Court Opinion

ID: 6875925
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:07:46.992781+00
Date Added: 2024-06-11T16:05:29.734578
License: Public Domain

PARKER, Circuit Judge
(dissenting.)
This is a controversy arising in the bankruptcy proceedings of the Hamilton Gas Co. with respect to rights under a gas lease held by that company. The lease was executed by one W. W. Hutchinson and wife with respect to oil and gas rights in 300 acres of land lying in Cabell County, West Virginia. The lease was made to E. L. Lusher, but his rights thereunder were duly assigned to the Hamilton Gas Co. The lessor and his wife are dead and the lands covered by the lease have been divided among his heirs at law. Three producing gas wells have been drilled on the lands; and the owners of the shares upon which these wells are situate filed petition in the court below, making the owners of the other shares party to the proceedings, and asking that the rights of the company under the lease be declared to have terminated or to have been forfeited or abandoned, that they be declared the owners of the gas wells to the exclusion of the other heirs at law of the lessor, and that they recover from the trustees of the court the proceeds of gas sold from December 1934 to date. From an adverse decree holding that the rights of the company in the gas wells had not terminated or been forfeited or abandoned, the petitioners have appealed.
The gas lease was executed by W. W. Hutchinson April 9, 1924, for a term of “10 years (and so long thereafter as oil or gas shall be produced from the land leased and royalty and rentals paid by the lessee therefor).” Lessee was to pay as a royalty one-eighth of all oil produced “and to pay for each gas well * * * from the time and while the gas is marketed the sum of ($50.00) fifty dollars each three months,” and lessor was to be entitled to gas free of cost for domestic use in three dwellings on the premises. Lessee agreed to drill a well on the premises within six months or to pay lessor waiting rental at the rate of $1 per acre in advance, i. e. $75 per quarter, until the well should be drilled or the lease surrendered.
The delay rental amounting to a total of $1244.50 was duly paid to the lessor as it accrued. The three gas wells in question were drilled by the company in July 1929, December 1929 and March 1930, at a cost of $13,406.29, $12,682.54 and $11,-143.21 respectively. Well rentals were paid on the first two from the date of their completion to October 15, 1930 and September 4, 1930, respectively. The third well was not turned into the production lines and no well rental was paid or tendered as to it until December 1934, when the payment of well rentals on all three wells was resumed under the circumstances hereafter set forth. In July 1930 the first two wells were shut off from the production lines and well rentals were not paid or tendered as to them until December 1934.
The circumstances surrounding the shutting off of the wells and the discontinuance of the payment of well rentals were briefly as follows: The company had been selling the gas at 12 cts. per m. c. f. to the West Virginia Gas Corporation which was owned and controlled by the same persons that controlled the company. In the Summer of 1930 they lost control of the West Virginia Company and were unable to obtain for the Hamilton Company a long term contract with respect to the gas which it was supplying. Being unwilling to enter into a temporary arrangement and hoping to effect a more satisfactory contract with the United Fuel Gas Co., they refused to sell to the West Virginia Company and shut in the wells. A contract was finally executed with the United Fuel Gas Co. in 1932, but gas was not taken under it until modifications were made in October 1934. During this period it was not possible for the Hamilton Company or for the Receivers of the court below, who succeeded to the control of its affairs, to market the gas from the wells. While there is some conflict in the evidence as to what contract might have been made with the West Virginia Company in 1930, the court has found the facts with respect to this matter as well as to the subsequent efforts to sell the gas; and, in my opinion, there is no sufficient basis in the record for disturbing these findings. They are as follows:
“4. At the time the first two wells were drilled in Hamilton Gas Company was able to market the gas and paid well rentals thereon in the amount of $400.00 as they accrued. By the time the third well was drilled the Hamilton Gas Company was *124without a satisfactory market for the production therefrom. Being unable to market the gas from any of said wells, except possibly on a temporary and unsatisfactory sufferance basis, the other two wells were shut in in July, 1930.
