Beam v. Dugan

99 P.2d 694, 37 Cal. App. 2d 491, 1940 Cal. App. LEXIS 558
CourtCalifornia Court of Appeal
DecidedFebruary 28, 1940
DocketCiv. No. 11322
StatusPublished
Cited by2 cases

This text of 99 P.2d 694 (Beam v. Dugan) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Beam v. Dugan, 99 P.2d 694, 37 Cal. App. 2d 491, 1940 Cal. App. LEXIS 558 (Cal. Ct. App. 1940).

Opinion

NOURSE, P. J.

Plaintiffs sued to quiet title and for an accounting, claiming under a sale and two assignments of portions of a landowner’s royalty in oil and gas aggregating one per cent of the total royalty payable to their grantors. Defendants had judgment, and the plaintiffs appeal.

At the time of the conveyances to plaintiffs there was an outstanding oil and gas lease on the property, which had nineteen years yet to run, and which is referred to herein as the Dumas community lease. This lease was later surrendered when the oil well had proved dry,.and a new lease [493]*493was executed under which a new well was sunk a short distance from the other and oil was discovered in paying quantities. Plaintiffs claim, as grantees of the landowner, a share in the profits of the land, while the defendants claim that their rights were limited to a share of any proceeds which might have been received under the Dumas community lease only.

The pertinent portions of the conveyances, or assignments, under which the plaintiffs claim read: “And whereas, S. K. Beam and Nora B. Beam, husband and wife, desires to purchase, and does hereby purchase a % of 1 per cent (1%) landowner’s royalty in said above described property.

“Now, therefore, we ... do hereby sell, transfer, convey, assign and set over to the said S. K. Beam and Nora B. Beam . . . out of our landowner’s royalty, an undivided % of 1 per cent (1%) in and to any and all oil, gas or other hydrocarbon substances produced or saved from any wells to be drilled upon any of the land described in the lease heretofore mentioned ... it being particularly understood and agreed that the royalty interest, herein assigned, affects all the land mentioned in said lease and is not limited to the land of said Dugans.” (Emphasis ours.)

The cause was before this court on a former appeal. (132 Cal. App. 546 [23 Pac. (2d) 58].) It was then determined that plaintiffs’ interest was not confined to the Dumas lease, but that they had secured from the landowner “such an interest in the royalties paid under the second lease as would entitle them to an accounting and an adjustment of their rights.” When the cause was heard for the second time the trial court declined to follow this direction and found that plaintiffs had no interest whatever in the proceeds paid under the second lease, and were not entitled to an accounting. On this appeal we will disregard all the points raised by appellants except that of the “law of the case”.

In the former opinion we discussed the conflicting rules concerning the rights obtained by purchasers under conveyances similar to those in this litigation; we referred to the line of decisions holding that the purchaser takes an interest in the oil and gas in place, and the line of decisions holding that he takes an interest running with the land similar to a profit á prendre. We also referred to the rule an[494]*494nounced in Jones v. Pier, 124 Cal. App. 444 [12 Pac. (2d) 646], that the purchaser obtained an interest in common with the landowner in all oil and gas produced upon the land for the full term of the original lease, regardless of who produced the same. In that case, as here, the landowner canceled the lease outstanding when the interests were sold and all the proceeds of production arose under a new and independent lease. The appellate court recognized the vested interest of the purchaser and held that this could not be defeated by a cancellation of the original lease without his consent.

Since the decision on the former appeal, the Supreme Court approved the rule of Jones v. Pier, supra, and the holding of this court that the purchasers took an interest in the land in Callahan v. Martin, 3 Cal. (2d) 110, where, at page 125 [43 Pac. (2d) 788, 101 A. L. R. 871], referring to Jones v. Pier, supra, it was said: “The appellate court held that under an assignment of oil royalty limited to the duration of a particular lease, the operating lease cannot be terminated by agreement between the lessors and operating lessee without the consent of the assignee of an oil interest. This decision was recognized with approval in Metzler & Co. of California v. Stevenson, 217 Cal. 236 [18 Pac. (2d) 330], and in Beam v. Dugan, supra, in which this court denied a petition for hearing.

“In Beam v. Dugan, supra, it was held that the rights of the assignee of oil royalty to share in oil produced extend not only to the lease in effect at the time the assignment is made, but to all future leases where the assignment of oil rights is unlimited in duration. In Jones v. Pier, supra, it was held that where the assignee’s rights are limited to a particular lease, said lease cannot be terminated without the assignee’s consent. Where, under the assignment of oil rights, the assignee’s rights are not limited to a particular lease, but are in perpetuity, under the rule of Beam v. Dugan, supra, that the assignee’s rights extend to oil produced under all leases, it must be held that such future leases cannot be terminated without the assignee’s consent. It must follow, if such assignee must be a party to any lawful termination of leases, that he must have a right to participate in entering into new leases for production of oil upon the premises. We are of the view that an assignee of a royalty interest be[495]*495comes in effect a tenant in common with his assignor who retains an interest in the oil rights, and with other assignees of percentage interests, in the right which the assignor had, by virtue of his ownership of the fee in the land, to drill for and produce oil. ’ ’

In the Callahan ease the Supreme Court adopts the prevailing rule recognizing oil royalties as rents and hence an assignment of oil royalty by a landowner “as a transfer of an interest in real property”. Beam v. Dugan, supra, was cited by the court as one of the many California cases holding to that rule. In the former opinion this court endeavored to make clear that the plaintiffs’ interests were not confined to the original lease, that “the appellants purchased some vested interest which they were entitled to have quieted in this proceeding” (132 Cal. App., p. 552); and that “the purchasers secured from the landowners such an interest in the royalties paid under the second lease as would entitle them to an accounting and an adjustment of their rights”. Under this ruling the trial court was limited to the taking of an account of all profits from the production of oil and gas under whatever lease they should be produced. The appellants were entitled to a judgment for the recovery of the agreed percentage of such profits according to their several contracts.

As to the issue pleaded seeking to quiet their title, appellants’ case now presents an interesting and novel problem. Following the opinion on the former appeal the Supreme Court in the Callahan case interpreted the judgment to mean that these appellants had a present estate or interest in the land, with the right to participate in entering into new leases for production of oil on the premises and that such an assignee or purchaser “becomes in effect a tenant in common with his assignor who retains an interest in the oil rights, and with other assignees of percentage interests, in the right which the assignor had, by virtue of his ownership of the fee in the land, to drill for and produce oil”. (Emphasis ours.)

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Cite This Page — Counsel Stack

Bluebook (online)
99 P.2d 694, 37 Cal. App. 2d 491, 1940 Cal. App. LEXIS 558, Counsel Stack Legal Research, https://law.counselstack.com/opinion/beam-v-dugan-calctapp-1940.