Vickers Petroleum Co. v. Biffle, 5444.

• Decision Date: 10 December 1956
• Docket Number: No. 5444.,5444.
• Citation: 239 F.2d 602
• Parties: VICKERS PETROLEUM CO., Inc., Appellant, v. Ned BIFFLE, sole owner, doing business as Ned Biffle Drilling Company, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

239 F.2d 602 (1956)

VICKERS PETROLEUM CO., Inc., Appellant, v. Ned BIFFLE, sole owner, doing business as Ned Biffle Drilling Company, Appellee.

No. 5444.

United States Court of Appeals Tenth Circuit.

December 10, 1956.

Coleman Hayes, Oklahoma City, Okl. (George Stallwitz, Wichita, Kan., on the brief), for appellant.

Luther Bohanon, Oklahoma City, Okl. (Bert Barefoot, Jr., Oklahoma City, Okl., on the brief), for appellee.

Before BRATTON, Chief Judge, and HUXMAN and PICKETT, Circuit Judges.

HUXMAN, Circuit Judge.

This was an action in which appellee Ned Biffle sought damages from appellant Vickers Petroleum Company, Inc., herein referred to as Vickers, for breach of contract. The factual situation out of which this litigation arose is as follows. Vickers was the owner of oil and gas leases covering an undivided 7/8 interest of the mineral interest under the North One-half of the Southwest Quarter of the Northeast Quarter of Section 27, Township 3 North, Range 2 West. The remaining 1/8 of the mineral interest thereunder was owned by Biffle. The lease which Vickers owned on this mineral interest would expire in the absence of the commencement of drilling operations on or before January 24, 1953. Biffle was the record owner of an oil and gas lease on the South Half of the Southwest Quarter of the Northeast Quarter of Section 27. It was orally agreed between Vickers and Biffle that the parties would communitize the two tracts and would drill one well so that if it became necessary the 40 acre tract could be operated as a unit. It was orally agreed that Biffle who had a string of drilling tools was to drill the well to a stated depth at a stated price per foot, not in dispute, and that Vickers was to be the operator of the communitized acreage if production resulted. It was also understood by the parties that the oral agreement was to be reduced to writing. In order to secure an extension of the Vickers Lease expiring January 24, 1953, it was necessary to move the rig on the premises and to begin drilling operations on or before February 15, 1953. Biffle moved onto the location selected on the North Half of the tract by that date and began drilling operations. All this was done before the oral agreement providing for the drilling of the well and the payment of the costs thereof could be reduced to writing. When the oral contract was reduced to writing by an attorney selected by the parties, it provided that Vickers should pay 7/16 of the drilling costs and Biffle 9/16 thereof. Biffle refused to sign this agreement claiming that it violated the oral agreement, under which he was to pay but 1/16 of the drilling costs.

The difficulty between the parties with respect to the payment of drilling costs arose because of the real ownership of the lease to the South 20 acres of the tract which of record stood in Biffle's name. Biffle apparently had made an assignment of all his interest to this lease to Tom Grimmett which was not placed of record and under the terms of which under certain conditions the interest or a part thereof in the lease might reinvest in Biffle.

In his complaint, Biffle alleged that he was the owner of an undivided 1/16 interest in the 40 acre tract; that it was orally agreed that he should bear 1/16 of the drilling costs; and that Vickers should be responsible for the remaining 15/16 thereof. He alleged a breach of the oral contract by Vickers' refusal to have the terms thereof incorporated into the written contract. In his complaint, he alleged that he had expended $15,337.04 in drilling operations and that a reasonable profit from the performance of the drilling contract would have been $22,000. He prayed judgment for $37,338.04.

Trial was had to the Court. It found as a fact that the oral agreement was that Biffle "would stand five-sixteenths (5/16) of all costs of drilling, equipping, and operations" and that Vickers "was to stand eleven-sixteenths (11/16) of all such cost" with the right of a lien by Vickers on the production of any other leasehold interest holder.

As stated, the difficulty comes about by virtue of the unrecorded assignment from Biffle to Grimmett of the lease to the South 20 acres of the tract. Notwithstanding Biffle's allegation that he had assigned the entire lease to the South 20 acres of the tract to Grimmett and had no interest therein, it seems to be without doubt that he had a continuing interest in that lease and therefore had a greater interest in the 40 acre tract than the 1/16 interest set out in his complaint. It seems to be without dispute that Vickers' entire interest in the 40 acre tract was a 7/16 interest. The Court's finding that the oral agreement was that Biffle would stand 5/16 of all costs is tantamount to a finding that this was his interest in the 40 acre tract. From this it follows that Grimmett would have a 4/16 interest in the 40 acre tract. The decision turns upon whether the minds of the parties met on an oral agreement, as found by the Court, that Biffle was to stand 5/16 of the drilling costs and in effect finding that Vickers should stand 7/16 of the costs, because of its ownership of such interest, and should be responsible for the 4/16 of the costs attributable to Grimmett's interest, and have a lien on his interest in any production which might be found, rather than that the agreement was as alleged by Biffle in his complaint that he was to stand only 1/16 of such costs.

There was some confusion in the testimony as to any interest Biffle might...