Broswood Oil & Gas Co. v. Mary Oil & Gas Co.

Decision Date31 May 1933
Docket NumberCase Number: 20506
Citation23 P.2d 387,164 Okla. 200,1933 OK 341
PartiesBROSWOOD OIL & GAS CO. v. MARY OIL & GAS CO.
CourtOklahoma Supreme Court
Syllabus

¶0 1. Oil and Gas--Diligence and Extent of Operations Required Under Lease, How Determined.

Neither party to an oil and gas lease is the arbiter of the extent to which, or diligence with which, operations thereunder shall proceed, but both are bound by the standards of what, in the circumstances, would be reasonably expected of an operator of ordinary prudence, having due regard for the interest of both.

2. Same--Appeal and Error--Action to Cancel Lease and for Damages for Failure to Diligently Develop--Sufficiency of Evidence to Sustain Judgment.

In an action to cancel an oil and gas lease for breach of general covenant to diligently develop, and to recover damages for failure to diligently develop, the findings of fact and judgment of the trial court will not be reversed or disturbed on appeal when it is found that the same are supported by competent evidence and not against the clear weight of the evidence.

Appeal from District Court, Tulsa County; Luther James, Judge.

Action by the Broswood Oil & Gas Company and another against the Mary Oil & Gas Company and others; defendant E. S. Horn, trustee for the Imperial Royalties Company, filing cross-petition. Judgment for defendants, and plaintiffs and cross-petitioner appeal. Affirmed.

Rollin E. Gish, H. O. Bland, and J. B. Dudley, for plaintiffs in error.

Stuart, Coakley & Doerner; for defendants in error.

WELCH, J.

¶1 This action was commenced in the trial court by Broswood Oil & Gas Company, a corporation, and W. C. McBride, Inc., a corporation, as plaintiffs, alleging in substance that plaintiffs together owned an undivided 89/128 interest in the oil and gas and mineral royalty in the lands in question in Tulsa county; that defendants W. L. Ransom and E. S. Horn claim to own the remaining fractional interest in the royalty, and that the remaining defendants were holders of the oil and gas lease on the lands in question; that said defendant lease owners had failed to comply with the terms of their lease, in that after due notice given in writing by plaintiffs, the defendants had failed and refused to drill additional wells and offsets to producing and paying wells situated on adjoining lands; that such failure to drill wells had resulted in damages to plaintiffs in the sum of $ 33,000; that said defendants were guilty of oppression and fraud in the conduct and operation of the lease on said premises, and on account thereof said defendants should be found liable for exemplary or punitive damages in the sum of $ 10,000. Plaintiffs sought judgment for cancellation of the oil and gas lease, and for damages, actual and exemplary.

¶2 The defendant E. S. Horn, trustee for the Imperial Royalty Company, answered, claiming to own an undivided 35/128 interest in the oil and gas royalty, and in substance joined in the claims of the plaintiffs for cancellation of the oil and gas lease and for damages.

¶3 The lease had been drilled to production some years prior to the commencement of this action, and to the time of trial oil had been produced in large quantities, and the royalties properly paid, and it was the contention of the defendant lease owners that they had used due diligence and properly drilled the premises in good faith as prudent operators; that prudent operators would not have drilled any one of the five locations insisted upon by plaintiffs; that by reason of all of the facts, plaintiffs were not entitled to require that such additional locations be drilled; that no drainage of oil from the premises had occurred, and that plaintiffs had not been damaged by any failure to drill; that the lease was producing at the commencement of the action, and at the time of the trial, with as much production as could be had by prudent operation, and that plaintiffs were entitled to no relief.

¶4 No objection was made to the commencement of this action by persons owning a portion only of the royalty interest, nor to the maintenance of the action by and on behalf of parties owning less than all of the royalty interest.

