{
  "id": 1473229,
  "name": "The Texas Company v. Mattocks",
  "name_abbreviation": "Texas Co. v. Mattocks",
  "decision_date": "1947-06-30",
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    "parties": [
      "The Texas Company v. Mattocks."
    ],
    "opinions": [
      {
        "text": "Robins, J.\nD. E. Armstrong and wife, owners of certain lands in Union county, on April 27,1920, executed to Harley R. Hinton and P. R. Mattocks an oil and gas lease thereon. The lease was in ordinary form and reserved to the lessors an undivided one-eighth royalty.\nHinton and Mattocks, by written instrument dated March 8, 1921, assigned an undivided one-half interest in this lease to White Oil Corporation. The consideration of this assignment was $686,250, of which $274,500 was paid in cash, $274,500 was represented by notes (all of which have been paid) executed by White Oil Corporation to Hinton and Mattocks, and the balance of $137,250 was, under the terms of the assignment, to be paid if and when seven-eighths of the total production of oil from the land amounted to 900,000 barrels. This final installment of $137,250 is the subject matter of the instant case.\nWhite Oil Corporation assigned this lease to United Central Oil Corporation on December 27, 1923, and in the assignment it was specifically provided that the latter corporation assumed the obligations of the former as to the lease. In 1925, United Central Oil Corporation changed its corporate name to Crown Central Petroleum Corporation.\nOn July 26,1926, Crown Central Petroleum Corporation assigned its interest in said lease to The Texas Company.\nCrown Central Petroleum Corporation, which was a Delaware Corporation, on September 20, 1937, became, under a consolidation agreement, Crown Central Petroleum Corporation of Maryland.\nFor brevity White Oil Corporation will be hereinafter referred to as \u201cWhite,\u201d United Central Oil Corporation as \u201cUnited,\u201d Crown Central Petroleum Corporation of Delaware as \u201cCrown Central,\u201d Crown Central Petroleum Corporation of Maryland as \u201cCrown,\u201d and The Texas Company as \u201cTexas.\u201d\nThe exact date when oil production from the leased lands began is not shown, but a letter written by an officer of \u201cCrown Central,\u201d dated September 1, 1926, to \u2018 \u2018 Texas \u2019 \u2019 stated that seven-eighths of the oil produced from these lands up to July 26, 1926, the date of the assignment by1 \u201cCrown Central\u201d to \u201cTexas,\u201d amounted to 473,335 barrels.\nIt is admitted by \u201cTexas\u201d that from the time it took over the lease it produced therefrom 426,665 barrels of oil, up to sometime (exact date not shown in testimony) in September, 1940; so that on that date the 900,-000 barrel production on the seven-eighths working interest was reached.\nThis suit was filed on March 27, 1941, against \u201cCrown\u201d and \u201cTexas\u201d by appellees, who had acquired the interests of Harley E. Hinton and P. E. Mattocks in the lease herein involved. In their complaint appellees set out their respective interests, alleged that seven-eighths of the total production of oil from the land covered by the assigned lease had already amounted to 900,000 barrels of oil and that therefore the balance of the consideration, namely $137,250, had become due. Prayer of appellees \u2019 complaint was for judgment against \u201cCrown\u201d and \u201cTexas\u201d for $137,250 and interest and for foreclosure of their lien against the one-half interest in said oil and gas lease.\nAfter the filing of certain demurrers and motions not necessary to catalogue here \u201cCrown\u201d and \u201cTexas\u201d answered. Each of them denied any liability and each denied that production of 900,000 barrels of oil on the leasehold had been reached. A plea of limitation was asserted by each of them and in the answer of \u201cCrown\u201d there was a cross complaint against \u201cTexas,\u201d in which it was prayed that if any judgment for appellees should go against \u201cCrown,\u201d \u201cCrown\u201d might recover all or a proportionate part thereof from \u201cTexas.\u201d\nThe lower court found that the 900,000-barrel production of oil, required to mature the final installment of purchase money under the terms of the assignment of the one-half interest in the lease to \u201cWhite,\u201d had been attained and rendered judgment against \u201cCrown\u201d and \u201cTexas\u201d for $137,250,' with interest at the rate of six per cent per annum from October 1, 1940, until paid.\nThe lower court made no formal order on the cross complaint of \u201cCrown\u201d against \u201cTexas.