OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

Honorable Bascom Giles 

Commissioner, General Land Office 

Austin, Texas ,' 

Dear Sir: . / 

You submitted to us co 

roii0ws: 

No. 20520. 

the drilling of a 

not commenced on 

ore one year from this 

ease shall terminate as to both 

es8 the lessee shall, on or beyear from this date, pay or 

e lessor or for lessor's credit 

redo National Bank at Laredo, Texas, 

ccessors,,which bank and its succesy 

re the lessor's agent and shall continue as the depository of any and all sums 

payahle under this lease, regardless of change 

of ownership in said land or in the oil and 

gas, or in the rentals to accrue thereunder, 

the sum of Six Hundred Fifteen Dollars ($615.00), 

which shall operate as rental and cover the 

privikege of' deferring the commenoement of 
Hon. Bascom Giles, Dage 2 

drilling operations ior a period of one 

year. In like manner and upon like paylllent or tenders, the oommenoemadt of 

drilling operations may be further deferred ror like periods suooessively during 

the original term of this lease as fixed 

in the habendum clause hereof.* 

You sent us a photostatlo copy of a receipt dated 

May 22, 1939, signed by yourself acknowledging reoeipt rrom 

D. D. Oil Company, Mission, Texas, of $307.50 rental on State 

lease No. 20580, 615 acres, Starr County. 

2. A lease dated April 7, 1936, executed 

by Dr. M. J. Brooks, et al, and as agent for the 

State of Texas, lessor, to F. Davenport, lessee, 

covering 342 acres, more or less, in Starr County, 

Texap. The lease being designated as M. F. 20602. 

It provides for a primary term of five (5) years 

and contains among others, the tollowing provisionsa 

"It operations for drilling are not 

oommenoed on said land on or berore one 

year from this date, the lease shall then 

terminate as to both.parties, unless on or 

before such anniversary date Lessee shall 

pay or tender to.Lessor or to the credit 

of Lessor in Atlanta National Bank at At? 

lanta, Texas, (which bank and its suocessors are Lessor's agent and shall continue 

as depository for all rentals payable hereunder regardless of ohan es in ownership of 

said land or the rentals f the sum of Three 

gzi=;i Forty-ei@t and no/100 ($348.00) 

($348.00) herein called rental); 

vahioh shall cover the privilege of deferring 

commencement of drilling operations ior a 

period of twelve (12) months. In like manner and upon like payments or tenders annually the commencement of drilling 0 erations 

may be further deterred for suooess P ve 

periods of twelve (12) months each during 

the primary term. The payment -or tender of, 

rentals may be made by the oheok or draft 

of hasee mailed or delivered to said bank 

on or before such date of payment." 

Said lease further provided: 
Hon. Basoom Giles,.Page 3 

"The rights of either party hereunder 

may be assigned in whole or in part and the 

provisions hereof shall extend to the heirs, 

suooessors and assigns, but no change or division in ownership of the land, rentals, or 

'royalties,' however accomplished, shall operate to-enlarge the obligations or ~diminish 

the rights of Lessee. No sale or aaslgnment 

.by Lessor shall be binding on Lessee until 

Lessee shall be furnished with a certified 

copy of recorded instrument,evidenoing same. 

In event of assignment of this lease as to a 

segregated portion of said land, the rentads 

payable hereunder shall be,apportlonable as 

between the several leasehold owners ratably 

according to the surface area of each, and 

default in rental payment by one shall not 

affect the rights of other leasehold owners 

hereunder.w. 

Tou also burnished us two receipts executed by W.,lk 

MoDonald, who was Cammissioner of the General &md Office during the year 193S. One receipt was dated April 4, 1998, aoknowledging receipt from D. D. 011 Company of $1$3.00 -rental, 

Seotion 920, Certificate 1918, W. M. Pierce, StarrrCouhty, 

Iii 2C6C2. The other reoelpt, by b¶r. McDonald, is dated h¶ay 7, 

193S, and acknowledges receipt from D. D. Oil Company of $11.00 

balanoe rental,' Seotion'920, Starr County, L, 20602. 

