ANDRETTA v. WEST

DUNAGAN, Chief Justice.

The appellant originally instituted this suit against the Superior Oil Company and W. E. West and wife in the 114th District Court of Smith County, Texas, alleging that he was the owner of a one-fourth non-participating royalty interest in a 100 acre tract owned by the Wests, which was then under an oil, gas and mineral lease to Superior Oil Company; and that by virtue of a lieu royalty agreement entered into between Superior and West, Superior had paid West certain monies as royalty and that appellees and Superior were jointly and severally liable to him for one-fourth proportionate part of said monies.

This action was brought in the nature of a suit for debt as a result of the monies paid to the Wests by Superior by virtue of the West-Superior agreement.

The Wests filed their pleas of privilege to be sued in Van Zandt County, the county of their residence. The Wests' pleas of privilege were sustained and such judgment on appeal was affirmed. Andretta v. West, 318 S.W.2d 768, (Tex.Civ.App.) 1958, writ refused, n. r. e. After transfer to Van Zandt County, the court entered an interlocutory decree in favor of Superior Oil Company, following the opinion of the Court of Civil Appeals in the case of Andretta v. West, supra, that plaintiff could not recover against Superior since he had failed to notify Superior of his royalty interest in accordance with the terms of the original lease under which he purchased.

W. E. West and wife owned 100 acres of land in fee. In 1942, they made an oil and gas lease for a ten-year primary term, which Superior later acquired. Subsequent to the lease, the Wests sold a one-fourth non-participating royalty interest in 1943 and appellant later acquired this non-participating interest.

Trial of this case was before the court without the aid of a jury. Judgment was rendered for appellees in which the interlocutory decree theretofore entered on behalf of Superior was made a part of the final judgment.

Appellant, who was plaintiff below, sued W. E. West and wife, Mrs. Willie B. West, and the Superior Oil Company to recover one-fourth of certain payments made by Superior to the Wests in accordance with the West-Superior agreement. Appellant in his brief states that: "(In view of the holding in the earlier appeal of this case involving venue, Andretta v. West, 318 S.W.2d 768, Tex.Civ.App., 1958, writ ref., n. r. e. on the question of Superior's liability, Appellant hereby abandons his suit against The Superior Oil Company. * * *" Accordingly, the reference in this opinion to "appellees' means only the Wests. The trial court held (1) that the payments in question did not constitute royalty, and (2) that even if such payments were royalty, appellant's claim is barred by the two-year statute of limitation.

All proceedings in this cause have been timely and regular, and this appeal is properly before this court for review.

Pursuant to appellant's request therefor, the trial court made and filed his findings of fact and conclusions of law. The facts in this case are undisputed, therefore it would serve no useful purpose to include said findings of fact and conclusions of law in this opinion.

Appellant, as grounds for his appeal, presents four Points of Error:

"POINT 1.

"POINT 2.

"POINT 3.

"POINT 4.

Appellees, owners of fee simple title to the 100 acre tract of land, on September 4, 1942, executed to George W. Lack an oil, gas and mineral lease thereon. This lease, drawn in routine form, provided for a ten-year primary term and a one-eighth royalty interest. The lease was assigned to Superior Oil Company on September 18, 1942, and will herein be referred to as the "Superior lease."

In answer to requests for admissions, appellees admitted that the Superior lease continued in full force and effect from its date of execution until released by Superior in July of 1957.

No oil or gas has been produced from the 100 acres and there is nothing in the record to indicate that it was capable of producing either oil or gas.

On August 31, 1944, during the primary term of the lease, W. E. West and the Superior entered into an agreement which is the subject of this suit. Appellant was not a party to the agreement, although he had, as shown by the admissions, demanded of Superior that some action be taken under the lease for development and he was advised by Superior that it contemplated no action and offered to farm out the lease to him. It is shown by the testimony of the appellant that he had been engaged in the oil business since 1922 and was thoroughly familiar with the oil business.

The agreement between West and Superior, which we will hereafter refer to as the "West-Superior agreement" made August 31, 1944, was recorded in the deed records of Van Zandt County, Texas, on September 16, 1944, and contains the following provisions:

"I

"II

"III

"IV

"V

Pursuant to the West-Superior agreement, Superior paid to appellees during the period from August 1, 1944, through May, 1957, the total sum of $27,978.16, none of which was paid to appellant by the appellees or Superior.

Appellant has grouped Points 1, 2 and 3 for discussion in his brief and we will likewise group these Points in disposing of same on this appeal.

