author: PHILLIPS, Justice.

text:
    RAILROAD COMMISSION of Texas et al., Appellants, v. SHELL OIL COMPANY et al., Appellees.
    No. 11103.
    Court of Civil Appeals of Texas. Austin.
    May 29, 1963.
    Rehearing Denied June 26, 1963.

      Waggoner Carr, Atty. Gen., Linward Shivers and Joseph Trimble, Asst. Attys. Gen., Hart & Hart, Walter R. Koch, Houghton Brownlee, Jr., Austin, for appellants.
    R. H. Whilden, James R. Connor, Houston, Dan Moody, Jr., Austin, Robert J. Stanton, H. D. Bushnell, Tulsa, Okl., C. F. Heidrick, E. M. Cage, Dallas, Powell, Rau-hut, McGinnis, Reavley & Lochridge, Frank Douglass, Austin, for appellees.
   PHILLIPS, Justice.

This is an appeal by the Railroad Commission and certain intervenors from the judgment of the district court cancelling an allocation formula contained in the field rules promulgated by the Commission for four oil fields in Wood County, Texas, namely, the Southeast Quitman (Kirkland), the Southeast Quitman (Rodessa), the Southeast Quitman Goldsmith (Kirkland) and the Southeast Quitman Goldsmith (Ro-dessa) fields. The appellees, plaintiffs below, are Shell Oil Company, Amerada Petroleum Corporation and Sun Oil Company.

: Appellees brought suit under Section 8 of Article 6049c, Vernon’s Texas Civil Statutes, alleging that the allocation of al-lowables among the wells set out in Rule 3 of the abovementioned field rules prorating the wells in each of the four fields in question on a 50%' per well 50% acreage basis fails to protect the correlative rights of the parties, that the formula causes uncompensated drainage from the appellees’ leases and deprives the appellees and their royalty owners from the reasonable opportunity of producing their fair share of oil from the reservoirs and further deprives them of their property without due process of law. Appellees further allege that there is no substantial evidence to sustain the 50-50 allocation formula. In addition to declaring the allocation formula null and void, the appellees asked that the court grant them an injunction permanently enjoining the Commission from applying the 50-50 for allocation formula to the fields in question.

The trial court found that Rule Number 3 of the abovementioned field rules was not reasonably supported by substantial evidence, was arbitrary, unreasonable, capricious and confiscatory, that it was null and void and permanently enjoined the Commission from enforcing the allocation formula.

The intervenors are C. A. Green and R. J. McMurrey. These intervenors aligned themselves with the position taken by the Railroad Commission. C. A. Green owns the fee to a 1-acre tract which has one well triply completed in the Southeast Quitman (Kirkland), the Southeast Quitman (Ro-dessa), and the Southeast Quitman (Gloyd) fields. R. J. McMurrey has a well on the R. J. McMurrey Quitman Independent School District 2.03 Tract, which is dually completed in the Southeast Quitman Goldsmith (Kirkland) and Southeast Quitman Goldsmith (Rodessa) fields.

The Railroad Commission and the inter-venors will be referred to as appellants unless otherwise designated by name. The oil companies, plaintiffs in the trial court, will be referred to as appellees.

Appellants assign error to the judgment of the trial court in sustaining special exceptions to their petition, the exclusion of certain evidence, in denying the appellants a jury trial on facts allegedly creating es-toppel, and further that Rule No. 3 of the Commission’s field rules was supported by substantial evidence.

We hold that the judgment of the trial court is' correct.

The four oil fields in question are part of the Quitman structure which is composed of some 37 separate reservoirs containing more than 300 wells. The discovery well was drilled in 1942.

The Southeast Quitman (Rodessa) and the Southeast Quitman (Kirkland) fields were discovered in September 1959. These two fields occupy approximately the same geographic area but are separated vertically by rock strata which are impervious to oil and gas. The Southeast Quitman Goldsmith (Rodessa) and Southeast Quitman Goldsmith (Kirkland) fields were discovered in January and February 1960, respectively. The latter fields are near one another and are separated vertically by impervious rock strata. Each field now has several wells completed in it. Many of the wells are dual completions and some are triple completions. Immediately after the expiration of the discovery allowable period, a field rule hearing was held on February 16, 1961, for the Southeast Quitman (Rodessa) field. On March 13, 1961, the Commission adopted field rules for the Southeast Quitman (Rodessa) field which included the 50-50 proration formula complained of including 40-acre proration units. No formal order was issued on these field rules and this allocation formula never became final, as on March 27 and 28, 1961, within the 15-day period allowed therefor under the rules of the Commission, each of the appellees filed a motion for rehearing on the matter of the allocation formula for the Southeast Quitman (Rodessa) field. These motions for rehearing were granted by the Commission on July 12, 1961 and a rehearing thereon was set for August 3, 1961.

On April 25, 1961, a field rule hearing was held for the Southeast Quitman (Kirkland) field. On August 3, the rehearing on the Southeast Quitman (Rodessa) field rules was held. On October 5, 1961, a field rule hearing was held for the Southeast Quit-man Goldsmith (Kirkland) and Southeast Quitman Goldsmith (Rodessa) fields.

No field rules were adopted by the Commission on the basis of these three hearings.

The Commission at a formal conference held November 8, 1961, noting that there had been a long delay in consideration of the applications for field rules in the four fields involved in this suit set another hearing on all four fields for December 4, 1961, to give all interested parties “an opportunity to present evidence and argument that will aid the Commission in establishing a fair and reasonable method of allocation of allowables for such fields.”

At a hearing held December 4th and 5th, 1961, for the purpose of considering the allocation formula to be adopted for the four fields involved in this suit, the facts and circumstances relating to the fields were presented to the Commission. After allowing the interested parties an opportunity to file written arguments, the Commission, purportedly acting on the basis of the evidence heard at the December 4th-5th hearing promulgated the order, Rule 3 of which has been declared invalid, adopting for each of the fields in question an allocation formula providing for allocation of allow-ables 50% on acreage assigned and 50%' on a per well basis. Proration units were set at one well for 40 acres.

Within the 15 day period allowed by the rules of the Commission, appellees filed motions for rehearing asking the Commission to rescind the 50-50 allocation formula and adopt as part of the field rules applicable to each of these four fields an allocation formula that would afford to the appellees a reasonable opportunity to recover their fair share of the oil in the field. On July 18, 1962, these motions were denied by the Commission.

Appellees filed this lawsuit on August 8, 1962.

Beginning with the abovementioned hearing on April 25, 1961, and continuing through the subsequent hearings appellees maintained the position that the 50%' per well 50% acreage allocation formula would be unfair and that in order to protect the correlative rights of the plaintiffs and their royalty holders there should not be any per well factor in the allocation formula and the appellees further requested that the Commission adopt an allocation formula based 100% on acreage.

The evidence adduced at the trial discloses that the wells located on the small tracts owned by appellant intervenors have already recovered from each zone in which they have been completed more than the recoverable reserves which were originally underlying the tract. It is also undisputed that each of the wells has already paid for itself, and in fact returned a net income substantially in excess of its original cost. The evidence further discloses that any future production from appellant interven-ors’ 1-acre and 2.03 acre tracts respectively would be produced from uncompensated net drainage from some other tract.

Appellees offered testimony to show that in the case of appellant intervenor Green more than 90% of the uncompensated net drainage has and will come from tracts in which appellees have an interest. That appellant intervenor McMurrey’s uncompensated net drainage would amount to 86% of his production and that this would also represent drainage from tracts in which the appellees have an interest. These figures were, apparently, not challenged by any of the appellants.

Considering the uncompensated drainage that appellant intervenors have already caused by their production under their discovery allowables and under the 50-50 pro-ration formula, it becomes apparent that future production from these wells will be, for the large part, drainage from adjoining leases as long as production is continued under the 50-50 formula.

Appellees based their argument in the trial court and in this Court on the holding of the Supreme Court in Atlantic Refining Company v. Railroad Commission, generally referred to as the Normanna case, 162 Tex. 274, 346 S.W.2d 801, and Halbouty v. Railroad Commission, generally referred to as the Port Acres, case, Tex., 357 S.W.2d 364. These cases held that gas allocation formulas based on ½ per well and ⅜ acreage were confiscatory under the facts presented.

We hold that the Normanna and Port Acres decisions are controlling in the case at bar, that Rule 3 of the order before us is invalid in that it does not afford an opportunity to all of the parties to produce and save their fair share of the minerals.

The Port Acres case followed the decision in the Normanna case and is the latest expression of the Supreme Court on the question of correlative rights and confiscation of hydrocarbons by an adjoining lease holder by virtue of an illegal proration formula promulgated by the Railroad Commission.

In the Port Acres case a number of operators in the Port Acres Field attacked the proration formula of the Railroad Commission allocating gas production on a ¡ well ⅜ acreage basis. A number of small tract owners intervened and aligned themselves with the Commission. Some of the small tracts which had Rule 37 wells ranged from ¾0 of an acre up to S acres.

The Court cites Article 6008, Sec. 12, V.A.C.S., which provides that the Commission shall regulate and prorate gas production in the reservoir “on a reasonable basis.” The Article further provides that “[t]he monthly reservoir allowable shall be allocated among all wells entitled to produce gas therefrom so as to give each well its fair share of the gas to he produced from the reservoir, provided that each well shall be restricted to the amount of gas that can he produced from it without waste.” Section 12 of the statute provides that the Commission shall take into account in fixing the daily allowable production for each gas well the size of the tract, the relation between the daily producing capacity and the aggregate daily capacity of all gas wells and all other factors which are pertinent.

