Union Gas & Oil Co. v. Wiedemann Oil Co.

• Citation: 211 Ky. 361,277 S.W. 323
• Parties: UNION GAS & OIL CO. v. WIEDEMANN OIL CO. ET AL.
• Decision Date: 25 March 1924
• Court: Court of Appeals of Kentucky

277 S.W. 323

211 Ky. 361

UNION GAS & OIL CO. v. WIEDEMANN OIL CO. ET AL.

Court of Appeals of Kentucky.

March 25, 1924

Rehearing Denied with Modification Nov. 20, 1925.

Appeal from Circuit Court, Johnson County.

Action by the Wiedemann Oil Company and others against the Union Gas & Oil Company. From the judgment, defendant appeals, and plaintiffs cross-appeal. Affirmed.

Holt Duncan & Holt, of Huntington, W. Va., and Otto C. Gartin, of Ashland, for appellant.

Wheeler & Wheeler, of Paintsville, Robt. H. Winn, of Mt. Sterling and S. S. Willis, of Ashland, for appellees.

THOMAS J.

Nelson Collier and his wife, Sarah, were the joint owners of 50 acres of land in Johnson county. On March 15, 1893, the husband, in consideration of love and affection, conveyed his undivided one-half interest in the land to the wife and their infant children, James, Mary, and Laura Collier. By this deed the wife took a life estate, with remainder to the three children in that undivided one-half. Davis v. Hardin etc., 80 Ky. 672; Virginia Iron Coal & Coke Co. v. Dye, 146 Ky. 519, 142 S.W. 1057; Smith v. Upton, 13 S.W. 721, 12 Ky. Law Rep. 27; McFarland v. Hatchett, 118 Ky. 423, 80 S.W. 1185, 26 Ky. Law Rep. 276; Salyer v. Johnson, 107 S.W. 210, 32 Ky. Law Rep. 709; Bowe v. Richmond, 109 S.W. 359, 33 Ky. Law Rep. 173. The other undivided one-half interest was still owned by Sarah Collier in her own name.

On May 3, 1916, Nelson and Sarah Collier executed an oil and gas lease upon the entire tract of land to A. C. Albin, and by different assignments it has been transferred to and is now owned by the Union Oil & Gas Company.

On the 14th day of December, 1917, Nelson and Sarah Collier, their three children, then adults, and the spouses of such as were married, executed another lease upon the same property to the Southwest Petroleum Company, and by various assignments this lease has reached and is now owned and held by the Wiedemann Oil Company; royalty interests therein being held by R. A. Childs, W. B. Lindsey, and George McNabb.

The last-named four parties, together with all of the above-named lessors, filed suit in the Johnson circuit court against the Union Oil & Gas Company on the 31st of May, 1921. Several amendments were afterwards filed, the final relief sought being: (1) To have the Albin lease canceled, and to have the title in the top lease quieted; or in the alternative, (2) for a partition by a division in specie; but, if indivisible, then (3) for a sale and division of the proceeds; and (4) for the appointment of a receiver to take charge of the property and develop it.

The circuit court adjudged each of the leases valid to the extent of an undivided one-half interest, and decreed a sale of the leasehold interests and division of the proceeds, and also adjudged the proportion in which the future royalties shall be divided by the purchasers.

The Union Oil & Gas Company has appealed on the theory that the court should have denied division, and by its judgment permitted either or both lessors to proceed with development on equitable principles. On the cross-appeal of appellees they insist that the judgment is erroneous, because (a) the Albin lease, which appellant now owns, was ineffectual for any purpose for the reason that the remaindermen did not join in it; and because (b) it failed to adjudge that lease void ab initio upon the grounds, as alleged in their belated amended petition, that "the right purported to be granted therein was incapable of exercise, and was wholly nugatory. The said lease, further, was void and of no effect, because it was executed without consideration or covenants and did not obligate the said A. C. Albin or his assigns to develop said property or pay rentals or otherwise." They do not seem to object to the judgment ordering the leasehold interests sold for the purposes of division. We will first determine those two contentions.

