Gulf Production Co. v. Kishi
Commission of Appeals of Texas
103 S.W.2d 965 (Tex. Comm’n App. 1937)
K. Kishi and others (plaintiffs) leased oil and gas rights on two tracts of land to Gulf Production Company (Gulf) (defendant). The lease covering the first tract expressly provided that, after discovery, Gulf was required to continue drilling wells every 60 days until 12 wells were drilled. The lease covering the second tract expressly provided that, after discovery, Gulf was required to continue drilling wells every 90 days until four wells were drilled. Gulf timely drilled 15 wells on the first tract and five wells on the second tract. The plaintiffs brought suit, alleging that Gulf had breached the implied covenant to further develop. Specifically, the plaintiffs alleged that reasonable diligence on the first tract would require the drilling of 15 new wells each year, and that reasonable diligence on the second tract would require the drilling of five new wells each year. The trial court found in favor of the plaintiffs and awarded damages. The Texas Court of Civil Appeals reversed. Pending action on a motion for rehearing, the court of civil appeals certified to the Supreme Court of Texas the question of the applicability in this case of the implied covenant to further develop. The Supreme Court of Texas delegated the certified question to the Commission of Appeals of Texas.
Rule of Law
Holding and Reasoning (Smedley, J.)
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