Superior Oil Co. v. Somers Drilling Co.

143 F.2d 49, 1944 U.S. App. LEXIS 4284
CourtCourt of Appeals for the Seventh Circuit
DecidedJune 13, 1944
DocketNos. 8400, 8401
StatusPublished
Cited by1 cases

This text of 143 F.2d 49 (Superior Oil Co. v. Somers Drilling Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Superior Oil Co. v. Somers Drilling Co., 143 F.2d 49, 1944 U.S. App. LEXIS 4284 (7th Cir. 1944).

Opinion

KERNER, Circuit Judge.

The District Court has in its registry the sum of $29,077.88, being the proceeds from the sale of oil produced by defendants from a tract of land pending litigation which involved the validity of their lease. These appeals involve the distribution of this money.

The District Court held that interveners should he paid the costs which they had incurred from April 30, 1941, hut refused ■to allow interveners their costs of drilling the well prior to that date. Hence $10,-327.94 was directed to be paid to interveners, and the remainder of the fund to plaintiff, Superior Oil Company.

Interveners appeal from that portion of the decree which denied them the right to recover the entire costs and expenses of drilling the well, and plaintiff appeals because the entire fund was not directed to be paid to it.

In contending that defendants had a valid title to the leasehold in question, interveners are trying to re-litigate what has already been decided against them. Superior Oil Co. v. Harsh, 7 Cir., 126 F.2d 572, affirming, D.C., 39 F.Supp. 467. As to interveners’ contention that the Illinois rule — that good faith trespassers are not entitled to compensation for the costs of production — is erroneous and should not be followed because it is based upon what the Illinois court thought was the English rule, but which, in fact, is contrary to the English rule, we think it is patently unsound. It is not for this court to speculate as to future decisions of the Illinois courts. The District Court correctly ruled against interveners’ contentions, 50 F.Supp. 358, and interveners’ appeal is, therefore, dismissed.

The only issue, then, is whether the court was right in allowing interveners ■the costs which they incurred after April 30, 1941, in producing the oil from the School House well. At that time the well had been drilled, hut had not been shot. Therefore, it was not in production. Production was believed imminent if the well should be shot. On April 22, 1941, plaintiff had obtained a temporary restraining order against defendants prohibiting the producing and marketing of oil from the well in question, and the cause had been set for hearing upon application for a [50]*50temporary injunction. It should be borne in mind that title to this land was in sharp dispute. Defendants believed they had a valid lease from the School Trustees, basing their belief upon an attorney’s opinion that notwithstanding there was no deed of record to the School Trustees, their title was good by adverse possession.

A representative of interveners stated to plaintiff’s counsel that quantities of water were in the hole so that if the well was shut down and not brought into production, there was danger of serious damage not only to this particular well but also to the oil-bearing formation of the area. If defendants were there rightfully and this occurred, plaintiff would have a liability of $10,000 under the bond that it had given for the restraining order. In this situation, the sensible thing to do was to bring the well into production on condition that the proceeds from the sale of the oil be deposited with the court.

On April 30, 1941, the parties entered into a stipulation which so provided. This stipulation included a paragraph making it subject to the approval and order of the court. Such approval was expressly given on May 2, 1941.

By the terms of the stipulation defendants released, plaintiff from all damages arising from the temporary restraining order. Thus plaintiff did receive some benefit from the stipulation. Bearing in mind that it was not clear whether defendants’ lease was valid, it is clear that plaintiff was anxious to escape liability on its bond. That this was a motivating cause of the stipulation is apparent from the following terms of the stipulation: “This stipulation is entered into for the purpose of eliminating, and in lieu of, any and all damages, accrued, accruing or hereafter to accrue unto the defendants by reason of the temporary restraining order heretofore entered herein, and said defendants hereby release the plaintiff from any and all claims, rights, demands, cause or causes of action which they and each of them may, might or could have or possess against said plaintiff on account thereof.”

Plaintiff, as well as defendants, sanctioned going ahead with producing this oil, which necessarily meant that certain costs would be incurred. The very first paragraph of the stipulation gave the defendants the right to “* * * * maintain, operate, and produce oil from, that certain oil well. * * This brings to light the fundamental flaw in plaintiff’s argument. For plaintiff’s argument is that defendants were trespassers, and plaintiff cites certain Illinois cases to the effect that a trespasser who removes oil from the lands of another is entitled to no credit for his expenses thereby incurred.1 But this argument ignores the instant stipulation. In the light of this express grant of the right to produce the oil, defendants and interveners can not be regarded as trespassers and penalized as such, for it is elementary that in order to be a trespasser the party must be acting without the consent of the owner of the property on which the alleged trespass is committed. Furthermore, defendants and interveners were not trespassers because they had the further assurance furnished by the court’s approval. Both plaintiff and defendants were before the court; the res was in the court’s custody, and defendants, by the order of the court approving the stipulation, were permitted to proceed.

The District Court concluded that the stipulation and the approval thereof by the court was in lieu of receivership pendente lite.

Plaintiff contends that in so concluding, the court erred, because defendants never applied for a receiver and there is no proof that the court would have appointed a receiver if applied for by .the defendants. Obviously, no receiver was applied for because the stipulation took its place. It is reasonable to assume that defendants could have obtained a receiver to operate this well if the stipulation had not been made. Especially is this so since the court in its opinion stated: “This court has made it a policy in extensive litigation involving issues between competitive claimants of oil and gas rights, wherever possible, to desist from appointment of a receiver. Inasmuch as, in most instances, a responsible oil company has been found engaged in drilling the well, the court has considered it more economical, less productive of costs of administration and wiser judicial action, to permit the party drilling to proceed with production depositing, pending litigation, the proceeds in court. The parties here acceded to such [51]*51procedure. Both were before the court; the res was in the court’s custody, and defendants, by the order of court approving the stipulation, were permitted to proceed.” 50 F.Supp. 361.

A large sum had already been spent, and there was danger of not only this well but the entire formation being ruined if the well was not brought into production. Defendants thought they had a valid lease, basing their belief on fifty-five years of possession (which was believed to be adverse) in their grantor.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Buggs v. McNulty
N.D. Indiana, 2025

Cite This Page — Counsel Stack

Bluebook (online)
143 F.2d 49, 1944 U.S. App. LEXIS 4284, Counsel Stack Legal Research, https://law.counselstack.com/opinion/superior-oil-co-v-somers-drilling-co-ca7-1944.