Callon Petroleum Co. v. Big Chief Drilling Co.

• Citation: 548 F.2d 1174
• Decision Date: 18 March 1977
• Docket Number: No. 74-4172,74-4172
• Parties: 1 Fed. R. Evid. Serv. 874 CALLON PETROLEUM COMPANY, Plaintiff-Appellee, v. BIG CHIEF DRILLING COMPANY, Defendant-Third-Party Plaintiff Appellant, v. William R. STANLEY, Defendant-Third-Party Defendant Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1174

548 F.2d 1174

1 Fed. R. Evid. Serv. 874

CALLON PETROLEUM COMPANY, Plaintiff-Appellee, v. BIG CHIEF DRILLING COMPANY, Defendant-Third-Party Plaintiff Appellant, v. William R. STANLEY, Defendant-Third-Party Defendant Appellee.

No. 74-4172.

United States Court of Appeals, Fifth Circuit.

March 18, 1977.

Rehearing and Rehearing En Banc Denied April 27, 1977.

George P. Hewes, III, Jackson, Miss., for Big Chief Drilling Co.

Elmer H. Theis, Houston, Tex., amicus curiae, for Int'l Assoc. of Drilling Contractors.

Dale H. McKibben, Roger C. Landrum, Richard L. Forman, Jackson, Miss., for Callon Pet. Co.

James E. Sandusky, Meridian, Miss., for Wm. R. Stanley.

Appeal from the United States District Court for the Southern District of Mississippi.

Before COLEMAN, GODBOLD and HILL, Circuit Judges.

JAMES C. HILL, Circuit Judge:

This appeal involves a controversy over the surface location of a well drilled in search of oil and gas in Clarke County, Mississippi. After the close of the evidence, the district court directed a verdict for the plaintiff and third-party defendant. We conclude this was error in part and reverse for a new trial.

The proper standard in federal court to test the sufficiency of the evidence for submission of a case to the jury was succinctly pronounced in Boeing Company v. Shipman, 411 F.2d 365, 374-375 (5th Cir. 1969) (en banc ):

On motions for directed verdict and for judgment notwithstanding the verdict the Court should consider all of the evidence not just that evidence which supports the non-mover's case but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury. A mere scintilla of evidence is insufficient to present a question for the jury. The motions for directed verdict and judgment n. o. v. should not be decided by which side has the better of the case, nor should they be granted only when there is a complete absence of probative facts to support a jury verdict. There must be a conflict in substantial evidence to create a jury question. However, it is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences, and determine the credibility of witnesses. (footnote omitted).

Thus, we are required to view the evidence in the light and with all reasonable inferences most favorable to the party opposed to the motions, i. e., Big Chief Drilling Company.

So viewed, the facts appear as follows: The plaintiff, Callon Petroleum Company (Callon), contracted with the defendant, Big Chief Drilling Company (Big Chief), to drill the oil well in question. The contract was a printed standard form drilling contract identified as "AAODC ¹ Rotary Drilling Bid Proposal and Contract." The contract provided that the Owner (Callon) engaged the Contractor (Big Chief) "to drill the hereinafter well . . . ." The well location was dealt with in the succeeding paragraph:

²

The responsibilities of the parties to the contract were then clearly divided. Among the "services" to be furnished by the Owner (Callon) was the following:

"6.2 Stake location, clear and grade location, and provide turnaround, including surface when necessary."

In this regard, the evidence revealed that in the normal custom and practice of the oil industry, prior to drilling of an oil well on "dry land," certain clearing, grading and boarding work had to be done in order to prepare the ground area for Big Chief's drilling equipment. This preparatory work on the surface area absolutely determines where the well will be drilled and the preparatory work was clearly the responsibility of Callon under the contract. In the instant case, a surface location was prepared by the third-party defendant, William R. Stanley, d/b/a Stanley Brothers Construction Company (Stanley), pursuant to an oral contract with Callon. Thus, Callon undertook to perform its responsibility for site preparation by contracting with Stanley to do it. Big Chief had no contractual arrangement with Stanley. The surface location ultimately prepared by Stanley was not the location designated in the contract between Callon and Big Chief. Big Chief proceeded to drill the well some nine thousand feet before Callon protested and an issue in this case is who should be responsible for the increased cost of slanting the well to conform with the original contract location.

