Bosworth v. Eason Oil Co.

1949 OK 199, 213 P.2d 548, 202 Okla. 359, 1949 Okla. LEXIS 481
CourtSupreme Court of Oklahoma
DecidedOctober 4, 1949
DocketNo. 31375
StatusPublished
Cited by17 cases

This text of 1949 OK 199 (Bosworth v. Eason Oil Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bosworth v. Eason Oil Co., 1949 OK 199, 213 P.2d 548, 202 Okla. 359, 1949 Okla. LEXIS 481 (Okla. 1949).

Opinion

HALLEY, J.

This is an action for accounting and damages claimed by R. L. Bosworth and associates, plaintiffs in error, against Eason Oil Company, a corporation, defendant in error, who will be referred to herein as plaintiffs and defendant as they appeared in the trial court.

Henry G. Katschor and others owned 80 acres of land in Logan county, Okla., and in 1930 executed an oil and gas lease thereon, containing the usual provisions relative to 1/8 royalty to lessors of oil, $50 per annum, for each well where gas only was produced, and 1/8 of the market value of the gas produced from any oil well and used for the manufacture of gasoline or other product, or sold. The royalty interest is not now involved in this suit, the claims of the landowners having been docketed as a separate action.

[360]*360The issues here arise out of two contracts between the owners of the 7/8 working interest in the oil and gas lease. W. C. Currier and Frank Frantz, as the owners of the oil and gas lease mentioned, entered into an operating contract with Eason Oil Company, whereby the latter agreed to drill a test well for oil and gas, and as part of the consideration for drilling the well, the Eason Oil Company was assigned an undivided one-half interest in the 7/8 working interest in the lease. If the well was a producer, Eason Oil Company was to have complete control of the lease and its operation. Plaintiffs were to pay one-half of the operating expenses and receive one-half of the proceeds from the sale of oil and gas produced, less 1/8 royalty interest to the lessors.

The test well was drilled, and at first produced several hundred barrels of oil per day and some four or five million cubic feet of casinghead gas per day from the Layton sand, found at about 5,000 feet. Both the oil and gas came from the same sand, two or three feet in depth, at the bottom of the hole, in the form of a spray or vapor. The oil and gas were separated in the usual manner in a separator, where the crude oil settled by gravity to the bottom of the separator and then into the flow or storage tanks, while the volatile gas was vented into the air at the top of the separator. There was no casinghead gas plant in that area, and hence no market for the casing-head gas, since it cannot be used as a fuel in the form in which it comes from an oil well.

The well was brought in in October, 1930, and on April 28, 1931, the plaintiffs and the defendant entered into a second contract, on a form generally referred to as a “Casinghead Gas Contract”, in which plaintiffs were referred to as “Sellers” and the defendant as “Buyer”. In general terms it provided that plaintiffs agreed to sell to defendant their share of the casinghead gas produced from the well at a price arrived at by multiplying 25% of the gasoline content of the gas produced by the average selling price per gallon of gasoline sold the preceding month by defendant, where the gasoline content was two gallons or less per thousand cubic feet of gas, or by 33 1/3 per cent of the gasoline content where it reached more than two gallons per thousand cubic feet of gas. The gasoline content was to be determined by the field compression test, or, at the option of the plaintiffs, by the charcoal-test. Defendant agreed to erect and operate at its own expense a casing-head gasoline plant upon the land, of the absorption type. The principal reason for this second contract was doubtless to provide a means for saving the large volume of casinghead gas being produced.

Under the lease operating contract plaintiffs were to receive their share of the oil produced, less their one-half of the operating expenses, and under the casinghead gas contract they were to receive payment as provided by the terms of the contract for their share of the casinghead gas produced, but were not burdened with any part of the cost of the plant or the expenses of its operation. Such costs were to be borne wholly by the defendant.

Plaintiffs allege that the defendant has operated fraudulently under both the lease operating contract and the casinghead gas contract. They claim that the defendant has not accounted fairly for the oil produced; has bypassed oil and not accounted therefor; has failed to account for materials and equipment used upon the lease and partis'- charged to plaintiffs; has failed to account for the market value of the oil produced and sold; overcharged plaintiffs for operating expenses; so operated the gasoline plant as to draw crude oil through the plant and failed to account therefor; and has greatly damaged the well as an oil well by failing to tube it, and thus shortened the life of the well, to the great loss of the plaintiffs.

This is the third appeal to this court. This case was filed in 1933 in the dis[361]*361trict court of Logan county, and trial resulted in a judgment for the defendant. On appeal the judgment was reversed and the case remanded for a new trial (Katschor et al. v. Eason Oil Co. et al., 178 Okla. 634, 63 P. 2d 977. On the second hearing, the court sustained the motion of the defendant to quash the summons, and on appeal the ruling of the trial court was again reversed and the case remanded for further proceedings (Katschor et al. v. Eason Oil Co. et al., 185 Okla. 275, 91 P. 2d 670). The third trial was had in 1942, when judgment was rendered for the plaintiffs for $520.84 and costs, and from that judgment, plaintiffs have appealed. Grounds for reversal are set out in eight propositions, which will be considered in the order stated in plaintiffs brief.

It is first claimed that where one joint adventurer has exclusive control' and management of the joint enterprise, such party stands in a fiduciary relationship to his co-adventurers and is bound to the utmost good faith in accounting to them for all money and property received, and that such accounting may be demanded even though they have accepted over a long period a portion of what they are justly entitled to receive.

The defendant does not dispute this general proposition of law, but admits that a joint adventure existed under the lease operating contract. However, it contends that such relationship does not exist under the casinghead gas contract, where it is claimed that the parties dealt with each other at arm’s length, and as vendor and purchaser. It is nowhere claimed that there was any fraud practiced by either party in entering into this contract. The complaints of the plaintiffs are to the alleged wrongful acts in operations carried on by the defendant under the contracts. Whether or not the casing-head gas contract makes the parties thereto joint adventurers is a difficult question to determine. As stated in 48 C.J.S. §la, p. 801, a certain, all-inclusive definition is very difficult, but a joint adventure is aptly defined as “an association of persons to carry out a 'single business enterprise for profit”. Some of the common elements of a joint adventure are lacking in the casinghead gas contract, although it is very closely connected with the operations under the oil and gas lease operating contract, wherein the parties are clearly joint adventurers. The parties do not share in the profits nor the losses under the casinghead gas contract, since the costs of the erection and operation of the plant are to be paid entirely by the defendant. However, the income to the plaintiffs from casinghead gas, as provided for in the contract, depends somewhat upon and is very closely allied to the profits accruing to the defendant in this operation.

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Bluebook (online)
1949 OK 199, 213 P.2d 548, 202 Okla. 359, 1949 Okla. LEXIS 481, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bosworth-v-eason-oil-co-okla-1949.