Brown v. Wilson

On June 17, 1912, John S. Ruhl and Lena, his wife, being the owners and in possession of the land therein described, made, executed, and delivered to M.S. Wilson an oil and gas mining lease, which was duly recorded, the pertinent part of which reads:

"* * * That the said parties of the first part, for and in consideration of the sum of one dollar in hand, well and truly paid by the said party of the second part, the receipt of which is hereby acknowledged, and of the covenants and agreements hereinafter contained on the part of the party of the second part, to be paid, kept, and performed, have granted, demised, leased, and let and by these presents do * * * grant, demise, lease, and let unto the second party, his heirs, successors, or assigns, for the sole and only purpose of mining and operating for oil and gas: * * * The southeast quarter (1/4) of section fifteen and the southwest quarter (1/4) of section fourteen (14), both in township 14 N., of range 16 E., containing three hundred and twenty (320) acres, more or less. * * *

"It is agreed that this lease shall remain in full force for the term of ten years from this date, and as long thereafter as oil or gas, or either of them, is produced therefrom by the party of the second part, his heirs, successors or assigns.

"In consideration of the premises the said party of the second part covenants and agrees:

"First. To deliver to the credit of the first parties, their heirs and assigns, free of cost, in tank or the pipe line to which he may connect his wells, the equal one-eighth (1/8) part of all oil produced and saved from the leased premises. * * *

"The party of the second part agrees to complete a well on said premises within four months from the date hereof, or pay at the rate of eighty ($80.00) dollars in advance, for each additional three (3) months such completion is delayed from the time above mentioned for the completion of such well until a well is completed. The above rental shall be paid to the first parties in person or to the credit of the first parties at the First National Bank of Boynton, Okla., and it is agreed that the completion of such well shall be and operate as a full liquidation of all rent under this provision during the remainder of the term of this lease. * * *

"The party of the second part shall have the right at any time to remove all machinery and fixtures placed on said premises, including the right to draw and remove casing.

"The party of the second part, his heirs and assigns, shall have the right at any time after 4 mos. on the payment of one dollar and all payable obligations then due to the parties of the first part, their heirs and assigns, to surrender this lease, if not tested, for cancellation, after which all payment and liabilities thereafter to accrue under and by virtue of its terms shall cease and determine.

"All covenants and agreements herein set forth between the parties hereto shall extend to their successor, heirs, executors, administrators and assigns. * * *"

Thereafter C.B. Wilson and D.A. Cameron became and now are the assignees of the southwest quarter of section 15; the Seven Sands Oil Gas Company, the assignee of the east half of the southwest quarter of section 14; John A. Sheppard, the assignee of an undivided half interest in the west half of the southwest quarter of said section; and said Wilson and Cameron, the assignee of the remaining undivided one-half interest therein, all of whom will be hereinafter called lessees.

Thereafter, to wit, on August 29, 1914, said Ruhl and wife made, executed, and delivered a second lease of the same land to one Leidecker, and later parted with their interest therein as lessors to one Humphreys, who later acquired the lease and thereafter conveyed his entire interest in the property to the plaintiffs in error, who, later, leased the entire 320 acres to John A. Sheppard, one of their number, and who is the same Sheppard who also owns, but who claims no interest in, an undivided 80 acres contained in the first lease, as stated.

Prior to the execution of the lease to Leidecker, to wit, on August 1, 1914, John S. Ruhl and wife brought suit to establish, as a matter of record, the forfeiture of the lease of June 17, 1912, and to cancel the same upon the ground that the same was unilateral, unperformed, optional as to the lessee and his assigns, and therefore optional as to the lessor, and that there was default in the payment of the rentals or delay money on the part of the lessees. Pending this suit, Cameron and Wilson, without leave, on September 3, 1914, entered and took possession of the southwest quarter of section 15 and thereupon erected a rig and commenced to drill a well, and thereafter struck oil in paying quantities, whereupon they brought suit to cancel the second lease as a cloud upon their title and to restrain plaintiffs in error from claiming thereunder and from interfering with their possession. Before being restrained, however, plaintiffs in error took possession of the well and thereafter enjoined defendants in error, or those claiming under the first lease, from interfering with their possession. After issue joined, the two cases were consolidated, and there was trial to the court and general judgment for defendants in error, sustaining the validity of the first lease and clearing the title of all parties in interest thereunder as prayed, to reverse which it is assigned that the same is contrary to the law and the evidence.

No well was ever commenced nor possession yielded of the demised premises to the lessees under the first lease, but up to July 17, 1914, some $420 had been paid by them, from time to time, as delay money. It is contended that the Seven Sands Company defaulted in the payment of $20 delay money due that day on its 80 acres and thereby incurred a forfeiture of that part of the lease. Assuming that all parties in interest agreed to the substitution of said company as lessee of the 80 acres assigned it, as contended by said company, on this point there is no conflict in the evidence. It discloses that on the next preceding rent paying day, i. e., April 17, 1914, Wilson and Cameron took from Ruhl this receipt:

"April to July 17, 1914.

"Boynton, Okla., April 17, 1914.

