Ardizonne v. Archer
| Decision Date | 07 January 1919 |
| Docket Number | Case Number: 8102 |
| Citation | 1919 OK 7,72 Okla. 70,178 P. 263 |
| Parties | ARDIZONNE et al. v. ARCHER et al. |
| Court | Oklahoma Supreme Court |
¶0 1. Oil and Gas--Lease--"Found in Paying Quantities."
The phrase "oil or gas is found in paying quantities," as used in the covenant of an oil and gas lease, that "it is agreed that one well on this lease is to be drilled to the top of the Mississippi lime, unless oil or gas is found in paying quantities before that lime is reached, unavoidable accidents excepted," taken in connection with other provisions of the contract, is interpreted to mean finding oil or gas in such quantities as would justify the expectation of a reasonable profit above the entire cost, including the cost of drilling and equipping the wells.
2.Same--Breach of Express Covenant Damages.
The measure of damages for the breach of an express covenant in an oil and gas lease, to drill one well to the top of the Mississippi lime, is held, under the facts and circumstances of this case, to be the reasonable cost of drilling same.
Error from Superior Court, Tulsa. County; M. A. Breckinridge, Judge.
Action by Thomas Jay Archer, an infant, by John W. Archer, his guardian, against Joseph Ardizonne, F. J. Ossenbeck, and others. Judgment for plaintiff against the named defendants and in favor of the other defendants, and the named defendants bring error. Affirmed on condition of a remittur, and otherwise reversed and remanded for a new trial.
Philip Kates, for plaintiffs in error.
H. B. Martin, A. F. Moss, and R. A. Reynolds, for defendants in error.
¶1 This action was commenced in the court below by defendant in error, Thomas Jay Archer, an infant, by his guardian, to recover from plaintiffs in error Joseph Ardizonne and F. J. Ossenbeck, and the defendants in error W. F. Braun and W. W. Lantz, damages for alleged failure to comply with the covenant in an oil and gas mining lease to drill one well "to the top of the Mississippi lime." After issues of fact joined, there was trial to the court, a jury being waived, which resulted in decision and judgment in favor of the infant and against the plaintiffs in error for $ 2,500, and in favor of the defendants in error Braun and Lantz, to reverse which this proceeding in error is prosecuted.
¶2 It appears from the record before us that the guardian of the infant, pursuant to proper orders of the county court having jurisdiction, executed to W. F. Braun an oil and gas mining lease on a then untested and unexplored tract of 80 acres of land belonging to the infant for the term of his minority and as much longer thereafter as oil or gas should be found in paying quantities. The consideration to the lessor being $ 10 paid, and, among others: one-eight of all the oil produced and $ 175 per year for each gas well where gas only was found and used off the premises. The lease contained the following express covenants with reference to development:
¶3 The rights and obligations of the lessee Braun passed by mesne assignments to plaintiffs in error. A well was not drilled to the Mississippi lime, but one was drilled to a less depth, at which an oil bearing strata was found. This well was shot, equipped, and operated for about eight months. At the expiration of that time the oil was so far exhausted that the quantity being then produced was insufficient to pay the costs of further operating the well, and it was plugged and abandoned. This well was not deepened to the Mississippi lime, and there has been no further development of the premises The cost of drilling and equipping the well was $ 3,784. During the eight months it was operated, oil was produced of the gross value of $ 452.85, of which the lessor received one eight or $ 56.60, leaving to the lessee $ 396.25. The cost of operating the well was $ 258.05, so that the lessee realized from the oil produced during the eight months, over and above the expenses incurred in operating the well after the same had been drilled and equipped, the sum of only $ 138.20. The trial court concluded that oil or gas had nor been found in paying quantities at a less depth and that the covenant to drill to the top of the Mississippi lime unless it was so found had been breached by plaintiffs in error, for which they were liable in damages. The court further found the cost of drilling a well to that depth to be $ 2,500, which was adopted as the measure of damages.
¶4 The first question presented by plaintiffs in error for consideration by this court is stated by them as follows:
"Are the lessees, or rather the assignees, liable for failure to prosecute the drilling of the lease and to drill a well to the Mississippi lime"?
¶5 Upon this question they do not contend that they were prevented from drilling to the stipulated depth by unavoidable accident. The contract contained the surrender clause, yet plaintiffs in error did not undertake to terminate their liability according to the terms of that provision, and they make no contention that they were not bound by reason of such clause in the contract. They simply contend that the evidence shows conclusively that oil was found in paying quantities before the Mississippi lime was reached, which, if true, would be a compliance with the agreement, and they would not, of course, be liable for any damages.
¶6 Whether there has been a compliance with, or breach of, the express covenants of an oil and gas lease with reference to development when the object of the operation is to obtain a benefit or profit for both lessor and lessee, is ordinarily a question of fact to be determined by the court or jury in each particular case from all the facts and circumstances in evidence. The judgment of the lessee although exercised in good faith, is not conclusive of the question. Paraffine Oil Co. v. Cruce, 63 Okla. 95, 162 P. 716; Brewster v. Lanyon Zinc Co., 77 C.C.A. 213, 140 F. 801. In this case, there is no conflict in the evidence. The only difference between the parties is as to the meaning of the phrase "found in paying quantities," as used in the clause of the contract obligating the lessee to drill one well to the top of the Mississippi lime unless oil or gas is found in paying quantities before that lime is reached. The interpretation of that clause in the contract is, under the circumstances of this case, a question of law for the court. American Jobbing Ass'n v. James, 24 Okla. 460. 103 P. 670: J. Rosenbaum Grain Co. v. Higgins, 40 Okla. 181, 136 P. 1073.
¶7 Plaintiffs in error contend that "oil or gas in paying quantities" means such quantity as can be produced at a profit, even a small one, over the operating expenses, though the cost of drilling may never be repaid and the operation as a whole may result in loss. Numerous authorities are cited in support of that interpretation, but all these authorities interpret the phrase as used in the clause fixing the term of the lease, and it may be said that such has come to be the generally accepted definition when used in that connection. When the lessor has agreed that the lessee may hold the premises as long after a fixed term as oil or gas is produced in paying quantities, such interpretation seems to be reasonable and just and may be said to have been that intended by the parties. But because a word or phrase is interpreted as having a given meaning in one clause of a contract, it does not necessarily follow that it has...
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...profit on the necessary sum required to be expended, including the cost of drilling, equipment, and operation of well." Ardizonne v. Archer, 72 Okla. 70, 178 P. 263; Pelham Petroleum Co. v. North, 78 Okla. 39, 188 P. 1069. ¶3 The evidence disclosed that oil was not found in paying quantitie......
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...differ far and wide from the Chamberlain-Parker Case. ¶15 We think the rule applicable to the instant case is laid down in Ardizonne v. Archer, 72 Okla. 70, 178 P. 263, decided by this court January 7, 1919; Fraley v. Wilkinson et al., 79 Okla. 21, 191 P. 156; North Healdton Oil & Gas Co. v......
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