Brewster v. Lanyon Zinc Co.

• Citation: 140 F. 801
• Decision Date: 27 September 1905
• Docket Number: 2,184.
• Parties: BREWSTER v. LANYON ZINC CO.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

140 F. 801

BREWSTER v. LANYON ZINC CO.

No. 2,184.

United States Court of Appeals, Eighth Circuit.

September 27, 1905

Baxter D. McClain, Travis Morse, L. W. Keplinger, and C. W Trickett, for appellant.

Altes H. Campbell, Chas. E. Benton, and John F. Goshorn, for appellee.

This was a suit in equity to establish, as matter of record, the forfeiture of an oil and gas lease and to cancel the same as a cloud upon complainant's title. The suit was commenced December 31, 1901, in the district court of Allen county Kan., and was removed into the Circuit Court on defendant's petition. To an amended bill filed February 20, 1904, defendant demurred, assigning as causes therefor want of equity in the bill and the existence of a full complete, and adequate remedy at law. The demurrer was sustained, and, as complainant declined to amend, a decree was entered dismissing the bill. Complainant appeals. The facts stated in the amended bill are these:

The lease was made by complainant to the Palmer Oil & Gas Company, October 28, 1895, and is as follows:

'In consideration of the sum of one dollar, the receipt of which is hereby acknowledged, and of the covenants and agreements hereinafter contained, M. L. Brewster (Widow), first part, hereby grants unto the Palmer Oil & Gas Company of Fostoria, Ohio, second party, successors and assigns, all the oil and gas under the following described premises, together with the right to enter thereon at all times for the purpose of drilling and operating for oil, gas, or water, to erect, maintain, and remove all buildings, structures, pipes, pipe lines, and machinery necessary for the production and transportation of oil, gas, and water: Provided, that the first party shall have the right to use said premises for farming purposes except such part as is actually occupied by second party, namely, a lot of land situated in the township of Iola and Elm, county of Allen, in the state of Kansas and described as follows, to wit: N. 1/2 of N.W. 1/4 of section 2-- 25-- 18; also S. 1/2 of S.E. 1/4 of section 5--25-- 19, less 7 1/2 acres off the west end; also S.W. 1/4 of section 21-- 24--19 section number 2-- 5-- 21-- township number 25-- 24, range number 18-- 19, containing three hundred and twelve and 50/100 acres more or less.

'The above grant was made on the following terms: (1) Second party agrees to drill a well upon said premises within two years from this date, or thereafter pay to first party seventy-eight dollars annually until said well is drilled, or the property hereby granted is conveyed to the first party. (2) Should oil be found in paying quantities upon the premises second party agrees to deliver to first party in tank or in the pipe line with which it may connect the well or wells the one-tenth part of all the oil produced and saved from said premises. (3) Should gas be found, the second party agrees to pay first party fifty dollars annually for every well from which gas is used off the premises. (4) The first party shall be entitled to enough gas free of cost for domestic use in the residence on said premises as long as second party shall use gas off said premises under this contract, but shall lay and maintain the service pipes at his own expense and use the gas at his own risk. The said party of the second part further to have the privilege of excavating for water and of using sufficient water, gas, and oil from the premises herein leased to run the necessary engines for the prosecution of said business. (5) Second party shall bury, when requested so to do by the first party, all gas lines used to conduct gas off said premises, and pay all damages to timber and crops by reason of drilling or the burying, repairing, or removal of lines of pipe over the said premises. (6) No well shall be drilled nearer than three hundred feet to any building on said premises, nor occupy more than one acre. (7) Second party may at any time remove all his property and reconvey the premises hereby granted, and thereupon this instrument shall be null and void. (8) A deposit to the credit of lessor in the Bank of Allen County, to the account of any of the money payments herein provided for shall be a payment under the terms of this lease. (9) If no well shall be drilled upon said premises within five years from this date, second party agrees to reconvey, and thereupon this instrument shall be null and void. (10) A failure of second party to comply with any of the above conditions renders this lease null and void.'

