Kidwell v. General Petroleum Corp.

Appeal from a judgment, after order sustaining without leave to amend demurrer to plaintiffs’ amended complaint.

Plaintiffs instituted this action to recover from the defendant the General Petroleum Corporation of California damages alleged to have been sustained by them by reason of the entry of said defendant upon the lands of the plaintiffs and the removal by said defendant from said lands of oil and gas by means of wells drilled upon said lands. Plaintiffs also ask for an injuction against said defendant restraining it from any further removal of oil or gas from said wells. The remaining defendants are employees of the defendant corporation. Their presence in the action is not necessary and we will not need to refer to them again, but in mentioning said corporation we will refer to it as the defendant.

In their complaint plaintiffs allege that on the fourth day of October, 1921, they entered into a certain oil and gas lease with defendant covering the lands described in their pleadings. This lease is set out in full in their second amended complaint. It is conceded by plaintiffs that the terms of this lease are clear and unambiguous, and that it is not necessary to resort to paroi or extrinsic evidence in order to ascertain the meaning of the parties as set forth in said lease. Nevertheless, plaintiffs’ pleadings abound in statements as to the object and purpose of the parties in executing said lease, as to the rights of the parties therein, and as to the nature and character of the property lease. In view of the fact that the lease is made a

“This Indenture of Lease, made and entered into this (4th) day of (October), 19(21), by and between (Minna Kidwell Hotchkiss, a married woman (the separate owner of the West 14 of Farm Lot 66 of the Alamitos Tract, hereinafter described) and Anna M. Kidwell, an unmarried woman), hereinafter called the Lessor (whether one or more), and the (General Petroleum Corporation), a corporation, hereinafter called the Lessee.

“Witnesseth: That the Lessor for (a valuable consideration) to them in hand paid, the receipt whereof is hereby acknowledged, leases to the Lessee, all those certain pieces or parcels of land situate in the county of (Los Angeles) state of California, and more particularly described as follows, to wit:

(“West % of Farm lot 66 of American Colony Tract, as per map recorded in Book 19, pages 89 and 90 Miscellaneous records of said county.)

“1. The lease shall continue for a period of 20 years from and after the date of this agreement, and so long thereafter as oil or gas may be produced thereon in paying quantities.

“2. Lessee shall have the sole and exclusive right of prospecting demised premises and drilling for and removing oil and gas therefrom, and to establish and maintain on said premises such tanks, boilers, houses, engines and other apparatus and equipment, power lines, pipe lines, roads and other appurtenances which may be necessary or convenient in the operation or production of oil or gas from said property. Lessee shall have the right during the term of the lease to drill for and develop such water on said premises as it may require in its operations.

“3. The Lessee agrees to start the drilling of a well for oil within (three (3) months) from the date of this agreement, and to continue the work of drilling such well after commencing the same with due diligence until a depth of (3500 feet) has been reached, unless oil is discovered in paying quantities at a lesser depth, or unless such formations are encountered at a lesser depth as will indicate to the geologist of the Lessee that further drilling would be unsuccessful. In the event of encountering mechanical difficulties in the prosecution of work the Lessee may abandon the same, but this lease shall continue in full force, provided a new well is commenced within (ninety (90) days) and thereafter drilled diligently as hereinabove provided.

“4. After discovery of oil in paying quantities in. the first well, the Lessee agrees to commence the drilling of a second well within (ninety (90) days) thereafter, and thereafter continuously operate one string of tools, allowing (ninety (90 days) between' completion of one well and the commencement of the next succeeding until (four wells) have been drilled including offset wells. Nothing herein sTiall be construed to limit the number of wells which the Lessee may drill, should it so elect, in excess of the number hereinabove specified.

“7. . . . All wells subsequent to the first well shall likewise be drilled with due diligence, until a depth of 3500 feet has been reached, unless oil is discovered in paying quantities at a lesser depth, or unless such formations are

The construction placed upon the foregoing terms of the lease by the plaintiffs is that while by the preceding paragraphs thereof the defendant is given the “sole and exclusive right of prospecting demised premises and drilling for. and removing oil and gas therefrom”, the succeeding conditions of the lease limit this right to a depth of 3,500 feet beneath the surface of the said lands, and the gravamen of plaintiffs’ complaint against the defendant is that the latter, after drilling one or more wells to a depth of less than 3,500 feet and obtaining oil therefrom in paying quantities, as defined by said lease, proceeded to and did drill eight other wells upon said lands each to a depth greater than 3,500 feet, from which and by means of which it has extracted from said lands large quantities of oil, the value of which plaintiffs seek to recover by this action. The particular provisions of said lease upon which the plaintiffs rely in support of the aforesaid • contention are those set forth in conditions 3 and 7 of the lease as quoted above, wherein it is stipulated that the lessee shall “continue the work of drilling such well after commencing the same with due diligence until a depth of 3500 feet has been reached, unless oil is discovered in paying quantities at a lesser depth” and “all wells subsequent to the first well shall likewise be drilled with due diligence, until a depth of 3500 feet has been reached, unless oil is discovered in paying quantities at a lesser depth”.

