**OFFICE OF**  **THE ATTORNEY**  **GENERAL OF**  **TEXAS AUSTIN** 

Honorable Bascom Giles Commissioner,

GeneralLand Office Austin,Texas ,'

Dear Sir: ./

You submittedto us co



### roii0ws:

No. 20520.

the drilling of a not commencedon ore one year from this ease shall terminateas 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 depositoryof any and all sums payahle under this lease, regardlessof 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 commenoementofHon. Bascom Giles, Dage 2

drilling operationsior a period of one year. In like manner and upon like paylllent or tenders, the oommenoemadt of drilling operationsmay be further deferred ror like periods suooessively during the original term of this lease as fixed in the habendum clausehereof.*

You sent us a photostatlocopy of a receipt dated May 22, 1939, signed by yourselfacknowledging 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 designatedas M. F. 20602. It provides for a primary term of five (5) years and contains among others,the tollowingprovisionsa

"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 anniversarydate Lessee shall pay or tender to.Lessoror to the credit of Lessor in AtlantaNational Bank at At? lanta, Texas, (whichbank and its suocessors are Lessor's agent and shall continue
as depository for all rentalspayable hereunder regardless of ohan es in ownershipof 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 privilegeof deferring commencementof drillingoperations ior a period of twelve (12)months. In like manner and upon like paymentsor tenders annually the commencementof drilling 0 erations may be further deterred for suooessve P periods of twelve (12)months each during the primary term. The payment -ortender of, rentalsmay be made by the oheok or draft of hasee mailed or deliveredto 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 ownershipof the land, rentals,or 'royalties,'

however accomplished, shall operate to-enlargethe obligationsor **~diminish** the rights of Lessee. No sale or aaslgnment .byLessor shall be binding on Lessee until Lessee shall be furnishedwith a certified copy of recorded instrument,evidenoing same. In event of assignmentof this lease as to a segregated

portionof said land, the rentads payablehereundershall be,apportlonable as between the several leasehold owners ratably accordingto the surface area of each, and default in rental paymentby one shall not affect the rights of other leaseholdowners hereunder.w.

Tou also burnishedus two receipts executedby **W.,lk** MoDonald,who was Cammissioner of the General&md Officeduring the year 193S. One receipt **was** dated April 4, 1998, aoknowledgingreceipt from D. D. 011 Company of $1$3.00 -rental, Seotion 920, Certificate1918, 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, individuallyand 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 designatedas M. F. 20350. 'Thelease is for a primary term of five (5) years and'has the followingprovisionr



### *If operationsfor drillingare not commencedon said land on or before one year 

### from this date the lease shall then terminateas to both parties,unless on or before such anniversarydate 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 depositorySor all 1Hon.. P~soom~Gilea,

Fa@ 4

.



### -.’ rehtals.payable hereunderregardlessof ehanges'inownershipof said land or the rentals)the sum of One Wdred Forty-Sir and No/l00 Dollars (#146.00), (hereincalled rental),which shall oover the privilege of deferringeommenoementof drillingoperations for a period of twelve (12)months. In like manner and upon like payments **or** tendersannually the oommenoementof dr1l.l~ ing operations

may be further deferredfor suooesslve

periods or twelve (12)months eaoh during the arimary term. The payment or tender of rentalmay be made by the oheck. or draft of Lessee mailed or deliveredto said bank on or before such date of payment.?

You furnished

ua a photostaticcopy of a receipt executedby 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 understandyour request'.yo$di)s%ra

. an answer to the last three only,531 the event re~ah&wer?$+. fir& question in the. negative.'Since we anWer.y&i&:ffi:s$...,~ questionin the affirmative, we will only set it .out'he$?& and prooeed to answer it.

"(1) Did the aforesaidleases 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.waspaid to them in due
-

. ,TheRelinquishment Act and particularlythat portion a of same'

as incorporatedin Artiole 5368. Revised Oivil Statutes of 1925, authorizesthe owner of th 3&a3to ereeute an oil d -se upon such terms aiWcondi&fs as s&h ownermay d%& best, subject only to the provisionsof.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,reonHon. Basoom Giles,Rage 5

or thereinupon such terms and conditionsas such ownermay 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** purchasershall in every case pay the State ten centsper aore per year of sales and rentals; 'andin case oS productionshallpay the State the undivided one-sixteenth

OS the value of the oil and gas deservedherein,and like amounts to the owner of the s0i1.~

**We** find nothing in'the statutewhich preventsthe owner from executing what is commonly known as an Qnless .leasenwith provisionssimilar to those pointed out above in the leases submittedto us Sor examination. That beingtrue, .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.dateprovided,and the receipts submittedshowingthat such rentalpaymentswere not **made in**  **time,** all OS theabove leases ipso Saoto terminated.- The 

### first lease listedabove, being No. 20580, terminatedon May'8, 1939;.thesecondlease .llstedabove,being No. 20602, terminated on April 7;1938, and.the third lease listed above,.beingNo. 20350, terminated on June 13, 1938, **for** Sailure to pay the delay rental8on or before the dates thereinprovided. 

### or oourse;we are assuming in all instancesthat operationsfor the drillingof a well for oil and gas were not commenced on the land ooveredby any of said.leases

on or before the dates abovementioned,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 nrovidedSor in the Relinauishfnent Aot the'oontract‘itself and .& statu&s relatingtheGet 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.provisionsin the statutepreventing the type of leases in question 'inso far as the delay rental feature is concerned,then we must'give full eSfeOttoHon. Bascom Giles,Page 6

theexpressed language in the lease oontract. We could cite and discussmany 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,drillingoperations not having been begun.