\u201d As to this phase of the case the decree recit\u00e9s: \u201cThe court declines to find for cross complainant over against The Texas Company for the full amount of the obligation sued on. The question as to whether the amount of the judgment and decree in favor of plaintiffs should be prorated between the two defendants on some equitable basis, is not presented to the court and no finding is made thereon. \u2019 \u2019\nBoth \u201cCrown\u201d and \u201cTexas\u201d have appealed, and \u201cCrown\u201d has cross appealed against \u201cTexas.\u201d Their contentions and arguments here are addressed to these questions:\nI. Whether the evidence was sufficient, as against both appellants, to show that the 900,000-barrel production had been attained.\nII. Whether, if the required production was shown, liability in favor of appellees against \u201cCrown\u201d was thereby established.\nTTT. Whether, if the required production was shown, liability in favor of appellees against \u201cTexas\u201d was proved.\nIV. Whether liability as between \u201cCrown\u201d and \u201cTexas\u201d was or should have been established by the decree.\nI.\nIn the same paragraph of the assignment from Hinton and Mattocks to \u201cWhite\u201d that contains provision for payment of the final installment of $137,250, the subject matter of this litigation, this language appears: \u2018 \u2018 The books and other papers relating to said operation and development shall be open to the reasonable inspection and examination of parties of the first part [Hinton and Mattocks].\u201d\nAt the beginning of the trial appellees moved that \u201cCrown\u201d be required to \u201cproduce the record of oil produced from the Armstrong lease involved in this suit during the period of time when oil was produced therefrom by the United Central Oil Corporation, Crown Central Petroleum Corporation of Delaware and Crown Central Petroleum Corporation of Maryland.\u201d\nTo this motion \u201cCrown\u201d responded that it had made a diligent search for the records of United Central Oil Corporation and Crown Central Petroleum Corporation of Delaware pertaining to operations on the lease involved and had been unable to find same. It further averred that Crown Central Petroleum Corporation of Maryland had never had anything to do with operations on this lease, and that while \u201cCrown Central\u201d had transferred the le\u00e1se to \u201cTexas\u201d in 1926, its consolidation with \u201cCrown\u201d of Maryland did not occur until in 1937. Several employees of \u201cCrown\u201d testified in support of the allegations in this response, and appellees, being unable to show that \u201cCrown\u201d had any of these records, the motion was overruled.\nTo sustain their contention that the final installment due them had been matured appellees introduced as a witness A. B. Carmody, president of appellee, North Central Texas Oil Company, which had purchased 32/64ths of the interest owned by Hinton and Mattocks. Mr. Carmody testified that during the time operations on the lease were being carried on by \u201cWhite,\u201d \u201cUnited,\u201d and \u201cCrown Central,\u201d monthly statements, showing how much oil had been run were furnished to him, and that similar statements were furnished after \u201cTexas\u201d took over the lease. He stated that on November 18, 1940, he wrote \u201cTexas\u201d a letter (copy of which he introduced) as follows: \u201cD. E. Armstrong Lease . . . Your production figures indicate that the above lease has produced to the working interest (%ths) 901,-680 barrels through October 31st, 1940. Under the terms of the above lease was included a payment to this Com-' pany of $68,625 payable as/ if and when the working interest (%ths) production equalled 900,000 barrels. We shall appreciate having your check for the above payment.\u201d\nThe letter he received, in reply to his, from \u201cTexas,\u201d which was introduced in evidence by Mr. Carmody, was as follows: \u201cWe acknowledge receipt of your letter of November 18th. The production from the Armstrong lease is now in excess of 900,000 barrels for the %ths working interest. Our company does not feel it is personally liable or responsible for the indebtedness and we suggest that you look to the Crown Central Petroleum Corporation, whose address is Pasadena, Texas (suburb of Houston, Texas) for the payment to which you refer.\u201d\nThere was also introduced in evidence a letter written by the vice-president of \u201cCrown Central\u201d on September 1, 1926, to \u201cTexas,\u201d in answer to an inquiry by \u201cTexas\u201d as to production from the Armstrong lease, which was as follows: \u2018 \u2018 This will acknowledge your letter of August 27th re the above subject and in reply to same wish to state that as of 7 a.