Eaton v. Allegany Gas Co.

25 N.E. 981, 122 N.Y. 416, 34 N.Y. St. Rep. 51, 77 Sickels 416, 1890 N.Y. LEXIS 1618

Opinion

Follett, Ch. J.

It is conceded that the parties of the second part to the contract dated April 27, 1881, performed their covenants in respect to the time in which they should commence operations for mining purposes, and that they sank the well to the required depth within the time limited.

Whether the lease (so called for convenience) created c term • for twelve years, or whether the term granted is limited to the time during which oil should be produced in paying quantities, is the question upon which the decision of this case turns.

This contract is called a lease, but it should be borne in mind that nothing is granted by it except the oil and gases found in the land described, together with the incidental rights to use the premises for the purpose of obtaining and removing those products, and that no rent or compensation is to be paid unless oil be found in paying quantities, in which case the lessor is to be compensated in kind. Had neither gas nor oil been found, it would not have been contended that the lessees would have a right to occupy the premises for the full term of twelve years without rent.

Undoubtedly the lessees had the right of possession so long as' they, in good faith, were engaged in boring wells or testing the oil-producing capacity of the land. But when it was demonstrated that oil could not be obtained, or when they should abandon their search, their right to possess the property would end and thereafter they would have no more right to occupy it than a stranger.

Construing all of the provisions of the instrument together and keeping in mind the evident purpose of the parties, we think the term created by the lease was limited to the time during which oil should be found in the quantities mentioned, and that the term, “ or as long as oil is found in paying quantities,” are words of limitation and fix the duration of the lease.

The lessees having tested the premises to their satisfaction and having for two years ceased to use them for the purposes granted, it was well held by the learned referee that the contract might be, and was, legally terminated by the lessor.

The order should be reversed, and the judgment entered upon the report of the referee should be affirmed, with costs.

All concur, except Bbadley and Haight, JJ., not sitting.

Order reversed and judgment affirmed.