Court Opinion

ID: 7166050
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:21:11.680948+00
Date Added: 2024-06-11T16:15:32.929893
License: Public Domain

On Rehearing
PROVOSTY, J.
The bringing in of an oil gusher at Beaumont, Tex., created a great deal of excitement at all places within a radius of 100 miles where any surface indications of oil, such as gas seepage, were found. Especially was this the case at Prairie Mamou, in the neighborhood of the towns of Jennings and Crowley, La., about 90» *837miles from Beaumont, where conditions very similar to those of the celebrated Spindle Top were observed — strong seepages of gas in the proximity of a mound. On a match being applied the gas would blaze and explode. These indications were on the southwest corner of the McDaniel tract and the northwest corner of the Corkran tract, which ■borders the McDaniel tract on the south, and also on the east border of the Clement tract, adjoining the other two tracts on the west. The northern part of the Cork-ran tract, that bordering the McDaniel tract, was owned by Arnaudet; the middle part, by Latreille; and the southern part, by Houssiere. The Arnaudet holding is approximately 900 to 1,000 feet broad, so that the Latreille land is approximately that distance from the McDaniel tract. As already stated, the Latreille land adjoins the Clement tract. The first wells that were brought in were 1,000 and 100 feet in distance, respectively, from the Latreille land; the former on the McDaniel tract, and the latter on the Clement tract.
C. C. Duson says:
“After the discovery of those indications the excitement was great.”
The same witness, who is a very successful business man, says that when he visited the spot, and saw the indications, he “went wild over it.” He and his brother, W. W. Duson, another very successful business man, bought the McDaniel tract, in association with others, for the purpose of exploiting it for ,oil. This was on the 11th of April, eight days before the contract involved in this case was entered into. On the preceding day the local paper had published an editorial with the .following headlines:
Gas Discovered in Acadia.
“Gas has been Struck in Acadia — Bound in Lower Mamou Prairie, and in Ebenezer Neighborhood — Parties are Purchasing Lands — Every Indication Points to the Binding of Oil if the Land is Developed.”
The purchase’ of the McDaniel tract was heralded in the local paper of the same day, the 11th, under the following headlines:
“Oil Prospectors Buy Acadia Land.
“Where Gas was Struck in South Mamou Prairie, Deal Closed This Afternoon, and a Complete Inspection will be Made — Who the Purchasers Are.”
On the next day the local paper published an article under the following headlines:
“Oil Talk Brom Different Sources.
“It is the Principal Topic of Conversation in Crowley To-Day — What the Oil Experts Say Concerning the Gas Strike in Mamou Prairie — Standard Examines Texas Oil.”
W. W. Duson says that by the time the act of sale to the McDaniel tract was recorded “it was pretty hard to know what value was in that section — the jump was so great.” The same witness was asked:
“In April, 1901 — at that time you had no idea what the land was worth? A. No, sir; speculatively it was worth something. We all went crazy. * * * I thought most of my co-proprietors were insane. They were worse than any I ever saw in my life.”
The men who are thus described by their associates as having gone “wild and crazy” were the substantial business men of the neighboring towns.
Latreille shared in this excitement, and in the dream of sudden wealth from the oil beneath his land. Some time before the signing of the lease, when a special excursion was being run to Beaumont to afford the people of Jennings and Crowley and neighborhood a chance to see the great Lucas well spout oil, one of the excursionists, a Mr. Hurtevant, asked Latreille what price he would ask for his land in case some one was found at Beaumont wanting to buy it. 1-Ie answered that he would consult with his neighbors about the price they were disposed to ask for theirs, and give an answer the next morning, when the excursion was to leave. He and his neighbors consulted overnight and *839agreed upon $200 per acre, and Latreille fixed that as the price which Mr. Hurtevant should asls. This was for the entire tract of 540 acres, and not merely for the 40 which were eventually included in the lease to Spencer.
S. A. Spencer, with some associates, were endeavoring to secure oil and development leases on the lands in the neighborhood of the surface indications of oil, and did, in fact, secure leases on some 4,000 or 5,000 acres. Such leases were being sought on the lánds for miles around. Mr. Bradford, one of the witnesses, says that “the newspapers printed thousands of them, and all of about the same character” as the one in question in this case.
When Spencer approached Latreille for a lease, Latreille had already been solicited in vain by others. Latreille says that pressure was brought to bear upon him to execute the lease, and that he finally consented to do so only as the result of this pressure. Be that as it may, he did execute with Spencer the following instrument, presented to him for- signature by Spencer, to wit:
Agreement
Made and entered into this 19th day of April, A. D. 1901, by and between Arthur Latreille, of the parish of Acadia and state of Louisiana, party of the first part, and S. A. Spencer, party of the second part:
“Witnesseth, that the party of the first part, for and in consideration of the sum of one dollar to him in hand well and truly paid by the said party of the second part, the receipt of which is hereby acknowledged, and of the covenants and agreements hereinafter contained on the part of the said party of the second part to be paid, kept, and performed, has granted, demised, leased and let, and by these presents do grant, demise, lease, and let, unto the party of the second part, its successors and assigns, for the sole and only purpose of mining and operating for oil, gas, and laying pipe lines, and of building tanks, stations, and structures thereon to take care of said products, all that certain tract of land, situated in Acadia parish and state of Louisiana, bounded and described substantially as follows:
“West by Jules Clement and Orange Land Company, north by Arnaudet, east by lessor, and south by Houssiere, containing forty acres, more or less, and being same land conveyed to the first party by Jean Gay, bearing date of -, reserving, however, therefrom one hundred feet around the buildings, on which no wells shall be drilled by either party, except by mutual consent.
“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 or assigns.
“In consideration of the premises, the party of the second part covenants and agrees, first, to deliver to the credit of the party, his heirs and assigns, free of cost, in 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 the premises, said payments to be made from each well within sixty days after commencing the gas therefrom, as aforesaid, and to be paid yearly thereafter while the gas from said well is so used.