3. A lease dated'Juhe.13, 1936, from F. Davenport, individually and as agent of the State of 

Texas, lessor, to D. D. Oil Company and Slick- 

: Ursohel Oil Compaq, lessee, oovering 146 aoces 

in the T. R. Wright Survey, Starr County, Texas, 

and being designated as M. F. 20350. 'The lease is 

for a primary term of five (5) years and'has the 

following provisionr 

*If operations for drilling are not 

commenced on said land on or before one 

year from this date the lease shall then 

terminate as to both parties, unless on 

or before such anniversary date Lessee 

shall pay or tender to Lessor or to the 

credit of Lessor in First State Bank dc 

Trust Company 'of Mission, Texas (which 

bahk and its suooessors~are,Lassor~s agent 

and shell'continue ES .the depository Sor all 1 
Hon.. P~soom~Gilea, Fa@ 4 

. 

-. ’ 

rehtals.payable hereunder regardless of 

ehanges'in ownership of said land or the 

rentals) the sum of One Wdred Forty-Sir 

and No/l00 Dollars (#146.00), (herein called rental), which shall oover the privilege 

of deferring eommenoement of drilling operations for a period of twelve (12) months. 

In like manner and upon like payments or 

tenders annually the oommenoement of dr1l.l~ 

ing operations may be further deferred for 

suooesslve periods or twelve (12) months 

eaoh during the arimary term. The payment 

or tender of rental may be made by the oheck. 

or draft of Lessee mailed or delivered to 

said bank on or before such date of payment.? 

You furnished ua a photostatic copy of a receipt 

executed by yourself aoknowledging rsaelpt frcun the I?..& 

Oil Company oP$73.Ob rental on State Lease No, 2035O, 146. .,~: 

acres, Starr County, dated June 14, 1939. MT 

Iii oouneation with said leases and reaa$p$~~ybu,ask 

ua hr questfons. As. we understand your request'.yo$di)s%ra . 

an answer to the last three only,531 the event re~ah&wer?$+. 

fir& question in the. negative.' Since we anWer.y&i&:ffi:s$...,~ 

question in the affirmative, we will only set it .out'he$?& 

and prooeed to answer it. 

"(1) Did the aforesaid leases expire ipso~. ' 

facto when the lessee fafled to pay the rentals' 

. 

due the State of Texas on the.date due and payable under the terms of said leases'l" 

You stated in your letter that 'the landown& parU& of the rental under said leases.was paid to them in due 

- . 

,The Relinquishment Act and particularly that portion a 

of same' as incorporated in Artiole 5368. Revised Oivil Statutes 

of 1925, authorizes the owner of th 3 &a3 to ereeute an oil d 

-se upon such terms aiWcondi&fs as s&h owner may d%& 

best, subject only to the provisions of.the Act. 

Artiole 5368. Revised Civil Statut~es of 1925; pro? 

@des as follows: 

The owner of sal+.iand is hereby t&h& 

riced to.sell or lease to any p.B‘SPqn, firm err 

oerporation'the oil.and $a8 that may be'the,reon 
Hon. Basoom Giles, Rage 5 

or therein upon such terms and conditions as 

such owner may deem best, subject only to the 

provisions hereof, and he may have a second lien 

thereon to secure the payment of any sum due him. 

All leases and sales so made shell be assignable. 

No oil or gas rights shall be sold or leased hereunder for less than ten cents per acre per year 

