MEYERS v. TEXAS CO (1935)

The defendant has appealed from a judgment of $116,710.39 which was rendered against it in a suit for an accounting. The judgment is based on the estimated value of plaintiffs' proportion of the oil and gas produced during a period of six and a half years from 1924 to July 1, 1930, from their ten-acre tract of land in Orange county, under the terms of a twenty-year lease which covenants to pay lessors as royalty therefor one-sixth of “all oil, gas, asphaltum or other hydrocarbon substances extracted and saved from said premises.” The judgment also includes interest on the unpaid portion of the royalty oil. The defendant ascertained the volume and specific gravity of plaintiffs' royalty oil by means of the commonly used three-point sample test, treated with bisulphide or benzol, with the centrifuge method of demulsifying the contents. All of the plaintiffs' proportion of the oil, determined in that manner, was fully paid for at the agreed market price therefor, except that it was stipulated the defendant still owes plaintiffs the sum of $966.03 on account thereof, which sum was tendered and refused at the time of the trial. The plaintiffs contend, and the court found that the three-point test above referred to is inaccurate and that it fails to determine the true specific gravity of the oil. It is asserted that the core system of testing oil by the application of phenol, which plan was subsequently adopted, is more accurate and results in obtaining a higher gravity. The court accepted the last-mentioned system as the correct method of testing the oil and rendered judgment against the defendant for the market value of the estimated difference in volume indicated by these two methods, applied to all plaintiffs' proportion of the entire production from the leased property for six and a half years prior to July 1, 1930, together with interest thereon.

The plaintiffs have also appealed from a portion of this same judgment in the stipulated sum of $13,382.77, which was allowed and credited to the defendant under the terms of the contract as “cost of extraction” of gasoline from the lessors' proportion of the natural gas produced. It is contended the court wrongfully included therein the items of “depreciation, insurance, administration expense, plant salaries * * * and taxes” incurred by the defendant in processing and marketing the same.

The plaintiffs are the owners of ten acres of land in Orange county, Cal. August 12, 1920, they executed a twenty-year oil lease of this property to the defendant Petroleum Midway Company, Limited, an oil-producing company, the name of which was subsequently changed to the Texas Company.

The provisions of the lease which are chiefly involved on this appeal are the following:

“I. * * * g–That it will pay to said lessors on account of rent or royalty for the premises, one-sixth (1/6) part of all oil, gas, asphaltum or other hydro-carbon substances extracted and saved from said premises; the lessee shall not be required to account to the lessor for, or pay rent or royalty on oil, gas or water produced by the lessee, from the premises and used by it in its operations hereunder, but may use such oil, gas or water free of charge. * * *

“j–That it will pay to the lessors for all gasoline extracted from the natural gas produced on said premises, one-sixth (1/6) part of the proceeds received from the sale thereof after deducting the cost of extraction and for all gas produced, saved and sold off the premises by the lessee; provided, however, that nothing herein contained shall be deemed to obligate the lessee to produce, save, sell, treat or otherwise dispose of gas from said premises or any well thereon.

“k–That it will, in the event it becomes necessary to treat any of the oil produced on said premises to make same marketable, and in the event the lessee erects a plant for that purpose, upon request, treat the royalty oil of the lessors together with its own, charging therefor only the net cost of such treatment.

“l–That it will at the request of said lessors, market in its original state the royalty oil or gas belonging to them, along with and upon the same terms as it markets its own oil or gas produced upon said premises, and pay to said lessors the proceeds therefrom, less the cost of handling after leaving the tank or container, but in no event shall it pay lessors less than the Standard's posted market price.

“m–That it will keep true and correct accounts of the production from said premises, which accounts shall be open and free to the inspection of said lessors, and that it will furnish said lessors on or before the twentieth day of each and every calendar month, a correct written statement of such production for the preceding calendar month. * * *

“III. * * * b–The lessors shall have the right at all reasonable times and during business hours to enter upon the demised premises and to examine and expert the books and accounts and records herein agreed to be kept by said lessee, together with its works, tanks and appliances and to examine, gauge and meter the oil, gas or products produced, found or saved under this lease, either directly by the lessors or through agents or representatives without let or hindrance whatsoever. * * *

“g–The lessors shall have the right to take the royalty herein agreed to be paid for oil produced and sold from said leased premises in money or in kind at their election, which election may be exercised only once in six months, and then only upon thirty (30) days notice in writing served upon the lessee. Unless and until said notice is given, the lessee shall have the right to handle, market, sell and/or otherwise dispose of said royalty oil, with and as a part of the products belonging to the lessee, and pay to the lessors in money, the proceeds thereof, less cost of handling after leaving tank or container.”

