Hammett Oil Co. v. Gypsy Oil Co.

1921 OK 239, 218 P. 501, 95 Okla. 235, 34 A.L.R. 275, 1921 Okla. LEXIS 4
CourtSupreme Court of Oklahoma
DecidedJune 21, 1921
Docket10533
StatusPublished
Cited by44 cases

This text of 1921 OK 239 (Hammett Oil Co. v. Gypsy 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
Hammett Oil Co. v. Gypsy Oil Co., 1921 OK 239, 218 P. 501, 95 Okla. 235, 34 A.L.R. 275, 1921 Okla. LEXIS 4 (Okla. 1921).

Opinions

McNEILL, J.

In October, 1906, the owners of certain land in Creek county executed an oil and gas lease thereon in consideration of a royalty of % of the oil delivered in the pipe line and $250 for gas wells when the gas was sold off the premises. The lease contained the further provision authorizing the lessee to sublease and release any part of the land. By mesne assignments, the lease was transferred to Mr. Hammett, who executed a sublease, containing a recital that the lease was subject to all the requirements, conditions, and stipulations contained in the original lease and conveyed all rights, privileges, and benefits in the original lease, subject, however, to the performance of certain conditions, to wit: Payment of all royalties due under, the original lease according to its terms, and in addition thereto to pay and deliver to Hammett in pipe lines on said land 40 per cent, of the total production of oil, from said land as royalty.

The plaintiff, the Hammett Oil Company, by mesne assignment is the- owner of % of the interest retained by Hammett by virtue of the sublease. The Gypsy Oil Company is the owner of all other interests in the lease and sublease. These assignments and transfers were executed in 1906 and 1907. Oil was found in paying quantities and has been divided as follows: To the lessors, 12% per cent.; Hammett Oil Company, 26% per cent.; and Gypsy Oil Company, 00 5-6 per cent.

In 1913 the Gypsy Oil Company entered into a contract with the lessors regarding the manufacture of gasoline from casing-head gas produced from said lease and have been manufacturing gasoline from casing-head gas since said time. The Hammett Oil Company brought this suit for an accounting, alleging that the defendant was manufacturing gasoline from casing-head gas. and the same was a part of the oil and by virtue of the lease contract it was entitled to 26% per cent, of the gasoline manufactured from said gas. The defendant, Gypsy Oil Company, filed its answer defending upon three theories: First. That the casing-head gas was not oil, and not oil’chemically or physically speaking, but an entirely different thing. Second. That the casing-head gas is gas, and no gasoline was extracted from the oil, but was extracted from the gas. Third. Regardless of the chemical and physical properties, the gasoline was not oil to be delivered in the pipe line within plaintiff’s contract, and if it was different from either oil .or gas so that it did not pass to the lessee, then it belonged to the fee owner, and the Gypsy Oil Company contracted with the owner regarding the same.

Upon trial of the case, the evidence consisted of the different contracts and assignments. over wliich iliere was no controversy, and testimony describing the method of manufacturing gasoline from casing-head gas, and expert testimony regarding the component parts, or compounds, of oil. gas, casing-head gas, and gasoline, and how and from where they were produced, and the effect of a vacuum pump upon an oil well. The court found the issues in favor of the defendant, and against the plaintiff. From said judgment, the plaintiff has appealed-

For reversal there are numerous assignments of error, and the case is very ably and extensively briefed upon all questions involved hv both parties, and especially *237 on the question of whether gasoline manufactured from casing-head gas is a product of the oil. It is upon this theory that plaintiff‘in error first'assails .the'judgment of the lower court.' IVe think the position taken by plaintiff in error, however, failed to take into consideration all the material questions. In our judgment the question is not whether gasoline manufactured from casing-head gas is oil in a technical sense, but whether it is oil in its ordinary and popular sense and was so understood by the parties to the oil and gas lease, which granted this lessee the right to produce oil o,r gas. and provided for a royalty of one-eightli of the oil delivered in the pipe line. In considering this question, there are certain well-known principles of law that must ho looked to as a guide.

First. Words in a contract are to be understood in their ordinary and popular sense, unless used by the parties in a technical sense. Wolf v. Blackwell Oil & Gas Co., 77 Okla. 81. 186 Pac. 484.

Second- However broad may lie the terms of a contract, it extends only to those things ccncerning which it appears that the parties intended to contract. Wolf v. Blackwell Oil & Gas Co., supra.

Third. That oil and gas leases are to be interpreted as have others of great importance, and all rights and claims of the grantee which are not conferred in direct' terms or by fair implication from those which are granted, are to lie considered withheld. See Wemple v. Producers' Oil Co. (La.) 83 South. 232.

Fourth. This being an equity case, the finding of the trial court, being a general finding for the defendant, must, he considered a finding- that gasoline manufactured from casing-head gas produced from the oil wells was not oil within the meaning of the terms as used in its ordinary and popular sense and as referred to by the original lessor and lessee in the lease contract dated October, 1906.

There was no evidence as to what the word “oil” includes, when used in an oil and gas lease, or how the parties to the lease understood it. but a large amount of litigation has arisen over such contracts, and the word “oil,” as used in an oil and gas lease, lias always been referred to by the courts and understood to designate the oil produced from a well, or crude petroleum in its natural state. There is nothing either in, the contract or in the evidence to disclose that the parties in this lease contract used it in any other sense, but the contract does support the contention that it was used in its ordinary and popular sense and refers to crude oil as it was produced from the mouth of the well.

If we apply the second and third principles of law announced above'to the contract, to-wit; “No matter' hbw broad may be the terms of the contract, it extends to only those things concerning which the parties contracted”; and “Oil and gas lease confers- upon the lessee those rights which are granted in direct terms or by fair implication from those which are g’ranted, and all other rights arc "considered withheld” — what rights were acquired by the lessee of the original lease? These question® are very ably discusses in the case of Wemple v. Producers Oil Co. (La.) 83 South. 232. In .hat case the landowner, brought suit against rlie lessee, bepause tbe lessee was manufacturing gasoline from casinghead gas and. was paying no royalty thereon; the lessor contending that if gasoline was not oil within the contemplation of the lease, it was a mineral not embraced in the contract and he was the owner thereof. It was contended that if tho court should hold it was oil within the terms of the lease, he was entitled to % of the same; or if the court should hold that the gasoline was a product of tho gas, and the wells should be held to, be gas wells, plaintiff was entitled to the amount due and payable under the terms of the lease for gas wells.

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Bluebook (online)
1921 OK 239, 218 P. 501, 95 Okla. 235, 34 A.L.R. 275, 1921 Okla. LEXIS 4, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hammett-oil-co-v-gypsy-oil-co-okla-1921.