Clark v. Slick Oil Co. , 88 Okla. 55 ( 1922 )

This action was commenced in the district court of Tulsa county by E.M. Clark against the Slick Oil Company, a corporation, for the conversion of certain oil by the defendant which was the property of the plaintiff. There is but little, if any, controversy about the facts in this case.

The Slick Oil Company was the owner of and operating an oil and gas lease on the east half of the southeast quarter of section 17, township 18 north, range 7 east, in Creek county, Okla. The lease was made on the 21st day of November, 1911, by Atwood W. Powell, as owner of said tract of land. Thereafter E.M. Clark acquired a 45/160ths. interest in said land and was thereafter entitled to 45/160ths. interest in all oil and gas royalty produced therefrom. The Slick Oil Company had knowledge of Clark's interest and right to the oil.

The lease was in writing, sealed, signed, and recorded; the material parts, which we may consider in order to determine this controvery, are as follows:

"In consideration of these premises said party of the second part covenants and agrees:

"1. To deliver to the credit of the first party, his heirs or assigns, free of cost, in the pipe line to which the party of the second part may connect the well or wells, the equal one-eighth part of all oil produced and saved from the leased premises."

It is admitted that a large quantity of oil had been produced from this land; that for a time the oil was sold and the Slick Oil Company had accounted to E.M. Clark for his share of the royalty and had paid him for it. It is also admitted that the amount of oil in controversy in this action is 20,201.46 barrels. In the petition of the plaintiff he states that this oil was worth $2 per barrel and that he is entitled to recover judgment for $40,402.92. The defendant contended that it owed the plaintiff $13,354.43, and no more, the difference being the price at which the oil is to be computed.

The jury returned a verdict in favor of the plaintiff for the amount admitted by the defendant, and judgment was rendered on this verdict. The plaintiff took all necessary steps to perfect this appeal to reverse the judgment of the district court. The parties will be referred to as they appeared in the court below.

Defendant in its amended answer states in part as follows:

