Seale v. Major Oil Co., 4225
| Decision Date | 26 April 1968 |
| Docket Number | No. 4225,4225 |
| Citation | 428 S.W.2d 867 |
| Parties | Henry L. SEALE et al., Appellants, v. MAJOR OIL COMPANY, Appellee. . Eastland |
| Court | Texas Court of Appeals |
Jackson C. Burroughs, Dallas, for appellants.
Kelsoe & Stone, Harold B. Stone, Dallas, for appellee.
Major Oil Company brought suit against Henry L. Seale and Henry L. Seale Aviation Supply Co., Inc., seeking to recover damages for the breach of a contract to drill an oil well. The case was tried before the jury and based upon the verdict, judgment was rendered against defendants for damages as prayed. The defendants hereinafter referred to as Seale, or appellant have appealed.
Appellee's pleadings and the record show that Major Oil Company, on May 7, 1962, assigned a 40 acre interest in an oil and gas lease located in the State of Louisiana to appellant, Henry L. Seale, reserving 1/4th of 7/8ths of all the oil, gas and other minerals produced under the lease, free of all costs to appellee. The assignment provided that appellant would drill two wells on the lease, one of which had already been partially drilled. Concerning the drilling of the wells, the assignment provided that each well should be drilled with due diligence to a depth sufficient to test the Saratoga and Annona chalk found in the area at a depth of between 3,000 and 4,000 feet; that the second well should be commenced within 45 days after completion of the first. Seale drilled the first well to the required depth and it appeared to be a dry hole. Appellant then refused to drill the second well. He alleged in his pleadings and contended at the trial and here contends that the first well was drilled to the prescribed depth but was not 'completed'; that he was unable to complete the well because it was a dry hole; that a 'completed' well, as contemplated by the contract and in the oil industry means the bringing in, finishing and completing of a commercial producting oil well and that since it was impossible to 'complete' the first well by making a commercial producing oil or gas well appellant had no obligation under the contract to drill the second well.
The court found that the undisputed evidence established that the assignment agreement between the parties was entered into by them and was valid in all respects, except as to appellants' defenses which were to be decided by the jury. The court further found, and it is undisputed, that appellants did fail to drill the second well.
The contract or assignment in question contains the following provisions:
'As the primary consideration for this assignment, the Assignee agrees to drill two wells, (one of which has been partially drilled), on the Southwest Quarter of Southeast Quarter, Section 27, Township 6 North, Range 13 West at the locations and in the manner hereinafter specified.
a. One well shall be drilled on each 20 acre tract of the assigned 40 acres according to the spacing regulations of the State of Louisiana.
b. Each well shall be drilled with due diligence to a depth sufficient to test the Saratoga and Annona chalks found in this area between approximately 3000 to 3400 feet.
c. The Saratoga and Annona chalk sections shall each be properly tested in each well by means of Drill Stem Tests or by setting casing and testing thru same.
d. The first well has been commenced and Assignee shall complete the same with due diligence and without delay; and the second well shall be commenced within 45 days after the completion of the first well.
As a further consideration, Major Oil Company reserves unto itself free of all costs, 1/4 or 7/8 of all oil, gas and other minerals that may be produced under this assigned lease. Said reserved interest being what is commonly called an Over-riding Royalty.'
We overrule appellants' point in which it is contended in effect that since under the uncontradicted evidence the first well was never completed as a producing oil or gas well that appellant was under no obligation under the contract to drill a second well, and that the court, therefore, erred in overruling his motions for an instructed verdict and for judgment non obstante veredicto. By the terms of the contract appellant agreed to drill two wells according to the spacing regulations of the State of Louisiana. Each well was required to be drilled to a depth sufficient to test the Saratoga and Annona chalk formations and it was provided that each of such formations should be properly tested in each well. It was further provided that the second well 'shall be commenced within 45 days after the completion of the first well.' Appellants' contention is that the 'completion' of the first well as referred to in the contract meant the completion of that well as a producing oil or gas well and that since the first well was not a producing oil or gas well that he has no obligation to drill the second well. In our opinion this was not the meaning of the language of the contract. The stated primary consideration of the assignment was appellant's agreement 'to drill two wells.' It was provided that 'one well shall be drilled on each 20 acre tract--.' Considering the provisions of the contract as a whole it is clear that the parties intended that two wells should be drilled and that there was no contingency or condition to appellants' obligation to drill the second well. The provision that 'the second well shall be commenced within 45 days after the completion of the first well' simply identifies the time at which appellant was required to begin the drilling of the second well. The reference to 'the completion of the first well' does not as contended by appellant mean the completion of such well as an oil or gas producer but has a broader meaning and refers to completion of the required work on the well whether it became a producer or not.
The judgment against the defendant because of his failure to drill the second well was in the sum of $19,823.25, which was the amount that the uncontroverted evidence showed to be the cost of drilling a second well. Appellants contend that the court erred in entering judgment for appellee for such amount or for any other amount because appellant asserts that it is the established law in this State that the measure of damages for the breach of a lessee's covenant to drill an oil well is the value of the lessor's royalty and not the agreed cost of drilling the well. This point is not well taken. The contract in question was made and performable in the State of Louisiana. Under the laws of that state the measure of damages for the failure to drill a well as contracted is the cost of drilling the well. Fite v. Miller, 196 La. 876, 200 So. 285 (1941); Jones v. Whittington, La.App., 171 So.2d 764; 247 La. 624, 172 So.2d 703. The trial court granted appellee's motion to take judicial notice of the law of the State of Louisiana and properly granted judgment for appellee for damages for breach of the contract according to the law of that state. Rule 184a Texas Rules of Civil Procedure; Pacific Mutual Life Insurance Company v. Hale, 267 S.W. 282 (Tex.Civ.App., 1924, writ ref.); Jones v. National Cotton Oil Company, 31 Tex.Civ.App 420, 72 S.W. 248 (1903, writ ref.); Washington National Insurance...
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