Carlisle v. National Oil & Dev. Co.

1924 OK 66, 234 P. 629, 108 Okla. 18, 1924 Okla. LEXIS 695

• Court: Supreme Court of Oklahoma
• Decided: January 22, 1924
• Docket: 14402
• Status: Published

Opinion

CO GIT RAN, J.

This action was commenced by the plaintiffs in error, against the defendants in .error, for the purpose of canceling an oil and gas lease covering the lands of Levi Carlisle. The lease was executed by Thomas L. 'Carlisle, as guardian of Levi Carlisle, to the National Oil & Development Company, on February 23, 1917. Judgment was gendered against the plaintiffs on the pleadings, and from this judgment an -appeal was take^i to this court. The opinion by this court is found in the case of Carlisle v. National Oil & Development Company, 83 Okla. 217, 201 Pac. 377. It was there decided that the extension lease contract executed on February 23, 1917, by the guardian of Levi Carlisle was, void, because it was not executed in compliance with the procedure provided by rule 9 of the Supreme Court, 47 Okla. xvi, and the case was reversed and ¡remanded v3&>¡r further proceedings. The. cas.e was tried upon its merits, and judgment wias rendered for the defendants, from which the -plaintiffs nave appealed. The judgment was rendered by tbe trial court on the theory that the testimony showed an -adoption by Levi Carlisle of the contract entered into by his guardian on February 23, 1917, after Levi Carlisle bad reached his majority and with full knowledge of the facts in connection with the transaction. The finding of the trial court on the quejstion of adoption will not -be disturbed by this -court, ¡unletss the same was clearly ‘against the weight of the evidence or unless as a matter of law the contract was not subject to adoption. The finding of the trial court on the question of fact w!a>s clearly -in accord with the weight of the .evidence, as the te-atimony in this case shows that the contract undq.r which the defendants claim was executed on February 23, 1917, iipon a petition signed by the guardian and by Levi Carlisle. He arrived at his majority on September 14, 1917, and according to ithe defendant and fully understood the the transaction between his guardian and ¡the dteftemdlant ¡and Sully understood the same. The agreement provided for a cash consideration of $100, which was paid and the payment of a royalty of one-eighth of •the oil produced from the premises instead •of owsKenth, which had theretofore been paid. After Levi Carlisle arrived at his majority, he made .a settlement with his guardian and received from him the balance due on the settlement, wthich represented a portion of the benefits accruing’ from th,e contract executed in February, 1917. From September 14, 1917, until November 10, 1917', the royalty checks for oil produced under this -lease contract ware sent to the gu'ardian of Levi Carlisle, but were by him returned to the pipe-liii(j company on November 10, 1917, with the -advice that Levi Carlisle was then of age and that payment should be mad^ to him. The guardian signed a written transfer authorizing thie payments to Levi lOarii-sle, which was accepted by Levi Carlisle in writing in November, 1917, and thereafter royalty checks were sent to Levi Carlisle until March 15, 1918. when he sold the land to John H. Kane. These checks wer^ not cashed immediately by Levi Carlisle, but were used as collateral to obtain money from the hawk, but w^re cashed by him prior to March 15, 1918. These acts on the part of Levi Carlisle were with full knowledge that the money received by him was b$ng paid under the terms of the agreement executed in February, 1917, and 'w|as also received by him -after Capps had advised him that the acceptance |Of the! money would he a recognition of the lease to the National Development Company. These facts weire sufficient to constitute an adoption of the contract of February, 1917, provided the contract was subject to adoption. Section 920, Rev. Laws 1910, provides :

“A voluntary acceptance of the benefit of a transaction is equivalent to- a consent to all the 'obligations arising :from it so far -as it'he facts are known, or ought to be knowh, to the person accepting.”

And section 1150, Rev. Laws 1910, ■ is as follows:

‘■Any per-s-on or corporation having knowingly received and accepting th^ benefits or ■any part thereof of any conveyance, mortgage, or contract relating to -real estate, shall be concluded thereby and esto-pped to der.y the validity of such conveyance, mortgage, or contract, or the power or authority to make and execute the same, Except on the ground of fraud; but this section -shall not apply to minors or- persons of unsound mind who pay or tender back the amount of such benefit received bv themselves.”

In Capps v. Hensley, 23 Okla. 311, 100 Pac. 515, this court held that w’here a yo-id agricultural lease was executed 'by the natural guardian of an Indian minor, and the -minor died leaving the father as the sole heir and he continued to accept refits from the premises, he was estopped to -assert the invalidity of ith© contract, and in 'the second paragraph of the syllabus the court s-aid:

“Where in such a case,, after the -death of the infant, the natural guardian, be¡-ing the father aoid sole heir, recognizes the tenant holding thereunder by accepting from him the money for the rent of the premises, such action on his part will constitute an afiirmance or adoption of the contract, -amd create of it a binding and enforceable obligation between th$n.”

