Opinion
No. 6,537.
Submitted November 26, 1929.
Decided January 29, 1930.
Oil and Gas Leases — Forfeiture — Action to Clear Record of Lease — Statutes of Limitation — Delay Rental — Time Extended Period Expires — Agency — Telegraphs — Banks and Banking.
Oil and Gas Leases — Forfeiture — Action for Cancellation of Record — Limitations of Actions. 1. An action for the cancellation of record of an oil and gas lease which had theretofore been declared forfeited, brought under sections 6902-6904, Revised Codes 1921, held not an action "upon a statute for a penalty or forfeiture" within the meaning of section 9032 prescribing that such an action must be brought within two years, nor one "upon a liability created by statute other than a penalty or forfeiture" for which a like limitation is prescribed by section 9033.
Same — Statute of Limitation — Cancellation of Lease of Record — Statute not One for Penalty. 2. A statute which gives a right that existed prior thereto and merely increases the damages by adding a penalty, as do sections 6902-6904, above, which grant the right to maintain an action to clear title from a cloud created by a recorded oil and gas lease, valid on its face but void or voidable as to plaintiff lessor's title, being remediable in character, is not a penalty statute within the meaning of the statute of limitations.
Same — Limitation of Actions — "Liability Created by Statute" — When Statute Inapplicable. 2a. A statute of limitation, such as section 9033, Revised Codes 1921, prescribing a limitation of two years for an action "upon a liability created by statute," does not extend to an action based upon defendant's alleged negligence in addition to a statutory liability, or to an action in which the element of agreement enters, as where defendant in an action of the nature of the above specifically agreed, as lessee in an oil and gas lease, in case of default on his part to release the lease of record.
Statutes of Limitation — Nature of Cause of Action, not Form, Determines Applicability of Statute. 3. Statutes of limitation cannot be made to apply to a cause of action not embraced within their intention by presenting it in a form of action to which, in terms, it is made applicable; the nature of the cause of action, not the form determines the applicability of such statutes.
Oil and Gas Leases — Release of Record — Sale of Land After Notice to Lessee to Clear Record of Forfeited Lease — Action for Cancellation — Parties. 4. Where the lessor of oil and gas lands, after making demand for cancellation of the lease required by section 6904, Revised Codes 1921, conveyed title by warranty deed to another, both thereafter had a remedial interest in the cause of action for cancellation of the lease, and they having joined as plaintiffs in the action commenced after passing of title, failure of the grantee to make demand upon the lessee to clear the record of the instrument prior to action did not destroy their right to maintain it, demand by the lessor having been sufficient to meet the requirement of the section.
Same — Primary Object of Action to Clear Record of Forfeited Lease. 5. The primary object of an action brought under sections 6902-6904, above, is to clear the record of the cloud on title to oil and gas lands cast thereon by a forfeited lease, not to recover the penalty therein provided for; therefore where the court decreed cancellation of a lease but did not award the penalty, appellant lessor's contention that primary relief, to-wit, the penalty having been refused, the incidental relief — cancellation — was improper, has no merit.
Same — Complaint — Causes of Action — Fact That Statute of Limitations has Run Against One not Fatal to Others — Judgment. 6. The complaint in an action for the cancellation of a forfeited oil and gas lease unites three separate causes of action; one for the cancellation of the lease, one for the recovery of the statutory penalty and one for damages, and the fact that one thereof may be barred by the statute of limitations does not affect the authority of the court to enter judgment on another not so barred, but before judgment for cancellation may be entered proof of the fact that the lease was forfeited is essential.
Same — Construction by Parties Forceful Clue to Meaning of Lease. 7. Where the parties to an oil and gas lease construed it as requiring the payment of delay rental at a certain time, i.e., each period of extension as beginning on a certain day and expiring on the previous day, their conduct in that regard is a forceful clue to arrive at the meaning of the lease.
Same — Delay Rental — Option Agreement — Construction. 8. A provision in an oil and gas lease requiring the lessee to commence a well "within three months from" a certain day on pain of forfeiture "unless at the expiration of said three months" he pay "in advance" each quarter the required delay rental, is not a covenant to pay rent, but an option to extend the lease, otherwise about to expire, and the rules as to option agreements, rather than those for the construction of covenants apply.
Same — "Unless" Leases — Construction Favorable to Lessor, not Lessee — Time of Essence of Contract. 9. Held, that the general rule that forfeitures are not favored in the law does not apply to oil and gas leases; as to them forfeitures are favored, and provisions relating to their extension on payment of delay rental must be liberally construed in favor of the lessor and strictly against the lessee; time is of the essence of the contract and forfeiture follows immediately on default.
Same — "Unless" Leases — Delay Rental — Failure to Pay at Expiration of Period Results in Forfeiture. 10. Where the parties to an oil and gas lease in unambiguous language declare that forfeiture of the lease follows failure to pay in advance and at the expiration of a stated period, no canon of construction, such as that the method of computation prescribed in section 10707, Revised Codes 1921, i.e., by excluding the first day and including the last, may be applied to overcome the clear intention of the parties.
