Dinsmoor v. Combs

• Decision Date: 16 November 1917
• Citation: 177 Ky. 740,198 S.W. 58
• Parties: DINSMOOR ET AL. v. COMBS ET AL.
• Court: Kentucky Court of Appeals

198 S.W. 58

177 Ky. 740

DINSMOOR ET AL. v. COMBS ET AL.

Court of Appeals of Kentucky.

November 16, 1917

Appeal from Circuit Court, Wolfe County.

Action by A. T. Combs and others against J. D. Dinsmoor, etc wherein the Stillwater Oil Company intervened. From judgment for plaintiffs, defendants appeal. Judgment reversed, with instructions to dismiss the petition.

G. C Allen, of Campton, for appellants.

G. B Stamper, of Campton, for appellees.

MILLER J.

On November 28, 1904, Pocahontas Combs and A. T. Combs, her husband, leased to J. A. McCormack the oil and gas rights and privileges in a tract of 175 acres of land in Wolfe county for a period of 10 years and for so long thereafter as either oil or gas should be produced therefrom by McCormack, his successors or assigns. The land belonged to Pocahontas Combs, and the consideration for the lease was the agreement by McCormack to deliver to her one-eighth of all the oil produced from the leased premises, and to pay her $100 per year for each gas well that might be drilled upon the land. By express stipulations in the lease McCormack further agreed: (1) To commence operations on the leased land, or on the adjoining land of S. M. Tutts, and push the work with due diligence until a well should be completed, under penalty of forfeiting the lease; (2) that if the first well drilled should not prove to be a good or producing well McCormack would surrender the lease, or proceed within 60 days thereafter to drill other wells upon the leased premises; and (3) that if at any time McCormack ceased to drill or operate on the leased premises, or should remove his drilling machinery therefrom, the lease should be null and void and be surrendered to the lessors.

In April or May, 1905, McCormack drilled a producing well upon the leased premises which is known and identified in this record as well No. 2; and in the winter or spring of 1906 he drilled another well which is known as well No. 1, and is located about 600 feet east of well No. 2. Well No. 1 produced oil in small quantities for a short time; but it was soon exhausted, and for the last six years it has been abandoned. On May 22, 1906, McCormack assigned the lease to the Torrent Oil Company; and on February 19, 1911, the Torrent Oil Company, in turn, assigned the lease to the appellants J. D. Dinsmoor and his associates doing business as the Mountain Oil Company. While well No. 2 was a fairly good producer of oil at first, its flow soon rapidly decreased, and for many years it has produced only so small a quantity of oil as to make it unprofitable if operated by itself. The appellants, however, have been operating it for several years with the power which they use in operating their well upon an adjacent tract, and, in this way only can they make it pay.

When the Dinsmoors bought this lease in 1911, they attempted to pump well No. 1, but it failed to produce anything. Up to that time well No. 2, which had been pumped all the time, was producing about three-quarters of a barrel of oil a day; and, when the depositions were taken in this case, it was producing only one-half barrel a day. These two were the only wells that were drilled upon the leased premises by McCormack or his lessees. Several wells had, however, been drilled by the Dinsmoors upon adjoining tracts upon which they had leases. A producing well had been drilled upon the Rowland tract about 1,100 feet from well No. 2, and this Rowland well is still a producing well in a small way. On the Hobbs tract immediately northwest of the leased premises a small producing well was drilled, which soon went dry. On the C. F. Horton tract, which adjoined the Hobbs tract, another small producing well was drilled, while one dry well and one well nearly dry were drilled upon the tract of the widow Horton. Two small producing wells were drilled upon another adjoining tract belonging to C. F. Horton, but they soon went dry. On the adjoining tract of S. M. Tutts there was a dry hole, no drilling was done on the W. S. Tutts adjoining tract, and there was a dry hole on the adjoining Childers tract. With the exception of the Rowland well, above referred to, all the oil wells on the adjacent tracts have been abandoned; and the Rowland well, which is owned and operated by the Dinsmoors, produces only about one-half a barrel of oil a day. In April, 1914, however, Mrs. Combs and her husband executed another lease to the Stillwater Oil Company, whereby she conveyed to that company the oil and gas privileges upon the same tract of land which she had theretofore conveyed to McCormack and which is the subject of this litigation, reserving, however, from said lease 400 feet around well No. 2, which was being operated by Dinsmoor in the manner heretofore stated. Pending this litigation, the Stillwater Oil Company, in 1914, drilled a well upon the leased premises known as Center well No. 3, which produced only a small quantity of oil. It was soon abandoned as worthless, and the oil company removed its tools and machinery. Subsequently, Mrs. Combs sold the surface of the leased land, and a one-half interest in the oil and gas produced on it, to O. T. Asberry.

On April 14, 1914, Pocahontas Combs and A. T. Combs, her husband, and O. T. Asberry, filed this action against Dinsmoor and his associates to cancel the lease for breach of the contract, and to recover damages. Judgment went for the plaintiffs by default, but upon the motion of the defendants the judgment was set aside and an answer was filed. The answer contains a traverse of the petition, and an affirmative statement of the facts as above narrated; and it also relies upon a settlement of Mrs. Combs' claims by the payment of $25 to A. T. Combs on September 8, 1914, as the agent of his wife. The Stillwater Oil Company filed its intervening petition and was made a party to the action, asking for a cancellation of the Dinsmoor lease, and that it be adjudged the owner of the oil and gas privileges in the leased premises. Upon a trial the chancellor entered a judgment canceling the lease, reserving, however, to the Dinsmoors well No. 2, with 600 feet of ground around it, in every direction; and he reserved the question of damages for further adjudication. From that judgment the Dinsmoors appeal. The court dismissed the petition of the Stillwater Oil Company but it has not appealed.

As no gas was ever found, that subject is eliminated from this litigation. It relates only to the production of oil.

It is the contention of the appellees, who were the plaintiffs below, that McCormack and his assignees failed and refused to properly develop the leased land so as to produce oil therefrom, and that the lease was properly canceled for that reason. On the other hand, the appellants contend that since as many wells have been drilled upon...