VANZANDT v. HEILMAN

• Decision Date: 13 February 1950
• Docket Number: No. 5209,5209
• Citation: 22 A.L.R.2d 497,214 P.2d 864,54 N.M. 97
• Parties: VANZANDT v. HEILMAN.
• Court: New Mexico Supreme Court

54 N.M. 97

214 P.2d 864

22 A.L.R.2d 497

VANZANDT

v.HEILMAN.

No. 5209.

Supreme Court of New Mexico.

Feb. 13, 1950.

[214 P.2d 864, 54 N.M. 98]

Mears & Mears, Portales, for appellant.

Jack M. Campbell, Roswell, H. M. Dow, Roswell, J. O. Seth, Santa Fe, Neil B. Watson, Artesia, Ross L. Malone, Jr., Roswell, Don G. McCormick, Carlsbad, amici curiae.

Compton & Compton, Portales, for appellee.

BRICE, Chief Justice.

The question is whether a contract to execute and deliver an oil lease, generally known as 'Producer's 88 Lease,' is voidfor lack of mutuality. The trial court made findings of fact which are accepted by both parties as the facts in the case, leaving only the question of law stated at the beginning of this opinion.

The findings of fact and conclusions of law are in substance as follows:

The defendant, E. C. Heilman, on the 29th day of April, 1948, was the owner of the following described real estate, to-wit: All of the coal, oil, gas and other minerals in and under and that may be produced from the North Half of Sec. 14, Twp. 8, South of Rge. 34 East, N.M.P.M. in Roosevelt County, New Mexico.

On that date the plaintiff entered into a written contract with defendant whereby defendant agreed to lease to plaintiff under what is known as Producers 88 Lease, the above described real property. The contract provided that the lease which defendant so agreed to execute in favor of plaintiff, should contain, among others, the following provisions:

'* * * That the said lessor, for and in consideration of $1920.00 (Nineteen hundred twenty and no/100 Dollars) Cash in hand paid, receipt of which is hereby acknowledged and of the covenants and agreements hereinafter contained on the part of lessee to be paid, kept and performed, has granted, demised, leases, and let and by these presents does grant, demise, lease and let unto the said lessee, for the sole purpose of mining and operating for oil and gas, and laying pipe lines, and building tanks, power stations and structures therein to produce, save and take care of said products, all that certain tract of land situated in the County of Roosevelt, State of New Mexico, described as follows to-wit: The North half of Section 14, Township 8 So., Range 34 East, N. M. P. Meridian, and containing 320 acres, more or less.

'It is agreed that this lease shall remain in force for a term of ten years from this date, and as long thereafter as oil and gas, or either of them, is produced from said land by lessee.

* * *

'If no well be commenced on said land on or before the 1st day of May, 1949, this lease shall terminate as to both parties, unless the lessee on or before that date shall pay or tender to the lessor, or to the lessor's credit in the _____ Bank at Guthrie, Oklahoma or its successors, which shall continue as the depository regardless of change in the ownership of said land, the sum of One hundred Sixty and no/100 dollars which shall operate as a rental and cover the privileges of deferring the commencement of a well for twelve months from said date. In like manner and upon like payment or tenders the commencement of a well may be further deferred for like periods of the same number of months successively. And it is understood and agreedthat the consideration first recited herein, the down payment, covers not only the privileges granted to the date when said first rental is payable as aforesaid, but also the lessee's option of extending that period as aforesaid, and any and all other rights conferred.

'Should the first well drilled on the above described land be a dry hole, then, and in that event, if a second well is not commenced on said land within twelve months from the expiration of the last rental period which rental has been paid, this lease shall terminate as to both parties, unless the lessee on or before the expiration of said twelve months shall resume the payment of rental in the same amount and in the same manner as heretofore provided. And it is agreed that upon the resumption of the payment of rentals, as above provided, that the last preceding paragraph hereof, governing the payment of rentals and the effect thereof, shall continue in force just as though there had been no interruption in the rental payments.'

The lease also provided that defendant should receive one-eighth of the oil and gas produced by plaintiff from the leased land during the life of the lease, except that used for lessee's operations.

The consideration which was to be paid for the lease was its fair and reasonable value, and the contract to execute and deliver it was fairly entered into between the parties thereto. The plaintiff has been at all times material herein, ready, able and willing to comply with the contract, and to take and pay for the oil and gas lease, and continues to tender and offer to take and pay for it, and to comply with the contract. The defendant after contracting in writing to execute and deliver the oil and gas lease mentioned, refuses to deliver it.

