Summary
Appeal from tbe decree of tbe Court of Nisi Prius. In equity.
This proceeding was a bill in equity, filed April 25th 1866, by tbe Cbicago and Allegheny Oil and Mining Company, tbe Garden City Petroleum and Mining Company, II. H. Honoré and Samuel J. Walker, against the United States Petroleum Company.
Tbe proceeding was founded on tbe following instrument:—
“ Articles of agreement made, &c., tbe 16th day of March a. d. 1864 between Thomas Ilolmden, &e., of tbe first part, and James Faulkner, Jr., &c., of tbe second part: Witnessetb that for and in consideration of tbe covenants, agreements and reservations hereinafter mentioned, and of tbe sum of $1, &c., tbe party of the first part hereby covenants and agrees to lease to the party of the second part, his heirs and assigns, all his right, title, interest and claim in and to all that certain piece or parcel of land lying and being in Cornplanter township, Yenango county, and state of Pennsylvania, known and described as follows, to wit: Commencing, &c. * * * containing 150 acres, be the same more or less.
“ The said party of the second part to have the sole and exclusive right to .bore or dig for oil on said lands, and gather and collect the same therefrom, for the term of twenty- years from the date hereof, upon the following terms and conditions, to wit: To give to said Thomas Holmden, his heirs and assigns, one-fourth, or twenty-five gallons, out of every one hundred gallons of all the oil that may be obtained from said lands, said oil to be delivered in barrels (the party of the first part to furnish barrels for his proportion of the oil) at the warehouses of the party of the first part wherever, on the said tract of land, the said warehouses may be located, said delivery of oil to take place as often as once in twenty days, and the time of such delivery to be fixed by the party of the first part; and the said party of the second part also to haul, free of expense, the empty barrels required from said warehouses to the wells, and said oil to be delivered free and clear of water.
“ The party of the second part further covenants and agrees to sell no oil until* it is divided as aforesaid, nor to barrel nor divide any without notice to the party of the first part, or his agents, heirs or assigns; and at all times to permit the party of the first part, or his agent, to enter the premises for the purpose of inspecting the operations, of examining the books and of ascertaining how much oil is being obtained, to pay all taxes that may be assessed on said lands during the continuance of this lease, to commence within one hundred and twenty days from the date hereof to dig or bore for oil on said lands, and to continue with due diligence to prosecute the business to success, or abandonment, and does moreover agree that if the said party of the second part shall cease to operate for oil then this lease, and the rights hereby granted, shall be null and void, and the party of the first part shall resume possession of the premises.”
“ It is further agreed that if the said party of the second part foil to get oil and abandon the premises, he may be at liberty to remove any machinery he may have placed thereon. It is expressly agreed between the parties to this instrument, that the party of the second part shall confine his operations or searches for oil to the bottom lands of said tract, and shall not enter upon and occupy the uplands without the eonsent of the party of the first part, said party of the first part reserving the uplands for agricultural purposes, also reserving the privilege of erecting buildings on said uplands and tbe privilege of selling lots on said uplands, subject to the conditions of this lease.
“ The party of the first part further covenants and agrees that the party of the second part shall have the sole and exclusive right to mine for coal, iron-ore and all other minerals, which may be obtained on said lands, upon terms and conditions which may hereafter be agreed upon.
“ It is moreover expressly agreed by and between the parties to this instrument, that a failure of the said party of the second part to comply with any one of the reservations, conditions or agreements contained in the within instrument, which by its terms are to be done, observed, kept and performed by the said party of the second part, shall work a forfeiture of the rights hereby granted, and the party of the first part, his heirs and assigns, may re-enter upon said lands and dispose of the same as effectually as if this lease had not been made, unless such failure occurred through some unavoidable necessity.”
The bill set out the agreement that all Holmden’s interest in the land and in the rights reserved under the agreement had been vested in the plaintiffs by several conveyances, the last being dated January 1st 1866, and that the rights of Faulkner under the agreement had vested in the defendants. The bill averred that the defendants have bored for oil on the land, and by themselves, or their sublessees, sunk not less than 100 wells, from which the defendants, since the 4th of September 1865, had obtained not less than from 840,000 to 850,000 barrels of oil. The bill averred that, by the vesting of the fee simple of the lands, together with Holmden’s rights in them, the defendants, under the agreement, were bound to deliver to the plaintiffs, in barrels to be furnished by the plaintiffs, the one-fourth of the oil once in twenty days, and not to sell any oil until divided, the oil delivered to be clear and free from water, and failure by the defendants to comply with any of the conditions, &c., worked a forfeiture, “unless such failure occurred through some unavoidable necessity.” The bill charged that the defendants had not delivered the plaintiff’s oil at least once in twenty days, and the oil had not been delivered clear and free from water; that they had sold large quantities before making a division, without sending any, or if any, a false account to the plaintiffs; that they had sold not less than 5000 barrels, for which they had rendered .no account, and refused to render an account; that they had permitted their sub-lessees to sell and use large quantities of oil without accounting to the plaintiffs for it; that they had furnished fraudulent accounts to the United States revenue officers, thus subjecting all the oil to danger of confiscation ; that the defendants had rendered fraudulent accounts, and refused to attend for division of the oil, although duly notified, and that the failures did not occur through unavoidable necessity, and in other respects had not kept their covenants; that the 'plaintiffs had notified the defendants that in consequence of the said failures they had revoked the rights of the defendants, &c., and claimed possession, which had been refused.
The prayer was for a decree of forfeiture; for. a receiver of the oil to which the defendants claimed to be entitled; an injunction restraining the defendants from exercising their rights under the agreement, and for general relief.