-m., July 26,1926, [date of assignment from \u201cCrown\u201d to \u201cTexas\u201d] % of the total production from this lease had amounted to 473,335 barrels.\u201d\nJ. C. Brooks, called as a witness by appellees, testified that he had been employed by \u201cTexas\u201d for 25 years and had been connected with the production accounting department since 1930, and that he was familiar with the records of production of the Armstrong lease. Mr. Brooks explained in detail the manner in which these records were made up from \u201crun tickets\u201d signed by representatives of the pipe line company. He testified that these records showed a prodnction'by \u201cTexas\u201d from the working interest on the Armstrong lease- of 474,954 barrels up to December 31,1945, that they had obtained information as to the production prior to July 26, 1926, when \u201cTexas\u201d took over the lease, and that such production, according to this information, was 473,335 barrels; and that, if this information was correct, \u201cthe Armstrong lease had produced 900,000 barrels for the working interest only, the date was September, 1940. \u2019 \u2019 This witness introduced in evidence a memorandum attached to his record, which was as follows: \u201cStatement of Gross (% WI) Production on Armstrong Lease \u2014 \"When Production aggregates 900,000 Barrels Payment of $137,250 is to be made to P. R. Mattocks and N. C. T. Oil Co.\u201d This memorandum was followed by a detailed record of the production by dates of \u201crun tickets.\u201d\nIn the face of this evidence, it is argued by \u2018\u2018 Crown\u201d and \u201cTexas\u201d that the production of 900,000 barrels of oil from the working interest involved was not shown by competent testimony.\n\u201cCrown\u201d contends that the letter written by \u201cTexas\u201d admitting attainment of the required production was-not binding on or admissible against \u201cCrown.\u201d \u201cTexas\u201d urges that its letter was necessarily based on information, as to oil production from the lease prior to \u2018 \u2018 Texas \u2019 \u2019 taking it over, contained in the letter written to \u201cTexas\u201d by \u201cCrown,\u201d and that this letter being \u201chearsay\u201d as to \u201cTexas,\u201d the admissions based thereon contained in the letter written by \u201cTexas\u201d is not binding even on \u201cTexas.\u201d It is also argued that the testimony as to what the books of \u201cTexas\u201d showed as to the oil production was not competent because the different persons who made the entries were not called as witnesses.\nWe do not\" deem it necessary to pass on these technical objections, because under the facts shown here the burden of proof was on appellants to show what the oil production from the lease was. The assignment under which both of them acquired their rights clearly showed that all parties contemplated that books reflecting the \u201coil run\u201d should be kept by the producer and that these books should be open to inspection by the appellees and their predecessors in title. No one but the producer could possibly know the amount of oil production. The principle applicable here was thus stated by Mr. Wharton (Evidence, \u00a7 367): \u201cWhen a fact is peculiarly within the knowledge of a party, the burden is on him to prove such fact, whether the proposition be affirmative or negative.\u2019 Hopper v. State, 19 Ark. 143; William v. The State, 35 Ark. 430; Fowler v. The State of Arkansas, 39 Ark. 209; City of Fort Smith v. Dodson, 51 Ark. 447, 11 S. W. 687, 1 L. R. A. 252, 14 Am. St. Rep. 62.\n' Since the appellants had the onus at the trial to show what the true amount of the oil production was, they were not in a position, in a court of equity, to challenge facts reflected by their own admissions in writing and by the books of either of them. There was abundant proof to justify the findings of the lower court that the 900,000 barrels of oil had been-produced from the %ths interest in the lease involved.\nII.