1 Ohio C.C. (n.s.) 589


[Circuit Court of Wood County.]

Charles E. Tucker v. John G. Watts et al.

Decided, June 26, 1903.

Lease — For Oil and Gas Lands — Delay in Drilling — No Term Fixed in Lease — Assignment of Lease not Recorded — Abandonment of Lease.

1. Under the terms of Section 4112a, the assignment of a lease, granting the right to go upon lands for the discovery and production of oil and gas, need not he filed for record or recorded in order to render it valid as between the parties thereto and. their assigns.

2. A contract of lease between a land owner and an oil producer gives the right of possession to the latter for the purpose of exploring for oil and gas, and is not void ab initio by reason of the fact that no term is stated or fixed by the contract; and oil or gas having been discovered, the contract endures for such time as is necessary to accomplish its purpose, the producer acting with reasonable diligence.

3. Where a well is drilled and no gas or oil is found, the term of the lease can not be fixed by the caprice of the driller, but he is bound to continue his search within a reasonable time; and where, as in the case under consideration, further drilling is delayed for a period of six years, the interest of the lessee and his assigns will be declared to have been abandoned.

Mooney, J.

This case comes here from the court' of common pleas on appeal. The plaintiff named avers in his petition that he is the owner of a leasehold interest and is in possession of certain lands described, in Wood county’’, Ohio, for the purpose of producing oil, and that the defendant, John G. Watts, has entered into possession of the lands and drilled thereon and is producing oil and is converting the five-sixths part thereof to his own use. The praynr of the petition is that Watts be enjoined from such conversion, and that the Buckeye Pipe Line Company — with the limes of which the tanks upon the lease are connected — shall be enjoined from delivering to defendant the oil produced upon said premises.

The ’defendant, John G.. Watt's, files an answer which is, in substance, a general denial, and then avers that he is the owner of *590the leasehold interest upon said lands, and prays for affirmative relief.

This averment of the interest in Watts is denied in the reply.

From the evidence in the case, as well as from the pleadings— more specific than has been stated — it 'appears that on the 21st day of November, 1892, Stearns and Ferris, the then owners of the fee of the lands in question, executed and delivered to Monroe and Hamnon a contract, or a lease, covering 'all these lands. That after-wards this contract was filed for record and was recorded, the date of the filing being April 5th, 1893; and after this time Monroe released to Harmon all his interest in the lands, and Harmon after-wards conveyed to the plaintiff in this action the interest, if any, arising and existing under the lease, and it is under this contract that the plaintiff claims. It is evident that the claim or title t'o relief of the plaintiff in this action must be based upon the validity of the contract originally made and the subsistence of an interest or estate thereunder at the time of the bringing of this action, and, therefore, the terms and conditions of the contract originally entered into between Stearns and Ferris of the one part and Monroe and Harmon on the other, become, as we think, of controlling importance in the case. By this contract the land owner, for a consideration of one hundred dollars, grants unto the second party the privilege of drilling for and removing the oil and gas from the premises, together with the right to place thereon such fixtures as may become necessary for the production, transportation and storage of oil or gas, and the right t'o remove such fixtures at the pleasure of said second party. It is provided that if oil be found the land owner shall receive a royalty share thereof of one-sixth of all that may be produced from the premises. Should gas be found the compensation to the land owner shall be three hundred dollars yearly for each and every gas well used and while used. It is further provided that said Monroe and Harmon shall complete a well upon the premises within ninety days from the date of this agreement, or thereafter shall pay t'o the first party $25 per month until such well is completed.' A well was completed in August, 1893, and all the rental due, at $25 per month, from the expiration of the first ninety daj^s after the execution of the agreement, was paid. Nothing was found in this well so drilled, and *591shortly after all the drive-pipe and casing, derricks and all appliances usual and necessary for the drilling of wells were removed from the premises. Harmon and Monroe had other leasehold interests for oil purposes in the vicinity, and from time t'o time prosecuted drilling for oil at some distance and then in the near vicinity of these lands, hut from 1893 to 1899 they had never entered upon this land for the purpose of drilling or further prosecuting their search for oil, nor had the plaintiff prior to the bringing of this action, nor any one for either Harmon and Monroe, nor the plaintiff, except that at one time a stake to mark the location, of a well to be drilled in the future, was driven. There is some evidence — but the fact is in dispute — that’ both Harmon and the plaintiff at various times declared their intention not further to prosecute their search for oil upon the lands described in this petition. And there is evidence tending to show that while Judge Harmon was the sole owner of this lease he declared his unwillingness at the time of making the statement to further drill, unless the royalty was reduced, and it is a fact established in the case that Judge Harmon was of opinion and intended to drill only in the event that the price of oil by its advance would justify the drilling to secure the quantity of oil that it was believed could be found by drilling upon these lands — bis conviction at that time being that' oil could not be found in quantity sufficient to make drilling profitable at the then price for which oil could be sold.

