Case Name: JENNINGS-HEYWOOD OIL SYNDICATE v. HOUSSIERE-LATREILLE OIL CO. et al.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1907-03-04
Citations: 119 La. 793
Docket Number: No. 16,308
Parties: JENNINGS-HEYWOOD OIL SYNDICATE v. HOUSSIERE-LATREILLE OIL CO. et al.
Judges: NICHOLLS, J., takes no part not having heard the argument. PROVOSTY, J., concurs in the decree.
Reporter: Louisiana Reports
Volume: 119
Pages: 793–863

Head Matter:
(44 South. 481.)
No. 16,308.
JENNINGS-HEYWOOD OIL SYNDICATE v. HOUSSIERE-LATREILLE OIL CO. et al.
(March 4, 1907.
On Rehearing, June 28, 1907.)
1. Mines and Minerals — Oil Lease — Construction — Delay—Fobeeiture.
Plaintiff, as transferee (through mesne conveyance) of the original lessee, sues for the enforcement of a contract whereby the owner of -40 acres of land, lying in a field and state from which no oil had ever been produced, and having a value of about $10 an acre, leased -the same for the sole purpose of operating for oil and gas, for a term of ten years, or so long as oil •or gas should be produced. The lessee agreed to begin operations within six months, or pay ■$50 quarterly in advance for each three months’ delay, and to deliver to the owner the equivalent •of one-eighth of the oil saved and of the gas marketed as royalty.
It was also stipulated that the lessee might, at any time, surrender and cancel the lease on payment of $100. This contract was duly recorded, and plaintiff’s authors made three, and plaintiff one, payment for delay. The tender of the fourth payment was made after the date contemplated, and was refused, on the ground that the contract had been thereby forfeited. Thereafter, but before any steps had been taken to put it in mora, plaintiff began drilling a well on the leased property, when it was enjoined, and later brought this suit on the contract, to which defendants, claiming under the original •owner and lessor, answer that the contract was forfeited for nonperformance, that it was obtained by fraud, misrepresentation, and coercion, and that the consideration is vile and inadequate.
Held: (1) That, in the absence of any allegation connecting plaintiff with the fraud, misrepresentation, and coercion charged, the testimony offered in support of those charges was properly excluded.
(2) That our law does not favor forfeitures, and that the contract did not become ipso facto forfeited by reason of the failure of the lessee to drill, or pay on the day stipulated; such violation of the contract being passive.
(3) That the consideration, as expressed in the contract, is adequate for its support, both upon the face of the papers and in the light of the testimony.
[Ed. Note. — For cases in point, see Cent. Dig. vol. 34, Mines and Minerals, § 200.]
On Rehearing.
2. Same — Duty oe Lessee — Option — Exercise — Breach oe Covenants — Rescission.
At the height of the excitement created by the discovery of oil at Beaumont, Tex., indications similar to those at the celebrated Spindle Top were observed at Prairie Mamou, about 90 miles from Beaumont, and it caused great excitement. Speculators began taking leases of the lands of the neighborhood, and a farmer leased to one of these speculators the part of his land in the immediate proximity of the oil indications. The lease was for ten years, and was declared to be for the sole purpose of operating for oil and gas, and its recited consideration was $1 and the engagement of the lessee to begin operations within six months, or pay $50 quarterly in advance for any delay in commencing operations; and to deliver to the lessor one-eighth of whatever oil or gas might be produced. The lessee reserved to himself the right to retire from the contract at any time on payment of $100. Just before the expiration of the six months the lessee made the first quarterly payment, and thereafter made two others in advance; but, when the time came for making the fourth, he overlooked it, owing to the fact that a fire was raging in the oil field. He tendered the payment four days late, and the lessor declined to receive it, claiming that the contract had been forfeited for nonperformance, and that the tender of the quarterly payment for further delay had not been made in advance as stipulated. The lessee did not even then offer to develop the land for oil, but insisted that he had the right to postpone doing so indefinitely on making quarterly payments of $50, and he continued to tender $50 quarterly to the lessor. When accepting those of the quarterly payments which he accepted, the lessor had insisted that the next well should be bored on his land, and at the time of the refusal of the fourth quarterly payment a number of wells had been bored in the immediate vicinity of the lessor’s land, and, for all that was known, were draining the lessor’s land of its oil. The evidence shows that the cost of boring the well which the lessee obligated himself to bore within six months was about $10,000, and it also shows that at the signing of the contract the prospect of striking oil appeared to be excellent. Things continued in this state for eighteen months longer, when, the lessor having begun making preparations for exploiting the land himself, the lessee came upon the land, and litigation followed. Held:
(1) That since the sole object and purpose of the contract was to exploit the land for oil and gas, and the contract left the lessee at liberty to do so or not at his option, there was in reality no contract binding on the lessee.
(2) That if, however, there was a contract, it was cither in the nature of an option to the lessee to begin operations within the time fixed in the contract, with the right to prolong the term on making quarterly payments in advance, or else it was a commutative contract, wherein the obligation was to exploit the land for oil and gas. If it was the former, it came to an end by the lessee not exercising the option timely. If it was the latter, the lessee broke it by neither beginning operations nor offering to do so within the term of the contract or within a reasonable time thereafter.
(3) That, even if the obligation of the lessee was alternative, namely, either to exploit the land for oil and gas or else to pay $50 in advance quarterly, it became pure and simple when the alternative right to make the payments vanished from the contract as the result of failure to exercise that right in time'; and from that time the only useful offer of performance the lessee could have made would have been to develop the land for oil and gas.
(4) An option must be exercised within the time limit, or the right will be lost. Even vis major is no excuse for delay.
(5) If a lease is made in consideration of a payment to be made in advance, the obligation of the lessor does not come into existence unless the payment is made in advance. The payment in advance is a suspensive condition, or condition precedent.
(G) Where the contract has been violated by not doing what was covenanted to be done within the time stipulated, a putting in default is not a prerequisite to a suit in rescission. Such putting in default is a prerequisite only to the recovery of future damages.
(7) When the contract has been violated by the obligor, the obligee, who no longer desires that it should be performed, is not bound to put the obligor in default or to bring suit for rescission, but may refuse to allow tne contractor to perform, and, in case of suit by the contractor, may plead the breach of the contract by way of exception.
[Ed. Note. — For cases in point, see Cent. Dig. vol. 34, Mines and Minerals, §§ 1GS, 204-211.]
Breaux, C. J., and Monroe, J., dissenting.
(Syllabus by the Court.)
Appeal from Eighteenth Judicial District: Court, Parish of Acadia; Philip Sidney Pugh, Judge.
Action by the Jennings-Heywood Oil Syndicate against the Houssiere-Latreille Oil Company and others. From the judgment,, both plaintiff and the above-named defendant appeal.
Judgment set aside, plaintiff’s-suit dismissed, and defendant’s reconventional demand for damages dismissed.
See 42 South. 930, 118 La. 202.
Chappuis & Holt and Gregory & Battsr for plaintiff. D. Caffery & Son, J. Sully Martel, Francis Liddell Richardson, Frank Soule, and Hampton Story (Kenneth Baillio, Edward Nieholls Pugh, and Farrar, Jonas- & Kruttschnitt, of counsel), for defendant. L. A. Carlton and Joseph Sidney Wheless,. amici curias.

Opinion:
Statement of the Case.
MONROE, J.
Arthur Latreille and S. A-Spencer having entered into a certain contract, Spencer assigned his rights therein to S. A. Spencer & Co., by whom they were assigned to plaintiff, and plaintiff brings this suit for their enforcement. The contract in question is set forth in the petition, and contains, among others, the following stipulations, to wit:
"That the party of the first part, ' in consideration of the sum of one dollar, to-him paid, and of the covenants and' agreements hereinafter contained, has granted, leased, and let unto the said party of the second part, its successors and assigns, for the sole and only purpose of mining and operating for oil and gas, laying pipe lines, and building tanks, stations, and structures-thereon, to take care of said products, all that certain tract of land, situated in Acadia parish,. described substantially as follows: West, by Jules Clement and Orange Land Company; north by Arnaudet; east, by lessor; and south, by Houssiere — containing 40 acres,, more or less, reserving, however, therefrom 100 feet around the buildings, on which no well shall be drilled. It is agreed that this lease shall remain in force for the term of ten years from this date and as long thereafter as oil or gas, or either of them, is-produced therefrom by the party of the second. part, its successors and assigns. In consideration of the premises, the party of the second part covenants and agrees: First, to deliver to the credit of the party of the first part, his heirs and assigns, free of cost, in the pipe line to which it may connect its wells, the equal one-eighth part of all oil produced and saved from the leased premises; and, second, to pay one-eighth of all the gas from each and every well drilled on said premises, the product from which is marketed and used off said premises. Second party covenants and agrees to locate all wells so as to interfere as little as possible with the cultivated portions of the farm, and, further, to commence operations on said premises within six months from date hereof, or pay at the rate of $50 quarterly in advance for each three months such operation is delayed until such well is completed; and it is agreed that the completion of such well shall be and operate as a full liquidation of all rental under this provision during the term of this lease. It is agreed that the second party is to have the privilege to use sufficient water from said premises to run all necessary machinery and fixtures placed on said premises, and, further, upon payment of $100 at any time by the party of the second part, its successors and assigns, to the party of the first part, his heirs or assigns, said party of the second part, its successors or assigns, shall have the right to surrender this lease for cancellation, after which all payments and liabilities thereafter to accrue under and by virtue of its terms shall cease and terminate, and this lease become absolutely null and void."
