Lowther Oil Co. v. Miller-Sibley Oil Co. Urpman
| Decision Date | 02 May 1903 |
| Citation | 53 W.Va. 501 |
| Court | West Virginia Supreme Court |
| Parties | Lowther Oil Co. v. Miller-Sibley Oil Co.Urpman v. Lowther Oil Co. |
Title under a lease only for production of oil and gas is inchoate and contingent, and for purposes of search only until oil or gas is found. If not found, no estate vests in the lessee, and his right, whatever it is, ends when the unsuccessful search is abandoned. If found, then the right to produce becomes a vested right upon the terms of the lease. Point 2 of syllabus in Oil Go. v. Gas Co., 5 W. Va. 583, explained, (pp. 505-7).
Power of chancery to cancel oil leases for delay of development, (p. 572).
To constitute abandonment by the lessee of a lease for oil there must be both an intention to abandon and actual relinquishment of the leased premises, (p. 507).
Where an oil and gas lease is for a given term, "and as much longer as oil and gas can be produced in paying quantities" to the lessee, if a well pays a profit, even a small lone over operating expenses, it produces "in paying quantity, 1' though it never repay its cost, and the operation as a whole may result in loss. The phrase "paying quantity" is to he construed with reference to the judgment of the operator, when exercised in good faith, (p. 508).
Equity will not grant speefie performance of a contract to convey land when the vendee has unreasonably delayed in performing the contract and asking relief, and conditions have changed and it would work hardship and loss to the vendor or other persons affected thereby, (p. 509).
When a vendee has not possession under an executory contract of sale of land, in order to have equity to grant specific performance, he is held to greater diligence in parforming the contract and asking performance than is the case of a vendee in possession under the contract, (p. 509).
Estoppel from conduct discussed, (p. 510).
A written contract, sealed or unsealed, may be rescinded by word of mouth by common consent of its parties. If no possession has been taken under it, and the parties agree to rescind, and in execution of the agreement to rescind the vendee surrenders the writing to the vendor, the rescission is complete, and the contract at an end. (p. 511).
An executory contract for the sale of land made with intent on the part of both parties to defraud creditors will not be specifically enforced in equity at the instance of the guilty vendee, or one to whom he has sold the land. (p. 512).
One who buys a mere equitable title to land is not a bona fide purchaser without notice, but takes only such title as his vendor has, and subject to all defences good against him, though in fact such purchaser had no notice of them. (p. 513).
Actual possession is notice to purchasers of the rights of him in possession, (p. 514).
Appeal from Circuit Court, Calhoun County.
Action by A. W. Urpman against flic Lowther Oil Company, and by the Lowther Oil Company against the.Miller-Sibley Oil Company. Actions were consolidated. From the decree, Urpman and the Miller Sibley Oil Company appeal.
Affirmed.'
Reeoe Blizzard, Northoott & Perry, and MR. O'Brien, for appellants.
T. P. Jacobs and John M. Hamilton, for appellees. Brannon, Judge:
Two chancery suits in the circuit court of Calhoun County were consolidated by order of the court, (as I think they should not have been, as they involved distinct subjects,) and were heard together, and a joint decree made in the two cases. One was a suit by the Lowther Oil Company against Miller-Sibley Oil Company; the other a suit by A. W. Urpman against the Lowther Oil Company. A joint appeal from that decree was taken by Urpman and Miller-Sibley Oil Company.
The Miller-Sibley case.
