in many other ways the wells may be ruined by failure to operate or to produce the oil or gas therefrom, thereby causing irreparable damage to the property. It is essential to produce the oil and gas to protect the interest of all the parties, and to hold that the further operation of said lease by the person in possession would amount to a wilful taking and appropriation of the property of another would be placing too narrow a construction on the word "wilful."

Damages

for producing oil without title.

To permit the owner of the land or another lessee to recover from the person who is in peaceful possession of the land and producing oil or gas therefrom, the value of the oil at the surface without deducting therefrom the cost of producing, would be analogous to permitting the recovery of exemplary damages. The damages recoverable would be more than compensatory. The distinction when the measure of damages would be the value of the ore when produced, and when it would be the value of the ore when produced, less cost of production, is stated in the case of Central Coal & Coke Co. v. Penny, 97 C. C. A. 600, 173 Fed. 340, as follows:

"One who, unintentionally and in the honest belief that he is lawfully exercising a right he has, enters upon the property of another and removes his ore, his coal, his timber, or any other valuable appurtenant to his land, is liable in damages for the value of the ore, timber, or other thing, in its original place, but for

no more.

"But one who wilfully, intentionally, or with reckless disregard of the rights of another, takes his ore, timber, or other property, and appropriates it to his own use, must respond to the owner for the full value of the property at the time he converts it, without deduction for the labor bestowed or expenses incurred in removing and preparing it for market."

The action to recover damages for

the unlawful production and taking oil and gas from the premises is in the nature of a tort, and the facts that permit the recovery of exemplary damages in an action sounding in tort has been stated by this court as follows: "To entitle a plaintiff to recover exemplary damages in an action sounding in tort, the proof must show some elements of fraud, malice, or oppression. The act which constitutes the cause of action must be actuated by or accompanied with some evil intent, or must be the result of such gross negligence-such disregard of another's rights-as is deemed equivalent to such intent." Haskell Nat. Bank v. Stewart, 76 Okla. 58, 184 Pac. 463; Western U. Teleg. Co. v. Reeves, 34 Okla. 469, 126 Pac. 216; Sale v. Shipp, 58 Okla. 598, 160 Pac. 502.

To hold that the taking of the oil is wilful, by a person who has obtained possession in an orderly manner without creating a breach of the peace, and is in peaceable possession of the land, operating under a lease which has not been declared invalid or void, and doing only what he is entitled to under his contract, we think would be contrary to the intention and spirit of the law that the damages should be compensatory only.

In the instant case, while it was pleaded that the lease was obtained by fraud, there is no evidence that there was any fraud, malice, or oppression in obtaining possession of the premises, or in operating the lease.

This court, in the case of Probst v. Bearman, 76 Okla. 71, 183 Pac. 886, stated as follows: "The cost of improvements and operations incurred by the holder of an oil and gas lease, purchased pendente lite and with actual knowledge of the adverse claim, and of the purpose of such party to insist upon his rights. and to obtain redress for the invasion of such rights, will not be deducted, when requiring such holder to account to the successful adverse party for oil and gas produced and sold from the premises."

In that case this court was dealing with a situation where a third party had purchased the lease pendente lite, or, in other words, was or might be considered an interloper, and that case may be distinguished upon that ground. The principle of law announced in that

case is too broad when applied to a lessee in peaceable possession.

For the reasons stated, the judgment of the trial court is therefore affirmed.

Harrison, Ch. J., and Johnson, Elting, and Nicholson, JJ., concur.

The earlier cases discussing the right of a trespasser to credit for the expenses of production, as against his liability for the value of oil or mineral matter which he has converted, are collected and reviewed in the annotation to Pittsburgh & W. V. Gas Co. v. Pentress Gas Co. 7 A.L.R. 908.