"Received from C.B. Wilson, by D.A. Cameron, atty., the sum of $20.00 for rental on lease on the E. 1/2 of S.W. 1/4, of Sec. 14, Twp. 14, Rg. 16 E., recorded in Muskogee county, Muskogee, Oklahoma. JOHN S. RUHL"

— but that in fact no money was paid Ruhl at that time; that instead, it seems, Wilson and Cameron executed to him their promissory note for $20, payable in 30 days, which they afterwards met with the check of the Seven Sands Oil Company for $20 drawn on the First National Bank of Chelsea, "by H.H. Lindley, Sec.," which was paid and its proceeds placed to his credit by the bank of Boynton on April 28, 1914. At that time, some delay in payment of delay money having theretofore occurred on the part of the lessees and their assigns, in consequence of which Ruhl had made complaint, he told the bank to go ahead and accept further rentals and give them another chance. This closed that incident so far as the Seven Sands Company was concerned until the next rent paying day. This fell on July 17, 1914. To meet this payment, said Lindley, at Chelsea, registered a letter addressed to Ruhl, at Boynton, Okla., containing a like check for a like amount, which arrived at Boynton on the 17th. On the next day the postmaster mailed Ruhl a rural delivery notice that there was a registered letter in the post office for him. Ruhl came to Boynton August 3, 1914, and there received the letter and the check, both of which he immediately returned to the sender, because, he says, he, being unlearned, did not understand its contents. At no time had the Seven Sands Oil Company funds in the bank to pay the check, and never had an account there. On August 12, 1914, or 25 days after it was due, said company caused $20 delay money to be deposited to the credit of Ruhl in the First National Bank of Boynton, which was the bank named in the lease as authorized to receive it. Ruhl never knew of this deposit until the fall of 1914, and in the meantime had, on August 1, 1914, commenced his action to cancel the lease, as stated, and on August 29, 1914, had executed the Leidecker lease.

It is sufficient to say that sending a worthless check to the lessor for the amount of the delay money is not payment thereof, and that placing the amount due to his credit in bank long after that time was not payment in advance or, indeed, payment at all, especially after he had declared a forfeiture and begun suit to cancel the lease on the ground, among others, of failure to pay. When the lessee and his assigns agreed in the lease, as they did, to complete a well on the premises within four months from the date thereof or pay at the rate of $80 in advance for each additional three months such completion was delayed after the expiration of the four months, the Seven Sands Oil Company, by accepting an assignment of 80 acres thereof, was on July 17, 1914, no well having been completed, possessed of an option to pay the lessor $20 delay money and thereby keep the lease alive until another rent paying period or not pay, and thereby forfeit or abandon its rights under the lease. This $20 was, by express terms of the lease, not only due on that day, but was payable in advance or as a condition precedent to the continued life of the lease. And time was of the essence of this contract. Cooper v. Ft.Smith Western Ry. Co., 23 Okla. 139, 99 P. 785. In FrankOil Co. v. Belleview, etc., Oil Co., 29 Okla. 719,119 P. 260, 43 L. R. A. (N. S.) 487, although an "unless" lease was under construction, what we said there as to that lease is equally applicable here to an "or" lease. There, in the syllabus, we said:

"A gas and oil lease giving the lessee the option to pay a certain sum, and thus extend the lease, is operative against the lessor during such extension only upon the payment of such sum; contract rights being correlative and mutual. * * *

"When contracts are optional in respect to one party, they are strictly construed in favor of the party that is bound and against the party that is not bound."

See, also, Kolachny v. Gralbreath et al., 26 Okla. 772,110 P. 902, 38 L. R. A. (N. S.) 451.

In Mitchell v. Probst, 52 Okla. 10, 152 P. 597, we said:

"Where an oil and gas lease provided 'that, if a well is not drilled on said premises in one year from date hereof, then this lease and agreement shall be null and void, unless the party of the second part, within each and every year in advance, after the expiration of the time above mentioned for the drilling of a well, shall pay a rental of $2.50 per acre for the first year,' etc., held, that such provision amounts to an option and gives the lessor the right to cancel unless the conditions are complied with.

"Where, in such case, the sum agreed to be paid for the option is not paid at the time agreed upon, nothing else appearing, the lessor has the right to cancel the lease. * * *

"In case of an option, time is of the essence of the contract, unless the contract expressly provides that it shall not be."

It will not do to say that, as the leases in those cases contain express provision that they shall be void if no well is completed within a certain time "unless" the lessee pay a certain sum for delay, what we said there has no application here, where the lease contains no such provision, but binds the lessee to complete a well within a certain time "or" pay for delay without providing that the lease shall be void on failure so to do. This for the reason that the leases there and the lease here alike give to the lessee the same kind of an option. In other words, although not couched in the same terms, the option in both leases to pay or not to pay for delay amounts to the same thing and works the same result; that is, if exercised it prolongs the life of the lease, if not, the lease is abandoned by the lessee and is forfeitable at the option of the lessor, and, after forfeiture declared, being a cloud upon his title, the lessor has a right to come into a court of equity and have it declared forfeit and canceled and removed.

We said the option was substantially the same in an "unless" lease as in an "or" lease. What the option is in an "unless" lease we have just shown by quotations from former opinions of this court. That it is substantially the same in an "or" lease is shown in McMillan v. Phila. Co., 159 Pa. 142, 28 A. 220. There the court said:

"The lessee had covenanted to do one of two things: to begin a well within 60 days and complete it within three months thereafter, or pay $25 per month as rental for the privilege of doing so afterward, and within the three years which limited his term, unless oil or gas was found in paying quantities. * * * He may drill the well and so pay no rental, or he may pay the rental and not be compelled to drill the well. It is not for the lessor, but it is for the lessee, to elect which he will do. This option was deducible from the stipulations of the lease, but the parties chose to put it in words and make it part of the contract."

