Gillespie v. Ormsby

272 P.2d 949, 126 Cal. App. 2d 513, 3 Oil & Gas Rep. 1839, 1954 Cal. App. LEXIS 2050
CourtCalifornia Court of Appeal
DecidedJuly 14, 1954
DocketCiv. 20157
StatusPublished
Cited by17 cases

This text of 272 P.2d 949 (Gillespie v. Ormsby) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gillespie v. Ormsby, 272 P.2d 949, 126 Cal. App. 2d 513, 3 Oil & Gas Rep. 1839, 1954 Cal. App. LEXIS 2050 (Cal. Ct. App. 1954).

Opinion

FOX, J.

In this action for breach of contract, with a cross-complaint raising issues of fraud and misrepresentations, plaintiff appeals from an adverse judgment.

By his amended complaint, plaintiff sought damages based on defendant’s alleged breach of a contract relating to the drilling of an oil well known as the Fitzhugh-Wilhite No. 10 (hereinafter referred to as Well No. 10). Plaintiff alleged that he had substantially complied with all the terms of the agreement and that defendant had failed to contribute his agreed share of the drilling costs. Defendant’s answer included as an affirmative defense plaintiff’s failure to perform the obligations required of him by the contract. Defendant thereafter filed a cross-complaint asking damages in the sum of $10,000 for fraud and deceit, or, as an alternative, rescission of the agreement and return of the sum of $10,000 paid thereunder to plaintiff. During the trial defendant filed a supplemental cross-complaint to conform with the proof. In accordance with the findings, judgment was entered for defendant and cross-complainant in the sum of $10,000, plus interests and costs of suit.

The findings, omitting those which are surplusage or un *516 necessary for the determination of the issues presented, are to the following effect: that plaintiff and defendant entered into a written contract under which plaintiff was designated as “operator” of Well No. 10, and defendant as “non-operator.” The contract included the 'following provisions:

“2. On or before October 25, 1951, operator shall commence operations or cause operations to be commenced for the deepening of that certain oil and gas well located on said above described lands and designated as ‘Fitzhugh-Wilhite #1 * well,’ and prosecute the drilling thereof until oil or gas is discovered in paying quantities, or until the depth of 1900 feet has been reached, or until such time as in the opinion of operator or his geologist the continuance of drilling operations would be undesirable or impractical.
“3. The cost of the deepening of said Fitzhugh-Wilhite #1 well, the completion thereof, or the plugging back and completion thereof from a depth less than 1900 feet shall be borne and paid for as follows:
“a. The cost of the drilling of said Fitzhugh-Wilhite #1 well from its present depth to the depth of 1900 feet, or less, as provided in paragraph 2 above shall be borne and paid for entirely by non-operator;
“b. In the event that a zone or zones are encountered between the present depth of said Fitzhugh-Wilhite #1 well and 1900 feet which such zone is worthy of testing in the opinion of operator or his geologist, then and in that event pipe shall be set and the zone tested and an effort made to place said well on production, the cost of the pipe, the setting thereof and all other completion costs to be borne and paid for—% by operator and % by non-operator;
“c. In the event that oil or gas is not encountered between the present depth of the Fitzhugh-Wilhite #1 well and the depth specified in paragraph 2 above, said well shall be plugged back to approximately 1100 feet, casing run, the well tested and an attempt made to complete said well and place the same on production, the cost thereof to be borne entirely by operator.”

The contract was actually executed on November 2, 1951, although it is dated October 19, 1951.

The findings further recite that “oil and gas was not encountered at the 1900 foot level or thereabouts or at all in *517 paying quantities and . . . that it was the understanding and agreement of the parties to the said contract that the said oil to be found would be in paying quantities and that if not so found plaintiff would comply with paragraph 3c of the aforesaid contract . . . and expend plaintiff’s funds to plug back to the 1100 foot level and there set casing and endeavor to make a producing well at that level . . . that the said plaintiff failed and intentionally refused to plug the said well back or to make any effort of partial compliance with the terms of the aforesaid paragraph 3c . . . that said paragraph was an integral part of the obligations and promises undertaken by the plaintiff and that plaintiff’s failure to comply with his promise contained in the said paragraph 3e constitutes a material failure of performance.”

The court found as follows on the question of fraud: That at the time the contract was executed and during the negotiations prior thereto, plaintiff fraudulently represented to defendant that Well No. 10 was at the approximate depth of 1,100 feet and that plaintiff was advised that a commercially productive well could be produced at about 1,100 feet and that if casing were run and the well completed at that depth oil and gas would be produced in commercial quantities; that plaintiff further represented that there was a probability that greater quantities of oil and gas could be produced at or about the depth of 1,900 feet, and that if oil were not encountered between 1,100 and 1,900 feet the well could then be completed at 1,100 feet and oil and gas produced at that depth; that at the time these representations were made, plaintiff knew that a well could not be produced and that he did not intend to produce a well or plug back to the 1,100-foot level to endeavor to create a commercially productive well; that at the time the contract was signed, plaintiff suppressed the fact that the well had already been drilled to the depth of 1,930 feet and that he had in his possession laboratory tests and electric logs disclosing to him that the said well would not be productive at the 1,900-foot level, or at any other level or at all; that plaintiff knew that defendant was relying upon his representations; that defendant relied upon the representations of plaintiff and without further investigation signed the aforesaid contract and paid over to plaintiff the sum of $10,000, which plaintiff accepted well knowing that the contract as written could not and would not be performed and that at the time this money was paid and the contract signed *518 that he had no intention of plugging the said well back to the 1.100- foot level; that said well did not produce oil or gas in commercial quantities nor did plaintiff encounter oil or gas at any depth in the drilling of the well; that on about March 15, 1952, as soon as defendant learned of the untruth of the representations made, he served on plaintiff a notice of rescission of the agreement and a demand for the return of the $10,000 paid over by him.

Plaintiff’s main contentions are that there is no substantial evidence to support certain of the material findings, hereinafter particularly identified, and that there was no obligation imposed on him by the contract to plug the well back to the 1.100- foot zone. We are unable to agree with these contentions.

Under familiar rules of appellate procedure, it will be sufficient to state the evidence which supports the findings and judgment, this court being bound by the findings of the trial court upon substantially conflicting evidence.

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Cite This Page — Counsel Stack

Bluebook (online)
272 P.2d 949, 126 Cal. App. 2d 513, 3 Oil & Gas Rep. 1839, 1954 Cal. App. LEXIS 2050, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gillespie-v-ormsby-calctapp-1954.