Mallery v. Chapman

HOUSER, J. It appears that the essential facts herein, in substance, are that a man by the name of Specht made an oil lease of certain property of which he was the owner, to one Emery, who thereupon assigned his interest in the lease to Shell Oil Company. The lease was for a period of twenty years; but it contained a provision to the effect that the lessee was to commence the drilling of an oil well upon the premises within eighteen months from the date of the lease; also that “in addition to the foregoing time and considerations, the lessee may have twelve (12) months after said eighteen (18) months period to begin drilling by paying to lessors the sum of one thousand ($1,000.00) dollars quarterly in advance as rental for said lands, but it is understood that if lessee does not begin the drilling of an oil well within thirty (30) months from date thereof, then this lease shall become null and void”. Before the time limit of thirty months succeeding the date of the lease had expired, Shell Oil Company procured from the lessor a modification of the lease by which the time within which drilling operations were to be commenced was extended for a considerable period beyond the date when by the terms of the lease as originally drawn the drilling operations should have been commenced. (In that agreement the Shell Company was the party of the first part, Emery, the party of the second part, and Bradley, the party of the third part.) Among the provisions of the assignment of the lease from Emery to Shell Oil Company was the following:

‘ ‘ Should the parties of the first and third parts, or should their successors or assigns, fail to commence drilling operations on the demised premises under said lease within eighteen (18) months from the date of said lease, then they will pay to the party of the second part (Emery), a cash rental equivalent to five dollars ($5.00) per acre per month, until such time as drilling is commenced, as in said lease provided, after first deducting from said five dollars ($5.00) [468]per acre per month, the amount due and payable to the original lessors, according to the terms of said lease.”

In addition thereto, the following provision of the assignment is important, to wit: “The parties of the first and third parts stipulate and agree that they will, so long as they or either of them, or their successors in interest, or assigns, hold title to the leasehold estate derived by them from said assignment, well and truly keep and perform each and all of the covenants of said lease to be by them kept and performed, provided, however, that it shall be a sufficient- compliance of said covenants, if, in lieu of the performance of drilling operations, they procure from the lessors or their successors in interest, proper and legal extensions of time.”