"III. "For a separate and further defense to plaintiff's petition, defendant, reiterating each and every allegation of its answers heretofore made in paragraphs one and two, the same as if the same were set out here at length, states, that on the first day of September, 1914, oil was discovered on the premises in controversy; that said premises were situated in what is known as the Cushing field, in the state of Oklahoma, and that at all times set forth in plaintiff's petition said field was producing oil in extraordinary and unforeseen quantities, and that during the year 1914 and a greater part of the year 1915, the flush production of oil from said field was of such extraordinary and unforeseen quantity that by reason thereof it was impossible to either find a market for or to procure a pipe line to transport the oil which was being produced from said premises and from said Cushing field generally. Defendant states that the oil wells which had been drilled on said premises from and after the first day of September, 1914, were producing large quantities of oil, and the same were not connected with any pipe line, and defendant was then unable to procure the transportation of said oil by a pipe line on account of said conditions existing in said field, and defendant says that on account of the matters and things alleged, it was unable to deliver the royalty oil produced from said premises to a pipe line, as stipulated and provided in said lease, and defendant says that on or about the first day of September, 1914, on account of said conditions then existing in regard to procuring transportation and a market for the oil produced from said premises, it was agreed and understood by and between plaintiff and defendant, that the defendant should receive and take said royalty oil and pay plaintiff for his interest in said royalty oil at the market price for said oil, said market price to be the price posted by the prairie Oil Gas Company, and defendant says that from and after said last mentioned date, up to and including the first day of January, 1916, defendant took said oil according to said understanding and agreement, and from time to time paid plaintiff for his interest in said royalty oil under said agreement, the said market price therefor, and defendant says that plaintiff, at all times, accepted payment for said oil under said understanding and agreement, and so continued to accept said payments, made as aforesaid, until during the month of September, 1915, but defendant says that after the month of September, 1915, plaintiff refused to accept payment, for the oil which had been received by the defendant, pursuant to the terms of said agreement aforesaid. Defendant alleges and states that by reason of its having received said royalty oil and plaintiff's interest therein, under the terms of said agreement, it is indebted to plaintiff in the sum of $13,354.43, which sum of money defendant has frequently offered to pay plaintiff, but which offers have been refused by plaintiff. Defendant says that said sum of $13,354.43 is the total market value of all royalty oil received by defendant from plaintiff for which payment has not been made by defendant to plaintiff, and defendant denies that any other or further sum is due plaintiff from this defendant, and defendant here and now offers to confess judgment for said sum of $13,354.43. "IV. "Defendant, for a further and separate defense to plaintiff's petition, reiterating its allegations in the above and preceding paragraphs the same as if the same were set out here at length, states that on and after the first day of September, 1914, that the oil wells on said premises were not connected with any pipe line, and that defendant was unable to procure their connection with any pipe line and was unable to run either its own or the royalty oil from said premises in any pipe line and was forced to store all of the oil produced from said premises, but that during all of said time defendant took and stored the royalty oil in which plaintiff claims an interest together with its own oil with the full knowledge of plaintiff, and from time to time, from said first day of September and up to the 23rd day of July, 1915, defendant paid plaintiff for his interest in said royalty oil the market price for said oil, which market price was at all limes determined by the price for crude oil posted by the Prairie Oil Gas Company, and defendant avers it to be true that by said course of dealing between the parties that said lease contract as to delivering plaintiff's oil to a pipe line was modified and changed so that it became and was the agreement between the parties that the defendant would take all of the royalty oil from said premises and pay to the owners thereof a price equal to the price posted by the Prairie Oil Gas Company for crude oil, and defendant further avers it to be true that plaintiff having accepted the payments aforesaid for his oil, with full knowledge of the fact that defendant itself was taking said oil and with the full knowledge of all the facts and circumstances concerning the conditions surrounding the production of oil from said premises, as aforesaid, that the plaintiff is now estopped from claiming that said contract now, or since the first day of September, 1914, is otherwise than as established by the course of dealing between the parties. "V. "Defendant, for a further and separate defense to plaintiff's petition, reiterating its allegations in the above and preceding paragraphs the same as if the same were set out here at length, states that the lease designated as Exhibit A to plaintiff's petition, among other things, provides that the lessee is 'to deliver to the credit of first party, his heirs or assigns free of cost in the pipe line to which the second party shall connect its well, one-eighth part of all oil produced or saved from leased premises;' but defendant specifically denies that said provision is any longer a part or parcel of said lease agreement or that said provision is now or has been at any time since the first day of September, 1914 binding upon or in force between plaintiff and defendant, but defendant avers it to be true that at all times since said first day of September, 1914, said provision aforesaid has been superseded by the agreement and by the course of dealing of plaintiff and defendant as aforesaid as to said oil produced from said premises, so that it is and was the understanding and agreement of the parties flint from and after said first day of September, 1914, that the defendant would take and receive all of said royalty oil and pay to plaintiff therefor for his interest therein the market price according to the posted price of the Prairie Oil Gas Company for crude oil in the Mid-Continent field."

It is unnecessary to quote the remaining parts of the answer. We now quote of the opening statement of the defendant:

"But now what was done as far as Mr. Clark was concerned in this case? After thin oil had been running a short while, salt water got into the wells and this oil began to be produced as filled with water and with mud: in other words, it is what we would usually call cut oil. It was oil, if there had been a pipe line which could have handled it, no pipe line would have taken. There was only one thing to do with it, and that was to put it off in a tank some where and treat it.

"Nobody in that field except the Slick Oil Company seemed to be able to take care of their royalty owners, by reason of the fact that the Okla Oil Company, a company in which Mr. Haskell was interested, as he was interested in the Slick Company, had a large amount of tankage; the Slick Company made an arrangement with the Okla Company by which this cut oil was run into storage and allowed to settle, and when it was settled the Okla Company bought it from the Slick Company, all the oil, the royalty owners' oil and the Slick Oil Company's portion of the oil. In other words, by this arrangement which was made with the Slick Oil Company, the royalty owners on this piece of land were receiving every day the market price for every barrel of oil that was being produced from those wells, widen the royalty owners on adjoining lands were not getting any return whatever.

"Now, did Mr. Clark know about this? did he raise any objection at that time and say, 'I want my oil?' The evidence will show that he never at any time said, 'Gentlemen, here is the contract, and I am entitled to my oil.' He had no place to put it upon this earth. Instead of that, he comes to Mr. Haskell, he comes to Mr. Hane, and congratulates them upon the fact theft they had been able to save this oil for him and for themselves. He expressed entire satisfaction with the arrangement which had been made.

