Iddings v. Equitable Gas Co.

Opinion by

Smith, J.,

The contract between these parties gave the defendant the exclusive possession of the premises described, with the sole right of operatmg thereon for oil and gas, for ten years. The original lease bound him to complete a well within ninety days, under a penalty of #90.00 a year until completion, and gave him a right to sink other wells at his discretion. It fixed the compensation to the lessor by a provision that “ should gas be found in sufficient quantities to justify marketing the same, the consideration in full to the party of the first part shall be #300 per annum for the gas from first well, so long as it shall be sold therefrom, and only #200 for each and every other Avell.” The first well having been completed, and a second decided on, a supplemental contract was made, modifying the terms of the lease with respect to a third well by the following provisions: “ In lieu of #300 to be paid as in said lease for well No. 1 and #200 to be paid as in said lease for well No. 2, provided for annually for all wells drilled, it is now agreed that the said company or assigns is to drill a well No. 3 on said farm, and for which the said company or assigns is to pay to said first party hereto the sum of #150 for well No. 3, at the same time and in the same manner as provided for in payment in said lease of #300 and #200 per well. This price is not to fix the price for wells drilled subsequent to No. 1. This shall not change or modify the covenant and agreement in said original lease except as to the price to be paid annually by second party, and also that well No. 3 is to be paid for in ten days from completion of well, and also that there is to be no damá'ge to pay for by said company in operating on said farm.”

The defendant completed the second well, and both first and second yielded marketable quantities of gas up to the commencement of this suit. The company failed, however, to sink the tlfird, and the present action is brought 'by the lessor for this breach of the contract. The defense set up is that, in the opinion of experts, a third well on the premises would not have yielded gas in marketable quantities, and would also have diminished the yield from the other two ; hence that no loss has resulted to the plaintiff from the failure to open the third. The question thus raised is whether the rights and obligations of the parties depend on the terms of their contract, or on the opinions of third persons respecting the advantages of performance by the defendant..

At the date of the supplemental contract, gas in marketable quantities had been found on the premises. One -well was in operation, and another was soon to be opened. "With these conditions in view, the defendant’s option as to additional wélls was, by this contract, changed to a positive agreement to sink a third, in consideration of a reduced rental therefor, and a release of damages. On this point, the defendant’s undertaking was absolute. It was in no sense contingent on the production of gas at the third well, and was in no way qualified by the possibility that none might be found. Nor did the consideration depend on the quantity of gas thus obtained; so long as any marketable quantity should be secured the rental remained the same. Had the parties intended .that the defendant’s obligation to sink the well should depend on the prospect of an adequate supply of gas, to be determined by expert opinion, we may presume that it would have been “ so nominated in the bond.” The only conditional feature anywhere appearing arises from the provision of the original lease limiting payment for gas to the period of its sale; if the third well yielded no gas, none could be sold, and no rental could accrue. But there is no provision for submitting the question of its existence to experts. The contract provided for the sinking of a well, and this is the most convincing method of ascertaining the presence and marketable value of oil or gas. Expert opinions may not be as satisfactory and conclusive of the question as the actual sinking of a well would have been. They have been said to be “ to a great degree fanciful, conjectural and speculative: ” Duffield v. Rosenzweig, 144 Pa. 520, 539.

The principles governing the determination of cases where the measure of damages has been agreed upon have been fully considered and settled- by the Supreme Court, in Cochran v. Pew, 159 Pa. 184; Gibson v. Oliver, 158 Pa. 277, and other cases there cited, and have been applied by this court in Young v. Gas Co., 5 Pa. Superior Ct. 232. No further discussion of them is here necessary.

When, as in the cases cited, the contract fixes the amount to be paid upon default, this is in the nature of liquidated damages, or a forfeit, which the defaulting party elects to pay in lieu of performance. When, as in the present case, no like ■ provision is made, the defaulting party must be regarded as electing to pay the damages actually sustained. The only question here is in relation to the measure of such damages. Performance of the contract by the defendant would have accurately fixed the measure of compensation to the plaintiff. Had the third well been opened, its rental would have been due while it yielded a marketable quantity of gas. Whether it' would yield such quantity, and for what period, could be determined with certainty only by the actual opening of the well. The plaintiff was entitled to this performance of the defendant’s contract or to its equivalent. The defendant’s breach of contract has made it impossible to ascertain the value of performance through the method provided for by the contract. Its value, upon the success of the well, was the rental agreed on. The case is not one in which the plaintiff’s claim for compensation may be satisfied by the value of the quantity produced. He was entitled to nothing unless the well yielded a marketable quantity of gas, and the smallest marketable yield entitled him to the full rental. The defendant, having by his default, deprived the plaintiff of the most decisive test, — drilling the well —the value placed on its success may properly be deemed, prima facie, the just measure of compensation for this default. Any uncertainty respecting its accuracy is due to the defendant’s wilful neglect of a self-imposed duty upon the faith of which the contract was executed by the plaintiff. It is a familiar' principle that upon the suppression or spoliation of evidence by a party, or the failure to produce it when within his control, the jury may presume that its effect, had it been produced, would have been unfavorable to him. On a contract to deliver to plaintiff all the starch made by defendant during the year, the quantity not to exceed 1,000 barrels, at prices depending, within certain limits, on the price of wheat, the defendant having given no evidence of the quantity manufactured or of the prices of wheat during the year, it was held that the jury might assume the fact that he had manufactured 1,000 barrels, and presume most strongly against him as to the price of wheat. “ The individual who willfully refuses to fullfil his contract, when able to do so, has no claim to favor at the hands of a jury when brought before them for a breach of it. If, however, he alleges any extenuating circumstances, he must make proof of them, otherwise his allegation ought to be disregarded: ” Hubbert v. Borden, 6 Wharton, 79. Here, in the absence of evidence to the contrary, the jury may presume the yield of a marketable quantity of gas up to the commencement of the action, while this presumption may be rebutted by evidence, competent in law, be it expert or other testimony, to show that a third well would not have yielded the quantity of gas required by the contract to entitle the plaintiff to the stipulated rental.

What has been said disposes of the first and third specifications of error. As to the second, the entries in the defendant’s book were not, of themselves, evidence of the matters to which they related. The fourth specification need not be considered, since the discretion of the trial court in refusing a new trial is not subject to review here, unless manifest error in its exercise is shown.

Judgment reversed and venire facias de novo awarded.