Court Opinion

ID: 4898254
Source: CourtListenerOpinion
Date Created: 2021-09-03 00:13:44.879192+00
Date Added: 2024-06-11T08:12:50.537438
License: Public Domain

*78ON MOTION FOR REHEARING
MR. JUSTICE GRIFFIN
delivered the opinion of the Court.
Respondents attack our holding that petitioner is entitled to receive .955 of l/4th of the oil payment covering the 284.74 acres, or 67.98 mineral acres. As pointed out by us in our original opinion, the deed under which Minchen claims his rights specifically provides that the grantee shall receive l/4th of all bonus, or bonuses, which grantors shall receive for any future leases. The amount of the bonus on the entire 802.6 acres was $60,195.00, which figures out $75.00 per mineral acre. Minchen, who owned 67.98 acres for bonus purposes, would be entitled to receive $5,098.50, as set forth in our original opinion. Further, on the trial of this cause a stipulation was entered into between the parties showing that Minchen was paid .955 of l/4th of the cash bonus covering the 284.74 acres received by the lessors from the lessees. Such stipulation also show — in a letter written to the Fields — that the lessee so construed Minchen’s rights under the deed conveying the mineral interests to Phillips, Minchen’s predecessor in title, and that the Fields recognized this construction by paying Minchen his part of the cash bonus. The ownership of the production payment was stipulated as follows: R. L. Fields et ux, 1/3 thereof; Flora Barnes, 1/3 thereof; and R. E. Fields 1/3 thereof. The trial court’s judgment awards the production payment in the same proportion.
Minchen’s mineral interest was derived through B. Wendell Phillips. The relevant portion of Phillips’ mineral deed is as follows:
“This grant shall run, and the rights, titles and privileges hereby granted shall extend to Grantee herein, and to Grantee’s heirs, administrators, executors and assigns, for a period of twenty (20) years from date hereof (4/3/35) and as long thereafter as oil, gas or other minerals, or either of them is produced or mined from the lands described herein, in paying or commercial quantities. If at the expiration of said twenty (20) years from date hereof, oil, gas or other minerals, or either of them, is not being produced or mined from said land or any portion thereof in paying or commercial quantities, this contract shall be null and void and the Grantee’s rights hereunder shall terminate.”
Respondents also contend that Minchen’s rights to any bonus *79were cut off on April 3, 1955, the date his 20-year term ended. The stipulation between the parties to the suit (Plaintiffs’ Exhibit 13) shows that the first production from the wells on the 802.6 acres was on December 18,1948, and that production from the lease was being had up through the date of the trial on June 11, 1956. The provision contained in the lease regarding the oil payment was for $60,195.00 out of l/32nd of 7/8th of the oil and/or gas and other minerals, if, as and when produced, saved and sold. Clearly this would give Minchen a right in the production only during the life of the term of his mineral interest. It is the holding of the courts of our state that a provision to pay a certain sum of money out of oil or a fractional part of the oil or its proceeds, produced from a given lease is conditional upon actual production from such lease. Sheppard v. Stanolind Oil & Gas Co., Tex. Civ. App., 1939, 125 S.W. 2d 643, wr. ref.; Harris v. Wheeler, Com. App., 267 S.W. 465; Ferris v. Huffman, Com. App., 274 S.W. 125. As stated in Ferguson v. Mansfield, 114 Texas 112, 263 S.W. 894, 900, “it is quite elementary that an instrument payable upon a condition which does not import an absolute liability is not payable until that condition has happened. * * *”
And further from Sheppard v. Stanolind Oil & Gas Co., supra:
“The sole purpose of a mineral lease is to develop the property in order to produce the minerals, and where the consideration, in whole or in part, moving to the lessor is a sum stated payable out of production or a part thereof, the obligation thereby created is contingent upon the fact and extent of production. Of course, language might be employed in a particular instrument which would import an unconditional obligation to pay, as was the case in Bell v. Kirby P. Co., Tex. Civ. App., 269 S.W. 170.”
