75 W. Va. 719 | W. Va. | 1915
Lead Opinion
Of a judgment,for $7000, rendered upon the verdict of a jury in an action of assumpsit brought by John M. Grass, defendant, Big Creek Development Company, complains on writ of error.
In July, 1907, Grass as owner leased 100 acres of land to C. H. Freeman for the sole purpose of mining and operating for oil and gas, the consideration being a cash payment of $100, one eighth of the oil produced, and $200 annually for each gas well the product from which should be marketed and used off the premises. As Freeman’s assignee, defendant soon thereafter entered upon the premises and drilled four wells producing oil in paying quantities, locating them so as to operate as off-sets to wells previously drilled on contiguous lands producing oil in like quantities. Deeming the four wells insufficient, under the implied covenants of the lease, for the full development of the lands for oil and ample protection from drainage through wells operated on neighboring lands, defendant operating both tracts under similar leases, plaintiffs instituted this proceeding, averring, or attempting to
The sufficiency of a declaration indefinitely stating a good cause of action can not, with us, be tested by demurrer, but only by a demand for a bill of particulars containing a more specific statement of the cause imperfectly averred as the basis for recovery. §46, ch. 130, Code; Clarke v. Railroad Co., 39 W. Va. 733, 742; Transportation Co. v. Oil Co., 50 W. Va. 612; Jacobs v. Williams, 67 W. Va. 377, 380; Carlin v. Coal & Coke Co., 72 W. Va. 405. Defendant, however, made no motion for an order requiring a specification of the particulars in which plaintiffs claimed defendant had failed to comply with the duties alleged to be so imperfectly assigned, it relied solely on its general demurrer.
Neither declaration definitely distinguishes between the breaches averred or the damages severally attributed to them. The most each pleading attempted was merely a statement of the implied covenants of the lease, and defendant’s failure to perform them, whereby plaintiffs suffered damage in the amount stated in the ad damnum clauses. Nevertheless, it can not reasonably be said they are insufficient to impart adequate notice of the causes assigned as the basis of the action. Por, while the rules of good pleading require certainty in the averment of the material facts relied on, only such circumstantial accuracy is necessary as will' reasonably afford notice of what is intended to be proved. Certainty to a common intent is ail that is. required. If intelligible to a person of ordinary understanding, and sufficient to afford him, the court and the jury the means of determining what is intended, the pleading is sufficient. Moreover, in respect of matters peculiarly within the knowledge of defendant, he can hot be heard to complain, unless the averments are so un
Nor can duplicity in a pleading, that being defendant’s second ground of demurrer, be reached in any manner’ except as provided by §46, ch. 130, Code, unless, as in Knotts v. McGregor, 47 W. Va. 566, there is a misjoinder of two inconsistent causes of action. There plaintiff sued for damages occasioned by breaches of the implied covenant for .quiet enjoyment of leased premises — one by the testator, one by Ms executrix after his death. That case holds that, unless plaintiff amends Ms pleading by striking one or more counts from Ms declaration, or elects to proceed only on one assignment of the breaches averred in one count, a demurrer will lie to such declaration as a whole or to any of its counts. Generally, however, duplicity is a defect in form only, and could be taken advantage of at the common law only by special demurrer, now abolished with us by §29, ch. 125, Code. Coyle v. Railroad Co., 11 W. Va. 94; Sweeney v. Baker, 13 W. Va. 158, 200; Poling v. Maddox, 41 W. Va. 780, 786; Martin v. Railroad Co., 48 W. Va. 542; Gartin v. Coal & Coke Co., supra.
