Riddle v. Lanier

• Decision Date: 01 January 1941
• Docket Number: No. 2326-7544.,2326-7544.
• Citation: 145 S.W.2d 1094
• Parties: RIDDLE v. LANIER.
• Court: Texas Supreme Court

Page 1094

145 S.W.2d 1094

RIDDLE v. LANIER.

No. 2326-7544.

Commission of Appeals of Texas, Section A.

January 1, 1941.

Error to Court of Civil Appeals of Second Supreme Judicial District.

Action by C. C. Lanier against A. J. Riddle for breach of a contract to drill a test oil well. From a judgment granting plaintiff partial relief, both parties appealed to the Court of Civil Appeals, which affirmed the judgment, 121 S.W.2d 655, and both parties bring error.

Judgments of the Court of Civil Appeals and the District Court reversed, and cause remanded.

John Atchison and Cecil Murphy, both of Gainesville, for plaintiff in error.

W. S. Moore, of Gainesville, for defendant in error.

GERMAN, Commissioner.

C. C. Lanier as plaintiff sued A. J. Riddle as defendant in the District Court of Cooke County for damages growing out of breach of a contract to drill a test oil well. The parties will be designated as in the trial court.

It appears that prior to May 31, 1935, plaintiff assembled a block of oil leases on some 3,000 acres of land in Cooke County, the block being made up of numerous leases by various landowners. None of these leases are in the record, and we are left entirely without information as to the rights and obligations of plaintiff under same. However, there is sufficient parol evidence to indicate that they were the usual commercial leases, providing for the usual royalties, and requiring the beginning of operations within a specified time, or payment of annual rentals in lieu of operations.

It further appears that on May 31, 1935, plaintiff entered into some kind of a general contract with the various landowners, wherein it was contracted that the drilling of one well upon what was known as the Thetford 60 acres was to be taken as the fulfillment of the obligation to begin operations under the various leases. Unfortunately we do not have full information as to the terms of this contract. From the parol testimony we are led to the conclusion that this contract, together with the original leases by the various landowners, was placed in a bank to be delivered, either at the time of the commencement of the well on the Thetford tract, or when the drilling of that well was completed.

Plaintiff by his testimony shows that he was unable to drill the test well on the Thetford tract, and further shows that his principal business was to assemble a block of leases, and then assign a portion of the leases to some one else as consideration for the drilling of a test well. On November 13, 1935, plaintiff entered into a contract with defendant wherein defendant assumed the obligation of drilling the test well, and wherein plaintiff agreed to assign to defendant as a consideration therefor leases upon some 1,030 acres of said lands. Said contract, among other things, recites the following: "Whereas second party (plaintiff) did enter into a written contract on the 31st day of May, 1935, with J. D. Leeper and other land owners in Cooke County, Texas, wherein certain rights, interests, obligations and performances were assumed by C. C. Lanier, the said contract being hereby incorporated by direct reference and the same made a part hereof for every purpose." The contract referred to was not put in evidence.

The contract further recited that the first party (defendant) desired to perform and assume all of the obligations in the said contract executed by and between C. C. Lanier and J. D. Leeper and other landowners, and second party (plaintiff) desired to assign the rights, title and interest in and to the said contract above referred to and incorporated in the contract. The various leases to be assigned were set out in the contract. It was further provided that all the assignments to be executed by plaintiff were to be executed to V. V. Waite, for the benefit of defendant, and that same was to be the full consideration to be paid defendant for the execution and performance of the contract. The principal obligation assumed by defendant is as follows: "First party agrees to drill a test well on the 60 acre tract hereinafter described and to continue drilling of said well with due diligence until the same shall have reached the depth of 3500 feet, unless oil or gas in commercial quantities is found at a lesser depth, or unless the Ellenburger Limestone or Granite, or some other impenetrable substance is encountered, making further drilling operations impracticable."

Shortly after the making of said contract of November 13, 1935, defendant began drilling a well on the Thetford tract. He proceeded with the drilling until a depth of 1,830 feet was reached, without encountering Ellenburger Limestone or Granite, or some other impenetrable substance. The work was abandoned at that depth, the machinery was removed, and the hole plugged. Apparently the only reason why defendant refused to drill the well deeper was the belief on his part that no oil would be discovered if the contract was fully performed.

Plaintiff instituted this suit, claiming that he had been damaged to the extent of the cost of the drilling the test well, and further had been damaged in depreciation in the value of leases on the remaining 1,370 acres of land. He has waived all damages as to the Thetford 60 acres, although he had retained a one-half interest in the leases covering that tract.

In the trial court the jury found that the cost of completing the well which had been abandoned on the Thetford tract would have been $22,000. It was further found that the cost of drilling a well from the surface to the contracted depth would have been $15,000. The jury found that the reasonable cash market value of plaintiff's leases on the remaining 1,370 acres before the well was abandoned was $6 per acre, or $8,220, while the reasonable cash market value of same after the well was abandoned was $1 per acre, or $1,370. There was a further finding that if the well had been completed to the depth of 3,500 feet, or to the Ellenburger Lime or Granite or some other impenetrable substance, plaintiff's remaining leases would have been worthless. It was also found that the Ellenburger Lime would not have been encountered if the well had been drilled to a depth of 3,500 feet.

The trial court denied plaintiff's claim for damages based on cost of drilling the well, but entered judgment in his favor for $4,558.75. This amount represented decrease in value of leases before and after abandonment of the well, less the value of certain leases which the court found had been sold prior to the abandonment of the well. This judgment was affirmed by the Court of Civil Appeals. 121 S.W.2d 655.

Both sides appealed, and both have come to this court by writ of error.

Defendant contends that under the facts of this record, plaintiff was not entitled to recover the decrease in value of his leases. His writ of error was granted, and plaintiff's writ was granted because of the granting of defendant's. Plaintiff urgently contends that he was entitled to recover the cost of drilling the test well, and in addition was entitled to special damages, said special damages being the difference between the value of his remaining leases before the abandonment of the well and their value after abandonment of the well, with no deductions for sales of leases made before the abandonment.

We will first dispose of plaintiff's proposition that he was entitled to recover the cost of drilling the test well, to wit, $15,000. What is known as...