Pipes v. Payne

101 So. 144, 156 La. 791, 1924 La. LEXIS 2099
CourtSupreme Court of Louisiana
DecidedJune 27, 1924
DocketNo. 26497
StatusPublished
Cited by25 cases

This text of 101 So. 144 (Pipes v. Payne) is published on Counsel Stack Legal Research, covering Supreme Court of Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pipes v. Payne, 101 So. 144, 156 La. 791, 1924 La. LEXIS 2099 (La. 1924).

Opinion

OVERTON, J.

Plaintiff alleges that he is the owner of certain described lands, situated in the parish of Caddo, consisting of 997 acres, which he alleges he acquired from the Caddo Mineral Lands Company. He also alleges that prior to the date of his acquisition his vendor entered into a pretended lease, known as an oil and gas lease, with one W. J. Homer; that said Homer made an assignment of said pretended lease to the Zenith Petroleum Company; that the Zenith Petroleum Company assigned it to M. G. Peck, and that Peck assigned it to E. C. Payne and P. L. Hart; and that Payne and Hart are in possession of the property, operating the wells thereon, and claiming possession of the property by virtue of the aforesaid lease and assignments. The purpose of the suit is to annul and cancel said lease and the assignments thereof on the following grounds, to wit: (1) Because said lease was [793]*793granted without serious consideration, the amount named therein as consideration being the sum of' $1; (2) because if the true consideration be considered to be the development of the property, then the assignees, Payne and Hart, have failed to develop it, although more than two years have elapsed since the assignment of the lease to them.

The petition then sets out that, prior to the pretended lease to Homer, there were three producing wells on the property, two of which were fully equipped; that Payne and Hart took possession of these wells when they went into possession of the property, and drilled thereon a fourth well, which was a shallow one; that, notwithstanding that the three wells that were on the property when the lease to Homer was made were producing wells, and notwithstanding the fact that said lease affects land known to be in oil-producing territory, and consisting of 997 acres, and notwithstanding that more than two years have elapsed since the completion of the shallow well by the present assignees, there has been no further development of the property. The petition then alleges:

“That your petitioner has demanded the cancellation of the said pretended lease and assignment in accordance with Act 168 of the legislative session of the year 1920, and the said Payne and Hart have failed to comply with the said demand, a copy of which is attached hereto and made a part hereof.”

The demand referred to in the preceding paragraph, and made a part of plaintiff’s petition, is- a demand to furnish plaintiff with an instrument, duly acknowledged, directing the cancellation of the lease, and the assignments thereof, on the records of the parish of Caddo, and the demand contains a notice that, if this be not done, plaintiff will claim the damages provided in the aforesaid legislative act. The petition then alleges that plaintiff is entitled to damages- in the sum of $3,500, as attorney’s fees, because of the failure of defendants to furnish said instrument, directing the aforesaid cancellation of said lease and the assignments thereof, and for judgment against defendants for damages, as above set forth, with legal interest thereon from the date of the aforesaid demand until the damages allowed are paid.

Defendants excepted to plaintiff’s petition on the ground that it discloses no cause or right of action. The trial court sustained this exception, and dismissed plaintiff’s demand, and plaintiff has appealed.

Opinion.

The first ground urged by plaintiff for the annulment of the lease, as we have seen, is that the lease was not granted for a serious consideration; the only consideration recited being $1. If the only consideration were $1, then under our law that consideration would be considered wholly inadequate for the rights granted, and so much so as to justify the annulment of the contract. In fact, $1 would be considered as no consideration at all for the granting of the right to explore for oil on nearly 1,000 acres of land, located in territory considered to be oil-producing. Murray v. Barnhart, 117 La. 1023, 42 South. 489. However, plaintiff has made the contract of lease attacked a part of his petition, and has attached it thereto for reference. By referring to the contract thus attached, it appears that the $1 consideration, therein recited, is only the nominal consideration, and that the true consideration is the exploiting of the land for oil and gas and the payment of .royalties, amounting to one-eighth or one-sixth, according to production, of all oil obtained from beneath the surface of the land, and $200 a year for each well producing only gas, while the gas is used off the premises.; and while' the contract of lease does not mention specifically the three producing ■ wells that were' oh the property at the, time the lease was executed, yet, as the petition alleges that defendants are op[795]*795erating these wells, and as no complaint appears to have been made relative to their operating them until notice, demanding the 1 cancellation of the lease, was 'given, which was after the wells had been operated for two years or more, it may be fairly inferred that it was contemplated that defendant should operate them, and pay the royalty to the holder of the lease, as provided for other wells by the contract, and the operating of these wells, and the obligation to pay the royalties, for so doing, may be considered as an additional consideration for the granting of the lease. The consideration stipulated and contemplated was sufficient. But, whether or not it was contemplated that the lessee or his assignees should'operate the three wells mentioned on the same terms as provided for wells which they might drill, we think that the obligation to explore the .land for oil, which obligation defendants have, at least, discharged, in part, by drilling one well, and the obligation to pay royalties based’ on the production, constitute a serious and sufficient consideration for the lease. Hence we conclude that plaintiff’s petition discloses no cause of action on the ground of attack considered.

The remaining ground upon which the lease is sought to be annulled, or declared forfeited, is, as we have seen, that, if the obligation to develop the property be considered the true consideration and a sufficient one, then that defendants have failed to develop the property, for they have drilled only one well, and more than two years have elapsed since they drilled it, and since then there has been no development of the property. The contract of lease provides that, if a well should not be commenced on the land before August 9, 1920, then the lease shall be considered to have terminated, unless the lessee should pay or tender to the lessor, or deposit to the lessor’s credit in a designated bank, $1 for every acre of land leased, and that] this sum shall be considered as rent, and its payment or tender shall confer the privilege of deferring the commencement of a well for 12 months. And the contract further provides that, should the first well drilled, on the land leased be a dry one, then, in that event, if a second well is not commenced on the land within 12 months from the expiration of the last rental period, the lease,shall be considered to have terminated, unless the lessee on or before the expiration of said 12. months shall resume the payment of rentals in the same amount and in the same manner as stated above, and that the effect of the resumption of the payment of rentals shall be to continue the contract in force, as if there had been no interruption in their payment. These are the only express provisions in the contract relative to the development of the property and the payment of rent.

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Bluebook (online)
101 So. 144, 156 La. 791, 1924 La. LEXIS 2099, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pipes-v-payne-la-1924.