A failure by the lessee to comply with the lease may amount to an abandonment,11 and in extreme cases may be held to do so, regardless of the lessee's actual intent.* 42

luminating Gas Co., 162 Ind. 9, 67 N. E. 259, 62 L. R. A. 895; Adams v. Stage, 18 Pa. Super. Ct. 308; Phillips v. Hamilton (Wyo.) 95 Pac. 846. "The extent of the development and number of wells to be drilled, and as to the protection of the lines, is often, if not usually, expressed in the lease; and that is certainly the better practice. When the extent of the development and protection of lines is provided for in the lease, there can be no implied covenant for further development and protection of lines. The implied covenant arises only when the lease is silent on the subject." HARRIS v. OHIO OIL CO., 57 Ohio St. 118, 128, 48 N. E. 502. See McKnight v. Manufacturers' Natural Gas Co., 146 Pa. 185, 23 Atl. 164, 28 Am. St. Rep. 790; Poe v. Ulrey, 233 Ill. 56, 84 N. E. 46; Brewster v. Lanyon Zinc Co., 140 Fed. 801, 72 C. C. A. 213. Where there is no way to market the product of wells if they are sunk, the remedy for breach of an implied covenant to drill wells has been held to be, not forfeiture, but an action for damages. Poe v. Ulrey, 233 Ill. 56, 84 N. E. 46. That the remedy for a breach of an implied covenant in an oil lease is ordinarily not by forfeiture, but by an action for damages, is asserted in CORE v. NEW YORK PETROLEUM CO., 52 W. Va. 276, 43 S. E. 128. But see CONSUMERS' GAS TRUST CO. v. LITTLER, 162 Ind. 320, 70 N. E. 363; Hodges v. Brice, 32 Tex. Civ. App. 358, 74 S. W. 590; Gadbury v. Ohio & I. Consol. Natural & Illuminating Gas Co., 162 Ind. 9, 67 N. E. 259, 62 L. R. A. 895. That equity may cancel the lease for delay in development, see Lowther Oil Co. v. Miller-Sibley Oil Co., 53 W. Va. 501, 44 S. E. 433, 97 Am. St. Rep. 1027; Starr v. Huffman (W. Va.) 59 S. E. 179. Where the same person holds an oil well on two adjacent farms, he will not be allowed to drill an oil well to drain the oil off of one of the farms to the detriment of the other. Barnard v. Monongahela Natural Gas Co., 216 Pa. 362, 65 Atl. 801.

39,

41 AYE v. PHILADELPHIA CO., 193 Pa. 451, 44 Atl. 555. See, also, note

supra.

42 WILMORE COAL CO. v. BROWN (C. C.) 147 Fed. 931.

CHAPTER XXIV.

OTHER MINING CONTRACTS AND LEASES.

129. Prospecting or Grub-Staking Contracts.
130. Mining Licenses and Leases.

131-132. Leases and Options and Title Bonds.
Working Contracts.

133.

134. Ore Contracts.

Our review of the peculiarities of oil and gas leases prepares the way for a consideration of the peculiarities of other mining leases and contracts. Only those matters which differentiate mining contracts and leases from ordinary real estate contracts and leases will be considered.

PROSPECTING OR GRUB-STAKING CONTRACTS.

129. Prospecting or grub-staking contracts are agreements by which miners, in consideration of supplies furnished to them, undertake to prospect for and locate claims to be held by all parties in certain agreed shares. Unless the supplies are furnished, a grub-staking agreement is without consideration, and does not bind the prospector. If they are furnished, the rights of the outfitters are fully protected at law and in equity.

The kind of contract common in the mining region, whereby a mìn er is furnished supplies by people who wish to locate mining claims, and in return agrees to prospect for and to locate such claims for all concerned in the shares agreed upon, has caused considerable litigation. One reason has been that such contracts have almost universally been regarded as not within the statute of frauds. They have been

1 SHEA V. NILIMA, 133 Fed. 209, 66 C. C. A. 263; Cascaden v. Dunbar, 2 Alaska, 408, 157 Fed. 62, 84 C. C. A. 566; MURLEY v. ENNIS, 2 Colo. 300; MEYLETTE v. BRENNAN, 20 Colo. 242, 38 Pac. 75; Moritz v. Lavelle, 77 Cal. 10, 18 Pac. 803, 11 Am. St. Rep. 229; Raymond v. Johnson, 17 Wash. 232, 49 Pac. 492, 61 Am. St. Rep. 908; Doyle v. Burns, 123 Iowa, 488, 99 N. W. 195; Eberle v. Carmichael, 8 N. M. 169, 42 Pac. 95; Id., 8 N. M. 696, 47 Pac. 717. See Reagan v. McKibben, 11 S. D. 270, 76 N. W. 943. The case of CRAW v. WILSON, 22 Nev. 385, 40 Pac. 1076, supposed to be contrary to the foregoing, holds that where an oral partnership has been formed under which some mining locations are made and other property obtained, and one partner acquires for himself still other mining locations, without employing partnership capital in their acquisition, the excluded partner cannot have a trust declared. The matter has since been set at rest for Nevada by a statute COST.MIN.L.-31

subject to all those disputes as to terms which naturally attend important verbal contracts.2

