Kolachny v. Galbreath

• Decision Date: 12 July 1910
• Citation: 110 P. 902,26 Okla. 772,1910 OK 229
• Parties: KOLACHNY v. GALBREATH et al.
• Court: Oklahoma Supreme Court

110 P. 902

26 Okla. 772, 1910 OK 229

KOLACHNY v. GALBREATH et al.

Supreme Court of Oklahoma

July 12, 1910

Syllabus by the Court.

G., the grantor of S., leased the land to K. (the plaintiff) for the purpose of drilling and operating for oil and gas. The lease provided that K. should have the right at any time to surrender and terminate said grant and demise by serving written notice upon G. of such intention, after which all payments or liabilities to accrue should cease and determine. Thereafter, G. having sold the land to S., he granted the oil and gas rights to other parties. Held, that the option to terminate the lease at any time deprived K., the plaintiff, of the right to specific performance directly or indirectly, until he had performed the contract or placed himself in such a position that he might be compelled to perform it on his part.

When contracts are optional in respect to one party, they are strictly construed in favor of the party that is bound and against the party that is not bound.

A subsequent purchaser of land is the proper party against whom to enforce an oil or gas lease or contract made with the prior owner of the fee.

Oil and gas, while in the earth, unlike solid minerals, are not the subject of ownership distinct from the soil, and the grant of the oil and gas, therefore, is a grant, not of the oil that is in the ground, but of such a part as the grantee may find and passing nothing that can be the subject of an ejectment or other real action.

(Additional Syllabus by Editorial Staff.

An oil and gas lease by an allottee of Indian lands whose restrictions against alienation had been removed need not be approved by the Secretary of the Interior.

Comp Laws 1909, § 6122, though authorizing a recovery of land held for a term of years in ejectment, does not authorize the maintenance of such action to recover land covered by an oil and gas lease as against the lessor or his grantee when the lessee has never had possession under the lease.

Error from District Court, Okmulgee County; John Caruthers, Judge.

Action by John W. Kolachny against Robert Galbreath and others. Judgment for defendants, and plaintiff brings error. Affirmed.

Robertson & Kean and Bailey & Kistler, for plaintiff in error.

Ramsey & Thomas, for defendants in error.

WILLIAMS J.

This action was commenced on December 18, 1907, in the district court of Okmulgee county by the plaintiff in error as plaintiff against the defendants in error as defendants. After issue was joined, the cause on October 5, 1908, was submitted to the court on an agreed statement of facts, and judgment rendered in favor of the defendants.

1. It is essential to determine whether any of the following paragraphs of the oil and gas lease, upon which this action was based, precluded the plaintiff from obtaining relief in equity; said paragraphs being in hæc verba:

"The party of the second part further agrees that, in case no well be drilled for oil or gas within two years from the date hereof, all rights and obligations secured under this grant and demise shall cease upon notice in writing being served by the parties of the first part, unless the party of the second part shall elect from year to year to continue this grant and demise in force as to any or all portions of the premises by paying in advance an annual rental of $24.00 per year for all of said land or such portion thereof as the party of the second part may designate, until a well is drilled, provided that upon the completion of said well the above provided for rentals shall cease. All payments of said rentals to be made at the 1st National Bank, Boynton to the credit of the parties of the first part.

"The party of the second part shall have the right to remove any and all fixtures placed upon said premises.

"The party of the second part shall have the right to discharge any incumbrance upon said premises, and shall have a lien thereon for the amount so paid, together with all costs and expenses incurred.

"It is hereby further agreed that the party of the second part shall have the right at any time to surrender and terminate this grant and demise by serving written notice upon the parties of the first part of such intention, after which all payments or liabilities to accrue shall cease and determine."

This lease was executed on May 7, 1904, by Sallie Garrett Scott, the original allottee, as party of the first part, to John W. Kolachny, as party of the second part, who was the plaintiff in this action in the court below for a cash bonus or consideration of $5. The oil lease was duly filed for record, but never approved by the Secretary of the Interior. Thereafter one of the defendants, to wit, F. B. Severs, purchased said land from said Sallie Garrett Scott; her restrictions against the alienation thereof having been removed prior to the time she executed the oil and gas lease to the plaintiff and he (Severs) then leased same to his codefendants for oil and gas purposes. This court has held that such a lease, when executed by an allottee whose restrictions against alienation had been removed, was not required to be approved by the Secretary of the Interior. Eldred et al. v. Okmulgee Loan & Trust Co., 22 Okl. 747, 98 P. 929.