Pursuant to this lease the defendant drilled wells on the plaintiffs' property which produced a large quantity of oil from 1924 to July 1, 1930, which was all accounted for and paid for, except as hereinbefore stated, on the basis of the “A.S. T.M. centrifuge method,” which is the three-point sample test, treated with bisulphide or benzol. This is the method of ascertaining the volume and gravity of petroleum oil which was used by all oil-producing companies in that vicinity during that period of time, with the exception of one or two other companies.

The plaintiffs elected, under the terms of the contract, to permit the defendant to process their royalty oil with its own portion of the product, and accepted without protest throughout that period of time their proportion of the net proceeds of sales determined in the manner above mentioned. From month to month, the defendant furnished plaintiffs with written statements of the production of oil and gas and the proceeds of sales as required by the lease. Subsequent to July 1, 1930, the defendant adopted the core system of testing the oil with the application of phenol, together with the centrifuge method of demulsifying the contents of the test tubes. March 20, 1931, this suit for an accounting was commenced.

The complaint is drawn on the theory that the defendant failed to account for the true volume or gravity of plaintiffs' royalty oil and gas, of which fact they were ignorant until after July 1, 1930, and that they had no knowledge of the scientific methods of ascertaining the volume, gravity, or value of the oil or gas produced and were not aware of the erroneous results of the A.S.T.M. centrifuge method of testing the oil which was employed by the defendant. The answer denies the material allegations of the complaint, and affirmatively asserts that the defendant fully, fairly, and correctly ascertained the true gravity of all oil and accounted for the same, and paid plaintiffs the entire proceeds of sales of all their royalties which accrued under the terms of the lease. It is alleged the defendant complied with the terms of the lease and ascertained the true gravity of the oil by adequate tests, eliminating therefrom the “cut” consisting of water and other impurities so as to determine the true amount of clean, pure oil, and fully accounted to plaintiffs for the proceeds of all sales of their royalty oil and products. As separate defenses, the defendant alleges that the plaintiffs' cause of action is barred by laches and by the statute of limitations and that the lessors' receipt of monthly statements and checks in payment of all royalties and the proceeds of the sales thereof without objection constitute accounts stated which preclude them from disputing the accuracy thereof. After trial of the cause, the court adopted findings favorable to the plaintiffs on all the material issues and rendered judgment accordingly.

On appeal the defendant asserts that the findings and judgment are not supported by the evidence; that the measure of damages which was adopted by the court and the amount thereof is speculative, uncertain, and erroneous; that the oil was tested and the true volume and gravity thereof were ascertained by means of the method which was in common use by the oil industry and trade in that vicinity; that the plaintiffs were entitled under the terms of the lease to only one-sixth portion of the crude oil produced, after eliminating therefrom the free water, tested according to the accepted method which was then employed by the oil industry in that vicinity, or to the net proceeds of the sales of the oil and gas therefrom; that the court erroneously allowed interest on the assumed unpaid portion of such proceeds; that the plaintiffs' cause of action is barred by laches and by the statute of limitations; and that plaintiffs are estopped from asserting the alleged errors upon which they rely on the doctrine of accounts stated or by virtue of accord and satisfaction.

A voluminous record on appeal contains much conflicting expert evidence concerning the relative merits of various methods of testing oil to ascertain the true volume and gravity thereof, together with the details of scientific processing of petroleum and a mass of figures which affords ample opportunity for mental gymnastics.

This case was not tried on the theory of actual fraud, although the plaintiffs assert that the defendant's use of an erroneous method of testing oil amounts to constructive fraud. The mere use of an erroneous system of testing oil, however, furnishes no evidence of fraud, where that method is commonly employed by the oil producing industry in that vicinity. There is no evidence indicating that the defendant knowingly continued to use the three-point system of testing oil with the intention of defrauding the plaintiffs. We are of the opinion the record contains no satisfactory evidence of either actual or constructive fraud.

