# Petition for a Writ of Certiorari — Scott v. Union Producing Co. (No. 340) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386420_0395%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for a Writ of Certiorari - **Published:** January 1, 1959 ## Text — In THE Supreme Court of the United States Octosper Term — 1959 J. Virew Scott, eT aL aND Paut J. Roaers, ef Au, Appellants, v. Union Propucine Company, ET AL, Appellees. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT AUG 24 JAMES & BROWNING, Joun C. WHITE 838-842 Transportation Bldg. Washington 6, D. C. Joun H. Dittmar Milam Building San Antonio, Texas Austin C. Witson M. W. Parse, Jr. Bank of the Southwest Bldg. Houston 2, Texas Of Counsel: FuLpricut, Crooker, Freeman, Bates & JAWORSKI 8th Floor Bank of the Southwest Bldg. Houston 2, Texas Morrison, Ditrmar, DAHLGREN & Kaine Milam Building San Antonio, Texas SORG PRINTING COMPANY OF TEXAS, HOUSTON, TEXAS Sat TSC Ray, reer TEC AREY as Seen SHES TE AT a aa iiieemed SP eer eae = a ABA SE te Few wie ae —_ —e | INDEX Opinions Below SEE STE ESA aL nee SUID certitiescnesiennnetirtinneicintiteniiitiesieneumntnenesennesnnsnenenonees STRATE TE ESO nr ee Mmmm Theme mene Wi assis cc cecncccnencsecescssncosscnssccns I a a cshebiniansenetion SIUIIITTE 1 cissocieidicsseneschdachitietceiniacatiinahitisilaaiehanestineeaneacinnsacanannsinn IE OF seateieniciesientiniseiniiiensinininaiaaniainapinienepinianannn CITATIONS Cases Archer County, et al, v. Webb, et all, ........ | A ST TE, Tie a. i isietinrennnsiioninstcstescesnseeierticennnenennen Burford v. Sun Oil Co., 319 U.S. 315............ccccccccssssscsscscossessesece City of Chicago v. Fieldcrest Dairies, Inc., 316 U.S. 168........ Cowling v. Deep Vein Coal Co., 183 F. 2d 652...........cessesseeees Erie Railroad v. Tompkins, 304 U.S. 64............ccssessssssereeseeeees Huddleston v. Dwyer, 322 U.S. 232............ccccssscssccssrscsscsssseosscee LeBlane v. Haynesville Mercantile Co., Inc., 88 So. 2d 377.... Louisiana Power & Light Company v. Thibodeaux, 3 L. Ed. SST ssusesibcidisddeancnectibedaihainlesetedechbciueaeainhiatenitaiaisitesmsnnicelenmiints Manufacturers Casualty Insurance Company v. Coker, 219 ic ID Me eiiesicbieareientssiiaeptntechatbinsnbinsiniininsatiadiaiesansiiiniainibineninaiaaiotionion Railroad Commission of Texas v. Pullman Co., 312 U.S. 496.. Sellers v. Breidenbach, 300 S.W. 2d 178...........ccccccscsssesssesseesees Southland Royalty Co. v. Humble Oil & Refining Co., 249 EE ee POORER EEE E EEE EEEE ESET EE EE EEEE SESE EEEEESES SEES ORES EEE EEES ESSE ED — ee ee ee Ee A ER. eS. oe MOR a 2 8 as San ee at etenats oa 28 AY EEA RETOLD TE REOLDI TELIA In THE Supreme Court of the United States Octosper Term — 1959 BN aleiadiaiaicsins J. Virem Scort, et au anp Paut J. Rocers, eT Au, Appellants, v. Union Propuctne Company, ET AL, Appellees. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT Benjamin Clayton, R. S. Nixon, Nueces Royalty Com- pany, a partnership, Paul J. Rogers, J. Virgil Scott and Erwin W. Smith pray that a writ of certiorari issue to re- view the judgment of the United States Court of Appeals for the Fifth Circuit entered in the above-entitled cause on May 21, 1959. OPINIONS BELOW The memorandum opinion of the District Court may be found at page 214 of the record, and the opinion of the Court of Appeals is included herein as Appendix A, infra. A petition for rehearing was denied by the Court of Appeals without opinion. aay 2 JURISDICTION The judgment of the Court of Appeals was entered on May 21, 1959. A petition for rehearing was denied on July 20, 1959. Jurisdiction of this Court is invoked under 28 U.S.C., See. 1254(1). QUESTIONS PRESENTED 1, Whether the Court of Appeals committed reversible error in affirming a judgment by the District Court grant- ing a summary judgment to respondents, and in holding that as a matter of local law of the State of Texas, term mineral interests owned by petitioners and expiring by the terms thereof on October 25, 1955 in the absence of production of minerals, terminated and reverted to re- spondents on that date notwithstanding compliance with a lease provision covering all mineral interests here in- volved defining production to include the payment of shut- in royalties on a shut-in gas well. 2. Where a case involving the precise issue on which the courts below based their