Court Opinion

ID: 6881826
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:17:52.744201+00
Date Added: 2024-06-11T16:05:36.709121
License: Public Domain

HUTCHESON, Circuit Judge
(dissenting).
What the parties to it intended as a protective arrangement between joint venturers, owners of oil properties, to insure that the drilling development would be competently done and at a reasonable price, has, I think, been turned by the judgment below and its affirmance here into a contrivance by which appellees have ' obtained their share of production without paying their share of the drilling costs. If I could agree with the majority that the provisión that appellees are to have the “preference of all future drilling operations at the prevailing contract price”, was sufficiently definite to constitute an enforceable option, I still could not agree with them that it was an option by which appellees were to profit at the expense of their associates. The further provision, “It is ' further agreed that in the handling of this as a joint venture there is to be no expenses as overhead charged upon either side”, makes it clear at .once, I think, that the parties understood they were joint venturers and understood too that in accordance with the prevailing rule, 20 R.C.L., at 877; 30 C.J., at 860; 47 C.J., at 786; Wilson v. Hunt, Tex.Civ.App., 270 S.W. 263; neither of the parties was to profit at the expense of the others. If therefore the provision for “preference” is definite enough to be effective - as ah option, it is effective only to give appellees the drilling preference at the best price obtainable, here the contract price at which the wells were actually drilled, and the words “prevailing contract price” must be, so construed.
Under this construction appellees’ suit for large profits would fail, both because it was plainly intended that it should not make profits out of the drilling and because the $2 contract-price at which the wells were drilled was the prevailing contract price.
But I cannot agree with the majority that- the provision was enforceable as an option, for its terms were so uncertain and indefinite as to be incapable of enforcement. Summers on Oil and Gas, Permanent Edition, Vol. 4, § 681, at 81; Emery Bros. v. Mutual Benefit Oil Company, 73 Old. 94, 175 P. 210; Forster Motor Company v. Slaterbeck, 186 Old. 395, 98 P.2d 17; Mills & Willingham on Law of Oil and Gas, at 290; Wynne v. McCarthy, 10 Cir., 97 F.2d 964; Jordan v. Buick Motor Company, 7 Cir., 75 F.2d 447; Spivey v. Saner-Ragley Lumber Company, Tex.Com.App., 284 S.W. 210. It would be difficult I think to find a provision more fatally indefinite than this one. It is on its face indefinite for it does not say when or where the prevailing price is to be determined. The very difficulty experienced here on the trial in undertaking to determine what was the prevailing contract price shows the indefiniteness of that clause. Indeed, the testimony affirmatively shows that there was no such price unless it was the contract price at which the wells were actually drilled. Appellees’ witness testified that the contract price for drilling in the area ranged from $2 to $2.75 a foot, and Buffington himself testified that there were two ways of determining the prevailing contract price, one where it was a matter of favoritism and the other where it was done by competitive bidding. So, under the evidence in this case, including that, that these wells were drilled at a contract price of $2, it seems clear to me that it was not ‘intended to speak of a general prevailing contract price but of the contract price determined by the bidding on the particular development and therefore not $2.50 but $2, for which contract price the drilling was done, was the prevailing contract price as to it. Had the agreement provided for the average contract price or the price paid for the greatest number of wells, there might have been some warrant for claiming that the agreement was definite and that the price was to be determined by averaging or counting the wells. But here the clause is either too general and too uncertain to be susceptible of that determination required when contract rights are claimed or asserted or it means as to these wells the price at which they could be actually contracted.
But there is still another reason why, in my opinion, the judgment was wrong. That reason is, that the evidence shows beyond dispute that the option, if an option, was not separable as to each well to be availed of as each well was drilled, it was entire and for “all future drilling operations” and ■ as such, it was enforceable as to all or none. Being an option contract it was the duty of appellees, when appel*367lant tendered them the opportunity to drill, to accept or reject the option. Upon the undisputed evidence, because of the requirement for rotary drilling appellees rejected it and at once sued appellants as for breach of the option. Having rejected the opportunity to avail of the option when opportunity was tendered them, they lost the option. It did not as the majority opin-' ion would indicate, remain suspended while the first well was drilled, to be availed of on later drillings. It seems clear to me that the judgment was wrong and should be reversed. I respectfully dissent from its affirmance.