Belmont Quadrangle Drilling Corp. v. Galek

137 Misc. 637, 244 N.Y.S. 231, 1930 N.Y. Misc. LEXIS 1458
CourtNew York Supreme Court
DecidedJuly 30, 1930
StatusPublished
Cited by4 cases

This text of 137 Misc. 637 (Belmont Quadrangle Drilling Corp. v. Galek) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Belmont Quadrangle Drilling Corp. v. Galek, 137 Misc. 637, 244 N.Y.S. 231, 1930 N.Y. Misc. LEXIS 1458 (N.Y. Super. Ct. 1930).

Opinion

Personius, J.

The plaintiff is a domestic corporation, authorized to explore for, produce and sell oil and gas. In 1929 it made a geological survey of a large tract to determine the probability of finding oil and gas. It was an unexplored territory. Following the survey, it obtained leases on an extensive block of land, commenced drilling and found gas, apparently in large quantities.

The defendant Margarita Galek owned 160 acres in this tract, occupied by herself and her husband, the defendant Michael Galek. On October 15, 1929, they signed and delivered to the plaintiff a lease granting, among other things, all the oil and gas under the [638]*638land and also said land for the purpose and with the exclusive right of drilling and operating thereon for said oil and gas.” The lease was recorded December seventeenth. In addition to the down payment of one dollar, the receipt of which is acknowledged, the lease requires the lessee, plaintiff, to pay the defendants one-eighth of all oil produced and one hundred dollars per year, payable quarterly, for each producing gas well, and to give 150,000 feet of free gas for the defendants’ use (or fifty dollars per year). If the lessee did not complete a well in one year, it was to pay a rental of forty dollars per year, payable quarterly, until a well was completed. Examination of the numerous authorities indicates that it was substantially a standard lease, such as has been used throughout the United States for many years.

Plaintiff found a gas pool apparently extending in the direction of the defendants’ land. When the plaintiff attempted to drill on the defendants’ land, the defendants prevented entry.

The plaintiff then instituted this action, alleging irreparable damage, for which it has no adequate remedy at law, and asks, among other things, that the defendants be enjoined from interfering with the plaintiff in its operations upon said property under said lease. By this motion it seeks an injunction pendente lite.

The defendants, admitting the lease, allege that it was obtained by fraudulent representations which are detailed later.

The defendants also allege that they “ never received any value or any consideration ” for said lease.

On or about May 29, 1930, the defendants gave another oil and gas lease (known as a “ top lease ”) on the same premises to Mr. Bacon .(defendants’ counsel) of Akron, Ohio, and on May thirty-first the defendants notified the plaintiff that its lease was terminated, null and void, for three reasons: (1) Fraud, (2) lack of consideration, (3) want of mutuality.

As to the consideration, was one dollar paid? The lease contains an acknowledgment that it was received. Mr. Mooney, plaintiff’s agent, swears that he paid it. The lease is under seal which creates a presumption of consideration at least. (Civ. Prac. Act, § 342.) The defendants do not expressly say it was not paid. The answer and affidavit say they never received any value or any consideration.” Furthermore, and more important it seems to us, is their allegation that the plaintiff’s agent said “ that one dollar was all the money consideration paid down * * * for an oil and/or gas lease.” Why were the defendants and the plaintiff’s agent talking about this one dollar, if it was never paid? We think it was.

The defendants attack the consideration as unfair and insufficient [639]*639to support an action in equity. We think it is sufficient. In the absence of fraud (which we later discuss), inadequacy of the consideration does not destroy the obligation of the contract. (Ga Nun v. Palmer, 216 N. Y. 603, 609.) In Guffey v. Smith (237 U. S. 101, 116) the terms of the lease were almost identical, even in amount of rentals (p. 111). The court held that in view of the circumstances, not knowing whether the tract contained oil or gas (it being an undeveloped district), and the lessee being obliged to stand the large expense of drilling with the corresponding possibility of loss if unsuccessful, the consideration could not be pronounced unreasonable. (See, also, Shaffer v. Marks, 241 Fed. 139, 152, and Lindlay v. Raydure, 239 id. 928, at p. 936, where it is said: “ So far as it is the consideration for the grant of the right to explore, it is for the right to incur the expense of the exploration, which may result in nothing.”)

The defendants’ principal argument is based upon the so-called “ surrender clause ” contained in the lease. It reads: the lessee shall have the right at any time upon the payment of one dollar to surrender this lease to the lessor. * * * ”

They say that this surrender clause (1) creates a want of mutuality, rendering the lease unenforcible in an action for specific performance, and (2) makes the" lease unilateral and, therefore, invalid.

The answer to the first proposition is that this action is not for specific performance — to compel the defendants to do or perform anything. Rather it seeks to enjoin the defendants from doing anything. True, the prayer for relief asks, not only for an injunction, but that the lease be specifically performed.” This, however, is not controlling. (Hydraulic Power Co. v. Pettebone Co., 198 App. Div. 644, 649, 650; Guffey v. Smith, 237 U. S. 101, 115; Lindlay v. Raydure, 239 Fed. 928; McCall v. Wright, 198 N. Y. 143, 152, 154; Wright v. Gillespie, 261 Fed. 46; Epstein v. Gluckin, 233 N. Y. 490.)

Does the surrender clause make the lease invalid? We think not. (Lindlay v. Raydure, 239 Fed. 928; affd., 249 id. 675; Guffey v. Smith, 237 U. S. 101; McCall Co. v. Wright, 198 N. Y. 143, 153, 154.)

In the Lindlay case the first lessee sued the second lessee; the owner intervened; therefore, the action was against both the owner and the second lessee to restrain them from interfering with the operations of the original lessee. District Judge Cochran, after thoroughly examining the numerous authorities in various States, concludes that the surrender clause does not invalidate the lease (239 Fed. 9.44, 975). The Federal courts determine the question by the law of the local State. The question has not been squarely [640]*640adjudicated in New York but we think that logically and by the great weight of authority the lease is valid.

Whatever the nature of the plaintiff’s interest, it has a vested interest — a vested right — to go upon the land and explore. This right the plaintiff could enforce and protect. (Shaffer v. Marks, 241 Fed. 139, 153; Guffey v. Smith, 237 U. S. 101; Lindlay v. Raydure, 239 Fed. 928, 933.) We have here an executed contract. (Becar v. Flues, 64 N. Y. 518; Lindlay v. Raydure, 239 Fed. 928, 940.)

Bearing on the alleged fraud, defendants stress their alleged inability to readily understand and speak English. As to Mr. Galek, the contrary is fairly established by the affidavit of Pierre L. Harpending. Furthermore, the argument is immaterial.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Czipott v. Fleigh
489 P.2d 681 (Nevada Supreme Court, 1971)
Division of the Triple T Service, Inc. v. Mobil Oil Corp.
60 Misc. 2d 720 (Appellate Division of the Supreme Court of New York, 1969)
Swarts v. Board of Education of the City School District
42 Misc. 2d 761 (New York Supreme Court, 1964)
Republic Aviation Corp. v. Republic Lodge No. 1987
10 Misc. 2d 783 (New York Supreme Court, 1957)

Cite This Page — Counsel Stack

Bluebook (online)
137 Misc. 637, 244 N.Y.S. 231, 1930 N.Y. Misc. LEXIS 1458, Counsel Stack Legal Research, https://law.counselstack.com/opinion/belmont-quadrangle-drilling-corp-v-galek-nysupct-1930.