Thompson v. Christie ( 1890 )

OpmioN,

Mr. Justice Williams :

The contest in this case is between the holders of an unrecorded oil lease in possession, and the holder of a subsequent lease taken and recorded before the defendants went into possession and began operations on the land. The land was owned by Hugh McClelland, who made a lease to Jones and others for oil purposes in 1888. By the terms of the lease, Jones and others were to drill one test-well within two miles of the land within one year. If oil was found in paying quantities in the test-well, they were “to complete one well on the above-described premises within one year after the completion of said test-well, or, in lieu thereof, pay to the party of the first part forty dollars per annum until work is commenced.” There was no clause in the lease providing for re-entry or forfeiture. The title of the lessees, after passing through several intervening parties, lodged in the defendants, who went into possession in September, 1889, built a rig, and began to drill an oil-well.

The plaintiff claimed under a lease made and recorded in May, 1889. On the trial he gave his lease in evidence, showed the possession of the defendants, and rested.

Christie and others defended their possession under the first lease. To show their title they made an offer to prove that all the former owners of the Jones lease had agreed to assign it to them in September, 1889, had received part of the purchase money, and had put them into possession ; that in pursuance of this bargain an assignment was drawn up, signed and acknowledged by all the grantors, except one, on the 24th day of September, 1889, and by him in December, on the day after the issuing of the writ in this case; that tbe grantor who had not signed when the writ was issued bad assented to the terms of the sale, and received his share of the money paid, before suit brought; and that the defendants after their entry had expended several thousands of dollars in preparing for and in drilling an oil-well on the land, before the writ in this case was issued. Upon these facts the defendants could successfully defend their possession, unless. the plaintiff, who was a subsequent lessee, had acquired his title in good faith and without notice of their rights.

To show that this was not the case, they made- a further offer to prove by McClelland, both upon his cross-examination and again when called by them, the circumstances under which he made the lease to the plaintiff. Their offer was to show that McClelland went to the law-office of J. M. Thompson and W. C. Thompson, who were law-partners, and father and son, for advice in regard to the best manner to proceed in order to terminate the lease to Jones and others; that J. M. Thompson advised, as the cheapest and most expeditious method, the making of a new lease, and putting it upon record so as to secure priority over the unrecorded lease to Jones; that he suggested his son and law-partner as the person to whom the new lease should be made; that the lease was accordingly drawn by him and executed by McClelland for the express purpose oí being used to defeat the title of the holders of the Jones lease. These offers were competent, and the evidence should have been received. W. C. Thompson cannot profit by a lease-obtained for him by his law-partner, without being affected by notice of the facts brought to the attention of his partner during the negotiation and which formed the inducement to the lease: Bracken v. Miller, 4 W. & S. 102. Having notice, he took subject to the title of the holders of the first lease, notwithstanding the fact that their lease was not recorded: Swank v. Phillips, 113 Pa. 482. He stood, therefore, in the shoes of his lessor, and could not recover unless McClelland' could have done so if the action had been brought by him.

But there was no clause of forfeiture in the lease, and forty dollars per annum was fixed as the price of delay. McClelland could not have recovered in ejectment, therefore, because, by the terms of the lease, it was money, not the possession of the tenants, which delay in completing the well entitled him to demand. Understanding exactly the position of the case, the plaintiff next attempted to reform the lease by adding a clause of forfeiture. He proved by McClelland and members of his family that he was induced to sign the lease by means of a contemporaneous verbal agreement that if the well was not drilled, as provided, within one year, and the forty dollars was not paid, the lease should be delivered up. This was denied by Jones, who negotiated for and wrote the first lease, and it was not consistent with the terms of that instrument. It is not easy to see how, upon this state of the evidence, a chancellor could pronounce the evidence of the alleged omitted clause to be “ clear, convincing, and indubitable,” as was done in answer' to one of the plaintiff’s points ; but, as the learned judge had the witnesses before him, we will not undertake to say that his conclusion was wrong.

The defendant’s fourth point drew attention to the position of the plaintiff, the kind of relief he was seeking, and the rules prevailing in courts of equity upon the subject of forfeitures. It was refused without any explanation of the subjects to which it referred. This was misleading. The rule undoubtedly is that the right to declare a forfeiture must be, distinctly reserved; that the proof of the happening of the event on which the right is to be exercised must be clear; that the party entitled to do so must exercise his right promptly; and that the result of enforcing the forfeiture must not be unconscionable. In this case the existence of the right was denied. There had been no attempt to exercise it except by means of the device suggested by counsel of executing a new lease. The lessees were in actual possession, and for several months had been engaged in the work of drilling a well on the premises. It would hardly be contended that, if McClelland was in a court of equity with a bill to reform this lease for the purpose of enabling him to assert a forfeiture upon the facts of this case, as they were shown, and as the defendants offered to show them, the conscience of a chancellor would be moved to aid him by a decree.

The sixteenth assignment of error is also sustained. The court was asked to say to the jury if they found that a verbal agreement providing for a forfeiture of the lease was made by Jones as the plaintiff alleged, yet if they also found that interests in the lease were afterwards sold for a valuable consideration, without notice of the verbal agreement so made, their verdict must be for the defendants to the extent of such interests. The court refused so to charge. It is well settled that a bona fide purchaser, without notice of a secret agreement or trust, takes the title discharged from such agreement or trust, and that he can convey a good title even though his vendee has had actual notice: Bond v. Stroup, 3 Binn. 66; Bracken v. Miller, 4 W. & S. 102; Meehan v. Williams, 48 Pa. 238. The plaintiff sought to avail himself of this rule, and claimed to be a lessee without notice, and in good faith, with a recorded title. The trouble was not with the rule he invoked, but with the facts embodied in the defendants’ offers, which were calculated to fix him with notice. For the reasons given, this judgment cannot be sustained, and it is now

Reversed, and a venire facias de novo awarded.