136 F. Supp. 412

G. M. WALDRIP et al., Plaintiffs, v. Jake L. HAMON et al., Defendants.

Civ. No. 3652.

United States District Court E. D. Oklahoma.

Nov. 18, 1955.

*413Fischl & Culp, Ardmore, Old., for plaintiffs.

George N. Otey, Ardmore, Okl., for defendants.

WALLACE, District Judge.

The plaintiffs instituted this suit urging four causes of action in connection with certain mineral interests owned by plaintiffs and presently leased to defendant Hamon.1 Plaintiffs ask: (1) for damages due to Hamon’s breach of contract with plaintiffs, G. M. and Helen E. Waldrip, husband and wife, wherein Hamon promised to either drill to the Humphreys Sands or assign the 20 acres to one willing to so drill; (2) for damages because of alleged drainage by a northwest diagonal offset in which Ham-on Eas an interest; (3) that Hamon be required to comply with the Wáldrip agreement and either assign or release the controverted Humphreys Sands; and, (4) for a release of the entire 40 acres as to all formations 200 feet below the Humphreys Sands because of Ham-on’s failure to complete a well in the Goodwin Sand.

Previously, this court ruled that defendant Hamon'did breach his agreement with the Waldrips in refusing to assign “to the Humphreys Sands” after failing himself to drill within the prescribed time.2 However, such ruling did not propose to deal with the relief to be granted because of such breach, with the alleged failure of Hamon to protect the 20 acres from drainage, or with plaintiffs’ claim as to the entire 40 acres asserted in the fourth cause of action.

Although all the mineral owners of the 40 acres in question have been joined as parties plaintiff, the claims for relief originate in the contract between the Waldrips and defendant Hamon. Inasmuch as there is no privity of contract between defendant Hamon and the “other plaintiffs” (that is, other than the Waldrips) these other plaintiffs have no standing to seek recovery based upon al*414leged breaches of the Waldrip-Hamon contract, and modifications thereto. Hamon’s liability for breaching this contract must be measured by the detriment suffered by the Waldrips, the promisees under the contract.3

Although the Waldrips’ monetary loss because of the breach cannot be determined to the precise dollar the evidence does enable the court to assess with .reasonable accuracy the extent of such loss inasmuch as the expert testimony and documentary evidence establishes with convincing certainty the approximate number of barrels of oil recoverable by primary methods from the Humphreys Sands under the 20 acres in question. The principle that where damage is certain, recovery should not be denied because of difficulty in determining the exact amount of the damage is peculiarly applicable here.4

Plaintiffs’ evidence indicates that of the 20 acres in question 3.17 acres contain recoverable oil.5 In addition, such evidence establishes that the net depth of these sands is 41 feet; and, that the sands contain some 125 barrels per acre foot.6 Thus, from Waldrip’s own testi.mony it is inferable that had the controverted well been drilled, the Waldrips’ interest would have amounted to about 1116 barrels.7 However, in calculating the monetary loss suffered by the Wald-rips because the instant well was not drilled consideration must be given the fact that the evidence also shows that the “Waldrip No. 1” offsetting to the east will recover approximately 25% of the oil underlying the 20 acres in question.8 Inasmuch as the Waldrips have the same fractional royalty interest in the “Waldrip No. 1” as held in the 20 acres in question, the increased produc*415tion to be gained by the “Waldrip No. 1” because of the failure to drill the controverted well must be subtracted from the oil which would have been recovered for the Waldrips from the proposed but undrilled well in order to arrive at the actual net loss suffered by the Waldrips because of the instant breach of contract. Such subtraction indicates the Waldrips suffered a net loss in barrels of oil of about 837.