Plaintiff, by original and amended petitions, alleges that it and its authors have complied with the obligations thus assumed by them; that, not having commenced operations within six months from the date of the contract, they, on October 19, 1901, paid Latreille the sum of $50 as the quarterly rental in advance, and made like payments on January 19 and April 19, 1902; and that its tender of $50 on or about July 19, 1902, was declined for no sufficient reason. It further alleges that on December 6, 1901, the Corkran Oil & Development Company instituted suit against Latreille and others, praying to be decreed the owner of the land in question; that the judgment in favor of defendants did not become final in the Supreme Court of the state until November, 1903, and was then taken by writ of error to the Supreme Court of the United States, where the suit is still pending, for which reason, in addition to those given, plaintiff' was legally justified in delaying active operations under its contract, but that, promptly after said suit had been decided by the-Supreme Court of the state, it erected a derrick on the leased land, with the bona fide intention of drilling for oil and gas, and was-engaged in that work when, on January 15, 1904, it was enjoined by defendant from further prosecuting the same and from entering, upon the premises, and that, though the injunction was ordered by the court to be dissolved, it was nevertheless kept in force by a. suspensive appeal from the order of dissolution, which appeal is still pending in the Supreme Court of the state.
Plaintiff further alleges that the land herein question is the western 40 acres of that part of section 47, township 9 S., range 2W, known as the "Latreille tract"; that theHoussiere-Latreille Oil Company, asserting title thereto under conveyances from Latreille, executed and recorded long after the-making and recording of the contract here-sued on, and availing itself of the pending injunction, has taken possession of said, land, and is now, -with its assigns, aiders, and. abettors (the R-ayne Planters' Oil & Development Company, Sharp Bros., John W.. Champion, J. B. Newton, J. P. Smith, John. C. McCullough, John Brown, Jim Tierce, J. B. Flynn, Tom Smith, the Moonshine OiL Company, the Texas Company, the Producers' Oil Company, Rev. Francis Rouger, and. the Rex Oil Company), engaged in drilling wells, and, as plaintiff is informed, has obtained at least 2,000,000 barrels of oil, of' which, with its aiders and abettors, it has-converted and appropriated 1,000,000 barrels, leaving 1,000,000 barrels on hand, and that, for the preservation of its rights in the-premises, writs of injunction and sequestration should be issued. Wherefore plaintiff prays that a writ of injunction be issued and maintained, restraining the parties named from further trespassing upon the property described, and that it have judgment recognizing and enforcing its rights under its contract and awarding it certain damages. In accordance with this prayer a preliminary injunction was issued, which was dissolved, on bond, at the instance of the principal defendant, and a writ of judicial sequestration was issued, under which a large quantity of oil was seized by, and is now in the custody -of, the sheriff.
The defendants filed various pleas and exceptions, which were overruled, and now rely upon the following defense, as set forth in the answer and amended and supplemental .answers of the Houssiere-Latreille Company, to wit: That said company is the owner of •the property in question, having acquired the same, through mesne conveyance and directly, from Arthur Latreille, and is in pos.sesssion of the same; that the contract set up by plaintiff, though never legal or binding, has lapsed,- according to its terms, by reason of plaintiff's failure either to drill a well or to make the quarterly payments as stipulated; that said contract "was obtained from Latreille, plaintiff's author, through fraud .and misrepresentation, as the parties for whom he signed same imposed upon him by representing that they were in a position to -prevent the bringing of the suit of the Cork-ran heirs, and by further representing that whatever proceedings would be taken by said Corkran heirs would be rendered less inimical if said lease were granted, which representations were entirely untrue, but had the effect of coercing said Latreille into signing said lease"; that S. A. Spencer acquired the lease in question as a speculation, and. with no intention of developing the property, and that plaintiff had no other assets than said leases and others of a similar character, and was incapable of such development, and it was only after it found that defendant was moving in that direction that it made any pretense of drilling for oil; that by the terms of the contract the lessee is not bound to drill for oil, but may hold the property until development elsewhere makes it profitable for it to do so, and that defendant is unwilling to submit its property to the blight of such a contract; that, when Latreille accepted the quarterly payments, he did so with the understanding that the next well drilled in that field would be on his property; that $100, payable on the surrender of the contract, is relatively nominal, and is insufficient to support said contract as a consideration, and that the quarterly payments are "vile," as considerations, "both with respect to the ordinary value of the property at the time of the contract, and its possible oil value then, and its actual oil value since; that the contract is not only unconscionable, because of the insufficiency of the consideration aforesaid, but also because the duration of the delay that may be involved, at the will of the lessee, permits the property to suffer in its oil value, or to entirely lose it — time being an essential factor in the operation under the contract"; that, in the alternative, if said lease be binding, it is a mere servitude, not' exclusive, and that defendant should be allowed to establish others of similar character; "that at the date of the alleged contract said property was much sought after by parties interested in-the discovery of oil, as the indications upon said property of the existence of oil were very great, and gave great and sudden value to said property by reason of the discovery of oil, shortly before, at Beaumont, Tex.; that the indications which led to the discovery of oil at Beaumont were the same as those upon that property, and that the Beaumont discovery, being the first in this entire section, was the beginning of widespread search for oil, and that property presenting favorable oil indications became valuable beyond all precedent; that the fraud perpetrated, on Latreille consisted, not only in assuring him that his title would be protected, but also in assuring him that oil would be prospected for at once, *' and that other features of said lease, permitting same to be held without any development, were not known to him to have been inserted in said contract, which was never read over to him, same being written in English, which he understood only imperfectly, and never having been explained to him upon that point in French, which language is exclusively used and understood by him;" that defendants have produced the oil in controversy at great cost, and, in the alternative of its being decreed to belong to petitioner, then that plaintiff should reimburse defendants their actual expenses in the production, preservation, and marketing of the same, which expenses, they allege, amount to' $500,000; and they call Latreille in warranty and pray for judgment. Latreille, by way of answer, merely joins defendants in resisting plaintiff's demands.
Early in the trial plaintiff's counsel "objected to any and all evidence going to establish fraud, duress, undue influence, and the like, set up in the pleadings, because, first, the charges of fraud, duress, and undue influence are so vague and indefinite as not to permit the introduction of evidence to' prove the same; second, conceding, for the sake of argument, that the contract is fraudulent in that way, the same cannot be attacked now, as the plaintiff is a third party, and is not charged with fraud, duress, or undue influence, and is holder for value of the contract rights of Spencer — which objection was sustained by the court." Subsequently, however, the following question was propounded, and objection and ruling made, to wit:
"Q. For the purpose, Mr. Latreille, not of proving up any fraud which is alleged to have been committed against you, but merely •of sustaining the allegation made by the Houssiere-Latreille Oil Company and by you to the effect that this property had a great oil value at the time of the execution of the contract, I want to ask you why it was, if you consider that your property had the value that you say it had, you signed a contract of that kind? How did you come to sign that contract ? The foregoing question is objected to by counsel for plaintiff on the ground that, in the first place, the allegations should not be limited to fraud, but should include duress and undue influence, and for the further reason that it is irrelevant, and is an attempt by counsel to bring out evidence which hag been ruled out by the court, under objection made by counsel for plaintiff, which objection is overruled by the court; the court limiting the evidence to the question of value only, which is now before the court, and not for the purpose of proving fraud, duress, or undue influence. To which ruling of the court counsel for plaintiff excepts," etc.
Under this ruling Honssiere and Latreille were enabled, as witnesses for defendant, to testify, practically without restriction, not only as to the facts connected with the negotiation and making of the contract sued on, but as to their understanding of what the written instrument signed by Latreille contained and as to the feelings which influenced him to sign it. As their testimony was not, however, offered for the purpose of proving the fraud and coercion alleged by defendants, plaintiff did not consider it worth while to offer evidence in rebuttal, so that, quoad those allegations, the evidence gives only the defendant's version of the matter — offered and admitted merely to show the value of the property, as compared with the consideration, and thereby make it appear that the contract was and is unconscionable, to the prejudice of defendants.
