Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1940-09-07
TEXAS-PACIFIC

tCOntinued rom rage Onel
assets, such as rigs. derricks. drill
ling tools. tanks. pipe and other
1 things necessary to the conduct OF
drilling operations, and that the
parties agreed that no expense
should be charged to joint account
except labor costs and the cost OF
equipment within the wells and
below the casinghead, such charges
/ to be payable out of production.
Plaintiffs contend that the language
| of the written agreement is am
/ biguous and that some Limitation
must necessarily be placed upon
| the expense to be chargable TO the
/ Joint account and that therefore
/ they may resort to parole agree
ments before and at the time OF
entering into the contract
Quotes Montana Court
/ The defendants claimed that the
/ language OF the written agreement
/ is clear and unambiguous aud ex-
pressly authorizes all the charges
that have been made to the joint
account. Judge Pray made refer
ence to the Montana supreme court
decision in the former case. arising
over the alleged failure to drill 9TH
er wells under this same agreement
and involving also the question OF
4 expense of drilling operations as a
measure of damages The supreme
court in deciding this case had oc-
casion to pass upon the items of
4 expense that would be properly
chargable as an element OF damage
under the language of the same
! agreement. In that case, the court
said, "the defendant also stipulated
as to the items chargable as ex-
( pense in considering measure of
damages, so that both sides appear
to have been somewhat in accord
/ in that respect. The attitude
of both parties in the other case
and In the statements OF the plain
tiffs in this case, with considerable
/ support found in the testimony OF
the other witnesses, would strongly
incline one to the belief that the
plaintiffs have been subjected to
improper charges in the joint ac-
count, if the court should hold to
the position heretofore indicated"
Holds Permits Valuable
The state supreme court had held:
THE cost of a well does not in
clude the value of the machinery
equipment and casing used in drill
ling it, which is removable from
the premises in case operations re-
suit in a dry hole" The federal
court held that plaintiffs were dis
satisfied with the charges made
from the beginning as not being in
accordance with the understanding
of the parties which was, before
the agreement was executed, that
this was not to be like the Merkle-
Dawson Mid Northern agreement
wherein nearly everything was
charged to the parties furnishing
the land; that defendant had equip
ment on hand and was to furnish
1t and drill, and the plaintiffs were
to furnish the leases, share the ex-
penses described and divide the pro-
fits, If any, on a ifty-fifty basis.
Defendants counsel mention the
permits as of negligible value. but
1t appears that the trustees had
been offered $6S,0OO by one syndi-
cate, and had received other similar
offers, and that they regarded the
permits as covering practically
proven oil bearing lands. 1t is
rather difficult for the court to I'M
derstand how such an interpreta-
ton, as plaintiffs claim was in
tended. would do violence to the
quoted language of the agreement
on the subject OF expense. Under
that language 1t would seem that |
nearly everything having any con-
nection with the drilling of a well
has been charged against the plain |
tiffs in the joint account, and no
matter how much oil was produced /
the plaintiffs might find themselves
no better off at the finish than they
were in the beginning unless some |
limitation was placed somewhere on |
this apparently unrestrained charg- |
ing power of the defendant.
Expenses Were Limited
There is much evidence through |
out the case, even from defendants
side, that lends conviction to the
theory OF the plaintiffs that there
was an understanding about the ex-
tent Of these charges, and that
there were certain fixed limitations
as to expense, and that the repre-
sentatives of the defendant agreed /
from time to time. as complaints
were made, to make adjustments
and corrections in the joint account