The Cross Section, Volume 16, Number 7, July 1970 Page: 4
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THE CROSS SECTION
SUN vs WHITAKER-
THE OPINION OF THE EASTLAND COURTSun Oil Company, Appellant
Vs. No. 4363
Earnest Whitaker, Appellee
Appealed from the 121st Judicial District Court of
Cochran County.
Sun Oil Company brought this suit seeking a perma-
nent injunction against Earnest Whitaker and his tenant
son-in-law, Doyle Henderson, enjoining them from in-
terfering with plaintiff's production of not more than
100,000 gallons of fresh water per day from Whitaker's
267.7 acres of land to use in waterflooding plaintiff's oil
and gas lease thereon. Sun contends that the lease gave
it this right as a matter of law. Whitaker filed an
answer and cross action seeking to enjoin Sun from pro-
ducing fresh water from his land for waterflood pur-
poses. He contends that the parties to the lease did not
intend to grant Sun the right to use amounts of water
which would materially affect the supply of water avail-
able for irrigation farming. He sought to recover actual
and exemplary damages. The case was tried before a
jury and based upon the verdict, judgment was rendered
denying Sun its requested injunction against Whitaker
and Henderson. The court also granted Whitaker a
permanent injunction, enjoining Sun from producing
fresh subterranean water from the land in question and
decreed that Whitaker recover from Sun actual and
exemplary damages in the sum of $12,598.03 for fresh
water already produced therefrom with six percent in-
terest from the date of the judgment. Sun Oil Company
has appealed.
This case is sequel to an earlier appeal in which Sun
was denied a temporary injunction. See 412 SW 2d 680,
(Amarillo CCA, 1967, affirmed 424 SW 2d 216.)
The record shows that Whitaker is the owner of the
surface of the land by virtue of a deed to him from L. D.
Gann in 1948. The conveyance to Whitaker was by its
terms subject to a 1946 oil, gas and mineral lease from
Gann to Sun Oil Company. Appellant contends that
the rights of the parties hereto are determined by the
provisions of the above mentioned deed and oil and gas
lease, and in support of its contention particularly relies
upon the following language in the 1946 oil and gas
lease:
"Lessee shall have free use of oil, gas, coal, wood,
and water from said land except water from
Lessor's wells for all operations hereunder, and
the royalty on oil, gas and coal shall be computed
after deducting any so used."
In 1966, Sun drilled a water well into the Ogallala
water formation on appellee's land and, after obtaining
approval of the Railroad Commission of Texas, began
injecting water produced therefrom into the underlying
San Andres oil formation to increase production of oil
from such land. The evidence indicates that the water
is produced from the only available source of water on
the land and that such water is used exclusively for the
benefit of the leased premises, the so-called Gann-
Whitaker tract. The waterflood operation results in the
production of additional oil. Sun contends that it has
the right under its lease to use as much of the surface
estate, including fresh water, as is reasonably necessary
for the conduct of all operations authorized by the lease.
The evidence shows that the Sun water supply well is
equipped so that it cannot produce in excess of 100,000
gallons of water per day and that 966,703 barrels of
water have been produced from the well. It has been
stipulated by the parties that the secondary recovery of
oil by the waterflood process is a reasonable and proper
operation for the production of oil from the San Andres
reservoir under the land in question; that it is a reason-
able and proper operation by Sun to use Ogallala water
as the extraneous or makeup water for injection into the
San Andres reservoir under the land in conducting second-
ary recovery of oil by waterflood process, and that the
location of the injection wells and the rates of water in-
jection as conducted by Sun Oil Company on the land
constitute reasonable and proper operations for the pro-
duction of oil.
