Court Opinion

ID: 9777105
Source: CourtListenerOpinion
Date Created: 2023-08-29 19:57:45.985713+00
Date Added: 2024-06-11T07:32:48.719735
License: Public Domain

HIGHTOWER, Justice
(dissenting).
Both parties have filed their motions for rehearing in this case. I have respectfully concluded that I cannot now fully agree with the majority of the court. The appellant’s contentions should be sustained.
With no reservations whatever, I concur with those findings and conclusions of the majority that tend to defeat the lease. However, under the facts of this case, I cannot agree that the lease did not lapse prior to the payment of shut-in royalty thirty days subsequent to completion of the well.
One of the purposes 'of the shut-in royalty clause in oil and gas leases is to provide for the precise situation that existed in this case. The innovation was necessitated by ■ the problem, recurring frequently in the oil world, when a- well capable of producing gas in paying quantities was completed successfully at a time when there was no market or demand for its product, or when negotiations were still in progress for a contract . leading to the marketing of such product. As the gas could not be stored, the Lessor would then be entitled to contend that the lease had terminated by virtue of the automatic operation of the habendum clause as a clause of special limitation. The courts thus were presented with resulting different fact situations; in this instance (again) a lessee faced with financial hardship and, confronted at the same time with accepted legal principles and theories opposed to his receiving aid. Many of the courts which had these problems before them and have held that the lease had terminated because of *119such failure of production prior, or subsequent, to the expiration of its primary term mentioned that the lease contract did not provide for the contingency that gas wells might he developed which would be unproductive for want of a market; while courts in other jurisdictions avoided that result by rewriting, in effect, the lease contract, or by giving such a strained construction to the language of the leases that their .judgments were incompatible with the actual terms of the lease. The next logical step was the inclusion in leases of a shut-in gas royalty clause designed to remedy these undesirable results in advance. See 24 Tex.Law Review, p. 478, by A. W. Walker, Jr.; 9th Annual Institute on Oil & Gas Law, p. 1, by James E. Sperling.
Of course, a part of the last sentence only of paragraph 5 is pertinent. In the Osborn case, with reference to the same part of such sentence it is said: “This sentence means that if production results from the continuous prosecution of the very operations being engaged in by the lessees upon the expiration of the primary term, the lease is good.” [152 Tex. 540, 261 S.W.2d 315.] To this I would now add: Providing lessees tender the shut-in royalty payment prior to cessation of such operations resulting in production. '
But it is clear from the record as a whole that nothing was done from and after the time the well was shut in as a producer that could be classified as drilling operations. Certainly the thirty day slumber by the ap-pellee, prior to tendering the shut-in royalty check, cannot be so classified. Nor can awaiting the installation of a pipeline and gathering system, at the convenience of some third party (United Gas Pipeline), be so classified. To do so is to completely disregard the great weight of Texas authority to the contrary.
The lease lapsed. Both parties were experienced in oil and gas operations, but to put it succinctly the appellee “slipped up”. To paraphrase the Freeman case: If appel-lee had wanted to prevent lápsation of the lease for non-production, it could easily have done so by paying the twenty-five dollars on or before the last day on which the well was shut in as a producer. It could have met the condition which it imposed upon itself when it accepted the conditions of the lease. For its failure to do so it has only itself to blame. The lease lapsed as a matter of law when it so failed, and could not be revived by the attempt to perform the condition thirty days after the contract said it should be performed.
It being my opinion that the case was fully developed on trial on appropriate theories, I would accordingly reverse the judgment of the trial court and here render it in appellant’s favor.