“5. In the summer of 1930, the officials of the Hamilton Gas Company began negotiations with the United Fuel Gas Company for the sale of gas from the wells in question, as well as from other wells in the same general vicinity, on the basis of a long term contract at good prices. These negotiations were, held up by delay in the completion of the Eastern Seaboard Line of the Columbia Gas & Electric Corporation and in the marketing of gas through such line. The contract with United Fuel Gas Company, dated Novem- ' ber-18, 1931, was finally executed in July, 1932, about six months after the institution of receivership proceedings against the Hamilton Gas Company in this court. The debtor’s Receivers and Trustees made diligent efforts to market the gas in question but business conditions were such that they were not able to do so until December, 1934, after modification of the aforesaid contract late in October, 1934. In order to market the gas under the modified contract the Debtor’s Trustees put in a pipe line costing $1,397.40, which, added to the original pipe line cost, made a total of $8,542.92 in connection with these wells.”
In the meantime changes had occurred with respect to the status both of the lessor and the lessee. The property of the latter had been placed in the hands of receivers of the court below in January 1932, and this was followed later by proceedings under Sec. 77B of the Bankruptcy Act. W. W. Hutchinson and wife, after conveying 57.53 acres of the land with reservation of all mineral rights had died intestate and their heirs at law had agreed upon a division of the remaining land. In February 1932 the land was divided into seven tracts and lots were drawn' for them by the heirs. Lot No. 3, upon which two of the wells had been drilled, fell to W. W. Hutchinson, Jr., who exchanged. it with R. C. Hutchinson, who had drawn lot No. 6 on which there were no wells. Lot No. 2 on which the remaining well had been drilled fell to G. C. Hutchinson. The heirs then executed partition deeds to each other, which contained the following reservation: “And it is further understood and agreed by and' between both parties hereto, that the land hereby conveyed is subject to an oil and gas lease made by W. W. Hutchinson to E. L. Lusher, as of record in Cabell County Court Clerk’s Office in Bonds and Contracts Book Number 93, page number 7, dated on April 9, 1924; and that any royalties or incomes arising from said lease shall be divided equally between the direct heirs of W. W. Hutchinson, deceased.” G.. C. Hutchinson sold his lot to W. L. Adkins, reserving all mineral rights. Later he conveyed all mineral interests in this lot to Adkins for a consideration of $200.
During the period that the wells were shut in, the company and its receivers and trustees took the same care of the wells that was taken of other wells of the company, making periodical tests of open flows and rock pressures, keeping the equipment painted and the rights of way mowed and paying taxes on the wells. During this period, also, gas from the wells was used for domestic purposes in three residences on the property. In January 1934 the receivers offered each of the heirs (or their assignees) $100 in cash and a proportionate part of fifty cents per acre per annum as rental on the lease until the gas could be marketed. This was accepted by four of the heirs and the amount so offered was paid to them. It was rejected by Adkins, R. C. Hutchinson and another of the heirs, who were the petitioners in the court below and are appellants here.
On April 30, 1934, within less than a month after the expiration of the 10 year period specified in the lease, the petitioners, through their attorney, wrote the Hamilton Gas Company stating that the company had marketed gas from two of the wells up to July 1, 1930, that it had then abandoned them and had paid no rentals since; that under the terms of the lease the lessee might surrender it by indorsement of surrender thereon or by recording a release; and that they wished to be advised whether the company would surrender the lease or whether it, would be necessary to litigate the matter in court.” In this letter abandonment was charged and surrender was requested, but there was no suggestion of expiration of rights under thé terms of the lease. The company replied under date of May 2d, denying abandonment and calling attention to the fact that the property was being kept up. It stated also that while not obligated to do so while the gas was not being marketed, it had offered to pay each of the heirs *125$100 in cash and 50 cents per acre per annum until the gas could be marketed.
In December 1934, the receivers and trustees arranged to market the gas and thereafter regularly tendered to each of the heirs, or their assignees, the quarterly well rental due under the contract. This was accepted by the four heirs who had accepted the offer of the preceding January but was rejected by the petitioners, who on December 26, 1934, protested through their counsel against the marketing of the gas by the receivers, again claiming that the wells had been abandoned in 1930 and that all rights under the lease had been forfeited. No relief was asked of the court having charge of the property until petition was filed by the petitioners on November 19, 1935. After the filing of the petition, the trustees offered to pay the maximum well rental to which the lessor would have been entitled if gas from all the wells had been marketed during the period that they were shut down. This was accepted by all of the heirs other than petitioners, but rejected by petitioners. The petitioners contended that as a result of the failure to pay rental during the period that the gas was not being marketed all rights under the lease had terminated or been forfeited, and that as owners of the portion of the land upon which the wells had been drilled they were entitled to the wells discharged of the provisions of the lease, to the gas which they produced to the exclusion of the other heirs of the lessor, and to the proceeds of the gas sold by the receivers and trustees therefrom, which it was agreed amounted to $23,000 from December 1, 1934 to April 30, 1937. The District Judge held that the rights of the lessee under the lease had not terminated or been forfeited and that the petitioners were entitled to recover only the amounts tendered them by the trustees.
