Case Name: OWENS et al. v. CORSICANA PETROLEUM CO.
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1914-05-30
Citations: 169 S.W. 192
Docket Number: No. 629
Parties: OWENS et al. v. CORSICANA PETROLEUM CO.
Judges: 
Reporter: South Western Reporter
Volume: 169
Pages: 192–201

Head Matter:
OWENS et al. v. CORSICANA PETROLEUM CO.
(No. 629.)
(Court of Civil Appeals of Texas. Amarillo.
May 30, 1914.
On Motion for Rehearing, June 27, 1914.)
1. Appeal and Error (§ 213 ) — Presentation of Grounds of Review — Necessity.
Acts 33d Leg. c. 59, declaring that objections or exceptions to the charge of the court not made in the trial court shall be deemed waived, does not apply to peremptory instructions, such as the direction of a verdict.
[Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 1149, 1165, 1304^1308; Dec. Dig. § 213. ]
2. Appeal and Error (§ 719 ) — Matters Reviewable — Fundamental Error.
The action of the trial court in directing a verdict is an error apparent upon the face of the record, which the appellate court will consider as fundamental error, even in the absence of an assignment of error.
[Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 2968-2982, 3490; Dec. Dig. § 719. ]
3. Contracts (§ 10 ) — Validity—Unilateral Contract.
A contract between an owner of oil lands and an oil company, giving the company the right to bore for oil, or to pay quarterly rentals, which, upon acceptance by the owner, extended the contract for another quarter, or to surrender the lease at any time upon the payment of $5 to the owner, was a unilateral contract, void for want of mutuality, the $5 being merely a nominal consideration and no consideration for the grant; so that, where the company fook no steps toward boring a well for 18 months, although it drilled wells upon three sides of the land in question, the effect of which would be to drain oil from it, the owner, on refusal of the agreed rental, had the right to cancel the lease; this being due to the nature of the business of oil mining, and to the temptation offered a shrewd operator to purchase at a nominal price the right to develop lands the owner of which is ignorant of their real value, and to hold them indefinitely for speculation, neither working them himself nor permitting another to do so.
[Ed. Note. — For other cases, see Contracts, Cent. Dig. §§ 21-40; Dec. Dig. § 10. ]
4. Mines and Minerals (§ 78 ) — Leases — Time for Performance.
Under such contract the company, without notice that the owner would refuse one of the quarterly rental payments, did not have a reasonable time after his refusal to begin boring a well; since the purpose of the extensions was to enable the company to develop the property and to pay the real consideration for the exclusive grant.
[Ed. Note.— For other cases, see Mines and Minerals, Cent. Dig. §§ 205-207; Dec. Dig. § 78. ]
5. Mines and Minerals (§ 77 ) — Lease — Waiver of Forfeiture.
A lessor, by permitting the lessee to expend large sums of money in developing oil property, may waive his right to declare a forfeiture provided by the lease.
[Ed. Note. — For other cases, see Mines and Minerals, Cent. Dig. § 204; Dec. Dig. § 77. ]
On Motion for Rehearing.
6. Mines and Minerals (§ 73 ) — Contracts and Conveyances — “Option.;’
• A contract or lease made whereby the owner, in consideration of a certain amount, granted all the oil, etc., under the lands for ten years, and as much longer as oil, etc., was produced in paying quantities, yielding to the owner one-eighth part of all oil produced, providing that the company should complete a well within one year thereafter or pay to the owner as a lease rental a certain amount each quarter during the term or until the well was completed, that the drilling of a productive well should be full consideration for the lease, that the company might surrender the lease at any time upon payment of $5, or continue it from quarter to quarter by making the agreed quarterly payments, and that the owner disclaimed any right to forfeit the lease on account of the option thereby granted for a valuable consideration, was an “option” contract, and nothing else. (Citing Words and Phrases, vol. 6, pp. 5000-5002; vol. 8, p. 7739.)
[Ed. Note. — For other cases, see Mines and Minerals, Cent. Dig. §§ 201, 210; Dec. Dig. § 73. ]
7. Mines and Minerals (§ 78 ) — Conveyance and Contracts.
Under such contract the company had 12 months within which to complete a well, and was required to begin operation within such time as would enable it to complete the well within that time; the provision for extension of the lease for 3 months after payment of each quarterly rental being to enable the company to complete a well already begun within 12 months, and not to give it time during which it might hold the land and delay its development or the commencement of a well.