In the aase of Gulf ProduotionCompany. et al., vs. ContlnenMl~Oil Companyet a
. 1 eo de of Texas; opiniondeliveredby Chief Justice Cureton on Nov. 1, 1939, and not yet reported;the court removed all doubt as to the righta of the partieswith respeot to delay rentals in an "unless lease" by the followinglanguage:

"The lease here inv'olved is an 'unlesslease,?, and Imposedno obligationon Joiner,Trustee, to either drill or pay; and upon his failure to .eitherdrill,pay, or make the deposit in the named bank, no liabilityof any kind arose in Savor of the Turners against'him; nothingwas 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);McLaughlinv. 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,-lnpart reads:
*'Its is clear from the wordin clause that lt'doesnot operate to L of the *unless" pose any duty

. upon the lessee either to drill or to nay delay rentals; the matter Is entirely optionalwith him, and thelessor cannot oompel him to drill nor oblige him to pay any rentals.! 31 Tex. Jur., P. 744, sea. 134. (ItalicsOars.) 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, 745Hon. 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'(writref;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 certioraridismisses), 278 U.S. 581.
"The *unless*provisions~orthe lease, therefore, are obviouslya iimitationon the grant; since ra limitationdeterminesan estate upon the happeningof 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; Caruthersv. 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 corporationoperating 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.onthe part **of** the landowneror lessee to pay. Under the terms of the lease oontraots in questionthe rental never.became

due in the ordinary sense of the word in that the payment thereof could not be enforced. The lesseeshad to make the payment8 in proper time to keep the leases alive for anotheryear, but they were not required to keep the leases alive. That being true, Article 5372 had no applicationto the rental provided in the above leases. Certainlythe leasesHon. 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 valuableright without paying a consideration therefor or being obligated in any way. There would be no mutualitybetween the parties to the extension.

Mr. Summers in his most reoent edition on oil and gas discussesthis question as follows:

sRemediesof the Lessor for'Failureof 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 periodicpayment of money, Is used, not for the purpose of fixing a duty upon the lessee to drill,or pay, but to' state a limitationupon which the'lease terminates If these acts are not performed. Consequently, if the lessee fails to drill within the stipulatedtime, 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'uponwhich 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 ProductionCo. et Al, vs. Continktal Oil Co., et' al.. sunra.

The provisionof Article 5368 that in every lease the state shall be paid a minimum Of ten oents Per acre Per year rental Is compliedwith in the above leasein so far
s 1 the year in 939, in the f rst lease; the year beginningApril 7, 1938,

Puired 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, providesnot 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 lesseeswere not liable for this rental but as we have pointed out they lost their leases by not paying it in, time and the leaseswere 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 thereinprovlded ia $174.00,being the portion to which the state is entitled,that the anniversarydate or the lease,being the date on or beforewhich 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 $11.00was not paid until after the anniversarydate, to.-wit, on May 7, 1938. The lesseenot having tendered or paid on or before April 7, 1938, all of the rental.provided in the lease, the lease Ipso raato terminatedby Its own terms, assumingthat. the lease on April 4, 1938,' was owned by the same party or parties. This presentsa 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 rentalsprovided for in the lease, the Court used the iolloviing language:

"It wfll be noted the lessee assumedno-obligationta oommenoea well in twelve (12)months rrom the date or the contractnor did he agree to pay a rental If suoh a well was not oanmenoed. It was wholly optionalwith 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 terminatedas to both parties. *,* * The oommenoement

### 0r a well or payment or rentalwas a oondition precedentto a continuanoeor*esn*gion,or lessee'sprivilegeafter that date.

We are of the'opinionthat under the aontract in questionwhere all the rights and privileges grantedby the instrumentas to all of the land describedthereinwer.e vested..in

one person, the optionalright to ay rental was Indivisibleand that suoh an dndlv dual

s would have n0 right to pay rental upon a part or the land, only..* * * And the failure to pay the'whole stiplatedamount terminatedthe entire oontraot.*Hon. Bascom Giles, Page 10

This questionwas involvedvinK;;;ect;ya;ith a surfaoe lease In the oase of MoCray

. 

### 9, S.W. (2) $58. .< 130

The lease had the followingprovision:

'It is further provided that If said rental becomes delinquentfor as much as three (3) months then and in that event this lease shall beoome null and void and shall revert immediatelyto the parties of the first part gogetherwith all improvementsthereon laoated."
SudRe Graves. who wrote the opinion for the Court of Civil Appe&s of Gaiveston, in dieouksingthe above vision in the lease used.thefollowing language:

Vinae this lease contained the recited automatic rorfeituredlause upon derault in payment of rental no eleation to deolare it rorfeltadwas required of appellee. * * *"
Y'he relied upon tendermust have been of the rull amount due from the appellantto 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 disonaaedherein, it is the opinion of this departmentthat eaoh of the leases in question ipso raoto expiredwhen the lessees failed to pay the rental In full on or before the date speclriedin the lease, and that Article 5372, supra,hever had any applioationto.the rentals in qudstion under the facts presented.

Yours very truly
ATTORNEyGENXZALOFTEX@

BY

DDM:jm APPI?CVEDD.= 7, 1939