plus royalty, and the lessee or purchaser shall 

in every case pay the State ten cents per aore 

per year of sales and rentals; 'and in case oS 

production shall pay the State the undivided 

one-sixteenth OS the value of the oil and gas 

deserved herein, and like amounts to the owner 

of the s0i1.~ 

We find nothing in'the statute which prevents the 

owner from executing what is commonly known as an Qnless 

.leasen with provisions similar to those pointed out above in 

the leases submitted to us Sor examination. That being true, 

.tid the terms of the above leases specifioally prodding that 

- they would terminate at the end.oS the first year or any year 

during their primary term on failure to drill or pay rental 

on the.date provided, and the receipts submitted showing that 

such rental payments were not made in time, all OS theabove 

leases ipso Saoto terminated.- The first lease listed above, 

being No. 20580, terminated on May'8, 1939;.the second lease 

.llsted above, being No. 20602, terminated on April 7;1938, 

and.the third lease listed above,.being No. 20350, terminated 

on June 13, 1938, for Sailure to pay the delay rental8 on or 

before the dates therein provided. or oourse; we are assuming 

in all instances that operations for the drilling of a well 

for oil and gas were not commenced on the land oovered by any 

of said.leases on or before the dates above mentioned, and 

t.hat all OS said leases had.been assigned to D. D. Oil Company. 

It is well settled that in construi& and detetinlng the right8 of the parties under an oil end gas lease as 

nrovided Sor in the Relinauishfnent Aot the'oontract‘itself and 

.& statu&s relating theGet must be.co&rued together. See 

Rmnire Gas and Fuel Co. v. State, 47 8. Wi (2) 265, Supreme 

Court of Texas. There being no.provisions in the statute preventing the type of leases in question 'in so far as the delay 

rental feature is concerned, then we must'give full eSfeOt to 
Hon. Bascom Giles, Page 6 

theexpressed language in the lease oontract. We could cite 

and discuss many authorities holding that the failure to pay 

delay rentals under,an' "unless lease" by the time provided 

in the lease caused the lease to terminate, drilling operations not having been begun. 

In the aase of Gulf Produotion Company. et al., vs. 

ContlnenMl~Oil Company et 1 a . eo de 

of Texas; opinion delivered by Chief Justice Cureton on Nov. 

1, 1939, and not yet reported; the court removed all doubt as 

to the righta of the parties with respeot to delay rentals in 

an "unless lease" by the following language: 

"The lease here inv'olved is an 'unless lease,?, 

and Imposed no obligation on Joiner, Trustee, to 

either drill or pay; and upon his failure to 

.either drill, pay, or make the deposit in the 

named bank, no liability of any kind arose in Savor of the Turners against'him; nothing was due 

thereunder; there was nothing for Turner to oolleot; and nothing oould be reoovered. 31 Tex. Jur. 

P' 

7W, sec. 134, Davis v. Bussy, 298 SW. 656 

writ refuEed)f Weiss v. Claborn, 219 S.W. 254, 

587 twrit refused); Stovall v. Texas Co., 262 S.W: 

152, 153 (wi@& refused); McLaughlin v. Brook, 225 

S.W,,575, 577; Jones v. Murphy, 253 S.W. 634; 

Summers on Oil & Gas (Perm. ea.), 701 2, Sea. 339 

wThe t&of Texas Jurisprudenoe oited (sea. 

l&$1,-ln part reads: 

*'Its is clear from the wordin 

clause that lt'does not operate to L 

of the *unless" 

pose any duty . 

upon the lessee either to drill or to nay delay rentals; the matter Is entirely optional with him, and 

thelessor cannot oompel him to drill nor oblige 

him to pay any rentals.! 31 Tex. Jur., P. 744, sea. 

134. (Italics Oars.) 

11* * * 

*The result or the failure of Joiner, Trustee, 

to al&her begin a well, pay the speoified.amount 

of money, or make the named deposit bg.April 7, 

1928, was to ~ facto terminate the lease, and 

the Turners became-vested with the entire estate without the necessity of re-entry, declarac, tlon, or legal aotion. 31 Tex. Jur., pp. 744, 745 
Hon. Rascom Giles, Page 7 

746 sec. 134; Waggoner Estate v. Sigler Oil 

co., 118 Tex. 509, 19 S.W. (2d) 27; Humble 

Oil & Ref. Co. v. Davis, 296 S.W. 285, 287 

Corn. App.); Mitchell v. Simms 63 S.W. 