"Now, you do not need the oral express agreement of the parties as to that; if not a word had been said, here is a check and here is a voucher which was sent to Mr. Clark and which he accepted, and he cashed the check showing that this oil had been run to the Okla Oil Company, without an objection as to how it was paid for or the manner in which it was handled.

"Now, that brings us up to July 31, 1915. During all this time, Mr. Clark had been growing richer and richer by reason of the efforts of the Slick Oil Company to preserve his oil for him and for themselves and never a word of complaint that they had violated this contract. Mr. Clark goes on about his business, and after July 31st, the Slick Oil Company continued up until August 17th to run this oil to the Okra storage assuming, as they had a right to assume, that it was agreeable to Mr. Clark, because he had expressly said so and because he had accepted the money for the oil, knowing how it was being handled; up until September 9th, Mr. Clark never, by word or act, indicated an unwillingness that this contract be performed as it was performed, but during the latter part of August and September this great flood of oil was beginning to subside to a certain extent; additional pipe line facilities had been laid to take care of it; additional tankage had been made; the price of oil started to advance and then when the check was sent to Mr. Clark in September was the first time that he ever raised an objection to the way that the oil was handled. He did not object then to them taking the oil, but he objected to the price that he was paid for it. In other words, when times were hard, when this oil was being saved for him, at the expense of the Slick Oil Company, without a dollar of expense to him for storage, it was perfectly agreeable to him; but when times got good Mr. Clark in the meanwhile had acquired larger and larger interests and he wanted more and more, and he says, 'I don't want to settle now according to our contract, because you run some of this oil about the first of August when oil was forty cents and you put it in storage. It is true, I accepted that price that we agreed on, but at that time oil was not worth sixty and sixty-five cents for all the oil which you took, whether when you took it it was forty cents or sixty-five cents.' Now, that was what started the row between these parties.

"Now, the Slick Company took this position, that 'Mr. Clark, by your acts and by your talk and by your express agreement, you have agreed with us that this contract should not he performed, as it was originally written between the parties and therefore we do not intend to pay you except according to our agreement.' Now, my friend, Mr. Devereux, will tell you that during the months of September and October and November that We tried to pay Mr. Clark after oil had gone up sixty and sixty-five and seventy and eighty cents, tried to still pay him forty cents. The proof in this case will show you that Mr. Clark was sent a check at the end of every month, September, October, November, and December, 1915, not for forty cents, but for the posted market price on the oil on every single day when every single barrel was run in the storage and when oil reached the price of eighty cents and a barrel of it was drawn out of these wells, Mr. Clark was credited with eighty cents for his portion of the barrel which came out of the well. That is the fact and the testimony in this case will show you that there can be no dispute whatever about it.

"Now, for September this oil was run, and along about the first of October a statement was sent to Mr. Clark and a check; this was not a case in which they took his oil and did not want to Day for it: a check was sent to Mr. Clark for the oil which had been run, and for which he had not been paid up until September or during the months of September and August, not at forty cents, but his value of this oil being figured every day, whenever the market advanced he was credited with the advance exactly like the agreement between the parties was. Mr. Clark kept the check, he did not return it. He wrote a letter on October 4th, which will he in evidence in this case, in which he still made the claim that he was not receiving enough for his oil, but he never made the claim up until that time that they had no right to sell the oil, his only contention then on Oct. 4th, as shown by his own letter being that we had not paid him enough for it. It is true in this letter he sort of hinted that we might not have had a right to sell his interest, but when you read the letter, you will see that this letter of October 4th is a complaint that he was not receiving enough money for his royalty oil.

