Melton v. Cherokee Oil & Gas Co.

• Court: Oklahoma Supreme Court
• Writing for the Court: BLEAKMORE, C.
• Citation: Melton v. Cherokee Oil & Gas Co., 170 P. 691, 67 Okla. 247, 1917 OK 67 (Okla. 1917)
• Decision Date: 09 January 1917
• Docket Number: Case Number: 7702
• Parties: MELTON et al. v. CHEROKEE OIL & GAS CO.

1917 OK 67

170 P. 691

67 Okla. 247

MELTON et al. v. CHEROKEE OIL & GAS CO.

Case Number: 7702

Supreme Court of Oklahoma

Decided: January 9, 1917

Syllabus

¶0 1. Oil and Gas--Lease--Operation--Forfeiture. An oil and gas lease containing a stipulation on the part of the lessee to commence operation on the premises within a year from a date certain or pay for delay conferred on the lessee an option to drill or pay, and a failure to do either rendered the some forfeitable at the choice of the lessor.

2. Same -- Provision for Avoidance -- Effect. Where such lease contains a clause reserving to the lessee the right at any time to remove all his property and reconvey the premises, and thereby render such lease null and void, held, that a corresponding right existed in the lessor before development to compel a surrender.

3. Specific Performance--Optional Performance--Equity Jurisdiction. A court of equity will not award relief in the nature of specific performance of a contract which is not certain, fair, and just, or where performance by the complaining party is entirely optional. (Syllabus by Bleakmore, C.) Kane and Miley, JJ., dissenting.

Tillotson & Elliott, for plaintiffs in error.

William P. Thompson, C. B. Holtzendorff, H. Tom Kight, and P. W. Holtzendorff, for defendant in error. J. L. Skinner and W. W. Pryor, amici curiae.

BLEAKMORE, C.

¶1 This suit was commenced in the district court of Rogers county by the Cherokee Oil & Gas Company, as plaintiff, against Charles L. Melton, Addie M. Melton, G. E. Slaugenhop, C. M. Eichorn, and C. C. Johnson, as defendants, seeking the cancellation of a certain oil and gas drilling contract theretofore entered into between the defendants, to enjoin them from entering upon the land described in such contract for the purpose of drilling for oil and gas, and from interfering with the plaintiff in its operations upon the premises, under a prior lease, etc. Defendants answered alleging the invalidity of the lease under which plaintiff claimed, and prayed for its cancellation, etc. There was judgment for plaintiff, from which defendants have appealed. The parties are referred to here as they appeared in the trial court. The lands involved are 120 acres situate in the southeast 1/4 of section 28, township 24 north, range 17 east. On January 7, 1902, the Secretary of the Interior, under authority conferred upon him by act of Congress, entered into an oil and gas mining lease for a term of 15 years with the plaintiff, covering the whole of section 28, by the terms of which plaintiff undertook to sink wells, operate the same, and pay certain advanced royalties, rentals, etc., which instrument is hereafter referred to as the "secretarial lease." The lands described therein were later allotted and patents therefor issued to members of the Cherokee Tribe. By virtue of congressional enactment the portion here involved subsequently became amenable, and was conveyed to the defendant Charles L. Melton. Thereafter, on July 16, 1913, Charles L. Melton and the Cherokee Oil & Gas Company entered into an oil and gas mining lease (hereafter designated as the "commercial lease"), covering the 120 acres in question, and containing the following provisions:

"1439. Oil and Gas Lease. "In consideration of the sum of one and no/100 dollars, and the release from secretarial lease No. 7 and of the covenants and agreements hereinafter contained, Charles L. Melton, first party, hereby grants unto Cherokee Oil & Gas Company, a corporation, second party, heirs, successors, and assigns, all of the oil and gas in and under the following described premises, together with the right to enter thereon at all times for the purpose of drilling and operating for oil, gas, or water, to erect, maintain, and remove all buildings, structures, pipes, pipe lines, and machinery necessary for the production and transportation of the oil, gas, or water, provided that the first party shall have the right to use said premises for farming purposes, except such as is actually occupied by second party. * * * "The above was made on the following terms:

"First. Second party agrees to commence operations on said premises within one year from date of release from secretarial lease or pay $ 1 per acre per annum until the first well is completed or the property hereby granted is conveyed to the first party.

