McKenna v. Nichlos

1944 OK 64, 145 P.2d 957, 193 Okla. 526, 1944 Okla. LEXIS 309
CourtSupreme Court of Oklahoma
DecidedFebruary 8, 1944
DocketNo. 30574.
StatusPublished
Cited by19 cases

This text of 1944 OK 64 (McKenna v. Nichlos) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McKenna v. Nichlos, 1944 OK 64, 145 P.2d 957, 193 Okla. 526, 1944 Okla. LEXIS 309 (Okla. 1944).

Opinion

HURST, J.

Plaintiffs, the owners of the royalty interest in a producing oil and gas lease, sued to cancel the undeveloped portion thereof, alleging that defendants, the owners and operators of the lease, had abandoned the same and breached the implied covenant for further development. Defendants denied that they had abandoned the lease or breached any of its implied covenants and asserted that they had at all times acted as ordinarily prudent operators.

The lease in question was executed on February 28, 1917, and was for a term of five years and as long thereafter “as oil or gas, or either of them, is produced from said land by the lessee.” It covered two tracts of 40 acres each, the northeast corner of one touching the southwest corner of the other. In 1922 and 1927, two wells, both of which are still producing oil, were drilled on the west half of the southwest 40-acre tract. These wells produce from the Fortuna sand, found at about 2,400 feet, and each had an initial daily production of about 60 barrels. No other wells have ever been drilled upon the lease. On February 7, 1940, plaintiffs notified the Little Nick Oil Company, a corporation, in care of defendant John B. Nichlos, its president, that unless a well was commenced on the northeast 40-acre tract within 30 days suit would be filed to cancel that part of the lease. Although the record is silent thereon, we presume that the lease was in the name of the corporation at that time. On December 14, 1939, defendant wrote plaintiffs’ attorneys that it was his intention to develop the lease fully when conditions indicated that it could be done profitably and that that time might “not be very far off.” On February 7, 1940, plaintiffs renewed their demand that a well be commenced on the northeast 40-acre tract and also demanded that a well be commenced on the east half of the southwest tract before April 1, 1940. Defendants declined to begin drilling within the time prescribed, and on April 25, 1940, plaintiffs commenced this action.

At the trial there was very little controversy in regard to cancellation of the lease as to the Fortuna sand. Plaintiff introduced evidence that Fortuna sand wells had been drilled upon an adjoining lease which defendants had failed to offset, and that such a well could be drilled upon defendants’ lease with a reasonable expectation of profit. Defendant John B. Nichlos testified that in his opinion the Fortuna sand under the lease was exhausted, but that if plaintiffs desired to drill a well thereto, he would assign them the lease for that purpose.

As to the deeper sands underlying the lease the evidence was less definite. The substance of the testimony was that while such sands might produce oil in paying quantities, the field was not proven, and a well drilled to such sands would be exploratory in nature. Defendant John B. Nichlos testified that he intended to drill a well on the lease to the deeper sands “whenever conditions justified it,” but that conditions would not justifiy such a well until there was “a better market for gas and oil and more certainty of production from deeper sand.” There was no evidence that a prudent operator would undertake the drilling of such a well with a reasonable expectation' of profit.

The trial court decreed cancellation of the lease as to the northeast 40-acre tract and the east half of the southwest 40-acre tract as to the Fortuna sand and all sands above that sand, but left the lease in effect as to all deeper sands. From such judgment, plaintiffs appeal.

1. Defendants have moved to dismiss *528 the appeal upon the ground that the case-made was not served and settled within the time fixed by statute, or any valid order extending such time.

It is conceded that the appeal was lodged in this court within the six-months period allowed by statute (12 O. S. 1941 § 972) and that defendants waived the right to suggest amendments to the case-made and consented that the same might be settled by the trial judge immediately and without notice, which was done within six months after the final order was made.

Defendants contend, however, that notwithstanding such facts, we are without jurisdiction of this appeal because the order of August 6, 1941, granting additional time within which to make and serve the case-made, and under which it was served, signed and settled, is void in that it attempted to extend the time therefor 15 days beyond the statutory six-months period. They agree that the order. was subject to correction by a subsequent order reducing the time, but assert that in the absence of correction it remained absolutely void. We do not agree. Such an order is void only in so far as it purports to authorize taking one or more of the necessary steps to perfect an appeal after the expiration of the six-months period. Staner v. McGrath, 174 Okla. 454, 51 P. 2d 795; Security B. & L. Ass’n v. Ward, 174 Okla. 238, 50 P. 2d 651.

It is true that in the cases which have come before us, the trial court had discovered. its error and entered a subsequent order reducing the time theretofore allowed, and we have sanctioned such practice. Staner v. McGrath, above; Security B. & L. Ass’n v. Ward, above; Citizens State Bank of Okeene v. Cressler, 69 Okla. 68, 170 P. 230. From these cases defendants apparently conclude that an order of correction is necessary in all cases, but the conclusion is unwarranted. We have been referred to no cases, and we know of none holding that an order of correction is necessary where, as here, the appellees have waived the right to suggest amendments and consented that the case-made might be settled immediately without notice. Of course, it is better practice to obtain an order reducing the time, for otherwise the appellee might claim the full time allowed to suggest amendments, and after the expiration of the six-months period the court would be without power to settle the case-made. First Bank of Mayesville v. Alexander, 47 Okla. 459, 149 P. 152. But where the appellee affirmatively waives such right, and the case-made is settled and the appeal lodged in this court within the six-months period, an order reducing the time could serve no useful purpose and is unnecessary. We therefore decline to dismiss the appeal.

2. The remaining question is whether the trial court erred in refusing to cancel the undeveloped portion of the lease as to the deeper sands.

Defendants urge that they have been under no duty to test such sands because circumstances have not indicated that such a venture would prove profitable. But the duty to drill further wells, after the lapse of an unreasonable length of time, is not tested by the standard of the prudent operator alone. In the recent case of Doss Oil Royalty Co. v. Texas Co., 192 Okla. 359, 137 P. 2d 934, we had occasion to treat this subject extensively, and the principles there laid down govern the instant case. In that case we pointed out that suits for the cancellation of oil and gas leases are governed by principles of equity, and that the question of whether a lessee- has breached the implied covenant for further development is committed to the sound discretion of the courts, to be determined from the facts and circumstances of each case. We stated that while, in determining such matter, we would consider the question of the likelihood of profit from further drilling, we would also give weight to other considerations, particularly the length of time which the lessee had held the lease without further development.

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Bluebook (online)
1944 OK 64, 145 P.2d 957, 193 Okla. 526, 1944 Okla. LEXIS 309, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mckenna-v-nichlos-okla-1944.