“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 thereof, or pay at the rate of fifty dollars quarterly in advance for each additional three months such operation is delayed until such a well is completed, and it agrees that the completion of such a 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 the said premises to run all necessary machinery and fixtures placed on said premises, and, further, upon payment of one hundred dollars at any time by the party of the second part, its successors or assigns, to the party of the first part, his heirs and 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 becomes absolutely null and void.
“Witness our hands in duplicate this 19th day of April, 1901,
“[Signed] Arthur Latreille.
“Tsmere Latreille.
“S. A. Spencer.
“[Signed] George O. Elms.
“Eugene Houssiere.”
The land embraced in this lease is not the whole of Latreille's land, but only the 40 acres of it in immediate proximity to the oil indications, namely, the northwestern end of the tract.
While only $1 is recited in the contract as *841to be paid cash, there was actually paid $50 in cash at the execution of the contract. Spenc.er transferred the contract to S. A. Spencer & Co., and the latter transferred it to the plaintiff syndicate. No question arises in connection with the transfers. The transferees have stood in the shoes of Spencer, with the same rights and obligations.
The contract thus entered into related exclusively to the mineral wealth supposed to lie within the body of the land. It was not a contract relating to the surface of the land, such as an agricultural lease might be. The object and purpose was that the parties might share the treasure supposed to lie hidden within the body of the land. The owner of this treasure was giving up seven-eighths of it in consideration of the party bringing it out in the early future, within the term specified in the act, and delivering one-eighth of it to him.
For making this contract Spencer copied the form that is given at page 869 of Thornton’s Law Relating to Oil and Gas, and, having properly filled the blanks, he got Latreille to sign it. The only change he made was that the obligation of the lessee, according to the form in the book, is “to complete a well,” and in the contract it was vaguely stipulated as to “commence operations.” The purpose of the change which Spencer thus made from the form as found in the book was, doubtless, to favor himself by relaxing the strictness of his obligation. Instead of having to complete a well within six months, he would only have to begin operations. By beginning operations was meant to begin boring a well, for there is no other way for commencing to operate for oil and gas than to begin to bore a well down to the oil or gas stratum. Latreille is a farmer, a man of very little education, who understands but imperfectly the English language, in which the contract is written; the negotiations being carried on mostly through an interpreter.
At the time this contract was entered into, the Corkran tract, which had been acquired by Arnaudet, Latreille, and Houssiere by purchase at tax sale, was threatened with serious litigation by the former owner. It was this supposed infirmity in his title which Latreille says was held as a club over his head to compel him to sign the lease. After oil had been discovered, the suit in question was brought, and eventually came to this court, and was decided by this court in November, 1903, and from the decision of this court a writ of error was obtained to the Supreme Court of the United States. That litigation is now referred to merely for greater fullness of statement, as it really plays no part in the present case. The* plaintiff syndicate urges it as one of the* reasons why it delayed beginning operations., on the Latreille land; but that excuse cannot be sincere, since the syndicate did operate on the Arnaudet land, which forms part-of the Corkran grant and was equally involved in the said litigation. It could play a part in this ease only if the syndicate had’ considered itself bound to begin operations: and had really been deterred from doing so> by fear of the uncertainty of the title. Ancfl even then it is questionable whether the excuse could have availed, since the impendency of the litigation was known to the parties at the time of entering into the contract, and no stipulation was made on account of it for further delay.
Assuming that the present contract relates, not to the surface of the land, but to the fluid wealth supposed to lie hidden within it, the remarks of the Supreme Court of' the United States in the case of Twin-Lick Oil Co. v. Marbury, 91 U. S. 592, 23 L. Ed. 331, are apposite:
“The fluctuating character and value of this class of property is remarkably illustrated in *843the history of the production of mineral oil from wells. Property worth thousands to-day is worth nothing to-morrow; and that which would to-day sell for $1,000 as its fair value may, by the natural changes of a week or the energy and courage of desperate enterprise, in the same time be made to yield that much every day. The injustice, therefore, is obvious, of permitting one holding the right to assert an ownership in such property to voluntarily await the event, and then come in and share the profit.”
The following extracts from decisions of other courts are also apposite in the same connection:
“Courts will take judicial notice of the vagrant character of petroleum, and that an oil well will draw its product from an indefinite distance, and in time exhaust a large space.” Wettengel v. Gormley, 160 Pa. 559, 28 Atl. 934, 40 Am. St. Rep. 733.
“The nature of oil and gas, the pressure of the superincumbent rock, and the vagrant habit of both fluids, under the influence of this pressure, enter into the contemplation of both parties to such an agreement.” Kleppner v. Leon, 35 Atl. 109, 176 Pa. 502.
“The real consideration of the instrument was, not the recited $1, nor the $100 that after two years might be paid in order that they might keep it going from year to year, but the beginning and prosecuting with due diligence of wells for oil or minerals upon the land; in other words, the development of the property for oils and minerals in the near future. This was the clear purpose of the grant.” Oil Co. v. Teel (Tex. Civ. App.) 67 S. W. 545.
And in the case of Federal Oil Co. v. Western Oil Co. (C. C.) 112 Fed. 373, the court said:
“Oil leases stand upon quite different ground from leases of other immovable property. The governing principle in gas and oil leases of the character in question is that the discovery and production of gas or oil is a condition precedent to the existence and continuance of any vested estate in the demised premises. Where, as in this case, the only consideration is prospective royalties to arise from exploration and development, failure to promptly explore and develop the demised premises renders the agreement nudum pactum, and works a forfeiture of the lease, for it is of the essence of such a lease that the work of exploration shall be commenced and prosecuted with promptness.”
In Martel v. Jennings-Heywood Oil Syndicate, 114 La. 358, 38 South. 256, this court said:
“Running through all the decisions on the subject of oil and mineral leases is the principle that in such contract the real consideration is the development of the property for oil or minerals in the near future.”