"Second. Should oil be found in paying quantities upon the premises, second party agrees to deliver to first party, in the pipe line which it may connect the well or wells. the one-eighth part of the oil produced and saved from premises.

"Third. Should gas be found, second party agrees to pay first party $ 150 per annum for every well from which and while gas is sold for commercial purposes therefrom off said premises. * * *

"Sixth. Second party may at any time remove all his property and reconvey the premises hereby granted, and thereupon this instrument shall be null and void.

"The second party agrees that a sum of money shall be paid to the first party upon the delivery of this lease, the amount to be determined by the number of acres in the description above multiplied by the pro rata per acre of advanced royalty to the United States Indian superintendent at the time the secretarial lease is canceled, or the foregoing stipulations to be complied with, unavoidable delays excepted."

¶2 This lease was placed in a bank with the understanding between the parties that it was to be delivered to the plaintiff upon payment of the accumulated royalties due defendant Melton, under the terms of the secretarial lease and the release of that instrument. Pursuant to such agreement and the terms of the commercial lease on August 27, 1913, plaintiff executed the following release of the secretarial lease:

"Release.

"The undersigned Cherokee Oil & Gas Company, lessee in a certain oil and gas mining lease executed by the Secretary of the Interior in favor of the undersigned lessee, date June 7, 1902, covering section 28, township 24 north, range 17 east, 410 acres, more or less, hereby releases, relinquishes, and surrenders all right, title, and interest in and to the foregoing lease, in so far as it pertains to the following described land: * * * Said land being located in Rogers county, state of Oklahoma.

"Effective from date of approval hereof by the Secretary of the Interior."

¶3 Such release was approved by the Secretary of the Interior October 13, 1913,, although it appears that the superintendent of plaintiff did not have actual notice thereof until January 5, 1915, and the release seas not returned to the plaintiff until about February 13, 1915. The royalties due Melton under the provisions of the secretarial lease had been received by him long prior to this time. Up to February 14, 1915, plaintiff had neither commenced operations on the premises nor offered to pay the $ 1 per acre per annum delay money. On that day, however, asserting its rights under the commercial lease, it tendered to Melton a check for $ 120, which he then declined to accept. On the following day the drilling contract between defendants, the cancellation of which is sought by plaintiff, was entered into. Thereafter plaintiff attempted to move machinery upon the premises for the purpose of drilling a well, but was prevented by defendants, whereupon this action was begun. A temporary retraining order against defendants was issued, which was subsequently dissolved, and defendants commenced the drilling of a well, which was sunk to a depth of about 100 feet, when their operations were interrupted by the appointment of a receiver, who took charge and completed such well. Beyond question all the rights of the plaintiff to the lands involved by virtue of the secretarial lease were surrendered by the release thereof, and, according to the express terms of such release and of the commercial lease, ceased to exist upon the approval of the release by the Secretary of the Interior. The authority of the Secretary in this regard and the efficacy of his approval of such release need not be considered. By the commercial lease it was stipulated:

"Second party agrees to commence operations on said premises within one year from date of release from secretarial lease or pay $ 1 per acre per, annum until the first well is completed or the property hereby granted is conveyed to the first party."

¶4 And by the release it was provided that it Should be "effective from date of approval hereof by the Secretary of the Interior." From the provisions in these instruments it is obvious that the parties intended that the date of the approval of such release should definitely fix the time at which the commercial lease should become effective, and within one year from which the plaintiff should commence operations on the premises or pay to the lessor $ 1 per acre per annum. Plaintiff defaulted in the performance of the commercial lease contract by failure to either commence operation or pay the delay money within the period specified therein. Such contract constituting an option to commence operations or pay, the failure to do either rendered the same forfeitable at the choice of the lessor. The lessor exercised his power in this respect by declining to accept the delay money after the expiration of the year and entering into a contract with other parties, and thus all rights of the plaintiff under the provisions of the commercial lease were forfeited. In Brown v. Wilson, 58 Okla. 392, 160 P. 94, it was held:

"Where an oil and gas lease was made, executed, and delivered for the consideration of $ 1 in hand paid the lessor, and the covenants and agreements hereinafter contained on the part of the lessee, and leased and let to him a certain tract of land for a term of ten years and as long thereafter as oil and gas or either were produced therefrom by the lessee, he to yield to the lessor certain royalties from the oil and gas produced, and where the lessee agreed to complete a well on the premises within four

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