Same — Forfeiture — Failure to Pay Delay Rental "at Expiration of" Extended Period — Meaning of Phrase — Case at Bar. 11. Under the last above rules, held, that where an oil and gas lease provided that the lessor should commence a well within three months from March 4 of a given year or forfeit the lease unless at the expiration of said three months he pay in advance each quarter the required delay rental, the phrase "at the expiration of" marked the close of a period after which the right to act was forever gone; that the lessor having paid the first delay rental on June 3, the second rental period expired at midnight of September 3 and did not extend into the following day, and payment thereafter did not save the lease from forfeiture.
Agency — Person Sending Telegraphic Money Order. 12. One sending a telegraphic money order drawn upon the telegraph company's central office to a bank at a place where the company has no office authorized to pay money, makes the company his agent; the bank, authorized to pay money orders transmitted by telegram, is the agent of the company and the subagent of the sender.
Same — Bank Collecting Agent may Accept Payment in Money Only. 13. Where a bank, as agent of a land owner, is authorized to accept payment of rental in behalf of the latter, it may accept payment in cash only.
Appeal from District Court, Toole County; John J. Greene, Judge.
Mr. Donald Campbell and Mr. Warren Toole, for Appellant, submitted a brief; Mr. Campbell argued the cause orally.
Mr. Homer G. Murphy, Messrs. Belden DeKalb and Mr. Merle C. Groene, for Respondents, submitted a brief; Mr. Murphy and Mr. H. Leonard DeKalb argued the cause orally.
An action to obtain a release of an oil and gas lease, which has become forfeited, and to recover the statutory penalty, costs and additional damages (secs. 6902-6904, Rev. Codes 1921), commenced more than two years and sixty days after the date of forfeiture, and more than two years and twenty days after written demand, is either (a) an action upon a statute for a penalty or forfeiture (subd. 1, sec. 9032, Id.), or (b) an action upon a liability created by statute other than a penalty or forfeiture (subd. 1, sec. 9033, Id.), and hence subject to objection taken by answer that it was not commenced within the limited time. ( Solberg v. Sunburst Oil Gas Co., 70 Mont. 177, 225 P. 612; Daley v. Torrey, 69 Mont. 599, 223 P. 498.)
Where the owner of leased land, by making written demand of the holder of an oil and gas lease that such lease be released of record, initiates a cause of action to obtain a release of such lease which has become forfeited, and to recover the statutory penalty, costs and additional damages (secs. 6902-6904 Rev. Codes 1921) thereafter, and prior to commencing such action, conveys such land to a third person, such transfer not only will not, as an incident thereto, operate as an assignment of such cause of action to the grantee, but will abate the cause of action which had accrued to the grantor; and, accordingly, under such circumstances, neither such grantee, nor such grantor, is entitled to bring such action.
This court in Solberg v. Sunburst Oil Gas Co., supra, likened sections 6902-6904 to statutes penalizing a mortgagee for failure to release a mortgage which has been performed. The courts have had occasion to construe such statutes relative to the question of who was entitled to sue thereunder and, in the absence of words expressly giving the right to the mortgagor's grantee, have held that the grantee was not entitled to sue. ( Capps v. United States Bond Mortgage Co., 274 Fed. 357; Deeter v. Crossley, 26 Iowa, 180.) These holdings are consonant with the general rule that a right of action to recover for damages to land does not pass by a conveyance of the land. ( Corning v. Troy Iron etc. Factory, 39 Barb. (N.Y.) 311 (affirmed 40 N.Y. 191); Harris v. Kingston Realty Co., 116 App. Div. 704, 101 N.Y. Supp. 1104; Lowrey v. Territory, 19 Hawaii, 123.)
In a statutory action at law the primary object of which is to penalize the lessee for a failure to clear the record after forfeiture of an oil and gas lease, and in which the court, as an incident to the primary relief, may clear the record title by canceling the lease (secs. 6902-6904, Rev. Codes 1921), the court, in the absence of awarding the primary relief, may not award the incidental relief of cancellation.
The action was at law. Its primary object was to penalize the lessee; the right to equitable relief was wholly incidental. ( Solberg v. Sunburst Oil etc. Co., supra.) While it is the undoubted right of a court to award the primary relief without awarding the incidental relief, if the case so warrants, the court has no authority to award the incidental relief without awarding the primary relief. This rule is merely an application of the rule that while the incident may follow the principle, the incident may not stand of itself. A cognate application of the rule is to be found in Gilham v. Devereaux, 67 Mont. 75, 33 A.L.R. 381, 214 P. 606, in which this court held that before exemplary damages may be awarded, actual damages must first be found to have been suffered, and predicated its decision on the ground that "punitive damages are never more than an incident to a cause of action for actual damages."
The lease was not forfeited. What was the last day upon which the well should be commenced? In determining this matter the question is one of computation of time. Whether or not the terminus a quo should be included or excluded has been a vexatious question for centuries. In Montana the question has long been settled by statute declaratory of the majority rule. (38 Cyc. 317.) "The time in which any act provided by law is to be done is computed by excluding the first day and including the last, unless the last day is a holiday, and then it is also excluded." (Sec. 10707, Rev. Codes 1921.) It will be observed that the statute refers to "the time," and not to merely "the number of days." It is hence applicable to months. ( South Staffordshire Tramways Co. v. Sickness etc. Assur. Assn., (1891) 1 Q.B. 402, 55 J.P. 168, 60 L.J.Q.B. 47, 63 L.T. Rep. (n.s.) 807; Castle v. Burditt, 3 Term Rep. 623, 100 Eng. Reprint, 768; Toronto Gas Co. v. Russell, 6 U.C.Q.B. 567.)
