154 P. 487 | Cal. Ct. App. | 1915
This action was brought to recover damages in the sum of twenty-two thousand five hundred dollars upon a stockholder's liability against defendants, who were stockholders in the Lorene Oil Company, a corporation.
The damage claimed arose from the removal of a quantity of casing from a certain oil well which had been drilled by the Lorene Oil Company upon the plaintiff's land in the Coalinga oil fields, upon the abandonment by that company of said lands and of its operations thereon under a certain lease. The action was based upon a breach of the terms of the lease, which had been entered into by the parties thereto under the following circumstances: On the sixteenth day of March, 1907, the plaintiff entered into a lease with one Wilcox, with the object in view that the former's land should be explored for oil and developed. The agreement required Wilcox to drill a well to a depth of at least three thousand feet, unless oil should be discovered in quantities of twenty-five barrels of oil per day at a less depth. If oil was discovered, the lessee was to pay to the lessor one-eighth royalty, and he was also given an option to purchase the property for the sum of twenty thousand dollars. Shortly thereafter, and during the same year, Wilcox assigned his interest in this agreement to the Lorene Oil Company, which assumed all his obligations thereunder. The company drilled a well to a depth of 3,660 feet, being 660 feet deeper than was required by the contract, and, *80 not having made a discovery of oil, abandoned the property. The lease contained the following provision with reference to abandonment: "In the event oil is not found in paying quantities by the lessee on the land so leased after the compliance with the terms herein, and said lessee desires to abandon the enterprise and to be released from the terms hereof, he shall have the privilege of removing all engines, tanks and fixtures above ground which he may have placed on said land, but shall not remove the casing from any well or plug any wells thereon without the written consent of said lessor." Upon the abandonment of the property the company, contrary to this last mentioned provision, removed over ten thousand feet of casing without the written consent of the lessor, and the breach of the agreement in this respect gave rise to the present controversy.
Plaintiff recovered judgment against the defendants in the sum of twenty-two thousand five hundred dollars, and this is an appeal from such judgment and from an order denying defendants a new trial.
The defendants make the following points for a reversal of the judgment: (1st) That the action was barred by the statute of limitations; (2d) errors in the instructions and in the admission of testimony concerning the measure of damages; (3d) that the contract was illegal, and consequently no recovery could be had thereon; and (4th) that the court had no jurisdiction as to two of the defendants.
In support of the first contention it is the claim of the defendants that the action is barred by virtue of the provisions of section
Section
The element of discovery in actions of this character was recognized in Moore v. Boyd,
It is further contended with reference to the statute of limitations that the liability was created at the time of the execution of the lease and prior to the breach thereof by the Lorene Oil Company. In this behalf it is the claim of the defendants that this is the only logical construction to be drawn from the decisions of the supreme court; and it is argued that the Lorene Oil Company having assumed all obligations under the lease in 1907, the liability of the stockholders became fixed at that time, and the statute of limitations was immediately set in motion. In Hunt v. Ward,
As stated by counsel for both parties, the important question to be determined in the case is the correct measure of damages for the breach of the contract in removing the casing from the well. Plaintiff and defendant have quite different theories upon this subject. It is the claim of plaintiff that the lessee not being permitted under the terms of the lease to remove any casing from the well without the written consent of the lessor, upon proof of such removal the only question of fact to be determined by the jury was the amount which it would cost to replace the well in the same condition *83 it was in at the time the Lorene Oil Company abandoned the premises and removed the casing. The theory of the defendants was and is that the land where the well was situated was barren, desert land, and valuable only if it contained oil; that the well itself was of value only in so far as it could be used to produce oil; that no attempt had been made by plaintiff to produce oil from the property since its abandonment and up to the time of the trial, a lapse of time of some four years; that there was no oil in the well, that the Lorene Oil Company had abandoned it after having expended from forty thousand dollars to sixty thousand dollars in development work; that neither the plaintiff nor anyone else had any wish, desire, or intent to produce any oil from the land or to use the well for that purpose, and that consequently the well was valueless, and the plaintiff suffered no damage no matter what was done to it. It is admitted that the Lorene Oil Company had removed some ten thousand feet of inner casing from the well but left the well cased from top to bottom. It is also conceded that it was a practical impossibility to take the casing that had been removed from the well and put it back so as to restore the well to its former condition, and that it was less costly and far more certain in results to drill an entirely new well than to attempt to replace the casing in the old one, and that a new well would cost anywhere from forty thousand dollars to sixty thousand dollars. The amount of damages claimed by plaintiff was twenty-two thousand five hundred dollars, a sum much less than the minimum amount which, according to the evidence, it would take to put the well in the same condition that it was in before the casing was removed from it.
