Ray v. West. Penna. N. Gas Co. , 138 Pa. 576 ( 1891 )

BAY V. GAS CO.

ObikioN,

Mb. Justice Clark -.

This appeal is taken from the judgment of the Common Pleas, entered for want of a sufficient affidavit of defence.

The action is assumpsit to recover certain sums, stipulated in a gas- or oil-lease, for delay or default in operating the lease. The lease is dated July 7, 1888; James Ray, the party of the first part, being the lessor, and the Western Pennsylvania Natural Gas Company, the party of the second part, the lessee. The lease provides that, in consideration of certain rents and royalties, the said Ray hath granted, demised, and let unto the said company, “ for the sole and only purpose of drilling and operating for petroleum oil and gas, for the term of two years or so long thereafter as oil or gas is found in paying quantities, a certain tract of land in Cross Creek township,” etc.; the party of the second part agreeing, in consideration, “to give said first party one eighth of all the oil from wells producing less than fifty barrels per day, and one fourth of the oil from all wells producing more than fifty barrels per day; and, further, “ to give |500 per annum for the gas from each and every well drilled,” etc., in case the gas is conducted and used off the premises. The particular clause of the contract, upon which suit is brought, is as follows:

“ The party of the second part agrees to pajr, within ten days from the execution, of this lease, the sum of fifty-three dollars; and, if a well is not completed within six months from the execution of this lease, the said second party agrees to pay a further sum of fifty-three dollars, and so on continually every six months, during the continuance of the term herein specified. The said sum of $500 gas rent shall be paid within one month from the time said well is completed on said premises, and to be paid annually, in advance, thereafter. It is further agreed by said second party, that if a well is not completed within fifteen months from the date of this lease, they are to pay a further sum of $250, said sum to be a credit on well when drilled; and, in case of failure to complete one well within such time, the party of the second part hereby agrees to pay thereafter to party of the first part, for any future delay, the sum of $106 per annum, within one month after the time for completing such well, as above specified, payable semi-annually at the First National Bank of Washington, Pa.; and the party of the first part hereby agrees to accept such sum as full consideration and payment for such yearly delay, until one well shall be completed. And a failure to complete one well, or to make any such payment within such time and such place, as above mentioned, shall render this lease null and void, and to remain without effect between the two parties.”

The plaintiff’s statement averred that the defendant had never completed a well on the demised premises, and claimed to receive $58, due January 7, 1889; $53, due July 7, 1889; $250, due October 7,1889; and $53, due January 7,1890. The affidavit of defence set forth, in substance, that, % the terms of the lease, the only right granted was the right to operate for gas or oil; that the defendant never entered into the possession for this purpose, while the plaintiff, not only at the time of the lease, but when the several sums sued for became due, respectively, was and still is in possession of the land described in the lease, and that, under these circumstances, and according to the law as declared in the decisions of this court, the lease, by its terms, on the defendant’s failure to put down one well, or to make any one of the payments specified, became ipso facto null and void, without re-entry, and that, therefore, there is now no liability upon the part of the defendant either to pay or to perform.

The case is in all respects governed by our decision in Wills v. Natural Gas Co., 130 Pa. 222. It is true, the lessor’s possession was not alluded to in the discussion and decision of that case, nor do we regard the question whether or not he was in possession, subject to the lease, as a matter of any great significance. We agree with the appellant in its contention that if, in such a case as this, the lessor should choose to avail himself of the forfeiture clause in his contract, a formal re-entry, to take advantage of the breach, was not required ; the authorities cited by the appellant are decisive of the question. In Hamilton v. Elliott, 5 S. & R. 375, there was a conveyance of a freehold by A to B, upon certain conditions which were not complied with, the grantor, in accordance with the terms of the grant, remaining in the possession from the time of the conveyance until after the forfeiture accrued; and it was held in a suit by the assignee of A that, by reason of the breach of the condition whilst A was in the actual possession, the estate re-vested in A without a formal entry to take advantage of the breach, or notice of the non-performance of the condition. As the grantor was already in the possession, it was deemed unnecessary that be should go out in order that he might re-enter, or, that the grantee should have formal notice of what he already knew, viz., that the condition was not performed. To the same effect are the other cases cited by the appellant: Dickey v. McCullough, 2 W. & S. 99; Feather v. Strohoecker, 8 P. & W. 508; and Bear v. Whisler, 7 W. 149. The same rule has been applied to leases for years: Kenrick v. Smick, 7 W. & S. 41; Sheaffer v. Sheaffer, 87 Pa. 525; Davis v. Moss, 38 Pa. 346; Brown v. Bennett, 75 Pa. 420; Brown v. Vandergrift, 80 Pa. 142; and Munroe v. Armstrong, 96 Pa. 307. But, as by the terms of the lease, Ray, the plaintiff, was entitled to remain in possession of the land, subject to the right of the company to drill and operate for oil and gas, his occupancy of the land at and after the time of the breach can be of little consequence, unless by some act in assertion of the forfeiture he gave it a greater effect. It was certainly not necessary that he should abandon the possession to which, by the very terms of his contract, he was entitled, in order that he might insist upon performance by the lessee; the lessor’s election to forfeit, whilst he is in the actual possession, may be regarded as a constructive entry, under his title.

