23 P.2d 387 | Okla. | 1933
Lead Opinion
This action was commenced in the trial court by Broswood Oil Gas Company, a corporation, and W.C. McBride, Inc., a corporation, as plaintiffs, alleging in substance that plaintiffs together owned an 'undivided 89/128 interest in the oil and gas and mineral royalty in the lands in question in Tulsa county; that defendants W.L. Ransom and E.S. Horn claim to own the remaining fractional interest in the royalty, and that the remaining defendants were holders of the oil and gas lease on the lands in question; that said defendant lease owners had failed to comply with the terms of their lease, in that after due notice given in writing by plaintiffs, the defendants had failed and refused to drill additional wells and offsets to producing and paying wells situated on adjoining lands; that such failure to drill wells had resulted in damages to plaintiffs in the sum of $33,000; that said defendants were guilty of oppression and fraud in the conduct and operation of the lease on said premises, and on account thereof said defendants should be found liable for exemplary or punitive damages in the sum of $10,000. Plaintiffs sought judgment for cancellation of the oil and gas lease, and for damages, actual and exemplary.
The defendant E.S. Horn, trustee for the Imperial Royalty Company, answered, claiming to own an undivided 35/128 interest in the oil and gas royalty, and in substance joined in the claims of the plaintiffs for cancellation of the oil and gas lease and for damages.
The lease had been drilled to production some years prior to the commencement of this action, and to the time of trial oil had been produced in large quantities, and the royalties properly paid, and it was the contention of the defendant lease owners that they had used due diligence and properly drilled the premises in good faith as prudent operators; that prudent operators would not have drilled any one of the five locations insisted upon by plaintiffs; that by reason of all of the facts, plaintiffs were not entitled to require that such additional locations be drilled; that no drainage of oil from the premises had occurred, and that plaintiffs had not been damaged by any failure to drill; that the lease was producing at the commencement of the action, and at the time of the trial, with as much production as could be had by prudent operation, and that plaintiffs were entitled to no relief.
No objection was made to the commencement of this action by persons owning a portion only of the royalty interest, nor to the maintenance of the action by and on behalf of parties owning less than all of the royalty interest.
The cause was tried to the court without a jury. The evidence disclosed that there was substantial production on the land in question; that there was production north, east, south, and southwest of the land in question. The evidence disclosing in full detail the location of numerous oil wells and gas wells, several were substantial producers and several were very small producers, with occasionally a dry hole, particularly west of the premises in question. The plaintiffs and cross-petitioner Horn insisted that the premises involved had not been sufficiently drilled to bring that production to which they were entitled, and that failure to drill the premises involved had resulted in drainage of oil from the premises by and through the producing wells on adjoining properties. The defendant lease owners insisted that the premises had been drilled to the fullest extent justified by prudent operation, and had been, and were producing substantially, and that by reason of the location of the producing wells on adjoining *202 premises, and the amount of production therefrom, and the nature and character of the geology of the premises, and by reason of the counter pressure of water, and the situation of the premises and adjoining premises in detail, that there was in fact no drainage whatever of oil from the premises involved, by and through the wells on the adjoining premises, and that if there would have been any drainage whatever, the same was very slight, and by and through wells of such insignificant production as to make it wholly unwarranted to drill offset wells on the premises involved in the action, or to undertake to compute any damages for drainage.
The record of the testimony is very voluminous, with numerous maps and plats showing location, depth, and production in detail of many wells, and showing the geological structure in and under the premises involved in the action and adjoining premises. Numerous witnesses testified in the trial. Several were expert geologists; several were experienced and practical operators. There was testimony by laymen and lawyers. The cause was thoroughly prepared and diligently tried.
At the conclusion of the trial the cause was argued and briefs were submitted to the trial court. The arguments of counsel and briefs submitted to the trial court are not, of course, included in the record, but judging from the diligence in the trial of the cause, and the earnest arguments and extensive briefs filed in this court, we assume there was at least no lack of diligence in finally presenting the matter to the trial court.
