Jath Oil Co. v. Durbin Branch

1971 OK 127, 490 P.2d 1086, 40 Oil & Gas Rep. 488, 1971 Okla. LEXIS 346
CourtSupreme Court of Oklahoma
DecidedOctober 12, 1971
Docket42887
StatusPublished
Cited by12 cases

This text of 1971 OK 127 (Jath Oil Co. v. Durbin Branch) 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
Jath Oil Co. v. Durbin Branch, 1971 OK 127, 490 P.2d 1086, 40 Oil & Gas Rep. 488, 1971 Okla. LEXIS 346 (Okla. 1971).

Opinion

McINERNEY, Justice:

This action to quiet title was commenced by Jath Oil Co., as the owner of “all the oil, gas and other minerals and mineral rights” on, in and under 30 acres of land in Stephens County, Oklahoma. The alleged cloud upon Plaintiff’s title is an oil and gas lease covering the 30 acres, herein called the Wilson lease, executed April 11, 1914 by Lille Wilson as lessor, to W. G. Skelley as lessee “for the term of ten years from the date of the approval hereof by the Secretary of the Interior, and as much longer thereafter as oil or gas is found in paying quantities.” The lease constitutes a cloud, in Plaintiff’s view, because as Plaintiff alleges in its petition the Wilson lease expired by its own terms for failure to produce oil or gas from the leased premises in paying quantities.

The ownership of the leasehold interest has passed by mesne assignments to the several defendants, some of whose leasehold interests extend only to a depth of 1,000 feet; the leasehold interests of others extend only below a depth of 1,000 feet. Upon demand, each of the several defendants has refused to execute a release of the lease. Oil production in paying quantities was commenced by the lessee under the lease, from a depth less than 1,000 feet, during its primary term and has continued until February 1964 by the lessee or by one or more of his assigns. No production has occurred from any depth more than 1,000 feet. Thereafter for a period in excess of two years there was a cessation of production from the Wilson lease.

Accordingly under adequate pleadings the trial court was presented with the issue of whether the cessation of production was only temporary or if permanent was Plaintiff barred by estoppel and laches from claiming that the Wilson lease had terminated perforce a permanent cessation of production. After a full hearing the trial court found the issues in favor of Defendants and decreed that Defendants’ title in and to the Wilson lease and leasehold be confirmed and adjudged to be valid and subsisting and in full force and effect.

The parties occupy the same positions on appeal as in the trial court and will be referred to by their trial court designations or by name. The survival of the defendants whose leasehold interests are below 1,000 feet depends obviously upon the producing operations of the defendants whose leasehold interests lie above 1,000 feet.

In May 1962, Defendant Oil Capitol Corporation acquired a ¾ interest to a depth of 1,000 feet in the 30 acre Wilson lease and the adjacent 30 acre Emerson lease for the purpose of secondary recovery by water flooding. Defendant Durbin Branch and J. N. King owned respectively a ¾6 and a ¼e interest in both leases to the same depth. These parties entered into an operating agreement May 1, 1962 making Oil Capitol the operator of the Wilson and Emerson leases, binding each party to the agreement to pay his proportionate share of the operating expenses and granting Oil Capitol a lien to satisfy unpaid operating expenses. Upon Oil Capitol’s application, The Corporation Commission entered an order on January 11, 1963 authorizing a water flood operation on the Emerson and Wilson leases. These leases were acquired at the same time to be operated as a water flood. The Emerson lease has continued to produce in paying quantities. Accordingly there is no question concerning its continuing validity.

Jath Oil Company contends that the Wilson lease terminated because there was no production in paying quantities by Oil Capitol from the Wilson lease for the period February 1964 to October 1964 and no production at all from the Wilson lease for the period October 1964 to July 1966. As *1088 la|ter quotations from the record reveal, there is no dispute in the record as to this non-production history. Jath Oil Company did not become aware of this lapse in production or that water flood operations were attempted until May 1966. On this basis, Jath urges (1) the Wilson lease terminated for failure to produce after the primary term “except where production' may be lessened by reason of a bona fide attempt to increase same in existing wells; ” (2) “the period of cessation of production from the Wilson lease, viewed in the light of all the circumstances, was for an unreasonable period of time;” (3) “Estoppel and laches do not constitute a defense.”

In support of Jath’s position that the cessation of production was for an unreasonable period of time it appears that Branch’s default occurred in December 1962. Oil Capitol made no complaint to Branch regarding his default until November 1963, a period of eleven months after default. Oil Capitol did not institute suit against Branch to foreclose its lien until July 1964, a period of eighteen months after default. Mr. March, President of Oil Capitol, testified on direct examination concerning the Wilson lease:

“Well, actually, we suspended operations, frankly, until we knew the outcome of this law suit. We were unwilling to spend any more money to bring this water flood on either the Wilson or the Emerson up to what we thought it was capable of. Our attitude being that until we knew how that came out, we were going to produce the well with the water flood that we then had in rather than add new and expensive additional equipment.”

Mr. Taylor, Production Superintendent of Oil Capitol, testified on cross examination:

“Q Why did you cease operations because of this problem that you had with Mr. Branch ?
A Well, to my knowledge, we were just unable to collect the money.
Q Is this the reason you ceased operations ?
A Yes.
Q In other words, you could not operate unless you had this money from Mr. Branch ?
A We did not feel that we wanted to spend any more money and not have him pay his share because we, at that time, felt that we were paying his way and was not being repaid for it.”

On cross examination Mr. March testified :

“Q Let’s look at it this way. From February of ’64 until the end of ’64, you had no direct expenditures on the Wilson lease, is that true ?
A If you will go along with me on what we’ve called unallocated as not being direct.
Q Right. Now, the same is true for the year 1965 ?
A That’s correct.
Q The same is true from January, 1966, up until about the first of May, 1966, at which time you drilled this well ?
A Approximately. About the first of May, it could have been April.”

On direct examination Mr. Taylor testified:

“Q So then your item of expenses shows no expense directly on the Wilson lease from about January of 1964 — oh, with the exception of a little expense in December of ’64— down until April or May of ’66, is that correct ?
A That’s correct.
Q Now, basically, tell the Court why there was no expense directly on the Wilson lease during that period of time ?

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Bluebook (online)
1971 OK 127, 490 P.2d 1086, 40 Oil & Gas Rep. 488, 1971 Okla. LEXIS 346, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jath-oil-co-v-durbin-branch-okla-1971.