Evidently, in the original and to some extent, in the amended declaration, the pleader’s main object was recovery for drainage; and the trial of the case seems to have proceeded as if that were the sole purpose of the action. Both do aver existence of the two implied covenants for diligent operation and for protection from drainage, and defendant’s breach of each of them. But, in the original declaration, the duty requiring diligence in development is merely incidentally stated. The charge made in it is that “there has been drawn from under the lands of these plaintiffs” their royalty, “at least fifteen thousand dollars worth”, which royalty oil has been “delivered to the respective owners of said adjoining tract, whereby plaintiffs have lost and been deprived of great gains which might and otherwise would have arisen and accrued to them from the sale and delivery of” such royalty
Thus, it will appear, as suggested, that the chief purpose of
The disposition of these defects leads to the inquiry as to the other assignments of error. We will first consider the effect of the special findings of the jury upon its general verdict. The statute authorizing this method of procedure, §5, ch. 131, Code, says: ‘‘Where any such separate verdict or special- finding shall be inconsistent with the general verdict, the former shall control, and the court shall give judgment accordingly”. By its negative reply to the interrogatory whether defendant failed “to drill wells upon the plaintiffs’ land to properly protect” it from drainage of oil into specified wells on other lands, “and if so how many barrels of oil” plaintiffs lost “by reason of such failure”, the jury eliminated any further inquiry as to damage suffered by plaintiffs from drainage. Virtually, they said there was no loss from that source. Nor does any question now arise as to the correctness of the jury’s response to that inquiry. The evidence did not warrant a different answer.
Although to the question, — “Did the defendant fail to properly drill and develop the land of the plaintiffs, and if so how many barrels of oil did it fail to deliver to them by reason of such failure?” — the jury replied, “Ves”, evidently as to the first proposition, and, as to the second, “The number
Evidently, plaintiffs have misconceived the theory on which they ought to have prosecuted their case to final determination. The course pursued by them apparently was based on the idea that the number of wells necessary for the extraction of all the oil from their land and the quantity of oil that ought to have been but was not produced by defendant therefrom prior to institution of this action constituted the real ground on which they had the right to predicate their claim for damages; for to this end they directed such evidence as tends to support such recovery. Whereas they are entitled only to such damages as they sustained by defendant’s failure, if any, to exercise an honest judgment in proceeding, with the necessary explorations on the lands and the extraction of oil therefrom, taking into consideration the subject matter of the lease, the character of the mineral products, the nature* of the oil-bearing sand in that territory, the situation of the? parties, the cost of drilling, the current prices of oil produced,, the location of the land, and all the surrounding circumstances and conditions attendant upon operations necessary for the extraction of such mineral products. In other words, the authorities hold that if, under such circumstances, the operator exercises a sound and honest judgment, and not unreasonable or arbitrary one, in continuing operations for mineral oils, he has faithfully discharged the duties implied devolving upon him by virtue of the lease, although he may not exercise that high degree of diligence which the exag
Brewster v. Zinc Co., 140 Fed. 801, states the reasonable rule to be: “Where the object of the operations contemplated by an oil and gas lease is to obtain a benefit or profit for both lessor and lessee, neither is in the absence of a stipulation to that effect the arbiter of the extent to which or the diligence with which the operations shall proceed; but both are bound by the standard of what, in the circumstances, would be reasonably expected of operators of ordinary prudence, having regard to the interests of both”. And, on the same subject, we said, in Jennings v. Carbon Co., 80 S. E. 368: “To the judgment of the operator, when and where and how many wells he shall drill, deference is justly due. But the judgment must be an honest, not an arbitrary, judgment. He must deal with the leased premises, not exclusively to serve his own peculiar and selfish interests, unmindful of his obligations to the source from which his authority is derived, but so as to promote the mutual advantage and profit of himself and the lessor”; and, to excuse the operator, his judgment “must conform to that judgment generally exercised by other operators under similar circumstances and conditions, and in view of the real purpose and intention of the parties when entering into the agreement”, and not merely the opinion of those not so engaged. This statement of the general and reasonable rule finds material support in Harris v. Oil Co., 57 Ohio 118, wherein it is said: “The development and protection of lines which is implied when the lease is silent is such as is usually found in the same business of an ordinarily prudent man, neither the highest nor the lowest, but about the medium or average”. To the same effect is Guffey v. Chaison, 48 Tex. Civ. App. 555. Of like import also is the language of the trial court approved in Bradford v. Blair, 113 Pa. 83, saying “if the knowledge and skill of persons engaged in the oil producing business and the machinery and appliances then known, and the prices of the product, were such that the business could not then be carried on with a profit to the defendant after giving to the plaintiff the agreed royalty, then we think the defendant was not
