Opinion ID: 1739549
Heading Depth: 1
Heading Rank: 4

Heading: When There is Anything Doubtful

Text: The contributions clause is found in many oil and gas form books. No judicial interpretation of the clause has been cited to us, and the only discussion of the clause located is in the 3rd Annual Rocky Mountain Mineral Law Institute at page 299: CONTRIBUTIONS OF CASH OR ACREAGE Not infrequently, the owner of a lease or leases within the limits of a prospect is unwilling to participate in the joint operation, but is willing to make a contribution of money or acreage to the drilling of a test well by the parties to the joint operation. This, however, is only one of the situations that may result in a contribution to the drilling of a well in the course of the joint operation. To eliminate any possibility for misunderstanding on this score, the agreement should provide that any contribution of money that is made by outsiders to any party in the joint operation will be shared with the other parties in proportion to their interests. If the contribution consists of a lease or leases, the party receiving the contribution should be required to notify all of the other parties, with full particulars concerning such lease or leases, whereupon each of the other parties would have the option to participate therein in proportion to its interest in the joint operation. However, care should be taken to make the participation in a contribution of acreage optional, so that no party will be obligated to assume the burdens imposed by the lease or leases, otherwise than at its election. Of course, if all parties elect to participate in an acreage contribution the lease or leases acquired should be made subject to the operating agreement. The one clear idea, applicable to the case before us, to be drawn from this discussion, is that contributions are made by outsidersthose not party to the joint operating agreement. Only in this way when one of the participants in the joint operating agreement receives a contribution toward the operations from someone not a party to the joint operating agreementdoes the function of the clause become clear. Only in this way does the recipient of the contribution profit at the expense of his partners. Since the clause before us does not limit contributions . . . toward the drilling of a well to those made by outsiders, there are doubts about its function and meaning. When there is anything doubtful in agreements, we must endeavor to ascertain what was the common intention of the parties, rather than to adhere to the literal sense of the terms. C. C.1950. Crow Drilling & Producing Co. v. Hunt, 254 La. 662, 226 So.2d 487 (1969); Jacka v. Ouachita Parish School Board, 249 La. 223, 186 So.2d 571 (1966). French law would add that an agreement includes, however general its terms may be, only the object to which the parties have intended to contract. Civil Law Translations 1, Aubry & Rau, Kinds of Obligations, § 347 at page 349. Therefore, what the parties did after the inclusion of the blue leases in the Pellerin production unit is relevant to determine the common intention of the parties. After the formation of the unit, Belco demanded an adjustment in a letter in which it set out that its working interest had been reduced from 9.120% to 1.47312%, before payout. This adjustment resulted from the inclusion of the blue leases in the Pellerin unit. The adjustment was made and Cox made a refund of well costs to each of the plaintiffs. Midwest and Belco cashed the refund checks and retained the funds. Superior remained silent for four months and returned the check. Midwest and Belco did not join Superior as plaintiffs in this litigation, but were brought in as defendants. This adjustment, the assignment of the blue leases by Midwest and Belco and the failure of Midwest and Belco to make any demand until required to by Superior's suit, constitute evidence that the parties to the agreement did not contemplate that the assignment to Cox of the blue leases would be considered an acreage contribution. For these reasons, Superior has failed to establish a right to share in the blue leases, and the plaintiff's and third party plaintiffs' demands should be rejected. There is now judgment in favor of defendants, Edwin L. Cox, Fred Snuggs, C. F. Braun & Company, Diamond Shamrock Corporation, Ralph H. Snuggs, Winnifred Ray and Hilton T. Ray, and against plaintiff, Superior Oil Company, and against Midwest Oil Corporation and Belco Petroleum Corporation, rejecting the demands of plaintiff and third party plaintiffs, at their cost. BARHAM, J., concurs in decree only and assigns reasons. SANDERS, C. J., concurs for the reasons assigned by BARHAM, J. MARCUS, J., dissents and assigns reasons.