Court Opinion

ID: 3834009
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:04:02.208128+00
Date Added: 2024-06-11T07:40:13.602875
License: Public Domain

In disagreeing with the majority opinion I do not question the soundness of the rules of law and equity therein announced, but I do question the manner in which those rules and principles are applied to the fact situation with which we are confronted in the case at bar.
This action was commenced by the plaintiffs in the trial court as owners of undivided fractional interests in and to the oil and gas and mineral royalty under the W. 1/2 of the S.E. 1/4 of section 6, twp. 19 north, and range 12 east of the Indian Meridian.
The action is equitable in nature. The plaintiffs seek the cancellation of an oil and gas lease and damages resulting from alleged failure to further develop the premises covered by the lease. Plaintiffs base their right to prevail upon the alleged breach by the lessee of the covenants of the lease, claiming that such covenants were broken by the failure of the lessee to develop, drill necessary offsets, and diligently develop and operate for oil and gas on the leased premises and protect the premises against drainage.
This case being equitable in character, it is within the proper province of this court to examine the evidence for the purpose of determining its weight, and in the event the judgment and decision of the trial court is clearly contrary to the weight of the evidence as disclosed by the record, it is within the province and power of this court to reverse the same. Chamness et al. v. Collopy, 90 Okla. 71, 215 P. 953; Teague, Adm'r, v. Murphy, 91 Okla. 116, 216 P. 475; Harris v. International Land Co., 89 Okla. 163, 213 P. 845.
Since this is a dissenting opinion, I will *Page 204 
refrain from an extended discussion of the evidence, mentioning only those salient facts which I believe should control the decision. The lease in question, as it was originally executed, covered 160 acres of land, including, in addition to 40 acres with which we are principally concerned, the other three 40-acre tracts embraced in the southeast quarter of section 6, twp. 19 north, and range 12 east. It was a departmental lease executed in 1908 for a term of five years from the date of approval by the Secretary of the Interior and as much longer as oil and gas should be found in paying quantities. Covenants to protect against drainage by drilling offset wells and to properly develop the property are set forth in express provisions of the lease. This is of minor importance, however, since in the absence of such express covenants the same would be implied by operation of law.
The lessees, who are defendants in this action, at the present time own only that portion of the original lease on the 160-acre tract of land which covers the west half of that tract. On the north 40 acres of the 80 acres covered by their lease three producing oil wells were drilled in 1924 with initial production of 1,900 barrels, 1,600 barrels, and 1,000 barrels, respectively. On the south 40 acres in question only one producing well was drilled; that well having an initial production of 1,200 barrels and having been completed in 1924. It is located in the northeast corner of the south 40-acre tract. It is urged by the plaintiffs that the discovery of this producing well in the northeast corner of the 40-acre tract required and rendered necessary further development of this south 40 acres, and that a failure to further develop the other portion of this tract constituted a breach of the covenant of the lease to properly develop the leasehold premises. In this connection it should be borne in mind that the covenant to properly develop the lease and the covenant to protect against drainage by the drilling of offset wells are separate and distinct. A breach of the covenant to further and properly develop does not necessarily depend upon the existence of drainage in connection with an adjoining property. Merrill's Implied Covenants, page 125. This court has held that it is within the power of a court of equity to cancel a lease as to that portion of the property which has not been properly developed. Papoose Oil Co. v. Rainey, 89 Okla. 110, 213 P. 882; Scott v. Price et al., 123 Okla. 172, 247 P. 103; Imo Oil  Gas Co. v. Chas. E. Knox Oil Co. et al., 120 Okla. 13, 250 P. 117. It seems to me that, independent of the existence of any drainage from adjoining property, the discovery of a well in the northeast corner of the 40 acres in question, which well had an initial production of 1,200 barrels, was in itself sufficient to require that the lessee further develop and explore this 40 acres for oil and gas. This they have failed to do. But, in addition to the discovery of a producing well on the northeast corner of the property in question, it also appears from the record that the same parties who are defendants in this case and who own this oil lease also own the lease on the adjoining land to the south, and that three wells have been drilled by them along the southern border of the land in question and in close proximity to the boundary line thereof. In fact, from 50 to 150 feet from said south line. And another and additional well has been drilled in a short distance from the southwest corner of this 40 acres and on the adjoining lease of the defendants. These wells are all producing oil and at the time of the trial indicated a profit, although the profits were not very large. The defendants also owned a lease for oil and gas purposes adjoining this property on the west which had several producing wells thereon. The lease on the west covered 80 acres of land and the total production thereon shows a profit at the time of trial of something over $40,000. Examination of the record also discloses that on the lease adjoining the 40 acres in question on the east, which is owned by the Continental Oil Company, profitable production exists. It is also apparent from the record that the 40 acres in question are nearer to the center of the field than either the producing lease on the west owned by the defendant or the producing lease on the south, also owned by the defendants. We then have this character of a situation. The 40 acres in question are completely surrounded by producing property, yet only one producing oil well exists thereon. and there has been no effort made on the part of the defendant to determine whether the remainder of the 40 acres will produce oil and gas. The defendants seek to justify their failure to explore and develop the remainder of the 40 on the theory that as a prudent lessee it cannot be anticipated that such development would result in profit to both the lessor and the lessee. In support of this contention they point out that the wells immediately adjacent to this particular 40 on the south and on the west are small producers and show little or no profits. This is an excellent argument and to a certain extent is supported by the record and might possibly entitle defendants to prevail if we were considering only the covenant to protect *Page 205 
against drainage. But when we view the facts in the situation in the light of the existence of profitable production on the adjoining property to the north and east, and in view of the one well on the 40 in question which was mentioned above, I do not think that the contention of the defendants should prevail in connection with the covenant in the lease to further and properly develop the property. To my mind the position taken by the defendants in this case is like the position taken by the proverbial dog in the manger which would neither eat the hay nor permit it to be eaten. The defendants refuse to drill the undeveloped portion of this 40, seeking to excuse their failure in that respect on the ground that the production might be unprofitable, and at the same time they seek to hold the lease so that no one else can drill the undeveloped portions. In my judgment this is an appropriate occasion to exercise the power of the court of equity at least to cancel the lease as to the undeveloped portion of the south 40 as was done in the case of the Papoose Oil Co. v. Rainey, supra.
For the reasons set out herein, I dissent from the manner in which I conceive the rules and principles of law are applied to the fact situation involved in this case.
OSBORN, J., concurring.