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Aye v. Philadelphia Co.

Supreme Court of Pennsylvania

October 9, 1899, Argued ; November 6, 1899

No. 2

Opinion

 [*454]   [**555]  OPINION BY MR. JUSTICE MITCHELL:

The lease to Aye and Martin being referred to in the lease from Campbell to Bailey, the appellant, as assignee of Bailey, must be held to have taken with notice. The recital of the prior lease, however, was not an affirmance by Campbell of its continuing validity, but a disclaimer by him of responsibility  [*455]  on that subject. It was a refusal to declare or enforce a forfeiture himself, but a transfer of his right in that regard whatever it might turn out to be, to appellant, which assumed the risk. Its entry and commencement of operations on the land [***6]  were an enforcement of a forfeiture for abandonment if Campbell had that right. This depends on the circumstances.

By their lease from Campbell the appellees covenanted to complete a test well in the vicinity within six months, and if oil should be found in paying quantities to complete a well on the leased premises within the next six months or pay a yearly rental per acre for the delay. The royalty reserved as rent by the lessor was one eighth of the oil produced. The lease was made July 11, 1887. The test well was put down on a farm in the vicinity, but produced no oil. A second well was drilled on another farm with like result, and operations then ceased without any well on the leased premises. On October 2, 1891, Campbell leased to Bailey and on June 19, 1892, Bailey assigned his lease to the appellant.

The lease from Campbell to appellees, it will be seen, contained express covenants what the lessees should do in a certain event, but made no provision for the contingency of the test well proving dry, which is what actually happened. In such case it becomes necessary to inquire what covenants, if any, are implied.

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193 Pa. 451 *; 44 A. 555 **; 1899 Pa. LEXIS 1146 ***

Fred. Aye, Albert Aye, R. S. Martin, R. L. Brown, J. R. Smith, W. H. H. Piper and G. W. Reese v. The Philadelphia Company, Appellant

Prior History:  [***1]  Appeal, No. 2, Oct. T., 1899, by defendant, from judgment of C.P. Armstrong Co., June T., 1897, No. 123, on verdict for plaintiffs. Reversed.

Ejectment for land in Kittanning township. Before RAYBURN, P.J.

The plaintiffs claimed under a lease dated July 11, 1887, from Wm. M. Campbell to them, for the exclusive right of drilling and operating for petroleum and gas, 100 acres of land in Armstrong county, the material portions of which lease are as follows:

"The parties of the second part their heirs or assigns to have and to hold the above described premises for and during the term of 20 years from the date hereof, and as much longer as oil or gas is found in paying quantities thereon.

"The said parties of the second part, in consideration of the said grant and demise, agree to give to the party of the first part, the full equal 1/8 part of all the petroleum obtained or produced on the premises herein leased and to deliver the same in tanks or pipe lines to the credit of the party of the first part. . . .

"The parties of the second part agree to drill a test well in the vicinity of the above described premises, within 6 months from the date hereof, unless prevented by accident,  [***2]  etc., and if oil is found in paying quantities in said test well, the parties of the second part further agree to complete one well on the above described premises within 6 months from the completion of said well, or within one year from the date hereof or thereafter to pay the party of the first part for such a delay a yearly rental of fifty cents per acre from the time of completing such well on the above described premises payable directly to the party of the first part. And the party of the first part agree to accept such sum as full payment for such delay until a well shall be completed on the above described premises; and a failure to complete such well or make such payment renders this lease null and void, and said parties of the second part upon surrendering, or offering to surrender this lease shall be released and discharged from making said payment or payments, and from all claims or demands for damages arising or growing out of a failure to drill or complete said well or wells, and the said lease shall remain without effect between the parties hereto."

The defendant claims under a lease dated October 2, 1891, for the same land from the said Campbell to Wm. C. Bailey [***3]  & Company, which contained this provision:

"It is further agreed, by the parties of the second part, that should lease under date of July 5, 1887, taken by Aye Bros. and R. S. Martin as the second part thereto be in full force and effect, then the said parties of the second part hereto agree to release said party of the first part of the demands above described and set forth."

Other facts appear by the opinion of the Supreme Court.

The court gave binding instructions for plaintiffs.

Verdict and judgment for plaintiffs. Defendant appealed.

Error assigned was in giving binding instructions for plaintiffs.

Disposition: Judgment reversed and venire de novo awarded.

CORE TERMS

lease, lessee, parties, farm, abandonment, test well, covenants, oil, declarations, lessor, reasonable diligence, oil and gas lease, paying quantities, leased premises, proper manner, circumstances, contingency, reservation, engagement, forfeiture, contracts, vicinity, grantor, quarry, stone, rent, dry

Contracts Law, Types of Contracts, Lease Agreements, General Overview, Contract Interpretation