Rispin v. Midnight Oil Co.

• Decision Date: 06 August 1923
• Docket Number: 3994.
• Citation: 291 F. 481
• Parties: RISPIN v. MIDNIGHT OIL CO.
• Court: U.S. Court of Appeals — Ninth Circuit

291 F. 481

RISPIN v. MIDNIGHT OIL CO.

No. 3994.

United States Court of Appeals, Ninth Circuit.

August 6, 1923

A. L Weil and Forrest A. Cobb, both of San Francisco, Cal. (Harris F. Shaw, of San Francisco, Cal., of counsel), for plaintiff in error.

Dana Blount & Silverstein, of Denver, Colo., and Dudley D. Sales of San Francisco, Cal., for defendant in error.

Before GILBERT, HUNT, and RUDKIN, Circuit Judges.

HUNT Circuit Judge.

The Midnight Oil Company brought this action against Rispin to recover $10,000 as liquidated damages and interest thereon. The complaint alleged that in settlement of certain litigation Rispin agreed to pay the Midnight Oil Company $10,000 upon the terms and conditions set forth in a writing signed by Rispin May 13, 1919. The writing recited that whereas, the Hopewell Oil Company had assigned to the Midnight Oil Company part of the benefits arising from an operating contract dated March 24, 1919, between Hopewell Oil Company, as grantor, and Associated Oil Company, as operator, upon certain tracts of land; and whereas, the first well to be drilled was located on the premises assigned by the Midnight Oil Company, and by said contract the Associated Oil Company had agreed to carry on the work of drilling continuously, barring unavoidable delays, until such well should reach a depth of and test out the known productive oil sands in the Lance Creek field, unless oil should be found in commercial quantities at a lesser depth: Therefore, Rispin 'guarantees' that the Associated Oil Company, or its assigns, 'will drill and complete a well' on the premises, commencing on or before the 15th day of June, 1919, and proceed, barring unavoidable delays, until such well should reach the depth of and test out the known productive oil sands in the Lance Creek field; that if the Associated Oil Company, or its assigns, should 'for any reason fail to drill and complete said well in manner and form specified,' then 'because the damage occasioned thereby' to the Midnight Oil Company 'would be difficult, if not impossible, to ascertain,' and in consideration of the settlement and dismissal of the suit referred to Rispin agreed to pay to the Midnight Oil Company $10,000, as liquidated damages, the amount to be paid on notice of the failure of the said Associated Oil Company, or its assigns, to drill and complete the well as specified. Plaintiff alleged that neither the Associated Oil Company, nor its assigns, ever commenced the drilling of the well. Notification and demand for the $10,000 as liquidated damages are alleged; also that it is impracticable and extremely difficult to fix the actual damages which would be suffered by the plaintiff by reason of the failure of the Associated Oil Company, or its assigns, to drill or commence to drill as guaranteed by Rispin.

A general demurrer to the complaint was overruled, and Rispin answered that on March 24, 1919, the Western States Oil & Land Company made a lease to the Hopewell Oil Company, covering the lands referred to in the agreement heretofore mentioned; that on March 24, 1919, the Hopewell Oil Company contracted with the Associated Oil Company with respect to certain described lands; that afterwards the Hopewell Oil Company assigned to the Midnight Oil Company all its interest, royalties, and benefits in and to the lands referred to in the complaint and arising out of the lease referred to in the complaint; that the Associated Oil Company was ready, able, and willing to commence drilling and to complete the well on the premises described in the complaint on or before June 15, 1919, but that the Midnight Oil Company was unable to deliver possession by that date; that the Associated Oil Company attempted to secure possession, but was prevented by threats and forcible opposition on the part of persons claiming the premises adversely to the Midnight Oil Company; that the Associated Oil Company never has been able to enter upon the premises, and that, but for the failure to deliver possession, the Associated Oil Company would have gone ahead as required. Rispin also alleges that the Associated Oil Company was barred by delays, unavoidable on its part, from beginning to drill on the premises on or before June 15, 1919, and alleged on information and belief that while the Associated Oil Company was excluded from the premises, wells were drilled within the Lance Creek field underlying the premises herein involved, and that it was demonstrated that oil in commercial quantities does not exist under the premises involved, and that plaintiff has sustained no damages; also denies that it would be impracticable or difficult to fix the actual damages suffered by reason of the failure of the Associated Oil Company, or its assigns, to drill.

The operating agreement between the Hopewell Oil Company and the Associated Oil Company recites that, whereas, the Hopewell Oil Company desired to arrange for the operation and development of the lands under the terms of the lease: Therefore it assigns to the Associated Oil Company all of its right, title, and interest in and to the lands under and by virtue of the lease, and subject to the terms thereof. The Hopewell Oil Company agreed to deliver possession of the lands for operation immediately. The Associated Oil Company was to take immediate possession and manage, control, and operate, to begin actual drilling of an oil well on certain lands on or before June 15, 1919, and to prosecute the work continuously, 'barring unavoidable delays, until such well shall reach a depth of and test out the known productive oil sands in the Lance Creek Oil field, unless oil in commercial quantities shall be found in said well at a less depth.'

General demurrer to the answer was sustained, default of the defendant was entered, and judgment by the court was entered against Rispin for the sum of $12,360 and costs.

The first inquiry is whether the answer stated a defense to the complaint. We think it does, and that it was error to hold otherwise. The contract sued upon is one of guaranty whereby Rispin guaranteed that under conditions specified the Associated Oil Company would drill and prosecute drilling the well. The Associated Oil Company stands in the relation of a principal and Rispin in that of a guarantor. The Midnight Oil Company defaulted, in that it failed to deliver possession as it was obliged to do. By the terms of the operating contract between the Hopewell Oil Company and the Associated Oil Company, the Associated Oil Company was to drill a well on certain lands, which included the land mentioned in the complaint, and the Hopewell Company was under obligation immediately to deliver...