Findings of Fact 145 C. Cls. on June 30, 1941. Pursuant to the plan, Chicago thereafter took over the development and operation of the properties in accordance with the terms of the contracts resulting from the offers of May 5, 1941, and the acceptances thereof. 13. On May 26, 1941, Corpus Christi executed conveyances of the overriding royalty interests to each of the minority stockholders, including plaintiffs, pursuant to the plan of liquidation. Each of these documents was identical in terms except for the name of the stockholder and the amount of the overriding royalty interest received by him. The conveyance to William K. Warren read in pertinent part as follows: STATE OF TEXAS, COUNTY OF NUECES. KNOW ALL MEN BY THESE PRESENTS: That the Corpus Christi Corporation, a Texas corporation, for and in consideration of the sum of Ten and no/100 ($10.00) Dollars, and other good and valuable considerations to it paid by W. K. Warren of Tulsa, Oklahoma, receipt of which is hereby acknowledged, has granted, sold, conveyed, and assigned, and by these presents does grant, sell, convey, and assign unto the said W. K. Warren, free and clear of all liens and encumbrances whatsoever, the following overriding royalty interests, in and to the oil, gas, and mineral leases and leasehold estates covering lands situated in Nueces, Jim Wells, and Kleberg Counties, Texas, described in Exhibit "A" hereto attached, to-wit: (a) .16 per cent of 8/8ths of all the oil, gas, and other minerals in and under and that may be produced and saved from the oil, gas, and mineral leases and leasehold estates described in said Exhibit "A" hereto attached, if, as and when so produced and saved from said premises. (b) .16 per cent of 8/8ths of all products extracted and separated from gas produced from the oil, gas, and mineral leases and leasehold estates described in Exhibit "A" hereto attached, if, as and when extracted and separated. The interests herein conveyed shall at all times be free and clear of all costs, charges and expenses of development, operation, and extraction; and Grantee shall have no interest in any personal property or well and plant equipment situated on said premises. 571 Findings of Fact With respect to the overriding royalty interest on oil produced from wells drilled on the property after May 20, 1941, the offer of May 5, 1941, and the above-described instrument provided that the payment of such royalty would be temporarily deferred until recovery of the cost of the well from seven-eighths of the oil produced and that the payment. deferred would bear interest from the date it accrued until paid at the rate of 5 percent per annum. The conveyance further provided: 1 Grantor will perpetuate and keep in full force and effect all of the oil and gas leases and leasehold estates described in said Exhibit "A" hereto attached, and regardless of any other provisions hereof, Grantor will protect said leases from drainage and keep and perform all express and implied lease covenants therein contained. 2 Grantor obligates itself, its successors and assigns, for such period of time and from time to time as Grantee may elect, to sell and market the petroleum products, or any of them, accruing to the interest herein conveyed in the same proportion as it makes sales of like products of its own derived from said properties, and to deliver to Grantee his portion of the proceeds of sale, on the basis of 100% tank tables on or before the 20th day of each calendar month; provided, however, that with the exception of overriding royalty deferred as herein provided, Grantee shall at all times have the right and option to take said petroleum products, or any of them, that accrue to the interests herein conveyed, in kind, and in the event Grantee elects to take said products or any of them in kind, Grantor shall provide Grantee with at least sixty (60) days' suitable storage on said premises for the said products accruing to the interests conveyed. TO HAVE AND TO HOLD THE INTERESTS CONVEYED unto Grantee, his heirs and assigns forever, and Grantor hereby binds itself, its successors and assigns, to warrant and forever defend all and singular the said premises and rights conveyed by this instrument unto Grantee, his heirs and assigns, against every person whomsoever lawfully claiming, or to claim the same, or any part thereof. This assignment shall become effective as of the 1st day of May, 1941, at 7:00 A. M. Findings of Fact 145 C. Cls. IN WITNESS WHEREOF, The Corpus Christi Corporation has caused this conveyance to be executed by its President, attested by its Secretary, and its corporate seal affixed, this 26th day of May, 1941, all in accordance with resolutions duly adopted by the stockholders and directors of said corporation. 