The Port Acres opinion continues:
“In Normanna the evidence shows that the Yz-2/z formula would result in the drainage of a tremendous quantity of gas and condensate from other leases in the field to the .3-acre lease in question, though the precise amount of drainage was incapable of ascertainment, and of course such drainage could not he compensated by drainage from the ,3-acre tract to other leases in the field. The evidence further showed that the order would allow the well on the ,3-acre tract to produce at a rate of over 200 times as much gas per acre as a well on the 320-acre unit established by the spacing pattern. We think the evidence here is comparable to that in Normanna. Under the order adopted in the Port Acres Field more than 90%' of the hydrocarbons recovered by the Rule 37 wells would be drained from other leases in the field. As said in Normanna the pro-ration formula adopted here of ½-⅜ does not come close to compelling ratable production nor afford to each producer in the field an opportunity to produce his fair share of gas from the reservoir.
******
“From the foregoing it follows that the Y$~2Á proration formula as applied by the Commission in the Port Acres Field is invalid in that it does not afford an opportunity to all of the parties to produce and save their fair share of the minerals or their equivalent. We hold that it is not reasonably supported by substantial evidence.”

The Attorney General in representing the Railroad Commission contends that the order in question is supported by substantial evidence and that under the numerous cases that have sustained orders of the Commission under the substantial evidence rule, the order should be allowed to stand. He contends that there is no dispute in that intervenor appellants Green and McMurrey had produced more oil up to June 1962, from the Rodessa and Kirkland zones than was originally in place under these tracts. He contends that much of this production was obtained under “discovery al-lowables” which permits, under a Commission ruling, the first five wells in a newly discovered field to produce more than the normal amount of oil per day for a period not to exceed eighteen months. This is a bonus for those who invest their capital in a high risk venture and is a means of speeding up search for reserves. It is not necessary for the purpose of this opinion to discuss whether past excessive production on the part of the intervenor appellants came from discovery allowable production or through the 50-50 proration formula. The fact that these appellants will continue in the future to produce more than their fair share of the oil through drainage from the tracts of their neighbors is sufficient to strike the formula down under the doctrines announced in the Normanna and Port Acres cases.

The argument is also advanced that inter-venor appellant McMurrey’s lease contained no pooling provisions and that he was forced to drill a well under an exception to Rule 37; that while intervenor appellant Green whose well is a triple completion had been offered a pooling arrangement by Amerada, that the pooling agreement would have applied to only two zones and that he would have been left unprotected in the third zone. Granted, arguendo, that these facts are true, they are certainly insufficient reasons to uphold a specific order that is confiscatory in nature.-

The Attorney General further contends that the Normanna and Port Acres decisions were concerned with gas that is regulated by Sec. 12 of Art. 6008, V.C.S., set out above, while the case is controlled by Sec. 7 of Art. 6049c, V.C.S. Article 6049c which requires that the Commission “ * * * shall distribute, prorate, or otherwise apportion or allocate, the allowable production among the various producers on a reasonable basis.”

There is nothing in either of the two statutes quoted above to distinguish them one from the other in respect to the Commission’s duty to protect the correlative rights of adjoining leaseholders and in giving each of the parties the opportunity to produce his fair share of oil or gas from the reservoir. In discussing the cases leading to the holdings in both the Normanna and Port Acres decisions, Rule 37 cases involving rights to oil wells as well as gas allocation formula cases were cited.

In Railroad Commission v. Williams, Tex., 356 S.W.2d 131, the Supreme Court stated:

“The basic right of every landowner, including the small tract owners, is to a fair chance to recover the oil and gas in and under his land or their equivalents in kind.
* * * * * *
“The rule of fair chance or fair share is the reason for the ‘confiscation’ exception to Rule 37 whereby an owner or lessee can get a well permit for a small tract (citing cases). In fact, it has been held that the proper test of confiscation under Rule 37 is whether an owner, with the wells which already exist, has been accorded a fair and equal opportunity with other producers of surrounding tracts within the drainage area to recover his fair share of the oil in place beneath his tract. If he has, no confiscation results.”

Both the Normanna and Port Acres cases cite with approval the following language from Marrs v. Railroad Commission, 142 Tex. 293, 177 S.W.2d 941 (an oil proratioa formula case) :

“Under the settled law of this State oil and gas form a part and parcel of the land wherein they tarry and belong to the owner of such land or his assigns, (citing cases); and such owner has-the right to mine such mineral subject to the conservation laws of this State. Every owner or lessee is entitled to a fair chance to recover the oil or gas in or under his land, or their equivalent in kind, and any denial of such fair chance amounts to confiscation.”

Appellants cite as error the action of the-trial court in striking from the appellants’ pleadings by sustaining special exceptions-thereto, the following portion of the order before this Court:

"SPECIAL ORDER ADOPTING RULES AND REGULATIONS FOR CERTAIN QUITMAN FIELDS, WOOD COUNTY, TEXAS
“WHEREAS, After due notice, the Railroad Commission of Texas held a hearing on December 4, 1961, on its own motion, to consider, among other things, the matter of allocation of al-lowables and the adoption of rules and regulations to govern the drilling, completion and operation of wells in certain Quitman Field Area, Wood County, Texas; and
“WHEREAS, From evidence adduced at said hearing, and from a review of its own records and reports, it is apparent to the Commission that the subject fields in the Quitman Fields Area, namely, the Southeast Quitman (Kirkland) Field, the Southeast Quit-man (Rodessa) Field, the Southeast Quitman Goldsmith (Kirkland) Field, and the Southeast Quitman Goldsmith (Rodessa) Field were discovered in 1959 and 1960; that each field is developed with five or more wells; that field rule hearings, Dockets No. 120-6-45,-403, No. 120-6-46,141, and No. 120-6-46,521, have been held for each of the four named fields wherein technical reservoir data was adduced into the record; that Commission action was delayed on such hearings, for such a time that a review of the matter of allocation of allowables was considered advisable; that rules made effective by Commission action on March 13, 1961 for the Southeast Quitman (Rodessa) Field have been operative although the subject of a rehearing; that reservoir data available supports a drainage pattern of a well to each forty acres; that the rules proposed, except the proposed allowable allocation rule, are acceptable rules to govern development and production operations for said fields; and
“WHEREAS, it further appears to the Commission that the fields designated are in the proximity of many other Quitman Fields which have heretofore had rules adopted, including allowable allocation formulae, that have been effective for a considerable period of time; that these allowable allocation rules were adopted prior to the recent Supreme Court decisions which invalidated certain per well factors in allowable allocation as being unreasonable, and, which have placed on the Commission, the extremely knotty problem of adopting some form of allowable allocation that gives each operator in a field an opportunity to recover his fair share of the oil and gas in place; that one of the four named fields has operated under rules adopted March 13, 1961, prior to the time that the Normanna decision became final; and
“WHEREAS, The Commission, from its study of the Normanna decision, and other decisions relating to the overall matter of ‘opportunity to produce a fair share’ is of the opinion that such decisions do not require adjustment of allowable allocation formulae which have been adopted and made effective for a field prior to the time the Normanna decision became final; that reliance upon a formula established prior to the Normanna decision has caused operators to invest large sums in drilling and development costs under conditions that were sufficiently stable to be considered good business investments; that any change would cause hardship and loss to all parties having interest in such investments; that, in fact, the Supreme Court, in the Nor-manna Case, by use of the following language:
“ ‘We are in agreement with the reasoning of the courts in the Humble and Standard Oil Company cases in holding that where producers have acquiesced in and have failed to complain of the Commission’s proration orders for a long period, during which time other operators have expended vast sums in exploration and drilling operations, such producers should not be heard to complain.’
“supports the Commission’s conclusion that the named fields all located in the Quitman Fields Area, being a closely associated group of fields on a common structure, having been subjected to an allowable allocation formula effective for a long period of time, should not now be subjected to a different allowable allocation formula; and
“WHEREAS, From evidence adduced at said hearing, the Commission is of the opinion and finds that waste as the term is defined in the applicable statutes will take place in said fields unless rules are adopted by the Commission for the prevention thereof; that the following field rules are necessary to prevent such waste and to provide for a more orderly development and operation of said fields and that the allocation formula adopted herein is reasonably necessary to protect the rights of all parties from confiscation.”

Appellants maintain that this part of the order was relevant in relating the history of the Quitman structure which the Commission considered to be the basis of its order. In discussing this point we will include appellants’ second point of error in that the trial court erred in denying to appellants a jury trial on the fact issue of unreasonable delay and estoppel by sustaining the exceptions to all of appellants’ pleadings which recited the acts and conduct of plaintiffs relating to the history of proration formulas in the Quitman Field area.

The trial court’s action in striking this portion of the pleading was correct in that the conclusions stated by the Commission in respect to the findings set out in its order all related to fields other than the fields in question and were not material to the validity or invalidity of the order before the court.

