Totah Drilling Co. v. Abraham

• Citation: 328 P.2d 1083,1958 NMSC 102,64 N.M. 380
• Decision Date: 14 August 1958
• Docket Number: No. 6371,6371
• Parties: TOTAH DRILLING COMPANY, a Corporation, Plaintiff-Appellee, v. Mike ABRAHAM, Defendant-Appellant.
• Court: Supreme Court of New Mexico

Page 1083

328 P.2d 1083

64 N.M. 380

TOTAH DRILLING COMPANY, a Corporation, Plaintiff-Appellee, v. Mike ABRAHAM, Defendant-Appellant.

No. 6371.

Supreme Court of New Mexico.

Aug. 14, 1958.

Keleher & McLeod, Albuquerque, for appellant.

Modrall, Seymour, Sperling, Roehl & Harris, Albuquerque, for appellee.

McGHEE, Justice.

On October 24, 1955, plaintiff, Totah Drilling Company, a New Mexico Corporation, filed suit upon a promissory note for the sum of $27,367.04 which had been executed by the defendant, Mike Abraham, July 12, 1955, in Dallas, Texas, as consideration for drilling a well under an alleged 'turn-key' drilling contract, and for additional work thereon.

In the pleadings below defendant admitted the execution of the note but alleged in substance that the note was invalid for failure of consideration in that the plaintiff did not properly complete the well according to the contract terms; that if the note was valid, defendant was entitled to an offset for charges and additional work properly includable under the terms of the contract; that defendant was entitled to damages for failure to perform the terms of the 'turn-key' drilling contract; that plaintiff left 'junk or tools' in the well; and that the note was procured by fraud and false representations.

The case was tried before the court without a jury and judgment was entered for the plaintiff for $26,502.65, the amount of the note less a credit of $864.39 for 2 3/8 inch external upset tubing found by the trial court to have been removed from the well by the plaintiff at the request of the defendant. Plaintiff was also awarded 6% interest on the note plus 10% attorney's fees for the collection thereof.

The ultimate facts as found by the trial court are substantially as follows:

On March 10, 1955, plaintiff commenced drilling a gas well for the defnedant on the NW 1/4 of Section 24 North, Range 5 West, NMPM, which well was designated as the J. J. Harris No. 2.

The site of this well was on land belonging to the Jicarilla Indians, leased to Magnolia Petroleum Company, 'farmed out' to J. J. Harris and assigned by him to the defendant upon terms which required the drilling and completion of wells in a specified period in accordance with the requirements of Magnolia Petroleum Company. (Defendant was to finance the drilling of the wells and upon completion, Harris was to assign the wells to defendant.)

Acting on behalf of his assignee, the defendant, J. J. Harris entered into an agreement with the plaintiff for the drilling of the well in question for $23,250 on a 'turn-key' basis, the essence of the contract, however, requiring compliance with the terms of the Magnolia farm out. Plaintiff drilled the same in compliance with the requirements of Magnolia Petroleum Company, the owner of the lease. The completed well was productive of gas but not in commercial quantities, and the defendant requested that the plaintiff perform additional work on the well in an effort to increase production but to no avail as to production.

Plaintiff drilled other wells for defendant which were commercial producers.

The well in question being duly and properly completed, Magnolia Petroleum Company assigned the specified acreage to J. J. Harris under the 'farm out' agreement, who in turn assigned the same to defendant pursuant to the agreement between Harris and the defendant. However, defendant did not make payment of the costs of drilling to plaintiff and as a result plaintiff filed liens upon the leased property and on July 12, 1955, defendant settled the accrued and unpaid drilling obligations by delivery of $51,829.25 in cash and execution and delivery of his promissory note for the balance. Plaintiff then released its claim of lien.

At the request of defendant and in a further effort to make the J. J. Harris Well No. 2 a producer, plaintiff pulled certain 2 3/8 inch tubing out of the well and replaced it with 1-inch pipe. Plaintiff was under no duty to salvage this pipe but did so and agreed to credit the note by the sum of $864.39.

Defendant failed to pay the note in accordance with the terms thereof and this suit followed. From judgment below, defendant prosecutes this appeal. The specific grounds relied on for reversal will appear in the opinion as each contention is discussed.