decisions is now pending be- fore the Supreme Court of Texas, and where that court has never passed upon the precise issue, should the judg- ment of the Court of Appeals be vacated and the cause remanded to await the state court’s declaration of the local law on the controlling issue. STATEMENT This is an interpleader suit brought by the mineral les- see, Union Producing Company, a Delaware corporation, against those persons asserting mineral and royalty inter- ests in a tract of land located in the Rio Grande Valley in Texas. The only controversy is between the petitioners and the respondents, all of whom are citizens of the State of Texas, the question being whether the interests of the term mineral owners (petitioners) have terminated and reverted to respondents. Petitioners claim under deeds (R. 26, 29) executed in 1935 conveying fractional interests in the minerals for a stated term of years and so long thereafter as oil, gas or other minerals are produced from the property. Such deeds further provide that it will not be necessary for the grantees to join in the execution of any lease, and as found by the District Court, (R. 222) all parties construed the deeds as reserving to the grantors, under whom respondents claim, the exclusive right to lease all of the minerals. In 1949, respondents executed an oil and gas lease (Supp. R. 1) purporting to lease all of the minerals, including peti- tioners’ interests therein, which lease included what is com- monly termed a shut-in gas well clause (Supp. R. 10). This clause provides that where gas is discovered but not mar- keted, the lessee may pay a stated sum, and upon such pay- ment, it will be considered that gas is being produced from the premises. A well was drilled; gas was discovered; the gas was not marketed pending the laying of gathering lines prior to the date specified for the termination of peti- tioners’ interests (R. 18) and shut-in gas royalties were paid to petitioners and tendered to respondents within the period provided for in the lease (R. 125, 129, 183). Gas and condensate have been produced and marketed continuously since early April, 1956 (R. 19). Under these facts the District Court granted a summary judgment to respondents relying upon the dictum in a case decided by an intermediate appellate court of this state which is readily distinguishable, and holding that the peti- 1 Sellers v. Breidenbach, 300 S.W. 2d 178 (Tex. Civ. App. 1957). While the case did involve a shut-in gas well, the lease did not have a shut-in royalty clause, and there consequently was no provision in the lease defining production to include such pay- ments (R. 135). WA RSet parenre em EP, MNT eh asker TI A ae RS Car Prt - LILLE ONE a NPA he RMB 4 tioners’ interests had terminated on the ground that the lease provision defining production to include the payment of shut-in royalties did not inure to petitioners’ benefit. The Court of Appeals affirmed summarily without even dis- cussing two closely analogous cases decided by the Supreme Court of Texas? which held that lease provisions defining production to include production from pooled units consti- tute a modification of the term interests, and that conse- quently, such lease definitions do inure to the benefit of the , term interest owners. | REASONS FOR GRANTING THE WRIT 1. The oil and gas industry is, of course, a most im- portant segment of the economy of this state. Conveyances of fractional interests in minerals for stated terms and so long thereafter as minerals are produced are becoming in- creasingly prevalent, and are, in turn, a significant part of our oil and gas industry. Petitioners respectfully submit that the decision of the Court of Appeals is in conflict with the local law as declared by the highest court of the state in the Spradley and Southland decisions, supra, in closely analogous cases. While distinguishable from the instant case since the set of circumstances defined by the leases as production differ from those herein involved, the rationale of those decisions — that the lease definitions inure to the benefit of term interest owners — is clear. Purely as a mat- ' ter of forecasting the decision of the Supreme Court of Texas on the precise issue here involved, petitioners sub- mit that the Court of Appeals erred. However, no forecast by the federal courts on this important issue of local law is necessary since the precise issue on which both the Dis- 2 Spradley v. Finley, 302 S.W. 2d 409 (Tex. Sup. 1957) ; South- land Royalty Co. v. Humble Oil & Refining Co., 249 S.W. 2d 914 (Tex. Sup. 1952). 