## Facts

- Joe W. Curtis and Lois B. Curtis executed an Oklahoma oil and gas “unless” lease covering 40 acres, providing that if no well was commenced by October 4, 1947, the lease would terminate unless delay rentals were paid or tendered on or before that date, with like annual extensions on timely payment.
- The lease was assigned to Phillips Petroleum Company, and the October 4, 1947 delay rental was timely paid.
- No well was commenced on or before October 4, 1948.
- Phillips did not pay or tender the October 4, 1948 delay rental to the lessors or to their credit at the named depository by the due date because of an internal employee error.
- Around December 1, 1948, Phillips discovered the mistake and tendered the rental (later also tendering interest), but the Curtises refused all late tenders.
- Phillips sued to quiet title, contending the lease remained in force and that equity should excuse the late payment; the district court ruled the lease had terminated, and Phillips appealed.

## Issues

1. Whether an Oklahoma “unless” oil and gas lease automatically terminates when delay rentals are not paid or tendered on or before the date specified in the lease.
2. Whether a court of equity may relieve a lessee from such termination when the late payment resulted from inadvertence or negligence and the lessee later tenders the rental with interest.
3. Whether Oklahoma’s statute permitting relief from penalties and forfeitures applies to preserve an “unless” lease after late payment of delay rentals.

## Decision

- The Tenth Circuit affirmed the judgment against Phillips.
- The court held the lease terminated by its own terms on October 4, 1948, when Phillips failed to timely pay or tender the delay rental.
- The court rejected equitable relief based on Phillips’s inadvertent error and later tender.
- The court held the Oklahoma forfeiture-relief statute did not apply to an “unless” lease that ends by limitation.
- The court found no waiver or estoppel because the lessors consistently refused the late tenders and did not induce late payment.

## Legal Principles

- An “unless” oil and gas lease in Oklahoma creates a special limitation on the lessee’s estate: failure to timely pay or tender delay rentals causes automatic termination without any action by the lessor.
- Time is of the essence in an “unless” lease delay-rental clause; strict compliance with the payment deadline is required to extend the lease.
- Equity generally will not revive or extend an “unless” lease that has terminated by limitation due to the lessee’s late payment, even if the default was inadvertent and the lessee later tenders payment with interest.
- Oklahoma’s statutory relief from penalties and forfeitures does not apply where the lease terminates automatically by its own terms rather than by a forfeiture imposed or enforced by the lessor.
- Absent lessor conduct constituting waiver or estoppel, the lessor may rely on the automatic termination resulting from nonpayment by the specified date.

## Conclusion

Because Phillips failed to pay or tender the required delay rental on or before the stated date, the “unless” lease terminated automatically under Oklahoma law, and neither equitable relief nor the state forfeiture-relief statute could restore the lease in the absence of waiver or estoppel by the lessors.


Phillips Petroleum Co. v. Curtis, 182 F.2d 122 (10th Cir. 1950)