192 Ky. 132 | Ky. Ct. App. | 1921
Opinion op the Court by
— Reversing.
On February 19, 1916, the appellees, M. Whitney and Bettie Whitney, who were plaintiffs below, executed and delivered-to A. Gr. Braswell an oil and gas lease on a tract of land in Allen county, Kentucky, -owned by one or both of them, which ¡entitled the lessee to explore the land for oil or gas for a period of five years and for the consideration therein named he agreed to complete a well -on the premises within three hundred and sixty-five days from its date, or if he should fail to do so to pay twenty-five cents per acre for each additional year in which the eonpletion of the well was delayed. The stipulation in the lease with reference to the payment of the rentals after the ¡expiration of the three hundred and sixty-five days, says: “The above rental shall be paid to the parties of the first part in person or by check to their order deposited in the post office by registered letter to their address at Seottsville, R. F. D. No. 4, Ky., or deposited or mailed to their credit in the Allen County National Bank at Seottsville, Ky.” By successive assignments the appellant and defendant below John D. McNutt became the owner of the lease and on June 3, 1919, plaintiffs filed this action against him in the Allen circuit court seeking a cancellation of the lease as a cloud upon their title, upon the ground that defendant had abandoned it and had forfeited all of his rights under it by refusing to complete a well within sixty days after March 25, 1919, pursuant to a notice that day given him by plaintiff’s requiring such completion within sixty days therefrom under penalty of -a forfeiture for failure to do so. The demurrer filed to the petition was overruled and defendant filed his answer, the first paragraph of which was a denial of the allegations of the petition, including the one that sixty days was a reasonable time within which to complete the well. The second paragraph affirmatively alleged the payment of the rental for the year ending on February 19, 1920, which payment was made on February 19,1919, and which fact is also alleged in the peti
Whatever may be the ride elsewhere, the position of this court concerning the rights of the parties under such leases is well stated in the case of Warren Oil & Gas Co. v. Gilliam, 182 Ky. 807, thus: “In construing such leases, we have takieta. the position that the main consideration is the development of the property, and the payment of the royalty, and that the lessee can not, in opposition to the wishes of this lessor, refuse to begin the development of the property for an unreasonable time, and extend the lease indefinitely by the payment -of a mere nominal rent. Monarch Oil, Gas & Coal Co. v. Richardson, 124 Ky. 602, 99 S. W. 668; Dinsmoor v. Combs, 177 Ky. 470, 198 S. W. 59. However, the right of the- lessor to forfeit the lease for non-development can not be arbitrarily exercised. He must first notify the lessee that he will no longer accept the annual rentals and p-ermit his land to remain idle and undeveloped, but will require the lessee to execute the contract according to the intention of the parties by beginning its development in good faith and if, after such notice -and demand, the lessee does not begin the development within a reasonable time, the lessor may then have the lease forfeited.” Still later cases supporting that doctrine are: Hughes v. Parsons, 183 Ky. 584, and Ohio Valley Oil & Gas Co. v. Irvine Development Co., 184 Ky. 517. There are a number of other cases to the same effect, and an examination of them will further show that if the lessor is either paid or tendered his rent at or within the time payment is duiei or within the time it may be made under the terms of the- lease- and before he gave notice to the lessee to develop the property, the right to demand development, or a consequent forfeiture for a failure to do so, is- postponed until the expiration of the
In the American Window Glass Company case, referred to, the opinion ¡says: “Where the oil and gas lease provided for certain annual rental, and ¡stipulated that a certain deposit in a certain bank to the credit of lessor should constitute a payment a deposit of a payment, without notice from the lessor not to do so, was., in effect, a payment to the lessor.” And this court referred to that opinion with approval in the Ohio Valley Oil & Gas 'Company ease. The other cases and text books cited fully support thie excerpt taken from that opinion.
It is alleged in the petition that “They (plaintiffs) say that about February 19th, 1919, the defendant sent to the Allen County National Bank of Scottsville, ¡one hundred dollars to pay the rental for mother year, and that they refused to accept the same or to continue the said lease for said rental. ’ ’ It will be observed that the quoted averment from the petition shows a ¡strict compliance with the stipulation in the lease which we have hereinbefore inserted, concerning the payment of rentals after the expiration of the first three hundred and sixty-five days of the lease. The deposit made by defendant on February 19,1919, in the Allen County National Bank at Scottsville, Kentucky, to the credit of plaintiffs was, as stated in the petition, “to pay the rental for another year,” which gave defendant until February 19, 1920, within which to drill a well and if plaintiffs did not wish
Such being the condition of the law, the court erred in overruling the demurrer to the petition and, likewise, erred in overruling the demurrer to the first, second and third paragraphs of the answer; but we think he correctly held that the fourth paragraph of the answer was insufficient, since we are not inclined to hold that the time fixed in the contract for the completion of the agreed development arbitrarily measures the reasonable time within which such development may be demanded by the lessor on his refusal to accept rents.
Since the lease term of five years expired on February 19,1921, upon a return of the ease, if an issue is made and the proof upon trial should support the averments of the pleadings, defendant should be allowed the time consumed in this litigation within which to comply with the obligations of his lease, if conditions are the same as when the action was filed.