Considering all of the evidence adduced, we find the facts to be as follows, to.wit:
Eugene Houssiere and Arthur Latreille are brothers-in-law, and are such good friends that they practically hold their property in common and act in concert in all matters of the slightest business importance; the transaction out of which this litigation arises having been dealt with from the beginning as a matter in which they were and are equally interested. They came from France in 1883, and, after spending a year in Chicago, removed to Louisiana, where, in 1892, they purchased, partly on credit, from Jean Gay, the south three-fourths of section 47, township 9 S., range 2 W., in the parish of Acadia; Latreille taking the upper, and Houssiere the lower, half of the tract so purchased. The upper quarter of the section of which the tract forms part was (in 1901) owned by Laurent Arnaudet (all of which will be better understood by reference to the subjoined plat A, which is an excerpt, approximately correct, from a large plat found in the transcript). The whole of the section in question had been adjudicated in 1882, by C. C. Duson, tax collector, to Henry Gellert, for taxes assessed to Anthony Corkran, or his heirs; and the parties holding under Gellert, including Houssiere and Latreille, as we understand the matter, in 1892 found themselves involved in litigation with certain persons who moved on the property and made application to enter the same under the homestead laws — the theory propounded being that Cork-ran's title rested upon a located, but unconfirmed, private claim, and that at the date of tax sale the land had not been segregated from the public domain. This litigation resulted in favor of the Gellert title, and subsequently the homestead entries were canceled by the register and receiver of the United States land office at New Orleans. It appears, however, that the homesteaders, represented by their attorney, Geo. Elms, in February, 1897, appealed from the decision last mentioned to the Commissioner of the General Land Office at Washington, and that the appeal was eventually decided in favor of the appellees. The Corkran heirs, in the meanwhile, had not been heard from, and the validity of the tax sale, quoad any assault that they might make, had not been tested.
Houssiere and Latreille had directed their attention to the cultivation of rice and the raising, for home consumption, of hogs, chickens, and vegetables. Latreille's tract contained but little land that was adapted tortee culture, and Houssiere had turned over-part of his in order to help Latreille out. Together they cultivated about 75 acres, and this with poor success (notwithstanding that, they erected an irrigation pump and that at one time Houssiere operated a small sawmill),, up to and after the making of the contract here sued on. In fact, it is doubtful whether Latreille had ever, prior to that time, received more than $300 in any one year from his. crops, and Houssiere testifies that in April,. 1901, their pecuniary condition was poor, and. if they had received $50 he would have remembered it. There is nothing in the record to justify the belief that, prior to the date at which the possibility of oil added value thereto, their holdings were worth more tham $10 an acre, and it is hardly likely that they could have found a purchaser at $8 an acre-The fixing of that date is, therefore, regarded, as a factor in the case.
Oil was "brought in" on the "Spindle Top'" field, near Beaumont, Tex. (about 90 or 1001 miles from the locus in quo), in January, 1901, and was immediately followed by a speculative excitement in that vicinity, the-accounts of which read like those of the-"South Sea Bubble"; but that excitement did not at once, or for several months, extend, to, or affect values in, the parish of Acadia.. It seems, however, that the indications which-led to the discovery at Spindle Top consisted of a seepage of gas in proximity, more or-less, to a mound, which is situated in an otherwise flat prairie, and, as gas seepage-was known to exist in many places in Acadia,. Calcasieu, and other parishes in Louisiana,, they attracted some renewed attention, and after a few months began to be seriously considered. It had been known for many years that such a phenomenon existed on section 48-(known as the "McDaniel Tract"), adjoining.
Plat A.
T. 95; Re. W.
cection 47 on the north, and it was also known that there was a mound on Latreille's prairie, some 1,000 or more feet distant from the seepage. About the first persons to act upon the idea suggested by those conditions were S. A. Spencer, of Jennings, and C. O. Duson, of Crowley; the places mentioned being small towns near, though in different directions from, the indications referred to. There were, sooner or later, associated with Spencer, Messrs. Williams, Jaenke, Mehaffey, and Wilkins, and they agreed to operate together in the obtention of land and leases (principally the latter, as no one seemed to care to invest much money in the enterprise), as a basis upon which thereafter to find some one with capital, experience, and courage enough to exploit their holdings at his own expense in the search for oil. This movement seems to have started some time in the month of April, and on the 18th of that month Wilkins, accompanied by Ceorge Elms (the person, we take it, whose name has already been mentioned as the attorney of the homesteaders), called on Latreille for the purpose of obtaining a lease, and were unsuccessful; Latreille telling them that he wished to sell, not to lease. On the following day, April 19th, another call was made on Latreille by Mehaffey, also accompanied by Elms, for the same purpose. What interest Elms had in the matter does not clearly appear. It may be that he went with Mehaffey as an interpreter, since he understood French and Mehaffey did not, and it was known that the negotiations would have to be conducted in part with Houssiere, and that he was unacquainted with English. As the contract which was then entered into— being the contract here in question — was signed by Latreille and his wife, of the one part, and Spencer, of the other part, as principals, it would seem that it was Spencer, rather than Mehaffey and Elms, who was willing to pay out the money and assume the risk; but there is no particular explanation I on that point, and, whilst Mehaffey became a member of the firm of S. A. Spencer & Co., to which the contract was transferred, Elms disappears from the scene from the time that it was made. It is shown that upon the occasion to which we are now referring Latreille was paid $50 in cash (instead of $1, as recited in the contract), and we find no reason for doubt that the instrument signed by him, as it appears in the transcript, was submitted to his inspection, was read by him, and, if there was anything in it that he did not understand, that it was fairly explained to him by Elms. In the course of his examination as a witness he was shown the contract between the defendant company (in which he owns 300,000 shares and of which he has been an active officer since its organization) and another company, and was cross-examined as follows:
"Q. You have read the first provision of the contract? A. Yes, sir. Q'. Do you understand the first provision of the contract? A. Not all of it. Q. Now, what part of this first part of the contract is it that you do not understand? A. I understand all the first paragraph, except one word. Q. Now, read the second paragraph, and tell me how much of it you understand? A. I understand about all of it. Q. Now, read the third paragraph and tell me what part of it you understand. A. I understand about all of it. Q. Is this all of the contract between Houssiere-Latreille Oil Company and the Rayne Planters' Development Company? A. I think so."
It is an admitted fact that Latreille could read, write, and speak English in 1901 (though imperfectly), and it appears that it was fully explained to him and Houssiere that the lessee under the contract which was then made was to begin operations within six months, or pay $50 quarterly in advance for each three months that such operations should be delayed. He and Houssiere say that they were told that the first well would be drilled on the Latreille tract; but Latreille says, at another time, that he was told that the first well would be drilled on the Clement tract, and the next well on his tract. The contract is silent on that subject, and Latreille never demanded as a right that drilling should begin on his land. He testifies that he made requests to that effect and that he received promises, but not from anyone authorized to represent the plaintiff, and, being asked whether he made such requests every time he received his rental, he answered, "No, not every time." And yet he received the rental only three times, so that his requests were not as frequent as counsel would seem to think.
Latreille and Houssiere tell different stories as to what Elms said about the Oorkran claim, though they agree that he had apparently abandoned his effort to obtain a lease and was getting his horse to leave, when they called him back and, after consultation with each other and with Madame Latreille, signed the lease, for which action Latreille, in his testimony, gives the following reason, to wit:
"A. I was kinder forced. Q. In what way? A. Mr. Elms told me that, if I did not sign the lease for the 40 acres, he would do as Mr. Duson had done about the Oorkran heirs, and buy their interest and attack my title. Q. Now, how and why were you influenced by such a threat, coming from Mr. Elms? A. Because they were attacking on two sides of the title, and Elms told me that they had some good lawyers, and they would defend the title."
Houssiere having testified, at considerable length, about Latreille's reason for signing the contract and about what had been said by Elms, and not having referred to the Oorkran claim, counsel for defendants finally called his attention to it as follows:
"Q. Then the Corkran suit was not discussed on that occasion, as one of the considerations of the contract? A. Yes, sir; it had been talked of a few days before that by Mr. Pavy. Q. Then Mr. Elms said nothing about it? A. Yes, sir; he did. Q. In what connection? A. 1-Ie said: 'You know, I always told you that the Gellert title was not worth anything, and I can prove it, and if you gentlemen will give me a lease I will buy out the heirs, who are going to proceed against you.' Q. What was said to that proposition? A. When Mr. Elms started off, and when he was catching his horse, we went and called him back. Q. Now, Mr. Houssiere, what was the main inducement to your signing the contract, considering all that was said? A.- It was to get some wells. Q. Although you wanted some wells, what would have been your answer to Mr. Elms if he had said nothing about the Corkran suit? A. We -would not have leased to him at all. We wanted to sell."
