Campbell v. Rock Oil Co.

BAKER, Circuit Judge, after stating the facts, delivered the opinion of the court. Appellant’s assertion that prior to her execution of this oil lease in 1897 the Indiana decisions had settled upon a construction of such contracts whereby the lessor at the end of the original or any renewal period could terminate the lessee’s interest without notice is not warranted by the cases. Diamond Plate Glass Co. v. Curless, 22 Ind. App. 346, 52 N. E. 782, and Same v. Echelbarger, 24 Ind. App. 124, 55 N. E. 233, were decided by the Appellate Court in 1899 and 1900, and were expressly disapproved by the Supreme Court in Hancock v. Diamond Plate Glass Co., 162 Ind. 146, 70 N. E. 149, decided in 1904. Knight v. Coal Co., 47 Ind. 105, 17 Am. Rep. 692, decided in 1873, was a case of an estate at will in realty, and its inapplicability to a contract right to explore for oil and gas, substances which, owing to their fugitive nature, are not subject to ownership until reduced to possession, was pointed out in New American Oil Co. v. Troyer (Ind. Sup.) 77 N. E. 739, decided in 1906. Under the Indiana law appellant had the right to terminate appellees’ privilege of exploration by giving them notice for a reasonable time prior to May 20, 1904, that no further extension would be granted. And appellees could have held over only by finding gas or oil in paying quantities within such reasonable period. Consumers’ Gas Trust Co. v. Littler, 162 Ind. 320, 70 N. E. 363; Same v. Worth, 163 Ind. 141, 71 N. E. 489; Same v. Ink, 163 Ind. 174, 71 N. E. 477; Same v. Crystal Co., 163 Ind. 190, 70 N. E. 366; Dafayette Gas Co. v. Kelsey, 164 Ind. 563, 74 N. E. 7; Manhattan Oil Co. v. Carrell, 164 Ind. 526, 73 N. E. 1084; New American Oil Co. v. Troyer (Ind. Sup.) 76 N. E. 253. But the Circuit Court ruled correctly, we believe, that the rights of .appellees were not terminated by the notice of March 26th, for two reasons. . [194] ‘ 1. -Appellant hád the burden of proving that, from' March 26th to May 20th was a reasonable time within which to ascertain whether oil or gas in paying quantities could be found. The evidence has not been brought before us. That the time was reasonable the master has not found as a fact; nor is it the inevitable inference from the evidentiary facts in the report. True, the report states that a well could be drilled, shot, and equipped for pumping in from 15 to 25 days. But the likelihood of encountering large volumes of salt water is not negatived, nor the fact that the water might be pumped off and a paying well produced. And the reasonable time, for such operations is not disclosed affirmatively. If it were necessary to draw an inference, the facts in relation to appellees’ operations, namely, that they worked diligently and skillfully from April 16th until after Juné 10th without being able to ascertain whether oil or gas could be found in paying quantities, might warrant a finding that a period of 55 days was not reasonable. 2. The notice itself is confused and ambiguous. The lease “will not be extended beyond May 20th; or delay in operations on said premises be delayed 'beyond such period; nor will a money consideration be accepted for further extension or delay in operations.” Did appellant mean that for a period' beyond May 20th money would be refused, but that diligent operations for the discovery of oil or gas would be accepted until the question of the profitableness of the enterprise could be determined? It is immaterial whether such in fact was her meaning. Immaterial also whether that interpretation was a fair one to put upon the notice. For appellant knew from appellees’ actions that such was their construction of the notice, and she approved of that construction while they expended $3,704 after May 20th, of which $2,203 would be a loss unless they had the right to continue their operations to success. The decree is affirmed.