While such contracts are sometimes referred to as mining partnerships, they are not such unless, in addition to covering the location and holding in common of mining claims, they provide for the development of the claims, and actually do develop them for the joint benefit of the contractors. So far as the contracts to locate claims contemplate only the discovery work essential to location, and the co-ownership which is to result from the location of the claims, they are not mining partnership contracts, but are simply "grub-staking" or prospecting contracts. A grub-staking contract does not constitute a partnership, unless the agreement extends beyond the mere furnishing of supplies as a consideration of a participation in the results of discoveries.*

Before the miner's obligation under a prospecting contract can be enforced against him, the other party to the contract must furnish the supplies agreed upon. If, therefore, the supplies are not furnished to him, the miner may go ahead and locate lodes in his own right, without regard to the contract. But if the supplies are furnished, and the miner locates claims in his own name, he holds the title thus acquired, or the property for which it is exchanged, in trust for himself and the outfitter in the proportions called for by the prospecting contract, and must account for the proceeds received on any sale of such

making grub-stake contracts void unless recorded. If acknowledged and recorded, they are made prima facie evidence in all cases where the title to mining locations is in question. Laws Nev. 1907, p. 370, c. 174. In Oregon such contracts seem to be void unless recorded. B. & C. Comp. Or. § 3985. In Idaho they may be recorded to make them constructive notice. Civ. Code Idaho 1901, § 2784. A verbal release of a grub-staking contract was upheld in Eubanks v. Petree, 1 Alaska, 427.

2 See Abbott v. Smith, 3 Colo. App. 264, 266, 32 Pac. 843.

3 See, however, Berry v. Woodburn, 107 Cal. 504, 512, 40 Pac. 802, 804, where such contracts are called "qualified partnerships." See, also, Boucher v. Mulverhill, 1 Mont. 306; Lawrence v. Robinson, 4 Colo. 567.

While prospecting contracts are partnerships of a kind, the term "mining partnership" is strictly applicable only where there is actual joint working of the claim. DORSEY v. NEWCOMER, 121 Cal. 213, 53 Pac. 557; Anaconda Copper Mining Co. v. Butte & Boston Min. Co., 17 Mont. 519, 43 Pac. 924. See, also, cases, cited in chapter XXV, note 6, infra. For that reason the term "prospecting contract," or the miners' term, "grub-staking contract," should be kept to apply to the kind of contract here considered.

4 See Costello v. Scott (Nev.) 93 Pac. 1.

5 MURLEY V. ENNIS, 2 Colo. 300; Miller v. Butterfield, 79 Cal. 62, 21 Pac. 543. See Windmuller v. Clarkson, 2 Alaska, 298.

6 MEYLETTE v. BRENNAN, 20 Colo. 242, 38 Pac. 75; Marks v. Gates, 2 Alaska, 519; Mack v. Mack, 39 Wash. 190, 81 Pac. 707. See Stewart v. Douglas, 148 Cal. 511, 83 Pac. 699. But, after the prospecting contract

title. Where the supplies are so inadequate as to make it apparent to anybody that the property located is not acquired by means of the grub-stake furnished and pursuant to the grub-stake contract, the California court refuses to compel a conveyance by the miner to the alleged outfitter. A contract to exchange interests in existing claims for supplies is not a grub-staking contract."

There has been some question as to the amount of proof necessary to establish an oral prospecting contract sufficiently to make the miner a trustee of the claims located. In Idaho, for instance, it was at first declared that a mere preponderance of the evidence was not enough, but that the evidence must be so clear and certain as to leave no wellfounded doubt in the mind of the court. Since then, however, it has been held in Idaho that the courts "should not refuse to enforce these grub-stake agreements simply because a plaintiff cannot produce that great preponderance of evidence which reaches a moral certainty and precludes all reasonable doubt.” 10 The latter seems the better doctrine where a statute does not require a writing, for all that should be required of evidence in such cases is that it be convincing.11

is rescinded by mutual agreement of the parties, one of them may relocate unperfected locations, and, in the absence of fraud, will hold such locations free from any trust. Page v. Summers, 70 Cal. 121, 12 Pac. 120; McLaughlin v. Thompson, 2 Colo. App. 135, 29 Pac. 816; Eubanks v. Petree, 1 Alaska, 427.

* But the complaining party must act promptly, or he may be denied any rights. McKenzie v. Coslett, 28 Nev. 65, 78 Pac. 976.