Except for one difference, which appears in section III, subdivision g, of the contract which is involved in this case, the appeal is fully determined by the opinion of the Supreme Court which was recently rendered in the case of Alamitos Land Company v. Shell Oil Company, 44 P.(2d) 573. That case was also a suit for an accounting under circumstances similar to those which are involved in this action. The provisions of that contract, like the language of this lease, covenanted to pay plaintiff “one-sixth royalty interest in all oil and gas produced and saved from the demised premises.” The judgment for nearly half a million dollars, which was rendered therein, is reversed on the ground that the language of the contract required only the delivery of the lessors' stipulated proportion of the petroleum well fluid in its natural state, less the free water therein contained which was first eliminated, the volume and gravity of the wet oil having been ascertained by the three-point sampling method tested by the use of carbon bisulphide or benzol, which was the method commonly used by the oil producing industry in that vicinity. On the contrary, that case specifically holds that the lessee was not required to deliver refined royalty oil which was clear, pure, and free from all water and impurities in emulsion therewith. Various methods of testing oil are also elaborately discussed in that opinion. The method by means of which the volume and gravity of the royalty oil were ascertained in this case was also followed in the Alamitos Land Case, and it was there held to be substantially accurate and correct, and in accordance with the accepted custom of the trade or industry in that vicinity, which is the very locality involved in this litigation.

The evidence in this case satisfactorily establishes the fact that the plaintiffs' royalty oil was tested for volume and gravity in the manner which was then accepted and followed by the oil producing industry in the vicinity of their wells, in spite of the fact that one or two other companies employed another method of so doing during a part of the time involved in this litigation. Practically all of plaintiffs' witnesses testified to the effect that it was customary for the trade to buy wet oil in that vicinity based on the three-point test treated with carbon bisulphide or benzol. That assertion was not disputed. Mr. Tizard, one of plaintiffs' witnesses, testified in that regard: “I believe it is true that whenever wet oil was purchased, it was purchased on a three-point sampling method, and on the net quantity as the result of the benzol test or the carbon bisulphide test.” Mr. Powell, another witness for plaintiffs, testified regarding the same subject, “The most universal practice is to pay on the observed gravity. It was universal to make these three-point tests, and to use the method of determining the cut by testing the three-point sample by the carbon bisulphide method. Once in a while they would require the benzol method. I never bought by any other method.” There is no evidence to the contrary.

The evidence also establishes the fact that the defendant accounted to plaintiffs for the proceeds of all sales of their royalty oil, tested in that manner, and that it paid for the same according to the agreed standard of market price therefor, except that the stipulated sum of $966.03 was not paid plaintiffs, but is still due and owing from the defendant.

There is no language in this lease which may be reasonably construed to mean that the plaintiffs' one-sixth royalty or portion of the oil produced from the wells on their premises is to be estimated on the basis of “pipeline oil” or clear processed oil free from all impurities and suitable for market. On the contrary, the prime consideration for the lease is the promise of the lessee to “pay to said lessors on account of rent or royalty for the premises, one-sixth (1/6) part of all oil, gas, asphaltum or other hydro-carbon substances extracted and saved from said premises.” The decision in the Alamitos Land Company Case construes this very language to mean that the lessee agrees to pay in consideration for the lease one-sixth of the wet oil in its natural condition, with the free water, only, removed. The other conditions of the present lease do not change that covenant. They merely provide for other contingencies, such as the subsequent extracting of gasoline from the natural gas, the processing of the natural oil so as to prepare it for market if that procedure becomes necessary, and the sale of the royalty oil with that of the producer, provided the lessors elect to receive their royalties in cash and authorize such processing and handling of their portion of the oil. This treatment of plaintiff's portion of the royalty oil and gas is to be performed by the lessee at the expense of the lessors. These subsequent provisions of the lease may be readily reconciled with the construction that the plaintiffs' royalty oil is to be determined by ascertaining their portion of the oil in its natural condition, minus the free water therein contained.

Under the provisions of this lease, the plaintiffs were therefore entitled to royalties equivalent to one-sixth of the oil and gas produced, in its natural condition, less the free water which by the custom of the trade is first removed in the ordinary process of “bleeding” the tanks. They also have the option to accept their royálties in cash. The term “oil,” as it is used in this lease, must be deemed to have been used and understood to mean the crude oil petroleum well fluid which is produced from the demised premises after the free water is first removed therefrom. Alamitos Land Company v. Shell Oil Company, supra. The royalty oil to which the plaintiffs are entitled under the terms of this lease is therefore one-sixth of the product of the wells in that same condition. The term “royalty,” unless it is otherwise defined in the agreement, is equivalent to rental, and is defined as the consideration for the execution of a lease which is payable either in kind or in cash as a stipulated proportion of the petroleum which is produced from the land. Collins v. Lemaster's Adm'r, 232 Ky. 188, 22 S.W.(2d) 567; 2 Thornton on Oil and Gas, p. 644, § 363. Royalty may be payable according to the terms of a contract either in money or in kind by delivery of a specified share of the oil. Homestake Exploration Corp. v. Schoregge, 81 Mont. 604, 264 P. 388.