Special issue number I which inquired of the jurywhether the use of water by Sun Oil Company for sec-
ondary recovery purposes was taking water from existing
wells of appellee Whitaker, was not answered. The
answers to special issues upon which the judgment was
based were: (2) that the parties to the Gann-Sun Oil
Company lease did not mutually intend for the lessee to
use such quantities of water as would materially affect
the supply which the surface owner could produce by
wells, (3) that the use of fresh water by Sun for secondary
recovery purposes from the wells which it had drilled on
said tract would materially affect the supply which the
surface owner could produce by wells, (4) that it was not
reasonably necessary for Sun to use water from the
Ogallala formation underlying the Whitaker farm to
waterflood the Gann lease, (5) that at the time the lease
in question was executed there existed a custom in Hock-
ley County for oil companies to use fresh water only in
substantially smaller amounts than those needed for water-
flood purposes (6) that both parties to the lease knew of
such custom prior to the time the lease was executed,
(7) that the proposed use of fresh water by Sun for
waterflood purposes will substantially reduce the value
of the farm owned by Whitaker, (8) that the installation
of waterflood facilities on the land by Sun destroyed aportion of Whitaker's growing crops, (9) that the reason-
able cash market value of Whitaker's crops so destroyed
was $431.00, (10) that the reasonable cash market value
in Hockley County of the fresh water that Sun has pro-
duced from the Whitaker farm for waterflood purposes
from the beginning of such waterflood to the date of
trial was $9,667.03, (11) that Sun acted willfully and
maliciously in producing fresh water from the Whitaker
farm and using it for waterflood purposes and (12) that
$2,500.00 was the amount of exemplary damages which
should be adjudged against Sun.
Appellant presents numerous points contending that
under the undisputed facts the Court erred as a matter
of law in submitting any issue to the jury; erred in ren-
dering judgment against it and in favor of appellee Whit-
aker; erred in admitting into evidence and considering
for any purpose extrensic evidence to vary, contradict or
explain the intention of the lessor Gann and the lessee
Sun as expressed in the language of their 1946 oil and
gas lease and particularly erred in admitting into evidence
testimony concerning the custom in regard to the amount
of water used in oil operations in and prior to 1946;
erred in admitting evidence which tended to show that
Sun's use of water from its supply wells on the leased
premises "will materially affect" the amount of water
which Whitaker could produce from his wells, evidence
that Sun could obtain water for its waterflooding oper-
ations from some source beyond the boundaries of the
leased premises, or testimony concerning the value of
the Whitaker farm either before or after the commence-
ment of Sun's waterflooding operation on the premises.
Appellant further urged that there was no evidence or in
the alternative insufficient evidence, to support the sub-
mission of any of the issues presented to the jury.
The principal question presented is whether the pro-
vision of the lease granting Sun the right to "free use of
oil, gas, coal, wood and water from said lease except
water from lessor's wells for all operations hereunder"
includes the right to use such water for waterflood pur-
poses. Both parties to this appeal agree that in construing
an oil and gas lease the intention of the parties is con-
trolling. The general rule of law is that a court in con-
struing a contract will ascertain the intention of the
parties from the language contained in the contract. 13
Tex. Jur. 2d, page 288. Sun contends that the language
of the lease is not ambiguous and grants to the lessee the
right to use as much of the water as is reasonably neces-
sary to produce oil and gas, and that the only limitation
to lessee's right to use the water is stated in the lease as
follows: "except water from lessor's well". As contended
by Sun the record is conclusive that it has drilled and
equipped its own water well and has not and does not
propose to use any water from appellee Whitaker's wells.
Appellant cites in support of its contention Carroll v.
Roger Lacy, Inc., 402 SW 2d 307, (CCA 1966, Ref. nre);
Guffey v. Stroud, 16 SW 2d 527, (Com. 1929) and Brown
v. Lundell, 162 Texas 84, 344 SW 2d 863, (Sup. Ct.
1961), in which the Supreme Court reaffirmed the hold-
ing in the Guffey case and stated that:
" 'The grant of the oil carried with it a grant of the
way, surface, soil, water, gas and the like essential
to the enjoyment of the actual grant of the oil.'
Thus, says the lessee, his right of user extends to
the subsurface water. We do not question that
proposition but the right to use does not imply the
right to damage negligently or unnecessarily."
None of the cases cited by appellant involve the right
of an oil and gas lessee under a lease similar to the one
here under consideration to use water from the leased
land for waterflood purposes. Appellant admits that the
specific question has not been passed upon in Texas.
