Kelly v. Ochs

MARKS, J. This is an appeal from a judgment refusing to quiet plaintiffs’ title to property in Kern County against an interest under an oil lease, dated January 14, 1936, and an assignment, dated September 17, 1940, of interest under that lease and made from plaintiffs to M. Peter Ochs and Lester Cutler.

The original lease is not before us but evidently one well had been drilled on the property down to an upper oil zone prior to the assignment which provided that the lessees deepen that well to a second zone, and, under certain conditions they were to drill three additional wells, paying the assignors an over-riding royalty.

The assignees deepened the first well and drilled another. They built a derrick for a third well but did not proceed with drilling operations because, as they claim, the outbreak of war together with federal regulations and shortages of materials prevented their proceeding with the work.

The two wells were not very productive and sanded up frequently. They were cleaned out at various times and put back on production.

There was no production from the wells during March, April, May and June, 1943. There was production from July, 1943, to January, 1944, both months inclusive. At the time of the trial one well was producing about eleven barrels of oil a day and the other about twenty-five barrels a day.

Under date of June 16, 1943, the assignors gave written notice to the assignees that they were in default in four particulars and that “You are Hereby required to comply with the terms of said lease and assignment as provided therein and within the time therein limited, and remove said default under said Lease and Assignment or the undersigned will take further legal proceedings as set forth in said Lease and Assignment.” It is admitted that this notice was received by the agent of the assignees on June 23, 1943.

No other notice of default or of cancellation of the assignees’ interest was ever given. The complaint to quiet title was filed on July 12, 1943.

[274]The notice of default contained four specifications: 1. That the assignees had failed to carry out their drilling obligations in that they had drilled only two wells on the property. 2. That they had failed to pay the assignors the royalty from oil produced from the first well. 3. That they had failed to pay them the royalty from the oil produced from the second well. 4. That they had failed to operate the two wells with reasonable diligence and in accordance with good oil field practices.