Opinion
No. 35141.
November 23, 1942.
1. MINES AND MINERALS.
Under oil and gas lease providing for termination unless well was commenced by certain date or unless lessee paid certain amount per acre for renewal, lessee's assignees had a mere "option" to renew and did not owe lessors any "debt" with respect to renewal.
2. PAYMENT.
Where one person pays the debt of another, either by agreement or out of a feeling of charity, the debt is liquidated and cannot be collected again.
3. MINES AND MINERALS.
An oil and gas lease, giving lessee option of renewal, providing for partial assignment, and providing that default by part of assignees should not affect others, was "divisible," and hence where one assignee, who was required to pay $40 for renewal of his interest, erroneously made timely payment of $80, such overpayment did not renew interests of other assignees who failed to make timely renewal payment of $20 but subsequently paid $20 to assignee under agreement for application of overpayment to work such renewal.
APPEAL from the chancery court of Yazoo county, HON. M.B. MONTGOMERY, Chancellor.
Howie, Howie McGowan, of Jackson, for appellants.
The oil and gas lease between Walkers and M. Carl Jones is essentially unitary and an indivisible contract.
3 Summers Oil Gas, Permanent Edition, Ch. 16.
Lessees and assignees in oil and gas lease have the right to pay rentals one for all and to adjustment of equities.
Broyles v. Gilman (Tex. Civ. App. 1920), 222 S.W. 685; Hyaldahl et al. v. Alphin et al. (Ark.), 290 S.W. 44.
A lessor having received and retained delay rentals is estopped to assert or claim forfeiture of lease.
McCrory et al. v. Twombly (Okla.), 266 P. 769; Love Petroleum Co. v. Atlantic Oil Producing Co., 169 Miss. 259, 152 So. 829.
Oil and gas leases in Mississippi are construed like other leases, against maker.
Love Petroleum Co. v. Atlantic Oil Producing Co., supra.
Development of assigned portion of lease will save the whole lease.
Smith et al. v. Gypsy Oil Co. (Okla.), 265 P. 647.
An oil and gas lease is a privilege for entry and exploration, and not a conveyance.
Hitson et ux. v. Gilman et al. (Tex. Civ. App. 1920), 220 S.W. 140; Young v. Jones (Tex. Civ. App. 1920), 222 S.W. 691.
W.E. Morse, of Jackson, for appellee.
In an oil and gas lease, where the unless clause is used, and the lease expressly provides that, if a well is not completed by a certain date, the lease shall be null and void unless the lessee pays a certain sum in advance for the extension of his privileges to explore the land, there seems to be no question but that the lessee, to save the lease from termination, must pay the stipulated sum at the beginning of the rental period. And the same result follows if the lease instead of expressly providing that the lessee pay in advance provides that if the lessee does not drill by a certain date the lease will be null and void unless the lessee pays a stipulated sum on or before that date.
Love Petroleum Co. v. Atlantic Producing Co., 169 Miss. 259, 152 So. 829; Gillespie v. Bobo, 271 F. 641; Empire Gas Fuel Co. v. Saunders, 22 F.2d 733; Summers on Oil and Gas, Sec. 341, p. 230.
The characteristic feature of the "unless" form of rental clause is the fact that lessee does not promise to either drill or pay delay rentals, but lease merely provides that the lease will terminate if a well is not commenced by a certain date unless delay rentals are paid. Since this is a clause of special limitation the lease terminates automatically upon the failure of a lessee to drill or pay and no declaration of forfeiture by the lessor or surrender by the lessee is necessary. Many jurisdictions hold that no excuse is available to the lessee for failure to pay the exact amount due to the proper claimants on the rental payment date and refuse to grant equitable relief against termination.
Humble Oil Ref. Co. v. Davis (Tex. Com. App. 1927), 296 S.W. 285; Empire Gas Fuel Co. v. Saunders (5th Cir. 1927), 22 F.2d 733.
Even delay in the mails has been held ineffective to prevent termination.
Appling v. Morrison (Tex. Civ. App. 1921), 227 S.W. 708; Gillespie v. Bobo (5th Cir. 1930), 271 F. 641; Gloyd v. Midwest Ref. Co. (10th Cir. 1933), 62 F.2d 483.
The same obligations were upon the holders of a portion of the lease as were upon the original lessee.
