Brunson v. Carter Oil Co.

• Decision Date: 31 May 1919
• Docket Number: 2539.
• Parties: BRUNSON et al. v. CARTER OIL CO.
• Court: U.S. District Court — Eastern District of Oklahoma

259 F. 656

BRUNSON et al. v. CARTER OIL CO.

No. 2539.

United States District Court, E.D. Oklahoma.

May 31, 1919

This case is here on removal from the district court of Stephens county, Okl. Plaintiffs, complaining in their petition, aver that they are the owners of a certain tract of land in Stephens county, Okl.; that on May 18, 1916, A. C. Flowers and wife, Cordie Flowers, being the owners of said tract executed and delivered to defendant an oil and gas mining lease thereon, said lease being 'in consideration of one dollar in hand paid by the lessee and other valuable consideration,' and which contained the following provisions:

'That the lessor, in consideration of one dollar ($1.00) in hand paid by the lessee, and other valuable considerations receipt of which is hereby acknowledged, and the covenants and agreements hereinafter contained, hereby grants, bargains and sells all the oil and gas in and under the land hereinafter described, and grants, demises, leases and lets said land, itself unto the lessee, its successors and assigns, for the sole and only purpose of operating for and producing oil and gas thereon and therefrom, together with rights of way and servitudes for pipe lines, telephone and telegraph lines, for tanks, power houses, stations and fixtures, for producing and caring for such products and housing and boarding employes, and all other rights and privileges necessary, incident to or convenient for the economical operation of said land, alone or conjointly with neighboring land for oil and gas with the right to use free oil, gas or water, but not from lessor's water wells, for such purposes, and with the right of removing, either during or after the term hereof, all and any property and improvements placed or erected on the premises by lessee including the right to pull all casing; * * * to have and to hold said lands, and all rights and privileges granted hereunder to and unto the lessee, its successors and assigns for the term of five (5) years from the date hereof, and as much longer as oil, gas or either of them shall be produced from said lands by lessee in paying quantities. * * *

'In consideration of the premises, the lessee further covenants and agrees:

'First. To deliver to the credit of the lessor, free of cost in the pipe line to which it may connect its wells, the equal one-eighth (1/8) part of all oil produced and saved from the leased premises, as royalty, or, at lessee's election, to pay the lessor for such royalty the market price prevailing the day the oil is run into the pipe line or run into storage tanks, in which last event settlement and payment shall be made by the lessee on the 15th day of each month for the royalty so purchased by the lessee during the preceding month. * * *

'Third. If no well is commenced on said land on or before the 19th day of May, 1917, this lease shall terminate as to both parties, unless the lessee, on or before that date, shall pay or tender the lessor the sum of ninety ($90.00) dollars, in the manner hereinafter provided, which payment or tender shall operate as a rental for twelve months from and after the date last above stated, and the same shall also cover the right and privilege in the lessee to defer the commencing of said well during said period of months. In like manner and upon like payments or tenders the commencement of a well may be further deferred for like periods of the same number of months successively during the entire five-year term of this lease. Lessor expressly declares that the down payment or bonus received by him for this lease at the time of the execution thereof is a good, valid and substantial consideration, and sufficient in all respects to support each and every covenant contained herein, including specifically the option granted the lessee to extend this lease from time to time during the five-year term thereof upon the payment or tender of the rentals hereinbefore provided for. Lessee agrees to immediately offset all paying oil or gas wells drilled on lands adjoining this tract, and it is expressly agreed that no implied covenants regarding the measure of diligence to be exercised by the lessee in the drilling of said land during the original five-year term hereof shall be read into this lease, it being the express agreement of the parties that the provisions of this paragraph set forth the exclusive conditions under which the lessee shall hold this lease for said original term of five years. * * *