I think that the holding of the District Judge was clearly correct. Upon the drilling of the wells which produced gas in paying quantities, the lessee became seized of a vested estate under the lease which clearly it has never abandoned; and there is nothing in the evidence to justify a holding that such estate has been forfeited. Reliance is placed upon the fact that from July 1930 until December 1934 well rentals were not paid to the lessor, but there are three answers to this: (1) the company was not required by the lease to pay rentals except while the gas was being marketed, and during the period in question it was not being marketed; (2) the failure to pay rentals, which from January 1932 was the failure of receivers of the Court, was due to bona fide controversy as to liability therefor and cannot furnish the basis for declaring a forfeiture ; (3) the property was in the possession of the court at the time the appellants attempted to forfeit the rights of the lessee, and a court of equity will not permit a forfeiture as to property in its possession which it is holding for the benefit of creditors of an insolvent because of failure to make payments for which the insolvent is liable.
It is to be noted that the rights of the lessee under the lease before us are not those of a mere optionee, where failure to pay the amount stipulated in the option may terminate all further rights thereunder, but they are the rights of one having a vested estate in property which may not be divested except by forfeiture for breach of condition or by abandonment. The provision for the payment of rentals was not a condition precedent to the continuance of the estate of the lessor but a condition subsequent inserted as a guaranty of payment. As said by Judge Brannon in Bettman v. Harness, 42 W.Va. 433, 26 S.E. 271, 275, 36 L.R.A. 566:
“Here are a landowner and an oil producer negotiating a lease. A term of only two years is fixed; but plainly that is only the period for completing a well. If a good one is obtained, the operator wants longer time, and he inserts a clause extending the term as long as oil or gas is produced in paying quantities: but the lessor wants the lease continued only upon condition that his share of oil and gas rent' be paid, and he means to have a clause which provides a continuance of the lease as long as both oil is produced and his rent is paid. It is unreasonable to suppose he would continue the lease, and omit a guaranty of his rent; that he would agree to continue without a guaranty of prompt payment.”
That the lessee after the sinking of the wells and the finding of gas became the owner of a vested estate therein is too well settled under the law of West Virginia to admit of argument. Cook v. MacCorkle, 113 W.Va. 793, 169 S.E. 470; Engel v. Eastern Oil Co., 100 W.Va. 301, 130 S.E. 491; Hall v. South Penn Oil Co., 71 W.Va. 82, 76 S.E. 124; Eastern Oil Co. v. Coulchan, 65 W.Va. 531, 64 S.E. 836; McGraw Oil & Gas Co. v. Kennedy, 65 W.Va. 595, 64 S.E. 1027, 28 L.R.A.,N.S., 959; Headley v. Hoop*126engarner, 60 W.Va. 626, 55 S.E. 744; Lowther Oil Co. v. Miller-Sibley Oil Co., 53 W.Va. 501, 44 S.E. 433, 97 Am.St.Rep. 1027. As said in the case last cited [page 434] :
“An ordinary oil lease, making the les.see pay a consideration, binding him to some obligation, vests only an inchoate right— that is, right to explore for-oil — but no actual other estate than right to develop; and, if he gets no oil, he still has no vested estate, but, if he does get oil, he has a vested estate. Such a lease calls for the right, not to oil in place, but to extract it.”