Jennings-Haywood Oil Syndicate v. Houssiere-Latreille OilCo., 119 La. 793, 44 So. 481, treats the obligation of the lessee to drill or pay delay money as an option substantially the same as in an "unless" lease, and that, too, in construing an "or" lease, as here. The court said:

"If he merely secured an option, then, by failing to make the fourth quarterly payment within the time fixed for the exercise of the option, he, or his assigns, forfeited all rights under the contract; and there is an end of the matter. Escoubas v.Petroleum Co., 22 La. Ann. 280. It is clear that if I agree to be bound on the condition, or provided you do a certain thing within a certain time, for example, if I agree that you shall have the exclusive right to exploit my land for minerals, provided you begin operations Within six months, or pay me in advance of the expiration of the six months $50 for a prolongation of the term, and you fail to do the thing thus stipulated to be done, I am not bound."

And after quoting from Pothier (volume 6, p. 217, sec. 209) said:

"It would seem to be a plain proposition that if I agree to lease you my house on condition that you pay me the rent in advance, and you fail to do so, I am under no obligation to you. 'An option must be exercised within the time limit, or the right will be lost.' 21 A. E. E. 931; Richardson v. Hardwick,106 U.S. 252, 1 Sup. Ct. 213, 27 L.Ed. 145; Litz v. Goosling,93 Ky. 185, 19 S.W. 527, 21 L. R. A. 129; Waterman v. Banks,144 U.S. 394, 12 Sup. Ct. 646, 36 L.Ed. 479."

And it makes no difference whether the lease contains a forfeiture clause or not, or whether it is an "unless" lease or an "or" lease, as both leases afford to the lessee the same option.

In Cohn v. Clark, 48 Okla. 500, 150 P. 470, L. R. A. 1916B, 686, there was an oil and gas lease under construction, as here, and, as here, it was an "or" lease, and again, as here, it contained no forfeiture clause. The "or" clause of the lease read:

"Second party agrees to commence operations on said premises within, on or before Jan. 1st, 1910, from this date, or thereafter pay to the first party one dollar per acre per annum annually until a well is drilled, or the property hereby granted is conveyed to the first party."

Reversing the rule and construing it most strongly against the lessor, the court said:

"* * * We will treat this clause as meaning that, upon failure of the lessee to begin operations or to pay rent as the contract provides, that within itself works a forfeiture. * * *"

Mitchell v. Probst, supra, was an "unless" lease containing a forfeiture clause in effect that the lease would be void on failure of the lessee to drill or pay "unless." There the court said:

"Where, in such case, the sum agreed to be paid for the option is not paid at the time agreed upon, nothing else appearing, the lessor has the right to cancel the lease."

In Conkling v. Krandusky, 127 App. Div. 761, 112 N. Y. Supp. 13, the lease was for oil and gas. It was an "or" lease and contained no forfeiture clause. The sixth paragraph of the syllabus reads:

"An oil lease provided that the lessee should begin operations at a specified time, or, in lieu thereof, pay a rental of $10 per month from that date, with the option at any time to surrender his lease and be released from all unfulfilled conditions. The lessee failed to commence operations at the time specified, and paid the first month's rental of $10, but thereafter, for more than two months, he ceased to pay and made no attempt to bore for oil.Held that, as in the lease time was the controlling factor, the failure to enter the premises or to pay the $10 per month was an abandonment of the lease."

In the body of the opinion the court said:

"He must keep his own lease alive, either by the monthly payments or by drilling for oil, if the provisions for his benefit were to be operative. * * * He paid the $10 * * * expecting possibly to go on with the venture. After that, and more than two months before Galletts entered, he ceased paying and made no attempt to bore for oil.

"In this lease time was the controlling factor, and when he failed either to enter the premises or to pay the $10 each month, one or the other of which was essential to keep his right effective, he manifested his purpose to abandon the project."

In Thornton's The Law Relating to Oil and Gas, section 797, it is said:

"If the lessee has only a mere option to enter and explore, then he must do some act toward the development of the property or pay the rent or commutation money for delay, and in one of these ways exercise his option before the lessor gives notice of his election to revoke and cancel the lease."

It is unnecessary to cite authority in support of what appears to us to be so clear. But see Smith v. Guffey, 202 Fed. 106, 120 C. C. A. 436, where the learned Circuit Judge compared an "unless" lease and an "or" lease substantially the same as here and held the difference between the two "negligible.'" And so we say the Seven Sands Oil Company, having failed to pay the delay money in advance, pursuant to the terms of the lease, abandoned and made subject to forfeiture at the option of the lessor all its rights thereunder so far as the 80 acres held by it was concerned. And it makes no difference in our conclusion that H.H. Lindley, who sent the check dated July 15, 1914, signed "Seven Sands Oil Gas Co., by H.H. Lindley," testified that he, personally, had sufficient money in the bank upon which it was drawn to pay the check, and further that, although he had no arrangement with the bank to do so, yet, as the bank had paid the previous check so drawn and charged it to his personal account, he was of the opinion that the bank would pay the check in question and also so charge it. As the check, had it been good, would not have been cashed in advance, as demanded by the lease (Kolachny v. Galbreath, supra), it goes without saying that a worthless check was not equivalent to placing the money in the hands of Ruhl or depositing that amount to his credit in the bank designated in the lease. We are therefore of the opinion that the court was wrong in holding, as counsel say it did, that the lease in question was not subject to forfeiture, and in failing to hold that, in so far as the Seven Sands Oil Company was concerned, it had abandoned, and made subject to forfeiture at the option of the lessor, its rights under the lease by failing to pay the delay money in question pursuant to the terms thereof.

It is further contended that Wilson and Cameron defaulted in the payment of the $60 delay money due and payable in advance April 17, 1914, and thereby abandoned and made subject to forfeiture the lease as to the remaining 240 acres of the demised premises. Assuming said amount was all that was due from them to Ruhl on that day, which seems to be the construction placed upon the lease by all parties in interest, the facts disclose that on said day Ruhl executed to Wilson and Cameron a receipt which reads:

"April to July 17, 1914.