[Ed. Note. — For other cases, see Miñes and Minerals, Gent. Dig. §§ 205-207; Dec. Dig. § 78. ]
8. Mines and Minerals (§ 78 ) — Contracts and Conveyance — Construction.
Contracts in which land is leased for development for oil are to be construed most favorable to the lessor, and, in order to preserve its rights, the lessee must begin performance within a reasonable time, and continue performance with reasonable diligence; for the reason that discovery and production of oil is a condition precedent to the continuance or vesting of any estate in the premises, that such operations make the land less valuable for agricultural purposes and, if delayed, result merely in speculation.
[Ed. Note. — For other cases, see Mines and Minerals, Cent. Dig. §§ 205-207; Dec. Dig. § 78. ]
9. Mines and Minerals (§ 73% ) — Contracts — Duration.
While the failure to have a time limit upon a contract or lease for the prospecting and development for oil wells, is a ground upon which it might be declared to be void, a limit of ten years during which the lease might be extended from quarter to quarter on the payment of the rentals at the option of the lessor should not establish the validity of such a contract.
TEd. Note. — For other cases, see Mines and Minerals, Cent. Dig. § 200; Dec. Dig. § 73%. ]
Appeal from District Court, Wichita County ; P. A. Martin, Judge.
Action by Mrs. M. J. Owens against the Corsicana Petroleum Company and others. Judgment for defendant, Petroleum Company, and plaintiff appeals.
Reversed and remanded.
Slay & Simon and Theodore Mack, all of Ft. Worth, for appellant. Geo. C. Greer, of Dallas, and Carrigan, Montgomery & Britain, of Wichita Falls, for appellee.
For other oases see same topic and section NUMBER in Deo. Dig. & Am. Dig. Key-No. Series & Rep’r Indexes
Writ of error granted by Supreme Court.
For other eases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep’r Indexes

Opinion:
HALL, J.
Mrs. Maria J. Owens, as the surviving wife of M. J. Owens, deceased, and in her own behalf, as well as for the heirs of said decedent, instituted this suit against appellee and S. B. Brooks, its receiver, Mrs. Julia Owens, and Gus Owens, as defendants, for the cancellation of a lease on 188 acres of land. Among other stipulations not necessary to the determination of the questions involved, the lease contained the following:
"Witnesseth: That the grantors in consideration of twenty-eight and 2°/ioo ($28.20) dollars, in hand paid by the grantee, the receipt of which is hereby acknowledged, has granted, bargained, sold, and delivered unto the gram tee all the oil, gas, coal, and other minerals in and under all that certain tract of land hereinafter described, with covenants of general warranty, and that the grantors have the sole right to convey the premises with' the exclusive right of drilling, mining, and operating thereon for and producing oil, gas, coal, and other minerals with all the rights necessary and incident thereto, such in part as right to construct and maintain telegraph and telephone and pipe lines, and roadways leading to and from adjoining lands on and across the premises and other lands of the grantors and the right to erect and maintain buildings and other structures and to use water from the premises for convenience in and the purpose of operating this and neighboring lands, and the right of removing, either during or after the term hereof, any property or improvements placed or erected on the premises by grantee."
"To have and to hold unto and for the use of the grantee, for the term of ten years from the date hereof, and as much longer as oil, gas, and other minerals are produced in paying quantities, yielding to the grantors the one-eighth part of all oil produced and saved from the premises, delivered free of expense into tanks or pipe lines to the grantor's credit, in which part shall be included any royalty or interest in said oil that may have been heretofore sold, reserved, or conveyed by said grantors or their predecessors in title."
"Grantee agrees to complete a well on said premises within oáe (1) year from the date hereof, or thereafter pay to grantors as lease rental twenty-eight and 2»/ioo ($28.20) dollars, each three months in advance from the 6th day of June, 1912, from quarter to quarter, to the end of the term or until said well is completed (or this lease is surrendered as herein stipulated), and the drilling of such well, if productive, shall be full consideration to grantors for grant hereby made to grantee, with exclusive right to drill one or more additional wells on the premises during the existence of this grant. But the completion of a nonproductive well shall operate only as liquidation of all lease rentals hereunder for a period of six months from the date of its completion."