The Supreme Court held in Railroad Commission v. Magnolia Petroleum Company, 130 Tex. 484, 109 S.W.2d 967, (also see 43 Tex.Jur.2d, Sec. 604) that it would not measure the validity of the Commission’s orders “by the reason it gives for same.” The court is bound by the Commission’s findings only on a material controverted fact situation that is supported by substantial evidence. Gulf Land Company v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73. Railroad Commission v. Shell Oil Company, 139 Tex. 66, 161 S.W.2d 1022, holds that Sec. 8 of Article 6049c, V.C.S., “clearly contemplates that the evidence shall be taken anew in the district court.” When this proration formula was attacked in the district court it would stand only if supported by substantial evidence to be adduced before the court at trial. The reasons given by the Commission for its order would merely be evidence to be admitted or excluded by the court under the rules of pleading and of evidence.

Appellants base their theory of estoppel on the following language in the Normanna opinion:

“ * * * where producers have acquiesced in and have failed to complain of the Commission’s proration orders for a long period, during which time other operators have expended vast sums in exploration and drilling operations, such producers should not be heard to complain.”

Appellants maintain that the following conduct of appellees amounting to an es-toppel extends back to 1957 when the first 50-50 formula in the Quitman area was adopted by the Commission for the Quit-man (Rodessa) reservoir. Shell had requested 75% acreage — 25% per well. Amerada had a twenty acre lease in that reservoir. Neither appealed from the order.

Appellants further contend that the following conduct of appellees supports their theory of estoppel.

The 50-50 formula was again adopted for the Quitman (Kirkland) reservoir in 1958. Though Shell had requested 75-25, no appeal was taken.

In May 1960, the Commission adopted the 50-50 acreage allocation formula for the Quitman Northwest (Paluxy) field. Shell, having again requested 75-25, nevertheless acquiesced in the 50-50 formula.

At a field rule hearing on January 3, 1961, for the Quitman Northwest (Kirkland) reservoir, Shell Oil Company itself recommended the 50-50 formula, and the Railroad Commission adopted its recommendation. When C. A. Green made application to the Railroad Commission for a Rule 37 permit to drill a well on his one acre tract, Shell Oil Company wrote to the Commission waiving any protest thereto. Later Shell also waived protest to the triple completion by C. A. Green of the well on his one acre tract. No suit was filed attacking the permits to drill and complete either the McMurrey or Green wells.

Shell Oil Company’s division manager wrote a letter dated January 31, 1961, addressed to certain operators which included appellant intervenor C. A. Green recommending a 50-50 formula for the Southeast Quitman (Rodessa) fields at the hearing to be held. That at the field rule hearing held on this field, sixteen days after the letter was written, Shell recommended a 75-25 per well formula.

The trial court’s action in sustaining special exception to the abovementioned allegations and refusing appellants a jury trial thereon was correct in that if all these facts alleged are true, the question of estop-pel and undue delay would not have been before the court as a matter of law.

There was no delay in the actions of the appellees regarding any of the hearings involving either of the four fields in question, nor was there any delay in bringing the action that is now before this Court when the ruling of the Commission proved to he adverse to the interests of the appellees. The acts or omissions on the part of the appellees that were not considered by the court (with the exception of the letter from Shell’s division manager) all pertained to fields other than the four fields in question, nor did any of the alleged acts or omissions, with the exception of the abovemen-tioned letter, refer to any of the hearings that led to the promulgation of the order presently before this Court. The letter from Shell’s division manager urging a 50-50 formula for the Southeast Quitman Rodessa was merely in the form of a recommendation and in fact was not followed by Shell in that they requested a 75-25 allocation formula at the hearing held sixteen days after the letter was written. The letter was written after appellant intervenors had drilled their wells so no reliance to detriment could have been placed upon it.

Appellants sought the admittance of the abovementioned evidence under the theory that appellees here are barred from attacking these allocation formulas because of this prior course of conduct on the part of appellees constituting an estoppel. Appellants cite Midas Oil Company v. Stanolind Oil & Gas Company, 142 Tex. 417, 179 S.W.2d 243; Stanolind Oil & Gas Company v. Midas Oil Company, Tex.Civ.App., 123 S.W.2d 911, writ dismissed; Stanolind Oil & Gas Company v. Midas Oil Company, Tex.Civ.App., 143 S.W.2d 138, writ refused; and Stanolind Oil & Gas Company v. Midas Oil Company, Tex.Civ.App., 173 S.W.2d 342, for the proposition that while Article 6049c, Section 8, V.C.S., does not fix a definite time for appealing from orders of the Railroad Commission in oil and gas cases, such appeals must be taken without unreasonable delay or the complaining party will be held to have been barred from obtaining a cancellation of the order. These cases dealt with Rule 37 permits and unreasonable delay in attacking the very permits that were before the courts in each of the particular cases cited. In these cases there was a question of estoppel as affecting a vested right to the only known method of access to the minerals underlying a given tract of land. These cases are not in point here.

A proration formula is subject to the continuous supervision of the Railroad Commission and may be changed at any 'time. Railroad Commission v. Humble Oil 'and Refining Co., Tex.Civ.App., 193 S.W.2d 824, writ ref., N.R.E. The ultimate decision as to the contents of any order of the Commission rests with the Commission itself. The responsibility for the order rests with the Commission and not with the various interested parties that appeared before the Commission either as proponents of the order or antagonists thereto. In discussing the Midas Cases appellants assert that the issue here is not the power of the Commission to act, but rather the right of an operator to force the Commission to change its established method of allocation. 31 C.J.S. § 74, page 280 in discussing Estoppel, states: “ * * * where no available right is parted with and no injury suffered there can be no estoppel in pais.” It is difficult to see how appellees by their conduct in other oil fields in the area, either through their action or inaction, could have led appellants to feel that they could rely on a right to a particular allocation formula in a newly discovered field. Whatever action appellees took in other fields would necessarily have been determined by the factors involved in those particular fields as they existed at the time the action was taken. This would be particularly true as regards the size of the tracts involved in those fields. In addition, it is difficult to see how appellants have sustained legal damage by appellees’ attack on an order that allows appellants to produce more oil than they are rightfully entitled to. This is not a case where the question of appellants’ right to produce their oil is jeopardized as in the Rule 37 cases cited, this is an attack on a particular formula in a particular order that is patently unjust. It is not the prerogative of this Court to write an order that would be fair to the parties involved. This is the duty of the Commission.

In further support of their theory of estoppel appellants have cited Railroad Commission v. Mackhank Petroleum Company, Tex.Civ.App., 186 S.W.2d 351, rev. 144 Tex. 393, 190 S.W.2d 802, for the proposition that the court recognized the distinction between the question of the power of the Railroad Commission, on the one hand, and the rights of private litigants on the other hand with reference to changes in proration orders. This case involved the correlative rights of the parties in the same field that were arrived at by contract between the parties and acquiesced in by the Commission. The successors to the original contracting parties were estopped from attacking a proration order on the grounds that it was discriminatory and confiscatory in that it did not protect correlative rights. In the case at bar there has been no contract between the parties and separate fields are involved.

Board of Water Engineers v. Colorado River Municipal Water District, 152 Tex. 77, 254 S.W.2d 369, cited by appellants as authority for an estoppel in the case at bar is not in point as this case concerns delay in attacking the particular order involved in the case, not a failure to attack previous similar orders concerning an allegedly similar situation. In addition, the order of the Board in this case fixes rights of the parties involved with respect to the districts created much in the same way that. the Railroad Commission does in a Rule 37 case. In fact the Court cites one of the Midas Cases, supra, (142 Tex. 417; 179 S.W.2d 243) for a comparison.

For a further discussion of proration orders and estoppel see Railroad Commission v. Aluminum Company of America, Tex.Civ.App., 368 S.W.2d818.

Appellants’ third point contends that the trial court erred in refusing to admit into evidence their exhibit number 4 which was written testimony of Shell Oil Company at the hearing before the Commission of January 3, 1961, on field rules for the Quitman Northwest (Kirkland) field.

The Quitman Northwest (Kirkland) is not one of the fields involved in this lawsuit, however, appellants maintain that the hearing thereon was held six weeks prior to the first field rule hearing on one of the four reservoirs involved in this suit. Appellants contend that this evidence would show that the Kirkland reservoirs are similar to the reservoirs in the fields before this Court and further that at this hearing Shell’s representatives thought a 50-50 formula for this reservoir was fair and proper.

We hold that the evidence was properly excluded.

The evidence was not admissible on any theory of estoppel for the reasons we have set out above. In the next place, there is no material dispute as to the similarity between the Kirkland reservoirs and those involved in this suit. The evidence, at best, would have been merely cumulative of evidence similar in nature already before the Court and its admissibility was within the discretion of the trial court.

Appellants maintain that the order in question is supported by substantial evidence.

We do not agree. We hold that the undisputed evidence demonstrates that the proration formula in this order, under the doctrine announced in the Normanna and Port Acres cases, has allowed an unreasonable amount of oil to be confiscated from the adjoining tracts and will continue to do so if allowed to stand and that as a matter of law the order is not supported by substantial evidence and should be struck down.

The judgment of the trial court is affirmed.

Affirmed.

      . Field Rules issued under Special Order No. 2-48,826 dated June 27, 1962.

      . RULE 3: The daily total field oil allowable as fixed by the Commission after deductions have been made for marginal wells, high gas-oil ratio wells and wells which are incapable of producing their allowables as determined hereby, shall he distributed among the remaining producing wells in the field on the following basis.
      (a)The daily acreage allowable for each well, after said deductions have been made, shall be that proportion of fifty (50) percent of the daily field allowable which the acreage assigned to the well bears to the remaining acreage assigned to all the wells in the field.
      (b) The daily per well allowable for each well, after said deductions have been made, shall be determined by dividing fifty (50) percent of the total field daily allowable by the number of producing wells in the field.
      (c) The total daily oil allowable for each well shall be the sum of its per well and acreage allowables.

