Eclipse Oil Co. v. South Penn Oil Co.

Dent, President: This is a controversy between the Eclipse Oil Company, appellant, and the South Penn Oil Company and others, from the circuit court of Wetzel County, over a lease in the following’ words, to wit: “Agreement made and entered into this 11th day of May, A. D. 1897, by and between Henry Garner, of the county of Wetzel and state of West Virginia, of the first part, and H. J. and J. C. Stolze, parties of the second part, witnesseth, that the said party of the first part, for and in consideration of the covenants and agreements hereinafter mentioned, does covenant and agree to lease, and by these presents has leased and granted, the exclusive right unto the parties of the second part, their heirs or asisgns, for the purpose of operating and drilling for petroleum and gas, to lay pipe lines, erect necessary buildings, re-lease, and subdivide, all of that certain tract of land situate in Proctor district, Wetzel County, and state of West Virginia, and bounded and described as follows, to wit: Bounded on the north by lands of C. Parsons’ heirs, on the east by the lands of Burton, on the south by the lands of Isaac and William Smith, on the west by lands of James Newman; containing 102 acres, be the same more or less. The parties of the second part, their heirs or assigns, to have and to hold the said premises foi and during the term of 3 years from the date thereof, and so long thereafter as oil or gas can be produced in paying quantities. The parties of the second part, heirs or assigns, agree to give to the first party part of all petroleum obtained from the said premises, as produced in a crude state; the said part of the petroleum to be set apart, in the pipe line running said petroleum, to the credit and for the benefit of the said party of the first part. The said party of the first part is to fully use and enjoy the said premises for the purpose of tillage, except such part as shall be necessary for said mining purposes, and the right of way over and across the said premises to the place or places of mining or operating. The said parties of the second part are further to have the privilege of using sufficient gas and water from the premises herein leased to run the necessary engines, with the right to secure any machinery, fixtures and buildings placed on said premises by the said parties of the second part or those 86 acting under them, and are not to put down any well for oil on the lands hereby leased, within SO rods of the buildings now on said premises, without the consent of the said party of the first part. Damages done to growing crops shall be paid by second party. It is agreed that, if gas is found in paying quantities, the consideration in full to the party of the first part for gas shall be $200.00 (two hundred dollars) per annum for the gas from each well, when utilized off the premises; gas free of charge for household uses to first party. The parties of the second part agree to drill one test well on the above described premises within six months from the execution of this lease, or, in lieu thereof, thereafter pay to the said party of the first part one dollar per acre per annum until such well is completed; and if said test well is not completed within six months from the above date, or rentals paid thereon, this lease is null and void, and not further binding on either party. And it is furher agreed that the second parties, their heirs or assigns, shall have the right at any time to surrender up this lease, and be released from all moneys due and conditions unfulfilled; then and from that time this lease and agreement shall be null and void, and no longer binding on either party, and the payments which have been made held by the party of the first part as the full stipulated damages for nonfulfillment of the foregoing contract; that all conditions between the parties hereto shall extend to their heirs, executors, and assigns. In witness whereof, we, the said parties of the first and second parts, have hereunto set our hands and seals. Henry Garner. [Seal.] H. & J. C. Stolze. LSeal.] Witness: Sam J. Beck.” This lease was assigned to the Eclipse Oil Company. On the 18th day of J'une, 1898, the lessor again leased this property to J. A. Phillips, who assigned to the South Penn Oil Company. The latter company began de-velopements, when the Eclipse Oil Company obtained an injunction, claiming that its lease was still valid, although nothing was done thereunder except the payment by it of the annual rental provided for on the 10th day by November, 1898, and alleged acceptance thereof by the lessor. The injunction was dissolved on motion, and plaintiff appeals. The effect of the last clause of the controverted lease ap87 years to have been overlooked by counsel. It is in these words: “And it is further agreed that the second parties, their heirs or assigns, shall have the right at any time to surrender up this lease, and be released from all moneys due and consideration unfulfilled; then and from that time this lease and agreement shall be null and void, and no longer binding on either party,” etc. This clause apparently destroys this lease, or renders it invalid, at least until some consideration has passed from the lessee to the lessor. Lessee’s counsel claim that he was not bound to do anything or pay anything until eighteen months from the date of the lease, and in the meantime he has the right to surrender it, and thereby be released entirely from any obligation whatever. This renders it, to this extent, nu-dum factum, by which the lessor is not bound any more than the lessee; and, until something is done in consummation thereof, either party may terminate it. “If one party may terminate an estate at his will, so may the