Glasgow v. Chartiers Oil Co. , 152 Pa. 48 ( 1892 )

Opinión by

Mr. Justice Williams,

This appeal depends on the construction that should be' given to the contract made by the parties on the tenth day of June, 1890. It is called “An Agreement of Lease.” An examination of its ■ provision's shows it to be a demise of the oil. and gas under the grantor’s tract of land in Clinton- township, Butler county, and of the right to go upon and operate the land for oil and gas purposes. The lease, or right granted, is to continue for five years, and as much longer as oil or gas shall be found in paying quantities on the tract. ' The consideration for the grant is a bonus of one hundred dollars, and a rent or royalty of one eighth part of the oil produced. If gas' be obtained, the réntal is fixed at three hundred dollars per year for each well producing gas in quantity sufficient to justify marketing it. The agreement then proceeds as follows “ Provided, however, that this lease shall become null and void and all rights hereunder shall cease and determine, unless a well shall be completed on the premises within one month from the date hereof, or unless' the lessee shall pay-at the rate of one hundred dollars monthly in advance for each additional month,” etc. There is no express covenant, promise or undertaking by the lessee to be found anywhere in the' agreement. A covenant to operate within a reasonable time might be implied from the nature of the instrument, but the lessee has been careful to make no express promise to operate the lease, or to do anything towards the development of the land. If he does nothing, the penalty for his inaction is fixed. It is the forfeiture or loss of his rights undér the agreement.' But, if 'he thinks it an object to do so, he may prevent the assertion of this forfeiture by paying one hundred dollars in advance of the first day of the next month after the date of the contract, and, upon such payment, the right of forfeiture is postponed one month. This he may do month after month as long as he pleases, or until the end of five years. If, however, he puts down no well during the first month, and pays no money in lieu of it, his rights are’ at an end, and the lessor may assert the forfeiture.

This looks like an improvident agreement, and, as the learned judge of the court below suggests, may have been obtained by artifice; but no fraud is alleged, and the question is, therefore, one of construction only.

Its legal effect is to confer on the grantee the right to explore for oil on the tract described. If he does not exercise this right within one month, it is lost to him, unless he chooses to pay one hundred dollars in advance as the price of another month’s opportunity to explore. If he does exercise it, and finds nothing, he is under no obligation to continue his explorations. If he explores and finds oil or gas, the relation of landlord and tenant or vendor and vendee is established, and the tenant would be under an implied obligation to operate for the common good of both parties, and pay the rent or royalty reserved. In this case, he did nothing in the way of development, and, after the payment of one hundred dollars per month for the delay, for a short time, he ceased to pay.

The appellant contends that, because he might pay under the terms of the contract, he may be compelled to pay. But payment was the means provided by the contract by which the exercise of the right of the lessor to assert a forfeiture could be postponed. If the lessee did not wish to postpone the exercise of such right, he had only to refrain from making the payment. This case is not ruled by Bay v. The Natural Gas Company, 138 Pa. 576, and kindred cases. There the lessor had an election whether to assert the forfeiture provided for, or waive it and proceed upon the covenants of the lessee. We said in those eases that a lessee could not set up his own broken covenants to shield him from liability. It was his duty to perform them. If he failed, his lessor could elect in what way to enforce them. He might assert the forfeiture and re-enter, or sue upon the broken covenants. Unfortunately for the plaintiff in this case, he has no covenants on which to sue.

The learned judge reached a correct conclusion, and the judgment is affirmed.