass under either of these interests without an express assignment or conveyance. 20 Texas Law Review 259, “Oil Payments”, by A. W. Walker, Jr., at page 280.
The majority opinion is undoubtedly correct in its restatement of the proposition that where the language “as, if and when produced” is used in oil payment clauses, it is for the purpose of fixing the time of payment and in order to make it clear that payment is only to be made out of production. Its use does not indicate an intention by the parties that no present interest in the oil in place be vested in the payee. It is with regard to the nature of petitioner’s interest and the duration thereof that the majority opinion is in error.
All of Minchen’s interest in the minerals were Not received under a deed expressly limiting the rights to a term of 20 years from April 2, 1935.' Minchen was and is a payee under the terms of the lease contract with Progress Petroleum, Incorporated, and under such terms he became a vested owner, of an “oil payment” for his 67.98 acres interest in Vg2 of ⅞ of the production from the 802.6 acres. It is not through the provisions of the term royalty deed that Minchen acquired his rights to this oil payment now being sought. This right arose out of the lease contract, which is still in force, and which provides that the “oil payment” shall be made at any time production is realized on the 802.6 acre tract.
By the terms of the lease which was executed prior to the termination date of petitioner’s term mineral interest, Minchen, as lessor-payee, became entitled to his proportionate share of the “oil payment” from the leasehold estate until the “bonus” of $60,195 has been paid. Under the facts of this case, petitioner’s right to the “oil payment” would be destroyed only by the termination of the lease and I would so hold.
I respectfully dissent.
SMITH, J., joins in this dissent.