This cause is before me on petition of Samantha J. IIoll to review the finding and judgment of the referee in relation to two mining leases, one of which was executed by Clayton Holl and others, dated April 3, 1917, and the other by Clayton Holl and others, dated July 7, 1917. Both leases had passed by mesne assignments to the bankrupt prior to the filing of the bankruptcy petition herein. The petitioner urges that both leases were forfeited or terminated because of the violation of certain covenants therein contained, which contention was denied by the referee, and
“Second party, shall produce enough lime in the forms herein mentioned and sell enough coal to net first party a royalty of $250 per year for coal and limestone. The failure to make the payments under this lease within 30 days from the date the same becomes due by the party of the second part will end and terminate this lease.”
Payment was made of $88.15 for 'the three months ending June 30, 1918, and $83.62 for the three months ending October 1, 1918. Since the last date it appears that no coal' or limestone was produced or mined, and ho payments have been made. The petition in bankruptcy was filed, and an adjudication in bankruptcy was made in November, 1918, since which time all the bankrupt’s property, including these mining leases, has been in the possession either of the receiver or of the trustee. In January, 1919, the lessor gave notice to the trustee of her intention to exact a forfeiture at the end of the 30 days within which payment for the preceding quarter should be made for failure to make such payment. Her answer and cross-petition herein was filed April 5, 1919, asserting that the lease was terminated for failure to make payment as required by the previous demand, and praying tliat the lease might be declared forfeited and stricken from the inventory of the bankrupt’s assets and the premises surrendered to her.
Obviously no violation of the covenants above quoted had in January taken place. On the other hand, if the one-year period within which limestone and coal shall be produced and mined sufficient to net a royalty of $250 is to date from the beginning of the lease, then a right to forfeit or terminate the lease would accrue at the end of 30 days after April 3, 1919, for the reason that the two payments previously made during the year aggregated only $171.77. This seems to me to be the reasonable construction to be put on the lease, rather than a construction, contended for by the trustee, that one year should elapse from the date of the last payment in'October, 1918, before such a right would accrue. This construction follows from the terms of the lease itself, and particularly its date and the time fixed for the first quarterly payment of royalties to be made.
“It is agreed by and between tlie parties that, unless said second party shall enter upon said premises and make exploration thereon for coal and limestone within 90 days from the date hereof, then and in that case this lease shall be null and void, and all parties shall be ipso facto released from all liabilities accrued and prospective hereunder.”
The referee finds that there is no proof of a failure to enter on the premises and make explorations within 90 days, but that, .on the contrary, such entry and exploration was made, and the existence of coal and limestone was thereby determined, and that the bankrupt and its several assignors had no intention at any time of abandoning the premises and terminating the lease because the mining of coal or limestone was or had become unprofitable. No coal or limestone was in point of fact mined, and the $500 minimum royalty, which should have been paid not later than October 1, 1918, was not paid, nor have any payments been made since, either by the receiver or trustee in bankruptcy. The provisions of this lease are similar to those coqsidered by the Supreme Court of Ohio in the following cases: Harris v. Ohio Oil Co., 57 Ohio St. 118, 48 N. E. 502; Gas Co. v. Eckhert, 70 Ohio St. 127, 71 N. E. 281; Oil Co. v. Robinson, 71 Ohio St. 302, 73 N. E. 222, 104 Am. St. Rep. 773, 2 Ann. Cas. 444. The interest granted by this lease is not merely a license, but an estate in the premises. The right to enjoy that estate is not dependent on any condition precedent, except the requirement that entry and explorations should be made within 90 days, which was done. No forfeiture or termination is provided for, except in the event of a failure to make such entry and exploration. No right to forfeit or terminate is given for failure to pay the minimum royalty of $500 a year. Any implied covenant or obligation to exercise reasonable diligence in mining limestone and coal is merged in the covenant to pay $500 a year in the event of failure to operate. The lease becomes, as was said in Gas Co. v. Eckhert, supra, a lease from year to year upon an annual rental of $500. The cases cited by counsel for petitioner, in which mining leases have been .canceled by courts of equity for failure to keep an implied obligation to exercise reasonable diligence, are not in point.
The only question then is: What is the effect under these conditions of a failure to pay the'$500? The referee, in my opinion, reached the. correct conclusion, namely, that no forfeiture or right to terminate has resulted therefrom, and that the lease may be sold as an asset of the bankrupt’s estate. The payments which have accrued during bankruptcy may be treated and provided for as an expense of administration, or an expenditure necessary for the preservation of the estate; but the failure of the referee to make provision fherefor in the order of sale does not require a reversal of his finding and judgment. No request was made of him so to do. One may still be made, with the right to have his rulings reviewed here, in the event parties are dissatisfied with his action.
This case will be remanded to the referee, with instructions to correct and modify the order of sale and proceed further in conformity herewith. An exception may be noted.