Grass v. Big Creek Development Co.

84 S.E. 750, 75 W. Va. 719, 1915 W. Va. LEXIS 233

• Court: West Virginia Supreme Court
• Decided: March 2, 1915
• Status: Published

Opinions

LyNCh, Judge :

Of a judgment,for $7000, rendered upon the verdict of a jury in an action of assumpsit brought by John M. Grass, defendant, Big Creek Development Company, complains on writ of error.

In July, 1907, Grass as owner leased 100 acres of land to C. H. Freeman for the sole purpose of mining and operating for oil and gas, the consideration being a cash payment of $100, one eighth of the oil produced, and $200 annually for each gas well the product from which should be marketed and used off the premises. As Freeman’s assignee, defendant soon thereafter entered upon the premises and drilled four wells producing oil in paying quantities, locating them so as to operate as off-sets to wells previously drilled on contiguous lands producing oil in like quantities. Deeming the four wells insufficient, under the implied covenants of the lease, for the full development of the lands for oil and ample protection from drainage through wells operated on neighboring lands, defendant operating both tracts under similar leases, plaintiffs instituted this proceeding, averring, or attempting to aver, in an original and amended declaration of one count each, two causes of action: one the breach of an implied covenant to protect against drainage, one the breach of a like covenant for the exercise of reasonable diligence in prosecuting developments necessary for extraction of all oil contained within plaintiff’s lands. To these declarations defendant tendered its demurrer, assigning as grounds therefor indefiniteness and uncertainty in the statement of the causes of action, and the joinder of two causes in the same count: and of the court’s action thereon it complains'.

The sufficiency of a declaration indefinitely stating a good cause of action can not, with us, be tested by demurrer, but only by a demand for a bill of particulars containing a more specific statement of the cause imperfectly averred as the basis for recovery. §46, ch. 130, Code; Clarke v. Railroad Co., 39 W. Va. 733, 742; Transportation Co. v. Oil Co., 50 W. Va. 612; Jacobs v. Williams, 67 W. Va. 377, 380; Carlin v. Coal & Coke Co., 72 W. Va. 405. Defendant, however, made no motion for an order requiring a specification of the particulars in which plaintiffs claimed defendant had failed to comply with the duties alleged to be so imperfectly assigned, it relied solely on its general demurrer.

Neither declaration definitely distinguishes between the breaches averred or the damages severally attributed to them. The most each pleading attempted was merely a statement of the implied covenants of the lease, and defendant’s failure to perform them, whereby plaintiffs suffered damage in the amount stated in the ad damnum clauses. Nevertheless, it can not reasonably be said they are insufficient to impart adequate notice of the causes assigned as the basis of the action. Por, while the rules of good pleading require certainty in the averment of the material facts relied on, only such circumstantial accuracy is necessary as will' reasonably afford notice of what is intended to be proved. Certainty to a common intent is ail that is. required. If intelligible to a person of ordinary understanding, and sufficient to afford him, the court and the jury the means of determining what is intended, the pleading is sufficient. Moreover, in respect of matters peculiarly within the knowledge of defendant, he can hot be heard to complain, unless the averments are so uncertain as not to disclose the essential elements of the canse of action he is required to answer, or are so vague and indefinite that they can not be said to state any cause of action sufficient to warrant a recovery. 31 Cye. 72, 282; Railroad Co. v. Lawrence, 169 Ind. 319; Railroad Co. v. Tyree, 110 Va. 38; Tarnsportation Co. v. Oil Co., supra; Clarke v. Railroad Co., supra.

Nor can duplicity in a pleading, that being defendant’s second ground of demurrer, be reached in any manner’ except as provided by §46, ch. 130, Code, unless, as in Knotts v. McGregor, 47 W. Va. 566, there is a misjoinder of two inconsistent causes of action. There plaintiff sued for damages occasioned by breaches of the implied covenant for .quiet enjoyment of leased premises — one by the testator, one by Ms executrix after his death. That case holds that, unless plaintiff amends Ms pleading by striking one or more counts from Ms declaration, or elects to proceed only on one assignment of the breaches averred in one count, a demurrer will lie to such declaration as a whole or to any of its counts. Generally, however, duplicity is a defect in form only, and could be taken advantage of at the common law only by special demurrer, now abolished with us by §29, ch. 125, Code. Coyle v. Railroad Co., 11 W. Va. 94; Sweeney v. Baker, 13 W. Va. 158, 200; Poling v. Maddox, 41 W. Va. 780, 786; Martin v. Railroad Co., 48 W. Va. 542; Gartin v. Coal & Coke Co., supra.

