Court Opinion

ID: 8177722
Source: CourtListenerOpinion
Date Created: 2022-09-09 22:23:25.526396+00
Date Added: 2024-06-11T16:40:03.056350
License: Public Domain

PopfenbaRGER, Judge,

(concurring):

The claim for damages on account of alleged drainage wholly fails for want of proof. The opinion of the court concedes that, under circumstances, not established by the evidence in this case, the lessee, under a lease, such as the one involved here, containing no express covenant to drill additional wells or to operate the land diligently for oil, •might recover damages for non-drilling of additional wells. Though some of our decisions contain dicta in agreement with this theory, Hall v. South Penn Oil Co., 71 W. Va. 82 and *733other cases there cited, I am of the opinion, after mature consideration, that there is no such right of action. It is not affirmed, as matter of decision, by any of our cases. "What was actually decided is that the lessee has no remedy in equity, under such circumstances, and the observation that there is remedy at law, must be taken subject to a very important qualification, namely, if the plaintiff has any right to relief at all. Though these observations read as if' the court has said there was such a right, they do not amount to decisions affirming it. Accurately expressed, the view was that, if the plaintiff had any right, his remedy for violation thereof was in a court of law.
The implied covenant on the part of the lessee to operate the lease and make it mutually beneficial to himself and the lessor has been affirmed, as matter of actual decision, only in cases involving the doctrine of abandonment. These cases say the lessee cannot hold on to the lease, after he has ceased operations thereon. He is under an implied covenant to make the lease productive and so beneficial to the lessor as well as himself. None of them undertake to say the implied covenant imposes duty to do more than make the lease produce oil or gas in paying quantities. Not one of them undertakes to say the lessee must make it beneficial in any certain degree. The degree of benefit or extent of. production did not arise in any of them. In each there had been, an actual, legal abandonment or such an abandonment was asserted, and the issue was whether or not the lessee had abandoned the lease and thus reinvested the lessor with possession and control of the leased premises for oil and gas purposes. Parish Pork Oil Co. v. Bridgewater Gas Co., 51 W. Va. 583; Steelsmith v. Gartlan, 45 W. Va. 27; Huggens v. Daley, 99 Federal Kep. 613; Munroe v. Armstrong, 96 Penn. St. 307; Conrad v. Morehead, 89 N. C. 31; Petrolum Co. v. Coal Co., 89 Tenn. 381.
Extension of this covenant, raised by necessary implication, for the purpose of testing the question of abandonment, was a natural error on the part of the lessors and their attorneys, due to the generality of the terms in which it was expressed. The lessor desiring something more than had ever been legally accorded him, readily and naturally siezed upon it as justification for his claim, and the court, having no occasion *734either to affirm or deny its validity in the .equity suits, in which it was presented, rather conceded it as mere matter of opinion, not decision, without inquiry as to the soundness of the claim. Extension of the covenant cannot be justified upon the ground of necessity, arising out of the terms of the lease. In cases of abandonment, there is such necessity, or there must be such a covenant, else the lessee gets from the lessor something for nothing. There can be no such result as long as the lessee produces oil or gas in paying quantities. Such production makes the lease mutually beneficial.
