Case Name: Ohio Oil Co. v. Lane
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1898-12-13
Citations: 59 Ohio St. 307
Docket Number: 
Parties: Ohio Oil Co. v. Lane.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 59
Pages: 307–316

Head Matter:
Ohio Oil Co. v. Lane.
Oil and gas contract — Lease by land owner to operating company— Question of payment for well not used — Construction of contract.
A contract between the owner of. lands and a company operating in oil and gas, whereby such minerals are granted in place to the operating company upon the stipulation that if gas only is found it will pay a fixed sum per year fo.r each well “while the saméis being used off the premises,” and containing no stipulation inconsistent therewith, should not be so construed as to require it to pay such sum for a gas well, whose product is not used, even though the jury should be of the opinion that it might have been so used off the premises without financial loss to the company.
(Decided December 13, 1898.)
Error to the Circuit Court of Auglaize county.
The controversy arises out of the second cause of action in - the petition filed in the court of common pleas by Lane against the oil company. That cause of action as alleged by him is, in substance, that on the fifth of May, 1890, being the owner of 120 acres of land lying in Mercer county, %he entered into a contract with the oil company, a copy of which is in the record, its material stipula- ■ tions being as follows:
“In consideration of the sum of $420 dollars, the receipt of which is hereby acknowledged, Thomas A. Lane of Transit, Hamilton county, Ohio, first party hereby grant unto The Ohio Oil Company, an Ohio corporation, second party, its 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 first party the one-sixth (1-6) part of all oil produced and saved from said premises, to be delivered in the pipe line with which second party may connect its wells, namely: * * *
If gas only is found, second party agrees to pay three hundred dollars ($300) each year, in advance, for the product of each well while the same is being used off the premises, and first party to have gas free of cost to heat six stoves in dwelling house during the same time. * * *
The second party shall have the right to use sufficient gas, oil or water, to run all necessary machinery for operating said wells, and also the right to remove all its property at any time. ’ ’
Said second cause of action contains the following allegations:
“That under, said agreement, said defendant drilled and constructed upon said land, one well which produces in paying- quantities gas only; the said well being drilled and completed about the fifteenth day of February, A. D. 1891; and plaintiff says that said defendant has never made any payment for gas from said well.
Plaintiff avers that said defendant agreed to use the gas produced on said premises within a reasonable time pff said premises and thereupon to pay for same, and that said gas from said well was, or reasonably should have been, used off said premises on or before the sixth day of May, A. D. 1891, continually, and that any delay since that time is unreasonable, and thereby defendant became indebted to plaintiff on the sixth day of May, A. D. 1891, in the sum of three hundred dollars ($300) for the gas from said first well.
And plaintiff says that said last mentioned sum has never been paid but that the whole amount thereof together with interest thereon from the sixth day of May A. D. 1891, is, and remains due and owing to the plaintiff from said defendant.” The company filed the following answer:
“For answer to the second cause of action in the second amended petition, defendant says: It admits that it has not made any payment for gas, under said contract of lease, and it denies each and every other allegation in said second cause of action contained.”
On the trial, the drilling of a gas well on the premises by the company being admitted, the plaintiff was permitted against the objection of the company to introduce evidence tending to prove that the well yielded gas in paying quantities which was explained to mean quantities that would make the well worth tubing if a market for the gas could be had, and that pipe lines were in operation at points from three to five miles from the well for the purpose of conveying gas to various municipalities in the western portion of the state. It was admitted that the oil company did not use the gas or sell it. There was also conflicting evidence as to whether the company could or not have laid pipe to existing lines and thus without loss have sold the gas, the evidence offered by the plaintiff in that regard being objected to by the defendant. Counsel for the defendant requested the court to give the following instructions to the jury:
1. There being no evidence to show that defendant used the gas off the premises from the well upon which rental is claimed in this case, I charge you that your verdict must he for the defendant.
2. I charge you that under the terms of the lease, it was left to the discretion of the defendant, to determine whether it could use or market the gas from this well off from the premises without loss to itself; and there being no evidence that the defendant did not exercise this discretion in good faith, your verdict must be for defendant.
