Jennings v Southern Carbon Co

1) Case Name and Citation: Jennings v. Southern Carbon Co. et al., 73 W.Va. 215 (1913); 1913 W. Va. LEXIS 175

2) Facts: Jennings, plaintiff, and Southern Carbon, defendant, entered into an oil and gas lease on Jennings 146 acres. The lease “is in the form and upon the conditions usually contained in contracts of that character.” (1/8th of oil, $200 per gas well per year). Carbon drilled one well on the land which produced in great quantities and at high pressure, however the company did not attempt to explore and produce the land further. Jennings brought suit against Carbon alleging fraud. Jennings argued that Carbon fraudulently ignored its obligations to conserve the gas within Jennings lands. Jennings also argued that Carbon conspired with others to promote drainage from her lands through wells adjacent to the western boundary of her tract. Plaintiff sought relief in equity for these violations.

3) Procedural History: The lower court entered judgment in favor of Carbon and Jennings appealed.

4) Issues: In an oil and gas lease entered into for the benefit of lessor and lessee through production of oil and gas, is there an implied agreement that if oil and/or gas is found in paying quantities that the lessee shall drill and produce from the land as necessary to secure the resources for the mutual benefit of both parties.

5) Analysis: “Where the contract (oil and gas K) does not expressly state what shall be done by the lessee, there arises the legal implication that if the latter finds one or both minerals on a lease operated by him, or if either he or other operators find them on adjoining lands, he will drill as many wells as will afford sufficient protection against drainage and otherwise so develop the leased premises as to serve the mutual benefit of both lessor and lessee.” This type of interpretation is necessary in these types of leases due to the illusive and migratory nature of the minerals. Although the judgment of one experienced in developments under these leases (operator of oil and gas leases) is controlling when compared to that of the landowner, if operator acts in fraudulent manner or in manner solely to promote his individual selfish interest, his judgment will not avail.

6) Holding: Case was reversed and remanded upon the findings that Carbon fraudulently failed to perform the conditions of the lease in direct violation of Jennings property rights.

7) Note: The court also found that relief in equity was appropriate in this case rather because an “adequate remedy at law” was not available. This was due to the inability to adequately measure the amount of oil and gas lost due to defendant’s fraudulent conduct.

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