14. The overriding royalty interests conveyed to plaintiffs and the other minority stockholders were as follows: 571 Findings of Fact 15. The conveyances of the overriding royalty interests to plaintiffs and the other stockholders were recorded in the Real Estate Records of the offices of the County Clerks in Jim Wells, Kleberg, and Nueces Counties, Texas. These documents were similar in terms to instruments generally used in the gas and oil industry conveying overriding royalties with the exception of the provision relating to the deferment of the payment of the overriding royalty in oil produced from new wells drilled after May 20, 1941, pending recovery of the cost of the wells. The conveyances provided that a separate account would be kept for each new oil well and that statements as to the cost of the well and monthly statements of the proceeds of all overriding royalties accrued and deferred on each well would be furnished to the grantees. On the basis of the production from the oil wells drilled prior to May 20, 1941, it appeared that it would take approximately four years for each new well to pay out its costs and to reimburse the royalty owners for their deferred royalties. 16. On May 26, 1941, Corpus Christi conveyed to each of the minority stockholders the oil payment rights in the sum of $150 per share, which are described in paragraph (b) of the quoted material set out in finding 8. Such oil payment rights are not in issue in these cases. 17. Each of Chicago's written offers of May 5, 1941, and each of the conveyances of the overriding royalties to plaintiffs provided in substance that Corpus Christi was obligated to sell and market the petroleum products accruing to the interest conveyed to plaintiffs in the same proportion as it made sales of like products of its own from the same properties and gave plaintiffs the option to have Corpus Christi pay them the proceeds of sales on or before the 20th day of each calendar month or to take the products in kind, in which event Corpus Christi agreed to provide at least 60 days' suitable storage for all products accruing to the plaintiffs. In the oil and gas industry, it is not customary for the owners of overriding royalties to accept the products produced in kind, except in a few instances where a royalty owner desires to obtain road oil or something of the kind. Each of the plaintiffs elected to require Corpus Christi to sell the petroleum products accruing to his interest and give 574580-61- -39 Findings of Fact 145 C. Cls. credit and pay all the proceeds to him. Such election was made by the execution of a division order addressed to Corpus Christi, effective May 1, 1941. Each of the division orders was similar to the division orders addressed to Chicago after the liquidation of Corpus Christi, except that the division orders to Corpus Christi did not contain a provision comparable to paragraph 6 of the division orders addressed to Chicago and quoted in the next finding. Between May 1, 1941 and June 30, 1941, Corpus Christi sold petroleum products under the division orders given to it and paid the proceeds to plaintiffs and the other minority stockholders in the amount of $22, 570.61. 18. After the liquidation of Corpus Christi and on or about October 24, 1941, plaintiffs each executed division orders addressed to Chicago. The division order executed by plaintiff, William K. Warren, which is typical of division orders signed by the other plaintiffs, provided in pertinent part as follows: To the CHICAGO CORPORATION, Corpus Christi Division. 1. The undersigned certifies and guarantees that he is the legal owner of and hereby warrants the title to his respective interests as set out below in all oil and gas (including products of gas) produced from all wells on the Wardner leases situated in Nueces, Jim Wells and Kleberg Counties, Texas, comprising a total of 8782.39 acres, which may be hereinafter referred to as Royalty Units One, Two, Three, Four and Five, all of which are more particularly described in Exhibit "A" attached hereto and made a part hereof, and until further written notice is received by you from the undersigned, you are hereby authorized to receive and sell all oil, gas and the products of gas including natural gasoline, condensate and other products and to give credit for and pay over my interest in the proceeds as directed below. Royalty owner W. K. WARREN, P.O. Box 1589, Tulsa, Oklahoma. Overriding royalty. Division of interest (percent of 8/8) .16 |