Robinson v. Gordon Oil Co.

Decision Date06 March 1934
Docket NumberNo. 139.,139.
Citation253 N.W. 218,266 Mich. 65
PartiesROBINSON v. GORDON OIL CO. et al.
CourtMichigan Supreme Court

OPINION TEXT STARTS HERE

Appeal from Circuit Court, Midland County, in Chancery; Leonard D. Verdier, Judge.

Action by W. (William) A. Robinson against the Gordon Oil Company, an Ohio corporation, and others. From a judgment, plaintiff appeals.

Affirmed.

Argued before the Entire Bench.

Charles H. Goggin, of Alma, and James E. Ryan, of Mt. Pleasant, for appellant.

A. W. Penny, of Muskegon, and Chester E. Morris, of Midland, for appellees.

EDWARD M. SHARPE, Justice.

On October 2, 1930, Noah J. Skinner and wife were the owners of a sixty-acre tract and an eighty-acre tract of land in Greendale township, Midland county, and executed two leases to the plaintiff, one on each tract, for the purpose of developing oil. Both leases were placed in escrow. The escrow agreement as to the sixty-acre lease provided that actual work in connection with the drilling of said well should commence on or before December 1, 1930, to entitle plaintiff to delivery of the lease; as to the eighty-acre lease, it was provided that actual work should commence on or before January 15, 1931.

About November 10, 1930, plaintiff met Mr. Mason of the Gordon Oil Company and made an agreement whereby the Gordon Oil Company was to drill a well on the sixty-acre tract. The oil company moved a drilling rig on the property at the location pointed out by plaintiff and was ready on November 25, 1930, to start drilling. The plaintiff left the vicinity about November 17th and did not return until June of the following year. The company had expended $1,500 in moving and placing their drilling rig on the premises. Under the contract between plaintiff and the oil company for the drilling of the well, plaintiff was to pay the company $3,000 when the rig was complete, $1,000 when the drive pipe was landed, and other specified amounts when the Marshall, Traverse, and Dundee formations were reached, with the price for drilling set at $2.50 per foot. Plaintiff also agreed to furnish drive pipe and casing. Plaintiff never complied with any part of this agreement.

On December 9, 1930, the Skinners requested the Gordon Oil Company to take a lease of the lands effective January 17, 1931, two days after plaintiff was required by his lease to commence drilling on the eighty-acre tract. The actual lease from Skinners to the Gordon Oil Company was signed January 26, 1931. During this interval of time the plaintiff was in various cities in an attempt to finance the undertaking. In December he wrote to the Skinners assuring them that he intended to live up to his agreement and also wrote defendants asking them to return his copy of the lease and escrow receipt as he needed these to complete financing. On January 3, 1931, plaintiff wrote a ‘peril’ letter addressed to Mr. Skinner, Mr. Mason, and defendant oil company, warning them that ‘if you attempt to develop the property, you will do so at your peril.'

Prior to January 26 the company was informed by their attorney, Mr. Dodds, that the leases to plaintiff were no longer in effect. The company was also told by Mr. Ryan, plainiff's attorney, that if he were in their place he would go ahead and do as he wished and give plaintiff no further attention. Drilling was commenced by the company February 10, 1931, and the well completed June 6, 1931. The first oil was sold June 8, 1931.

This case has come before this court once before and is reported in 258 Mich. 643, 242 N. W. 795. The court there validated the lease to the sixty-acre tract given by the Skinners to plaintiff, but declared plaintiff's eighty-acre lease invalid. In the decision of that case, Mr. Justice McDonald, speaking for the court, used the following language in referring to the Gordon Oil Company leases from the Skinners (258 Mich. at page 651, 242 N. Y, 795, 797):

We think the methods used to secure the leases were unfair and closely resemble fraud, but we do not base decision to cancel them on that ground.'

Again (page 651 of 258 Mich.,242 N. W. 795, 797):

Plaintiff has not had a square deal.'

The court also said (page 651 of 258 Mich.,242 N. W. 795, 797):

‘The question of an accounting we leave undetermined, because there is no evidence from which a determination could be made.'

Upon the subsequent trial of the accounting action in the lower court, it was stipulated that the agreed value of the oil taken from the well was $20,079.70 and the agreed cost of production $17,000. The trial court held that defendant Gordon Oil Company was an innocent trespasser and therefore entitled to set off the cost of production of the oil. From this decision, plaintiff appeals.

The sole question now to be determined is, Was the defendant oil company a willful trespasser or a casual and innocent trespasser? If the trespass was willful, plaintiff is entitled to the full value of the oil without deduction; if the trespass was casual, defendant is entitled to deduct from its value the cost of producing it.

The general rule in the United States in actions for the conversion of oil, as in the case of conversion of minerals and other natural products of the soil is that, although a willful trespasser is liable for the enhanced value of the oil at the time of conversion without deduction for expenses or for improvements by labor, an innocent trespasser is liable only for the value of the oil undisturbed; that is, he is entitled to set off the reasonable cost of production. Guffey v. Smith, 237 U. S. 101, 35 S. Ct. 526, 59 L. Ed. 856;Turner v. Seep (C. C.) 167 F. 646, modified in (C. C. A.) 179 F. 74;United States v. Midway Northern Oil Co. (D. C.) 232 F. 619;United States v. McCutchen (D. C.) 238 F. 575;Kahle v. Crown Oil Co., 180 Ind. 131, 100 N. E. 681;Bryson v. Crown Oil Co., 185 Ind. 156, 112 N. E. 1;Dyke v. National Transit Co., 22 App. Div. 360, 49 N. Y. S. 180;Miller v. Tidal Oil Co., 161 Okl. 155, 17 P. (2d) 967,87 A. L. R. 811;Barnes v. Winona Oil Co., 83 Okl. 253, 200 P. 985, 23 A. L. R. 189;Corrigan v. Shell Petroleum Corp. (Tex. Civ. App. 1933) 62 S.W.(2d) 663;Taylor v. Higgins Oil & Fuel Co. (Tex. Civ. App. 1928) 2 S.W.(2d) 288.

In Bryson v. Crown Oil Co., 185 Ind. 156, at page 158, 112 N. E. 1, 2, it was said:

‘It has been held that one who willfully and intentionally takes ore, timber, or other property from the land of another must respond in damages for the full value of the property taken, at the time of the conversion, without any deduction for the labor bestowed or expense incurred in removing and preparing it for the market; but that if he commits the wrongful act unintentionally, or by mistake, or in the honest belief that he is acting within his legal rights, the measure of liability is the value of the property taken, less what it costs to produce it.'

The latest application by this court of this distinction in the measure of damages for a willful or innocent trespass is found in Eagle Oil Corp. v. Cohassett Oil Corp., 263 Mich. 371, 248 N. W. 840, an oil conversion case. The court there stated the rule as follows (page 378 of 263 Mich.,248 N. W. 840, 843):

‘The plaintiff was an innocent trespasser on the land of Joseph H. Metcalf. As such he is liable to the owner for the oil taken but may deduct therefrom the...

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