Sehle v. Producing Properties, Inc.

BROWN (Gerald), J.

The plaintiffs C. F. Sehle and his wife Helen N. Sehle appeal from a judgment of the trial court holding the defendant Producing Properties, Inc., had a right under an existing agreement to continue producing oil through three wells traversing the Sehle land.

By lease on December 29, 1954, the Sehles gave Tut 0. Lee the right to drill and produce oil from three of their lots in Huntington Beach. The duration clause provided the lease was to run for one year and so long thereafter as oil or gas or other hydrocarbon substances were produced from the property.

An addenda was executed the same day, giving the lessee the right to drill traverse wells under or through the property, for which a percentage royalty on oil produced would be paid. No duration was mentioned for this new right. The lease and addenda were assigned the same day by Lee to Joseph R. Neaves. Later Producing Properties, Inc., succeeded to the entire interest of the lessee, and ultimately became the only defendant in the case.

In January 1955 an amendment replaced the addenda. The amendment retained the right of the lessee to drill traverse wells, but substituted a flat fee of $500 for each traverse for the percentage. No duration was mentioned in the amendment.

In time one well was drilled to oil sands beneath the Sehle land and four traverse wells were drilled not less than 1,300 feet below the surface. The Sehles received $2,000 for the four traverses. The well drilled to oil sands beneath the Sehle land has been abandoned. Three of the traverse wells are still producing.

The Sehles made a written demand upon defendant to remove all casings and other property from the Sehle land, contending the right to use the traverse wells terminated at the time the well producing from oil sands beneath their land was abandoned. When the demand was refused the Sehles

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brought this action to quiet title to the land. The only casings or property concerned are at least 1,300 feet below the surface of the Sehle land.

The trial court concluded that although the right granted in the lease to produce oil directly from the property had terminated, the right to use the traverse wells was still in effect and would remain effective until oil or gas production through them ceased.