SHERIDAN OIL CO. v. CUNNINGHAM

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Docket Number

No. 28864.

Attorney(S)

Kleinschmidt Johnson, of Tulsa, for plaintiff in error. E.A. Adriaenssens, of Tulsa, for defendant in error.

Judges

WELCH, V. C. J.

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Smart Summary

Factual and Procedural Background

This case arises from an action brought by Maud Cunningham against the Sheridan Oil Company for damages resulting from the defendant's failure to furnish casinghead gas for domestic use as provided under an oil and gas lease. Plaintiff owned land subject to a mining lease held by defendant, which operated the lease and produced oil. The lease granted the lessor the right to gas for domestic purposes if wells produced sufficient gas, with the lessor responsible for connection costs. For over 20 years prior to August 1, 1935, plaintiff had used casinghead gas supplied under this arrangement. On that date, defendant allegedly removed packing from the well causing gas to escape into the air, depriving plaintiff of its use. Plaintiff sought damages for this loss. After a judgment for plaintiff in justice court, the case was appealed to the court of common pleas, where a jury verdict and judgment also favored plaintiff. Defendant appealed that judgment.

Legal Issues Presented

Whether the lease contract, which provided for furnishing gas for domestic purposes but did not explicitly mention casinghead gas, should be construed to include casinghead gas based on the parties’ long-standing conduct.
Whether the contract was sufficiently clear to be construed as a matter of law by the court, or whether the parties’ practical construction through their conduct should control interpretation.

Arguments of the Parties

Defendant's Arguments

The lease contract does not mention casinghead gas, so it cannot be interpreted to include casinghead gas.
The court should construe the contract as a matter of law because the contract language is clear and unambiguous.

Plaintiff's Arguments

The parties have construed the lease contract by their conduct over more than 20 years by permitting and using casinghead gas for domestic purposes.
The contract language is uncertain or indefinite regarding the type of gas, so the court should adopt the construction placed on the contract by the parties’ actions.
Defendant’s removal of the packing caused deprivation of gas supply, entitling plaintiff to damages.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Hammett Oil Co. v. Gypsy Oil Co., 95 Okla. 235, 218 P. 501, 34 A. L. R. 275	When contract language is uncertain, the parties’ subsequent construction by their conduct will be adopted by the court.	The court relied on this precedent to uphold the parties’ practical construction of the lease to include casinghead gas.
Ahrens Refrigerator Co. v. Williams, 176 Okla. 5, 54 P.2d 200	Supports adopting the parties’ interpretation of ambiguous contract terms based on their conduct.	Used to reinforce the principle that the court defers to the parties’ practical construction.
Mussellem et al. v. Magnolia Petroleum Co. et al., 107 Okla. 183, 231 P. 526	Practical construction of a contract by partial performance is entitled to great weight in interpretation.	The court applied this principle to give controlling weight to the parties’ long-standing conduct in using casinghead gas.

Court's Reasoning and Analysis

The court recognized that the lease contract granted the lessor the right to gas for domestic use if wells produced sufficient gas but did not specify the type of gas. The parties had for over 20 years treated casinghead gas as fulfilling this obligation, evidenced by plaintiff’s installation of connections and defendant’s allowance of such use. The court applied established legal principles that where contract language is ambiguous or indefinite, the parties’ subsequent construction by their conduct is controlling. The court distinguished cases cited by defendant that apply only when contract language is clear and unambiguous. Because the parties’ actions constituted a practical construction of the contract, the court adopted that interpretation. The plaintiff’s evidence that the gas supply was ample and that defendant ceased supplying it justified submission of the case to the jury. The jury’s verdict for plaintiff was supported by evidence and proper instructions, warranting affirmance of the judgment.

Holding and Implications

Affirmed.

