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COURSEVIEW v. PHILLIPS PETROLEUM COMPANY (12/04/57)

decided: December 4, 1957.

COURSEVIEW, INCORPORATED
v.
PHILLIPS PETROLEUM COMPANY



Error to the Court of Civil Appeals for the First District, in an appeal from Brazoria County.

COUNSEL

Andrews, Kurth, Campbell & Bradley, F. L. Andrews, James R. Drury, and James W. Dilworth, all of Houston, for Courseview, Incorporated. Woodul, Arterbury & Wren, and Escar R. Wren, all of Houston, for Mid-Coast Oil Company, Petitioners.

COUNSEL

R. L. Foster, H. D. Turner, of Bartlesville, Okla., R. K. Batten, E. H. Brown, Tarlton Morrow and Vinson, Elkins, Weems & Searls, all of Houston, for respondents.

Mr. Justice Walker delivered the opinion of the Court. Mr. Justice Culver, dissenting in part.

Author: Walker

[ 1 Tex. Sup. J. Page 400]

    This is a controversy over the ownership and enforcement of purchase option rights under a contract executed in 1939 by Amos L. Beaty & Company, Inc., Victor H. Borsodi, and Phillips Petroleum Company. By the terms of the contract, Beaty and Borsodi assigned to Phillips some thirty-five oil, gas and mineral leases covering approximately 3,000 acres of land in Brazoria County known as the Chocolate Bayou Prospect, reserving to themselves one-fourth of the net profits derived by Phillips from the development and operation of the lands covered by the leases, and also agreed upon demand to execute to Phillips leases on certain mineral fee interests owned by them in such Prospect. Paragraph 7 of the agreement provides that if either party should purchase "any royalty or mineral interest or fee title" within an area specified in the contract, the other party would be given written notice of the purchase and would have twenty days thereafter within which to elect to purchase from the acquiring party a specified fractional interest therein. The parties to this action are Courseview, Incorporated, Mid-Coast Oil Company, Phillips Petroleum Company, and others whose names are not material. Courseview, claiming to have succeeded to the rights of Beaty under paragraph 7 of the contract, brought suit against Phillips to require a disclosure of purchases made in the designated area and to enforce specific performance of its right to acquire an interest therein. At the conclusion of the evidence on the first trial, the district judge decided that Mid-Coast was a necessary party and declared a mistrial.

After the joinder of Mid-Coast as a party defendant, the suit developed into a controversy between Courseview and Mid-Coast over the ownership of the Beaty purchase rights, and between Courseview and Phillips as to the former's right to specific performance thereof with respect to various properties. On the second trial there was a directed verdict that Courseview take nothing, but the Court of Civil Appeals reversed and remanded the cause for a new trial. Courseview, Inc. v. Phillips Petroleum Co., 258 S.W.2d 391 (wr. ref. n.r.e.).

Following the remand, the case was again tried and submitted to the jury, and judgment was again entered that Courseveiw take nothing. The Court of Civil Appeals concluded that Courseview is entitled to no relief against Phillips, but remanded the cause to the trial court for the entry of judgment establishing

[ 1 Tex. Sup. J. Page 401]

    Courseview's ownership of the purchase rights involved in the suit. 298 S.W.2d 890. Courseview and Mid-Coast each filed an application for writ of error, and both applications were granted. As the case reaches us, Courseview is claiming the right to purchase an interest in the following properties acquired by Phillips subsequent to the execution of the 1939 contract: (1) the Overley and Bookout tracts; (2) certain overriding royalty interests; and (3) the Andrau tract. It is our opinion that the Bookout and Overley tracts and the overriding royalty interests are subject to the purchase rights and that Courseview is entitled to specific performance with respect thereto, but we approve the other express holdings of the Court of Civil Appeals which have been attacked here. The judgment of the intermediate court will accordingly be affirmed, but the trial court will be governed by this opinion in entering its judgment. It is necessary first to determine the ownership of the rights created by paragraph 7 of the contract. Agreements executed by Beaty and Phillips in 1943 and 1945 converted the former's net profit interest under the contract into a 1/32 overriding royalty. This overriding royalty and other property were conveyed by Beaty to W. W. Burch and by the latter to Mid-Coast in 1946. Although the purchase rights are not explicitly mentioned in or conveyed by these instruments, Mid-Coast contends that they passed under the provisions of one of the clauses therein. In 1949 the officers of Beaty executed to W. W. Burch a deed purporting to convey all of the corporation's property and assets of every kind, the instrument reciting that the corporation had been duly dissolved and that the grantee was its sole stockholder and entitled as such to distribution of all its remaining assets. The following year Burch conveyed to Courseview all rights owned by him in any contracts between Beaty and Phillips.