3 Summers 289, Sec. 551; 3 Summers 300, Sec. 553; 3 Summers, Sec. 452; 3 Summers 180, Ch. 16; 3 Summers 181.
The chancellor, in construing the lease in his opinion, found as to the terms of the lease and as to the facts with reference to the payments thereto as follows:
"It is clear from the foregoing authorities, and I have found none to the contrary nor have any been cited by counsel, that under the `unless' form of lease there is (1) no obligation on the part of the lessee or his assignee to pay any rent and (2) the lease does not secure the payment of any rental, and (3) the lease confers on the lessee or his assignee a privilege for a specified time with the option to secure the extension of the privilege for an additional period upon complying with the prescribed condition and (4) time is of the essence of such provision of condition. It follows logically, therefore, and I have heard no argument to the contrary, that, unless the rent was paid on or before its due date, the prescribed condition was not complied with, the extension of the privilege was not renewed for any additional period, and the lease as to the SW 1/4 of SW 1/4 of Section 2, T 9, R 3 W, was terminated.
"The `unless' form of lease confers on the lessee or his assignee the privilege, therein contained, for a specified time. In addition it contains an option or irrevocable offer to extend the privilege for an additional period of time upon a compliance with its terms by the payment of rent. To express the same thought in greater detail, the `unless' form of lease provides an irrevocable offer by the grantor to extend the provisions of the lease for a specified time (1) as to all the lands contained in the lease upon payment, within the time specified, of the stipulated rent on each and every acre covered by the lease; or, (2) as to such segregated portion of the lands, as to which the lessee has not assigned his lease, upon payment, within the time specified, of the stipulated rent on each acre covered by the lease and not assigned by him; or (3) as to such segregated portion of the lands as may have been assigned by the lessor, upon payment, within the time specified, of the stipulated rent on each acre contained in such assignment. In other words, the lease contains the following irrevocable offers to renew upon payment of the rent: (1) There is an offer to renew as to M. Carl Jones the lease upon the lands still held by him as above described; (2) There is an offer to renew for a twelve months period the provisions of the lease on the lands held by W.G. Ray as to the lands covered in his assignment; (3) likewise there is an offer to renew the lease on the lands assigned to S.D. Hunter; (4) another offer as to the J.L. Condon lands; (5) another as to the V.V. Ryan lands; and (6) another as to the J.H. White lands.
"Now the offer, contained in the lease, to extend the privileges therein contained, does not ripen into a contract of extension until the offer has been accepted and there has resulted a meeting of the minds. This is elementary law and requires no citation of authority.
"The Walkers, in the lease, offer to M. Carl Jones to renew his lease for a year on W 1/2 of NE 1/4 and NW 1/4 of SE 1/4 and E 1/2 of SW 1/4, Sec. 2, T 9, R 3 W for the sum of $100.00. This is the only offer contained in said lease as made to Jones. Jones could not by his acceptance enlarge upon the offer, but he must unconditionally accept each and every term of the offer. Accordingly, the payment of the $100.00 could not operate to extend the lease upon any more than the lands contained in the offer. Jones also described in his acceptance the SE 1/4 of NW 1/4 of Sec. 2, T 9, R 3 W, which he had assigned to Ryan and which was the sole land contained in the Ryan assignment that had not been reassigned by him. The amount due on these acceptances was $120.00. Jones paid $160.00. What offer was the remaining $40.00 paid in acceptance of? Was it paid in acceptance of the Ray offer, the Hunter offer, the White offer, or the Condon offer, or was it paid because of a mistake or miscalculation as to the amount he was due to pay? The letter to the Bank, accompanying the checks for rent, is as follows:
"`Delta National Bank "`Yazoo City, Miss.
"`Gentlemen:
"`I hand you herewith my check for the sum of $80.00, No. 5319, and my check No. 5320 for the sum of $80.00 which amounts you will please credit as follows:
"`Bill Walker and Mrs. Ruby Walker — $80.00. This deposit is in payment of rentals due under oil and gas lease dated September 5, 1939, executed by Bill Walker and Mrs. Ruby Walker, lessors, to M. Carl Jones, lessee, covering an interest in the W 1/2 of NE 1/4 and NW 1/4 of SE 1/4, and SE 1/4 of NW 1/4 and E 1/2 of SW 1/4, Section 2, Township 9 North, Range 3 West, Yazoo County, Mississippi, and extends said lease to September 5, 1941.