It appears that about — or, as we think, before — -that time Latreille had been advised by a prominent lawyer in a neighboring town that his title would be stronger after the 12th of May, then approaching, at which date the period of three years required for the prescription established in favor of tax titles by article 233 of the Constitution of 1898 was to be completed; that he had been visited by P. J. Pavy, who desired to obtain a lease, but was unsuccessful; that Pavy knew of the Oorkran claim, and perhaps had some connection with the Oorkran heirs, and had spoken of the possibility of a suit in their behalf; that C. O. Duson had called and made propositions about the land; that Duson was a member (nominal, it is said) of the firm of W. W. Duson & Bro., which at that time represented some of the Oorkran heirs; that he, too, mentioned the possibility of a suit in their behalf; and that Latreille, bearing in mind the advice which he had received, temporized with him — requested him to call again — and in the meanwhile, and after making the contract with Spencer, absented himself from his home until after the 12th of May, when he declined Duson's proposition. It further appears that in the fall of 1901 suit was brought on the Corkran claim for the recovery of the whole of section 47; that S. A. Spencer & Co., to whom S. A. Spencer had transferred his lease, appeared by counsel and defended it, not as a matter of obligation to Latreille, or because of any request from him, but for the protection of their own interest. In fact, it somewhere appears that Houssiere, Latreille, and Arnaudet conveyed a one-fifth interest in their lands to the able counsel by whom they were represented, as compensation for professional services in -that litigation, and possibly in other matters, and it nowhere appears that they ever called on Spencer & Co. to assume any part of that burden. Incidentally, it may be-said, that one of the grounds upon which this court decided the Corkran suit in favor of the defendants was that it had not been instituted prior to the 12th of Hay, 1901 (Corkran Oil & Development Company v. Arnaudet, 111 La. 563, 35 South. 747); that the judgment so rendered did not become final until some time in January, 1904; and that the matter was then taken by writ of error to the Supreme Court of the United States, where it was pending long after the institution of the suit now before the court. It is said that Houssiere and Latreille did not know until 2% years after it had been made that the contract sued on has a term of 10 years. They, however, had a fair opportunity of obtaining that information before signing the instrument in which it is contained, and it does not appear that, prior to the trial of this case in 1905, they ever let the lessee know that they had not obtained it, or ever complained that they had been led into a contract in ignorance of its conditions.
What followed the making of the contract is told by Spencer in his testimony, to wit:
"A. After the leases were taken, we spent about $2,000 more, and we paid our different proportions, and then, as we were not oil men, we decided to see if we could not interest some parties in Beaumont in the hold we had, and Mr. Williams and myself went to Beaumont, and the first oil man we met was Mr. Scott Heywood. They were very successful men, had operated successfully at Spindle Top, and they were prominent and attracted our attention. We met him at the hotel, and told him we had acquired by purchase leases of large tracts of land —between 4,000 and 5,000 acres — in Acadia parish, on what they call 'Mamou Prairie,' and which had a gas seepage on one place which, for certain tests, had gotten certain results, and, judging from what we read in the papers about the Beaumont, or Spindle Top, oil field, there were indications that would induce practical oil men to come in with us. He agreed to come to Jennings and look the territory over, and in a week or ten days after the talk in Beaumont he came, and we took him out to the place and showed him the gas seepages. He took some notes as to what our holdings were and then went back to Beaumont. I do not remember whether he came back to Jennings, or we went to Beaumont; but I think we went to Beaumont, and then we had a talk with Mr. Scott Heywood and Mr. Dewey Heywood, and we entered into a contract with myself and .associates and themselves at Jennings, in which they agreed to drill two wells on our holdings, at a depth of 1,000' feet, in consideration of our transferring to them one-half interest in our holdings, and after the drilling of the two wells they would drill a third well before they would be released from their contract. That is my recollection of it now. I have not seen the contract for three, four, or five years. The agreement arrived at between myself and associates and Heywood Bros., or rather with Scott Heywood, was satisfactory to us, and after some delays they got their machinery on the grounds and began drilling, and after getting down the required 1,000 feet we only had a little showing for oil, and to us inexperienced people it looked rather gloomy, and the question came up as to where the next well would be drilled, and, if I remember right, I think the Heywood Bros, agreed to put the second on top of the first, to give the land a good test, if we would agree to release them from putting down the third well. That looked fair to us, and they went ahead, and finally brought in the first well, at 1,790 feet. It was 1,790 and some odd feet, I believe. Q. When, if at any time, was there excitement at Mamou, or at Jennings, with reference to the Jennings oil field? A. Never, until after that first well was brought in. Understand, of course, that there was, naturally, a little excitement among our local people, and a few outsiders came in after reading in the papers of the gusher, and we — the citizens of Jennings — rather helped along the newspaper notoriety. It was to our interest to do so."
The oil, seepage was in the southwest corner-of section 48, and as the Arnaudet tract lies between that section and the Latreille tract, whilst the Clement tract adjoins section 48 on the west, the drilling was prosecuted on those tracts first, as being nearer to the point at which it was supposed the oil would be found. Before the expiration of six months Latreille was paid the $50 called for by his contract for further delay, and a similar payment was made on or before January 19, 1902. In February, 1902 (the Hey-woods having, in the meantime, found oil), the plaintiff corporation was established, and the capital stock, represented by the holdings of Spencer & Co., which were transferred to the Corporation, and by the work done and .money invested by tbe Heywoods, was divided between tbe Heywoods and Spencer & Co. in accordance with the agreement as set forth in Spencer's testimony. Following •.that, on or before April 19, 1902, Latreille was paid a sum of $50 for a delay of three months ending July 19th. Upon the latter •date, however, a fire was raging in the oil field, and the payment of the rental for the succeeding three months was overlooked, and the amount was not tendered until July 23d, when it was refused, on the ground that the contract had been forfeited by reason of nonperformance; and tenders of quarterly payments subsequently falling due were likewise refused. Thereafter Houssiere, Latreille, and •others organized the Houssiere-Latreille Oil Company, defendant herein, and transferred to it the land or mineral rights in section 47, of which they claimed to be the owners, and the company proceeded to lease those rights to the different individuals and corporations joined herein as defendants, and in December, 1903, brought suit against plaintiff, complaining of a disturbance of its possession of the tract of 40 acres covered by plaintiff's lease, with the result that there was a judgment, rendered by this court, to the effect that the company was not in a position to maintain such an action, and that the contract between Latreille and the syndicate (as the transferee of Spencer & Go.) was prima facie valid. Houssiere-Latreille Oil Company v. Jennings-Heywood Oil Syndicate, 115 La. 107, 38 South. 932.
Returning, now, to the consideration of what others were doing, and of the effect, in April, 1901, of the oil movement on the value of Latreille's land: C. O. Duson (who has been mentioned as the tax collector by whom section 47 was sold to Gellert in 1882, and as a member of the firm of W. W. Duson .& Bro., which firm founded the town of 'Crowley and have been engaged in the real •estate business at that place ever since) appears to have lived in what is now the parish of Acadia, or in that section of the state, all his life, and from that circumstance,' together with his occupations, was particularly well informed in regard to land matters. He does not appear to have been interested in, much less excited about, oil, until some time in April (following the discovery, in January, of oil at Spindle Top). Having then associated himself with a few other citizens of Crowley, including Mr. Toler, Mr. Abbott, and Dr. Martin, they reconnoitered the field at Spindle Top, and, comparing the conditions which they found with those which they knew to exist in Acadia, set about putting themselves in a position to make a profit, should oil be discovered in that parish. Duson's attention was at once (or, perhaps, it would be more correct to say, had already been) directed to the McDaniel tract (section 48). He had purchased that property, some years before, for the Pacific Improvement Company, and W. W. Duson. & Bro.- were, and had been, the local agents of the owner, and had had it for sale for a long time, subject to the approval of the attorney in fact of the owner, who resided in the adjoining parish of Lafayette, and, knowing of the gas seepage thereon and of the mound on the Latreille tract, he and his associates concluded to buy section 48. W. W. Duson had, however, sold to Welman Bradford, for $200, payable within a short time, the privilege of buying that section at $11 an acre, and Bradford was taken into the association; the understanding being that the associates were to pay the $200, acquire the property, organize a company for its development, and give him (Bradford) one-eighth of the shares as a bonus. For the carrying out of this program it seems to have been found necessary to take in other persons; that is to say, the $200 cash, which was needed, was not exactly forthcoming; and was gathered, in sums of $25, from per sons who had not previously been consulted, principally friends of Dr. Martin, who had the matter in charge, after which, on April 11, 1901, the tract, containing 689.45 acres, was purchased for $7,050 (about $11 an acre), of which $1,800 was payable in cash and the balance in one, two, and three years. Duson testifies that he explained the matter fully to the attorney in fact of the owner (who, as we have said, resided, and still resides, in the adjoining parish, and is a most highly respected citizen), and that, with a full understanding of the conditions, that gentleman was of opinion that the sale would be a good thing for his principal. The Crowley Oil & Mineral Company was then formed, with a nominal capital of $200,000, and section 48, together with 10 acres at Anse la Butte, which cost $100, and the mineral rights in 23 acres, at the same place, which cost $1,200, were put into it, at a valuation of $55,000. One-eighth of the stock was then turned over to Bradford; one-half of the remainder was distributed among the promoters, at 20 cents a share (the shares being of the par value of $10); and the balance, less 5,000 (or, possibly, 2,000) shares, was reserved. The promoters then undertook to raise money by a sale of a portion of the 5.000 (or 2,000) shares to the public at 50 cents on the dollar. Being asked: "Was it uphill business to sell stock?" Dr. Martin replied:
"They were not taking in big quantities, and Mr. Crippen and myself decided to ask people to pay for the stock in order to develop our country. That was our understanding. So we went to work and commenced to talk about it on that line, and as soon as we sold 2.000 shares at $5 we would put down a well."