The following from Bryan on Petroleum, p. 146, is also apposite:
“As will be seen from the examination of the case presently to be made, the trend of the decisions touching question of forfeiture arising out of oil and gas leases has been almost uniformly in favor of the lessor. Generally it is the lessee who is favored, and after a substantial compliance by him with the terms of the contract equity will not regard a technical breach. But with mining leases it is otherwise. This is true, principally, if not entirely, to the nature of the business of mining, and, more specifically, oil mining — to the temptation offered the shrewd opera-tor to purchase at a nominal price the right of developing the lands, the owner of which is ignorant of their real value for any purpose, and then to hold them indefinitely, should it suit their purpose, neither working them himself nor permitting another to do so.
“Of course, it may be said, in a general way, that parties may make any contract which they desire, and, if a lessor should, by way of lease, make his intention clear to grant the oil and gas rights upon his property for an inadequate consideration, the court will enforce it. But the lessee, where the instrument presents a semblance of inequality or unfairness, will find that he has a thorny road to travel before reaching a judicial establishment of his claims.”
See. in the same sense, Thornton’s Law of Oil and Gas, § 78; Donahue, Petroleum and Gas, p. 201; Steelsmith v. Gartlan, 29 S. E. 978, 45 W. Va. 27, 44 L. R. A. 107; Bettman v. Harness, 26 S. E. 271, 42 W. Va. 433, 36 L. R. A. 566; Parish Fork Oil Co. v. Bridgewater Gas Co., 42 S. E. 655, 51 W. Va. 583, 59 L. R. A. 566; and especially Huggins v. Daley, 99 Fed. 606, 40 C. C. A. 12, 48 L. R. A. 320.
Extracts to the foregoing purport could be reproduced here almost without end. We will give one more, from Chief Justice Hadley, in Ohio Oil Co. v. Delmore (Ind. Sup.) 73 N. E. 908, to wit:
“Whether it proceeds from design of crafty speculators in oil and gas leases to enshruiid their contracts with doubtful, ambiguous, and absurd provisions, as a means of promoting their interests, or whether it comes from a *845custom in the rural districts of employing «unskilled draftsmen, it is a notable fact that few subjects of- contract contribute to the courts an equal proportion of written agreements Cor interpretation. The fact is so .patent that courts generally, in gas and oil states, have come to place such contracts in a class of their own, and to look critically info such instruments for the real intention of the parties, because it so frequently happens -that they cannot, on account of incongruous .provisions, be enforced according to the strict letter of the contract. Oil Co. v. Crawford, 55 Ohio St. 161, 44 N. E. 1093, 34 L. R. A. 62. The mutual understanding and intent of the parties as to purpose, scope, and ultimate object to be attained by the contract that inspired and accompanied its execution is controlling, and must be' determined, not by detached provisions, but by reviewing the provisions as a whole.”
The boring of wells was begun on the McDaniel tract by the Crowley Oil & Mineral ■Company, its owners, and on the Clement tract by the plaintiff syndicate, on the same May and about the same hour, to wit, on May 4, 1901. The first oil gusher was brought in November or December, 1901.
Just before the expiration of the six months fixed in the contract for the commencement of operations, namely, on October 12, 1901, S. A. Spencer & Co. tendered to Latreille $50, and Latreille accepted same, and gave a receipt reciting that said amount •was received “for first quarterly payment in advance for delay in operations as stipulated in contract,” etc. On January 16th, following, another similar payment was made and ■similar receipt executed; and likewise on April 15, 1902. The next payment had to be tendered on or before July 19, 1902, in •order to be in time, but was only tendered four days thereafter. Latreille declined it, .as being too late, and told the lessee that the ■lease was at an end. The reason assigned by the syndicate for not having tendered the payment in time was that a fire was raging in the oil field which had absorbed their attention and that they overlooked the payment.
At the time the payments were made wells ihad been bored and were continuously and rapidly being multiplied on the adjoining tracts, and millions of barrels of oil were spouting out of the land, and of this flood Latreille was getting not one drop. On receiving the payments, he had insisted that the next well should be located on his land, and promises had been made to that effect. At the time the fourth payment was declined, as being too late, there had already been bored between 10 and 12 wells on the adjoining Clement tract and a number on the McDaniel tract. The syndicate continued to make the quarterly tenders, and Latreille continued to refuse to accept them.
The evidence establishes that the supply of oil on one tract of land may be drained through wells on another tract, and that so direct is the connection sometimes that, when air pressure would be applied to the wells on the Arnaudet tract, the effect upon the wells on the Latreille tract would be visible and immediate. Soon after the lease to plaintiff had been declared by Latreille to be at an end, the defendant company was organized; and Latreille sold to it all his land in the Corkran grant, including that which had been leased to Spencer. When the plaintiff syndicate saw that the defendant company, through its lessees, was about to begin boring a well on the 40 acres in question, it slipped a derrick across from the Arnaudet tract, and claimed that under the lease to Spencer it was in possession of the 40 acres. The defendant company then brought against' the syndicate the possessory action reported at page 107 of 115 La. and page 932 of 38 South. The questions involved in that suit were possession vel non, and, incidentally, whether the lease to Spencer was, or not, absolutely null and void on its face. The court decided that on its face the lease was valid, and that the syndicate was in possession.
The date at which Latreille refused the tardy tender was 15 months after the sign*847ing of the contract. The date when the plaintiff syndicate made the first move towards executing the contract by slipping the derrick across the line was 2 years and 9 months after the signing of the contract. At the date of the trial of the possessory suit in the lower court there were some 70 wells in the neighborhood of the Latreille land. The plaintiff syndicate had 8 wells within 1,200 feet of Latreille’s land.
Pending said suit, the syndicate instituted the present suit. The allegation is that the lease to Spencer is valid, and that the plaintiff syndicate has fulfilled all its obligations under it, and that the defendant company, though its lessees, is trespassing upon the leased premises. The prayer is that the defendant and its said lessees be enjoined from thus trespassing, and for judgment “recognizing and enforcing the rights” of the petitioner under the lease in question.
