A. & T. Oil Co. v. Interstate Oil Corp.

ARCHBALD, J.,

pro

tem.

Suit was brought by plaintiff against defendant for the recovery of certain sums of money claimed to be due under a contract dated December 31, 1921. From a judgment in plaintiff’s favor defendant has appealed.

The evidence shows that plaintiff owned certain oil leases in the Signal Hill district, Long Beach, California, as well as in the Huntington Beach district. A contract was entered into with defendant whereby plaintiff assigned such leases to the former, the agreement being that defendant was to assume the obligations of the leases so far as the property herein involved is concerned and was to be reimbursed from the proceeds of the oil produced on the property for all moneys expended by it in connection with the obligations of said leases, including the development of wells, and was thereafter to operate such property “as a producing property, and pay the royalties, then the operating expenses including insurance, both compensation and fire, and superintendence, then . . . party of the first part [plaintiff] . . . shall receive 37-%% of the market price of the net oil, or other hydrocarbon substances produced, saved or sold; said market price to be based on the market price of oil, or other hydrocarbon substances of like gravity, produced in that field, the remainder, or the 62-%% to be the property of the party of the second part [defendant] ”. It was also provided “that all of the transactions covering this agreement shall be carried in a special account, subject to the inspection by the party of the first part at all reasonable times during business hours”; that “all of the material placed upon the premises by the party of the second part” shall remain its property until fully paid for out of production, when it should be “owned by the said party of the first part ... in proportion to the interest heretofore defined for the distribution of net profits”, and that if any of it was sold said first party was to 1 ‘ participate in the net profits therefrom, in the same percentage”. Wells were produced, defendant repaid and the production was distributed thereunder as agreed for a period of years, that is, the net amounts actually received for the oil sold, most of it being disposed of at the posted

[694]

Standard Oil Company prices, although for a period of about twelve months prior to December, 1928, it was sold for a bonus of from five to ten cents a barrel over and above such posted price. .In July, 1928, an item of $1,009.50, legal expense incurred by defendant in defending a suit for declaratory relief involving the lease on the property, was charged against the net production of the property, which, of course, reduced the amount of the distribution to plaintiff. In May, 1928, and thereafter, the bonus received above said posted price was retained by defendant, and distribution made with plaintiff on the posted Standard Oil price only. It also appears that certain oil was sold by defendant to the California Eastern Company, which company failed, and that plaintiff’s share of such amount was $995, which was never paid.