Court Opinion

ID: 5004363
Source: CourtListenerOpinion
Date Created: 2021-10-01 01:47:50.470707+00
Date Added: 2024-06-11T08:17:13.081519
License: Public Domain

FUNDERBURK, Justice
(dissenting).
This court, in three cases, has approved the measure of damages contended for by appellants. Mitchell, Jones & May v. Dabney (Tex. Civ. App.) 294 S. W. 243, 245; Texas Pacific Coal & Oil Co. v. Stuard (Tex. Civ. App.) 7 S.W.(2d) 878; Curry v. Texas Company (Tex. Civ. App.) 18 S.W.(2d) 256. In the latter case there was on rehearing some modification of the previously expressed views. We have, however, in the instant case, approached the consideration of the question as one still open, if not subsequently concluded by the opinion of the Supreme Court in Gwynn v. Wisdom, 119 Tex. 320, 30 S.W.(2d) 298, 300. The conclusion of the court in the last-named case was stated thus: “The damages suffered by Mrs. Wisdom, under the facts of this case, were such special damages, if any, as she may have suffered by reason of, or on account of, Gwynn’s delay [italics ours] in beginning to drill as he had contracted.” The obligation of Gwynn as provided in the lease to begin within thirty days the drilling of a well, while an unconditional covenant, was, at the same time, perforce of the contract a condition subsequent upon which the determinable fee estate conveyed by the lease was granted. Upon breach of the covenant (same being also a condition subsequent) the lease did not ipso facto terminate. Forfeiture could be waived, and unless asserted would be waived. Mrs. Wisdom promptly asserted the forfeiture. She, in legal parlance} made a re-entry upon the land (the oil and gas therein). The effect of the decision of the Supreme Court, as we construe it, was simply to hold that she could not assert the forfeiture, and also, for breach of the covenant, claim damages measured in any way so as to give her compensation for failure to drill the well. The court, in stating that under the facts of the case the damages recoverable were such special damages, if any, as she may have suffered on account of the delay, evidently meant that such would be the case had she not elected to claim a forfeiture of the lease. Gwynn was within his contract rights in delaying commencement of the well until just before the expiration of thirty days. In other words, there was no delay until the expiration of the thirty days’ time. On the 31st day Mrs. Wisdom had the fully accrued right to declare a forfeiture of the lease and the consequent further right to forbid Gwynn thereafter to commence or prosecute the drilling of the well. On that day her cause of action accrued for damages, if any she had, fpr breach of the covenant to drill the well. We do not believe that the opinion of the Supreme Court should be understood as holding that, under such circumstances, Mrs. Wisdom had any right to damages for delay. Manifestly there could have been no delay •prior to the accrual of the only cause of action she could have had for damages. Therefore, it seems the court must have had reference to what would have been Mrs. Wisdom’s right had she waived forfeiture of the lease, thereby allowing the. lease to continue in effect and have elected to assert only her cause of action for damages for the breach of the covenant. In such case Gwynn, having the right to do so, -could have drilled the well and thereby have limited his liability for damages to such only as may have been occasioned by the delay. We have therefore concluded that the question for decision is still open, so far as the decision of the Supreme Court in Gwynn v. Wisdom is concerned. That case, we think, would not be authority for the proposition that, even if the lessee repudiated his obligation and abandoned the lease, he could not be held, upon the plaintiff’s election to do so, to respond in damages other than for mere delay.
