Gypsy Oil Co. v. Marsh
| Decision Date | 16 March 1926 |
| Docket Number | Case Number: 15015 |
| Citation | 248 P. 329,1926 OK 246,121 Okla. 135 |
| Parties | GYPSY OIL CO. v. MARSH. |
| Court | Oklahoma Supreme Court |
¶0 1. Oil and Gas--Validity and Priority of Leases by Common Landowner--Equitable Relief.
A court of equity has jurisdiction to settle the validity and priority of oil and gas leases between conflicting claimants, where such leases have been executed by a common landowner, and having jurisdiction, the court may grant such relief to either party as the pleadings and proof warrant.
2. Same--Common Landowner as Unnecessary Party.
In a suit in equity between conflicting lessees to determine the validity and priority of oil and gas leases, executed by a common landowner, such owner is not an indispensable party, where his title is not drawn into question, and where his interests are not, and cannot be affected, even indirectly, by the decree, and where it is not shown that either party is entitled to any relief as against him.
3. Oil and Gas--Term of Lease--Construction--"Produced" Equivalent to "Produced in Paying Quantities."
The terms "produced" and "produced in paying quantities," as used in oil and gas leases for a given term and as much longer as oil or gas is produced, or produced in paying quantities, have substantially the same meaning, and an oil and gas lease containing the following habendum clause: "To have and to hold the same for the term ending December 15, 1922, and as long thereafter as oil or gas or either of them is produced from said land by the lessee, its successors or assigns," expired on December 15, 1922, unless oil or gas was found on the land in paying quantities on or before said date.
4. Same--"Paying Quantities."
The term "paying quantities," as used in an oil and gas lease for a given term, and as much longer as oil or gas is produced in paying quantities, means paying quantities to the lessee. If the well pays a profit, even small, over operating expenses, it produces in paying quantities though it may never repay its cost, and the operation as a whole may prove unprofitable. Ordinarily the phrase is to be construed with reference to the operator, and by his judgment, when exercised in good faith.
5. Estoppel--Elements of "Equitable Estoppel."
The essential elements of an "equitable estoppel" are: First, there must be a false representation or concealment of facts. Second, it must have been made with knowledge, actual or constructive, of the real facts. Third, the party to whom it was made must have been without knowledge, or the means of knowledge, of the real facts. Fourth, it must have been made with the intention that it should be acted upon. Fifth, the party to whom it was made must have relied on or acted upon it to his prejudice. The representation or concealment mentioned may arise from silence of a party under imperative duty to speak; and the intention that the representation or concealment be acted upon may be inferred from circumstances.
6. Same--Oil and Gas--Lessor not Estopped to Question Validity of Lease for Lack of Production by Executing Division Order Relating to Production.
The lessor in an oil and gas lease is not estopped to question the validity of such lease, as against the lessee, on the ground that oil or gas had not been produced in paying quantities within the life of the lease, because he joined with the lessee in the execution of a division order, where he was without knowledge, or means of knowledge of the quantity of oil or gas produced, and where the lessee possessed such knowledge, or means of obtaining the same, and where it is not shown that the lessee changed its position, or did, or omitted to do, any act to its prejudice because of the conduct of the lessor in executing said division order.
Error from District Court, Carter County; W. F. Freeman, Judge.
Action by Stanley Marsh against the Gypsy Oil Company. Judgment for plaintiff, and defendant appeals. Affirmed.
James B. Diggs, Redmond S. Cole, William C. Liedtke, and C. L. Billings, for plaintiff in error.
Moore & West, Rainey & Flynn, Calvin Jones, M. E. Jordan, and Lydick, McPherren & Wilson, for defendant in error.
¶1 On the 25th day of November, 1919, one James Moyer executed and delivered to the Gypsy Oil Company an oil and gas lease covering 80 acres of land then owned by him, and situated in Carter county, for a term ending December 15, 1922, and as long thereafter as oil or gas, or either of them, is produced from said land by the lessee, its successors or assigns. On the 10th day of November, 1922, one William Moyer, the then owner of said land, executed and delivered to Stanley Marsh, an oil and gas lease covering said land for a term of five years from January 2, 1923, and as long thereafter as oil or gas or either of them is produced from said land by the lessee. On or about November 30, 1922, the Gypsy Oil Company started the erection of a derrick on the land and began the actual drilling of a well thereon on December 2, 1922, and completed said well on December 12, 1922, at a depth of about 1,060 feet, and in an oil sand producing a small quantity of 24 gravity oil. After the completion of this well, the Gypsy Oil Company erected a tank on said land and constructed a pipe line from said well to the pipe line of the Coline Oil Company, a distance of more than three and one-half miles, and on January 31, 1923, began delivering the oil from said well to the Coline Oil Company, which paid therefor the sum of 50 cents per barrel. The Coline Oil Company paid for this oil by checks payable to the Gypsy Oil Company and William R. Moyer, in accordance with a division order theretofore signed by them.
