United Fuel Gas Co. v. Ledsome

153 S.E. 303, 109 W. Va. 14, 1930 W. Va. LEXIS 2

• Court: West Virginia Supreme Court
• Decided: March 11, 1930
• Docket: 6592
• Status: Published

Opinions

Litz, Judge :

This is a suit by the lessee of oil and gas property to en join the operation of the premises for oil or gas by the lessors or tbeir assigns. From a decree denying relief tbe plaintiff has appealed.

June 11, 1914, tbe defendants, William Ledsome and D. Ledsome, as owners of two adjoining tracts of land in Koane County containing 106 and 14 acres, respectively, leased each parcel, by separate writing (in wbicb tbeir wives joined), to tbe plaintiff, United Fuel Gas Company, for oil and gas; and tbe said William Ledsome, as owner thereof, by similar writing (in wbicb bis wife joined), leased to tbe Gas Company, for like purposes, a parcel of land adjoining tbe 106 acres tract, containing 3% acres. Each of tbe lease contracts fixed tbe term of letting at ten years ‘1 and as long thereafter as oil or gas is produced from” tbe demised premises; and required tbe lessee (1) to deliver to tbe lessors in tanks or pipe line, a royalty of one-eighth of all oil produced or saved from tbe premises, (2) to pay for each gas well while gas is sold therefrom tbe sum of $75 each three months, and upon failure to drill a well on tbe demised premises within three months from tbe date of tbe lease, (3) to pay tbe lessors a stipulated sum quarterly until such well shall have been drilled or tbe lease surrendered. There was also a provision in each lease that “the increased payments herein provided are in full of all damages by reason of all wells now drilled on adjoining property. ’ ’

November 24, 1915, J. E. Springston, as counsel for tbe lessors, wrote tbe Gas Company: ‘‘Sometime since I was in your office at Charleston, at the request of Mr. Wallace representing tbe lessee in regard to tbe claim of W. M. Ledsome, for off-set wells and damages for failure to develop, and while there Mr. Wallace told me be thought be could arrange for Mr. Ledsome to get pay for three wells at tbe rate of $250.00 per year for each well whether drilled or not, as compensation for failure to off-set and develop, or words to that effect, or a total sum of $750.00 annually and free gas for domestic purposes. I have advised him, and be authorized me to accept that proposition if acted upon by you promptly. He feels that be would accept the proposition rather than to engage in a litigation which would be expensive and annoying to him and tbe company also, and that if you wish to make that arrangement, within a reasonable time, he will accept it by way of a compromise of the differences between himself and the Company, but that he must be given some assurance that the proposal was made in good faith by some action being taken to perfect the same within a short time. Please let me hear from you in regard to the matter at once, that I may know what course to pursue.” On August 29, 1916, the lessors and lessee entered into a written contract, reciting the execution of the three several leases, the demand of the lessors upon the lessee to commence operation “upon said land in development of the gas thereunder and for the purposes of off-setting gas wells on other lands, ” and that “the demand so made” had been compromised. The agreement then provides: That the lessee shall commence a well upon the 106 acres within 90 days and complete the same with reasonable diligence; that the quarterly rentals on the 14 acres and 3[4 acres of $50 and $39, respectively, shall each be increased to $62.50; that the lessee shall not be required to drill any well “at any time upon the 14 acres or 3% acres,” but “shall not have the right to surrender either of said leases until it shall have completed a well thereon, unless it shall at the same time surrender and abandon” the lease on the 106 acres. The contract further provides that, except as therein expressly modified, each of the three leases shall remain in force and effect. The lessee promptly thereafter drilled a well on the 106 acres which has since been producing gas in paying quantities.

By deed dated January 21, 1920, William Ledsome and wife conveyed to E. R. Reed the oil and gas underlying the 3% acres, with convenient mining rights, and the benefit of the lease to the United Fuel Gas Company and the modification contract. By deed dated May 10, 1928, E. R. Reed -and wife conveyed to William Ledsome, H. C. Geary, H. A. Geary, and E. A. Robertson the oil and gas underlying the 3% acres and convenient mining rights, subject to said contract. On May 15, 1928, William Ledsome notified the Gas Company in writing that the lease on the 14 acres had, by its terms, expired, and that he would decline to receive or accept any further payments under the lease or the modification contract. About the same time, William Ledsome, H. A- Geary, H. C. Geary, and E. A. Robertson also declined to accept further rentals on the 3y2 acres. By deed dated May 16, 1928, William Ledsome and wife conveyed to H. C. Geary the oil, gas, and other minerals in and underlying the 14 acres, and convenient mining rights. The quarterly rentals on the 14 acres and 3y2 acres, as provided in the modification agreement, were paid and accepted in advance to June 11,1928.

The question for determination is whether payment and acceptance of rentals on the 14 acres and 3>y2 acres under the modification contract extended the leases covering the same beyond the ten-year term. Defendants deny and plaintiffs affirm the proposition. The said modification contract, which was executed at the instance and for the benefit of the lessors, consolidated the three leases by requiring .the lessee to pay an annual rental of $250 or drill a well on each of the small tracts as a condition precedent to its right to operate the oil or gas on the 106 acres. This obligation, under the very terms of the agreement, was to continue until the lessee should surrender and abandon the lease on the 106 acres. Its purpose evidently was to prevent the lessee from draining the small tracts by the operation of a gas well on the large one without paying the lessors sums of money substantially equivalent to the rental or royalty of a well on each of the small tracts. The parties recognized the continuance of the small leases under the force of the contract for four years after the expiration of the ten-year period by the payment and acceptance of the quarterly rentals in accordance with its terms. The annual payment of $250 on each of the small tracts is shown to have been the usual rental or royalty for a gas well in the locality of the property at the date of the agreement.

“Where a new contract is made with reference to the subject-matter of a former contract, containing provisions clearly inconsistent with certain provisions of the original contract, the obligations of the earlier contract, in so far as they are inconsistent with the later one, will be abrogated and discharged, and the two contracts will be construed together, disregarding the provisions of the original which are inconsistent with those of the latter. ’ ’ Myers v. Carnahan, 61 W. Va. 414, 57 S. E. 134.

The decree of the circuit court lief prayed for granted. will be reversed, and the re-

Beversed.