The trial court adopted the plaintiff's theory, that the cost of replacement was the proper measure of damages, and instructed the jury to find an amount sufficient to put the well in the condition it was before the removal of the casing. The instruction given upon this point was as follows: "I instruct you that under the terms of the lease involved in this action the plaintiff, as lessor, was entitled to have any well drilled by the Lorene Oil Company on the premises described in the lease left in the condition as to the casing therein in which said well was at the time said Lorene Oil Company ceased drilling said well with the intention of abandoning the same; and in this connection I charge you that the plaintiff's right *84 to have said well so left was irrespective of the question whether oil had been discovered on said land, or whether there was reasonable ground to believe that oil would be discovered thereon. If, therefore, you find that the Lorene Oil Company did not leave the well drilled by it in the condition above described, then your verdict must be for the plaintiff in an amount sufficient to place said well in such condition, not exceeding, however, the sum of twenty-two thousand five hundred dollars." Under this instruction the jury was practically told to find for the full amount of damages prayed for, regardless of whether there was oil in the land or not, or whether the well was of any value at the time of the removal of the casing, and regardless of whether the well would have been of any value if restored, or whether the well as left could have been made thoroughly useful at a less cost. We are of the opinion that the instruction was erroneous.
The instruction was based on the theory of plaintiff that he was entitled to have the casing remain in the well for the reason that the lease so provided, and that this right was not dependent or based upon the use to which the lessor might thereafter put such well, or whether thereafter he ever used it at all; that it was enough for the corporation to know that it was "so nominated in the bond." It is a fundamental rule of law that courts will not, except where exemplary damages are given, allow a party to a contract, to recover upon its breach more than he would have received by its due performance. The Civil Code, in providing for the measure of damages in the case of a breach of contract, lays down the rule that a party is entitled to recover an amount which will compensate him for all the detriment proximately caused by the breach, or which in the ordinary course of events would be likely to result therefrom (Civ. Code, sec.
Certain rulings of the court on the admission of testimony are claimed to be erroneous. These rulings in the main were based upon the court's theory of the measure of damages, and it is unnecessary to discuss them in view of what we have already stated upon that subject.
Defendants further contend that by reason of the fact that the complaint contains an allegation that the land in question is oil land, the provision in the contract that the lessee should not remove the casing therefrom or plug any wells without the written consent of the lessor makes the contract void upon its face, and that the demurrer to the complaint should have been sustained upon that ground. The basis of this contention is that such provision is violative of the act to prevent injury to oil or petroleum bearing strata by the infiltration or intrusion of water therein (Stats. 1903, p. 399), and which requires that upon the abandonment of any oil well it shall be the duty of the owner to withdraw the casing therefrom and fill up such well.
The statute was not designed to affect a case of this character. The lessor had the undoubted right to reserve unto himself the right to further prosecute the development of the land, irrespective of the fact that the lessee might conclude to abandon the lease for the reason that he was of the opinion that it was useless to further prosecute the work of exploration.
And, finally, defendants call the attention of the court to the proclamation of the President of the United States withdrawing from entry certain mineral lands, including the land here in question; and they claim that by reason thereof the plaintiff had no title to this land, and therefore has no cause of action. The proclamation referred to was issued July 2, 1910; the time of the entry of the Lorene Oil Company upon the land as lessee, and the time of the removal of the casing, were both prior to such proclamation. Whatever rights had accrued as between the parties were not affected by it. Moreover, it is a rule of law that a tenant is not permitted to deny *87
the title of his landlord. At the time of the breach of the covenant in the lease the plaintiff was in lawful possession of the land as a locator under the mining laws of the United States, and his right to the land as against everybody except the United States government was the same as though he held the land in fee (Jennison v. Kirk,
As to the defendants Katharine Brennan and E. H. Pauson, the prayer for damages against each of them is for less than three hundred dollars, and it is conceded that under the authority ofMyers v. Sierra Valley etc. Assn.,
For the reasons given the judgment and order are reversed, with directions to dismiss the action as to Katharine Brennan and E. H. Pauson.
Lennon, P. J., and Richards, J., concurred.
A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on January 28, 1916.