Guffey v. Smith - 237 U.S. 101 (1915)
U.S. Supreme Court
Guffey v. Smith, 237 U.S. 101 (1915)
Guffey v. Smith
Argued December 2, 3, 1914
Decided April 5, 1915
237 U.S. 101
Under the settled rule of decision in Illinois, an oil and gas lease like that involved in this suit passes to the lessee, his heirs and assigns, a present vested freehold interest in the premises, and an option on the part of the lessee to surrender does not create a tenancy at will, give the lessor an option to compel surrender or make the lease void as wanting in mutuality.
Decisions of the highest courts of the state in which the property is situated are accepted and applied by tho federal courts as rules of property in passing upon the estate and rights passing by such a lease.
Where, as is the case in Illinois, the holder of such a lease cannot maintain ejectment in the state courts, he cannot, under §§ 721 and 1914, maintain such an action in the federal courts in that state.
Where ejectment cannot be maintained by one holding a gas and oil lease against another claiming under a later lease, and no other action affords an adequate remedy, the earlier lessee may maintain a suit in equity to restrain the later lessee and for accounting and discovery in the federal courts where the requisite amount is involved and diverse citizenship exists, even though such a suit, by reason of the lessee's having an option to surrender, could not be maintained in the courts of the states.
Remedies afforded and modes of procedure pursued in the federal courts sitting as courts of equity are not determined by local laws or rules of decision, but by general principles, rules, and usages of equity having uniform operation in those courts wherever sitting.
According to the general principles and rules of equity enforced in the federal courts, a clause in a lease permitting the lessee to surrender it is not an obstacle to enforcing the lease in equity against those who, under a later lease, are committing waste.
Whether a lease is so unfair and inequitable that it cannot be enforced by the lessee in equity must be determined in view of the circumstances under which it was given, and, in this case, held that an oil and gas lease of undeveloped land requiring all expenses to be paid by the lessee and providing for reasonable royalties and fixed rental
during a designated period of delay is not so unfair and inequitable as to require that equitable relief be withheld, even where it contains a provision permitting the lessee to surrender it at any time.
Under the statutes of Illinois, a lessee who omits to pay rent when due may cure his default by payment at any time prior to demand and notice or within the time named in the notice, and if so paid, the lessee's rights are the same as though the default had not occurred. On an accounting for oil and gas taken under color of a lease later than that of plaintiff but without actual knowledge thereof, although the same was recorded, held that the later lessees were entitled to be credited with the cost of improvements and operation incurred prior to, but not after, the date on which they were actually notified of the rights of the earlier lessee. The continued taking thereafter was a willful taking and appropriation of the property of another.
202 F. 106 reversed.
The facts are stated in the opinion.