Ludey v. Pure Oil Co.

• Decision Date: 15 September 1931
• Docket Number: Case Number: 20497
• Citation: 1931 OK 527,157 Okla. 1,11 P.2d 102
• Parties: LUDEY v. PURE OIL CO. et al.
• Court: Oklahoma Supreme Court

1931 OK 527

11 P.2d 102

157 Okla. 1

LUDEY v. PURE OIL CO. et al.

Case Number: 20497

Supreme Court of Oklahoma

Decided: September 15, 1931

Syllabus

¶0 1. Oil and Gas--Casinghead Gas Held Neither Oil nor Gas Under Lease Silent on Subject.

Casinghead gas is neither oil nor gas within the contemplation of an oil and gas lease which makes no reference to casinghead gas and nothing appears to indicate that the parties have contracted concerning the same.

2. Tenancy in Common--Actual Ouster Necessary to Start Statute of Limitations in Favor of Cotenant.

Before the statute of limitation will start in favor of a tenant in common there must be an actual ouster by the one asserting the statute.

3. Same--Right to Accounting from Cotenant in Possession.

A tenant in common receiving the common property, either wrongfully or by consent, holds it as trustee for his cotenant to the extent of the interest of the cotenant, who may compel an accounting.

4. Same--Oil and Gas--Interest in Casinghead Gas Recoverable by One Lessor From Lessee in Absence of Contract.

Where a lessee extracts casinghead gas from an oil well and sells same by right of contract with two of three lessors, held, the third lessor, who did not contract concerning said casinghead gas, may recover from the lessee the value of his one-third interest in the casinghead gas, charged with the reasonable and necessary expenses in production and marketing same.

Appeal from District Court, Creek County; Fred A. Speakman, Judge.

Action by Charles A. Ludey against the Pure Oil Company and others. From the judgment, plaintiff and certain defendants appeal. Affirmed.

Davidson & Williams, for plaintiff in error.

Alvin Richards and F. A. Calvert, for defendants in error.

RILEY, J.

¶1 This action was instituted by Charles A. Ludey against the Pure Oil Company, the Ohio Cities Gas Company, the Quaker Oil & Gas Company, the Eagle Gasoline Company, corporations, and Charles G. Tibbens, to recover the value of one-third of casinghead gas taken from the southwest 1/4, of section 21, township 18 N., range 12 E., Creek county, Okla., and for accounting and for cancellation of a lease upon said lands.

¶2 Judgment was for plaintiff in the sum of $ 4,494.35. Plaintiff and defendants who constituted the lessees appeal.

¶3 Plaintiff alleged, in substance, that:

On June 1, 1911, Kemp and Hayden, the owners of the described land, executed an oil and gas mining lease thereto in favor of Quaker Oil & Gas Company. The said lease provided for a one-eighth oil royalty and $ 200 per year per well gas royalty where gas was marketed and used off the premises.

On June 19, 1911, Kemp and Hayden conveyed an undivided one-third interest in said land, subject to said lease, to the plaintiff.

¶4 The Quaker Oil & Gas Company proceeded to develop said land. There are now 26 wells producing oil and gas. None of the wells produce gas only. All of said wells are oil wells. Casinghead gas for many years has been produced from said oil wells. The Pure Oil Company, formerly the Ohio Cities Gas Company, has succeeded to all rights and liabilities of the Quaker Oil & Gas Company and the Ohio Cities Gas Company.

¶5 The lessee defendants have sold and delivered to the Eagle Gasoline Company and Charles G. Tibbens casinghead gas from said wells.

¶6 Plaintiff amended his petition so as to seek recovery for dry or residue gas used by defendant lessees in the operation of said lease.

¶7 The Pure Oil Company admitted the execution of the lease as pleaded; that it was now the lessee in possession and producing oil and casinghead gas; admitted that Ludey owned a one-third interest in the lands; that there are 19 oil wells on said lease; that all of said wells except one were drilled prior to 1912; that there were no gas wells; that about the year 1915, a market existed for casinghead gas, and on July 22, 1915, the lessee contracted with Tibbens for the sale of casinghead gas at 5c per M. cu. ft.; that a vacuum plant was installed by the defendant lessees to collect said casinghead gas and a large sum of money so expended for installation and maintenance to date; that D. A. Bartlett and F. A. Bartlett, owners of the other two-thirds interest in the land involved, contracted with lessee defendants whereby they agreed to receive two-thirds of one-eighth of the value of the casinghead gas as their royalty, but Ludey refused to join in said contract; that, in June, 1920, the value of the casinghead gas was increased slightly in proportion to quality; that lessee defendants tendered to Ludey checks for his royalty interest in the casinghead gas at the rate of one-third of one-eighth, but Ludey declined; that lessee defendants have sold approximately $ 40,000 worth of casinghead gas from said lease; that in event it should be held that plaintiff is entitled to recover more than one-third of one-eighth, the statute of limitation, section 185, C. O. S. 1921, be declared a bar to plaintiff's recovery; that plaintiff be estopped by laches from claiming the amount set forth in his petition; that the court determine and allow defendants the production cost.

