Smith v. McCullough
| Citation | 285 F. 698 |
| Decision Date | 23 December 1922 |
| Docket Number | 5892. |
| Parties | SMITH v. McCULLOUGH et al. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
Arthur S. Thompson, of Miami, Okl., for appellant.
Paul A Ewert, of Joplin, Mo. (A. C. Towne, of Miami, Okl., and James S. Davenport, of Vinita, Okl., on the brief), for appellees.
Before SANBORN, Circuit Judge, and TRIEBER and MUNGER, District judges.
The plaintiffs, appellees here, brought a suit in equity against the defendant Smith, here the appellant, and secured a decree against him to the effect that the mineral, oil, and gas lease of the 120 acres in controversy from Leander J. Fish, a Quapaw Indian, to Dallas Hopper, of April 29, 1912, which Hopper had assigned to the plaintiffs, was valid; that the mineral, oil, and gas leases from Leander J. Fish to the defendant of November 4, 1912, and January 6, 1913, were void as against the rights of the plaintiffs; and that the defendant be perpetually enjoined from interfering with the plaintiffs' possession and use of the premises. From this decree the defendant has appealed.
The plaintiffs' lease required them to commence operations to prospect for and develop oil, gas, or other minerals within 90 days after its date, and defendant's counsel argue that this decree should be reversed because the plaintiff did not enter upon the land leased within the 90 days. But neither such an entry nor the commencement operations within that time was indispensable to the maintenance of a suit and the recovery of the relief in equity against the defendant claiming under the subsequent leases which the plaintiffs obtained, for the plaintiffs had paid the dollar consideration for the lease and the rental fixed therein, 5 cents per acre per annum, in case such operations were deferred. Guffey v. Smith, 237 U.S. 101, 112, 119 35 Sup.Ct. 526, 59 L.Ed. 856, and McCullough v Smith, 243 F. 823, 825, 833, 834, 835, 156 C.C.A. 335, wherein the pertinent provisions of the plaintiffs' lease are set forth, and their legal effect was stated, discussed and adjudged by this court. It is true that our decision at that time was based upon the averments of the complaint that the lessee Hopper and the plaintiffs had immediately after the date of the lease entered upon, continued in possession of, and prospected, developed and drilled the land. But under the decision in Guffey v. Smith, supra, such possession and operation were not necessary to the maintenance of this suit, and the court below found in its decree that the plaintiffs were in possession of the land under their lease at the time of the commencement of this suit.
The lessees' agreement to begin operations within 90 days after the date of the lease is a part of the paragraph of the lease which also provides that in case such operations are not commenced within that time the lessees agree to pay to the lessor 5 cents per acre yearly for each acre of the land described in the lease 'in lieu of said work.' It is contended that this provision for a postponement of the prospecting, drilling, and development of the mineral on this 120 acres for $6 per year renders the lease so unconscionable that a court of equity ought not to protect or enforce any rights or interests of the lessees thereunder. The arguments, the authorities, and the exhaustive brief in support of this position have received studious and deliberate consideration. But the Supreme Court has decided that similar clauses in like leases do not bar lessees from relief in equity from the interference with their rights thereunder by subsequent lessees. Guffey v. Smith, 237 U.S. 111, 116, 35 Sup.Ct. 526, 59 L.Ed. 856, and this court held in 1917 that this provision in this lease did not appear to invalidate it (243 F. 834, cited Brewster v. Lanyon Zinc Co., 140 F. 801, 72 C.C.A. 213), and added that the question whether or not that clause rendered the lease unfair or inequitable must be determined upon the final hearing upon the issues between the parties. That final hearing has been had and the court below has found that the lease was not inequitable or unfair. There is no averment in the answer of the defendant that this clause or the lease that contained it was unjust or unconscionable, and counsel in his brief calls attention to no evidence to that effect. The issue whether or not the lease was unfair or inequitable must be determined in view of the circumstances at the time it was given. Guffey v. Smith, 237 U.S. 101, 116, 35 Sup.Ct. 526, 59 L.Ed. 856; Willard v. Tayloe, 8 Wall. 557, 570, 571, 19 L.Ed. 501; Marble Co. v. Ripley, 10 Wall. 339, 357, 19 L.Ed. 955; Franklin Tel. Co. v. Harrison, 145 U.S. 459, 473, 12 Sup.Ct. 900, 36 L.Ed. 776. Prima facie the clause and the lease were fair and just. The burden was upon the defendant to prove that they were unconscionable or inequitable.
The original parties to the lease had the right to agree and deliberately agreed to the clause in question and to the other terms of the lease, and neither of them sought relief therefrom. The lease and that clause in it were in the customary form of such leases and clauses in the state of Oklahoma and differed from others only in the amount per acre specified for the yearly postponement of the work. This lease was made April 29, 1912. The defendant's leases were made November 4, 1912, and January 6, 1913, and each of them contains a clause whereby the lessee agreed to pay 10 cents per acre yearly in lieu of work in case he did not commence operations within the time therein stipulated therefor. When the plaintiffs' lease was made in April, 1912, no one had any knowledge of any oil, gas, or mineral in or under the land thereby leased. There had been no drilling for or development of such minerals, and there was no drilling for or development in the vicinity of these lands sufficient to make it probable that such minerals would be found until some time in the year 1914. It was not until May 8, 1915, that a discovery of a mine was made on a tract adjacent to the 120 acres here in dispute. None had then been discovered on this land. It is difficult to perceive anything in that state of facts that would indicate that in April, 1912, there was any probability that oil or other mineral would ever be found in the land leased, or that the right to prospect for and develop it had or would ever have any substantial value. The discovery of mineral therein was a mere possibility. The...
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