So that, in these particulars, the verdict rendered was based upon evidence wholly insufficient to sustain it; because, as clearly appears, the proof was directed solely to the number of wells necessary, in the opinion of the witnesses testifying, for the full development of the leased premises for oil and gas, and not to the degree of diligence defendant ought to have exercised. The only exception to this character of proof was the testimony of one or two witnesses, who did-express the opinion that the drilling of each additional well by them deemed essential should have followed within sixty days after the completion of the preceding one. As they fixed no basis therefor, the opinion was wholly arbitrary. But, if not arbitrary, it does not measure up to the standard deemed material and requisite by the authorities cited. Has the operator been duly diligent under all the circumstances requiring him to exercise a reasonable judgment as to the proper course to pursue in regard to continuity and extent of developments? is the vital question; not how many wells are necessary to withdraw all the oil from any particular tract of land-. Or, differently stated, has the operator exercised that degree of diligence reasonably and ordinarily exercised by prudent operators engaged in the same line of business under the same or similar circumstances and conditions, keeping in view the covenants of the lease and the mutual benefit and advantage of the parties to the contract? If he has been thus diligent, plaintiffs can not recover; otherwise they can recover for the loss sustained by them as the result of the unreasonable delay in the drilling of wells and the production of oil on their lands.
There are cases, prescribing the measure of damages for failure faithfully to prosecute developments on leased premises, not in accord with the views we have expressed. These are Bradford v. Blair, 113 Pa. 83, and Daughetee v. Oil Co., 151 Ill. App. 102, affirmed 105 N. B. 308. These cases state the measure of damages to be as prescribed in plaintiffs’ instruction. See also White on Mines and Mining Rights 235. The lease involved in Bradford v. Blair expressly re
Indeed, the very absence of reported cases prescribing such measure or standard for the ascertainment of damages readily leads to the conclusion that persons interested in the result of operations for mineral oils are disposed to accede to the judgment of the lessee exercised as to the diligence and extent with and to which such operations should be prosecuted. While there are many such leases and manjr developments under them, few actions based on delay in development have reached appellate courts of the different states. It is therefore reasonable to infer that lessors willingly defer to the judgment reasonably exercised by the lessee. The cases involving rights under such leases are ordinarily limited to inquiries as to forfeiture, abandonment, drainage, or fraudulent conduct on the part of the lessee resulting in delay of' developments. Excepting the cases cited, we find none prescribing the measure of damages the lessor is entitled to re
But, surely, it would be grossly unfair to permit recovery of damages to the extent allowed by the jury in this case. It scarcely is conceivable that plaintiffs have suffered such loss from lack of wells on a tract of land containing only 100 acres. To have that effect, the tract must indeed be richly productive of minerals. At the rate ascertained for one-sixteenth, the production from it would reach $112,000; Conceding that result remotely probable, or as in any event possible, are not plaintiffs still entitled to another sixteenth from that quantity when produced? If so, they will receive twice the sum fixed by the contract as compensation for right of exploration on their land. The verdict is not for the share of oil produced; it is damages for failure to produce. Clearly, then, plaintiffs’ share of the production is not the true measure of the injury suffered. To allow double damages for the same breach of a contract silent on the subject of compensation therefor is wholly irreconcilable with and disproportionate to a due regard for justice and right. We can not conceive such result as reasonably possible under any circumstances. The proof shows no foundation for it. Indeed, no testimony justifies any such finding. Plaintiffs may not have suffered any loss. None is shown, none proved.
The jury arbitrarily fixed the amount named. It had not the slightest evidence to support it. Blow plaintiffs were injured they do not tell us. As said before, they limited the inquiry to an ascertainment of the number of wells not drilled which witnesses say they think defendant ought to have drilled, a mere arbitrary conclusion. Plaintiffs assumed the burden of showing, by competent proof, the extent of the injury to them resulting from delay in drilling under the implied provisions of the lease. Yet they made no effort to produce any evidence on that feature of their case. Not a word spoken by them, or by any other witness, tends in the
Moreover, additional wells may not produce an ounce of oil, or they may produce great quantities of it. If none,’the lessee loses the cost and expense incident to the operation; if in paying quantities, the lessor obtains his share without expense. But, as the operator assumes all the risk and burdens of a hazardous business, and the lessor no risk, no burden, a verdict without merit because based on evidence wholly insufficient under any view of thé case, can not and ought not to be permitted to stand as a foundation for the judgment rendered thereon.