"`Joe Walker and Cora Mae T. Walker — $80.00. This deposit is in payment of rentals due under oil and gas lease dated September 5, 1939, executed by Joe Walker and Cora Mae T. Walker, lessors, to M. Carl Jones, lessee, covering and interest in the W 1/2 of NE 1/4 and NW 1/4 of SE 1/4, and SE 1/4 of NW 1/4, and E 1/2 of SW 1/4, Section 2 Township 9 North, Range 3 West, Yazoo County, Mississippi, and extends said lease to September 5, 1941.
"`I enclose, for your convenience, a copy of this letter with a receipt at the bottom of same, which I will thank you to please sign and return to me at once.
"`Yours very truly, "`(Signed) M. Carl Jones
"`Receipt is acknowledged of the deposits above described and same have been placed to the credit of the above named, in the proportions above stated, all in accordance with the foregoing instructions.
"`This, 24th day of August, 1940. "`Delta National Bank "`Yazoo City, Mississippi "`By ____ "`Vice-Prest. Cashier'
"Attention is called to the fact that the rent paid the bank was on lands particularly described and the SW 1/4 of SW 1/4 of Section 2, T 9, R 3 W was not included.
"The letter accompanying the J.L. Condon payments to the bank for rent was as follows:
"`The Delta National Bank "`Yazoo City, Miss.
"`Gentlemen:
"`I am enclosing you herewith certified check in the sum of $80.00 covering oil and gas lease rental on the SE 1/4 of the NE 1/4 and NE 1/4 of the SE 1/4 Section 3, Township 9 N, Range 3 W., Yazoo County, Mississippi, which was originally leased by Joe and Bill Walker, et als to M. Carl Jones and assigned by M. Carl Jones to J.L. Condon.
"`It would appear from the records this should be divided as follows:
"`Resin W. Williams $ 1.67 "`N.R. Williams .33 "`T.H. Griffis, Trustee $10.00 "`Joe Bill Walker 68.00
"`The original lease designates your bank as place for payment of rentals. Please acknowledge receipt of this remittance.
"`Yours very truly, "`(Signed) J.L. Condon
"`CEI/da "`Enc.'
"The memorandum attached to the check of W.G. Ray Drilling Company was as follows:
"`This acts as lease rental for delay in drilling on NE 1/4 of NW 1/4, and SW 1/4 of NW 1/4, Section 2-9N-3W, Yazoo County, Mississippi, and extends lease for period of one year ending September 5, 1941. (Lse #73)'
"Each of the foregoing payments were tendered as rents on certain and particularly described lands, and the SW 1/4 of SW 1/4, of Section 2, T 9, R 3 W, was not included in any of them.
"Condon was paid $80.00 as rent on SE 1/4 of NE 1/4 and NE 1/4 of SE 1/4 of Section 3, T 9, R 3 W. He was due to pay only $40.00 because of the diminution clause of the lease, since the Federal Land Bank owned one-half of the minerals. Consequently, he overpaid the Walkers to the extent of $40.00. Did he tender this extra $40.00 as rent on the White lands? His letter does not so state nor even imply. There is no implication contained in either the Jones or the Condon letter that would justify the court in holding that it was the intention of either of them to tender any money in payment of the rent on the White lease, viz: SW 1/4 of SW 1/4, of Section 2, T 9, R 3 W.
"Was the money tendered in payment of the rent on the White assignment? In its ordinary legal sense, payment involves an actual or constructive delivery, by a debtor or some one for him, to his creditor, or some other person authorized to receive it, of money or something accepted by the creditor as the equivalent thereof, with the intention or purpose on the part of the payor or transferor to extinguish a debt or obligation in whole or in part, and its acceptance by the creditor for the same purpose. See 48 C.J. Page 585, Sec. 1.
"In Adele Gernon et als. v. David C. McCan, 23 La. Rep. 84, the Court said:
"`It is true that the payment of a debt which is to be acquitted in money, is permitted to be made by a third person, even one not interested. The right thus to pay is absolute; it may be exercised not only against the will of the creditor, but without the knowledge and even against the opposition of the debtor; because on the one hand the creditor has no interest and consequently no right to refuse a regular and satisfactory payment, and it is a matter of indifference whence the money comes, and because, on the other hand, it is permitted to everyone, by a kind of "fraternal mandate," to ameliorate the condition of another, even without his knowledge and against his will. Larombiere on Obligations, Volume 3, page 66. Thus Gaius decided: "Solvere pro ignorante et invito ciuque licet, cum sit jure civile constitum licere etiam ignorantis inditique meliorem conditionem facere," Dig. 46, 3, 53; and this rule of the Roman law has been continued in Article 1236 of the Code of Napoleon and in corresponding article 2130 of the Code of Louisiana.