Disposing of contention (a), it properly may be said that there is no reason why Sarah Collier and her husband jointly could not make a valid oil and gas lease to her undivided one-half interest in the land. Ball v. Clark, etc., 150 Ky. 383, 150 S.W. 359. As to the other half interest, while neither the life tenant nor the remainderman could singly make a valid lease, they could jointly make such lease. Meredith v. Meredith, 193 Ky. 192, 235 S.W. 757; Sparks v. Albin, 195 Ky. 52, 241 S.W. 321; Gerkins v. Ky. Salt Co., 100 Ky. 734, 39 S.W. 444, 19 Ky. Law Rep. 130, 66 Am. St. Rep. 370. It follows that if the Albin lease was otherwise valid, it conveyed the one-half undivided interest belonging to Sarah Collier, and that the top lease conveyed the other one-half undivided interest owned by her and her children, all of which is upon the theory that the Albin lease for whatever interests it had the effect to convey was valid in its inception. Whether or not that was true will now be taken up by us for determination, and which question is the one raised by contention (b) above.

That lease was executed by N. A. Collier and wife, Sarah Collier, to A. C. Albin for an express consideration of $1, "receipt of which is hereby acknowledged," and it expressly granted and leased to him all the oil in and under the tract of land, with the right to enter thereon at all times for the purposes of drilling or operating for oil or gas, and to do other named things "necessary for production and transportation of oil or gas." It provided for a royalty of one-eighth of all the oil produced under the privileges therein granted to the lessors and the payment to them of $100 annually for every gas well from which gas was produced in sufficient marketable quantities to be transported. It was for a period of 10 years, "or as long as gas or oil is found in paying quantities," but all "on the following conditions: In case no well is commenced within 12 months from this date, then this grant shall be null and void, unless second party shall thereafter pay at the rate of 10 cents per acre for each year drilling is delayed." Then follows other conditions immaterial to the issues here, among which was a designated bank in which rental payments might be made, "for any money falling due under this grant." Then follows a surrender clause, wherein it is provided that the lessee, upon the payment of $1 to the lessors, might surrender the lease, and, if done, it would "be null and void and binding on neither party." It was and is the contention of plaintiffs that the lease as so phrased was without consideration, and was therefore unilateral and void, and they rely principally upon the cases from this court of Berry v. Frisbie, 120 Ky. 337, 86 S.W. 558, 27 Ky. Law Rep. 724; Young v. McIllhenny, 116 S.W. 728; Killebrew v. Murray, 151 Ky. 345, 151 S.W. 662, and Soaper v. King, 167 Ky. 121, 180 S.W. 46.

In some of them, at least, there are expressions which would seem to be broad enough to sustain the contention, but a critical analysis of them will reveal that the cases cited therein for the position do not sustain it because inapplicable to the particular facts in those four cases. Others of them involved the remedy of specific performance wherein the inadequacy of the monetary consideration ($1) is an essential element in determining whether or not courts will enforce that remedy, while others of those cases are based upon one or more of the preceding ones and which prior ones contain the vice to which we have referred. It might also be said in this connection that the four cases referred to from this court and relied on by appellees appear to be almost, if not entirely, without company, since practically the courts of all the states in the Union, the federal courts and this court, both since and before the rendition of those opinions, hold that in leases of this character, to say nothing about the multiplicity of contracts in commercial transactions, a consideration of $1, if it was the only one, is not only a valuable consideration coming from the lessee, but is sufficient to support the lease and all of the optional conditions and privileges which it contains. Judge Cochran, the learned United States District Judge for the Eastern Federal District of Kentucky, in the case of Lindlay v. Raydure, 239 F. 928, beginning on page 965, made a most exhaustive analysis of the four cases referred to, and in which he clearly pointed out the discords in them and wherein the facts under consideration in each of them were not parallel with those in that case, which were the same as we have here, with the single exception that the lease therein involved was what is known as an "or" lease, whereas the one we have now is what is known and referred to as an "unless" lease, and which difference we will subsequently discuss.

Since the question is a most important one in this state, and since we know that we cannot improve on Judge Cochran's analysis of those opinions, we have concluded at the expense of some space to insert his analysis as a part of this opinion, and it is:

"Coming, then, to the Kentucky cases involving oil and gas leases relied on to support defendant's contention, the first to be considered is the Frisbie Case, decided in 1905. The instrument involved in that case, considered by itself, was a mere option. [ No present grant.] By it the landowner offered to grant the oil prospectors the right for two years to explore for oil and gas, and, if found, to convey to them by deed the right to produce and make their own the oil and gas so found, paying him certain royalties, and, in consideration of $1 paid, the receipt of which was acknowledged, agreed to keep this offer open for acceptance for four months thereafter. Assuming the $1 to be a sufficient consideration to make such agreement binding upon the

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