The plaintiffs may not repudiate the customary method adopted by the trade for testing oil in the vicinity of their property to ascertain the volume and specific gravity thereof, by a mere plea of ignorance of the prevailing usage. The general established custom respecting the conduct of a particular business, trade, or enterprise in the same vicinity is presumed to be known and accepted by the contracting parties with respect thereto, unless the contrary appears. 25 Cal. Jur. p. 420, § 5; section 1655, Civ. Code; Miller v. Germain Seed & Plant Co., 193 Cal. 62, 222 P. 817, 32 A. L. R. 1215. In 25 California Jurisprudence, at page 420, it is said in that regard: “Parties who contract as to a subject-matter concerning which known usages prevail, by implication incorporate them into their agreements, if nothing is said to the contrary.” In the present case not only was nothing said regarding the existence of this prevailing custom of the trade in that vicinity, but the oil was treated in that manner and accounted for in monthly statements to the plaintiffs for six and a half years without objection. Under such circumstances, it seems unreasonable for the plaintiffs to now plead ignorance of an established custom with respect to the accepted method of testing oil or the asserted inaccuracies of that system particularly in view of the fact that section III, subdivision b, of the lease authorized them, at any time, to inspect the defendant's books, accounts, records, works, tanks, and appliances, and also permitted them to gauge, test, or examine all apparatus and methods of producing, handling, and marketing oil, gas, and other products of the wells to ascertain the volume, gravity, or value of the same, either personally or with the assistance of agents or experts. To permit this plea of ignorance in the absence of fraud under the circumstances of this case would not only destroy the effect of the presumption of knowledge, but it would also upset established rules of business of the entire industrial world. We are therefore of the opinion the rule with respect to the presumption of knowledge of trade customs should apply in the present case.

The plaintiffs attempt to distinguish the facts of this case from those of the Alamitos Land decision by asserting that there is an omission in the present lease of language contained in that lease with respect to the condition or grade which the royalty oil is required to possess. It is claimed this language of the Alamitos Land Case was controlling on the Supreme Court in construing that lease. The language of the Alamitos Land Company lease, upon which the plaintiffs rely for their asserted distinction, reads:

“The Lessee shall deliver to the Lessor on said demised premises, as royalty hereunder, the equal one-sixth (1/6) of all petroleum oil, asphaltum or other hydro-carbon substances produced and saved from said demised premises by said Lessee, and said Lessor shall have the option to take its royalty in kind, and if it so elects, the same shall be delivered as produced and saved into tanks or other containers maintained upon said demised premises by said Lessee for that purpose, and such royalty oil may be stored without charge in such tanks or containers for a period of not to exceed thirty days, but at said Lessor's sole risk. At said Lessor's option, Lessee will purchase said royalty oil from said Lessor, and shall pay said Lessor therefor the current price paid by the Lessee for oil of like grade and gravity at the wells of production in the same vicinity.”

We are unable to draw the distinction between these two leases suggested by the plaintiffs. The provisions of the lease in this case are remarkably similar to those which were involved in the Alamitos Land Case with regard to the condition of the royalty oil, as may be seen by comparing the preceding paragraph of the Alamitos Land lease with the terms of the present lease previously quoted. The only difference in the provisions of these leases, in that regard, is that the Shell Oil Company agreed to store the royalty oil belonging to the Alamitos Land Company in tanks, and purchase the same from the lessor at the market value of other oil of like grade and gravity. It will be observed this is not a specification regarding the condition of the royalty oil in tanks, nor is it a covenant affecting the grade or gravity upon which the lessor's royalty oil is to be determined. Like the lease in this case, there was a total absence of any agreement with respect to the grade or gravity of the royalty oil. It was for that reason the Supreme Court held that the term “royalty oil” meant crude petroleum from which the free water had first been removed.