The contract between Callon and Big Chief clearly provided that the well was to be located at the point of intersection of imaginary lines 250 feet from the West line of section 23 in Clarke County and 200 feet from the North line of the same section. This site was selected after a conversation on November 24, 1971, between Stanley and Meade Hufford, the Vice-President of Callon, in which Hufford instructed Stanley to have the surveyor "stake" this location since two originally proposed sites were unsuitable. However, on or about December 15, 1971, Stanley and Jack Pitchford, the "toolpusher" or supervisor of the Big Chief drilling crew, met at the "staked" location and agreed that the site afforded insufficient room to prepare a site for the erection of the size drilling rig necessary for the well. While there was evidence that this location could have been used with difficulty, Stanley and Pitchford agreed that, if the location could be moved some 60 feet to the northeast, the drilling equipment could be more safely and easily erected.

However, at this meeting Stanley made it clear that he could not move the location from 250 X 200 without first getting approval from Callon. Stanley told Pitchford that he would undertake to get permission from Callon to move the location and then report back to Pitchford. On December 20, 1971, Pitchford called Stanley and asked him if he had received permission from Callon to move the location of the well. Stanley stated that he had gotten the "go ahead" and that it would probably take a week to ten days to prepare the site for drilling. ³

Morris Robinson, a bulldozer operator and employee of Stanley, began grading and preparing a drilling site a few days after Christmas. He received his instructions from Billy Stanley who told him to prepare a location "where the rig could be rigged up and the well drilled." Robinson did this by mentally selecting an imaginary stake and building the location around it. This was later surveyed to be 84 feet from the North line of section 23 and 292 feet from the West line, approximately 122 feet in a general northeasterly direction from the 250 X 200 contract site. ⁴ This is the location where the well was in fact drilled by Big Chief.

Big Chief began its work on or about December 30, 1971, when the conductor pipe ⁵ was set. It is undisputed that the building of the location and laying of the boards by Stanley precedes the setting of the conductor pipe and absolutely determines where the conductor pipe is to go. By the time Jack Pitchford returned to the well site on January 5, 1972, the location had been prepared, the conductor pipe set and the rigging-up operations begun.

Around January 6, 1972, O. C. Collins, Callon's Consulting Engineer, visited the site and Pitchford reported that the location had been moved approximately 60 feet to the northeast and that Stanley had obtained permission from Callon for this move. Collins reported this directly to Callon in a letter dated January 7, 1972. Actual drilling operations had not then commenced and did not commence until January 13, 1972. The original surveyor for Callon went back to the site on January 20 and determined that the surface location was approximately 122 feet in a general northeasterly direction from the 250 X 200 contract site. He reported this to Callon who then had another survey made of the actual well site. Finally, on January 29, 1972, Big Chief was informed by Callon of the substantial deviation from the contract location of 250 X 200.

At the time Big Chief was informed of the incorrect location of the well, the drilling operations had reached an approximate depth of 9,000 feet. Callon then took over the drilling of the well and began "slant" or directional drilling for the stated purpose of getting the well back to a position vertically beneath the original permitted location. On February 2, 1972, Callon filed a petition with the Mississippi Oil and Gas Board requesting authority to continue directional drilling. Permission was granted and directional drilling continued until the well reached an approximate depth of 10,700 feet. Big Chief then resumed control of the drilling operations and drilled to a total depth of 14,800 feet. The well was a "dry hole."

Callon then instituted this suit against Big Chief on February 6, 1973, to recover the cost of drilling the well and the added expense for directional drilling. Big Chief answered and counterclaimed against Callon for the unpaid balance allegedly due under the drilling contract. At the same time, Big Chief filed a third-party complaint against Stanley to recover any amount that might be recovered by Callon against Big Chief in the original action. Upon trial of the case the district court granted a directed verdict in favor of Callon and Stanley. This appeal followed. We conclude that the district court erred in directing a verdict for Callon.

The contract between Callon and Big Chief provided that the well was to be located at a point 250 X 200. The evidence is equally as clear that the well was...