James Metz made a lease, 24 May, 1897, to Miles for oil and gas purposes of a tract of 250 acres of land in Calhoun County. The lease was to continue three years from date "and as much longer as oil and gas can be found in paying quantities.". It contained no provision for rental or forfeiture. It provided for payment to Metz of a royalty of one-eighth of oil produced, and $200.00 yearly for each gas well. It provided right to the lessee to remove machinery, and to "at any time surrender this lease and be relieved from all liability thereunder." Miles assigned the lease to Miller-Sibley Oil Company, and it bored a well and found some oil, but by reason of tools becoming fastened in the well or from an invasion of salt water, this well was abandoned, and another well was bored, and in it a small quantity of oil was found, its quantity being a matter of controversy, but, say from two and three-fourth to five barrels per day. This well was pumped for oil. Two tanks were partly filled, one of 250, the other 60 barrels. The quantity of oil does not appear. The first well was pumped some and a little oil obtained from it. The second well was pumped several months. The operations were suspended. The last pumping was in January, 1899; but a witness says that a little pumping was done in March, 1899. Some of the casing was pulled from the first well. Nearly all the casing was drawn from the second well and taken away. No tools were left. The rigs were left to decay. There were an engine and boiler left at the first well, but parts of the engine taken away, and then an order was given to Warden by the agent of the Miller-Sibley Company authorizing him "to remove the engine, boiler and tanks, casing, tubing, sucker rods, &c." Warden at once moved the engine only. This order dates December 11, 1900. The two rigs were left and a boiler and some other articles used in the business. The company owned leases on other land in the vicinity, making up in all 800 or 1000 acres. This tract is stated in the lease to be a part of a block of 800 acres of leased land owned by Miles. The company drilled two wells on these other lands in developing the territory. These wells were not far from the tract of 250 acres. One of the wells produced gas, not oil. No royalty was ever paid to Metz by Miller-Sibley Co. On 9 January, 1900, Metz executed, to Lowther a lease of the same tract for oil and gas purposes, and Lowther assigned this second lease to the Lowther Oil Company, and in June, 1900, that company went upon the land and endeavored to utilize the first well which had been bored by Miller-Sibley Co., but failed, and then went to the second well bored by that company and cleaned and pumped it, but did not succeed in producing oil in paying quantity, only one barrel a day, and then bored it to greater depth and produced oil in paying quantity. Then the Lowther Oil Company brought a chancery suit in the circuit court of Calhoun County against Miller-Sibley Oil Company to restrain the latter company from entering on the land or interfering with the possession of the Lowther Oil Company of said land, and to declare the first lease, that made by Metz to Mjies, no longer in force, and to cancel it. The decree of the circuit court avoided and canceled the first lease and the Miller-Sibley Company appealed. The first question is whether there was any estate vested in Miller-Sibley Company when Metz made the second lease. The lease requires no rent, only a share of oil, and gives absolute right to the lessee to surrender it, and under Eclipse Oil Co. v. South Perm, 47 W. Va. 27, gives no present vested estate, and might be ended at any time by either party, and a second lease would end it. That is the character of this lease. But when once the lessee under even such a lease begins work, whilst he yet has no vested estate, still he has right to go on in search of oil, and the lessor cannot then at mere will destroy bis right. An ordinary oil lease, making the lessee pay a consideration, binding him to some obligation, vests only inchoate right, that is right to explore for oil, but no actual other estate than right to develop, and if he gets no oil, he still has no vested estate; but if he does get oil, he has a vested estate. Such a lease calls for the right, not to oil in place, but to extract it. Steelsmith v. Gartlan, 45 W. Va. 27; Lowther Oil Go. v. Guffy, 52 W. Va. 88; 43 S. R. 101; Bryan on Petro. & Gas, 174 citing Venture Oil Company v. Fretts, 152 Pa. 451; Coigan v. Oil Co. 194 Pa. St. 234. Just so with the lessee under a lease without rental or obligation after he has begun or after he has obtained oil. When he has obtained oil, he has a vested interest according to the lease. In Oil Co. v. Gas Co., 51 W. Va. 583, in point 2 of syllabus, is language that "mere discovery of oil by exploraton under it, vests no title to it in the lessee." This language is inadvertent, and does not express the meaning intended, as on page 591 it is stated that discovery of oil does vest title. As above stated when Miller-Sibley Co. discovered oil an estate vested in it according to the lease, which it could lose only by terms of the lease or by abandonment. It is said that the oil was not in paying quantity, and therefore no estate vested. Whether the oil is in paying quantity is left to the judgment of the lessee, and I do not see that where oil is found its quantity is material in deciding whether any estate vested under the lease. We must therefore see whether this estate has been lost. The lease contains no provision of express forfeiture. Under some circumstances of delay or fraudulent evasion of duty of development equity will cancel an oil lease, as development is regarded as the real intent of the lessor, even if there be no express clause of forfeiture. Crawford v. Rickey, 43 W. Va. 252; Bluestone Coal Co. v. Bell, 38 W. Va. 297; Betman v. Harness, 42 W. Va. 433; Bryan on Petro. & Gas section 182, citing West- ern Pa, Co. v. George, 16 Pa. 47; Elk Fork Oil...
To continue reading
Request your trial