“The measure of damages in the ease of a breach of contract is the amount which will compensate the injured person for the loss which a fulfillment of the contract would have prevented or the breach of it has entailed. In other words, the person injured is, so far as it is possible to do so by a monetary award, to be placed in the position he would have -been in had the contract been performed.” 17 C. J. p. 847, § 168. Unquestionably this is a correct statement of the law applicable to the case. In agreement therewith is the statement by our own Supreme. Court of the ruling principle, as- follows: “The purpose of the law to give compensation for breach of contract is subserved by *348allowing the injured party to have the value to him of the contract’s performance.” Texas Pacific Coal & Oil Co. v. Barker, 117 Tex. 418, 6 S.W.(2d) 1081, 1037, 60 A. L. R. 936. The specific question presented for decision may then in other words he stated as follows: Would the allowance to plaintiffs of the sum of $8,000, the agreed reasonable cost of drilling the well, be “the value to” plaintiffs “of the contract’s performance?” By value of the contract’s performance we understand is meant the monetary equivalent of the contract’s performance. So understood it is easier to see that the value of the contract’s performance may not include the profits from the possible production of valuable minerals. In an unproven field a contract for a test well which obligates one party absolutely to drill the well to a specified depth contemplates no more than a chwnce to profit by the possible discovery of minerals. It contemplates that, when the contract is fully performed, there may be no valuable minerals discovered, and hence no profit from the production thereof. It is therefore apparent that the value of the contract’s performance in the very nature of such a case would not include something which the contract did not contemplate as being embraced within its performance. This, it seems to us, is a consideration of vital importance in our inquiry.
In order to show the proper application of the law as above stated, to the facts of the particular case, we believe this can best be done by supposing a case or two different from the instant ease, but in which such application can more readily be seen, and then showing, if we can, that there is no material difference between the supposed cases and this case.
First case: A owns a lot and makes a contract with B, a building contractor, to construct a building thereon according to plans and specifications. Eor some special reason, we shall say, A pays the consideration in advance. B wholly breaches his obligation. A elects to sue for damages for breach of the contract rather than to rescind and recover the consideration paid. What is the correct measure of damages? What would be the value or monetary equivalent to A of the contract’s'performance? It seems to us there could be no valid argument that the reasonable cost of constructing the building to comply with the contract would be the proper measure of his damages. It will perhaps be conceded that, if A, being able to do so, should himself construct the building, he would be entitled to recover as his damages the reasonable cost of constructing same. Since the measure of his damages would be the reasonable cost of constructing the building and not the actual cost, no good reason can be perceived why, if he did not construct the building, he should not nevertheless be entitled to recover as damages the reasonable cost of constructing the building. Both propositions we regard as supported by both reason and authority. As said in 9 C. J., p. 812, § 149, upon the subject of building contracts: “In case of failure to perform, the measure of damages is the difference between the contract price and the fair' cash market price or value of the doing of the work contracted for. * * ⅜ where the contractor has been paid in advance the measure of damages is the value of the building when completed in accordance with the contract.” Simons v. Witmann, 113 Mo. App. 357, 88 S. W. 791; In re Carrier (D. C.) 21 F.(2d) 589; Hamilton v. Stephens, 240 Mich. 228, 215 N. W. 321. The authorities cited show that by “value of the building” is not meant the value of the land, including the building. It means, as first stated in the quotation, “value of the doing of the work contracted for.” The case of Simons v. Witmann, supra, will be found most interesting and instructive upon the problem presented in this case.