"`But it seems equally clear that the payment thus permitted must be the deliberate and intentional act of the third person who makes it; that this provision of law is not meant to entrap the unwary; and that one who, like Stone or Henry, sends his broker to buy negotiable paper, shall not find that paper turning to ashes in his grasp, as by a sort of legal socery, simply because the person to whom he gives his money erroneously imagines that the transaction is a payment, and not a purchase. In the case of Bloodworth v. Jacobs, 2 Ann. 26, this court said in regard to payment: "It is not only the delivery of a sum of money but the performance of an obligation. It is an act calling for the exercise of the will, of consent without which it has not the characteristics of that mode of extinguishing obligations;" and we are satisfied that there was no such consent in the case at bar.'
"In Breck v. Blanchard, 22 N.H. 303, the Court said:
"`To make a payment effectual to discharge a debt of any kind, it must be proved to have been made and received in discharge of the debt, and so as to extinguish it. Fitch v. Sutton, 5 East, 231; 1 Ch. Ret. 390. 2 Saund. El. and Ed. 716.'
"In Bradley v. Lehigh Valley Railroad Company, 153 Fed. Rep. 350, Norse Co. shipped a cargo of wheat that was damaged in transit. The insurer paid Norse Co. $3,392.85, a sum equal to the amount of the loss. Norse Co. then assigned their claim against the railway company to one Bradley, who brought suit for the damages. The Court, in permitting recovery, said:
"`Treating the transaction as a payment of the loss, it did not discharge the liability of the railroad company upon the theory of extinguishment. Payment of an obligation of another by a third person does not discharge it as between the original parties, unless the payment is made and received with the intention that it shall do so."
"In order for the surplus paid by either Jones or Condon to operate as a tender and payment of the rent due by White, it must be alleged and proven that Jones or Condon paid to the Delta National Bank the sum of $20.00 with the intention or purpose, on their part, to apply same in payment of the rent due on the White portion of the lease, and it was accepted by the bank, as agent for the Walkers, as payment of the rent on SW 1/4 of SW 1/4, of Section 2, T 9, R 3 W. The proof, as shown by the agreed statement of facts, does not so show. The burden is on the complainant."
The contention of the appellants is that this lease is indivisible. In our minds the appellants have made a misinterpretation of the covenants that are indivisible of an oil and gas lease. In the first place, the divisibility of rentals for certain lands is recognized in the lease itself. The lease provides that it can be assigned in whole or in part.
In the situation where the lessor leases a single tract of land, the lease upon a part of which is later conveyed by the lessee, a Louisiana court has held that a provision which permits partial assignments and allows the partial assignee to extend the lease as to his portion by paying a proportionate part of delayed rentals, makes the covenants divisible upon assignment.
Summers on Oil and Gas, Ch. 16, pp. 202-203.
There is no restriction on the covenant for paying rents and deferring the commencement of a well. That is the only issue in this case.
Appellants White and Bradshaw had an oil and gas lease on forty acres of land in Yazoo County. Appellee Hunt acting on the assumption that their lease had expired obtained a like lease from the common source. Thereupon appellants filed their bill in the chancery court of that county seeking to cancel as a cloud on their title appellee's lease upon the ground that their lease was valid and subsisting when appellee acquired his. The cause was heard on original and amended bills, answers, exhibits, and agreed facts, resulting in a decree in favor of appellee dismissing the cause; from which decree appellants prosecute this appeal.
We have legal questions exclusively to pass on. The main and controlling question is whether or not at the end of the first twelve months of appellants' lease they paid the lessor the amount provided for in the lease for its extension for another twelve months.
The provisions of appellants' lease necessary to have in mind follow:
"If no well be commenced on said land on or before the 5th day of September, 1940, 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 Delta National Bank at Yazoo, which bank and its successors are the lessor's agent and which shall continue as the depository regardless of changes in the ownership of said land the sum of $1.00 per acre (changed to $.50 on account of Federal Land Bank's ownership of half interest in the mineral rights in the lands owned by the lessors), which shall operate as a rental and cover the privilege of deferring the commencement of a well for twelve months from said date. In like manner and upon like payments or tenders, the commencement of a well may be further deferred for like periods of the same number of months successively. . . .
