Court Opinion

ID: 9443475
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:21:43.474718+00
Date Added: 2024-06-11T17:29:30.005882
License: Public Domain

PHILLIPS, Chief Judge
.(dissenting in part).
It is my opinion that, under the facts presented, the trial court’s instruction on the measure of damages was erroneous. In all other respects, I concur in the opinion of the court.
R. Olsen Oil Company, hereinafter called1 Olsen, entered into a written contract with Fidler under which, in consideration of the assignment of oil and gas leases covering approximately 6,000 acres of land in Torrance County, New Mexico, by Fidler to Olsen, Olsen agreed to drill an oil and gas well, at a stipulated location on the area embraced in such leases, to a depth of 6,000 feet, unless oil and gas should be discovered in paying quantities at a lesser depth, or unless igneous rock or other impenetrable substances should be encountered at a lesser depth. The contract provided that the well should be completed at the sole expense of Olsen; that Olsen should furnish to Fidler samples of all formations and waters encountered in the drilling of the well; that Fidler should at all times have access to the derrick floor and the drilling log of such well; and that Olsen, upon request from Fidler, from time to time should furnish to Fidler samples of all cores taken from the well. Fidler retained no interest in the assigned oil and gas leases. He owned other oil and gas leases in the area surrounding the acreage embraced in the assigned leases.
The complaint, as amended, alleged that the reasonable cost of drilling the well at the stipulated location to a depth of 6,000 feet would be $120,000. Fidler introduced testimony of an expert that the reasonable cost of drilling the well at the stipulated location was $120,000. Fidler testified at the trial below that the leases assigned had a value at the time of the assignment of $15 an acre, or approximately $90,000. I think the facts disclosed by the record justify the conclusion that Fidler’s estimate of the value .of the leases was probably high. . During the drilling of the well, Olsen undertook to sell units in the drilling block covered by the assigned leases to a number of major qil companies at a price of $15 per acre if the well was a commercial producer and $12 per acre should the well be a non-producer and was unable to effectuate any sales. Thus, it will be seen that the consideration which Olsen received under the contract was far short of the full cost of drilling such well. The additional cost was to be borne by Olsen.
*873Fidler held options to acquire certain royalty interests from lessors under the assigned leases for a stipulated price. These options created no present legal or equitable interests in oil and gas rights covered by the assigned leases.1 He did not exercise the options.
Since Fidler retained no interest in the assigned leases, the well when completed and the lessee’s interest in the oil and gas, if any, produced therefrom would have belonged wholly to Olsen. Fidler would have received no direct benefit from the well itself as distinguished from the geological information which the drilling of the well would have disclosed. That information would have been valuable to Fidler in determining the value of the oil and gas leases he held on acreage adjacent to the land covered by the assigned leases, in determining his course of action with respect to the development thereof, and in determining whether he should exercise his option rights.
In my opinion, the instant case is indistinguishable from the case of Hoffer Oil Corporation v. Carpenter, 10 Cir., 34 F.2d 589, 593. There, as here, in return for information to be furnished, the assignor of the leases contributed a portion of the cost of drilling the well and the remaining cost of drilling the well was to be borne by the assignee of the leases. For the reasons more fully stated in the opinion in that case, it is my opinion that the proper measure of damages in the instant case was the value of the services which Olsen agreed to furnish Fidler with respect to the geological information which would be obtained in the drilling of the well. In Hoffer Oil Corporation v. Carpenter, supra, we said:
“We conclude that the value of such services is what a reasonable person owning land adjacent to the lands on which another proposes to drill such a test well, similarly situated and of similar oil-bearing potentialities as the land of the parties in the instant case, would ordinarily pay by way of contribution to the cost of such test well for the log of such well and the geological information which the drilling thereof would disclose. While a witness should not be permitted to speculate or conjecture as to possible or probable damages, still the best evidence obtainable, under the circumstances, is receivable, and this is often nothing better than the opinion of well-informed persons. Daughetee v. Ohio Oil Co., 263 Ill. 518, 105 N.E. 308, 311.
“The contract being a usual one in the oil fields, we think evidence could be produced, in all probability, which would show what, under similar circumstances, is ordinarily and usually paid for such services. This, we think, would afford a reasonable basis for computation, and would furnish sufficient data for an approximate estimate of the value of such services. It would, of course, be something less than the full cost of drilling the well, because with the full amount the contributor could drill a well on his own land.”
The opinion of the trial court says that the- value of such services under the facts in the instant case is the usual and ordinary cost of drilling the well. Such a recovery would enable Fidler not only to obtain the geological information, but would enable him to drill a well on his own land and enjoy the full benefit of the lessee’s interest in any oil or gas produced from such well. That is more than he contracted for and more than he contemplated he would receive.
It is my opinion that the damages in the instant case should have been measured by the rule laid down in Hoffer Oil Corporation v. Carpenter, supra.

. Richardson v. Hardwick, 106 U.S. 252, 254, 1 S.Ct. 213, 27 L.Ed. 145; Todd v. Citizens’ Gas Co. of Indianapolis, 7 Cir., 46 F.2d 855, 866, Phenix Ins. Co. v. Kerr, 8 Cir.. 120 F. 723, 727, 66 L.R.A. 569; Milwaukee Mechanics’ Ins. Co. v. B. S. Rhea & Son, 6 Cir., 123 F. 9, 11; 55 Am.Jur., Vendor and Purchaser, § 27, p. 493.