Boyer v. Tucker & Baumgardner Corp.

D. E. Holbrook, Jr., P.J. Plaintiffs appeal as of right from an order that granted defendants’ motion for summary judgment and denied their motion to amend their complaint. Plaintiffs are landowners who entered into lease agreements with defendants for the oil and gas rights of their land. The consideration for execution of these leases were 30-day sight drafts; one draft was given for each land parcel. These drafts were due on December 7, 1980, and were not paid. Around January 7, 1981, defendants issued money orders to plaintiffs to pay the sight drafts and shortly thereafter recorded the leases. Plaintiffs, who had sent a notice to defendants on December 19, 1980, informing them that the drafts had been dishonored and that they considered the leases cancelled, refused to accept the tendered money orders. Plaintiffs, on February 27, 1981, executed similar leases with a third party. Plaintiffs then filed a circuit court action to have the recorded leases removed as they alleged that they constituted a cloud on their title. On appeal, plaintiffs contend that the trial court erred in granting defendants’ motion for summary judgment, that the leases were void ab initio upon dishonor of the sight drafts and that plaintiffs are entitled to rescission under these facts. In the instant case we are dealing with oil and gas leases which are considered to be speculative in nature. Where there is any ambiguity in the leases, the terms of the leases are to be strictly construed in favor of the lessor. McClanahan Oil Co v Perkins, 303 Mich 448; 6 NW2d 742 (1942). The trial court granted the lessees the right to [365] cure based on its interpretation of the leases as a whole. We find this to be in error. An oil and gas lease should be read not only according to its words, but in connection with the purpose of its clauses. Howard v Hughes, 294 Mich 533, 538; 293 NW 740 (1940), and Michigan Wisconsin Pipeline Co v Michigan National Bank, 118 Mich App 74, 81; 324 NW2d 541 (1982). The lessors contend that the right to cure is only to protect the lessees from having to suffer inequitable losses after the lessees have made an investment in the land under the rights conveyed in the leases. The lessees claim that they have the right to cure at any time. We agree with the lessors and find that the trial court erred when it construed the leases in favor of the lessees. As the signing of the leases gave defendants the exclusive and immediate right to explore for and remove the oil and gas, Michigan Consolidated Gas Co v Muzeck, 4 Mich App 502, 507; 145 NW2d 266 (1966), it is reasonable to believe that plaintiffs relied on the sight drafts1 to represent cash in hand. The leases are considered to be technical contracts reflecting the development and present status of the law of oil and gas. Michigan Wisconsin Pipeline Co, supra, p 81. Plaintiffs’ interpretation that payment of the sight drafts was a condition precedent is fair. Since this area is so highly speculative, plaintiffs deserve more consideration and protection than merely the right to sue on an obligation. Were we to allow lessees’ version of the leases to control, defendants would be able to speculate [366] with the assets of another without the payment of any consideration. Plaintiffs did not bargain for a promise to pay later, rather, they bargained for immediate payment, which was not received. Therefore, we reverse the order for summary judgment and hold the leases to be null and void. Summary judgment is also improper here, as there was a genuine issue of material fact. Plaintiffs contend that defendants perpetrated a misrepresentation upon them and that, due to that misrepresentation, rescission should be granted, or in the alternative, damages should be awarded. It is possible that defendants were aware that their drafts were going to be dishonored and that all the elements of misrepresentation were present. United States Fidelity & Guaranty Co v Black, 412 Mich 99; 313 NW2d 77 (1981). Accordingly, this is not a situation where there could be no factual development to justify plaintiffs’ right to recovery. Plaintiffs should have an opportunity to develop their claims. Cramer v Metropolitan Savings Ass’n (Amended Opinion), 136 Mich App 387; 357 NW2d 51 (1984), and Ferrell v Vic Tanny International, Inc, 137 Mich App 238; 357 NW2d 669 (1984). We are reluctant to grant summary judgment in a case such as this which involves a state of mind. Goldsmith v Moskowitz, 74 Mich App 506, 518; 254 NW2d 561 (1977). Our judgment is for plaintiffs and we remand for determinations as to the misrepresentation claim and damages. Reversed and remanded with instructions. Costs to appellants. R. R. Lamb, J., concurred. Footnotes [1] Sight drafts, which are considered negotiable instruments, MCL 440.3104; MSA 19.3104, are to be treated no differently than any other form of consideration. Without sufficient funds in the bank, all plaintiffs received was a right to sue. 11 Am Jur 2d, Bills and Notes, § 237, p 264. While this may be sufficient in some instances, we do not find this to be sufficient consideration in the instant case.