Epperson v. Helbron

• Decision Date: 01 November 1920
• Docket Number: 213,28
• Citation: 225 S.W. 345,145 Ark. 566
• Parties: EPPERSON v. HELBRON
• Court: Arkansas Supreme Court

225 S.W. 345

145 Ark. 566

EPPERSON v. HELBRON

No. 213, 28

Supreme Court of Arkansas

November 1, 1920

Appeal from Nevada Chancery Court; James D. Shaver, Chancellor reversed.

STATEMENT OF FACTS.

This was a suit brought in equity by the owner of land to cancel an oil and gas lease covering 120 acres of land in Nevada County, Arkansas, upon the ground that the lessee and his assigns had forfeited the lease.

On the 2d day of December, 1918, B. C. Epperson and W. E. Epperson his wife, in consideration of $ 1, leased to H. H. Givan 120 acres of land in Nevada County, Arkansas, for ten years, upon the following conditions: "If oil is found in paying quantities, first party shall have one-eighth part of all oil produced and saved from said premises, to be delivered in pipe line, with which second party shall connect the wells. Second party shall have the right to use sufficient gas, oil and water to drill all wells and to run all necessary machinery in operating same.

"Second party agrees to pay any damage such operations may cause to growing crops.

"In case no well is completed on said premises within one year from this date, then this grant shall become null and void unless second party shall thereafter pay the first party at the rate of $ 60 for each year thereafter such completion is delayed, payment to be made by depositing the amount in the Bank of Prescott, Prescott, Arkansas, or by check to first party."

H. H Givan assigned the lease to R. G. Helbron. On April 19, 1920, B. C. Epperson wrote Helbron a letter in which he declared the lease void, and informed Helbron that he had leased the land to other parties. Epperson claimed that the lease was void because it was conditioned that no well had been commenced on the land and no payment of rent had been made, although more than a year had elapsed since the lease was executed. The letter was duly received by Helbron, and he replied by tendering to Epperson $ 40, which he claims was the rental due upon the part of the lease which had been assigned to him. Epperson refused to receive the amount tendered by Helbron and returned the check to him. Epperson also informed Helbron in the letter that he had leased the land to another party for the purpose of having it explored for oil and gas.

The agreed statement of facts shows that no well was drilled on the land within the year mentioned in the lease, and that no effort has been since made to drill a well.

The chancellor was of the opinion that there was no equity in the plaintiffs' bill, and it was decreed that their complaint should be dismissed for want of equity.

The plaintiffs have duly prosecuted an appeal to this court.

Decree reversed. Motion for rehearing denied.

McRae & Tompkins, for appellant.

1. The lease was unilateral. It bound the lessee to do nothing and the lessor was not bound. The lease does not require the lessee to do anything. He is not bound to begin work on a well or to pay rental. It is entirely optional with him and not binding. 96 Ark. 184. Such leases are void. 159 S.W. 193; 112 F. 373. A lease determinable at the will of one party is equally so at the will of the other. 47 Ind. 105; 112 F. 373; 131 Id. 696. The lessee can not make the contention that the down payment of one dollar paid at the time the lease was executed was a consideration of the lessee's option to extend the lease, as there is no such clause in the present lease. There was no consideration for the lease after the end of the first year if one dollar was a sufficient consideration for the first year. Nothing had been done toward developing the land, and the promise to pay being optional with the lessee, the lessor had clearly the right to withdraw the option after the end of the first year, at any time before the option had been accepted and the rental paid. 132 La. 601; 61 So. 684.

2. While equity abhors a forfeiture, it will be enforced where essential to do justice. 36 Okla. 773; 59 L. R. A. 566; 96 Pa. 307. Courts do not favor the tying up of lands for long periods of time, especially where the consideration is nominal. 91 U.S. 587. Every contract must be based upon a valuable consideration. The consideration here was $ 1, and there is no promise on part of the lessee that he will ever do anything; the language of the lease contains no obligation whatever on the part of the lessee. A suit for specific performance would not be entertained on the clause in the lease. While a nominal consideration may be sufficient at law, equity requires a substantial consideration. 202 F. 109.