And as bearing upon the nature of the right acquired and what is necessary to show abandonment thereof, which is peculiarly appropriate here, the court said in the same case:
“Under some circumstances of delay or fraudulent evasion of duty of development, equity will cancel an oil lease, as development is regarded as the real intent of the lessor, even if there be no express clause of forfeiture, Crawford v. Ritchey, 43 W.Va. 252, 27 S.E. 220; Bluestone Coal Co. v. Bell, 38 W.Va. 297, 18 S.E. 493; Bettman v. Harness, 42 W.Va. 433, 26 S.E. 271, 36 L.R.A. 566; Bryan on Petro. & Gas, § 182, citing Western Pa. Gas Co. v. George, 161 Pa. 47, 28 A. 1004; Elk Fork Oil & Gas Co. v. Jennings (C.C.) 84 F. 839. But this doctrine cannot apply under the facts of this case. We must inquire whether there has been an abandonment, for an oil lease can be lost by abandonment. The loss of valuable property by mere abandonment is not easily shown or readily held by the courts. ‘To constitute abandonment in respect of property, there must be a concurrence of the intention to abandon, and an actual relinquishment of the property, so that it may be appropriated by the next comer.’ ‘In determining whether one has abandoned his property or rights, the intention is the first and paramount object of inquiry; for there can be no abandonment without the intention to abandon.’ 1 Cyc. 4, 5.”
■ And it is clear that the estate so vested does not terminate with the initial period prescribed in the lease, which limits the period prescribed for exploration, but continues so long as gas is produced and rentals paid, and is subject to forfeiture after the expiration of the initial period in no different way from that which would apply before the expiration of that period. McCutcheon v. Enon Oil & Gas Co., 102 W.Va. 345, 135 S.E. 238. As said in the case cited. where there had been a failure to pay well rentals after the expiration of the initial period [page 241] :
“We can see very little strength in the claim that the lease has expired by its own terms at the end of the 10-year period. If there had been no development, and a vested interest had not accrued, then the payment of delayed land rental would not extend the right to drill after the 10 years given for that purpose. Indeed, if there had been neither development nor payment of rental, simply a paper claim, abandonment would be presumed, if not in some way satisfactorily rebutted. But that is not the case here. A valuable well was drilled. Appellees claim that gas was not produced; that it was found, but not marketed, was closed in, and therefore not produced, within the meaning of the lease, which says the lease will be extended as long after the 10 years as gas is produced from the land. It has been pointed out that there was no market for the gas when the well was drilled, a situation which both the lessor and lessee well knew. What more could be done than to shut it in and conserve it? * * * It is true the payments have not been promptly made; but in 1917, payment was accepted by the lessor up until January 1, 1918. While there has been no payment since that time, payment is now proffered, less an unascertained sum for the excessive use of gas by lessor and his privies. * * * The law favors the vesting of estates, and is adverse to their destruction after they have been vested. Sands v. Holbert, 93 W.Va. 574, 117 S.E. 896. Under the facts shown it cannot be held that the lease had expired at the end of the 10-year term.”
And it is equally well settled that the payment of the well rentals provided in the lease was not a condition precedent to the existence of rights thereunder, but a condition subsequent, breach of which might have resulted in forfeiture if wilful. Engel v. Eastern Oil Co., 100 W.Va. 301, 130 S.E. 491; Spies v. Arvondale & C. R. Co., 60 W.Va. 389, 55 S.E. 464. As said in Underhill v. Saratoga & W. R. Co., 20 Barb., N.Y., 455, quoted with approval by the Supreme Court of Appeals of West Virginia in the case last cited [page 465] : “If the act or condition required do not necessarily precede the vesting of the estate, but may accompany or follow it, and if the act may as well be done after as before the vesting of the estate, or if from the nature of the act to be performed and the time required *127for its performance it is evidently the intention of the parties that the estate shall vest, and the grantee perform the act after taking possession, then the condition is subsequent.” There can be no question, of course, but that payment of the well rentals, under a lease such as this is a condition of the continuance of the lease. It is a condition subsequent, however, the breach of which will forfeit the vested rights of the lessee in the well, not a condition precedent, compliance with which is necessary to bring those rights into existence.