In Lasoya Oil Company v. Zulkey, 40 Okla. 690, 140 Pac. 160, the legal guardian executed a lease on a minor’s land and the minor after -reaching majority brought suit to cancel -the lease, alleging that it was obtained by fraud and collusion of the court and guardian. It appears the minor, after becoming of age. made a voluntary settlement with the guardian, receiving bonus amd rentals collected by him under the lease, -and the court held that such acts constituted a ratification of the lease. To the same effect is the case! of Perkins v. Middleton, 66 Okla. 1, 166 Pac. 1104. In Scott et al. v. Signal Oil Company, 35 Okla. 172, 128 Pac. 694, a departmental oil and gas lease was .executed which contained a provision that no assignment of thej lease could be made without -the written consent of the lessor and the Secretary of the Interior. An assignment was made in violatio-ra of this provision. It appeared that lessor acceipted the rents and royalties from the assignee of the lease, and this court held that by her conduct in accepting the reints and royalties she waived her rights to the lease. See, also, Avery et al. v. Van Voorhis et al., 42 Okla. 232, 140 Pac. 615. In Cosden Oil & Gas Company v. Hendrickson et al., 96 Okla. 206, 221 Pac. 86, the court said:

“* * * It is possible for a person, after reaching majority, to adopt a void contract made by hi-s guardian during his mi-li'-rity, and we believe; the authorities are aimifie to support this view.”

Much confusion has arisen due to the application of the statutes a-bove quoted to voidable Irans-aOtions in. some instances and to void transactions in others, and to the use of the word “estoppel’’ in connection with' such transactions -in other cases. In Lasoya Oil Company v. Zulkey, supra, tlie transaction was voidable and the acts of the lessors were designated a ratification. In Scott v. Signal Oil Company, supra, the contract was void and the act of the lessors was designated and adopted. In Capps v. Hensley, supra, and Cosden Oil & Gas Co. v. Hendrickson, supra. the court calls attention to the fact that adoption should be used Co apply to void transactions, and ratification should be limited to voidable transactions. In all of the cases referred to, however, the parties were denied relief because they had accepted the benefits of the contracts, whether void or voidable, with full knowledge of the facts and at a time whem the party so accepting was under the law fully competent and0 capable of contracting for himself. It therefore does not matter whether .the transaction be referred to as am adoption, ratification, or estoppel, as the effect of those holding, taken together, is to prevent a party from assorting the invalidity of a contract when such party has accepted the benefits of the contract with the full knowledge of the facts.

It ,is our opinion that the acts of Levi Carlisle wejre such as to show an intentional acceptance of the benefits! iof the contract with the full knowledge of the facts, at a time when he was competent and capable of making a contract, ajnd therefore eonlstituted an adoption of the contract. It is contended by the plaintiffs, however, that Levi Carlisle executed a lease] contract to Capps in October, 1917, and thereafter filed this suit 'with Capps for the cancellation of the contract hcjld by the National Development Company, and that these things were done prior to the acts of Levi Carlisle which we have held constituted an adoption, and amounted to a disaffirmance of the National Development Company's contract, and having dis-affirmed the contract, it could never be res-cussitated, except by the making of a new contract. Thei authorities .cited to support this contention apply to the cases where the contract was voidable and subject to dis-affirmance upon the minor reaching majority, and where, after reaching majority, the minor disaffirmed, the contract, in which disaffirmance the other parties to the contract acquiesced. In the instant case, however, -the contract was held by tbis court to bej void and not voidable. Any act of the minor in conveying the property to others or in filing a suit for the cancellation of the contract would render the contract no more void than it already was. In the instant case, since thq' contract was void and had to be adopted, instead of ratified, the previous acts of the party in .attempting to cancel the conjtract or convey the property to other persons would mot prevent an adoption of the contract "by him, provided the rights of other persons had not intervened, so as to prevent such adoption.