The doctor also testifies that they kept the daily paper pretty well supplied with inspired articles, and his testimony on that subject is corroborated by specimens of the articles referred to, which we find in the transcript. In that way, and by the diligent efforts of some of its members, the company after awhile collected money enough to begin the drilling of a well: but even then we do not discover the existence of any general excitement or enthusiasm. In the course of the drilling one of the holders of the stock gave 800' of his shares to Mr. Pavy in exchange for a tract of land which was valued at $800, and thought that he was getting the better of the bargain by thus disposing of his stock at 10 cents on the dollar (it having cost him only 2 cents on the dollar), and somewhat later, when the money which had been collected gave out, and no oil had been found, the company suspended operations in great discouragement and would go no further until the I-Ieywoods had "brought in" a well on the adjoining tract. Duson, it has been stated, called on Houssiere and Latreille and made propositions which were not accepted. One of the propositions was that they should divide their land into four tracts, and sell him 45 acres from each tract, at $10 an acre; he to undertake to protect them, as to the balance, against the Corkran claim. The other proposition was no better, and need not be stated. He testifies that they were willing at that time (during the month of April) to sell their entire property at $25 an acre, or say $10,000; and Dr. Martin gives testimony to the same effect. They deny this; but they say that Hurtevant, a neighbor of theirs, was going to Beaumont, and that they told him, if he found any one "foolish enough" to give a good price for their property, to let them know, and, upon his asking them what price they meant, they fixed the "foolish" price at $200 an acre. Section 40 (the "King Tract"), adjoining section 47 to the south, was for sale during the whole of the summer of 1901 at $12 an acre. The north one-haif of section 41, containing- 113.-52 acres, was sold to P. S. Spencer on April 12th for $l,740-.80, and it is affirmatively shown that, prior to the date at which oil was actually found, no one (save Duson) of fered to buy any of the Houssiere and Latreille land at any price, and that no better offer to lease any part of it was made than that of Spencer. When a well had been, or was about to be brought in, the owners received an offer, which was accepted, of $1,-000 for one acre, and $200 was paid to bind the bargain; but when the bidder learned of the Corkran claim he called the trade off and demanded and obtained the return of his money. It is shown that there are many known places, in Louisiana and elsewhere, where there is seepage of gas; that in most instances no attempt at development has been made; and that in other instances the attempts have proved expensive failures. The seepage at Anse la Butte, for instance, is said to be stronger than in the Jennings field, and the Heywoods have spent some $80,000 there in drilling for oil, with the result that at the end of three years (when this case was tried) they were getting about enough of that fluid to supply them with fuel for the engines by which it was being produced. There is seepage at Welsh, and it is said that over $200,000 have been expended there in the search for oil, with no result. There are oil indications at Sulphur, and Mr. Webster, a witness for defendants and a man of means, seems always to have been disposed to hold some land which he owns in that vicinity for all that it might possibly be worth. There has, however, been no successful attempt to develop oil there. Many thousands of dollars are shown to have been vainly spent in the Jennings field, and similar experiences are shown to have been met at Spindle Top and other places. In fact, there is, and there was in 1901, far less difficulty in finding promising places with good indications than in finding people who were, or are, willing to supply the money for their development.
In December, 1903, after the Corkran Case had been decided by this court, the Houssiere-Latreille Company leased the 40 acres in dispute to the Bayne Oil & Development Company; but before that concern got into the field plaintiff had begun drilling a well. The company thereupon instituted what is called the "possessory action," enjoined plaintiff off the property, kept its injunction in force by an appeal from a judgment dissolving it, and under cover thereof made leases to various of the other parties herein made defendants, and among them they have produced a vast quantity of oil, which is now in the hands of the sheriff under writs of judicial sequestration. One'of the questions presented in the ease is as to the rights of the defendants, should they be dealt with as possessors in bad faith, arising out of the fact that the oil in question has been produced at their expense. The learned judge a quo, though of the opinión that the contract about which the dispute has arisen is unreasonable and unconscionable, and should be decreed forfeited by reason of plaintiff's failure to pay the rental on or before July 19, 1902, considered himself bound by the ruling-of this court in the possessory action, and gave judgment, maintaining plaintiff's rights under said contract; distributing the oil on hand (subject to the payment of costs) in the proportions of 12% per cent, to the Houssiere-Latreille Oil Company, as transferee of Latreille, 00 per cent, of the remainder to the defendants by whom it was produced, respectively, and the other 40 per cent, of such remainder to plaintiff; reserving to defendants the right to remove all their improvements and pipes, if possible; dismissing the suit as to J; C. McCullough and J. P. Smith, who are shown to have no interest; condemning all the defendants, save McCullough, Smith, the Texas Company, and the Producers' Oil Company, for costs; ordering the ease to remain on the docket as to the two companies last mentioned, who were not parties to the trial; and directing that "the sheriff hold the oil now in his hands until his costs shall have been paid. From the .judgment so rendered plaintiff and the Houssiere-Latreille Oil Company, defendant, prosecute this appeal, and the other defendants have answered, praying the court to reverse the judgment appealed from and give judgment as prayed for by them and the company, .appellant, or, if the judgment awarding the property to the syndicate be affirmed, that -the court also affirm it in so far as it disposes of the oil, or else that the court so amend the judgment as to allow defendants' claim as producers of the oil, as set forth :in the pleadings and evidence.
Opinion.
In what is called the "possessory action," heretofore decided, it was held that the contract here sued on, purporting to be a lease for a term of 10 years of mineral rights in .a 4.0-acre tract of land in an unproved part •of the country, whereby the contractor, agrees to commence operations within six months, or pay $50 quarterly, in advance for each additional three months such operations are delayed, until an oil well is completed, and whereby he is given the right to remove his machinery at any time, and to cancel • the •contract, on payment of $100 at any time, .and whereby, in the event of the discovery •of oil and gas, the yield is to be shared by the contracting parties in certain proportions, was not void upon its face for want •of mutuality or as containing a potestative condition. Houssiere-Latreille Oil Co. v. Jennings-Heywood Oil Syndicate, 115 La. 107, 38 South. 932.
For the purposes of the judgment so rendered it was assumed that there had been no fraud, misrepresentation, or coercion prac-ticed by the defendant (the present plaintiff), .and that the contract was no more unconscionable, by reason of conditions not dis-closed, than it appeared upon its face. It has now been shown that Latreille entered into a contract, apparently legal (and which may be called a "lease"), granting to Spencer, the other contracting party (whom we will call the "lessee"), the right upon certain conditions to exploit 40 acres of his land in search for oil and gas, during a period of 10 years or longer, and to enter upon and use the land during that period for that purpose. By the terms of the contract the lessee was authorized, without consulting the lessor, to transfer his rights therein and substitute another person in his place, and acting under that authority, after recording the contract in the public records, he made a transfer such as was contemplated to S. A. Spencer & Co., and the contract remained so recorded for more than 9 months, during which period the lessor made no objection or protest upon any ground whatever, but received from the substituted lessees two payments in cash, made in execution of the contract as written. Thereafter the substituted lessees transferred their rights to the plaintiff, from whom, a month or two later, the lessor received, in further execution of the contract, a third payment in cash; and when, upon the next occasion a payment was tendered, the money was refused, not upon the ground that the contract was illegal, either as to the plaintiff or any one else, but upon the ground that it was forfeited, because, it was said, the tender came too late.
