Thomas Gilcrease Foundation v. Stanolind Oil & Gas Co.

First National Bank of Forth Worth (Bank) owned the entire mineral estate on the northeast quarter of a tract of land and one-half of the mineral estate on the northwest quarter. In 1929, the Thomas Gilcrease Foundation (Gilcrease) (plaintiff) acquired an undivided three-fourths mineral interest in the northeast quarter, and an undivided one-fourth mineral interest in the northwest quarter. In 1946, the Bank executed an oil and gas lease with Stanolind Oil & Gas Co. (Stanolind) (defendant) covering the Bank’s remaining mineral interests. One month later, Gilcrease executed a similar lease with Stanolind, a major difference being that in the Gilcrease lease, Stanolind included an entirety clause: “If the leased premises are now or shall hereafter be owned in severalty or in separate tracts, the premises, nevertheless, shall be developed and operated as one lease, and all royalties accruing hereunder shall be treated as an entirety and shall be divided among and paid to such separate owners in the proportion that the acreage owned by each such separate owner bears to the entire leased acreage.” Development of the northwest quarter turned out to be much more productive than the northeast quarter. This meant that Gilcrease owned a three-fourths mineral interest in the less productive quarter, and a one-fourth mineral interest in the more productive quarter. Gilcrease brought suit against Stanolind, seeking royalty payments based on its overall ownership of the entire tract of land (i.e., one-half). Stanolind argued that Gilcrease was entitled to only three-fourths of the royalty on the less productive northeast quarter and one-fourth of the royalty on the more productive northwest quarter. The trial court granted Gilcrease summary judgment based on the entirety clause in the lease. The Texas Civil Court of Appeals reversed. Gilcrease appealed.