Dill v. Fraze
| Decision Date | 17 January 1907 |
| Docket Number | 20,982 |
| Citation | 79 N.E. 971,169 Ind. 53 |
| Parties | Dill v. Fraze et al |
| Court | Indiana Supreme Court |
Rehearing Denied June 28, 1907.
From Henry Circuit Court; John M. Morris, Judge.
Suit by Charles F. Dill against Emmett Fraze and others. From a decree for defendants, plaintiff appeals. Transferred from Appellate Court under § 1337j Burns 1901, subd. 2, Acts 1901, p. 565, § 10.
Reversed.
George H. Koons and W. A. Brown, for appellant.
Forkner & Forkner and Brownlee & Browne, for appellees.
Suit by appellant against appellees to cancel a certain gas and oil contract. The suit was instituted and the issues made in the Delaware Circuit Court, but the venue thereof was changed, on the motion and affidavit of appellee Mutual Oil Company, to the Henry Circuit Court, where the cause was tried.
The contract, which is set forth in the complaint, states that in consideration of $ 1, Charles F. Dill and wife, described as the first party, have granted unto Emmett Fraze, described as the second party, all the oil and gas under a certain described forty acres of land, "for the purpose of drilling and operating for oil and gas," for and during the term of five years from date, and as long as oil and gas can be found on said real estate in paying quantities or the rental is paid thereon as provided in the contract. The provisions as to royalties are then set out, and then follows this language:
The lease was executed May 26, 1903, and this action was commenced December 31, 1903. It is alleged in the complaint that operations have not been commenced to drill a well on the land, and that no sum whatever has been paid or deposited for the delay. The complaint further alleges that the recited consideration of $ 1 for the execution of the agreement was not in fact paid. There are also charges that the defendants have never taken possession, but have abandoned the same. Separate paragraphs of answer were filed by the appellee oil companies, each alleging, in substance, that it was the assignee of said contract for a valuable consideration, and had taken the same without knowledge that the original consideration of $ 1 for the execution of said contract had not been paid; that it proposed to enter upon said land to prosecute the drilling and operation of gas and oil wells in the spring of 1904; that, while it admitted that the sum fixed as the price of delay had not been paid, yet it had in good faith construed said contract as not requiring said payment to be made in advance, and it offered to pay the annual rental should the court hold that it was due. A demurrer was addressed to these paragraphs, but was overruled, and, upon the completion of the issues, there was a trial, which resulted in a finding and judgment for appellees. No question is made by counsel for the latter concerning the sufficiency of the complaint, except so far as it presents the question whether the rent was payable in advance.
Having stated the substance of said pleadings, we enter upon the question of the sufficiency of said answers. Under the facts averred in said answers appellant is estopped to deny that the original consideration has been paid, and we therefore assume the original validity of said contract. The question of forfeiture, therefore, becomes the controlling question in the case. There can be no doubt that the principal purpose of appellant in making said contract was to procure the exploration of his land for oil and gas, to be followed by the development of it, if circumstances warranted. The strong implication of the contract was that this would be done, and it must be construed in the light of this fact. Consumers Gas Trust Co. v. Littler (1904), 162 Ind. 320, 70 N.E. 363; Ohio Oil Co. v. Detamore (1905), 165 Ind. 243, 73 N.E. 906.
While, upon the receipt of the first year's compensation for delay, the operator would have been entitled to postpone the beginning of operations, yet it does not admit of question that it was within the power of appellant, by appropriate action, to prevent the second party from continuing to hold the right granted in the land, without exploration or development, for the whole of the contract period.
The agreement contains an express provision for a forfeiture if a well is not completed within sixty days, unless the second party thereafter pays at the rate of $ 40 per year for each year such completion is delayed. The unit of payment was $ 40, and the question arises whether such payment was to be made in advance. While the ordinary rule governing rentals is that payment in advance is not required, unless so stipulated in the contract, yet, as the endeavor of courts in the enforcement of agreements is to effectuate the intent of the makers, we are of opinion that, in the circumstances of this case, it should be held that it was the purpose of the parties that payment should be made in advance.
The situation of appellant must be considered. There was no express agreement on the part of the operator that he would even explore for gas or oil; on the contrary, he had reserved the right at any time, upon the payment of the nominal consideration of $ 1, to cancel and annul the contract. He had not agreed that he would pay any sum in the nature of rent. Ohio Oil Co. v. Detamore, supra; Van Etten v. Kelly (1902), 66 Ohio St. 605, 64 N.E. 560. The contract was not a lease (Hancock v. Diamond Plate Glass Co. [1904], 162 Ind. 146, 70 N.E. 149; New American Oil, etc., Co. v. Troyer [1906], 166 Ind. 402, 76 N.E. 253), and, as the relation of landlord and tenant did not exist, and as there was no beneficial use or occupation, an action could not have been maintained on an implied agreement to pay. Ohio Oil Co. v. Detamore, supra; Pittsburgh, etc., R. Co. v. Thornburgh (1884), 98 Ind. 201, and cases cited; Diamond Plate Glass Co. v. Curless (1899), 22 Ind.App. 346, 52 N.E. 782.
The contract before us distinctly contemplated that a forfeiture should result at the end of sixty days (a well not being then completed), unless the operator should pay the consideration for delay. This plainly required him to become an actor if he would save his rights. In such a case the owner has the privilege of declaring the lease forfeited at the end of said time, except as the other party pays the sum stipulated for the delay. The forfeiture must occur, if at all, when that time has elapsed, provided that the owner sees fit to take advantage of it. In these circumstances, it would throw the provisions of said contract into hopeless confusion, and would work a great injustice to the owner, to hold that he must wait a year, without even the assurance that the contract would then be complied with, and with no remedy for compensation de hors the contract, to have it determined whether the forfeiture he had already elected to declare, acting under the terms of his contract, was really an effective act.
Holding as we must, that the sum stipulated for delay was payable upon the failure to drill a well within the time...
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Dill v. Fraze
...169 Ind. 5379 N.E. 971DILLv.FRAZE et al.No. 20,982.Supreme Court of Indiana.Jan. 17, 1907. Appeal from Circuit Court, Henry County; J. M. Morris, Judge. Action by Charles F. Dill against Emmett Fraze and others. From a judgment of the Appellate Court (77 N. E. 1147) affirming a judgment ove......