Elsinore Oil Co. v. Signal Oil and Gas Co.

SCOTT, J.,

pro tem.

Plaintiff, as lessor, about September 8, 1930, entered into a gas and oil lease with defendant, as lessee, relating to a certain “parcel No. 1” consisting of forty acres. Another lease to an adjoining property known as “parcel No. 2” had theretofore been entered into by the same parties. On July 11, 1932, defendant executed and delivered to plaintiff a quitclaim deed to the property, and admits that there was then due plaintiff under the lease to parcel No. 1 the sum of $1854.99. Plaintiff brought this action under said lease to parcel No. 1 and recovered judgment for $6,000 plus interest, from which judgment defendant appeals.

[572]

The question here presented involves the construction of the lease to parcel No. 1. Lessee therein agreed “to pay to lessor as a bonus One Hundred Fifty Dollars per acre for the premises above described . . . payable only out of twenty-five per cent of the proceeds derived from the sale of the oil produced, saved and sold” from parcel No. 2, and further to pay “the equal of one-sixth part of the proceeds derived from the sale of all oil removed from the leased premises” (parcel No. 1). Certain other payments were provided, contingent upon oil or gas being produced on parcel No. 1, which are not material to this consideration, since it is conceded that no well was drilled and there was no production on that parcel. Said lease further provided that “the lessee may at any time quitclaim to the lessor this lease in its entirety or as to part of the acreage covered hereby, and thereupon lessee shall be released from all further obligations as to the part of the land so quit-claimed, and all rentals and drilling operations shall be reduced

pro rata

according to the acreage quitclaimed”.

Prior to July 11, 1932, the date of the quitclaim deed, a quantity of oil was produced on parcel No. 2 and sold for an amount sufficient so that twenty-five per cent of it equaled the sum of $1854.99, which is all that lessee admits is due under the lease. Further oil was produced during July, 1932, and sold for an amount sufficient so that twenty-five per cent of it equaled more than the additional $4,145.01 and interest, which the lessor claimed and which was included in the judgment for $6,000 plus interest recovered. '