We have said nothing regarding defendant’s instructions, the admission of evidence, or the existence of the implied covenants in oil and gas leases; because what has been said virtually disposes of the first two, and no question is raised as to the other. The authorities uniformly concede the existence in oil and gas leases of covenants for protection against drainage and for the exercise of reasonable diligence in promoting production on the lands leased. Brewster v. Zinc Co., supra; Jennings v. Carbon Co., supra.
Being based on a wrong theory, the judgment is reversed, the verdict set aside, and a new trial awarded, to be governed by the principles herein announced.
Reversed, and new trial granted.
Concurrence Opinion
(concurring):
The claim for damages on account of alleged drainage wholly fails for want of proof. The opinion of the court concedes that, under circumstances, not established by the evidence in this case, the lessee, under a lease, such as the one involved here, containing no express covenant to drill additional wells or to operate the land diligently for oil, •might recover damages for non-drilling of additional wells. Though some of our decisions contain dicta in agreement with this theory, Hall v. South Penn Oil Co., 71 W. Va. 82 and
The implied covenant on the part of the lessee to operate the lease and make it mutually beneficial to himself and the lessor has been affirmed, as matter of actual decision, only in cases involving the doctrine of abandonment. These cases say the lessee cannot hold on to the lease, after he has ceased operations thereon. He is under an implied covenant to make the lease productive and so beneficial to the lessor as well as himself. None of them undertake to say the implied covenant imposes duty to do more than make the lease produce oil or gas in paying quantities. Not one of them undertakes to say the lessee must make it beneficial in any certain degree. The degree of benefit or extent of. production did not arise in any of them. In each there had been, an actual, legal abandonment or such an abandonment was asserted, and the issue was whether or not the lessee had abandoned the lease and thus reinvested the lessor with possession and control of the leased premises for oil and gas purposes. Parish Pork Oil Co. v. Bridgewater Gas Co., 51 W. Va. 583; Steelsmith v. Gartlan, 45 W. Va. 27; Huggens v. Daley, 99 Federal Kep. 613; Munroe v. Armstrong, 96 Penn. St. 307; Conrad v. Morehead, 89 N. C. 31; Petrolum Co. v. Coal Co., 89 Tenn. 381.
Extension of this covenant, raised by necessary implication, for the purpose of testing the question of abandonment, was a natural error on the part of the lessors and their attorneys, due to the generality of the terms in which it was expressed. The lessor desiring something more than had ever been legally accorded him, readily and naturally siezed upon it as justification for his claim, and the court, having no occasion
Implied covenants can only be justified upon the ground of legal necessity. Such a necessity may arise out of the terms of the contract or out of the substance thereof. One absolutely necessary to the operation of the contract and the effectuation of its purpose is necessarily implied, whether in-ferable from any particular words or not. It is not enough to say it is necessary to make the contract fair, or that it ought to have contained a stipulation which is not found in it, or that, without such covenant, it would be improvident or unwise or would operate unjustly; for men have the right to make such contracts. Accordingly courts hesitate to read into contracts anything by way of implication, and never do it except upon ground of obvious necessity. “All authority opposes construction, or the reading in of matter not expressed, when it is not rendered necessary in some way or for some reason. ’ ’ White v. Bailey, 65 W. Va. 573, 576; United States v. Fisher, 2 Cranch 358; Jackson v. Lewis, 17 Johnson 475; Turnpike v. People, 9 Barb. 161; Morgan v. Railroad Co., 96 U. S. 716. In Hamlyn & Co. v. Wood & Co., 2 Q. B. 488, Lord Esher said: “I have for a long time understood that rule to be that the Court has no right to imply in a written1- contract any such stipulation, unless, on considering the terms of the contract in a reasonable and business manner, an implication necessarily arise that the parties must have intended that the suggested stipulation should exist. It is not enough to say that it would be a reasonable thing to make such an implication. It must be a necessary implication in the sense I have mentioned.” In the Moorcock, 14 P. D. 64, Bowen L. J., said: “The implication which the law draws from what must obviously have been the intent of the parties, the law draws
