Prairie Oil & Gas Co v. Allen

2 F.2d 566 (8th Cir. 1924)

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Nature of the Case

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Facts

On May 9, 1911, the Good Land Company conveyed land to J. C. Trout reserving a ninetenths of all oil, gas, and mineral interest. On November 21, 1912, J. C. Trout and Rozella Trout, executed and delivered to P their deed to the above-described property conveyed by Good Land Company to J. C. Trout. Good Land Company entered into an assignment and contract with the Kay-Wagoner Oil & Gas Company. Kay-Wagoner Company executed and delivered an assignment to Skelly Company. At the time of the assignment from Kay-Wagoner Company to Skelly Company, it was agreed that Skelly Company should have the operation, management, and development of the premises for oil and gas. On June 15, 1920, Skelly Company entered upon the land and proceeded with the development thereof for oil and gas. It completed a producing oil well on July 12, 1920. It then drilled two additional wells. It completed the last one on February 9, 1921. From July 12, 1920, to the date of the trial, it continuously produced oil from the premises in paying quantities. The reasonable and necessary expenditures of Skelly Company in the development and operation of the property up to and including February 1, 1922, amounted to $153,880.40. On August 4, 1920, Skelly Company contracted with D to sell the latter the oil produced from well No. 1, and from wells that might thereafter be drilled on the land. a divisional order was executed by the Good Land Company, Kay-Wagoner Company, and Skelly Company, which directed D to give credit for oil received from such wells, as follows: Good Land Company 15 percent. royalty interest; Kay-Wagoner Company 18.75 percent. working interest; Skelly Company 66.25 percent. working interest. The 66.25 percent. working interest credited to Skelly Company included the 10 percent belonging to P. One-tenth of the purchase price of all oil run after May 13, 1921, was retained by D. On February 26, 1921, Skelly Company replied stated that P was being credited with one-tenth of the gross proceeds of oil sold from the premises and charged with one-tenth of the cost of drilling the wells and equipping and operating the property, and when the receipts exceeded the costs it would account to her for one-tenth of the net proceeds monthly, and that as soon as well No. 3 was completed it would furnish a statement to her of the cost of the wells and the amount received for oil sold. On May 7, 1921, P, notified Skelly Company, in writing that she objected to its taking oil and gas from the land. On May 12, 1921, P made a demand in writing upon D to surrender and deliver to her one-tenth of all the oil that had been produced from this land and received by it. D refused this demand. P sued D and the court held that P was entitled to recover from D $2,737.19, the value of one-tenth of the oil delivered after May 7, 1921, and from D and Skelly Company $5,758.68, the value of one-tenth of the oil produced and delivered prior to May 7, 1921. Ds appealed Ds contend that Skelly Company and P are tenants in common; and that Skelly Company, as a tenant in common, had the right to develop the property for oil and produce oil therefrom, and was only liable to account to P, as a tenant in common, for one-tenth of the proceeds after deducting the reasonable and necessary costs of development and production. P contends that under the provisions of the title papers she was entitled to one-tenth of the oil, gas, and other mineral, and was not liable for any part of the expense of development and production, that the lease to Skelly Company was void as to P, and that Skelly Company was a trespasser on the land and liable to account as a trespasser for the full value of one-tenth of the oil extracted from the premises, and and that one-tenth of the oil belonged to P, that Skelly Company had no right to sell the same to D, and that when D purchased and appropriated such oil to its own use, it was guilty of conversion and liable to P for the full value of one-tenth of the oil received.