While the foregoing statute is directed to the construction of the written law, it furnishes a convenient canon for the interpretation of private contracts where no different meaning is exhibited by the instrument to be construed, and no different intention is manifest from the contract. ( Allen v. Effler, 144 Tenn. 685, 235 S.W. 67; Gray v. Worst, 129 Mo. 122, 31 S.W. 585; Fairchild-Gilmore-Wilton Co. v. Southern Refining Co., 158 Cal. 264, 110 P. 951; Law v. Northern Assur. Co. of London, 165 Cal. 394, 132 P. 590; Dickson v. Frisbee, 52 Ala. 165, 23 Am. Rep. 565.)
The circumstances of this case compel the conclusion that both lessor and lessee intended and understood that the day upon which the lease was executed should not be included in computing the period of time within which a well was to be commenced. ( United Timber Co. v. Bivens, 253 Fed. 968, affirmed in 264 Fed. 308; certiorari denied in 253 U.S. 495, 64 L.Ed. 1030, 40 Sup. Ct. Rep. 587.) Accordingly, the delay rental for the second three months' period having been duly paid, the defendant had until midnight of September 4, 1925, within which to commence a well. If he did not do this the demise ceased, unless he should "at the expiration" of this period pay delay rental in advance.
The question next arises as to the meaning of the term "at the expiration." Did it mean that the payment had to be made contemporaneously with the expiration of the last fraction of the last second of the last hour of September 4, or could the payment be made within a reasonable time thereafter? We contend that the defendant was entitled to a reasonable time after the stroke of midnight of the 4th within which to make his election, and that an election prior to noon of the 5th was seasonable. ( Oatman v. Walker, 33 Me. 67.)
The fact that the delay rental was payable "in advance" does not alter the above conclusion, for where rent is payable at intervals in advance, the tenant has the whole of the first day of the interval of time in which to make the payment. (36 C.J. 385, note 66; Wolf v. Ranck, 150 Iowa, 87, Ann. Cas. 1912d 386, 129 N.W. 319; Smith v. Shepard, 15 Pick. (Mass.) 147, 25 Am. Dec. 432; Dalton v. Laudahn, 27 Mich. 529; Sherlock v. Thayer, 4 Mich. 355, 66 Am. Dec. 539; Weiss v. Jahn, 37 N.J.L. 93; Realty Associates v. Purdy, 143 App. Div. 119, 127 N Y Supp. 584.) In view of the fact that the first day of the third three months' period was September 5, 1925, it follows that the defendant had the whole of the 5th within which to pay the delay rental.
While it is true that the general rule that forfeitures are looked upon in the law with disfavor does not apply where the instrument in dispute is an oil and gas lease ( McNamer Realty Co. v. Sunburst Oil etc. Co., 76 Mont. 332, 247 P. 166), this exception in regard to oil and gas leases is not applicable where the provision for forfeiture is ambiguous, as here. ( Decker v. Kirlick, 110 Tex. 90, 216 S.W. 385; Bouldin v. Gulf Production Co., (Tex.Civ.App.) 5 S.W.2d 1019.)
But there is still a further reason why the defendant had the right to make the payment of delay rental on September 5, 1925. The preceding day was a holiday, in consequence of which the bank named as the depository was closed. The plaintiff, Abell, lived at Bear River, twenty miles distant from the bank. The defendant was in Montana. Such being the case the defendant had the whole of the 5th to make payment. ( Armstrong v. McGough, 157 Ark. 173, 29 A.L.R. 236, 247 S.W. 790; Semans v. Adams, (Tex.Civ.App.) 228 S.W. 353; Plumber v. Southern Oil Co., 185 Ky. 243, 214 S.W. 896.)
The gravamen of plaintiffs' cause of action was to secure discharge of an offending instrument encumbering the record. It matters not whether some other incidents are included in the complaint. They might or might not be proved, or might be abandoned, and yet plaintiffs be entitled to a decree of cancellation or relief quia timet.
The case, as tried, presented both legal and equitable rights. At the outset of the trial, it was such a case. Regardless of what happened to the legal rights asserted in the subsequent proceedings of the trial, it did present matters for both legal and equitable cognizance, at the outset. To give the court jurisdiction of that part of the case legal in its nature, it was necessary to expressly waive a jury, and that was done.
