Howerton v. The Kansas Natural Gas Company

• Decision Date: 07 May 1910
• Docket Number: 16,292
• Parties: LEE A. HOWERTON et ux., Appellees, v. THE KANSAS NATURAL GAS COMPANY, Appellant
• Court: Kansas Supreme Court

108 P. 813

82 Kan. 367

LEE A. HOWERTON et ux., Appellees, v. THE KANSAS NATURAL GAS COMPANY, Appellant

No. 16,292

Supreme Court of Kansas

May 7, 1910

Decided January, 1910.

Appeal from Allen district court; OSCAR FOUST, judge. Opinion on rehearing, filed May 7, 1910. (For first opinion see Howerton v. Gas Co., 81 Kan. 553.) Reversed.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

1. MINERAL LEASE -- Cancellation for Insufficient Development -- Adequacy of Remedy in Damages -- Burden of Proof. An oil-and-gas lease provided that the lessee should pay $ 50 per year for each gas well upon the leased premises during the time gas should be marketed therefrom. Adhering to the decision on a former hearing (Howerton v. Gas Co., 81 Kan. 553, 106 P. 47) that the contract contemplated that other wells should be drilled with reasonable diligence to utilize this lease, it is further held, that the burden of proof is upon the plaintiff to show that a remedy in damages is not an adequate remedy for the failure of the lessee to proceed to drill other wells to protect the land from drainage and to obtain gas therefrom.

2. MINERAL LEASE -- Same. Having failed to make this showing, the decree for cancellation can not be sustained.

3. MINERAL LEASE -- Measure of Damages for Failure to Drill Wells. The measure of damages is the sum of $ 50 per year for each well from the time it ought to have been drilled.

4. MINERAL LEASE -- Alternative Decree for Breach of Agreement by Lessee to Operate. If it be determined that such a rule of damages can not be applied, an alternative decree may be entered, upon proper proof, providing that the defendant shall proceed, within a time to be fixed, as before indicated, to drill such wells as may be necessary to protect and develop the land and utilize the gas thereon, and pay for such wells as stipulated, or that the lease be canceled.

Eugene Mackey, and John J. Jones, for the appellant; Jones &amp Reid, and Mackey & Sculley, of counsel.

Baxter D. McClain, for the appellees.

H. P. Farrelly, and T. R. Evans, as amici curiae.

BENSON J. PORTER, J. concurring specially. BENSON, J., dissenting. Mr. Justice GRAVES concurs in this dissent.

OPINION

BENSON, J.:

This action has been reconsidered by the court after argument upon a rehearing heretofore allowed. The facts are stated in the first opinion. (Howerton v. Gas Co., 81 Kan. 553, 106 P. 47.)

Upon a careful consideration of the arguments made upon the rehearing and of the authorities the court is satisfied with the former opinion, except in one particular. It was held that there was no adequate remedy in damages for the default of the defendant. Upon a review of the findings of the district court, and of the evidence upon which the conclusions of law of that court were based, we now hold that the plaintiffs failed to show, as they were required to do in order to obtain equitable relief, that damages would not afford an adequate remedy. The default consisted in the failure properly to develop the leased territory by drilling and operating a reasonable number of wells necessary for that purpose, and the failure to market gas from, and make the payments stipulated for, the well completed. No reason is shown why witnesses of experience, acquainted with the gas field, may not testify with reasonable accuracy as to the number of wells which should have been drilled on the leased land, both for protection from drainage by neighboring leaseholds and to obtain the gas underneath the land. No insurmountable obstacle to such proof is perceived by the court, and in the absence of evidence that it can not be produced it is concluded that the plaintiffs are not entitled to a remedy by forfeiture or cancellation of the lease. This conclusion is supported by Harris v. The Ohio Oil Co., 57 Ohio St. 118, 48 N.E. 502, cited in the first opinion, and other adjudicated cases which have followed that decision. It needs no authority, however, to support the proposition that if there is an adequate remedy in damages no other relief can be obtained. The burden was upon the plaintiffs to show, either by the nature of the case or by proper evidence, that such damages could not be ascertained with reasonable certainty. Failing in this, the judgment of cancellation can not be sustained.

It should be observed that this is not a case where royalties payable in a share of the product are provided for, but is an agreement to pay $ 50 per annum for each gas well. The measure of damages, therefore, is the sum the plaintiffs have lost or may lose by the failure of the defendant to complete the number of producing wells reasonably necessary to develop the resources of the leased land and to protect its lines. When the plaintiffs shall have received $ 50 per year for each well from the time it should have been drilled they will have received the full compensation agreed upon in the lease. Under the terms of the lease they have no share in the product of the wells, no concern as to the disposition which shall be made of that product, and the rules to be applied in leases where the lessor is given a royalty are not entirely applicable here. Penalties and forfeitures are not favorites of the law, and if in this case the damages which the plaintiffs sustain from the breach of the contract can be ascertained with reasonable certainty no forfeiture can be adjudged. It should also be observed that the plaintiffs, during all this long delay for which they now seek a forfeiture, made no complaint other than that the test well was leaking. Some affirmative action ought at least to have been taken by them indicating a purpose to insist upon a forfeiture before summarily declaring it.

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