5 trict Court and the Court of Appeals based their decisions is now pending in the Supreme Court of Texas. In the case of Archer County, et al, v. Webb, et al, the State District Court of Crockett County, Texas, entered summary judg- ment in favor of term royalty owners whose interests were to expire in the absence of production, holding that such in- terests were extended by virtue of a lease provision defining production to include the payment of royalties on a shut- in gas well. The Court of Appeals for the Eighth Judicial District sitting at El Paso, Texas, reversed on the basis of the opinion of the Court of Appeals in the instant case, and a motion for rehearing was denied on July 15, 1959. The opinion of the Court of Civil Appeals is reported in snintieas S.W. 2d ......... Due to basie factual similarities, the decision by the Supreme Court of Texas should doubtlessly be controlling of this case. As shown by the certificate of the Clerk of the Supreme Court of Texas (Appendix B, infra., page ....) a writ of error has been applied for, and action by that court on the application is expected momen- tarily. Unless this petition for a writ of certiorari is granted, petitioners’ interests will be irretrievably lost even though the Supreme Court of Texas, whose decisions control in cases of this kind, Erie Railroad v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1937), declares the rule in Texas, as it is in Louisiana,’ to be that term interests are extended by the payment of shut-in royalties pursuant to the lease provision. It is evident that in that event, a serious injustice will have been done to petitioners, and their inter- ests will have terminated solely because of the fortuitous * LeBlane v. Haynesville Mercantile Co., Inc., 88 So. 24 377, (La. Sup. 195....). —_— 6 combination of the incorporation of Union Producing Com- pany in Delaware, the Texas citizenship of the claimants to the mineral interests, and the election of Union Produc- ing Company, which actually has no interest in the outcome of the litigation, to file this suit in the federal court rather than in the state court. Petitioners respectfully submit that no such contrariety should be encouraged by a premature decision of the federal courts when an opportunity to insure unanimity is presented by a case pending in the highest court of the state. Since the Court’s decision in Vandenbark v. Owens-Illinois Glass Co., 311 U.S. 538, 85 L. Ed. 327, 61 S. Ct. 347 (1941), it is settled that in cases governed by local law, decisions of the highest court of the state announced subsequent to the judgment of the District Court but prior to the entry of a final judgment in the federal courts, must be followed. This Court has vacated judgments of courts of appeal and remanded cases to those courts for reconsideration in the light of subsequent state decisions. Huddleston v. Dwyer, 322 U.S. 232, 88 L. Ed 1246 ...... ts Ee (1943). Numerous other decisions have announced the desirability of staying actions in the federal courts pending decisions by the state courts where local law is decisive. City of Chicago v. Field- crest Dairies, Inc., 316 U.S. 168, 86 L. Ed. 1355, 62 S. Ct. 786 (1941) ; Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 85 L. Ed. 971, 61 S. Ct. 643 (1940); Burford v. Sun Oil Co., 319 U.S. 315, 87 L. Ed. 1424, 63 S. Ct. 265 (1942); Manufacturers Casualty Insurance Company v. Coker, 219 F. 2d 631 (4th Cir. 1955); Cowling v. Deep Vein Coal Co., 183 F’. 