Second case: A pays B in cash a sum of money to drill a well to a specified depth on land owned wholly by A, it being contemplated as indicated by recitations in the contract that a test is thus to be made of the possible existence of valuable minerals. B breaches the contract. A, being able to do so, drills the well in just such way that, had it been drilled by B, would have constituted full performance. The reasonable cost of drilling the well was $8,000. If our observations upon the first supposed case be granted to be correct, then we think there can be no difference of opinion, but that A would be entitled to recover as damages for the breach of the contract the sum of $8,000; the reasonable cost of drilling the well. The $8,000 would be the exact monetary equivalent of the contract’s performance. That would be equally true whether the well was dry or a producer of 10,000 barrels of oil per day. In such a ease there could be no valid argument, we think, either that the reasonable cost of drilling the well was not the value to A of the contract’s performance or that such value included any profit from the production of minerals. If the consideration for said contract was legal and sufficient to support it, then it would be wholly immaterial what was the nature, amount, or value of such consideration. It necessarily follows that, if instead of the payment of cash, A paid the consideration by conveying to B another tract of land, or by executing and delivering to him a lease on other land or by giving any other thing of value sufficient to constitute an executed consideration, it would make no difference. It is also just' as certainly an immaterial matter in either case what it would have actually cost B to perform his obligation, or that the consideration received by him originally sufficient to support the contract turned out to be of little or no value. Just as in the case *349first supposed, the reasonable cost of drilling the well and not the actual cost, being the measure of A’s damages, it would not be necessary for him to drill the well in order to recover damages. Suppose B’s obligation to drill the well was one enforceable in an action for specific performance. To specifically enforce the contract, what would the court order B to do? The court, of course, would order him to drill the well. In lieu of that, what more certain and just legal equivalent could be given than a sum of money representing the reasonable cost of drilling the well? Is it a sufficient objection to say that if the well is not drilled but a sum of money equal to the reasonable cost of such drilling is allowed in lieu thereof, the parties will not be thereby placed in the exact position they would have been had the contract been performed in that A would still not have had his chance to profit by the possible production of minerals? We think not. According to the rule as quoted from Corpus Juris above, it is only “so far as it is possible” (italics ours) that the person injured is “to be placed in the position he would have been in had the contract been performed.” Upon what principle of right or justice could the defendant be heard to object that, since the award of damages measured by the cost of drilling the well would not place the plaintiff in a position fully as good as if the contract had been performed, such measure of his damages must be rejected? That measure of damages will place him in as good position “as it is possible to do so” and that is the measure of A.’s right under the law. It certainly does not lie in the mouth of the defendant to object that it may fall a little short of full compensation.
Thus far, we think, we have not entered upon really controversial ground. We now come to that in our endeavor to show that the same rules and principles applicable to the two cases supposed are likewise applicable to this. All three cases are alike in that an executed consideration was paid in advance for the obligation to drill the well. In the instant ease such consideration was the execution and delivery of the oil and gas lease. The cases are alike in that the contract contemplated a test well in an unproven field. The evidence showed that in the “boom days” three wells had been drilled upon the land covered by the lease, of which two were dry and one a small producer. A few wells on other land in the vicinity were, some dry, and others small producers. The correspondence of the parties leading up to the making of the lease and the surrounding circumstances all seem clearly to show a mere chance to discover oil or gas in paying quantities was within the contemplation of the parties. The purpose of the contract was, by actually drilling a well, to determine the existence or not of profitable production. Aside from the defendant’s unconditional obligation to drill the well, most of the respective rights and duties of the parties were in the very nature of the situation contingent and conditional.
Wherein does this case differ from the two above supposed? We think we may safely assume that any differences which can he thought to be material consist of one' or both of the following facts, namely, (1) that the well was to be drilled upon the land covered by the lease given as a consideration for defendant’s obligation to drill it, and (2) that, in the event the drilling of the well resulted in the discovery and production of minerals, defendant would be the owner of seven-eighths and plaintiff one-eighth thereof. The only difference, we think, as respects the subject of inquiry, between, an obligation to drill a well upon land owned wholly by the plaintiffs, and an obligation to drill a well upon land owned wholly by defendant, would be material only in determining what was within the contemplation of the contracting parties. There could be no uncertainty in that respect, where the obligation was to drill a well for oil or gas on plaintiff’s land, but an obligation of the defendant to the plaintiff to drill a well on defendant’s own land in which the plaintiff had no interest might present a different question as to what was within the contemplation of the parties as an advantage or benefit to the plaintiff. But as between such two cases, the instant case is like the first and unlike the second. It just as certainly contemplates the chance of a profit to the plaintiffs from performance in one case as the other. The fact that defendant’s performance gives him also a chance to profit from production does not alter or detract from the fact that a chance for a profit to plaintiff will he the result of defendant’s performance within the contemplation of the parties. The latter fact is the material one in the present inquiry, and it certainly exists where the well is to be drilled on defendant’s lease but in which plaintiff has a royalty interest just the same as where plaintiff is sole owner of the minerals. The amount or degree or proportion in which plaintiff and defendant may profit is wholly immaterial. The material question is, Does the contract show that within the contemplation of the parties performance by the defendant would afford the plaintiff a chance to profit from the production of discovered minerals?
