Nelson v. Big Rapids Gas Co.

• Decision Date: 06 October 1941
• Docket Number: Motion No. 474.
• Citation: 300 N.W. 89,299 Mich. 284
• Parties: NELSON v. BIG RAPIDS GAS CO.
• Court: Michigan Supreme Court

299 Mich. 284

300 N.W. 89

NELSON

v.BIG RAPIDS GAS CO.

Motion No. 474.

Supreme Court of Michigan.

Oct. 6, 1941.

Suit by Hjalmar C. Nelson against Big Rapids Gas Company, a Michigan corporation, for determination of amount due plaintiff from defendant under prior decree of Michigan Supreme Court, providing in part for payment by defendant for gas used during certain period but not taken from plaintiff's well in accordance with contract. From an order of dismissal, plaintiff appeals.

Decree in accordance with opinion.Appeal from Circuit Court, Muskegon County, in Chancery; Joseph F. Sanford, Judge.

Argued before the Entire Bench.

Alexis J. Rogoski, of Muskegon, for plaintiff and appellant.

Worcester & Worcester, of Big Rapids, and Warner, Norcross & Judd, of Grand Rapids, for appellee.

STARR, Justice.

Plaintiff appeals from an order entered by the circuit judge, February 11, 1941, dismissing plaintiff's petition filed May 10, 1938, for determination of amount due plaintiff from defendant under decree of this court entered December 28, 1936. This being a chancery case, we consider the same de novo and will endeavor to dispose finally of the prolonged litigation between these parties.

Our former decision in this case (Nelson v. Galpin, 277 Mich. 529, 269 N.W. 586) and our decree entered December 28, 1936, should be reviewed and considered as prefatory to this opinion. We will herein refer to the case of Nelson v. Galpin, supra, as the ‘first case’ and the appeal now before us as the ‘present case.’

Our decree entered in pursuance of opinion in the first case provided in part as follows:

‘(Paragraph 2) That the defendant, Big Rapids Gas Company, is liable for the performance of the obligations of the party of the second part in the contract, dated May 20, 1933, wherein plaintiff is party of the first part, and Harris E. Galpin, Trustee, is party of the second part.

‘(Paragraph 3) That defendant, Big Rapids Gas Company, shall account to plaintiff for all gas used by it between May 20, 1933, and the date hereof, shall forthwith deliver to plaintiff a verified statement of all natural gas used by it between said dates, and shall immediately make payment to plaintiff at the rate of 15 cents per 1,000 cubic feet for all natural gas used by it between May 20, 1933, and March 22, 1935, not in excess, however, of the amount of his reserve for such period, determined as stipulated by paragraph 5 of the contract between the parties.

‘(Paragraph 4) That for all gas used by defendant between March 22, 1935 (the date of the first order of the Michigan public utilities commission determining the amount of gas which might be withdrawn daily from plaintiff's well based upon the open flow thereof) and the date hereof, defendant, Big Rapids Gas Company, shall pay to plaintiff at the rate of 15 cents per 1,000 cubic feet for all gas used by it, which under an order or orders of Michigan public utilities commission was subject to withdrawal by plaintiff from his said well.

‘(Paragraph 5) That defendant, Big Rapids Gas Company, shall be entitled to receive credits from plaintiff on the amounts hereinbefore decreed to be paid by the said defendant to plaintiff for all gas sold by plaintiff from his leasehold between May 20, 1933, and the date hereof.

‘(Paragraph 6) That hereafter defendant, Big Rapids Gas Company, shall take from plaintiff's leasehold, all gas required by it for the remainder of the term of said contract, to the extent that orders from time to time made by Michigan public utilities commission will permit plaintiff to supply to defendant, Big Rapids Gas Company, its said requirements for natural gas, and said defendant shall pay to plaintiff therefor in the manner and at the times, and at the rate prescribed by paragraph 9 of said contract; or, in the alternative, for the remainder of said term of said contract, defendant, Big Rapids Gas Company, betweenthe 5th days of each month hereafter, shall account to plaintiff for all natural gas used by it during the preceding month, and on the 25th day of each month shall pay to plaintiff the equivalent of the amount of gas used by it for said preceding month that was subject to withdrawal from plaintiff's well or wells pursuant to such order or orders of Michigan public utilities commission, at the rates prescribed by paragraph 3 of said contract, less the amount received by plaintiff during said preceding month for any gas sold by him from his leasehold not in excess of the amount of his reserve, determined in the manner and stipulated in the provisions of paragraph 5 of said contract; and it shall be the duty of plaintiff to apprise said defendant, Big Rapids Gas Company, in writing, prior to the 25th day of each month, of all sums received by him for the sale of gas during the preceding month from said leasehold not in excess of the reserve for the preceding month. * * *

‘(Paragraph 9) That this cause be, and it is hereby remanded to the circuit court for the county of Muskegon, in chancery, for the county of Muskegon, in chancery, that said court shall thereafter retain jurisdiction of this cause for the purpose herein mentioned, and for the other purposes stated in paragraph (7) of the decree entered below.’