The contentions of defendant are stated in the brief as follows:
“(1) That the consideration of $50 quarterly for the right to delay operations is insignificant and wholly inadequate.
“(2) That the consideration of $100 for the right to hold the lease without development, and to cancel same at will, is insignificant and wholly inadequate.
“(3) That the contract is unconscionable, as giving something for nothing, as enabling the lessee to speculate with another man’s property.
“(4) That the real consideration of the contract is the royalty to the lessor, which royalty may be taken away from him by the surrender and delay clauses of the contract, at the arbitrary will of the lessee.
“(5) That the contract was framed to enable the lessee to await the event of the operations of other parties, and to profit enormously without outlay on the part of the lessee, and was actually held by the plaintiff herein for such speculative purpose.
“(6) That the plaintiff herein took out large quantities of oil from the tracts adjoining the premises leased; that it did not desire to develop the leased premises, as too much production might affect the price of the oil already produced; and that oil taken from the adjoining land was drained from the leased land.
"(7) That the syndicate did not attempt to exercise the right to operate under this contract until after it found that the owner of the land had made arrangements with the Rayne Planters’ Oil & Development Company to take the land and operate, when it built a derrick near I the line, and slipped it over on the leased land,, and began its operations, thereby forestalling the Rayne Company a few weeks.”
The first contention of plaintiff is that the judgment in the possessory action is res judicata of the present suit.
We do not think so. As already stated,, the questions in that suit were as to possession vel non, and as to the validity vel non of the contract on its face; whereas, the court is now called upon to pass on the question of the validity and effects of the contract, not merely on its face, but upon-the facts, and in the light of all the surrounding circumstances, and is also called upon te pass on the further question of whether the plaintiff has complied with its obligations and is in a position to demand performance from defendant.
The cardinal rule in the interpretation of contracts is to seek the intention of the parties, and when that intention is ascertained, to give effect to it. In this case the circumstances attending the execution of the contract leave no room for doubt as to what was the intention of the parties. It was, on the-one hand, that Spencer should have the sole and exclusive right to exploit the land in question for oil and gas, and, on the other hand, that he should be under the obligation to do so within the six months specified in the agreement, or within a reasonable time thereafter. Any interpretation of the contract which would defeat that intention is-not to be entertained. Especially is it not permissible to put upon the contract an interpretation such as would confer upon Spencer the power to prevent the development of the land for oil and gas, thereby converting the contract, which is professedly for the sole purpose of the development of' the land for oil and gas in the early future, into one that would operate in the very opposite direction — into one that would enable the lessee to prevent the development of the land for oil and gas for 10 years.
*849The circumstances attending the execution of the contract leave no room for doubt that the cause of the obligation which Latreille subscribed was the hope of securing in the early future one-eighth of the mine of wealth which was supposed to be lying underneath the surface of the land. This store of wealth was large enough for him to be content with one-eighth of it. He was willing to relinquish his right to the other seven-eighths to Spencer in consideration of the latter’s obligating himself to take the proper measures for delivering the one-eighth to him in the early future. We repeat, this was the intention.
Now, the question arises as to whether that intention was embodied in the instrument which the parties executed for the purpose of evidencing their contract. For making this contract Spencer took out of a law book a form of contract upon which the ingenuity of the most astute legal minds seems to have exhausted itself in seeking to accomplish the impossible task of devising a contract which shall be without mutuality of obligation and yet be valid. He took that superingenious form, and copied it, and filled in the blanks, and presented it to Latreille for signature. He even sought to improve on the ingenuity of the inventors of that form by changing the specific obligation to complete a well into that of merely commencing operations, whatever that might mean — thus seeking to loosen still more, if possible, the already slipping hold on the lessee. This form of contract, concerning the obligations of which no two persons seem entirely able to agree, even after careful study, and over the proper interpretation of which the courts are widely divergent, the plaintiff contends that Latreille understood perfectly well as meaning that Spencer should have the right to himself abstain from developing the land for oil and gas, and keep all others, including Latreille himself from doing so.
The contention is that “ita seriptus est contractus,” and that as the parties have made-their contract so must it be enforced. The-answer is, “Ita seriptus non est contractus,” if read as a whole and in the light of the-circumstances under which it was entered into and of the plain purpose it was designed to accomplish. True, one clause reads in such a way that, taken by itself, it confers upon Spencer the power to abstain from developing the land for oil -and gas and keep any one else from doing so for the 10 years, on paying $50 quarterly; but this clause is utterly repugnant to the express-declaration of the contract that it is made for the sole purpose of operating for oil anu gas and that the lessee obligates himself to-begin operations within six months, -and it is repugnant to the true spirit of the contract according to which the delay it speaks, of and for which the $50 should be paid should be a delay for which the lessee might assign some good cause. It is for delay in performance of the contract that the $50 payments are stipulated, and not as an alternative performance of the contract.
It is simply impossible to understand by this contract that Latreille was willing to. give up his hope of sudden wealth from this mine of oil within his land for the mere mess of pottage of $50 every three months-until the land should have been drained of its treasure through the wells on the adjoining lands, when it would be thrown back on his hands, dry as a squeezed lemon, plus-$100.
The court takes the same view of the present contract as of the similar instrument in the case of Murray v. Barnhart, 117 La. 1023, 42 South. 489. The court thinks that the evidence which has been taken in this case, and which was not before the court in the possessory action, and could not have been considered even if it had been — and there are several volumes of it — shows that, rela*851tively to the value of the thing which the lease embraces, the $50 paid by Spencer at the execution of the lease, and the $100 which he obligates himself to gay in case he did not fulfill the obligations of the lease, are as insignificant and lacking in seriousness as were the $1 and $2 in the Barnhart Case. The court was led into error in the opinion heretofore handed down by considering the leasing value of the surface of the land for agricultural purposes, instead of its speculative value for oil-mining purposes. 'The court thinks that what Latreille bargained to get unller and through this contract was the one-eighth of the supposed mine of hidden wealth under the surface of the land, and that he would never have •consented, and, in fact, never did consent, to bargain away his new-born, surging, and exultant hope of great wealth for any $50 payable every three months for a period of three or four, or possibly ten, years, nor even for the $100 additional.
