Keyworth v. Wiechers , 269 Mich. 687 ( 1934 )

I concur in the opinion for reversal. Under the provisions of the contract of November 27, 1929 (exhibit 1), plaintiff, then Mina B. Narmore, was bound to sell, and defendant Wiechers to purchase and pay for a one-half interest in the oil, mineral and surface rights of cutover timber land worth but little for agricultural purposes but of a large potential value if oil in paying quantities should be discovered. On November 24, 1930, a new contract (exhibit 2) was executed. It superseded exhibit 1 and released Wiechers from absolute promises to make specific payments provided in exhibit 1, and left it entirely optional with him to make any further payments of any kind under exhibit 2. He could refuse to pay and be freed from all obligations of every kind under the new contract. At any time after the new contract had been in existence for a year his rights could be forfeited for default upon notice, but he would have 90 days in which to cure the default. Proper notice was given to him in December, 1931. He had failed to pay $500 of the amount due the vendor bank.

Defendants contend that they were entitled to further time inasmuch as exhibit 2 contained no clause stating that time was of the essence of the contract. Contracts for the lease or purchase of oil, gas and mineral rights are considered in a different class than the ordinary contract containing a forfeiture clause. Notwithstanding the absence of such a clause, time as a rule is of the essence of a contract, lease or option to purchase oil, gas or mineral rights.Waterman v. Banks, 144 U.S. 394 (12 Sup. Ct. 646); Campbell v.Warnberg, 133 Kan. 246 (299 P. 583). An option must be exercised within the time specified or rights thereunder will be lost. Olson v. Sash, 217 Mich. 604; Bailey v.Grover, 237 Mich. 548, 554; Steed v. Pure Oil Co., 260 Mich. 699.

In December, 1931, when the notice of forfeiture was given, neither Wiechers nor the Moraine Land Company had paid $500 of the amount that became due the Chemical State Savings Bank, which held the vendor's interest in the contract to plaintiff. It is contended, however, that the fact that the bank stated in its receipt of November 25, 1931, that the balance of the payment of $500 was to be paid on or before January 15, 1932, amounted to an extension and as far as the plaintiff, the vendee, was concerned, it was equivalent to payment; that the extension released plaintiff to the extent of $500 from her obligation to the bank. Defendants invoke the principles of suretyship and claim that the bank as creditor, having extended the time of payment, to the Moraine Land Company, as debtor, relieves plaintiff as surety. I do not believe there is any question of suretyship involved. The extension was without any consideration. Wiechers and the Moraine Land Company were not bound to pay the bank any sums. Plaintiff was not released by the bank from her obligation to pay. A somewhat similar question arose in Pulling v. Schreiber, 240 Mich. 333, 339, where, in an opinion written by Mr. Justice NELSON SHARPE, the court said:

"It is defendants' claim that on March 1, 1922, plaintiff entered into an agreement with Wetsman, the then holder of the equity of redemption in the premises, that on payment to him of the sum of $1,783 (six months' interest in advance), all payments on principal would be deferred for six months, and that such extension, without the consent of the defendants, released their obligation on the bond.

"The rule is well established that a valid and binding agreement with a debtor to grant an extension of time for payment will relieve a surety. But, to so operate, the agreement must be made with the debtor; with one from whom payment can be demanded and enforced. It was so held inAldous v. Hicks, 21 Ont. R. 95, wherein it was said:

" 'Though the defendant Riches purchased the equity of redemption and covenanted to pay the mortgage, and so has become primarily liable for the mortgage debt as between her and the mortgagor, that does not create any privity of contract between her and the plaintiff, the mortgagee. No right of action arose to the plaintiff whereby he could recover the mortgage debt directly from the purchaser. * * *

" 'There is, therefore, at the outset, an absence of the threefold relation of creditor, principal debtor, and subsidiary debtor or surety upon which the equitable doctrines invoked operate.'

"See, also, Forster v. Ivey, 2 Ont. L. R. 480; Clarke v.Birley, 41 Ch. Div. 422 (60 L. T. 948).

"While Wetsman purchased subject to the mortgages to plaintiff, he had not assumed or agreed to pay them, and payment could not have been enforced against him. So the rule stated does not apply."

Although the precise question was not presented inBigelow v. MacCrone, 267 Mich. 217, we held in that case that although the vendor in a land contract had granted a two-year extension as to principal payments to the assignee of the vendee, who had assumed and agreed to pay the balance due on the contract, no novation of contract was effected, and the vendor could not maintain an action against the assignee; nor was the vendee relieved from liability to the vendor.

The $500 payment to the bank was not made within the 90 days after the notice of forfeiture was given. Under the circumstances, the notice of forfeiture was properly given and the default was not cured within the time prescribed by the contract.

The decree should be entered for plaintiff as prayed for.

NELSON SHARPE, C.J., and BUSHNELL, J., concurred with BUTZEL, J.