256 P. 232 | Cal. Ct. App. | 1927
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *596 These are consolidated actions for the purpose of quieting title against the various defendants to the property described in certain oil leases. Defendant Interstate Oil Corporation is the holder of said leases and appeals from the judgments rendered for plaintiffs.
Upon trial it was conceded by counsel for defendants that in each case the plaintiffs were the owners of the respective properties set forth in their respective complaints. The evidence offered and admitted showed an assignment by the defendants Augur, Trebell, and Young to the A. T. Oil Company of the leases involved in each of the actions, bearing date of December 15, 1921; also an assignment by the A. T. Oil Company of the leases involved in the above actions to Interstate Oil Company under date of December 31, 1921; also an assignment of said leases by the Interstate Oil Company to the Interstate Oil Corporation, dated January 24, 1922; all of which leases, save as to differences in names and properties, and differences not exceeding a period of two months in the respective dates of execution, are identical. The lease appearing in the transcript is dated May 5, 1921, and provides that in consideration of one dollar and of the other agreements contained in said lease, the lessor lets to the lessee for the term of twenty years a certain *597 lot, together with the exclusive right to explore, drill for, etc., all kinds of crude petroleum, gas, and other hydrocarbon substances. It is covenanted, among other things, that the lessee has already obtained and will obtain other leases similar in form upon other lots situated in the same five-acre tract; that all such leases shall be deemed to constitute one pool or community lease; that as rent and royalty the lessee shall pay to the lessor such proportion of one-sixth part of the proceeds from the sale, at the market price at the well, of all crude petroleum, oil, gas, and other hydrocarbon substances produced from any lots in said tract, as the number of lots leased by the respective lessors bears to the total number of lots in the community lease; that the lessor shall not allow any other person, firm, or corporation to drill any wells upon said ground as long as the lessee shall continue to produce oil in marketable quantities and pay royalties as agreed upon; that no lease shall be accepted as a portion of this community lease after May 30, 1921, and upon that date the community lease shall be deemed closed. The lease further provides: "It is further understood and agreed that it shall be the duty of the lessee to commence the erection of a derrick within thirty days from the closing of this community lease and to commence drilling operations within thirty (30) days thereafter, and that drilling operations from the time they are commenced shall be prosecuted with due diligence, until oil is found in paying quantities, or to a depth at which further drilling would, in the judgment of the lessee, be unprofitable." There is no condition subsequent, no re-entry clause, no forfeiture clause, nor any penalty clause contained in the lease. It appears from the evidence that the defendants did not commence drilling operations within the time prescribed in said lease or at all; nor have the leases ever been canceled or abandoned in writing. Suit was filed on May 22, 1922.
[1] It is urged that appellant owns a leasehold interest which has never been canceled, terminated or abandoned; that the deed is absolute and contains no condition subsequent, forfeiture, re-entry, or penalty clauses. Before discussing the law of the case it may be well to consider the evidence on the subject of abandonment. It appears that none of the covenants of the lease were ever performed by the lessee, except the erection of a derrick after the period *598
within which such erection was required by the terms of the lease. No attempt was ever made to commence drilling operations. The lease was executed May 5, 1921. It was a community lease and was to be deemed closed on May 30, 1921. The lessees agreed to erect a derrick within thirty days from the closing of the community lease and to commence drilling operations within thirty days thereafter and to prosecute such driling operations with due diligence. Thus it was required that drilling operations be commenced within sixty days after May 30, 1921, and prosecuted diligently thereafter. Upon failure of the lessee to comply with the terms of the lease, the lessors made new leases of the respective parcels to the Texcal Oil Refining Company; said leases being dated between October 31, 1921, and July 1, 1922. The witness Logsdon, who was the original agent for the lessees testified that he entered into negotiations with the Texcal Company after one of the lessees, Trebell, told him in September they would not be able to go ahead and that they would quitclaim the leases back to the original lessors; that before negotiating with the Texcal Company the lessees Augur, Trebell, and Young told him they were unable to render financial assistance in carrying out the drilling operations. All these conversations were held prior to December 15, 1921, the date of the assignment of the original lease to the A. T. Oil Company. The foregoing is the substance of the testimony in respect to abandonment and is not contradicted by any other witness. Abandonment will be more readily found in the case of oil and gas leases than in most other cases. In Harris v. Riggs,
[2] "It has been held and supported by sound reason that abandonment may be more readily found in cases of oil and gas leases than in most other instances. [3] The rights granted under such leases are for exploration and development. The title or interest granted is inchoate until oil or gas is found in quantities warranting operation, and courts will not permit the lessee to fail in development and hold the lease for speculative or other purposes, except in strict compliance with his contract for a valuable and sufficient consideration other than such development. (Gadbury v. Ohio etc. Co.,
[4] We believe the evidence was sufficient to support the finding of fact by the trial court that the defendants abandoned whatever right, title, or interest they or either of them had in and to such lease prior to the assignment of said lease to the Interstate Oil Corporation. It then remains to determine the rights of the plaintiffs as a matter of law in a suit to quiet title, where the lease has been abandoned by the lessees and where there is no condition subsequent, forfeiture, re-entry, or penalty clauses contained in the lease. The rights of the parties to ordinary oil leases is well stated in Brookshire Oil Co. v.Casmalia etc. Co.,
[8] Applying the principles discussed to the present case: The main consideration for the execution of these leases was the payment of royalties to the plaintiffs, which could only be obtained through drilling the oil wells. Royalties were never paid because no wells were drilled. The lessees before the assignment of the lease on December 15, *602 1921, both by word and deed indicated their inability to finance the undertaking and their intention to abandon the lease. For a period of several months the lessees failed to comply with the terms of the lease requiring drilling to commence within sixty days from May 30, 1921. Under these circumstances the plaintiffs executed new leases to the Texcal Oil Refining Company between October 31, 1921, and July 1, 1922. Defendants could not revive said leases after their abandonment by assigning them to third parties. Besides, the evidence shows that no drilling was ever commenced by the assignees of the lessees. [9] The attempted assignment of the leases did not affect the plaintiffs' declared forfeiture of the leases by their act in leasing to other parties. The plaintiffs had a right to forfeiture for conditions broken, not only as against the lessees, but as against any assignee of the lessees who might claim possession of the premises under them.
For the reasons stated, it is ordered that the judgments be affirmed.
Conrey, P.J., and York, J., concurred.
A petition by appellant to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on June 27, 1927.