The real and only consideration of such a contract on the part of the lessee is the obligation to develop; and an oil development lease which leaves the lessee free not to develop on making certain periodical payments is held by the courts to be void for want of mutuality of obligation. Martel v. Syndicate, 114 La. 351, 38 South. 253; Foster v. Gas Co., 90 Fed. 178, 32 C. C. A. 560; Steelsmith v. Gartlan, 45 W. Va. 27, 29 S. E. 978, 44 L. R. A. 107; Federal Oil Co. v. Western Oil Co. (C. C.) 112 Fed. 373; Id., 121 Fed. 676, 57 C. C. A. 428; Huggins v. Daley, 99 Fed. 606, 40 C. C. A. 12, 48 L. R. A. 320; Brown v. Vandergrift, 80 Pa. 142; Cowan v. Iron Co., 83 Va. 547, 3 S. E. 120; Petroleum Co. v. Coal Co., 89 Tenn. 381, 18 S. W. 65; Oil Co. v. Jennings (C. C.) 84 Fed. 839; Guffey v. Oliver (Tex. Civ. App.) 79 S. W. 884; Marble Co. v. Ripley, 10 Wall. (U. S.) 339, 19 L. Ed. 955; Pipe Line Co. v. Teel (Tex. Civ. App.) 67 S. W. 547.
In vain is the principle which has inspired those decisions sought to be met and circumvented by the stipulation of a paltry sum, such as $1, or $2, or even, in a contract of the magnitude and importance of the one here in question — where the prospect is of thousands of dollars, if not millions, and the actual fixed obligation is of $10,000, or more —by the stipulation of $100.
It is not because of lesion, or of error, that the contract is null. It is not a question of lesion, nor a question of error. Both of these questions presuppose the existence of a contract. It is a question of no contract. Not the presence of lesion or error; but the absence of contract. The only contract which the circumstances called for, which, from the surrounding circumstances and from the instrument taken as a whole, the parties can be supposed to have desired to enter into, was a contract binding Spencer to operate for oil and gas; and if, as a matter of fact, he is not bound to that obligation, then the result, or sum total, is that there is no contract. If I make an agreement with a builder to construct an $8,000 house for me on my vacant lot at his own expense, he to retain possession of the house until the rents have reimbursed him his outlay, and he stipulates the right to be released from the contract on payment of 30 cents, the legal situation is that there is really no contract between us. The stipulation of Spencer to bore a $10,000 well, with leave to be relieved from the obligation on paying $100, is hardly a more serious contract. It is an attempt to bind one party, while leaving the other foot loose.
Be that, however, as it may, under no view that can be taken of the contract can the patent fact be lost sight of that the object and purpose of the contract, the thing concerning which the parties dealt, the thing which Spencer was to do under the contract, the cause of the obligation which Latreille on *853Ms part incurred, was that Spencer should ■develop the land for oil and gas within the time fixed in the contract.
Now, whether Spencer incurred that obligation absolutely at the signing of the contract, so that the contract became then and tnere a commutative contract, or whether he merely secured to himself, or purchased, •an option in consideration of the sundry •small payments which he made and agreed to make, are other questions, and questions -which, it must be admitted, present the great•est difficulty.
If he merely secured an option, then, by -failing to make the fourth quarterly payment -within the time fixed for the exercise of the option, he, or his assigns, forfeited all rights under the contract; land there is an end of the matter. Escoubas v. Petroleum Co., 22 La. Ann. 280. It is clear that if I agree to he bound on the condition, or provided, you ■do a certain thing within a certain time, for example, if I agree that you shall have the exclusive right to exploit my land for .minerals, provided you begin operations within six months, or pay me in advance of the -expiration of the six months $50 for a prolongation of the term, and you fail to do the -thing thus stipulated to be done, I am not hound. Says Pothier (volume 6, p. 217, § ~-9):
“Lorsque la condition- renferme un temps prefix, dans Rquel elle doit Stre accomplie, eomme -si je me suis oblige de vous donner une certaine somme si un navire était cette année de retour •dans les ports de Erance, il faut que la chose ■arrive dans le temps prefix; et lorsque le temps est expiré sans que la chose soit arrivée, la condition est censée défaillie, et l’obligation con•tractée sous cette condition est entierement ■•évanouie.”
It would seem to be a plain proposition -that if I agree to lease you my nouse on condition that you pay me the rent in advance, •■and you fail to do so, I am under no obligation to you.
“An option must be exercised within the time fiimit, or the right will be lost.” 21 A. & E. E. 931; Richardson v. Hardwick, 106 U. S. 252, 1 Sup. Ct. 213, 27 L. Ed. 145; Litz v. Goosling, 93 Ky. 185, 19 S. W. 527, 21 L. R. A. 129; Waterman v. Banks, 144 U. S. 394, 12 Sup. Ct. 646, 36 L. Ed. 479.
If, however, the contract was commutative —that is to say, if Spencer incurred the obligation to develop the land — then the question arises whether the contract did not continue in existence until he or his assigns had been called upon by Latreille or his assigns to fulfill it, or, in other words, had been put in default, and had thereafter failed to perform.