2d 652 (7th Cir. 1950). This is particularly true where a suit is already pending in the state court. Arkansas v. Texas, 346 U.S. 368, 98 L. Ed. 80, 74 S. Ct. 109 (1953). a FEELIN SRS PORE ORT AM AA wee F a 7 As was observed by the Court in the recent case of Louisi- ana Power & Light Company v. Thibodeauz, 3 L. Ed. 1058 (1959) : “We have increasingly recognized the wisdom of staying actions in the federal courts pending deter- mination by a state court of decisive issues of state BBWS 2s” The Court has also stated in Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 84 L. Ed. 876, 60 S. Ct. 628 (1939) : “ ... Unless the matter is referred to the state courts, upon subsequent decision by the Supreme Court of Illinois, it may appear that rights in local property of parties to this proceeding have — by the accident of federal jurisdiction — been determined contrary to the law of the state which in such matters is supreme.” The application of the Court’s statement in the Thomp- son case to the instant case is abundantly clear. If the writ is denied petitioners will have lost their interests although in the Archer County case, the Supreme Court of Texas may, and petitioners submit that said court will by virtue of its earlier analogous decisions, declare erroneous the forecast of the local law by the Court of Appeals in this ease. The delicate federal-state relationship is hardly prompted by such a result which can be easily averted by the simple expedient of postponing a final judgment in this case, CONCLUSION Petitioners respectfully submit that the only common- sense approach to the problem dictates that (1) this case be reversed, (2) the judgment of the Court of Appeals be vacated, and (3) the Court of Appeals be instructed to defer onermmrsod further consideration until the impending decision in the Archer County case by the Supreme Court of Texas has been made. Respectfully submitted, Joun C. Wuite 838-842 Transportation Bldg. Washington 6, D. C. Joun H. Ditrrmar Milam Building San Antonio, Texas Austin C. Witsonx M. W. Parse, Jr. Bank of the Southwest Bldg. Houston 2, Texas wre STIN Cc. Was Attorneys for Petitioners Of Counsel: Fvusricut, Crooker, Freeman, Bates & Jaworski 8th Floor Bank of the Southwest Bldg. Houston 2, Texas Morrison, Dittmar, DanicrRen & Karne Milam Building San Antonio, Texas we Bete ee ar 2 ee 9 CERTIFICATE OF SERVICE Copies of the above and foregoing petition for a writ of certiorari to the United States Court of Appeals for the Fifth Cireuit have been served upon all counsel for respond- ents and Mr. W. S. Stovall, by placing copies of same properly addressed and stamped in the United States mail on this the 4. day of August, 1959. Avstix C. Witson Page. Bae Stas iy PEELE LOLS LIU GER MII ve NES 388 FEAL ON OREN oie me eorge APPENDIX A In THE United States Court of Appeals For Tee Firtx Circuit No. 17495 J. Vireit Scott, et au and Paut J. Rocers, er Au., Appellants, Ve Union Propucine Company, ET AL., Appellees. APPEALS FROM THE Unitep Srates District Court FOR THE SouTHERN District or Texas. (May 21, 1959.) Before HUTCHESON, Chief Judge, and TUTTLE and BROWN, Circuit Judges. HUTCHESON, Chief Judge: These are appeals from a summary judgment entered on motions filed in an inter- pleader action brought by Union Producing Co., lessee in an oil and gas lease, to have determined and declared the owners of mineral interests subject to the lease and the pro- Le a SPEDE Te ea kk ences ae = ee PEED R SGT PR OS OOO LEI LES RIOR Ef CRM Q ten Kein aha eee Se A-2 portions of royalties and payments thereunder to which, as such owners, they are entitled. It presents for decision here the single question whether the district judge erred in holding, on the authority of Sellers v. Breidenbach, 300 SW (2) 178,! that the fractional mineral interests acquired by appellants under term mineral deeds had terminated, and the interests had reverted to the grantors. Because the undisputed and controlling facts are fully and correctly set out and the law is as fully and correctly declared in the thoughtful opinion? of the district judge, we shall not undertake to present and discuss the theories and arguments of appellants and appellees in opposition and in support, but, referring with agreement and approval to the district judge’s analysis of the law and the facts and contenting ourselves with adopting his thorough going opinion as our own, we affirm the judgment upon the con- siderations and for the reasons stated by him. We add only a reference to the recent opinion of the Supreme Court of Texas in Midwest Oil v. Winsauer, ........ , pane (4-15-59), a case dealing with a temporary cessa- tion of production without fault on the part of the operator after production had been begun within the term. There, distinguishing the Sellers and Holchak cases, the Supreme Court expressly approved the principle upon which they were decided, that term clauses in mineral deeds are analogous to and must be given the same effect as similar term clauses in term mineral leases. Saying: Rar LT 1 Cf. Freeman v. Magnolia, 141 Texas 274, Morrison v. Swaim, 220 S.W(2) 493; Clark v. Holchak, 152 Tex. 26; and Holchak v. Clark, 284 SW(2 2 ) 399. 