Dickey v. Coffeyville Vitrified Brick & Tile Co.

The opinion of the court was delivered by Smith, J. :

It is contended that the lease is void for uncertainty, in that its duration extends “so long as gas or oil may be found in paying quantities.” This is a common expression found in such leases, and it is generally for the benefit of the lessee. Whether a gas- or oil-well is a source of profit can be determined readily by deducting the cost of production from the market value of the product.' We have not been referred to any adjudicated cases involving the validity of gas or oil contracts like the one at bar *110 where leases containing such stipulations have been held void for uncertainty; on the other hand, the authorities on the subject sustain the validity of such contracts. (Thorn. Oil & Gas, §§ 134, 135; Harness v. Eastern Oil Co., 49 W. Va. 232 , 38 S. E. 662 ; The Xenia Real Estate Company et al. v. Macy, 147 Ind. 568 , 47 N. E. 147 ; McMillan v. Phila. Company, Appellant, 28 Atl. 220 ; Young v. Oil Co., 194 Pa. St. 243, 45 Atl. 121 ; Colgan v. Oil Co., 194 id. 234 , 45 Atl. 119 , 75 Am. St. 695.)

.Gas and oil leases are in a class by themselves; they are not strictly “leases,” as defined and treated in the law of landlord and tenant; they are in the nature of a written license, with a grant conveying the grantor’s interest in the gas- or oil-well, conditioned that gas or oil be found in paying quantities.

Plaintiff in error invokes the rule that where a lease is terminable at the option of one party it is equally so at the will of the other. It is sought to apply this rule here from the fact that in clause 5 of the lease it is provided:

“If wells are put in operation, and at any time in the future the party of the second part shall become satisfied that it is not paying, he shall surrender this lease, and remove all machinery, pipes and fixtures from the premises, and be released from all further obligations.”

The lease before us does not create what may be likened to an estate at will, and permit the lessee at his option to terminate the lease at any time. The lessee could not arbitrarily declare that a profitable gas- or oil-well was not paying, and thus satisfy the condition of the lease above set out respecting a surrender. (Balto. & Ohio Rld. Co. v. Brydon, &c., 65 Md. 198, 611 , 3 Atl. 306 , 9 Atl. 126 , 57 Am. Rep. *111 318 ; Exhaust Ventilator Co. v. Chicago, Milwaukee & St. Paul Ry. Co., 66 Wis. 218 , 28 N. W. 343 , 57 Am. Rep. 257 ; Ela and another v. Bankes, 37 id. 89; Andis v. Personett, 108 Ind. 202 , 9 N. E. 101 .)

The condition in this contract is different from that before the court in Campbell v. Holcomb, 67 Kan. 48 , 72 Pac. 552 . In that case the agreement was that an employee should receive as salary a stated sum per annum and twenty-five dollars a month additional if the value of business done by him should be satisfactory to his employer. It was held that the plaintiff must show satisfaction on the part of the employer before a recovery of the extra compensation could be had. Here it may be said that there are two conditions precedent which must concur to justify the lessee in surrendering the lease—one. that the well is not paying, and the other that the lessee shall become satisfied of that fact. In Campbell v. Holcomb, supra, if the contract had been that the employee was to receive $100 a month as salary provided the profits on the goods he sold should appear to the satisfaction of his employer to be $200 a month, the amount of profits could have been ascertained readily, and if they should have aggregated the sum mentioned the expressed dissatisfaction of the employer would not have availed to defeat an action for salary. So, if it should be stipulated in a contract for the sale and delivery of bridge timbers that the vendee was not obligated to pay the agreed price unless he should be satisfied that the timbers delivered were twenty feet long or over, the purchaser would certainly be liable for the price if timbers thirty feet in length were furnished to him, although he should protest, however solemnly, that the same were shorter than the length contracted for.

In matters of taste, as where an artist or sculptor *112 agrees to furnish a picture or bust to the satisfaction of another, the latter is the sole judge whether the work done complies with the contract. (Zaleski v. Clark, 44 Conn. 218 , 26 Am. Rep. 446 ; Gibson v. Cranage, 39 Mich. 49 , 33 Am. Rep. 351 .) In such cases there is but one test or condition of payment, which is that the vendee be satisfied. In this case it must be held that if it be demonstrated that a gas- or oil-well is paying, which, as before stated, can be ascertained readily, it is satisfactory, within the meaning of the contract, although the lessee assert to the contrary. (Hawkins v. Graham, 149 Mass. 284 , 21 N. E. 312 , 14 Am. St. Rep. 422 .)

Again, it must be remembered that this action had for its purpose the cancelation of the entire lease and its removal as a cloud on the title of the owner of the fee. In our construction of clause 5, above quoted, the provision for the termination of the contract, when the lessee should become satisfied that a certain well was not paying, had application to that particular well only, and, in such event, the lease was not terminated except with respect to the unprofitable well, if there'were no breach of the other conditions in the contract. In Coffinberry v. Oil Co., 68 Ohio St. 488 , 67 N. E. 1069 , a decree was entered canceling an oil lease as to all undrilled land. It would be unreasonable to hold that if one of a dozen wells should prove unprofitable, and the lessee should so declare, such fact would avoid the entire lease.

If, as argued by counsel for plaintiff in error, the lessee could arbitrarily end the lease by asserting that he had become satisfied that a profitable well was losing money, such action would result in a benefit to their client, for in lieu of rent or royalty a valuable gas- or *113 oil-well would revert to him in its entirety, freed from any claim of the lessee.

When this action was begun in the court below the time allowed the lessee to begin the drilling of oil-wells had not expired. With respect to the gas-wells the contract was executed. A gas-well was completed which produced gas in paying quantities. From this well the lessor was entitled under the contract to a sufficient supply of gas for his tenants’ domestic purposes, free of charge, and eighty dollars a year as rent for the same. When gas or oil is found, it is held that the right to produce it becomes a vested right, and the lessee will be protected in exercising it in accordance with the terms and conditions of his contract. (Colgan v. Oil Co., supra.)

It is contended that Martin forfeited the lease by abandonment of the gas-well. This was a question of fact for the court or jury. (Thorn. Oil & Gas, § 185.) The court below, after hearing the evidence, decided against the claim of abandonment, and its finding will not be disturbed.

There is no merit in the claim that defendant in error was estopped by its conduct from asserting its ownership of the lease assigned to it by Martin. Plaintiff in error took his deed to the land subject to the lease, which was recorded, and which ran to Martin and his assigns. There was testimony also that he had ample notice of the assignment by Martin to the brick company beyond the recitals in the recorded lease before he bought the land.

The judgment of the court below will be affirmed.

All the Justices concurring.