Does the surrender clause as hereinbefore set out render the lease such a contract as a court of equity will refuse to enforce? The defendant Severs under an agricultural lease was in possession of the land covered by the oil and gas lease at the time the same was obtained by the plaintiff from the allottee, and continued in such possession up to the time he acquired the fee from such allottee, and thereafter as the owner of the fee; the plaintiff never having been in possession of said land in any way whatever. In Superior Oil & Gas Co. v. Mehlin, decided by this court at its March, 1910, term (108 Pac., at page 545), it is said: "From the foregoing, it will be noted that the lessee under the terms of the lease could delay the beginning of any well upon the land described for practically 15 years, and then, if at the end of that period of time he desired to delay longer, there was a proviso allowing it (for a consideration not specifically named) to hold the land indefinitely, without beginning any operations whatsoever. Thus, while by a decree defendant might be compelled to enter into this lease, no court could under its terms exercise any power to compel the lessee to operate. Under its terms, it is left entirely to the action of the lessee to either drill for oil or gas, or not drill, and there is no forfeiture or burden provided for during this 15-year term in which the lessee may deprive the owner of any of the benefits whatsoever of having his land exploited. The general rule in such cases is that contracts unperformed, optional as to one of the parties, are optional as to both. Venture Oil Co. v. Fretts, 152 Pa. 451, 25 A. 732; Huggins et al. v. Daley, 99 F. 606, 40 C. C. A. 12, 48 L. R. A. 320; Reese et al. v. Zinn et al. (C. C.) 103 F. 97; Federal Oil Co. v. Western Oil Co., 121 F. 674, 57 C. C. A. 428. The favorable presumptions which are usually indulged in behalf of ordinary lessees are not enjoyed by those holding leases of the character whose enforced execution is sought by plaintiff in this action, for the doctrine seems to be fundamental that, on account of the peculiar nature of the subject-matter upon which they operate, and the danger of loss to the lessor through the movement of oil and gas to surrounding lands and its withdrawal from neighboring wells, oil and gas leases are construed most strongly against the lessee and in favor of the lessor." The lease there under consideration showed a consideration of $1 cash in hand paid, for which consideration the lessee was allowed a term of 15 years to explore for oil and gas, at the end of which time, if such development had not been commenced, the lessee was to pay the lessor a certain sum in advance for each additional year the development was delayed, no reservation being contained therein, as in this case, that at any time the lessee might at his election surrender and terminate the grant or demise by serving written notice upon the lessor, after which all liability on the part of the lessee was to terminate. Federal Oil Co. v. Western Oil Co. et al., 121 F. 674, 57 C. C. A. 428, decided by the United States Circuit Court of Appeals for the Seventh Circuit, on October 7, 1902, is a case in point, holding that such contracts cannot be enforced in equity. See authorities cited in that case, and also Iron Age Pub. Co. v. West. Un. Tel. Co., 83 Ala. 498, 3 So. 449, 3 Am. St. Rep. 758; Chadwick v. Chadwick, 121 Ala. 580, 25 So. 631; Collins v. Abel, 151 Ala. 207, 44 So. 109, 125 Am. St. Rep. 24; Nick's Heirs et al. v. Rector, 4 Ark. 251; Jordon v. Deaton, 23 Ark. 704; De Cordova v. Smith, 9 Tex. 129, 58 Am. Dec. 136; Meason v. Kaine, 63 Pa. 335; Tenn. Oil Gas & Min. Co. et al. v. Brown, 131 F. 696, 65 C. C. A. 524; Reese et al. v. Zinn (C. C.) 103 F. 97; J. M. Guffey Petroleum Co. v. Oliver, 79 S.W. (Tex. Civ. App.) 884; Jennings-Heywood Oil Syndicate v. Houssiere-Latrielle Oil Co. et al., 119 La. 793, 44 So. 481; Huggins et al. v. Daley, 99 F. 606, 40 C. C. A. 12, 48 L. R. A. 320; Cold Blast Transportation Co. v. Kansas City, etc., 114 F. 77, 52 C. C. A. 25, 57 L. R. A. 696.

The Supreme Courts of Kansas and Illinois in cases where the lease contains a reservation permitting the lessee to surrender or cancel the lease before the expiration of the term, but not allowing the lessor the mutual privilege at will of compelling a surrender, have held that such options and contracts are not invalid at law, not creating a tenancy at will, and not void for want of mutuality, it being the essence of an...