Frank Oil Co. v. Belleview Gas & Oil Co.

• Decision Date: 14 November 1911
• Docket Number: Case Number: 929
• Citation: 29 Okla. 719,119 P. 260,1911 OK 385
• Parties: FRANK OIL CO. v. BELLEVIEW GAS & OIL CO. et al.
• Court: Oklahoma Supreme Court

1911 OK 385

119 P. 260

29 Okla. 719

FRANK OIL CO. v. BELLEVIEW GAS & OIL CO. et al.

Case Number: 929

Supreme Court of Oklahoma

Decided: November 14, 1911

Syllabus

¶0 1. MINES AND MINERALS--Contracts---Oil and Gas--Construction and Operation. Oil and gas, while in the earth, unlike solid minerals, are not the subject of ownership distinct from the soil, and the grant of the oil and gas, therefore, is a grant not of the oil that is in the ground, but of such a part as the grantee may find, and passes nothing except the right to explore for the same under the terms of such contract.

2. MINES AND MINERALS--Oil and Gas Lease--Construction and Operation--Forfeiture. Where a party leases a tract of land for the purpose of mining and operating for oil and gas, the lessee contracting to deliver to the pipe line with which such well or wells may connect one-eighth of all oil saved from said premises, and to pay $ 150 each year for the product of each gas well while the same is being used off the premises, if oil and gas are found on said premises, also paying cash in hand the sum of $ 200 and agreeing to commence within 30 days from the date of said lease a well on an adjoining tract of land belonging to one Gibson, and in which the lessor had no direct interest, and the lease containing the following provision:

"If no well is commenced on said premises within one year from this date, then this grant shall become null and void, unless second party shall pay to the first party eighty ($ 80.00) dollars for each year thereafter such completion is delayed, said rental to be paid quarterly in advance. Party of the second part further agrees to protect the lines of the land above described by immediately offsetting all wells drilled within 150 feet of said land, unavoidable delays excepted. It is further provided that this grant shall become null and void unless a well is commenced within thirty days from the date hereof on the following land belonging to Benjamin L. Gibson. * * *"

--Held, that this provision did not bind the lessee to pay any rent for the land or for delay in commencing to operate for oil and gas, said grant or lease amounting to an option, preventing the lessor, after receiving the consideration for the first year, from leasing to another during such time, and after receiving a quarterly payment, from leasing to another until such delay period of a quarter had expired, the lessee having the option, by continuing to pay such quarterly payments, to continually renew such option by such succeeding payments, the word "year" being used merely as a basis to fix the amount of the quarterly payments.

(a) A gas and oil lease giving the lessee the option to pay a certain sum, and thus extend the lease, is operative against the lessor during such extension only upon the payment of such sum; contract rights being correlative and mutual.

(b) Where the lessee had abandoned his lease by nonpayment of quarterly payments of rent or delay money, as stipulated therein, and such lease or contract having been declared forfeited by the lessor, the rights of the lessee thereby terminated.

3. MINES AND MINERALS--Oil and Gas Lease--Construction Favoring Lessor. A different rule of construction obtains as to oil and gas leases from that applied to ordinary leases or to other mining leases. Owing to the peculiar nature of the mineral, and the danger of loss to the owner from drainage by surrounding wells, such leases are construed most strongly against the lessee and in favor of the lessor.

4. CONTRACTS -- Optional Contracts -- Construction. When contracts are optional in respect to one party, they are strictly construed in favor of the party that is bound and against the party that is not bound.

5. CONTRACTS--Installments--Time of Payments--Waiver--Estoppel. The contract providing for the payment of the sum of $ 20 quarterly in advance, the check for the first payment was mailed by the lessee to the lessor on the date the payment was to be made, and, being received by the lessor on the next day, it was accepted by him. The check for the second payment was mailed by the lessee to the lessor four days before the date of payment, and, being received by him prior to said date, was accepted. The third quarterly payment was not mailed to the lessor by the lessee until five days after the date provided for payment; the lessor having three days after the date of payment declared the lease forfeited on the ground of nonpayment. The check was received by the lessor six days after the date of payment and returned by him. Held, that the accepting of the first payment one day after the date of payment did not estop the lessor from declaring a forfeiture for nonpayment, or operate as a waiver to insist on the conditions of the contract; the lessee obviously not so construing it as an estoppel or waiver, as he sent the second payment four days before the date required, thereby indicating a recognition of the binding force of all the terms of the contract.