Civ. Code, art. 1911, explains what is meant by the obligee putting the obligor in default. It is to “demand that it [the contract] shall be carried into effect” ; i. e., shall be performed. Article 1931 provides that a contract is “violated by not doing what was covenanted to be done, or not doing it at the time stipulated.” Now, the question arises: When a contract has been violated by not having been performed at the time stipulated, and the obligee no longer desires that it should be performed, must he, under our law, call upon the obligor to perform it (i. e., do the very thing that he does not want done), or may he resist its performance by the contractor, who has violated his contract, and therefore is in no position to call upon his adversary to perform his? That question would seem to answer itself. It does so, however, only with a qualification. The contractor may have been prevented from executing his contract by some cause which ought to excuse him, which the parties in all probability would have agreed should excuse him in case they had foreseen it. In suen a case, the contractor, though he has technically violated his contract, and is therefore technically in no position to call upon his adversary to perform his, yet is equitably still in time, because his delay has a good excuse. In such a case, if the contraetee refuses to allow the contract to be perform*855ed, the courts may enforce the equity. This is what article 2047 means when it says that:
“The party in default may, according to circumstances, have further time allowed for the performance of his contract.”
Our law enforces no such fanciful notion as that, after a contractor has violated his contract by not performing it “at the time stipulated,” the contractee who no longer desires to have the contract performed must call upon him to perform, and that if this is not done the time for performance continues to run indefinitely.
When the time for performance is passed, and neither party says anything about the matter, the presumption is that neither party desires performance, but that both desire that nothing further shall be said about the matter. If, in such a case, the contractee desires that the contract shall be performed, or desires to hold the contractor responsible in damages for future delay in performance, he must call upon him to perform, or, as the expression is, “put him in default,” and then “damages are due from the time that the debtor has been put in default.” Article 1933.
“Suivant Topinion la plus répandue la recevabilité de l’action en resolution n’est pas subordonnée ü une mise en demeure préalable du débiteur: celui-gi en est suffisamment averti par la citation en .justice.” Dalloz, C. G. Annoté, art. 1184, No. 65 — citing a long list of authorities.
That is to say, when the contract has been violated by the thing covenanted to be done not having been done within the time stipulated, the contractee acquires the right to have it rescinded, and does not have to call upon the defaulted contractor to perform it. The rationale of the matter is clear. The contractor knows what his contract is. He knows that it is to be fulfilled within a certain time; and if, without good excuse, he fails to perform it, he violates it, and is no longer in a position to call upon his contractee to perform his part.
. Article 19.12, Civ. Code, in no wise conflicts with what is here said. It is found in section 2 of chapter 3 of the Code, under the-rubric “Of the Obligation of Giving.” It. reads as follows;
“The effects of being put in default are not only that in contracts to give the thing, which is the object of the stipulation, is at the risk of the person in default; but in the cases hereinafter provided for it is a prerequisite to the recovery of damages and of profits and fruits, or-to the rescission of the contract.”
That article does not say that default is. in all cases <a prerequisite to the action of rescission (which is the contention now made-by plaintiff), but that it is such “in the cases, hereinafter provided.” Hereinafter, where?In the entire subsequent portion of the Code?No; if that had been the idea, the language-would have been “in all cases”; but “in the cases hereinafter provided” — i. e., in this section. This was the view taken by this court in Murray v. Barnhart, supra, cited, and the court adheres to it.
We think that, since Latreille no longer-desired that the contract should be performed there was no necessity for him to go-through the ceremony of calling upon the syndicate to perform it. Indeed, we think that any call of that kind he might have made would have had the effect of waiving: the default of the syndicate and renewing the-term of the contract for a time sufficiently long to admit of performance. I cannot call upon my debtor to perform and refuse him the time in which to do so. Article 2047, Giv. Code, provides that rescission may be-demanded “by exception”; and that is what, the defendant is doing in this ease.
Moreover, the sole object of putting in default is to let the obligor know that theobligee desires that he should perform his. contract. When, therefore, the obligee notifies the obligor, as was done in this case, that he considers that the contract is at an end and that he will not allow its performance,, there can no longer be any question of putting the obligor in' default. The sole ques*857•tion must then be whether the obligor will 'insist upon his rights or will acquiesce in the •termination of the contract.
The learned counsel for plaintiff argue •that, because damages cannot be demanded •for delay in performing a contract, therefore the rescission of a contract cannot be de.manded without precedent putting in default. But the two actions are toto coelo ■different. The one is predicated on the affirmance and continued existence of the •contract; the other, on its disaffirmance and •dissolution. Default is a prerequisite only to the demand for future damages; not to a demand for damages in the past. If the contract was of such a nature that the obligee would suffer damages if it were not perform■ed within the time fixed, the damages thus •suffered may be recovered without any putting in default. Civ. Code, art. 1933, No. 1. But if time is not of essence, and the thing may be done as well later as at the time -fixed, the law, as a matter of equity, requires .•as a prerequisite to the action in damages (which is founded on fault) that the contractee notify the contractor that he desires that -the contract should be performed at the time fixed. Such a putting in default is purely .a technical proceeding, and may take place as •well before as after the expiration of the delay for performance. Such an anticipatory notification would be the exact equivalent of .•a stipulation in the contract that “the party failing to comply shall be deemed to be in default by the mere act of his failure.” Civ. •Code, art. 1911, No. 1. The contractor would be fully notified that the contractee desired that the contract should be performed within the time fixed.
If it be conceded that originally the contract was alternative — that the syndicate might, at its option, either exploit the land •■or pay $50 in advance every three months— • certainly the latter alternative became forfeited and vanished out of the contract when •the syndicate failed to make the payment in advance as stipulated. The contract then remained purely and simply a contract to exploit the land, without any alternative. The syndicate had then no more right to insist upon the alternative which had vanished from the contract than if that alternative had never been in the contract; and when it did so, and persisted in doing so, instead of offering to perform the only subsisting obligation under the contract, it simply insisted upon a right it did not have, and failed to perform the obligation it was under.
