McKean Natural Gas Co. v. Wolcott

Opinion by Mr. Justice Walling, This is a bill in equity to restrain defendants as lessors from repossessing themselves of premises embraced in an oil and gas lease, for an alleged forfeiture of the lease. Defendants were in 1901 and still are the owners of one hundred and twenty acres of land in McKean [325] County; and that year executed a lease thereof to one James H. Waring for oil and gas purposes, which was afterwards assigned to and is now held by plaintiff. The term of said lease was ten years from the date, thereof, “and so long thereafter as oil or gas can be produced in paying quantities or rentals paid in advance as hereinafter stated.” In case gas was found in paying quantities the rental was to be fifty dollars per annum for each gas well on the premises, payable in advance. Said lease also contains a clause as follows, viz: “The party of the second part agrees to complete six wells within one day on said farms......or in lieu thereafter pay to the party of the first part three hundred ($300) dollars per annum payable by deposit in the First National Bank of Olean, N. Y., or directly to the party of the first part in advance on the 28th day of January of each year until six wells are completed upon this lease or well rentals amount to three hundred ($300) dollars are paid yearly on the 28th day of January in advance......And if second party fails to pay to first party three hundred ($300) dollars annually on January 28th of each year then this lease becomes absolutely null and void.” The manifest intent was that defendants should receive at least three hundred dollars per year as rental even though no wells were drilled. Plaintiff took and maintained such possession of the premises as was necessary for the purpose of the lease, and drilled its first gas well thereon in the fall of 1911 and four more within the next two years, which wells produce natural gas in large and paying quantities and are connected with plaintiff’s general pipe line system. In the drilling and equipping thereof plaintiff incurred large expense, and its business would be greatly injured by the forfeiture of said lease. Down to and including the year 1913 said rent was paid annually on or before January 28th, of each year [326] in advance, as provided in the lease. Plaintiff’s office was at Olean, N. Y., about twenty miles from this property, and the said rent had been paid by checks sent to defendants therefrom by mail. However the checks so sent for the rent due January 28, 1914, did not reach defendants until the evening of the following day. On January 80, 1914, defendant, C. A. Wolcott, called plaintiff’s president by telephone and arranged a meeting for the following day, when Mr. Wolcott went to plaintiff’s office at Olean, returned said checks and declared the lease forfeited for nonpayment of said rent when due. On the same day or shortly thereafter defendants proceeded to turn the gas from plaintiff’s lines and otherwise repossess themselves of said premises, declaring said lease terminated. To prevent which the court granted a preliminary injunction against the defendants, and after final hearing the same was made permanent. Defendant made no demand for the payment of said rent. An oil and gas lease is not a mere license but creates in the lessee a corporeal interest in the land: Barnsdall v. Bradford Gas Co., 225 Pa. 338. ■ While it is not in all respects similar to an ordinary lease for agricultural or other like purpose we see no vital difference so far as relates to the forfeiture thereof for nonpayment of money rent. The provision in such lease rendering it null and void for failure to pay the rent as stipulated is for the protection of the lessor, and to terminate the lease by reason thereof requires affirmative action on his part. Notwithstanding the failure to pay the rent the tenancy continues until he declares the forfeitures: Wills v. Manufacturers Natural Gas Co., 130 Pa. 222; Ray v. Western Penna. Natural Gas Co., 138 Pa. 576; Jones v. West Penna. Natural Gas Co., 146 Pa. 204. If before the lessor takes action in the matter the rent so in arrear be paid or tendered it heals the breach and saves the tenancy: 18 Am. & Eng. Ency. of Law (2d Ed.), 389. [327] We adopt the following from the opinion of the learned chancellor in the court below: “It may be stated as a rule of law, that, when a tenant defaults in the payment of rent under a lease giving a right to a landlord to declare it forfeited for this reason, if, before a forfeiture is declared by the landlord, the money or rent due is paid or tendered by the tenant, the right to take advantage of the default as a forfeiture has passed. See Moran, et ux., v. Lavell, 25 Amer. & Eng. Ann. Cases 1007; s. c. 79 Atl. Repr. 818. “In this case the Supreme Court of Rhode Island has discussed the application of this principle fully. Numerous other cases recognizing the same principle of law will be found in the note following the opinion of the court. ‘Many principles of the law pertaining to landlord and tenant have been adapted to the rights arising between lessor and lessee of oil and gas leases, and we think that every reason is present for application of the rule under consideration to this case that exists in cases arising between landlords and tenant.’ If this application of the law is correct, it follows that there was no forfeiture of the lease by nonpayment of rent on the 28th day of January, 1914, and that defendant’s intex’ference with the gas property of the plaintiff was unlawful, and its consequences so seriously interfered with the rights of the plaintiff that a court of equity should intervene to protect it in its rights.” It is suggested that the defendants only had one day before such tender in which to declare the forfeiture, .which indicates that the breach was an oversight and not intentional. The chancellor also finds upon sufficient evidence that , to enforce the forfeiture in this case would be unconscionable, and if so equity, has jurisdiction to prevent it: Thompson v. Christie, 138 Pa. 230; Lynch v. Versailles Fuel Gas Company, 165 Pa. 518; Homet v. Singer, 35 Pa. Superior Ct. 491. Of course a forfeiture will often be enforced, but we [328] cannot say that the court below erred in declining to permit it in this case. The assignments of error are overruled and the decree is affirmed at the cost of the appellants.