Appellee contends that the meaning of the language
of the free wood and water clause as used in the lease
and as applied to the facts and circumstances in this case
are uncertain and doubtful and that the court properly
admitted evidence concerning the circumstances, condi-
tions and customs existing at the time the lease was exe-
cuted to determine the intention of the parties. Weagree with appellee's contention. Appellant's points to
the contrary are overruled. Murphy v. Dilworth, 151
SW 2d 1004, (Sup. Ct. 1941); Ryan v. Kent, 36 SW 2d
1007, (Com. 1931); Dauray v. Gaylord, 402 SW 2d 948,
(CCA 1966 Ref. nre); King v. City of Dallas, 374 SW
2d 707, (CCA 1964 Ref. nre). In Murphy v. Dilworth,
supra, Justice Alexander speaking for the Supreme Court
stated as follows:
"It is true that, even though a written contract be
unambiguous on its face, parol evidence is admis-
sible for the purpose of applying the contract to
the subject with which it deals: and if by reason of
some collateral matter an ambiguity then appears,
proof of the facts and circumstances under which
the agreement was made is admissable, in order
that the language used in the contract may be read
in the light thereof for the purpose of ascertaining
the true intention of the parties as expressed in the
agreement. In other words, if the meaning of the
language used in a written contract becomes uncer-
tain when an attempt is made to apply it to the
subject matter of the contract, though not other-
wise uncertain, parol evidence is permissible to
aid in making the application."
On the former appeal of this case the Amarillo Courtof Civil Appeals, 412 SW 2d at pages 682, 683, in passing
upon this question stated as follows:
"The phrase 'all operations hereunder' is not
ambiguous on its face. However the meaning of
that language when applied to the rights of the
parties hereto become uncertain and doubtful. We
do not think it can be said such language is not
subject to more than one reasonable meaning.
Contrary to Sun's contention 'all operations here-
under' has not been given a settled, legal construc-
tion. It does not have an exact meaning. The
lease does not specifically grant the lessee the right
to engage in secondary recovery by the process of
waterflooding. To hold the phrase under consider-
ation is not subject to more than one reasonable
interpretation, we would be compelled to hold as
a matter of law that the lessee is entitled to free
water for waterflooding as an operation under its
lease rights. We think such a holding would be un-
tenable. We therefore conclude the trial court cor-
rectly admitted evidence pertaining to the con-
ditions and circumstances under which the oil and
gas lease was executed."
The evidence concerning the circumstances, conditions
and customs which existed at the time of execution of
the oil and gas lease in 1946 containing the "free wood
and water clause" was, in effect: that such clause was
usual and customary in oil and gas leases executed at that
time and had been used by Sun in all its leases as early
as 1926; that the only uses whi':h oil companies were or
had been making of water at that time and in that portion
of the state under the wood and water clause were for
drilling operations, supply operations for water boilers
and reworking operations and that none of these opera-
tions used a large amount of water; that at the time of
the execution of the lease waterflooding was unknown to
landowners, farmers, bankers and attorneys in that part
of the state and that at that time neither party to the
lease knew of the existence of the underground water
deposits here involved. Although Sun Oil Company per-
sonnel knew of the waterflooding practice for several
years prior to the date of this lease it made no effort to
specifically provide for the right to use water for that
purpose. The evidence indicated that the consideration
for the lease was commensurate with the consideration
paid for any lease on a farm with insufficient water for
waterflooding or irrigation. The evidence indicated that
waterflooding was not practiced in the west Texas area
in 1946 although prior to that date waterflooding had
been practiced in some parts of Texas, but that knowledge-
able people in the Hockley County area became aware of
secondary recovery by waterflooding several years after
the date of the lease here under consideration. As above
indicated, at the time the lease was executed in 1946 all
operators in Hockley County and in surrounding territory
had used fresh water only for drilling operations and
other activities which did not require appreciable or sub-
stantial amounts of fresh water; that the amount of water
needed for drilling eight oil wells is three acre feet and
that Sun Oil Company proposes to use 451 acre feet for
its waterflood project.
The Ogallala formation is a closed isolated under-
ground reservoir in that there is no replenishment of such
water except from moisture which penetrates down into
it after falling on the surface. The fresh underground
water with which Whitaker irrigates his crops and
secures his domestic water and that which Sun proposes
to use comes from the Ogallala formation which is the
only source of water in the area of Whitaker's farm.
There was evidence to the effect that a water well drilled
into the Ogallala formation in close proximity with other
wells in the same formation will take part of the water
from those wells; each well depends upon its supply from
an area spread out from the well, and the longer a well
is pumped the broader this sphere of influence spreads.