Evidently, in the original and to some extent, in the amended declaration, the pleader’s main object was recovery for drainage; and the trial of the case seems to have proceeded as if that were the sole purpose of the action. Both do aver existence of the two implied covenants for diligent operation and for protection from drainage, and defendant’s breach of each of them. But, in the original declaration, the duty requiring diligence in development is merely incidentally stated. The charge made in it is that “there has been drawn from under the lands of these plaintiffs” their royalty, “at least fifteen thousand dollars worth”, which royalty oil has been “delivered to the respective owners of said adjoining tract, whereby plaintiffs have lost and been deprived of great gains which might and otherwise would have arisen and accrued to them from the sale and delivery of” such royalty “had defendant drilled off-set wells or sufficient wells upon the said premises to develop the same and to protect them from .drainage against the said four wells ’ ’ operated on adjoining farms. The theory as to drainage seems to permeate the amended declaration also. After specifying the wells drilled on the several tracts, including those on plaintiff’s lands, it avers “no wells other than the three mentioned were drilled by defendant to develop the said farm and protect it from drainage”, pursuant to the implied covenants of the lease of the breach of which complaint is made, “but that on the side of said premises next to the said four wells” on adjoining tracts “no drilling was done by the defendant, nor was any well drilled as an off-set against any one of the aforesaid wells, and the said four wells have been operated continuously since they were drilled, through which plaintiffs’ oil is being taken by drainage, notwithstanding” defendant “has been in possession of the said premises under1 the assignment from the said .Freeman during all the time” the four wells on the adjoining tracts “have been producing oil and draining plaintiffs’ land”. And, after averring failure by defendant to perform its covenants by properly developing said land for oil and properly protecting them from drainage of oil through the wells aforesaid on adjoining lands by off-set wells to each and every of said wells, the declaration concludes, “whereby and by means whereof the plaintiffs have been damaged in a large sum, towit, fifteen thousand dollars”, and they “say that by reason .of the location of the aforesaid wells near the line of these plaintiffs as aforesaid there has- been drawn from under the lands of these plaintiffs their” share of the royalty in the oil, “at least fifteen thousand dollars worth as aforesaid, which said royalty oil has been drawn from under their land and been delivered to the respective owners of said adjoining tracts, whereby plaintiffs have lost and been deprived of great gains which might and otherwise would have arisen and accrued to them from the sale and delivery of said royalty to them had the said defendant drilled off-set wells or sufficient wells upon said premises to develop the same and to protect them from drainage against the said four wells”.

Thus, it will appear, as suggested, that the chief purpose of this proceeding is a recovery of the value of the oil extracted from the leased premises through wells operated on contiguous lands, although by indefinite and uncertain averments the declaration does charge a breach of the implied covenant for development sufficient to extract all oil discoverable upon the premises demised. As against this indefiniteness, defendant directed its objection under color of a general demurrer, which, as we have seen, is not available to it. And, even if the defect were so obvious as reasonably to justify allowance of a motion, if made in due time, and none was made, for a more definite specification of the cause or causes of action, no advantage can now be taken of 'it, under fhe statute of jeofails, after judgment; because, for reasons stated, the defects urged against the declarations in this action could not be regarded on demurrer. §3, Ch. 134, Code; Holiday v. Myers, 11 W. Va. 276; Fulgham v. Lightfoot, 1 Call 250; Improvement Co. v. Karn, 80 W. Va. 589; Taylor v. Stewart, 5 Call 520; Spengler v. Davy, 15 Gratt. 381.

The disposition of these defects leads to the inquiry as to the other assignments of error. We will first consider the effect of the special findings of the jury upon its general verdict. The statute authorizing this method of procedure, §5, ch. 131, Code, says: ‘‘Where any such separate verdict or special- finding shall be inconsistent with the general verdict, the former shall control, and the court shall give judgment accordingly”. By its negative reply to the interrogatory whether defendant failed “to drill wells upon the plaintiffs’ land to properly protect” it from drainage of oil into specified wells on other lands, “and if so how many barrels of oil” plaintiffs lost “by reason of such failure”, the jury eliminated any further inquiry as to damage suffered by plaintiffs from drainage. Virtually, they said there was no loss from that source. Nor does any question now arise as to the correctness of the jury’s response to that inquiry. The evidence did not warrant a different answer.

