Allegheny Oil Co. v. Snyder

• Decision Date: 07 November 1900
• Docket Number: 807,808.
• Citation: 106 F. 764
• Parties: ALLEGHENY OIL CO. v. SNYDER et al. GILLMOR et al.
• Court: U.S. Court of Appeals — Sixth Circuit

106 F. 764

ALLEGHENY OIL CO. v. SNYDER et al.

GILLMOR et al. v. BROWN et al.

Nos. 807, 808.

United States Court of Appeals, Sixth Circuit.

November 7, 1900

These cases involve a construction of certain oil leases upon the lands of one William E. Fowler, in North Township, Harrison county, Ohio, and may be considered together. On the 12th of November, 1896, Fowler made a lease of the land in question to one Hiram Snyder. This lease was acknowledged by Fowler and wife and Snyder before a notary. It had but a single witness. It was admitted to record and recorded in the lease records of Harrison county December 16 1896, and is in the following language: 'Agreement made this twelfth day of November, A.D. 1896, between William E Fowler and Anna Fowler, his wife, of the township of North county of Harrison, and state of Ohio, lessors, and Hiram A. Snyder, of the village of Scio, state of Ohio, lessee, witnesseth: That the lessor, in consideration of one dollar, the receipt of which is hereby acknowledged, does hereby demise and grant unto the lessee, his heirs and assigns, all the oil and gas in and under the following described tract of land, and also the said tract of land for the purpose and with the exclusive right of operating thereon for said oil and gas, together with all the rights of way, the right to lay pipe lines on and over and to use water from said premises, and also the right to remove at any time any property placed thereon by the lessee, which tract of land is situated in the township of North, county of Harrison, and state of Ohio, and is bounded and described as follows, to wit: North by lands of John W. Spiker, east by lands of the Houser estate, south by lands of Richard Downs, west by lands of Thomas Cameron; containing 114 acres, more or less. To have and to hold the same unto the lessee, his heirs and assigns, for the term of two years from the date hereof, and as long thereafter as oil or gas is found in paying quantities thereon, not exceeding in the whole the term of twenty-five years from the date hereof, yielding and paying to the lessor the one-eighth part of all the oil produced and saved from the premises, in tank or in pipe lines, to the lessor's credit; and, should any well produce gas in sufficient quantities to justify marketing, the lessor shall be paid at the rate of one hundred and fifty dollars per year for such well, as long as the gas therefrom is sold. In case nowell shall be drilled on said premises within two years from the date hereof, this lease shall become null and void, unless the lessee shall pay for the further delay at the rate of one dollar per acre at or before the end of each year thereafter. Such payment may be made in hand, or by deposit to the lessor's credit in the Scio Bank. No well to be drilled within 250 feet of any of lessor's buildings. It is agreed that the lessee shall have the right at any time to surrender this lease to the lessor for cancellation, after which all payments or liabilities to accrue under and by virtue of its terms shall cease and determine, and this lease become absolutely null and void. It is understood that all the terms and conditions between the parties hereto shall extend and apply to their respective heirs, executors, administrators, and assigns. ' Nothing was done under this instrument by way of sinking wells or otherwise taking possession until after the expiration of the two years named in the lease. On the 10th of November, 1898, the sum to be paid in the lease for delay at the rate of one dollar per acre was paid to Fowler. On the 18th day of October, 1898, Fowler made another lease to one George Gillmor, which was duly acknowledged and recorded on the 16th day of November, 1898. This lease was subsequently assigned to the Allegheny Oil Company, and it commenced an action in the United States circuit court for the Southern District of Ohio to remove the cloud of the Snyder lease and clear its own title, having in the meantime taken possession of the property. Brown and Myers, the assignees of Snyder, commenced a similar suit in the court of common pleas of Harrison county, which was removed to the United States circuit court after an injunction had been obtained in the state court restraining the oil company from operating under its lease, and under the protection of which Brown and Myers took possession. A motion having been filed for a temporary injunction in the action commenced originally in the United States court by the Allegheny Oil Company, and to dissolve the temporary injunction granted in the state court, the matter came on for hearing on the bill, answer, and affidavits. On hearing, the cour refused the temporary injunction applied for, dismissed the bill of the Allegheny Oil Company, and made perpetual the injunction of the state court restraining the oil company from interfering with the assignees of the Snyder lease.

W. G. Shotwell and Lee & Chapman, for appellants.

D. A. Hollingsworth, for appellees.

Before LURTON, DAY, and SEVERENS, Circuit Judges.

DAY Circuit Judge, after stating the foregoing facts, .

The leading question in the case is as to the construction of the Snyder lease. As we read this instrument, applying the familiar rule that all parts of it must be given effect if possible, and the intention of the parties gathered from the four corners of the instrument, we find it to be a lease of a certain tract of land for the purpose of removing oil and gas therefrom, together with certain privileges to enable the lessee to reach and remove the same from the premises. As was said by the supreme court of Ohio in Harris v. Oil Co., 57 Ohio St. 129, 50 N.E. 1129:

'An instrument in such form is more than a mere license. It is a lease of the land for the purpose and period limited therein, and the lessee has a vested right to the possession of the land to the extent reasonably necessary to perform the terms of the instrument on his part.'

By the terms of the habendum clause the lessee is to enjoy the estate for the term of two years, and as long thereafter as oil and gas are found in paying quantities on the premises, not exceeding 25 years, in the whole, from the date thereof, for which the lessee is to render to the lessor one-eight part of the oil; and, for any wells producing gas in sufficient quantities to justify marketing, the lessee is to pay at the rate of $150 per year. Thus far no time has been fixed for the beginning of operations on the premises, and no clause of forfeiture is inserted for the failure to drill and develop the same. It is then provided:

'In case no well is drilled on said premises within two years from the date hereof, the lease shall become null and void, unless the lessee shall pay for the further delay at the rate of one dollar per acre at or before the end of each year thereafter.'

That is to say, the lessee is given two years within which to drill, which privilege he may extend by the payment for further delay at the rate of one dollar per acre at or before the end of the following year. It is claimed that the consideration of one dollar may support the grant of the two years term, but the privilege of extending the same beyond the term of two years is supported by no consideration and is entirely at the option of the lessee, and, before it can become a binding agreement, requires an engagement upon the part of the lessee to pay the stipulated sum of one dollar per acre. We are unable to agree with this construction, although this interpretation is supported by a decision of the circuit court of Ohio for the Seventh judicial circuit, in the case of Brown and Myers v. Ohio Oil Company et al. We have been furnished with a manuscript copy of the opinion in that case. While the opinion of that court is not conclusive upon us, it is nevertheless entitled to great respect, being the decision of an able court. So far as the opinion discloses, the lease in that case was like the one now under consideration. In the opinion the court say:

'The lessee, plaintiffs, had paid a consideration for the privilege for a specified term of two years, but no longer, and all rights under the lease ceased unless some new contract was made. The lease, as we have seen, provided how a new contract might have been made. It gives the lessee the option of making a new contract upon a new and an increased consideration; but, to obtain this new right or license before developing and holding the territory for the period of two years, the lessee must have elected to avail himself of that provision of the lease,-- have notified the lessor of this promise to pay the increased or new consideration for the further time.'

This construction undertakes to divide the lease into independent parts, and annuls the effect of the...