"Boynton, Okla., April 17, 1914.

"Received in full $60.00 for rent according to terms of lease recorded in Muskogee county, Okla., given by me to the S.E. 1/4 of Sec. 5 and S.W. 1/4 of Sec. 14 of Twp. 14, Rg. 16 E. JOHN S. RUHL."

But in fact no money was paid him at that time. Instead, Wilson executed to Ruhl his promissory note for $60, payable 60 days thereafter, with interest from date, which was not paid when due and not until November 3, 1914, at which time said amount with interest was placed to the credit of Ruhl in the bank designated in the lease, long after he had brought suit to cancel the same and had parted with all interest in the demised premises, as stated. There is no evidence tending to prove that Ruhl agreed to take the note in absolute payment of the debt. On the contrary, the evidence discloses that Ruhl accepted it reluctantly, stating that he was tired of taking notes, as they did not pay them on time and that he could not cash them, but was finally induced to accept the note on the strength of the promise of Wilson that he would pay it before due if Ruhl would notify him that he needed money. This Ruhl did, and later, before and after it was due, insisted on payment up to the time he brought suit to cancel the lease. But the note was not paid when due, and not until after said suit was brought, to wit, on November 3, 1914, was the amount of the note and interest placed to his credit in the bank named in the lease.

Among other things, it is contended that, owing to the absence of a forfeiture clause therein, the lease was not subject thereto, and, if it was, inasmuch as Ruhl had theretofore accepted the checks of the Seven Sands Company and the notes of Wilson and Cameron for delay money, which was afterwards paid, that he thereby waived the forfeiture, if any, and is estopped to assert it. But, as we have just held that an "or" lease without a forfeiture clause and an "unless" lease with a forfeiture clause alike vest an option in the lessee to drill or pay, and we have seen that a failure to drill or pay, as here, forfeits, or, in other words, operates as an abandonment by the lessee of, an "unless" lease, so we hold that the same result would follow a failure to drill a well or pay pursuant to the terms of this "or" lease, and that there is no merit in the contention that the lease in question is nonforfeitable. And, as we have repeatedly held that in order for defendant to avail himself of an estoppel he must plead it (Town of Sapulpa v. Sapulpa Oil Gas Co., 22 Okla. 347,97 P. 1007), and such has not been done, and it nowhere appearing that, if true, such conduct misled the lessee to his injury, we pass to the next contention, which is, in effect, that, by accepting the $60 note of April 17, 1914, for the delay money then due and attempting to collect it, which he did, Ruhl evidenced his intent to and did waive the forfeiture (or, rather, his option to declare a forfeiture), if any accrued, and elected to affirm the lease. In support of this contention, counsel cite Archer on Oil and Gas, p. 284, where it is said:

"If the lessor declares a forfeiture, the lease is terminated, and thereafter no recovery can be had for rentals thereunder; if he claims the rentals, he affirms the continuation of the lease for the period for which he claims."

And 40 Cyc. 268, note 45, where the annotator says:

"The courts not favoring forfeitures are usually inclined to take hold of any circumstances which indicate an election to waive it."

He cites many cases, some of which undoubtedly support his contention. But such is not the rule in this jurisdiction, where, in Kolachny v. Galbreath, supra, quoting approvingly from the Mehlin Case, 25 Okla. 809, 108 P. 545, 138 Am. St. Rep. 942, we said:

"* * * Oil and gas leases are construed most strongly against the lessee and in favor of the lessor."

And in Deming Investment Co. v. Lanham, 36 Okla. 773,130 P. 260, 44 L. R. A. (N. S.) 50:

"* * * By failing to drill a well or to pay the rent the lease became forfeited, and no rent was due thereunder. Ordinarily forfeitures are not favored, but gas and oil leases furnish exceptions to this general rule. Thus, in paragraph 148, Thornton's (2nd Ed.), the law relating to oil and gas provides: 'Forfeitures, however, on the part of the lessee in a gas or oil lease, which arise by reason of his neglect to develop or operate the leased premises, are rather favored by the law, because of the peculiar character of the product to be provided'."

Which means that we will not be astute to seize on circumstances indicating a waiver of forfeiture on the part of the lessor. Whether the lease is an "unless" lease or an "or" lease, or whether the "or" lease contains a provision that the same "shall be null and void" on failure to drill or pay, as is contained in the "unless" lease, or not, the option available to the lessor to forfeit the lease (on failure of the lessee to do either), being for his benefit only, may be waived by him. But there is no evidence reasonably tending to prove that the lessor waived the forfeiture here.

On this point, aside from any question of pleading, the evidence discloses that, at the time the $60 note of April 17, 1914, was taken for the delay money due that day from Wilson and Cameron, Ruhl took the note under protest for the reason that their notes theretofore given by them for the same purpose had not been paid promptly; that Ruhl then and there told them in effect that if he took the note they must start a well within three days, which they declined to do, but promised to start a well within ten days, after which, it appears, he took the note, saying that he would not allow the lease to run longer if they did not and that it was the last chance he was going to give them; that thereupon they agreed upon those terms, and, in addition, Cameron told Ruhl that if he needed the money "bad" he would send it to him at any time; that thereafter, before the note fell due, he pressed them for payment, which was refused, and when due remained unpaid, whereupon he placed the matter in the hands of his attorneys, who, on July 20, 1914, caused written notices to be served on defendants that he had declared a forfeiture of the lease. Of course, Ruhl could have waived the forfeiture by acts from which an intention so to do might fairly be inferred (St. Paul,etc., Co. v. Cooper, 25 Okla. 38, 105 P. 198); but there was nothing in his acts from which to infer such intention, but, on the contrary, everything to lead us to believe that he intended to insist on a forfeiture.