      . The Commission consistently includes the following provisions in Meld Rule orders which are included in the order before this Court, to wit:
      “This cause be held open on the docket for such other and further orders as may be necessary.”
      “PROVIDED, HOWEVER, that any reservoir not identified herein, or any reservoir that may later be discovered in this multiple reservoir area, will be assigned a designation in the same manner as set for the aforementioned reservoirs, but said rules as adopted herein will not be effective for additional reservoirs unless and until specifically adopted after due notice and hearing.”


source: Caselaw Access Project

author: GRISSOM, Chief Justice.

license: Public Domain

text:
    Archa F. ROBERTS, Appellant, v. LONE STAR PRODUCING COMPANY, Appellee.
    No. 3813.
    Court of Civil Appeals of Texas. Eastland.
    June 21, 1963.
    Rehearing Denied July 5,1963.

      Scurry, Scurry, Pace & Wood, John A. Pace, Dallas, for appellant.
    Pitts, Gormley & Bilton, Thomas M. Gormley, Dallas, for appellee.
   GRISSOM, Chief Justice.

Mrs. Archa F. Roberts, individually and as independent executrix of the estate of J. H. Roberts, deceased, sued Lone Star Producing Company. She sought construction of an assignment of oil and gas leases, lease amendments and division orders executed by her to Lone Star. The leases assigned were pooled, or unitized, by Lone Star with other lands and leases to form units 1, 7 and 8 of the Travis Peak formation involved here. Mrs. Roberts contends that she retained, in addition to an overriding royalty of 54 of ⅞ of the oil and gas produced above the Travis Peak formation, an oil payment of $75,000.00 from ½6⅛ of Piths of the oil and gas produced from the Travis Peak formation; that Lone Star is producing gas from that formation but is paying her on said oil payment only ¾6⅛ of piths of the production allocated to the units involved, while she is entitled to ½6⅛ of J^ths of the gas produced from the leases assigned by her to Lone Star.

The case was submitted to the court upon an agreed statement of facts. The court found that the lease amendments executed by Mrs. Roberts authorized Lone Star to pool the assigned leases with other lands and leases included in said units; that the declaration of unitization by Lone Star of Travis Peak gas units 1, 7 and 8 pooled and combined the interest of plaintiff with other leases and lands included therein; that execution by plaintiff of division orders applicable to units 1 and 8 ratified defendant’s, declaration of such units and subj ected plaintiff’s interest in those two units to the-unitization provision; that acceptance by-plaintiff of payments accruing to her interest in unit 1 upon a unitized basis from August 1, 1956, until about May 30th, 1962,. constituted a ratification of unit 1 so that her interests therein were bound by the-unitization provisions; that the %6th of' piths of production reserved by plaintiff in, the assignment, which interest Mrs. Roberts, calls an oil and gas payment, is an overriding royalty within the meaning of the-lease amendments which amendments authorized pooling and payment of overriding-royalty based on the production allocated’ to said units because (1) such interest is, as-a matter of law, an overriding royalty and’ (2) the parties defined that interest as am overriding royalty in the paragraph that created it. The court rendered judgment-that plaintiff take nothing. Plaintiff has-appealed.

It was agreed that on May 17, 1955, Mrs. Roberts owned, in the capacities in whichi she sued, an undivided ½ interest in the-leases assigned in so far as they include-the Travis Peak formation; that she assigned said leases to Lone Star as to all' formations down to the base of the Travis-Peak formation; that the Bacon and Ro-dessa lime formations have been unitized by-agreement and are not involved here. The-only formation involved here is Travis-Peak. The original leases did not permit, the lessee to pool, or unitize, the land covered thereby with other lands and leases... After Lone Star acquired said leases it ob— tained from all the “land owners” permission to pool the lands covered by said leases with other lands and leases, as it has done. Lone Star has formed pools, or units, numbered 1 through 10, for production of gas from the Travis Peak formation. At the time Mrs. Roberts assigned the leases to Lone Star, the Riddlesperger Well Number 1 was producing gas from the Travis Peak formation and plaintiff executed a division order effective May 1, 1955, which referred to Mrs. Robert’s $75,000.00 interest as a ■“.0625 O.R.I.” It provided that the stated division should continue “until the date on which the Lone Star unitization agreement covering this property is filed of record—

The preamble to Article 2 of the assignment recited that Mrs. Roberts excepted and reserved “the following overriding royalty interests and oil and gas payments.” Paragraph 1 of Article 2 then provided that Mrs. Roberts excepted and reserved an overriding royalty of of ^ths of the oil and gas produced above the Travis Peak formation. (That is not involved here.) Paragraph 2 of Article 2 dealt with production from the Travis Peak formation and contained the provision reserving the $75,-000.00 payment in controversy. Said reservation is as follows:

“2. The equal one-sixteenth (⅛6) part of all oil, gas — and all other minerals which may be produced and saved by Lone Star Producing Company — from all wells now or hereafter completed and producing oil or gas from the Travis Peak Formation in the lands described in Exhibit ‘A’ — until such time as Assignor shall have received from the proceeds of the sale of said one-sixteenth (¾6) part of such oil, gas — and other minerals over and above, and free and clear of any cost, charge, expense or deduction of any kind, including but not limited to gross production, pipe line, gathering and severance taxes, (but not including ad valorem or federal income taxes) the sum of Seventy-Five Thousand and no/100 ($75,000.00) Dollars, whereupon this reservation shall terminate; and thereafter the working interest in the oil, gas and other minerals under the aforementioned leases shall be free and clear of the overriding royahy payment provided for in this section 2 of Article 11 hereof. — The overriding royalty production payment herein reserved shall be in addition to all other outstanding overriding royalty, production payments other than such overriding royalty, production or other payments that may have been assigned or reserved by said Assignor since May 1, 1951, the date J. H. Roberts acquired the aforementioned oil, gas and mineral leases. In the event said Assignor owns less than the interest so acquired by J. H. Roberts on May 1, 1951, the overriding royalty production payment hereinabove provided for in this Section 2 of this Article 11 shall be decreased proportionately.”

In 1958 Mrs. Roberts executed two lease amendments. The first recited that Mrs. Roberts owned “a mineral and/or royalty and/or overriding royalty interest” and that Lone Star owned the leasehold interest in certain leases and that they desired to amend said leases to provide for pooling. It gave Lone Star authority to pool the land covered by said leases, or any part thereof, with any other land or leases it deemed advisable. It provided that Lone Star should record an instrument describing the pooled acreage. It then provided that “The entire acreage so pooled into a unit shall be treated for all purposes, except the payment of royalties, as if it were included in this lease, and drilling or reworking operations thereon or production of oil or gas therefrom, or the completion thereon of a well as a shut-in gas well, shall be considered for all purposes, except the payment of royalties, as if such operations were on or such production were from or such completion were on the land covered by this lease, whether or not the well or wells be located on the premises covered by this lease. In lieu of the royalties elsewhere herein specified Lessor shall receive from a unit so formed, only such portion of the royalty stipulated herein as the amount of his acreage placed in the unit or his royalty interest therein bears to the total acreage so pooled in the particular unit involved.” It then provided that Lone Star might add to a unit other interests acquired in the area by filing notice with the County Clerk “but no such interest shall share in the royalties under any such existing unit prior to the first day of the calendar month next succeeding the date when such interest becomes bound under said unit. In the absence of production Lessee may terminate any unitized area by filing of record notice of termination. The foregoing provisions as to royalties shall also apply to overriding royalties.”

The second lease amendment, likewise, authorized unitization by the lessee and provided that royalties, including overriding royalties, should be paid upon the basis of the production allocated to a unit, instead of upon the amount actually produced from the assigned leases.

In July, 1955, Mrs. Roberts executed a division order applicable to unit 1. It referred to her $75,000.00 payment as an .0625 overriding royalty interest and provided that such interest should continue until $75,000.00 was received from “this interest and interests in other leases” and that the division provided for should continue “until the date the Lone Star unitization agreement covering this property is filed of record — .” Mrs. Roberts, knowingly, for about six years, accepted payments for gas produced from unit 1 based upon the production allocated to that unit, instead of actual production from the assigned leases. She executed a like division order applicable to unit 8, however, no payment was received thereon prior to this suit. Mrs. Roberts did not execute such a division order for unit 7.

Mrs. Roberts says that neither the lease amendments, the division orders, nor a combination of the things mentioned, authorized Lone Star to make payments on the $75,-000.00 based on allocated production, and that the court erred in so holding. The lease amendments were executed for the expressed purpose of permitting the lessee to pool, or unitize, the leases assigned by Mrs. Roberts with other lands and leases. They provided that when this had been done the acreage in a unit should be treated for all purposes, except payment of royalties, as if it were included in the amended leases. They expressly provided a change in the basis for payment of royalties from a certain portion of actual production to the same portion of the production allocated to a unit. They stipulated that said provision for payment of royalties should apply to overriding royalties.

