The opinion of the court was delivered by: John E. Miller, District Judge.
This cause was tried to the court on April 6, 1955, upon the
pleadings, the stipulation of the parties and documents mentioned
in said stipulation, together with affidavits attached to the
motion for summary judgment and the response thereto. At the
conclusion of the trial, the case was submitted and the attorneys
for the respective parties were requested to file briefs in
support of their respective contentions. Said briefs have been
received and have been considered by the court along with all of
the testimony and stipulation, and the court now makes and files
herein its formal Findings of Fact and Conclusions of Law,
The plaintiff, R.V. Hill, is a citizen of the State of Arkansas
and resides in Union County, Arkansas. The defendant, Larcon
Company, is a corporation organized and existing under the laws
of the State of Delaware and is authorized to do business in
Arkansas. The amount involved exceeds in value the sum of $3,000,
exclusive of interest and costs.
The plaintiff, R.V. Hill, is the owner of the SW1/4 of the
SW1/4 of Section 5, Township 18 South, Range 13 West, in Union
County, Arkansas, having acquired the same under the will of
Llewellyn Hill, who died testate in Union County, Arkansas, on
December 14, 1952.
The lease further provided:
"It is agreed that this lease shall remain in force
for a term of five years from this date, and as long
thereafter as oil or gas, or either of them, is
produced from said land by the lessee."
The lessor was to receive "the equal one-eighth (1/8) part of
all oil produced and saved from the leased premises" and "for gas
from each well where gas only is found, the equal one-eighth
(1/8) of the gross proceeds at the prevailing market rate, for
all gas used off the premises."
"If no well be commenced on said land on or before
the 14th day of December, 1951, this lease shall
terminate as to both parties, unless the lessee, on
or before that date, shall pay or tender to the
lessor, or to the lessor's credit in the First
National Bank of El Dorado, Arkansas, or its
successors, which shall continue as the depository
regardless of changes in ownership of said land, the
sum of One Hundred Twenty and No/100 Dollars, (the
lease covered a total of 120 acres, so the rental was
$1.00 per acre), which shall operate as a rental and
cover the privilege of deferring the commencement of
a well for twelve months from said date. In like
manner and upon like payments or tenders the
commencement of a well may be further deferred for
like periods in the same number of months
successively. And it is understood and agreed that
the consideration first recited herein, the down
payment, covers not only the privileges granted to
the date when said first rental is payable as
aforesaid, but also the lessee's option of extending
that period as aforesaid, and any and all other
"Should the first well drilled on the above
described land be a dry hole, then, in that event, if
a second well is not commenced on said land within
twelve months from the expiration of the last rental
period for which rental has been paid, this lease
shall terminate as to both parties, unless the lessee
on or before the expiration of said twelve months
shall resume the payment of rentals in the same
amount and in the same manner as hereinbefore
provided. And it is agreed that upon the resumption
of the payment of rentals, as above provided, that
the last preceding paragraph hereof, governing the
payment of rentals and the effect thereof, shall
continue in force just as though there had been no
interruption in the rental payments.
"Lessee shall have the right at any time to remove
all machinery and fixtures placed on said premises,
including the right to draw and remove casing."
The lease further provides that the covenants therein shall
extend to the heirs, executors, administrators, successors or
assigns of the parties.
Also, the lease provided:
"Notwithstanding anything in this lease contained
to the contrary, it is expressly agreed and
covenanted that if the lessee, his heirs, successors
or assigns, shall commence drilling operations at any
time while this lease is in force, this lease shall
remain in force and effect, and the term and life
shall continue as to the entire acreage described
herein, so long as such operations are prosecured,
and if production results from such operations, then
as long thereafter as such production continues."
The named lessee on February 23, 1951, assigned the lease to
Roberts Petroleum, Inc., and on April 16, 1951, Roberts
Petroleum, Inc., executed and delivered a deed of trust to
Franklin O. Mann, as Trustee of the Harris Trust & Savings Bank,
covering an undivided one-half interest in said lease and other
leases to secure an indebtedness of $253,000.
In the meantime, Robert C. Wallingsford, the original lessee,
had either assigned or agreed to assign an undivided one-half
interest in the lease to various other persons and, on January
28, 1952, Roberts Petroleum, Inc., executed and delivered a deed
of trust to Louisiana Machinery Company, Inc., and West Pontiac,
Inc., covering an undivided one-half interest in said lease to
secure an indebtedness of $400,000, subject, however, to the deed
of trust to Franklin O. Mann, as Trustee.
On May 16, 1952, Roberts Petroleum, Inc., filed its petition
for an arrangement under Chapter XI of the Bankruptcy Act, 11
U.S.C.A. § 701 et seq. Thereafter certain proceedings were had
that resulted in adjudicating the said Roberts Petroleum, Inc.,
a bankrupt on July 30, 1952. J.S. Beebe was appointed Trustee of
the estate of the bankrupt and, after serving a few months,
resigned and Donald E. Bradham was selected as Trustee.
On May 17, 1954, Bradham, as Trusttee, acting under the orders
of the court and after proper advertisement, sold and assigned
said oil and gas lease to the defendant. At the sale the
defendant also purchased the other assets of the bankrupt and,
subsequent to the purchase of the interest of the bankrupt in the
oil and gas lease herein involved, the defendant acquired by
mesne conveyances the interest of all other parties who had
acquired an interest in the lease by assignment from Wallingsford
or Roberts Petroleum, Inc.
A well was drilled on the property in March, 1951, and produced
for a few months a total of 20,366 metric cubic feet of gas which
was sold to the Arkansas Louisiana Gas Company. The purchaser of
the gas paid therefor during the month of April, 1951, $86.59;
for the month of May, $194.12; for the month of June, $200.85;
for the month of July, $185.40; for the month of August, $72.18,
and for the month of September, $32.26.
No gas has been produced or sold from the said lease since
During the year 1951 the total operating cost charged to the
well was $355.24, or an average monthly operating cost for the
six months period of gas sales of $59.26.
No delay rentals were paid at any time and no effort has been
made to operate the well on the property since September, 1951,
and there has been no production of either oil or gas. Thus no
royalties or other considerations have been paid by the lessee or
the defendant for any failure of operation and no other wells
have been ...