Humble Oil & Refining Co. v. Trapp

BAUGH, Justice. This is a Rule 37 case. Suit was by the Humble to cancel a permit granted by the Railroad Commission to G. T. Blankenship to drill a second well on a 2.08-acre tract of land located in the west edge of the fairway of the East Texas oil field in Gregg County; and to enjoin production from said well which had been drilled thereunder. The permit, dated February 28, 1941, was granted by Commissioners Thompson and Sadler, Culberson dissenting, on the recited grounds to prevent confiscation and waste. Trapp was made a party to the suit as owner of a half interest in the lease. The defendants, Trapp and Blankenship, pleaded in defense, among other things, an unreasonable delay by Humble amounting to laches, in filing and prosecuting its suit to cancel the permit; and a prior agreement by Humble’s attorney with Trapp not to sue, on which he relied to his prejudice. The case was submitted to a jury on special issues in response to which the jury found: 1. That Humble delayed for an unreasonable time in bringing suit to cancel said permit; 2. That by reason of such delay Trapp and Blankenship incurred heavy expense which they otherwise would not have incurred ; 3. That in May, 1937, the attorney for the Humble, in consideration of the dismissal by Trapp of his cross-action against the Humble in a suit by Humble then pending involving a permit on another tract of land in the East Texas field, agreed that Humble “would not thereafter interfere by suits or otherwise with M. E. Trapp in his drilling and producing oil from such leases in East Texas in which he was an owner”; and 4. That Trapp drilled the well in question relying in good faith on such agreement. ' The trial court thereupon rendered judgment that the Humble take nothing by its suit; hence this appeal. The issues as to whether the well was necessary, as an exception to Rule 37, to prevent either confiscation or waste were not submitted to the jury nor requested by appellant, whose duty it was, of course, to make such proof. And it is the contention of appellees that there was evidence to sustain the permit on these grounds; and appellant not having requested that such issues be submitted, it waived them under Rule 279, T.R.C.P., and that the trial court’s judgment should therefore be sustained, regardless of the special issues submitted. However, an examination of the uncontroverted evidence in the light of *784 prior decisions discloses, we think, that as a matter of law the permit cannot be sustained on either of the grounds on which it was granted. The tract in question is located in one of the best producing areas in the field. It is rectangular in shape, approximately 246 feet wide, north-south, and approximately 347 feet long, east-west. Well No. 1 thereon, drilled in 1931, is located in the center thereof, 126 feet from its south boundary. Well No. 2, the one here involved, is located 80 feet south of well No. 1. Without well No. 2, there was no uncompensated drainage from said tract. The eight times surrounding area delineated by a rectangle superimposed on said tract, and including well No. 1, contains 8 wells. The eight times surrounding area delineated by a circle with well No. 1 as the center contains 7 wells. The underground conditions, i. e. sand thickness, porosity, permeability, bottom hole pressure, well potentials, and daily allowable production per well- — were substantially uniform for such areas; as was the daily production per acre therefrom. The testimony of geologists was that one well on said tract would produce the recoverable oil in place beneath said tract and such oil as would naturally migrate to it. While the witnesses did testify that there was a theory advanced that on the issue of waste of “more wells, more oil” production; and that there were other wells than those in the eight times area within 660 feet (the spacings established by Rule 37) of said tract; such wells did not cause uncompensated drainage from such 2.08-acre tract; and the “more wells, more oil” theory as a waste prevention measure has already been adjudicated adversely to such contention. Without further discussion, under the uncontroverted facts as stated above, and the adjudicated cases, said permit cannot as a matter of law be sustained on the grounds on which it was granted; and that failure to submit such issues to the jury will not support the judgment on the grounds of waiver under Rule 279, T.C.R.P. See Railroad Comm. v. Magnolia Pet. Co., Tex.Civ.App., 169 S.W.2d 253; Trapp v. Atlantic Ref. Co., Tex.Civ.App., 169 S.W.2d 797, writ refused; Gulf Land Co. v. Atlantic Ref. Co., 134 Tex. 59, 131 S.W.2d 73; Railroad Comm. v. Shell Oil Co., 139 Tex. 66, 161 S.W.2d 1022; Holcomb v. Atlantic Ref. Co., Tex.Civ.App., 172 S.W.2d 523. We think it is also clear that the case was tried on the theory of laches and estoppel as submitted to the jury. Considering next the efficacy of the agreement pleaded by appellees, testified to by Trapp and found by the jury to have been made in May, 1937, as barring Humble’s right to set aside the permit here involved; we have concluded that not only is it void and unenforcible because too uncertain and indefinite; but even if valid, it did not, under Trapp’s own testimony, apply to the tract of land here