Paraffine Oil Co. v. Cruce

• Decision Date: 26 December 1916
• Docket Number: Case Number: 7706
• Citation: 63 Okla. 95,162 P. 716,1916 OK 1055
• Parties: PARAFFINE OIL CO. et al. v. CRUCE et al.
• Court: Oklahoma Supreme Court

1916 OK 1055

162 P. 716

63 Okla. 95

PARAFFINE OIL CO. et al. v. CRUCE et al.

Case Number: 7706

Supreme Court of Oklahoma

Decided: December 26, 1916

Syllabus

¶0 1. Oil and Gas--Lease-- Construction.

On November 6, 1913, lessors leased a tract of land for oil and gas mining purposes to the P. company, which thereafter assigned certain interests therein to other oil companies. Section 3 fixed the term of the lease for one year, "and so long thereafter as oil or gas * * * is produced from said land" by the lessee, "its successors or assigns, in accordance with the stipulations of sections 6 and 7 of this contract." After section 5 obligated the lessee to begin operations for drilling in 30 days and to diligently prosecute the same until a test well was completed, section 6 provided: "That if said territory proves productive, then the lessee to complete this contract shall drill as many as eight wells on said premises." The test well proved the territory productive January 20, 1914, and it took about 20 days to drill a well. Held, that "if" means "when," and that "then" is an adverb of time and means "at the time," and that, at the time the territory proved productive by the drilling of the test well, it was then the duty of the lessee to drill as many as eight wells upon the premises and within a year from the date of the lease as a condition precedent to the extension of the lease beyond the term of one year fixed in the lease. And, whether said wells were by the lessee drilled with due diligence and dispatch, having in view the interests of both parties to the lease, and so as to produce all the oil and gas that might be reasonably produced from the premises, as required by the lease, if available as a defense, was a question of fact; and, being found adversely to defendant, will not be disturbed, there being evidence reasonably tending to support the finding. And there being no question that oil was found in paying quantities in the first well drilled, and there being evidence reasonably tending to support the finding of the court, in effect, that there was at its completion a profitable market for the product of the first well, the lessee cannot escape a forfeiture of the lease, declared by the trial court, in virtue of section 11 of the lease, for failure to drill as many as eight wells upon the premises within one year from the date of the lease, under the plea that there was not a profitable market at its completion for the product of the first well.

2. Same.

Where the language of the lease was as much that of the lessee as that of the lessors, the lease will be construed most strongly against the lessee, so as to promote development and prevent delay and unproductiveness, looking to all parts of the instrument in the light of the facts contained in the record.

3. Landlord and Tenant -- Leases -- Conditions.

No particular words are necessary to create a condition. The intention of the parties must be determined from the language used by them in the lease, and from the subject-matter to which such language relates. Such intention being determined, it governs.

4. Oil and Gas Lease--Rights of Parties-- Diligence in Operations.

Where the object of the operations contemplated by an oil and gas lease is to obtain a benefit or profit for both lessor and lessee, neither is, in the absence of a stipulation to that effect, the arbiter of the extent to which or the diligence with which the operations shall proceed; but both are bound by the standard of what, in the circumstances, would be reasonably expected of operators of ordinary prudence, having regard to the interests of both.

5. Same--Conditions Precedent.

Precedent conditions must be literally performed, and even a court of chancery will never vest an estate, when, by reason of a condition precedent, it will not vest in law. It cannot relieve from the consequences of a condition precedent unperformed.

Error from District Court, Carter County; W. F. Freeman, Judge.

Action by W. I. Cruce and others against the Paraffine Oil Company, a corporation, and others. There was a judgment for plaintiffs, and defendants bring error. Affirmed, with directions.

Geo. S. Ramsey, James B. Diggs, Rush Greenslade, Malcolm E. Rosser, Henry McGraw, R. A. Hefner, L. S. Dolman, and Edgar A. DeMeules, for plaintiffs in error.

C. B. Stuart, M. K. Cruce, and Thos. Norman, for defendants in error.

TURNER, J.