Enough has already been said to show that the fact is wholly without controlling significance that in ease of the discovery of valuable minerals the profit of the defendant may be as much as, or more than that of the plaintiff. As already stated, full performance of the contract may, within the contemplation of the parties, result in no profit to either plaintiff or defendant. Therefore, in determining what is the value or equivalent to plaintiff of the contract’s performance, it ex*350tends no further than a completed well and the chance to profit from the discovery of minerals.
In the' case first supposed A may have expected or hoped for a large profit from the land with the building thereon to accrue from the use of same, the rents to be derived, the enhancement of market value, etc., but he did not so contract with B as to bring such expectation or hope within the contemplation of the contract. Therefore, B could not, in answer to A’s claim for damages, be permitted to show that if he had performed, such expectation or hope would not have been realized, or that plaintiff's land with the building would have been of no greater value than the land without the building, and that therefore A had suffered no damages. If the building in fact proved to be a monument to A’s folly, he had the right to build such a monument. He had the right to contract with B to build it for him. If B breached the contract, A had the right to recover his damages measured by the usual rule; namely, the monetary equivalent or value of the contract’s performance,- — the reasonable cost of constructing tile building. Just so in this case the plaintiffs had the right to have a well drilled on their land to the Desdemona sand. They could have paid the defendant in cash to drill the same; they could have conveyed him other land or have given him a lease on other land, but they just as certainly had the right to pay him as they did by the execution and delivery to him of a lease on the very land upon which the well was to be drilled. In the cases supposed and in this case the consideration was an executed consideration. Of what possible significance is it that in the latter case plaintiffs’ profit from possible production would not have been as much as if the consideration had been something else, as for instance a lease on other land, with the result that all interest was retained in the particular land? That could be no concern of the defendant. His obligation, it must be kept in mind, was not to procure production but to drill a well; not to produce a profit, but at most only the chance of a profit. If he could fully perform his contract without there being any production, as manifestly was the ease, how can the question at issue be affected by the fact that, if there had been production, plaintiffs would not have profited to the same extent or in the same proportion as if, instead of giving him a lease on the particular land, they had paid him in some other way?
It has been argued that, if as damages, plaintiffs be allowed to recover the reasonable cost of drilling the well, then they will have all the oil and gas, if any, in the land, and their damages besides. It is suggested that this would violate the rule that “a plaintiff is not to be put in a better position by a recovery of damages for the breach of a contract than he would have been in if there had been performance.” 17 C. J. p. 848, § 168. It is, we think, an entirely erroneous notion that such is the effect of such holding. Gwynn v. Wisdom, supra, illustrates a case where the allowance of such damages would have that effect. The very nature of the claim for damages in itself shows an election not to forfeit the lease. If, however, the lease terminated by limitations therein, such in no proper sense constitutes a taking back by plaintiffs of the minerals conveyed. If the plaintiffs had themselves drilled the well when defendant breached his obligation to do so, and had discovered valuable minerals, defendant, unless in the meantime the lease had terminated by reason of some limitation therein, and not by any act of the plaintiffs, would have owned the lease, and according to its terms would have profited by such production. If the lease had terminated by a limitation inhering in the nature of the estate granted by the lease, the result would have been no different than if the consideration had been a lease on other land which had so terminated but which land subsequently proved to be productive. Plaintiffs’ subsequent right to the land, including the minerals, would no more in one case than in the other have been a taking back of the consideration given for the defendant’s obligation.
