335 F.2d 438
SOCONY MOBIL OIL COMPANY, Inc., Appellant,
v.
CONTINENTAL OIL COMPANY, a corporation, Midwest Oil Corporation, a corporation, and King-Stevenson Gas and Oil Company, a corporation, Appellees.
No. 7480.
United States Court of Appeals Tenth Circuit.
August 5, 1964.
Rehearing Denied September 14, 1964.
Robert W. Richards and Coleman H. Hayes, Oklahoma City, Okl. (S. M. Groom, Jr., Oklahoma City, Okl., and C. B. Wallace and Ross Madole, Dallas, Tex., with them on the brief), for appellant.
Fisher Ames, of Ames, Daugherty, Bynum, Black, Ashabranner & Rogers, Oklahoma City, Okl. (Lewis G. Mosburg, Jr., of Mosteller, Andrews & Mosburg, Oklahoma City, Okl., for King-Stevenson Gas & Oil Co., appellee, Richard R. Linn and Robert E. Gill, Jr., Oklahoma City, Okl., for Continental Oil Co., appellee, with him on the brief), for Midwest Oil Corp., appellee.
Before PICKETT, LEWIS and BREITENSTEIN, Circuit Judges.
PICKETT, Circuit Judge.
This is an appeal from a judgment of the United States District Court for the Western District of Oklahoma, requiring the appellant to assign certain interests in oil and gas leases to the appellees which the court found had been earned under the terms of a farm-out agreement, as amended. The principal issue here is whether the plaintiffs acted diligently in demanding an assignment of the oil and gas leases in question.
Prior to October 30, 1958, Magnolia Petroleum Company held leases on more than 9,000 acres of land in Dewey County, Oklahoma. On that date Magnolia, desiring to test the Chester formation in that area, entered into a farm-out agreement with Calvert Drilling Company, the essence of which was that if Calvert drilled the test well, Magnolia would assign an undivided one-half interest in the leases above the base of the Chester formation (a depth of about 12,950 feet). Magnolia expressly reserved all of its rights in the formation below the base of the Chester. This test well, known as the #1 Brundage, was completed as a dry hole in April, 1959. On May 4, 1959 Magnolia wrote to Calvert, Midwest and King-Stevenson, stating in part that "You have earned your assignment under the above letter agreements, but as you know, we have been renewing leases in this area and will furnish you the assignment when we have had time to get all of the renewals processed through our Dallas Office." No assignments were executed.
Before completion of the Brundage well, Magnolia had completed a deep-test well as a commercial producer of gas in the vicinity of the farm-out area. It then desired to test the deep formations of the farm-out leases and #1 Herring was drilled and completed as a dry hole. During this time Magnolia took new leases on over 4,000 acres of land in the farm-out area although the existing leases had not expired. Thereafter, by letter agreement of September 23, 1960, the parties arranged for a division of costs in reworking the Herring well to test the sands above the Chester formation. A question then arose as to the rights and obligations of the parties concerning the renewed leases. It was agreed that the Calvert group would pay $27,742.50 as their share of the renewal costs and delay rentals. This agreement was set forth in a letter dated September 30, 1960, from Mobil Oil Company to Calvert Drilling, Inc. The workover of the Herring well was completed on October 24, 1960, with unfavorable results. Thereafter the appellees did not waive the assignments referred to, nor did they demand the lease assignments or offer to pay the amount agreed upon. Mobil made no demand for the payment. After Continental acquired the Calvert interests, it discovered in March of 1961 that assignments had not been made to Calvert. It then made inquiry concerning the transfer of the leases, and on August 3, 1961, wrote Mobil requesting the assignments. Mobil replied that Continental had acquired no interest in the leases from Calvert as it, together with Midwest and King-Stevenson, had waived all assignments under the terms of the agreement. This was the first indication by Mobil that it did not intend to recognize the right of the Calvert group to the assignments.
The terms of the September 30, 1960 agreement are unambiguous. Calvert, Midwest and King-Stevenson obligated themselves to pay an agreed amount as their share of the costs of the renewal leases and delay rentals which had been paid by Mobil. They reserved the right to cancel out these obligations by an election to waive assignment after the results of reworking the Herring well became known. Under the terms of the agreement, the rights and obligations of the parties were fixed. The Calvert group was not required to take any action unless it desired to waive the assignments. In the absence of a waiver, Mobil was required to deliver the assignments upon payment of the amount due. Neither party took any action to consummate the contract. Such delay appears to have been the usual course of conduct of the parties from the time of their first association in 1958. There is no evidence in the record that there was a material change in the situation of the parties between the date of the contract and the filing of this action, and no substantial evidence of a material change in the value of the oil and gas leases.
