Wills v. Manufacturers N. Gas Co.

Opinion,

Me. Justice Clark :

This action was brought upon the covenants contained in a .certain lease, dated January 18, 1887, by John A. Wills to the Manufacturers Natural Gas Company, of a certain tract of land in Washington county, containing 228 acres, for the sole and only purpose of mining and excavating for gas and oil, and for the removal of the same. The term of the lease was twenty years, or as long as oil or gas should be found on the premises in paying quantities within that period.

In consideration of this lease, the lessee agreed to commence operations upon one well within ninety days, and to prosecute the work “actively, diligently and continuously,” and to complete the same on or before the first day of September, 1887; “ and upon failure to do so within the time herein specified, to pay the party of the first part the sum of $1,000 annually in advance after the last named date, payable quarterly, at the First National Bank of Washington, Pa., until the said well is completed; ” that is to say, as we construe the contract, at the rate of $1,000 per year, payable in advance quarterly until the well is completed. Upon a careful reading and consideration of the terms of the contract, we do not think the parties contemplated that upon failure of the lessee to complete the well on the first day of September, 1887, the sum of $1,000 was immediately thereafter owing to the lessor, payable, etc., but rather that the $1,000 annually in advance was payable quarterly until the said well was completed, at which time such quarterly payments were to cease.

It is conceded, however, that the defendant did not, within ninety days, or at any other time prior to the bringing of this suit, commence operations or make any effort whatsoever to complete the first well, or indeed in any way or to any extent develop the territory, either for oil or natural gas. On the first day of September, 1887, when the period of default began, the defendant voluntarily paid the first quarterty payment of $250 in advance, according to the agreement. Failing to pay the second instalment due on the first day of December, 1887, suit was brought and judgment obtained therefor; after judgment this instalment was also paid. The present suit is brought to recover the third and fourth quarterly instalments, payable March 1,1888, and Jrme 1, 1888, respectively.

By way of defence, the defendant invokes the benefit of certain clauses of the contract, which are as follows :

“ And it is further understood and agreed that upon the failure by the party of the second part, its successors and assigns, to keep and perform all the covenants herein contained, such failure to perform, or breach of the said covenants, shall work an absolute forfeiture of this grant or lease, and the privileges or easements hereby given shall absolutely cease, determine and become null and void: Provided, however, that no such forfeiture shall in any way interfere with or prevent the collection of any and all sums of money due the said party of the first part, his heirs and assigns, under this lease, at and immediately before such forfeiture.”

The company’s contention is, that its own failure either to commence operations to put down the first well or to pay the $250 on December 1, 1887, was such a failure on its part to keep and perform its covenants as worked a forfeiture of the lease; and that, although it was obliged to pay the $250 sued for, which was the amount due “ at and immediately before such forfeiture,” there was no legal obligation remaining to make any further payments; that the lease was by this means forfeited and surrendered, the possession abandoned, and all claim relinquished, of which the plaintiff had notice before this suit was brought; in the language of the affidavit of defence : “ That the aforesaid failure to pay the $250 above mentioned upon the first day of December, 1887, and until collection thereof from the defendant by suit, and the said abandonment of the lease aforesaid, worked an absolute forfeiture of the said lease, and put an end to the contract existing between the plaintiff and the defendant prior to the first day of March, 1888, and that the moneys for which this suit is brought never accrued or became due from the defendant to the plaintiff.”

It is very plain that this clause of the contract was inserted in the interest and for the exclusive benefit of the lessor whose purpose it was to have his lands developed for oil or gas. With this purpose in view he bound the defendant to commence the first well within a specified time, to prosecute the work actively and continuously to completion, and, failing in this, to pay him $1,000 a year until a well was completed. This was manifestly intended to be applied as a spur to the operator and to compel the development which was the object of the lease. Anticipating, however, that the defendant might not only fail to put down a well, but through insolvency or otherwise, might become unable to pay the money, the plaintiff provided in the contract, upon 'the failure of the companjr to keep their covenants, for a forfeiture of the lease, which would enable him in that event to put an end to the lessee’s pretensions, and give him an opportunity to seek other means of development. It was certainly not in contemplation of the parties that the defendant might set up its own default as a cause for cancellation; if this is so, this contract, drawn with exceptional care for the protection of the lessor, is a mere rope of sand; its obligations could only “ keep the word of promise to the ear to break it to the hope.” It was the duty of the lessee to develop the territory by putting down a test well according to the stipulations of its contract; failing to do so, and failing also to pay the money as agreed upon, the plaintiff had an undoubted right to declare a forfeiture, but the lessee had no such right.