involved. That purported agreement grew out of a suit filed by the Humble against Trapp on May 31, 1935, being cause No. 55.598, in the District Court of Travis County, Texas, to set aside and cancel a permit theretofore granted to Trapp to drill a second well on a one acre tract in said field in Gregg County. By supplemental answer and cross-action filed in that suit on March 12, 1937, Trapp alleged that the Humble had been running excess oil from its offset wells on its adjoining tract to the injury of his wells on the one acre tract, causing low pressure conditions in that immediate area, and prayed that further production from Humble’s wells be enjoined until such lowered bottom hole pressure could be equalized in the surrounding area. After negotiations with reference to that suit, both the plaintiff’s (Humble) suit and Trapp’s cros's-action were dismissed “with prejudice” to their being refiled; and the order of dismissal was approved in writing by the attorney for Humble and the attorney for Trapp. The order of dismissal in nowise refers to nor indicates any agreement. The purported agreement, denied by Rauhut, attorney for Humble, and asserted by Trapp, was oral and made by long distance telephone between them as a part of the negotiations for dismissal of cause No. 55.598. Trapp’s testimony with reference to the matter was as follows: “Mr. Rauhut insisted upon dismissing it and wanted to know what I wanted him to do. He said, ‘We don’t want to try the *785 law suit, and we will do anything you want us to do; that we can not win the law suit and want to have it dismissed and disposed of, and what do you want us to do.’ I was somewhat of the opinion that the cross action ought to have been tried, but he was very nice about it and said if we would dismiss it they would pay the costs in the matter and hold me harmless from any expense by reason of it, and he agreed then not to bring any more actions against me or interfere with my operations in the field. That if they had any grievance they would see me personally about it and thrash it out personally without jumping into court on each occasion that occurred; and under those circumstances I told him to tell Mr. Pollard I would agree to dismiss it on those terms. Later I called Mr. Pollard and told him I had talked to Mr. Rauhut about it and Mr. Rauhut had agreed that they would not annoy me or interfere with my operations in the East Texas Field any further, and that we would get along. “Q. Now Governor, does that correctly state the agreement you had with Mr. Rauhut? A. Yes, sir. ****** “Q. Now following that dismissal of your cross action, did you secure any additional permits in East Texas? A. Yes, sir, that was part of the agreement at that time. I called his attention to the fact that I was preparing to apply for additional permits, and that he agreed not to oppose those permits — or at least he agreed not to go into court.” On cross-examination Trapp further testified that in his conversation with Rau-hut “There was not anything said necessarily about the confining it” (the agreement) to East Texas. He later limited the scope of the agreement to the East Texas field. Further: “Q. First it was limited to the East Texas oil fields and second it was limited to the leases you owned or had an interest in? A. In the East Texas oil field yes.” Again: “It was a telephone conversation and it was brief and I do not recall of anything being said about that (after acquired leases). In fact I am sure there was no question of any additional lease that I might acquire.” “I think it was sufficiently broad to cover any lease I might thereafter acquire. Nothing was said necessarily.” It is not controverted that the lease involved in this suit was not acquired by Trapp until some six months after the purported agreement was made. Consequently the permit here involved did- not, under Trapp’s own testimony, come within the terms of such agreement. There was no evidence that Humble knew or was informed by Trapp what leases he then owned in whole or in part in the East Texas field. The Humble was. not required under its terms to do anything affirmatively. Nor was any time-limit fixed for which the agreement was to-run, and no terms stated upon which damages for breach of such agreement could! be computed or arrived at. As stated in 12 Am.Jur., § 64, p. 555: “The terms and conditions are not sufficiently definite unless the court can determine therefrom the measure of damages in case of a breach.” Further, that in order to be binding sued an agreement “must be sufficiently definite-to enable the court to determine its exact meaning and fix definitely the legal liability-of the parties.” See also 10 Tex.Jur., §■ 101, p. 17S. It is obvious we think that not only was the purported agreement asserted by Trapp invalid because too indefinite to-be enforcible; but that if it were valid it did not, under Trapp’s own testimony,, include nor apply to the leasehold here involved. This conclusion renders unnecessary discussion of appellant’s contention-made at length that such agreement was. void because contrary to public policy. The next issue presented is that of laches, by Humble in that it “delayed for an unreasonable time the bringing of this suit”; and that by reason thereof the appellees, “incurred