The controversy as to the ownership of the purchase rights thus turns upon the effect of the 1946 deeds from Beaty to Burch and from the latter to Mid-Coast. Since the two instruments are in substantially the same form, we shall notice only the provisions of the first deed. By its terms the grantor conveyed "an undivided 25225/25625ths interest in all and singular the property and premises lying and being situated in the State of Texas and County of Brazoria, more particularly set forth and described in Exhibits A and B hereto annexed and made a part hereof." Exhibit A which describes one-half of the 7/8 working interest in an oil and gas lease executed by B.E. Norvell

[ 1 Tex. Sup. J. Page 402]

    to Pure Oil Company, is not material to this suit, but it does contain a general provision in substantially the same language as that quoted below from Exhibit B. Exhibit B describes eight separate tracts. Tracts 1 through 7 are fractional mineral and royalty interests in various parcels of land in Brazoria County, and the first six appear in each instance to be one-half of the mineral and royalty interests on which Beaty and Borsodi agreed in the 1939 contract to execute leases to Phillips on demand. The eight tract is described as follows:

" Tract 8. Chocolate Bayou Override, Brazoria County, Texas. A 1/32 overriding royalty interest in the oil, gas and other minerals in, under, produced and to be produced from the hereinafter described tracts of land situated in Brazoria County, Texas, said overriding royalty interest having been created by virtue of agreements between Amos L. Beaty and Company, Inc., and Phillips Petroleum Company; said tracts of land being described in and covered by the following described oil, gas and/or mineral leases, to-wit: * * *."

Following this language there are listed a large number of mineral leases, most of which are described simply by date, names of the lessors and lessee, and a reference to the deed records. This list includes some leases which were assigned to Phillips under the terms of the 1939 contract and others which apparently are renewals of leases covered by that portion of the agreement. Immediately after the description of the leases appears the following provision upon which Mid-Coast relies to support its contention that the purchase rights were conveyed by the deed:

"Together, in each case, with all its right, title and interest in and to any additional, correction, or amended leases, extensions, renewals, contracts or agreements covering or in any manner affecting said properties."

Mid-Coast argues that this provision was placed in the deed for the purpose of conveying all of the grantor's right, title and interest in any agreement covering or in any manner affecting the properties previously described, that the 1939 contract is one such agreement, and hence that all of the grantor's right, title and interest in such contract, including the purchase rights created thereby, passed under the deed. In the alternative it says that the conveyance is at least ambiguous and that the

[ 1 Tex. Sup. J. Page 403]

    findings of the jury require that this construction be adopted. The jury found that by the 1946 deeds Beaty and Burch each intended to convey the option rights, but that Mid-Coast did not intend to purchase the same from Burch. We agree with the Court of Civil Appeals that the deed is unambiguous and does not convey the purchase rights, and therefore do not find it necessary to determine the legal effect of the jury findings. See opinion on motion for rehearing in Smith v. Allison, 157 Texas 220, 301 S.W.2d 608. The quoted provision does not purport to embrace all of the grantor's right, title and interest in and to any and all leases and contracts covering or affecting the properties previously described. Instead it refers only to "any additional, correction or amended leases, * * * contracts or agreements covering or in any manner affecting said properties." If given its literal meaning, therefore, the language would not include leases, contracts or agreements previously mentioned in the deed or exhibit. It will be recalled that the overriding royalty interest is described in Exhibit B as having been "created by virtue of agreements between Amos L. Beaty & Company, Inc. and Phillips Petroleum Company." This clearly appears to be a ...


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