It will not do to say that a forfeiture of the lease should not be enforced for the reason that both the $60 note of Wilson and the $20 check of the Seven Sands Company given Ruhl for the delay money due from them to him on April 17, 1914, and July 17, 1914, respectively, were on November 3, 1914, and August 12, 1914, respectively, paid by depositing the money in the bank named in the lease, and hence the lessee should be relieved of the forfeiture by reason of Rev. Laws 1910, section 2844, which reads:

"Whenever, by the terms of an obligation, a party thereto incurs a forfeiture, or a loss in the nature of a forfeiture, by reason of his failure to comply with its provisions, he may be relieved therefrom, upon making full compensation to the other party, except in case of a grossly negligent, willful, or fraudulent breach of duty."

This for the reason that, as said lessees stood on their lease in the trial court and denied a forfeiture and there prevailed upon the theory that the lease was not forfeited, if indeed it was forfeitable at all, they will not be permitted to change front in this court and for the first time urge that, under the facts, they should be relieved of the forfeiture, if any occurred. Having failed there to plead in confession and avoidance in virtue of the statute invoked and there put in issue the question of whether or not they had made "full compensation to the other party," as required by statute, and whether their breach of duty was or was not "grossly negligent, willful, or fraudulent," we can give them no relief here, especially in view of the fact that the rights of the second lessees have intervened and had intervened at the time of the rendition of the judgment complained of. Besides, as stated inDill v. Fraze, 169 Ind. 53, 79 N.E. 971:

"There is little or no reason for the interference of a court of equity to prevent a forfeiture before operations have begun, where the operator has sinned away his opportunity under the contract."

We are therefore of opinion that by non-payment in advance of the delay money, as stated, this entire lease was subject to forfeiture, that is, as to the 240 acres thereof held by the Camerons and also as to the 80 acres held by the Seven Sands Company; that, being so subject, the same was not waived by Ruhl and, not being waived, was by him duly declared; that the jurisdiction of the court was properly invoked to have the same declared forfeit and canceled as a cloud upon his title; and that the court erred in refusing to grant relief to him and those claiming under the second lease as prayed, and in granting relief, in effect, sustaining the validity of the first lease.

But let all we have said be as it may: Was Ruhl, together with the owners and holders of the second lease and those claiming under them, entitled to cancel the first lease on other grounds? They contend, in virtue of the general surrender clause contained therein, they were, because, they say, the lease is a "contract," the performance of which is optional on the part of the lessee, and hence is optional on the part of the lessor, and, being unperformed, the lessor had the right to terminate the same at any time and sue to set aside, as he did. This contention must be sustained. Although the lease recites a consideration to Ruhl of $1 paid "and the covenants and agreements hereinafter contained on the part of the second party, to be paid," the real and only consideration for the lease, as a whole, was development by lessee or his assigns.Jennings, etc., Co. v. Houssiere, etc., supra; Foster et al. v.Elk Fork, etc., Co., 90 Fed. 178, 32 C. C. A. 560; Dill v.Fraze, 169 Ind. 53, 79 N.E. 971; National Oil, etc., v. Teel (Tex. Civ. App.) 67 S.W. 545. After which they were "to deliver to the credit of the first parties, their heirs and assigns, free of cost in the tank or the pipe line to which he may connect his wells, the equal one-eighth (1/8) part of all oil produced and saved from the leased premises." Now, while there is authority to the contrary (Brewster v. Lanyon Zinc Co., 140 Fed. 801, 72 C. C. A. 213, and others), we hold that the dollar paid Ruhl at the time of the execution and delivery of the lease was the sole and only consideration paid to hold the lease for the four-month term within which the lessee had to enter and complete a well, and that such consideration did not extend to uphold any other stipulation in the lease; and, further, that the agreement on the part of the lessee to pay delay money after that time was a provision made for the sole purpose of prolonging the lease.

In Lowther Oil Co. v. Guffey et al., 52 W. Va. 88, 43 S.E. 101, speaking to the $1 consideration, the court said:

"* * * It was only intended to hold the grant for two years, and after that time a further consideration to prevent forfeiture was provided."

Or, as stated in the headnote to Allegheny Oil Co. v. Snyder, 196 Fed. 764, 45 C. C. A. 604:

"* * * The consideration recited ($1) supported, not only the grant for the two years term, but as well the privilege of extending the time for drilling by paying the stipulated price therefor."

In National Oil Pipe Line Co. v. Teel (Tex Civ. App.) 67 S.W. 545, the court said:

"The real consideration of these instruments was not the recited $1, nor the $100 that after two years might be paid, in order that they might keep it going from year to year, but the beginning and prosecuting with due diligence of wells for oil or minerals upon the land; in other words, the development of the property for oils and minerals in the near future. This was the clear purpose of the grant."

See, also Owens v. Corsicana Petroleum Co. (Tex Civ. App.)169 S.W. 192.

Now, if the $1 paid the lessor was earned at the expiration of the four months in which the well was agreed to be, but was not, completed, and thereafter, under the terms of the lease, there remained to the lessee the option to pay for delay, and thus keep the lease alive, or not pay and thereby let it die, with the further option to surrender it for cancellation at any time and thereby terminate the contract and defeat both payment and development, the lease not only, lacked in mutuality, in that it imposed no legal obligation on the lessee to do anything, but, in addition thereto, for the reason that it imposed no such legal obligation and left the lessor powerless to compel the lessee to develop and thereby perform the contract and thus yield the lessor the prospective royalties which constituted the sole consideration for which the lease was given, the lease was also nudum pactum and nothing more than a a mere option on the part of the lessee, or rather two options: To drill or pay or surrender (and thereby avoid doing either), or, in other words, an option to develop or not to develop, or rather to perform or not to perform the lease contract, as he saw fit.

