Barrett v. Dorr

• Decision Date: 02 December 1965
• Docket Number: No. 1,No. 20104,20104,1
• Citation: 212 N.E.2d 29,140 Ind.App. 295
• Parties: Carl A. BARRETT and Laura E. Barrett, Appellants, v. Willam B. DORR, Ralph C. Halbert, Howard Sober, Gerald Francis, Clair C. Loudon, Howard Sober, Inc., Lethe E. Sober, G. C. Schoonmaker, R. J. Forsyth, Harry S. Miles, and H. L. Cokes, Appellees
• Court: Indiana Appellate Court

Page 29

212 N.E.2d 29

140 Ind.App. 295

Carl A. BARRETT and Laura E. Barrett, Appellants, v. Willam B. DORR, Ralph C. Halbert, Howard Sober, Gerald Francis, Clair C. Loudon, Howard Sober, Inc Lethe E. Sober, G. C. Schoonmaker, R. J Forsyth, Harry S. Miles, and H. L. Cokes Appellees.

No. 20104.

Appellate Court of Indiana, Division No. 1.

Dec. 2, 1965.

Rehearing Denied Jan. 6, 1966.

[140 INDAPP 296] Steven C. Bach, Mount Vernon, William L. Mitchell, Evansville, Robert Hollowell, Indianapolis, Hollowell, Hamill & Price, Indianapolis, of counsel, for appellants.

Joseph B. Minor, Evansville, Otis B. Allyn, Mount Vernon, for appellees.

PRIME, Chief Justice.

Before proceeding to a discussion of this matter of the merits, we note that the appellees have included in their answer brief a Motion to Dismiss. This motion is not properly presented under Rule 2-12 of the Supreme Court in any particular and is hereby denied.

This is an action by appellants against appellees to quiet title to certain real estate and to have an oil and gas lease cancelled because of failure to operate and produce an oil well on said property.

[140 INDAPP 297] The lease was executed by a prior owner of the land and subsequently a producing well was drilled on the property. By reason of assignments and overriding royalty interests, numerous parties are appellees herein.

The complaint in two paragraphs and a supplemental complaint alleged that the lease and assignments expired because of failure to produce and operate for an unreasonable period of time of approximately 11 months. The prayer was to quiet title and for an accounting.

A cross-complaint was filed against the plaintiffs alleging that the engine pumping the well had been removed by the plaintiffs and recovery of approximately $1200 in damages was asked.

Briefly, the facts of the case are that the appellants became owners of the land involved here in 1950. In 1956, a producing oil well was drilled on the real estate and oil was produced in paying quantities until March 20, 1960. During this time all parties received their proportionate shares of the oil produced and the money received. After March 20, 1960, production of the well dropped and no oil was produced, except for a few days which were in dispute. The appellees contend that owing to rain and floods the well could not be operated and that the appellees, being owners of fractional parts of the lease, were scattered and by reason of lack of communication and information did not know that the well was not being produced properly. That in July, 1961, a new operator, or pumper, was hired and that production of the well was increased from about 6 barrels per day to 21 barrels per day.

The issues were tried by the court without the intervention of a jury. Special findings and conclusions of law was entered and judgment was rendered for the appellees thereon.

The following paragraph is the part of the lease requiring interpretation and application:

[140 INDAPP 298] 'It is agreed that this lease shall remain in force for a term of Five years from date, and as long thereafter as oil or gas, or either of them, is produced from said land by lessee, and or if lessee shall commence drilling operations at any time while this lease is in force this lease shall remain in force and its terms shall continue so long as such operation(s) continue with due diligence and if production results therefrom then as long as production continues.' (Emphasis added.)

We set out herewith a summary of the facts found by the court which are necessary to a determination of the questions presented here.

No. 1--That the plaintiffs (appellants) were the owners of the real estate in fee simple subject to the two oil and gas leases set out.

That a producing oil well was drilled on the real estate in 1956 and the legal owners of the well were set out showing their various shares.

No. 2--That the oil well was equipped for production and was produced in paying quantities until March 20, 1960. That all parties received their proper shares of the oil.

No. 3--That due to the weather, floods, the condition of the roads, said well could not be produced continuously from March 21, 1960, to March 19, 1961. That there were times from March, 1960, to March, 1961, when said well could have been produced and said well was produced at times during said period by undisclosed parties and said oil was sold from the tanks or taken from the tanks by undisclosed parties. That during said period of time Howard Atha was the operator of the lease and in July, 1961, he was discharged and Elmo Holder was employed to operate said oil well. That since that time the production of the well has been increased from 6 barrels daily to 21 barrels daily after certain repairs to the pump and equipment had been made.

