Eastern Oil Co. v. Coulehan

65 W. Va. 531 | W. Va. | 1909

Mlller, President:

August 3, 1901, defendant and wife executed and delivered to West Union Gas Co., a lease, which on the same day it assigned to plaintiff, and whereby in consideration of two hundred and fifty dollars,, and other valuable considerations, the said lessors granted and demised unto said lessee all the oil and gas in and under a tract of one hundred and eighteen acres in Doddridge county and also said tract of land for the purpose and exclusive right of operating thereon for oil and gas, together with other rights usually appertaining to such leases, and containing this habendum: “To have and to hold the same unto the lessee for the term of five years from this date, and as much longer as oil ór gas is produced, or the rental paid thereon.” The lease also stipulates that the lessor shall be paid a royalty of one eighth part of all the oil produced and saved; and thereafter at the rate of two hundred dollars yearly for each gas well as long as gas therefrom is sold, payable within sixty days after commencing to use gas therefrom, the lessor to have gas for his dwelling from any gas well free by making connections; and, in case no well shall be completed within three months from.the date thereof the same to become absolutely void and of no further effect whatever on either party, unless the lessee shall pay for further continuances of the privileges therein mentioned the sum of fifty dollars quarterly, payable in advance until a well shall be completed; and that the lessee may at any time re-convey the premises “thereby granted” and ^hereupon be forever discharged from all liability to the lessors under any and every provision thereof accruing after such, re-conveyance and the instrument be no longer binding on either party. In Ohio a lease of this character, for a consideration, with granting clause, a habendum, a condition subsequent or defeasance clause, and a surrendering clause, is held to be a lease and not merely a license. Brown v. Fowler, 65 Ohio St. 507, 521, citing Woodland Oil Co. v. Crawford, 55 Ohio St. 161, and Martin v. Jones, 62 Ohio St. 519, 525. In this State and in Pennsylvania, such leases are generally treated as mere licenses vesting no estate, the title thereto, both as to the period of years and the term thereafter remaining inchoate and contingent on the finding of óil and gas. Crawford v. Ritchey, 43 W. Va. 252; Steelsmith v. Gartlan, 45 W. Va. 27; Headley v. Hoopengarner, 60 W. Va. 626.

The plaintiff, having paid the cash consideration entered, and regularly paid the quarter annual instalments of rent in advance for the full period of five years, but did not begin the work of drilling for oil or gas until June, 1906, after the last quarter had begun. It owned other leases adjoining and in the same neighborhood, on some of which it had put down wells, the wells drilled, defining defendant's land as gas, but not oil, producing territory. We take judicial notice that gas, unlike oil, can not be brought to the surface and stored to await a market for it, but must remain in nature’s storehouse, and, unless allowed to waste away, taken out only as and when the producer may be able to find customers to take and consume it.

Plaintiff, having 'then invested in bonus money and rentals, twelve hundred dollars, in June, 1906, began a well on defendant’s land, and, about July 20, struck gas in the salt sand at the depth of about 1240 feet, which when gauged, and tested showed a capacity of about 3,000,000 cubic feet per day. After striking this gas, however, he concluded to go deeper, to the lower or Indian sand. The well was begun in ample time 'to have completed it in the lower sand, but shortage of water, due to the drouth, caused a delay of several days. Finding the time growing short, and defendant declining to extend the term except uj>on terms deemed oppressive, orders were given the drillers to work on Sunday. The defendant seeing the drillers at work suggested that they were la3dng themselves liable to arrest and conviction for working on Sunday, and they were frightened away and refused to work. Thirty minutes, about, after midnight of August 2, 1906, defendant with witnesses, appeared at the well, where the drillers were at work on the night tower, and inquiring of and being informed by them that the well was not yet completed in the lower sand, notified them that the lease had expired at midnight, that the rights of lessee had ceased, and that all from that time would be treated as trespassers. The drillers in'the absence of the owners stopped drilling, went home and went to bed, and work was not resumed until noon of August 3rd, a loss of about twelve hours in time. The drilling then begun was continued until shortly before one o’clock of August 4th, when ■gas in immense quantities was struck in the Indian sand, the only interruption being the second appearance of the defendant with witnesses shortly after the previous midnight to again notify the drillers that the lease had then expired and ordering them off the premises. The plaintiff having refused to vacate the premises the defendant on August 4, 1906, instituted against the plaintiff in the circuit court of Doddridge county a suit in unlawful detainer to recover possession of the property.