The evidence indicates that hydrological records show that
the water level in the vicinity of the Whitaker farm has
declined over a period of years, and there was expert
testimony to the effect that this water level will continue
to decline and that Sun's proposed use will considerablyshorten the useful life of Whitaker's water supply; that
this is true even if Sun uses only one well and Whitaker
drills no more irrigation wells. The evidence indicated
that Sun's waterflooding project would ultimately con-
sume 4,200,000 barrels of Ogallala water and although
there is some evidence to the contrary that if Sun uses
such amount of water without drilling other supply wells
Whitaker's water supply will disappear at least eight years
more quickly than it would in the absence of Sun's activi-
ties. The evidence also indicated that if the development
of water on the land surrounding Whitaker occurs, Sun's
activities would cause the effective life of Whitaker's
water to be reduced from 18 years to 10 years.
In answer to special issues numbers 2, 3, and 7, the
jury found that the parties to the lease did not mutually
intend for the lessee to use such quantities of water as
would materially affect the supply which the surface
owner could produce by wells; that the use of fresh water
by Sun for waterflood purposes would materially affect
the supply which the surface owner could produce by
wells; that at the time the lease was executed there
existed a custom in Hockley County for oil companies
to use fresh water in their operations only in substantially
smaller amounts than that needed for waterflood pur-
poses; that both parties to the lease knew of such custom
prior to the time the lease was executed; and that the
proposed use of fresh water by Sun for waterflood pur-
poses will substantially devalue the farm owned by
Whitaker.In numerous points appellant contends that there was
no ek .rence to support the submission of such special
issues: nd that there was insufficient evidence to sup-
port -r answers of the jury thereto and that such answers
are against the great weight and preponderance of the
evidence. These points are overruled. As shown by the
facts and circumstances in evidence, as heretofore sum-
marized, there was evidence supporting the submission of
each . the issues, and although there was some evidence
to th: .> ntrary, the evidence considered as a whole was
suffix a- to support the findings of the jury in answer
there. - And such answers are not against the great weight
and r'cronderance of the evidence.
Ir: iswer to special issue number 4 the jury found
that i. -as not reasonably necessary for Sun to use water
from *e Ogallala formation underlying the Whitaker
farm to waterflood the Gann lease. Appellee urges points
contending that the court erred in admitting any evidence
tending to show that Sun could afford to purchase water
for its lease waterflood operation from some source
beyond the boundaries of the Whitaker land, that there is
no evidence or insufficient evidence to support the sub-
mission of special issue number 4 to the jury and that
the answer to such issue is contrary to the great weight
and preponderance of the evidence. These points are
overruled. Appellant's argument contending that the
court erred in admitting evidence tending to show that it
could purchase such water from some source beyond the
boundaries of the lease is based upon the assumption that
Sun had the right under the lease to use fresh water from
that land for waterflood purposes. We have already held
that contention untenable. It is true as contended by
Sun that it is reasonably necessary for Sun to use Ogallala
water to waterflood the Gann lease but there is ample
evidence showing that Ogallala water could be purchased
and used by Sun from other sources than the water from
Whitaker's land.
In appellant's 21st point it is contended that the court
erred in entering judgment against Sun for exemplary
damages. It is true as contended by appellant that exem-
plary damages will not be granted merely because of the
comn.n. on of an unlawful act. Ware v. Paxton, 359
SW 2. -97. However the record in this case shows that
Sun I oed a water well on Whitaker's property over
strent. objections and has since unlawfully produced
almost ,000,000 barrels of water of a total value of
$9,66~ which it has used in its waterflooding opera-
tions. ,t the time such well was drilled this lawsuit was
pendi"; and the trial court had denied Sun's request for
a temporary injunction. The drilling of the well by Sun
was not only unlawful but was done intentionally and
willfully and with full knowledge that the District Court
had made a judicial determination that Sun had no legal
right to use Whitaker's water for waterflood purposes.
It is held that a defendant may be compelled to respond
in exemplary damages if the act causing actual damages
is a wrongful act done intentionally in violation of the
rights of the plaintiff. Tennessee Gas Transmission Com-
pany .. oorhead, 405 SW 2d 81, (CCA 1966, Ref. nre).
W. have considered all of the points presented by
appeal or.s and find them to be without merit. The
judgnst: is affirmed.
CECIL C. COLL1NGS
ASSOCtATE JUSTICE
June '" 1970.t. _ __
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Reference the current page of this Periodical.
High Plains Underground Water Conservation District No. 1 (Tex.). The Cross Section, Volume 16, Number 7, July 1970, periodical, July 1970; Lubbock, Texas. (https://texashistory.unt.edu/ark:/67531/metapth1532944/m1/4/?q=%22~1%22~1: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.