McVicker v. Horn, Robinson and Nathan

• Citation: 71 A.L.R.2d 1211,322 P.2d 410
• Decision Date: 25 February 1958
• Docket Number: No. 37716,37716
• Parties: , 1958 OK 49 John McVICKER, Sue DeVore McVicker, W. C. Berry, Robert E. Baker and John T. Gibson, Plaintiffs in Error, v. HORN, ROBINSON and NATHAN, a copartnership of Ed Horn, Robert Robinson and Samuel Nathan; J. W. Dutton, S. L. Marshall and Ray Burgin, Defendants in Error.
• Court: Supreme Court of Oklahoma

Page 410

322 P.2d 410

71 A.L.R.2d 1211, 1958 OK 49

John McVICKER, Sue DeVore McVicker, W. C. Berry, Robert E.

Baker and John T. Gibson, Plaintiffs in Error, v. HORN, ROBINSON and NATHAN, a copartnership of Ed Horn, Robert Robinson and Samuel Nathan; J. W. Dutton,

S. L. Marshall and Ray Burgin,

Defendants in Error.

No. 37716.

Supreme Court of Oklahoma.

Feb. 25, 1958.

Syllabus by the Court

1. Where an oil and gas lease does not, in express terms, provide for the marketing of the product of a well drilled on the leased land, any covenant on the part of the lessee to do this can only be an implied one, in which instance said lessee has a reasonable time, after the completion of the well, to comply with such covenant.

2. In the present action, instituted by oil and gas lessors and royalty owners, as plaintiffs, against the lessees, as defendants, seeking cancellation of an oil and gas lease on the theory of abandonment and ipso facto termination at the end of the lease's primary term; Evidence examined and Held: The trial court's judgment for defendants was not clearly against the weight of the evidence.

Appeal from the District Court of Oklahoma County; A. P. Van Meter Judge.

Action by plaintiff owners of lessor's share of the minerals under a 40-acre tract leased to defendants for oil and gas exploration purposes, to quiet their title to the leased premises. After judgment for defendants, plaintiffs appeal. Affirmed.

Luther Bohanon, Bert Barefoot, Jr., W. Otis Ridings, and Norman E. Reynolds, Jr., Oklahoma City, for plaintiffs in error.

Chas. L. Orr, Oklahoma City, for defendant in error Horn, Robinson and Nathan.

Robinson, Shipp, Robertson & Barnes, by T. Murray Robinson, Wm. L. Robertson, Oklahoma City, Okl., for defendants in error Ray Burgin and S. L. Marshall.

BLACKBIRD, Justice.

Plaintiffs in error, hereinafter referred to as plaintiffs, are the owners of a 40-acre tract of land in the Witcher area of Oklahoma County. In 1953, they executed and delivered to J. W. Dutton an oil and gas lease on said tract for a term of one year from October 31st, 1953. Duttom thereafter assigned the lease to the partnership of Horn, Robinson and Nathan, reserving to himself, as overriding royalty, 1/8th of the 7/8ths lessees' interest therein. Thereafter, he assigned a part of this reserved interest to S. L. Marshall; and Horn, Robinson and Nathan assigned to Ray Burgin a part of their working interest. All of the aforenamed owners of the working, or normal lessee's interest, will hereinafter be collectively referred to as defendants. They completed a gas well on the leased land on or about May 1, 1954, but no gas from said well has even been marketed or sold.

On October 24, 1955, plaintiffs commenced this action against the defendants to quiet their title to the property (including pipe and other well equipment defendants had installed thereon) against all claims of the defendants. Their position that defendants no longer had any right, title or interest in and to said property was predicated on the theory, both that defendants had abandoned the leasehold after completing the well in May, 1954, and that the lease had expired by its own terms on account of defendants' failure to produce gas from the leased land by October 31, 1954, the end of the lease's one-year term.

The defendant, Dutton, filed a disclaimer, representing that he had transferred all his right, title and interest in the property to the defendant, Burgin. The defendants Burgin and Marshall filed a joint answer; and the partnership of Horn, Robinson and Nathan filed a similar one. No useful purpose would be served by describing in detail the allegations of these answers, but, generally, and in partial substance, they set forth facts inferring both that plaintiffs had acquiesced in defendants' attempts to find a purchaser for the gas well's production and that, after gas in paying quantities was found in the well, defendants had a reasonable time, under the lease, within which to market it; and that within such period they found a purchaser therefor, but that plaintiffs barred them from going upon the leased premises to do the work necessary to connecting the well with the prospective purchaser's pipe line.

