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Greer v. Stanolind Oil & Gas Co.

December 29, 1952



Before PHILLIPS, Chief Judge, and BRATTON and MURRAH, Circuit Judges.

MURRAH, Circuit Judge.

Appellee, Stanolind Oil and Gas Company, brought this suit to quiet its title to an oil and gas lease covering property in San Juan County, New Mexico, and to enjoin defendants, Greer and Wininger, from drilling operations on the said premises. The defendants answered alleging their paramount title under a previous oil and gas lease on the same property from the same lessors, and in the alternative counter-claimed for reimbursement of their costs incurred in the drilling of a well on the property.

Greer's lease commences: "This Agreement, Entered into this the 20 day of May, 1947,". It ends: "In Witness Whereof we sign the day and year first above written." Because the lessors lived in different localities they separately signed and acknowledged the lease on various dates between June 12, and July 15, 1947. The lease was actually delivered to Greer on July 15, 1947, but it was not recorded until July 14, 1948.

This lease is an "unless lease", Paragraph 5 thereof reciting: "If operations for the drilling of a well for oil or gas are not commenced on said land on or before one year from this date, this lease shall terminate as to both parties, unless the lessee shall, on or before one year from this date, pay or tender to the lessor * * * the sum of $320.00 which shall operate as rental and cover the privilege of deferring the commencement of drilling operations for a period of one year."

In June, 1948 the owner of the San Juan County Abstract & Title Company, who was the local agent of Stanolind for the procurement of oil and gas leases, finding no lease of record covering the land involved, approached one of Greer's lessors for the execution of a lease in favor of Stanolind. The lessor then checked the lease and the depository bank, and finding that no delay rentals had been paid by Greer, and no drilling operations having been commenced on the property, concluded Greer's lease had expired by its own terms.

Thereafter the same lessors executed two leases to Stanolind covering the same property involved in Greer's lease, both dated June 23, 1948.

Shortly after the execution of these leases, Hartman, one of the lessors, contacted Greer who said he wanted to pay the delay rentals on his lease. Hartman then informed him that he considered Greer's lease terminated because of the failure to pay timely delay rentals and that another lease had been executed to Stanolind on the same property.

Then Greer, believing that the date of delivery of the lease to him on July 15, 1947 was the date from which to compute the timely payment of delay rentals, deposited a rental payment with the depository bank on July 15, 1948. He made similar deposits on June 10, 1949 and May 8, 1950. None of these payments have ever been accepted by the lessors and all were retained by the bank in a special deposit.

After procuring the advice of counsel, Greer entered into a drilling agreement with Wininger, and on October 26, 1950 drilling operations were commenced on a 40-acre tract included within his lease. These operations were continued until two days after this suit was filed, when the defendants vacated the premises.The well had then been drilled to a depth of 1510 feet in the Pictured Cliff Formation at a stipulated cost of $17,780.00.

The trial court concluded as a matter of law that Greer's lease expired by its own terms for failure to pay delay rentals as provided in the lease, but when Stanolind refused to pay defendants the costs of drilling the well, the court ordered Stanolind to convey to the defendants its interest in the lease covering the 40-acre drilling site. Judgment was entered accordingly.

Greer and Wininger have appealed from that part of the judgment of the trial court holding that the anniversary and rental paying date is May 20, 1947, as recited in the lease, contending that the operative date is the date of delivery of the lease to Greer by the lessors, or July 15, 1947.

We agree with the trial court. It is of first importance that a contract shall have definitely ascertainable dates of commencement and termination. To that end, those dates should be determinable from the recitations in the contract itself; there should be no room for conjecture or speculation. If, however, the intent of the parties becomes material, it should be gathered from the language of the contract and resort to extraneous facts is justified only if the contract itself creates a patent ambiguity, 12 Am.Jur., Contracts, ยง 229, Pages 751-3; Provident Life & Accident Ins. Co. v. Hunter, 4 Cir., 165 F.2d 931; Hughes v. Franklin, 201 Miss. 215, 29 So.2d 79.

Obedient to that rule, the courts have generally construed contracts to run from the date they bear and not from the date of delivery. Kishi v. Humble Oil & Refining Co., ...

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