Edwards v. Lachman

• Decision Date: 30 April 1974
• Docket Number: No. 44435,44435
• Citation: Edwards v. Lachman, 534 P.2d 670 (Okla. 1974)
• Parties: L. A. EDWARDS, Jr., an Individual, et al., Appellees, v. Charles R. LACHMAN et al., Appellants.
• Court: Oklahoma Supreme Court

Page 670

534 P.2d 670

L. A. EDWARDS, Jr., an Individual, et al., Appellees, v. Charles R. LACHMAN et al., Appellants.

No. 44435.

Supreme Court of Oklahoma.

April 30, 1974.

Rehearing Denied May 6, 1975.

Lee B. Thompson, Cantrell, Douglass, Thompson & Wilson, Oklahoma City, Patrick D. Sullivan, Leach, Sullivan, Sullivan & Green, Duncan, Earl A. Brown, Jr., Anderson, Brown, Orn, Pressler & Jones, Houston, Tex., for appellees, L. A. Edwards, Jr., and others.

George E. Erickson Jr., Cosgrove, Webb & Oman, Topeka, Kan., John S. Miller, Tulsa, for Amerada Hess Corp.

Robert J. Emery, Lytle, Soule & Emery, Oklahoma City, George N. Otey, Otey & Evans, Ardmore, J. D. DeBois and O. L. Peck Jr., DeBois & Peck, Duncan, for appellants.

IRWIN, Justice:

Appellants, herein referred to as defendants, drilled an oil and gas well at such an angle of deviation from the vertical that it bottomed in and produced hydrocarbons from formations underlying adjacent property. The drilling of this well into the adjacent property constituted a sub-surface trespass.

Defendants owned the working interest in the trespassing well and this well's surface location is on a 40 acre tract, known as the Fuqua tract. The adjacent trespassed property is a 40 acre tract located north of the Fuqua tract and is known as the Graham tract. The Fuqua and Graham tracts were subject to 40 acre spacing orders of the State Corporation Commission. Defendants started drilling operations on their Fuqua well in June, 1966, and during the course of drilling, the well deviated to such an extent that it entered the Graham tract. Production was obtained in September, 1966. The well was drilled to a total depth of 11,200 feet and was dually produced from two separate formations, the Dornick Hills Sand and the Springer Sand. At the time the well penetrated these sands, the trespass had already occurred and the well was bottomed in and produced hydrocarbons from the Graham tract.

Appellees (except Rock Island Oil and Refining Co., and Service Gas Products Co., who purchased the hydrocarbons produced) either owned the royalty interest in the Graham tract or owned the working interest in a well drilled on the Graham tract in June, 1967, and completed in August, 1967. This well was drilled to a total depth of 8,077 feet and penetrated only the Dornick Hills Sand and produced only from the Dornick Hills Sand.

The appellee-owners, referred to as plaintiffs, commenced proceedings against defendants and sought injunctive relief and an accounting for all the hydrocarbons produced by defendants' Fuqua well.

The trial court, inter alia, ordered defendants to plug their well back to the property line, and rendered judgment in favor of plaintiffs for the sum of $826,950.46. This sum represents the value of the production received by defendants from the Fuqua well, plus interest, but does not include the gross production taxes paid by defendants and defendants' lifting costs in the sum of $29,000.00. The trial court disallowed defendants any credit for the costs in drilling and completing the Fuqua well, amounting to approximately $276,000.00; royalty payments made by defendants, amounting to approximately $72,000.00; and other credits and allowances to which defendants contend they were entitled. Defendants appealed.

The trial court's judgment was based on specific Findings of Fact and Conclusions of Law. The material findings are as follows: that the manner in which defendants drilled the Fuqua well constituted a negligent, imprudent and improper drilling procedure; that the Graham well 'drilled by plaintiffs upon their land and which is now producing, is sufficient to effectively produce all the oil and gas in and under said tract, * * * and the drilling of defendants' well (the Fuqua well) was of no benefit to said plaintiffs which would entitle the defendants to recover any part of the cost of drilling and completing said well.'

The material conclusions are: that 'defendants had wrongfully and unlawfully trespassed upon, in and under plaintiffs' land and had wrongfully and unlawfully converted the hydrocarbons therefrom for their own use and benefit'; and 'that the well drilled by defendants conferred no benefit upon plaintiffs or their property and defendants are not entitled to recover any part of the cost of drilling, equipping or completing the same.'