A number of recent cases support the rules therein stated, to the effect that the status of the trespasser as an innocent one, on the one hand, or as a wilful one, on the other, ordinarily determines whether he is entitled to have the measure of damages for oil or mineral matter which he has converted fixed at its value as it lay undisturbed in the mine, and, in the absence of satisfactory evidence of such value, to be allowed to deduct the cost of its production from its value at the mouth of the mine or well, or whether he is to be held liable for the value of the oil or mineral matter after it is severed. Alvarado Min. & Mill Co. v. Warnock (1920) 25 N. M. 694, 187 Pac. 542; Petrelli v. West Virginia-Pittsburgh Coal Co. (1920) 86 W. Va. 607, 104 S. E. 103. See also North Jellico Coal Co. v. Helton (1920) 187 Ky. 394, 219 S. W. 185; New Domain Oil & Gas Co. v. McKinney (1920) 188 Ky. 183, 221 S. W. 245; Kelvin Lumber & Supply Co. v. Copper State Min. Co. (1921) Tex. Civ. App. S. W. 858. And see the reported case (BARNES V. WINONA OIL Co. ante, 189).

232

In the reported case (BARNES v. WINONA OIL Co.) it is held that, on an accounting for oil and gas taken 23 A.L.R.-13.

by the defendant under color of a lease later declared to be invalid in a judicial proceeding, the measure of damages was the value of the oil and gas produced from the premises, less the expense of their production. It is also held that the defendant was entitled to credit for the cost of producing oil and gas taken from the premises by him after a notification that another person claimed the right to the oil and gas. The court distinguishes the taking of ore from the taking of oil and gas after notice of an adverse claim. With respect to the latter it refuses to impose a rule which denies to the defendant under such circumstances the right to credit for the cost of production, since oil and gas deposits are not stable, and it is to the advantage of all persons interested in the deposits to have them developed without delay. It is also noted that to require the defendant to respond in damages for the value of the oil or gas without credit for the expense of production if not an exaction of compensatory damages only, but imposes exemplary damages, and that exemplary damages are not properly imposed for an act affecting property, done by one in the peaceable possession of the property under a contract which has not, at the time of the act, been declared invalid or void.

In Kentucky it appears that the measure of damages for an innocent conversion of a mineral by a trespasser is the usual or reasonable royalty paid for the right to mine it. Such a royalty in that state is the recognized standard for determining

the value of a mineral as it lies in the ground. North Jellico Coal Co. v. Helton (1920) 187 Ky. 394, 219 S. W. 185. For a dictum to the same effect, see New Domain Oil & Gas Co. v. McKinney (1920) 188 Ky. 183, 221 S. W. 245. The usual effect of employing that method is, of course, to give to the innocent trespasser not only credit for the expense of production, but also the profit ordinarily made by a lessee of mineral land.

v.

In North Jellico Coal Co. Helton (Ky.) supra, the facts before the court of appeals did not make it clear whether the defendant company was an innocent or a wilful trespasser. For the guidance of the lower court, on a second trial of the case, the court stated the following principles: "In view of another trial we deem it proper to say that the measure of damages for coal taken from another's land through an honest mistake is the value of the coal taken as it lay in the mine, or the usual, reasonable royalty paid for the right of mining. On the other hand, where the trespass is wilful, and not the result of an honest mistake, the measure of damages is the value of the coal mined at the time and place of its severance, without deducting the expense of severing it."

In Strathmore Coal Min. Co. v. Bayard Coal & Coke Co. (1921) 139 Md. 355, 115 Atl. 620, upon the ground that the same damages as in an action of trespass were recoverable in ejectment against a lessee negligently disregarding the fact that the lease had terminated because of a default, and retaining possession after notice to quit, held that the defendant was liable for the worth of the coal as first severed, without deduction of the expense of severing it from its native bed.

In Alvarado Min. & Mill Co. v.

Warnock (N. M.) supra, it appeared that the plaintiff executed an option entitling the holder to purchase mining claims within a certain time, and to mine ore therefrom within two years for the purpose of doing assessment work. The option was recorded and the defendant was an assignee of the option through several mesne assignments. The court held that, in mining ore for another purpose than that of making an assessment, the defendant was a wilful trespasser, and that the measure of the damage for which he was liable was the net value of the ore when taken from the premises, without a deduction for the expenses of mining or for freight and smelter charges.

