New State Oil & Gas Co. v. Dunn
| Decision Date | 08 July 1919 |
| Docket Number | 8716. |
| Citation | 182 P. 514,75 Okla. 141,1919 OK 204 |
| Parties | NEW STATE OIL & GAS CO. v. DUNN et al. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
Oil and gas leases are construed strongly against the lessee and in favor of the lessor.
Ordinarily oil and gas leases are executed for the purpose of exploring and operating for oil and gas, and where its terms will permit it, under the rules of law, such lease will be construed so as to promote development and prevent delay and unproductiveness.
Without an express covenant in an oil and gas lease to develop within a certain period, the law will imply a covenant to develop within a reasonable time in view of the surrounding circumstances, and forfeiture may be declared for failure to so develop.
Where an oil and gas lease for 10 years, and as much longer as oil and gas may be found in paying quantities, contains an express covenant to complete a well within 2 years, and without provision to pay for delay, failure of lessee to comply with such express covenant amounts to abandonment, and renders the lease forfeitable at the option of the lessor or his grantee.
Error from Superior Court, Tulsa County; M. A. Breckinridge, Judge.
Action to quiet title by R. A. Dunn and others against the New State Oil & Gas Company. Judgment for plaintiffs, and defendant brings error. Affirmed.
L. V Orton and E. R. McNeill, both of Pawnee, for plaintiff in error.
West Sherman, Davidson & Moore, of Tulsa, for defendants in error.
This action was brought by Dunn and his lessees, defendants in error, to quiet title and cancel an oil and gas lease. Plaintiff in error claims under a lease executed by Barber, the original allottee, in January, 1908. Dunn purchased the land from Barber in February, 1910. Defendants in error entered and developed the premises for oil and gas under a lease executed by Dunn in July, 1912. The New State Oil Company did not attempt to take possession or to develop under its lease until after oil had been produced in paying quantities by defendants in error. And this action was brought to quiet title and to cancel the lease under which the claim was then asserted.
The lease in question, executed on the 27th day of January, 1908 was for a term of 10 years, and as much longer as oil or gas might be found in paying quantities. The consideration recited in the lease was $15,000 in shares, and the covenants and agreements on the part of the lessee, it appearing the shares referred to stock in the New State Oil Company. One of the covenants was to complete a well on the premises within 2 years from the date of the lease. The lease was executed on a form commonly known as the "or lease," but the usual provision for payment in event completion of the well was delayed was left blank, and plaintiff in error offered proof to the effect there was to be no further payment in addition to the shares delivered to the lessor when the lease was executed.
The question presented is whether the New State Oil Company abandoned the lease by failing to complete a well within the time specified, thereby rendering the lease forfeitable at the option of Dunn, the owner of the land.
Plaintiff in error takes the position that the initial payment of shares supports the lease for the entire period of 10 years, and no further payments being contemplated, and there being no forfeiture clause, the failure to drill or begin operations for development did not amount to an abandonment, and such lessee had the full period of 10 years to complete the well.
It is not contended the shares were, in fact, worth $15,000, but it is not necessary to determine what the exact value was in the...
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