Court Opinion

ID: 9832388
Source: CourtListenerOpinion
Date Created: 2023-09-01 21:52:25.823815+00
Date Added: 2024-06-11T07:43:46.289321
License: Public Domain

On Rehearing.
In our former opinion we held it was necessary for lessees (appellees) to •drill a second well on or before June 23, 1934, or pay delay rentals. This holding should have been qualified by a statement that this was not an outright obligation, but was necessary if lessees desired to prevent termination of the lease. However, upon consideration of appellees’ motion for rehearing it occurs to us that, while as an abstract proposition, this would be a ■correct interpretation of the lease, yet under certain pleaded facts this holding states an incorrect measure of appellees’ duties at this stage of the transaction. While the escrow agreement obligated appellees to drill a test well as a condition precedent to their' right to the lease, and provided certain other duties in the event oil were not secured, it did not obligate lessees to continue to operate said well after its completion, unless such obligation arose out of the agreement to commence drilling not later than June 23, 1934. The pleadings of appellant were to the effect that the well drilled under the escrow agreement was a “producer” and that appellant received $180 per month out of his royalties from its production. This amounted to considerably more than the contract rentals to be paid for the privilege of deferring drilling. Appellant, having accepted these benefits, must be held to have accepted this production in lieu of such as might have resulted from the first well called for by the lease. We, therefore, withdraw so much of our opinion as held the trial court to be in error in sustaining the demurrer to the first alleged cause of action.
Necessarily the 'trial court was correct in sustaining the demurrer to the second count of the amended petition, if our views are correct as to appellees’ duty as to “further development.”
In other respects the opinion expresses the view of the court, and, except as indicated herein, appellees’ motion for rehearing is overruled.
On Appellant’s Motion for Rehearing.
Appellant in his motion for rehearing discloses a failure to comprehend the effect of this court’s holdings upon appellees’ motion for rehearing. To prevent misunderstanding we restate them in different language :
First. We hold that the trial court did not err in sustaining a demurrer to the first count of plaintiff’s amended petition.
Second. We hold that the alleged cause of action based alone upon alleged failure after discovery to reasonably develop for oil and gas was subject to demurrer. The original opinion states our conception of appellees’ duty as to further development— a mere failure to further develop not being actionable; but such failure resulting from an abuse of discretion, or failure to be guided by their deliberate judgment in good faith after due investigation is an actionable wrong if the lessor be damaged thereby.
Third. We hold that the district court e.rred in sustaining a demurrer to the count *570alleging that the “defendants have abused and are abusing their discretion and have arbitrarily refused to drill any additional wells on said land, although they knew * * * that a reasonable development would have required the number of wells to be drilled within the time hereinabove stated,” etc. We treated the allegation that the defendants failed to reasonably develop and thereby damaged plaintiff as the second count and the allegations that they knew that reasonable development called for further development and that they arbitrarily and in bad faith declined to pro-, ceed further with the development of the property to plaintiff’s damage as the third count. We held, and now hold, that the trial court erred in sustaining a demurrer' or exception to said third count. Our original opinion sufficiently indicates the allegations constituting this third count.
Otherwise than as here indicated, appellant’s motion for rehearing is overruled,