"Now, in October, 1915, again we run this oil to the storage of the Slick Company, just exactly as he had agreed we might run it, and at the end of October or November we again sent Mr. Clark a statement showing the amount of oil that was run and showing the exact amount which had been paid for, every barrel, and showing that he had been credited with every advance in tile market. Mr. Clark kept this check, at least it hasn't been returned to us. He didn't notify us that he was not going to cash it, but as far as he is concerned today, tie can walk down to the bank and cash the check and put the money in his pocket. About that time oil kept going up and got up over a dollar before he goes to an attorney and, for the first time, Mr. Clark then contends at the consultation of counsel that he wants this contract enforced, that he wants his oil in kind. Now, what was his position? It was admitted by counsel, who stated this case to the jury, that he never made any arrangement to take this oil until December, 1915. Along in December, 1915, he began to make arrangements with the National Refining Company to take this oil, in the meantime making charges and counter charges and claims and claims against this company and annoying them and harassing them by reason of the fact that he was then unwilling to abide by the contract which had been of such great benefit to him during the period of distress find adversity in this oil field. He then makes an arrangement in December with this refining company, and the testimony will show that as soon as the refining company was capable of taking care of the oil, the company said, 'All right, you just keep objecting about your payments; go ahead, if they will take the oil and pay you for it, we will give it to you.' So they gave it to this refining company in January. Up until January there had never been a day when if this oil had been tendered to Mr. Clark, he could have taken it; never a day when Mr. Clark had a tank on this property to receive the oil or a pipe line on the property to which it could be run; never a day that he offered to provide any means for taking care of the oil.

"It is true that it was our duty to run the oil and not let it go to waste. If we had run it, that is the only way we could have run it, and I think when the testimony is in in this case, that it will show you that the contentions that were being made by Mr. Clark in the fall of 1915 when oil had advanced greatly in price, were not made in good faith for the purpose of taking this oil, but were made in order to take advantage of a technical statute in this state and to found an action by which, when he brought a suit, if he could have maintained it, he would recover not the value of the oil, which any man ought to be satisfied with, but by which he could take advantage of any increase in the price of oil provided it increased up until the day that the case was tried. Now, that is going to be the case."

Defendant seems to be laboring under the impression that, because an emergency or extraordinary conditions arose and Mr. Clark was willing to accept a settlement for his royalty oil under different terms or conditions than those specified in the written contract, he thereby forever waived his rights under the written contract. The terms of the contract were plain and unambiguous. This is not a case where there is room for doubt in construing the provisions of the contract and the parties have construed it themselves by certain acts and dealings. Under such circumstances, the construction placed on the contract by the parties will be considered by the court as the real intent of the parties. The plaintiff was only bound to accept the settlements on this basis so long as it was agreeable to him. The fact that he makes a settlement for certain "oil runs" on a different basis than that provided for in the contract does not preclude him from demanding a settlement under the terms of the written contract on any subsequent "oil runs" that he has not already accepted settlement for. Having declined to accept further settlements on this basis and demanding of the company that the terms of the lease govern the settlement, it was the duty of the company to make settlement in accordance with the terms of the written contract.

Section 998, Revised Laws of Oklahoma, 1910, reads as follows:

"A contract in writing may be altered by a contract in writing, or by an executed oral agreement, and not otherwise."

This section of the statute determines the rights of the parties in this action.

"An oral agreement which alters an agreement in writing is not valid or binding unless such oral agreement is executed; and proof of its existence is not competent to vary the terms of a written instrument." Page v. The Geiser Mfg. Co.,17 Okla. 110, 87 P. 851.

"An oral agreement which alters an agreement in writing is not valid or binding, unless such oral agreement is executed, and proof of its existence is not competent to vary the terms of a written instrument." Neverman v. Bank, 14 Okla. 417,70 P. 334.

"A written contract cannot be altered except by a contract in writing or by an executed oral agreement." Halsell et al. v. Renfrew and Edwards, 14 Okla. 674, 78 P. 118, 2 Ann. Cas. 286, 202 U.S. 287, 50 L.Ed. 1032; Brown et al. v. Coppadge et al., 54 Okla. 88, 153 P. 817.

Smith-Wogan Hardware Implement, Co. v. Moon Buggy Co.,26 Okla. 161, 108 P. 1103, is distinguished from the foregoing cases for reason that in this case there was a new consideration for the oral agreement. Paragraph I of the syllabus reads:

"At any time after a written contract has been entered into the parties may orally, on a fresh consideration, vary or abrogate it; or they may substitute for it a new written one."

Before this action was instituted and on November 19, 1915, Honorable James A. Veasey, acting in behalf of the defendant, wrote a letter to Honorable Bird S. McGuire, attorney for the plaintiff, which letter was attached to plaintiff's petition as Exhibit B and is as follows:

"Nov. 19, 1915.

"Dear Mr. McGuire:

"Referring further to the controversy between Mr. E.M. Clark and the Slick Oil Company, we understand Mr. Clark's contention to be that he is entitled to his proportion of the royalty oil in kind, our contention being otherwise.