The trial court concluded as a matter of law, the following: Because of the provisions contained in the proposed oil and gas lease, which has been set out herein, the contract so entered into between the plaintiff and defendant is lacking in mutuality of obligation and remedy and cannot be specifically enforced in a court ofequity, and for that reason plaintiff is denied relief. Thereupon judgment was entered for the defendant, from which judgment plaintiff has appealed to this court.

The plaintiff (appellant) presents his case under one point, viz.:

The trial court erred in entering judgment for defendant, upon the ground that the contract so entered into between plaintiff and defendant is lacking in mutuality of obligation and remedy, and cannot be specifically enforced in a court of equity, because the lease contracted to be delivered by defendant to plaintiff contains the following provision, to-wit: 'If no well be commenced on said lands on or before the 1st day of May, 1949, this lease shall terminateas to both parties, unless the lessee, on or before that date shall pay or tender to lessor, or to the lessor's credit in the _____ Bank at Guthrie, Oklahoma, or its successors, $160.00 which shall operate as rental and cover the privilege of deferring the commencement of a well for twelve months from said date. In like manner and upon like payment or tenders, the commencement of a well may be further deferred for like periods of the same number of months successively.'

There is no contention that the contract is invalid. The contention is that a court of equity will not enforce specific performance because of a lack of mutuality in obligation and remedy; that is, the lessee may cause the lease to terminate by refusing to start drilling a well, and refusing to pay the $160 rental in lieu of drilling, before the end of any one of the ten years of the lease term, which if paid would defer the drilling of a well for the succeeding year; while the lessor has no remedy whereby he could terminate it.

The doctrine of mutuality of obligation and remedy (or the want of it) was mentioned in some English cases in the early part of the 19th Century, Hamilton v. Grant, 1815, 3 Eng.Reprint 980; Flight v. Bolland, 1828, 38 Eng.Reprint 817; Pickering v. Bishop of Ely, 1843, 63 Eng.Reprint 109, and others; but it was not until later that any attempt was made to formulate it into a rule of law. Lord Justice Fry in his treatise on Specific Performance, published in 1848, originated the doctrine and stated it as follows:

'Sec. 460. A contract to be specifically enforced by the Court must, as a general rule, be mutual,-that is to say, such that it might, at the time it was entered into, have been enforced by either of the parties against the other of them. When, therefore, whether from personal incapacity to contract, or the nature of the contract, or any other cause, the contract is incapable of being enforced against one party, that party is, generally, incapable of enforcing it against the other, though its execution in the latter way might in itself be free from the difficulty attending its execution in the former.' Fry on Specific Performance, 6th Ed.

'Sec. 463. The mutuality of a contract is, as we have seen, to be judged of at the time it is entered into; so that it is no objection to the plaintiff's right, that the defendant may by delay, or other conduct on his part subsequent to the contract, have lost his right against the plaintiff. * * *' Id.

In his first edition on Equitable Remedies, Professor Pomeroy followed Fry with some modifications, as follows: 'If, at the time of the filing the bill in equity, the contract being yet executory on both sides, the defendant, himself free from fraud orother personal bar, could not have the remedy of specific performance against the plaintiff, then the contract is so lacking in mutuality that equity will not compel defendant to perform, but will leave the plaintiff to his remedy at law.' 6 Pomeroy Equity Jurisprudence, 1st Ed., Sec. 769.

Many courts followed the Fry doctrine without question; but in 1884 the Supreme Court of the Territory of New Mexico, in Borel v. Mead, 3 N.M. (Gild) 39, 2 P. 222, 223, refused to follow it, stating, through Chief Justice Axtell: 'As to the second point, the condition of mutuality is, in general, sufficiently satisfied if there be any consideration on the one side as well as the other. It is also held that a court of equity, in actions for the specific performance of optional contracts and covenantsto lease and convey lands, will enforce the covenant, although the remedy is not mutual, provided it is shown to have been upon a fair consideration. So it is also held not to be necessary to the specific performance of a written agreement that it should be signed by the party seeking to enforce it. If the agreement is certain, fair, and just in all its parts, and signed by the party sought to be charged, that is sufficient. The want of mutuality is no...