¶8 The lessee defendants denied the sale of dry or residue gas, but admitted the use of same as fuel in operation of said lease. They pleaded custom and knowledge of plaintiff as to this fact at the time he acquired his interest in the land. The defendant lessees plead that: "Casinghead gas for which plaintiff seeks to recover herein was, and is, in fact and in truth, oil," and that plaintiff is entitled to the same rate of royalty upon casinghead gas as provided in his lease for royalty upon oil and no more.

¶9 An estoppel was pleaded in that on September 21, 1915, the defendant lessee paid to a bank of Ohio $ 71.73, the same being one-eighth of the proceeds derived from the sale of casinghead gas from said lease, and one-third of said sum ($ 71.73) was credited to Ludey, but it was subsequently admitted that Ludey was not bound by said acceptance.

¶10 The trial court sustained plaintiff's demurrer to defendants' answer that Ludey was entitled to only one-third of one-eighth of the casinghead gas. The cause proceeded to trial and judgment.

¶11 The judgment found that Ludey was entitled to one-third the value of the casinghead gas sold from the Ludey (Big Pond) farm, together with interest at 6 per cent. calculated monthly. That Ludey should pay one-third of the cost of production and marketing of this casinghead gas plus 6 per cent. interest thereon, calculated monthly; that Ludey was entitled to judgment against lessee defendants in the sum of $ 4,494.35, with interest from July 1, 1928; that Ludey was not entitled to anything for dry gas used in development; that defendants were not entitled to expenses prior to the year 1915; that casinghead gas was not a part of the oil produced from the lease, and therefore not contemplated by the one-eighth royalty clause of the lease. The defendants' plea of limitation and laches was denied. The trial court found that the Pure Oil Company owned a valid and subsisting oil and gas mining lease upon the lands involved, and denied plaintiff's prayer for cancellation of the same. The court found that D. A. Bartlett and F. L. Bartlett, owners of an undivided two-thirds interest in the land, had authorized the sale of their interest in casinghead gas produced from the premises, and that defendants had the right to produce and sell all casinghead gas produced, for it was impossible for defendants to separate the one-third interest owned by plaintiff and no market had been provided by Ludey, nor had he attempted to use it.

¶12 The first issue on appeal is:

Does the term oil, as used in the lease here presented, include casinghead gas? Hammett Oil Co. v. Gypsy Oil Co., 95 Okla. 235, 218 P. 501 (June 21, 1921); Mussellem v. Magnolia Pet. Co., 107 Okla. 183, 231 P. 526 (March 11, 1924); George v. Curtain, 108 Okla. 281, 236 P. 876 (April 7, 1925); Mullendore v. Minnehoma Oil Co. (Okla.) 233 P. 1051 (Nov. 12, 1924, rehearing granted Feb. 9, 1926); Mullendore v. Minnehoma Oil Co., 114 Okla. 251, 246 P. 837 (April 13, 1926); Withington v. Gypsy Oil Co., 68 Okla. 138, 172 P. 634 (April 23, 1918); Wolf v. Blackwell Oil & Gas Co., 77 Okla. 81, 186 P. 484 (Jan. 6, 1920).

¶13 In the Hammett Case this court said, referring to the last two cited cases:

"These cases are the only cases that have been called to our attention where the rights of the parties regarding casinghead gas were in dispute and where no mention was made in the lease concerning the same. We think these cases support the position that gasoline manufactured from casinghead gas is neither oil nor gas within the contemplation of an oil and gas lease which makes no reference to casinghead gas and nothing appears to indicate that the parties have contracted concerning the same."

We answer the query in the negative.

¶14 It follows that the casinghead gas produced from the land in controversy belonged to the landowners, because in the lease no mention is made of casinghead.

¶15 The Bartletts, cotenants with plaintiff Ludey, agreed that the lessee defendants might sell their interest in such casinghead gas to Tibbens and the Eagle Gasoline Company, and that they would accept the royalty mentioned in the oil royalty clause of the lease as their consideration. Ludey made no demand for delivery to him of his interest in the casinghead gas, and the lessee defendants properly acted when they sold it. The parties lessee and Ludey became as tenants in common:

"A tenancy in common is where two or more hold the same land, with interests accruing under different title, but at different periods, or conferred by words of limitation importing that the grantees are to take in distinct shares." Black's Law Dict. (2nd Ed.) p. 1142.

¶16 Before the statute of limitations will start in favor of a tenant in common, there must have been an actual ouster by the one asserting the statute. Beaver v. Wilson, 117 Okla. 68...