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Freeman v. Magnolia Petroleum Co.

171 S.W.2d 339 (Tex. 1943)

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Freeman v. Magnolia Petroleum Co.

Supreme Court of Texas

171 S.W.2d 339 (Tex. 1943)

Facts

Freeman (plaintiff) signed an oil and gas lease, leasing oil and gas rights on his property to the Magnolia Petroleum Company (Magnolia) (defendant). The lease provided that the lease would terminate after ten years, unless gas was being produced at the end of the ten-year period. The lease also provided that the well could be said to be producing if Magnolia paid Freeman a $50.00 annual shut-in royalty. The well was producing, but not selling gas at the end of the ten-year term. Magnolia did not immediately pay a royalty to Freeman, but attempted to pay the royalty four months after the ten-year term expired. Freeman declined to accept the payment and brought suit for a declaration that the lease had terminated at the end of the ten-year term. Freeman filed a motion for directed verdict, which the trial court denied. The jury found for Magnolia. Freeman filed a motion for judgment notwithstanding the verdict, which the trial court also denied. The trial court found that the royalty clause was an “absolute and unconditional agreement on the part of [Magnolia],” as opposed to an option that had to be timely invoked. The Court of Civil Appeals at Amarillo affirmed. Freeman appealed.

Rule of Law

Issue

Holding and Reasoning (Brewster, Commr.)

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