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Davis v. Cramer

Court of Appeals of Colorado, Division One

February 27, 1992, Decided

No. 87CA1627

Opinion

 [*221]  This case returns to us pursuant to a mandate by our supreme court in Davis v. Cramer, 808 P.2d 358 (Colo. 1991), in which that court reversed our decision in Davis v. Cramer, 793 P.2d 605 (Colo. App. 1990). We now affirm that portion of the judgment of the trial court terminating the lease, reverse the determination of damages, and remand.

A brief overview of the facts and case progression is helpful to an understanding of the current posture of the case.

Plaintiffs, Gwendolyn and J.W.C. Davis, are the owners in fee simple of the southwest quarter of section 2, Township 3 south, Range 64 west, 6th P.M., and the southeast quarter of section 30, in Township 2 south, Range 63 west, 6th P.M., in Adams County, except a one-half mineral interest in the southeast quarter of section [**2]  30 which was reserved by the Allensworths, plaintiffs' predecessors-in-interest.

On November 1, 1968, the parties executed the Davis lease. This oil and gas lease covers the southwest quarter of section 2 and the southeast quarter of section 30, excepting the one-half mineral interest reserved by the Allensworths. Defendants are lessees who also have right of access under the Allensworth lease. The stated purpose for the Davis lease is "mining, and operating for oil, gas, and other minerals, laying pipe lines, buildings, tanks, power stations and structures thereon, to produce, save and take care of said products . . . ."

The habendum clause to the lease provides for a primary term of 10 years and "as long thereafter as oil or gas or other minerals are produced from said land by lessee." As is pertinent here, the lease also contains a shut-in royalty clause which will be described later. Also, as pertinent here, the lease contains a drilling clause which calls for payment of a delay rental for the privilege of deferring for 12 months commencement of a well or the drilling of a second well after finding a dry hole.

In March 1978, plaintiffs filed their amended complaint alleging, among [**3]  other things, breach of express covenants of the lease and breach of the implied covenants of prudent operation and of further exploration and development. Defendants counterclaimed, seeking damages for plaintiffs' refusal to allow them access to drill on the southeast quarter of section 30.

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837 P.2d 218 *; 1992 Colo. App. LEXIS 53 **; 16 BTR 268

J.W.C. Davis and Gwendolyn Davis, Plaintiffs-Appellants and Cross-Appellees, v. R.K. Cramer, Richard Haines, Irene M. Light, Louis S. Madrid, Gary Sandlin, and Sandlin Oil Corporation, Defendants-Appellees and Cross-Appellants.

Subsequent History:  [**1]  Opinion Modified, and as Modified Rehearing Denied April 2, 1992. Certiorari Denied October 13, 1992 (92SC287). Released for Publication October 15, 1992.

Prior History: Appeal from the District Court of Adams County. Honorable Michael Obermeyer, Judge. No. 31595

Disposition: JUDGMENT AFFIRMED

CORE TERMS

lease, Oil, lessee, shut-in, marketing, habendum clause, diligence, trial court, implied covenant, royalty, lessor, royalty clause, terminated, oil and gas lease, primary term, cancellation, covenant, paying quantities, reasonable time, drilling, damages, implied duty, exploration, minerals, prudent

Contracts Law, Types of Contracts, Lease Agreements, General Overview, Energy & Utilities Law, Leases & Licenses, Habendum Clauses, Natural Gas Industry, Marketing & Transportation, Marketability, Business & Corporate Compliance, Contracts Law, Covenants, Discovery, Exploration & Recovery, Exploration Obligations & Rights, Oil, Gas & Mineral Interests, Implied Covenants, Administration & Marketing, Drilling Agreements, Further Exploration, Prudent Operators, Reasonable Care & Diligence, Reasonable Development, Implied Duties, Royalty Interests, Royalties, Defenses, Savings Clauses, Royalty Clauses, Shut In Royalty Clauses, Collection & Payment, Leasehold Royalty Clauses, Forfeiture Clauses, Civil Procedure, Pleadings, Time Limitations, Extension of Time, Personal Property, Personalty Leases, Assignment, Release & Surrender, Contract Interpretation