Dormon Farms Company v. Stewart

• Decision Date: 12 February 1923
• Docket Number: 160
• Citation: 247 S.W. 778,157 Ark. 194
• Parties: DORMON FARMS COMPANY v. STEWART
• Court: Arkansas Supreme Court

247 S.W. 778

157 Ark. 194

DORMON FARMS COMPANY v. STEWART

No. 160

Supreme Court of Arkansas

February 12, 1923

Appeal from Howard Chancery Court; James D. Shaver, Chancellor affirmed.

Decree affirmed.

J. S. Butt and W. P. Feazel, for appellant.

1. While equity usually abhors forfeitures, this does not appear to be true of oil and gas leases, and the courts, where there is a failure of development, will usually cancel such leases upon slight defaults. 152 P. 597; 157 P. 308; 127 A.D. 761 112 N.Y.S. 13; 119 La. 793; 22 La.Ann. 280; L. R. A. 1917-B 1190; 29 Okla. 719; 26 Okla. 772.

2. In this case the contract is immaterial and void. If not binding on the lessee, it is not binding on the lessor, and may be canceled at his option. 32 Tex. Civ. App. 47; 95 Tex. 586; 134 La. 701; 25 Okla. 809; 138 Am. St. 942; 47 W.Va. 107; L R. A. 1917-B, 1184; Thornton on Oil & Gas, § 270; Id. §§ 54-62.

3. It was incumbent on appellees to designate the particular part of the land embraced in the original lease upon which they desired to pay rent. This they failed to do. Thornton on Oil & Gas, § 328; 220 S.W. 140.

4. There was no proper tender. Payment of rent to Goodlett, with knowledge that he had transferred the land and had no right to receive the rent, was not sufficient. Harrell v. Saline Oil & Gas Co., 153 Ark. 104.

Thomas, Frank, Milam & Touchstone, of Dallas, Texas, W. C. Rodgers, and J. H. Brennan, of Wheeling, W. Va., for appellees.

1. The rule which appellant seeks to invoke with reference to enforcement of forfeitures in oil and gas contracts applies to the peculiar nature of the mineral; but where, as in this case, there is no question raised as to adjoining wells taking oil from the land by drainage, the reason for the rule does not exist. 91 Ark. 407, 418; 109 Ark. 465-6-7; 101 Ark. 331, 335; 126 Ark. 389, 399; 141 Ark. 280, 285; 139 Ark. 542, 556; 155 U.S. 665. The liberal construction sought by appellant has never been carried to the extent of forfeiting rights of a lessee who has faithfully kept his part of the contract. 155 U.S. 665. Moreover, the facts in the case relied on by the appellant are substantially different from the facts in this case. 112 Ark. 342, 352; 123 Ark. 365, 368; 150 Ark. 43, 48.

2. To sustain appellant's contention, it would be necessary to eliminate portions of the contract, such as the clause authorizing the payment in cases of partial assignments, and the clause requiring the furnishing of a written transfer before the lessee or assignees would be justified in paying the rentals to any one other than the original owner, and the stipulation that the down-payment applies as a consideration to every part of the lease. The courts will not make or modify contracts for parties. 66 Ark 295; 111 Ark. 173. No useful purpose could be served by the lessee at the time of making the deposits stating what part of the lease he owns. Therefore the law does not require it. 96 Ark. 376; 132 Ark. 289; 133 Ark 16; 104 Ark. 119; 109 Ark. 465; 114 Ark. 359; 127 Ark. 261; 141 Ark. 235.

3. The original lease and the various assignments of parts thereof were recorded. Appellant, when it purchase from Goodlett, took with notice of the provisions of the lease and these assignments. 14 Ark. 69; 15 Ark. 184; 35 Ark. 100; 50 Ark. 322; 103 Ark. 425; 107 Ark. 484; 97 Ark. 397; 58 Ark. 84; 23 Ark. 735.

4. Appellant's contention that the royalties mentioned in the lease must be the "sole and moving consideration for the execution of the contract" is not borne out by the instrument itself, which provides, among other things, that "the consideration first recited herein, the down-payment, covers not only the privilege granted to the date when said first rental is payable, * * * but also the lessee's option of extending that period * * * and any and all rights conferred." The primary consideration is thereby tied to every part of the contract, and the court will not inquire into the adequacy of the consideration. 145 Ark. 310; Rogers v. Magnolia Oil & Gas Co., 156 Ark. 103; 33 Ark. 97; 99 Ark. 233; 127 Ark. 28; 23 Ark. 735; 106 Ark. 1. A primary consideration of one dollar is sufficient consideration. Mere inadequacy of consideration is not a ground for cancellation. 23 Ark. 735.

