Lion Oil Co. v. Gulf Oil Corp. (181 F.2d 731, 1950)

BORAH, Circuit Judge.

This civil action was filed by appellant, Lion Oil Company, against appellee, Gulf Oil Corporation, to recover the sum of $9,720.60, an amount alleged to be equal to 1/2 of the expenses incurred by appellant in operating certain oil and gas leases in Victoria County, Texas, during the period March 1, 1947, to March 1, 1948. The complaint alleges that the appellee was obligated to pay 1/2 of such operating expenses by virtue of an assignment executed by Gulf Production Company, appellee’s predecessor in interest, to E. L. Smith Oil Company, Inc., appellant’s predecessor in interest, and pursuant to the terms of a written contract by and between the same parties which was executed concurrently therewith on November 9, 1935. A copy of the assignment and contract are attached to and made a part of the complaint. The parties will be referred to herein as they were designated in the trial court, the Lion Oil Company as plaintiff, and the Gulf Oil Corporation as defendant.

In its responsive pleading the defendant asserted the defense of failure to state a claim upon which relief can be granted and, upon application of the parties, this defense was heard and determined before trial. The trial court sustained the defense and entered judgment dismissing the cause and the case is here on appeal from that judgment.

Inasmuch as appellant’s cause of action is based upon an interpretation of the contract and -assignment, wé think a clear, picture of the situation may be obtained by setting forth the material provisions of the contract- -in the beginning -before proceeding with a further statement of the allegations of the complaint.

The contract recites that Gulf Production Company, hereinafter called Gulf, has by instrument of even date • transferred and assigned to E. L. Smith Oil Company, Inc., hereinafter called Smith, certain .mineral leases covering lands in Victoria County, Texas; that the consideration for the assignment of the properties is the assumption by the assignee of all of the' léase obligations ; and that the contract is executed for the purpose of evidencing the agreement made. Paragraph one of the agreement provides that Smith shall comply with all of the obligations imposed by the leases, shall keep..them in full force and effect and hold Gulf harmless from any injury or damage arising