3. Even if we admit that $ 1 was a good consideration, it would strain that dollar to keep the lease in force for one year. It could not prolong the life of the lease longer than the first year. The lease itself only provided that the one dollar should keep the lease in force for the first year. The lease carried its own forfeiture clause, and the lessee had the power to continue the lease in force, and knew just what was required but failed to do so, and the lease expired by its own terms December 2, 1919. Nothing was done to extend it and it expired on that date. The lease was prepared by the lessee and was his contract and any uncertainties or ambiguities should be resolved against him and in favor of the lessor. 115 Ark. 166; 112 Id. 1; 84 Id. 431; 26 Okla. 772; 25 Id. 809. It was a lease for one year and it might hold for more, provided the lessee complied with its terms, but to keep it alive the lessee had to act. After the end of the first year, the lease was a mere naked option, and could be withdrawn at any time before it was accepted, and it was so withdrawn before any tender was made. 43 L. R. A. (N. S.) 487. The lessee was not bound. The sum total of his obligations was to pay any damages sustained to the growing crops; there was no other promise on part of the lessee. The only case found construing a lease which merely provided for the rentals to be "thereafter" paid is 79 N.E. 971. The real consideration was that the lessee should develop and explore the land. It was a harsh contract, truly a lessee's lease, and the courts are slow to enforce such; and if the lease was broken by failure of the lessee to bore a well or pay the rental, the lease became null and void and could not later be revived by paying rentals. 70 Kan. 778. The chancellor erred in his construction of the lease and its findings are against the law and justice.

Carmichael & Brooks, for appellees.

The lease is not unilateral. 104 Ark. 466, 474; 94 Id. Huyck & Gray; 40 Minn. 497. There was mutuality and the lease was bilateral and there was consideration. 3 Am. Law Rep. Ann. 344-8, 352-7. See, also, 138 Ark. 367; 104 P. 851-2; 120 F. 893; 74 P. 625; 63 L. R. A. 625. If the lessee had a whole year in which to pay the money, he was in ample time when he tendered it within four and a half months within the time shown by the agreed statement of facts. The lease was a binding and mutual obligation, and the lessee had a full year after the expiration of the year to complete the well and pay the rentals. The chancellor was familiar with the situation and held the contract binding and that the tender was made within a reasonable time, and he was right on both questions.

HART J. WOOD, J., dissents.

OPINION

HART, J., (after stating the facts).

Counsel for the plaintiffs contend that no well was completed on the land within one year from the date of the execution of the lease, and that by the terms thereof the $ 60 rental provided in the surrender clause was payable in advance, and that the lessor had a right to declare the lease void for the nonpayment thereof.

It is the contention of counsel for the defendants that the $ 60 annual rental was not payable until the end of the second year after the date of the execution of the lease, and that the plaintiffs had no right to declare the lease void for the nonpayment of the $ 60 before the payment therefor became due.

That equity will enforce a forfeiture of a lease giving the exclusive right to explore for minerals upon a tract of land where it would be inequitable to permit the lessee longer to assert such right by reason of his continued default is settled in this State by the case of Mansfield Gas Company v. Alexander, 97 Ark. 167, 133 S.W. 837.

The reason for enforcing a forfeiture under such leases is well stated in Brown v. Vandergrift, 80 Pa. 142. In the opinion Chief Justice AGNEW said: "The discovery of petroleum led to new forms of leasing land. Its fugitive and wandering existence within the limits of a particular tract was uncertain, and assumed certainty only by actual development founded upon experiment. The surface required was often small compared with the results, when attended with success; while these results, led to great speculation, by means of leases covering the lands of a neighborhood like a flight of locusts. Hence it was found necessary to guard the rights of the landowner as well as public interest, by numerous covenants, some of the most stringent kind, to prevent their lands from being burdened by unexecuted and profitless leases, incompatible with the right of alienation and the use of the land. Without these guards, lands would be thatched over with oil leases by subletting, and a farm riddled with holes and bristled with derricks, or operations would be delayed so long as the speculator would find it hopeful or convenient to himself alone. Hence covenants became necessary to regulate the boring of wells, their number and time of succession, the period of commencement and of completion, and many other matters requiring special regulation. Prominent among these was the clause of forfeiture to compel performance and put an end to the lease in case of injurious delay, or a want of...