\nOn behalf of \u201cCrown\u201d it is argued that since there was nothing in the assignment of the lease or in the lease itself which obligated \u201cWhite\u201d or its assignees to drill on the land embraced in the assigned lease, there was no obligation upon \u201cCrown\u201d to pay the delayed consideration sued for herein. But certainly under the original assignment there would have been an obligation on \u201cWhite\u201d to pay this installment if \u201cWhite\u201d had been operating the lease when the required amount of production was reached. Neither \u201cWhite\u201d nor any subsequent assignee could avoid this liability by simply transferring the lease to some one else. If this liability could be so evaded, a solvent producer working a lease under an agreement of the kind involved here, after producing 890,000 barrels might assign the lease to an insolvent person or corporation and, after the production of 900,-000 barrels of oil was reached, defeat entirely the collection of the final installment.\n\u201cWhite,\u201d by accepting the assignment, obligated itself to pay the final installment of the consideration of the assignment. \u201cUnited\u201d specifically assumed the obligations of \u201cWhite.\u201d By operation of law the liabilities of \u201cUnited\u201d were finally cast upon \u201cCrown.\u201d It follows that \u201cCrown,\u201d as far as the appellees are concerned, is liable for the $137,250 installment sued for herein.\nHI.\n\u201cTexas\u201d argues that it was not a party to the original assignment and that it has never assumed or agreed, to pay the indebtedness sued on here. The assignment to \u201cWhite\u201d was recorded. \u201cTexas\u201d therefore took the interest of \u201cCrown\u201d with notice that this obligation would become due when the required amount of production was reached.\nA somewhat similar question was involved in the case bf Graysonia-Nashville Lumber Co. v. Saline Development Co., 118 Ark. 192, 176 S. W. 129. In that case it appeared that Saline Development Company had sold and conveyed to Nashville Lumber Company the merchantable timber on a large tract in Howard county. The consideration recited in the contract, which was referred to in the deed, was the payment of $5,298 which represented a calculation of $2 per thousand on an estimated 2,625,000 feet of timber, and it was provided in the contract that the purchaser should pay the further sum of $2 per thousand for all timber, in excess of said estimate, as same was cut. The Nashville Lumber Company sold the timber to Grraysonia-Nashville Lumber Company, and, upon its refusal to pay the company for the amount of timber cut in excess of 2,623,000 feet, Saline Development Company sued and recovered judgment therefor in the chancery court. On appeal to this court, the decree of the lower court was affirmed, it being held that the Oraysonia-Nashville Lumber Company was bound by the provisions in the contract between its vendor and Saline Development Company and had assumed the contingent balance of the purchase money.\nLikewise, dealing with the liability of an assignee of an oil lease, we said, in the case of Thurman v. Moore, 178 Ark. 885, 13 S. W. 2d 22: \u2018The assignee simply stepped into the shoes of the lessee. He took his assignment subject to the payment of the purchase- price out of the oil produced.\u2019\nWe held in Harvey v. Marr, 173 Ark. 880, 293 S. W. 1005, (headnote 2): \u201cThe purchaser of an interest in an oil lease, who collected oil as provided for in the contract and received the benefits thereof, became liable according to its provisions.\u201d\nIn support of the contention that \u201cTexas\u201d is liable to - appellees herein it is argued that the agreement to pay the final installment of purchase money, set forth in the assignment from appellees\u2019 predecessors in title to \u201cWhite,\u201d is in the nature of a covenant running with the lease. Whether this contention is well founded we do not find it necessary to decide. \u201cTexas\u201d took over this assignment and, according to its own admission, produced nearly half a million barrels of oil therefrom, and thereby caused the final installment of purchase money to mature. Since \u201cTexas\u201d accepted the benefits accruing under the assignment, it must bear the burdens thereof. Atlantic & North Carolina Railroad Company v. Atlantic & North Carolina Co., 147 N. C. 368, 23 L. R. A., N. S. 223, 125 Am. St. Rep. 550, 15 Ann. Cas. 363, 61 S. E. 185; Union Pacific Railway Company v. Douglas County Bank, 42 Neb. 469, 60 N. W. 886; Kirby Lumber Company v. R. L. Lumber Company (Tex. Civ. Ap.), 279 S. W. 546; South v. Williamson Dealers Corporation, 298 Ky. 557, 183 S. W. 2d 634; C. V. Hill & Company v. Hadden\u2019s Grocery, 299 Ky. 419, 185 S. W. 2d 681.