Appellees have filed six Counter Points.1

The West-Superior agreement very definitely states its object in the last paragraph thereof by saying:

We think the purpose of the agreement was to pay for the privilege of delaying drilling by Superior upon the land covered by their lease and to that extent applies as an amendment of Paragraph 4 of the oil, gas and mineral lease held by Superior at the time. The material parts of Paragraph 4 provide:

Insofar as this record shows subsequent to the West-Superior agreement, the Superior never paid to the Wests the rental of $250.00 for the privilege of deferring the commencement of operations for the drilling of a well as provided for in Paragraph 4 of the Superior lease, but to the contrary, the record shows that after said agreement Superior paid to the Wests only the monthly sums as provided for in the agreement for the privilege of deferring commencement of operations for the drilling of a well upon the 100 acre tract. This clearly shows the intention of the parties to the West-Superior agreement was for such agreement to be only for the purpose of paying for the privilege of deferring the commencement of drilling operations on the land involved in this controversy.

It appears also that the West-Superior agreement is applicable to Paragraph 2 of said oil and gas lease as an amendment to the portion thereof that provides:

because it is without dispute that the Superior lease was maintained in full force and effect long after the ten year period from the date of the lease by virtue of the payments made by Superior to the Wests under the West-Superior agreement.

We do not hold that the provisions of Paragraphs 2 and 4 referred to above of the Superior lease are the only provisions to which the West-Superior agreement may have some application.

The West-Superior agreement was a private agreement and was made only for the benefit of the appellees and Superior and as so expressed within the agreement itself, it was effective for the sole purpose of maintaining the lease in full force and effect for the time and in the manner therein provided.

Appellant seizes upon the term "lieu royalty" as used in the agreement, but such term did not add anything to the agreement, nor make it production from the 100 acre tract at all, and calling an interest an overriding royalty or a lieu royalty would not be conclusive of its true status.

The Supreme Court in Delta Drilling Company v. Simmons, 161 Tex. 122, 338 S.W.2d 143, 146, speaking through Associate Justice Greenhill, said:

Simply because the Superior and Wests used the word "royalty" did not make the delay rentals royalty unless they really were.

The royalty deed from West, under which the appellant holds, contains the following provisions:

This was followed by a description of the 100 acre tract of land involved in this controversy, being the same land described in the oil and gas lease held by Superior. The instrument further provides:

It also provides:

In the case of Griffith v. Taylor, 156 Tex. 1, 291 S.W.2d 673, the Supreme Court sets at rest the definitions of "bonus," "rental," and "royalty." In quoting from the Supreme Court of Louisiana and adopting its words, the court used this language:

Applying the law pronounced in the Griffith case to the West-Superior agreement, the payments from Superior to West which were for the sole purpose of delaying or deferring drilling operations on the West 100 acre tract and maintaining the lease in full force and effect, were "rental payments."

The Texarkana Court of Civil Appeals held in Andretta v. West, supra, 318 S.W.2d page 772:

Surely the warranty has not failed. Appellant sues for debt, and if anyone owes him a debt, it is the Superior Oil Company, not the Wests.

The Wests made a private contract with the Superior and as said by the Supreme Court in Dickason v. Mathews, Tex.Civ. App., 335 S.W.2d 658, at page 661:

The non-participating royalty interest acquired by appellant was passive in its nature and entitled him to participate only in the event of production from the land described in his conveyance, nothing more. If he wanted anything more, or desired something from the Superior, he should have demanded it of them. If they owed him anything, then they still owe him, but not the Wests. The Wests were paid what Superior contracted to pay them. Such is the expression in Evans v. Opperman, 76 Tex. 293, 13 S.W. 312, wherein the court, in discussing the payment of insurance and speaking through Judge Gaines, said:

To the same effect is the case of Patton v. Mitchell, 13 S.W.2d 146, 148, (Tex.Civ. App.) 1929, n. w. h., wherein the court said:

Appellant relies upon the case of Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543, and the case of Morriss v. First Nat. Bank of Mission, Tex.Civ.App., 249 S.W.2d 269. These cases were dealing with a contract providing for mineral royalty within the lease itself and not with the situation wherein there was a subsequent agreement and a subsequent contract made between different parties and for another purpose, and we do not believe these cases are applicable to the case at bar.

The Wests were paid by the Superior under a private contract to the appellees, who had a claim of right to it and were not in any sense of the word holding the money for the use of any other claimant, but only for the benefit of the appellees, themselves.

At the time of the execution of the original royalty instrument between the parties, the land described was under an oil and gas lease held by the Superior Oil Company. That lease stayed in existence during the entire time of the payments made to the appellees by the Superior Oil Company.

This lease having never been cancelled or forfeited, no executive rights ever inured to the benefit of appellees, and they were not called upon to execute them until such rights came into existence. Appellees were not in a position of trustees, nor bound to protect the interest of the grantee and his assigns in the royalty conveyance.

