Syllabus
by the Court.
The
filing of an amended petition which is complete in itself
and does not refer to the original petition or any prior
amendment, is an abandonment of all prior averments not
contained in such amended petition.
The
abandonment of an oil and gas mining lease rests upon the
intention of the lessee to relinquish the premises.
Forfeiture
of an oil and gas mining lease will be decreed for breach of
an implied covenant to diligently operate the property when
such forfeiture effectuates justice.
Where
part of the leased premises has been developed and operated
with reasonable diligence by drilling and operating one well
and the other portion of the lease has not been, and cannot
be, developed by the lessee, the lease will be canceled as to
the undeveloped portion for breach of the implied covenant to
diligently operate the property and permit the lessee to
continue to operate the developed portion, where reason and
justice require it.
Commissioners'
Opinion, Division No. 1.
Appeal
from District Court, Murray County; A. C. Barrett, Judge.
Action
by Ellis Price and another against W. J. Scott. Judgment for
plaintiffs, and defendant appeals. Remanded, with directions.
RAY, C.
This is
an action by Ellis Price and Nina Price, husband and wife
against William J. Scott to cancel an oil and gas lease
executed by plaintiffs to the defendant, and for an
accounting of the royalties accrued and accruing under the
terms of the lease. The lease was executed December 26, 1916,
for a period of five years, "and as much longer as oil,
gas, or either of them shall be produced from said lands by
lessee in paying quantities." By the terms of the lease
the lessee was to deliver to the lessor a one-tenth part of
all oil produced and saved from the premises as royalty, free
of cost to the lessor, in the pipe line to which the well
might be connected, or, at the lessee's election, to pay
the lessor for the royalties the market price prevailing the
day the oil was run into the pipe line or run into storage
tanks.
The
defendant joined issue by answer and cross-petition, and
prayed judgment for certain sums alleged to be due from the
plaintiffs to the defendant. Judgment was for plaintiffs
canceling the lease, for possession, and for an accounting
for the royalties. From this judgment the defendant, William
J. Scott, has appealed.
No
question arising upon the defendant's cross-petition is
presented in his brief. The findings of fact and conclusions
of law, in so far as they relate to, or affect, the question
here under consideration, are as follows:
"(1) That on the 26th day of December, 1916, the
plaintiffs, for a consideration of $1 cash in hand paid, and
the covenants and agreements contained therein, to be kept
and performed by the defendant, made, executed, and delivered
to the defendant a certain oil and gas lease on the following
described lands: [Description of lands], under which said
lease the defendant should have and hold said lands and all
the rights and privileges granted thereunder for the term of
five years from the date thereof, and as much longer as oil,
gas, or either of them should be produced from said lands in
paying quantities.
(2) That thereafter the defendant went into possession of
said lands under the terms of the lease, and commenced
drilling and developing operations. That in the month of
October, 1919, sand was encountered in said well on said
leased land at a depth of 1,265 feet; that said well produced
a very small quantity of gas, and produced a substance or
liquid which might be denominated liquid asphalt. That the
substance so produced was heavy and tenacious and incapable
of being handled in pipe lines, noncombustible, and which had
to be baled from the well. That said well would produce a
maximum of 50 barrels of this substance per day, its exact
capacity for production not having been definitely
determined. That the market value of this substance at the
well, when a market can be obtained therefor, is
50 cents per barrel. That the value of the product so
obtained at said price is insufficient to pay the expenses of
production.
(3) That the production of said well from the month of
October, 1919, when said well was brought in, up to the date
of trial on November 7, 1924, was 700 barrels, a portion of
which was on the premises at said last-mentioned date.
(4) That the defendant has been unable from the time of the
discovery of said well up to the time of the trial to find a
market for
the output of the well, but has only been able to sell same
in comparatively small quantities and at irregular intervals.
That defendant has diligently sought a market therefor, and
has expended considerable sums of money and a large amount of
time in experimenting therewith and advertising the same.
(5) That the defendant has not operated said well regularly
and constantly since its discovery, but has operated the same
intermittently for short periods when it was possible to
dispose of the product, and has produced, and sought to
produce, only such quantities as were necessary in order to
consummate the sales which he was able to make, and for the
purposes of advertisement and experiment.
(6) That the defendant has not paid to the plaintiffs any sum
for rental or royalty since the operation of said lease
began, except the $1 paid at the time of the delivery of the
lease, and the sum of $2 at another time, when plaintiffs
sold for defendant a small quantity of the product locally.
(7) That the defendant has expended large sums of money in
drilling the well and in making permanent improvements on the
lease, including a pipe line from the well to the railway
switch, about a quarter of a mile away, in obtaining the
building of said switch and erecting a dwelling and other
buildings.
(8) That the defendant has resided on, and been in possession
and control of, the premises constantly since the time of the
execution of the lease. * * *
Conclusions
of Law.
(1) The court finds that the oil and gas lease involved in
this suit expired by its own limitations on the 26th day of
December, 1921, oil and gas, or either of them, not having
been discovered in paying quantities on said lease within the
period prescribed by the terms of the lease.
(2) That said lease is subject to forfeiture by reason of the
breach by defendant of the express and implied covenants
thereof to diligently operate and develop same.
(3) That the defendant has not abandoned said lease. * * *
(7) That judgment should be rendered for the plaintiffs and
against the defendant canceling said lease and removing the
same as a cloud upon plaintiff's title, for the
restitution of said lands and premises to the plaintiffs and
for an accounting."
On
these findings of fact and conclusions of law judgment was
for plaintiffs canceling the lease, for possession, and for
an accounting of the royalties.
The
contention of the defendant that the conclusion of the trial
court that the lease expired by its own limitations was not
within the issues must be sustained. Plaintiffs, to sustain
the conclusion of the trial court that the lease expired by
its own limitations for failure to discover oil or gas in
paying quantities within the life of the lease, say that the
original petition, construed together with certain
allegations of the amended petition, sufficiently alleged
that oil or gas was not discovered in paying quantities
during the life of the lease to justify the cancellation of
the lease upon that ground. The difficulty of that argument
is that the amended petition, on which the case was tried
was complete in itself, and contained no reference to the
original petition. The effect of the original petition was
destroyed by the filing of the amended petition which was
complete in itself, and did not refer to, or adopt, the
original as a part of it. Gaar, Scott & Co. v
Rogers, 46 Okl. 67, 148 P. 161. In the amended petition
it was alleged, in substance, that within the life of...