No. 4--That the owners of the working interests have paid all expenses of operation and are the owners of the equipment and casing.

No. 5--That the plaintiffs at no time notified the defendants that they intended to cancel said lease until this law suit was filed.

No. 6--That plaintiffs filed suit on June 3, 1961, at which time the well was being produced by the defendants owning the working interests.

[140 INDAPP 299] No. 7--That there was no intention by the defendants to cease operations.

No. 8--That the defendants did not abandon said oil well.

No. 9--That the defendants owning the working interests have had expenses to the present time of $35,973.44 and have received from production $18,599.50.

No. 10--That the lease on which the well is located has a present estimated value of $300,000.00.

No. 11--That the plaintiffs have suffered no damages as a result of the non-production of said well from March 21, 1960, to March 19, 1961. That there was no drainage and the increased production will repay the plaintiff for the loss of production.

No. 12--That the plaintiffs, Carl L. Barrett, removed the engine used on said well without permission of the working owners on September 21, 1961, and refused to return it until November 21, 1961. That the engine was damaged in the amount of $100.00 while removed.

The conclusions of law were as follows:

'1. The law of equity is with the defendants and against plaintiffs and the defendants interest in said lease and mineral rights under said estate will not be cancelled.

'2. That the plaintiff, Carl A. Barrett, as a result of removing the engine from said well has damaged the defendants, * * *, in the sum of $100.00.'

(Judgment, May 31, 1963.)

A motion for new trial was filed and overruled and is assigned as error.

The grounds of the motion for new trial were:

1. Irregularity in the proceedings:----

a. Misconduct of counsel in writing a letter to the trial judge setting out certain citations and arguments therein to influence the judge in arriving at a decision.

b. Notes made by the court on said letter without the knowledge of plaintiffs or counsel.

2. The decision of the court is not sustained by sufficient evidence.

3. The decision of the court is contrary to law.

[140 INDAPP 300] 4. The court erred in sustaining the objection of the defendants to a question directed to Charles White, a witness for plaintiffs; for the purpose of impeaching a witness for the defendants, the foundation having been laid.

The first ground is not urged in the argument portion of the appellant's brief, and presents no question for our consideration. Rules of the Supreme Court of Indiana 2-17(e).

We have considered the fourth ground in the motion and, while admitting that appellant is correct in his contention that the question might be proper, after the laying of a proper foundation, we do not see that the point constitutes reversible error or that the decision would have been affected. This was an impeaching question and was therefore a matter on which the trial court had wide discretion. Acts 1881 (Spec. Sess.) ch. 38, Sec. 286, p. 240, being Sec. 2-1727, Burns' 1946 Repl.

Specifications No. 2 and No. 3 are grouped in one argument and will be so considered.

Our courts have been vexed for many years in connection with the question of the effect of a failure by lessees to operate oil wells and market the product after oil has been discovered.

We are thus here confronted with the obligation to determine if the lease in question expired by its own terms of limitation and if the appellees had abandoned the lease or whether, by their actions, reasonably diligent efforts were made to conform to the terms of the lease and continue production.

The appellants submit a considerable number of cases touching upon this point:

In New American Oil, etc. Co. v. Troyer (1906), 166 Ind. 402, 411, 76 N.E. 253, reh. 77 N.E. 739, 740, the court said:

'The peculiar, wandering character of gas and oil precludes ownership in their natural state and hence they [140 INDAPP 301] are not the subjects of sale and conveyances until they have been reduced to possession and placed under control by being diverted from their natural path into artificial receptacles. In such cases the real subject of the contract is the mining of the gas, or oil, that may be found, on the terms specified. The preliminary exploring is a mere incident that goes for nothing if unsuccessful, and unless oil, or gas, is found in paying quantities, then there is and was not at the inception of the contract, anything to which it could attach. So the title in such contract is at least inchoate until the result of the drilling is ascertained. And if barren territory is developed then there is no lease, no continuing contract, no conveyance of title, because there is nothing to pass under the agreement. * * *'

In Dill v. Fraze (1907), 169 Ind. 53, 58, 79 N.E. 971, 973, the court said:

'The wandering and vagrant character of oil and gas is recognized by the courts, and contracts pertaining thereto are to be construed with reference to the known characteristics of the business. * * * The injustice to...