Paragraph 5 of the contract between the parties, dated May 20, 1933, and referred to in our decree, reads as follows: ‘Second party shall only be required to purchase from said first party such of its requirements for said gas as the estimated reverves for said gas, as hereinafter determined, on or under said tract of land shall be sufficient to reasonably provide a source of supply to second party of its requirements for and during the period of 10 years from and after sale of said gas shall be commenced by first party to second party; it being intended that second party shall not be required in the purchase of gas from first party to take or purchase such quantity of gas as would deplete said acreage of its said reserves sooner than 10 years time. In the event said reserves shall be in excess of said requirements over said period of time, said second party agrees that first party may sell to other parties such gas as shall not be required by said second party hereunder but in no event shall said reserves be depleted faster than said estimated requirements or at a rate sooner than to preserve the same for said period of 10 years. The amount of said reserves shall be determined from time to time by agreement between the parties hereto and in the event said parties are not able to agree said reserves shall be estimated and determined by a geologist of recognized standing to be appointed by the Michigan public utilities commission of the State of Michigan or its successor then in office upon the application of either party.’

The parties were unable to agree on the amount of natural gas reserves ‘on or under’ plaintiff's 80-acre leasehold. On plaintiff's application the circuit judge entered an order February 14, 1938, providing in part that the gas reserves of plaintiff's leasehold ‘shall be estimated and determined for the period of 10 years commencing January 1, 1934, by a geologist of recognized standing to be appointed by the public utilities commission of the State of Michigan, in keeping with paragraph 5 of the contract dated May 20, 1933 * * *.’

On February 25, 1938, the Michigan public utilities commission entered order providing in part:

‘(a) That said applicant (plaintiff) and the Big Rapids Gas Company are unable to agree as to the amount of applicant's reserve of natural gas. * * *

‘(d) That Ralph W. Melhorn, of 720 No. Washington St., Owosso, Michigan, is a geologist of recognized standing and is a proper person to be appointed by this commission for the purposes indicated in this order.

‘Now, therefore, it is hereby ordered--

‘1. That Ralph W. Melhorn of Owosso, Michigan, be and he is hereby appointed as a geologist to make an estimate and determination of the gas reserve on or under the tract of land situate in the county of Mecosta, State of Michigan, described as follows, to-wit: South 1/2 of the northwest 1/4 of section 11, town 14 north, range 9 west, containing 80 acres, more or less, in accordance with the terms of the said contract of May 20, 1933, and the said order of the circuit court for the county of Muskegon in chancery, dated February 14, 1938.’

Under date of April 9, 1938, geologist Melhorn made his report and estimate of gas reserves under or applicable to plaintiff's leasehold, which report read as follows:

‘This certifies that I, Ralph W. Melhorn, an accredited oil and gas geologist residing at 720 North Washington street, Owosso, Michigan, was appointed on March 4, 1938, by order of the Michigan public utilities commission to estimate the gas reserves under (or applicable to) the Spitler 80-acre farm (plaintiff's leasehold) situated in the south 1/2 of the northwest 1/4 of section 11, township 14 north, range 9 west, in what is known as the Austin township gas field; that the order further directs that an estimate of such gas reserves be made for a period of 10 years beginning January 1, 1934.

‘I further certify that I have studied all court testimony and have read many letters bearing upon the Spitler lease, and upon the gas well drilled October 18, 1933, upon this lease: that I have secured all available data from the files of the Michigan public utilities commission, which bears upon the Spitler well and upon all wells in the Austin gas filed; that I have carefully studied all of these records, and that I have incorporated my conclusions in a detailed report which is appended herein; that I have based my conclusions solely upon the actual recoveries from the Austin field and not upon any technical formula or method; that I have formed these conclusions with no collaboration or consultation with any individual or individuals.

‘I hereby certify that, in my belief, the Spitler well, if it had been turned into a...