Although to the question, — “Did the defendant fail to properly drill and develop the land of the plaintiffs, and if so how many barrels of oil did it fail to deliver to them by reason of such failure?” — the jury replied, “Ves”, evidently as to the first proposition, and, as to the second, “The number of barrels we can not determine”, they nevertheless did fix the sum of $7000 as compensation in damages for such failure, although dn effect they conceded the insufficiency of the proof upon which to base their judgment as to the quantity of oil which defendant ought to have produced from wells not drilled which it should have drilled. Evidently, the court deemed a reasonably accurate ascertainment of the quantity of oil defendant ought to have produced but did not produce, as an essential element for recovery in the action; for, by an instruction propounded on plaintiffs’ motion, the jury was required to ascertain (1) “the number of additional wells, if any, the defendant should have drilled on plaintiffs’ land to sufficiently develop it, and the time when such wells should have been completed”; (2) “how much oil such additional wells would have produced from commencement of production to the bringing of this suit”; and (3) “the value of that oil in the Griffithsville field at the various times it would have been sold if it had been' produced ’ ’. One of these elements, so deemed essential, the jury said it could not determine from the evidence before it; and we find no data from which a different conclusion could have been reached.. Without such data, it is difficult to perceive the existence of any substantial basis for the award of damages fixed as compensation for delay in productive operations on the leased premises. A jury can not mulct a suitor in damages where the evidence furnishes no reasonably accurate or substantial basis for the ascertainment and computation of the loss sustained by the breach of duty complained of. Otherwise, their verdict must be deemed to have resulted from the exercise of a mere arbitrary conclusion, one based on no substantial foundation, or, as in this case, upon proof insufficient to show breach of' any duty due from defendant to plaintiffs. Construing the two responses to the dual interrogatory mentioned, in the light most favorable to plaintiffs, wé can not understand how or why they were entitled, in any aspect of the case as presented, to a verdict for more than merely nominal damages. Because, although by the first answer the jury said defendant had failed to. drill as many wells on plaintiffs ’ land as it ought to have drilled under the implied covenants of the lease, by the second it virtually said plaintiffs had failed to furnish any proper basis for estimating the damages arising out of such breach. We reversed the judgments reviewed in Bess v. Railroad. 35 W. Va. 492, and Douglass v. Railroad, 51 W. Va. 524, the first because of the jury’s negative response to the inquiry as to the name and official relation to defendant of the agent to whose assault the injury sued for was attributed, the second because the jury could not properly ascertain damages under the proof submitted to them. To avoid any misconception, in this connection, it may be observed, we do not express the opinion that, to entitle plaintiffs to recover, they must definitely prove the extent of the injury, if any, sustained by them by reason of unduly delayed developments on their lands; for only such proof as the case will reasonably admit of is required.

Evidently, plaintiffs have misconceived the theory on which they ought to have prosecuted their case to final determination. The course pursued by them apparently was based on the idea that the number of wells necessary for the extraction of all the oil from their land and the quantity of oil that ought to have been but was not produced by defendant therefrom prior to institution of this action constituted the real ground on which they had the right to predicate their claim for damages; for to this end they directed such evidence as tends to support such recovery. Whereas they are entitled only to such damages as they sustained by defendant’s failure, if any, to exercise an honest judgment in proceeding, with the necessary explorations on the lands and the extraction of oil therefrom, taking into consideration the subject matter of the lease, the character of the mineral products, the nature* of the oil-bearing sand in that territory, the situation of the? parties, the cost of drilling, the current prices of oil produced,, the location of the land, and all the surrounding circumstances and conditions attendant upon operations necessary for the extraction of such mineral products. In other words, the authorities hold that if, under such circumstances, the operator exercises a sound and honest judgment, and not unreasonable or arbitrary one, in continuing operations for mineral oils, he has faithfully discharged the duties implied devolving upon him by virtue of the lease, although he may not exercise that high degree of diligence which the exaggerated expectations of the landowner may demand. Even • when charged with undue delays, the proof mnst he clear, positive and convincing, in order to warrant recovery.

