Fite v. Miller

• Decision Date: 02 December 1940
• Docket Number: 35813.
• Citation: 200 So. 285,196 La. 876
• Court: Louisiana Supreme Court
• Parties: FITE v. MILLER.

200 So. 285

196 La. 876

FITE v. MILLER.

No. 35813.

Supreme Court of Louisiana.

December 2, 1940

Rehearing Denied Feb. 3, 1941.

Appeal from Eleventh Judicial District Court, Parish of DeSoto; Hal A. Burgess, Judge.

Suit by Luther S. Fite against Paul L. Miller for damages resulting from defendant's failure to company with agreement to drill an oil well to a certain depth on mineral lease owned by the parties jointly. From an adverse judgment, the plaintiff appeals.

Judgment annulled and set aside and judgment rendered for plaintiff.

Lee & Lee, of Shreveport, for plaintiff and appellant.

Craig & Magee, of Mansfield, for defendant and appellee.

HIGGINS, Justice.

This suit was instituted against the defendant for damages alleged to be due the plaintiff because of the defendant's failure to comply with his unconditional contractual obligation to drill a well to a certain depth in search of oil and gas under a mineral lease which the parties owned jointly. It is stated in the petition that in consideration of the sale and transfer by the plaintiff to the defendant of a half interest in a certain oil, gas and mineral lease covering the south ten acres of land in Section 36, Township 11 North, Range 11 West, DeSoto Parish, Louisiana, the defendant paid $1,000, in cash, and obligated himself to drill a well thereon, immediately after the completion of a well on the north ten acres adjacent thereto, upon which the defendant alone owned the mineral lease; that the well drilled on the north ten acres proved to be a dry hole and was abandoned by the defendant; and that the defendant refuse and failed to drill the well on the south ten acres covered by the mineral lease in which the plaintiff had transferred to him an undivided half interest. The petitioner alleged that the cost of drilling the well would have been $14,000, for which amount he prayed for judgment as damages for defendant's breach of the contract.

The defendant filed exceptions of no right and no cause of action, which were sustained by the lower court on the ground that the plaintiff could not prove that he sustained a loss or was deprived of profit by the defendant's failure to drill a well on the south ten acres, as there was no assurance that if the well had been drilled it would have been a producer. Plaintiff appealed to this Court and we annulled the judgment and remanded the case for further trial on the ground that, as the plaintiff alleged he had sustained the loss of the chance or prospect of being enriched if defendant had fulfilled his contract, and this being a thing of value in itself, the petition stated a right or cause of action. 192 La. 229, 187 So. 650, 122 A.L.R. 446.

Thereupon, the defendant filed an answer admitting the sale and transfer to himself by the plaintiff of an undivided half interest in the mineral lease covering the south ten acres and the unconditional contract to drill a well thereon to a certain depth and that he had failed and refused to drill the well, but denied that the cost of drilling the well would have been $14,000 and averred that it would not have amounted to more than $6,400. He specially pleaded that, when the contract between himself and the plaintiff was entered into on July 13, 1937, it was generally believed by those well informed in the oil business that a new field had been discovered and that oil and gas would be found under the south ten acres; that at the time for the performance on September 3, 1937, he had completed the drilling of the well on the north ten acres and that this well had been abandoned as unsuccessful; that the south ten acres, at that time, had little or no value for oil or gas; that, except in one instance where oil was produced in paying quantities, various other wells had been drilled in the vicinity of the south ten acres and that each of them had likewise been abandoned as dry holes; that after September 3, 1937, there was no further development in Section 36 or its vicinity; that it had been demonstrated and proved to the satisfaction of experienced oil operators by the various wells which had been drilled that the south ten acres would not produce oil and gas in paying quantities at the depth set forth in the contract and, therefore, the drilling of a well thereon would have been a vain and useless thing; that the defendant informed the plaintiff of this fact and offered to reassign the lease to him; that at the time the defendant was to commence the drilling of the well on the south ten acres, the chances or prospects or the uncertain hope of the plaintiff of being enriched by the drilling of the well had little if any value.

