Coles v. Johns
| Decision Date | 24 January 1964 |
| Citation | 377 S.W.2d 587 |
| Parties | Otis C. COLES et al., Appellants, v. Robert JOHNS et al., Appellees. |
| Court | United States State Supreme Court — District of Kentucky |
Terry L. Hatchett, Glasgow, for appellant.
Charles R. Richardson, Harry H. Wilson, Munfordville, for appellee.
Appellants, Coles and McGee, sought to recover in the Hart Circuit Court the sum of $7000 which had been placed in escrow in connection with an option to buy one half interest in an oil and gas lease. The appellees, Robert Johns and escrow agent Wilson, by counterclaim, also sought to recover the amount which had been placed in escrow. The court held that Johns was entitled to the sum sought.
The owners of certain mineral rights in 176 acres of land executed and delivered to Johns a lease to the mineral rights for one year and so long thereafter as oil or gas was produced. The lease contained a forfeiture clause which read: 'Well must be commenced by ninety days from date of delivery of lease or lease void. 1st well must be drilled to bottom of blue sand.' Allthough the lease was dated March 6, 1959, when one of the lessors signed the lease, it was necessary to obtain the signature of each of certain non-residents who owned an interest in the land and the deed was not actually returned, delivered and recorded until March 13, 1959. On March 14, 1959, Johns and Otis C. Coles executed an option agreement, a pertinent part of which read:
'Party of the second part may purchase on or before March 16, 1959, at 12:00 O'clock, Noon, one half of the total acreage embraced in said lease for the sum of $7,000.00 (Seven Thousand Dollars) reserving unto the party of the first part a 1/16 overriding interest in the portion purchased by the second party, and said acreage shall be arrived at after a boundary survey has been made of the whole tract by starting at a mutually agreed fixed point on the northeast side and running a straight line to the southwest side at such fixed point as would equally divide the tract, and it is further granted unto the party of the second part that he may take either half.'
In view of the fact that additional surveys were necessary before an actual specific assignment could be made, the sum of $7000 was placed in escrow, Wilson being the escrow agent. At the time Coles exercised the option he disclosed that he had been acting as agent for Taft McGee and instructed Johns to make assignment of the leasehold to Taft McGee. Thereafter, for a period, all parties seem to have lost interest in completing the surveys and closing the assignment. However, Johns did obtain a boundary survey of the whole tract which he delivered to the escrow agent on June 9, 1959. It may be here remembered that the option agreement provided that after a boundary survey had been made of the whole tract, the parties would mutually agree upon a fixed point from which a division line might be run. It will be noted that this survey was delivered by Johns at a time when the forfeiture provision requiring the original lessee to begin drilling had practically expired, that is, ninety days from March 13, 1959.
Appellants contend that the delivery of the boundary survey such a short time before the expiration of the ninety day period for drilling made it impossible for them to come to Kentucky and agree upon division of the lease and commence drilling. This contention requires some discussion as to expiration of the ninety day period for drilling. In other words, appellants assume that the lease was in fact forfeited and that the original owners were entitled to cancel the lease because of such failure. By the terms of the lease to Johns from Peebles and other owners of the land, the lessee was required to commence a well 'by 90 days from date of delivery of lease.' Although the lease was dated March 6, as we have shown above, it was not delivered to Johns until March 13. The rule in this state is that where the computation of time is...
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