The assignment of this agreement by Judge Harmon to the plaintiff in this case w.as mot filed for record, nor recorded. It is contended now by the defendants in this case that this lease is not in force, for the reasons: First, that the assignment has not been recorded, and therefore, the plaintiff in this case has no title to the leasehold, even though it is still a subsisting interest; second, that this lease was invalid ab initio, for the reason that no term is stated or fixed by its terms; and, third, that if the lease ever were valid, all interest of the plaintiff in the premises has been lost by reason of the abandonment, either by himself or Judge Harmon.

We are of the opinion that under the terms of Section 4112a, the assignment of a lease need not be — as between parties sustaining the interests in the lands that these parties do — need not be filed for record, or recorded, and that the failure to so file or to so record *592is an immaterial circumstance in this action. The lease in this ease was filed for record and recorded, and, therefore, if the lease were otherwise valid, an interest passed and terms were complied with to some extent, and if the peformance of these contract obligations upon the part of Harmon changed or affected or increased the inchoate interest theretofore existing, that interest was vested in him; he was possessed at all events with the interest, and that as to persons, except third persons acquiring am interest in that interest under Harmon, the title of the plaintiff in this case became valid and subsisting by the 'act of transfer without filing or recording the evidence of the assignment.

We are not of opinion that this agreement is invalid by reason of the fact that no term is fixed in -it. This was a contract that was entered into between the land owner and an oil producer, for the purpose of enabling the oil producer to follow his occupation upon these premises and produce oil and gas therefrom. A right to possession, at least for this purpose, passed to the oil producer. He had a right to explore for oil, and when he did discover it the contract then would endure for such time as was necessary to accomplish the purpose of the contract, the producer acting with reasonable diligence.

In this case, then, if oil had been found, Harmon, or his- assignee, would have had the right to retain possession of this land for such length of time as would be reasonably necessary to the production of the oil and gas lying in and forming part of the lands. Now it is a maxim of law that that' is certain which can .be rendered certain, and the existence of the means of rendering need not attend the formation of the contract; if subsequent events established or fixed the means that had been agreed upon in the contract, that would create the certainty that the law requires. We, therefore, think that by necessary implication the period that this contract was to endure was fixed by the terms of the contract, and that in consequence the contract is not subject to the objection in that respect that is taken to it.

The sole remaining question in the case is that of abandonment. It will be observed that by this, contract there is granted the privilege of producing oil — the privilege of going into possession of this land for.the purpose of exploring for oil is the primary right. *593This right, the eases are 'agreed, is not an estate in the land, and while some difficulty is experienced by the different court's in the adequate legal expression of just the right conveyed, the substance of it is recognized by all. Some of the cases call it a right to possession and some 'a license, the terms varying, but all agreeing that' to the producer is given the right to go upon the land and make search. No estate or interest in the land itself arises until the product' is found, and then the interest becomes vested, and being vested, -may be called an estate.

It was evidently the theory of the original party to this contract — the second party — that, having drilled one well, required by the terms of this contract, that thereby a perpetual interest was granted and that if at any time in the future oil should be found, it would become the property of the assignees or of the party who succeeded to the interest of Harmon in this lease. To that construction of the contract we can not agree. The contract was entered into for the benefit of both the producer and the land owner, and if oil were found, the land owner was entitled to his share. The time of the enjoyment of this beneficial interest in the contract is something that could not be fixed by the caprice of the driller — it was his right and duty to do the drilling, but it was equally the right of the land owner, within a reasonable time, to enjoy the fruits of this contract so far as he was entitled to them; and so we think that a fair construction of the rights that each of the parties had under this contract is: While upon failure to find oil when the first well was drilled, the interest of the owner of this contract — the producer — would not cease, or be in any manner forfeited, while he still had the right to continue his search, that he was bound to do so within a reasonable time. That is more especially the case where, as here, the duration of the lease is not fixed expressly by its terms. Now, to this contract Ferris was a party. She had no interest in, and no benefit was conferred upon her by the finding of oil, or its production upon adjoining lands in the immediate vicinity, or at distances remote; she had the right t'o have proceedings taken looking to the securing to her of the benefits under this contract, and within a reasonable time.