After taking the case under advisement in order that briefs might be submitted, the trial court made extensive findings of fact. The material portion thereof, for the purpose of this determination, being in substance as follows: That the plaintiff Broswood Oil Company is the owner of an undivided 57/128 interest, and plaintiff W.M. McBride is the owner of an undivided 32/128 interest in the oil and gas royalty in and to the lands involved, and that the defendant E.S. Horn is the owner of an undivided 35/128 interest therein. That, beginning in the year 1923, the defendant lessees commenced drilling and brought in paying wells on the premises covered by the lease in question, one of which was in the south 40 acres. The court made specific findings as to the production of various wells located on adjoining premises, some coming in for a large initial production, but in practically every instance rapidly or immediately declining to small producers; two of the wells declining to production of about four barrels per day, and some wells, particularly west of the premises involved, being nonproducers or dry holes. The court further found specifically in reference to the five drilling locations urged, and contended for by plaintiffs, and in each instance the finding of the court was against the contention of the plaintiffs and cross-petitioner Horn, and in favor of the defendant lessees.
The trial court further found that the defendant lessees, as practical operators, were not, in the exercise of good faith, required to drill any of the offset wells contended for by plaintiffs, and that there was no bad faith on the part of the defendant lessees in the conduct of the drilling operations in the territory, and that on account of the circumstances, situations, and conditions shown to exist in, about, and under the premises involved in this action, the defendant lessees, as practical operators, were not required to do the drilling requested, demanded, and contended for by plaintiffs, and in substance the trial court found generally against the plaintiffs and in favor of the defendant lessees upon each and all of the issues presented.
We deem it unnecessary to set out the testimony in any detail, nor to comment thereon further than to say that the evidence was in sharp conflict upon most every question of fact, save and except the physical condition as to location and depth of wells, and as to the geology, and as to the amount of productions of all of the many wells referred to. The plaintiffs relied largely upon the testimony by way of opinion of witnesses to establish the fact that defendants should have drilled further, and that there was drainage, and these contentions were refuted by the defendant lessees by the opinions of numerous witnesses.
We have reviewed the record and considered the briefs of the parties and the oral arguments, and it appears that the findings of the trial court are abundantly supported by competent evidence. We recognize the rule that the findings of the trial court should be sustained if reasonably supported by the evidence, and that the conclusions of the trial court should not be disturbed, unless we could say such conclusions were clearly against the weight of the evidence. The burden was upon the plaintiffs in the trial court to establish their right to recover by a fair preponderance of the evidence. This in our judgment, they failed to do. Upon this appeal the burden is upon the plaintiffs to show that the conclusions *203 of the trial court are contrary to the clear weight of the evidence, and this the plaintiffs have failed to do, as it clearly appears that the findings and judgment of the trial court are abundantly supported by the evidence.
In Fox Petroleum Co. v. Booker,
"This court is committed to the doctrine that neither party [to an oil and gas lease] is the arbiter of what is reasonable diligence,* * * but both are bound by the standard of what in the circumstances would be reasonably expected of an operator of ordinary prudence, having due regard for the interest of both."
The premises involved in this action have been developed by the defendant lessees, and for many years have been, and are now, producing oil and gas in substantial quantities, and they should not be required to surrender to plaintiffs the premises involved, and make further payment to plaintiffs in damages, unless the testimony and evidence of the plaintiffs show, by at least a clear preponderance, that the defendants have been guilty of lack of diligence and misconduct or wrongful action resulting in damages to the plaintiffs. The evidence does not show this, but, on the contrary, shows that the premises have been developed in good faith and to the extent reasonably justified by prudent operation, and that the development by the defendant lessees, and the procuring of production, has resulted in those benefits and profits to the plaintiffs and cross-petitioner Horn to which they were reasonably entitled as owners of the royalty interests which they represented.
Under such circumstances, it would be manifestly unjust to cancel this lease, and to require the lessees to pay to the plaintiffs and cross-petitioner a sum claimed by them as damages. The trial court observed the witnesses, heard their testimony, weighed it in connection with the numerous maps and plats introduced, and upon consideration thereof, and the arguments and trial briefs, the trial court found and concluded all the several matters in favor of the defendant lessees.