1?$*371 373 (Tex Corn. App )* Weiis v. Claborn, 214 S.W. S84'(writ ref;sAd); Wi,lson v. 

Gass, 289 S.W. 141, 142 (writ refused); Morrissey v. Ambrugey, 292 S.W. 255, 256 (writ refused); 

Thornton on Oil & Gas &h ea.), vol..l, seo. 124; 

Summers on Oil and Gas (Perm.'ed.), vol. 2, pp.217, 

218, sec. 337; EmFire Baa k. Fuel Co. v. Sannders, 

22 Fed. (2d) 733, 735 (writ of certiorari dismisses), 

278 U.S. 581. 

"The *unless* provisions~or the lease, therefore, are obviously a iimitation on the grant; 

since ra limitation determines an estate upon the 

happening of the event Itself without the neces- 

~~~~e~~~"~~~a~~~~~~~r~~~~~~~~~~~~, 

(Perm. ed.), vol. 2, seo. 337, p. 215; Waggoner 

Estate v. Sigler Oil Co., 118 Tex. ,509, 519, 520;. 

Humble Oil & Ref. Co. v. Davis, 296 S.W. 285, 287; 

Caruthers v. Leonard, 254 S.W.~ 779, 782, Morrissey 

v. Amburgey, 292 S.W. 255, 256 (wkit refused); authorities supra." 

Artiole 5372 0r 

provides in part: 

the Wevised civil Statutes or 

*If any person, rim or corporation operating under tnls law anal1 rail or refuse to makd 

the payment of zn$ sum within thirty days after 

it becomes due * the rights acquired under 

the permit or lease shall be subjeot to forfelture by the Commissioner*, etc. 

1925 

The above quoted provisions of Article 5372 has reference only to sums which become due and for which there Is 

a liabillty.on the part of the landowner or lessee to pay. 

Under the terms of the lease oontraots in question the rental never.became due in the ordinary sense of the word in that 

the payment thereof could not be enforced. The lessees had to 

make the payment8 in proper time to keep the leases alive for 

another year, but they were not required to keep the leases 

alive. That being true, Article 5372 had no application to 

the rental provided in the above leases. Certainly the leases 
Hon. Basoom Giles, Page 8 

545 

did not remain alive until thirty days after the rental 

payment date, the rental hot having been paid In time and 

until the Lana Commissioner decided to forfeit the leases 

for failure to pay same in spite of the plain provisions 

in the leases to the contrary. The lessees could not secure this valuable right without paying a consideration 

therefor or being obligated in any way. There would be no 

mutuality between the parties to the extension. 

Mr. Summers in his most reoent edition on oil and 

gas discusses this question as follows: 

sRemedies of the Lessor for'Failure of the 

Lessee to Drill or Pay Where the *Unless* Drllling Clause is used 

wWhen the 'unless' drilling clause is used, 

the lessee'does not convenant to drill% pay. 

The olsuse relative to the drilling of wells 

within a stated time, or the periodic payment 

of money, Is used, not for the purpose of fixing 

a duty upon the lessee to drill,or pay, but to' 

state a limitation upon which the'lease terminates If these acts are not performed. Consequently, if the lessee fails to drill within the 

stipulated time, the lessor cannot recover in an 

action for rent, or recover in an action for 

damaaes for failure to drill. for the obvious 

reason that there is no duty'upon which to found 

such action.* Summers' Oil & Gas, Vol. 2, p. 494, 

Section 452. 

See also W. T. Waggoner Estate vs. Sigler Oil Com- 

: fit 

19 S.W. (2d) 27 b S . Ct. of Texas; Humble Oil k 

RE: Aing Co. v. Davia'etyalUP296 S.W..295 Corn. App..Seo.B'. 

ulr Production Co. et Al, vs. Continktal Oil Co., et' 

al.. sunra. 

The provision of Article 5368 that in every lease 

the state shall be paid a minimum Of ten oents Per acre Per 

year rental Is complied with in the above leasein so far 

s 

1 

the year in 

939, in the f P rst lease; the year beginning April 7, 1938, 

uired about, being the year be&iwing May 8, 

in the seoond lease, and the year beginning June 13, 1939, 

in the third lease, for eaoh lease, provides not only that 

a rental of which the state is to get more than ten cents 