The provision for payment of $75,000.00 out of a certain part of the oil and gas produced is an overriding royalty within the meaning of the lease amendments. Westgate-Greenland Oil Co. v. Mack, Tex.Civ.App., 164 S.W.2d 31, 32 (RWM); McMahon v. Christmann, 157 Tex, 403, 303 S.W.2d 341, 344; State National Bank v. Morgan, 135 Tex. 509, 143 S.W.2d 757; State v. Quintana Petroleum Co., 134 Tex. 179, 133 S.W.2d 112, 115, 128 A.L.R. 843. In the paragraph of the assignment creating and reserving that interest it is described as “an overriding royalty interest” and referred to as an “overriding royalty production payment.” It was not therein called an oil and gas or production payment. See Murphy v. Jamison, Tex.Civ.App., 117 S.W.2d 127, 131, (WR). However, an oil and gas payment, or production payment is a royalty and an overriding royalty. See Delta Drilling Company v. Simmons, 161 Tex. 122, 338 S.W.2d 143, 147. Both overriding royalties and oil and gas payments are carved out of the working interest. They are overriding. They are both interests in land. Standard Oil Company of Texas v. Marshall, 5 Cir., 265 F.2d 46, 53. The only difference is that an oil and gas payment terminates when the amount provided for has been paid, while an overriding royalty continues until termination of the lease. We do not think that distinction is material here. 20 Tex.Law Review 269. When the parties were creating and reserving that interest they called it an ■overriding royalty. When they changed the manner of its payment they called it an •overriding royalty. See Griffith v. Taylor, 156 Tex. 1, 291 S.W.2d 673, 675. It is an overriding royalty. See Kaiser v. Love, (Tex.Sup.Ct), 358 S.W.2d 586, 588. By virtue of the terms of the lease amendments the $75,000.00 is payable out of the stated portion of the gas allocated to the units, •instead of out of the same portion of actual production from the assigned leases. Appellant granted appellee the right to unitize the land and leases with other lands and leases. The $75,000.00 payment is covered by the provisions in the amendments that overriding royalties are payable out of the •gas allocated to a unit. Furthermore, we think that in the absence of a contrary agreement, such is the legal effect of a -unitized lease, to wit, the sharing of production, or the proceeds thereform, in proportion to the acreage contributed to a unit, where no other basis is specified. Southland Royalty Co. v. Humble Oil & Refining Co., 151 Tex. 324, 249 S.W.2d 914; Duffey v. Callaway, Tex.Civ.App., 309 S.W.2d 853, (WR) ; Eighth Annual Institute on Oil & Gas Law 260-290; Ward v. Gohlke, Tex. Civ.App., 279 S.W.2d 422, 427, (WR); Standard Oil Co. v. Donald, Tex.Civ.App., 321 S.W.2d 602 (WR).

The division order applicable to unit I provided that

“It is agreed that settlement for proceeds on the interests set out herein shall be determined on the basis of the proportion the total acreage in the tract described above bears to the total acreage included in the Travis Peak Unit comprising a total of 691.73 acres described and designated in Declaration of Travis Peak Unit No. 1 — .”

The division order for unit 8 contained the following:

“The undersigned hereby adopts, ratifies and confirms the aforementioned designation of Gas Pooling Unit, and the oil and gas leases including any and all amendments thereof more specifically described therein; such ratification to be valid and effective irrespective of the cancellation of this instrument.”

As to units 1 and 8, appellant, by execution of said division orders, ratified unitization of the leases assigned with other lands and leases and appellee’s method of paying the $75,000.00. Loeffier v. King, 149 Tex. 626, 236 S.W.2d 772, 774; Leopard v. Stanolind Oil and Gas Company, Tex.Civ.App., 220 S.W.2d 259, 264, (Ref. N.R.E.); Grissom v. Anderson, 125 Tex. 26, 79 S.W.2d 619, 622.

Appellant’s points are overruled. The judgment is affirmed.


author: ARCHER, Chief Justice.

text:
    Dwight G. HALE, Appellant, v. F. W. SCHRAUB, Appellee.
    No. 11090.
    Court of Civil Appeals of Texas. Austin.
    June 12, 1963.
    Rehearing Denied July 3, 1963.

      Elbert R. Jandt, Seguin, for appellant.
    B. B. Schraub, Seguin, Schleyer, Bartram, Reagan & Burrus, New Braunfels, for ap-pellee.
   ARCHER, Chief Justice.

This is an appeal from a judgment, based on a jury verdict, granting the appellee an injunction ordering the removal of a fence erected in a public road.

The appeal is founded on six points assigned as error and are that the Court erred in overruling appellant’s exception to the petition because there was no allegation that the road had been legally established, and because appellee did not plead any special damages, and allowing appellee to introduce exhibits 1, 2, 3 and 4 without requiring appellee to lay the proper predicate, in instructing the jury that a first class road extended 20 feet on both sides of its center line, such being a comment on the weight of the evidence, and finally the issue submitted to the jury is not supported by the pleading and the evidence.

Appellee alleged that he was the owner of a tract of 113 acres, and that on November 14, 1879 by orders duly entered the Commissioner’s Court established a first class road known as the Wilson County to Cíbolo Creek Road, and also known as the San Antonio-Cuero Road; that on July 23, 1913 the course of the road was changed from a diagonal course to a straight line in some instances. Further allegation was that a second class road described as the Seguin-San Antonio-Cuero Road was established by order dated May 15, 1885; plaintiff further alleged that the roads have been open to access for over 50 years, and that he bought his farm after the roads had been in use for ingress and egress to and from the land for over 40 years, and he had used the roads as access to and from his farm for over 8 years before the defendant purchased his land, and that plaintiff’s land is impaired by the erection of the fences.

The defendant answered by exception and general denial: that the roads were not established by a jury of view, with report and acceptance thereof so as to constitute a legally established road; that the plaintiff did not have a right to bring the suit, or show that he has suffered any damage not suffered by the public generally.

By further answer the defendant alleged that the roads have not been used as public roads for many years; that the County had not acquired title to the land over which the roads are supposed to have been established ; that the roads have been abandoned and the property returned to the owners of the abutting property, and that plaintiff now has a better road to his place than he formerly had before the fence was built.

Both parties filed motions for instructed ■verdict which were overruled.

The case was submitted to a jury on one special issue reading as follows:

“Do you find from a preponderance of the evidence that the new fence built hy the defendant D. G. Hale, along the ■southeast line of the 300 acre tract, was built within the boundary lines of the road as the same was located on the ground in 1913?”

to which issue the jury answered yes.

Based on the jury’s verdict the Court ■entered judgment, reading in part:

“ * * * ; and the Court being of the opinion that judgment should be rendered, as follows, for the Plaintiff, it is therefore ORDERED, ADJUDGED AND DECREED BY THE COURT that the said Defendant, DWIGHT G. HALE, be perpetually enjoined to remove the fence built by him along the Southeast line of his 300 acre tract, heing a part of the H & T C RR Section 31, in Guadalupe County, Texas, sometimes known and referred to as the C. F. Diechow and the Gus Vorpahl 300 acre tract; and that said Defendant, DWIGHT G. HALE, his agents, servants and employees, be, and they are hereby perpetually enjoined from, and that he, the said DWIGHT G. HALE, shall desist from obstructing said road located twenty (20) feet on each side of the Southeast line of said 300 acre tract of land, the maintenance ■of said roadway, and from in anyway ■damaging, destroying or injuring the roadbed thereof; and further that Plaintiff, F. W. SCHRAUB, do have and recover of and from DWIGHT ■G. HALE all costs in his behalf expended, for all of which let Writs of Injunction and Execution issue.”

The issue was plead and the evidence justified the answer of the jury.

The defendant Hale, objected to the charge of the Court as follows:

“You are instructed as a part of the law in this case that when the width of a first class road is not stated in the order therefor, the proper construction of the order is that the road shall be not less than 40 feet wide and extends twenty (20) feet on each side of the line as given.”

We believe that such was a proper instruction. The class of the road was not in controversy and the Court followed the law. Ballard et al. v. Bowie County, 59 Tex.Civ.App. 438, 126 SW. 56.

There .can be no question but that the establishment and location of the roads is supported by the records and by the testimony of the several witnesses who testified, and particularly by Louis Wahl, a State Registered Public Surveyor and the County Surveyor, who prepared a map of the area and depicted the roads based on County Records and the tracts of land abutting thereon.

Mr. Wahl testified that the original road, established in 1884 was through a 300 acre tract now owned by appellant, in a diagonal direction, and that in July 1913 the Commissioner’s Court changed the original course of the road to follow property lines, so as to omit the diagonal directions of the older road.

The witness described the 1913 road and old fences and the width of such road and stated that the fence built by Mr. Hale was in the center of the old roadway.

F. W. Schraub, appellee, testified that he was familiar with the roads and had been for 50 years, and owned land in the area, and traveled the road involved to get to his property, and that other people used the road, and that Mr. Hale’s fence was across the right of way, and prevented the use of the road.

Other witnesses testified as to the us'e of the road prior to the erection of the fence. Mr. Hale, the appellant, testified that he owned the 300 acres of land mentioned as the Diechow tract, having purchased it in 1957, and that he had rebuilt or repaired the fence; that at the time he purchased the land no one was making use of the road. Mr. McBride, County Commissioner, testified that he was familiar with the road, and that it had been bladed a time or two, and that the fence is in the road. Henry Glenewinkel, County Judge of Guadalupe County, testified that he was familiar with the lands in the area and the road in question and was a surveyor and had located the lines of the old fencing, and that such lines ran 20 feet on either side of the present new fence, and that appellant did not have permission to build the new fence.

The record is extensive, the statement of facts contains over 300 pages and we have read and considered it and believe the verdict of the jury is supported by a preponderance of the testimony and that the Trial Court was correct in entering the judgment.

