162 Ind. 9 | Ind. | 1903
By their second paragraph of complaint, appellants seek to quiet tlieir title, to a certain tract of real estate which they allege that they own in fee simple. The cloud that they seek to have removed was occasioned by the execution of a written contract by them and appellee’s grantor, one Andrews, which contract is in the words and figures following: “In consideration of the sum of $1, the receipt of which is hereby acknowledged, we, R. R. Gadbury and J. A. Gadbury, first parties, hereby grant unto J. S. Andrews, second party, his successors and assigns, all the oil and gas in and under the following described premises, together with the right to enter thereon at all times for the purpose of drilling and operating for oil, gas, or water, and to erect and maintain all buildings and structures and lay all pipes necessary for the production and transportation of oil, gas, or water from said premises, excepting and reserving, however, to the first parties, the one-sixth part of all oil produced and saved from said premises to be delivered in the pipe-line with which second party may connect his wells, namely: All that certain lot of land situate in the township of Licking, county of Black-ford, 'in the State of Indiana, bound and described as follows, to wit: The east half of the northwest quarter of section thirty-two, township twenty-three north, range ten east, containing eighty acres, more or less. To have and to hold the above premises on the following conditions: If gas only is found, second party agrees to pay $100 each year for the product of each well while the same is being used off the premises, and the first party to have gas free of cost for domestic purposes. Whenever first party shall request it, second party shall bury all oil and gas lines and pay all damages done to growing crops by reason of burying and removing said pipe-lines. No wells shall be
Said paragraph of complaint further alleges that said contract was assigned by said Andrews to said defendant on the 6th day of January, 1900; that there was no consideration for the execution of said contract by plaintiffs, except the income, rents, profits, and royalties referred to in said instrument; that said Andrews completed a well on said premises on the 19th day of February, 1898, and paid plaintiffs the sum. of $1 per day during the time that completion of said well was delayed after forty days from the execution of said contract down to the date last aforesaid; that, by the construction of said well, gas was found on said premises in large and paying quantities; that, notwithstanding the discovery of said gas as aforesaid, said Andrews, immediately upon the completion of said well, closed and anchored the same, so as to prevent any gas from escaping therefrom, and neither said Andrews nor said defendant, nor any other person or corporation, has prodiiced any gas or oil on or from said premises, nor have they, or either of them, used or transported any gas whatever from' said premises; that neither said Andrews nor said defendant has ever paid the plaintiffs
The grant in question, upon its face, appears to be a mere option to the grantee. Every express undertaking upon his part is subsidiary to the exercise of the option to explore and develop the real estate. The question arises, however, whether obligations to explore and develop the property
In determining whether a condition is to be implied it is important to note that the substantial consideration which moves a grantor to execute such a grant is the hope of profits or royalties if oil or gas is discovered. Even- if the grantee in this case had paid the stated consideration of $1 — a technically valuable consideration — yet we must construe the instrument with the fact in view that a more ^substantial reason or reasons prompted the making of the grant. Huggins v. Daley, 99 Fed. 606, 40 C. C. A. 12, 48 L. R. A. 320; Federal Oil Co. v. Western Oil Co., 112 Fed. 373. In an ordinary agricultural lease, where the rent is payable in kind, it would, of course, be implied that the tenant would farm the land; and the requirement is implied that lessees in mineral leases, upon royalties, will develop the property if exploration warrants it, where the minerals are stable, although the only result of a delay in operating would be to postpone the receipt of profits or royalties. Island Coal Co. v. Combs, 152 Ind. 379; McKnight v. Natural Gas Co., 146 Pa. St. 185, 23 Atl. 164, 28 Am. St. 790. If a duty to operate is to be implied in such cases, there is much more reason for the implication in a grant of the right to operate for oil and gas upon a royalty, owing to the migratory habit of the fluids. “Oil leases,” it was declared in McKnight v. Natural Gas Co., supra, “must be construed with reference to the known characteristics of the business.” As said in another Pennsylvania ease: “The nature of oil and gas, the pressure of the superincumbent rocks, and the vagrant habit of both
In grants of the character in question, the title is inchoate, and for the purpose of exploration only, until oil or gas is found in quantities warranting operation; and while the courts manifest a disposition to protect the grantee at this stage by treating his interest as no longer postponed to the happening of a condition precedent, yet it is thoroughly settled that he can not omit to develop the property and hold the grant for speculative purposes purely. Parish Fork Oil Co. v. Bridgewater Gas Co., 51 W. Va. 583, 42 S. E. 655; Bluestone Coal Co. v. Bell, 38 W. Va. 297, 18 S. E. 493; Guffy v. Hukill, 34 W. Va. 49, 11 S. E. 754, 8 L. R. A. 759, 26 Am. St. 901; Ray v. Natural Gas Go., 138 Pa. St. 576, 20 Atl. 1065, 12 L. R. A. 290, 21 Am. St. 922; Venture Oil Co. v. Fretts, 152 Pa. St. 451, 25 Atl. 732; Kleppner v. Lemon, supra; Huggins v. Daley, supra; Federal Oil Co. v. Western Oil Co., supra,; Hawkins v. Pepper, 117 N. C. 407, 23 S. E. 434.
The duty to develop the property upon the discovery of oil or gas in paying quantities is not to be regarded as a mere implied covenant, but, in a ease like this, where practically the whole consideration must depend upon the implied undertaking, is to be treated as a condition subsequent.
Conditions subsequent are not ordinarily favored, “because,” as declared by Professor Kent, “they tend to destroy estates; and the rigorous exaction of them is a species of summum jus, and in many cases hardly reconcilable with conscience.” 4 Kent’s Comm., *129. Accordingly, it has been declared in unrestricted terms that equity will not lend its aid to enforce a forfeiture. Where there has been a cause of forfeiture, followed by an entry upon the part of the grantor, so that the title has been lost, it is not strictly the enforcing of a forfeiture for a court of
The facts stated in the second paragraph of complaint, which stand as admitted by the demurrer, were such as to require the court below to aid appellants, by means of its jurisdiction, to decree cancelation and to remove clouds from titles.