Starr v. Lee

NOURSE, J.

Plaintiff sued upon a contract whereby the defendants agreed to pay him the sum of $5,000 if they failed to commence the drilling of an oil well before a fixed day. Plaintiff had judgment and the defendant Lundeen alone has appealed on a typewritten transcript under section 953 et seq. of the Code of Civil Procedure.

At the time of the execution of the undertaking plaintiff held a lease from the title owners of a lot of land 30x130' feet located in the Signal Hill oil field in the county of Los Angeles. This lease called upon plaintiff to “spud in and commence the actual drilling of a well” within forty days after delivery to him of a certificate showing title to the premises vested in the lessors, to continue drilling with reasonable diligence until oil was found in paying quantities, or until the well should reach a depth of thirty-five hundred feet, and to pay the lessors as royalties sixteen and two-thirds per cent of the proceeds received from the sale of all oil, gas or other hydrocarbon substances extracted. On December 9, 1922, plaintiff and defendants Lundeen and Lee executed an “oil and gas contract” whereby these defendants agreed to commence the drilling of a well upon the premises and to perform all the provisions of plaintiff’s lease which were to be performed by him and to pay plaintiff thirty per cent royalty, out of which he was to pay the royalties stipulated to the original lessors. The undertaking upon which the suit is based was executed the same day and, as a part of the same transaction, the plaintiff gave to the defendants certain writings wherein he specified the time for the commencement of work as thirty days after “I show you clear title” and also an easement to the 30x60 feet west of the lot described. This date was left blank at the time of signing the oil and gas contract and also in the undertaking, but the date “25th of January, 1923,” was later inserted by agreement, that date being thirty days after certificate of title and easement were shown to defendants. The defendants actually commenced to “spud in” on February 7, 1923, thirteen days after the time called for in their contract and, in order to protect himself from a forfeiture of the lease, plaintiff procured from the owners of

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the land an extension of time for performance under his lease.

At the beginning of the trial plaintiff amended his complaint by adding the allegation that at the time of entering into the undertaking “it was impracticable or extremely difficult to estimate the amount of damages which would accrue to plaintiff by reason of the default or failure of defendants, Lee and Lundeen, to spud in an oil well on said property as required . . . for the reason that there was not then, nor at any other time or now, any method or means by which it may be ascertained as to the amount of oil that would be lost to plaintiff by reason of the delay,” and for the further reason that plaintiff’s lease with the owners of the property would expire on February 3, 1923, unless said work had been commenced. The issue was thus drawn whether the undertaking came within the provisions of section 1671 of the Civil Code permitting the parties to a contract to liquidate the damages for its breach when, from the nature of the ease, it would be impracticable or extremely difficult to fix the actual damages. The trial court found that the allegations of the complaint touching this issue were true and gave judgment for plaintiff on the theory that the damages had been liquidated in a proper case.