The three cases chiefly relied on for the proposition that rights under a lease terminate at the end of the initial period upon failure to comply with its terms relate to exploratory rights thereunder, not to the rights which arise upon the finding and production of oil or gas in paying quantities; and there is no holding anywhere, so far as I can find, that such rights are terminated other than by abandonment or by forfeiture for breach of condition. South Penn Oil Co. v. Snodgrass, 71 W.Va. 438, 444, 76 S.E. 961, 43 L. R.A.,N.S., 848, holds no more than that the exploratory period is extended if the lessee has used due diligence within the period and has found oil, although not in paying quantities. It is no authority for the position that the vested estate of a lessee who has found gas and oil in paying quantities can be terminated otherwise than by abandonment or forfeiture. Ohio Fuel Oil Co. v. Greenleaf, 84 W.Va. 67, 99 S.E. 274, holds merely that time for developmental operations will be extended where during the initial period the lessee has conducted operations in good faith and, while not producing oil or gas in paying quantities, has demonstrated that the land was underlaid with oil and gas and at the expiration of the period was making diligent efforts to produce it in paying quantities. Anderson v. Schaffner, 90 W.Va. 225, 110 S.E. 566, presents a case where a well was sunk and oil discovered, but before paying production was attained, the well caved in and was abandoned for the remainder of the exploratory period, and nothing was done to secure production. Under such circumstances the expiration of the period of the lease was held to terminate the rights of the lessee. It is no authority for the proposition that one who has acquired vested rights within the period limited for exploration can lose them otherwise than by abandonment or forfeiture.
As there is no evidence of abandonment in the case at bar, and as the rights of the lessee became vested by the sinking of the wells and discovery and production of gas in paying quantities, the rights of the appellants, if they have any rights, must rest upon the forfeiture of the lease for the breach of condition subsequent. The question in the case, then, comes to this: Was there such a breach of condition subsequent in the failure to pay well rentals between July 1930 and December 1934 as would justify a court of equity in decreeing a forfeiture of the lease under the circumstances here existing?
The first answer to this question is that the lease required payment of well rentals only “from the time and while the gas is marketed”. As gas from the wells was not being marketed and was not marketable during the period in question, it is clear, I think, that no well rentals were payable under the lease and no basis of forfeiture for non-payment thereof existed. The decision in Leslie v. Chase Nat. Bank, 6 Cir., 83 F.2d 1013 is clearly in point. The opinion of the late Judge A. M. J. Cochran in the court below, adopted by the Circuit Court of Appeals, relating to the point here under consideration, is as follows:
“The petitioner claims that there is due her under the lease the quarterly royalties for each of these dates and for the last quarters before their appointment, or one year’s royalties in all amounting to $900, and it is for payment thereof that she seeks an order from this court. This calls for a construction of the provision of the lease as to the payment of royalties. Payments thereof are to be made ‘from the time and while the gas is marketed.’ This expression can be expanded so as to read ‘from the time the gas begins to be marketed and while it continues to be marketed! without enlarging its meaning. So read it conforms to its meaning. The expression has in mind a continuous marketing from the time the marketing begins. This is enforced by the expression as to the payment of the $75. for each well. It is to be made ‘each three months’. Each of what three months? It is of the marketing of the gas. * * * But the expression ‘is marketed’ has to be modified. The payments are to begin not when the gas is actually marketed, but when it can be marketed and they are to continue not while it is actually- marketed, but while it can be marketed. The lessee could not evade the payment of royalties by not marketing the gas after it is produced and becomes *128available for market. It was his duty to market it if it could be sold. It was only in case it was unable to market it that its obligation to pay ceased. ■ In that contingency it was to cease because there is no other stipulation to pay than while the gas is marketed. In the case of Rockcastle Gas Co. v. Horn, 241 Ky. 398, 44 S.W.2d 273, the provision in the lease was that the lessee was ‘to pay for each gas well from the time the gas is marketed, the sum of $50. each three months.’ The court held as follows: ‘Until the gas is marketed by appellant or it fails to market it by reason of its bad faith or failure to exercise ordinary care to do so, the appellee is without right to recover the $50. each three months for each gas well as provided in the lease in the absence of a reformation of the lease.’ The inability to continue to market the gas, whilst it relieved the lessee of the obligation to pay therefor did not ipso facto forfeit the lease. It had a reasonable time within which to market it. Such is the effect of my decision in the case of Gathright v. Petroleum Exploration Co. [affirmed J. B. Gathright Land Co. v. Kentucky-West Virginia Gas Co., 6 Cir., 65 F.2d 907].”