per acre is to be paid but that it must be paid in advance, 
Hon. Basoom Giles, Page 9 

in order gor the lease to be in effect for the year. The 

lessees were not liable for this rental but as we have 

pointed out they lost their leases by not paying it in, 

time and the leases were not in erreat at any time unless 

the state had received its rental in advance; thus the 

provisions or Article 6368, supra were rollowed. 

It ~111 be noted that in conneation with the dlsdussion or the second lease above, being the M. J. Brooks 

Lease No. 20602, that one-half of the rental therein provlded ia $174.00, being the portion to which the state is 

entitled, that the anniversary date or the lease, being the 

date on or before which the rental had,to be paid in order 

to keep the lease alive for another year, was April 7, 1938, 

and that'$163,00 was paid before the anniversary date', towit, on April 4, 1938, but the balanoe of $11.00 was not 

paid until after the anniversary date, to.-wit, on May 7, 

1938. The lessee not having tendered or paid on or before 

April 7, 1938, all of the rental.provided in the lease, the 

lease Ipso raato terminated by Its own terms, assuming that. 

the lease on April 4, 1938,' was owned by the same party or 

parties. This presents a similar situation whloh was be 

fore the El Pay W;; 0;~Czi1 Appeals Sor decision in the 

ease or YOUIM 222 S.W. 691, wherein the 

lessee laoked $&96 pa&g ali'of the delay rentals provided 

for in the lease, the Court used the iolloviing language: 

"It wfll be noted the lessee assumed no-obligation ta oommenoe a well in twelve (12) months 

rrom the date or the contract nor did he agree to 

pay a rental If suoh a well was not oanmenoed. 

It was wholly optional with him. In this oonneotion it will be noted also that by the express 

terms of the contract ii such well was not oommenaed 

in twelve (12) months'or the rental paid, the lease 

was terminated as to both parties. *,* * The oommenoement 0r a well or payment or rental was a oondition precedent to a continuanoe or*esn*gion,or 

lessee's privilege after that date. 

We are of the'opinion that under the aontract 

in question where all the rights and privileges 

granted by the instrument as to all of the land 

described therein wer.e vested..in one person, the 

optional right to ay rental was Indivisible and 

that suoh an dndlv s dual would have n0 right to pay 

rental upon a part or the land, only..* * * And 

the failure to pay the'whole stiplated amount 

terminated the entire oontraot.* 
Hon. Bascom Giles, Page 10 

This question was involvedvinK;;;ect;ya;ith a 

surfaoe lease In the oase of MoCray . 9, 

S.W. (2) $58. 

.< 130 

The lease had the following provision: 

'It is further provided that If said rental 

becomes delinquent for as much as three (3) months 

then and in that event this lease shall beoome 

null and void and shall revert immediately to the 

parties of the first part gogether with all improvements thereon laoated." 

SudRe Graves. who wrote the opinion for the Court 

of Civil Appe&s of Gaiveston, in dieouksing the above 

vision in the lease used.the following language: 

Vinae this lease contained the recited automatic rorfeiture dlause upon derault in payment 

of rental no eleation to deolare it rorfeltad was 

required of appellee. * * *" 

Y'he relied upon tender must have been of 

the rull amount due from the appellant to the appellees at the date thereor 'to have been valid as 

such, which was not the aase in any or the three 

instanoes.w. 

proFor the reasons disonaaed herein, it is the opinion 

of this department that eaoh of the leases in question ipso 

raoto expired when the lessees failed to pay the rental In 

full on or before the date speclried in the lease, and that 

Article 5372, supra, hever had any applioation to.the rentals 

in qudstion under the facts presented. 

Yours very truly 

ATTORNEy GENXZALOFTEX@ 

BY 

DDM:jm APPI?CVEDD.= 7, 1939