Likewise, in Kelvin Lumber & Supply Co. v. Copper State Min. Co. (1921) Tex. Civ. App. —, 232 S. W. 858, it was held that the defendants as trespassers were not entitled to credit for expenses in taking out ore from a mining claim which they had relocated after it had been located in due form of law by the plaintiffs. In Petrelli V. West Virginia

Pittsburgh Coal Co. (1920) 86 W. Va. 607, 104 S. E. 103, it appeared that the defendant company, in conducting coal mining operations, knowingly encroached on the property of the plaintiff and removed a large quantity of coal belonging to the latter. In stating the amount of damages which the plaintiff was entitled to recover, the court said: "Under such circumstances, when the wrongdoer commits the trespass wilfully and with the knowledge that he is invading the rights of others, or under such circumstances as to charge him with knowledge of the character of his act, the measure of damages is the value of the thing mined, after its severance, without deduction of expenses incurred in mining or moving it."

W. S. R.

said copartnership and of the said copartners equitably and ratably. The trustee is to pay any balance remaining to the said Sargent & Burnett, to be held and disposed of by them as if this conveyance had not been made. If the said Sargent & Burnett make any arrangement within three years from date with their creditors, whereby they are released from all liability to them, or three fourths of said creditors cease to be so interested, or otherwise consent that said property shall be conveyed to the said debtors, then the trustee shall reconvey the property then in its hands. No person shall be entitled to payment under said assignment except such as are at the date thereof creditors of the firm or of one of the copartners, and shall within thirty days from such date notify the trustee in writing of the amount and character of the claim, and furnish a specification of the items if requested by the trustee. The trustee shall distribute the moneys ratably among the creditors in discharge of their debts by such instalments and at such times as the trustee shall think satisfactory, and pay the surplus, if any, to the copartners. It shall be lawful for the trustee to postpone the sale and collection of any part of the premises for such time as is consistent with reducing the same to money as soon as this can wisely and prudently be done. The trustee may carry on the business which the copartners have heretofore carried on, and for that purpose make advances out of the premises, subject to the trust and as it shall deem fit.

Sixty-four creditors with claims aggregating $29,054.06 consented to its terms, and filed their claims with the assignee. The appellant had a claim against the copartnership, based on a note executed in 1913, which fell due in August, 1914, and was renewed for one year. On June 12, 1916, appellant obtained a judgment against the said copartnership in the district court for Canyon county in the sum of $5,955.90.

Execution issued and was returned unsatisfied. Following the execution of the assignment, respondent went into possession of the real and personal property, and proceeded to administer the trust. On September 15, 1916, appellant commenced this action. In his complaint he alleges that the copartnership is insolvent and has no property from which he can collect his judgment; that the assignment was without consideration, and made with intent to delay and defraud him, and prays that the transfer be declared fraudulent and void, that his judgment be declared a lien on the property transferred, and be satisfied by a sale thereof. Respondent in its answer denies any lack of consideration or any intent to delay or defraud appellant, and sets up that appellant has been guilty of laches. The trial court found that the assignment was supported by a sufficient consideration, that there w no intent to delay or defraud appellant, and that appellant had been guilty of laches; concluded that the assignment was valid, and entered judgment for respondent. From this judgment an appeal is taken.

The assignment is a voluntary one for the benefit of creditors. Unless inhibited by statute it is valid. 5 C. J. 1047, § 16, note 14. The Idaho statute in regard to assignments by insolvents is inoperative, having been pended by the Fed- creditors-Valideral Bankruptcy Act, and such an assignment is valid in this state. Capital Lumber Co. v. Saunders, 26 Idaho, 408, 143 Pac. 1178.

sus

Assignment for

ity.

We will take up the principal points urged by appellant in the order which seems to us most logical. He first contends that the deed shows on its face an intent to delay or defraud other creditors, in violation of C. S. § 5433.

Even if the assignment had the effect of preferring certain creditors, it would not be invalid for that reason. A preference is valid in the absence of an actual intent to de