Lynch v. Versailles Fuel Gas Co. , 165 Pa. 518 ( 1895 )

Opinion by

Mb. Justice Mitchell,

There is a wide distinction even in equity between forfeitures for failure of punctual payment of money where time is of the essence of the contract and where it is not. If parties choose to stipulate for matters as essential, it is not for courts to say they are not so, but in the absence of a clear agreement for materiality courts will look into the nature of the transaction, and be governed by the real bearing of the facts upon the intentions and rights of the parties. Hence it is a settled general rule that where time is not stipulated as essential and a forfeiture for nonpayment of money, or other matter that admits of accurate and full compensation, is provided as a mere penalty whose object is to enforce performance of another and principal obligation, equity will relieve against it, and will not permit it to be used for a different and inequitable purpose. Story, Equity Jur., sec. 1816. In the present case time is not of the essence, for although the nature of oil and gas territory and of contracts affecting them, is such that in general time is essential, yet in the lease in question there is a stipulated rent payable for delay in putting down a well, and no date is expressed for the payment of such rent, it being left to fall due by operation of law at the close of each year. The main purpose of the lease was to have the land tested and developed, and to secure for the lessor the profits of such development. It was his interest therefore to have a producing gas well, for it would immediately nearly double his rental. The appellant paid the rent for several years, postponing the effort to get gas, for reasons not appearing but of which no complaint was made, until July, 1892. It then began drilling, and prosecuted the work in good faith, at a large expense, until it produced gas in paying quantity about the end of August. This as already said was in plaintiff’s interest. He lived on the premises and saw the daily progress of the work. On August 20, when the well was near completion, a year’s rent fell due, and payment was overlooked by the lessee. On August 26, plaintiff told the contractor to take away his machinery, and on the next day gave formal notice of his election to enforce a forfeiture. Under the circumstances he could not equitably do so without notice. There was some evidence that in previous years the rent had not been paid or demanded on the precise day, but it was not strong enough to establish a usage between the parties, and therefore a ground of relief, though it adds something to the equity of appellant’s case. But if plaintiff intended to insist on punctuality of payment he was bound to ascertain on the very day, whether the rent had been paid or not, and to give notice promptly. A delay of six or seven days it is true would not ordinarily be conclusive and perhaps not even material, but in this case the appellant was in that interval expending on its well, in good faith, and relying on its lease, a sum equal to nearly three years’ rent per acre, or a year and a half’s rent under a producing well. While making this expenditure under the circumstances the appellant was entitled to prompt notice, and the plaintiff was bound to observe and act upon that right. It was said by our brother Williams in Thompson v. Christie, 138 Pa. 230 (249), that the part}'' entitled to enforce a forfeiture of this kind must exercise his right promptly, and the result must not be unconscionable. In the present case the action of the plaintiff was neither prompt nor eonscionable.

As it is quite clear upon the undisputed facts that a court of equity would have enjoined this forfeiture, the judge should have directed the jury as requested in defendant’s third point.

Judgment reversed.