New Harmony Realty Corporation v. Superior Oil Co.
| Decision Date | 13 February 1941 |
| Docket Number | 16435. |
| Citation | 31 N.E.2d 673,108 Ind.App. 668 |
| Parties | NEW HARMONY REALTY CORPORATION v. SUPERIOR OIL CO. |
| Court | Indiana Appellate Court |
Isidor Kahn, Robert C. Enlow, and Harry P. Dees, all of Evansville for appellant.
Miller Miller & Bredell, of Indianapolis, and W. B. Wagner and J. P. Adoue, both of Houston, Tex., for appellee.
This action was brought by appellee (plaintiff below) against appellant to obtain a declaratory judgment of the Posey Circuit Court pursuant to an act of the General Assembly of the State of Indiana. Acts of 1927, c. 81, pp. 208-211. The issues were formed by an amended complaint and an answer of general denial.
The cause was submitted to the trial court upon an agreed statement of facts upon which the court found for the plaintiff, fixing its rights and liabilities, and entered judgment accordingly.
The defendant (appellant here) filed its motion for a new trial assigning as reasons therefor that the decision of the court is not sustained by sufficient evidence, and that the decision of the court is contrary to law. The court overruled the appellant's motion for a new trial and this ruling of the lower court constitutes the assignment of error on appeal to this court.
It would unduly extend this opinion to set out in full the agreed statement of facts, and only such parts thereof that we deem pertinent to this opinion are recited.
It appears that appellant leased to the appellee certain lands for the purpose of drilling for oil and gas. Said lease executed June 18, 1938, was to run for a period of five years and as long thereafter as oil or gas or either of them was produced from the land by the lessee; that in consideration for the said oil and gas lease and the rights, interests, and privileges granted to plaintiff as lessee thereunder, the appellee paid to the appellant $6,001, and upon amendment to said lease fixing the exact acreage which had been theretofore estimated, a further sum of $1,403.20 was paid to appellant as a further cash consideration for said lease. This lease provided that in the event no well was commenced on said land on or before June 18, 1939, the lease should terminate as to both parties unless the appellee, on or before that date, paid or tendered to appellant fifty cents per acre for the acreage covered by the lease, and that such payment or tender should operate as a rental and cover the privilege of deferring the commencement of a well for twelve months from said date; and in like manner and upon like payments the commencement of a well might further be deferred for like periods of the same number of months successively within the five-year period covered by said lease.
On the 9th day of March, 1939, the appellant served on appellee a written notice requiring appellee to commence a well for the purpose of mining and operating for oil and gas on the real estate described in the lease on or before June 18, 1939, and to drill such well to completion with reasonable diligence and dispatch. The notice further provided that in the event no well be commenced on said premises on or before June 18, 1939, that the appellant hereby elects to declare the said lease forfeited and will proceed in a court of competent jurisdiction to quiet title to the real estate described in the lease against the appellee.
According to the agreed statement of facts the appellee, subsequent to the execution of the lease and the amendment thereto, and before the 9th day of March, 1939, entered the leased acreage and expended the sum of $8,700 in making geophysical explorations in order to reasonably ascertain whether or not the area in question might be suited to the accumulation of oil and/or gas, and for the further purpose of ascertaining the most favorable point upon the real estate involved at which to locate a well to be drilled in search of these fugitive minerals.
It was further stipulated that from the time of the execution of the original lease and up to and including the time of filing the amended complaint in this cause, no production of oil or gas had or has been secured within the area in which is located the real estate described in the original lease and the amendment thereto. That said real estate had not been and is not now (referring to the agreed statement of facts) being drained of oil or gas by reason of production of oil and/or gas elsewhere.
The agreed statement of facts further informed the court that the appellee, in addition to the real estate leased from the appellant, was the owner of twenty-seven other oil and gas leases covering approximately 2800 acres of real estate in Posey County. That the approximate cost of drilling a well to the expected production levels in this particular area was $15,000, and if oil or gas were found in paying quantities the matter of pipe lines and outlets for marketing such product involved the expenditure of a large sum of money. That in order to assure the existence and continuation of such supply of oil and/or gas it is the usual, ordinary, and customary business practice among producers of oil and gas to buy and hold oil and gas leases in considerable number covering an aggregate of large numbers of acres of land in a given locality. That in addition to the cost of drilling a well for oil and gas to expected producing levels in this area, the approximate cost and value of drilling machinery, pipes and equipment used in the drilling of a well is the sum of $40,000.
The agreed statement of facts was filed April 18, 1939.
On a finding for appellee the following judgment, omitting the matter of costs, was entered by the trial court: "It is therefore, ordered, adjudged and decreed by the Court that plaintiff has fully complied with all its obligations under and pursuant to the provisions of a certain oil and gas lease entered between the parties hereto on June 18, 1938, and a written stipulation amending the description of the real estate covered by said lease entered into on February 14, 1939; that said oil and gas lease shall be continued in full force and effect without the commencement of operations for the drilling of a well upon said real estate for a period of twelve months from and after June 18, 1939, upon the payment or tender of payment of rental to the defendant as in said lease provided on or before said date, and that in like manner and upon like payments or tenders the commencement of the drilling of a well may be further deferred for like periods of the same number of months successively during the five-year term as provided in said lease; that should the first well drilled on the land covered by said oil and gas lease be a dry hole, then if a second well is not commenced on said land within twelve months from the expiration of the last rental period for which rental has been paid, said oil and gas lease shall nevertheless be continued in full force and effect during the five-year term as provided in said lease in event plaintiff, on or before the expiration of said twelve months, shall resume the payment of rental as in said lease provided."
Under the assignment of error both causes for a new trial may be treated together.
The appellant challenges the decision of the trial court and contends that under the law of our state as applied to the facts submitted to the lower court, the contractual obligation to explore for oil and gas is such an essential part of the agreement even though implied, that it must be treated as a condition which, if not performed by the appellee within a reasonable time after receipt of notice to perform by it, will entitle the appellant to claim a forfeiture under the contract; and that after receipt of the notice which appellant sent to appellee on the 9th day of March, 1939, the appellee had no right to defer drilling a well by the payment or tender of payment of annual rentals, but was required to drill and explore for oil.
The appellant also contends that the whole tenor of the contract shows that the prospective benefits and...
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