These were refused and the defendant excepted. The court instructed the jury that the defendant admitted that it “did enter into a contract with the plaintiff of the nature and character set forth in the petition a copy of which you will find in the petition.” And, further, that if the well drilled upon the premises was a paying gas well and the defendant could by reasonable diligence have found a market for the gas prior to November 27, 1891 (the date of the commencement of the action), then the three hundred dollars would be due. “It was the duty of the defendant if gas was found in the well in paying quantities, and there is no serious controversy on that question, it was the duty of the defendant to make a reasonable effort to find a purchaser for the gas — utilize the gas or find a purchaser so that it could have been utilized off the premises.” In various forms the jury were directed to inquire whether the defendant could have placed the gas in market without loss and that if it could the sum of three hundred dollars was actually due with interest.
To the several parts of the charge as given the defendant excepted, and a verdict was returned in favor of the plaintiff for$379.50. The defendant’s motion for a new trial was overruled and a judgment was entered on the verdict. The judgment was affirmed by the circuit court. This is a petition in error to reverse both judgments.
Layton <& Stueve and Wheeler & Brice, for plaintiff in error.
The whole case depends upon the meaning of the clause in the contracts which reads as follows:
“If gas only is found, second party agrees to pay $300 each year in advance, for the product of each well while the same is being used off the premises, and first party to have gas free of cost to heat six stoves in dwelling house during the same time.”
In the consideration of the case, it should constantly be borne in mind that no gas was used out of this well either on or off the premises.
Plaintiff in error contends, that the language of the gas clause, above quoted, is clear and unambiguous, and means exactly what it says; and that no liability could arise, unless gas was used off the premises.
We submit that the above proposition is the recognized law, as laid down by text writers and adjudications on contract law.
Where language is plain and unequivocal there is no room for construction. Strohecker v. Farmers Bank, 6 Barr., 41; Benjamin v. McConnell, 4 Gilm., 536; Chitty on Contracts, page 105; Wilson v. Bevan, 7 C. B., 673; Ford v. Beech, 11-2 B., 842; Lawler v. Burt, 7 Ohio St., 341; Cobb v. Fontaine, 3 Rand (Va.), 487; Parsons on Contracts, 2 Yol. star page, 500; Beach on Contracts, sections 703, 707; 1 Greenleaf on Evidence, section 277; Aspdin v. Austin, 5 Q. B., 671; Anson on Contracts, section 252.
Now we maintain that in the case at bar the court below has done just what the foregoing authorities, and a multitude of others, hold a court cannot do, namely, made a new contract for the parties to this contract. The court has held that a recovery can be had upon the gas clause in this contract when the gas was not used off the premises, which is in direct contradiction of-the plain and unequivocal meaning of the words of the contract.
We submit that the construction placed on this clause by the court below does not give any effect to the words of the contract. If at the time of making’ this contract the parties intended that the gas should be paid for if found at all, or if found in paying quantities, or if found in quantities sufficient to utilize and there was a market for it, it would have been the simplest matter in the world for them to say so in the contract. The fact that they did not say so, is we think upon reason and authority, conclusive presumption that they did not intend to make such a contract. Am. & Eng. Ency. Law, Vol. 12, page 1012, and authorities there cited.
Goeke ds Gulliton, for defendant in error.
We maintain that in this case the language of the contract in respect to the clause in the controversy is not plain and unambiguous; in fact, that it is very obscure and does not in any manner express the real intention of the parties to this contract.
We claim that, if there ever was a contract since litigation began, that needs construction, this is the one. If this contract needs construction, then it became the duty of the trial court to construe the contract when the case was submitted to the jury. Beach on the Modern Law of Contracts, Volume 1, sections 702 and 743; Wason v. Rowe, 16 Vermont, 525; Emery v. Owings, 16 Gill., 191.
The intention of the parties is to be derived from the terms and subject matter and not from the statements of one party as to what might have been the understanding. 22 Florida, 279; Beach on Contracts, section 708; Little v. Banks, 77 Hum., 511; Russell v. Allerton, 108 N. Y., 20; Jugla v. Trouttet, 120 N. Y., 21; Wright v. Rensens, 133 N. Y., 298.