Plaintiffs rely upon the well accepted rule, applicable to the construction of contracts, that a specific intent of the parties governs any general intent expressed therein. The general intent of the parties expressed in said lease was that the lessors, the plaintiffs herein, let and leased to the defendant for the term expressed' therein the real property of plaintiffs with “the sole and exclusive right of prospecting demised premises and drilling for and removing oil and gas therefrom”. Had the lease stopped with these words, plaintiffs concede that the' defendant would have had the unquestioned right to explore for and produce oil from said premises at any depth at which oil might be found or discovered beneath the surface of said lands. Were the

These provisions of the lease were made for the protection of the plaintiffs and were in the nature of an insurance to them that their land would be properly and adequately prospected for oil and gas lying beneath its surface. They cannot in any sense be construed as a limitation upon the broad rights granted to the defendant by the previous terms of the lease.

The contention of the plaintiffs that, as the parties to the lease at the time of its execution were ignorant of any oil deposits therein below the 3,500-foot level, they did not contract as to these lower deposits of oil, and that their minds did not meet except as to the oil and gas found above that depth, is equally without merit. The lease as we have seen is general in its terms and gives to the defendant the sole and exclusive right to drill for oil and gas upon said land. It might with equal force be contended by plaintiffs’ grantors that at the time said lands were conveyed to the plaintiffs the parties to said transaction were ignorant of the valuable deposits of oil and gas lying beneath the surface thereof and that they did not contract in reference to these deposits, and, therefore, that the deed to plaintiffs in so far as these deposits of oil and gas were concerned was void and of no effect, for the reason that the minds of the parties to said deed never met upon the question of the conveyance of these deposits of oil and gas. It is perfectly clear that no such contention could be successfully maintained. The deed to plaintiffs, executed by their grantors,

There is but little authority upon this subject to be found in the decided cases. We think, however, that somewhat similar questions were involved in the cases of St. Louis Union Trust Co. v. Galloway Coal Co., 193 Fed. 106 , 126, affirmed in 201 Fed. 1022 , and Grimes v. Goodman Drilling Co., (Tex. Civ. App.) 216 S. W. 202 . In the former case the lease provided that the lessor let to the lessees “the privilege of mining coal on the land”. There were three seams or strata of coal on the lessor’s land. The lease made no reference to any particular seam or stratum of coal which the parties had in mind at the time the lease was executed, but it did contain a provision that if the seam of coal opened on said land should fail to be worked out the lease should cease and terminate. The lessees entered upon the land and worked one of the seams of coal until it was exhausted and the question then arose as to whether they could continue and mine coal in the other seams. The court held that the lease covered any coal under the leased land, and the provision in the lease providing for the termination thereof if the seam of coal opened should be worked out was for the benefit of the lessees and conferred an option upon them of terminating the lease when the contingency happened. In the other case cited above, the lessee agreed to drill to the depth of 2,000 feet unless oil or gas was obtained at a lesser depth in paying quantities and that the drilling of one well was a complete fulfillment of the

As the sufficiency of the second amended complaint must be determined by the terms of the lease, and as the lease gives to the defendant the unlimited power to drill for oil on said lands, it necessarily follows that the pleading states no cause of action, and the action of the trial court in sustaining the general demurrer thereto must be sustained.

We hardly think the reference of plaintiffs to certain physical facts and characteristics under which oil and gas exist in their natural state can have any material bearing upon the decision of this action. Illustrating this point, plaintiffs quote from Summers’ Law of Oil and Gas, page 70, as follows :

“At this point it is necessary to recall briefly some of the physical facts and characteristics of oil and gas, known to geologists and judicially recognized by the courts. They accumulate in strata of sandstone, limestone, or in the crevices of shale, and in their natural state are retained in these rock strata, commonly spoken of as reservoirs, held from escape by sealing or folding of the reservoir rock. Thus imprisoned they are subject to great pressure, rock, gas, or hydrostatic, ranging in different fields from 25 to 1200 pounds per square inch.”

From the foregoing statements as well as others from equally eminent authors, plaintiffs assert, and in this assertion we agree, that oil and gas are usually found in separate and distinct strata under the surface of the soil and these strata are entirely separate and distinct and disconnected from one another; that these different strata of oil-bearing rock or shale are frequently found in a hori

Defendant also demurred to plaintiffs’ second amended complaint on the ground that it appears therefrom that plaintiffs’ alleged causes of action are barred by loches and the statute of limitations. It is unnecessary to discuss these grounds of demurrer. Having held that the pleadings fail to state facts sufficient to constitute a cause of action, it is a matter of no consequence whether the other grounds of demurrer are, or are not, well taken.

The judgment is affirmed.

Richards, J., Langdon, J., Seawell, J., Waste, C. J., and Shenk, J., concurred.