Contention is made that the gas would have been marketable if the gas company’s president had not shut in the wells and refused to sell to the West Virginia Gas Co. It appears, however, that this action on the part of the gas company’s president was- taken in an effort to secure a better contract for the marketing of the gas; and even if the action upon his part was unwarranted it does not result that the gas was marketable after the action had been taken. There is nothing in the contract or in the principles of law applicable which warrants forfeiture of the lease because of mistakes made by the company in the marketing of the gas or which justifies a holding that the gas was marketable because of action on the part of the company which resulted in the losing of a customer. As a matter of fact the gas was not marketable after the breach occurred between the company and the West Virginia gas company until December 1934; and the well rental was payable only while the gas was being marketed, or, at the most was marketable. The case is not one where the lessee has shut in the wells because of a desire not to market the gas, but one where a customer has been lost through effort to secure from him a more favorable contract and of inability to market after loss of such customer.
' If, however, it be held that the gas was marketable, it does not follow that the lease was forfeited for failure to market it, but merely that the well rentals were payable. The question that then arises is whether failure to pay these resulted in forfeiture; and in this connection it should be remembered that the lessee had expended over .$37,000 in' the development of the property and that a bona fide controversy existed over whether the well rentals were payable or not. ' In my opinion there are three reasons why forfeiture should not be declared even though the well rentals are held to have been payable, viz.: (1) the failure to pay (which from January 1932 to December 1934 was the failure of the court below) was not arbitrary and willful but was based upon a bona fide contention that the rentals were not payable; (2) forfeiture for failure to pay rentals will not be enforced in equity where . the rentals can be collected at law, especially where they are tendered into the court asked to declare the forfeiture; (3) a court of equity is in possession of the property holding it for the benefit of creditors; and it should not decree a forfeiture injuriously affecting their rights under the circumstances here existing.
In the case of Headley v. Hoopengarner, supra, 60 W.Va. 626, 55 S.E. 744, the lease under consideration contained a stipulation for forfeiture in event of failure' to comply in all respects with its terms and stipulations. . In refusing to decree a forfeiture for failure to pay a part of the rental stipulated, as to which there was a controversy, the court said [page 752] :
“While there is a provision in the deed made by the guardian in the summary proceeding to the effect that a failure to comply in all respects with the terms' and stipulations of the deed would work a forfeiture, and that the property would revert to the heirs, there is no claim that the lessees have failed in any respect to comply with the contract, except as to the payment of four-fifths of one-sixteenth of the oil production, and this was because of the complications which gave rise to this litigation. They placed a different construction upon the contract from that given it by the heirs, and have so confided in their construction as to litigate it through this court for decision. This is not such a voluntary and *129willful failure and refusal to comply with its provisions as should work a forfeiture of the estate acquired under the deed. It appears from the record that, their failure to pay must have been in good faith, relying upon their construction of the deed. To impose a forfeiture is a harsh penalty, and courts are slow to do so, except where it is plainly demanded.”
But irrespective of the controversy as to whether the well rentals were payable, a court of equity should not enforce the forfeiture of a vested estate for failure to make payments which were recoverable at law and which the lessee has finally offered to pay. Instead of enforcing a forfeiture, equity will relieve against a forfeiture in such a case. As said in Engel v. Eastern Oil Co., supra, 100 W.Va. 301, 130 S.E. 491, 492:
“The breach in this case was of a pecuniary covenant. It was not willful. The lessees made prompt offer, upon discovery, to pay the amount in arrears. They tendered and paid into court the amount due, with interest. Equity will relieve from forfeiture in such case. ‘It is well settled that, where the agreement secured is simply one for the payment of money, a forfeiture either of lands, chattels, securities or money, incurred by its nonperformance, will be set aside on behalf of the defaulting party, or relieved against in any other manner made necessary by the circumstances of the case, on payment of the debt, interest and costs, if any have accrued, unless by his inequitable conduct he has debarred himself from the remedial right, or unless the remedy is prohibited under the special circumstances of the case by some other controlling doctrine of equity.’ Pomeroy, par. 450. ‘In cases of forfeiture for nonperformance of pecuniary covenants, relief in equity goes as a matter of course, where compensation may be made.’ Wheeling & E. G. Ry. Co. v. Triadelphia, 58 W.Va. 487, 516, 52 S.E. 499, 511 [4 L.R.A.(N.S.) 321]; Spies v. Arvondale & C. R. Co., supra; Pheasant v. Hanna, supra [63 W.Va. 613, 60 S.E. 618]; South Penn Oil Co. v. Edgell, 48 W.Va. 348, 37 S.E. 596, 86 Am.St.Rep. 43; Lynch v. Versailles Fuel Gas Co., 165 Pa. 518, 30 A. 984.