In their attack upon the contract, so made and so partially executed, the defendants do not allege that the plaintiff, as the transferee through mesne conveyance of the original lessee, was a party to or had notice of the fraud, misrepresentation, and coercion said to have been practiced by the latter, and the judge a quo properly excluded all evidence offered in support of the allegations as made on that subject. Fletcher v. Peck, 6 Cranch (U. S.) 133, 3 L. Ed. 162; Harris v. Harris, 109 La. 913, 33 South. 918; Snoddy v. Bras hear et ux., 3 La. Ann. 569. Houssiere and Latreille, as .witnesses for defendant, were nevertheless, and upon the theory that another purpose would thereby be subserved, Allowed to detail all the circumstances connected with, including the representations made prior to and at the time of, the making of the contract, and to state the influence upon their minds of considerations which do not appear, and are irreconcilable with those expressed, in the writing to which •the contract was reduced; and, after giving their testimony our careful attention, we find that it fails to sustain the allegations referred to, whether for the purpose for which it was admitted or for any other purpose. To the contrary, it will, we think, satisfy any reasonable mind that Elms took no advantages of Latreille, and attempted to take none; but that the contract was submitted to Latreille for his perusal, and read by him, And was explained by Elms, in French, so far as explanation was thought to be necessary. It is nowhere denied that Latreille read the contract, and it is proved and admitted that he could read and write English, though imperfectly, and that both he and Houssiere could read and write in French. It is also proved that the advice of a competent lawyer was available to them, and that Latreille obtained such advice for the purpose of his negotiation with Duson, and learned thereby that the prescriptive period needed for the protection of his title would be completed on the 12th of May. It is not pretended that they did not know that the lessee had the privilege of terminating the contract upon the payment of $100, and whilst they testify that they made requests, and received promises, that the first well, or the next well, •should be drilled on Latreille's land, it does not appear that they ever made such a demand as a matter of right under the contract, -or that they ever made it at all of any authorized officer of the plaintiff company, and Latreille testifies that he did not always make it when he received his rental, although there were but three such occasions. Under these circumstances, considering their admitted knowledge- and means of knowledge and the course of conduct pursued by them afterwards, we find nothing to authorize the assumption that they (or Latreille) would (or need to) have signed the contract without knowing what it contained; and, when they say that they did not know that the term was 10 years, we conclude that they mean that they did not understand the stipulation on that subject to be susceptible of the interpretation that the lessee might, at its option and on payment of the rent, delay the actual drilling for oil during that period. Whether one knows of the existence of a particular stipulation in a contract to which he affixes his signature, and whether he and the other contracting party will thereafter agree as to the meaning of such stipulation, are, however, distinct questions. As to the stipulation referred to, we are of opinion, for the reasons stated, that Houssiere and Latreille knew of its existence; and they knew as much of the interpretation that would be placed on it by the courts, in case they should disagree with the lessee, as did the lessee.- Whether that stipulation is properly susceptible of the interpretation suggested, and of no other, need not here be determined. It was said by this court, in deciding the possessory action, that the lessee was bound to drill within the term of the contract, or pay $100, or subject itself to an action in damages; but it was not said that under particular circumstances, as, for instance, if it should have been shown that Latreille's land was being drained of its oil by means of wells drilled and operated on adjacent tracts, a remedy might not have been found. It is, perhaps, an implied obligation of the lease that the land and the lines of the lessor should be protected; but the demand for such protection was not, nor could it have been, and is not, nor could it be, the foundation of the possessory or of the instant suit, since the lessee was actually drilling for oil and protecting the lessor's lines to the best of its ability when the suit first mentioned was begun, and the purpose and effect of that suit was to prevent it from continuing its operations. The charge that Latreille was coerced by any threat made by Elms with regard to the Corkran claim Is unsustained by the proof. It is evident that Elms made no such threat, and, if he had, it would have constituted no ground for the setting aside of the contract, since it does not appear that his relation to Latreille was such as to give his threat any particular weight, and he had the right to buy the Cork-ran claim, if he thought proper, and to inform Latreille of his intention. Nor do we think it established that in obtaining the lease he assumed any obligation towards Latreille with respect to the Corkran claim; for, if he had done so, the obligation should have been incorporated in the written instrument prepared and signed for the purpose of witnessing the obligations agreed on, and Latreille should have demanded compliance therewith when, in December, 1901, suit was brought on that claim for the recovery of the whole of section 47. But the contract is silent upon the subject, and it is nowhere suggested that such demand was made.
As an independent proposition it must be conceded that it is not within the power of the courts to prohibit the owner of land worth §10 an acre from leasing it for 10 years at §5 an acre; and there is no law that authorizes the owner to oust or disturb the lessee's possession during the term of his lease for the purpose of exploiting the land for oil or of selling it at a higher price. If, therefore, Latreille, in the year 1900, had leased his 40 acres to Spencer for 10 years at §5 an acre, he could not thereafter, by reason I of the discovery of possible mineral wealth, beneath the soil, have canceled the lease. Im that case, however, he would (we will assume, although it is not really so) have acted, in total ignorance of such possibility and would have been entitled to sympathy, upon its being afterwards ascertained that lie-had unwittingly precluded himself for so-long a period from realizing a fortune frorq the leased land. In the instant case it is-shown that he acted with his eyes open; that he and Houssiere had for years known of the-gas seepage and the mound; that the possibility that the gas indicated oil had been a matter of common conversation; that he-knew of the excitement at Spindle Top, where speculators and others, wise and unwise, were buying and selling land at extravagant prices; and he had had one or two-offers with reference to his own property. He also knew that there was ño gas seepage on his land, and he may have heard that the-oil at Spindle Top had not been found under-the mound, but at the places where the gas-seeped through and elsewhere. And with, this knowledge he entered into the contract here sued on, and, whilst reserving the use-of his land for all ordinary purposes, secured for himself an annual rental in cash equal to-one-half its ordinary value, plus one-eighth, of the oil that the lessee, at his own expense,, should discover and deliver to him. We are-informed by the testimony in the record that: there are many tracts of land in Texas, besides Spindle Top, and many tracts in Louisiana, besides the Mamou Prairie, upon which there are gas seepages, and that, whilst upon some of them vast amounts of money have-been expended in the fruitless search for oil,, no one has as yet been found to exploit the others. Whether it would be wise for-the owners of the exploited, or the unexploited, or the partially exploited, tracts to sell them, or to lease them for a term of years, or to lease merely their oil possibilities, are- matters which, under the law, they- — the owners — alone have the right to determine, and this court is utterly without authority to render a decree which shall, in effect, say to such an own.er: "You may not reserve to yourself the ordinary use of your land, and grant to another person the privilege at any time within ten years of exploiting it for oil, unless the consideration shall meet with our approval; and we shall not approve such a contract unless the grantee agrees to pay more than one-half the ordinary value of the land quarterly in advance by way of rental so long as he delays operating, and more than one-eighth of the product in the event of his discovering oil."
It is true our law undertakes to interfere to some extent with the right of the citizen to do as he pleases with his own; but it defines and limits the cases to which such interference extends with great precision. Thus, quoting from the Civil Code:
"Art. 1SG0. Lesion is the injury suffered -by one who does not receive a full equivalent for what he gives in a commutative contract. The remedy given for this injury is founded on its being the effect of implied error or imposition ; for, in every commutative contract, equivalents are supposed to be given and received.
"Art. 1861. The law will, however, not release a person of full age, and who is under no incapacity, against the effect of his voluntary contracts, on account of such implied error or imposition, except in the two following cases: (1) In partition, where there is a difference in the value of the portions to more than the amount of one-fourth to the prejudice of one of the parties. (2) In sales of immovable property, the vendor may be relieved if tlie price given is less than one-half of the value of the thing sold; but the sale cannot be invalidated for lesion to the injury of the purchaser.
"Art. 1862. Lesion can be alleged by persons of full age in no other sale than one of immovables, in which is included whatever is immovable by destination.
"Art. 1S63. Persons of full age are relieved for lesion in no other contracts than those .above expressed; not even in exchange, which bears some resemblance to the contract of sale."
Construing this law, our predecessors iu this court have said:
The right to rescind a sale for lesion beyond moiety is the only restraint upon the liberty of the citizen to bind himself and his property according to the dictates of his own judgment, and the evidence relied on to establish that right should be peculiarly strong and conclusive." Demaret v. Hawkins, 8 La. Ann. 484; Mayard v. Laporte, 109 La. 110, 33 South. 98.
"Much has been said about the lesion which affects this contract. It is greatly exaggerated in the statement of counsel. But the law is emphatic that lesion, however enormous it may bo, has no effect upon the contracts of persons of full age, and under no incapacity, except in certain designated contracts, and this is not one. Civ. Code, art. 1861; 2 Mourlon, p. 553." Prescott v. Cooper, 37 La. Ann. 559.