other. Right to terminate is mutual.” Cowan v. Iron Co., 83 Va. 547, 3 S E. 120; Petroleum Co. v. Coal, Coke & Mfg. Co., 89 Tenn. 381; 18 S. W. 65; Knights. Iron Co., 47 Ind. 105; Pidgeon v. Richards, 4 Ind. 374; 2 Bl. Comm. 135. The lessee was out nothing, at no expense, and running no risk, and yet he makes the conditions of his contract such that the lessor cannot tell for eighteen months whether the contract is to be binding on the lessee or not. In the meantime, he receives nothing for his delay. As Judge Brannon says in the case of Roberts v. Bettman, (W. Va.) 30 S. E. 95, “The covenant to pay is brought to birth by the lease, only to die at the hands of its mother,” — a case of fetal strangulation which kills the mother. The lessor had the right to terminate this nudum factiim at any time, which he effectually did by making a new lease, and giving possession of the premises to another. 12 Am. & Eng. Enc. Law, 757; Kelly v. Waite, 12 Metc. (Mass.) 300; 2 Bl. Comm. 146; Guffy v. Hukill, 34 W. Va. 49, (11 S. E. 754), 8 L. R. A. 759. Nor can declarations or conduct on his part affect the rights of his new lessee. The lessor’s conduct in receiving the rent and recognizing the prior leases after he had parted with the estate would be of very little weight, if admissible as evidence, for he “was an old, fee 88 ble man, easily influenced.” It must be presumed that the lessor, in executing the last lease, intended to do and did what he had the legal right to do. The lessees, having the mere right of entry, were not bound to do so, and could escape the payment of any consideration at any time, at their will, by surrender of the lease. They could hold on for years, or until their lessor pressed for his rent, and then surrender his own lease in satisfaction thereof. This is not like the lease in the case of Roberts v. Bettman, cited above, and in which the majority of this court held that the lessor was entitled to demand rent until the lease was surrendered. That lease provided that at any time the lessee might surrender the lease, and “thereafter be discharged,” while this lease provides that the lessee “shall have the right at any time to surrender up his lease, and be released from all moneys due and conditions unfulfilled.” It is a complete release, as referred to in Judge English’s dissenting opinion in the case last cited. Nor was the right of the lessor to terminate the lease raised in that case. But both parties having allowed the lease to remain in being for a certain length of time, without any effort on the part of either party to terminate it, the court held that the lessee, having retained the lease and enjoyed its benefits,0 could not take advantage of his own wrong to escape the payment of the accrued rents. It was admitted that he could surrender at any time, and thereafter be discharged, while under the present lease the lessees could surrender, and were released. There was nothing to bind them to pay rent or explore. These matters were as completely at their will as though they had signed no lease. The lessor, by execution of the junior lease, passed all his right to his lessee; and, if there was anything necessar}^ to be done to terminate the senior lease, the lessee had the right to do it. It might be possible to show in some way that the junior lease was not intended to take away the right of entry of the senior lessees. There would have to be proper allegations to this end in the bill. It contains none, and the presumption is that there are none. The plaintiff rests its case entirely on the validity of its leases. The defendant’s lease renders them invalid. The plaintiff was at no expense or loss before it had full notice of the termination 89 of its leases. Such termination was neither inequitable or unconscionable, but rid the lessor of a dubious, speculative contract, liable to be defeated at any moment, to his loss and injury, by his lessees. The plaintiff afterwards paid the rent at its own risk, and, with wide-open eyes, assumed the consequences, thereof. This determination renders it unnecessary, to construe the thereafter clause so eloquently and earnestly dwelt upon by the learned counsel on both sides of this litigation, and the questions raised will be left open for future consideration in a proper case. There is another ground for which this lease should not be enforced by a court of equity, and that is its unfairness. The lessor executed this lease with the expectation of a prompt development of his land. The lessees deceived him by the covenant to sink a well in six months, and then, under the pretense of fixing a penalty, in the shape of rental, for failure to complete the well in the time prescribed, skillfully turned it into a speculative lease, for rental merely, which, according to their claim, they had eighteen months, and so much longer, as they could postpone the same, to decide to pay or not. This evidences a plain intention on their part not to explore for oil or gas, and the covenants in relation thereto were simply a blind to deceive the confiding lessor. It is decidedly a one-sided lease, and, if the lessor had remained quiet, they could have held it’ for an indefinite period without either exploring for gas or oil or paying any rent. That only those contracts which are fair, just, and reasonable will be specifically enforced is an unquestionable doctrine of equity, and any trace of unfairness will render specific performance impossible. 22 Am. & Eng. Enc. Law, 1022; Vogel v. Pekoc, 157 Ill. 339, 42 N. E. 386, 30 L. R. A. 491; Weaver v, Weaver, 109 Ill. 225; Chit. Cont. 155.; Bish. Cont. 32; 1 Whart. Cont. 5; Marble Co. v. Ripley, 10 Wall. 339, 19 L. Ed. 955; Alworth v. Seymour, 42 Minnh. 526, 44 N. W. 1030. The decree complained of is affirmed.