"It is fully understood and agreed that, for and in consideration of the money paid and the delivery thereof and the payment for extension of lease rental above mentioned,_ grantee acquires and has the right and option, either to surrender this grant at any time upon the payment of the sum of five ($5.00) dollars, and all amounts then due under and thereafter be released and discharged from all payments, obligations, and covenants herein contained, whereupon this grant shall become null and void; or to continue the same in full force and effect from quarter to quarter and from year to year, by making the stipulated quarterly payments which, the grantors hereby bind themselves to accept when tendered and grantors expressly renounce and disclaim any right to claim or ask for a forfeiture of this grant or any provision thereof on account of the option herein, for a valuable and satisfactory consideration granted. Grantors agree that the delivery to grantors of a deed of surrender, duly authenticated of record, or the recordation of same in the proper county and deposit in the post office of a check payable as above provided, for the said sum of $5.00, and all amounts then due hereunder, together with notice of such surrender, shall be accepted as full legal surrender of this grant, and that all terms, conditions, and limitations between the parties hereto shall extend to their heirs, successors, personal representatives, and assigns."
The property was the homestead of the grantors. This instrument was signed by Mrs. M. J. Owens and her husband, and witnessed by Louis Campbell.
The substance of plaintiff's petition is that the lease was a unilateral contract, and void for want of mutuality; that there had been a breach of the terms and conditions of the lease; and that the defendant had abandoned it.
The court peremptorily instructed a verdict for the appellee. The appellee objects to the consideration by us of appellant's assignments of error, upon the ground that the act of 1913 (chapter 59, p. 113) precludes appellant from objecting to the charge of the court here, because no objections or exceptions were made in the trial court. This statute does not apply to peremptory instructions.
It has been héld a number of times in this state that the action of the trial court in directing a verdict is an error apparent upon the face of the record, and requires of the appellate court the full consideration of all fundamental errors, even in the absence of assignments of error.
Ten propositions are submitted under the first assignment'of error, each of which it is our duty to consider as fundamental error. Without taking up the propositions in the order presented, we will consider the first contention, which is that the contract is unilateral and void for want of mutuality. A careful reading of the contract shows that the appellee had the right to bore for oil or to pay the quarterly rental of $28.20, or to surrender the grant at any time upon the payment of $5 to the grantors. It is apparent that the only right which the grantors could have enforced and the only real obligation resting upon the appellee was to pay $5. By the great weight of authority this is held to be merely a nominal consideration, and no consideration, in fact, for the grant. In other jurisdictions we find the courts are at variance in their construction of oil and gas leases, but it seems to be settled in this state that contracts of this character, to quote Judge Gaines, in National Oil & Pipe Line Co. v. Teel, 95 Tex. 591, 68 S. W. 980, "do not pass an interest in the lands, but are mere contracts for an option by which they may acquire such interest." On March 6, 1913, the lease sought to be canceled herein had been in existence for one year and nine months, and the uncontroverted evidence is that the appellee had taken no steps whatever toward boring a well on the premises. Ap-pellee had the right, by the payment of the quarterly rental provided for in the instrument, to continue the option for three months; but, since the contract was unilateral and void, unless the appellant, Mrs. Owens, accepted the rents at the expiration of each quarter, and by so doing agreed to continue the option for three months longer, appellee had no contract and no right which it could enforce, in the absence of a showing that it had in good faith attempted to explore for minerals. It is said:
"Such leases vest no present title in the lessee. If at any time the lessee has the option to suspend operation, the lease is no longer binding upon the lessor, because of want of mutuality. A lease should not be construed so as to enable the lessee to hold it merely for speculative purposes without doing what he stipulated to do and what was clearly in contemplation of the lessor when he entered into the agreement. The trend of the decisions has been almost uniformly in favor of the lessor. Generally, it is the lessee who is favored, and, after a substantial compliance with the terms of the contract, equity will not regard a technical breach; but with mineral leases it is otherwise. This is due to the nature of the business of mining, and especially of oil mining, and to the temptation offered a shrewd operator to purchase at a nominal price the right to develop lands the owner of which is ignorant of their real value, and to hold them indefinitely, neither working them himself nor permitting another to do so." Steelsmith v. Gartlan, 45 W. Va. 27, 29 S. E. 978, 44 L. R. A. 107.
