Court Opinion

ID: 9547935
Source: CourtListenerOpinion
Date Created: 2023-08-07 17:54:38.854226+00
Date Added: 2024-06-11T15:18:16.328468
License: Public Domain

WILLIAMS, Justice
(dissenting).
In this case, plaintiffs base their alleged right to a recovery upon two distinct theories. The first of such theories is, that their assignment of an oil and gas lease to defendant, with a reservation therein of an overriding interest, gave rise to an implied covenant that defendant would develop the leasehold, that is, drill an exploratory oil and gas well, within the term of the lease so assigned. No cases are cited in support of such theory, however, and it is well settled, in this jurisdiction at least, that as between the assignee and assignor of an oil and gas lease, no implied covenant to drill arises in the absence of an express covenant to that effect. Kile v. Amerada Petroleum Corp., 118 Okl. 176, 247 P. 681; Phoenix Oil Co. v. Mid-Continent Petroleum Corp., 177 Okl. 530, 60 P.2d 1054, 111 A.L.R. 504.
Plaintiffs’ second theory was that defendants orally agreed with plaintiffs to a contemplated plan of development, whereby defendants would drill and complete a successive and continuous program of wells for the discovery and production of oil and gas, beginning with the Brouchoud No. 1 well, then proceeding eastward so that the second well would be drilled on the east 80 acres of the Brouchoud tract, which would follow immediately the completion of the Brouchoud No. 1 as a commercial producer, and then a well would be drilled and completed in substantially continuous drilling operations on the tract here involved; that this plan and agreement was conditioned upon commercial production successively in the wells contemplated, which did later occur, but clearly contemplated and included the drilling of the intended well upon the tract herein involved within the primary term of the leases then held by plaintiff and assigned to defendants.
Plaintiffs’ evidence, however, which consisted of the testimony of plaintiff Rees and the testimony of the plaintiff Rodkey, fell far short of establishing any agreement or promise to drill a well upon the subject tract within the term of the oil and gas leases assigned. The testimony of the plaintiff Rees was to the effect that upon one occasion, defendant Powel Briscoe had said “I have got the rig out there, and I will drill all three of those wells right while the equipment is out there”; and on another occasion, defendant Powel Bris-coe had said that “he would move his rig to Caddo County to drill one well, and that he would move it back up there on the Brouchoud or Perry tract”; that he, Rees, had every reason to believe that defendant would carry through as long as defendant *765was getting commercial production in these wells, and that he would go ahead and develop the Perry tract; that it was his (plaintiff’s) understanding at the time of the assignment that defendants would drill three wells in the area as long as sand body was there and as long as they were commercial producers; that it was the understanding of plaintiff Rees that after drilling the initial Brouchoud well, that the next well was to be drilled on the Brouchoud tract and that the general plan was to step east eighty acres at a time from the initial well on the west 80 acres of the Brouchoud tract, the next well to be on the east 80 acres of the Brouchoud tract and then the Perry tract as long as defendant was getting commercial production. The other plaintiff, Rodkey, testified in substance that he understood defendants would drill the wells “hand running” one to each 80 acres, east from the original well, but that the assignment of the Brouchoud leases and the assignment of the leases on the Perry tract were separate deals. Neither plaintiff testified that defendant promised to drill a well on the subject tract, the Perry tract, prior to the expiration of the leases assigned. Neither did either plaintiff testify that defendants promised that if they failed to drill a well on the subject tract within the term of the assigned leases, that defendant would acquire new leases and carry plaintiffs for a new override therein.
Defendants’ testimony squarely contradicted that of the plaintiffs. Defendant Briscoe testified that he and his associates acquired the Perry tract after the Brou-choud lease was acquired in November of 1949, and that although he agreed to drill the Brouchoud well, which agreement was in writing, he did not agree to drill any wells on the Perry lease within the primary term or otherwise, nor did he agree to any plan of continued development of the two leases. Defendant Briscoe further testified that after drilling the Brouchoud well he was of the opinion that the next well on the east 80 acres of the Brouchoud lease would have been a dry hole. Defendants’ geologist testified that he was disappointed in the first Brouchoud well, which was completed in January of 1950, and that because the sand was tighter and shaling out to the east, it was his opinion that no further development should be undertaken toward the east for the Bartlesville sand production, which was the production that they were looking for at the time. Said geologist further testified that he had advised the defendant Briscoe of his opinion in this regard and had advised Briscoe against further drilling to the east of the Brouchoud No. 1.
With the evidence in this state of conflict, the trial court rendered judgment for defendants without making findings of fact and conclusions of law. The rule is that a general finding is deemed to include a special finding upon every issue of fact necessary to sustain the judgment rendered. Hitt v. Hitt, Okl., 258 P.2d 599; Wahby v. Renegar, 199 Okl. 191, 185 P.2d 184. The judgment of the trial court therefore necessarily determined that there was no oral agreement to drill a well upon the Perry tract within the primary term of the leases assigned. Such judgment is not clearly against the weight of the evidence, and therefore should not be disturbed by this court upon appeal. Hitt v. Hitt, supra; Preston v. Ross, 205 Okl. 164, 236 P.2d 244.
