Court Opinion

ID: 9642170
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:51:00.169265+00
Date Added: 2024-06-11T18:10:43.987942
License: Public Domain

PALMORE, Judge
(dissenting opinion).
The assignment in this case specifically provided that it would terminate upon the assignee’s failure to drill or pay the delay rentals when due. Such a provision in an oil and gas development contract not only is “favored by the courts,” cf. Bell v. Kilburn, 192 Ky. 809, 234 S.W. 730, 731 (1921), but by statute is made a part of any contract that “provides in substance that actual drilling or development may be postponed by the payment or tender of the rental on or before a certain day.” KRS 353.020. “The lease must be construed if possible to bring as strong a pressure to bear as possible on the lessee to begin development as soon as he can. The covenant as to rent must be interpreted in the light of this principle * * *. The provision that the failure to pay stipulated rentals on or before the day provided by the lease for that purpose shall work a forfeiture of such lease has a direct tendency to enforce the lease.” Kelley v. Hardwick, 228 Ky. 349, 14 S.W.2d 1098, 1099 (1929).
In Bell v. Kilburn, 192 Ky. 809, 234 S.W. 730 (1921), an assignment required the as-signee within 60 days to place a drilling machine on the leasehold or to pay a $510 delay rental. When the 60 days expired he had surveyed the premises and placed pipes and casing preparatory to drilling but had not moved a drilling machine onto the property. His tender of the $510 several days later was rejected, and this court upheld an injunction against his further entry. A similar result was reached in Niles v. Meade, 189 Ky. 243, 224 S.W. 854 (1920), wherein the assignee had expended $1,000 in preparing the leased premises but was prevented by heavy rains and high waters-from placing a drilling rig on the property within the specified time. The following excerpts from the opinion in the last-cited case are appropriate to this case:
“The failure to perform the stipulations of a contract, such as the ones undertaken by the defendants and their assignor, is not excused by the obligor being disabled to perform them because of casualties arising without fault upon his part, and the conditions of this contract were not impossible of performance when undertaken, and the assignor of defendants in making the contract did not make any provisions against such conditions as thereafter made the stipulations difficult of performance by the defendants. * * * Parties may place such lawful stipulations in their contracts as they may see fit and mutually agree upon, and if sui juris they are bound by them, and must submit to such results as they agree shall follow a failure to perform * * * ”
As pointed out in Kelley v. Hardwick, 228 Ky. 349, 14 S.W.2d 1098, 1099 (1929), a covenant to pay delay rentals is of no lesser importance than a covenant to drill. They are complementary. Failure to perform one or the other gives the lessor (or, in this case, the assignors) the right to avoid the contract. Hence this case cannot be distinguished from Niles v. Meade, 189 Ky. 243, 224 S.W. 854 (1920), cited above, upon the ground that in the Niles case the obligation was to place a drilling rig on the leasehold whereas in this instance it was merely to pay a delay rental, because it is a distinction without a difference in legal principle. And in no sense can this case be distinguished from Bell v. Kilburn, 192 Ky. 809, 234 S.W. 730 (1921), except insofar as the assignee here may be entitled to more sympathy by reason of the particular circumstances that occasioned his default.
I regard the delay rental provision of oil and gas contracts as very little different *72from an option. The lessee must either drill or make timely payment to keep the lease alive. When grown men have seen fit to place such a requirement in the contract, without condition, qualification or provision against unforeseen circumstances, I do not feel that a court should modify it.