Kelley v. Hardwick

• Decision Date: 08 March 1929
• Parties: KELLEY v. HARDWICK et al.
• Court: Kentucky Court of Appeals

14 S.W.2d 1098

228 Ky. 349

KELLEY v. HARDWICK et al.

Court of Appeals of Kentucky

March 8, 1929

Appeal from Circuit Court, Daviess County.

Suit to quiet title to an oil lease by H. Lee Kelley against James F Hardwick and others. Plaintiff's petition dismissed, and he appeals. Affirmed.

Logan Gilliam & Logan and Alex M. Chaney, all of Bowling Green, for appellant.

Floyd J. Laswell, of Owensboro, and Davis & Harrison, of Pineville for appellee Mahlosky.

Coleman Taylor, of Russellville, and R. Miller Holland and Louis I Igleheart, both of Owensboro, for appellees.

DIETZMAN J.

This suit was brought by the appellant against the appellees to quiet his title to an oil lease. A demurrer was sustained to the petition, and the appellant declining to plead further, his petition was dismissed, and he appeals.

On the 22d day of June, 1920, T. M. Bennett and Arrie Bennett, his wife, executed an oil lease to the appellant covering some property they owned in Daviess county. The pertinent part of the lease reads:

"The party of the second part agrees to commence a well on said premises within one year from the date hereof, or pay at the rate of 25 cents an acre for each additional 12 months such completion is delayed from the time above mentioned for the completion of such well until a well is completed. * * * Rentals to be paid at -------."

The appellant never developed the leased premises nor did he pay or even tender any rent until just before this suit was brought in February, 1928. In the meantime the Bennetts sold the property covered by their lease to Pete Mahlosky, and he in July, 1927, put a cap lease upon the property which by mesne assignments has come into the ownership of the appellees. They starting development, this suit was brought.

Chapter 24 of the Acts of 1920, now section 3766b1c et seq. of the Statutes, by its first two sections provides:

"Whenever, in any lease of lands for oil and gas purposes, it is provided in substance that actual drilling or development may be postponed by the payment or tender of rentals on or before the date fixed in said lease for such payment or tender, if the lessee or assignee of said lease shall fail to pay or tender said rents on or before the date stipulated in the lease, or contract to pay, then said lease or contract shall be void, unless the lessor thereafter, and before executing a new lease or contract, shall accept said rentals.

That all valid existing or future contracts and leases for oil and gas rights upon and under the lands of this commonwealth, wherein by their terms a rental clause is provided in event of failure to drill for oil or gas within a given period, are hereby validated and declared to be, and shall be, construed by the courts of this commonwealth enforcible and binding contracts according to the terms thereof between the parties so long as the rentals therein provided shall be paid or tendered at and as provided by their terms during the period of said lease and contract."

Under the provisions of this statute, if the lessee or his assignee fails to pay or tender the rents provided for by the lease on or before the date stipulated in the lease or contract for payment, then the lease or contract is void. Appellant insists that this statute is not applicable to his lease because there is no date stipulated in his lease for the payment of the rent and even if the statute is applicable it is unconstitutional. In the case of Dix River Barytes Co v. Pence (Ky.) 123 S.W. 263, the provision in question of the lease there involved was that the lessee was to commence operations under the lease within one year from its execution, or, in lieu thereof, to pay the lessor 20 cents per acre per annum thereafter until operations were commenced. It was held in substance that this rent was due annually at the end of each year beginning with the second year. This holding was cited with approval and applied in case of Warren Oil & Gas Co. v. Gilliam, 182 Ky. 807, 207 S.W. 698, and by inference in the case of McNutt v. Whitney, 192 Ky. 132, 232 S.W. 386. As stated in these opinions, the real purpose of an oil and gas lease is to provide for development, and the lease should be construed with that idea in mind. To permit the lessee to put off until the end of the term the payment of rental for delayed development, as appellant argues should here be done, would be to...