That such lease is an option is contrary to the holding in Illinois and other jurisdictions, where it is held to vest a freehold estate in the land. Or, as stated in Guffey v. Smith,237 U.S. 101, 35 Sup. Ct. 526, 59 L.Ed. 856:

"It is settled by the decisions of the Supreme Court of Illinois that an oil and gas lease like that of the complainants passes to the lessee, his heirs and assigns, a present vested right — 'a freehold interest' — in the premises, that this interest is taxable as real property, and that the clause giving the lessee an option to surrender the lease at any time is valid, does not create a tendancy at will, or give the lessor an option to compel a surrender, and does not make the lease void as wanting in mutuality. Bruner v. Hicks, 230 Ill. 536, 540, 542, 82 N.E. 888, 120 Am. St. Rep. 332; Poe v. Ulrey,233 Ill. 56, 62, 64, 84 N.E. 46; Ulrey v. Keith, 237 Ill. 284, 298, 86 N.E. 696; People ex rel. Carroll v. Bell, 237 Ill. 332, 339, 86 N.E. 593, 19 L. R. A. (N. S) 746, 15 Ann. Cas. 511;Daughetee v. Ohio Oil Co., 263 Ill. 518, 524, 105 N.E. 308. These decisions constitute rules of property and must be accepted and applied in passing upon the complainants' rights."

But where the lease vests no such interest, but only an option, as here, the great weight of authority supports the rule announced by us in the Mehlin Case, supra. There we said:

"* * * An executory contract, which under its terms leaves it optional with one party whether or not he will proceed with the contemplated enterprise, makes the same likewise optional with the other. * * *"

The application of which leads to a rule precisely contrary to the Illinois rule, and that is the rule that, where the lessee has the option to surrender the lease at any time, the lessor has the corresponding option to compel a surrender, and that the lease is void for want of mutuality, or rather voidable, before performance, at the option of the lessor.

In the Jennings Case, supra, the lease involved was an "or" lease, as here, in which the lessee agreed to commence development within six months or pay $50 quarterly in advance for each three months' delay and to deliver to the owner a royalty of one-eighth of the production. The lease contained a clause that the lessee might at any time cancel and surrender the lease on the payment of a sum certain. After certain payments were made for delay, the lessor refused to accept the next payment, which was tendered after the date on which it was due, on the ground that the lease had thereby become forfeit. In a suit to enforce the forfeiture, it was held that such it had become for the reason that the option of the lessee had not been exercised within the time limit, and "that since the sole object and purpose of the contract was to exploit the land for oil and gas, and the contract left the lessee at liberty to do so or not at his option, there was in reality no contract binding on the lessee."

Owens v. Corsicana Petroleum Co., supra, was a suit to cancel an oil and gas mining lease, the provisions of which were substantially as here. It was an "or" lease and contained a general surrender clause. Therein the lessee agreed to complete a well on the demised premises within one year from the date thereof or pay to the lessor $28.20 each three months in advance for delay. In construing that clause as operated on by the general surrender clause, the court said:

"If appellants could neither recover damages, require the completion of a well, nor recover $28.20 rent without the consent of appellee, the contract is clearly unilateral and void. Any attempt to do either of these things could be instantly defeated by appellee by interposing that term of the contract whereby it is permitted to surrender the grant upon the payment of $5."

And in the syllabus:

"A contract between an owner of oil lands and an oil company giving the company the right to bore for oil, or to pay quarterly rentals, which, upon acceptance by the owner, extended the contract for another quarter, or to surrender the lease at any time upon the payment of $5 to the owner, was a unilateral contract, void for want of mutuality; the $5, being merely a nominal consideration and no consideration for the grant. * * *"

See, also, Long v. Sun Co., 132 La. 601, 61 So. 684. Witherspoon v. Staley et al. (Tex Civ. App.) 156 S.W. 557, was also a suit to cancel an oil and gas lease in effect as here. It was executed in consideration of $25 and certain royalties, and provided if operations were not commenced with diligence within 60 days from a certain date the grant should immediately become void, except that lessee might prevent such forfeiture by paying $25 every 60 days until an oil well was commenced; construing which, it was held that, since the instrument did not bind the lessee to do anything, it was a unilateral contract and nothing more than an option, which terminated on the failure of the lessee to perform the conditions. It seems that such was the conclusion of the court independent of the general surrender clause in the lease. In the opinion the court said:

"This contract was likewise a unilateral one, in that it did not bind or obligate the lessee to perform any of the conditions thereof, and was therefore lacking in mutuality. SeeNatl. Oil Pipe Line Co. v. Teel, 95 Tex. 591, 68 S.W. 979, 67 S.W. 545; Forney v. Ward, 25 Tex. Civ. App. 443, 62 S.W. 109; Roberts v. McFadden, 32 Tex. Civ. App. 47, 74 S.W. 111;Hodges v. Brice, 32 Tex. Civ. App. 358, 74 S.W. 590; Marble Co.v. Ripley, 10 Wall. 339, 19 L.Ed. 955; Huggins v. Daley, 99 Fed. 606, 40 C. C. A. 12, 48 L. R. A. 320; Steelsmith v.Gartlan, 45 W. Va. 27, 29 S.E. 978, 44 L. R. A. 107. See, also,Eclipse Oil Co. v. South Penn Oil Co., 47 W. Va. 84, 34 S.E. 923; Harness v. Oil Co., 49 W. Va. 232, 38 S.E. 670; Cowan v.Iron Co., 83 Va. 547, 3 S.E. 120."