Plaintiff-appellee correctly points out that defendant-appellant has throughout his brief in chief, with three exceptions, violated Supreme Court Rule 15, subd. 6 in that he relies upon facts contrary to those found by the trial court, fails to state the substance of all the evidence in the record bearing upon his contentions, and makes reference primarily only to evidence favorable to the defendant. This rule has been construed many times and it is now settled that the findings of fact made by the trial court are the findings upon which the case must rest. This court will not search the record in an effort to find facts with which to overturn the findings made by the lower court. Gore v. Cone, 60 N.M. 29, 287 P.2d 229, and cases cited therein; Cross v. Ritch, 61 N.M. 175, 297 P.2d 319, and cases cited therein. In reviewing the evidence on appeal, all disputed facts are resolved in favor of the successful party and all reasonable inferences indulged in to support the judgment. All evidence and inferences to the contrary will be disregarded and the evidence viewed in the aspect most favorable to the judgment. State ex rel. Magee v. Williams, 57 N.M. 588, 261 P.2d 131; Rasmussen v. Martin, 60 N.M. 180, 289 P.2d 327. And if the findings thus found are supported by substantial evidence they will be sustained on appeal. State ex rel. Magee v. Williams, supra.

Thus, as to points argued in violation of Supreme Court Rule, 15, subd. 6 only summary consideration has been given to the facts construed in the light most favorable to plaintiff-appellee.

The sole direct attack made by defendant on the trial court findings is Point VI that the court erred in finding J. J. Harris to be an agent of defendant. Defendant predicates his argument on the theory that because J. J. Harris was paid by the plaintiff out of the turn-key consideration to be paid by the defendant to the plaintiff for drilling the well in question, there was created such a conflict of loyalty that Harris could not be the agent of defendant. Neither plaintiff nor defendant has favored us with any authority for or against this proposition, however, after careful consideration, we find there is no merit in defendant's contention.

As we view the record there is substantial evidence to support the trial court finding that Harris on behalf of the defendant entered into an oral agreement with the plaintiff subsequently reduced to writing embodying specifications worked out by Harris and the defnedant and discussed by Harris with the plaintiff. In addition to being designated the owner-operator under the Magnolia lease, it is evident that Harris was recognized by all parties as the geologist in charge of the drilling and fracking of the well. Plaintiff's witnesses testified Harris was considered the representative of the owner or as working on behalf of himself and the defendant as joint owners of the lease farm out and that it was Harris and Abraham who ordered the bringing in of a gas completion rig to do additional work on the well to make it a producer; and that Harris was in charge of additional drilling and other work after completion of the well.

It is noted, too, that defendant remained in Dallas all the time the well was being drilled. Unless Harris was acting for defendant, who could be said to be looking after his interest where there was ample testimony that his brother, Oscar Abraham, had no authority to bind defendant and that it was a custom in the industry for the owner or his representative to be present for making decisions with reference to the well? See, 1 Mechem, Law of Agency, Sec. 300 (2d ed. 1914).

The fact that plaintiff paid his salary, though a fact to be considered in an agency relationship, is not conclusive that such interest will be adverse to that of the defendant, especially here, since the salary was to be paid out of the turn-key consideration paid by defendant, the salary was set and agreed to by both plaintiff and defendant. When Harris asked for a raise, the amount was agreed upin in the presence of the defendant and added to the turn-key consideration with his consent. In fact, there is a stronger argument that plaintiff was the agent of the defendant to pay Harris.

Furthermore, if it can be said that the position of Harris in getting the salary from the plaintiff, acting as geologist on the well for his own benefit and for that of the defendant created such a conflict of loyalty that he could not be said to be acting primarily for the benefit of the defendant and therefore could not be his agent, the defendant is estopped to so assert since he consented to this arrangement and actively participated in it by conveying or allowing to be conveyed the impression that Harris was his agent in matters concerning the well. Restatement, Agency, Sec. 13, comment a, (1933); 1 Mechem, Law of Agency, Secs. 177, 178 (2d ed. 1914).

Had Abraham desired Harris to be other than agent he should have so stated to the plaintiff; the record is, however, silent on this point and the statements of plaintiff's witnesses that his manifestations were such that they believed Harris to be the representative of Abraham and other testimony create a reasonable inference that Abraham so recognized Harris until their dispute which occurred after the well was drilled.

It is not necessary that the parties intend to create the legal relationship of agency or to subject themselves to the liabilities which the law imposes upon them as a result of it, but only that the principal has in some manner indicated that the agent is to act for him, and that the agent so acts or agrees to act on his behalf and subject to his...