The legal rights of the plaintiff, Aurel J. Abell, may have faded from the picture, for the following reasons: (a) Want of proof of damages. It will be remembered that no proof was submitted by plaintiff of any special damage, and, of course, no judgment for any special damage could be sustained, nor is it sought; (b), her assumed cause of action for the statutory penalty might be lost by virtue of the statute of limitations, although this is not conceded. It is contended by defendant that this right did not pass to Norma R. Thompson; ergo, it must have been retained by plaintiff, Abell, unless lost by virtue of the statute of limitations. However, Aurel J. Abell was a proper party plaintiff in this case. She had conveyed, and it is conceded she did, her interest in the lands to plaintiff, Norma R. Thompson. This conveyance was a warranty. If her title was not good, or clouded, at the time of her conveyance, she was liable on the warranty. Under these circumstances, the grantor, Aurel J. Abell, was a very proper party plaintiff in the action. ( Farmers Merchants' Bank v. Tipton, 98 Kan. 34, 159 P. 1016; Sutliff v. Smith, 58 Kan. 559, 50 P. 455; Jones v. Nixon, 102 Tenn. 95, 50 S.W. 740; Jackson Mill Co. v. Scott, 130 Wis. 267, 110 N.W. 184; Coel v. Glos, 232 Ill. 142, 15 L.R.A. (n.s.) 413, 83 N.E. 529; Langrois v. Stewart, 156 Ill. 609, 41 N.E. 177; 21 Standard Ency. Proc. 1007; 9 C.J. 1227.) Plaintiff Thompson had also a cause of action because she owned the land, was in possession, and directly interested. (30 Cyc. 30, 31; 47 C.J. 24; White v. Baley, 65 W. Va. 573, 23 L.R.A. (n.s.) 232, 64 S.E. 1019; 9 C.J. 1224.) Nobody has been misled by the plaintiffs' position in this case. The facts showing this interest are pleaded. It has been too many times decided that all relief of every character that can be afforded in an action of this nature will be awarded by the court. ( Maloney v. King, 30 Mont. 414, 76 P. 939; Stevens v. Equity Mutual Fire Ins. Co., 66 Mont. 461, 213 P. 1110; Raistakka v. Fagerstrom, 64 Mont. 173, 208 P. 949.)
It is wholly immaterial to the point under discussion whether this court shall determine (a) that plaintiff, Norma R. Thompson, never did acquire the statutory right of Aurel J. Abell, or, (b), whether Aurel J. Abell lost that right through the operation of the statute of limitations. The only point necessary to decide is whether or not those facts are present which disclose a cloud upon the title occasioned by an offending instrument which should be removed and whether a cause of action is stated in favor of one or more of the parties plaintiff therefor.
In so far as the purpose of this action is to obtain a release of the oil and gas lease in question, it was not created by the statute as that remedy existed prior to the statute, and is wholly independent of it. ( Solberg v. Sunburst Oil Gas Co., 70 Mont. 177, at 182, 225 P. 612.) "The statute is remedial in its operation." ( Solberg v. Sunburst Oil Gas Co., 73 Mont. 94, at 109, 235 P. 761, at 765.) "Thus we see that by the provisions of Sec. 6902, it is the duty of the lessee, and without any action on the part of the lessor, to record the release within 60 days from the date of forfeiture." ( Steven v. Potlatch Oil Ref. Co., 80 Mont. 239, 260 P. 119.) Since the main purpose of the action, i.e., "to obtain such release," was not created by the statute, but existed independent of it, it cannot be said that the action is upon a "liability created by statute." "The phrase `liability created by statute' means a liability which would not exist but for the statute, and does not extend to an action based upon defendant's alleged negligence in addition to a statutory liability, or to an action in which an element of agreement enters." (37 C.J. 783, 784.)
In Brown v. Quincy etc. Ry. Co., 198 Mo. App. 71, 199 S.W. 707, the court said: "Where the statute gives the same right as existed at common law and merely increases the damages by adding a penalty payable to the party aggrieved, it is not a penalty statute * * * and is not governed by the statute of limitations as to penal actions."
If, by any possible construction, the damage elements of the action could be deemed barred by the two-year statute of limitations, the section of the statute pleaded could not apply to the action, in so far as it seeks to clear the records of the cloud thereon, because the plaintiffs' right to that relief is not, in any respect, based upon the statute. ( Preece v. Oregon Short Line Ry. Co., 48 Utah, 551, 161 P. 40.)
The wrong of the defendant in failing to release the lease of record is a continuing wrong, and continuous up to the date of trial. By the nature of the defendant's act, the action can never be barred, because the wrongful act or omission was continuous up to the date of the commencement of the action and afterwards. (37 C.J. 883, 884; 16 Cal. Jur. 497, 498.) The statute of limitations never runs against a suit to quiet title, or to remove a cloud provided the plaintiff is in possession of the land in question, because in such case, the wrongful claim of the defendant is in the nature of a continuing wrong. (5 R.C.L., pp. 666, 667.) The same rule should be applied to the case under consideration.
The lease was forfeited. The prime question in the case is as to when the Bishop oil and gas lease expired in the absence of drilling or payment. The determination of this question will be based upon the language of the eighth paragraph of the lease. It will be observed that there are two provisions of the eighth paragraph which must be given consideration. The first sentence, complete in itself, contains an agreement which, standing alone, would be absolute, requiring the commencement of a well within three months from the date of the lease. This includes the first day of the term, or the day upon which the lease goes into effect. The lease would terminate under this provision absolutely within, and not beyond, the three months. Under this provision the word "within" can be given only one meaning. If drilling shall save the lease, it must be commenced not later than the midnight marking the end of the third month of the succeeding three months' period. It is not necessary to exhaust the authorities on this point, as the instrument under consideration makes this construction imperative. ( Guerney v. Moore, 131 Mo. 650, 32 S.W. 1132; Sanborn v. Fireman's Ins. Co., 16 Gray (82 Mass.), 448, 77 Am. Dec. 419; Davies v. Miller, 130 U.S. 284, 32 L.Ed. 932, 9 Sup. Ct. Rep. 560; French v. Powell, 135 Cal. 636, 68 P. 92.) The alternative is that in case no well is drilled within three months "all rights and obligations secured under this grant and demise shall cease unless" Bishop should "at the expiration of said three months" elect a further extension by paying the quarterly rental in advance. The word "at" as used in connection with other words and in this connection has been frequently considered, as the court will observe by reading the complete analysis of the phrases used by the authorities construing it "in," and as discussed by the following courts: Lord Ranelagh v. Melton, 2 Drew S. 277, 63 English Reprint, 627; Hollmann v. Conlon, 143 Mo. 369, 45 S.W. 275-278; Ferree v. Moquin etc. Coal Co., 29 Misc. Rep. 624, 61 N.Y. Supp. 120; M. Fine Realty Co. v. City of New York, 53 Misc. Rep. 246, 103 N.Y. Supp. 115; National Water Works Co. v. Kansas City, 62 Fed. 853, 10 C.C.A. 653, 27 L.R.A. 827; I.X.L. Furniture etc. House v. Berets, 32 Utah, 454, 91 P. 282; Rowe v. Atlas Oil Co., 147 La. 37, 84 So. 485; Wilder v. Norman, 147 La. 413, 85 So. 59.