It is needless to consider what would have been the situation if the syndicate had insisted that, notwithstanding the forfeiture of the alternative obligation, it had the right to go on and exploit the land, and had offered to do so. Its position, then, might have had equity, if supported by proof that the delay in fulfilling the contract while Latreille was willing and anxious that it should be fulfilled had been from some good cause. The refusal of Latreille to allow the land to be exploited might then possibly have been an excuse for not executing the contract. But the syndicate made no such tender of performance. On the contrary, it insisted that it was under no obligation to perform, but could hold the land undeveloped for ten years by making the quarterly payments. And by the latter contention it must stand or fall; and it falls.
That such an option is in the nature of a suspensive condition or condition precedent is clear. It is an agreement that an obligation shall come into existence upon the happening of a certain event, or provided a certain event happens, namely, the payment of the $50 in advance. The payment not having been made as thus stipulated, the obligation vanished.
Prom Pothier, Obi. vol. 1, No. 224, we transcribe and translate the following:
“This difference between resolutory conditions and the suspensive conditions spoken of *859in the preceding article may be illustrated by the following example: Ton agree to lend Peter by my orders the sum of 1,000 francs, if I engage to return it if such a ship, on which he holds a bottomry interest, arrives safe. This is a suspensive condition, and I am not your debtor until the condition is accomplished by the arrival of the vessel; but if I engage for Peter until the arrival of the vessel, but upon condition that my obligation shall only continue until the arrival of the vessel, the cqndition in this case is only a resolutory condition, which does not prevent my engagement from being perfect immediately upon its being contracted, and consequently you may immediately demand the payment of the money. All the effect of this condition is that, if the vessel arrives before I have discharged or been called upon to discharge my obligation, the accomplishment of the condition puts an end to it.”
From N. O. v. T. & P. R. R. Co., 171 U. S. 312, 18 Sup. Ct. 875, 43 L. Ed. 178, we take the following:
“The suspensive condition under the Louisiana Code is the equivalent of the condition •precedent at common law.
“The general principles in respect to, conditions precedent are set forth sufficiently for the purpose of this case by Chief Justice Shaw, in Proprietors of Milldam Foundry v. Hovey, 21 Pick. (Mass.) 440, cited by appellant: ‘Where the undertaking on one side is, in terms, a condition to the stipulation on the other — that is, where the contract provides for the performance of some act, or the happening of some event, and the obligations of the contract are made to depend on such performance or happening — the conditions are conditions precedent.’ ”
From the French commentators' we take the following:
“When the suspensive condition does not happen, the obligation is destroyed, or is considered as never having existed.” Toullier, T. 6, n.-; Aubry et Rau, T. 4, p. 303, n. 75; Laurent, T. 17, n. 106; Larombiere. T. 2, art. 1181, n. 10; Demolombe, T. 25, n. 276.
It stands to reason that an obligation, which is to come into existence or to continue in existence only in case a certain thing is done within a certain time, does not come into existence in case the thing is not done within the time fixed, and that it makes uo difference what was the cause why the thing was not done — barring, of course, the acts of the obligee. The French commentators are agreed that in such a case the act of a third person to prevent the doing of the-thing, or even vis major, make no difference:.
“C’est en vain que l’un des contractants invoquerait la force majeure ou le refus d’un. tiers, pour échapper aux conséquences de l’inaccomplishment d’une condition potestative oumixte dañe le délai fixé.” Pothier, Obl. n. 213;. Duranton, T. 11, n. 62, et seq.; Rolland desVillargues v. Condition, n. 331; Larombiere sur les Arts, 1116 et 1177, n. 4; Aubry et Rau, T. 4, p. 69, par. 302; Demolombe, T. 25, n. 553; Fuzier-Hermann on article 1117, C. N. No. 3.
See, also, Bach v. Lafayette City Co., 13 La. 549; Chase v. Turner, 10 La. 23; Beal v. McKiernan, 8 La. 572; Collins v. Briggs, 5 La. 256; Kimball v. Breher, 1 La. 211; Thompson v. Moulton, 20 La. Ann. 535.
It follows from this that the prevalence-of a fire in the oil field did not have the effect of prolonging the term within which payment was to be made. Such an event could furnish excuse for delaying the performance-of a contract, but could not operate for bringing a contract into existence.
We do not think there is any merit in the-contention of the plaintiff that the defendant should have tendered back the several small, payments made to Latreille. Spencer and the syndicate paid these amounts as the-price of the delay which they thereby secured to themselves for the performance of the-contract, and, having had the benefit of this-delay — that is to say, of the thing for whiebthey made the payments — they are not in a. position to demand the return of the payments.
Plaintiff is in reality suing for a specific-performance of the contract, and, such being the case, cannot succeed without showing, that it has on its part performed the contract This proof it has failed to make. If' the exploitation of the land was the contract, plaintiff has failed to do that. If the-payment of $50 quarterly in advance was-the contract, plaintiff has failed to do that.
Defendant’s claim for damages has not. *861been pressed, and hence has not been considered.
In further support of the views herein expressed, and for the benefit of the profession as a contribution to a branch of jurisprudence new in this state — that on the subject of oil development contracts — we make part of this decision, by way of appendix, an extract from the very able opinion of the learned trial judge in the case.
It is therefore ordered, adjudged, and decreed that the judgment appealed from be set aside, and that plaintiff’s demand be rejected and its suit be dismissed, and the order for injunction herein be set ¿side, with costs in both courts, and that defendant’s reconventional demand for damages be dismissed as in case of nonsuit.
Extract from Opinion of Trial Judge.
“Were it not for the views expressed by the court in the possessory action, my judgment would be an entirely different one; for all of the authorities in other states in passing upon these oil contracts hold lessees to strict accountability thereunder, and this contract shows upon its face that thereunder everything is absolutely in favor of the lessee and against the lessor. In the first place, there is no express obligation on the part of the lessee to bore although the reading of the contract implies that at least one well must be bored; but thereafter there is nothing in the contract to compel the lessee to bore other wells, even though oil be discovered in paying quantities. Again, the lessee is given the right to hold onto the land, not only for a period of 10 years, but as long thereafter as oil or gas is produced therefrom by the party of the seeond part; there being even no stipulation that the said oil or gas shall be produced therefrom in paying quantities. In other words, the lessee is given the absolute right to hold the property for 10 years upon boring one well, and as long as the said well produces he can still continue to hold the same property, regardless of the wishes or of the rights of the lessor.
