Munroe v. Armstrong , 96 Pa. 307 ( 1880 )

Mr. Justice. Trunkey

delivered the opinion of the court, November 26th 1880.

The lease from Reep to Clark & Lilly is for the term of twenty years, unless forfeited; exclusively for the purpose of producing oil; the work to be commenced in ten days, and continued with due diligence until success or abandonment; and if the lessees fail to get oil in paying quantities, or cease to work for thirty days at any time, the lease to be forfeited and void. As respects diligent prosecution of the work by the lessees, and what act of theirs would annul the lease, there is no room for interpretation, for the contract could not be expressed in simpler language. The agreement is plain that if the lessees failed to get oil in one well they had right- to put down another, and as many more as they pleased, so long as they worked with diligence to success or abandonment, and equally plain .that a cessation of work for thirty days would end their lease. They were not bound to do more than make a reasonable search for oil, but they were bound to operate or quit; they could not hold on and be idle. The contract did not require them to keep on drilling oil wmlls indefinitely and without cessation, for twenty years nor for any indefinite length of time; neither did it entitle them, after the drilling of the well, to hold the lease for twenty years without working it. Even at the beginning of the lease, the. duration of the term was qualified by the words, “ unless forfeited.” The question seems to be, shall the concise and clear expression of the agreement of these parties, as written, give way to imaginary terms more favorable to the lessees ?

What is there in the circumstances calling for a fiction to defeat the covenant against delay in searching for or producing oil ? The subject of the lease was a fluid likely to flow for a considerable distance through the crevices a.nd loose sand where it is found. A small tract of land could be nearly or entirely drained by wells on adjoining lands, and it is common that leases contain covenants for diligent operation and for forfeiture in case of suspension. An oil-lease yields nothing to the landowner, when not worked, and is an encumbrance on his land, tying his hands against selling or leasing to others; but when idle it costs the lessee nothing, and is valuable, or may prove valuable, if he can hold it awaiting .developments in its vicinity. If a well bo productive it is the interest of both lessor and lessee that it be continuously operated till its exhaustion, hut if di’y, it is of no value. Holding on to a lease after ceasing search is often for purposes of speculation, the thing which a prudent landowner guards against. Forfeiture for non-development or delay, is essential to private and public interests in relation to the use and alienation of property. In such cases as this equity follows the law. In general equity abhors a forfeiture, but not when it works equity and protects a landowner from .the laches of a lessee whose lease is of no value till developed, except for a purpose foreign to the agreement: Brown v. Vandergrift, 30 P. F. Smith 142.

At the trial, the parties admitted that Clark & Lilly commenced and completed a well, and kept their covenants up to October 1877; that from the 1st of November 1877 until July 1878, they ceased operations and did no work ; that Clark and Lilly assigned to Armstrong, who, in the latter part of July 1878, put down a well and was successful in getting oil, which well was almost completed before this suit was brought; that Reep leased sixteen acres, including the ten in controversy, to Munroe, who had knowledge of the former lease to Clark & Lilly, and also of the time they had ceased work, and he took his lease from Reep at his own risk; that Armstrong.had knowledge of the fact that Reep had leased to Munroe before he took the assignment from Clark & Lilly, and before commencement of operations by Armstrong he had express notice not to go on to develop and expend money on the property, and that Munroe claimed and held the lease of the property.

In the rapid development and exhaustion of oil lands, cessation of work for nine months is a long period. Often, in far less time, the fluctuation in prices of lands and leaseholds is very great. Perhaps in no other business is prompt performance of contracts so essential to the rights of the parties, or delay by one party likely to prove so injurious to the other. Nothing in the facts proved or admitted shows -a waiver of strict performance by Reep, or anything which in equity should relieve Clark & Lilly from the consequences of their broken covenant. Yt was the province of the court to declare the meaning of the agreement, and upon the admitted facts the jury ought to have been instructed to render a verdict for the plaintiff.

Judgment reversed and venire facias de novo awarded.