Trice Production Co. v. Dutton Drilling Co.

• Decision Date: 11 February 1960
• Docket Number: No. 13282,13282
• Citation: 333 S.W.2d 607
• Parties: TRICE PRODUCTION COMPANY, Appellant, v. DUTTON DRILLING COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 607

333 S.W.2d 607

TRICE PRODUCTION COMPANY, Appellant, v. DUTTON DRILLING COMPANY, Appellee.

No. 13282.

Court of Civil Appeals of Texas, Houston.

Feb. 11, 1960.

Rehearing Denied March 10, 1960.

Second Motion for Rehearing Denied March 31, 1960.

Edward D. Coulson, Houston, Hollis Massey, Columbus, for appellant.

Bates, Cartwright, Miller & Gilley, Ralph K. Miller, James H. Wright, Houston; Miller, Rutta & Allen, Hodges, moore & Gates, Columbus, of counsel, for appellee.

BELL, Chief Justice.

On trial to the court without intervention of a jury, appellee recovered judgment against appellant for $77,042.78, with interest at the rate of 6% per annum from September 20, 1956, plus $10,000 as attorney's fees.

Suit was by appellee to recover the amounts alleged to be due under a written contract under which appellant had employed appellee to drill an oil or gas well for it in Colorado County. Suit was in the form of a verified account.

The contract provided that appellee should drill the well to a depth of 10,500 feet. Payment was to be made at the rate of $3,60 per linear foot, except that if formations were encountered that made drilling abnormally difficult ot hazardous which caused sticking of drill pipe or casing or precluded drilling ahead under reasonably normal procedures, and such conditions continued to exist after 24 hours of effort to overcome the conditions, payment was to be on a day basis of $850 if appellee furnished drill pipe. Appellee did furnish the drill pipe. Appellee drilled to 8,818 feet, when it hit what it determined to be heaving shale and the drill pipe stuck. The account sued upon shows a charge of $31,744.80 for drilling this footage at $3,60 per foot. The drill pipe was stuck for some time and appellee billed appellant for 25 days and 23 hours at the rate of $850 per day for an aggregate of $21,214.66. In addition to this appellee paid for the account of appellant the sum of $23,368.77. This latter item was paid to Houston Oil Field Material Company (Homco) for services rendered in an effort to get the drill pipe loose so normal drilling could be restored. It is contended by appellee that this was appellant's obligation. A Charge of $271.50 was made because of it being necessary for Tubescope to straighten some drill pipe that was allegedly damaged when the pipe was stuck. Then the sum of $443.05 was the price agreed upon by appellant and appellee for a water well appellee left for appellant's use when appellant took over the well.

It appears that appellee commenced the drilling of the well about the middle of July, 1956 and drilling continued satisfactorily and expeditiously, according to all testimony, until about midnight of August 4, when the drill pipe stuck. Mr. Owens, Drilling Superintendent for appellee, attempted to contact Mr. Hollingsworth, who was District Superintendent for appellant, to request him to get some one to furnish fishing service in an effort to get the drill pipe loose. Being unable to contract Mr. Hollingsworth, Mr. Owens called Homco, a specialist in the field, to do the fishing work. Mr. Hollingsworth knew of this next morning after Homco commenced its work. Work by Homco continued until about August 21, when, apparently the drill pipe had been loosened so that normal drilling could be resumed. Drilling was resumed and continued about a day when the drill pipe again became stuck. Homco again was called to do the fishing service. On Sunday, August 26, while efforts were still going on to loosen the drill pipe, Mr. Owens, appellee's representative, says that Mr. Hollingsworth told him that Trice wanted appellee to clean up the hole and move its rig off the location. This is disputed, but it is nevertheless the positive testimony of Mr. Owens.

At this point it should be noted that according to appellee the cause of the sticking of the drill pipe was a formation of heaving shale that had been encountered. While appellant strenuously contests this and contends the fault lay in the deficiency of the mud pumps, the condition of the drill pipe and incompetency of personnel, there is substantial evidence supporting appellee's contention, that the cause was heaving shale

On Monday, August 27, the day following the Sunday on which Mr. Owens says Mr. Hollingsworth told him he could clean up the hole and move off, Mr. Owens talked with Mr. McCauley, District Manager for Trice. In this conversation Mr. Owens says that Mr. McCauley told him Trice wanted them to change the mud pump and drilling pipe or get off and that he refused because he did not think it necessary.

