Rice v. Lee

KELLY, J.,

pro tem.

The plaintiffs below sued to quiet title to certain lands in Santa Barbara County. The defendants having answered, the cause was tried by the court without a jury. Judgment having been entered for plaintiffs and a motion for a new trial having been denied, the defendants prosecute this appeal.

On June 30, 1937, the plaintiffs below, as lessors, leased to the defendants certain lands in the lease described, to be explored and developed for the production of oil, gas and other

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hydrocarbons. The term of the lease was 20 years and so long thereafter as oil or gas could be produced in paying quantities. The lessees were granted the exclusive right of prospecting the demised premises and drilling for and removing oil and gas and of establishing and maintaining the usual incidents to an oil lease such as tanks, boilers, houses, engines, power lines, roads, etc., and of drilling for and developing water. The lessors were to receive the usual royalties out of the products of operation. The lease then recites in paragraph 3 thereof:

“The lessee agrees to start the drilling of a well for oil on demised premises within sixty (60) days from the date of this agreement, and to continue the work of drilling such well after commencing the same, with due diligence and dispatch until a depth of 3500 feet has been reached, unless oil is discovered in paying quantities at a lesser depth or unless such formations are encountered at a lesser depth as will indicate to the geologist of the lessee that further drilling will be unsuccessful. If by reason of encountering mechanical difficulties in the prosecution of the work, or other causes, the lessee shall determine to abandon the same, this lease shall continue in full force provided a new well is commenced within ninety (90) days and thereafter drilled diligently as hereinabove provided.”

On August 27, 1937, the lessees having done nothing in discharge of their obligations, an extension agreement in writing was executed by the parties by which the lessees were given an additional period of sixty days to start drilling. This agreement further designated the particular location on the demised premises whereat the first well was to be drilled. The lessees having done nothing, the lessors, on November 6, 1937, signed and served upon them a notice to commence work within ten days or abandon their rights under the said lease. The lessees continued inactive and the lessors filed their complaint on January 10, 1938.