Since under the authorities above cited the second quarter expired on midnight of September 3, 1925, any payment made on September 4 or 5 was clearly out of time, because with the expiration of the lease, all rights thereunder expired, including the right to continue the same in force by payment of delay rental.
In February, 1928, Aurel J. Abell and Norma R. Thompson commenced action against J.B. Bishop for the cancellation of record of an oil and gas lease, declared forfeited in September, 1925, and for damages in the sum of $16,000, in addition to the statutory penalty for failure to release on demand.
The complaint alleges that Abell gave the required notice of forfeiture and thereafter transferred the land described in the lease to Thompson by warranty deed; that defendant failed to either commence a well within time or to pay delay rental when due. By answer, defendant denied that he defaulted, and affirmatively alleged transmission of the amount of delay rental within time, but that Abell's "agent the telegraph company" was unable to deliver the message on the day it was sent. The answer alleges that neither plaintiff is entitled to maintain the action, and sets up two pleas in bar. The affirmative matter in the answer is denied by reply.
The cause was tried to the court without a jury, and on the trial plaintiffs abandoned their claim for special damages. At the close of plaintiffs' case defendant moved for dismissal as to each of the plaintiffs separately and then moved for judgment of nonsuit as to each of them, and renewed these motions at the close of the case. Each motion was overruled. On the record made, the court made findings in favor of plaintiffs and thereon entered judgment declaring the lease "forfeited and terminated" and ordering its release and cancellation of record, but did not award plaintiffs the statutory penalty.
Defendant has appealed from the judgment, and, by appropriate specifications of error, presents for our determination the questions raised by his several motions made during the trial.
1. Counsel for defendant first contend that the action is predicated upon sections 6902, 6903 and 6904, Revised Codes 1921, and is, therefore, barred by the provisions of section 9032, Id., which provides that an action "upon a statute for a penalty or forfeiture" must be commenced within two years, or by section 9033, Id., which prescribes a like limitation upon action "upon a liability created by statute other than a penalty or forfeiture."
This is not an action "upon a statute for a * * * forfeiture," but an action wherein, a forfeiture having been declared, the plaintiffs seek to have the record cleared of the cloud on the title to the land existing by reason of the lease, valid on its face, remaining of record, and for the penalty provided for in section 6903, above ( Solberg v. Sunburst Oil Gas Co., 70 Mont. 177, 225 P. 612; see, also, Merk v. Bowery Min. Co., 31 Mont. 298, 78 P. 519, and note; 15 A.L.R. 604); the right to recover special damages pleaded having been waived at the beginning of the trial.
Section 6902 declares that, "when any oil, gas, or other mineral lease * * * shall become forfeited, it shall be the duty of the lessee * * * within sixty days from the date of the forfeiture * * * to have such lease released from record * * *." This section declares the duty of the lessee, which duty attaches on forfeiture without action on the part of the lessor ( Steven v. Potlatch Oil Refining Co., 80 Mont. 239, 260 P. 119) and, regardless of whether or not such a duty existed independent of the statute as a matter of law, it was imposed upon the lessee in the instant case by his agreement in the lease to execute and deliver to the lessor, in case of default, "a full discharge, satisfaction and release," which might be then recorded by the lessor. Had the lessee complied with this requirement of his contract, he might have had a complete defense to this action, as the parties had modified the statutory duty to that extent.
Section 6903 provides that, "should the owner of such lease neglect or refuse to execute a release as provided by this Act, then the owner of the leased premises may sue * * * to obtain such release, and he may also recover * * * the sum of one hundred dollars as damages, and all costs * * * and * * * any additional damages that the evidence in the case will warrant."
Section 6904 requires, as a condition precedent to maintaining the action, that the land owner serve written notice upon the lessee for cancellation at least twenty days prior to commencing action.
These provisions are remedial in their character and operation. ( Solberg v. Sunburst Oil Gas Co., 73 Mont. 94, 235 P. 761; Steven v. Potlatch Oil Refining Co., above.)
The right to maintain an action to clear title from a cloud created by a recorded instrument, valid on its face, yet void or voidable as to the plaintiff's title, existed long prior to the enactment of sections 6902, 6903 and 6904, as Chapter 22, Laws of 1917 (sec. 8733, Rev. Codes 1921, enacted in 1895), and the right to bring an action to cancel a breached and forfeited oil lease, as a cloud on title, exists independent of any statute. (2 Thornton's Law of Oil Gas, 1612.)
