Western Petroleum Co. v. Atlantic Refining Co.

359 P.2d 773, 68 N.M. 149
CourtNew Mexico Supreme Court
DecidedFebruary 21, 1961
Docket6717
StatusPublished
Cited by2 cases

This text of 359 P.2d 773 (Western Petroleum Co. v. Atlantic Refining Co.) is published on Counsel Stack Legal Research, covering New Mexico Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Western Petroleum Co. v. Atlantic Refining Co., 359 P.2d 773, 68 N.M. 149 (N.M. 1961).

Opinion

MOISE, Justice.

Under date of April 23, 1932, one C. M. Carlson obtained an Oil and Gas Prospecting Permit covering 2560.20 acres of land in Lea County, New Mexico, from the Secretary of Interior. On November 2,. 1936, C. M. Carlson, as “Owner,” and Anderson-Prichard Oil Corporation, hereinafter referred to as Anderson-Prichard,. as “contractor,” entered into a drilling and operating agreement covering the 2560.20-acres included in the prospecting permit, whereby Anderson-Prichard was given certain rights of possession and occupancy of the lands for purposes of “prospecting or drilling for, developing, producing and marketing of oil, gas, casinghead gas and kindred substances therefrom.” By the terms of this agreement 640 acres described therein was denominated “Preferential (a) Lease” and the balance as “Secondary (b) Lease.” We are only interested in the lands included in the “Preferential (a) Lease.” The agreement provided that Anderson-Prichard would, on or before December 1, 1936, commence drilling a well in the SWJ4NW14 of Section 21, Twp. 25 S., Rge. 37 E., N.M.P.M., being 40 acres, of the “preferential (a) lease” and drill it to 3650 feet unless oil was discovered at a lesser depth or sulphur or salt water encountered.

This well was drilled and oil discovered, whereupon pursuant to the terms of the agreement a lease was obtained from the-Secretary of Interior.

Thereupon, as provided in the drilling, and operating agreement, Anderson-Prichard received an assignment of 520 acres of the preferential (a) lands, including the 40. acres where the discovery well was located. Under the agreement certain drilling requirements and duties were imposed and assumed. The duties included payment of royalties, and in paragraph 9 provided for other obligations. Since the dispute in this case revolves principally around paragraph 9, it is quoted in full:

“9. Contractor shall, so long as there is a market for oil and/or gas, and the posted price for crude oil in the field is not less than fifty cents (500) per barrel, continue with the drilling of wells upon all of said Preferential (a) lands to which he is entitled to drill under the terms of this agreement, at the rate of one well completed to production or abandonment for each and every year, as hereinafter in this paragraph defined, until Contractor shall have drilled upon the Preferential (a) land at least eight wells exclusive of the initial or test well; provided that Contractor may at any time within the first nine months of each such year elect by notice in writing to Owner, not to drill a well during such year, whereupon Owner' shall have the right to select from Contractor’s Preferential (a) acreage, any undrilled forty acres of land in square form, which forty acre tract shall forthwith be assigned to Owner free ■ and clear of this agreement, whereupon the obligation of Contractor to drill a well upon said land during such year shall terminate. It is understood, however, that in the drilling and operation of said property contractor will always drill any wells reasonably necessary to adequately protect all of the Preferential (a) lands hereby granted to Contractor against drainage. The term ‘year’ in this paragraph hereinbefore referred to, shall be the period between Feb. 1st of one year and Feb. 1st of the next year, commencing with the 1st day of Feb. 1937. It is further understood and agreed that the C.M.C.J.S.A. oil and gas leases above referred to are issued pursuant to the applicable laws of the United States, and this contract is amenable to said law and the rules and regulations of the Secretary of the Interior promulgated thereunder, and whenever there may be any conflict between this agreement and the rules and regulations of the Secretary of the Interior, such rules and regulations shall govern.”

Paragraphs numbered 12 and 23, also being of particular interest, they are likewise quoted in full:

“12. Should Contractor fail or refuse to commence the well herein provided for, or should Contractor fail to complete said well with reasonable diligence, or should Contractor otherwise fail or refuse to perform any of the other conditions in this agreement provided for Contractor to perform, Owner may, at its option, cancel and terminate this agreement upon written notice to Contractor advising wherein Contractor has failed to comply with this agreement, provided that the Contractor shall thereafter have forty five (45) days, except as to first well where Contractor shall have fifteen (15) days, within which to comply with this agreement in the respect in which default has occurred, and if Contractor shall so comply, this agreement shall remain in full force and effect; otherwise this agreement shall be immediately terminated and Contractor shall execute and deliver to Owner a re-assignment or quitclaim deed of the lands held by Contractor, in such form and to such persons as Owner may designate, whereupon Contractor shall have no further obligations as concerns the lands so reassigned or quitclaimed. In the event of any such termination, Contractor shall be entitled to retain any wells drilled by it and producing on said land, together with an area of forty acres surrounding each such well, said forty acre tracts to be in square form; all of which shall be held, however, subject to performance by Contractor, as concerns the same, of the Contractor’s obligations hereunder.”
“23. The rights of Contractor under the terms of this agreement shall not be assigned or sublet or otherwise contracted by Contractor unless the assignee, sublessee or person contracting with Contractor shall first sign and deliver to Owner in writing a fuly executed memorandum agreeing to. be bound by the terms and conditions of this agreement as concerns the land in which they are interested.”

Thereafter, the interests of Carlson as owner were conveyed to and are now owned by the plaintiff-appellant. In turn, Anderson-Prichard, under date of January 19, 1943, conveyed to the defendant-appellee all of its interest in N14SE14 of Section 23, Twp. 25 S., Rge. 37 E., N.M.P.M., containing 80 acres, being part of the preferential (a) land. The present action sought to have the court declare all interests of appellee in the 80 acres standing in its name, to be terminated and reverted to appellants pursuant to the terms of paragraph 12 of the November 2, 1936, agreement, and for an order requiring a reconveyance to appellant by appellee of all rights claimed by it. Upon cross motions for summary judgment being considered by the court, the motion of appellee was sustained and this appeal followed.

There is no dispute in the evidence. As stated, the case was decided on motion for summary judgment where the court considered certain answers to interrogatories, the various written instruments and the deposition of the Chairman of the Board of appellant corporation.

To continue with the facts: After ex-ecution of the 1936 agreement, and prior to February 1, 1943, Anderson-Prichard drilled three wells and pursuant to the provisions •of the contract acquired all lease rights in the three 40-acre tracts on which the wells were located.

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Bluebook (online)
359 P.2d 773, 68 N.M. 149, Counsel Stack Legal Research, https://law.counselstack.com/opinion/western-petroleum-co-v-atlantic-refining-co-nm-1961.