Article 2464 of the Civil Code provides that:
"The price of the sale must be certain, that is to say, fixed and determined by the parties. It ought to consist of a sum of money, otherwise it would be considered an exchange. It ought to be serious, that is to say, there ought to have been a serious and true agreement that it should be paid. It ought not to be out of all proportion with the value of the thing; for instance, the sale of a plantation for a dollar could not be considered a fair sale. It would be considered as a donation, disguised."
This article is found under the subtitle, "How the Sale is Perfected," and deals with the price as one of the essential elements of that particular contract. It is evident, however, that the contract here in question is not a sale. It is equally evident that, if the remedy given for lesion, in cases of partition and sale, and the rule thus applied to the price, in the latter contract, had been intended to be applied to the consideration in all contracts, the lawmaker would have so declared, and that he would not, in terms, have limited its application, as has been done in the articles cited. From which it follows that mere inadequacy of consideration would constitute no ground for declaring the contract sued on to be of no effect. The learned counsel for defendants, as we understand it, rely upon the doctrine applied by the courts that:
"Where the inadequacy is so gross as to shock the conscience and common sense of all men, it may amount, both at law and in equity, to proof of fraud, oppression, and undue influence."
Considering the case in the light of this doctrine we are confronted with the facts (which, for the most part, have already .been stated), to wit: Latreille's land was worth, for ordinary purposes, hardly $10 an acre, and it is doubtful whether his gross revenue from the whole tract (200 or more acres) had ever exceeded $300. Spencer paid him $50 in cash, and agreed to pay him $50 quarterly in advance (or $200 a year), for the right to drill for oil on 40 acres, and further agreed to deliver to him one-eighth of the oil that might be produced and saved, etc. The fact that Latreille was, in the meanwhile, to retain the possession and enjoyment of the land, save in so far as he might be disturbed by Spencer's operations, and that he would, in any event, whether oil was found or not, receive annually, one-half of the surface value of the tract leased, and give practically nothing in return, was worthy of, and no doubt received, his consideration. The value of the land to Spencer had, however, no such elements of certainty. It depended upon the possibility of his finding some one who would be willing to risk his money in the search for, and who would find, oil; and, as there were gas seepages In many places, those possibilities were not particularly valuable assets, nor did they produce any material effect upon the value of the land, save in the hopes and dreams of the parties immediately concerned. Otherwise that value remained as it had been, and, we apprehend, would have so remained until this day, but for the initiation and prosecution of an actual movement for the discovery of the oil finder, and through him of the oil. The movement initiated by Spencer and his associates and by Duson or Martin and their associates, was, therefore, the cause, and not the effect of and hence preceded, and did not follow, the speculative appreciation in the value of the-land; and as it was, even then, altogether uncertain whether oil would be found at all,. and where, and whether in sufficient quantities to make its extraction profitable, that appreciation -was by no means marked at: first, and values fluctuated, with the hopes- and fear of the promoters, up to the moment(during the summer of 1901) when the Hey-woods actually "brought in" the first well-Whether, then, the consideration which Spencer agreed to give and Latreille to receive was adequate or inadequate, reasonable- or unreasonable, was a question the answer-to which was to be determined by no definite standard, but depended upon the temperament and habit .of thought of the individual to whom it was at that time propounded. O. O. Duson testifies that, about the time that he and his associates bought section 48 (for $7,050), he thought it was. 'worth $500,000. W. W. Duson, his brother, testifies that his opinion, at that time, was-that C. O. Duson and his associates were crazy. And O. C. Duson admits-that, when the Crowley Company had spent the money collected by it (mainly from the public at large and as the result of inspired articles in the daily paper and appeals to local pride)in drilling a well and had found no oil, it ceased operations, and would probably never-have resumed them if the Heywoods had not prosecuted similar work successfully. Webster, also a witness for defendants, testifies-that he would not have made such a contract as that sued on with respect to 1,200 acres. of land owned by him near Sulphur, where-there were oil indications, and which is probably nearer the Spindle Top than is PrairieMamou; but it is quite certain that if he had done so, and the contract had been executed, in the matter of the quarterly payments, he would, up to the time that he testified, have received some $27,000 in the-way of rental, and would, so far as we are- informed, have been about as near finding oil on his land, and about as near selling the land at a speculative valuation as he was without such rental. It is by no means certain, however, that the person who might have paid the $27,000 would have found it a profitable investment. There is, besides, a mass of testimony (if it can be so called) in the record, consisting of personal opinions, given on the witness stand in 1905, as to the oil value on April 19, 1901, of the 40 acres of land, and as to the reasonableness of the contract here in controversy; but, whilst we have no reason to doubt the sincerity of the witnesses, none of them were thoroughly informed as to all the factors which properly entered into the determination of that question. Some of them were at Spindle Top at the date in question, and as not one of them appears to have worked in rice fields for nine years, or to have supported his family on $300 a year, or to have been in a poor condition financially, they could not well have seen the matter from Latreille's point of view. Upon the other hand, we do not find that either of them, at that date, invested any considerable amount of his own money in the Mamou oil fields, and we are inclined to agree with the view, expressed by our predecessors in this court, that:
"In appraising the probable value of lands at a past period, it is almost impossible to guard the mind from the influence of those accidental circumstances which have given it its present value. One readily supposes that be would have had the sagacity to forsee those circumstances." Snoddy v. Brashear, 13 La. Ann. 471.
It is again urged (as it was urged in the possessory action) that the $100 that Spencer was to pay in the event of his abandonment of the contract was inadequate as a consideration, and hence that the whole agreement was founded on a potestative condition; and we repeat, what we have already said, that the parties had the right, in making the contract, to fix the terms upon which it might be terminated, just as they would have had the right to fix those terms after the contract had been made. Instead of the $100 as; the amount to be paid by Spencer, they might have agreed on $10,000 (which was-the amount for which, it is said, that both; Houssiere and Latreille were willing at that' time to sell all the land they owned), and it could not have been contended in such case that the contract was founded on a potestativecondition. The question, then, relates to the amount. The $100 can only be regarded as a liquidation of the damages that Latreillemight have sustained in the event of Spencer's abandonment of the contract; but we-are unable to discover in what -way any damages could have been sustained by such action, since it is hardly to be supposed that the contract would have been abandoned: without the drilling of a well, unless it had. become reasonably certain that no oil would be found, in which case Latreille would have-sustained no damage by the abandonment,, and, if it had been abandoned after the finding of oil, he would have regained the control, of his land, plus a producing well. The fact is, it was not the abandonment of the contract that he had reason to fear; but he-might have been apprehensive that, by holding on to the contract and delaying the drilling for oil, the lessee would prevent the advantageous sale of the land and might allow it to be drained of its oil by wells on the adjacent tracts. So far as the keeping of the land out of the market is concerned, that happens to every lessor who makes an ordinary lease, and it would be rather startling-for a court to hold that, because of a speculative rise in the value of leased property, the-lessor should be allowed to cancel the lease. As to the danger of drainage, it may be that,, in a case presenting that issue, some relief should be afforded; but we do not consider this such a case. Plaintiff held leases (no-more favorable to it than the Latreille lease) on the Arnaudet and Clement tracts, both; of which are nearer to the gas seepage on •section 48 than is the Latreille tract, and neither of which was involved in any threatened or actual litigation affecting the title; and it began drilling on those tracts because it was considered more likely that oil would "be found on them than on a tract which was more remote. Subsequently (after the Cork-ran suit had been instituted, and after the defendant had taken the position that Latreille's lease was forfeited), plaintiff was deterred from operating on the Latreille tract by the complication of the situation, until it was driven to assume the risk by the action of the defendant company in leasing the property to the Rayne Planters' Oil & Development Company. We find nothing in these •circumstances to indicate that plaintiff was acting in bad faith or with any purpose to .allow Latreille's land to he drained; nor do we find that there was any immediate danger of such a result — the testimony on that subject being entirely inconclusive. Nor was that the ground upon which the defendant undertook to declare the forfeiture. In fact, .as we have seen, plaintiff was actually engaged in drilling a well on the Latreille tract •when the possessory action was instituted and it was enjoined from the further prosecution of the work. We are therefore of opinion that the consideration moving towards the lessor was and is amply sufficient, and particularly is this true in view of the aleatory character of the contract; that is to •say, of the fact that it is based upon the wholly uncertain event of the finding of oil in a field from which no oil had ever before been produced. Beale v. Ricker, 7 La. Ann. 667; Demaret v. Hawkins, 8 La. Ann. 484; Prescott v. Cooper, 37 La. Ann. 559; Parker v. Talbot, 37 La. Ann. 22; Linkswiler v. Hoffman, 109 La. 947, 34 South. 34; Copley v. Flint & Cox, 16 La. 380.