Implied covenants can only be justified upon the ground of legal necessity. Such a necessity may arise out of the terms of the contract or out of the substance thereof. One absolutely necessary to the operation of the contract and the effectuation of its purpose is necessarily implied, whether in-ferable from any particular words or not. It is not enough to say it is necessary to make the contract fair, or that it ought to have contained a stipulation which is not found in it, or that, without such covenant, it would be improvident or unwise or would operate unjustly; for men have the right to make such contracts. Accordingly courts hesitate to read into contracts anything by way of implication, and never do it except upon ground of obvious necessity. “All authority opposes construction, or the reading in of matter not expressed, when it is not rendered necessary in some way or for some reason. ’ ’ White v. Bailey, 65 W. Va. 573, 576; United States v. Fisher, 2 Cranch 358; Jackson v. Lewis, 17 Johnson 475; Turnpike v. People, 9 Barb. 161; Morgan v. Railroad Co., 96 U. S. 716. In Hamlyn & Co. v. Wood & Co., 2 Q. B. 488, Lord Esher said: “I have for a long time understood that rule to be that the Court has no right to imply in a written1- contract any such stipulation, unless, on considering the terms of the contract in a reasonable and business manner, an implication necessarily arise that the parties must have intended that the suggested stipulation should exist. It is not enough to say that it would be a reasonable thing to make such an implication. It must be a necessary implication in the sense I have mentioned.” In the Moorcock, 14 P. D. 64, Bowen L. J., said: “The implication which the law draws from what must obviously have been the intent of the parties, the law draws *735with the object of giving efficacy to the transaction and prevent such a failure, of consideration as cannot have been within the contemplation of either side.” In Sterling v. Maitland, 5 B. & S. 840, Chief Justice Coekburn stated the rule as follows: “I look on the law to be that, if a party enters into an arrangement which.can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances under which alone the -arrangement can be operative. ’ ’ This was quoted and approved by Kay, L. J. in Hamlyn & Co. v. Wood & Co., 2 Q. B. 488. Bowen, L. J. said in Oriental Steamship Co. v. Tylor, 2 Q. B. 518, “The case comes within the well-known rule that where the contract as expressed in writing would be futile, and would not carry out the intention of the parties, the law will imply any term obviously intended by the parties which is necessary to make the contract effectual.” In Mackay v. Dick, 6 App. Cas. (1881), 251, Lord Blackburn said: “I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that' is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. "What is the part of each must depend on circumstances. ’ ’
The limitations upon the rule have been expressed in terms no less clear. Lord Esher said in Butler v. Manchester, Sheffield and Lincolnshire Railroad Co., 21 Q. B. D. 207: “No Court has a right to imply any term as between parties which was not clearly and obviously within the contemplation of both parties.” In Hamlyn & Co. v. Wood & Co., Kay, L. J., said: “The Court ought not to imply a term in a contract unless there arises from the language of the contract itself, and the circumstances under which it is entered into, such an inference that the parties must have intended the stipulation in question that the Court is necessarily driven to the conclusion that it must be implied. To state the rule in any *736wider terms would be going, I think, beyond what is justifiable on principle. ’ ’
This rule amply justifies recognition of an implied covenant to operate the lease and make it produce oil or gas in paying quantities. Otherwise the lessee would hold the lessor’s land for nothing, a thing the parties could not possibly have contemplated. It is born of necessity that something be done under the lease. No such necessity underlies the claim of a covenant to take out the oil as fast as it is practicable or possible to ¿xtract it, for, as long as oil or gas is produced in paying quantities, the expectation of the lessor is measurably fulfilled. In the other case, it is not. This marks the distinction very clearly. As long as oil is flowing in paying quantities, the lessor derives a benefit. If the lessee leaves the premises and oil ceases to flow, the lessor gets nothing, and his land is held to no purpose, except the mere hope of speculative profit on the part of the lessee. While the oil flows in paying quantities, the letter of the contract is fulfilled. It provides that the lessee shall have the use of the premises for oil and gas purposes, for a fixed term, and as long thereafter as oil and gas is produced in paying quantities. That condition, production of oil or gas in paying quantities, is all the land owner expressly stipulated for. Por all that anybody can see or know, he has relied, for further benefits and profits, upon the inducement which the land itself, as oil or gas territory, holds out to the lessee, assuming the sufficiency thereof to secure the drilling of as many wells as are profitable. Who can say with any degree of certainty he did not ? Iiow does it conclusively appear that he reserved the right to require more wells than the lessee should $ee fit to put down, or faster drilling than the lessee cares to do? Nothing in the terms of the lease or circumstances of the parties drives or forces the'court to say he did either. The assertion thereof is mere speculation.