¶5 The cause was tried to the court without a jury. The evidence disclosed that there was substantial production on the land in question; that there was production north, east, south, and southwest of the land in question. The evidence disclosing in full detail the location of numerous oil wells and gas wells, several were substantial producers and several were very small producers, with occasionally a dry hole, particularly west of the premises in question. The plaintiffs and cross-petitioner Horn insisted that the premises involved had not been sufficiently drilled to bring that production to which they were entitled, and that failure to drill the premises involved had resulted in drainage of oil from the premises by and through the producing wells on adjoining properties. The defendant lease owners insisted that the premises had been drilled to the fullest extent justified by prudent operation, and had been, and were producing substantially, and that by reason of the location of the producing wells on adjoining premises, and the amount of production therefrom, and the nature and character of the geology of the premises, and by reason of the counter pressure of water, and the situation of the premises and adjoining premises in detail, that there was in fact no drainage whatever of oil from the premises involved, by and through the wells on the adjoining premises, and that if there would have been any drainage whatever, the same was very slight, and by and through wells of such insignificant production as to make it wholly unwarranted to drill offset wells on the premises involved in the action, or to undertake to compute any damages for drainage.

¶6 The record of the testimony is very voluminous, with numerous maps and plats showing location, depth, and production in detail of many wells, and showing the geological structure in and under the premises involved in the action and adjoining premises. Numerous witnesses testified in the trial. Several were expert geologists; several were experienced and practical operators. There was testimony by laymen and lawyers. The cause was thoroughly prepared and diligently tried.

¶7 At the conclusion of the trial the cause was argued and briefs were submitted to the trial court. The arguments of counsel and briefs submitted to the trial court are not, of course, included in the record, but judging from the diligence in the trial of the cause, and the earnest arguments and extensive briefs filed in this court, we assume there was at least no lack of diligence in finally presenting the matter to the trial court.

¶8 After taking the case under advisement in order that briefs might be submitted, the trial court made extensive findings of fact. The material portion thereof, for the purpose of this determination, being in substance as follows: That the plaintiff Broswood Oil Company is the owner of an undivided 57/128 interest, and plaintiff W. M. McBride is the owner of an undivided 32/128 interest in the oil and gas royalty in and to the lands involved, and that the defendant E. S. Horn is the owner of an undivided 35/128 interest therein. That, beginning in the year 1923, the defendant lessees commenced drilling and brought in paying wells on the premises covered by the lease in question, one of which was in the south 40 acres. The court made specific findings as to the production of various wells located on adjoining premises, some coming in for a large initial production, but in practically every instance rapidly or immediately declining to small producers; two of the wells declining to production of about four barrels per day, and some wells, particularly west of the premises involved, being nonproducers or dry holes. The court further found specifically in reference to the five drilling locations urged, and contended for by plaintiffs, and in each instance the finding of the court was against the contention of the plaintiffs and cross-petitioner Horn, and in favor of the defendant lessees.

¶9 The trial court further found that the defendant lessees, as practical operators, were not, in the exercise of good faith, required to drill any of the offset wells contended for by plaintiffs, and that there was no bad faith on the part of the defendant lessees in the conduct of the drilling operations in the territory, and that on account of the circumstances, situations, and conditions shown to exist in, about, and under the premises involved in this action, the defendant lessees, as practical operators, were not required to do the drilling requested, demanded, and contended for by plaintiffs, and in substance the trial court found generally against the plaintiffs and in favor of the defendant lessees upon each and all of the issues presented.

¶10 We deem it unnecessary to set out the testimony in any detail, nor to comment thereon further than to say that the evidence was in sharp conflict upon most every question of fact, save and except the physical condition as to location and depth of wells, and as to the geology, and as to the amount of productions of all of the many wells referred to. The plaintiffs relied largely upon the testimony by way of opinion of witnesses to establish the fact that defendants should have drilled further, and that there was drainage, and these contentions were refuted by the defendant...

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    ...effect is Cooper v. Ohio Oil Co., D.C.Wyo.1938, 25 F.Supp. 304. In Broswood Oil & Gas Co. v. Mary Oil & Gas Co., 1933, 164 Oil. 200, 23 P.2d 387, 389, plaintiff sued to cancel a lease for breach of covenant to develop, and to recover damages for alleged drainage by wells of defendant on adj......
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