Rehbock v. Reservoir Hill Gasoline Co.

SHINN, J., pro tem. Plaintiffs, lessors under an oil and gas lease dated July 12, 1922, recovered from Rio Grande Oil Company, assignee of the original lessees, W. R. Ramsay and IT. T. Coffin, certain sums as royalties, which the trial court found to be due in addition to the royalties theretofore paid under the lease. Defendant Rio Grande, hereinafter referred to as the defendant, appeals.

The lease provided that “In the event that petroleum, oil, naphtha, natural gas, asphaltum or hydrocarbon, or other kindred or like substances are found in and produced from the demised premises, then the Lessee shall pay the Lessor as royalties or rentals and in the place and stead of all other rentals herein provided, one-sixth (1/6) of the net proceeds derived from the sale of said minerals produced, saved and sold by the Lessee; said minerals being those which may remain after taking from said total minerals any quantity required and used for fuel purposes in any mining or drilling operation carried on by the Lessee under the lease. Net proceeds or royalties as the expressions are used in this lease, shall be deemed to be gross receipts of sales of minerals produced from the demised premises and actually collected in cash by the Lessee, less taxes paid on said product or on said sales, or the proceeds thereof, and the usual charges for making said sales and for delivery and for the use of tanks, pipe lines, cars and storage facilities, and for insurance and for loss from fire or leakage, and a reasonable charge for the [235]maintenance of the equipment of the Lessee used in storing, transporting, and selling said products based on cost nor shall the Lessee be obliged to account for any proceeds which using reasonable diligence he has been unable to collect. The Lessee shall on or before the 10th day of each month, prepare a statement of the amount of minerals produced and saved from the said premises during the previous month upon which the Lessor is entitled to royalties and also a statement of the amount of sales made during said preceding month, and the amount of collections made during said preceding month and the amount of royalties on said collections to which the Lessor is entitled, and shall within said period furnish said statement to the Lessor and pay the Lessor the royalties on said collections to which he is entitled in accordance with said statement and the terms of this lease. The Lessee agrees that the Lessor or his legal representative shall at all reasonable times during business hours, have access to the books and accounts of the Lessee with reference to the operations of the Lessee under this lease, together with the right to examine and gauge any and all tanks and wells, to the extent necessary for the purposes of verifying the statement of the Lessee.”