The defendants filed an answer, September 14th 1866, averring that they had permitted the plaintiffs at all times to inspect the operations, examine the books, and ascertain the amount of oil; that they had been at all times ready to give the plaintiffs one-fourth of the oil, and had delivered a large quantity in accordance with the stipulations of the agreement; that if the whole quantity due plaintiffs had not been delivered it had been because plaintiffs had refused to deliver barrels, as they should have done. The answer denied that they had sold or barrelled any oil until after division or notice to the plaintiffs; it admitted that sales without a division had been made, but it was through unavoidable-necessity, caused by the plaintiffs’ neglect to perform the conditions binding on them; it denied that defendants had not complied with their covenants, as set out in the bill; it averred that the oil delivered was free from water in the sense in which the term is used at oil wells, and that they had equitably performed and were willing to perform all their covenants, &c.
On' the 2d of November 1866 the plaintiffs filed an amended bill, setting out as in the original bill, and further averring that they had commenced an action of ejectment in Yenango county to recover the premises mentioned in the agreement, by reason of the forfeiture heretofore set forth, and brought this bill in aid of that suit; they prayed that an account might be taken of all the oil taken- since the plaintiffs’ rights had accrued, and for a receiver for the oil to which the defendants claimed they were entitled; for an injunction to restrain the defendants from taking oil, &c., and for general relief.
Ey agreement of November 27th 1866, the plaintiffs had leave to withdraw so much of the bill as prayed for an account, and the defendants had leave to file a supplemental answer before December 8th 1866.
The supplemental answer was filed December 6th 1866. It averred: that the defendants had permitted the plaintiffs (called “ the' land interest”) always to enter the premises to inspect the operations, examine the books, &c., and for that purpose allowed them to erect and occupy, rent free, an office opposite the defendants’ ; that they had been always, and were now, ready to give the plaintiffs one-fourth of the oil at the times and places stipulated; that they were not notified until April 9th 1866 that the plaintiffs were owners of the land interest, but had supposed that it had continued in some of their predecessors in title, who had always expressed themselves satisfied with the acts of the defendants in the matters complained of; that before the plaintiffs acquired their interest, a regular system had been established with “ the land interest” for their mutual benefit, which practically, but not in principle, somewhat modified the mode of paying the royalty, viz., tri-monthly examinations were made of the amount from each well, and that in tanks, which was then divided into fourths, for the land interest, the working interest and the lessees. The oil was seldom removed by the owners, but by purchasers on orders from the owners, and it was removed irregularly at different times, in different amounts and on account of different interests. The accounts were kept separately for each well and each interest: periodical accounts were rendered to plaintiffs which were received and acted on by them; that by an account prepared by defendants it appeared that the plaintiffs had received several thousand barrels of oil more than they were entitled to. The answer also stated circumstances incident to the business of obtaining oil, in view of which the agreement should be construed, and the conduct of plaintiffs in failing to perform their stipulations for promptly receiving and removing their oil, as subjecting the defendants to risk and loss, and averred that they, the defendants, never claimed to deliver oil at any particular place or from any particular tank, but were always ready to fill and had filled all the plaintiffs’ orders, the holders of which never complained of the place of delivery. The answer averred that if oil had been sold prior to division, it was with the plaintiff’s assent and from unavoidable necessity, which compelled them to dispose of the oil or stop the works and permit the tanks to overflow; the other denials and averments were the same- as in the answer to the original bill.
A cross bill (in which the defendants in these bills were plaintiffs) was filed November 24th 1866 against these plaintiffs, averring acts which it alleged amounted to an eviction, and prayed the court to decree that said eviction was a sufficient bar to the proceedings in equity and to the action of ejectment, and for an injunction restraining them from proceeding in either; and from collecting any royalty under the lease for repayment of all royalty paid since the eviction, for an account and for general relief. The defendants in the cross bill (plaintiffs in the other bills) denied its allegations, and prayed for the dismissal of the bill.
The ci’oss bill and answer are not referred to in the opinion of the Supreme Court, and are therefore not further noticed.
A large amount of testimony was taken by various examiners, and on the 8th of June 1867 the case was referred to David W. Sellers, Esq., master, “to find the facts, the law and a decree.”
The master found that the habitual mode of division and delivery of the oil had been, that defendants informed the plaintiffs of the amount of oil on hand, that the plaintiffs gave orders for the. amount due them, which were accepted by the defendants; the master held that it was immaterial if barrels occasionally were not filled according to the letter of the agreement. Pie found that the “land interest” never established a warehouse in which to receive their one-fourth in barrels; had never received the rent as a whole, but that each owner received his share. The master found that there was an habitual division, and delivery as above stated; that there was no wilful breach by the defendants of their covenants, and that a refusal to deliver in barrels would not work a forfeiture. The master found what books the defendants kept; that they were kept with honesty and accuracy; that such books as were properly subject to the inspection of the “land interest” were not withheld, and that there was no breach of the covenant in relation to inspection of the books.
The master reported that as the prayer for an account had been withdrawn, it was not necessary to determine whether there had been a full delivery of the plaintiff’s share of the oil; but found that a failure to deliver one-fiftieth of the amount due (about which amount there was evidence the deliveries to the plaintiffs were short), would not work a forfeiture.
The master reported other findings, whose statement is not necessary to an understanding of the case and its decision.
He' finally found that there had been no wilful breach of any of the covenants which incurred forfeiture, and reported that the prayer for a receiver and injunction be denied, and that the costs be divided.
Both parties filed exceptions, which were dismissed by the court and the master’s report confirmed.
The plaintiffs appealed, and assigned the confirmation of the report for error.
Syllabus and headnotes are prepared by the reporter or publisher, not the court, and are not part of the opinion.