¶1 On February 18, 1915, W. I. Cruce and three other lessors, defendants in error, in the district court of Carter county sued the Paraffine Oil Company, lessee, and four other oil companies, plaintiffs in error, claiming an interest therein under the Paraffine Company as assignees, to cancel an oil and gas lease. The petition as amended substantially states: That on November 6, 1913, plaintiffs made, executed, and delivered to the Paraffine Oil Company a certain oil and gas mining lease on a certain 40-acre tract of land, described in the petition, in which said company thereafter assigned an interest to its four codefendant companies. That the material parts of the lease read:

"Sec. 3. It is agreed that this lease shall remain in force for a term of one year from this date, and as long thereafter as oil or gas, or either of them, is produced from the said land by the party of the second part, its successors or assigns, in accordance with the stipulations of sections 6 and 7 of this contract. * * *

"Sec. 5. Party of the second part agrees to begin operations for the drilling for an oil or gas well within thirty days from the delivery of this contract, and to diligently prosecute said operations until said well is completed.

"Sec. 6. It is understood and agreed by both parties hereto that if said territory proves to be productive, then the party of the second part to complete this contract shall drill as many as eight wells on said premises and said wells shall be drilled with due diligence and dispatch, having in view the interest of both parties hereto, and so to produce all the oil and gas that may be reasonably produced from said premises: Provided that if oil be found in paying quantities in the first well drilled, and there is at the completion of said well, no profitable market for the products of same, the second party shall not be required to begin the drilling of the second well until a market for the products of the first well is available. * * *

"Sec. 7. The party of the second part shall drill as many offset wells as may be necessary to offset each paying well on the adjacent property when such well on adjacent property is within three hundred feet of the boundaries of the premises herein leased."

"Sec. 11. A failure on the part of the second party to comply with any of the stipulations of this contract shall of itself work a forfeiture of this contract and all rights thereunder."

¶2 The petition further states that about 30 days thereafter the Paraffine Company, as lessee, drilled a well on the land which was productive to the extent of 150 barrels of oil a day, at which time there was a profitable market of $ 1.05 per barrel for all the oil that could then be produced upon the demised premises; that on February 25, 1914, said company drilled another well on the premises, which was productive to the extent of 480 barrels of oil per day; that thereafter, for some time, said lessee developed the lease no further and not until plaintiff complained of its failure so to do pursuant to the terms of the lease, whereupon, pursuant to its promise so to do, said lessee drilled a third well upon the premises which had an initial average production of 300 barrels of oil per day; and that since that time the lessee has neither drilled nor attempted to drill other wells upon the premises and has made no preparation in the way of building tanks or otherwise to take care of the oil from the aforesaid three producing wells. The petition further states that oil-bearing sand is about 1,000 feet beneath the surface of the land, that a well could be drilled thereto in 30 days, and that by the exercise of ordinary diligence the lessee could, within the term of one year fixed by the lease, have drilled eight wells as required by the terms thereof, but had failed so to do.

¶3 The petition further states that, although the three producing wells had an initial capacity of 800 barrels a day, defendants have so negligently operated the same that their total production is less than 200 barrels per day, that less than 10 per cent. of their capacity has been taken therefrom, and that the royalties of the plaintiff lessors have been correspondingly reduced. They further allege "that if the defendants had completed the eight wells upon said land, which said contract required, the total capacity for production would have been much greater than the capacity of the three wells now on said premises," and that on or about November 19, 1914, "plaintiffs notified the defendants and each of them that because of their failure to comply with the terms of said contract, that each forfeited all rights under the same. Said notice was in writing and was delivered to and received by the president and secretary of each of the defendant companies, and said original notice is now in the possession of each one of the defendant companies," by reason of all of which they pray that the lease be declared forfeit and canceled, and for general relief.

¶4 For answer, each of the defendants, after- denying "all and singular the allegations contained in Plaintiffs' petition, except as hereinafter specifically admitted," admitted the execution of the lease and the assignments thereof to the codefendants of the Paraffine Company as alleged, and pleaded that they had complied with the terms and conditions of the lease, and that upon its execution and delivery they "took possession of the premises covered by said lease, and have drilled three wells for oil and gas purposes, and have erected a derrick on said premises for a...