It is Mobil's position that the court erred in granting specific performance of the September 30, 1960 contract, because the parties seeking that relief had not acted promptly in electing to participate in the renewal leases as well as asserting their claim for relief. Generally, the doctrine of laches applies only in cases where, because of the lapse of time, it would be inequitable to permit a party to enforce his legal rights. In other words, the delay must result in prejudice or an injustice to another. Pfister v. Cow Gulch Oil Co., 10 Cir., 189 F.2d 311, cert. denied 342 U.S. 887, 72 S.Ct. 177, 96 L.Ed. 665; Shell v. Strong, 10 Cir., 151 F.2d 909; Hoehn v. Crews, 10 Cir., 144 F.2d 665, aff'd 324 U.S. 200, 65 S.Ct. 600, 89 L.Ed. 870. Whether a delay has been injurious to a party depends upon the facts and circumstances of each case. Phelan v. Roberts, 182 Okl. 202, 77 P.2d 9; Carnes v. Thomas, 280 P.2d 474, (Okl.1955). It has been held that where the value of the subject matter of a contract such as oil and gas property changes rapidly, or where there has been a substantial change in its value, specific performance is available only where the rights are asserted diligently and without unreasonable delay. Nelson v. Hamra, 127 Okl. 141, 259 P. 838; Parker v. Ryan, 143 Okl. 187, 287 P. 1006; Pfister v. Cow Gulch Oil Co., supra; Texas Co. v. Herring, 8 Cir., 19 F.2d 56; Taylor v. Salt Creek Cons. Oil Co., 8 Cir., 285 F. 532.
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335 F.2d 438
SOCONY MOBIL OIL COMPANY, Inc., Appellant,
v.
CONTINENTAL OIL COMPANY, a corporation, Midwest Oil Corporation, a corporation, and King-Stevenson Gas and Oil Company, a corporation, Appellees.
No. 7480.
United States Court of Appeals Tenth Circuit.
August 5, 1964.
Rehearing Denied September 14, 1964.
Robert W. Richards and Coleman H. Hayes, Oklahoma City, Okl. (S. M. Groom, Jr., Oklahoma City, Okl., and C. B. Wallace and Ross Madole, Dallas, Tex., with them on the brief), for appellant.
Fisher Ames, of Ames, Daugherty, Bynum, Black, Ashabranner & Rogers, Oklahoma City, Okl. (Lewis G. Mosburg, Jr., of Mosteller, Andrews & Mosburg, Oklahoma City, Okl., for King-Stevenson Gas & Oil Co., appellee, Richard R. Linn and Robert E. Gill, Jr., Oklahoma City, Okl., for Continental Oil Co., appellee, with him on the brief), for Midwest Oil Corp., appellee.
Before PICKETT, LEWIS and BREITENSTEIN, Circuit Judges.
PICKETT, Circuit Judge.
This is an appeal from a judgment of the United States District Court for the Western District of Oklahoma, requiring the appellant to assign certain interests in oil and gas leases to the appellees which the court found had been earned under the terms of a farm-out agreement, as amended. The principal issue here is whether the plaintiffs acted diligently in demanding an assignment of the oil and gas leases in question.
Prior to October 30, 1958, Magnolia Petroleum Company held leases on more than 9,000 acres of land in Dewey County, Oklahoma. On that date Magnolia, desiring to test the Chester formation in that area, entered into a farm-out agreement with Calvert Drilling Company, the essence of which was that if Calvert drilled the test well, Magnolia would assign an undivided one-half interest in the leases above the base of the Chester formation (a depth of about 12,950 feet). Magnolia expressly reserved all of its rights in the formation below the base of the Chester. This test well, known as the #1 Brundage, was completed as a dry hole in April, 1959. On May 4, 1959 Magnolia wrote to Calvert, Midwest and King-Stevenson, stating in part that "You have earned your assignment under the above letter agreements, but as you know, we have been renewing leases in this area and will furnish you the assignment when we have had time to get all of the renewals processed through our Dallas Office." No assignments were executed.