If the parties desired to participate in the payments under the oil and gas lease for the deferring of commencement of drilling operations, they could have very easily written into the instrument the same terms as were contained in the royalty conveyance under consideration in Masterson v. Gulf Oil Corporation, 301 S.W.2d 486, (Tex.Civ. App.) 1957, writ refused, n. r. e.

In that conveyance, the grantors excepted from the conveyance a one-sixteenth royalty interest and one-half of any bonus or rentals paid in lieu or in place of that royalty interest. The court held under such a reservation that they were not entitled to any monies paid in lieu of that royalty. There was no such language in the present conveyance to appellant, but, on the contrary, the conveyance itself provided:

This language is broad enough to cover any monies paid to the appellees to defer any drilling upon the property under lease, and by the provisions of the instrument itself, the grantee in said instrument, or appellant, would have no interest in those payments.

As said by Judge Pope in Campbell v. Dreier, 382 S.W.2d 179, (Tex.Civ.App.) 1964, writ refused, n. r. e., quoting from the case of Sellers v. Breidenbach, 300 S.W.2d 178, 179, (Tex.Civ.App.) 1957, writ refused:

If the parties to the royalty deed under consideration had wished or agreed that the grantee was to share in any payments of whatever nature, they could have written into the contract any terms and conditions with reference thereto, but not having so agreed, the court could not re-write the contract for appellant's benefit. Our Supreme Court has definitely followed this line of thought in Archer County v. Webb, supra, wherein they followed the opinion by the Circuit Court of Appeals in Scott v. Union Producing Company, 5 Cir., 267 F.2d 469, holding that a grantee in an instrument could have additional rights ingrafted by the court on his conveyance, but later said:

It is also held in Campbell v. Dreier, supra, that:

We have concluded that the payments made to the appellees herein by the Superior Oil Company were paid for only one purpose, and that was to delay the drilling of a well upon these premises, and regardless of the language of terms used by the parties, it came within the exception of the royalty conveyance itself, which provided in plain language that the grantee in said instrument should not participate in any rental to be paid for the privilege of deferring the commencement of a well under any lease, not confining the restrictions to any future lease, but using the language "now or hereafter."

We think this language could have no other meaning than that any monies paid to the grantor or appellees, under the lease in existence at the time of the execution of the royalty conveyance for the sole and only purpose of delaying the drilling of a well, were not to be shared by the grantor and the grantee. The language of the instrument itself forecloses the idea that the grantee in said instrument, or his assigns, were to have any interest in any rentals paid to defer the development or drilling of a well on the tract of land in controversy.

Appellant has quoted from an article "`In Lieu' Royalty Agreements in the Oil Industry" 3 Houston Law Review 84, written by Leslie Moses, wherein he makes the statement that:

In the case at bar, there are no pleadings or any evidence that at any time during the existence of the Superior lease or the West-Superior agreement that oil, gas or any other minerals were being drained from under the 100 acre tract of land in controversy.

The conveyance by the appellees to the appellant was at a time when there was a valid lease on the property, and such lease not having expired during the payment of the delay rental to appellees, no executive rights ever accrued and there was no trust relation existing between the parties.

There are some expressions by our Supreme Court notably in Schlittler v. Smith, supra, which announce the rule that the holder of an executive right under a mineral reservation owed a duty to the non-participating royalty owner of protecting his rights in the execution of any leases under the executive right. But, as said by Judge Pope in Campbell v. Dreier, supra, "* * * The existence of a duty to protect the royalty owners does not, however, mean that an owner or holder of executive rights has the additional and new power to change the terms of outstanding royalty deeds."

Under the provisions of the royalty deed, until the Superior lease became cancelled, or forfeited, the appellees were not the holders of any executive rights. Consequently, not having the executive rights in making the agreement with the Superior Oil Company for the delay of drilling, appellees could not have been acting as trustees for the appellant, and until said lease, which was in existence at the time of the making of the royalty conveyance was forfeited or cancelled, West did not owe the appellant any fiduciary duties, nor was he under any fiduciary duties to the grantee in the royalty conveyance, or to his assigns.

In the words of Judge Hutcheson in Scott v. Union Producing Company, supra, it is the mineral deed and its provisions that must be looked to, and the mineral deed in providing for any duties owing by the appellees to appellant, the court would not be authorized to insert into the agreement any provisions or agreements that had been omitted. Appellant's Points of Error Nos. 1, 2 and 3 are overruled.

In view of the disposition we have made of this case, under appellant's Points of Error Nos. 1, 2 and 3, it is unnecessary for us to discuss appellant's Point of Error No. 4.

The judgment of the trial court is affirmed.