That such inducement is ordinarily sufficient is evidenced by the fact that the great oil fields of this state and of the country generally have been developed and completely operated, to the satisfaction of lessors, under provisions of this kind, construed as leaving to the lessee the determination of the number of wells and the time and place of drilling. *737Under the thousands of leases taken in this form, complaints of lack of diligence on the part of the lessees have been rare. In only three or four instances, have lessors come to this court with complaints on grounds of refusal of the lessees to drill additional wells, and, in almost every such case, an effort was made to establish drainage as the real ground of relief. Such was the complaint in Hall v. South Penn Oil Co., 71 W. Va. 82; Ammons v. South Penn Oil Co., 47 W. Va. 610; Harness v. Eastern Oil Co., 49 W. Va. 232; Core v. Petroleum Co., 52 W. Va. 276; and, in this case, the principal grievance set forth in the declaration is the unsustained allegation of drainage. The meagerness of complaints of this kind strongly argues the sufficiency of the hope of profit to the lessee as an' inducement to the drilling of additional wells. In most of these complaints, the territory was apparently worthless and the efforts were to compel the lessees to spend vast amounts of money on the mere hope of returns and contrary to their judgment. The hundreds of leases that -have come into this court, in the course of litigation, are nearly all in the form of the one here involved, and this signifies the inability of land owners to secure such stipulations for development according to any prescribed standard. In a few rare cases, stipulations for additional wells to the extent of two or three or four have been found, but such instances have very seldom occured. The hazard, the risk is all on the part of the lessee. The land owner risks nothing except the use of his land. The oil business is extremely hazardous to the operator, wherefore it is not an easy matter to obtain a contract for additional wells. Such contracts are decidedly exceptional. Yery few of them have ever been seen. The following observation of Mr. Justice Mitchell, dissenting in Kleppner v. Lemon, 176 Penn. 502, quoted with approval in Core v. Petroleum Co., 52 W. Va. 276, accords with the incontrovertible facts: “The lessee has to bear the cost'of putting down wells, and his interest is to proceed carefully, with due regard to expense and probable returns, while the lessor’s interest is to have search and experiment without regard to present cost. The decision in regard to such matters belongs primarily to the lessee. It is a proper subject for agreement, and when the parties have agreed what shall be done their rights are not subject to the *738judgment of any court to fix a different standard. If the parties to the present controversy had expressly stipulated that one well should he sufficient for the whole tract, no court would venture to enlarge the test by directing another to be put down at the lessee’s expense, yet the covenant of the lease amounts to just that, as I understand the learned court below to admit. I would reverse this judgment as a flagrant violation of the liberty and sanctity of contracts by raising a purely factitious equity to enable the complainant now to make a better bargain at the defendant’s expense than he chose or was able to make for himself at the time. ’ ’
Having demonstrated inhibition of the proposed extension of the implied covenant by the limitations of the rule governing such covenants, I now apply two other familiar rules of interpretation, giving effect to the words of the contract and force to established customs and usages. By the terms of the agreement, it is to continue as long as oil or gas is produced from the land in paying quantities. This clearly negatives any implication of right in the lessor to require production in any greater quantity. Compliance with that condition continues the estate in the lessee. As long as it is complied with, the lessor cannot forfeit the lease. McGraw Oil Co. v. Kennedy, 65 W. Va. 595. For the same reason,- we must say, to be consistent, he cannot require more than compliance with the prescribed condition, unless there is danger of loss by drainage.
This contract was made with full knowledge of the usage and custom of lessors under such agreements, to leave the locations and number of wells and times of drilling to the determination of the lessees. It is an usage so general as to require judicial notice thereof. Practically all of the' tens of thousands of leases under which the vast oil and gas fields of this state have been developed have been made in the form of this one. The lessors never so much as thought of the alleged right here asserted. They left it all to the lessees, and, so interpreted and executed, these leases have adequately and fully protected the lessors-and effectuated full, complete and diligent development of their lands. The interest of the lessee has been a sufficient inducement in almost every case. It has been in this case. This court so finds and decides.
*739An established usage known to the parties to a contract is a part of the contract, unless excluded by its terms. Anderson v. Lewis, 64 W. Va. 297; Cobb v. Dunlevie, 63 W. Va. 398; Johnson v. Burns, 39 W. Va. 658; Governor, etc. v. Withers, 5 Gratt. 24; Hansbrough v. Neal, 94 Va. 722.; Richlands & Co. v. Hiltebeitel, 92 Va. 91; Anson, Con. 246 et seq., 2nd Ed. 322 et seq.