Clear Creek Oil & Gas Company v. Bushmaier

• Decision Date: 05 November 1923
• Docket Number: 229
• Citation: 255 S.W. 37,161 Ark. 26
• Parties: CLEAR CREEK OIL & GAS COMPANY v. BUSHMAIER
• Court: Arkansas Supreme Court

255 S.W. 37

161 Ark. 26

CLEAR CREEK OIL & GAS COMPANY v. BUSHMAIER

No. 229

Supreme Court of Arkansas

November 5, 1923

Appeal from Franklin Circuit Court, Charleston District; James Cochran, Judge; reversed.

Judgment reversed and complaint dismissed.

E L. Matlock and Hill & Fitzhugh, for appellant.

1. The verdict was contrary to the law and the evidence. This case grows out of a misapplication of this court's decision in the Blair case, 148 Ark. 301. That case recognized the principle that there is an implied covenant on the part of the lessee to protect the lessor against drainage, and, in default thereof, the lessor may recover damages, but only when there has been a demand made within a rental period with notice of intention to refuse to accept further rentals and to declare a forfeiture for noncompliance with such demand. Id. 310; 89 S.E. 12; L. R. A., 1917-A, 171. In this case the lessor continued to accept rentals for four years, and until the cancellation of the lease, after the alleged demand for a protection well. See 177 P. 104.

2. The action is barred by limitation. C. & M. Digest, § 6950; 148 Ark. 301-310; 47 Ark. 317; 49 Ark. 468; 112 Ark. 6; 115 Ark. 84; 91 Ark. 162. We do not believe this action is controlled by the second paragraph of the statute, supra, but, if it is, appellee's case is not bettered. 52 Ark. 240; 92 Ark. 406; 107 Ark. 330.

3. There was no duty to drill a protection well, if the cost of producing gas and the market condition for its sale were such, at the time the plaintiff was entitled to have a protection well, that the defendant could not sell the gas so produced at a profit and without loss. 140 F. 801; 177 P. 104, and authorities there cited.

Chew & Ford, for appellees.

It is an implied covenant in every lease of this kind that the lessee will make diligent search and operation of the leased premises. 97 Ark. 167; 72 C. C. A. 213. The acceptance by appellees of the yearly rentals did not estop them from insisting that the lessee should comply with the terms of its obligations to explore and develop the leased premises. 148 Ark. 301.

OPINION

HUMPHREYS, J.

This suit was instituted by appellees against appellant in the circuit court of Crawford County, to recover damages in the sum of $ 2,000 for the alleged failure of appellant to explore and develop gas wells on certain lands in said county leased by appellees to appellant. The venue was changed to the Charleston district of the circuit court of Franklin County, where the cause was tried upon the pleadings, evidence, and instructions of the court, resulting in a verdict and consequent judgment against appellant in the sum of $ 390, from which is this appeal.

The suit was based upon a written lease of the lands therein described, which was executed in order that the oil, natural gas, and mineral resources thereon might be discovered and developed. The provisions of the lease necessary to a determination on the vital question involved on this appeal are as follows:

"That said first parties (appellees here) for and in consideration of the sum of one dollar, cash in hand paid, and in further consideration of the agreements and covenants hereinafter set forth to be kept and performed by said second party, have granted, demised and let, and do by these presents grant demise and let unto the second party, its successors and assigns, the premises hereinafter described and for the terms specified herein, with the exclusive right and privilege of entering into, possessing, holding, drilling into, mining therein and prospecting for oil, natural gas and other minerals, * * * and also the further right and privilege of making such further use of said premises as it may deem necessary in developing, operating and exploring the mineral resources thereof, the following described lands, to-wit:" [Here follows a description of the land.]

"That if the said second party shall market any gas from any well producing gas only, then the parties of the first part shall receive therefor at the rate of two hundred dollars per annum for each well, quarterly in advance. Should any minerals of commercial value be discovered in paying quantities on the within-described premises, and the development and production of same by said second party be carried on with reasonable diligence, then the lease shall remain in full force and effect. * * *

"That if no drilling operations are begun on the premises within one year, all right and obligations secured under the lease shall cease upon notice in writing being served on the second party by the parties of the first part, unless the second party shall elect to continue the lease in force as to any and all parts...