Live Oak Basin Oil Ass'n v. Reagan

289 S.W. 1052
CourtCourt of Appeals of Texas
DecidedDecember 15, 1926
DocketNo. 7647.
StatusPublished
Cited by2 cases

This text of 289 S.W. 1052 (Live Oak Basin Oil Ass'n v. Reagan) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Live Oak Basin Oil Ass'n v. Reagan, 289 S.W. 1052 (Tex. Ct. App. 1926).

Opinion

COBBS, J.

Appellees, as plaintiffs, sued appellants, as defendants, to cancel a certain oil, gas, and mining lease covering some 1,-733 acres of land in Live Oak county. The court sustained certain exceptions to plaintiffs’ petition and plaintiffs having filed an amended pleading the case went to trial on it. It was alleged appellants failed to carryout the drilling obligation and prayed for the cancellation thereof, for damages, and general relief. The appellants filed general and special exceptions, answered by general denial and plea of estoppel. The cause was tried without a.jury and the court made and filed findings of fact and conclusions of law, upon which a judgment was entered in favor of appellees, canceling the lease. Appellants filed some 18 assignments and 10 propositions thereunder, and then grouped their propositions for treatment as follows:

“The trial court made three conclusions of law to the effect (1) that the lease was forfeited for failure of lessees to carry out the drilling obligations; (2) that lessees abandoned the lease; (3) that, if the foregoing conclusions be unfounded, nevertheless, the lease expired by lapse of time in July, 1925.
“Appellants have adopted that natural division and have grouped together for treatment propositions 1, 2, 3, and 4, as they all go to the correctness of'the trial court’s findings of fact and conclusion of law on the question of whether or not lessees carried out their drilling obligations.
“Into a second group, appellants have placed together propositions 5, 6, and 7, as they all go to the correctness of the trial court’s findings and conclusionse on the question of abandon1ment.
“A third group treats together propositions 8, 9, and 10, as they all go to the correctness of the trial eburt’s findings of fact and conclusions of law upon the question of whether or not the lease expired by lapse of time in July, 1925.”

The findings of fact and conclusions of law filed by the court are supported by the testimony.

The prime contention of appellees is grounded upon the alleged failure to drill the required wells to the requisite depth, which constituted the material part of the lease. Appellants seem greatly to rely upon the supplemental agreement that they were entitled to continued to hold the lease as long as there was any gas to be found in the one well that was for a time connected with the town of Three Rivers, and, by reason of such agreement, appellees were estopped from claiming any right of cancellation. The language of which agreement is as follows:

“Whereas, it is agreed that * * * said test well has been drilled in compliance with said *1053 oil and gas lease * * * to a depth of 2,500 feet, and that said second party is now producing gas from said lease, and that the same (lease) is in full force and effect as long as said gas is produced in paying quantities as provided in said lease.”

Appellants contend this clause amounted to a novation and appellees contend that subsequent provisions control or limit that, which require the gas to be produced in paying quantities which would insure proper future development, and if not, notwithstanding such supplemental agreement, the lease would terminate by its own terms, and that the purpose of such agreement was to simply acknowledge the completion of a test well and release the sureties from their bond and not for the purpose of renewing and continuing in force the lease.

Considering appellants’ propositions 1, 2, 3, 4, as to whether the drilling obligations were fulfilled by the lessees and challenging the ruling of the court in entering judgment of forfeiture, sends us to a consideration of the facts. This case, like almost all the cases of oil lease cancellations, involves largely the consideration of facts.

In this case lessees agreed to begin development at the place to be indicated by ap-pellees within 4 months and continue the drilling with diligence until the same was completed to a depth of 2,500 feet, unless oil, gas, or other minerals be found in paying quantities at a lesser depth.

If oil or gas be found at a depth less than 2,000 feet the lessee had the right to develop and operate the well and was not required to drill to a greater depth; but, within 4 months from the time drilling was stopped, lessee was to begin the drilling of another well on some portion of the land and prosecute drilling with reasonable diligence to a depth of 2,000 or 2,500 feet, unless oil or gas or other mineral be found in paying quantities at a depth between 2,000 and 2,-500, and shall be deemed to have complied with his contract if an oil well produced as much as 50 barrels per day at any depth.

The well drilled 2,000 feet unless a 50 barrel well is found is termed the ‘‘test well.” Dropping of tools in the well or casing, that cannot be controlled or avoided by the lessee, which delays the work and thereby causes failure of the completion within 18 months, then that amount of time shall be extended and an additional period of time, equal to the delay caused, shall be granted. If any of the events cause the abandonment, the lessee shall immediately begin another well and complete the same within 18 months, under foregoing terms.

In case lessee ceases drilling operations for 90 days or quits work and abandons operations for such length of timé, he shall be deemed not to have exercised reasonable dil-igenee and the lease shall become null and void.

After “test well” is completed lessee shall, within 90 days, begin drilling operations upon another well on the tract and with reasonable diligence drill to a depth of 2,500 feet, unless oil or gas be discovered or other minerals found in paying quantities at a lesser depth, and, upon failure to do so, the lease may be forfeited, unless lessee pays $2 per acre by depositing same to lessor’s credit in the Commercial National Bank of Beeville, which will extend the lease 12 months after payment.

The lessee has privilege to drill the additional well within the 90 days upon the tract in lieu of rentals pending the same, but upon completion shall, within 6 months thereafter, begin drilling upon the particular tract and prosecute drilling with reasonable diligence to a depth of 2,500 feet, unless oil, etc., be found, or this contract shall become null and void, unless on or before 6 months he places to the credit of lessor in said bank the sum of $2 per acre, which operates as rental to cover the privilege of deferring commencement for 12 months from the last-mentioned date. Like payment or tender the commencement will be deferred for like periods for same number of months successively, but in no event to exceed a period of 5 years, unless, etc.

After the “test well” was bored there is no evidence that there was any other well begun and drilled 2,500, as is contemplated and provided for in the thirteenth subdivision of the contract. The trial court found this to be of vital importance which justified the appellees to cancel the contract.

We cannot agree with appellants that wells drilled prior to the test well can in any wise be considered as a compliance with the contract requiring drilling of certain wells after the completion of the “test well.” The parties, by their supplemental agreement, designated Reagan No.

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Bluebook (online)
289 S.W. 1052, Counsel Stack Legal Research, https://law.counselstack.com/opinion/live-oak-basin-oil-assn-v-reagan-texapp-1926.