On December 8, 1906 the plaintiff upon its original bill obtained from said circuit court of Doddridge county an injunction protecting it in the possession and occupancy of said land, and enjoining defendant from in any manner interfering with any of its rights specified in said lease of August 3, 1901, and from in any manner interfering'with it in the use, occupancy and operation of said land for oil and gas purp'oses under said lease, and also, from prosecuting his said action of unlawful detainer until plaintiff’s rights under said lease should be settled and determined in this suit, and until the further order of the coiirt. The further prayer of the bill was on the grounds alleged that the court would decree plaintiff vested with the title to and interest in all tlie oil and gas according to and subject to the terms of said lease, and that the said lease be held firm and valid.

At January rules, 1907, the plaintiff filed an amended bill amplifying the grounds of relief alleged in the original bill, renewing the prayer thereof, and upon hearing upon said original and amended bill and the separate answer of John C. Coulehan thereto and upon the depositions and proofs taken and filed in the cause, the decree of September 7, 1907, appealed from, was pronounced by the circuit court, whereby, the court being of opinion that the evidence did not sustain the material grounds for relief alleged, decreed that said injunction bo wholly dissolved, the plaintiffs original and amended bills dismissed, but though expressing no opinion as to the production .of gas in the salt sand, reserves to plaintiff the right to interpose the same as a defense to said action of unlawful detainer.

The grounds for relief alleged and especially relied upon by plaintiff are; (1) That having for the consideration paid and acknowledged, purchased the lease, promptly paid all the bonus and rental money for the full term of five years and within that period having actually discovered and produced gas in the salt sand, it thereby acquired a vested estate in and the right to produce oil and gas according to the provision of the lease; (2) • That whether or not the first ground be good it could, and but for the alleged improper conduct and interferenee of defendant, it would have discovered and produced gas in the Indian sand before the five years expired.

The defendant relies upon the theories: (1) That even if oil and gas was discovered in the salt sand in July, it was not util-' izecl, but abandoned, evidenced by drilling deeper, pulling the casing, whereby it was drowned out by the water and defendant thereby deprived of the use of the gas therefrom for domestic purposes according to the terms of the lease; (2) That by the provision of the lease the term of five years expired at midnight of August 2, and not as plaintiff claims at midnight of August 3, 1906, and that there was no such interference on his part with the completion of the well in the Indian sand within the five years, as claimed by Mm; as to entitle plaintiff at law or in equity to an extension of time, and that therefore the rights of plaintiff under the lease were wholly terminated at midnight of August 2, if not then certainly at midnight of August 3, and; (3) That equity has no jurisdiction of the subject matter of plaintiffs bill.