The court affirmed the judgment for plaintiff, holding that the lease contract’s provision for furnishing gas for domestic use includes casinghead gas based on the parties’ long-standing conduct. The decision enforces the parties’ practical construction of their contract and upholds plaintiff’s claim for damages due to deprivation of gas supply. No new legal precedent was established beyond applying existing principles regarding contract interpretation by conduct. The direct effect is to affirm plaintiff's right to damages and confirm that casinghead gas falls within the lease’s domestic gas provision as construed by the parties.

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SHERIDAN OIL CO. v. CUNNINGHAM.

(Syllabus.)

OIL AND GAS — Lease contract providing that lessor be furnished gas for domestic purposes — "Gas" construed to include casinghead gas where for years so construed by parties.

Where, under an oil and gas lease contract, the lessor is to be furnished gas for domestic purposes, and subsequent to the contract the lessor is furnished with casinghead gas for domestic purposes for more than 20 years, then the court will place the same construction on that portion of lease, providing for furnishing gas for domestic use, as the parties themselves by their actions have placed upon the contract, and in such an instance gas will be construed to include casinghead gas.

WELCH, V. C. J.

This action was brought by Maud Cunningham, plaintiff in trial court, against the Sheridan Oil Company, a corporation, defendant in trial court, for damages for failure to furnish casinghead gas for domestic use.

The plaintiff is the owner of a tract of land upon which defendant holds a mining lease for the exploration, production, and sale of oil and gas. The defendant operated said lease and produced oil therefrom. As a part of the terms and conditions of the lease it is provided "lessors may, if any well or wells on said premises produce sufficient gas, have gas for domestic purposes for one family, the lessors paying for connections at such points as may be from time to time designated by lessees."

Plaintiff alleged that prior to August 1, 1935, for some years (more than 20 years by the evidence) she had the use and benefit of an ample supply of gas from the well to which she laid a line at her own expense, but that on said date the defendant removed the packing around the well in such manner that the gas was allowed to escape into the air, depriving the plaintiff of the use thereof. The plaintiff alleges in her bill of particulars that the gas supply was ample for her use and was not used by defendant. Judgment was rendered in favor of plaintiff in justice court, the cause was appealed to the court of common pleas, where trial was had to a jury, resulting in a verdict and judgment for plaintiff.

The defendant lists a number of assignments of error in its brief, but seriously presents only two questions. One contention being that in the oil and gas lease, since casinghead gas was not mentioned, the lease contract cannot be construed to include casinghead gas. This lease contract, however, has been construed by the parties themselves when the plaintiff made the connections and the defendant permitted plaintiff to make connections and use the casinghead gas for a period of years.

Where a contract, or any clause thereof, is uncertain and indefinite, and the parties thereto, by their subsequent conduct or acts, have construed it, and such construction is within the purview of the language used, the court will ordinarily adopt as controlling the construction placed on the contract by the parties themselves. Hammett Oil Co. v. Gypsy Oil Co., 95 Okla. 235, 218 P. 501, 34 A. L. R. 275; Ahrens Refrigerator Co. v. Williams, 176 Okla. 5, 54 P.2d 200.

The other contention of defendant is that it was the duty of the court to construe the contract as a matter of law. The authorities cited by defendant are applicable where a written contract is clear, explicit, and unambiguous, while in the case at bar the written contract is not clear as to the kind of gas the parties had reference to, especially in the face of the construction placed on the contract by the parties thereto by their actions.

Where the parties to a contract have given it a practical construction by their conduct, as by acts in partial performance, such construction is entitled to great, if not controlling, weight in determining its proper interpretation. Mussellem et al. v. Magnolia Petroleum Co. et al., 107 Okla. 183, 231 P. 526; 13 C. J. page 546.

Therefore, since the plaintiff in her bill of particulars alleged that the gas supply was ample, and was not being used by the defendant, and that plaintiff was entitled to money damages, and supported such allegations with competent evidence, said cause was rightfully permitted to go to a jury, with proper instructions by the court.

Judgment is therefore affirmed.

BAYLESS, C. J., and OSBORN, CORN, HURST, and DAVISON, JJ., concur. GIBSON, J., concurs in conclusion. RILEY, J., dissents. DANNER, J., absent.