The plaintiffs insist that the present lease is different from that which was involved in the Alamitos Land Case because section III, subdivision k, of this lease contemplates the dehydration and treatment of the oil to purify it for marketing purposes; that the Alamitos lease does not contain this clause; and that the language of this lease means the royalty oil which is to be delivered to the lessors must therefore be of a grade and gravity which renders it suitable for market. It is suggested this construction of the lease is recognized by the defendant in its letter to one of the plaintiffs, dated September 9, 1924, as follows:

“Referring to the ‘Vollmer-Meyers' oil lease in the Huntington Beach field, now being operated by this company and of which you are one of the owners.

“You are hereby advised that the oil now being produced from this lease contains such quantities of water and other foreign substances and is of such character as to render it necessary to treat same to make it marketable. The undersigned has erected a plan in the Huntington Beach oil field for the treatment of its own oil. The lease provides that in the event the Lessee erects a plant for the purpose of treating such oil, it will, upon request, transport and treat the royalty oil of the Lessors together with its own, charging therefor the actual cost of such transportation and treatment.

“If you desire us to transport and treat your oil with ours please sign the enclosed request and return same to us at once.

“As there is no market for this oil until it has been treated, we will, until advised by you to the contrary, transport and treat your oil with ours, charging you your proportion of the actual cost therefor.”

We do not so construe the lease. That provision upon which the plaintiffs rely merely covenants that the lessee will, upon request of the lessors, when it becomes necessary to do so, “treat” the royalty oil together with its own portion of the petroleum so as to prepare it for market. This clause reads:

“That it (the lessee) will, in the event it becomes necessary to treat any of the oil produced on said premises to make same marketable, and in the event the lessee erects a plant for that purpose, upon request, treat the royalty oil of the lessors together with its own, charging therefor only the net cost of such treatment.”

This paragraph does not make it mandatory for the lessors to have their royalty oil so treated. That process is merely optional on their part. If they do elect to have it done, they must pay the defendant the cost of such treatment. That clause contemplates that the lessors already have a quantity of royalty oil distinct from the portion which belongs to the lessee, and because the lessors have elected to receive their oil in cash, in the event it is not marketable in its natural state, the lessee agrees to treat it with its own oil so as to make it suitable for market if the lessors so desire and subject then to the payment of the cost thereof. This clause applies to covenants and conditions distinct from and subsequent to the accruing of plaintiffs' royalty oil to which they are entitled. This construction of the lease is reinforced by the last sentence of the clause above mentioned, which provides that the lessors shall pay the lessee for processing their portion of the oil “the net cost of such treatment.” If the quantity of the lessor's royalty oil were not already deemed to have accrued by virtue of section I, subdivision g, of the contract, it would be unjust and senseless to charge them for processing it. Nor is the language of the above-quoted letter inconsistent with this construction of the lease, for it specifically says, “If you desire us to transport and treat your oil with ours please sign the enclosed request and return same to us at once.” The last paragraph of section III, subdivision g, of this lease confirms this construction by providing that, “The lessee shall have the right to handle, market, sell and/or otherwise dispose of said royalty oil, with and as a part of the products belonging to the lessee, and pay to the lessors in money, the proceeds thereof, less cost of handling after leaving tank or container.” Section I, subdivision 1, of this lease also contemplates that the royalty oil to which the lessors are entitled is the natural product with the free water eliminated, for it provides: “That it (the lessee) will at the request of said lessors, market in its original state the royalty oil or gas belonging to them, along with and upon the same terms as it markets its own oil or gas produced upon said premises.” We are therefore of the opinion there is nothing in the present lease in that regard which distinguishes it from the lease which was construed by the Supreme Court in the Alamitos Land Case so as to define royalty oil to mean the crude petroleum in its natural state with the free water first removed therefrom.

The case of Adams v. Petroleum Midway Co., Ltd., 205 Cal. 221, 270 P. 668, which is relied on by the plaintiffs in this case, furnishes no aid in the construction of this lease. In that case the consideration for the execution of the oil lease was one-sixth of the “net proceeds” of the sales of the products of the well. The court merely held that the payment to lessors of an amount equal to one-sixth of the prevailing market price of the products did not comply with the lease. In the present case the lease does not designate the royalties as one-sixth of the net proceeds of sales of oil, but, on the contrary, it provides for one-sixth of the oil, gas, asphaltum, or other hydro-carbon substances extracted and saved from the premises.

