Page:Ezzell v. Oil Associates, Inc.pdf/9

810 lessee in a mining lease, the consideration of which is a royalty to be paid, has, after a reasonable time, failed to begin and to continue the work of development and exploration provided in the contract, the lessor has three remedies, viz: (1) he may sue in equity to Cancel the contract and recover incidental damages; (2) he may sue at law for damages for breach of the contract, or (3) he may treat the contract as rescinded, and sue at law to recover possession of the property leased.

In Drummond v. Alphin, 176 Ark. 1052, 4 S. W. (2d) 942, it was held that where an oil and gas lease, covering 27 scattered tracts of land, provided that in case operations were not commenced and prosecuted with due diligence within one year, the lease should be void, but that a forfeiture could be prevented by payment of quarterly rentals until drilling operations were commenced, after which no rent was to be paid, a drilling of two wells was not a compliance with the lessee's obligation to continue development of lands.

So it may be taken, as the well-settled rule in this State, that there is an implied covenant on the part of the lessee in oil and gas leases to proceed with reasonable diligence in the search for oil and gas, and also to continue the search with reasonable diligence, to the end that oil and gas may be produced in paying quantities throughout the whole of the leased premises.

It is true that the original lease provides for the payment of $3,000 in common stock of an operating oil company, controlled by the lessee, to be given to the lessors, but the principal consideration for the lease was the payment to the lessors of a part of the oil and gas produced on the leased premises. Where the payment of royalties is the principal consideration for the execution of the lease on the part of the lessors, it is evident that the parties contemplated that oil should be searched for and produced with reasonable diligence, to the end that both parties might be profited by the production of oil or gas in paying quantities. Because of the absence of an express provision as to the number of wells to be drilled,