It is true in this case that the defendant lessees owned leases on some of the adjoining lands to the premises here involved, and while that is a circumstance to be considered, it is no more than that. This owning of an adjoining lease is within itself no badge of fraud. It is a circumstance to be considered in connection with all of the circumstances in evidence in determining the diligence used, or lack of diligence in drilling the premises involved, to procure production therefrom and to prevent drainage therefrom. And when all due diligence and good faith are shown, the ownership of an adjoining leasehold is unimportant.
The judgment of the trial court denying any relief to the plaintiffs and cross-petitioner Horn is affirmed.
RILEY, C. J., CULLISON, V. C. J., and ANDREWS and BAYLESS, JJ., concur. SWINDALL, McNEILL, OSBORN, and BUSBY, JJ., dissent.
Dissenting Opinion
In disagreeing with the majority opinion I do not question the soundness of the rules of law and equity therein announced, but I do question the manner in which those rules and principles are applied to the fact situation with which we are confronted in the case at bar.
This action was commenced by the plaintiffs in the trial court as owners of undivided fractional interests in and to the oil and gas and mineral royalty under the W. 1/2 of the S.E. 1/4 of section 6, twp. 19 north, and range 12 east of the Indian Meridian.
The action is equitable in nature. The plaintiffs seek the cancellation of an oil and gas lease and damages resulting from alleged failure to further develop the premises covered by the lease. Plaintiffs base their right to prevail upon the alleged breach by the lessee of the covenants of the lease, claiming that such covenants were broken by the failure of the lessee to develop, drill necessary offsets, and diligently develop and operate for oil and gas on the leased premises and protect the premises against drainage.
This case being equitable in character, it is within the proper province of this court to examine the evidence for the purpose of determining its weight, and in the event the judgment and decision of the trial court is clearly contrary to the weight of the evidence as disclosed by the record, it is within the province and power of this court to reverse the same. Chamness et al. v. Collopy,
Since this is a dissenting opinion, I will *204 refrain from an extended discussion of the evidence, mentioning only those salient facts which I believe should control the decision. The lease in question, as it was originally executed, covered 160 acres of land, including, in addition to 40 acres with which we are principally concerned, the other three 40-acre tracts embraced in the southeast quarter of section 6, twp. 19 north, and range 12 east. It was a departmental lease executed in 1908 for a term of five years from the date of approval by the Secretary of the Interior and as much longer as oil and gas should be found in paying quantities. Covenants to protect against drainage by drilling offset wells and to properly develop the property are set forth in express provisions of the lease. This is of minor importance, however, since in the absence of such express covenants the same would be implied by operation of law.
The lessees, who are defendants in this action, at the present time own only that portion of the original lease on the 160-acre tract of land which covers the west half of that tract. On the north 40 acres of the 80 acres covered by their lease three producing oil wells were drilled in 1924 with initial production of 1,900 barrels, 1,600 barrels, and 1,000 barrels, respectively. On the south 40 acres in question only one producing well was drilled; that well having an initial production of 1,200 barrels and having been completed in 1924. It is located in the northeast corner of the south 40-acre tract. It is urged by the plaintiffs that the discovery of this producing well in the northeast corner of the 40-acre tract required and rendered necessary further development of this south 40 acres, and that a failure to further develop the other portion of this tract constituted a breach of the covenant of the lease to properly develop the leasehold premises. In this connection it should be borne in mind that the covenant to properly develop the lease and the covenant to protect against drainage by the drilling of offset wells are separate and distinct. A breach of the covenant to further and properly develop does not necessarily depend upon the existence of drainage in connection with an adjoining property. Merrill's Implied Covenants, page 125. This court has held that it is within the power of a court of equity to cancel a lease as to that portion of the property which has not been properly developed. Papoose Oil Co. v. Rainey,
For the reasons set out herein, I dissent from the manner in which I conceive the rules and principles of law are applied to the fact situation involved in this case.
OSBORN, J., concurring.