The facts in this case show that appellee had drilled wells upon three sides of the land in question, the effect of which would be to drain the oil from appellant's land. This condition shows the necessity of due diligence upon the part of appellee to take advantage of the option given them under the contract and bore a well upon appellant's premises. Our construction of this contract' is sustained by the Teel Case, supra; J. M. Guffey Petroleum Co. v. Oliver (Civ. App.) 79 S. W. 884; Forney y. Ward, 25 Tex. Civ. App. 443, 62 S. W. 108; Roberts v. McFadden, 32 Tex. Civ. App. 47, 74 S. W. 105; Emery v. League, 31 Tex. Civ. App. 474, 72 S. W. 607; Hodges v. Brice, 32 Tex. Civ. App. 358, 74 S. W. 590; Presidio Mining Co. v. Bullis, 68 Tex. 581, 4 S. W. 860; and Witherspoon v. Staley (Civ. App.) 156 S. W. 557, and authorities from other states cited therein. In the last-named case it is said:
"Hence, in order to bind appellant Hines [the grantor], he either must have received this money [the rents for 60 days] or by some work or conduct of his must have induced appellee to have acted in his behalf to his injury or detriment, which is not shown. In fact, nothing was done by Staley [the lessee] between the 30th of January and the 3d of February, when written notice was given him by Hines of his refusal to accept said payment and declaring said contract forfeited, except the hauling, on the 30th of January, of one load of pipe to the land, and it is not shown whether this took place before or after Hines was informed of the deposit of the §25, and which said pipe was still on the land at the time of this trial. Besides this, if the evidence had shown such facts as constituted an estoppel on the part of appellant Hines, it could not have affected or changed the result, for the reason that appellees have pleaded no estoppel whatever as against him, and therefore could assert none."
Appellee insists, since it appears from the testimony of appellant, Mrs. Owens, that it had no notice of the fact that she would refuse the lease money on March 6th, that it had a reasonable time after her refusal to begin boring a well. It having been uniformly held, in accordance with the decision of Justice Gaines in the Teel Cáse, that there is a want of mutuality in contracts of this character, and that there is therefore no consideration to support the grant, the contract is void, we cannot assent to this proposition. The primary purpose of the grant on the part of appellant was to have the land explored for the purpose of ascertaining the existence of minerals thereunder and to obtain the benefits from its development. This was the real consideration for the grant. Appellee had one year from the date of the contract in June, 1911, to bore the well, and, if the well was not completed within that time, it could extend the lease from time to time for three months, provided the grantors would accept the rents and consent to such extension. The purpose of promoting these extensions was clearly not to enable appellee to hold the land without development during the entire term of the lease (which was stated to be ten years), because in such time, by surrounding the premises with other wells, appellee might have taken the oil, or a greater part of it, from under the grantor's land; but the purpose in providing for extensions from time to time must be held to have been to enable appellee to develop the property, or, in other words, pay the real consideration for the exclusive grant. It appears from the statement of facts that, a few days after appellant refused to accept the rent provided for in the contract and extend the option, appellee hauled lumber and other materials upon the land, and within a few months completed a well upon the premises at an expenditure of about $12,000, that the well was at the time of the trial producing 117 barrels of oil a day; and appellee contends that because of certain acts and conduct upon the part of appellants, which induced it to proceed with the work, they are estopped from maintaining this suit. Without discussing the evidence bearing upon this issue, and the right of appellee to sink a well after the expiration of the option, we merely state that it was sufficient to have •required the court to submit the issue to the jury.
It is held that the lessors, by permitting the lessees to expend large sums of money in developing the mine, may waive their right to declare a forfeiture, and this rule may, upon another trial, apply to this case. Washington v. Rosario Mining & Mill. Co., 28 Tex. Civ. App. 430, 67 S. W. 459; Benavides v. Hunt, 79 Tex. 383, 15 S. W. 396.
Because the court erred in peremptorily instructing a verdict,, the judgment is reversed, and the cause remanded.