Opinion ID: 1239735
Heading Depth: 1
Heading Rank: 1

Heading: The Shidler Appeal

Text: Shidler's first assignment of error is that the judge considered only gross production without reducing the amount by the proportionate share of costs of production chargeable to Krusmark. A review of the judge's original decision letter together with Exhibit 4  the principal evidence relied on by plaintiff  discloses that the judge was right in the first place and wrong when he changed to the theory of counsel for Clayton. The theory advanced by counsel for Clayton treats the Krusmark interest as if it is an overriding royalty of 15% rather than a 15% working interest. There can be no doubt that Clayton as operator of the lease can and should withhold from any payments due Krusmark 15% of all drilling and lifting costs. The Clayton argument seems to be that Shidler caused all the trouble about the Krusmark interest and therefore Shidler should pay Clayton damages equal to 15% of the gross production, leaving it up to Shidler to recover from Krusmark what Krusmark owes on drilling and lifting costs. This argument entirely overlooks the obligation of Clayton to mitigate its damages. As stated by us in Asbell Bros., Inc. v. Nash-Davis Machinery Company, Wyo., 382 P.2d 57, 59, it is well established that one who is injured by the wrongful act of another must exercise reasonable care and diligence to avoid loss or to minimize the resulting damage. [1] That rule is especially applicable in this case because Clayton is the operator of the lease involved. [2] Moreover, as indicated in our former decision, at 473 P.2d 593, Clayton knew of the interest of Krusmark when it sold oil. Thus, Clayton has been and is in a far better position than Shidler to collect drilling and lifting costs from Krusmark. As we see it, all Clayton has to do is to withhold such costs from Krusmark or cause the costs to be withheld by the oil purchaser. Also, Clayton knows what the drilling and lifting costs are and Shidler has no way of knowing. As indicated in our former opinion, at 473 P.2d 593, Shidler assigned to Clayton the right to operate, produce, take and remove oil and gas in a certain quarter-section of land. If Clayton knew of Krusmark's interest when Clayton drilled, then Clayton necessarily drilled with the understanding that 15% of all drilling and lifting costs would be withheld from Krusmark's share of proceeds. And even if Clayton did not know of the Krusmark interest at the time of drilling, it did know of such interest prior to any settlement with Krusmark. Therefore, Clayton has been in a position at all times to see that Krusmark's share of drilling and lifting costs are withheld from proceeds payable to Krusmark. A look at Exhibit 4 reveals that the judgment as entered is contrary to the testimony and intention of the expert who prepared such exhibit. With respect to damages in connection with future income, the exhibit, on page 2, clearly shows lifting costs to the 15% working interest at $3,600.00. Also, on page 1, in a capitulation of losses, the exhibit lists the future net income loss to Clayton as $2,965.48. Then again, on page 3, the author of the exhibit undertook to show a possible loss in future or undrilled wells. In doing so, he used the figure of $2,965.48 as the future loss per well. From these considerations, it becomes apparent there was no evidence of a future loss to Clayton in excess of $2,965.48. The only other assignment of error actually argued by Shidler is that funds impounded by the oil purchaser are in the reach of Clayton but not Shidler; and that Clayton's judgment should be reduced by that amount. The judge's decision letter referred to $2,210.28 as the production withheld to the time of trial (May 1, 1969), on account of the 15%. Neither side has challenged this figure. The testimony of plaintiff's expert witness concerning the impounded funds of $2,210.28 was that such funds are burdened with an obligation to Clayton of $3,404.04 as Krusmark's share of the capital investment made in the well through May 1, 1969. We see no reason therefore why Clayton is not in a position to cause the impounded funds of $2,210.28 to be released to it  especially since it is operator of the lease. What we have said about Clayton having a duty to mitigate damages applies to impounded funds. Clayton is in a position to collect the $2,210.28 and Shidler is not. Under these circumstances, we are inclined to believe plaintiff should not have judgment against Shidler for the $2,210.28 and that portion of the judgment needs to be reexamined as we will indicate later.