"We are further advised by you that you contemplate an action for conversion, or an action to require us specifically to deliver this proportion of the oil to Mr. Clark, in kind.

"We therefore tender you the further production of this property, belonging to Mr. Clark's royalty interest, and, in the same connection, will also deliver to Mr. Clark sufficient barrels of oil to cover the number of barrels run in the past and for which he has not accepted settlement. As you know, there is a considerable quantity of crude oil produced from this property, and Mr. Clark will have to make immediate arrangements for sufficient tankage or other facilities to handle his proportion of the oil and to settle the oil in such way that the cut oil can be separated from the good oil. What we have said about arrangements to handle the cut oil is suggestive, merely, as we assume no purchaser will take the oil from Mr. Clark until this is done. Please advise us when Mr. Clark is in position to receive this oil from us."

Mr. McGuire's answer to this letter is attached to plaintiff's petition as Exhibit C, and is as follows:

"Dear Sir:

"Answering your letter of some days ago, in which you proposed in substance to deliver to E.M. Clark barrels of oil in kind equal to the number of barrels covered by the two checks which you have heretofore sent Mr. Clark, and which he refused to accept, one being for $5,105.67 and the other for $1,615.57, and that in addition thereto to deliver any other back royalty oil now due him; and that you will deliver all future oil which may be due him in kind I have the honor to state that Miss Clark, daughter of E.M. Clark, has directed me to accept the terms provided in your letter; of course, with the understanding that in delivering back oil and oil for the future, that Mr. Clark would not receive more than his share of what is termed 'cut oil,' if any such oil there should be."

These letters are a part of the pleadings and show conclusively that the plaintiff refused to make further settlements, except under the terms of the written contract. The defendant admits these letters and refers to them in the seventh paragraph of its answer as follows:

"VII. "Defendant, for a further and separate defense to plaintiff's petition, reiterating its allegations in the above and preceding paragraphs the same as if the same were set out here at length, denies that the writings shown as Exhibits B and C to plaintiff's petition constitute or ever constituted a contract or agreement between the plaintiff and defendant by which the defendant agreed to deliver to plaintiff the oil in controversy in kind, but it avers it to be true that said Exhibit B was, and at the time was intended, to be an offer to compromise the differences between the plaintiff and the defendant about the matters and things involved in this cause of action, and defendant says that said writings constitute no agreement between the parties for the reason that the proposition made in Exhibit B was never accepted by the plaintiff or by any person authorized by plaintiff to, accept the same, before it was withdrawn by the defendant, and defendant says that the writing designated Exhibit C to plaintiff's petition was not in good faith an acceptance of the of the offer made in Exhibit B, for the reason that at the time the plaintiff had no facilities to receive the oil if the same should have been delivered to him, and plaintiff well knew that he was and would be unable to receive said oil, and that its delivery to plaintiff would be an impossibility by reason of the fact that plaintiff had no tanks or other facilities for receiving the same on said premises."

It was not incumbent upon the plaintiff to furnish storage tanks to receive and care for this oil. Under the contract it was the duty of the defendant to care for the oil until it was delivered in the pipe line, and there is where the plaintiff was entitled to have it delivered. It was not necessary for the plaintiff to treat his part of this oil and make it marketable So that the pipe line companies would receive it. Neither was he required to provide storage tanks in which to let the "cut oil" settle. It was just as much a part of the duty of the defendant under the contract to prepare this oil for market so that it would be received by the pipe line company as it was its duty to pump the oil from the wells or drill the wells. The plaintiff had a right to demand his oil delivered in the pipe line, and the defendant's duty was not discharged until it was so delivered.

Under the Veasey letter, Exhibit B, and the paragraph of the amended answer last above quoted, the defendant admitted it had plaintiff's oil. By other parts of its answer and the opening statement, it admitted it had never tendered plaintiff the amount of money due him for the oil when delivered in the pipe line. This amounted to a conversion of plaintiffs oil on the part of the defendant.