Brewster v. Zinc Co., 140 Fed. 801, states the reasonable rule to be: “Where the object of the operations contemplated by an oil and gas lease is to obtain a benefit or profit for both lessor and lessee, neither is in the absence of a stipulation to that effect the arbiter of the extent to which or the diligence with which the operations shall proceed; but both are bound by the standard of what, in the circumstances, would be reasonably expected of operators of ordinary prudence, having regard to the interests of both”. And, on the same subject, we said, in Jennings v. Carbon Co., 80 S. E. 368: “To the judgment of the operator, when and where and how many wells he shall drill, deference is justly due. But the judgment must be an honest, not an arbitrary, judgment. He must deal with the leased premises, not exclusively to serve his own peculiar and selfish interests, unmindful of his obligations to the source from which his authority is derived, but so as to promote the mutual advantage and profit of himself and the lessor”; and, to excuse the operator, his judgment “must conform to that judgment generally exercised by other operators under similar circumstances and conditions, and in view of the real purpose and intention of the parties when entering into the agreement”, and not merely the opinion of those not so engaged. This statement of the general and reasonable rule finds material support in Harris v. Oil Co., 57 Ohio 118, wherein it is said: “The development and protection of lines which is implied when the lease is silent is such as is usually found in the same business of an ordinarily prudent man, neither the highest nor the lowest, but about the medium or average”. To the same effect is Guffey v. Chaison, 48 Tex. Civ. App. 555. Of like import also is the language of the trial court approved in Bradford v. Blair, 113 Pa. 83, saying “if the knowledge and skill of persons engaged in the oil producing business and the machinery and appliances then known, and the prices of the product, were such that the business could not then be carried on with a profit to the defendant after giving to the plaintiff the agreed royalty, then we think the defendant was not bound to prosecute the same with any greater diligence than was done.” Core v. Petroleum Co., 52 W. Va. 276; Ammons v. Oil Co., 47 W. Va. 610, 628.

So that, in these particulars, the verdict rendered was based upon evidence wholly insufficient to sustain it; because, as clearly appears, the proof was directed solely to the number of wells necessary, in the opinion of the witnesses testifying, for the full development of the leased premises for oil and gas, and not to the degree of diligence defendant ought to have exercised. The only exception to this character of proof was the testimony of one or two witnesses, who did-express the opinion that the drilling of each additional well by them deemed essential should have followed within sixty days after the completion of the preceding one. As they fixed no basis therefor, the opinion was wholly arbitrary. But, if not arbitrary, it does not measure up to the standard deemed material and requisite by the authorities cited. Has the operator been duly diligent under all the circumstances requiring him to exercise a reasonable judgment as to the proper course to pursue in regard to continuity and extent of developments? is the vital question; not how many wells are necessary to withdraw all the oil from any particular tract of land-. Or, differently stated, has the operator exercised that degree of diligence reasonably and ordinarily exercised by prudent operators engaged in the same line of business under the same or similar circumstances and conditions, keeping in view the covenants of the lease and the mutual benefit and advantage of the parties to the contract? If he has been thus diligent, plaintiffs can not recover; otherwise they can recover for the loss sustained by them as the result of the unreasonable delay in the drilling of wells and the production of oil on their lands.

There are cases, prescribing the measure of damages for failure faithfully to prosecute developments on leased premises, not in accord with the views we have expressed. These are Bradford v. Blair, 113 Pa. 83, and Daughetee v. Oil Co., 151 Ill. App. 102, affirmed 105 N. B. 308. These cases state the measure of damages to be as prescribed in plaintiffs’ instruction. See also White on Mines and Mining Rights 235. The lease involved in Bradford v. Blair expressly required the lessee, after discovery of oil, “to continue with due diligence and without delay to prosecute the business to success or abandonment, and, if successful,, to prosecute the same without interruption for the common benefit of the parties”; and it presented to the jury the question as to whether defendant had been duly diligent. The measure of damages there prescribed was approved in the Illinois case. Without citing any authority therefor, White says only: “The measure of damages which the lessor would be entitled to recover for violation of the covenant to drill sufficient wells to properly test the land for oil would, ordinarily, be the rent or royalty which would have resulted to the lessor had the lessee complied with such covenant, and upon this question expert evidence would be competent as to the probable amount of, or whether any recovery should be allowed”. In effect,, he concedes that mere delay in drilling is not per se actionable. So Howerton v. Gas Co., 81 Kan. 553, holds that “the contract contemplated other wells should be drilled and operated with reasonable diligence to utilize the lease”, and that “four years’ delay under the circumstances shown was unreasonable”. That was an equitable proceeding to cancel the lease for failure to exercise diligence in the production and marketing of gas. The case prescribes no measure of damages for delay in development.

