Hays v. Forest Oil Co.

Opinion by

Mr. Justice Elkin,

The plaintiff has proceeded in assumpsit to recover for monthly rentals alleged to be due under the provisions of a lease to mine for and produce petroleum and natural gas from a certain tract of land located in the county of Butler.

The plaintiff’s right to recover depends upon the construction of that part of the lease which reads as follows: “ This lease to be null and void and no longer binding on either party if a well is not completed on the premises within three months from this date, unless the lessee shall thereafter pay monthly to the lessor $500 per month for each month’s delay in completing said well; each payment to extend the time for completion for one month and no longer. ” The contention of the appellant is that the lessee covenanted to pay a rental of $500 per month until a well should be completed or the lease surrendered and canceled. The appellee denies that these provisions of the lease should be construed as a covenant to pay a monthly rental, but insists that the payment of the $500 per mouth is only a condition precedent and necessary to maintain the vitality of the lease until a well is completed.

The question involved is practically ruled by Glasgow v. Chartiers Gas Company, 152 Pa. 48, wherein Mr. Justice Williams, construing the provisions of an oil lease which in legal effect and almost similar language to that used in the present lease, said: “ 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 obligations 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 reserved. ” It was held in that case that the monthly payment was the means provided in the contract by which the right of the lessor to forfeit the lease could be postponed, but that it was not a covenant to pay a monthly rental which the lessor could assert in an action on the lease.

The learned counsel for the appellant has endeavored to distinguish that case from the one at bar. It is a distinction, however, without a difference. The two leases are almost identical in language and certainly are the same in legal effect. A reversal of the judgment in this ease would mean an overruling of that one. It may be conceded that this is an improvident agreement, but inasmuch as no fraud, mistake or misrepresentation is alleged, the lease must be construed according to its plain meaning. This lease in language too plain to be misunderstood provides that it shall be no longer binding on either party if a well is not completed within three months, unless .the lessee before the expiration of the three months’ period shall pay lessor $500 for each month’s delay in completing said well. Each monthly payment is to extend the time for completing the well one month longer. It will be observed that these monthly payments are connected with and have only to do with the forfeiture of the lease which by its own terms expires in three months from its date if a well is not completed at that time. This provision is a protection to the lessor in order that his property shall not be indefinitely tied up while the explorations are being made. On the other hand, if the lessee has not been able to complete a well within three months and still wishes to continue explorations, he can extend the time for completing the well by paying $500 each month. He does not covenant to pay a monthly rental, but reserves the right to elect to pay $500 a month, rather than forfeit his lease, until the well is completed.

On the other branch of the case the learned court below was clearly right in holding that the lessee had complied with the terms of the lease relating to the drilling of a well and that the lessor could not enforce the payment of a monthly rental on the ground of failure to complete the well. The lessor, before and after the defendant company took over the lease, treated it as a completed well and received the royalties due under the terms thereof from the defendant from February, 1900, to September, 1902. After having treated the well as completed, and having accepted the royalties for so long a period of time, the lessor cannot now be heard to say that the well was not completed in the first instance.

Judgment affirmed.