Opinion
No. 78-640
Decided December 14, 1978.
Board of Land Commissioners appealed from a judgment determining that certain rentals received by the Board pursuant to two geothermal leases must be refunded to the lessee.
Affirmed
1. LANDLORD AND TENANT — Geothermal Lease — Force Majeure Clause — Defined — Action by State — Withholding Issuance — Well Permits — Rent Obligation — Suspended. Where under terms of geothermal lease, the lessee's obligations were to be suspended if a "force majeure" operated to prevent him from carrying out those obligations, and where a "force majeure" was specifically defined as any action by the state, which interferes with the lessee's rights, the state's action in withholding issuance of any geothermal well permits pending adoption of certain regulations pertaining thereto constituted a force majeure so as to suspend the lessees obligation to pay rent during the period that the issuance of such permits were held in abeyance.
Appeal from the District Court of the City and County of Denver, Honorable George M. McNamara, Judge.
Samuel L. McClaren, Thomas R. Lefly, for plaintiffs-appellees.
J. D. MacFarlane, Attorney General, David W. Robbins, Deputy Attorney General, Edward G. Donovan, Special Assistant Attorney General, Jeffrey G. Pearson, Assistant Attorney General, William R. James, Assistant Attorney General, for defendants-appellants.
Defendants, as members of the Board of Land Commissioners, appeal from a judgment determining that certain rentals received by the Board pursuant to two geothermal leases must be refunded to plaintiff, Charles A. Underwood. We affirm.
The relevant facts are not in dispute. On December 14, 1973, the Board as lessor signed two leases with plaintiff Gillespie for development and production of geothermal products from certain state lands. Plaintiff Gillespie assigned her interest in the leases to plaintiff Underwood on October 25, 1976. The leases provide for a primary term of ten years which is extended so long thereafter as geothermal products are produced in paying quantities. The leases require payment of rentals, and, in addition, certain royalties based upon the production of geothermal products.
On May 17, 1974, the General Assembly adopted the Colorado Geothermal Resources Act, § 34-70-101, et seq., C.R.S. 1973 (1976 Cum. Supp.). This Act authorized the Oil and Gas Conservation Commission to withhold issuance of well permits pursuant to § 34-60-106(1)(f), C.R.S. 1973, until regulations were adopted governing the drilling of such wells. The trial court found that between the dates of May 18, 1974, and June 1, 1974, Gillespie was advised by the director of the Oil and Gas Conservation Commission that the Commission "could not or would not issue permits for geothermal wells until the Commission adopted rules and regulations relating to geothermal wells." However, no regulations were in effect until January 26, 1977.
Pursuant to the leases, the required rentals were paid from December 14, 1973, through December 13, 1976. Prior to filing the present action on October 28, 1976, Gillespie asked the Board to determine that the absence of drilling regulations pursuant to the Geothermal Resources Act invoked the force majeure clause in the leases so that she was entitled to credit on future rentals for rentals previously paid. The Board denied Gillespie's request.
Insofar as pertinent here, the force majeure clause of each lease provides:
"If Lessee is rendered unable wholly or in part by force majeure to carry out the obligations of Lessee under this lease, . . . the obligations of Lessee so far as they are affected by the force majeure shall be suspended during the continuance of the force majeure . . . . The term 'force majeure' as used herein shall mean . . . action by the federal or state government regulating or interfering in any way with Lessee's rights and obligations under this lease . . . ." (emphasis supplied)
The Board contends that the trial court erred in its interpretation of the leases. In its view, the lessees' obligation to pay rent was not "affected" by force majeure — the lessees obviously had the ability to pay rental in this case because they did so. The Board also asserts that the force majeure clause must be strictly construed with the result that, absent a specific provision suspending rental payments, it was improper for the court to so decree. The Board points out that the lessees can eliminate any obligation to pay rent by surrendering the lease. Finally, because one provision of the leases obligates the lessees to comply with all laws, rules, and regulations of the state pertaining to the development and production of geothermal resources, the Board contends that lessees assumed the risk of governmental inaction and that, therefore, such delays cannot be considered as a force majeure. We find no merit in these contentions.
[1] The leases specifically define force majeure as any action by the state which interferes with lessees' rights. Stated otherwise, if the state interferes with a right of the lessee, the lessee's obligations are suspended if the obligations are "affected" by that interference. To "affect" the obligation, the interference must only "act upon, influence, enlarge or abridge" the obligation adversely. See, Black's Law Dictionary 79 (rev'd 4th ed.). The affect here is obvious in that the lessee is deprived of an opportunity to generate income by development of the leasehold for payment of the rentals. Hence, the lease requires suspension of the obligation to pay rent during the term of the force majeure.
In the alternative, the Board contends that the judgment must be reduced because Gillespie made most of the rental payments, Gillespie's claims were dismissed prior to final judgment, and Gillespie did not appeal. We find no merit in this contention.
The complaint alleged that Gillespie assigned "all rights" under the leases to Underwood, and the court so found. There is no information in the record before us to indicate that this finding is incorrect, and thus the trial court properly concluded that the real party in interest was Underwood and that, therefore, the refund was due and payable to him.
Judgment affirmed.
JUDGE PIERCE and JUDGE VAN CISE concur.