Court Opinion

ID: 9672006
Source: CourtListenerOpinion
Date Created: 2023-08-24 03:47:03.410703+00
Date Added: 2024-06-11T18:16:13.117250
License: Public Domain

SEARS, Justice,
dissenting.
I respectfully dissent.
The only persons with authority to execute mineral leases are the owners of the minerals. Klein v. Humble Oil & Refining Co., 126 Tex. 450, 86 S.W.2d 1077, 1079 (1935). Appellants had no ownership interest in the mineral estate, therefore they could have no right to execute the leases thereon. “Only owners of mineral interests have authority to execute such leases.” Grissom v. Guetersloh, 391 S.W.2d 167, 171 (Tex.Civ.App.-Amarillo 1965, writ ref’d n.r.e.).
The history of Texas oil and gas law is that the executive right is a “power coupled with an interest.” A power coupled with an interest is defined as “a power accompanied by or connected with an interest in the property subjected to the power.” Superior Oil Co. v. Stanolind Oil & Gas Co., 230 S.W.2d 346 (Tex.Civ.App.-Eastland 1950), aff'd, 150 Tex. 317, 240 S.W.2d 281 (1951); see also Jones v. Guy, 71 S.W.2d 913 (Tex.Civ.App.-Texarkana 1934, writ dism’d). This power of executive right has been further defined as follows:
In order that a power may be irrevocable because coupled with an interest, it is necessary that the interest shall be in the subject matter of the power, and not in the proceeds which will arise from the exercise of the power. The person clothed with the power must derive, under the instrument creating it or from the nature of the relation, a present or future interest in the thing or subject itself on which the power is to be exercised, and not merely that which is produced by the exercise of the power. The question is, does the agent have an interest or estate in the subject matter of the agency independent of the power conferred, or does the interest or estate accrue by or after the exercise of the power conferred. If the former, the agency is coupled with an interest; if the latter, it is not. It has also been laid down that the estate or interest vested or created in the agent must be such as the agent could transfer or convey in his own name in the event of the death of the principal.
Superior Oil Co. v. Stanolind Oil & Gas Co., 230 S.W.2d at 352, and cases there cited.
Although the Texas Supreme Court affirmed the Superior Oil Co. opinion, and that opinion has been cited by many other courts, the Court later said the power did not have to be coupled with an interest. Pan American Petroleum Corp. v. Cain, 163 Tex. 323, 355 S.W.2d 506 (1962). In Pan American, the grantor conveyed an interest in the mineral estate and reserved the executive rights as to that conveyed interest. The Court said the grantor had no interest in the mineral estate conveyed but the reservation of the executive rights thereto was proper. However, the grantor still retained an interest in the mineral, estate, therefore he still had an interest in the property subject to the power. If we recognize that the power goes with the interest, and if we recognize that the interest can be divided and conveyed as undivided mineral interests with no executive rights, then so long as the grantor does not convey all of the mineral interest, the executive power is still coupled with some interest in the mineral estate. In the event all of the mineral interest is conveyed and the grantor attempts to reserve the executive rights, this is considered a “naked” power. Id. 355 S.W.2d at 508. The Pan American opinion is important because it recognizes the ambiguity in our law regarding executive rights. Further, it discusses the agency principle from which this power evolved:
(1) “An interest, not in the thing concerning which the power is to be exercised, or in the results to flow from its exercise, but merely an interest in being permitted to exercise it in order to earn his commissions.” This is a *7mere naked power, and is revocable at the will of the principal even though such revocation involves the breach of an agreement not to revoke it.
(2) “An interest, not amounting to a property or estate in the thing itself, but still an interest in the existence of the power or authority to act with reference to it, not for the purpose of earning a commission by the exercise of the power, but because the agent has parted with value, or incurred liability, or assumed obligations, at the principal’s request or with his consent, looking to the exercise of the power as the means of reimbursement, indemnity or protection.” Although this has been referred to by the courts as a power coupled with an interest and is not revocable by act of the principal, it is ordinarily deemed to be revoked by his death. For purposes of this classification, Mechem designates the same as a power given as security.
(3) “An interest or estate in the thing itself, concerning which the power is to be exercised, arising from an assignment, pledge or lien created by the principal, coupled with which is the power to deal with the thing itself in order to make the assignment, pledge or lien effectual.” This is the orthodox power coupled with an interest which is generally held to be irrevocable by the act of the principal or by his death or disability.
Id. at 508 (quoting 1 F. Mechem, Law of Agency § 588 (2d ed. 1914)).
The Supreme Court recognized that the Pan American situation fell in the second category, and the Court said:
It is clear that James Kiser had more than a mere naked power. Although he owned no estate in the subject matter on which the executive right was to operate, the power was reserved to facilitate the leasing of his interest in the minerals. It was for the protection of security of such interest that he stipulated for the power. On the basis of Mechem’s classification, such power might be regarded as one given by way of security but it is not coupled with an interest.
Id. While that Court found the power was not coupled with an interest in that portion of the mineral estate conveyed, I still prefer to believe that the power, to be irrevocable, must be coupled with some interest in the mineral estate. For a good discussion of the executive right, see H. Williams & C. Meyers, Oil & Gas Law § 348 (1959). The executive right is described therein as power inherent in mineral fee ownership. They further describe the executive right as appurtenant to the mineral estate. Our sister state of Louisiana has enacted a mineral code, and it states: “The executive right is a mineral right. It may exist independently or as a part of another form of mineral right, such as a mineral servitude.” La.Rev.Stat.Ann. § 31:106 (West 1975).
This majority opinion does what no other Texas court has done; it has provided appellants with an irrevocable executive right over a mineral estate in which they have no interest. This has never before been done in the history of oil and gas law. The only case that can be found in which the grantor conveyed all of the interest in the mineral estate and reserved an executive right is Dallapi v. Campbell, 45 Cal.App.2d 541, 114 P.2d 646 (1941). In this case the California court held that the reservation of the executive rights to a mineral estate over which the grantor had no ownership interest was void under the rule against perpetuities. This California case was discussed in O’Daniel v. Roth, 320 S.W.2d 51 (Tex.Civ.App.-El Paso 1958, no writ). However, it is distinguishable in that the O’Daniel conveyor retained a share of the mineral interest, and the power of the executive right was therefore valid.
Appellants have no interest whatsoever in the mineral estate except an interest in the proceeds derived therefrom. Texas courts have held that if the executive power is to be irrevocable there must be a beneficial interest in the thing itself, apart from the proceeds derived therefrom, to *8the extent that a revocation of the power would be depriving the holder thereof of a substantial right. Allison v. Smith, 278 S.W.2d 940 (Tex.Civ.App.-Eastland 1955, writ ref'd n.r.e.).
It would appear that the executive power reserved by appellants was a mere “naked power” as described in Mechem’s example number one, and such a power is revocable at the will of the principal.
I would hold first that an irrevocable executive right over a mineral estate must be coupled with some interest in that mineral estate. Second, I would hold that appellants created a revocable executive right; I would further hold that appellees, by execution of the oil and gas leases, revoked appellants’ executive rights. Third, I would hold that appellants conveyed to appellees the right to lease and an interest in the mineral estate. This is a power coupled with an interest and is irrevocable notwithstanding appellants’ attempt to require their joinder in the lease. Allison v. Smith, 278 S.W.2d at 945; Odstrcil v. McGlaun, 280 S.W.2d 353 (Tex.Civ.App.-Eastland 1950, no writ).
The judgment of the trial court should be affirmed.