Sutphin v. Speik

In 1926, Sutphin (plaintiff) acquired a 5 percent royalty interest in oil produced from the well number 3 “or any substitute well therefore” on lot numbers 12 and 14 on property in Huntington Beach, California. In 1928, Speik (defendant) acquired the remaining royalty interests on the property. In 1933, well number 3 was destroyed by a fire and Speik drilled new wells numbered 3A and 4. Later in 1933, Sutphin sued Speik for his royalty interest, and the court determined that Sutphin was entitled to his interest in the oil produced from lots 12 and 14—“whether or not same is produced from one or more wells upon said premises.” That judgment was affirmed on appeal. Thereafter, Sutphin sued Speik for his percentage interest that accrued from the time of his first judgment. Speik contended that well number 4 did not produce any oil from the ground under it, but that it came from a whipstock well drilled diagonally into oil-producing sand from the Pacific Ocean and more than 2,000 feet from lots 12 and 14. The trial court found that res judicata prevented Speik’s new defense because no wells other than 3A and 4 had been drilled, and they produced oil from the same zone and pool—and the whipstock well defense was available to Speik in the first action. Speik appealed and argued that preclusion did not apply because the whipstock well was not raised and litigated in the first action.