Roberts v. Bettman

Brannon, President: Roberts made two leases of two tracts of land to Boyle for oil and gas purposes, by which Boyle agreed to pay a certain share of oil for oil wells, and a certain money rent for gas wells, should producing wells be bored. The leases contained the clauses: “It is agreed that the party of the second part shall pay to the party of the first part $100 per month in advance until a well is completed from the date of this lease, and a failure to complete such well, or to pay said rental when due, or within ten days thereafter, shall render this lease null and void, and can only be renewed by mutual consent, and no right of action shall after such failure, accrue to either party on account of the breach of any covenant herein contained. * * * It is further agreed that the second party shall have the right at any time to surrender this lease to the party of the first part, and thereafter be fully discarged.” These leases were assigned by Boyle to M. A. and D. Bettman, partners. No well was bored under said leases. For some time the rental was paid, and then there was a failure to pay the rent for about nine months. For several — 145 — months after the first failure to pay the monthly rental the Bettmans made no surrender of the lease, but finally did so. Roberts afterwards brought an action of covenant upon the leases for the purpose of recovering the unpaid monthly rentals. He recovered a verdict for the monthly rental of the whole period claimed by him. The court, upon a motion for a new trial, received a remittitur for that part of the verdict covering the monthly rentals after the surrender of the lease by the Bettmans, and gave judgment for the balance of the verdict, — that part of it which included rentals from the time when the Bettmans ceased to pay them up until the surrender. The Bettmans bring the case here by writ of error. The question before us is, I think, one of great importance in this State. I surmise that there are many leases in this State containing- similar clauses to those above given, and it is important that we give a fixed construction to them. The Bettmans advance the proposition that they could retain these leases without any formal surrender of their estate therein, and not bore for oil or gas, and not pay rentals, and that they could not be made to pay rentals because of the provisions in the leases themselves; in other words, that the very failure to pay would alone, under the leases, absolve them from liability for such monthly rental. If so, these leases are wholly one-sided. Where does the safety of the land-owner come in under such a construction? What does he get for making a lease for the very purpose of heiving his land developed, or, in default of development, to receive his rental? -He gets nothing under this construction. The lessee pockets his lease, and awaits the chances of wealth from speculation, spending nothing. The landowner gets naught, but perhaps he has lost his all from having his land thus tied up. Shall we make such leases a delusion and a snare? Did the landowner ever dream that he was entering into a contract of the import which the Bettmans would assign to this contract? Indeed, did the lessees ever so regard it themselves? If it is capable of such a construction against the unwary, inexperienced landowner, it is a delusion and a fraud, which no court ought to enforce. But we can give a construction to such leases which will vindicate and — 146 — protect the rights of both sides to them. We can make the leases themselves speak a language and intention which shall subserve the purposes of right and justice. Let us look at the leases. They affirmatively stipulate for monthly payment to the lessee of a fixed rental until the completion of a well. Until the well is completed, that rental is the compensation given the landowner for having granted a monopoly as to oil and gas until a well comes in, and then it stipulates for the payment of a share of the oil or a fixed sum per gas well. The purpose here is plain. If we say that the failure to pay that rental monthly ifso facto releases the lessee from its payment, what is the use of the provision for payment? Why provide for payment, if failure to pay alone nullifies the provision for payment? The covenant to pay is brought to birth by the lease only to die at the hands of its mother. This construction renders the instrument self-contradictory. The lease cannot mean this nonsense. We must attribute some other meaning- to it. If such be the meaning, where is the need of the clause giving the lessee right to surrender the lease at any time and discharge himself? If the other clause was intended to release him from the obligation to pay, this second clause, plainly made for the benefit of the lessee, would be useless. The clause stipulating for payment of rent is the only benefit which the lessor gets until development shall give him what moved him chiefly to make the lease, his share of oil, and he protected himself against the insolvency of the lessee, or his failure to pay, by the clause forfeiting the lease for failure to complete a well or to pay rental. That clause of forfeiture was designed for his benefit, and not for the lessee’s benefit. It was the lessor’s only safety. The clause giving the lessee a right at any time to surrender the lease and discharge himself from further liability is his ample shield. This construction gives all the clauses their fair operation. This construction is sustained by repeated decisions upon similar leases in the state of Pennsylvania. Those decisions are in a state where such questions have received more mature consideration, from the wide-spread prevalence of such leases, than in perhaps any other state, and they are entitled to great regard in other states; and I feel justified, — 147 — as we have large interests of the kind in this State., in making a somewhat prolonged reference to them. In Galey v. Kellerman, 123 Pa. St., 491, (16 Atl. 474), the lease said that a failure to complete a well or make the payment in lieu of it “renders this lease null and void and to remain without effect between the parties hereto.” The lessees neither developed the territory npr paid rental in lieu thereof, and claimed that, as the lease provided that such failure should “render this lease null and void,” it must be treated as void, not from and after the default, but ab initio, so that a cause of action accruing before or by reason of the default was extinguished by the lease itself. The court said: “This construction overlooks the character of the agreement and the relation of its covenants. The lessees secured by it the exclusive right to operate for oil and gas. On their part, and as consideration for the grant, they agreed to begin