A clause or a word may be rejected which is irreconcilable with the language of the contract or the general design of the parties. Buck v. Burke, 18 N. Y., 337; 45 Iowa, 166.
The general rule is that the contract should if possible be so construed as to render it binding on both parties and not so as to render it inequitable as to either party. Nute v. American Glucose Co., 55 Kansas, 225; 40 Pacific Reporter, 297; Beach on the Modern Law of Contract, at sections 711, 712 and 719; Beach on Contracts, section 723; Mintier v. Mintier, 28 Ohio St., 307; Vol. 14, American State Reports, 668; 2 American State Reports, 362; 24 American-State Reports, 283.

Opinion:
Shauck, J.
The numerous questions raised by the objections to the evidence offered by the plaintiff in the trial court and the exceptions to the refusal of the court to give the instructions requested by the defendant depend upon the meaning of the stipulations in the contract of May 6, 1890. ' That is true, also, of the questions raised by the exceptions to the instructions given, unless it is the exception to the portion of the charge advising the jury respecting the admissions of the defendant. Although a contract of this character should not be copied into the petition either in lieu of, or in addition to, allegations of its terms, the written agreement in this case was treated throughout the trial as though it had been put in evidence, and the defendant did upon the trial practically admit its execution. It does not contest it now. In its answer it denied all of the allegations of the second cause of action except that of non-payment. Nor did it admit upon the trial, as is alleged against it in the petition, that "it agreed to use the gas produced on said premises within a reasonable time off said premises and thereupon to pay for the same." On the contrary its consistent contention has been that the instrument whose execution it admits does not support the controverted allegation of the petition as to that promise. By the terms of the instrument executed the company promised to pay a stipulated price for the gas "while the same is being used off the premises." It did not in terms undertake to use the gas off the premises within a reasonable time as alleged in the petition, nor to use it off the premises if it could do so without loss as is stated in the charge. But in support of the charge it is said that upon construction of the instrument the obligations stated in the charge should be inferred and that the phrase " 'while the same is being used off the premises' only determines how long the payments are to be kept up." That view of the phrase is not helpful, for it fixes the beginning of the term of payment as well as its close. It is further said that "inconsistent claims must be construed according to the rsubject matter and the motive and intention of the parties as gathered from the whole instrument." This is a familiar and established rule of interpretation. Its terms pre-suppose the presence of clauses that are inconsistent or not clearly expressed.
The company was engaged in prospecting in the vicinity for oil, and in producing it when found. It was known to both parties that in drilling for oil, gas might be found. For the purpose of fixing their rights in the mineral which might be discovered they entered into a contract containing stipulations familiar to operators and owners having similar motives. Indianapolis Gas Co. v. Teters, 44 N. E. R., 549; Bryan on Oil and Gas, 97.
If oil, the principal object of search, should be found, the owner was to receive one-sixth of it delivered in the pipe line. But' 'if gas only' ' should be found, the operating company was expressly granted the right to use it on the premises in driving machinery for drilling other wells, to use it for that purpose on other premises, or to place it in the market, but without incurring any obligation to pay therefor unless it should be taken from the premises of the plaintiff. The recovery was upon the theory that if gas should be found in such a quantity the plaintiff was entitled to recover at all events if the jury were of the opinion that the gas could have been sold without loss. That view is not only without warrant in the terms of the instrument, but it is distinctly refuted by the stipulation that the company might, without making compensation, use the entire quantity in further operations upon the premises of the plaintiff.
From a consideration of all the terms of the contract and from the purposes of the parties at the time of its execution it is obvious that the operating company's obligation to pay for the gas only in case it should be "used off the premises" was deliberately inserted as expressive of the intention of the parties. There is, therefore, no occasion for the application to this contract of any rule relating to the interpretation of contracts whose terms are ambiguous or inconsistent. In view of the terms of the contract, the plaintiff's admission that gas had not been used off the premises was equivalent to the admission that he had no cause of action.
Judgments of the circuit cowt and the court of common pleas reversed and judgment for the plaintiff in error.