B ut it is said that the doctrine declared in Wills v. Natural Gas Co., supra, is an innovation or change in the law; that the parties must be presumed to have contracted in view of the general law, as it was expounded when their engagements were formed, and to determine the legal effect of the contract otherwise, is to impair its obligation, in contravention of the tenth section of the first article of the federal constitution. In Kenrick v. Smick, supra, and in Sheaffer v. Sheaffer, supra, although the condition, in each case, was inserted in the interest of the lessor, it was held that, upon breach of the condition by the lessee, the lease was ipso facto absolutely void without re-entry, and could not afterwards be affirmed or-continued by any subsequent recognition of the tenancy on part of the lessor, or by any act of his other than the making of a new lease. But, as we said in Wills v. Natural Gas Co., supra, the rigor of the rule was relaxed in Davis v. Moss, 38 Pa. 346, where the forfeiture was said to depend upon the terms of the instrument, “ unless there be evidence to affect the landlord with a waiver of the breach, like the receipt of rent, or other equally unequivocal act,” in which case the lease may be continued at the instance oí the lessee. The ruling in Davis v. Moss, supra, was the first step in the transition from the doctrine of Ken-rick v. Smick, supra, to the now well-settled rule laid down in Galey v. Kellerman, 123 Pa. 491, and Wills v. Natural Gas Co., supra, where the principle is established that, where the condition appears to have been inserted solely in the interest of the lessor, the lease is void upon the breach, if the lessor, by some positive act, elects to take advantage of it. The departure from Davis v. Moss, supra, is greater, perhaps, than the reasoning in the case last cited would seem to indicate, but it was taken on due deliberation and careful study of the principles involved, and we are not inclined to recede from the position assumed. It is a somewhat significant fact, that in all the cases cited, including Davis v. Moss, supra, the forfeiture was set up by the lessor, in whose interest the condition was inserted, upon the default of the lessee; in none of them, as in the case at bar, did the lessee set up his own default as a cause of forfeiture. No case has been brought to our notice in which the lessee was allowed to take advantage of his own wrong, or to set up his own default, to work a forfeiture of his own contract; it must be conceded, however, that if the old rule is the right one, this anomalous result must ensue. Persons may perhaps contract expressly in this form, and to this effect; when they do, tho transaction amounts to a mere option, and the lessee, in setting up his own default, simply avails himself of an elective right secured to him in his contract. We do not understand the contract in suit to be of this character. The clear purpose of the lessor was to have his lands operated for oil or gas, and the condition was inserted for his benefit. Whilst the. obligation on part of the lessee to operate is not expressed in so many words, it arises by necessary implication. The lease was for the expressed purpose of drilling and boring for oil or gas, the lessor, in a certain event, to receive a share of tbe production as a royalty or rent, and, in another event, to be paid $500 per annum for each gas-well, the product of which w'as conducted from the land for consumption. If a farm is leased for farming purposes, the lessee to deliver to the lessor a share of the crops, in the nature of rent, it would be absurd to 3ay, because there was no express engagement to farm, that the lessee was under no obligation to cultivate the land; an engagement to farm in a proper manner, and to a reasonable extent, is necessarily implied. The clear purpose of the parties to this lease was to have the lands developed, and the half-yearly payments, and the other sums stipulated, were intended not only to spur the operator, but to compensate Ray for the operator’s delay or default. The lessor’s hands have been tied for two years. We do not know that he- lost anything in royalties, or that he suffered by drainage, for the territory might have proved unproductive; but, as the transaction was founded in the hope that either oil or gas, or both, might be found in paying quantities, it was competent for the parties to con.tract in advance for the amount of compensation to which, in the event of delay or default in development, the lessor would be entitled. The provision for forfeiture was doubtless inserted in anticipation that the lessee might make default and become unable to pay, in which event he might put an end to the lessee’s pretensions and seek other means of development. This clause having been inserted as a protection to the lessor, he had the right either to declare the forfeiture or to' affirm the continuance of the contract; and, if the lessor did not choose to avail himself of the forfeiture, the lessee cannot set it up as a defence to an action in affirmance of the contract: Galey v. Kellerman, supra; Wills v. Natural Gas Co., supra.

