Midland Oil Co. v. Thigpen

Decision Date23 March 1925
Docket NumberNo. 6469.,6469.
Citation4 F.2d 85
PartiesMIDLAND OIL CO. v. THIGPEN et al.
CourtU.S. Court of Appeals — Eighth Circuit

S. N. Hawkes, of Bartlesville, Okl. (H. O. Caster and Hayes McCoy, both of Bartlesville, Okl., and George A. Henshaw and A. C. Hough, both of Oklahoma City, Okl., on the brief), for plaintiff in error.

Frank T. McCoy, of Pawhuska, Okl. (A. M. Widdows, of Pawhuska, Okl., and J. R. Spielman, of Oklahoma City, Okl., on the brief), for defendants in error.

Before STONE and LEWIS, Circuit Judges, and PHILLIPS, District Judge.

PHILLIPS, District Judge.

A. J. Thigpen and A. J. Thigpen, Jr., members of a copartnership, hereinafter called plaintiffs, brought this action against Midland Oil Company, hereinafter called Midland Company, and Fred O. Davis, to recover damages for alleged injuries to cattle owned by the copartnership.

The Midland Company was the owner of a departmental oil and gas lease dated January 24, 1916, running from the Osage Tribe of Indians to the Midland Company, and covering the N. E. º of section 17, township 24 N., range 9 E.

Paragraphs 16, 19, and 20 of the lease read as follows:

"16. This lease is subject to the regulations now or hereafter prescribed by the Secretary of the Interior, relative to such leases, all of which are made a part of this lease: Provided, that no regulations made after the approval of this lease shall operate to affect the term of lease, rate of royalty, rental or acreage, unless agreed to by both parties."

"19. Assignment of this lease or any interest therein may be made with the approval of the Secretary of the Interior and not otherwise.

"20. Each and every clause and covenant of this indenture shall extend to the heirs, executors, administrators, successors, and lawful assigns of the parties hereto."

Sections 21 and 61 of the Regulations of the Secretary of Interior, approved August 26, 1915, read as follows:

"21. Approved leases or any interest therein may be sublet, transferred, or assigned with the consent and approval of the Secretary of the Interior, and not otherwise. Subleases, transfers, or assignments, when so approved, shall be subject to the terms and conditions of the original leases and the regulations under which such leases were approved, as well as to such additional requirements as the Secretary of the Interior may prescribe. The sublessee, transferee, or assignee shall furnish with his sublease, transfer, or assignment a satisfactory bond as hereinbefore prescribed in connection with leases.

"Any attempt to sublease, transfer, or assign an approved lease or any interest therein without the consent and approval of the Secretary of the Interior shall be absolutely void and shall subject the original lease to cancellation in the discretion of such Secretary."

"61. All B-S or water from tanks or wells shall be drained off into proper receptacles located at a safe distance from tanks, wells, or buildings, to the end that same may be disposed of by being burned or transported from the premises.

"Where it is impossible to burn the B-S, or where it is necessary to pump salt water in such quantities as would damage the surface of the leased land or adjoining property, or pollute any fresh water, the lessee shall notify the superintendent who shall give instructions in each instance as to the disposition of such B-S or salt water."

Section 45 of the Regulations of the Secretary of Interior approved August 26, 1915, as amended May 13, 1919, reads as follows:

"45, as amended May 13, 1919. — Lessee shall provide two properly prepared slush pits, into one of which he must deposit sand pumpings and other materials extracted from the well during the process of drilling, but other material as is suitable for the mudding of a well shall be run into the other pit. The construction of such pits shall be subject to the approval of the inspector. Sand pumpings and such materials shall not be allowed to run over the surface of the land."

The plaintiffs were the owners of three agricultural leases, running from members of the Osage Tribe to the plaintiffs, covering lands located in sections 17, 18, and 19, township 24 N., range 9 E., and lying adjacent to the tract of land covered by the oil and gas lease.

The oil and gas lease required the Midland Company to drill a well on the leased premises to the Mississippi lime unless oil or gas should be found in commercial quantities at a lesser depth.