On the 27th the attorney for Trice wrote a letter to Dutton Drilling Company, which was received by Dutton sometime August 28, in which he informed Dutton that Trice was dissatisfied with performance on account of unreasonably slow progress and incompetency in performance. It stated that the causes of its dissatisfaction were insufficient volume of mud circulating so as to keep the hole clear of cuttings, badly worn drill pipe, slow progress and failure to furnish satisfacotry supervisory personnel. The letter gave notice that unless these matters were corrected within 5 days Trice would take over the operation of the equipment of Dutton Drilling Company in order to complete the well and the parties would thereafter be controlled by paragraph 7 of the contract.

On August 28, attorneys for Dutton Drilling Company wrote Trice confirming the conversation they had with Mr. McCauley. The substance of this was that Trice wanted Dutton to alter its equipment and if it did not do so, Dutton should complete the fishing job, move its equipment and relinquish possession to Trice or a drilling contractor of Trice's choice. The letter further stated Dutton was not abandoning the well, but was leaving at the request of Trice and was waiving no right to compensation under the contract.

On August 31, attorneys for Dutton wrote Trice, stating that Dutton had now completed cleaning up the hole in good shape ready for Trice or a contractor of Trice's choice. Too, the attorneys advised that Dutton did not desire at this late date to replace its equipment and continue to attempt to penetrate the impenetrable formation encountered and it was, as instructed by Mr. McCauley, dismantling its equipment, and moving it to another location.

As shown by the pleadings, it was the contention of appellee that appellant had terminated the contract, as it had a right to do under Paragraph 6 of the contract. Paragraph 6 reads as follows:

'6. Stoppage of Work by Owner:

'notwithstanding the provisions of Par. 3 with respect to the depth to be drilled, the Owner shall have the right to direct the stoppage of the work to be performed by Contractor hereunder at any time prior to reaching the specified depth, and even though Contractor has made no default hereunder, and in such event Owner shall be under no obligation to Contractor except as follows:

'6.1 If such work stoppage occurs prior to the spudding of the well, Owner shall pay to Contractor the sum of the following: (a) all expenses reasonably and necessarily incurred and to be incurred by Contractor by reason of the contract and by reason of the premature stoppage of the work, excluding, however, expenses of normal drilling crew and supervision; (b) ten per cent (10%) of the amount of such reimbursable expenses; and (c) a sum calculated at the standby rate for all time from the date upon which Contractor commences any operations hereunder down to such date subsequent to the date of work stoppage as will afford Contractor reasonable time to dismantle his rig and equipment.

'6.2 If such work stoppage occurs after the spudding of the well, Owner shall pay the Contractor (a) the amount owing Contractor at the time of such work stoppage under the footage rate, applicable day work rate, and standby rate; but in such event Owner shall pay Contractor for a minimum footage of _____ feet regardless of whether or not the well has been drilled to such depth at the time of work stoppage; or (b) at the election of Contractor and in lieu of the foregoing Owner shall pay Contractor for all expenses reasonably and necessarily incurred and to be incurred by Contractor by reason of this contract and by reason of the premature stoppage of work plus the sum of $_____.'

If termination was under this paragraph, appellee says appellant would owe it for 8,818 feet of hole drilled at $3,60 per foot, and for 24 days and 23 hours at $850 per day for the period that fishing operations were being conducted in an effort to loosen the drill pipe so that normal drilling operations could be resumed. Too, appellee contends the cost of fishing service was, under the contract, the obligation of appellant and it having paid this for the benefit of appellant it was entitled to reimbursement. The small amount of $271.50 was, appellee contends, an obligation, under the contract, of appellant since it represents a charge for straightening drill pipe damaged during operations to loosen the drill pipe that was stuck.

Appellant contends that it terminated the contract, not under paragraph 6, but rather under paragraph 7, which reads as follows:

'7. Optional Right of Owner in The Event of Default by Contractor:

'In the event Owner is dissatisfied with the performance of Contractor hereunder on account of unreasonably slow progress or incompetency in the performance of the contract as a result of causes reasonably within the control of Contractor, Owner shall give Contractor written notice in which Owner shall specify in detail the cause of his dissatisfaction. Should Contractor fail or refuse to remedy the matters complained of within five days after the written notice is received by Contractior, Owner shall have the right at his option to take over the operation of Contractor's equipment for the purpose of completing the drilling of the well. Should such drilling operation be taken over by the Owner,...