The numerous other cases cited by the plaintiffs are likewise distinguishable from the facts of this case. This case must be determined primarily on the construction of the language of the lease, and many of the cases cited are not helpful in that regard. When an appeal is to be determined by a construction of the unambiguous language of a lease or other document as distinguished from extraneous evidence of the intention of the contracting parties, or oral evidence of the meaning of technical terms, or the existence of a controlling trade custom, the appellate court is not bound by the construction of the document by the trial court, but must, itself, construe the instrument as a matter of law. Scudder v. Perce, 159 Cal. 429, 433, 114 P. 571.

The plaintiffs have appealed from that portion of the judgment represented by the stipulated sum of $13,382.77 which was allowed the defendant under the terms of the contract as “cost of extraction” of gasoline from the lessors' proportion of the natural gas produced. It is contended the court wrongfully included in this term the items of “depreciation, insurance, administration expense, plant salaries and expense, and taxes” which were included as necessary costs thereof. The amount of such costs is not in dispute, but, on the contrary, the above sum was stipulated to be correct provided the various items are determined to have been properly included in the term “cost of extraction.”

Our attention is not called to any evidence in the record indicating that the court allowed defendant as “cost of extraction” more than the plaintiffs' fair proportion of the total expense which was incurred by it in separating the gasoline from the natural gas produced so as to prepare it for market.

We are of the opinion the court properly included the items of depreciation, insurance, administration expense, plant salaries, and expense and taxes on account of processing and marketing plaintiffs' proportion of the product as “cost of extraction.” The terms of the contract indicate that the word “cost” as it was used in that clause was intended by the contracting parties to be construed in its ordinary meaning and not in some technical or unusual manner. It is the accepted rule of construction that words which are used in a contract are to be interpreted in their ordinary and popular sense, rather than in a strictly technical manner unless it appears that the parties used them in a technical sense or according to peculiar usage. Section 1644, Civ. Code; 13 C. J. p. 531, § 489; 6 Cal. Jur. p. 284, § 175; Schlitz v. Akers, 210 Cal. 490, 292 P. 463. From an examination of the contract as a whole, it seems apparent that the lessee agrees to pay the lessors as a consideration for the lease “on account of rent or royalty for the premises, one-sixth (1/6) part of all oil, gas, asphaltum or other hydro-carbon substances extracted and saved from said premises”; that it will “store, free of charge, in tanks or reservoirs upon the demised premises or convenient thereto, at its own expense, for the period of thirty (30) days, all royalty oil deliverable hereunder to the lessors, without cost or charge of any kind to said lessors”; that it will, at the request of lessors, “transport any royalty oil or gas belonging to the lessors with the oil or gas belonging to it, and will charge therefor the actual proportionate cost of such transportation”; and that it will “pay to the lessors for all gasoline extracted from the natural gas produced on said premises, one-sixth (1/6) part of the proceeds received from the sale thereof after deducting the cost of extraction and for all gas produced, saved and sold off the premises by the lessee; provided, however, that nothing herein contained shall be deemed to obligate the lessee to produce, save, sell, treat or otherwise dispose of gas from said premises or any well thereon.” From the preceding quotations, it seems clear that the lessee was not necessarily required to process and extract gasoline from the lessors' proportion of the oil mining project on their land, but when that was done, and their royalty proportion was so treated and marketed, the lessee was entitled to deduct from the proceeds of such sales the lessors' fair proportionate share of the cost thereof. This was done, and the court properly so found.

It does seem, as contended by the defendant, that the estimated volume, gravity, and market value of royalty oil for a period of six and a half years past, based solely upon a different method of testing the oil which was subsequently adopted and applied to other oil which may have been in a different condition, may be too speculative and uncertain. But in view of our construction of the lease and what we have previously said, it becomes unnecessary to pass on that question. For the same reasons, it is unnecessary to pass on the defendant's other contentions that the court wrongfully allowed interest on an unliquidated sum without a previous demand therefor; that the plaintiffs' cause is barred by laches and by the statute of limitations; and that they are estopped from maintaining their action by the doctrine of accord and satisfaction and upon the theory of an account stated.

It is, however, stipulated that the defendant owes plaintiffs on account of royalty oil accruing to them during the period of time which is involved in this litigation the sum of $966.03.

That portion of the judgment from which the plaintiffs appeal is affirmed. The appeal of the defendant is sustained, and the judgment awarding plaintiffs the sum of $116,710.39 is reversed, and the court is directed to render judgment against the defendant, in lieu thereof, for the sum of $966.03. The defendant is entitled to its costs on appeal.

PER CURIAM.