As to the applicability of such statutes of limitation as are here relied upon, the rule is "the phrase `liability created by statute' means a liability which would not exist but for the statute, and does not extend to an action based upon defendant's alleged negligence in addition to a statutory liability, or to an action in which the element of agreement enters," and "statutes prescribing the period within which penal actions must be brought are not to be so construed as to defeat an action under a remedial statute." (37 C.J. 783 and 789.)
Although statutes of limitations, being founded on sound policy, so far as they are statutes of repose, are not to be evaded by construction, they cannot be made to apply to a cause of action not embraced within their intention by presenting it in a form of action to which, in terms, it is made applicable; the nature of the cause of action, not the form, determining the applicability of the statutes. (Endlich on Interpretation of Statutes, 476.) So, where a statute gives a right which existed theretofore and merely increases the damages by adding a penalty, it is not a penalty statute within the meaning of the statute of limitation as to penalty statutes. ( Brown v. Quincy, O. K.C. Ry. Co., 198 Mo. App. 71, 199 S.W. 707; Preece v. Oregon Short Line Ry. Co., 48 Utah, 551, 161 P. 40.)
Under the above rules, the most that could be said is that the limitation invoked might apply to the cause of action for the recovery of the penalty; it does not apply to the cause of action for the cancellation of the lease of record, and, therefore, the judgment herein is not vulnerable to the attack that the statute of limitations had run against the cause of action on which the judgment is based.
2. Counsel for defendant next assert that, as plaintiff Abell, as owner, made the demand for cancellation under the provisions of section 6904, and thereafter parted with title and plaintiff Thompson was the owner of the land in question at the time suit was commenced, but did not make the statutory demand, neither plaintiff was in a position to maintain the action.
Calling attention to the fact that, in the Solberg Case in 70 Mont. 177, 225 P. 612, this court likened the sections under consideration to statutes penalizing a mortgagee for failure to release a mortgage which has been paid, counsel cite Capps v. United States Bond Mortgage Co., (C.C.A.) 274 Fed. 357, and Deeter v. Crossley, 26 Iowa, 180, with certain decisions to the effect that a right of action to recover damages for injury to real property does not pass by conveyance of the land. None of these cases are persuasive here. In the Capps Case the action was solely for the recovery of a drastic penalty for failure to satisfy a mortgage of record; the court held that, as the statute gave the right to the mortgagor only, and the reason for its enactment was that an unsatisfied mortgage of record affected the pecuniary standing of the mortgagor, the penalty could not be recovered by the grantee of the land. It does not follow that such grantee could not sue to have the record cleared of the satisfied mortgage.
The Deeter Case does not support the position taken; the decision there is based on a showing that the mortgage was in fact satisfied before demand and suit, but the court declares: "We cannot concur with the learned judge * * * that plaintiff having conveyed the land * * * to the defendant, this is a defense to an action for the penalty."
As to the remaining cases cited, a grantee takes the land as he finds it at the time it is conveyed to him; consequently, an action for prior injury does not pass to him, but this situation is not found in the case at bar; here the cause of action for the penalty was, in effect, decided against the plaintiffs; the judgment is on the cause of action to rid the record of the cloud on title. As title was conveyed, after demand for release, by warranty deed, each of the plaintiffs has a remedial interest in this cause of action and might maintain such an action. ( Kersten v. Coleman, 50 Mont. 82, 144 P. 1092; secs. 9067, 9077, Rev. Codes 1921; 47 C.J. 24, 25.) In view of the fact that plaintiff Thompson did not make the statutory demand, it may be that she alone might not have maintained the action under the statute, but, as plaintiff Abell was qualified to make the demand at the time it was made and joined in the action, the demands of the statute, as a prerequisite to maintaining the action, were complied with.
3. It is next contended that, as the primary relief provided for in the statute was not awarded, the court was without authority to award the incidental relief of cancellation.
This contention is based upon the statement made in Solberg v. Sunburst Oil Gas Co., 70 Mont. 177, 225 P. 612, 614, above, that "it is manifest that, when the legislature enacted the sections on which this action is based * * * its primary object was to penalize the lessee for a failure to clear the record after forfeiture of the lease," by a special statutory action. This statement is not open to the construction placed upon it, i.e., that the purpose of the action is to recover the $100 penalty, and the cancellation of the instrument of record is but incidental to that purpose.
The primary object of the legislature in enacting the statute was to penalize the failure to perform the duty imposed by section 6902, but this was merely done in the hope that the imposition of the penalty would spur the delinquent lessee to diligence in performing the duty imposed. The primary object of the action is not to recover the penalty, but to clear the record of the cloud on title, and, we apprehend, the plaintiff in such an action is not ordinarily concerned over the recovery, or failure to recover, the statutory penalty.
The purpose of the provisions of the statute is correctly stated in Daley v. Torrey, 71 Mont. 513, 230 P. 782, 783, where it is said: "The owner is authorized to maintain an appropriate action and combine therein (a) a cause of action for the cancellation of the lease; (b) a cause of action for the recovery of the statutory penalty; and (c) a cause of action for damages." This is the order of precedence and of importance set out in the statute itself. The complaint in such an action may, and does, unite three separate causes of action, and the fact that one thereof may be barred by the statute of limitations does not affect the authority of the court to enter judgment on another not so barred. The judgment was properly entered if the facts established warrant its entry.