But, although the lessor had this right, he was not, we think, under the present state of the law, bound to exercise it. The clause of forfeiture having been inserted wholly in his interest and for his protection, it was competent for him to dispense with its provisions and to affirm the continuance of the contract. His right was optional or elective; and when default was made by the defendant on both alternatives, the plaintiff might either forfeit the contract or affirm its continuance, as he chose. The English authorities recognize the rule that “ even in the case of a lease for years, when the direction is that it shall become void on breach of the condition, it will only be void at the option of the lessor; the lessee shall not take advantage of his own wrongful performance of the contract in order to destroy the lease, which had perhaps turned out a disadvantageous one: ” 1 Smith’s L. C., 89, citing Doe v. Bancks, 4 B. & A. 401; Rede v. Farr, 6 M. & S. 121; Arnsby v. Woodward, 6 B. & C. 519, and other cases.

In Doe v. Bancks, 4 B. & A. 401, the lease was for mining purposes, and contained a proviso in substance as follows: “ Provided also, and it is mutually agreed, etc., that tbe aforesaid works shall commence and begin within one year from tbe date hereof, and if tbe same shall stop or cease working at any time for two years, this lease shall be deemed void to all intents and purposes.” Best, J., said: “ In construing this clause of tbe lease we must look to the object tbe parties bad in view. Tbe rent was to depend upon tbe number of tons of coal raised. In order to derive any benefit from tbe mine, it was tbe object of tbe landlord, by introducing this clause, to compel the tenant to work it. Tbe clause therefore was introduced solely for the benefit of the landlord, to enable him in case of a cesser to work to take tbe possession of tbe mines, and either to work them himself or let them to some other tenant. That, therefore, being tbe object of tbe parties in introducing tbe clause, I think it will be fully answered by holding the lease to be void at the option of tbe landlord. Besides, I take it to be a universal principle of law and justice that no man can take advantage of bis own wrong.”

A distinction formerly prevailed between a proviso declaring that tbe lease should be void on a specified event, and a proviso enabling the lessor to determine it by re-entry. It was held that in the former case tbe lease became absolutely void on tbe event named, and was incapable of being restored by acceptance of rent or other act of intended confirmation; whilst in’ tbe latter, some act, such as entry or claim, must have been performed by tbe lessor, to manifest bis intention to end tbe demise, which was voidable in tbe interval and consequently confirmable. Tbe force of this distinction, it is said, in Taylor on L. & T., § 492, has been almost, if not quite, abated by tbe modern decisions, which establish that tbe effect of a condition malting a lease void, upon a certain event, is to make it void at tbe option of tbe lessor only, in cases where tbe condition is intended for luis benefit, and be actually avails himself of bis privilege. To tbe same effect is 2 Platt on Leases, 327. But it is entirely optional with tbe lessor whether be will avail himself of this right or not, although by tbe terms-of tbe proviso tbe term is to cease or become void for tbe non-performance of tbe covenant; and if tbe lessor does not avail himself of it tbe term will continue, for the lessee cannot elect that it shall cease or be void: Taylor on L. & T., supra. Where there is a proviso in a lease that on non-payment of rent the term shall cease, the lessor and not the lessee has the option of determining the lease upon a breach made: Reid v. Parsons, 2 Chit. 247.

The English law in this respect has been generally followed in this country, and such a lease is held to be good until avoided; though the lessee is estopped to set it up against the lessor. A lessee cannot avail himself of his own act to vacate a lease, on the principle that no man shall be permitted to take advantage of his own wrong: Wood’s L. & T., 1204. So, Mr. Parsons in his Law of Contracts, vol. 1, page 507, referring to the distinction formerly recognized between the effect of a proviso declaring that the lease shall be void on a specified event, and a proviso enabling the lessor to determine it by re-entry, says : “ This distinction is now exploded, and it is held that the lease is voidable only at the election of the lessor, but not of the lessee, though the proviso expressly declare that it shall be void.” To the same effect are the cases of Clark v. Jones, 1 Den. 516, and Phillips v. Chisson, 12 Ire. 194, and many others that might be referred to.