After a non-jury trial, the court took the cause under advisement and thereafter entered judgment for defendants, upon the general finding that 'the allegations of plaintiffs' petition are not supported by the evidence * * *'. After the overruling of their motion for a new trial, plaintiffs perfected the present appeal.

The lease involved here was executed on what is called a 'Producers No. 88' form, 'With Pooling and Regulation Clauses.' It is regular in all respects except that the provisions of the ordinary printed form with reference to delay rentals were stricken out, or obliterated, from it. With this deletion, the only remaining provisions of the lease at all material to the present controversy read as follows:

'It is agreed that this lease shall remain in force for a term of One (1) years from this date, and as long thereafter as oil or gas, or either of them, is produced from said lands by the lessee.

'In consideration of the premises the said lessee covenants and agrees:

* * *

* * *

'And where gas only is found one-eighth of the value of all raw gas at the mouth of the well, while said gas is being used or sold off the premises, payment for gas so used or sold to be made monthly. The lessor to have gas free of cost from any gas well on said premises for all stoves * * *

* * *

* * *

'To pay lessor for gas produced from any oil well and used off the premises one-eighth of the value of the raw gas at the mouth of the well, payment for the gas so used or sold to be made quarterly.

* * *

* * *

'Should the first well drilled on the above described land be a dry hole then, and in that event, if a second well is not commenced on said land within twelve months from the expiration of the last period which rental has been paid this lease shall terminate as to both parties, unless the lessee on or before the expiration of said twelve months shall resume the payment of rentals, as above provided, * * *' (Emphasis ours.)

It will be observed from the avove that the 'unless' provision, or only part of the lease expressly providing for its termination, is incomplete and meaningless without the delay rental provision, which, the ordinary Producers 88 form of lease contains. In connection with this part of the lease, it is also perhaps worthy of mention that the Corporation Commission's well-spacing order, in effect in the area, allows only one well on a tract the size of the one here involved. Plaintiffs cite authorities to support the proposition that the duty to market the oil and gas found on the leased premises is an implied covenant on the part of the lessee in oil and gas leases generally, or in the regular forms thereof; but they have failed to point out an express covenant therefor in the lease before us. Defendants point out that the mere use of the word 'produced' in the quoted 'thereafter' clause does not make of that clause such an express provision. They argue, in effect, that the word 'market' is neither included in, nor synonymous with Webster's definition of the word 'produced.' They say they could have 'produced' gas from the leased premises, within the ordinary meaning of the word, if they had not 'shut in' the well, but had left it open to waste its gaseous product into the air. A similar argument was made in Home Royalty Ass'n v. Stone, 10 Cir., 199 F.2d 650, but rejected, because it was a Kansas case, and the court thought that previous opinions of the Kansas Supreme Court required marketing, as well as discovery, citing Ratcliff v. Gouinlock, 136 Kan. 149, 12 P.2d 798, and Tate v. Stanolind Oil & Gas Co., 172 Kan. 351, 240 P.2d 465. It was recognized, however, that what was there considered as the Kansas rule was dictum in the Tate Case and we notice that the Ratcliff Case involved a lease for mining and producing clay wherein, at the end of the primary term, clay had been discovered on the leased premises but none separated from its natural strata or reduced to possession so that it could have been marketed. We have been referred to no Oklahoma case, and know of none, in which a lease, like the present one, has been declared terminated at the end of its primary term, on account of the lessee's failure to produce, where, by that time, he had not only discovered oil or gas in paying quantities, but was bringing it to the surface and reducing it to possession in a manner in which it could be, but had not yet been, marketed. Of course, it is easier to see how oil can be produced by bringing it to the surface and placing it in storage facilities (though not marketed until the storage is filled) than in the case of gas where storage is not yet a practical, accepted, or perhaps possible procedure. In this connection, see 9 Okla.L.Rev. 200, Note 4. Regardless of this difference in the nature of the product, however, it cannot be disputed, as Judge Huxman recognized in his dissenting opinion in Bristol v. Colorado Oil & Gas Corp., 10 Cir., 225 F.2d 894, and stated in the majority opinion in Christianson v. Champlin Refining Co., 10 Cir., 169 F.2d 207, 210, that:

'* * * in the very nature of the oil business * * * a reasonable time must intervene between the completion of the drilling operations resulting in production and the ability to market and sell the product of a well.'

And this, in the most ordinary, or usual, situations, applies more markedly to the 'nature' of the gas business than the oil business.

We do not think some of the statements of the Kansas Supreme Court in the Tate Case, supra, concerning ipso facto termination of a lease for failure to produce, can be soundly applied to such termination for failure to market. Accordingly, our views are not in accord with their interpretation and application in the...