“This right of relief from a forfeiture for failure to pay the rent in arrear is also specifically recognized in section 17, chapter 93, of the Code. Upon the payment into court of the amount in arrear, with interest, the court should have adjudged the lease to be in full force and effect.”
The case of McCutcheon v. Enon Oil & Gas Co., supra, 102 W.Va. 345, 135 S.E. 238, is directly in point, and the attempts made to distinguish it do not distinguish. There was in that case a failure to pay the rentals provided in the lease after the expiration of the initial period as well as before, and the court based its decision, not merely on the relationship of the lessor to the lessee company, but also on the ground that the failure to make the stipulated quarterly payments was not ground of forfeiture. The court said [page 241]:
“The failure to make stipulated quarterly payments on the well is not ground for declaration of a forfeiture of the lease, in the absence of a clear and unequivocal stipulation that such failure to pay will forfeit. We have many times declared, following the rule formulated when chancery courts came into existence, that equity will never lend its aid to enforce a forfeiture. Never to declare or enforce a forfeiture, nor divest an estate or title for violation of a condition subsequent, is an invariable rule of equity, if there be a legal remedy. Under such circumstances, a court of equity utterly declines to touch the case, and leaves the party to his legal remedies. ‘Equity abhors a forfeiture.’ Craig v. Hukill, 37 W.Va. 520, 16 S.E. 363; Wheeling, etc., R. Co. v. Town of Triadelphia, 58 W.Va. 487, 520, 52 S.E. 499, 4 L.R.A. (N.S.) 321; Spies v. Arvondale & C. R. Co., 60 W.Va. 389, 55 S.E. 464; Headley v. Hoopengarner, 60 W.Va. 626, 646, 55 S.E. 744.
“Plaintiffs had their legal remedy for the enforcement of the quarterly payments, and in the answer defendant proffers to pay, upon an ascertainment of the amount, claiming that plaintiffs should account for the gas used from the well in one of the houses, which use was not authorized in the lease contract. The lease cannot be forfeited because of nonpayment of the quarterly payments, under the circumstances shown by the evidence. In Reserve Gas Co. v. Carbon Black Manufacturing Co., 72 W.Va. 757, 79 S.E. 1002, it is said: ‘An oil and gas lease, binding the lessee to drill a well on the leased premises within a certain period, or, in *130lieu thereof, make periodical payments of rental or delay money, and containing no clause of forfeiture, is not forfeitable merely by nonpayment of the rental. It can be terminated -only by surrender, abandonment, or expiration of the term.’ ” (Italics supplied.)
But there is yet another ground upon which the forfeiture of the lease should be denied. No forfeiture was claimed for failure to pay rentals during the period that the company was in possession of the property, i. e. between July 1930 and January 1932. On the contrary, in February 1932, after the court had taken possession of the property through its receivers in the preceding January, all of the heirs recognized the lease as valid in the partition deeds executed among themselves. In January 1932, the court below took possession of the property through receivers and has held possession of it ever since. Any failure to pay rentals due after that date was the failure of officers of the court; and the remedy of the lessors was manifestly an application to the court for an order adjudicating their right to the rentals and directing the .receiver to pay them. If there was any thought that the receivers contemplated abandoning the right of the company under the lease, the proper remedy was a motion requiring them to elect. Appellants could not sit by without asking relief and claim that the rights of creditors in the property had been forfeited by the inaction of the court or its receivers. The law is thus stated by the Supreme Court of Appeals of West Virginia in the headnote to the case of Pelzel v. Pen-Mar Coal Co., 101 W.Va. 247, 132 S.E. 510: “When a court of equity has properly taken charge of an insolvent mining company’s operation, the court will not ordinarily permit the company’s landlord, in advance of an adjudication of the claims of all the creditors, to forfeit the lease and re-enter on the demised premises.” In denying the claim of forfeiture pressed by the lessor in that case, the court in its opinion used the following language:
“We might be impressed with the lessors’ argument if the rights of no one were involved but those of the lessors and the lessee. However, the rights of numerous other parties are seriously affected. We discern no equitable reason for determining and attempting to satisfy the claim of the lessors in advance of all the other creditors. We see no equity in turning over to the lessors property worth many times their claim, when, by so doing, other creditors may be prevented from or hindered and delayed in the collection of their demands. Bryant v. Thomas, 143 Ga. 217, 222, 84 S.E. 739. One of the very authorities cited in support of the decree of the lower court admonishes that ‘equity will not permit the enforcement of a forfeiture in an inequitable * * * manner.’ Wheeling & E. G. Ry. Co. v. Triadelphia, 58 W.Va. 487, 52 S.E. 499 [4 L.R.A. (N.S.) 321]. To this principle all rules relating to forfeiture must yield.”