By its decree the court below was manifestly of the opinion that the bill presented no grounds of equitable relief, and that whatever rights, if any, plaintiff acquired by its alleged discovery of gas within the five years was available at law as a defense to defendant’s suit of unlawful detainer, wherefore its reservation in the said decree. If plaintiff’s rights depended solely on discovery of gas in the first sand, there would be force in this view of the Court, although jurisdiction in-equity to settle all questions as to the validity and'priority of leases, for oil and gas and other minerals and mineral rights, where the parties claim under the same title, has been established by a long line -of decisions of this Court, beginning perhaps .with Thomas v. Hukill, 34 W. Va. 385, and including Williamson v. Jones, 39 W. Va. 231; Bellman v. Harness, 42 W. Va. 433; Crawford v. Ritchey, 43 W. Va. 252; Steelsmithi v. Gartlan, 45 W. Va. 27; Lowther Oil Co. v. Guffey, 52 W. Va. 88; Lowther Oil Co. v. Miller-Sibley Co., 53 W. Va. 501; Pyle v. Henderson, 55 W. Va. 122; Siam v. Huffman, 62 W. Va. 422, and other cases, and ending with Suit v. Hochstetter Oil Co., 63 W. Va. 317, and Pheasant v. Hanna, 63 W. Va. 613. Jurisdiction in equity was maintained in many of these cases on the well recognized grounds of avoidance of multiplicity of suits, removal of cloud and quieting of title, accounting, avoidance of forfeiture and specific execution of. contracts. And it has been held by this Court in Kilcoyne v. Oil Co., 61 W. Va. 538; Knotts v. McGregor, 47 W. Va. 566, and Headley v. Hoopengarner, 60 W. Va. 626, that the covenant for peaceable and quiet possession implied in every lease for oil and gas is not limited to the right of exploration, but extends also to the right, after finding oil or gas, to produce the same, and that injunction is the proper remedy for enforcement of such covenant or to protect the.exclusive right of the lessee under the contract. Transportation Co. v. Pipe Line Co., 22 W. Va. 621; Tufts v. Copen, 37 W. Va. 623; Brown v. Spitman, 155 U. S. 673. In Pennsylvania we find it has been held that a preliminary injunction will be awarded against a lessor where he has made a re-entry under a claim of forfeiture and the claim is disputed on every ground on which he puts it. Thornton on Oil and Gas, 120, citing, Poterie Gas Co. v. Poterie, 153 Pa. St. 10; Duffield v. Rosenzweig, 144 Pa. St. 520. The doctrine of these ■cases on the subject of equitable jurisdiction has never, we believe, been questioned' in this Court, except that in Freer v. Davis, 52 W. Va. 1, the first point of the syllabus of Bettman v. Harness, supra, so fax as it relates to the jurisdiction to settle the title and boundary of lands as between adverse claimants, when the plaintiff has no equity against the party who claims adversely to him, was overruled.

But as we view this case the rights of the plaintiff are not wholly dependent on the discovery of gas in the salt sand. The fact of such discovery within the meaning of the lease, is controverted. The question whether the gas in that sand was not abandoned and the rights of the plaintiff, if any, lost thereby, •are raised here, and no doubt would be raised in the trial of the action at law, so that if the plaintiff has any other rights of an ■equitable nature to assert against the defendant of which a court of equity can take cognizance, or its defense at law would not be as complete, adequate and certain as in a court of equity it should not be required to relinquish its equitable rights. Hoggs Equity Proe., § 3, and state and federal cases cited. Eaton on Equity 31, and cases cited. As the Court said in Nease v. Insurance Co., 32 W. Va. 283: "A doubtful or partial remedy at law does not exclude the injured party from relief in equity.” And in Robinson v. Braiden, 44 W. Va. 183: “A defendant at law, having a legal defense to the action, and a distinct ground for equitable relief against the plaintiff’s claim may bring his suit in equity without waiting for the determination of the action at law, and may, without being compelled to waive his legal defense by confessing judgment, have a hearing in the court of equity on the merits of his case, and a decree for the proper relief.” These cases were affirmed in Gas Co. v. Window Glass Co., 63 W. Va. 266. Equity retains its jurisdiction to relieve from a forfeiture notwithstanding it may be relieved at law. Hoggs Equity Proe., § 587, p. 678, citing 2 Story Equity Jur. (4th Ed.), § 1301. Indeed this is such a well recognized rule that it requires no citation of authority to sustain it.