¶2 On December 18, 1922, Marsh notified the Gypsy Oil Company that the oil then being produced from said lands could not be considered production, within the meaning of the lease, and on January 4, 1923, William R. Moyer wrote the Gypsy Oil Company that it did not have commercial production, and its lease expired December 15, 1922. On February 10, 1923, Marsh purchased from Moyer an undivided one-half interest in the oil, petroleum, gas, coal, asphalt, and other minerals in and under said land, the grant thereof containing a recital that it was subject to any valid oil and gas lease then on said premises, and subsequently he conveyed an undivided one-fourth interest therein to one Woodruff. On February 28, 1923, Marsh brought this suit, claiming under his lease dated November 10, 1922, seeking the cancellation of the lease of the Gypsy Oil Company and an order placing him in the possession of the leased premises, quieting his title thereto, and perpetually enjoining the Gypsy Oil Company from asserting any right, title, or interest in said premises adverse to his claim. A trial resulted in a judgment in favor of Marsh, decreeing him the relief sought, from which the Gypsy Oil Company has appealed.
¶3 The oil company contends that Marsh cannot maintain this action because his oil and gas lease is not a grant of the oil and gas that is in the ground, but of such part thereof only as the lessee may find, and passes no estate that can be the subject of ejectment, or other real action, and in support of this contention cites Kolachny v. Galbreath et al., 26 Okla. 772, 110 P. 902; Warner v. Page, 59 Okla. 259, 159 P. 264; Brennan et al. v. Hunter, 68 Okla. 112, 172 P. 49; Hill Oil & Gas Co. v. White et al., 53 Okla. 748, 157 P. 710; and Frank Oil Co. v. Belleview Gas & Oil Co., 29 Okla. 719, 119 P. 260.
¶4 If this were an action in ejectment, or other real action, the position taken would be correct, and the doctrine announced in the cases cited would apply, but this is not such an action, but is a suit in equity brought to determine the rights of the parties under their respective leases, and that a court of equity has jurisdiction to settle the validity and priority of oil and gas leases between contesting lessees, where such leases have been executed by a common landowner, is well settled. Thornton on Oil & Gas, vol. 2, sec. 921; Archer's Law & Practice in Oil & Gas Cases, 895; Trees v. Eclipse Oil Co., 47 W. Va. 107, 34 S.E. 933; Smith v. Root et al., 66 W. Va. 633, 66 S.E. 1005; Monarch Gas Co. Roy (W. Va.) 81 W. Va. 723, 95 S.E. 789; Guffey et al. v. Smith, 237 U.S. 101, 59 L. Ed. 856, 35 S. Ct. 526; Kentucky Coke Co. v. Keystone Gas Co., 296 F. 320; Logan Natural Gas & Fuel Co. v. Great Southern Gas & Oil Co., 126 F. 623, 61 C.C.A. 359; Downey v. Gooch, 240 F. 527; Allegheny Oil Co. v. Snyder et al., 106 F. 764; Smith v. McCullough et al., 285 F. 698. And having jurisdiction, the court may grant such relief to either party as the pleadings and proof warrant.
¶5 It is next contended that Moyer, the landowner, is a necessary and indispensable party to this suit, and that the same cannot be maintained without bringing him in. Many cases are cited in support of this contention, among which are Shields v. Barrow, 58 U.S. 130, 17 HOW 130, 15 L. Ed. 158; McConnell v. Dennis, 153 F. 547; Moore v. Jennings (W. Va.) 47 W. Va. 181, 34 S.E. 793; Steelsmith v Fisher Oil Co. (W. Va.) 47 W. Va. 391, 35 S.E. 15; South Penn Oil Co. v. Miller, 175 F. 729.
¶6 Shields v. Barrow, supra, merely announces the general rule, that a court of equity can make no decree affecting the rights of an absent person and can make no decree between the parties before it which so far involves, or depends upon, the rights of an absent person that complete and final justice cannot be done between the parties to the suit without affecting those rights. The other cases cited, supra, adhere to this doctrine, and hold that the interest of an absent person would necessarily be affected by the decree. Thus, in McConnell v. Dennis et al., supra, which presented a contest between two rival lessees in oil and gas leases, the facts were that one Amanda Miller, who was prior to July 1902, the owner of the land covered by the leases, did on July 21, 1902, by deed convey the land to...
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