Adams v. Petroleum Midway Co., Ltd.

SEAWELL, J.

Defendant, Petroleum Midway Company, appeals from a judgment for plaintiffs in the sum of $7,79-9.01 entered upon a complaint in the form of a count for money had and received by defendant for the use and benefit of plaintiffs. The case was tried upon an agreed statement of facts, from which it appears that the sum sued for was claimed by plaintiffs as due and owing to them as royalty under the terms of a lease of oil lands, situate in Huntington Beach, executed by plaintiffs as lessors to the Columbia Leasing and Developing Company as lessee, and by it assigned to defendant and appellant herein.

Before action brought, defendant had paid to plaintiffs a sum equal to one-sixth of the prevailing market price of a quantity of oil and other products equal to the entire output of the well situate upon the leased lands, instead of one-sixth of the “net proceeds” of said sales as provided by the lease contract. The plaintiffs’ contention, upheld by the court below, was that the obligation of' the defendant under the terms of said lease was to pay them one-sixth of the amount actually realized from the sale of the oil and other products of the well upon the leased lands, the amount sued for being the difference between one-sixth of the sum actually received from the sale of the entire output, a portion of the oil produced thereon having been sold at the rate of $2.00 a barrel, which was considerably higher than the prevailing market price, and one-sixth of the amount which would have been received had the entire production been sold at the market price.

[223]

The provision of-the lease in question is as follows:

“To have and to hold the same unto the said lessee, its heirs, successors and assigns, for the term of one year from and after the date hereof, and as much longer as petroleum, maltha, or gas shall be produced by said lessee from said lands; yielding and paying therefor unto the said lessors, to be shared in proportion to the acreage herein leased by each of them, one-sixth part of so much of said petroleum, maltha and gas produced and saved from said lands by the lessee ... as shall be evidenced by written statement thereof to be rendered the lessors on or about the fifteenth day of each month, for the oil, maltha, or gas produced during the preceding calendar month, delivery of the quantity of oil or maltha due the lessors to be made free of expense into tanks, storage not to exceed thirty day period, or the oil, maltha or gas to be sold and settlement made with lessors for the net proceeds of such sales, on or about the fifteenth day of each month.”