One of the questions presented, but particularly applicable to the rights of the plaintiff involved in the discovery of gas in the second sand, but somewhat apropos also to the discovery of gas in the salt sand is, when did the five years term expire ? It is urgently insisted for plaintiff that “five years from August 3, 1901, did not expire until the end of August 3, 1906,” and it is with equal energy insisted for defendant that in construing a lease contract of this character which it is said must be regarded as having become effective on the day of its date, that day must not be excluded but included in reckoning time. We perceive that a rule which might be applicable to a mere deed of grant and conveyance, passing present title, and containing no words of condition, limitation or defeasance would not be applicable to a deed of lease of this character, making the subsequent rights of the lessee depend upon things to be done and covenants to be performed on his part thereunder. The plaintiff in addition to the rule at common law, relies upon section 288, Code 1906, providing that “The time within which an act is to be done shall be computed by excluding the first day and including the last; or, if the last be Sunday, it shall also be excluded; but this provision shall not be deemed to change any rule of law applicable to bills of exchange, or negotiable notes.” It is suggested by counsel for defendants that this statute is only applicable where the act to be done is one required by some provision of the statute law, and has no application to things to be done under a contract. But the title of the chapter under which this section occurs is, “Of the promulgation, proof, commencement and construction of laws; effect of the common law and ancient statutes.” This title seems to imply a broader meaning than that given it by defendant’s counsel. In 28 Am. & Eng. Ency. of Law 211, the common law rule supported by the weight of authority is said to be that the date of the act or the happening of the event is to be excluded and the last day of the period included. The authorities both English and American are there collected in a note. And at page 215, this authority, referring to the distinction drawn in the early cases between the terms “day” and “day of date” holding that where the computation was from the former the day of the date was included, but when from the latter the day of the date was excluded, says: “It is obvious that this distinction is without merit and only calculated to mislead, and it is now recognized that there is no distinction between the two phrases, and the universal rule is that the day of the date is excluded and the last day of the period included; whether the computation be from the date or from the day of the date.” Citing in note the English and American cases on the subject. In Atkins v. Sleeper, 7 Allen 487, it was held that “a lease for a term of years from the 1st day of July begins on the 2nd day of July.” In Pugh v. Leeds, 2 Cowper 714, where under a power to make a lease in possession but not in reversión a lease was granted for twenty one years to commence from the day of the date it was held that from the day, etc., was to he regarded as inclusive and not exclusive of the date. This construction was given to the instrument, however, for the purpose of upholding it under the power. But Lord Mansfield said: “The ground of the opinion and judgment which I now deliver is, that ■‘from’ may in vulgar use, and even in the strict propriety of language, mean either inclusive or exclusive.” And the rule seems to be that the first and last days will be included or excluded in the computation of time as it may be necessary to give effect to an instrument, save a right or prevent a forfeiture, if this can he done without violating a clear intention or a positive provision thereof. Weeks v. Hull, 19 Conn. 376, 378; Sands v. Lyon, 18 Conn. 18; Bigelow v. Willson, 1 Pick. 485; State v. Gasconade County Ct., 33 Mo. 102; 28 Am. & Eng. Ency. of Law 215, and other eases cited in notes. Our conclusion based on our statute and these authorities is, that where a contract of lease of the character of that involved here requires of the lessee affirmative acts to be done within a certain period stipulated from the date thereof, unless there is something in the instrument itself evincing a different intention on the part of the parties thereto, the date of the instrument will he excluded in the computation of time.

But it is claimed that the receipts taken by plaintiff for the quarterly installments of rent show a different construction by the parties, which should prevail. We do not think so. The rule invoked is applicable only when the words of the instrument are ambiguous.