Error from District Court, Okmulgee County; John Caruthers, Judge.

Action by the Belleview Gas & Oil Company and others against the Frank Oil Company. Judgment for plaintiffs, and defendant brings error. Affirmed.

West, Mellette & Jones, for plaintiff in error

Geo. S. Ramsey, J. C. Stone, Thos. H. Owen, and C. L. Thomas, for defendants in error

WILLIAMS, J.

¶1 On the 15th day of October, 1906, the defendants in error, Elmer M. Lowe and Mollie E. Lowe, executed an oil and gas lease to the plaintiff in error upon a certain 80 acres of land allotted to Elmer M. Lowe, as a member of the Creek Tribe. Said contract is in haec verba:

"In consideration of the sum of one and no-100 dollars and the covenants and agreements hereinafter contained, Elmer M. Lowe, and Mollie E. Lowe, his wife, of Mounds, Indian Teritory, first party, hereby grant unto the Frank Oil Company of Independence, Kansas, second party, its successors or assigns, all the oil and gas in and under the following described premises, together with the exclusive right to enter thereon for the purpose of drilling or operating for oil, gas or water, to erect, maintain, and remove all structures, pipe lines and machinery necessary for the production, transportation and storage of oil, gas or water, namely: A lot of land situated in Creek Nation, Western District of Ind. Ter. bounded and described as follows: The west half (1/2) of the southwest quarter (1/4) of section twenty-nine (29), township sixteen (16) north, range twelve (12) east of the Indian base and meridian containing eighty (80) acres more or less, according to the government survey thereof. Should oil be found in paying quantities on the premises second party agrees to deliver to the first party in the pipe line with which he may connect the well or wells, the one-eighth (1-8) part of all the oil saved from said premises. If gas only is found, second party agrees to pay one hundred and fifty ($ 150.00) dollars each year for the product of each well while the same is being used off the premises, and first party shall have gas free of expense to light and heat the dwellings on the premises. The second party shall have the right to use sufficient gas, oil or water to run all machinery used by it in carrying on its operations on said premises, and the right to remove all its property at any time. If no well is commenced on said premises within one year from this date, then this grant shall become null and void unless second party shall pay to the first party eighty ($ 80.00) dollars for each year thereafter such completion is delayed, said rental to be paid quarterly in advance. Party of the second part further agrees to protect the lines of the land above described by immediately offsetting all wells drilled within 150 feet of said land, unavoidable delays excepted. It is further provided, that this grant shall become null and void unless a well is commenced within thirty days from the date hereof on the following land belonging to Benjamin L. Gibson: The west half (1/2) and the southeast quarter (1/4) of the northeast quarter(1/4) of section thirty (30), township sixteen (16) north, range twelve (12) east, in the Ind. Ter. All rentals and all gas royalties mentioned herein shall be payable to the first party personally or deposited to his credit in the Bank of Mounds, of Mounds, I. T. In witness whereof, the parties have hereunto set their hands this 15th day of October, A. D. 1906.

ELMER M. LOWE.

MOLLIE E. LOWE.

THE FRANK OIL COMPANY,

By F. B. UFER, President.

[Seal] By WALTER M. LITCHFIELD, Secy."

¶2 The well on the Gibson tract was commenced within 30 days; but no well was commenced on the leased premises within one year from said date, nor had possession been taken thereof prior to the time of the alleged forfeiture. It becomes essential, under the facts stated, to determine the meaning of the provision, "unless second party shall pay to the first party eighty ($ 80.00) dollars for each year thereafter such completion is delayed, said rental to be paid quarterly in advance."

¶3 This contract having been entered into prior to the erection of the state, section 1118 (section 876, Statutes Okla. Ter. 1890), Compiled Laws of Oklahoma, 1909, which provides, "Time is never considered as of the essence of a contract, unless by its terms expressly so provided," has no application in the construction of this lease, as certain statutes of Arkansas, as they appeared in Mansfield's Digest of 1884, were at that time in force in Indian Territory. Act of Congress, May 2, 1890, 26 U.S. Statutes at Large, § 31, c. 182, p. 94. Under the controlling decisions in Arkansas, the forfeiture in the language of this lease was permissible. Williams v. Green, 14 Ark. 315; Gann v. Ball, 26 Okla. 26, 110 P. 1067.

¶4 It is insisted by counsel for plaintiff in error that:

"A lease for no definite term, with an annual rental, which is payable quarterly or monthly, is a lease from year to year. The

...