Case ID: ohio-st_66/html/0605-01.html
Source: Caselaw Access Project
Author: {"author": "Burket, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Van Etten et al. v. Kelly.
    
      Oil lease requiring certain wells — To be completed within stated time — Otherwise to become void unless second party make monthly payment — Does not constitute obligation to pay rental — Action for recovery of rentals will not lie, when.
    
    An oil lease which required certain wells to he completed within stated times, contained the following: “In case no' well is completed within thirty days from this date, then this grant shall become null and void, unless second party shall pay to first party thirty dollars each and every month in advaneé while such completion is delayed.” Held, that this did not constitute a promise or obligation to pay rental; and held further, that the lessee had the option to complete wells, or pay rentals, to keep the lease alive; and that upon breach of the agreement to complete wells, no action would lie for the recovery of rentals.
    (Decided June 24, 1902.)
    Error to the Circuit Court of Wood county.
    The action in the court of common pleas was for the recovery of rental claimed to be due under the terms of an oil lease made by Luceba A. Kelly to one Scott Blair. The following is a copy of the lease except signatures;
    “In consideration of the sum of one hundred dollars, the receipt of which is hereby acknowledged, Luceba A. Kelly, first party, hereby grants unto S. Blair, 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; to erect and maintain all buildings and structures and lay all pipes necessary for the production and transportation of oil, gas or water taken from said premises. Excepting and reserving, however, to first party the one-sixth part of all oil produced from said premises, to be delivered in the pipe line with which second party may connect its wells, namely:
    All that certain lot of lands situated in the township of Freedom, county of Wood, in the state of Ohio, bounded and described as follows: to-wit:
    The south half (%) of the northwest quarter of section No. twenty (20), town five (5), range twelve (12) 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 three hundred dollars 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 to heat three stoves in dwelling house during the same time.
    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 removing and burying said pipe lines, or in drilling said wells.
    No well shall be drilled nearer than 300 feet to the house or barn on said premises, and no well shall occupy more than one acre.
    In case no well is completed within thirty days from this date, then this grant shall become null and void, unless second party shall pay to said first party thirty dollars each and every month in advance while such completion is delayed. Payable at first party’s residence.
    The second party shall have the right to use sufficient gas and water to run all necessary machinery for operating said lease, and also the right to remove all its property at any time.
    
      The east forty acres of said land shall be drilled first. Second party agrees to complete a well every sixty days from date hereof on said east forty acres until six wells are completed including the first well and all lines must be protected. Second party further agrees to complete a well every ninety days on the west forty after the completion of the sixth or last well on the east forty acres. It is understood that the monthly rental shall apply to any well or wells not completed as herein specified.
    It is understood between the parties to this agreement that all conditions between the parties hereunto shall extend to their heirs, executors and assigns. This lease to be void after fifteen years from date hereof.
    In witness whereof, the parties have hereunto set their hands and seals this 15th day of September, A. D. 1896.”
    Neither the lease nor any transfer of any interest therein was ever recorded.
    After stating in proper form the making of said lease and its terms and conditions, the petition of the said plaintiff below, Luceba A. Kelly, proceeds as follows:
    “That said Blair on said 15th day of September, 1896, took said lease in his own name, but in fact for and on behalf of defendants, excepting and reserving one-eighth interest in and to said lease which was owned by said Blair and afterwards the defendant, Henry Bowlus, purchased the said interest therein belonging to said Blair.
    “That said lease is held and owned by said defendants under and subject to all the terms and conditions in said lease therein mentioned and read, and that said defendants and each and every one of them in accepting said lease, and operating same, as hereinafter alleged, have become liable to the payment of any moneys there may be due as rental of said lands. That according to the terms of said lease, the said defendants did drill the first well upon the east forty acres of said premises and completed the same within the time provided for in said lease. And sixty days thereafter they, the said defendants, did drill and complete another well on said east forty (40) on said premises. That according to the terms of said lease in the month of March and on the 15th day of said month, 1897, there should have been another and third well completed on the said east forty acres on the said lands.
    “To complete said third well the defendants each and every one of them have wholly failed, refused and neglected to do, and thereupon and thereby they became and are liable to the payment of said sum of thirty ($30) dollars per month as long as the completion of said third well is delayed.
    “And the said plaintiff further says that for the last five months past said defendants have Avholly failed and refused to operate the wells they have so drilled and have failed to operate the same so that this plaintiff has received no benefit therefrom.
    “Yet the said defendants have failed, refused and neglected to either cancel said lease or operate said, wells or pay said rental.
    “Wherefore said plaintiff prays that she may have judgment against said defendants for the sum of three hundred and ninety ($390) dollars together with interest thereon, as follows
    Then follow installments of rental, amounting to $390 with interest.
    