The facts developed in the trial of the case on the merits are substantially the same as those set forth in the pleadings.

There was judgment in favor of the defendant, dismissing the plaintiff's suit and he has appealed again.

The defendant contends that in a case like the present one a litigant should not be permitted to recover damages, unless he has actually suffered a loss or has been deprived of a definite profit, and that where damages may be inferred or presumed, the defendant should be allowed to show that no actual loss was suffered by reason of the breach of the contract.

The pertinent part of the provisions of Article 1934 of the R. C. C., reads:

‘Where the object of the contract is any thing but the payment of money, the damages due to the creditor [obligee] for its breach are the amount of the loss he has sustained, and the profit of which he has been deprived, * * *.’ (Italics and parenthesis ours.)

It will be noted that there are two elements of recoverable damage (1) the loss sustained and (2) the profits of which the creditor or obligee has been deprived by the unjustifiable breach of the contract. We shall discuss these two items of damage in their inverse order.

The uncontradicted expert testimony and geological data establish beyond dispute that the plaintiff's uncertain hope or prospect for profit or gain from the discovery of oil or gas in paying quantities from the leased property was exceedingly remote and purely speculative. We, therefore, readily come to the conclusion that the plaintiff has failed to prove with that certainty required by law this alleged element of damage. Julian Petroleum Corp. v. Courtney Petroleum Co., 9 Cir., 1927, 22 F.2d 360 and Garland P. Fallis et al. v. Julian Petroleum Co., 108 Cal.App. 559, 292 P. 168.

The defense to the plaintiff's claim for damages for the loss of the right to have the well drilled by the defendant, i. e., the act of performance, is that there is no method by which the value of this alleged item can be ascertained. In our former opinion herein we cited with approval authorities which held that the measure for such damage or loss is the cost of drilling the well. Fite v. Miller, supra. See also Ardizonne v. Archer, 72 Okl. 70, 178 P. 263; Brown v. Homestake Exploration Corp., 98 Mont. 305, 39 P.2d 168; Pen-O-Tex Oil & Leasehold Co. v. Pittsburgh Western Oil Co., 3 Cir., 66 F.id 657, and Knupp v. Bright, 186 Pa. 181, 40 A. 414.

It appears that prior to 1933, the general rule on this question in Texas was that the plaintiff could recover damages to be estimated by the costs of drilling the well, but later, in the cases of Guardian Trust Company v. Brothers, Tex.Civil App. 1933, 59 S.W.2d 343, it was held that only nominal damages would be allowed for the breach of the obligation to drill. However, in Golston v. Bartlett, Tex.Civ.App. 1938, 112 S.W.2d 1077, it was decided, if the lessee received consideration for the obligation to drill the well, the measure of damage would be the cost of drilling it.

In the instant case, the defendant's own evidence establishes the fact that the net cost of drilling the well at the time performance was due would have been the sum of $6,400. There can be no doubt that the plaintiff was illegally and unjustifiably deprived of the right under the unconditional contract to have the well drilled at the expense of the defendant. It was the refusal and failure of the defendant to comply with this serious obligation of his contract which was supported by an important and valuable consideration that caused the loss to the plaintiff of his right to have the well drilled by the defendant at his own cost. This right was valuable to the plaintiff and was the primary reason why he parted with a half interest in his oil and gas lease in favor of the defendant. The parties themselves and especially the defendant recognized this fact by agreeing, on July 13, 1937, to drill a well and to pay all of the costs thereof. There is no uncertainty as to what this proposed expenditure would amount to because the defendant himself unquestionably proved that it would have been $6,400, exclusive of salvageable materials and equipment.

The circumstance that at a subsequent date, i. e., September 3 1937, the defendant and his experts concluded that it had been sufficiently demonstrated by drilling operations and geological data that the chances for the discovery of oil and gas in paying...