On November 28, 1919, the Midland Company entered into a contract with its codefendant, Davis. This contract described the above-mentioned oil and gas lease, and recited that the Midland Company was the owner of mining leases covering adjoining lands, and was desirous of having the same tested for oil production, and provided:

"That for and in consideration of the sum of one ($1.00) dollar by the second party (Midland Company) to the first party (Davis) paid, the receipt of which is hereby acknowledged, and of the terms, covenants, agreements and conditions hereof, the party of the first part agrees to drill a well on the land hereinbefore specifically described at a proper location offsetting land held under lease by second party adjoining the same, in a proper manner and with due diligence, at his own costs and expenses, with proper tools and equipment, furnishing all the labor, tools, material, fuel, water and equipment, and to commence the drilling thereof within thirty (30) days from the delivery of the parts hereof, duly approved by the Secretary of the Interior, and to prosecute the drilling thereof with due diligence to a depth of three (300) feet in the Mississippi lime, unless the drilling thereof is ordered stopped at a lesser depth by the superintendent of the Osage Indian Agency or other proper representative of the Interior Department of the United States, and to fully comply with the terms, covenants and provisions of said lease in so doing and with the requirements of the rules and regulations heretofore promulgated by the Secretary of the Interior, now in force, governing drilling operations in the Osage Indian Reservation and those that may hereafter be promulgated by said Secretary, and with the rules and reglations heretofore or hereafter promulgated by the Corporation Commission of the state of Oklahoma. * * *

"The party of the second part, in consideration of said drilling, agrees to execute and deliver to the party of the first part, upon the completion of said well, as aforesaid, an assignment of said lease hereinbefore specifically described. * * *"

It further provided: That Midland Company should pay the rentals on the oil and gas lease falling due prior to the completion of the well and that Davis should reimburse it therefor on the execution and delivery of the assignment; that upon the failure of Davis either to commence the well within the time fixed by the contract or to prosecute the drilling thereof with due diligence, his rights under the contract should terminate; and that Davis should not acquire any interest in the lease until the assignment above referred to had been executed and delivered with the approval of the Secretary of the Interior.

This contract was approved by S. G. Hopkins, Assistant Secretary of the Interior.

Davis entered into a contract with one Martin, a drilling contractor, to drill the oil well. This contract provided that Davis should construct the derrick, rig, and slush ponds, and that Martin should furnish the tools and other equipment and drill the well at a certain price per foot. Davis constructed the derrick, rig, and one slush pond.

On February 10, 1920, Martin began the drilling of an oil well on the lease. About February 29, 1920, he encountered salt water; he bailed out about 75 barrels of the salt water and deposited same in the slush pond. This amount more than filled the slush pond and about 50 barrels of the salt water escaped and ran down into a creek which runs through the lands of plaintiffs. The cattle of plaintiffs drank this water, with the resultant injuries for which damages are sought in this action.

The Midland Company had nothing whatever to do either with the construction of the slush pits, the drilling of the oil well or the permitting of the salt water to escape. The alleged wrongful acts complained of were caused wholly by Davis and his drilling contractor, Martin.

The cause of action set up in plaintiffs' amended petition sounded in tort. Plaintiffs alleged therein, in effect: That the Midland Oil Company and Davis were guilty of negligence, in that they failed to comply with the rules and regulations of the Department of the Interior, the laws of the state of Oklahoma, and the regulations of the Corporation Commission of the state of Oklahoma with respect to providing slush ponds for the purpose of catching salt water and other poisonous substance coming from the oil well, and in that they negligently permitted salt water and other poisonous matter coming from the oil well to escape and flow down onto the lands leased by plaintiffs; and that as a result of the negligent acts of the Midland Company and Davis, plaintiffs were damaged in the particulars set out in their amended petition.

The trial resulted in a verdict for the plaintiffs in the sum of $4,292. Judgment was entered on the verdict and the Midland Company sued out a writ of error therefrom to this court.

At the trial the court instructed the jury in part as follows:

"At the outset, you are instructed that the defense is not available to the company that it was relieved of liability by the fact that Davis was an independent contractor. The leases to the company and the regulations of the Interior Department were such that the company and Davis, and each of them, are responsible for the acts and omissions of Davis, and the agents, employees, and servants engaged in the drilling of the well and taking part in the construction and maintenance of...

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