'Fourth. All rentals due hereunder shall be paid by lessee's check, mailed, postage prepaid, to lessor at Duncan, Okl., or to First Nat. Bank of Duncan, Okl., for lessor's credit on or before the date any such rental shall become payable; said bank, by a power irrevocable, is hereby made the agent of lessor to accept all rentals paid hereunder, and the same shall continue as the depository of such rentals during the life of this lease regardless of changes in the ownership of said land or said rentals. No change in the ownership of said land, or the rentals or royalties due hereunder, shall affect or bind the lessee until such purchaser shall have furnished the lessee an abstract of title to such lands, certified to date, showing as a part thereof the title claimed by such purchaser. * * * '

That thereafter, on or about the 2d day of April, 1917, said Flowers and wife granted and conveyed by deed said land to plaintiffs, which was duly placed of record; and thereafter, on or about the 5th day of May, 1918, said deed, with an abstract of title, as provided in said lease, was furnished to said defendant as evidence of plaintiffs' ownership; that at the time of said purchase by plaintiffs the defendant had an oil and gas lease on said land under the terms of which defendant was to pay the lessor, his heirs and assigns, the sum of $90 by the 19th day of May, 1918, as rental in lieu of development or said lease would terminate on said date; that said payment was not made, and that said lease was then and there terminated.

Defendant admits the execution of said oil and gas mining lease, but avers that it paid the lessor as a bonus for said lease the sum of $540, in cash; that it had drilled no well on said land for oil and gas mining purposes, and that by the terms of such lease the delay rental accrued thereunder on or before May 19, 1917, in the sum of $90; that such sum was paid to the persons entitled thereto before said due date; that in order to continue said lease in force beyond May 19, 1918, it was necessary for it to pay a rental in the sum of $90, and that such rental was not paid or tendered to plaintiffs on or before May 19, 1918, but that 'through inadvertence and mistake' it did pay said rental before said May 19, 1918, to the said A.C. Flowers and wife, the lessors in said lease, instead of to the plaintiffs.

Defendant further averred that:

'During the months of April and May, 1917, it was the owner of more than 10,000 leases for oil and gas mining purposes covering lands in Oklahoma, Kansas, and other states, practically all of which leases provided for the periodical payment of rentals; that the number of leases upon which the defendant pays rentals averaged about 900 per month prior to April, 1917; that during the month of April, 1917, 665 rentals were paid, necessitating an expenditure of $61,968.46; that it is the practice of the defendant to pay said rentals a month in advance of the final date when they may be paid; that the great number of payments thus required of defendant and the varied conditions under which such payments must be made demand a thorough and comprehensive system, insuring the payment thereof of the correct amount and to the proper parties, and the delegation of the duty of keeping proper records and of making such payments to competent and experienced clerks qualified in regard thereto; that accordingly this defendant has created a department designated as the 'Rental Department,' which is in charge of competent and experienced clerks, whose duty it is to make a proper record of each lease as secured, and to note on such record the periodical payments of rentals required under the terms of the particular lease, and showing the persons who are entitled to receive such payment; that a separate sheet calling for these details is provided for each lease, and such sheet is then arranged in a record according to the calendar months, in order that the necessity for the payment of each rental shall be brought to the attention of said rental department at least one month before the particular payment is to be made; that among the details shown on such sheet is a column showing the persons entitled to such rental; that when this defendant is advised that there has been a change in the ownership of the land covered by any of its leases, so that there is a change in the parties who are entitled to receive the rentals accruing on such lease thereafter to accrue, the clerk in the rental department who has charge of such a transaction makes a note on the rental sheet to the effect that the ownership of the land has changed, and the names of the new owners are written on such rental sheet, and shown thereby as entitled to receive the rentals thereafter accruing; that owing to the vast amount of lands which this defendant has leased there are more than a thousand transactions per year of this character; that, owing to the number of leases owned by this defendant, no reference is had to the original file for the purpose of securing the data to make proper rental payments, but such data is procured solely from the rental sheet covering a particular lease; that it would be impracticable to refer in each case to the files, and it is necessary that all necessary information be placed on

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