Donaldson v. Josey Oil Co.

• Decision Date: 12 November 1924
• Docket Number: Case Number: 14806
• Citation: 232 P. 821,106 Okla. 11,1924 OK 1005
• Parties: DONALDSON et al. v. JOSEY OIL CO.
• Court: Oklahoma Supreme Court

1924 OK 1005

232 P. 821

106 Okla. 11

DONALDSON et al. v. JOSEY OIL CO.

Case Number: 14806

Supreme Court of Oklahoma

Decided: November 12, 1924

Syllabus

¶0 1. Trial--Demurrer to Evidence in Equity Case--Effect.

A demurrer to the testimony is not authorized under the practice in this state in an equity case, but where such practice is followed, a demurrer to the testimony will be treated by the court as a motion by the defendant for judgment for defendant upon the testimony as produced by the plaintiff.

2. Appeal and Error--Sufficiency of Evidence--Review of Equity Case.

Where, in an action of purely equitable cognizance, tried to the court without the intervention of a jury, the finding of the court is not clearly against the weight of the evidence and comes within the principles of equity, the decision of the lower court should be and must be affirmed, but, if the court, after weighing the evidence, finds that the judgment of the trial court is clearly against the weight of the evidence, the judgment will be reversed.

3. Oil and Gas--Leases--Construction to Promote Development.

Ordinarily oil and gas leases are executed for the purpose of exploring and operating for oil and gas, and where its terms will permit it, under the rules of law, such lease will be construed so as to promote development and prevent delay and unproductiveness.

4. Same--Reasonable Diligence in Operations Required.

Where the object of the operations contemplated by an oil and gas lease is to obtain a benefit or profit for both lessor and lessee, neither is, in the absence of a stipulation to that effect, the arbiter of the extent to which, or the diligence with which, the operation shall proceed; but both are bound by the standard of what, in the circumstances, would be reasonably expected of an operator of ordinary prudence, having regard to the interest of both.

5. Same--Forfeiture of Lease for Breach of Implied Covenant of Diligence.

A court of equity will decree a forfeiture of the whole, or part, of an oil and gas lease on account of a breach of an implied covenant to diligently operate and develop the property when such forfeiture will effectuate justice. The granting of such relief depends upon the facts and circumstances surrounding each particular case.

Wilcox & Swank, for plaintiffs in error.

Biddison & Campbell and C. H. Lowry, for defendant in error.

THOMPSON, C.

¶1 This action was commenced in the district court of Payne county by Wm. F. Donaldson and Hattie Donaldson, plaintiffs in error, hereinafter called plaintiffs, against the Josey Oil Company, a corporation, defendant in error, hereinafter called defendant, to cancel an oil and gas lease upon approximately 130 acres of land in Payne county for failure to develop the land for oil and gas, and for failure to properly drill, shoot, and care for the well, drilled by defendant, and to care for the production of oil and gas from said well. The lease was originally executed by plaintiffs on the 18th day of October, 1915, to the Roma Oil Company, and by it transferred to the defendant, Josey Oil Company. Said oil and gas mining lease was given for the term of three years or as long thereafter as oil and gas, or either of them, were produced from said land by the lessee. Plaintiffs were to receive an one-eighth royalty from all oil produced, $ 500 per year from each gas well where only gas was found, while the same was used off the premises, and $ 25 per year for gas produced from any oil well used off the premises, and said lease contained the usual conditions and stipulations contained in the ordinary form of such lease. The cause, being an equity case, was tried to the court without the intervention of a jury, and at the close of the evidence on part of the plaintiffs, the defendant interposed a demurrer to the evidence, which was sustained by the court, and judgment entered in favor of the defendant and against the plaintiffs, from which judgment of the court plaintiffs appeal. It will be necessary to examine briefly the evidence introduced by the plaintiffs. The lease in controversy was executed on the 18th day of October, 1915. Nothing was done under said lease toward exploring the lands for oil and gas until some time in March, 1918, at which time the defendant, through its representative, R. A. Josey, principal stockholder and owner of the company, sought to have an extension of time to drill the first well, and failing to secure said extension, the plaintiffs offered to show that the said R. A. Josey became very angry and stated: "I will deal in cold blood with you from this on. I will drill this one well and hold the lease indefinitely," which statement was improperly excluded by the court and exception reserved by the plaintiffs; that immediately thereafter the defendant commenced to drill a well on the premises; that the defendant lost part of its drilling tools in the well and could not fish it out and drilled by the tools, so lost, thereby making a crooked hole and was unable to seat the casing, on this account, so that it would cut off the water properly; that it first drilled into a gas sand, which, by actual measurement, produced 3,500,000 cubic feet of gas per day, which gas was allowed to go to waste and was not attempted to be preserved; that oil sand was reached, which produced an initial production of 60 barrels per day, actual measurement; that the well was shot for a gas well with three or four quarts of nitro-glycerine; that on account of the water being mixed with the oil and gas, it produced an inferior grade of oil, which the defendant attempted to take care of by virtue of dirt vats or tanks, thrown up by teams and scrapers, which tanks were so constructed that the banks would break and large quantities of the oil were allowed to escape into the river; that, in the operation of this well, according to the production account introduced in evidence, there were months intervened, during which no oil was obtained from the well; that several hundred feet of pipe and what is known as "jars" and rods were dropped into the well by defendant, which were never removed and part of which no attempt was made to...