We will first consider defendants' contention that the trial court erred in refusing to allow them credit for the cost (approximately $276,000.00) of drilling and completing the Fuqua well. Defendants contend there was no proof and no finding by the trial court that they acted in bad faith or with evil intent, or the equivalent thereof, in the drilling and completing the Fuqua well, and in the absence thereof it was error to disallow them credit for such expenses.

Plaintiffs placed defendants' 'good faith' in issue in its second amended petition. Therein, plaintiffs alleged that the drilling and completion of the Fuqua well was done on behalf of the defendants in bad faith in that such drilling was conducted in a grossly negligent manner, and defendants knew or should have known that said well was being drilled so that it would trespass upon plaintiffs' land, or said defendants intentionally allowed said well to deviate from the perpendicular so as to trespass on plaintiffs' land.

Although defendants' drilling of the Fuqua well may have constituted negligent, imprudent and improper drilling procedures as found by the trial court, such does not necessarily mean defendants were 'bad faith' trespassers when they drilled and completed the Fuqua well.

Good faith is the opposite of fraud, and its existence or nonexistence must be established by proof. Sapulpa Petroleum Co. v. McCray, 136 Okl. 269, 277 P. 589. In Miller v. Tidal Oil Co., 161 Okl. 155, 17 P.2d 967, 87 A.L.R. 811, we said:

'* * * Good faith, as the term is used in the rule of law that a trespasser on the land of another who takes property therefrom shall be liable only for actual damages if the property taken was taken in good faith, means that the taking is without culpable negligence or a willful disregard of the rights of others and in the honest and reasonable belief that it was rightful. The term has been employed in the authorities on this subject to characterize the acts of one who, while legally a wrongdoer, acted in the honest belief that his conduct was lawful. * * *.'

Paraphrasing the language employed in Dilworth v. Fortier (1964), Okl., 405 P.2d 38, in order to prove that a trespasser has acted in 'bad faith' the proof must show some element of fraud, malice or oppression, or the trespasser's actions must be shown to be actuated by or accompanied with some evil intent, or must be the result of gross negligence--such disregard of another's rights--as is deemed equivalent of such intent.

Considering the findings and conclusions of the trial court in connection with our decisional law, we find that the trial court did not allow defendants their costs in drilling and completing the Fuqua well because of 'bad faith' on defendants' part, but because 'the well drilled by defendants conferred no benefits upon plaintiffs or their property.'

The trial court's findings and conclusions, which we find did not constitute an adjudication that defendants acted in bad faith, are not against the clear weight of the evidence unless there is merit to another 'circumstance' which plaintiffs contend conclusively shows 'bad faith' on the part of defendants.

The 'circumstance' relied upon by plaintiffs is that defendants obtained a directional survey on their well in April 1967, which disclosed that the Fuqua well constituted a sub-surface trespass and was bottomed in and was producing hydrocarbons from plaintiffs' land. Defendants did not divulge this information to plaintiffs and plaintiffs drilled their well on the Graham tract after the survey was completed.

If defendants were not guilty of 'bad faith' when they drilled the Fuqua well, their subsequent knowledge that they were trespassers did not convert them into 'bad faith' trespassers ipso facto. See Sapulpa Petroleum Co. v. McCray, supra. In other words, the fact that defendants subsequently found that their Fuqua well trespassed upon plaintiffs' land did not retroactively make defendants 'bad faith' trespassers when they drilled and completed the Fuqua well. The record will not justify a finding by this Court on appeal that defendants' acts constituted 'bad faith' when they drilled and completed the Fuqua well. However, as will be pointed out later, defendants did not continue to be 'good faith' trespassers under the facts presented after they obtained the directional survey and found their well was bottomed in and producing hydrocarbons from plaintiffs' property.

In Dilworth v. Fortier (1964), Okl., 405 P.2d 38, we held:

'An action to recover damages for the unlawful production and taking of oil and gas against a lessee who does not have a valid and subsisting oil and gas lease on the premises, is in the nature of a tort and to permit the rightful owner of the oil and gas rights to recover the value of the production at the surface or in pipe line or tanks wherever the same may be, without deducting therefrom a reasonable cost of developing and producing the same, would be analogous to permitting the recovery of exemplary damages against the lessee. To entitle such recovery, the proof must show some element of fraud, malice, or oppression, or the lessee's actions must be shown to be actuated by or accompanied with some evil intent, or must be the result of such gross negligence--such disregard of another's rights--as is deemed equivalent of such intent.'

Dilworth, and cases of similar import, disclose that the 'good faith' trespassers conferred benefits upon the rightful owners of the oil and gas rights by their drilling operations and production of minerals. We see no reason why the Dilworth...