Nolan v. Thomas, 5-1428
| Decision Date | 27 January 1958 |
| Docket Number | No. 5-1428,5-1428 |
| Citation | 228 Ark. 572,309 S.W.2d 727 |
| Parties | Wm. C. NOLAN et al., Appellants, v. H. L. THOMAS et al., Appellees. |
| Court | Arkansas Supreme Court |
Crumpler & O'Connor, El Dorado, Keith, Clegg & Eckert, Magnolia, for appellants.
Jack Machen, Magnolia, for appellees.
In the Trial Court the appellees were plaintiffs and the appellants were defendants; and for convenience we will refer to the parties by trial court designation.
The plaintiffs brought this suit to cancel oil and gas leases and assignments, insofar as the same affected 120 acres of a tract of 160 acres. The reason for cancellation was the defendants' failure to fulfill the implied covenant to develop the premises for oil and gas. At the conclusion of the plaintiffs' case, the defendants invoked Act No. 470 of 1949 (§ 27-1729, Ark.Stats., as amended), and filed their written motion to dismiss the complaint--i. e., they claimed that the plaintiffs had not established a case for the relief sought. The Trial Court denied the motion to dismiss, and then granted the plaintiffs their desired relief when the defendants elected to stand on the motion to dismiss. The defendants have appealed.
I. The Rule Announced in Werbe v. Holt. At the outset, it is proper to mention the rule for testing defendants' motion to dismiss. In Werbe v. Holt, 217 Ark. 198, 229 S.W.2d 225, 227, we discussed the history and applicability of Act No. 470 of 1949, which is now § 27-1729 Ark.Stats., as amended. We said: evidence its strongest probative force, he held that a case was made so as to require the defendants to offer their proof.
II. The Plaintiffs' Claim For Cancellation. The opinion of the learned Chancellor is in the record, and it briefly and succinctly states the case. We copy the opinion in full:
'This cause was filed by Plaintiffs against Defendants, seeking cancellation of an Oil and Gas Lease, which was executed in March, 1944 for a period of ten (10) years, covering the SE 1/4 of Section 6, Township 16 South, Range 19 West, Columbia County, Arkansas. The Lease has the usual provision for the payment of delay rentals to be paid for the deferment of drilling from year to year.
'When the lease was about to expire by its own terms, viz, ten years from date of execution, a well was drilled in the Northwest corner of said 160 acre tract. This well has produced and is still producing a small amount of oil. It was completed about the 20th of February, 1954, and has produced from 10 to 20-some barrels of oil per day during this time. No other wells have been drilled on the 160 acre tract.
'Some time in the early part of November, 1954, Lessors wrote Lessees requesting that another well or wells be drilled on this tract seeking further exploration, and from that time until May 1956, some 5 or 6 letters were written, and all of which were answered, and which letters have been introduced, without objection in this case. From the tenor of these answers, it appears that lessees (defendants) do not intend to drill any other wells or make further exploration on this tract of land, notwithstanding they have had the lease for 13 years and have drilled only one well, and it is still producing oil.
'The Court feels that Lessees owed Lessors a duty to further develop the leased premises, and that Lessees have had more than three (3) years since the well, which is now producing, was brought in.
'It is true that Lessors do not know whether in fact oil and/or gas can be produced from the remaining acreage, but it is also true that they cannot find out so long as Lessees keep the lease and refuse to make further exploration thereon.
'The Court believes the law to be, and the principles of equity to be:--'The production of oil on a small portion of the leased tract cannot justify the Lessee's holding the balance indefinitely and depriving the Lessor not only of the expected royalty from production pursuant to the lease, but of the privilege of making some other arrangement for availing himself of the mineral content of the lands. 1 '
'The Court therefore feels that the Petition for cancellation of the Lease, insofar as affects the South Half SE 1/4 and the Northeast Quarter of said S.E. 1/4, should be granted.'
Defendants argued below, and urge here: (a) that the plaintiff had the burden of proving that a prudent operator would have drilled other wells in addition to the one that was drilled; and (b) that the plaintiffs failed to offer such proof. We hold that the plaintiffs made a prima facie case requiring the defendants to go forward and offer their proof on the prudent operator matter when the plaintiffs showed these facts: (1) that the leases here involved were executed in 1944 and allowed delay rentals to be paid each year for ten (10) years; (2) that the delay rentals were paid and no drilling was undertaken on the lease until 1954, when one well was drilled and was a small producer; (3) that the plaintiffs then insisted for more than two years that the defendants should drill other wells; (4) that the defendants consistently refused 2 to drill other wells; and (5) that the plaintiffs are not asking that the lease be cancelled on the 40 acres on which there is a producing well, but are asking for cancellation only on the other three 40-acre tracts.
To support their argument, appellants cite, inter alia, a few sentences from Winn v. Collins, 207 Ark. 946, 183 S.W.2d 593, about a 'prudent operator'. The facts in that case are entirely dissimilar from those in the case at bar. That case involved a fixed mineral (bauxite) and not a transitory mineral like oil or gas. Furthermore, the exploration in that case was in the first year of the lease, whereas, in the case at bar, twelve years after the date of the original lease and more...
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