Corsicana Petroleum Co. v. Owens

Mr. Chief Justice PHILLIPS delivered the opinion of the court.

The suit of the plaintiff, Mrs. M. J. Owens as surviving wife of M. J. Owens, deceased, and in her own behalf and for their children, was to cancel a mineral or oil 'lease upon 188 acres of land executed by herself and husband, June 6, 1911, in favor of the Corsicana Petroleum Company, upon the several grounds, (1) that it was a unilateral agreement and therefore void; (2) that the lessee had breached it by failing to complete an oil well on the premises within one year from the date of the instrument; and (3) that the lease had been abandoned by the lessee.

In the trial court, a verdict was directed for the defendants. The honorable Court of Civil Appeals, on the appeal, held the lease to be void because unilateral; but in reversing the judgment, remanded the case for trial upon the issue of estoppel made by the Petroleum Company.

The lease recited that the grantors, in consideration of $28.20 paid by the grantee, the receipt being acknowledged, had granted, sold, etc., unto the grantee all the oil, gas, coal and other minerals in and under the land described, with the exclusive right to drill, mine and operate thereon for producing oil, ,gas, coal and other minerals; to be held by the grantee for the term of ten years from the date of the instrument and as much longer as oil, gas or other minerals were produced in paying quantities; yielding to the grantors the 1/8 part of all oil produced and saved from the premises. The grantee agreed in the instrument to complete a well on the premises within one year from the date of the instrument, or pay to the grantors as lease rental, $28.20 each three months in advance from the 6th day of June, 1912, from quarter to quarter, to the end of the term, or until the well was completed, or the lease surrendered as elsewhere stipulated in the instrument; the drilling of such well to be full consideration of the grant made by the instrument. A further clause provided that in consideration of the payment of the $28.20 and the quarterly amounts, just mentioned, the grantee acquired and had the right and option either to surrender the grant at any time upon the payment of the sum of $5 and all amounts then due under the instrument and thereby be discharged from all further obligation, the grant thereby becoming null and void, or to continue the grant in full force and effect from quarter to quarter and from year to year by making the stipulated quarterly payments which the grantors bound themselves to accept when tendered, it *571 being further recited that such option was granted for a valuable and satisfactory consideration.

Before the end of the first year of the lease, M. J. Owens died, leaving his wife and ten children surviving. There was no administration upon his estate. On June 6, 1912—one year from the date of the instrument, Mrs. Owens was paid and accepted the stipulated quarterly lease rental, $28.20, further quarterly payments in that amount being regularly paid to and accepted by her down to and including the payment due December 6, 1912. This extended ana carried the lease, according to its terms, to March 6, 1913. On this latter date, a further quarterly payment was duly tendered Mrs. Owens, but its acceptance was refused. On March 28, 1913, the Petroleum Company began preparations to drill a well on the premises. Actual drilling of the w.ell began on April 7, 1913, at an expense of $14,000 in that connection up to the time the present suit was filed on May 14, 1913. The well was completed, July 5, 1913, producing oil in paying quantities, with an average of 117 barrels of oil per day.

The issue of abandonment of the lease was, in our opinion, not raised by the evidence. The parties to the lease were competent to contract. No fraud or imposition of any kind is charged. The question in the case, therefore, is simply whether the terms of the lease are such as to make it unenforeible.

We fail to see anything in the terms of the several agreements evidenced by the instrument which invalidates it. The finding of oil upon the land was merely prospective. For a valuable consideration, satisfactory to themselves, the grantors by the instrument gave the grantee the right to prospect upon the land for a definite period; the right to seven-eighths of the" oil if found; the right, in lieu of its completing a well within the first year, to extend the time for its completion, within the term of the grant, by its making the quarterly payments; and the right or option to surrender the lease by paying the sum of $5 and all other amounts due under it up to that time. There is nothing unlawful about such a contract, and the parties were privileged -to make it. If the grantors were willing to accept the quarterly payments instead of the completion of a well within the original period stipulated for its completion, that was their affair. They contracted to that effect by the instrument. The contract being fair, there can be no reason for a court’s striking down that part of it.

The grant of the right to the grantee to surrender the lease by the payment of an amount in addition to the original consideration and all other amounts then due under the instrument, relieved the grantee of any requirement to complete a well. But the grantors, for an independent consideration, by their contract agreed that the grantee should have that option. The unilateral character of the agreement for the option, is of no consequence. A contract for the grant of *572 an option is necessarily unilateral. An option is granted for the purpose of enabling the grantee to exercise the particular right or not, as he may elect. The value of it consists in that privilege. Owners of property have the unquestioned power to grant such rights with respect to it. They are free to validly make such contracts. When so made; it is the duty of courts to uphold and enforce them. A contract for the grant of an option, limited to a definite time, is therefore valid and enforeible if supported by an independent consideration. National Oil & Pipe Line Company v. Teel, 95 Texas, 586 , 86 S. W., 979 . In many valid contracts the promise is only on one side. They are unilateral. As to them, the inquiry is not whether they are of that character, but whether they are supported by a consideration. In return for the consideration paid them, the grantors here agreed that the grantee should have the • right to surrender the lease on the terms stated. If the right was not exercised, the grantee would remain bound by its covenants. If exercised, the grantors would be free to deal with the premises. A surrender was not to affect any existing liability. There is nothing inequitable about such an agreement. Its presence in the instrument did not invalidate it. Guffey v. Smith, 237 U. S., 101 , 59 L. Ed., 856 , 35 Sup. Ct., 526; Rich v. Doneghey, 177 Pac., 86 , 3 A. L. R., 352.

The judgment of the Court of Civil Appeals is reversed and the judgment of the District- Court is affirmed.

Reversed md judgment of District Court affirmed.