Nielson v. Allied Petroleum Corp.

DORAN, J.— Plaintiff appeals from an adverse judgment in an action to recover royalties alleged to be due under the terms of an oil and gas lease wherein plaintiff is lessor and defendant is lessee.

The oil well, in connection with which the dispute herein arose, is located in the harbor area of the city of Long Beach, California. Drilling for oil was prohibited in the area in question until June 15, 1937, when by special election it was permitted, subject to certain restrictions. Plaintiff and ap[168]pellant, with others, executed a community lease which provided by its terms for the payment to the lessors by lessee, respondent herein, of certain royalties in the proportion that the area of each bore to the total area. The lease was dated June 12, 1937. The restrictions contained in the ordinance adopted three days later limited a drill site to one acre or more. Accordingly, two additional land owners were later included. An application by respondent for a permit to drill was refused because the area designated lacked 180 square feet of containing one acre. The respondent, in connection with the refusal, was notified by the Board of Harbor Commissioners that a certain lot owned by one Morrison must be included. This was to prevent the exclusion of the Morrison lot from participation in the benefits of oil production from adjoining land. Thereafter, by the terms of a memorandum dated September 19, 1938, Morrison’s lot was included. The last mentioned memorandum was not signed by appellant but was signed by a majority of the signers and lessors of the original lease dated June 21, 1937. A well was drilled; and completed September 8, 1938. Royalties have been paid continuously by respondent according to the terms of the lease in question, as interpreted by respondent.

Plaintiff alleged two causes of action; the first in trespass and the second on the community lease contract. It was contended by plaintiff at the trial, and the contention is renewed on appeal, that the so-called second contract, which includes the Morrison lot, cannot be made the basis of computing the royalties except as to the lessors who signed the same. As above noted, plaintiff did not sign it. Respondent, to the contrary, contends that appellant is a party to the contract in question. Defendant’s answer also set up the defense of estoppel and res judicata.

There is no dispute as to the pertinent facts. The evidence was presented at the trial by a series of stipulations.