Stimson v. Tarrant

• Decision Date: 14 October 1941
• Docket Number: No. 158.,158.
• Citation: 43 F. Supp. 657
• Parties: STIMSON et al. v. TARRANT et al.
• Court: U.S. District Court — District of Montana

43 F. Supp. 657

STIMSON et al. v. TARRANT et al.

No. 158.

District Court, D. Montana, Great Falls Division.

October 14, 1941.

Gunn, Rasch, Hall & Gunn, of Helena, Mont., for plaintiffs.

George E. Hurd, of Great Falls, Mont., for defendants.

PRAY, District Judge.

This is a suit to cancel an oil and gas lease. Plaintiffs call it: "an action to clear title from a cloud created by a recorded instrument valid on its face but void as to the plaintiffs' title."

The theory of the case according to plaintiffs is that the oil and gas lease in question terminated when the production of oil and gas from the premises therein described was suspended in January, 1938, pursuant to the terms of the lease, as follows: "It is agreed that this lease shall remain in force for a term of five years from this date and as long thereafter as oil or gas, or either of them, is produced from said lands by the lessee." The original lease was dated December 22, 1930, and the assignment to R. C. Tarrant, one of the defendants herein, was dated July 18, 1932. Another pertinent paragraph of the lease which should be mentioned in connection with the above quoted, reads as follows: "If lessee shall fail to commence the drilling of any well herein provided for within the time specified (unless the time is extended by the payment of rental), all of lessee's rights hereunder shall thereupon terminate at the option of lessor. If lessee shall fail to perform any of the other terms or conditions hereof then all of his rights hereunder shall terminate, unless lessee shall perform the same within thirty days after written notice from lessor specifying the condition or conditions wherein lessee is at fault which notice may be mailed lessee at Cut Bank, Montana." Under the facts, the last sentence of the foregoing paragraph becomes of primary importance. The failure to commence drilling not being in issue under the lease, then if the lessee shall fail to perform any of the other terms or conditions hereof, the lessee's rights shall terminate, unless upon written notice to lessee, specifying the condition or conditions wherein lessee is at fault, he shall perform within the thirty days provided in the notice.

The evidence discloses that there was a temporary suspension of about thirteen months in pumping oil from the producing wells. The lease required the production of oil on the part of the defendants, and if they failed to keep this covenant, then should not it be regarded as one of the "other terms and conditions hereof" which required a thirty days' notice. Plaintiffs claim the termination of the lease as of January 1st to 25th, 1938, and yet they served no notice and raised no objection, but permitted defendant to go ahead and expend $6,500 on another well which he completed in March, 1939. It appears that defendant drilled seven wells on the lease from 1933 to 1939 at an expense of $82,470.85; that production to end of 1939 amounted to $203,538.08, and that the accounts show that he suffered a loss of $43,941.13.

According to the plain language of the lease and the law which would seem to govern under the facts presented, the failure of lessor to observe this requirement as to notice might be sufficient in itself to justify a dismissal of the case, without further consideration of the voluminous record consisting of nearly 450 pages. But the court has considered the record and many of the authorities cited by counsel and finds a grave question presented as to whether the plaintiffs would be entitled to prevail on the merits. There appear to be equitable considerations here that should be taken into account, such, for instance, as the time, labor and outlay of defendant Tarrant, and good faith disclosed in the production of oil in paying quantities covering a long period, and likewise the adverse market conditions which have been shown to exist. The important issue on the merits, as the court views it, is to determine whether the equitable considerations are sufficiently clear and convincing as to justify a refusal to decree a termination or forfeiture of the lease for failure to produce during the period aforesaid. The failure for a long time to administer the estate of Alice Long Miller, the lessor, in the jurisdiction where the oil producing lands were situated seems to have been another cause of delay in orderly procedure under the lease. It could hardly be expected that royalties would be paid to plaintiffs in the absence of a...