4. The chief question raised is as to the correctness of the court's finding that defendant forfeited his lease. Proof of this fact is a prime requisite to judgment of cancellation of the record. ( Solberg v. Sunburst Oil Gas Co. — both cases — above.)
The record on this phase of the case discloses the following facts: In the lease, executed on March 4, 1925, the defendant agreed to "commence a well" on the leased premises "within three months from the date" thereof, and it then provided that, on his failure so to do, his rights should become forfeited, "unless at the expiration of said three months" he should elect to continue the lease in force "by paying quarterly in advance one dollar per acre until said well is commenced." Defendant was given the privilege of either paying the lieu rental to the lessor personally or depositing it to her credit in the First National Bank of Steamboat Springs, Colo. At the expiration of the first three months' period the defendant complied with the "unless" provision of the lease by paying the requisite amount on June 3, 1925.
On September 1 following, the lessor, through her attorneys, wired defendant from Steamboat Springs: "Wire rental to First National Bank here by September third or will forfeit lease." This demand was the result of certain correspondence in which defendant had urged that the lease was validated by drilling commenced on the ground by a stranger to the lease. The message was received by defendant at Great Falls on September 4 and he immediately caused to be transmitted a telegraphic money order for the amount of the lieu rental, drawn on the telegraph company's agent at Denver and payable to the designated bank. This order was received by the telegraph company at Steamboat Springs on September 4, but, as the bank was closed on account of a local holiday, it was not delivered until the 5th; it was then cleared through Denver and the money received and placed to Abell's credit on the 8th; she was notified, but refused to accept the payment. On December 3 defendant remitted the amount of lieu rental for the fourth period to the designated bank, but this payment was also rejected, and both sums were thereafter returned to defendant on his demand.
It will be noted that both parties to the lease had, prior to the commencement of the action, construed the lease as requiring the payment of the delay rental on the 3d of the appropriate month, as "at the expiration" of the period then closing, which was manifestly in accordance with the letter of the agreement; the defendant by payment on June 3 and tender of a like amount on December 3; the plaintiff Abell by demand that payment for the third period be deposited on September 3.
The cause was tried on the theory, stated by counsel for plaintiff in opening, that, under the express provisions of the lease, each period began on the fourth day of the month and expired on the third day of the third month following, and counsel consistently urge that theory here. Accepting this statement as the position of the plaintiffs, and without challenging the same on technical grounds, counsel for defendant contended, and now contend, that the method of computation prescribed in section 10707, Revised Codes of 1921, i.e., by excluding the first day and including the last, applies, and therefore the third period did not expire until September 4, at midnight, but that, as it is not presumed that parties will be up for the transaction of business, or a bank open to receive deposits at midnight, the defendant had a reasonable time on September 5 in which to make the deposit; and, further, that, as September 4 was a holiday, that day should be excluded, thus giving defendant all of the 5th in which to make deposit, and, as by her demand Abell had made the telegraph company her agent, the delivery of the telegraphic money order on that day was sufficient, although the actual money was not deposited until the 8th, her action being a waiver of payment in the manner prescribed by the lease.
The acts of the parties who made a lease, and knew its purpose, are a forceful clue to get at the meaning. ( Caperton's Admr. v. Caperton's Heirs, 36 W. Va. 479, 15 S.E. 257.)
What counsel for defendant term "the peculiar provisions" of the lease require defendant "to commence a well * * * within three months from * * *" March 4, on pain of forfeiture, "unless at the expiration of said three months" he shall pay "in advance" each quarter the required delay rental. This is not a covenant to pay rent, but only a clause giving the lessee the privilege of keeping the lease alive and operative without drilling — but an option to extend the lease, otherwise about to expire, by paying for the privilege in the manner prescribed. Failure to pay was not a violation of any provision of the lease, as the lessee did not agree to pay. ( Smith v. South Penn Oil Co., 59 W. Va. 204, 53 S.E. 152; Van Etten v. Kelly, 66 Ohio St. 605, 64 N.E. 560.) The rules as to option agreements, rather than those for the construction of covenants in a contract, should therefore be applied. ( Central Ohio Natural Gas Fuel Co. v. Eckert, 70 Ohio St. 127, 71 N.E. 281.)
In considering the effect of this specific requirement we must bear in mind that, if the intention of the parties is clearly expressed, the terms of the instrument will control over all mere rules of construction ( Butte Water Co. v. City of Butte, 48 Mont. 386, 138 P. 195; Ming v. Pratt, 22 Mont. 262, 56 P. 279; Lehrkind v. McDonnell, 51 Mont. 343, 153 P. 1012), and that, owing to the peculiar product to be produced and the fact that the purpose of such leases is to have the land explored and tested for oil, rather than to yield ground rental, it has been found necessary to guard the rights of the land owners, as well as the public, by numerous covenants and provisions, some of the most stringent kind, to prevent lands from being burdened by unexecuted and profitless leases, and the forfeiture for nondevelopment is essential to private and public interest in relation to the use and alienation of property (1 Thornton's Law of Oil and Gas, 596); consequently, the general rule that forfeitures are not favored in the law does not apply to leases for the purpose of having lands explored for oil or gas; rather, in this class of cases, forfeitures are favored ( McNamer Realty Co. v. Sunburst Oil Gas Co., 76 Mont. 332, 247 P. 166), and such provisions as that under consideration are to be construed liberally in favor of the lessor, bound thereby, and strictly against the lessee who is not bound. Time is of the essence of the contract, and forfeiture follows immediately on default. ( McDaniel v. Hager-Stevenson Oil Co., 75 Mont. 356, 243 P. 582.) Under such a provision, these rules are applied both at law and in equity. (2 Page on Contracts, 1792.)