"Where a party to an action makes a solemn admission against his interests in a pleading, in the absence of mistakes on his part or on the part of his counsel who inserted them in such pleadings, a court, in passing upon the sufficiency of a subsequent amended pleading filed by him, should take such admissions into consideration and treat them as admitted facts in the case. In the original answer it was admitted that the Geiser Manufacturing Company sold one Johnson certain threshing machinery, upon the condition that Johnson obtain a note from one Page to be used as a part of the purchase price; that Page executed and delivered his note to Johnson for that purpose upon Johnson's verbal agreement to thresh Page's grain, at the customary price, in an amount equal to the face of the note. In the amended answer it was alleged, as a defense, that Johnson failed to perform his part of the contract, and that therefore the note was given without consideration. Held: That Page cannot, because of Johnson's default to him, escape his liability to the company; and that, in view of the admissions made, a motion for judgment on the pleadings was properly sustained." Page v. The Geiser Mfg. Co., 17 Okla. 110,87 P. 851.

In the following cases conversion had been held to be — "Any distinct act of dominion wrongfully exerted over another's property in denial of or inconsistent with his rights therein": Danciger v. Isaacs, 82 Okla. 263, 200 P. 164; Probst v. Bearman, 76 Okla. 71, 183 P. 886; McClintock v. Parish. 72 Oklahoma, 180 P. 689; Mercantile Co. v. Fitch, 22 Okla. 475,99 P. 1089; Bilby v. Jones, 39 Okla. 613, 136 P. 414; Nat'l Bank of Commerce v. Jackson, 69 Oklahoma, 170 P. 474.

A motion for judgment on the pleadings and opening statement of counsel in rawer of the plaintiff would have been properly sustained, except for the fact that the value of the oil had to be determined. In other words, by applying the law to the facts admitted by the defendant in its answer and opening statement, the plaintiff was entitled to recover. Therefore the only issue in this case was the value of the oil. The measure of plaintiff's damage is defined by section 2875, Revised Laws Oklahoma 1910. This was covered by instructions Nos. 8 and 9 by the court, which are as follows:

"No. 8. You are instructed that where one party converts the property of another to his own use, the detriment caused by the wrongful conversion of the personal property is presumed to be:

"First: The value of the property at the time of the conversion with interest from that date; or

"Second: Where the action has been prosecuted with reasonable diligence, the highest market value of the property at any time between the conversion and the verdict, without interest, at the option of the injured party.

"You are instructed that in the case at bar the plaintiff has elected and exercised the option of accepting as his damage the highest market value of the property at any time between the time the same was converted and this date, without interest.

"The court further instructs the jury that by agreement of the parties to this action the question of whether this action was instituted and prosecuted with reasonable diligence was left to the determination of the court. The court charges the jury that it has found under the evidence that this action was instituted and prosecuted with reasonable diligence.

"No. 9. You are instructed in this case that it is agreed by and between the plaintiff and defendant, that the plaintiff is the owner of certain interest in land and the court instructs you that under and by virtue of said agreement plaintiff is the owner of 45/160 part of one-eight of all oil produced from the premises described in plaintiff's petition.

"You are therefore instructed that if you believe from the preponderance of the evidence that the defendant produced from said premises oil and failed, neglected, and refused to deliver the same to the pipe line and then failed, neglected, and refused to deliver the same to the plaintiff, but converted the same to the use of said defendant, then your verdict should be for the plaintiff and against the defendant for the value of all oil converted by the said defendant, and the value of said oil is to be determined at the highest market value thereof at the time between the conversion and the verdict."

The plaintiff requested the following instruction which was refused by the court:

"That if the jury believe from the evidence that the defendant was the lessee in an oil and gas lease of which the plaintiff, E.M. Clark, was the lessor, as to a certain part of the oil, and ill which lease it was provided that the lessee Mmuld deliver one-eighth of the oil to the credit of the lessor, free of costs in the pipe line to which the lessee should connect its well, then the court charges you that the plaintiff was the owner of the oil sued for in this action, to wit: 20,201.46 barrels."

This instruction should have been given under the admission of the defendant in his answer, opening statement, and the Veasey letter. The court committed error in refusing to give this instruction.

The jury should have been instructed to find the highest market price of the oil, under instructions Nos. 8 and 9, and this was the only question for their consideration.

The plaintiff in error complains of certain instructions given by the court, but, as this case Will have to be reversed, it will not be necessary to consider the other instructions complained of, as any error predicated upon them will probably not occur again.

HARRISON, C. J., and KANE, ELTING, and KENNAMER, JJ., concur.