Court Opinion

ID: 9536363
Source: CourtListenerOpinion
Date Created: 2023-08-07 06:58:28.209485+00
Date Added: 2024-06-11T14:54:21.005775
License: Public Domain

Wedell, J.
(dissenting): This appeal presents primarily the question of the purpose and function of G. S. 1935, 55-201. It is conceded the landowners complied fully with the statute and that in addition, and some considerable time prior to instituting the procedure thereunder, they notified the Magnolia Petroleum Company in writing the lease was forfeited, except as to the twenty acres on which production was had. The letter further reads:
“Said owners hereby demand a release of the non developed portion of said lease be filed by you in the office of the Register of Deeds of Stafford County, Kansas.”
Seven days later Magnolia answered that letter as follows:
“Gentlemen:
“This is to acknowledge receipt of your letter oí November 9 regarding the above captioned lease. This has been referred to our Geological Department *364for recommendation and you will be notified as to our position in the near future.”
Contrary to this letter the landowners were never notified of Magnolia’s decision. Over two months later the landowners first published the statutory notice of forfeiture of the lease. The foregoing facts are all admitted by the motion for judgment on the pleadings.
Before discussing the purpose and function of the statute I desire to state briefly my views on a few other subjects covered by the opinion. I have always adhered to the principle that neither the lessor nor the lessee, in the absence of stipulation, is the sole arbiter of what constitutes diligent exploration or development of a lease. (Myers v. Shell Petroleum Corp., 153 Kan. 287, 295, 110 P. 2d 810.) I also admit a breach of an implied covenant ordinarily does not justify an automatic forfeiture of an oil and gas lease.
The cancellation of a lease pursuant to the provisions of G. S. 1935, 55-201, however, cannot possibly be termed an automatic forfeiture. In order to obtain cancellation of the lease the landowner is compelled to follow strictly the procedure prescribed in the statute. Under it the lessee may compel a judicial determination of the question whether the lease actually has been forfeited. The statute specifically grants the lessee the right to deny the lease has been forfeited and when he does so, as provided in the statute, no cancellation of record results and the landowner is again relegated to the statutory remedy of an action in court to establish the forfeiture of the lease by proof. Manifestly such a statutory procedure does not constitute automatic forfeiture.
I am also obliged to disagree with the view that cancellation of a lease on the ground it has become forfeited for violation of an implied covenant to explore and develop can be obtained only by judicial action. If that is the rule then our previous interpretation of G. S. 1935, 55-201, is wrong. This court has uniformly approved the operation of this statute and has applied it where the implied covenant to explore and develop the entire lease was squarely involved. (Nigh v. Haas, 139 Kan. 307, 313, 31 P. 2d 28.)
This brings me to the true purpose of the statute. As I understand it the statute, as a result of various amendments, was enacted in order to provide an inexpensive and prompt method whereby a landowner may clear the cloud on the title to his land as against a lease which he claims has become forfeited and that he may ob*365tain such cancellation pursuant to the statute in the event the lessee does not dispute the landowner’s claim of forfeiture. (Elliott v. Oil Co., 106 Kan. 248, 187 Pac. 692; Mollohan v. Patton, 110 Kan. 663, 202 Pac. 616; Nigh v. Haas, 139 Kan. 307, 312, 31 P. 2d 28.) The history of legislation leading to the enactment of this statute and its purpose has been treated in these cases and need not be repeated.
To hold the statute does not apply to a lease where a dispute exists as to whether it has become forfeited, either by its express terms or otherwise, and that it applies only to a lease which has become forfeited on its face as a matter of law or by judicial decree, emasculates the statute. Obviously if a lease has been canceled by judicial decree there is no need for the statute. The statute in order to be effective of necessity must include leases relative to which a dispute exists as to whether they have become forfeited. This has been our interpretation of the statute. In construing the statute this court in Mollohan v. Patton, supra, said the statute requires “ . . . affirmative action on the part of the lessee to prevent the discharge of the challenged lease.” (Our italics.) (p. 666.) This court did not say, “to prevent the discharge of a forfeited lease.” The language of the Mollohan opinion was quoted with approval in Nigh v. Haas, supra, p. 314. See, also, earlier cases cited in the Mollohan case.
Moreover, the statute itself discloses it applies to leases where the question of forfeiture is in dispute. In providing the action which the landowner may take if the lessee denies the forfeiture, the statute reads:
. . the register of deeds shall notify the owner of the land of the action of the lessee, his successors or assigns, and the owner of the land shall be entitled to the remedies now provided by law for the cancellation of such disputed lease.” (Our italics.)
That a lease may become forfeited by reason of failure to comply with the implied covenant of diligent exploration and development must be, and is, conceded by all the parties. There is no basis in the language of this statute for excluding from its operation forfeitures resulting from a violation of implied covenants. The lawmakers did not make such a distinction and courts are not permitted to legislate by reading exceptions into it. The statute pertains to leases which “shall become forfeited.” In the absence of restrictive language that means forfeited for any reason.
In a declaratory judgment action this court, as previously stated, *366held the statute was applicable to a partial forfeiture of the lease claimed by reason of failure to comply with the implied covenants to explore and develop the entire lease where only a certain assigned portion thereof.had been developed. (Nigh v. Haas, supra.)
Although the opinion does not directly so state it clearly contains an intimation the statute does not apply to the instant case for the reason the landowners did not attempt to obtain a release of the entire lease and that the statute makes no mention of a partial forfeiture. In fairness to counsel for appellees it should be stated they do not make such a contention. Furthermore, as stated, this court has not so construed the statute.
True, some of the facts in Nigh v. Haas, supra, were not precisely the same as in the instant case. In that case the lessee assigned the lease. The assignee retained a part of it and assigned the remainder to another. The part such assignee retained was not developed. The proceeding for cancellation under G. S. 1935, 55-201 pertained only to the latter undeveloped portion of the original lease. The contention against forfeiture of that part of the lease was that the development of the other portion thereof, was sufficient to keep the entire lease in effect. This court rightly renounced the contention by concluding that a development which is insufficient to ascertain what oil and gas is contained under the entire lease does not constitute proper development of the lease. It also said the statute was enacted to meet situations just such as those there presented and further found the notice of forfeiture pursuant to the statute was sufficient to cancel the undeveloped portion of the lease. I shall not labor the point.
Limitations of time prevent a discussion of other cases. I pause, however, to observe that in consideration of the motion for judgment on the pleadings the record was not limited to the mere statutory procedure under the forfeiture statute but in addition thereto Magnolia had prior personal notice of the landowners’ claim of forfeiture, after expiration of the primary term of the lease, was served with a demand to release the undeveloped portion of the lease and did nothing whatever about it.
We are not concerned with the wisdom of the forfeiture statute. That is a legislative function. There are parts of the statute which experience in the practice has led me to believe should be improved. It has seemed to me the statute should provide for direct service on the lessee or his statutory designated agent of the proceedings for forfeiture filed by the landowner with the register of *367deeds but obviously that is not the question presently before us. As previously indicated this court has uniformly approved the operation of the statute as it now exists. Our problem, therefore, is to again declare the legislative will and to make it effective. It is my opinion the statute was intended to be operative in a situation such as obtains here and that such a conclusion is in harmony with the legislative intent and our past decisions.
Smith, J., concurs in the dissent.