The limitations upon the rule have been expressed in terms no less clear. Lord Esher said in Butler v. Manchester, Sheffield and Lincolnshire Railroad Co., 21 Q. B. D. 207: “No Court has a right to imply any term as between parties which was not clearly and obviously within the contemplation of both parties.” In Hamlyn & Co. v. Wood & Co., Kay, L. J., said: “The Court ought not to imply a term in a contract unless there arises from the language of the contract itself, and the circumstances under which it is entered into, such an inference that the parties must have intended the stipulation in question that the Court is necessarily driven to the conclusion that it must be implied. To state the rule in any
This rule amply justifies recognition of an implied covenant to operate the lease and make it produce oil or gas in paying quantities. Otherwise the lessee would hold the lessor’s land for nothing, a thing the parties could not possibly have contemplated. It is born of necessity that something be done under the lease. No such necessity underlies the claim of a covenant to take out the oil as fast as it is practicable or possible to ¿xtract it, for, as long as oil or gas is produced in paying quantities, the expectation of the lessor is measurably fulfilled. In the other case, it is not. This marks the distinction very clearly. As long as oil is flowing in paying quantities, the lessor derives a benefit. If the lessee leaves the premises and oil ceases to flow, the lessor gets nothing, and his land is held to no purpose, except the mere hope of speculative profit on the part of the lessee. While the oil flows in paying quantities, the letter of the contract is fulfilled. It provides that the lessee shall have the use of the premises for oil and gas purposes, for a fixed term, and as long thereafter as oil and gas is produced in paying quantities. That condition, production of oil or gas in paying quantities, is all the land owner expressly stipulated for. Por all that anybody can see or know, he has relied, for further benefits and profits, upon the inducement which the land itself, as oil or gas territory, holds out to the lessee, assuming the sufficiency thereof to secure the drilling of as many wells as are profitable. Who can say with any degree of certainty he did not ? Iiow does it conclusively appear that he reserved the right to require more wells than the lessee should $ee fit to put down, or faster drilling than the lessee cares to do? Nothing in the terms of the lease or circumstances of the parties drives or forces the'court to say he did either. The assertion thereof is mere speculation.
That such inducement is ordinarily sufficient is evidenced by the fact that the great oil fields of this state and of the country generally have been developed and completely operated, to the satisfaction of lessors, under provisions of this kind, construed as leaving to the lessee the determination of the number of wells and the time and place of drilling.
Having demonstrated inhibition of the proposed extension of the implied covenant by the limitations of the rule governing such covenants, I now apply two other familiar rules of interpretation, giving effect to the words of the contract and force to established customs and usages. By the terms of the agreement, it is to continue as long as oil or gas is produced from the land in paying quantities. This clearly negatives any implication of right in the lessor to require production in any greater quantity. Compliance with that condition continues the estate in the lessee. As long as it is complied with, the lessor cannot forfeit the lease. McGraw Oil Co. v. Kennedy, 65 W. Va. 595. For the same reason,- we must say, to be consistent, he cannot require more than compliance with the prescribed condition, unless there is danger of loss by drainage.
This contract was made with full knowledge of the usage and custom of lessors under such agreements, to leave the locations and number of wells and times of drilling to the determination of the lessees. It is an usage so general as to require judicial notice thereof. Practically all of the' tens of thousands of leases under which the vast oil and gas fields of this state have been developed have been made in the form of this one. The lessors never so much as thought of the alleged right here asserted. They left it all to the lessees, and, so interpreted and executed, these leases have adequately and fully protected the lessors-and effectuated full, complete and diligent development of their lands. The interest of the lessee has been a sufficient inducement in almost every case. It has been in this case. This court so finds and decides.