The lease was assigned in February, 1899, to Thomas L. Hughes, and he, in March following, assigned it to defendant. It covered three separate and distinct tracts. In June, 1899, complainant sold and conveyed the tract in section 2 to one Holmes, who in July following sold and conveyed it to the Iola Portland Cement Company, which is not a party to the suit. Complainant continues to own the tracts in sections 5 and 21, and has actual possession thereof, save as defendant may have such occupancy of a portion of the tract in section 5 as is incident to the operation of the gas well thereon. No well was drilled during the first four years after the date of the lease, but the stipulated sum of $78 was paid to complainant during each of the third and fourth years. In August, 1900, during the fifth year, a well was drilled on the tract in section 5 from which gas was obtained in paying quantity. Gas from this well has ever since been used off the premises by defendant in its business of smelting and refining ores. When the suit was commenced, which was 14 months after the expiration of the 5-year period and 16 months after the drilling of the single well, nothing more had been done by defendant in compliance with the terms of the lease, express or implied, save that the required annual payment of $50 for the gas so used off the premises may have been made-- a matter in respect of which the bill is uncertain. Many oil and gas wells have been drilled in the territory adjacent to and surrounding the tracts leased, which furnish oil and gas in paying quantities, and new wells are being drilled and operated in that territory. These wells are so near to the tracts leased as to drain the same of a good portion of the

oil and gas therein, and therefore they render the lease of much less value to complainant than it would have been had defendant proceeded with reasonable diligence to drill other wells and to operate the same for the mutual benefit of the parties. The extent of this drainage is not susceptible of reasonable ascertainment, and therefore the consequent injury to complainant cannot be adequately compensated in damages. Defendant has at all times insisted, and still insists, that by drilling the single well it acquired the right to all the oil and gas in the leased tracts, and also the right to hold the lease indefinitely, without further development or doing more than paying annually $50 for the gas from that well used off the premises. It has been and is defendant's purpose to hold the lease either for speculative purposes or to prevent the oil and gas from being used by its rivals in business. Seven days before the commencement of the suit complainant notified defendant in writing that she elected to declare the lease terminated, null, and void, and demanded a surrender and cancellation of the same, but the demand was not complied with. As matter of convenience the defendant will generally be spoken of as the lessee, although it is in fact an assignee.

Before VAN DEVANTER, HOOK, and ADAMS, Circuit Judges.

VAN DEVANTER, Circuit Judge, after stating the case as above, .

Before considering the principal questions arising on this appeal attention will be given to some matters set forth in the bill and not mentioned in the foregoing statement. On of these is an allegation to the effect that the lease was fraudulently procured, because in the negotiations which resulted in its execution the complainant was represented by an agent who was also, and without complainant's knowledge, acting as the agent of the lessee. Referring to this, counsel for the complainant say in their brief:

'No reflection is intended. We known him (the agent) to be a strictly honorable man, and we believe complainant's rights were fully protected.'

This is a practical withdrawal of the charge of fraud; but, if counsel's concession were not so intended, the charge did not constitute a ground for avoiding the lease six years after its execution, almost three years after its assignment to a third person not claimed to have been cognizant of the fraud, more than one year after the assignee, relying on the validity of the lease, had made large expenditures in developing gas on the premises in paying quantity, and two years or more after the complainant had accepted from the lessee and the assignee, respectively, substantial payments, made according to the requirements of the lease, which she did not offer to return or attempt to excuse herself from returning.

It is also alleged that no gas has been furnished for domestic use in the residence on the premises. But this does not show that any right of the lessor has been denied or any obligation of the lessee broken. The lease in terms entitled the lessor to use the gas for domestic purposes, only on condition that she should lay and maintain the requisite service pipes to conduct the gas from the gas well or the pipes of the lessee to such residence, and it is not alleged that she complied with the condition.

Other allegations are to the effect that the lease was without consideration, save the payment of $1, which, though technically valuable, was merely nominal, and that its terms were altogether unconscionable. These allegations, even if not withdrawn by counsel's...