Jones v. Whittington

• Decision Date: 26 January 1965
• Docket Number: No. 10323,10323
• Citation: 171 So.2d 764
• Parties: Lyle E. JONES, Plaintiff-Appellant, v. Richard A. WHITTINGTON, Defendant-Appellee.
• Court: Court of Appeal of Louisiana — District of US

Page 764

171 So.2d 764

Lyle E. JONES, Plaintiff-Appellant, v. Richard A. WHITTINGTON, Defendant-Appellee.

No. 10323.

Court of Appeal of Louisiana, Second Circuit.

Jan. 26, 1965.

Rehearing Denied March 1, 1965.

Writ Refused March 30, 1965.

Dixon & Malsch, Shreveport, for appellant.

Feist & Schober, Shreveport, for appellee.

Before HARDY, GLADNEY and AYRES, JJ.

HARDY, Judge.

This is an action for damages resulting from breach of contract. After trial an exception of no right and no cause of action was filed on behalf of defendant, which exception was sustained and judgment rendered in favor of defendant dismissing plaintiff's suit. From this judgment plaintiff has appealed.

There is no substantial variation between the material facts alleged by plaintiff and those established on trial of the case. In anticipation of the execution of a farm-out agreement from the California Company, owner of oil and gas leases on two separate forty acre tracts of land in Sabine Palish, the parties to this action entered into a contractual agreement. The contract is evidenced by a letter of date March 7, 1963, signed by defendant and directed to plaintiff, who accepted the agreement contained in said communication under date of March 8, 1963. Under this contract defendant agreed to drill one well on each of the two described tracts of land and to bear the cost of the drilling and completion thereof; plaintiff was to retain a working interest in the completed wells but was required to bear a proportionate cost of any subsequent wells which might be drilled on the lands involved. A pertinent provision of the agreement as to further obligations of the defendant, which also fixed the consideration to be given by plaintiff, reads as follows:

'It is my understanding that the above referred to tracts will be a farm-out from the California Company and I further Agree to comply with the requirements set forth by the California Company in their farm-out to you as concerns the drilling of a well on either of the tracts. For the above consideration you agree to assign to me 100% Of the working interest acquired by you from the California Company, less and except the 1/8 working interest you retained as set out above.' (Emphasis supplied)

By letter dated March 11, 1963, the California Company advised plaintiff as to the general terms which had been approved by the Company as a basis for the proposed farm-out. Plaintiff was required to commence a well on one tract by March 27, 1963, as the result of which operation he would earn the right to ownership of the lease on said tract; he was further required to begin drilling operations on the second tract within fifteen days from the completion or abandonment of the first well, and, upon compliance, would earn the right to ownership of the lease on this tract. California Company reserved an over-riding royalty on the properties involved.

The California Company prepared a farm-out agreement by instrument dated March 19, 1963, which was accepted by plaintiff. On or about March 26, 1963, defendant began operations for the drilling of a well on one of the tracts of land involved, which well was plugged and abandoned as a dry hole on or about April 2, 1963. Thereafter, defendant refused to commence the drilling of a well on the other tract of land included in the agreement. In this suit plaintiff seeks monetary damages represented by the cost of drilling the second well which amount, by stipulation of counsel, has been fixed in the sum of $9,500.00.

Defendant's peremptory exception was predicated upon the contention that plaintiff was without authority to sublease, transfer or assign, in whole or in part, the interest covered by the farm-out agreement without the written consent of the California Company, and that said consent had never been given. Defendant urged the conclusion that plaintiff did not have the capacity nor right to contract with defendant with respect to an obligation to assign the leases on the properties involved.

The first issue presented by this appeal requires a determination as to the correctness of the judgment sustaining defendant's exception.

In a written opinion the district judge held that the farm-out agreement between California Company and plaintiff was an integral part of the contract between plaintiff and defendant; that absent plaintiff's authority in writing from the California Company to make an assignment to defendant in compiance with his obligation, he has no right to attempt to force the defendant to perform his obligations under the agreement. Upon the basis of this reasoning the trial judge sustained the objection and rendered judgment against plaintiff.

We think the reasons advanced for sustaining the exception are obviously erroneous in numerous particulars. First, it must be pointed out that defendant was not a party to the farm-out agreement between plaintiff and the California Company; second, in his contract with plaintiff defendant clearly accepted and agreed to comply with the requirements of the farm-out agreement; third, defendant and his attorney were fully informed of the provisions of the farm-out agreement Before defendant began operations in compliance with his contract with plaintiff; and, finally, this is not a suit to force or compel performance but the remedy which plaintiff seeks is a judgment for damages for failure to perform. It may further be noted, so far as the record discloses, that defendant has never demanded an assignment, nor is it established that the California Company would have refused to honor plaintiff's obligations under his contract with defendant If the defendant had complied with his obligations thereunder. Somewhat in the sense of piling Pelion upon Ossa, it is material to observe that plaintiff's rights under his farm-out agreement depnded upon defendant's compliance with his obligations, of which fact defendant, unquestionably, was fully aware.

For the reasons noted, we are firmly convinced that the judgment sustaining the exception was erroneous. It would be most inequitable to permit one who has breached a contract to assert his own violation as a defense on the ground that the other party Might be unable to perform his obligations Which would become due at some future time.

Inasmuch as the case was fully tried, it is appropriate that we consider the issues with respect to the merits and pronounce judgment thereupon.

Defendant urges that plaintiff has sustained no damage and has no right to recover the cost of drilling the well as a proper measure of damages; that, in any event, plaintiff is precluded from recovery of damages by reason of his failure to place defendant in default under the provisons of LSA-C.C. Article 1912; finally, that plaintiff voluntarily remitted defendant's obligation to drill the second well. We proceed to a consideration of these defenses, seriatim.

Counsel for defendant argue that the drilling of a well on the second tract of land would have been a vain and useless undertaking inasmuch as the possibility of production had been geologically condemned by the drilling of two dry holes in the immediate vicinity of the subject property. Even if the validity of this...