2 Union Producing Co. v. Scott, ........ F. Supp. ........ , June, 1958. a A-3 “We see no reason why the same general principles of law governing the construction of oil and gas leases containing habendum clauses providing the estate con- veyed shall continue after the expiration of its primary term so long as oil or gas is produced, should not be applicable to the construction of a term royalty deed containing the same or similar provisions. The ‘term royalty’ in the case at bar is a determinable fee just as is the lessee’s estate.” SE Pe ee OED Ce Tee and citing applicable cases, the Supreme Court held that in the event of temporary cessation of production without fault on the part of the operator, plaintiffs’ right to enjoy the royalty “will continue in any event as long as the opera- tor in good faith exercises diligence.” Rejecting the claim that Holchak and Sellers had held differently, the court stated: “These cases are not in point. Neither of these cases dealt with the question of cessation of production either temporary or permanent. The question in the Holchak F case, supra, was ‘whether or not there was paying pro- duction from the land within six months after Dec. 10, 1945, i.e., on June 10, 1946’. The uncontradicted evi- dence was that on or before June 10, 1946, there was no production from the well situated on the premises covered by the royalty deed. The same question was involved in the Sellers case, supra. The court simply f held there was no production whatever from the prem- ises,” REO EIE ORL IEE ETN LE ERIE TEIN FATE SE att es In the light of this opinion, of the cases cited in it, and of those cited by the district judge, we believe there is no escape from his conclusion that the reliance of the mineral i deeds claimants upon the shut-in gas well provision in the oil and gas lease will not do, and that this is so for the reason stated by him: a ’ STARE ISR SLADE RT PO EE A-4 “It is the mineral deed, not the lease, that should have contained a provision securing to the term mineral owners the benefit of a shut-in gas well provision.” The judgment was right. It is AFFIRMED. 4 [Sear] A true copy Test: /s/ Epwarpv W. WapswortH Edward W. Wadsworth Clerk, U. S. Court of Appeals, Fifth Circuit New Orleans, Louisiana AUG 5 1959 A-5 JUDGMENT Extract from the Minutes of May 21, 1959. No. 17495 J. Vine Scort, er au., and Pauu J. Rocers, ev Au., v. Union Propucine Company, ET AL. This cause came on to be heard on the transcript of the record from the United States District Court for the South- ern District of Texas, and was argued by counsel; Ox ConsiperaTion Wuenreor, It is now here ordered and adjudged by this Court that the judgment of the said Dis- trict Court in this cause be, and the same is hereby, affirmed; It is further ordered and adjudged that the appellants, J. Virgil Scott, and others and the surety on their Cost Bond herein, National Surety Corporation, and the appel- lants Paul J. Rogers, and others and the surety on their Cost Bond herein, Globe Indemnity Company of New York, he condemned, in solido, to pay the costs of this cause in this Court for which execution may be issued out of the said District Court. ENR LOPES 7S APPENDIX B ‘ 9 EE ALPERT In THE Supreme Court of Texas No. A-7490 ArcHer County, TExas, ET AL., Vv. C. R. Wess, Et A. © GILES I LLEL GICLEE DELI ET POR MIE NT IE From Crockett County, Eicuts District. I, Geo. H. Temptrn, Clerk of the Supreme Court of Texas, ¢ do hereby certify that application on behalf of Archer : County, Texas, et al, and application on behalf of C. R. Webb, et al, for writs of error to the Court of Civil Appeals, Eighth Supreme Judicial District, were received and filed as numbered and styled above, on this 17th day of August, 1959. Ixy Testimony WuereEor witness my hand and the seal of the Supreme Court of Texas, at the City of Austin, this, the 17th day of August, 1959. Geo. H. Tempuiy, Clerk By /s/ Jewett SEELIGER Mrs. Jewell Seeliger, Deputy [Seau] — OMELET ETE ED BORER AERIN PLO ENE BY NOMA LE RESIN MR DG MD --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386420_0395%3A1. Public record. Not legal advice.