We believe that the location of the “old” road in 1885 and that the relocation of the road in 1913 were in substantial compliance with the Statutes. Sneed v. Falls County, Tex.Civ.App., 42 S.W. 121.

The orders of the Commissioner’s Court establishing the roads cannot be collaterally attacked. 21 Texas Jurisprudence, Sec. 4, page 545.

The minutes of the Commissioner’s Court were admissible as evidence.

Appellee filed in this cause a notice of the filing of papers to be used in evidence, and listed the several orders and actions by the Commissioner’s Court in establishment of the “old” roads and that of the “new” relocated road.

The judgment of the Trial Court is affirmed.

Affirmed.


author: BATEMAN, Justice.

text:
    John W. MURCHISON, Jr. et ux., Appellants, v. CARUTH BUILDING SERVICE et al., Appellees.
    No. 16180.
    Court of Civil Appeals of Texas. Dallas.
    June 7, 1963.
    Rehearing Denied June 28,1963.

      Bradford, Pritchard & Ashley, Dallas, for appellants.
    Leslie Shults and John W. Price, Dallas, for appellees.
   BATEMAN, Justice.

Appellants, husband and wife, entered into a written contract on or about April 11, 1961 with I. C. McElyea whereunder the latter agreed to construct a house on a lot owned by appellants and known as 518 Lois Lane, Richardson, Texas. The contract contained a mechanic’s lien to secure payment of the contract price. Appellants brought this suit against McElyea and certain of his creditors, alleging that simultaneously with the execution of the contract it was also agreed between appellants and McElyea that the contract price of $25,500 would be paid in the following manner: $20,600 in cash (of which $18,000 would be borrowed by appellants from a life insurance company, secured by a first lien on the property) and the remaining $4,900 would be paid by transfer by appellants to McElyea of their equity in their former home at 417 Terrace Drive, Richardson, Texas. Appellants also alleged that simultaneously with the execution of the written contract they also executed their negotiable promissory note to McElyea in the amount of $25,500, payable on or before six months after date, which note McElyea simultaneously sold, assigned and conveyed to Preston State Bank, receiving from the bank $18,000.

Appellants also alleged that they paid McElyea $2,600 in cash, and that McElyea thus received all of the contract price except the equity in the property at 417 Terrace Drive, and that on or about July 10, 1961 he abandoned the contract, leaving the work unfinished which appellants paid $219.50 to complete.

Appellants asked the court to declare that appellees and McElyea had no valid claims or liens against the property at 518 Lois Lane, and that appellants be awarded $3,-832.20 out of the proceeds of the sale of their property at 417 Terrace Drive, consisting of the following items of damages suffered by them by reason of McElyea’s breach in abandoning the work and permitting appellees’ liens to be filed against the property:

A. The cost of completing the contract, $219.50.

B. Payments on the existing mortgage, taxes and insurance on 417 Terrace Drive, which appellants say they would not have had to pay had McElyea completed his contract, totaling $752.35.

C. Excessive interest paid to Preston State Bank, over and above what they would have owed had McElyea completed his contract, $1,660.35.

D. A fee of $200 paid to an attorney to prevent foreclosure by Preston State Bank.

E.A fee for appellants’ attorneys for clearing title to their property by this suit, or in the alternative a stakeholder’s fee, $1,000.

The appellees are Caruth Building Service and Jones Brothers Cement Contractors, who allege they furnished to McElyea certain labor and materials going into the construction of the house. They filed in the office of the County Clerk of Dallas County certain affidavits and statements which they claim fixed mechanic’s and materialmen’s liens in their favor on appellants’ property, even though it was their homestead, under the provisions of Art. 5460, Vernon’s Ann. Tex.St.

At appellants’ request a receiver was appointed who sold the property at 417 Terrace Drive, realizing for the equity and paying into the registry of the court the net sum of $3,842.26. All parties filed motions for summary judgment. That of appellants was sustained only to the extent of reimbursing them the $219.50 cost of completing the construction contract. The remainder of the fund, after payment of costs, was awarded pro rata to the appellees.

Considering first the appellants’ claim to the fund, we note that they say in their brief that when McElyea abandoned the contract “he had substantially completed the erection of the house,” and that it cost them only $219.50 to complete same. This we hold was the full measure of their damages for McElyea’s breach of the contract. The other elements of their claim (mortgage payments, interest, taxes and attorney’s fees) are special damages obviously not in contemplation of the contracting parties, and we think the court correctly refused to allow them to appellants. Evans v. Pacific National Fire Ins. Co., Tex.Civ.App., 367 S.W.2d 85; 17 Tex.Jur.2d 135.

The court having awarded to appellants all of the fund to which they were entitled, they have “no right to complain of the judgment so far as it disposes of the [remainder of the] fund between others.” Ragsdale v. Groos, Tex.Civ.App., 51 S.W. 256, no wr. hist. Nevertheless, we shall consider the objections raised by appellants to the claims of appellees.

They first argue that appellees had no rights in the fund because they did not perfect valid liens on the property, in that (1) neither appellee notified Mrs. Murchison, or mentioned her as an owner in the affidavits filed, (2) appellants’ $25,500 note had been negotiated to the Preston State Bank long prior to any notice of appellees’ claims and prior to the filing of their affidavits, (3) neither appellee gave appellants written notice of each item of his claim, or copy of each bill of lumber as same was furnished, showing how much was due and unpaid on each bill of material furnished or labor performed, and (4) the lien statements were not sufficiently itemized.

We find no merit in the contention that appellees’ mechanic’s liens must fall because they did not notify appellant Mrs. Murchison, a co-owner, thereof. Under the record before us, we must presume that the new home was community property. Art. 4619, V.A.T.S.; Ellerd v. Randolph, Tex.Civ.App., 138 S.W. 1171, err. dis.; 23 Tex.Jur. 355, § 307. The husband being in law the manager of the community property, notice to him of the liens was also notice to the wife. Ellis v. City of San Antonio, Tex.Civ.App., 341 S.W.2d 508, err. ref. n. r. e.; Thompson v. Harmon, Tex.Civ.App., 152 S.W. 1161, 1165, reformed and affirmed Tex.Com.App., 207 S.W. 909; 23 Tex.Jur. 151, § 121.

In making the foregoing ruling we are not unmindful of the constitutional and statutory precautions by which our law so jealously safeguards the rights of a wife in her homestead. Ordinarily her husband cannot act for her in encumbering or disposing of the homestead; in both instances she must sign for herself and the officer taking her acknowledgment must examine her privily and apart from her husband, make certain she understands what she has signed and give her an opportunity to rescind it. Art. 16, § 50, Texas Constitution, Vernon’s Ann.St.; Art. 1300, V.A.T.S. But here it is apparent from appellants’ own pleadings that a valid lien had already been placed on the homestead by the written contract between them and McElyea. Appellees were attempting to fix their liens under McElyea’s lien, as authorized by Art. 5460, V.A.T.S.; Fullenwider v. Longmoor, 73 Tex. 480, 11 S.W. 500. We merely hold in this connection that their notices to “the owner,” served on the husband, are sufficient to bind the wife, who has already given her consent to the general contractor’s lien in accordance with law.

Appellants’ next contention is that the filing by appellees of their liens did not impound any portion of the contract price in the hands of appellants because they had given McElyea their promissory note for the full amount, which McElyea had assigned to Preston State Bank. However it appears rather clearly from the record as a whole, and particularly the affidavit of appellant Murchison, that all the Bank paid McElyea on the note and all the Bank demanded of appellants thereon (exclusive of interest) was $18,000; that when Murchison was notified and the liens were filed the balance owing to McElyea was the equity in the former home at 417 Terrace Drive. This equity was converted to cash and the cash paid into the registry of the court as aforesaid, and the court correctly applied the doctrine of Lonergan v. San Antonio Loan & Trust Co., 101 Tex. 63, 104 S.W. 1061, in holding, that appellees were not entitled to liens on appellants’ homestead, but only to the unpaid balance of the contract price which would otherwise be owing to McElyea, as if appellees had sued out writs of garnishment against appellants, subject of course to the right of appellants first to deduct the cost of completing the house.

The contention that appellees’ liens were invalid because they did not notify appellants of each item of material as it was furnished is also without merit. The requirement to this effect contained in Art. 5465, V.A.T.S., has been held many times to he unenforceable where no prejudice or harm to the owner resulted from a failure to observe the same. Wood v. Amarillo Imp. Co., 88 Tex. 505, 31 S.W. 503, 506; Riter v. Houston Oil Refining & Mfg. Co., 19 Tex.Civ.App. 516, 48 S.W. 758, err. ref.; Padgitt v. Dallas Brick & Const. Co., Tex.Civ.App., 51 S.W. 529, err. ref.; Nichols v. Dixon, 99 Tex. 263, 89 S.W. 765; Ogburn Gravel Co. v. Watson Co., Tex.Civ.App., 190 S.W. 205, affirmed 110 Tex. 161, 217 S.W. 373.

Appellants also claim that the liens of appellees ape invalid because not adequately itemized, citing Turner Roofing & Supply Co. v. United Pacific Ins. Co., Tex. Civ.App., 289 S.W.2d 407, and Lebo v. Dochen, Tex.Civ.App., 310 S.W.2d 715. It would serve no good purpose to lengthen this opinion by setting forth the claims involved ; suffice it to say that we have carefully studied the claims and the applicable authorities and are of the opinion that sufficient detail was given to comply with the statute and to apprise the owners of what was being claimed and that appellants were in no way prejudiced by the claimed defects in itemization. This contention is also overruled.