7 PRINCE v. LAMB, 128 Cal. 120, 60 Pac. 689. Roberts v. Date, 123 Fed. 238, 59 C. C. A. 242.

Rice v. Rigley, 7 Idaho, 115, 61 Pac. 290. Compare Copper River Mining Co. v. McClellan, 2 Alaska, 134.

10 MORROW v. MATTHEW, 10 Idaho, 423, 79 Pac. 196. The court there says that the rule requiring evidence so convincing as to leave no reasonable doubt is properly applied when one seeks to declare a trust as against a record title conveyed to a defendant by a third person, but has no application where the defendant, as locator of a mining claim, creates his own record title.

11 "Grub-stake contracts will be enforced by the courts, but only as other contracts; that is to say, it is not enough for parties to assert that they have rights, in order to secure legal protection, but they must be able to prove in each case a clear and definite contract, and that by the terms and conditions of such contract, and compliance therewith on their part, rights have become vested." Cisna v. Mallory (C. C.) 84 Fed. 851, 854.

MINING LICENSES AND LEASES.

130. In distinguishing between licenses, leases, and sales of mineral in place, it is the intention of the parties gathered from the terms of the instrument, and not the form of the instrument, that determines which kind of interest exists in the given

case.

The common-law rule is that the lessee of real property may work already opened mines, but cannot open new ones. But the lease may expressly, or by implication from express powers, give the right to open new mines. If a leasehold estate is created in the land, with a right to take the minerals, the instrument is a genuine lease.12 On the other hand, if an attempt is made by the instrument to pass title to the minerals in place, there is really a sale of the mineral.13 If no title to the minerals passes, and a leasehold estate even is not created in the so-called lessee, the instrument merely creates a license.1 It is not the form of the instrument, but rather the intention of the parties gathered from its terms, that determines whether it is a lease, or passes title to the minerals, or is only a license.15

12 Cahoon v. Bayaud, 123 N. Y. 298, 25 N. E. 376; Young v. Ellis, 91 Va. 297, 21 S. E. 480; PAUL v. CRAGNAZ, 25 Nev. 293, 312-314, 59 Pac. 857, 60 Pac. 983, 47 L. R. A. 540; MALCOMSON v. WAPPOO MILLS (C. C.) 85 Fed. 907; Raynolds v. Hanna (C. C.) 55 Fed. 783; Appeal of Hope (Pa.) 2 Atl. 23; Harlan v. Lehigh Coal & Navigation Co., 35 Pa. 287. See Wilkins v. Abell, 26 Colo. 462, 58 Pac. 612; Fuhr v. Dean, 26 Mo. 118, 69 Am. Dec. 484; National Light & Thorium Co. v. Alexander, 80 S. C. 10, 61 S. E. 214.

18 PLUMMER v. HILLSIDE COAL & IRON CO., 104 Fed. 208, 43 C. C. A. 490; In re Lazarus' Estate, 145 Pa. 1, 23 Atl. 372; Kingsley v. Hillside Coal & Iron Co., 144 Pa. 613, 23 Atl. 250; Delaware, L. & W. R. Co. v. Sanderson, 109 Pa. 583, 1 Atl. 394, 58 Am. Rep. 743; Hobart v. Murray, 54 Mo. App. 249; Edwards v. McClurg, 39 Ohio St. 41 (but see Buchannan v. Cole, 57 Mo. App. 11); Dorr v. Reynolds, 26 Pa. Super. Ct. 139. It is none the less a sale that the coal conveyed is to be taken out within a fixed term. HOSACK v. CRILL, 204 Pa. 97, 53 Atl. 640. But a so-called "sale" may really be “a lease without impeachment of waste." Coolbaugh v. Lehigh & Wilkes-Barre Coal Co., 213 Pa. 28, 62 Atl. 94, 4 L. R. A. (N. S.) 207.

14 Wheeler v. West, 71 Cal. 126, 11 Pac. 871. See Silsby v. Trotter, 29 N. J. Eq. 228. Such a license is not such an interest in the land as to be taxable as real property. Board of Sup'rs of Hancock County v. Imperial Naval Stores Co. (Miss.) 47 So. 177. Even a quitclaim deed may be so worded as to be a license. BAKER v. CLARK, 128 Cal. 181, 60 Pac. 677. A parol license passes no title to ores not severed, even though the licensee has expended money in mining. McCullagh v. Rains, 75 Kan. 458, 89 Pac. 1041.

15 CONSOLIDATED COAL CO. v. PEERS, 150 Ill. 344, 37 N. E. 937; PAUL v. CRAGNAZ, 25 Nev. 293, 59 Pac. 857, 60 Pac. 983, 47 L. R. A. 540; Baker v. Clark, 128 Cal. 181, 60 Pac. 677; Tennessee Oil, Gas & Mineral Co. v.