It is true that oil developments in the vicinity are matters of consequence in cases of this kind — because, having expended money *594in the completion of a well, the parties here wipe justified in waiting a reasonable time for other oil-producers, or themselves— upon adjoining lands to cast sidelights upon the oil probabilities in these various lands, but the simple fact of activity, by Harmon or by the plaintiff, upon adjoining lands, would not' authorize am undue and unreasonable extension of time for further drilling upon these lands. Now, from 1893 to 1899 no step had been taken looking to immediate drilling upon these lands — six years, with oil wells drilling in upon lands within a half a ’mile, or perhaps a less distance, and nothing to indicate that rights were claimed under this contract. As has been stated it is quite evident that Judge Harmon was of opinion that oil from these lands could mot be produced profitably and he was unwilling to experiment further upon these lands at the them price of oil; in fact, we take it from the record, as well as from the arguments, that the specific intention was to drill further wells when there was an advance in the price of oil. Now an intention t'o drill further wells when there is-an advance in price is tantamount to an intention not' to drill further wells until after such advance. Tire advance in the oil market was a matter that was entirely beyond the control of this lessee; it either might happen within a reasonable time, or it might never happen, and so the intention, so far as there was an intention, was to permit the matter of drilling to go to a time when in the judgment of the lessee the price would justify the expenditure. But, under the terms of this contract, Harmon was bound to drill within a reasonable time whether the price of oil would make it profitable or mot. '‘This intention, therefore, to drill only when the price of oil would make it profitable, was an intention not to comply with this contract but to comply with some other contract which he had substituted for it. His relinquishing of any intention to drill strictly in accordance with the terms of this contract, as well as the lapse of time — which we think was unreasonable — we believe resulted in an abandonment of the interest that' accrued to Harmon, and consequently to the plaintiff, under the terms of this lease.

I might say, as tending to support this conclusion, that' very recently, in a case unreported, the Circuit Court of the'Third Circuit held that where nothing had been done in the way of drilling after the failure of the first well, for four years, upon a leasé *595where the lessees had expressly agreed that they would drill another well when a Mr. Geazy, a consumptive, had returned from Ashe-ville, North Carolina, from whence, being an inválid, he never did return, that after waiting four years for his return and drilling no well, it resulted in an abandonment. It is but fair to state, however, that the activity in oil drilling around that leasehold intefest was somewhat greater than in this case.

The case of Baumgardner v. Browning, 12 Circuit Court Reports, 73, relied upon here by the plaintiff, we think, so far from being authority to sustain his contention 'here, is rather against the plaintiff’s position. In that case 'a lease for oil purposes upon a cash payment of five hundred dollars was executed and the term fixed at twenty years, and that was 'a definite term. It was held finally in that case that a failure to drill for a certain length of time did not result in an abandonment or forfeiture of the leasehold interest, but it was not' held in that case that the lessee was entitled to the full period of twenty years, but it was, in substance and effect, held that a reasonable time for the' doing "of further drilling upon the premises had not expired. It is evident from a reading of the entire ease that the court intended to decide the ease upon it's own particular circumstances; and the court had, I believe, theretofore held in other oases, and where the term of lease was less clearly fixed, and where the territory had been more thoroughly developed for oil purposes, that an abandonment would result. And so it is indicated by the concluding paragraph of that' opinion that the case is exceptional and is decided upon its own peculiar circumstances. There is it stated:

“Now, without in any way infringing upon any rule we have already laid down, but deciding this case as it' stands, we are of the opinion that the equities are with the plaintiffs, Baumgardners, and that they still have a fair and just right to hold the exclusive possession of these premises for the time being, and at this time, for the purpose of determining whether there is any oil in the land or not.”

And at another part of the opinion, it is said:

“We think the better rule is to say that under this lease the parties have a right to abide, at least for some time, to see what the developments were in the vicinity around and about there.”

*596Gilbert Harmon and Fries & Painter, for plaintiff.

Balchvin & Harrington and J. O. Troup, for defendants.

If it had appeared that' for several years — four, or five, or six— that upon adjoining lands oil had been produced, we are of the opinion that the lessee would not have been excused from drilling and would not be permitted to retain his interest in the absence of drilling simply because, while oil was found, it was deemed, by reason of .the state of the oil market, that it would not be profitable to do the drilling. If it is not profitable, there is an easy escape for the oil driller; he may either confer the benefits of the royalty upon the land owner by drilling, or he may surrender his interest in the land; but he has no right, when oil is found in considerable quantities to decline to produce the oil for the benefit of the land owner because in the condition of the oil market it would not be profitable for the producer to do the drilling. He may do that, but if he does it he must' surrender his interest in the premises.

• And so, upon the last case, we find that the lease here was abandoned, and that at the commencement of this action the plaintiff was without title to the interest of the oil lessee, and that' in consequence of that finding the decree must be for the defendant in the case. We find that the lease had been abandoned at the time of the commencement of the action.

Tucker v. Watts
1 Ohio C.C. (n.s.) 589

Case Details

Tucker v. Watts
Decision Date
Jun 26, 1903

1 Ohio C.C. (n.s.) 589




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