Before completion of the Brundage well, Magnolia had completed a deep-test well as a commercial producer of gas in the vicinity of the farm-out area. It then desired to test the deep formations of the farm-out leases and #1 Herring was drilled and completed as a dry hole. During this time Magnolia took new leases on over 4,000 acres of land in the farm-out area although the existing leases had not expired. Thereafter, by letter agreement of September 23, 1960, the parties arranged for a division of costs in reworking the Herring well to test the sands above the Chester formation. A question then arose as to the rights and obligations of the parties concerning the renewed leases. It was agreed that the Calvert group would pay $27,742.50 as their share of the renewal costs and delay rentals. This agreement was set forth in a letter dated September 30, 1960, from Mobil Oil Company to Calvert Drilling, Inc. The workover of the Herring well was completed on October 24, 1960, with unfavorable results. Thereafter the appellees did not waive the assignments referred to, nor did they demand the lease assignments or offer to pay the amount agreed upon. Mobil made no demand for the payment. After Continental acquired the Calvert interests, it discovered in March of 1961 that assignments had not been made to Calvert. It then made inquiry concerning the transfer of the leases, and on August 3, 1961, wrote Mobil requesting the assignments. Mobil replied that Continental had acquired no interest in the leases from Calvert as it, together with Midwest and King-Stevenson, had waived all assignments under the terms of the agreement. This was the first indication by Mobil that it did not intend to recognize the right of the Calvert group to the assignments.
The terms of the September 30, 1960 agreement are unambiguous. Calvert, Midwest and King-Stevenson obligated themselves to pay an agreed amount as their share of the costs of the renewal leases and delay rentals which had been paid by Mobil. They reserved the right to cancel out these obligations by an election to waive assignment after the results of reworking the Herring well became known. Under the terms of the agreement, the rights and obligations of the parties were fixed. The Calvert group was not required to take any action unless it desired to waive the assignments. In the absence of a waiver, Mobil was required to deliver the assignments upon payment of the amount due. Neither party took any action to consummate the contract. Such delay appears to have been the usual course of conduct of the parties from the time of their first association in 1958. There is no evidence in the record that there was a material change in the situation of the parties between the date of the contract and the filing of this action, and no substantial evidence of a material change in the value of the oil and gas leases.
It is Mobil's position that the court erred in granting specific performance of the September 30, 1960 contract, because the parties seeking that relief had not acted promptly in electing to participate in the renewal leases as well as asserting their claim for relief. Generally, the doctrine of laches applies only in cases where, because of the lapse of time, it would be inequitable to permit a party to enforce his legal rights. In other words, the delay must result in prejudice or an injustice to another. Pfister v. Cow Gulch Oil Co., 10 Cir., 189 F.2d 311, cert. denied 342 U.S. 887, 72 S.Ct. 177, 96 L.Ed. 665; Shell v. Strong, 10 Cir., 151 F.2d 909; Hoehn v. Crews, 10 Cir., 144 F.2d 665, aff'd 324 U.S. 200, 65 S.Ct. 600, 89 L.Ed. 870. Whether a delay has been injurious to a party depends upon the facts and circumstances of each case. Phelan v. Roberts, 182 Okl. 202, 77 P.2d 9; Carnes v. Thomas, 280 P.2d 474, (Okl.1955). It has been held that where the value of the subject matter of a contract such as oil and gas property changes rapidly, or where there has been a substantial change in its value, specific performance is available only where the rights are asserted diligently and without unreasonable delay. Nelson v. Hamra, 127 Okl. 141, 259 P. 838; Parker v. Ryan, 143 Okl. 187, 287 P. 1006; Pfister v. Cow Gulch Oil Co., supra; Texas Co. v. Herring, 8 Cir., 19 F.2d 56; Taylor v. Salt Creek Cons. Oil Co., 8 Cir., 285 F. 532. In any event, the defense of laches is available only when there has been some detrimental result from the delay in asserting rights. Bechler v. Kaye, 10 Cir., 222 F.2d 216, cert. denied 350 U.S. 837, 76 S.Ct. 75, 100 L.Ed. 747; Chisholm v. House, 10 Cir., 183 F.2d 698; Yates v. American Republics Corp., 10 Cir., 163 F.2d 178; Alexander v. Phillips Pet. Co., 10 Cir., 130 F.2d 593; Stallings v. White, 194 Okl. 649, 153 P.2d 813. We find no error in the trial court's conclusion that the delay in making demand for the assignments caused no detriment or prejudice to the rights of Mobil, and that specific performance was appropriate under the circumstances.
The appellants' last contention, that is, that Calvert's assignment to Continental was invalid because not approved by Mobil, is without merit. The original farm-out agreement contained the requirements that assignments be approved, but the subsequent agreements did not. The original agreement became fully executed, except for making the assignments, when the Brundage well was completed as a dry hole. Mobil's letter of May 4, 1959 admits that the assignments had been earned. The authority cited by Mobil correctly states the rule that a covenant not to assign is valid so long as the contract is executory, but when all that remains to be done is the payment, the reason for nonassignability no longer exists. Cheney v. Bilby, 8 Cir., 74 F. 52, cert. denied 164 U.S. 705, 17 S.Ct. 992, 41 L.Ed. 1180; Prudential Fed. Svgs. & Loan Ass'n v. Hartford Acc. & Indemn. Co., 7 Utah 2d 366, 325 P.2d 899.
Affirmed.