      The defendants below in their answer denied substantially all the averments of the petition, and plead that oil in paying quantities could not be produced on said premises, and that after ascertaining that t£> be so, they had offered to surrender and cancel the lease, and. also averred that by a proper and fair construction of said lease the defendants below, plaintiffs in error here, were not required to pay any rental whatever to the plaintiff, by reason of the failure to drill said wells, or for any other cause. The reply denied the averments of the answer.
    Upon the trial the evidence tended to show that Scott Blair took said lease in behalf of himself and the other defendants, except Henry Bowlus, who came in later; that they so understood the matter, accepted the lease, and drilled the two wells thereunder. That Henry Bowlus purchased the interest of Scott Blair after default had been made in completing the third well.
    The plaintiff below recovered a verdict against all •the defendants for $390. A motion for a new trial was made and overruled, and judgment entered on the verdict.
    The circuit court affirmed the judgment, and thereupon the plaintiffs in error came here, seeking to reverse the judgments below.
    
      Mr. John B. Hoyman; Messrs. Baldioin & Harring.ton and Mr. James 0. Troup, for plaintiffs in error.
    
      Mr. Peter JUmslie, for defendant in error.
   Burket, J.

The only question worthy of report is, as to the true construction of the oil lease in regard to the payment of rentals. All the terms and conditions of the lease in that regard are the following : “In case no well is completed within thirty days from this date, then this grant shall become null and void, unless second party shall pay to said first party thirty dollars each and every month in advance while 'Such completion is delayed. * * * It is understood that the monthly rental shall apply to any well or wells not completed as herein specified.”

It was in said lease specified that a well should be completed every sixty days from date of lease on east forty acres until six wells should be completed thereon, and that a well should be completed every ninety days on the west forty, after the completion of the sixth well on the east forty.

A well was completed on the east forty within thirty days after the date of the.lease, and as to that well there was full performance, and the lease was thereby saved from forfeiture, as to the first well. The same is true of the second well. But no third or other well was ever completed, and thereby the agreement in the lease as to completing such other wells, was broken, and now the question arises as to the remedy for such breach of contract.

The plaintiff below claims that in the words, “unless second party shall pay to said first party thirty dollars each and every month in advance while such completion is delayed,” there lies a promise to pay thirty dollars per month for such delay. This is not tenable. The full force and effect of this “unless” clause, taken by itself, is, to give the lessee the option by making such payment to continue the lease in force to the end of the term without completing the first well, or upon failure to make such payment, allow the lease to become null and void at the end of thirty days after the date of the lease. Brown v. Fowler, 65 Ohio St., 507.

There is no promise or obligation in this lease to pay rental to the lessor for failing to complete the first well, bnt only a privilege to pay such rental at the option of the lessee to prevent the lease from becoming null and void.

As the only monthly rental provided for in the lease is that found in this “unless” clause, and as that rental is to prevent the lease from becoming null and void, it seems fairly clear that the subsequent understanding that the monthly rental should apply to any well or wells not completed as therein specified, is for the same purpose, that is, to prevent the lease from becoming null and void, and that upon failure to pay such monthly rental in advance while the completion of any well was so delayed, the lease by its terms became null and void, and the lessor had the option to so treat the lease, and recover possession, or recover for use and occupation, or recover damages for breach of contract to drill the wells specified in' the lease, but she could not recover rentals for breach of contract to complete wells, because there is no agreement to pay rentals for such breach, and there being no such agreement, there can be no breach thereof.

In Woodland Oil Co. v. Crawford, 55 Ohio St., 161, the lessee agreed to drill certain wells and upon failure, to pay certain rentals, It was held that the lessor might elect to enforce the contract to drill, or waive that, and enforce the promise to pay rental.. There the option was with the lessor. Here, as there-is no promise to pay rental, the option is with the lessee, either to drill or pay rental to keep his lease alive, and failing in both, the lease becomes null and void, with an option however in the lessor to treat it as void, or to sue for damages for breach of the contract to complete the wells as specified in the lease.

As the action below was for the recovery of rentals under the lease, and as the lease contains no promise to pay rentals, the plaintiff under a correct construction of the lease has no cause of action for rentals, and the judgments of the lower courts must therefore be reversed and petition dismissed, but without prejudice to the bringing of such other action for the breach of said contract to complete- wells, as máy be authorized by law.

Judgments reversed and judgment for plaintiff in error.

Spear, Davis, Shaucic and Price, JJ., concur.