Alexander v. Oates

McCOMB, J.

From a judgment in favor of plaintiff in an action for declaratory relief and to quiet title to property, defendants appeal.

Facts:

July 1, 1945, plaintiff executed an oil and gas lease in favor of defendant H. P. Oates as lessee. The lease contained among other provisions the following:

“5. Commencing with the Sept. 1st, 1945, of the term hereof, if the Lessee has not theretofore commenced drilling operations on said land or terminated this lease as herein provided, the Lessee shall pay or tender to the Lessor semiannually in advance, as rental, the sum of One ($1.00) Dollars per acre per year for the 1st 18 mo. and 2.00 per acre per yr.

for the hal. of 3-yr. period

for so much of said land as may then still be held under this lease,

until drilling operations

[267]

are commenced or this lease terminated as herein provided.

“6. The Lessee agrees to commence drilling operations on said land within three (3) years from the date hereof (unless the Lessee has sooner commenced the drilling of an offset well on said land as herein provided) and to prosecute the same with reasonable diligence until oil or gas is found in paying quantities, or to a depth at which further drilling would, in the judgment of the Lessee, be unprofitable; or it may at any time within said period terminate this lease and surrender said land as hereinafter provided. No implied covenant shall be read into this lease requiring the Lessee to drill or to continue drilling on said land, or fixing the measure of diligence therefor.

The Lessee may elect not to commence or prosecute the drilling of a well on said land as above provided, and thereupon this lease shall

terminate.” (Italics added.)

“21. Upon the violation of any of the terms or conditions of this lease by the Lessee and the failure to begin to remedy the same within 90 days after written notice from the Lessor so to do, then, at the option of the Lessor, this lease shall forthwith cease and terminate, and all rights of the Lessee in and to said land be at an end, save and excepting Twenty (20) acres surrounding each well producing or being drilled and in respect to which Lessee shall not be in default, and saving and excepting rights-of-way necessary for Lessee’s operations, provided, however, that the Lessee may at any time after such default, and upon payment of the sum of One (1.00) Dollar to the Lessor as and for fixed and liquidated damages quitclaim to the Lessor all of the right, title and interest of Lessee in and to the leased lands in respect to which it has made default, and thereupon all rights and obligations of the parties hereto one to the other shall thereupon cease and terminate as to the premises quitclaimed.”