Metzler & Co. v. Stevenson

PRESTON, J.

Appeal from judgment quieting title of plaintiff to a portion of subdivided tract of land located in Los Angeles County and hereinafter referred to as “Parcel C”. Some of the defendants failed to appear and their default was regularly entered. Appellants, however, are insistent in their demands based upon the provisions of a certain oil and gas lease held by them.

Said lease was executed on April 15, 1924, by defendants Stevenson and Morgan, as owners of a portion of the above-mentioned tract of land described as parcel A and as purchasers under contracts of the remaining portions thereof, described as parcel B and parcel C, to defendant Pomeroy, covering said parcels A, B and C and giving him the sole and exclusive right to prospect, drill for and re

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.move oil, gas and other hydrocarbon substances therefrom and to do other things incidental thereto, for a term of twenty years, and during production thereafter, unless the lease should be otherwise surrendered or forfeited by the lessee. The lessors reserved the right to subdivide the land into lots to be sold for residence and business purposes or to use it for agriculture or grazing, so long as said operations should not interfere with the rights or operations of the lessee. The lease then provided that immediately upon its execution by the lessors the lessee “will cause to be erected and constructed on ‘Parcel A’ an oil well derrick . . . ” and “The Lessee hereby promises and agrees to commence actual drilling of a well upon some portion of the premises hereby leased within five months

from and after date of delivery of certificates of title upon said lands showing title in lessors

. . . Actual drilling of a well . . . is . . . understood to be the actual spudding in of said well followed by diligent prosecution of drilling of said well to completion, or abandonment. ... It is understood . . . that the erection and construction of the oil derrick in this lease above required to be immediately erected . . . does not in any wise constitute compliance with the provisions of this paragraph requiring the commencement of actual drilling of a well . . . within the time . . . provided ...” The lease further provided that upon completion or abandonment of the first well, the lessee would within sixty days thereafter commence the drilling of a second well. Following various provisions covering the drilling of further wells and payment of royalties, etc., the lease provided: “Lessee accepts this lease upon the express understanding and with the knowledge of the fact that as to Parcels B and 0 the legal title to said lands is not as yet vested in the Lessors, but that the Lessors are the purchasers of parcels B and C and will in due course of time procure title to same and that it is the intent of the parties hereto that upon the lessor acquiring the legal title to parcels B and C the lease herein created shall be of the same force and effect as if the said Lessors at the date of execution of this lease had the legal title thereof.” It was further provided that upon failure of the lessee to commence the drilling of said first well within the time specified the lease should