Now as to the two main questions. Eirst, was gas discovered in the salt sand, and if so did the plaintiff thereby become vested with an estate in the right to produce oil and gas, which has not been lost by abandonment or otherwise? It is not controverted that gas in some quantity was struck in this sand; but an effort was made, and some evidence offered, tending to show that it was not of sufficient quantitv for profitable production, and it is claimed the plaintiff by going on down with same well to deeper sand, and by subsequently pulling the casing and allowing the water to' come in and flood out the gas in the first sand must be treated as having abandoned the gas in that sand arid therefore as not having acquired any vested right to produce gas from it or from the lower sand. But the positive evidence of the drillers and others, tested by the gauge, is that gas sufficient for profitable production was obtained in this first sand, and plaintiff denies any intention to abandon it, claiming that in going to the deeper rock its intention was to also test the land for oil and gas in that sand. Our cases seem to clearly hold that discovery of oil or gas is alone sufficient to vest the right, a right it is true which may be lost by abandonment, manifested by neglect to produce, or pursue the work of production and further development. Steelsmith v. Garllan, 45 W. Va. 27; Lowther Oil Co. v. Guffey, 52 W. Va. 88; Lowther Oil Co. v. Miller-Sibley Co., 53 W. Va. 505; Oil Co. v. Gas Co., 51 W. Va. 583, 591. See also Thornton on Oil and Gas, § 53, and § 70, and cases cited. In Oil Co. v. Gas Co. supra, at page 591, it is said: “After the discovery of oil in paying quantities, it is held that title does vest in the lessee, but there is no case which goes so far as to announce that- after mere discovery of oil, the lessee, upon the assumption of a vested interest or title, may cease operation, refuse to develop the property, tie up the oil by his lease, and simply hold it for speculative purposes, or to await his own pleasure as to the time o£ development.” But what of the fact here? After discovery of gas in the first sand the lessee went right on down, with the same hole, it is true, succeeding thereby in finding greater quantities of gas in the lower strata, and rendering the defendant’s land and its lease still more valuable. We •have nq case directly holding, that where oil or gas has not been first produced from the rock in which they are first found, there is no abandonment by going deeper for the product ’in some lower strata, but we have a case where a well had ceased to .produce oil in the first sand, saying: “Ho one can claim that under such lease, if the lessee go on in further exploration his right is lost. He may go on in a reasonable time.” Ammons v. Toothman, 59 W. Va. 165, 169. We would have to say on the weight of the evidence that gas was found by plaintiff in the first sand, in sufficient quantities to vest in it the right to produce oil or gas from said land,, and that there was no intention to abandon that right by going deeper with the same well to the lower rock. Having discovered gas in the first sand, and almost immediately thereafter in larger quantities in the lower sand, what was to preclude plaintiff from returning to the first sand and either from the same well, or from a .new well drilled again tapping that reservoir, discovered by it, and producing gas also from it ? Of course, if gas had not been found in the lower rock, on the principle announced in the ease last cited, production of gas from the first sand, after discovery, could not long be deferred, without incurring the penalty of forfeiture or abandonment.

But suppose we are wrong in our conclusion on the first question, what rights, if any, did the plaintiff acquire by the slightly belated discovery of gas in the Indian sand ? It is conceded the Indian sand was not penetrated and the gas gotten there until about one o’clock of August 4, some twelve hours after the five years had expired. What is the proper construction of the lease as to time? It is for five years from date and as much longer as oil or gas is produced or the rental paid thereon. If oil or gas was produced within the five years given for exploration the full term thereof was as surely for as much longer as oil or gas should be produced, as it was for the term óf five years in which to explore. Failure to produce oil or gas within that time therefore, while not strictly or technically working a forfeiture of any further right to explore or produce oil or gas, it resulted in the same thing to plaintiff, and we perceive no reason why in a proper ease equitable principles applicable in cases of technical forfeiture should not be applied. The same necessity therefor, in order to prevent a gross injustice, may arise in the one case as in the other. It is said, however, that in contracts of this kind time is of the essence 'thereof, and this proposition, for which authorities are cited by counsel, is not controverted; but the case we have in hand is one where the plaintiff was legally entitled to the full term of five years given for exploration, without let or hindrances of the lessor; indeed the lessee by the implied covenants of his deed was entitled to the protection of the lessor therein. The evidence satisfies us that though defendant may not have been guilty of serious breach of the implied covenants of his deed, yet that he was anxious the lessee should fail to get to the Indian sand in time, did nothing to aid him, and actually succeeded by his suggestions in preventing work on Sunday, and caused a loss oí about twelve hours time after midnight of August 2, when he had no right of interference, but owed a positive duty to plaintiff to protect it in its rights. The drillers Kenney and Gaffney give it as their opinion that had they not been thus interrupted the well could have been drilled into the Indian sand and gas produced from it before the time expired. •