5. The assignment to Carmen Oil Company was not void for uncertainty of description, since its assignor's title was duly recorded and contained a correct description, and reference thereto was made in the assignment to Carmen Oil Company. 6 Ark. 191; 28 Ark. 75; 30 Ark. 513.

OPINION

SMITH, J.

On January 20, 1920, W. V. Goodlett, who was then the owner of 640 acres of land in Howard County, executed to Earl A O'Hara an oil and gas lease thereon. On November 20, 1920, O'Hara executed to the Superior Producing and Refining Company an assignment of the lease on 200 acres of the land; and that company, on September 19, 1921, reassigned the lease to the 200 acres to the Carmen Oil Company. One of the questions in the case is whether this last assignment is void for the reason that it fails to describe the land. The lease to O'Hara was filed for record January 20, 1920; the assignment to the producing company was filed for record December 9, 1920; and the assignment from the producing company to the Carmen Oil Company was filed for record September 24, 1921.

On January 30, 1920, O'Hara assigned to W. P. Stewart the lease on 120 acres of the land. This assignment was filed for record December 20, 1920. On January 30, 1920, O'Hara assigned to C. A. Gates the lease in so far as it covered 160 acres of the land; and this assignment was filed for record February 20, 1920. On March 18, 1921, W. V. Goodlett, the original lessor, executed and delivered to the Dormon Farms Company his warranty deed wherein he conveyed the entire 640 acres.

The original lease from Goodlett to O'Hara contained the following provisions:

"If the estate of either party hereto is assigned (and the privilege of assigning in whole or in part is expressly allowed), the covenants herein contained shall extend to their heirs, executors, administrators, successors and assigns, but no change in the ownership of the land or assignment of rentals or royalties shall be binding on the lessee until after the lessee has been furnished with a written transfer or assignment, or copy thereof; and it is hereby agreed that, in the event this lease shall be assigned as to a part or as to parts of the above described lands, and the assignee or assignees of such part or parts shall fail or make default in the payment of the proportionate part of the rents due him or them, such default shall not operate to defeat or affect the lease in so far as it covers a part or parts of said lands upon which the said lessee or any assignee thereof shall make due payment of said rental. * * * *

"It is agreed that this lease shall remain in force for a term of five years from this date (January 20, 1920), and as long thereafter as oil or gas, or either of them, is produced from said land by the lessee. In consideration of the premises the said lessee covenants and agrees, if no well be commenced on said land on or before the 20th day of January, 1921, this lease shall terminate as to both parties, unless the lessee, on or before that date, shall pay or tender to the lessor, or to the lessor's credit in the Planters' Bank & Trust Company bank at Nashville, Arkansas, or its successors, which shall continue as the depository, regardless of changes in the ownership of said land, the sum of $ 320, which shall operate as a rental and cover the privilege of deferring the commencement of a well for twelve months from said date. In like manner and upon like payments or tenders the commencement of a well may be further deferred for like periods of the same number of months successively. And it is understood and agreed that the consideration first mentioned herein, the down payment, covers not only the privilege granted to the date when said first rental is payable as aforesaid, but also the lessee's option of extending that period as aforesaid, and any and all other rights conferred."

The Dormon Farms Company brought this suit to cancel these leases, and, as ground therefor, alleged that the lease to O'Hara was void for lack of mutuality, and that the assigned leases were void because the sublessees claiming them have not paid or properly tendered the rental provided for in the lease to O'Hara.

The lease to O'Hara was evidently prepared by an attorney whose chief concern was to protect the rights of O'Hara, the original lessee, and the sublessees. At any rate, the lease serves that purpose most excellently.

We think the contract was not void for the want of mutuality. For the recited consideration the right to explore oil for five years was granted. It is true there was no requirement that the lessee develop the land during the first year; but as appears from the portion of the lease quoted above, it was provided that the lease should expire on its first anniversary, unless on or before that date the lessee had paid the annual renewal charge of fifty cents per acre. A similar payment before each subsequent anniversary was essential to continue the lease in force....