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VERNE L. CULBERTSON, ET AL. v. DIXIE OIL COMPANY

APRIL 24, 1985

VERNE L. CULBERTSON, ET AL.
v.
DIXIE OIL COMPANY, ET AL.



BEFORE WALKER, HAWKINS AND ROBERTSON

WALKER, PRESIDING JUSTICE, FOR THE COURT:

This cause comes as an appeal from the Chancery Court of Wayne County. Dixie Oil, the complainant below, sought to remove an alleged cloud on its mineral leasehold. After judgment in favor of Dixie Oil, the defendants below filed this appeal.

The suit involves the ownership of the mineral estate in a 40-acre oil unit described as:

 Southeast quarter of Southeast quarter (SE/4 of SE/4), Section 34, Township 10 North, Range 9 West, Wayne County, Mississippi

 The principal issue concerns two oil leases executed in 1946 by H. A. Smith and S. J. Hooper to James F. Michael. These leases, together, covered an undivided half of the mineral estate in the property.

 The primary term of the leases was for ten years or as long as production continued. There was also a provision that

 if production ceased and there was no drilling or reworking operations for 60 days the leases would terminate.

 After the leases were executed in 1946, a well was drilled and brought in as a producing oil well. Production continued from 1947 until March 1969. There is no evidence of any production of oil or gas for the next thirty-two months. Production was resumed in 1971 and continues.

 In 1971 J. K. Pace brought suit to declare that the 1946 leases had expired. Pace had executed a lease covering his mineral interest in the forty-acre tract to James F. Michael at the same time as the two 1946 leases in question in this lawsuit. A settlement was reached by which Pace acquired by quitclaim all of the leases on the forty-acre tract. A court order was entered on September 28, 1971 incorporating the settlement agreement. In 1971 Dixie Oil acquired the leases from Pace and brought the oil well back into production

 In 1978 the successors to Smith and Hooper, owners of one-half the minerals in the forty-acre tract, took the position that their two leases to Pace had expired because of termination of production and lack of any subsequent drilling or reworking, and leased their interest in the property (by two leases) to Verne Culbertson. These leases were renewed in 1980 and are still in effect.

 The present lawsuit was begun in August 1980 by J. K. Pace and Dixie Oil Company by bill of complaint to remove as clouds on their title the 1980 mineral leases from the successors of Smith and Hooper to Culbertson. The trial court below held that the 1971 court decree was res judicata on the question of the validity of the 1946 leases and as a result that Dixie Oil had clear title to the mineral leasehold interest.

 I.

 DID THE 1971 DECREE ADJUDICATE THE VALIDTY OF THE LEASES?

 The 1971 lawsuit instituted by Pace was brought to declare the 1946 leases invalid. The prayer to the bill of ...


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