heavy expense which they otherwise would not have incurred” ; thus estop-ping the Humble from attacking the validity of said permit. The facts in this regard, are: The permit was granted by the Railroad Commission on February 28, 1941., Blankenship resided and had his office in. Oklahoma City. He and Trapp had adjoin *786 ing offices, used the same telephone and office employees and owned jointly the lease here involved; but the permit in question was granted to Blankenship alone and notation made on the Railroad Commission’s docket that all communications concerning it should be addressed to Blankenship. While it is not shown when the contract with the driller to drill the well was made, Trapp testified that he acted immediately after the permit was granted; that the drilling rig was moved on the lease on March 2, 1941, drilling operations were begun on March 3d, and continued until completion of the well on March 16th; notwithstanding a rule of the Railroad Commission allowing protestants 15 days after a permit is granted in which to file a motion with the Commission for rehearing. On March 4, 1941, Humble, through its attorneys, wired Blankenship that it would bring suit to have the permit set aside. Trapp testified that he did not know of this telegram until a week or ten days after it was sent, because he was in Texas. The Humble did not file its suit until May 29, 1941, some three months after the permit was granted. Blankenship was served on June 3, 1941, but process on Trapp, issued to Oklahoma, was returned with the notation that he was in Texas. He was not served until November 27, 1943, more than two years after suit was filed. We do not attach controlling importance to this delay in service of process on Trapp, as no issue was made of lack of diligence in prosecuting this suit after it was filed, but only as to delay in “the bringing of this suit,” the language used in the special issue submitted. The permit was granted to Blankenship alone, obviously with the knowledge, consent and acquiescence, if not with the approval or at the instance of Trapp, since he appears to have spent much of his time in Texas and was frequently before the Railroad Commission in person looking after such matters. That being true, in so far as the suit sought to cancel the permit, a judgment against Blankenship alone, setting aside the permit as invalid, would have been binding on Trapp. Laches is closely related to estoppel and involves many of the same elements. In 27 Tex.Jur., § 2, p. 16, it is stated that the “Defense of laches rests on an estoppel in pais.” For distinctions between laches and estoppel, see 19 Am.Jur., § 38, p. 637. It is clear that there could be no estoppel by contract against the Humble to attack said permit, not only because the contract was invalid, but because the permit in question, according to the testimony of Trapp himself, was not within the terms of such contract. His only ground of estop-pel, therefore, must rest entirely upon the delay in “the bringing of this suit.” For estoppel to be available as a defense, based upon silence or inaction, “There must be some element of turpitude or negligence connected with the silence or inaction by which the other party is misled to his injury.” 19 Am.Jur., § 55, p. 662, and cases cited in support of the text. And in order for Blankenship and Trapp to' claim the benefit of estoppel against the Humble, it was incumbent upon them to show that they were misled by the conduct of the Humble to change their position for the worse. That is, that they relied on its delay in bringing this suit to their prejudice. See 17 Tex.Jur., § 9, p. 137; § 15, p. 144, and numerous cases cited in the footnotes. The Humble notified the permittee, Blankenship, by wire on March 4th, four days after the permit was granted, that it would bring suit to cancel it. Trapp testified that he did not learn of this telegram until a week or ten days after it was sent. He also testified that he acted immediately on said permit after it was granted. That his drilling contractor moved his rig on the property on March 2d and began drilling on March 3d. It is not shown what day he made such drilling contract, if any. Obviously it was made, if he had such a contract, on or before March 2d; though he knew that, under rules of the Commission, the protestant had 15 days in which to file a motion for rehearing before the Commission. And after having started the well immediately upon issuance of the permit, when asked “And you would have completed the well regardless of a petition being filed?” he answered: “Yes, sir, relying upon the Humble’s agreement to not bring such action.” *787 While the jury found that appellees incurred heavy expense because of delay in filing such suit, which they would not have incurred otherwise, we think that such finding is not only not supported by the evidence but is contrary to the uncon-tradicted testimony of Trapp, the only witness who testified on such issue. The evidence shows conclusively, we think, that such expenses were incurred immediately after the permit was granted regardless of any suit being filed; and in sole reliance upon the asserted agreement between Trapp and the Humble. The well was completed on March 16, 1941, and has been a producer since that date. We fail to