“Again, the lessee, by the payment of an absolutely insignificant sum in so far as oil contracts are concerned, can, if the lease be held good, absolutely withhold the land- from the market and prevent its development, provided, however, that at the last moment within the 10 years he bores an oil well on the premises; and then, if oil is found, he can still continue to hold said land. The lessor, who gets $100 in case of surrender and- a supposed one-eighth royalty in case of the discovery of oil, is absolutely at the mercy of the lessee, who, although the very object of the contract is to bore and develop the property, can pay a small amount and still prevent the development of the land. Again, the poor-lessor is absolutely at the 'mercy of the lessee,, for the very minute that the lessee discovers that the adjoining fields do not contain oil he can pay an insignificant sum — the insignificant sum of $100 — and absolutely void the contract and all responsibility thereunder.
“The contract, in my opinion, is absolutely unconscionable from a legal standpoint. It confers for a ridiculously small sum an immensely valuable right to the syndicate. It is-clearly speculative, made for the purpose of enriching the lessee at the expense of the lessor. He gets nothing thereunder. This-contract, under my construction of the law and under the numerous authorities which have been cited, is merely an executory contract, and the construction placed upon such contracts by all the courts in the oil-producing states is that they should be construed strictly; and they hold, as a general proposition, that they are merely options, subject to-revocation where no work has been attempted thereunder. Therefore, construing the contract from my own standpoint, I would hold, that within the first six months the lessee had a right to bore a well, but, if the same were-not completed within the six months, he could, by the payment of $50, continue boring operations ; but if, on the other hand, no effort had been made by the lessee to bore within six months, and if, at any subsequent date, the-payment which was to secure the extension of the contract for the ensuing three months was not paid in advance, as required by the said contract, this payment being, in my opinion, but a mere option for the extension of time, then the contract would cease to exist by reason of the failure of the party to pay for the extension within the given time. I cannot understand how one party can be given the right to rescind a contract at any time-within a period of ten years by the payment of $100, without the other party’s having exactly the same right; and it seems to me-that the amount of $100, by which the lessee-can have the right to retire from the field, is-absolutely insufficient and insignificant, and contrary to the very terms of the contract itself. The first part of the contract stipulates-that the lessee is to bore one well at least, and yet, by the payment of $100, he can escape the obligation.
“The real consideration of the lease is the-royalty to be received by the lessor, and yet the contract may be dissolved at any time by the one party upon the payment of $100. The whole contract, in my opinion, is so drawn that every benefit and advantage is to be derived by the lessee, and all the obligations^ incurred by the lessor; and while he is promised certain royalties on the one hand, on the other it is taken away from him if the lessee chooses to do so.
*863“The contract, if held good, undoubtedly ■enables the lessee to prevent all development ■on the tract of land in dispute until he can discover whether there is oil in the adjacent fields; and, if there is oil found in adjoining tracts, he has an immensely valuable right, of which he can easily dispose at an immense valuation; and if, on the other hand, no oil is •discovered in the adjoining fields, and he finds that it is a barren waste, he bores no well, incurs no obligation, pays $100 to the lessor, .and says ‘Good-by.’
“Therefore, but for the decision heretofore rendered by this court, I would set aside the contract as speculative in its nature, as absolutely one-sided and unfair to the lessor, who is shown to be an ignorant, uninformed, and credulous Frenchman. I would further hold that the contract sued on is executory in its nature, only giving the right to bore within the first six months, and the right to bore thereafter being optional only upon the strict •compliance with the letter of the contract— that is, by the payment of the $50 quarterly in advance; and, as the evidence shows that no boring was done and no payment made in advance for the quarter beginning July 19, 1902, I would set aside said contract. The evidence adduced here convinces me that this •contract is a speculative contract, and held by the syndicate for speculative purposes ; that it has developed largely the adjoining tracts, deriving an immense quantity of oil as ■royalties; that it did not desire to develop this particular piece of land for fear of producing too much oil; that oil was being drained from this tract of land by wells on the adjacent tracts; that the syndicate never attempted to bore upon the property in dispute until the Houssiere-Latreille Oil Company had acquired the mineral rights of Arthur Latreille and had entered into a contract with the Rayne Planters’ Oil & Development Company, Limited; and that only when the syndicate discovered that the Rayne Planters’ Oil & Development Company, Limited, was about to bore upon this tract of land controlled by it, they slipped the said derrick across the line of the land in dispute, thereby commencing •operations a few weeks prior to the said Rayne Planters’ Oil & Development Company, Limited. Up to that time it had neither bored nor made the slightest effort to bore, so far as the records show, although there is some testimony to the effect that the syndicate •did attempt to get others to bore on the fiexu. Prom April 19, 1901, until December, 1902, the oil had been discovered and a large number of wells bored. Still nothing was done on the tract in dispute. The fact that a suit had been instituted by the Corkran heirs is alleged by the syndicate as one of the reasons for its not having bored; but yet we find on ■the Arnaudet tract, which was involved in the same litigation, wells were being bored and oil largely extracted therefrom. Equally invalid is the excuse of the syndicate for not .making the payment in advance by reason of the fire at the oil field. It was its duty under the law, if it intended to preserve its legal rights, to pay the money within the required time, and the mere fact that the field was on fire would not exonerate it from its failure to do so.”
MONROE, J. For the reasons assigned in the original opinion heretofore handed down, as also in the dissenting opinion now handed down by the Chief Justice, I dissent.
NICHOLLS and LAND, JJ., concur in the decree.
For concurring opinion of LAND, J., and dissenting opinion of BREAUX, C. J., see 44 South. 506, 507.