Do these facts and circumstances give rise to no equitable rights against defendant? Shall he be permitted to take advantage of his own wrong in this way? And if he had not so interfered and the well could not have been drilled in within the time, are there no principles available to a court of equity upon which the plaintiff can be relieved from the gross injustice which the defendant seeks to inflict upon it? The plaintiff was acting in good faith, had invested large sums of money; the defendant lost nothing, but he got the benefit of the successful search, and wherein has he been wronged? Defendant's counsel cite us to Thornton on Oil and Gas, § 141, for the proposition that “although a well be commenced in time if it be not completed in time the lease will terminate." For this Thornton cites Clem-inger v. Baden, 159 P’a. St. 16, a ease in which though the well was commenced in time, there was no .intention to complete it in time. It was not begun in good faith, and it was very properly held the beginning of the well did not prevent a forfeiture. The other cases cited are of the same character, and are not, we think, in conflict with the conclusion we have reached in this case. A lessor should not be heard to complain of a default caused by himself, or permitted to take advantage of his own wrong. Delmar Oil Co. v. Barllett; 62 W. Va. 700; Chenny v. Libby, 134 U. S. 68; Stahl v. Van Vleck, 53 Ohio St. 136; Hukill v. Guffey, 37. W Va. 426.

We perceive that upon the facts shown, the plaintiff is entitled to relief by injunction upon at least two well recognized grounds of equitable jurisdiction: First, upon the principle applicable in cases calling for relief from a forfeiture; second, upon the ground that where there has been a substantial compliance with the contract and gross injustice would be inflicted upon the plaintiff by denying him relief, relief should be granted. As we have said the case in hand does not strictly speaking, involve forfeiture, but is one, we think, calling for the application of the same principles. The reasons therefor are the same in both cases. “The reason of the law is the life of the law.” “Affirmative relief against penalties and forfeitures,” as was said by this Court in Craig v. Hukill, supra, “was one of the springs or fountains of equity -jurisdiction, and the jurisdiction was very early exercised; and it would be going in the very opposite direction and acting contrary to its very essential principles to affirmatively enforce a forfeiture.” Citing Story, Pom-eroy and Bishop on this subject. Unless the delinquency has been willful the court has diseretionáry power in relation thereto. Railroad Co. v. Triadelphia, 58 W. Va. 516, citing Noyes v. Anderson, 124 N. Y. 175, and other cases. In Pheasant v. Hanna, supra, jurisdiction in equity was.upheld to relieve a mining lessee from a mere technical forfeiture.

blow on the subject of substantial performance of the contract. There can certainly be no question as to the fact that the plaintiff substantially performed its contract. It had discovered gas in one sand and was about to find it in a lower sand in still greater quantities, and we cannot say from the evidence that but for the improper interference by the defendant with its operation it would not have discovered the gas in the lower sand within the term of five years. Where there has been such substantial performance of a contract, equity may set aside or disregard a forfeiture occasioned by a failure to comply with the very letter of an agreement. 1 Pomeroy, section 451, page 756, citing Hager v. Buck, 44 Vt. 285 (8 Am. Rep. 368), and Bliley v. Wheeler, 5 Colo. App. 287. And this Court in Railroad Co. v. Triadelphia, supra, page 517, recognizes the doctrine announced in Henry v. Tupper, 29 Vt. 358, opinion by Chief Justice Redfield, that relief may be granted in equity even where the condition is for the performance of collateral acts.

Eor the reasons given we think the plaintiff has made out a case entitling it to relief in equity and the decree which the circuit court should have entered will be entered here, making-perpetual the injunction awarded upon the original, and prayed for therein and in the amended bill, and that the plaintiff have its costs in this Court and in the circuit courl in this behalf expended.

Reversed and Remanded.