Chi-Okla Oil & Gas Co. v. Shertzer

• Decision Date: 07 October 1924
• Docket Number: Case Number: 13826
• Parties: CHI-OKLA OIL & GAS CO. et al. v. SHERTZER et al.
• Court: Oklahoma Supreme Court

1924 OK 845

231 P. 877

105 Okla. 111

CHI-OKLA OIL & GAS CO. et al. v. SHERTZER et al.

Case Number: 13826

Supreme Court of Oklahoma

Decided: October 7, 1924

Syllabus

¶0 1. Oil and Gas--Lease for Nominal Cash Payment--Presumption of Development as Consideration.

If an oil and gas mining lease shows merely a nominal cash payment, it will be presumed that the principal consideration for the execution and delivery of the lease was to secure a test of the lands for the minerals.

2. Same--Rights Granted by Lease.

The lease does not grant, in praesenti, an interest to the lessee in the lands. The lease grants to the lessee the mere right to enter on to the premises to prospect for oil and gas. The imperfect interest may be ripened into a vested estate by the development of production according to the terms of the lease.

3. Same--Lapse of Lease by Failure to Develop or pay Rental.

If the lessee neither enters for development, nor pays the renewal money for a new term on or before the expiration of the preceding term, the lease will lapse and become null and void by the force of its own provisions.

4. Same--Construction of Leases.

The scope and effect of an oil and gas mining lease are to be determined from the provisions of the contract and the law applicable thereto.

5. Same--Lease Not Affected by Prior Oral Agreements.

Neither the lessor nor the lessee will be permitted to prove a prior or contemporaneous oral agreement which has the effect of changing the legal rights of the parties as fixed by the provisions of the contract and the law applicable thereto.

6. Same--Forfeiture of Lease--Conditions not Expressed--Province of Court.

If the parties provide for the forfeiture of an oil and gas lease, and do not express the conditions for the forfeiture, it becomes a matter for the court to determine from the situation of the parties, their apparent purpose in making the contract, and the subject-matter.

7. Same--Development as Chief Consideration--Right of Forfeiture--Presumption.

If it is apparent from the terms of the lease that the principal consideration for the execution of the lease was to secure a test of the property for oil and gas, it will be presumed that the lessor reserved the right of forfeiture to prevent the lessee from taking repeated terms to enter the property for prospecting for the minerals.

8. Same--Effect of Entry and Development.

After the lessee enters and commences to prospect and develop the property, in good faith, the ground for the particular forfeiture of the lease is destroyed. Thereafter, the grounds for the forfeiture of the lease, in favor of the lessor, will be measured by the rules of equity.

9. Same--Lease Construed.

The forfeiture provision as embodied in this lease had the effect of granting the right of entry to the lessee, after the expiration of the first term for entry, subject to the will of the lessor.

10. Landlord and Tenant--Termination of Tenancy--Right of Tenant to Notice.

The duty of the landlord to give notice of his intention to terminate the tenancy rests upon the fact that the term of the tenant is of uncertain duration, and the tenant is entitled to notice so that he may protect his crops and property on the premises.

11. Same--When Notice Unnecessary.

If the tenant has not entered on to the premises and has no property on the premises, the reason for the requirement of the notice does not exist.

12. Same--Termination by Execution of Subsequent Lease.

If the landlord has remained in the exclusive possession of the premises, it is not a matter of reentry by the owner, but merely that of declaring the termination of the right of entry by the tenant. The execution and delivery of a subsequent lease and entry by the tenant will be sufficient to terminate the right of entry in favor of the first lessee.

13. Judgment Sustained.

Record examined; held, to be sufficient to support the judgment in favor of plaintiffs and against the defendants. A. M. Etchen and A. B. Campbell, for plaintiff in error Chi-Okla Oil & Gas Co. B. Campbell, for plaintiffs in error Beasley and Beasley.

1. H. H. Montgomery and S. J. Montgomery, for defendants in error.

STEPHENSON, C.