Appellants also say that the court below erred in rendering judgment for appellees because they failed to make the contractor, McElyea, a party to their cross-actions. The transcript shows that both of the appellees sued McElyea for the amounts of their respective claims, but does not show that citations were issued thereon and the judgment specifically recites that these parties did not cause citation to be issued against McElyea. Appellants had made him a party defendant in their original petition and, while the transcript contains no citation, the judgment recites that he was served on a certain date in the suit of appellants against him. As this recitation is not challenged, we give it that verity to which it is entitled. 49 C.J.S. Judgments § 437, p. 869; Bass v. Hoagland (C.A.5) 172 F.2d 205, cert. den.; 338 U.S. 816, 70 S.Ct. 57, 94 L.Ed. 494.

The only basis on which appellants would have a right to complain of the failure of appellees to have McElyea served with citation on their cross-actions would be the possibility that they, the appellants, might later be called upon to pay the balance of the contract price to McElyea who might claim that the judgment in favor of ap-pellees against him was not binding on him. The transcript contains no answer by Mc-Elyea and the judgment recites that he filed none. We overrule this contention of appellants, holding that the judgment is binding on McElyea. He was cited to appear and answer their suit, which was against him and the appellees and in which appellants set forth the claims of appellees of liens on the new home and prayed for judgment against all of them declaring that none of them had any right, title or interest in or liens upon the new home property and that their purported liens are invalid and of no effect, and further that plaintiffs be awarded $3,832.20 out of the proceeds of the sale of the other property, for costs “and such other and further relief to which they may be entitled.” He was thus put on notice of the fact that appellees had filed affidavits to fix liens on the same property he had a lien on; also that appellants were claiming as an offset to his unpaid balance certain damages alleged to have been sustained because of his failure . to pay ap-pellees’ claims. Rule 97(a), Vernon’s Texas Rules of Civil Procedure, required him to assert as a counterclaim any claim he might have against appellants arising out of the transaction. He did not do so; therefore we hold that the judgment appealed from is res judicata as to any claim of McElyea for any part of the contract price, and that, accordingly, appellants’ have no just cause for reversal in this respect.

We think the distribution made of the fund by the trial court was just and is amply supported by the pleadings and the evidence.

Affirmed.


author: HYDE, Judge.

text:
    WRIGLEY PROPERTIES, INC., et al., (Plaintiffs) Appellants, v. CITY OF LADUE, Missouri, a City of the Fourth Class, et al., (Defendants) Respondents.
    No. 49465.
    Supreme Court of Missouri, Division No. 1.
    July 15, 1963.
    Granville L. Gamblin, Clayton, for appellants.
    J. H. Cunningham, Jr., St. Louis, Will-son, Cunningham & McClellan, St. Louis, of counsel, for City of Ladue, Mo., respondent.
   HYDE, Judge.

This action, which plaintiffs call declaratory judgment, sought to have the court determine that their ten acres of land zoned as residential should be rezoned as commercial and asked a mandatory injunction for that purpose. At the close of plaintiffs’ case, the trial court ordered judgment for defendants and plaintiffs have appealed.

As the basis for our jurisdiction plaintiffs say the refusal to rezone was arbitrary and unreasonable, deprives them of their property without due process of law and denies them of equal protection of the law in violation of the 14th Amendment to the U. S. Constitution and Sec. 10, Art. I, of the Mo. Constitution, V.A.M.S. However, plaintiffs fail to show how the construction of these constitutional provisions is involved (see Sec. 3, Art. V, Mo. Const.) making no claim that they did not have notice of the proceedings (which in fact they commenced) and full opportunity to be heard. Moreover plaintiffs make no claim of unconstitutionality of any zoning statutes or ordinances and their so-called constitutional issue amounts to nothing more than a contention of incorrect application of zoning laws by the city. See State ex rel. Doniphan Telephone Co. v. Public Service Commission of Missouri, Mo., 369 S.W.2d 572; Goodson v. City of Ferguson, Mo.Sup., 339 S.W,2d 841; McClard v. Morrison, Mo.Sup., 273 S.W.2d 225. However, we have decided we do have jurisdiction because of the amount in dispute. Plaintiffs allege “that the land described in this petition is, and has always been unimproved ground, and for residential purposes the reasonable and fair market value thereof would approximate $50,000; and that its reasonable and fair market value for commercial purposes would approximate $450,000.” Thus the value of the relief sought is claimed to be in excess of our jurisdictional amount of $15,000. Sec. 3, Art. V, Const.; Sec. 477.-040, RSMo, V.A.M.S.; see Chemical Bank & Trust Co. v. Anheuser-Busch, Inc., 360 Mo. 877, 231 S.W.2d 165; Superior Concrete Accessories v. Kemper, Mo.Sup., 284 S.W.2d 482, and cases cited.

The 10-acre tract, sought to be rezoned, is the east 10 acres of a 14-acre tract owned by plaintiff Wrigley Properties, Inc. (hereinafter called Wrigley) which in 1961 had made a contract for its sale to plaintiff Taylor Gamblin for $382,021.20, subject to obtaining rezoning from residential to commercial. Gamblin desired to build a large shopping center building on this 10 acres with paved parking space for about 800 cars, at an estimated cost of $1,-500,000.00. Wrigley had bought the 14 acres before 1958 for $300,000.00 and was using the west 4 acres (the west 300 feet) for a supermarket and a parking space. The 14-acre tract is at the western limits of the City of Ladue at the intersection of Lindbergh Boulevard (on the west) and Clayton Road (on the south) with U. S. Highway 40, an express highway, on the north. Across the east side, there is a graded bank, east of which is the Field-crest residential subdivision on somewhat higher ground. On the north side of the highway is the Salem Methodist Church. Also nearby on the north side of the highway is Ladue High School.

When Wrigley bought the entire 14 acres, the west 250 feet was zoned commercial and upon its petition this was extended 50 feet farther east. The commercial zone on the south side of Clayton Road likewise extends 300 feet east of Lindbergh. (It is occupied by a service station and a restaurant with a branch of the St. Louis County Public Library to the south.) From that point east the land on the south side of Clayton Road (like the land on the north side) is zoned residential along and beyond the 10-acre tract involved, with the requirement of 30,000 square feet per family. This was true of the land adjoining the 10-acre tract on the east, as well as on the south side of Clayton Road and on the north side of Highway 40. The present value of the 10-acre tract, if zoned commercial, would be $440,000 to $450,000 according to plaintiffs’ evidence. (The prospective value of the 10-acre tract if 12 houses were constructed on it was estimated at $360,000.) Plaintiffs offered to give a strip of the south side of their land for an additional westbound lane of Clayton Road if rezoned as they requested. The 10-acre tract has been in Ladue since' 1947 when its boundaries were extended to Lindbergh Boulevard and has always been zoned residential.

All of the testimony was produced by plaintiffs and the witnesses included the mayor and city clerk of Ladue. The City Zoning and Planning Commission recommended against rezoning because (1) insufficient major changes to justify it; (2) adequate area for commercial development to serve city’s future population with still vacant commercial areas along Clayton Road; (3) proposed 850 parking spaces would add to existing traffic congestion along Clayton Road even though an additional traffic lane was provided; (4) adverse effect upon nearby and adjacent residential development; (5) rezoning area would invite requests for additional zoning changes, particularly along Lindbergh, not needed to serve Ladue residents. There was testimony to support these findings and also that paving the area for parking would increase flow of water after rains so as to adversely affect nearby residential subdivisions. These also were the reasons of the mayor and city council in refusing plaintiffs’ application for rezoning. The history of Ladue and a description of its zoning will be found in our opinion in Flora Realty & Investment Co. v. City of Ladue, 362 Mo. 1025, 246 S.W.2d 771.

Plaintiffs’ principal argument is that the growth and development of the region outside Ladue to the west, southwest and northwest has been so great and has so completely changed conditions in the area that rezoning of the ten acres from residential to commercial is necessary for the physical and economic needs of the area and therefore refusal to rezone is arbitrary and unreasonable. Other cities and towns adjoining Ladue on the north, west and south are Olivette, Creve Coeur, Frontenac, Huntleigh and Warson Woods, with several other towns just beyond them; and there was evidence that the planned shopping center would serve all these municipalities. However, it also appeared that on the southwest corner of the intersection of Clayton Road and Lindbergh, in Frontenac, there was a tract reaching 500 feet west on Clayton Road and 1500 feet south along Lindbergh, undeveloped and available for commercial development; and that there were other such open areas in Frontenac. (A new Shriners Hospital was being built south of the 1500-foot tract on Lindbergh on the west side of Lindbergh and to the north of Clayton Road, in Frontenac, there was a furniture store and a motel.) The Planning Director of St. Louis County, who testified concerning the development of the area and stated the view that a neighborhood shopping center was needed in the area, also said that residential development of the 10-acre tract would be a reasonable use, particularly some type of high density residential use (multiple or apartment) for at least part of it. It also appeared that there had been people wanting to buy it for residential development; and the Assistant County Planning Director said residential development would be a reasonable use.

