Nunley v. Shell Oil Company

76 So. 2d 111
CourtLouisiana Court of Appeal
DecidedFebruary 14, 1955
Docket8219
StatusPublished
Cited by14 cases

This text of 76 So. 2d 111 (Nunley v. Shell Oil Company) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nunley v. Shell Oil Company, 76 So. 2d 111 (La. Ct. App. 1955).

Opinion

76 So.2d 111 (1954)

L. H. NUNLEY, Plaintiff-Appellant,
v.
SHELL OIL COMPANY et al., Defendant-Appellee.

No. 8219.

Court of Appeal of Louisiana, Second Circuit.

October 29, 1954.
Rehearing Denied December 10, 1954.
Writ of Certiorari Granted February 14, 1955.

Colvin & Hunter, Mansfield, for appellant.

Blanchard, Goldstein, Walker & O'Quin, Shreveport, for appellee.

HARDY, Judge.

This is a suit in which plaintiff seeks the cancellation of an oil and gas lease with reference to a portion of a tract of land in which he is the owner of the fee and of an undivided interest in the minerals. The entire tract of land covered by the lease consists of 84 acres, of which 44 acres comprise a portion of a 640-acre drilling unit established under orders of the State Department of Conservation governing the production of gas from the Anthony sand and the Pettit zone horizons in what is known as the Spider Field of DeSoto Parish. In this action plaintiff seeks the release of the remaining 40 acres on the ground of non-development. On trial it was stipulated that the rights of Shell Oil Company *112 as lessee, named as one of the defendants, had been acquired in their entirety by the Vanson Production Corporation, and, accordingly, a judgment of nonsuit was entered as against the Shell Oil Company. After trial there was judgment in favor of defendant rejecting plaintiff's demands, from which plaintiff prosecutes this appeal.

The original lease, under which defendant claims, was executed on July 30, 1935, and was subsequently amended for the purpose of correcting the description of the property covered thereby. The primary term was fixed at a period of ten years and the instrument of lease contained a reservation in favor of lessee of 25 acres around each well in the event of cancellation or termination of the lease for any cause.

In his petition plaintiff alleged that a well drilled on a unit comprising the 40 acres sought to be released would be productive of oil and gas, and, as ground for this belief, asserted that an offer had been made to drill a well on a unit comprising this acreage and that a formal demand for development or, in the alternative, cancellation and release thereof had been made upon defendant, which demand had been refused. The petition included a demand for attorney's fees in the event of rendition of judgment ordering cancellation. By stipulation the fees were fixed at $500 for the trial services and $500 in event of an appeal.

On trial of the case it was shown that no well had ever been drilled on the 84 acres comprising the leased premises; that the primary term of the lease expired July 30, 1945; that by order of the Department of Conservation of the State of Louisiana issued July 23, 1945, 44 acres of the tract had been pooled, integrated and unitized for the production of gas and condensate from the Anthony sand of the Spider Field in DeSoto Parish, Louisiana, as a part of a 640 acre unit; that subsequently a well was drilled on the said unit (but not on the leased premises), resulting in the production of gas in commercial quantities, which gas at the time of suit was being marketed by defendant, Vanson Production Corporation; that plaintiff had received a bona fide offer of $10 per acre and $25 per acre out of production for a lease on the 40 acres which was proposed to be incorporated in a drilling unit, provided plaintiff should be successful in procuring the release or cancellation of the existing oil and gas lease thereupon.

Defendant filed an exception of no cause or right of action which, by consent, was referred to the merits, but the grounds for which were again urged in the answer and have been reiterated in the hearing and brief on this appeal. The exception is based upon the contention that plaintiff's action is an attempt to cancel an indivisible oil and gas lease insofar as it affects only a portion of the leased land.

On the merits defendant urges that:

"* * * a reasonably prudent operator would not have drilled upon the plaintiff's property to any formation now known to be productive in the area."

Additional established facts bearing upon the enumerated defenses reveal that defendant's geologist, who testified on trial on behalf of defendant, was of the firm opinion that the 40-acre tract sought to be released by this action would be wholly unproductive with reference to development in the Anthony sand or the Pettit zone, the two known producing horizons in the Spider Field, with the possible exception of one acre out of the 40 acres involved; that plaintiff had received a bona fide offer of lease on the 40 acres from one J. W. Caraway, President of the Mansfield Bank & Trust Company, who had occupied such position for a period of seven years, who had previously been connected with the Bank of Logansport, also in DeSoto Parish, over a period of nineteen years, and who had engaged in the buying, selling and development of leases in DeSoto Parish for a period of some twenty years.

Proceeding first to a discussion of defendant's exception of no cause and no right of action, we unreservedly concede *113 the correctness of counsel's argument that the Supreme Court of our state has established the general rule that an oil and gas lease is an indivisible obligation, with respect to which a lessor has no right to demand the forfeiture and cancellation of a part of the leased premises; Hunter Company, Inc. v. Shell Oil Company, Inc., 211 La. 893, 31 So.2d 10, 11, and cases therein cited. Consideration of the Hunter case further conclusively indicates that the majority of our Supreme Court affirms the position that the issuance of a pooling order by the proper conservation authority does not constitute a division of an indivisible obligation and does not justify the cancellation at the instance of the lessor of a portion of the leased premises which lies outside the established unit. The further effect of the holding in the Hunter case is that the drilling of a well on any portion of the pooled unit, though not on any part of the leased premises, is a compliance with the drilling obligation of a lease, if performed within the primary term, which is sufficient to maintain the lease in effect beyond the primary term.

However, we do not construe the holding of the Hunter case as being so extensive in scope and nature as is contended by counsel for defendant. It is important to observe that the action of the plaintiff lessor in the Hunter case was predicated on the ground specifically set forth in the opinion of Mr. Justice Hawthorne:

"* * * that the primary terms of both leases had expired without a well's having been drilled on that portion of the leased premises."

The leases to which reference was made embraces a total of 400 acres, of which 240 acres had been force pooled by order of the Commissioner of Conservation. Plaintiff's action sought to cancel the leases, with reference to the 160 acres excluded from the pooling and unitization order, on the ground above stated.

The court's opinion made the following pronouncement:

"The law is well settled that the lessee's obligation to drill a well is indivisible in its nature, and that the grantor's corresponding obligation to deliver the land is likewise indivisible, and that, if the obligation of one of the parties to the contract is to be fulfilled entirely, the obligation of the other contracting party must likewise be fulfilled in whole."

The court further stated that inasmuch as the obligation

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Bluebook (online)
76 So. 2d 111, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nunley-v-shell-oil-company-lactapp-1955.