It is next contended by the plaintiffs that the rights of B. E. Capps ought to be determined as of October 10, 1917,. and that the contract of the National Development Company had not been adopted by Levi Carlisle at that -time,, hence, no subsequent adoption by him could in any maimer affect tbe right's of B. E. Capps under bis contract. On October 10, 1917, Levi Carlisle executed an oil and gas lease on tbis property to B. E. Capps, and the sam^ was deposited in the bank with an escrow agreeanent, according to the terms of which, the lease contract was deposited in the bank with a check from Capps to Levi Carlisle for $3,000, that in the ^vent a suit for the cancellation of the National Development Company’s lease should result in favor of Levi Carlisle, the lease; contract should he delivered to Capps and the $3,000 should b.e delivered to Levi Carlisle. On March 15, 1918, while th^ suit for the cancellation of the National Development Company’s contract w.as yet un-disposed of, Levi Carlisle sold the land covered by the liaise to John H. Kane. 'Oapps was advised by O. W. Bliss thalt since the land had been sold by Carlisle, he had better record his lease. He thereupon obtained from the bank the lease contract and his check for $3,000, and recorded the lease and retained the check. Capps contended . that Bliss was representing Car-lisle in this transaction and agreed that the lease might be delivered by the bank to him at that time, .and that the $3,000 should he paid to Carlisle upon the determination of the law (suit. Carlisle denied that Bliss had any authority to make! such an agreement or that he had authorized the delivery of the lease by the bank, Car-lisle further contended that he! bad no knowledge of -the lease contract having been taken from the bank until the decision by this court on the former appeal, when he went to Capps to get the $3,000 which had been placed with the lease in the bank. This question of fact was decided by the trial court in favor of this contention of Carlisle and is clearly in accord with the weight of the evidence. We will; therefore, deal with the situation as one in which the lease contract whs wrongfully delivered to Capps, without the conditions upon which it was to have been delivered hav- tug been performed. Oapps, having gained possession of th^ lease before the performance of the condition's, acquired no rights by reason of such delivery. Powers v. Rude, 14 Okla. 381, 79 Pac. 89; McMurtrey v. Bridges, 41 Okla. 264, 137 Pac. 721; Stone v. Daniels, 80 Okla. 45, 193 Pac. 986; Hunter Realty Co. v. Spencer, 21 Okla. 155, 95 Pac. 757; Health v. Burnham-Munger-Root Dry Goods Co., 74 Okla. 186, 177 Pac. 606.

It is contended by Capps; however, that even though the deed was wrongfully delivered to him in March, 1918, it w.as ratified by Levi Carlisle on May 27, 1918. After the opinion was rendered by the Supreme Court, Carlisle went to Capps to get his $3,000, and Capps advised him that the suit had not been finally disposed of and the $3,000 was not due. Carlisle complained of the vtrongful delivery of the lease contract to Capps, and finally the matter was settled by Capps paying Carlisle $1,750. By reason of this settlement, instead of carrying out the original agreement, which provided for the payment of $3,000 for the lease contract in the event -the ®uit was finally determined in favor of Carlisle, the $1,T50 was paid to Carlisle for the lease without regard to the final determination of the suit. The wrongful delivery of a conveyance which had been placed in escrow may be ratified, as was bold in Oland v. Malson, 39 Okla. 456, 135 Pac. 1053. Without deciding whether the facts in this case show a ratification, let us concede that thq wrongful delivery was ratified, then the material question is, When did the Oapps lease become effective? It is contended on the part of Capps that the delivery related back to the date the instrument was deposited in escrow and cuts off the intervening claim of th^ National Development Company. A conveyance placed in escrow, when made and delivered to a grantee at a subsequent date, and after a compliance with thej conditions in the escrow agreement, will ordinarily take effect at the time of such final delivery and not before. M'c-Murtrey v. Bridges, supra. In order to prevent a manifest hardship and injustice, the fiction of relation back to the date oi the deposit of the instrument in escrow has been frequently reported to for the protection] of the grantee against intervening rights and to prevent an injustice being done, when thq escrow conditions have been performed and such is established as the intention of the parties, but vihere it is not required for any such purpose, this fiction is not indulged in, and the deed operates according to the truth of the case, May v. Emerson (Ore.) 96 Pac. 1065. 16 Ann. Cas. 1129; McMurtrey v. Bridges, supra. In the instant case the lease was not delivered to Oapps upon perfljrmance of the escrow conditions, but was wrongfully obtained by him, and even though the agreement in May should considered a ratification of the wrongful delivery, there was never a delivery in compliance with the escrow agreement, hqnce the fiction of relation back to the time the instrument was placed in .escrow has mo application in the instant case. At most, the ratification only rendered thej instrument valid as of the time it came into the possession of the grantee, as it came into his possession not by reason of carrying out the original intention of the parties, but by__an abandonment thereof and the substitution of a newt agreement. The rule is well stated in Page on Contracts, vol. 2 (2nd Ed.) section 797, as follows;

“The fiction of relation will never be invoked when the original contract is abandoned and the deed is subsequently delivered under a later contract.”

In th^ instant case the original agreement provided for the payment of $3,000 upon the favorable determination, ¡of rthe litigation. The new agreement provided for the payment of $1,750 without regard to the determination of the litigation. Thef lease to the National Development Company was adopted by Levi Carlisle prior to March 15, 1918, the date upon which Oapps obtained possession of the lea's© contract; therefore, the rights of the National Development Company by reason of the adoption of its lease contract ar.o prior to the rights of Capps.

For the reasons stated, it is our opinion that the judgment of the trial court should be affirmed, and it is so ordered.

JOHNSON, C. J., and NICHOLSON, HARRISON, and MASON, JJ., concur.