Stacy v. Midstates Oil Corporation

On Rehearing MOISE, Justice. This is a suit instituted by R. A. Stacy of Caddo Parish, La., and Moses Ascher *189 of New York City, N. Y., in which they seek to have themselves recognized as owners, under an oil and gas lease executed in their favor by Mrs. Fannie W. Bond on February 24, 1942, of a valid mineral lease affecting the SE/^ of the NEJ4 and the South 10 acres of the NE]4 of the NE]4 of Section 21, T. 23 N., R. 8 W., Claiborne Parish, Louisiana, and as such entitled to recover their proportionate share of the oil now being produced from this property; claiming -that a prior existing lease covering 320 acres had expired by its terms as to 200 acres, of which the above 50 acres form a part, because of lack of production in paying quantities for several years prior to the date of plaintiffs’ lease ■from Mrs. Bond. Parties defendant are (1) James E. Smitherman (the original owner of the prior existing lease and the claimant of an overriding royalty -through that lease); (2) the Midstates Oil Corporation (the company which had successfully drilled a well, subsequent to plaintiffs’ acquisition of their lease from Mrs. Bond, on a portion of the property covered by the Smitherman lease) ; (3) .the Ohio Oil Company and T. L. James & Co. Inc. (which also claim overriding royalties under the lease held by Midstates); and (4) certain other mineral claimants who need not be enumerated since they are not'necessary to a decision. The case comes before us on an appeal taken by the above named defendants from a judgment overruling the exceptions of no cause and no right of action, and a judgment in plaintiffs’ favor on the merits, as prayed for. - The defendants re-urge the foregoing exceptions, claiming now that the district court improperly overruled them. It is a rule of law that, for the purpose of considering the exceptions of no cause and no right of action, all of the well-pleaded facts in the petition, as well as the documents made a part thereof, must be accepted as true. From the allegations of plaintiffs’ petition and the annexed documents, it appears that on February 24, 1942, the plaintiffs acquired a lea-se from Mrs. Fannie W. Bond covering the 50 acres above described, she having acquired the title to this property by purchase from R. P. Bond in 1933.' Prior thereto, in February of 1919, Bond had given a lease covering 320 acres of land (including this 50 acres) to James E. Smitherman. In this lease was contained the stipulation that the lease would remain in effect after the primary term so long as production was continued in paying quantities. The right to develop the E% of the NE]4 of Sec. 21, included in the original 320 acre lease to Smitherman (of which the 50 acres in controversy form a part) was acquired by the Mid-states Oil Corporation. Subsequent to the date of plaintiffs’ lease, this company commenced and successfully completed a producing well' in paying quantities on this acreage. It also appears that in the various *191 transfers of the origina) lease insofar as it affects the E% of the NE/^, Smitherman, the Ohio Oil Company, and T. L. James & Co., Inc., retained overriding royalties. Plaintiffs claim that the lease from Bond to Smitherman, insofar as it affected 200 acres (including the E% of -the NE%: of Sec. 21 operated by Midstates) had expired by reason of no production thereon in paying quantities for several years prior to acquisition of plaintiffs’ lease, a fact that the then owner of the lease (the Ohio Oil Company) recognized by taking top leases from all of the mineral owners excepting Mrs. Bond. The basis for the exceptions of no cause and no right of action lies in defendants’ contention that the plaintiffs predicated the validity of their lease upon the alleged nullity of a portion of an indivisible prior existing lease embracing a larger area because of failure of production on this portion in paying quantities, without having alleged the failure or lack of production on the remaining acreage. Plaintiffs in their argument, both orally and in brief, apparently concede that the lease is indivisible, but contend that such a lease is subject to division by the consent of all parties, and that by their subsequent actions, all parties concerned have consented to such division and the lease has in effect been divided. An examination of the petition and documents attached thereto fails to disclose any allegation that would support the plaintiffs’ contention. The documents upon which their argument is based were not a part of the petition but instead weré introduced in evidence after the defendants’ objection to any and all evidence on the merits of the case had been made general by the trial judge. Consequently this contention cannot be considered in disposing of these exceptions. We believe, therefore, that the exceptions were well founded and should have been maintained. For the reasons assigned, the judgment of the district court is annulled and set aside; and it is now ordered, adjudged and decreed that the exceptions of no cause and no right of action be* maintained and plaintiffs’ suit dismissed at their cost. The right to apply for a rehearing is reserved to the plaintiffs.