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HILL v. LARCON COMPANY

May 27, 1955

R.V. HILL, PLAINTIFF,
v.
LARCON COMPANY, DEFENDANT.



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, separately stated.

Findings of Fact.

1.

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.

2.

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.

3.

On December 14, 1950, Llewellyn Hill executed and delivered to Robert C. Wallingsford for a consideration of $10 an oil and gas lease by which he conveyed the land herein involved (with other lands) "for the sole and only purpose of mining and operating for oil and gas and laying of pipe lines, and of building tanks, power stations, and structures thereon to produce, save and take care of said products."

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
  rights conferred.
    "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."

4.

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.

5.

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.

6.

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 September, 1951.

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.

7.

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 ...


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