The courts of highest authority of all the states, and of the United States, are not infrequently constrained to change their rulings upon questions of the highest importance. In so doing, the doctrine is, not that the law is changed, but that the court was mistaken in its former decision, and that the law is, and really always was, as it is expounded in the later decision upon the subject. The members of the judiciary in no proper sense can be said to make or change the law; they simply expound and apply it to individual cases. To this general doctrine there is a well-established exception, as follows : “ After a statute has been settled by judicial construction, the construction becomes, so far as contract rights are concerned, as much a part of the statute as the text itself,, and a change of decision is, to all intents and purposes, the same in effect on contracts as an amendment of the law by means of a legislative enactment : ” Douglass v. Pike Co., 101 U. S. 677. See, also, Anderson v. Santa Anna, 116 U. S. 361, and cases there cited: Cooley, Const. Lim., 474-477. To this effect, and no more, we understand to be the cases of Ohio Trust Co. v. Debolt, 16 How. 432; Gelpcke v. Dubuque, 1 Wall. 175; Havemeyer v. Iowa Co., 3 Wall. 294; Olcott v. Supervisor, 16 Wall. 678. In Ohio Trust Co. v. Debolt, supra, the doctrine is thus stated : “ The sound and true rule is that if a contract, when made, was valid by the laws of the state, as then expounded by all the departments of the government and administered in its courts of justice, its validity and obligation cannot be impaired by any subsequent act of the legislature, or the decision of its courts altering the construction of the law.” The ruling applies, it will be observed, not to the general law, common to all the states, but to the laws of the state “ as expounded by all the departments of its government;” and it is held that contracts valid by these laws may not be impaired, “either by subsequent legislation, or by the decisions of its courts altering their construction.” The reference is, of course, to the statute law.

In New Orleans Water-Works Co. v. Louisiana Co., 125 U. S. 18, the law on this subject is stated as follows : “ In order to come within the provision of the constitution of the United States, which declares that no state shall pass any law impairing the obligation of contracts, not only must the obligation of a contract have been impaired, but it must have been impaired by a law of the state. The prohibition is aimed at the legislative power of the state, and not at the decisions of its courts, or the acts of administrative or executive boards, or officers, or the doings of corporations or individuals. This court, therefore, has no jurisdiction to review a judgment of the highest court of a state, on the ground that the obligation of a contract has been impaired, unless some legislative act of the state has been upheld by the judgment sought to be reviewed.” “We are not authorized by the judiciary act,” says Mr. Justice Milleu, in Knox v. Bank, 12 Wall. 383, “to review the judgments of the state courts because their judgments refuse to give effect to valid contracts, or, because those judgments, in their effect, impair the obligation of contracts. If we did, every case decided in a state court could be brought here, when the party setting up a contract alleged that the court had taken a different view of its obligation to that which he held.” To bring the case within this provision of tbe federal constitution, it must be the constitution,' or a statute, or some enactment that has the force of law, either of the state or of some municipality-exercising legislative power delegated by the state, which impairs the obligations of a contract: Williams v. Bruffy, 96 U. S. 176-183; United States v. New Orleans, 98 U. S. 381-392; Murray v. Charleston, 96 U. S. 432-440 ; Meriwether v. Garrett, 102 U. S. 472. In the very recent case of Lehigh Water Co. v. Easton, 121 U. S. 388, Mr. Justice Harlan says: “ The state court may erroneously determine questions arising under a contract which constitutes the basis of the suit before it; it may hold the contract void, which in our opinion is valid; it may adjudge the contract to be valid, which in our opinion is void; or its interpretation of the contract may in our opinion be radically wrong; but in neither of such cases would the judgment be reviewable by this court, under the clause of the constitution protecting'the obligation of contracts against impairment by state legislation, and, under the existing statutes defining and regulating its jurisdiction, unless that judgment, in terms, or by its necessary operation,-gives effect to some provision of the state constitution, or some legislative enactment of the state, which is claimed by the unsuccessful party to impair the obligation of the particular contract in question.”