The validity of these conclusions can in no way be affected by the fact that the lease given as a consideration for the drilling obligation may have had only a nominal value. It is sufficient, as we have before pointed out, if it would support the defendant’s promise and make of same a contract obligation. If the lease had only a nominal value, that fact would show, or at least strongly suggest, that the defendant had valued his own chance of profitable production at a minimum equal to the cost of drilling the well. Erom this fact we concluded on rehearing in Gurry v. Texas Company, supra, that such valuation should constitute the presumptive value of plaintiff’s chance and place upon defendant the burden of proving to the contrary. But this investigation has led us to the conclusion that we were in error and that our determination of the question in the original opinion in that ease was correct. We now see that the rule suggested in the opinion on rehearing in the Gurry Case, if sound, could not toe applied in any case where the lease, regardless of the drilling obligation, had a substantial value. In any such case, since in any event the lessee would be getting the value of the lease, it could never be said that the reasonable cost of drilling the well represented his valuation of the chance of profitable production. Nor-should the plaintiff be bound by the defendant’s valuation of such chance, when, as we have endeavored to show, the law provides a different and better rule.
Now let us examine for a moment the theory that the proper measure of damages is the *351value of the royalty that would have been received by plaintiffs. If it bo conceded that there may exist situations where proof could be made that royalty would be received, and the value thereof, it’ certainly must be admitted that such instances would be comparatively few. It never could be done where no -wells had been drilled in the particular vicinity. The utmost claim of reputable geologists and petroleum engineers is that they can point out localities where the chances of obtaining production are more than ordinarily favorable or unfavorable. They do not pretend to say that they can tell that oil or gas will be found at any particular point. Then how is it to be shown that damages had resulted from the breach of an obligation to drill a well, and the amount thereof? We submit .that it cannot be done except by substituting a jury’s mere guess for the certainty which the contract’s performance provided. Suppose that, in a case where the undisputed evidence showed that the reasonable cost of drilling a test well in a section where no well had ever been drilled was $2,000, the jury guessed that the value of royalties that would have been received but for breach of the obligation to drill was $25,000. This would be no impossible case. Would any court give judgment for that sum? If not, any attempt to limit it would be tantamount to an admission that a wrong measure of damages was being employed since it must thus needs be corrected. If in such ease the full value of the royalty was allowed as damages and judgment rendered for $25,000 for the royalty on the minerals never produced but still remaining in the ground, and the lease terminated as It probably would before any minerals were discovered, how could the lessee ever get the minerals upon which he had by the judgment been forced to pay royalty? The defendant would have no lease. The plaintiff could undoubtedly make a new lease to a third party. The third party would certainly be entitled to the minerals. We cannot believe that we are to become finally committed to such an unnecessary, ineffective, and unjust rule when the established rule is, as we have endeavored to show, both applicable and effective.
We do not believe that we should regard the decision in Texas Pacific Coal & Oil Co. v. Barker, 117 Tex. 418, 6 S.W.(2d) 1031, 60 A. L. R. 936, as having determined the question to the contrary. In that case there was an obligation like the one here; namely, to drill a test well. But that obligation was performed and was therefore not involved in that 'Case. The obligations involved in that case were those that were contingent and conditional upon the result of the performance of the obligation to drill a test well. Manifestly there could have been no obligation to drill offset ’wells, or to reasonably develop until production had been obtained. Possibly these obligations may be governed by different rules, because manifestly something different from a mere chance to profit by the discovery of valuable minerals was ¡by the very terms of the contract within .the contemplation of the parties.
We shall not undertake to point out the nature of such differences, nor even to express an opinion that they are such as to call for application "of a different measure of damages than we hold to be correct herein. We merely mention the fact by way of explanation why we cannot accept the decision in the' Barker Case as foreclosing the question involved in this. It is our view that the parties themselves, by their contract, prescribed the test by which it was to be determined whether or not the drilling of a well would have resulted in profitable production and that therefore the trial court should not have heard testimony necessarily in the nature of speculations of the witnesses as to whether there would in fact have been any minerals produced.
In our opinion and for all of the reasons discussed, the judgment of the trial court was erroneous; that judgment should have been rendered for the plaintiffs for the sum of $8,-000, by reason whereof said judgment should be reversed and here rendered.