Harris v. J. C. Trahan Drilling Contractor, Inc.

• Decision Date: 30 October 1964
• Docket Number: No. 10234,10234
• Citation: 168 So.2d 881
• Parties: Eleanor Cargill HARRIS et al., Plaintiffs-Appellees, v. J. C. TRAHAN, DRILLING CONTRACTOR, INC., et al., Defendants-Appellants.
• Court: Court of Appeal of Louisiana — District of US

Page 881

168 So.2d 881

Eleanor Cargill HARRIS et al., Plaintiffs-Appellees, v. J. C. TRAHAN, DRILLING CONTRACTOR, INC., et al.,

Defendants-Appellants.

No. 10234.

Court of Appeal of Louisiana, Second Circuit.

Oct. 30, 1964.

Simon, Carroll, Fitzgerald & Fraser, Shreveport, for J. C. Trahan, Drilling Contractor, Inc., J. W. Vandeveer, Vanson Production Corporation, M. F. McCain, A. M. Jackson, W. P. Prentiss, defendants-appellants.

Theus, Grisham, Davis, Leigh & Brown, Monroe, for Eleanor Cargill Harris, Elaine Cargill Armstrong, Mayme Cargill Heard, and John Lee Cargill, plaintiffs-appellees.

Before HARDY, GLADNEY, and AYRES, JJ.

AYRES, Judge.

This is an action by plaintiffs who, as lessors, pray for the cancellation of an oil, gas, and mineral lease on a described 120-acre tract of land in Lincoln Parish upon the basis of the nonpayment of royalties. Plaintiffs further seek an accounting of royalties allegedly accruing to their interests as a result of production from a well drilled upon property with which their land was unitized. The defendants denied any breach of the original lease on their part and, in reconvention, prayed for the recognition of a release of the lease tendered in response to plaintiffs' demands. Defendants further pleaded that plaintiffs were estopped to deny their right to tender the release because plaintiffs formerly contended the lease had expired by its terms, and threatened litigation unless such a release was furnished, or unless an additional bonus was paid for a ratification of the lease.

There was judgment below ordering the oil, gas, and mineral lease canceled as of July 2, 1963, and directing the defendants to account for shut-in and production royalties from the date of the completion of the well on December 3, 1961, to the aforesaid cancellation date, recognizing plaintiffs as the owners of the entire interest in the lease subject to a deduction of their proportionate share of operating costs incurred thereafter, and assessing defendants with costs incurred in connection with drilling and equipping the well prior thereto. Defendants appealed. Plaintiffs answered the appeal seeking damages and attorneys' fees.

No substantial dispute exists as to the pertinent facts. The case was tried primarily on the basis of a stipulation of those facts. A re sume suffices for an understanding of the issues as they are resolved.

Plaintiffs, as the owners in equal proportions, and as part of their separate estates, of the S 1/2 of the SE 1/4 and S.E. 1/4 of SW 1/4, Sec. 31, T. 19 N., R. 3 W., executed an oil and gas lease November 21, 1960, to and in favor of J. W. Vandeveer, with a primary term of nine months, which, however, was to continue in effect as long thereafter as oil, gas, or other minerals was produced from said land or land with which it was pooled. By instruments of record, the defendants became the owners of this lease. The Commissioner of Conservation, under date of March 22, 1961, unitized Sec. 31 of the aforesaid township and range as a separate drilling and production unit for each of the Price, Davis, and 'D' Sands of the Cotton Valley Formation. Pursuant to such unitization, a well was commenced August 3, 1961, in the SW 1/4 of the NE 1/4 of the unit and drilled through the aforesaid sands, none of which were found to be productive of minerals in paying quantities. However, gas and associated liquid hydrocarbons were encountered in the 'C' Sand of the Cotton Valley Formation. Thereafter, on or about November 14, 1961, defendants made application to the Department of Conservation for the creation and designation of the aforesaid section, township, and range as a drilling and production unit for that sand. Pursuant to this application, the unit was established by the Commissioner's order of January 24, 1962. In the interim, the well, known as Pankey Unit Well No. 1, was plugged back and completed on or about December 3, 1961, as a producer from the 'C' Sand of the Cotton Valley Formation . All of the aforesaid operations, from commencement to completion date, were conducted without cessation at any time of so much as 30 days.

Following the completion of the aforesaid well, plaintiffs contended that the lease executed by them had expired and terminated by its own terms. In support of this contention, plaintiffs pointed out the lease provided that, if the lessees should drill a dry hole on the subject property, or on property with which it was pooled and unitized, the lease would remain in force and effect for an additional 60 days thereafter, during which delay operations for additional drilling or reworking might be undertaken. Thus, it was contended, no operations were conducted upon plaintiffs' property, nor upon any property with which it was unitized, as to the 'C' Sand of the Cotton Valley Formation, until the lapse of more than 60 days from the failure of lessees to obtain a producer in the unitized formation. This contention appears to possess no merit in view of the stipulation that not more than 30 days intervened during the course of the operations. Defendants therefore contended that the lease had not expired or terminated and rejected plaintiffs' demands for a release.

Shut-in royalties in the form of bank money orders were remitted by defendants to plaintiffs covering a period extending to July 15, 1962. These payments were refused and returned to defendants. There followed an extended exchange of communications and correspondence between plaintiffs and defendants, individually and through their counsel, relating to their respective contentions as to the continued validity and existence, vel non, of the lease. May 31, 1963, the defendants executed a release of the lease, effective as of December 3, 1961. This release was forwarded to plaintiffs' counsel with a letter explaining that, notwithstanding the execution of the release, plainti...