The St. Louis County Planning Director and his assistant testified that they had prepared a preliminary land use plan for the entire county; that they considered a reasonable use of the 10-acre tract would be commercial; and that the entire area both in and beyond Ladue was increasing in population and could be served by a shopping center there. They also expressed the view that this would have no detrimental effect on adjacent residential districts ; and that it would be better to, have the shopping center there next to the supermarket rather than on the southwest corner of the intersection (then unimproved and zoned commercial) which would require constant back-and-forth movement of people across Lindbergh to do normal shopping. These views were “from the standpoint of overall planning of St. Louis County rather than from the planning of an individual municipality.” An officer of a real estate appraisal and planning firm testified that the shopping center would provide service to a large trade area which then was rather devoid of major retail buying centers; that this was one of the major intersections in the county; that home values in the immediate vicinity would average around $35,000; that the center would serve a community overlapping city boundaries; that the estimated number of families in the trade area was 4500, which would increase to 6000 in the next eight years; and that 1000 of this increase would be west of Lindbergh. He also estimated the sales potential of the center at $30,000,-000.00 with an increase to $40,000,000.00 by 1970, with two-thirds of the increase coming from west of Lindbergh; and stated his opinion that a shopping center would be more appropriate to the entire area than residential development and that it would not affect values of existing residential property. Other witnesses with experience in the real estate business affirmed the need of the whole area for such a shopping center and had the view that it would not be detrimental to existing residential areas in Ladue; and also expressed the opinion that present conditions around the intersection, traffic, lights all night, etc., would deter development of the 10-acre tract for residential purposes. Therefore, they considered its best use to be commercial. However, it was admitted that there were fine homes in Ladue in subdivisions that come right out to Lindbergh and the area restricted to three acre lots, containing the finest residences, is to the south and southeast of the 10-acre tract, also coming out to Lindbergh.

The trial court found that plaintiffs “made a prima facie case as to the nature and needs of the entire community, but they have failed in establishing that these needs are not in conflict with the social, economic and physical conditions within the community of Ladue.”

Zoning is an exercise of the police power and “the rule is that, if the question as to whether or not the legislation is unreasonable or arbitrary or an unequal exercise of power is fairly debatable, the legislation must be upheld as valid”, Schell v. Kansas City, 360 Mo. 27, 226 S.W.2d 718, 719, and cases cited; Flora Realty & Investment Co. v. City of Ladue, supra, 246 S.W.2d 1. c. 777. This rule likewise must apply to refusal of an application to rezone. “[U]nder some circumstances the refusal to rezone property from residential to business use may be arbitrary and unreasonable.” 101 C.J.S. Zoning § 97, p. 851. The following cases cited in C.J.S. have held refusal to rezone arbitrary and unreasonable: Del Buono v. Board of Zoning Appeals of Town of Stratford, 143 Conn. 673, 124 A.2d 915 (conceded that land could not serve for residential purposes until extensive piling, fill, drainage and retaining walls were put in at great expense to owner; surrounding neighborhood zoned for business and industry); Suffield Heights Corporation v. Town Planning Commission of Town of Manchester, 144 Conn. 425, 133 A.2d 612 (uncontradicted testimony that land was unsuitable for residential use and entirely unfit for any other use but business); Hamilton Company v. Louisville & Jefferson County Planning and Zoning Commission (Ky.), 287 S.W.2d 434 (commercial structures adjoining tract and on opposite side of road and land not suitable for residential purposes; idle and isolated property); Hoffman v. Mayor and City Council of Baltimore, 197 Md. 294, 79 A.2d 367 (general area industrial and building residences on lots involved would be unwise and wasteful; evidence indicated no use for residential purposes ever); Dequindre Development Co. v. Charter Township of Warren, 359 Mich. 634, 103 N.W.2d 600 (part of tract rezoned industrial, rest left residential against recommendation of zoning commission; substandard, blighted area, owner unable to obtain purchaser for residential use, see also Knibbe v. City of Warren, 363 Mich. 283, 109 N.W.2d 766; City of Hattiesburg v. Pittman, 233 Miss. 544, 102 So.2d 352 (lots so reduced in depth by construction of highway by-pass as to make them unsuitable for residential construction; other lots adjacent and nearby rezoned commercial) ; Bianchi v. Morey, 124 N.J.L. 258, 11 A.2d 405 (triangular lot on a heavy traffic through highway opposite commercial greenhouse, adjoining lumber yard, near night club, with stores and gas stations in vicinity and factories nearby.)

The following cases have held refusal to rezone reasonable: County Council for Montgomery County v. Gendleman, 227 Md. 491, 177 A.2d 687 (county planning agency recommended change and one lot in block had been rezoned; immediate neighborhood predominately residential); Highland Village Land Co. v. City of Jackson, 243 Miss. 34, 137 So.2d 549 (land zoned residential by county annexed to city; found change would depreciate value of neighborhood residential property); Urmston v. City of North College Hill, 114 Ohio App. 213, 175 N.E.2d 203, app. dism. 172 Ohio St. 1126, 178 N.E.2d 36 (residential property east and west although property immediately south was in business zone and property immediately north had nonconforming business use; test is best interest of entire district rather than adaptability and suitability of particular property); Marshall v. City of West University Place (Tex.Civ.App.), 351 S.W.2d 257 (claimed greater population, increased traffic on boulevard and business use on other side). See also Metzenbaum, Law of Zoning, p. 1125; Yokley, Zoning Law and Practice, Sec. 68; Landau v. Levin, 358 Mo. 77, 213 S.W.2d 483; Deacon v. City of Ladue, Mo.App., 294 S.W.2d 616; Gould v. Kansas City, Mo. Sup., 316 S.W.2d 571.

Counties have zoning authority only as to their unincorporated area (see Chap. 64, statutory references are to RSMo and V.A.M.S.) and it is not claimed that St. Louis County has any zoning authority within cities. Zoning authority of La-due comes from Secs. 89.010-89.140 applicable to all cities, towns and villages, and the purposes of such zoning are stated in Sec. 89.040. Some of those applicable here are to lessen congestion in the streets, to prevent overcrowding of land and to facilitate the adequate provision of transportation, water, sewerage, schools, parks and other public requirements. All this authority and these purposes are at least primarily related to conditions within a city. Plaintiffs cite Duffcon Concrete Products v. Cresskill, 1 N.J. 509, 64 A.2d 347, 9 A.L.R.2d 678, cited in Flora Realty & Investment Co. v. City of Ladue, supra, 246 S.W.2d 1. c. 778, in which it was said: “What may be the most appropriate use of any particular property depends not only on all the conditions, physical, economic and social, prevailing within the municipality and its needs, present and reasonably prospective, but also on the nature of the entire region in which the municipality is located and the use to which the land in that region has been or may be put most advantageously. The effective development of a region should not and cannot be made to depend upon the adventitious location of municipal boundaries, often prescribed decades or even centuries ago, and based in many instances on considerations of geography, of commerce, or of politics that are no longer significant with respect to zoning.” However, it was held that the municipality involved in the Duffcon case could entirely exclude heavy industrial use because of the residential character of the municipality, the suitability of its location for residential development and availability of another nearby area for industrial purposes, saying: “[T]he power of the municipality to restrict its territory to residential purposes with ample provision for such small businesses, trades and light industries as are needed to serve the residents, is clear.” A judgment that the municipality could not exclude heavy industry was reversed.

As shown by our former decision, Flora Realty & Investment Co. v. City of Ladue, supra, Ladue was organized in 1936 (extended in 1947) “in the path of the better residence development” of the St. Louis metropolitan area (246 S.W.2d 1. c. 775), representing “about the finest residential development of the entire metropolitan area,” and containing “only a limited amount of commercial and industrial development.” The evidence shows that it has been kept that way and also that most of the development in the entire-area in the cities and towns adjoining La-due has been and is predicted to be residential. In fact plaintiffs’ contention is that the rczoning sought for the proposed shopping center is necessary to serve new residential areas developing beyond Ladue. Moreover, as we also said in the Flora Realty & Investment Co. case (246 S.W.2d 1. c. 779), “The fact that loss will he sustained through depreciation, if the ordinance is valid, is not controlling”; and we also add this is true if refusal to rezone prevents sale at a profit if rezoning is a fairly debatable question.

We conclude from the evidence in this case, which includes zoning and other maps, contracts, plan of proposed shopping center and other documents, that the question of whether the 10-acre tract should be rezoned from residential to commercial was shown to be fairly debatable and therefore the determination by the city council should not be set aside by the courts. Sufficient reasons which the council could have found for reaching its decision are that the proposed use as a shopping center appears to be more for the benefit of other cities and towns than for the benefit of Ladue; that there is more than ample space for such a shopping center on the opposite corner of the intersection (southwest corner) in Frontenac already zoned commercial; that traffic around present adjacent built-up residential districts would be increased, flooding conditions from rains aggravated and values adversely affected; that all of Ladue adjoining Lindbergh, except the 300-foot areas on each side of the Clayton Road intersection and one smaller tract to the north where the Missouri Pacific Railroad crosses, is zoned residential with many fine homes constructed; that there was still vacant area along Clayton Road in Ladue, zoned commercial, sufficient to serve the city’s population; and that Ladue still is a fine residential community with parks, public and private schools, country clubs and residential growth prospects making residential use of the 10-acre tract involved reasonable. In short, a change of conditions in Ladue which would require such a change is not shown and it does not sufficiently appear that any need therefor of the entire region cannot be provided outside of Ladue but instead it reasonably could be found that there are available nearby larger commercially zoned areas to do so.

The judgment is affirmed.

All concur.