Lohn v. Fletcher Oil Co., Inc.

THOMSON, J.,

pro

tem.

This is an appeal from a judgment in a suit for declaratory relief, upon the judgment roll alone.

The record discloses that the respondents, as trustees for the benefit of the creditors of the Colly Oil Company, filed a complaint against appellant, seeking a declaration by the court of the rights, duties and obligations of respondents under an alleged written option to purchase oil.

On April 3, 1935, and prior to the time respondents became such trustees, Colly Oil Company entered into an agreement in writing with appellant which gave appellant the right and option to purchase all or any part of the oil and gas produced from a well then being drilled by the Colly Oil Company, and to pay the posted market price therefor. In August, 1935, the well was placed on production. It is alleged in the complaint and found by the court in its findings, that demand was made upon appellant that it accept the production in accordance with the terms of the option, and that appellant refused to purchase or take any part of the production. It is further found by the trial court that, on August 20, 1935, Colly Oil Company informed appellant that it had an opportunity to make a contract for one year with the Mercury Petroleum Corporation, Inc., and thereupon appellant stated

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that it did not need and could not use the oil produced from said well, and that it was agreeable to appellant that such contract be made, and that “on said 20th day of August, 1935, the agreement of April 3, 1935, was abandoned by the mutual consent of the parties thereto”. The trial court also found that no consideration existed for the granting of the option; that said option agreement is unenforceable because it is uncertain in that it does not specify the quantity of oil to be purchased by defendant and it lacks mutuality, and the option “was not exercised within a reasonable time, such exercise of option not taking place until August 4, 1936”. The trial court further found that plaintiffs did not assume the option agreement, “that an actual controversy and

bona fide

dispute exists between the plaintiffs and defendant herein relating to the legal rights, duties and obligations under the terms of said alleged contract of April 3, 1935”, and that this is a proper case for the court to exercise its discretion to declare the rights of the parties under said contract. The trial court entered judgment that said agreement of April 3, 1935, is unenforceable and of no effect and that respondents are entitled to dispose of the oil from the well free from liability by reason of said agreement and enjoining defendant from asserting any claim against the oil or gas from said well by reason of said agreement.