The phrase "at the expiration of" defines a limit of time; it marks the close of a period after which the right to act is forever gone; it is a "vital, mandatory and controlling" provision; it expresses the intention of the parties that the lessee's option shall be exercised when his rights would otherwise cease, and not thereafter. However, the word "at" is said to be equivalent to "in or near," and the provision is construed, not to require action "at the very punctum temporis" when the term expires, but within a reasonable time before, not after, that final moment. ( People ex rel. Knight v. Blanding, 63 Cal. 333; Lord Ranelagh v. Melton, 2 Drew S. 277, 63 Eng. Reprint, 627; Hollman v. Conlon, 143 Mo. 369, 45 S.W. 275; Ferree v. Moquin etc. Coal Co., 29 Misc. Rep. 624, 61 N. Y: Supp. 120; M. Fine Realty Co. v. City of New York, 53 Misc. Rep. 246, 103 N.Y. Supp. 115; I.X.L. Furniture etc. House v. Berets, 32 Utah, 454, 91 P. 279, 282; Tilton v. Sterling Coal Coke Co., 28 Utah, 173, 107 Am. St. Rep. 689, 77 P. 758.) The lessor is entitled to know, at the moment the lease expires, whether he still has a tenant or is in a position to lease to a new tenant. ( I.X.L. Furniture etc. House v. Berets, above.)
In construing a contract it is only by adopting a fiction for convenience that it can be said that the first day of a given period is to be excluded and the last included, thus extending the period one day; the first day of a period is as much a part thereof as any other day within the period; for example, a month begins on the first day thereof and ends on the last. Likewise, the "period" of minority always ends on the last day preceding the twenty-first anniversary of birth. (1 Blackstone's Commentaries, 462; Ross v. Morrow, 85 Tex. 172, 16 L.R.A. 542, 19 S.W. 1090; Ex parte Wood, 5 Cal.App. 471, 90 P. 961.)
Where, as in the lease under consideration, the parties have declared in plain and unambiguous language that forfeiture follows failure to pay "in advance" "at the expiration" of a stated period, no mere canon of construction can be resorted to to overcome the clear intention of the parties.
Under the lease and the foregoing decisions, the expiration date was September 3, 1925, and failure to pay on or before midnight of that day warranted the declaration of forfeiture; the fact that the "punctum temporis" when the period expired was midnight did not extend the time into the following day. This conclusion is fortified by reasoning and declarations found in the following cases: I.X.L. Furniture etc. House v. Berets, above; Adams v. Dunn, 64 Pa. Super. 303; Nathan v. Sinclair, 65 Pa. Super. 237; Darling v. Hoban, 53 Mich. 599, 19 N.W. 545; Rowe v. Atlas Oil Co., 147 La. 37, 84 So. 485; Dill v. Fraze, 169 Ind. 53, 79 N.E. 972; Mason v Payne, 47 Mo. 517; Magoffin v. Holt, 1 Duv. (62 Ky.) 95; Renoud v. Daskam, 34 Conn. 512; Guyer v. Warren, 175 Ill. 328, 51 N.E. 580. See, also, as to the actual time of expiration of the period: Herman v. Winter, 20 S.D. 196, 105 N.W. 457, and Gray v. Maier Zobelien Brewery Co., 2 Cal.App. 653, 84 P. 280.
But even if the rule were otherwise, and the defendant could have made an effective payment on September 4 or 5, the judgment must be affirmed, as payment was not actually made until the 8th.
Abell's telegram of September 1 may be paraphrased to read: "You may wire the rental to the First National Bank here, provided you wire it by September third." The lessor was under no obligation to advise the defendant as to when payment must be made, and, as the rental was not wired on the 3d, the message may be entirely disregarded; it had no effect whatever. When, therefore, the defendant sent his telegraphic money order to the bank on the 4th, he made the telegraph company his agent ( Bond v. Hurd, 31 Mont. 314, 3 Ann. Cas. 566, 78 P. 579), and the depository bank, being authorized to pay money orders transmitted through the telegraph company, as set out in the agreed statement of facts, was the agent of the telegraph company and subagent of the defendant for that purpose; indeed, the very message sent so provides, for it is therein stated that, "when the company has no office at destination authorized to pay money, it shall * * * be the agent of the sender * * * to contract on the sender's behalf with * * * any bank * * * for the final payment of this order." As the agent of the land owner for the acceptance of payment of the rental, the bank was not authorized to receive in payment anything but cash. ( Case v. Kramer, 34 Mont. 142, 85 P. 787; 2 C.J. 628.) The attempted payment was not therefore, received by the depository bank until September 8.
Having arrived at the above conclusion, it becomes unnecessary to consider the remaining questions raised by counsel for defendant.
The judgment is affirmed.
MR. CHIEF JUSTICE CALLAWAY, ASSOCIATE JUSTICES GALEN and ANGSTMAN, and HONORABLE C.P. POMEROY, District Judge, sitting in place of MR. JUSTICE FORD, disqualified, concur.