operations within sixty days, and within three months complete the first well. If they failed to do as they agreed, they promised to pay for delay $1,000 per annum. If they neither developed the land nor paid for their delay, they were, by such disregard of their contract, to forfeit all rights under it, and the lease was to be rendered thereby null and void. But the forfeiture did not happen until default. * * * The acts that forfeited their rights did not forfeit those of the lessor.” The court held that the lessor could recover the stipulated rental for the time the lessees held the exclusive rights to operate. The court said that the construction contended for by.the lessee transferred the punishment for the breach of the contract from him on whose default it arose to the injured party, and said: “We should need the constraint of insurmountable necessity to induce us to adopt the construction contended for.” In Wills v. Gas Co., 130 Pa. St., 222, (18 Atl. 721), the lease provided that, on failure to drill a well within a specified time, the lessee should pay one thousand dollars annually in advance thereafter, and that failure by the lessee to perform any of his covenants should work an absolute forfeiture, and the lease shall thereupon become null and void; and it was held that said clause was intended for the — 148 — benefit of the lessor, and he had the option either to declare the forfeiture or affirm the coiitinuance of the contract, and, if he did not choose to avail himself of the forfeiture, it could not be set up by the lessee as a defense to an action for .the rent under the lease. In Leatherman v. Olliver, 151 Pa. St., 646, (25 Atl. 309), the lease provided that the lessee should complete a well within six months, “or, in default thereof, pay to the party of the first part for further delay an annual rental of $500, payable quarterly in advance;” and that “a failure to complete said well or pay said rental for ten days after the time above specified for so doing- shall render this agreement null and void, and it can only be renewed by mutual consent, and no right of action shall, after such failure, accrue to either party on account of the breach of any promise or.agreement herein contained;” and it was held that on failure to drill the well the lessor was entitled to the stipulated rental, and that the latter clause did not deprive him of his right of action, as by the latter clause the parties meant that the lessor could not re-enter and treat the rights of the lessee as forfeited or abandonded on the day the default happened, but that he must give the lessee ten days of grace to make payment before he could take advantage of the default to terminate the lease, and that the lessee could not compel the lessor to re-enter so as to terminate the lease for the lessee’s benefit, and that the lessee was entitled to recover his rental. In Phillips v. Vandergrift, 146 Pa. St., 357, (23 Atl. 347), the lease provided that a well should be completed within a fixed time, or, in default, the lessee should pay a yearly rental, and that failure to complete such well or pay said rental -‘shall render this lease null and void, and not to be revived without the consent of both parties;” and it was held that such covenant was for the benefit of the lessor, and that the lessee by his own act of default could not relieve himself from a liability already incurred. In McMillan v. Philadelphia Co., 159 Pa. St., 142, (28 Atl. 220), the lease said that a “failure to complete such well, or comply with any of the foregoing conditions, or to make any of such payments within such time and at such place as above mentioned, renders this lease absolutely — 149 — null and void, and no longer binding on either party, and will revest the estate herein granted in the lessor, and release the lessee from all his covenants herein contained, he having the option to drill said well or not, or pay said rent or not, as he may elect.” Yet the court held that “this clause is for the benefit of the lessor, and he may assert the forfeiture or forbear to do so.” The opinion says: “He [lessee] may drill the well, and so pay no rental, or he may pay the rental, and not be compelled to drill the well. It is not for the lessor, but it is for the lessee, to elect which he will do. This option was deducible from the stipulations of the lease, but the parties chose to put it in words and milite it part of the contract. The contention of the defendant destroys the character of the whole contract. It makes the lessee say that he will drill a well within a given time, or, failing to do so, that he will pay a monthly rental, but that he will do neither unless it pleases him, and, if he does neither, he shall be liable in no manner for his breach of contract. Such a construction is so unjust and absurd that the words relied upon -as requiring it must be plain and unambiguous, and must be incapable of an exposition in harmony with the body of the contract, before we can consent to adopt it.” The same doctrine will be found in Cochran v. Pew, 159 Pa. St., 184, (28 Atl. 219). In Conger v. Transportation Co., 165 Pa. St., 561, (30 Atl. 1138), the lease contained the clause: “A failure on the part of the second party to make any of .the payments within 10 days after the time hereinbefore stated, and in manner provided for, renders this lease null and void, and to remain without effect between the parties, and it can be renewed only by mutual consent, and no right of any action shall, after such failure, accrue to either party by reason of the breach of any promise or agreement herein contained.” And it was held that, upon failure to drill the well within twelve months, the lessor was entitled to the stipulated rental for each year of delay. Thus, I say that the true construction of this lease on its face is not that which the plaintiff in error asks us to give it. Judge Dicnt suggests, also, that we may presume that the parties by tacit, mutual consent continued the lease, — 150 — and this would entitle the plaintiff to recover his monthly rental until such tacit prolongation of the leases ended by the lessee’s express surrender of them. I think this suggestion is fair and strong. It only adds strength to the conclusion which we reach, that the plaintiff was entitled to recover his rentals until the surrender of the leases. It is assigned as error that the court allowed the plaintiff to release a part of the verdict. I do not see how, if there be no other error against the party complaining, — if the facts make him liable to the amount for which judgment was rendered, — it lies in his mouth to complain of a release. Without further discussion, I refer to Ohio River Co. v. Blake, 38 W. Va., 718, 725, (18 S. E. 957). We therefore affirm’ the judgment.