The majority opinion reverses the judgment of the trial court, but it is not clear upon what theory such reversal is entered. Such opinion does not hold that there was an oral agreement between the parties to drill a well on the Perry tract within the term of the assigned leases, but seems to assume that there was such an agreement, in the face of the trial court’s holding to the contrary. It is apparent that plaintiffs themselves recognized what the majority opinion fails to recognize, that is, that before plaintiffs would be entitled to recover in this action they must first establish a duty on the part of the defendants and then a violation of such duty or obligation. • Plaintiffs therefore advanced the two theories above discussed, that is, the implied covenant to drill, and the alleged oral *766agreement to drill. As I have already-shown, there is no merit in either theory and the judgment of the trial court should therefore be affirmed. The majority opinion, however, reverses the trial court and holds that plaintiffs are entitled to recover, but does so without sustaining either of plaintiffs’ theories. The majority opinion, as I understand it, does not hold that there was any duty upon defendants to drill a well upon the Perry tract within the primary term of the lease assigned, nor does it point out any violation of any duty by said defendants. As I understand the majority opinion, it holds that plaintiffs had confidence in defendants, and that they had such confidence because defendants had •carried out their written contract in the case of the Brouchoud tract, and that since defendants had done what they had agreed in writing to do in the case of the Brouch-oud tract, they should therefore be required to do that which they had not agreed to do in connection with the Perry tract; that since defendants had agreed to drill the Brouchoud well and had drilled such well in compliance therewith, that plaintiffs had a right to expect defendants to drill a well -or wells on the Perry tract without having agreed to do so. I am unable to follow such logic.
It should be remembered that plaintiffs’ reserved overriding royalty interest in the Perry tract was reserved in the assignment -of the three leases which expired in 1950, and that the reservation did not purport to •extend to renewals and extensions of the leases so assigned. Such overriding interest, therefore, expired with the original leases. Hawkins v. Klein, 124 Okl. 161, 255 P. 570. Plaintiffs concede such to be the case, but nevertheless attempt to assert an interest in the new leases acquired by defendants at their own expense upon the theory that the same should be impressed with a constructive trust in favor of plaintiffs for the continuation of the same overriding royalty interest that plaintiffs had held in the original leasshold. The rule with reference to establishment of a constructive trust is well settled in this jurisdiction. A constructive trust may be established by parol evidence, but the law, for the safety of titles, requires that the proof should be of the most satisfactory and trustworthy kind. The onus of establishing a constructive trust lies upon him who seeks its enforcement, and before a court of equity would be warranted in making a decree therefor, the evidence must be clear, unequivocal and decisive. Colbourn v. Bell, Okl., 294 P.2d 289; Preston v. Ross, 205 Okl. 164, 236 P.2d 244. The majority opinion completely ignores this rule, however.
The general rule relative to the relationship between assignor and assignee of an oil and gas lease is well stated in 24 Am.Jur. 590, Gas and Oil, sec. 82, as follows:
“Relationship arising from transfers —While the transfer of a lease does not ordinarily create any confidential relationship between the parties, this is not, of course, always the case. The terms of the conveyance may be such as to impose upon the assignee or sub-lessee the duty of protecting the interests of the assignor or s%ib-lessor; and, whenever they are of such character, he must comply with the general rules that govern the conduct of persons occupying a trust status, and any effort on his part to procure from the lessor rights antagonistic to those of the assignor will be defeated. Thus, when an assignment expressly provides that any extension or renewal of the lease shall be subject to the overriding royalty therein agreed upon, the courts will regard a new lease procured by the assignee as an extension or renewal of the old one, and charge it with the royalty so reserved, even though it was not granted until production under the former lease had come to an end.” (Emphasis added.)
A similar conclusion is expressed in Summers Oil & Gas, Permanent Edition, Sec. 554, pages 320-321, wherein it stated:
“While the right to overriding royalty, or a sum of money paid out of *767production of oil or gas, created in the assignment, does not survive the termination of the assigned lease, yet in a number of cases the assignor has claimed that the assignee, by permitting the lease to expire, or by surrender thereof, and the taking of a second lease from the lessor, has violated a relation of trust and confidence, and that the assignor should be entitled to such overriding royalty or money out of production under the renewal lease. The mere assignment of an oil and gas lease creates no such fiduciary relation. If it is created, it must he by the terms of the assignment. In a number of cases the courts have held that the provisions of the assignment did not create a fiduciary relation between the parties so that the assignor would be entitled to the payment of overriding royalties or other sums out of oil or gas produced under a second lease taken by the assignee. But where the assignment of a lease expressly provides that the reservation of an overriding royalty should apply to extensions, renewals or modifications of the lease that the assignee or his successors might secure, it was held that such provision created a relation of trust and confidence between the assignor and his assignees permitting the assignor to payment of the overriding royalty reserved in the assignment out of oil or gas produced under the second lease.” (Emphasis added.)
See also Probst v. Hughes, 143 Okl. 11, 286 P. 875, 69 A.L.R. 929; Hivick v. Urschel, 171 Okl. 17, 40 P.2d 1077; Wier v. Glassell, 216 La. 828, 44 So.2d 882; Goocey v. Hopkins, 206 Ky. 176, 266 S.W. 1087; Howell v. Cooperative Refinery Ass’n, 176 Kan. 572, 271 P.2d 271; Henry v. Gulf Refining Co., 179 Ark. 138, 15 S.W.2d 979; Hawkins v. Klein, supra; and Phoenix Oil Co. v. Mid-Continent Petroleum Corp., supra.
Since the terms of the assignment from plaintiffs to defendants here involved imposed no duty of any kind upon defendants, I am of the opinion that no fiduciary relationship was created between the parties and that the trial court was correct in so holding. In the two cases relied upon by the majority opinion, Probst v. Hughes, supra, and Hivick v. Urschel, supra, the terms of the assignment involved specifically provided for certain duties upon the part of the assignee, which duties the assignee violated and failed to perform. Such is not the case here, and these cases are not therefore in point. I therefore respectfully dissent.