In determining the Waldrips’ loss resulting from the breach in question, the court has not overlooked plaintiffs’ argument that the proper measure of damage should be the cost of drilling a well on the site in question to the agreed upon depth. Although plaintiffs cite authorities from Oklahoma wherein the “cost of the well” was determined to be the proper measure of damage for failure to drill an agreed upon well,9 such authorities are inapplicable to the case at bar. Where the courts have applied such a norm two basic conditions have existed. First, the breached contracts were ones wherein there was an unconditional promise to drill specific wells, with the drilling of a well, or wells, the paramount object in view.10 Secondly, the cost of the well appeared to be the most logical rule to apply to determine the exact extent of the loss of the promisee because of the breach.11

In the case at bar, Hamon did not unconditionally promise, as an operator, to drill a well for the Waldrips. His promise was conditioned upon a self-determination of whether such a well would be profitable with an alternative of assigning or releasing the acreage in question if in his judgment such a well would not prove profitable. It is clear, that insofar as the Waldrips were concerned the object of the contract was to gain production from the sands in question, with the drilling of a well merely being the means to secure that end result. Nothing inheres in the controverted agreement pointing to a desire to obtain an exploratory well for testing of the structure or proving or disproving a certain general area, or other considerations which may enter into a promisee’s desire to contract for the drilling of a specific well, or wells. And, where as in the instant case taking plaintiffs own figures of likely primary recovery, there would be no logic in arbitrarily using the cost of drilling a well as the basis for recovery where a more accurate means of determining the financial consequence of the promisor’s breach is available.12 A different situation exists where it is absolutely impossible to determine whether *416the well not drilled would have been dry or a tremendous producer. Under such circumstances the “cost of the well” is the best, if not the only means of judging the damage resulting from the breach. However, inasmuch as the “cost of the well” recovery is in essence an award of liquidated damages, not looked upon with favor by the law, an approximation of the true damage to the promisee should be used where as in the case at bar such a determination can be made with a reasonable degree of certainty.

Although plaintiffs introduced evidence going toward the possible secondary recovery of barrels of oil from the controverted 20 acres had a well been drilled, such evidence is entirely too speculative upon which to pitch a monetary award.13 Many contingencies enter into any attempt for secondary recovery;14 and, in determining the loss suffered by the Waldrips because of the instant breach the allowed damages must be based upon probability and not merely conjecture or possibility.

Although the bases of all the plaintiffs’ causes of action are founded in the Waldrip-Hamon contract, the court has also considered whether in light of the introduced evidence the “other plaintiffs” have established a right to recover for drainage based upon the breach of an implied covenant running between the “other plaintiffs” and Hamon. The evidence fails to disclose any such right. Although, doubtless, the “Haas No. 2” (a 10-acre 'diagonal offset to the northwest) and “the Pickens-Williams No. 4” (a 10-acre diagonal offset to the northeast) will probably benefit from added bottom hole pressure due to the absence of a well to the Humphreys Sands on the controverted 20-acres; nonetheless, the evidence is convincing that these two offsets have not and will not produce oil drained from this 20 acres. The only well which is draining the sands in question is the “Waldrip No. 1” (located to the east) and inasmuch as the plaintiffs own the same fractional interest therein as in the 20-acres in question, plaintiffs can show no damage.

There is nothing in the contract between the Waldrips and Hamon which at this time requires Hamon to release or assign “all formations two hundred (200) feet below the Humphreys Sands” on the 40-acres as requested in plaintiffs’ fourth cause of action. Although the last sentence of Paragraph 5 of the “Modification of Contract” when read out of context appears to require such a release or assignment if Hamon did not complete a well in the Goodwin Sand, a reading of the entire contract and modification thereto demonstrates that the relied upon Paragraph 5 never came into operation. Such provision was only to be applicable if Hamon in drilling the first *417well failed to test or “drill to” the Goodwin Sands. When Hamon drilled the first well (the Waldrip No. 1) such hole was drilled to the Goodwin Sand and carefully tested. Such being done, no rights under Paragraph 5 accrued to the Waldrips. If Hamon had not drilled down to the Goodwin Sand when drilling the “Waldrip No. 1”; and had the Wald-rips then procured a person willing to test such sand, Paragraph 5 would have come into effect, thereby making it incumbent upon Hamon to either complete the second well in the Goodwin or release the Goodwin Sand.

It is the conclusion of the court that the Waldrips under their first cause of action are entitled to a money judgment in the sum of $2427.30, the amount in dollars lost by Waldrips because of Ham-on’s failure to drill a well to the Humphreys Sands on the 20 acres in question, or assign to one willing to so do.15

Within 15 days counsel should submit a journal entry which conforms with this opinion.

Waldrip v. Hamon
136 F. Supp. 412

Case Details

Name
Waldrip v. Hamon
Decision Date
Nov 18, 1955
Citations

136 F. Supp. 412

Jurisdiction
United States

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