¶1 C. C. McAdoo and L. M. McAdoo, on December 2, 1914, executed and delivered an oil and gas mining lease to Jas. R. Lewis covering the lands involved in this action for a period of five years. The instrument provided that the lessee should commence drilling operations on or before January 5, 1915, or pay $ 1 per acre for one year's additional time to commence drilling operations. The lease provided that if drilling operations were not commenced on or before January 5th, or a renewal payment made of $ 1 per acre, the lease should be null and void. The lease further provided that either party might cancel the lease at his option by the payment of $ 1. The lessee failed to commence drilling operations on the land and failed to make the renewal payment on or before January 5, 1915. L. M. McAdoo forwarded notice of cancellation with $ 1 on June 14, 1915, to the lessee. The latter admitted receiving the notice, but claimed that the notice did not describe the lands involved in the lease. However, the lessee did not hold any other oil and gas leases from Mrs. McAdoo at the time of receiving the notice. Mrs. L. M. McAdoo executed and delivered an oil and gas mining lease to C. P. Shertzer and John Shertzer on September 7, 1915, covering the same lands for a period of five years. Jas. R. Lewis made a written assignment of his lease to A. A. Humphrey, as trustee, on October 25, 1915. The trustee placed $ 160 in the bank to the credit of Mrs. McAdoo in the latter part of December, 1915, as a renewal payment for his lease. The Shertzers entered into the possession of the premises under their lease and commenced sinking a well for oil and gas. They brought in production according to the terms of the lease, and were in possession and developing the premises on October, 25, 1917. The Beasleys entered on to the premises on the latter date under a drilling contract from Humphrey, to sink a well while the Shertzers were in possession and developing the property. The Beasleys commenced sinking a well and completed the same by the use of force over the protest and objections made by the Shertzers. The trustees failed and refused to pay the Beasleys for drilling the well, the latter filed a mechanic's lien for the cost of drilling against the property. The Beasleys commenced an action to foreclose their mechanic's lien against the property on October 15, 1918, in which only A. A. Humphrey, as trustee, was named as defendant. Judgment followed for the Beasleys for the debt and order foreclosing their mechanic's lien on the property against the trustee. The sheriff of Nowata county sold the premises on the 26th day of November, 1919, upon an order of sale issued out of the cause. The Beasleys purchased the premises at the sale and received sheriff's deed for whatever interest Humphrey held in the property as trustee. The Shertzers sold and assigned their lease to Chi-Okla Oil & Gas Company on the 22nd day of August, 1919. The assignee executed and delivered its note and mortgage on the property to the Shertzers to secure an unpaid portion of the purchase price. The assignors warranted the title of the lease to the oil company. The Beasleys commenced to assert adverse ownership in the property through their sheriff's deed in the foreclosure proceedings. The Shertzers and the Chi-Okla Oil Company thereupon commenced action, as plaintiffs, against the Beasleys to determine the ownership of the mineral rights through the conflicting lease and sheriff's deed. The oil company made default in the payment of the note and mortgage given as a part of the consideration for the oil and gas lease. The Shertzers then commenced an action for debt and for foreclosure of the mortgage against the assignee. The Beasleys and the oil company filed a stipulation for the dismissal of the oil company in the action to quiet title, the Shertzers then made the oil company a party defendant in the action. The Beasleys filed their answer asserting a paramount claim to the oil and gas mining rights through the sheriff's deed. The oil company adopted the allegations of the Beasleys and asserted the right to cancel the note and mortgage given by it to the Shertzers for the lease, for failure of consideration. The action to quiet title came on for trial and judgment was entered for the plaintiff and against the Beasleys, canceling and setting aside the sheriff's deed. The judgment denied the cancellation of the note and mortgage as prayed for by the oil company.

¶2 The Beasleys and the oil company have appealed the cause, and assign the following errors for reversal here: (1) The judgment is contrary to the evidence; (2) the judgment is contrary to law. The principal complaint made by the plaintiffs in error is that the court refused to permit them to show an oral agreement for the payment of the renewal money at any time during the year following January 5, 1915, for the Lewis lease. The disposition of this question depends upon the terms of the conveyance and the nature of the interest granted by the Lewis lease. The provisions of the lease which bear upon the questions are:

(1) The lease granted to Lewis the right to enter the premises to prospect for oil and gas from the date of the lease to and including January 5th, 1915; (2) the right to create a new or additional period of time for one year from January 5, 1915, to enter the premises to prospect for the minerals by the payment of $ 1 per acre; (3) the lease was for a general term of five years, and as much longer as oil or gas should be produced from the premises according to the terms of the lease; (4) the failure of the lessee to sink a well or to make a renewal payment should operate to terminate the lease and render the same null and void; (5) either party was given the right to cancel the grant

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