In Pennsylvania the older doctrine would seem at first to have been adhered to, that in a lease for years with condition, if the condition be broken by the lessee, his interest was ipso facto void by the breach, and no subsequent recognition of the tenancy' could set it up : Kenrick v. Smick, 7 W. & S. 41. In the case cited, there was a lease of land upon condition that the rent should be paid upon certain specified dates, and if a certain default was made for three months, neglect to pay after ten days’ notice should render the lease null and void. The default occurred, and notice was given, and it was held that after ten days the lease was ipso facto void, without re-entry, and could not afterwards be affirmed, or continued. In Sheaffer v. Sheaffer, 37 Pa. 525, the doctrine announced by Justice Sergeant, in Kenrick v. Smick, supra, was adhered to ; the English cases were brought into contrast with the doctrine of Kenrick v. Smick, and it is admitted that the rule of the English courts is followed in most of the states of the Union. In Davis v. Moss, 38 Pa. 346, the rule of the previous cases is again apparently recognized, but its rigor is relaxed in this, that the forfeiture is 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.”

The distinction between the Pennsylvania cases referred to and the weight of authority elsewhere, therefore, would seem to be that by the former the lease, upon breach of the condition, is ipso facto void, unless by some unequivocal act of the lessor it is waived, whilst by the latter it is void if the lessor elects by some positive act to take advantage of it. We do not understand that in either case a re-entry is required to complete the forfeiture. This almost amounts to a distinction without a difference. In practice, the prima facies being different, it merely shifts the burden of proof from one party to the other.

It will be observed, moreover, that the Pennsylvania cases already referred to are all cases in which the forfeiture was set up by the lessor upon the default of the lessee; in none of them did the lessee set up his own default as a cause of forfeiture. No case has been called to our attention, in this or any other state, in England or elsewhere, which recognizes the doctrine that a party may take advantage of his own wrong, or set up his own default to work a forfeiture of his own contract. Persons may, of course, contract in this form and to this effect, if they choose, but we do not understand the parties to this contract to have so intended.

But the rigid rule of Kenrick v. Smick, supra, is further relaxed, in the very recent case of Galey v. Kellerman, 123 Pa. 491. In that case the lessees in an oil lease covenanted to commence operations within sixty days and to complete one well within three months thereafter, and, in case of failure, to pay the lessor for such delay $1,000 per annum within a certain period; it was further agreed that a failure to complete one well, or to make such payment within that period, should render the lease “ null and void,” so as “to remain without effect between the parties.” In a proceeding by the lessor, on failure of the lessee to put down the well, to recover the $1,000, or a proportional part thereof, covering the period during which he had been deprived of his property, the counsel for the defendant submitted a point for instruction to the jury as follows:

“ That there can be no recovery in this case because at the time of bringing tbis suit the contract or lease sued on was null and void and not in existence; that the non-payment of the rent claimed in this case, instantly, upon its non-payment, and ipso facto, rendered the lease null and void.”

The point was refused, and in this court the refusal was assigned for error. The opinion of this court was delivered by our brother Williams, who, in disposing of this branch of the case, distinguished the rights of the lessees from the rights of the lessors, as follows: “ But the acts that forfeited their (the lessees’) rights did not also forfeit those of the lessor. Their liabilities growing out of their non-performance are to be distinguished from their rights under the contract. The latter they could forfeit, but the former belonged to the lessor and could be lost only by his act. The lessees promised to complete one well within a given time. This was for the benefit of the lessor. If this was not done he was to be compensated in money. If the money was not paid he was at liberty to rid himself of his tenants and resume the possession of his land. But the construction contended for by the plaintiffs In error transfers the punishment for the breach of the contract from him on whose default it arises to the innocent injured party. Because the lessees have secured the control of the land of the lessor by covenants which they have broken, the lessor shall be deprived of all redress at law, by the very acts of his lessees which give him a cause of action. Their default takes away his remedy. The acts or omissions of which he complains are an answer to his complaint. We should need the constraint of insurmountable necessity to induce us to adopt the construction contended for.” The ruling of the court below was approved and the judgment affirmed.

Thus it appears that the distinction formerly maintained between the rulings of the English courts and of the courts of our sister states, and the rulings in Pennsylvania, is no longer found to exist. We have by slow approaches at last apparently turned into the general current of cases, in which is found, without doubt, the great weight of authority, both in England and in this country.

We are of opinion that the defendant should have been denied the advantage of its own default; and as the lessor in this case has not, either by word or act, availed himself of the privilege of forfeiture, but, on tbe contrary, by a demandjor payment of the price of the lessee’s delay, has affirmed the continuance of the contract, there is nothing shown to prevent his recovery. And as the affidavit of defence is deemed insufficient to prevent judgment,

The record is remitted to the court below with directions to enter judgment against the defendant, for such sum as to right and justice may belong, unless other legal or equitable cause be shown why such judgment should not be entered.