Young v. McIllhenny (Ky.) 116 S.W. 728, was a suit for delay money due on two certain oil and gas leases, alike in all essential particulars. They were "unless" leases, and each provided:

"If no well is commenced on the premises hereby leased, within one year from this date, then this grant shall be null and void, unless the party of the second part shall pay to the first party ($75 in one lease and $50 in the other) for each year thereafter such commencement is delayed" — and contained a general surrender clause, as here.

Without any particular note of the effect of the surrender clause, in construing the lease, the court said:

"These leases are simply options given by the lessor to the lessee for one year with the right to renew the options at the end of the year upon the payment of $125, if the lessee has not commenced operation thereunder within the 12 months. There is nothing in either the leases or the contract binding the lessee to do anything. He has the exclusive right to bore for oil or gas upon the premises described in the leases for 12 months, and if he fails to exercise his right, such failure, of itself, operates to cancel the leases. The right to bore for either oil or gas is purely optional with the lessee; the lessor is bound, but the lessee is not. There is nothing in the leases or the contract upon which the lessor could base an action for specific performance; under neither the leases nor the contract could he compel the lessee to commence operations, or to continue them after he had commenced.

"In the case of Steinwender's Coffee Co. v. Guenther GroceryCo., 80 S.W. 1170, 26 Ky. Law Rep. 270, this court, in speaking of a contract similar to the one under consideration, said: 'Contracts which are valid must be mutual and binding upon both parties. As we have said, it is a fundamental principle of law that there must be mutuality in every contract.' "

Reese et al. v. Zinn et al. (C. C.) 103 Fed. 97, was a suit for the cancellation of a lease. It does not appear whether the same was an "unless" or an "or" lease, or whether it contained a general surrender clause or not. But therein the court was of opinion that the plaintiff was entitled to the relief sought: First, for the reason that the parties claiming thereunder had by the terms and provisions of the lease forfeited their right, and not only that, but had abandoned the lease; and —

"Second, because the contract is void for want of mutuality, for the reason that it puts it in the power of the lessee to terminate the lease at will, and thereby confers the same power upon the lessor. This principle is well settled by numerous decisions, both in our own courts, as well as courts of other states. 12 Am. Eng. Enc. Law, 757; Kelly v. Waite, 12 Metc. (Mass.) 300; 2 BI. Comm. 146 Guffy v. Hukill, 34 W. Va. 49, 11 S.E. 754, 8 L. R. A. 759 [26 Am. St. Rep. 901]; Roberts v.Bettman, 45 W. Va. 143, 30 S.E. 95; Eclipse Oil Co. v. SouthPenn Oil Co. [47 W. Va. 84] 34 S.E. 932."

See, also, National Oil, etc., Co. v. Teel (Tex. Civ. App.) 67 S.W. 545.

In Steelsmith v. Gartlan et al., 45 W. Va. 27, 29 S.E. 978, 44 L. R. A. 107, the question was, as here, whether the first lease was at an end at the time the second lease was executed. The lease was an "unless" lease and was for and in consideration of $1. It contained a general surrender clause, substantially as here. Referring to the first lease, the court said:

"Mrs. McGregor entered into the lease for the sole consideration of the prospective rents and royalties she would enjoy if the lessee, in diligent search therefor, should find oil and gas in paying quantities. If such lease failed to bind the lessee to diligent search for oil and gas, it was without consideration, binding on neither party, and voidable, if not void, at the pleasure of either. Cowan v. Iron Co., 83 Va. 547, 3 S.E. 120; Petroleum Co. v. Coal, Coke Mfg. Co., 89 Tenn. 381, 18 S.W. 65."

See, also, Foster v. Gas Co., 90 Fed. 178, 32 C. C. A. 560.

Eclipse Oil Co. v. South Penn Oil Co., 47 W. Va. 84, 34 S.E. 923, was a suit in equity by the owner of the first lease against the owner of the second lease on the same property, who had entered and commenced development, to test the validity of the first lease, although nothing had been done thereunder except the payment of the annual rental therein provided for. The lease was for and in consideration of "the covenants and agreements hereinafter mentioned," which was a royalty on production. It provided for the drilling of a well upon the demised premises "within six months from the date of the execution of the lease," or "in lieu thereof" the lessee agreed to pay $1 an acre per annum until the well was completed. The lease also contained a general surrender clause, which, if exercised, would defeat development as here, construing which the court said:

"Under the provisions of the lease in controversy, there is no obligation upon the lessee to explore or pay rent; but he reserved the voluntary option to surrender it at any time, without legal obligation to do anything or pay anything. Hence the lessor had the right to vacate it at any time while in an executory state. * * * The only considerations mentioned in the lease are the royalties and rentals on oil and gas to be produced, and the commutation for failure to complete a well. The plaintiff was not bound to complete a well in any given time, or during the life of the lease, so as to produce oil royalties or gas rentals, but in lieu thereof might pay a commutation, which he reserved the right to defeat at any time before payment enforced by surrender of the lease. It was entirely optional with him to bore or not, or pay or not. He was not bound to do either, but could decline to do both. This lease is not capable of any other construction. A consideration mentioned which is not legally enforceable is equivalent to no consideration, and a contract dependent thereon is as much anudum pactum as if no consideration were mentioned."