Indeed, the very absence of reported cases prescribing such measure or standard for the ascertainment of damages readily leads to the conclusion that persons interested in the result of operations for mineral oils are disposed to accede to the judgment of the lessee exercised as to the diligence and extent with and to which such operations should be prosecuted. While there are many such leases and manjr developments under them, few actions based on delay in development have reached appellate courts of the different states. It is therefore reasonable to infer that lessors willingly defer to the judgment reasonably exercised by the lessee. The cases involving rights under such leases are ordinarily limited to inquiries as to forfeiture, abandonment, drainage, or fraudulent conduct on the part of the lessee resulting in delay of' developments. Excepting the cases cited, we find none prescribing the measure of damages the lessor is entitled to recover for non-development, and think the measure they prescribe is not the proper one in cases of this character. We are not now speaking of what is the measure of damages recoverable for drainage through wells operated on other lands near plaintiff’s boundary line. That question, as heretofore observed, is not before us, the jury having said no such drainage had occurred.

But, surely, it would be grossly unfair to permit recovery of damages to the extent allowed by the jury in this case. It scarcely is conceivable that plaintiffs have suffered such loss from lack of wells on a tract of land containing only 100 acres. To have that effect, the tract must indeed be richly productive of minerals. At the rate ascertained for one-sixteenth, the production from it would reach $112,000; Conceding that result remotely probable, or as in any event possible, are not plaintiffs still entitled to another sixteenth from that quantity when produced? If so, they will receive twice the sum fixed by the contract as compensation for right of exploration on their land. The verdict is not for the share of oil produced; it is damages for failure to produce. Clearly, then, plaintiffs’ share of the production is not the true measure of the injury suffered. To allow double damages for the same breach of a contract silent on the subject of compensation therefor is wholly irreconcilable with and disproportionate to a due regard for justice and right. We can not conceive such result as reasonably possible under any circumstances. The proof shows no foundation for it. Indeed, no testimony justifies any such finding. Plaintiffs may not have suffered any loss. None is shown, none proved.

The jury arbitrarily fixed the amount named. It had not the slightest evidence to support it. Blow plaintiffs were injured they do not tell us. As said before, they limited the inquiry to an ascertainment of the number of wells not drilled which witnesses say they think defendant ought to have drilled, a mere arbitrary conclusion. Plaintiffs assumed the burden of showing, by competent proof, the extent of the injury to them resulting from delay in drilling under the implied provisions of the lease. Yet they made no effort to produce any evidence on that feature of their case. Not a word spoken by them, or by any other witness, tends in the slightest degree to show they suffered any damage' from operations deferred. So far as disclosed, they have lost nothing more than interest on the value of productions obtainable had defendant exercised that degree of diligence we have suggested as due under certain condition and circumstances.

Moreover, additional wells may not produce an ounce of oil, or they may produce great quantities of it. If none,’the lessee loses the cost and expense incident to the operation; if in paying quantities, the lessor obtains his share without expense. But, as the operator assumes all the risk and burdens of a hazardous business, and the lessor no risk, no burden, a verdict without merit because based on evidence wholly insufficient under any view of thé case, can not and ought not to be permitted to stand as a foundation for the judgment rendered thereon.

We have said nothing regarding defendant’s instructions, the admission of evidence, or the existence of the implied covenants in oil and gas leases; because what has been said virtually disposes of the first two, and no question is raised as to the other. The authorities uniformly concede the existence in oil and gas leases of covenants for protection against drainage and for the exercise of reasonable diligence in promoting production on the lands leased. Brewster v. Zinc Co., supra; Jennings v. Carbon Co., supra.

Being based on a wrong theory, the judgment is reversed, the verdict set aside, and a new trial awarded, to be governed by the principles herein announced.

Reversed, and new trial granted.