Daughetee v. Ohio Oil Co.

• Decision Date: 03 June 1914
• Docket Number: No. 9026.,9026.
• Citation: 105 N.E. 308,263 Ill. 518
• Parties: DAUGHETEE v. OHIO OIL CO.
• Court: Illinois Supreme Court

263 Ill. 518

105 N.E. 308

DAUGHETEE

v.OHIO OIL CO.

No. 9026.

Supreme Court of Illinois.

April 23, 1914.

Rehearing Denied June 3, 1914.

Error to Appellate Court, Third District, on Appeal from Circuit Court, Clark County; E. R. E. Kimbrough, Judge.

Action by Nathaniel P. Daughetee against the Ohio Oil Company. Judgment for the plaintiff, rendered by the circuit court after trial by the court, was affirmed by the Appellate Court (181 Ill. App. 135), and the defendant brought certiorari. Affirmed.

Abram Simmons, of Bluffton, Ind., Samuel M. Scholfield, of Marshall, James W. & Edward C. Craig and Donald B. Craig, all of Mattoon, for plaintiff in error.

Frank T. O'Hair, of Paris, and Davison & Bartlett, of Marshall, for defendant in error.

VICKERS, J.

This suit was brought by defendant in error, Nathaniel P. Daughetee, against the Ohio Oil Company, plaintiff in error, for damages for an alleged failure of plaintiff in error to comply with the terms of an oil and gas lease executed by defendant in error to Hoblitzell & Co. and by said lessees assigned to plaintiff in error. The action is assumpsit, and is based upon the theory that defendant in error has been damaged by the failure of plaintiff in error to develop the land described in the oil lease, and to diligently pump and market the oil which it is claimed could have been obtained from wells sunk upon said land. The case was originally tried in the circuit court of Clark county, and a judgment was rendered in favor of the defendant in error for $5,000. This judgment was reversed by the Appellate Court for the Third District because of an error in connection with the assessment of damages. The Appellate Court held, in effect, that defendant in error was entitled to recover, and the judgment was only reversed for an error that affected the amount of damages. Daughetee v. Ohio Oil Co., 151 Ill. App. 102. A second trial was had before the circuit court without a jury, and a judgment was rendered against plaintiff in error for $2,828. This judgment, upon an appeal, was affirmed by the Appellate Court, and the case comes to this court upon certiorari.

The declaration is in four counts, each of which is based upon the lease, and avers that the original lessees under said lease entered into possession of the premises demised and undertook the development of the same for oil and gas, and that thereafter, on the 10th day of November, 1905, the original lessees assigned all of their right, title, and interest to plaintiff in error, and that plaintiff in error thereafter entered upon the demised premises under the lease aforesaid for the purpose of producing and marketing oil and gas, and did afterwards sink and drill nine wells, which were producing oil, and that thereupon it became the duty of the plaintiff in error to fully and fairly develop said premises for oil, which duty the plaintiff in error failed to perform, whereby defendant in error lost the royalty, income, and profits that he otherwise would have had and received but for the neglect and failure of plaintiff in error to comply with the terms of the lease.

The evidence shows that at the time the lease in question was executed the defendant in error claimed to own 250 acres of real estate in Clark county, and that on the 3d day of June, 1904, he executed an oil and gas lease covering all of said real estate, which is described in the lease. It afterwards developed that defendant in error did not own 60 acres of the demised premises in fee, and that he held that tract only in trust. There are only 190 acres of land involved in this case. Soon after the execution of the lease Hoblitzell & Co. took possession of the premises and on July 6, 1904, completed the first well. This well was drilled to a depth of 390 feet, and oil was struck at a depth of 360 feet. This well was not shot with nitroglycerin, but was closed and never opened or operated by the original lessees. The evidence of experts shows that this well would have produced 30 barrels of oil each 24 hours without shooting, and 60 barrels per day after being shot, for an indefinite period. The original lessees put down two other wells in 1905, both of which proved to be dry holes or nonproducing wells, and were closed up. These wells, known in the record as Nos. 2 and 3, have never been operated for or produced any oil. After plaintiff in error obtained the lease nine additional wells were drilled between the years 1905 and 1909. These wells were all producers, and the output varied from 10 barrels per day to 75 barrels each 24 hours. The evidence shows that the pay sand increased in thickness going from east to west-that is, the best wells were those drilled nearest to the western boundary. There are no producing wells in that field east of defendant in error's tract; but west of his tract the oil is produced in paying quantities. The evidence shows the quantity of oil produced by all of the wells on defendant in error's premises from January, 1907, to March, 1911, and the prevailing prices at which the oil was sold for these respective years. The total amount produced upon the defendant in error's premises was 13,339 barrels, which sold on the market for $8,734.88. The evidence further shows that to fully and completely develop oil land requires a well for each 10 acres. The expense of drilling and completing a well of the depth required on defendant in error's premises was from $1,000 to $1,200, and the expense of operating a well is $60 per month.

[1] This suit is based on the theory that plaintiff in error was required by the terms of the lease, after a test well had been drilled and oil found in paying quantities, to proceed with reasonable diligence to put down as many additional wells as were necessary to properly develop the premises, and to operate said wells and pay defendant in error the royalty provided for by the lease. Both the trial and Appellate Courts have found the fact in accordance with the contention of the defendant in error. This court must assume that all controverted questions of fact have been properly decided in favor of defendant in error.

[2] The lease contains the following provisions: ‘Second parties shall within two years from date hereof drill to completion a test well upon said premises. If gas is found in sufficient quantities to transport, second parties agree to pay first party the sum of $100 per year for the gas product of each well from which gas is transported, payable quarterly, when a market is found for the gas, and first party to have gas free of cost to heat and light one dwelling house, to be transported at first party's cost. If oil be found in paying quantities, the first party shall have the one-eighth part of all oil produced and saved from said premises, to be delivered in the pipe line with which second parties shall connect their wells. The party of the first part grants the further privilege to parties of the second part of the right of way over and across said premises to the place of operating, together with the exclusive right to lay pipes to convey oil and gas, the right to remove any machinery or fixtures placed on said premises by them. In case no well is completed on said premises within twenty-four months from this date, the parties of the second part shall pay to the party of the first part a rental at rate of twenty-five cents per acre per year, to be paid annually at close of the first quarter of each such rental year, counting from the expiration of said twenty-four months. It is further agreed that, in case no paying well is completed on said premises within five years from the date hereof, this grant shall be null and void without further agreement of the parties hereto. The second parties shall have the right to use sufficient gas and water to run all machinery for operating said well, also the right to remove all its property at any time, but without interference with first party's water supply. Upon abandonment by second partiesof the premises, or upon expiration of the rights and privileges of the second parties under the provisions hereof, the second parties agree to execute full release to party of first part. The parties of the second part hereby agree to complete one test well in Westfield district No. 1, Clark county, Illinois, on or before the 30th day of September, 1904, or forfeit all rights under this lease. It is...