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The Ethics of Top Leasing

Hugh C. Garner, Implied Covenants (1986)

Generally, the courts have held top leases to be valid. The Oklahoma Supreme Court, in a 1923 case, admitted that it could find no authority to support the defendants contention that the plaintiff's top lease was void and said:

The lessors were the owners of the fee-simple title to the property, and the same was not restricted in any manner whatever. Such being the condition of the title, there was no reason why the owners of the fee could not carve out as many estates as they saw fit. There was no reason why the [lessors] could not execute a second oil and gas lease during the existence of the first lease. Of course, the holders of the second lease would take same subject to the rights of the holders of the first lease...we are therefore of the opinion that the lease to the plaintiff was valid and the judgment should have been rendered for the plaintiff.8

So, in spite of the readings between-the-lines, the innuendo and invective, what we have is a business practice which, at its inception, might have been characterized as being “sharp”, but in the shakedown does not appear to be legally or morally wrong.

Perhaps we should not be looking at this within the broad meaning of ethics, but rather, in the more limited sense of legal ethics, i.e. that branch of moral science which treats of the duties which a member of our profession owes to the public, to