The affidavit, in our opinion, is insufficient, and the judgment was rightly entered.

Judgment affirmed.

SMILEY V. GAS CO.

OPINION,

Mr. Justice Clark:

The clause of forfeiture in this case would seem to apply, not to the half-yearly sums of $250, but to the annual payments of $500 to be made for gas rent of the well, or each of the wells, the product of which, should be conducted off the farm for consumption within the period covered by the lease, which was “ for two years, or so long thereafter as oil or gas is found in paying quantities,” or to a failure to put down any well within two years. There was no time within two years in which the lessees were bound to put down a well under penalty of forfeiture; but, for certain periods of delay within that' time, they were to pay certain sums of money, which, in a certain event, were to be credited upon th.e rent, when a well or wells were put down producing oil or gas in paying quantities. The last payment of 0250 was due on February 4, 1890, and the suit was brought March 14,1890, whilst the two years did not expire until August 4th thereafter. The time for forfeiture, therefore, had not yet arrived. But, if this were not so, the case is governed by our opinion filed in Ray v. Natural Gas Co., ante, 576, filed at present term.

The judgment is affirmed.

agerter v. vandergrift.

OPINION,

MR. Justice Cla rk :

The principal question, in this case, arising out of the clause of forfeiture contained in the lease, is decided in Ray v. Natural Gas Co., ante, 576. We there held, following our own cases of Galey v. Kellerman, 128 Pa. 492, and Wills v. Natural Gas Co., 130 Pa. 222, that, as this clause was inserted in the interest of the lessor, he had the option either to declare the forfeiture or to affirm the continuance of the contract, and, if the lessor does not choose to avail himself of the forfeiture, it cannot be set up by the lessee as a defence to an action in affirmance of the lease.

The case differs from Ray v. Natural Gas Co., supra, in this, however, that Eva C. Agerter, the lessee at the time of the making and execution of the lease, was and still is a feme-covert, being the lawful wife of Christopher D. Agerter, who joined her in the execution thereof; and it is contended that, as the said lease was not acknowledged as required by law, it is null and void, and that the plaintiff, upon that ground if not upon any other, was not entitled to judgment for want of a sufficient affidavit of defence.

As the validity of the lease in question is not affected by any statute in force at the time the lease was made, the question is to be determined according to the principles of the common law. The contracts of a married woman, at the common law, were absolutely void, but they have been held valid when set up by her in her own behalf, and when she is not in default in performance on her part.

It has been held that she may take a lease; and, if she, in fact, voluntarily performs all the stipulations on her part to be performed, tbe lessor will not be permitted to treat the lease as void, for this would be against equity and good conscience: Baxter v. Smith, 6 Binn. 427. She may take a conveyance in fee of lands to herself, and the fact that it is encumbered with a condition will not prevent its vesting: Bortz v. Bortz, 48 Pa. 382. She may hold lands purchased under an executory agreement upon which she has paid the instalments of purchase money as they fell due, averring her readiness and willingness to pay the balance as it shall become due. Such a contract can be rescinded only on her refusal to perform the conditions: Vance v. Nogle, 70 Pa. 176. In Walker v. Coover, 65 Pa. 430, it was held that an assignment of bonds to a married woman, as collateral security, upon her undertaking to pay certain debts of the assignor, was good notwithstanding her cov-erture, she having paid part of the debts and averred her readiness to pay the remainder.

It is not pretended that the plaintiff has not in all respects complied with her contract. She has not sought to avoid the instrument, nor has she interfered with the defendant, or in any way or manner prevented him from operating under the lease. On the contrary, she has respected his rights, has refrained from operating herself, or through others, and, still standing upon her contract, she demands that the defendant shall comply with his covenants. An affidavit of defence setting up coverture, under such circumstances, is insufficient: Kahn v. Pickard, 5 W. N. 537.

The judgment is affirmed.

MERTZ v. VANDERGRIET.

OPINION,

Mr. Justice Clark:

This case is in all respects governed by the principles set forth in our opinion in Ray v. Natural Gas Co., ante, 576.

Judgment affirmed.