"If the estate of either party hereto assigned, and the privilege of assigning in whole or in part is hereby expressly allowed, the covenant hereof shall extend to their heirs, executors, administrators, successors or assigns . . . it is hereby agreed in the event this lease shall be assigned as to a part or as to parts of the above described lands and the assignee or assignees of such part or parts shall fail or make default in the payment of the proportionate part of the rents due from him or them, such default shall not operate to defeat or affect this lease in so far as it covers a part or parts of said lands upon which said lessee or any assignee thereof shall make due payment of said rental."
The same provisions apply to appellee's lease. The necessary facts to have in mind are these: Joe Walker and Tindall Walker owned 480 acres of land in Yazoo County; they, and their wives joining them, on September 5, 1939, leased to Carl Jones the oil and gas rights in said lands, the pertinent provisions of which lease are set out above. Through various assignments of the mineral interests covered by said lease the oil and gas rights on the 5th of September, 1940, were held as follows: Carl Jones in 200 acres, W.G. Ray in 80 acres, S.D. Hunter in 40 acres, J.L. Condon in 80 acres, V.V. Ryan in 40 acres, and appellants White and Bradshaw in 40 acres. Neither appellants nor Condon had bored a well on that date. Appellants had failed to pay the $20.00 — fifty cents an acre — for the extension of their lease for another twelve months. Condon had erroneously paid $80.00 instead of $40, the amount provided in his lease. Therefore, he had in the depository to his credit the sum of $40, which was $20 more than the amount necessary to be paid for the extension of appellants' lease for another twelve months. Several months after the 5th of September, 1940, Condon and appellants discovered such overpayment and by agreement between them sought to apply it to the renewal of appellants' lease. Thereupon appellants paid over to Condon $20. That was the first attempt made by appellants to renew their lease.
In the case of Gillespie v. Bobo, 5 Cir., 271 F. 641, the court held as follows, which is correctly set forth in the headnotes:
"In an oil and gas lease, giving lessee the right to drill within one year, otherwise the lease to terminate, a provision that on payment of a stated sum within the year the time for drilling should be extended for six months held to give lessee an option, of which time was of the essence, and on failure to exercise the option within the year lessee's rights held terminated, not by forfeiture, but by termination of the lease in accordance with its terms.
"Under an oil and gas lease, giving lessee the right to drill for the term of one year, with an option to extend the term by payment of a stated sum within the year, the mailing of a check for the sum within the year, which was not received by lessor because incorrectly addressed, held not a valid exercise of the option."
See further Empire Gas Fuel Co. v. Saunders, 5 Cir., 22 F.2d 733; Summers Oil Gas, Perm. Ed., vol. 3, sec. 551, page 289; Id. sec. 553, page 300.
Appellants did not owe the lessors a debt in order to renew their lease, it was a mere option they held — a privilege which they could exercise or not as they chose. They did not agree to bore a well within twelve months, but agreed that if they did not they would forfeit the rental payment already made. Neither did they agree to renew the lease at the end of the twelve months by paying fifty cents an acre. Under the contract they were simply granted an option to do so if they so desired. Putting it differently, under the lease contract the lessors had no right to go into court and force the lessees to either bore a well or pay for the extension of their option. The argument on the other side is that if one person pays the debt of another, either by agreement or out of a feeling of charity, the debt is liquidated and can not be collected again. Of course, that is true, but that is not this case. Appellants did not owe the lessors any debt, they simply held an option not an obligation. Suppose appellants had decided not to renew the lease, surely a third person could not bind them by renewing it for them. Therefore, the matter stands exactly as if appellants had attempted to renew the lease several months after their option had expired.
Appellants contend, however, that those principles do not apply here because the lease under consideration is a unit and therefore not divisible. That contention, if sound, means that all and each one of the sub-lessees of the 480 acres of land had the right to exercise the option of renewal for all of them. A complete answer to that contention is the provision of the lease contract itself last copied above. It plainly makes it a divisible contract. As between the different lessees and sub-lessees there were no obligations or duties. The terms of the lease applied to each of them separately and not collectively. Therefore, the case of Broyles v. Gilman (Tex. Civ. App.), 222 S.W. 685, and other authorities relied on by appellants along the same line have no application.
The result is appellants failed to renew their lease by payment of the $20 on or before September 5, 1940, and for that reason appellee acquired a valid lease which prevails over that of appellants.
Affirmed.