\nFurthermore, in the construction of the assignments herein involved, we have a right to resort to the construction the parties themselves have placed upon these agreements. It is a familiar rule that, when construing a contract, meaning of which is in doubt, a court may consider how the parties themselves have \u2014 by their words and acts \u2014 construed it. Chief Justice Hill, in the case of Kahn v. Metz, 88 Ark. 363, 114 S. W. 911, quoted with approval this language of Lord Chancellor Sugden: \u201c \u2018Tell me what you have done under a deed, and I will tell you what that deed means\u2019.\u201d Other cases in which \u201cpractical construction\u201d of a contract, as shown by the acts of the parties thereunder is upheld, are: Edgar Lumber Company v. Cornie Stave Company, 95 Ark. 449, 130 S. W. 452; Keopple v. National Wagonstock Company, 104 Ark. 466, 149 S. W. 75; Continental Insurance Company v. Harris, 190 Ark. 1110, 82 S. W. 2d 841.\n\u25a0 The undisputed evidence shows that as soon as \u201cTexas\u201d acquired its interest in this lease it wrote to \u201cCrown Central\u201d and ascertained the amount of production up to the time \u201cCrown Central\u201d assigned to \u201cTexas.\u201d It was also shown that one of the production officials of \u201cTexas\u201d kept on his desk a memorandum calling attention to the fact that when 900,000 bairels were produced from the %ths working interest under this lease the $137,250 payment would be due. If \u201cTexas\u201d had taken this assignment from \u201cCrown Central\u201d with the understanding or belief that no liability for this final installment would rest on \u201cTexas,\u201d why would the amount of production up to the time \u201cCrown Central\u201d assigned have been of such importance to \u201cTexas\u201d as to require it to ascertain such production? And, if \u2018 \u2018Texas\u2019\u2019 had no obligation as to this installment, there could have been no valid reason for the memorandum as to the liability being kept on the production manager\u2019s desk. All these circumstances, about which, there is no dispute whatever in the testimony, point strongly to the conclusion that \u201cTexas\u201d considered itself liable under the provisions of the assignment through which it claimed title.\n\u201cTexas\u201d took over this lease with notice of the contingent liability for the final installment. It operated the lease, received the benefits conferred by the assignment to \u201cWhite\u201d and its production actually matured the final installment by producing the nine hundred thousandth barrel of oil from the working interest. It mav not avoid liability for this Dayment.\nIV.\n\u201cTexas\u201d asked no relief as against \u201cCrown.\u201d \u201cCrown,\u201d in its cross complaint, prayed judgment against \u201cTexas\u201d for any amount that \u201cCrown\u201d might be compelled to pay appellees.\nThe lower court apparently determined that the question of the liability of appellants inter sese was not properly before it. While in the findings the court stated that it would not grant \u201cCrown\u201d \u201cin full\u201d the relief it prayed against \u201cTexas,\u201d there was in the ordering part of the decree no disposition of \u201cCrown\u2019s\u201d cross complaint against \u201cTexas.\u201d The lower court might have considered that, \u201cCrown\u201d not yet having paid appellees anything,- its cross complaint was premature. We treat the decree below as not having in any manner disposed of the rights and liabilities of \u201cCrown\u201d'and \u201cTexas\u201d as between thems\u00e9lves, and, so that this entire branch of the controversy may be left open for future settlement or adjudication, we modify the decree of the lower court so as to show that the cross complaint of \u201cCrown\u201d against \u201cTexas\u201d is dismissed without prejujdice. With this modification, the decree appealed from is affirmed.\nThe Chief Justice, Mr. Justice McFaddin and Mr. Justice Millwee dissent as to that part of the opinion which authorizes judgment against The Texas Company for any amount in excess of $65,066.42 and interest.",
        "type": "majority",
        "author": "Robins, J."
      }
    ],
    "attorneys": [
      "John G. Jackson, H. B. Wilson, Mahony & Yocum, Karl F. Steinmann, Edwin E. Brownley and Davis & Allen, for appellant.",
      "Gaughan, McClellan & Gaughan, T. 0. Abbott and Claude Grumpier, for appellee."
    ],
    "corrections": "",
    "head_matter": "The Texas Company v. Mattocks.\n4-8182\n204 S. W. 2d 176\nOpinion delivered June 30, 1947.\nRehearing denied September 22, 1947.\nJohn G. Jackson, H. B. Wilson, Mahony & Yocum, Karl F. Steinmann, Edwin E. Brownley and Davis & Allen, for appellant.\nGaughan, McClellan & Gaughan, T. 0. Abbott and Claude Grumpier, for appellee."
  },
  "file_name": "0972-01",
  "first_page_order": 988,
  "last_page_order": 999
}