In discussing whether an oil payment was taxable to the payee, the court further said [ (4-7), p. 647] :
“* * * Consequently everything paid or contracted, whether in money or in oil or its proceeds, as distinguished from delay rentals, constitutes a part of the purchase price for the lease. In this particular the ‘oil bonus’ (the term usually applied to the sums under consideration) stands upon the same footing as the cash bonus. But here the analogy between the oil bonus and money bonus (whether cash *80or deferred) ends. Royalty also is on the same footing as bonus, cash, deferred, or oil, as regards representing a part of the purchase price for the lease. And this is true for another reason: Oil in place is a part of the land. It constitutes real estate. When it is severed from the soil, the land itself is taken (wasted) to that extent, and the corpus of the estate in the land is to that extent depleted. * * *”
Again, (6. 649), in discussing the cases of Sheffield v. Hogg, and Federal Royalty Co. v. State, 124 Texas 290, 77 S.W. 2d 1021, 80 S.W. 2d 741, the court says: “ * * * We have been unable to peruse the opinion, holding in mind the facts of the instant case, without concluding that the interest here involved, by whatever name it may properly be called, is an interest in real estate, an interest in production under the leases, and such an interest as imposes upon its owner the burden of the production tax under the statute we are considering. * * *” See also Tennant v. Dunn, 130 Tex 285, 110 S.W. 2d 53 (1937) ; State v. Quintana Petroleum Co., et al, 134 Texas 179, 133 S.W. 2d 112, 128 A.L.R. 843, rehearing denied, 134 Texas 179, 134 S.W. 2d 1016; 128 A.L.R. 850. Greene v. Robison, 117 Texas 516, 533, 8 S.W. 2d 655; Lemar v. Garner, 121 Tex. 502, 512, 513; 50 S.W. 2d 769, 773.
It is further established by the case of Sheppard v. Stanolind Oil & Gas Co., supra, that “anything which the lessor receives, in whatever form, in consideration for the oil taken or to be taken from the land, constitutes a part of the purchase price of the title to the oil, and therefore of the land,” citing State ex rel Moody v. Hatcher, 115 Texas 332, 281 S.W. 192; Andrews v. Brown, Tex. Civ. App., 283 S.W. 288, affirmed 10 S.W. 2d 707.
Professor A. W. Walker, in an article Oil Payments, 20 Tex. Law Rev. 259, discusses the various cases in Texas on the question of whether or not an oil payment is an interest in land and sums up the matter by saying that, “The decisions in Tennant v. Dunn and State v. Quintana Petroleum Co. seem to have settled the law in Texas to the effect that an oil payment of the ordinary type which undertakes either to reserve or to grant a title to a fractional share of the oil or of the leasehold estate, or which provides for a delivery of this share of the production in kind to the payee, creates a present interest in land in the payee.” And further (p. 263), “actually this language [as, if and when produced] is used in oil payment clauses for the pur*81pose of fixing the time of payment and in order to make it clear that payment is only to be made out of production, and its use does not indicate an intention by the parties that no present interest in the oil in place shall be vested in the payee.”
All of Minchen’s interest in the minerals were received under a deed expressly limiting these rights to a term of 20 years from April 3, 1935. These rights expired April 2, 1955, and among those rights expiring was the right to receive a part of the oil payment set forth in the lease. So long as his interest was valid and binding he was entitled to his share of the production until that share amounted to $5,098.50. If his 67.98 acres interest in l/32nd of 7/8ths of the production from the 802.6 acres equaled the amount of $5,098.50 prior to April 3, 1955, Minchen should recover judgment for such amount. We are unable to accurately determine from the record before us just how much Minchen’s share of the production would be up to and including April 3, 1955. We therefore modify our former opinion only to the extent that this cause is remanded to the trial court for the purpose of rendition of a judgment for Minchen for his 67.98 acres interest in l/32nd of 7/8ths of the production from the 802.6 acres up to and including April 3, 1955, but in no event to exceed the sum of $5,098.50.
Mrs. Flora Barnes contends that Minchen’s rights are governed by the requirements of the Statute of Frauds and must be evidenced by written instruments. That is correct. Minchen’s rights are by virtue of the written deed to Phillips and the ensuing written assignments to Minchen, plus the written oil and gas lease executed by the Fields to Progress Petroleum, Inc., and the written assignments of that lease to the present lessee, Sohio Petroleum Company.
Respondents’ motions for rehearing are granted and our former judgment is modified as herein stated; otherwise, the judgment remains unchanged.