Since no forfeiture was claimed because of failure to pay rentals prior to the receivership, but on the contrary the lease was thereafter recognized by all of the heirs as existing and a contract was made with respect thereto, and since the holding that the lease has terminated is based upon the expiration of the’ 10-year period during the receivership coupled with the failure of the receivers- to pay the well rentals provided for, there is no escaping the conclusion that a large part of a valuable property is being lost to creditors of the bankrupt solely as a result of the inaction of the court’s receivers; and this is being decreed notwithstanding the fact that appellants took no action asking the court to order that the receivers either pay the rentals or abandon the property. It does not answer this to say that the lease is expiring by its own terms; for, as pointed out above, the rights acquired by the discovery and production of gas do not expire with the initial exploratory period, but, if not abandoned, are lost only by forfeiture for breach of conditions subsequent. I cannot believe that the forfeiture of the property of creditors because of the inaction of the court’s officers can be based upon sound equitable principles. I know of no authority anywhere justifying such a forfeiture; and, so far as I can learn, it is without precedent. It seems to me to establish a precedent which, if followed, will be fraught with much danger to the rights of creditors in the administration of insolvent estates.
If, however, a forfeiture is declared, I see no escape from the position of appellants that they are entitled to the wells on their shares of the land; and I cannot follow the reasoning which would give *131them only a three-sevenths interest therein. The partition deeds executed by the heirs of the lessor among themselves did not reserve the mineral rights in the lands but were made “subject to” the lease here under consideration, with provision that “royalties or income arising from said lease” (italics supplied) should be divided among the heirs. If there has been a forfeiture of the lease, the shares allotted by the partition deeds are not subject to anything, and the wells belong to the persons upon whose lands they are situate. If the mineral rights in the lands had been reserved in the partition deeds, there would be force in the contention that there was a waiver of the forfeiture by the four heirs who accepted the compromise payment; but, not owning the mineral interests upon the termination of the lease, they were not in position to waive the forfeiture. So far as they are concerned, they could waive the time of payment of the moneys due to them, but not a prior forfeiture the result of which was to free the property of others of the encumbrance. The same reasoning applies to what is said about extending the term of the lease. An extension of term could be made only by the person • who, upon the expiration of the term, would be the owner of the property leased. Neither Gay Coal & Coke Co. v. Chafin, 116 W.Va. 262, 180 S.E. 95, nor Updegraff v. Blue Creek Coal & Land Co., 74 W.Va. 316, 81 S.E.1050, is to the contrary. Both of these cases dealt with the right of a lessor to extend the terms of a lease under an extension agreement or covenant for renewal contained therein, after he had conveyed the land subject to the lease, the holding being that the conveyance was subject to the right to extend the lease under the covenant, a doctrine which manifestly has no application here. The hardship that would result from declaring a forfeiture of the lease is an additional reason why a court of equity should not declare same forfeited but limit the parties to recovery of the rentals due thereunder.
For the reasons stated, I am of opinion that the decree appealed from should be affirmed; and, with all respect for the opinion of my brethren, I cannot join in the decision in No. 4365. I concur in the view that the appeal in No. 4353 should be dismissed.