Clear Creek Oil & Gas Company v. Bushmiaer

• Decision Date: 07 July 1924
• Docket Number: 102
• Citation: Clear Creek Oil & Gas Company v. Bushmiaer, 264 S.W. 830, 165 Ark. 303 (Ark. 1924)
• Parties: CLEAR CREEK OIL & GAS COMPANY v. BUSHMIAER
• Court: Arkansas Supreme Court

264 S.W. 830

165 Ark. 303

CLEAR CREEK OIL & GAS COMPANY v. BUSHMIAER

No. 102

Supreme Court of Arkansas

July 7, 1924

Appeal from Crawford Chancery Court; J. V. Bourland, Chancellor reversed.

Decree reversed.

E L. Matlock and Pryor & Miles, for appellant.

Where there is no adequate market, the value of personal property may be fixed by proof of the value at the nearest available market, with proper additions or deductions for cost and risk of transportation. 53 Ark. 27; 92 Ark. 111; 121 Ark. 150. The acceptance of the checks for the royalties from month to month estops appellees. Clear Creek Oil & Gas Co. v Bushmaier, 161 Ark. 26; Clear Creek Oil & Gas Co. v. Brunk, 160 Ark. 574.

Chew & Ford, for appellee.

OPINION

HART, J.

The Clear Creek Oil & Gas Company prosecutes this appeal to reverse a decree against it in favor of W. S. Bushmaier and wife for an accounting under a gas lease.

It appears from the record that the Clear Creek Oil & Gas Company is a public service corporation furnishing natural gas mainly to industrial consumers in the cities of Van Buren and Fort Smith, Arkansas. W. S. Bushmaier and his wife own a tract of land containing 106 acres in Crawford County, Arkansas. In February, 1919, by a contract in writing, they leased said tract of land to the Clear Creek Oil & Gas Company to be explored for oil and gas for the period of time designated in the lease. The lessee drilled two wells on the premises, and brought in two high-pressure gas wells. The Clear Creek Oil & Gas Company operated twenty-five wells in the gas field during the year 1921. Six of these wells are operated under contracts similar to the one in question. The lease from W. S. Bushmaier and wife to the Clear Creek Oil & Gas Company, with reference to the payment of royalty, contains the following:

"That if the said second party (appellant) shall market any gas from any well producing gas only, then the party of the first part shall receive therefor at the rate of one-eighth of all gas marketed from such wells, payable monthly on the 20th of such succeeding month."

"It is agreed that the market price of royalty gas at the well at the time shall be the basis upon which royalty shall be paid." * * *

"And it is also agreed that a failure to operate any well or wells, mine or mines, on the within described premises, when the same must be done at a loss to said second party, shall not work a forfeiture of this lease."

Some of the wells operated by the Clear Creek Oil & Gas Company in 1921, and used by it in supplying its industrial consumers, were low-pressure wells, and could not be operated in cold weather. For this reason, during the summer months the two wells in question in this case were shut off and the gas was taken from the low-pressure wells. The Clear Creek Oil & Gas Company operated all its gas wells in this field in such a manner as to give each one the proportionate amount of gas which it would furnish. Meters were placed at each well so that the flow of gas could be measured there, and each well was given its proportionate amount of the gas furnished by the Clear Creek Oil & Gas Company to its consumers. Other owners of gas wells in that field were paid 2 1/2 cents per 1,000 cubic feet as royalty. This was the price that other producing companies were paying for gas in that field. Industrial consumers in Fort Smith and Van Buren paid the Clear Creek Oil & Gas Company 10 cents per 1,000 cubic feet for gas, and it cost the company 3 1/2 cents per 1,000 cubic feet to transport and distribute the gas.

It was the opinion of the court below that the lessor should receive royalty on the basis of 10 cents per 1,000 cubic feet, and that no deduction should be made for transportation and distributing charges.

The chancellor was also of the opinion that the Clear Creek Oil & Gas Company had no right to shut down the gas wells during the summer months, and divide the amount of gas which it furnished industrial consumers proportionately with the owners of the gas wells operated by it.

A decree was entered in accordance with the finding of the chancellor.

It may be stated at the outset that the question of any loss or damage suffered by the landowners by gas being drawn from their wells by reason of wells on adjoining lands does not arise under the facts of this case.

We are of the opinion that the decree of the chancellor was wrong. The lease provides that a failure to operate any well on the premises when the same must be done at a loss to the lessee shall not work a forfeiture of the lease. While parol evidence is not competent to contradict or vary the terms of a written contract to show what is intended, we are of the opinion that it is admissible to explain the surrounding circumstances, and the situation and relation of the parties at the time of the execution of the contract, in order to explain all terms and phrases which are used in a technical, special, or local sense. This aids the court in determining what the contract means when its language, either in its literal sense or as applied to...