Lieber v. Ouachita Natural Gas & Oil Co.

• Decision Date: 27 November 1922
• Docket Number: 23891
• Parties: LIEBER v. OUACHITA NATURAL GAS & OIL CO
• Court: Louisiana Supreme Court

95 So. 538

153 La. 160

LIEBER v. OUACHITA NATURAL GAS & OIL CO

No. 23891

Supreme Court of Louisiana

November 27, 1922

Rehearing Denied January 27, 1923

Appeal from Sixth Judicial District Court, Parish of Ouachita; Fred M. Odom, Judge.

Suit by L. L. Lieber against the Ouachita Natural Gas & Oil Company. From a judgment for defendant, plaintiff appeals.

Affirmed.

Madison & Madison, of Bastrop, for appellant.

Hudson Potts, Bernstein & Sholars, of Monroe, and Wilkinson, Lewis &amp Wilkinson, of Shreveport, for appellee.

OVERTON, J. O'NIELL, J.

OPINION

OVERTON, J.

Plaintiff executed an instrument which, upon its face, purports to convey to defendant all of the oil and gas in and under 557 acres of land located in the parish of Ouachita, with the right of ingress and egress, at all times, for the purpose of drilling, mining, and operating for gas, oil, or water, and with the right to erect storage tanks and other necessary structures, and to lay all pipes necessary for the production, mining, and transportation of the minerals named. The contract also confers the right on defendant to use such quantity of the oil, gas, and water, that it may withdraw from the land, as is found necessary for operations, and to cut and use such wood on the land as is not fit for sawing, for fuel purposes, in drilling wells. It also recognizes the right in defendant to remove at any time all machinery, fixtures, and improvements placed on the land by it. The consideration for the alleged sale is the drilling of a well in quest of oil and gas in that locality, one-eighth of all oil produced and saved on the property, and, if gas should be found, the payment to plaintiff of $ 200 per year, payable quarterly, for the product of each well, while the same is being used off the premises. The contract was made subject to the following conditions, to wit:

"In case operations for either the drilling of a well for oil or gas, is not commenced and prosecuted with due diligence within from this date, then this grant shall immediately become null and void."

"In case the parties of the second part should bore and discover either oil or gas, then in that event this grant, incumbrance or conveyance shall be in full force and effect for twenty-five years from the time of the discovery of said product, and as much longer as oil or gas may be produced in paying quantities thereon."

The above instrument was executed on March 15, 1917, and was signed by plaintiff alone. At the time of its execution the land was situated in what was considered "wildcat" territory. In fact, the nearest well to it was about two miles distant. Within ten days after the execution of the instrument defendant took possession of the property, erected a derrick thereon, and, with the knowledge and acquiescence of plaintiff, drilled a well on the property, completing the well in 60 days from the date of taking possession. The well did not produce oil, but it produced gas in quantities, which, due in large part to the market that defendant was largely instrumental in creating, has paid it handsomely. When the well was completed, defendant tendered to plaintiff the consideration stipulated in the contract for gas used off the premises, but plaintiff refused to accept the money, as appears from his answer to the following questions propounded to him while a witness on the stand, to wit:

"Q. I will ask you if it is not a fact that before the defendant company sold any gas out of the well on your land that it made you a tender of $ 50 to cover the first quarter under the lease contract they held with you, and that you refused it?

"A. I don't know of my own knowledge whether they sold any from this well or whether they had it connected up, or not. I don't know.

"Q. You refused to receive it?

"A. I refused to receive the check; yes, sir.

"Q. And not because of the fact that it was not timely presented to you?

"A. I refused it for the fact I didn't consider it sufficient consideration.

"Q. It was the amount named in the contract that they offered you, was it not?

"A. I think so.

"Q. Then you refused it because you weren't satisfied with the contract?

"A. Yes, sir.

"Q. And you didn't expect to stand on the contract?

"A. Didn't know the value of a gas well at the time I signed the contract.

"Q. I asked you if it was not a fact that you refused to take the amount called for by the contract when tendered to you, and within the time fixed in the contract, by the defendant, because you became dissatisfied with the contract, and didn't expect to stand on it?

"A. Yes, sir; because I signed the lease in error, not knowing the value of a gas well.

"Q. Then you testified that the defendant company had not paid you anything subsequent to the drilling of the well, on account of the gas; it was only because you would not accept anything, was it not?

"A. That's correct, for reasons stated before."

Being dissatisfied with the contract, as indicated by the above answers, and considering it illegal, plaintiff instituted this suit to have it annulled, and in the event it should be held that he has no legal ground to annul it, then to obtain such equitable relief as the facts alleged and those established on the trial may justify. The grounds on which the lease is attached are numerous, and will be mentioned as they are considered.

The grounds of attack that may be first considered are that the contract is potestative in character, lacks mutuality, is not signed by the defendant, and that there has been an utter failure of consideration in money or other thing of value.

Viewing the contract, for the moment, as valid from the time plaintiff signed and delivered it, in order to ascertain its nature, it may be said that, while it purports on its face to be a sale of the oil and gas in and under the land, and is expressly, by a stipulation in it, declared to be such, yet the law regards it as a mere conveyance or grant of the right to mine for those minerals, and to reduce them to possession and ownership, and not as a sale of them in their natural state, beneath the surface. Frost-Johnson Lumber Co. v. Salling's Heirs, on second rehearing, 150 La. 756, 91 So. 207. Therefore the contract will be so viewed in ascertaining its validity.

It is clear that the contract makes it depend on defendant's will alone whether or not it should be executed by exploiting the land for gas and oil. It was therefore potestative, and contains the same potestative condition, word for word, as the one contained in the contract that was under consideration in the case of McClendon v. Busch-Everett Co., 138 La. 722, 70 So. 781. The drilling by defendant and the payment of the royalties stipulated was the real consideration for the contract. Hence, as its execution was dependent on defendant's will alone for the reason mentioned, and for the additional reason that it was even optional with defendant to drill on plaintiff's property or on adjoining property, there was in reality no contract at all when the instrument, purporting to be one, was delivered. Caddo Oil & Mining Co. v. Producers' Oil Co., 134 La. 701, 64 So. 684. And, since the contract should have been signed by both plaintiff and defendant but was not signed by the latter, there was for that reason also no contract at the time. However, as plaintiff permitted defendant to take possession of the property, and to spend a large amount of money in drilling a well, he should not, after defendant has thus assumed the obligations of the instrument, and has discharged, in part, its terms by developing the property successfully for gas, be permitted to repudiate the obligations of the instrument. By delivering the contract to defendant, such as it was, and by raising no objection to the development of the property under it, though he had knowledge that the property was being developed, he sanctioned the course pursued, and should not now be permitted to annul the contract to the latter's injury. If he were permitted to do so, the advantages to be derived by him would be considerable, and the injury to the defendant would be great. To annul the contract now would be opposed to both law and...