see, therefore, wherein the delay in filing such suit has prejudiced the rights of the permittee, or wherein he has acted thereon to his injury. It is now settled law that acts or agreements of private parties cannot be binding upon, nor work an estoppel against, the agencies of the State in the enforcement of its conservation laws. Edgar v. Stanolind Oil & Gas Co., Tex.Civ.App., 90 S.W.2d 656, writ refused. Those are matters in which the public interest controls. In so far as the issue of waste is concerned, therefore, appellees’ defenses have no application. However, as above stated, the evidence negatives any issue of waste. But estoppel to attack a permit, where the facts warrant, is available as a defense where only the correlative property rights of adjacent leaseholders are involved. Stanolind Oil & Gas Co. v. Midas Oil Co., Tex.Civ.App., 143 S.W.2d 138, writ refused; Gulf Land Co. v. Atlantic Refining Co. 134 Tex. 59, 131 S.W.2d 73; Midas Oil Co. v. Stanolind Oil & Gas Co., 142 Tex. 417, 179 S.W.2d 243. It is upon the two last above-cited cases that appellees chiefly rely; and particularly the language of the Supreme Court as used in the Midas case. The facts of the instant case, however, are clearly distinguishable from those involved in the Midas case. This court is thoroughly familiar with the facts and issues involved in the Midas case, having had that case before us twice on appeal. See 123 S.W.2d 911; 143 S.W.2d 138. In the last-cited publication we reversed it on the rule laid down in the Gulf Land Company case. In neither the Gulf Land Company case nor the last reported Midas case, 179 S.W.2d 243, 245, does the Supreme Court change or modify the general principles governing estoppel. Judge Alexander in the Midas case reiterates and reaffirms the rule stated by Judge Critz in the Gulf Land Company case. That is, to constitute estoppel against an attack on an invalid permit facts must exist which constitute “unreasonable delay in appealing orders pertaining to well permits which cause the opposite party to act, to his injury" (Emphasis ours.) And in construing the language of the court as used in a decision, it should be interpreted in the light of the facts involved in the case before the court. In the Midas case (see Tex.Civ.App., 123 S.W.2d 911; Tex.Civ.App., 143 S.W.2d 138; Tex.Civ.App., 173 S.W.2d 342; 142 Tex. 417, 179 S.W.2d 243) the permit was granted on June 10, 1935, after protest by Yount-Lee Oil Company, the then owner of the adjacent lease. Thereafter, Yount-Lee transferred its holdings to the Stanolind. The permittee waited four months, without any indication from either of said companies that further action against it would be taken, let a contract to drill on October 10, 1935; and it was not until October 19, 1935, that suit was filed to set it aside. Thus the elements of estoppel were clearly presented; and it was clearly shown that such delay and inaction did cause the Midas to act to its injury. The following language of Judge Alexander in.that case is significant: “Both Yount-Lee Oil Company and Stano-lind knew that the permit had been granted, but neither of them gave any notice to Midas of an intention to further contest the permit, until the filing of the suit hereinafter mentioned.” (Emphasis ours.) That is, on October 19, 1935. In the instant case the Humble, through its attorney, did notify the permittee on March 4, 1941, four days after the permit was granted, of its intention to bring suit to set aside said permit, stating in said telegram, “This notice given in order that you may incur no expense on the faith of the permit until this matter is finally *788 closed.” In the instant case not only did the permittee act immediately on his1 permit, and obviously, we think, before any suit by Humble could have been filed and citation had; but Trapp testified that he would have gone ahead in any event, whether suit had been filed or not, in reliance upon the agreement he had with the Humble. The status of the parties as to estoppel, and their respective rights, were, we think, referable to what transpired between February 28th and March S, 1941; and not as of the date the suit was actually filed. Thus, we think, it affirmatively appears as a matter of law that there was no unreasonable delay by Humble in giving notice to the permittee of its intention; but even if its conduct be construed as an unreasonable delay, such delay did not cause appellees to act to their injury, because appellees would have proceeded to drill the well anyway, regardless of such suit. That being true the essential elements of estoppel were lacking; and the findings of the jury in that regard are not only not supported by the evidence but are contrary to the evidence and should be disregarded.- The foregoing conclusions make it unnecessary for us to discuss the other issues raised by appellant as to lack of authority of Rauhut to make such an agreement on behalf of the Humble; improper admission and exclusion of evidence; and misconduct of the jury. It follows, therefore, that the permit attacked should be and is set aside as invalid; and the cause is reversed and remanded to the trial court with instructions to grant appropriate relief in accordance with this opinion. Reverse4 and remanded with instructions. BLAIR, J., dissents.