Case Name: The STATE of Oklahoma ex rel. COMMISSIONERS OF the LAND OFFICE of said State, Plaintiff in Error, v. Alfred B. COUCH, Defendant in Error
Court: Oklahoma Supreme Court
Jurisdiction: Oklahoma
Decision Date: 1956-06-05
Citations: 298 P.2d 452
Docket Number: No. 36579
Parties: The STATE of Oklahoma ex rel. COMMISSIONERS OF the LAND OFFICE of said State, Plaintiff in Error, v. Alfred B. COUCH, Defendant in Error.
Judges: WILLIAMS, V. C. J., and CORN, DAVISON, HALLEY and BLACKBIRD, JJ., concur.
Reporter: Pacific Reporter 2d
Volume: 298
Pages: 452–456

Head Matter:
The STATE of Oklahoma ex rel. COMMISSIONERS OF the LAND OFFICE of said State, Plaintiff in Error, v. Alfred B. COUCH, Defendant in Error.
No. 36579.
Supreme Court of Oklahoma.
June 5, 1956.
R. H. Dunn, A. M. De Graffenried, N. A. Gibson, Shell Bassett, Oklahoma City, for plaintiff in error.
Alfred B. Couch, Kansas City, Tryon & Sweet, Guymon, for defendant in error.

Opinion:
JACKSON, Justice.
This is an action by plaintiff, the State of Oklahoma on relation of the Commissioners of the Land Office, seeking cancellation of an oil and gas lease on 160 acres of land in Texas County, Oklahoma.
The lease was executed October 23, 1920, by Carl Wood in favor of Alfred B. Couch, defendant herein. Thereafter, in 1932, plaintiff acquired a mortgage on the property, and through foreclosure proceedings obtained a Sheriff's deed on June 25, 1941. The validity of the Couch lease was not made an issue in the foreclosure proceedings and it is agreed that the foreclosure has no effect on the validity of the lease.
This action was commenced on July 21, 1952, by plaintiff for cancellation of the lease. Plaintiff's petition alleges that the lease from Wood to Couch was (1) without consideration; (2) that defendant, Couch, has breached the implied covenant to drill; and (3) that the failure to commence development for more than thirty years constitutes abandonment.
No notice to undertake development was given to the defendant prior to the institution of this action, although defendant was advised by letter that plaintiff intended to file a suit to cancel the lease. There was evidence that gas was being produced in the area, although it is not contended that there is any drainage of the property.
As we understand plaintiff's petition, evidence and argument, relief is not sought upon equitable grounds but upon the legal import of the lease in question. That is, plaintiff is not seeking drilling operations or a cancellation of the existing lease, but seeks a complete cancellation of the lease with no opportunity for lessee to drill at this time.
The material parts of the lease provide, in substance, that for $1 and the covenants and agreements of lessee (Couch), "hereinafter contained," the lessor (Wood) leases unto lessee for the sole and only purpose of operating for oil and gas. The lease to remain in force for a term of forty years, and so long as oil or gas is produced. Lessee agrees to deliver ⅛ of the oil to lessor ; agrees to pay $1 each year for the gas from each well where gas only is found, while the same is used off the premises; and to pay lessor $25 per year for gas produced from any oil well and used off the premises.
The1 lease further provides:
"The Lessee agrees to commence drilling a well on said premises within from date thereof, and to prosecute such work with due diligence to completion, and in case the work of drilling is abandoned for a period of one year to pay the first parties (lessor) hereafter no dollars, per annum during the term of this lease; and it is agreed that the prosecution of the work of drilling or the completion of such well shall be a full liquidation of all rent under this provision during the remainder of the term of this lease. .
" Cash lease cash paid in advance."
At the outset we recognize that oil and gas leases are construed most strongly against the lessee and in favor of the lessor. Frank Oil Co. v. Belleview Gas & Oil Co., 29 Okl. 719, 119 P. 260, 43 L.R.A., N.S., 487.
Under Oklahoma laws, oil and gas leases should be construed to promote development and prevent delay, where the terms of the lease will permit. Crain v. Pure Oil Co., 10 Cir., 25 F.2d 824; Paraffine Oil Co. v. Cruce, 63 Okl. 95, 162 P. 716, 719, 14 A.L.R. 952. But the paramount rule in the interpretation of contracts is to ascertain the intention of the parties and give effect to the same, if it can be done consistently with legal principles. This rule is applicable to the interpretation of an oil and gas lease. Prowant v. Sealy, 77 Okl. 244, 187 P. 235.
The primary term of this lease, 40 years, together with the fact that the time to commence drilling a well on the premises is left blank, would indicate that "development" was not of the essence of this contract.
The provisions for drilling and delay in drilling are all contained in one sentence and are in substance that, lessee will commence drilling in -years, prosecute the drilling with due diligence, and in case drilling is abandoned for one year to pay lessor no dollars, per annum during the term of the lease; and the prosecution of the work of drilling is a liquidation of all rent under this provision during the remainder of the term.
From the foregoing it is apparent that the form of lease contemplated that the time for drilling would be inserted. It is also apparent the form contemplates that if drilling is abandoned after the first well is started, the proviso for drilling will be satisfied by the payment of-dollars, per annum during the term of the lease.
We are convinced that the time to commence drilling was intentionally left blank, and that delay in drilling was intended. This intention is expressed wherein lessee agreed to pay "no dollars, per annum during the term of this lease." This conclusion is fortified by the last sentence in the lease contract, "Cash lease cash paid in advance." Stated another way, it appears that the "Cash paid in advance" is in lieu of delay rentals and was paid in advance for the privilege of delaying drilling operations during the term of the lease.
In McKee v. Thornton, 79 Okl. 138, 192 P. 212, 215, this court upheld a lease contract which authorized a 20 year delay in drilling and quoted with approval from Rose v. Lanyon Zinc Co., 68 Kan. 126, 74 P. 625, wherein that court said:
" ' "Courts have no right to declare that, whatever the parties may think, operations for sinking a well must begin at once under an oil or gas lease. If this court had done so prior to the time plaintiffs desired to contract they would have rebelled, without any doubt, with the utmost indignation against the decision as an infringement of their liberty to contract with reference to their land and the minerals beneath its surface as they pleased. In so doing they would have been justified. If plaintiffs should desire to contract for an immediate exploration, they must have that right; and if they should desire to give an oil or gas company five years in which to sink a well, upon a consideration satisfactory to themselves, and as the result of negotiations free from imposition and fraud, they must have that right. " ' "
We conclude that there was a consideration for the lease; that the lease agreement, as written, excludes any implied covenant to drill, and there is no evidence of an intention to abandon the lease.
Our attention is invited to Hitt v. Henderson, 112 Okl. 194, 240 P. 745. There the primary term of the lease was 15 years. The only consideration recited in the lease was one dollar and the covenant to explore for oil and gas. While there was no time provided to commence drilling, there was no stipulation for the privilege of delaying operations. The court held there was an implied covenant to drill within a reasonable time. That case may be distinguished upon the facts. The recited consideration in that case was one dollar and the covenant to explore. In the absence of exploration there would have been a practical failure of consideration. Drilling would appear to be the consideration for that lease. In the case now before us the "Cash paid in advance" appears to be the consideration for the lease and the privilege of delaying drilling.
Judgment affirmed.
WILLIAMS, V. C. J., and CORN, DAVISON, HALLEY and BLACKBIRD, JJ., concur.
HUNT, J., dissents.