In Petroleum Co. v. Coal, etc., Co., 89 Tenn. 381, 18 S.W. 65, Lurton, J., said:

"If the compensation to be paid the lessor depends upon the profit to result from the development and working of a mine, and the lessee is not bound, either expressly or impliedly, to explore and discover, or, when discovered, to work such mine, then no consideration for the lease exists. It is a mere option based upon no consideration, and may be withdrawn at any time before money is expended in doing what is optional upon the part of the lessee. Taylor's Landlord Tenant, sec. 152."

We are therefore of opinion that, as the lease in question conferred on the lessee the right to surrender the lease at any time after four months before development and thereby terminate the same, a corresponding right existed in the lessor to compel a surrender and terminate the same before development, which he did by making the second lease and yielding possession of the land to the second lessee (Oil Co. v. Oil Co., 479 W. Va. 84, 34 S.E. 923), and by commencing his action to cancel the same, and that the court was wrong in refusing to grant him relief upon this ground and in granting relief to the lessees sustaining the first lease.

In so holding, we refuse to follow Brewster v. Lanyon ZincCo., 140 Fed. 801, 72 C. C. A. 213, which counsel for the lessees in the first lease contend should be considered as establishing a rule of property in this state. That was a suit in equity to establish a forfeiture of an oil and gas lease as a matter of record and to cancel the same as a cloud on plaintiff's title, as here. A demurrer was sustained to the petition, from which plaintiff appealed. The lease provided, among other things, that the lessee "may at any time remove all his property and reconvey the premises hereby granted and thereupon this instrument shall be null and void," and that, "if no well shall be drilled upon said premises within five years from this date, second party agrees to reconvey, and thereupon this instrument shall be null and void." No well was drilled during the first four years of the lease, delay money being paid during the third and fourth years. During the fifth year a well was drilled from which gas was obtained in paying quantities. In refusing to cancel the lease, the court, in effect, refused to apply the doctrine we have applied here, for the reason that the court took an entirely different view of the nature of the lease. The court said that the position taken by reason of the surrender clause that the lease was wanting in mutuality, was terminable at the will of the lessee, and was therefore equally terminable at the will of the lessor, was not sound, for the reason that the lease was in the nature of a grant in praesenti of all the oil and gas in the land described, with the right to enter and search for them and to mine and remove them when found. From which premise the court concluded that the surrender clause did not make the estate a mere tenancy at will within the operation of the common-law rule that an estate at the will of one party is equally at the will of the other, and hence denied the relief. Besides, it will be seen that the contract there had been in part performed by boring, but not so here. Here we are not attempting to make application of the doctrine announced after the lease contract has been performed in whole or in part by the lessee, but are applying it where there has been no performance. Although the last case cited came from Kansas, the rule there applied was substantially the Illinois rule, which we have never followed, but refused to follow in the Mehlin Case, the Frank Oil Case, the Kolachny Case, and the Mitchell Case, supra. For the same reason we refuse, on this point, to follow Central Ohio Natural Gas Co., et al. v. Eckert et al.,70 Ohio St. 127, 71 N.E. 281; Brown et al. v. Fowler et al.,65 Ohio St. 507, 63 N.E. 76; Poe v. Ulrey, 233 Ill. 56, 84 N.E. 46. Also, Watford Oil Co. v. Shipman, 233 Ill. 9, 84 N.E. 53, 122 Am. St. Rep. 144, where an oil and gas lease is held to convey a "freehold interest."

Neither will we follow Poe v. Ulrey, supra. That was a suit in equity against the appellants, the object of which was to enforce a forfeiture and cancellation of an oil and gas lease providing substantially as here. The lessor urged his corresponding right to compel a surrender of the lease in virtue of the surrender clause contained therein giving such right to the lessee; but the court held that such he could not do, for the reason that the consideration of $1 mentioned in the lease as paid to the lessor by the lessee was sufficient to sustain every covenant in the lease, including the surrender clause, and hence the same was not void for want of mutuality. We say we will not follow that case in holding that the dollar was sufficient to uphold the stipulation contained in the surrender clause, for the reason that such holding is not in keeping with reason or the weight of authority, and, besides, we have just held the contrary, and that it was sufficient consideration to hold the lease for the four months during the time the lessee had to enter and complete a well only, and that such consideration did not extend to uphold any other stipulation in the lease. Besides, it would be incongruous with what we have just held, which is that, after the expiration of the four months in which the lessee had the right to enter and complete a well, it is not the dollar paid as consideration to hold the lease during that time which thereafter keeps alive the lease, but the payment of delay money only in advance as a condition precedent to that end. It would also be incongruous with what we have just held, in keeping with what we believe to be the weight of authority, that development is the sole consideration moving the lessor to execute the lease, that is, the lease as a whole; while the dollar, we repeat, is consideration to sustain the four months' term for drilling.

It is perhaps unnecessary to say, but we will, in the language of the headnote in Ohio Oil Co. v. Detamore,165 Ind. 243, 73 N.E. 609:

"Where the lessee has lost his rights under a lease and the lessor has commenced an action to quiet his title, the lessee by re-entering over the lessor's objections cannot revive any rights to the premises."

See, also, Zeigler v. Dailey, 37 Ind. App. 240, 76 N.E. 819.

We are therefore of opinion that as the surrender clause in this lease rendered the performance thereof optional as to the lessee, being unperformed, it was also optional as to the lessor; that, as the clause under consideration gave the lessee the right to surrender the lease at any time after four months, a corresponding right existed in the lessor to compel a surrender; and that the court erred in holding that such right in him did not exist and in refusing to decree a cancellation thereof pursuant to his prayer and the prayer of those claiming under the second lease.

Let the cause be reversed and remanded, to be proceeded with pursuant to the views herein expressed.

SHARP and HARDY, JJ., concur.