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Gillette v. Pepper Tank Co.

Colorado Court of Appeals
694 P.2d 369 (Colo. Ct. App. 1984)


Charles Underwood (plaintiff) was the lessor of oil and gas rights to Pepper Tank Company (Pepper) (defendant). Pepper drilled several producing wells in 1952 and 1953, one producing well in 1957, and one producing well in 1972. Each of these wells was subsequently abandoned, with the exception of one well that continued to operate with minimal production. Underwood brought suit for breach of the implied covenant of further development and exploration and for breach of the implied covenant to operate prudently, and sought cancellation of the lease. The trial court found that Pepper had breached the implied covenants. As a remedy, the trial court ordered conditional cancellation of the lease. Specifically, the trial court ordered that Pepper could avoid cancellation for the nonproducing areas of the leasehold if Pepper filed a plan of development within 60 days. If Pepper failed to file, Underwood could cancel the lease by filing a development plan. Additionally, the trial court held that Pepper could avoid cancellation for the producing area if Pepper made necessary repairs to the lone producing well that remained. Both parties appealed.

Rule of Law


Holding and Reasoning (Pierce, J.)

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