The proposition that the contract was forfeited by reason of the failure of the lessee either to begin operations or to make the quarterly payments prior to July 19, 1902, is untenable. The contract contains no provision for its ipso facto forfeiture in the event of such failure, and the law does not favor forfeitures and does not impose that penalty in a case of this kind. The violation having been passive, it was necessary that the obligor should have been put in default. Civ. Code, arts. 1912, 1913, 1926, 1931, 2046, 2047; Charpaux & O. Vallette v. Bellocq, 31 La. Ann. 164; Gayden v. Railroad Co., 39 La. Ann. 269, 1 South. 792.
The Supreme Court of Indiana, whose jurisprudence is about as favorable to the lessor as any that we find, had presented to it, during the past year, a case in which the lease was founded on a consideration of $1, coupled with an agreement to drill a well within two months, "or thereafter pay in advance for further delay a quarterly rental of $20"; there being no term fixed in the lease, and it not appearing, from the report of the case, what the other stipulations were. The' lessee had made five quarterly payments, which had been received without objection, but had omitted to make the sixth payment within the time prescribed; and ten days later, no tender of payment having been made and no work having been done in the meanwhile, the less- or brought suit for the forfeiture of the contract. In disposing of the case the court said (inter alia):
"There are many things to be taken into account in arriving at a fair and rational construction of a contract like this. The usual rivalry-in procuring leases in the limited oil and gas territory, the time and expense required in drilling wells, the peculiar character of the fluids, the difficulties and delays in providing pipe lines, and the methods of storage and transportation, are all matters generally present at the making of such a contract. Besides, without a market, the operator can ill afford, and it will avail the landowner little, to put down a well before transportation lines have approached within accessible distance. Under a contract of this sort parties must act fairly with each other. The landowner must be given a fair opportunity to compel such timely operation as will preserve the underlying oil and gas and prevent it being mined through wells on other premises, while, on the other hand, he will not be permitted to take advantage of delays that have been reasonably induced by his own conduct and force forfeiture for nonperformance. The operator must have a fair chance to perform his contract. He has not had a fair chance in this case. If appellees, when they accepted the advance payment on March 10th, or at some other reasonable time, had given appellants notice that they must drill a well within that quarter and that no further extension of time would be granted, then we should have quite a different question. • This action, however, is brought and prosecuted upon the theory that the failure to drill a well within the paid period put an end to their right to drill one at all. This view is erroneous." New American Oil & Mining Co. v. Wolff (Ind. Sup.) 76 N. E. 255.
In National Oil & Pipe Line Co. et al. v. Teel et ux. (Tex. 1902) 67 S. W. 545, the Court of Civil Appeals of Texas held that a contract calling for the drilling of a well within two years, on pain of forfeiture, but that the forfeiture might be averted by annual payments in advance, there being no term fixed, was an option, which might be rescinded by the owner of the land, in the absence of any equities, owing to work having been begun by the other contracting party. In Allegheny Oil Co. v. Snyder, 106 Fed. 764, 45 C. C. A. 604 (Ohio, 1900), the lease read:
"In case no well shall be drilled within two years from the date hereof, this lease shall become null and void, unless the lessee shall pay for the further delay at the rate of $1 per acre, at or before the end of each year thereafter: that the lessee shall have the right, at any time, to surrender this lease for cancellation, after which all payments shall cease and this lease become null and void."
The court said:
"An instrument in such form is more than a mere license. It is a lease of the land, for the purpose and period limited therein, and the lessee has a vested right to the possession of the land, to the extent reasonably necessary to perform the terms of the instrument on his part, It is claimed that the consideration of $1 may support the grant of the 2-year term, but that the privilege of extending the same beyond the term of 2 years is supported by no consideration, and is entirely at the option of the lessee, and before it can become a binding agreement requires an engagement on the part of the lessee to pay the stipulated sum of $1 an acre. We are of opinion that this lease constitutes an entire contract, and that the consideration recited supports, not only the grant of the 2-year term, but as well the privilege of extending the time of drilling, by paying the stipulated price therefor. » It is an indivisible agreement. Each part of it must be given effect. It is urged that this construction permits the lessee to hold the territory for the term of 25 years, without drilling or developing the same, paying only the rental of $114 a year, and that this would work great hardship to the landowner. This contract, in view of its peculiar purpose and object, has written into it an implied covenant on the part of the lessee that he will drill and operate such number of oil wells on the lands as would ordinarily be required for the protection of the oil contained on such lands and affords ordinary protection to the lines. This was the holding of the Supreme Court of Ohio; and the lessor is not obliged to let the lessee hold the land indefinitely, but may have an action upon this implied covenant for the proper development of the oil and gas on the premises. It is said that the effect of this copstruction would be to specifically enforce a contract based upon an entirely inadequate consideration, and that an injunction restraining the parties interested from interfering with the lease held under Snyder will have an effect to specifically enforce that contract. ln gugh cases, mere inadequacy of consideration is no reason for withholding specific performance."
In Guffy v. Hukill, 34 W. Va. 49, 11 S. E. 754, 8 L. R. A. 759, 26 Am. St. Rep. 901, and the Eclipse Oil Co. Case, 47 W. Va. 84, 34 S. E. 923, it was held that by the stipulations authorizing the surrender of the leases at will (and as a matter of fact without the payment of any sums of money by way of liquidated damages or otherwise) the obligations of the lessees became (in effect) purely potestative, and hence that the contracts were void. In Friend v. Mallory, 52 W. Va. 53, 43 S. E. 114, the same court sustained a contract containing a similar stipulation, distinguishing the two oases above mentioned by the fact that in those cases the amounts agreed on as consideration for the delay in beginning operations had been paid, and the delay thus paid for had not expired when the lessor acted.
In Leatherman v. Oliver (1892) 25 Atl. 309, 151 Pa. 646, it was held that:
"Under an oil lease for a term of years, which provides that the lessee shall complete a well on the leased premises within six months or pay an annual rental until he does so, a clause in such lease providing that the agreement shall, be void if the lessee does not complete the well or pay the rent within ten days after it is due, and that after such failure neither party shall have a right of action against the other by reason of the breach of any agreement in the lease, does not take away the lessee's liability to pay the rent, where he fails to complete the well, but such clause constitutes merely a provision by which the lessor can forfeit the contract on the lessee's failure to comply with the other terms of the lease."
We have examined many other decisions, rendered by courts to which oil leases have long been familiar, and have found none in which a lease such as is here presented has been held void for want of consideration, or decreed forfeited under circumstances such as are disclosed by the transcript in this-ease.
In conclusion, we may observe that whilst, by reason of the manner in which the case has been presented, we .have been led -into rather an extended review of the facts, we are inclined to think that, save as to the alleged forfeiture, the whole matter was logically disposed of in our affirmance of the ruling of the trial judge excluding the testimony offered in support of the charge of fraud, etc., since it has heretofore been held that, prima facie, the consideration of the contract is adequate, and its inadequacy, as affected by the facts existing at the time that the contract was entered into, falls under the ruling to which we have referred. In the branch of this litigation entitled "Jennings-Heywood Oil Syndicate v. Houssiere-Lattreille Oil Co.," 116 La. 1058, 41 South. 255, it was held that:
"The syndicate's right of possession attached to the oil as a product of the soil, • and the operating expenses should be deducted from the proceeds of the well."
The learned judge of the district court has directed that, subject to the payment of the costs, the oil which has been producecL by the defendants (save the Texas Company and the Producers' Oil Company) be distributed in the proportion of one-eighth to the' Houssiere-Latreille Oil Company, as the transferee of Latreille, 60 per cent, of the balance to the producers, respectively, and the remaining 40 per cent, of such balance to the plaintiff. We find a paragraph, at the end of one of the briefs filed on behalf of plaintiff, rather objecting to this distribution, and, on the other hand, counsel representing the Moonshine Oil Company (one of the producers) have filed a brief praying that (in the alternative) the judgment appealed from be affirmed in that particular.' The judge a quo correctly proceeded upon the theory that plaintiff is to get the oil, less the royalty of one-eighth and less the cost of production, and has, as we understand it, fixed upon 60 per cent, of the remaining 87% per cent, (or 52% per cent, of the whole product) as fairly representing that cost. We do not, at present, discover any objection to that disposition of the matter, and, as no specific ground of objection has been suggested, it will remain undisturbed.
It is therefore ordered, adjudged, and decreed that the judgment appealed from be affirmed, and that the costs of the appeal be equally divided between the two appellants.
NICHOLLS, J., takes no part not having heard the argument. PROVOSTY, J., concurs in the decree.