Champlin Refining Co. v. Aladdin Petroleum Corp.

The State of Oklahoma believed it had title to a property. Relying on this belief, Champlin Refining Company (Champlin) (defendant) bought a mineral lease from Oklahoma on the land. Champlin drilled two producing wells and one non-producing well. Subsequently, in a separate proceeding, the trial court determined that Oklahoma never had title to the property. As a result, the trial court ordered that Champlin’s producing wells be turned over to Aladdin Petroleum Company (Aladdin) and Phillips Petroleum Company (Phillips) (plaintiffs), the actual owners. In accordance with the court order, Champlin turned over the wells and paid the plaintiffs the market value of the minerals produced from the wells on the date of production, minus the costs of drilling and operation. The plaintiffs then brought a conversion suit against Champlin, seeking the highest market value of the minerals between the time of the conversion and the time of trial, as opposed to the market value at the time of production, which Champlin had already paid. The conversion suit was filed five years after the conversion of Aladdin’s property and 17 months after the conversion of Phillips’s property. At all times, Champlin acted in good faith. The trial court ruled in favor of the plaintiffs, finding that Champlin’s compensation to the plaintiffs should be the highest market value of the minerals between the time of conversion and the time of trial, minus the costs of drilling and operation. The trial court also found that Champlin could not offset its payment using costs associated with the nonproducing well. Champlin appealed.